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Leaders Institute LLC v. Jackson

United States District Court, N.D. Texas, Dallas Division

March 29, 2017




         Before the Court is Defendants Robert Jackson and Magnovo Training Group, LLC's (collectively Defendant or Defendants) Expedited Motion for Leave to Amend Counterclaims. Doc. 142, Defs.' Expedited Mot. for Leave to Am. Countercl. [hereinafter Defs.' Mot.]. For the following reasons, the Court GRANTS in part and DENIES in part Defendants' Motion.

         I. BACKGROUND

         Plaintiffs The Leader's Institute, LLC and Doug Staneart (collectively Plaintiff or Plaintiffs) initially filed their lawsuit in this Court on October 2, 2014. Doc. 1, Pls.' Orig. Compl. Put simply, Plaintiffs, purveyors of corporate leadership and team-building events using a trademarked “Build-A-Bike” training method, allege Defendant, a former independent contractor of Plaintiff, breached an independent contractor agreement by going into the corporate training business against Plaintiff using a similar method, and violated Plaintiff's “Build-A-Bike” trademark by registering confusingly similar domain names-such as,,, and a deliberate attempt to confuse consumers. See generally Id. Accordingly, Plaintiffs' causes of action against Defendants include, inter alia, claims for federal trademark infringement, violations of federal anti-cybersquatting law, breach of contract, unfair competition, and tortious interference with prospective business relations.

         On December 17, 2015, Plaintiffs filed their Third Amended Complaint. Doc. 82, Pls.' 3d Am. Compl. In response, Defendants filed an Answer on January 11, 2016. Doc. 91, Defs.' Answer to Pls.' 3d Am. Compl. Defendants' Answer also included counterclaims for, inter alia, tortious interference with business relations, fraud and defamation, and copyright infringement against Plaintiff. See generally Id. According to Defendants, Plaintiff registered four internet domain names-(1), (2), (3), and (4) “[f]ollowing such domain registrations, . . . caused such registered domains to then ‘frame' Defendant Magnovo's internet website . . ., whereby the full content of [Defendant's] website, including the Copyrighted Works, was presented within and under Plaintiffs' registered domain name as though Plaintiffs owned and operated such Magnovo website content and Copyrighted Works.” Id. ¶¶ 256-57. At that time Defendants also accused Plaintiffs of: (1) “retaliating against Jackson due to Jackson resigning and starting his own consulting firm”; (2)“holding Defendants' business out as that of Plaintiffs”; (3) creating a “false persona” to “obtain a Magnovo client proposal document” and then using “the Magnovo client proposal document, along with printouts of Magnovo's website, in order to fraudulently file a trademark application for ‘MAGNOVO' with the United States Patent and Trademark Office”; and (4) making “defamatory statements . . . to current and former [The Leader's Institute] employees” that “Jackson is the subject of a ‘sting operation' and is being investigated by the Federal Bureau of Investigation for criminal violations.” Id. ¶¶ 225, 233, 237-42.

         The Court's Scheduling Order in this case required that all pleading amendments be submitted by December 24, 2015. Doc. 61, Sched. Order 1. On August 8, 2016, with leave of Court, Plaintiffs filed their Fourth Amended Complaint. Doc. 130, Pls.' 4th Am. Compl. On August 19, 2016, Defendants filed an Answer to Plaintiffs' Fourth Amended Complaint, which included the same counterclaims as its January 11, 2016 Answer to Plaintiffs' Third Amended Complaint, including the following: (1) abuse of process; (2) tortious interference with business relations; (3) fraud and defamation; (4) cancellation of Plaintiffs' trademarks; (5) attorneys' fees; and (6) federal copyright infringement. Doc. 131, Defs.' Answer to Pls.' 4th Am. Compl. ¶¶ 230-74.

         On September 21, 2016, Defendants moved for leave to amend their counterclaims “based on recently discovered acts of Plaintiffs and in order to clarify counterclaims previously pleaded.” Doc. 142, Defs.' Mot. 1. Specifically, Defendants allege they discovered on July 27, 2016, that Plaintiffs “content scraped, framed, mirrored, copied and reposted Magnovo website data, including Magnovo's logo, and proprietary photos from” two of Defendants' websites, onto another site allegedly managed by Plaintiffs at Id. at 2. Based on the newly discovered website, Defendants seek to amend their counterclaims by: (1) adding additional counterclaims for (i) money had and received, (ii) retaliation under the Fair Labor Standards Act (FLSA), (iii) false advertising under the Lanham Act, and (iv) tortious interference with prospective contracts; (2) dropping their claims for fraud and attorneys' fees; and (3) supplementing their remaining causes of action with additional facts and allegations. See Id. at 5; Doc. 142-1, Defs.' [Proposed] Am. Countercls. ¶¶ 21-72. Plaintiffs have responded, Doc. 154, Pls.' Resp., and Defendants have replied. Doc 162, Defs.' Reply. Thus, Defendants' Motion is ripe for this Court's review.


         A. Federal Rule of Civil Procedure 16

         Once a court has entered a scheduling order and the deadline for amending pleadings has passed, the decision to permit post-deadline amendments is governed by Rule 16(b) of the Federal Rules of Civil Procedure. S & W Enters., L.L.C. v. South Trust Bank of Ala., 315 F.3d 533, 536 (5th Cir. 2003) (“We take this opportunity to make clear that Rule 16(b) governs amendment of pleadings after a scheduling order deadline has expired.”). Under Rule 16(b), a scheduling order should not be modified unless there is a showing of good cause. Fed.R.Civ.P. 16(b)(4) (“A schedule may be modified only for good cause and with the judge's consent.”).

         The Fifth Circuit has set forth four factors to determine whether a movant has established good cause for modification of a scheduling order to allow an untimely amendment of pleadings: (1) the explanation for the failure to timely move for leave to amend; (2) the importance of the amendment; (3) potential prejudice in allowing the amendment; and (4) the availability of a continuance to cure such prejudice. S & W Enters., L.L.C., 315 F.3d at 536 (quotations and alterations omitted). “The ‘good cause' standard focuses on the diligence of the party seeking a modification of the scheduling order.” Forge v. City of Ball, No. 3:03-CV-0256, 2004 WL 1243151, at *2 (N.D. Tex. June 4, 2004). A party's mere inadvertence to meet a deadline and the absence of prejudice to the opposing side are insufficient to establish good cause. Id. Rather, one must show that “despite his diligence, he could not have reasonably met the scheduling deadline.” Id. (quoting Am. Tourmaline Fields v. Int'l Paper Co., No. 3:96-CV-3363, 1998 WL 874825, at *1 (N.D. Tex. Dec. 7, 1998)). Rule 15(a), which governs the substance of amendments and allows for liberal leave to amend, only comes into play once the moving party has demonstrated good cause under Rule 16(b). S & W Enters., L.L.C., 315 F.3d at 536 n.4 (“[T]he presence of a scheduling order renders the Rule 15 inquiry secondary.”).

         Here, Defendants seek leave to amend their counterclaims nearly nine months after the December 24, 2015 deadline for amending pleadings established in the Scheduling Order. See Doc. 61, Sched. Order; Doc. 142, Defs.' Mot. (filed September 21, 2016). Thus, Rule 16(b) governs whether to permit an amendment. See S & W Enters. L.L.C., 315 F.3d at 536. Only if Defendants have demonstrated good cause will the Court consider whether granting leave to amend is consistent with Rule 15. See Id. at 536 n.4.

         B. Federal Rule of Civil Procedure 15

         Under Rule 15(a), courts “should freely give leave [to amend] when justice so requires.” Fed.R.Civ.P. 15(a)(2). But this “generous standard is tempered by the necessary power of a district court to manage a case.” Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667, 678 (5th Cir. 2013) (quoting Schiller v. Physicians Res. Grp. Inc., 342 F.3d 563, 566 (5th Cir. 2003)). Although Rule 15 indicates a bias in favor of granting leave to amend, leave is by no means automatic. Southmark Corp. v. Schulte Roth & Zabel (In re Southmark Corp.), 88 F.3d 311, 318 (5th Cir. 1996) (citing Wimm v. Jack Eckerd Corp., 3 F.3d 137, 139 (5th Cir. 1993)). A district court must have a “substantial reason” to deny leave, yet the decision remains within the court's discretion. Smith v. EMC Corp., 393 F.3d 590, 595 (5th Cir. 2004) (citing Quintanilla v. Tex. Television, Inc., 139 F.3d 494, 499 (5th Cir. 1998)). In its discretion, the court should consider several factors, including “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the ...

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