United States District Court, W.D. Texas, Austin Division
STOCKADE COMPANIES, LLC and STOCKADE FRANCHISING, LP, Plaintiffs,
KELLY RESTAURANT GROUP, LLC, Defendant.
PITMAN UNITED STATES DISTRICT JUDGE.
the Court in the above-entitled matter are Defendant's
Motions to Dismiss for Failure to State a Claim, (Dkt. 36),
and Plaintiffs' Motion for Leave to File a Second Amended
Complaint, (Dkt. 39).
BACKGROUND AND OVERVIEW
Stockade Companies, LLC and Stockade Franchising, LP
(collectively, “Plaintiffs” or
“Stockade”) own and license the trademarks for
the Sirloin Stockade, Coyote Canyon, and Montana Mike's
restaurants. (Compl., Dkt. 1, ¶ 1). Plaintiffs filed
suit against Defendant Kelly Restaurant Group
(“KRG” or “Defendant”) on February
24, 2017. (Dkt. 1). They subsequently filed a Motion for
Preliminary Injunction, which the Court granted in part on
May 31, 2017. (Dkt. 26). On that date, the Court ordered KRG
to de-brand its Sirloin Stockade, Coyote Canyon, and Montana
Mike's franchise restaurants within 21 days.
(Id. at 7).
9, 2017, Plaintiffs filed a First Amended Complaint alleging
that KRG, following the Court's order on Plaintiffs'
Motion for Preliminary Injunction, intended to “make
purely cosmetic changes to its buffet restaurants” and
then “continue to operate identical buffets as it did
under” its franchise agreement with Plaintiffs,
“thereby misappropriating Stockade's trade secrets
and confidential information.” (First Am. Compl., Dkt.
27, at 2). Plaintiffs also filed an Opposed Motion for
Expedited Discovery, seeking expedited discovery on the issue
of “whether KRG will be using Stockade's trade
secrets in its buffet restaurants after de-branding”
and whether “KRG will be continuing to use
Stockade's buffet system and trade dress with a mere name
change.” (Mot. Expedited Discovery, Dkt. 28, at 3). KRG
then filed an Opposed Motion to Strike the First Amended
Complaint, arguing that it was not filed in accordance with
Federal Rule of Civil Procedure 15(a). (Mot. Strike, Dkt. 31,
at 1). After reviewing those motions, the Court denied
Defendant's Motion to Strike. It also denied
Plaintiffs' Motion for Expedited Discovery, reasoning
that Plaintiffs would receive much of the information they
sought when KRG filed a written update with the court on June
21, 2017. (Order, Dkt. 34).
30, 2017, Defendant filed a Motion to Dismiss arguing both
that Plaintiffs' Amended Complaint fails to state a claim
and that the Court no longer has subject matter jurisdiction
over the action. (Dkt. 36). Plaintiff did not respond to the
Motion to Dismiss, instead filing an Amended Complaint on
July 17, 2017. (Dkt. 37). The Court marked that filing deficient,
noting that Plaintiffs could not file it without leaving
seeking leave from the Court. (Dkt. 38). Plaintiffs filed
their Opposed Motion for Leave to File on July 19, 2017.
to file an amended pleading “shall be freely given when
justice so requires, ” but “is by no means
automatic.” Wimm v. Jack Eckerd Corp., 3 F.3d
137, 139 (5th Cir. 1993) (quoting Fed.R.Civ.P. 15(a)). In
deciding whether to grant leave to file an amended pleading,
a district court may consider factors such as 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 opposing party;
and futility of amendment. Foman v. Davis, 371 U.S.
178, 182 (1962); Wimm, 3 F.3d 137, 139. The decision
to grant or deny a motion to amend pleadings is within the
sound discretion of the court. Avatar Exploration, Inc.
v. Chevron U.S.A., Inc., 933 F.2d 314 (5th Cir. 1991).
opposing Plaintiffs' Motion for Leave to Amend, Defendant
argues primarily that (1) its pending Motion to Dismiss
“still renders any amendment ineffective due to
incurable deficiencies”; and (2) Plaintiffs' Motion
for Leave to Amend was filed in bad faith. (Resp. Mot. Leave,
Dkt. 40, at 2-3). The Court addresses each of these arguments
respect to the alleged “incurable deficiencies”
in Plaintiffs' claims, Defendant asserts that
“[Plaintiffs'] proposed Second Amended Complaint
does not provide the Court with jurisdiction or proper
venue.” (Id.). This argument, as outlined in
Defendant's Motion to Dismiss, relies on the franchise
agreements KRG signed with Plaintiffs. (Mot. Dismiss, Dkt.
36). According to Defendant, because those agreements include
an arbitration clause and state that Plaintiff may seek
judicial involvement only when doing so is “necessary
to protect its Proprietary Marks, ” the fact that KRG
has “fully de-branded” means Plaintiff has a duty
to arbitrate. (Id. at 14). The text of the franchise
agreements, however, in fact specifies that Plaintiff may
seek judicial involvement when doing so “may be
necessary to protect its Proprietary Marks or other
rights or property.” (Franchise Agreement, Dkt.
27-2, at § 21.02) (emphasis added). It is therefore far
from a foregone conclusion that KRG's discontinued use of
Plaintiffs' marks, by itself, is enough to preclude
Plaintiffs from seeking judicial involvement or that KRG
would suffer undue prejudice if the Court were to grant
Plaintiffs' Motion for Leave to File.
the other, merits-based arguments in Defendant's Motion
to Dismiss, the Court notes that Plaintiffs' proposed
Second Amended Complaint includes several pages of new
factual assertions and incorporates revisions to several of
Plaintiffs' legal arguments. (S ee generally
Proposed Second Am. Compl., Dkt. 39-1). For that reason,
alongside those stated above, the Court is unconvinced that
Plaintiffs' proposed amendment is futile.
next argues that Plaintiffs seek leave to file their Second
Amended Complaint “in an attempt to circumvent a ruling
on [Defendant's] Motion to Dismiss.” (Resp. Mot.
Leave, Dkt. 40, at 3). While Defendant is correct to note
that courts have “reject[ed] proposed amendments where
the real (but unstated) purpose behind the amendment is to
avoid a dispositive ruling, ” (id), the Court
is not satisfied that such motives are at play in the instant
case. Indeed, Plaintiffs informed the Court as to their
concerns about Defendant's post-branding activities as
early as June 9, 2017. (Dkt. 28). The Court therefore cannot
conclude that Plaintiffs have acted with undue delay, bad
faith, or dilatory motive.