Michael K. Terry (MT 8625)

KONOWITZ & GREENBERG

110 Cedar Street, Suite 250

Wellesley Hills, MA 02481

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

DEFENDANT'S OPPOSITION TO PLAINTIFFS' MOTION

FOR LEAVE TO FILE AMENDED COMPLAINT AND MOTION

FOR LEAVE TO MODIFY PRE-TRIAL SCHEDULING ORDER

AND REQUEST FOR SANCTIONS

Now comes the Defendant, Wolfe's Borough Coffee, Inc., d/b/a Black Bear Micro Roastery ("Black Bear") and opposes the motion of the Plaintiffs, Starbucks Corporation and Starbucks U.S. Brands, Inc. ("Starbucks") for leave to amend their Complaint and for leave to modify the pre-trial scheduling order.

1.     INTRODUCTION

Starbucks seeks to amend its Complaint by eliminating from the original any request for an award of damages. While this may appear on its surface to be a benign amendment that seemingly no reasonable defendant could oppose, its effect, if allowed, may actually be quite devastating to Black Bear. The only underlying rationale for this motion is quite clearly and simply to eliminate Black Bear's insurance coverage, thereby making it impossible for Black Bear to adequately defend this action. Starbucks seeks to throw the playing field out of balance in order to avoid having this matter decided upon the merits.

II. STATEMENT OF FACTS

Starbucks is the largest seller of specialty coffees in North America, with over four thousand retail coffee shops in locations around the world, with annual revenues in excess of two billion dollars. Black Bear is a small, family owned and operated coffee roasting business with annual revenues that generally total less than two hundred thousand dollars.

This action was commenced by Starbucks on or about July 2, 2001. Its complaint includes counts for trademark infringement, dilution and unfair competition. Starbucks complains of Black Bear's labeling and sale of a coffee product under a name that incorporates the mark "Charbucks." Starbucks has been aware of Black Bear's use of said mark since August of 1997. To date, Black Bear has sold less than twenty thousand dollars of the "Charbucks" product. (See Black Bear sales report appended hereto as Exhibit A). It is Black Bear's contention that it has neither infringed upon nor diluted Starbucks' trademarks, that there is no possibility that Starbucks has been or could be harmed by its use of the "Charbucks" mark and that Starbucks has no legal basis for bringing this action.

A pre-trial conference was held in this matter on November 2, 2001. During said conference, counsel for Starbucks advised defense counsel that he was considering the option of seeking to amend his complaint by withdrawing any damages claim, thereby  eliminating Black Bear's insurance coverage and with it its ability to defend itself in the  action.

Upon Starbucks' insistence, a mediation session, presided over by Magistrate Judge Katz, was held on November 19, 2001. Representatives of the parties were in attendance, together with counsel. During the discussion, Starbucks' counsel repeated the threat that he would seek to eliminate the Black Bear's insurance coverages if no agreement could be reached. James dark, corporate officer of Black Bear, stated that it would agree to cease using the disputed mark if the Starbucks would "make it whole," i.e., compensate it for the expenses it had incurred as a result of the dispute.  In response to encouragement from Starbucks, Black Bear then prepared and offered a settlement proposal to counsel for Starbucks via email transmission on December 4, 2001.

Approximately a month later, on or about January 7, 2002, Starbucks responded with an offer of settlement that was nominal in amount, less even than what had been offered and rejected prior to the commencement of the litigation. The pointless mediation and the resulting negligible offer had served only to delay the progress of this action.

On February 1, 2002, the Plaintiffs served their first discovery requests upon the Defendant. By letter dated February 7, 2002, John Rawls, counsel for Starbucks, notified Black Bear that Starbucks would in fact waive any recovery of damages. The letter did not provide for a waiver of attorneys fees or costs. (Copy of letter appended as Exhibit B). This notice caused Black Bear another delay, as counsel was obliged to seek an opinion from Black Bear's insurer as to continued coverage.  The court's pre-trial scheduling order provided that all non-expert discovery would be completed by April 5. Black Bear requested that Starbucks assent to an extension of the said discovery period due to the delays in this matter. (Copy of letter of Michael K. Terry, dated March 22, 2002 appended as Exhibit C). Starbucks has refused and has likewise objected to Black Bear's discovery responses and requests as untimely.

Starbucks filed its motion to amend, together with a motion to modify the pre-trial scheduling order on April 1, 2002.

III. DISCUSSION

1.     The Plaintiffs' Motion Has Been Brought in Bad Faith.

While the Rules of Civil Procedure are generally liberal regarding the allowance of a party to amend its pleadings where appropriate, bad faith or dilatory motive on the part of the movant or resulting undue prejudice to the non-moving party may provide a basis for denial of a motion to amend. See Foman v. Davis. 371, U.S. 178, 9 L.Ed.2d 222, 83 S.Ct. 227 (1962)(copy appended as Exhibit D).

In this case, the movant's bad faith is crystal clear. The explicitly acknowledged rationale underlying Starbucks' motion is to eliminate Black Bear's insurance coverage, thereby making it impossible for Black Bear to adequately defend this action. There is no compelling legal reason why the amendment would be offered otherwise. If it were interested in eliminating monetary damages as an issue in the case, Starbucks could simply not offer any such evidence and/or it could waive any collection of damages awarded it. What Starbucks intends by this motion is to end this case by preventing Black Bear from defending it.

The allowance of Starbucks' motion will result in undue prejudice to Black Bear.  Black Bear is a small, family business with no resources, save its insurance coverages, to defend itself from a vast operation like Starbucks. Justice requires that Black Bear be afforded the opportunity to have its claims and defenses heard and decided on the merits.  If this motion to amend is allowed, that will be impossible, for the proposed Amended Complaint has been carefully crafted so as to fail to trigger the duty to defend of Zurich American Insurance Company, Black Bears' commercial liability carrier. (See copy of letter from Debra Bertone, Claims Case Manager dated March 12, 2002, appended as Exhibit E\cf1 \par        Significantly, Starbucks' waiver of damages does not mean that Black Bear is not potentially liable for monetary losses in this action, for the proposed Amended Complaint still seeks attorneys' fees and costs.  An award by the court of such fees and costs would likely be enough to put a small company like Black Bear out of  business.

2.     The Motion to Amend Is Offered Contrary to the Deadline Set by the Pre-trial Scheduling Order.

 The court's pre-trial scheduling order provided that all amendments of right were to be made by December 31, 2001. Starbucks has therefore also moved the court to grant it relief from such order to allow it to file its motion to amend.  Starbucks has been less than accommodating to Black Bear, however. Starbucks has steadfastly refused to assent to any modification of the discovery deadlines proscribed by said same scheduling order, notwithstanding the fact that delay in this case has largely resulted from its own actions: (1) its insistence on a mediation, which proved to be futile and a waste of time; and (2) its campaign to undermine Black Bear's insurance coverage and thereby its ability to defend itself.

IV. CONCLUSION

Just as it dwarfs its commercial competitors and just as it has attempted to intimidate Black Bear into submitting to its demand that it stop using the "Charbucks" mark, Starbucks now seeks to use its colossal resources to unfair advantage in this action.  Rather than have this matter heard and decided on the merits, Starbucks seeks to undermine the Defendant's ability to defend itself in this matter by underhandedly amending its Complaint for that purpose, all the while claiming that it simply seeks to simplify the litigation. Justice requires that the Plaintiffs' motion to amend be denied.  Further, such a predatory action on the part of the Plaintiffs cries out for sanctions.

WHEREFORE, in accordance with all the foregoing, the Defendant respectfully requests that the court grant it the following relief:

1. Deny the Plaintiffs' Motion for Leave to Amend Complaint;

2. Impose sanctions upon the Plaintiffs due to the egregious nature of the bad faith they have displayed in bringing said motion, to include: (a) the dismissal of their Complaint in its entirety; and (b) an award of attorneys' fees to the Defendant for the costs it has incurred in opposing this motion; and

3. Such other and further relief as the court may deem just and appropriate.

Dated: April 10, 2002