Annie Sloan Interiors, Ltd. v. Jolie Design & Decor, Inc.
Filing
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ORDER AND REASONS granting 55 Motion for Leave to File Amended and Supplemental Complaint. Signed by Magistrate Judge Janis van Meerveld on 7/18/2018. (ajn)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ANNIE SLOAN INTERIORS, LTD.
VERSUS
JOLIE DESIGN & DÉCOR, INC.
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CIVIL ACTION NO. 17-11767
SECTION: “S“(1)
JUDGE MARY ANN VIAL LEMMON
MAGISTRATE JUDGE
JANIS VAN MEERVELD
ORDER AND REASONS
Before the Court is the Motion for Leave to File First Amended and Supplemental
Complaint (Rec. Doc. 55). For the following reasons, the Motion is GRANTED.
Background
This lawsuit arises out of a distributorship arrangement between Plaintiff Annie Sloan
Interiors, Inc. (“ASI”) and JDD. ASI, which maintains its principal place of business in Oxford,
England, designs and manufactures paints and associated products under the trademarks ANNIE
SLOAN® and CHALK PAINT®. JDD was founded by Lisa Rickert. Pursuant to a 2010
agreement (the “Distributorship Agreement”), JDD began serving as ASI’s exclusive distributor
of CHALK PAINT® in the United States. The Distributorship Agreement states that JDD would
serve as exclusive distributor “on a perpetual basis.” JDD successfully built a distribution network
for ASI's products in the United States, and JDD claims that ASI asked JDD to expand its territory
cover all of North America, Central America, South America, and Australia.
The relationship between JDD and ASI began to deteriorate. ASI claims that it was
concerned with certain actions on the part of JDD that ASI deemed detrimental to its brand, while
JDD claims that ASI improperly attempted to insert itself into JDD’s distribution and operational
practices.
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After years of attempts to negotiate a resolution to their differences, on November 3, 2017,
ASI filed this lawsuit against JDD seeking a declaratory judgment finding that (1) the perpetual
term contained in the Distributorship Agreement is against Louisiana public policy and is
terminable at the will of either party upon a reasonable notice pursuant to Louisiana Civil Code
article 2024; (2) 180 days constitutes reasonable notice for terminating the Distributorship
Agreement; (3) JDD's activities in countries other than the United States are not encompassed by
the Distributorship Agreement and JDD does not have rights to the exclusive distributorship of
ASI's products in those countries; and, (4) to the extent that JDD's activities in countries other than
the United States are conducted under the Distributorship Agreement, the termination of the
Distributorship Agreement would result in the termination of JDD's exclusive distributorship in
those countries.
JDD filed an Answer and Counterclaim. In its Counterclaim, JDD sought a declaratory
judgment finding that: (1) the Distributorship Agreement is legally enforceable, including its
provisions regarding its duration and the grounds for resolution or termination; (2) JDD is in full
compliance with its obligations under the Distributorship Agreement and has not breached it by
any action or inaction, and that the Distributorship Agreement is in full force and effect; (3) the
Distributorship Agreement permits JDD to sell ASI's products directly to consumers, including
over the Internet; (4) to the extent JDD has not implemented some or all of ASI's “brand
guidelines” in territories where JDD sells ASI's products, such action does not constitute a breach
of JDD's obligations under the Distributorship Agreement or a justification for ASI to resolve or
terminate it; (5) JDD has the right under the Distributorship Agreement to market, advertise,
promote, distribute and sell ASI's products using whatever methods and means JDD, in its
reasonable discretion, deems appropriate; (6) JDD has exclusive distribution rights for ASI's
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products in North America, the United States, Canada, Central America, South America, Australia,
New Zealand, and other parts of Australasia; (7) the Distributorship Agreement applies to control
the relationship between ASI and JDD in all of those geographical areas where JDD is the
exclusive distributor of ASI's products; (8) JDD has the sole right to select and terminate stockists
in its reasonable discretion in those geographical areas where JDD is the exclusive distributor of
ASI's products; and, (9) in the alterative, if the court declares that ASI is entitled to terminate the
Distributorship Agreement at will with reasonable notice, that reasonable notice under the
circumstances would consist of a substantial period of time, the precise duration of which to be
established by evidence at trial.
On May 4, 2018, the District Court granted the motion for partial summary judgment filed
by ASI and held that Louisiana Civil Code article 2024 applies to the Distributorship Agreement.
The Court found that under that article, the Distributorship Agreement (which states that it
continues on a “perpetual basis”) is a contract for an unspecified and undeterminable duration.
Contracts for an unspecified and undeterminable duration may be terminated at the will of either
party upon giving reasonable notice to the other party.
On May 8, 2018, ASI notified JDD that the distributorship agreement would be terminated
on November 5, 2018. On May 18, 2018, JDD filed a motion to certify the District Court’s May
4, 2018, order for immediate appeal or for entry of final judgment and stay of proceedings pending
appeal (“Motion to Certify”). On June 5 2018, JDD filed a Notice of Voluntary Dismissal without
Prejudice as to its Counterclaims against ASI. On June 13, 2018, the morning of oral argument
on the Motion to Certify, ASI filed a Motion for Leave to File a First Amended Complaint. The
District Judge instructed the parties to meet with the undersigned. A settlement conference was
held on June 21, 2018, but was unsuccessful. On June 27, 2018, ASI moved to substitute the
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proposed amended complaint filed on June 13, 2018, with a new proposed First Amended
Complaint. The Court allowed the substitution and set the Motion for Leave to Amend.
In its proposed First Amended Complaint, ASI adds additional factual allegations
regarding communications by Ms. Rickert to her stockists in April, May, and June 2018 that ASI
says disparage the ASI brand. ASI also asserts that, upon information and belief, Ms. Rickert
formed a new entity, Jolie Home, LLC (“Jolie Home”), for the purpose of competing directly with
ASI. It asserts that Ms. Rickert has recruited stockists to represent competing paint products and
that JDD has stopped using the ANNIE SLOAN® mark in conjunction with the CHALK PAINT®
mark on social media. ASI has dropped its claims for a declaratory judgment regarding whether
180 days constitutes reasonable notice and JDD’s activities in other countries, but seeks to add
claims seeking declaratory judgment that JDD’s representation of ASI in territories outside of the
United States is terminable at will by either party, that ASI is the sole owner of certain Annie Sloan
trademarks and domain names, and that JDD has breached the Distributorship Agreement’s
implied duty of good faith and fair dealing as well as several provisions of the agreement, including
the provision prohibiting JDD from representing products that compete with ASI’s products. ASI
also seeks to add Ms. Rickert and Jolie Home LLC (“Jolie Home”) as parties and to assert a claim
under the Louisiana Unfair Trade Practices Act (“LUTPA”), a claim for Tortious Interference with
Contractual Relations, and a claim of Conspiracy.
ASI insists that it can establish good cause to allow the amended pleading. It says it could
not file the motion earlier because it did not discover the facts until after the pleading amendment
deadline. ASI argues that the amendment is important because it asserts separate grounds for
terminating the Distributorship Agreement and asserts a LUTPA claim, which is subject to a short,
one-year-peremptive period. ASI says that amendment will not unduly prejudice JDD’s defense
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because there is sufficient time to conduct discovery and because a continuance could cure any
deadlines. Of note, since the filing of the motion and opposition, the District Judge has now
continued the trial.
JDD opposes the proposed amendment. It separately argues that ASI cannot establish good
cause for the addition of its trademark claims, its domain name claim, its tortious interference with
contract claim, and its civil conspiracy claim. JDD argues that each of these claims is futile and
asserted in bad faith. JDD does not address ASI’s proposed amendments to its claim for declaratory
relief, including the breach of contract claim, or its LUTPA claim.
With regard to the trademark claims, JDD points out that ASI does not explain what facts
were missing before the March 20, 2018, pleading amendment deadline that precluded seeking
amendment. JDD further argues that ASI’s trademark validity claims are futile. JDD insists the
claims are not justiciable because they fail to identify any dispute concerning the “claimed
trademarks.” Specifically, JDD notes that ASI does not allege that JDD is liable for trademark
infringement. JDD further argues that ASI’s trademark claims are brought in bad faith. JDD points
out that when ASI moved to substitute its proposed amended pleading, the new pleading only
added new claims—including the trademark claim. But, JDD says, the new proposed pleading did
not add any new facts. JDD argues that ASI only added the trademark claims in response to JDD’s
argument in its Supplemental Memorandum in Support of its Motion to Certify that LUTPA does
not provide a private right to an injunction and that ASI’s breach of contract claim had been plead
“solely in the alternative” to ASI’s article 2024 claims. JDD argues that ASI has only added the
trademark claims in an attempt to defeat the Motion to Certify and they are therefore brought in
bad faith. JDD also argues the trademark claims substantially alter the landscape of the case and
require JDD to engage in significant new preparation on matters completely unrelated to the
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original complaint. JDD insists there is no judicial economy in allowing ASI to add the trademark
claims.
On the domain name claims, JDD suggests that ASI may be attempting to assert a claim
under the Anti-Cybersquatting Consumer Protection Act (“ACPA”). JDD argues that as with the
trademark claims, ASI has failed to offer any explanation for failing to assert these claims earlier
since it has long known of the domain names. JDD also argues that the claims are futile because
the fact that JDD registered the domain names is insufficient for ACPA relief. Instead, JDD insists,
ASI must also allege a bad faith intent to profit from the mark.
JDD argues that ASI’s claim that Ms. Rickert tortiously interfered with the contract
between ASI and JDD is frivolous and could not withstand a motion to dismiss. JDD insists that
ASI has failed to sufficiently allege that Ms. Rickert was not justified in her actions. JDD argues
that the claim is merely an attempt to intimidate Ms. Rickert by threatening personal liability. JDD
adds that the tortious interference claim is incompatible with ASI’s proposed conspiracy claim that
JDD and Ms. Rickert are acting in concert. Further, JDD argues that the conspiracy claim is futile,
noting that conspiracy is not an independent cause of action but instead a theory of apportioning
liability. JDD argues that ASI has failed to allege facts establishing any agreement between JDD
and Ms. Rickert to commit wrongful acts. Moreover JDD argues that even if an agreement was
adequately plead, ASI cannot establish a conspiracy between JDD, Ms. Rickert, and Jolie Home,
because ASI is essentially alleging that Ms. Rickert has conspired with herself.
In reply, ASI insists that the supplemental claims in its proposed amendment are viable and
that they all rely on conduct that occurred after the original complaint was filed. ASI argues that
where a defendant engages in additional misconduct after an original complaint is filed, the
plaintiff must be allowed to amend its pleadings or the defendant would be able to proceed with
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impunity. ASI argues that JDD (the only party at this time) does not have standing to challenge
claims against Ms. Rickert and Jolie Home. ASI also insists that its filings are not in bad faith and
that its claims are necessary to redress JDD’s misconduct. Finally, ASI argues that JDD’s futility
arguments are premature, noting that such defenses can be raised by motions to dismiss.
Law and Analysis
1. Standard to Amend Pleadings
Under Federal Rule of Civil Procedure 15(a)(2), when the time period for amending a
pleading as a matter of course has passed, a party may amend its pleadings by consent of the parties
or by leave of court. “The court should freely give leave when justice so requires.” Fed. R. Civ.
Proc. 15(a)(2). Thus, the United States Court of Appeals for the Fifth Circuit instructs that the
“district court must possess a ‘substantial reason’ to deny a request for leave to amend.” Smith v.
EMC Corp., 393 F.3d 590, 595 (5th Cir. 2004). Nonetheless, “that generous standard is tempered
by the necessary power of a district court to manage a case.” Yumilicious Franchise, L.L.C. v.
Barrie, 819 F.3d 170, 177 (5th Cir. 2016) (quoting Schiller v. Physicians Res. Grp. Inc., 342 F.3d
563, 566 (5th Cir. 2003)). The court may consider numerous factors when deciding whether to
grant a motion for leave to amend, including “undue delay, bad faith or dilatory motive on the part
of the movant, repeated failures to cure deficiencies by amendments previously allowed, undue
prejudice to the opposing party by virtue of allowance of the amendment, and futility of the
amendment.” Schiller v. Physicians Res. Grp. Inc., 342 F.3d 563, 566 (5th Cir. 2003).
To determine whether a complaint is futile, courts “apply ‘the same standard of legal
sufficiency as applies under Rule 12(b)(6).’” Stripling v. Jordan Prod. Co., LLC, 234 F.3d 863,
872–73 (5th Cir. 2000) (quoting Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000)). “To survive
a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state
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a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
Where the court ordered deadline for amending pleadings has passed, that schedule “may
be modified” to allow for additional amendments “only for good cause and with the judge’s
consent.” Fed. R. Civ. Proc. 16(b)(2); see S&W Enterprises, L.L.C. v. SouthTrust Bank of
Alabama, NA, 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.”).
When determining whether the movant has shown good cause, the Court considers “(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 Enterprises, 315 F.3d at 536 (quoting Reliance Ins.
Co. v. Louisiana Land & Expl. Co., 110 F.3d 253, 257 (5th Cir. 1997)) (alterations in original).
2. ASI’s Proposed Amendment
Here, the scheduling order set March 20, 2018, as the deadline to amend pleadings.
Accordingly, Rule 16 governs this Court’s determination of whether ASI’s Motion will be granted.
The Court finds that ASI has established good cause for its amendment. Most of the new
allegations in ASI’s proposed amendment arise from conduct that occurred in April, May, and
June 2018. This was after the pleading amendment deadline of March 20, 2018. Although JDD
says the trademark and domain name claims should have been known to ASI earlier, as ASI points
out in reply, it was not until June 2018 that JDD rejected ASI’s request that JDD turn over the
domain name “chalkpaintnorthamerica.com.” The Court finds no evidence of delay by ASI in
raising its new claims.
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Further, the addition of ASI’s new claims to the present lawsuit is important. Like the
claims in the original lawsuit, the new claims arise out of the same Distributorship Agreement and
the same relationship between ASI and JDD. To require ASI to file its new claims would not serve
the interests of judicial economy. Since the trial of this matter has been continued, the Court finds
there is no prejudice to be suffered by JDD in having to defend these claims. Further, the ASI’s
claims are not so futile so as to warrant denial of leave to amend. The viability of the claims can
be tested by the appropriate motion.
Accordingly, the Court finds that ASI has established good cause for the filing of its
Amended and Supplemental Complaint.
Conclusion
For the foregoing reasons, Motion for Leave to File First Amended and Supplemental
Complaint is GRANTED.
New Orleans, Louisiana, this 18th day of July, 2018.
Janis van Meerveld
United States Magistrate Judge
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