SPEED INFORMATION TECHNOLOGY, INC. et al v. SAPIDO TECHNOLOGY, INC. et al
Filing
68
OPINION fld. Signed by Magistrate Judge Joseph A. Dickson on 4/21/16. (sr, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
SPEED
INFORMATION
TECHNOLOGY, INC., et al.,
Civil Action No. 12-3040 (JLL) (JAD)
Plaintiff,
OPINION
v.
SAPIDO TECHNOLOGY, INC., et al.,
Defendants.
JOSEPH A. DICKSON, U.S.M.J.
This matter comes before the Court upon Speed Information Technology Inc., Ekran
Ozcan, and Farah Avci's (collectively "Plaintiffs") Motion for Leave to File an Amended
Complaint. (ECF No. 61). Pursuant to Federal Rule of Civil Procedure 78, no oral argument was
heard. Upon careful consideration of the parties' submissions, and for the reasons stated below,
Plaintiffs' Motion to Amend is GRANTED in part and DENIED in part.
I.
BACKGROUND
Plaintiff Speed Information Technology, Inc. ("Speed") is a New Jersey corporation with
its principal place of business in Edgewater, New Jersey. (Id.~ 1). Plaintiffs Ekran Ozcan and
Farah Avci, officers of Speed, also reside in New Jersey. (Id.). Defendant Sapido Technology,
Inc. (incorporated in Taiwan) ("Sapido Taiwan") "manufactures products used for wireless
communications [and] accessing the Internet and computer networks, including modems, routers
and other electronic devices."
(Id.~
3). Defendant Sapido Technology, Inc. (incorporated in the
1
state of Virginia) a/k/a Sapido Technology Inc. US ("Sapido US"), 1 a subsidiary of Sapido Taiwan,
is incorporated in the state of Virginia and maintains its offices in Virginia Beach, Virginia. (Id.
w4-5).
On May 21, 2012, Plaintiffs brought this action against Defendants Sapido Taiwan, Sapido
US, and other fictitious defendants (hereinafter "Defendants") in this Court, alleging: that
Defendants made fraudulent and/or negligent misrepresentations (First Count); that certain of
Defendants' actions are barred under the doctrine of promissory estoppel (Second Count); that
Defendants violated the New Jersey Franchise Practices Act (Third Count); that Defendants
unjustly enriched themselves at Plaintiffs' expense by misappropriating Speed's intellectual
property (Fourth Count); that Defendants tortiously interfered with Plaintiffs' business
relationships (Fifth Count); that Defendants converted Speed's intellectual property (Sixth Count);
that Defendants breached their fiduciary duty to Plaintiffs (Seventh Count); that Defendants
breached the March 2010 Distribution Agreement (Eighth Count); that Defendants breached an
implied contract following the expiration of the March 2010 Distribution Agreement (Ninth
Count); that Defendants breached both the explicit terms and the implied covenant of good faith
and fair dealing of the Proposed 2011 Agreement (Tenth and Eleventh Counts); that Defendants'
actions also damaged individual Plaintiffs Okran and Avci (Twelfth Count); that Defetidants
negligently harmed Plaintiffs (Thirteenth Count); and that Plaintiffs were entitled to certain
declaratory and equitable relief in connection with Defendants' actions (Fourteenth and Fifteenth
1
Throughout the Complaint, Plaintiffs collectively refer to both Sapido Taiwan and Sapido,US as
"Sapido." (Compl., ECF No. 1, ~ 5; Prop. Am. Compl., ECF No. 62, ~ 5). While the Court notes
that all pre-June 28, 2011 references to "Sapido" must necessarily refer only to Sapido Taiwan (as,
per Plaintiffs' own allegations, Sapido US did not yet exist), post-June 28, 2011 references are
unclear. The Court therefore attributes such allegations to both defendants. Furthermore, the
Court shall only endeavor to differentiate between the two Defendants when the parties have made
the distinction clear.
2
Counts). Plaintiffs contend that, as a result of Defendants' conduct, Plaintiffs have suffered both
monetary and reputational damages. (Id. if 74).
On February 14, 2014, Defendant Sapido Taiwan filed a motion seeking to dismiss
Plaintiffs' Complaint for lack of personal jurisdiction, or in the alternative, forum non conveniens.
(ECF No. 33). On August 18, 2014, the Honorable Jose L. Linares, U.S.D.J., ordered, based on
the Report and Recommendation of this Court, that the First, Second, Third, Fourth, Fifth, Seventh,
Eight, Twelfth, and Thirteenth counts of the Complaint be dismissed without prejudice for lack of
personal jurisdiction. (ECF No. 47, at 2).
On October 17, 2014, this Court entered an Amended Pretrial Scheduling Order, which set
the date to add new parties and amend the Complaint for February 13, 2015. (ECF No. 50, ,, 13,
14). Plaintiffs filed the instant motion for leave to file an Amended Complaint on September 24,
2015, seeking to: (i) add an additional count against the existing Defendants for the sale,
distribution, and/or supply of blank CD's and DVD's in the United $tates, and (ii) add a new count
asserting new claims against CNET Technology ("CNET"). (Prop. Am. Compl., ECF No. 62, at
46-76). Moreover, Plaintiffs' proposed Amended Complaint includes the claims Judge Linares
dismissed for lack of personal jurisdiction. (ECF No. 47, at 2; ECF No. 61-2; ECF No. 62). The
inclusion of those claims is discussed in further detail below.
Plaintiffs argue that its motion to amend should be granted pursuant to Federal Rule of
Civil Procedure 15 because the information regarding Sapido's distribution of CD's and DVD's
in violation of the Exclusive Distribution Agreement was not discovered until August of 2015.
(Pis. Br., ECF No. 61-1, at 3). While conducting research in response to Defendants' discovery
requests, Plaintiffs discovered a website containing U.S. Customs information indicating that
Sapido allegedly shipped over 30,000,000 CDs and DVDs to the United States in 2010 and 2011.
3
(Eichhorn Cert., ECF No. 61-4, ~ 4-5). Plaintiffs assert that they would have made 30% net profit
off of the sale of each CD and DVD had the Exclusive Distribution Agreement been honored. (Id.
1Mf 6, 9).
Plaintiffs further argue that they should be given leave to amend as to CNET because
Plaintiffs "maintained in the past that Sapido provided the work product and intellectual property
of Speed to CNET Technology (incorporated in Taiwan)." (Pis. Br., ECF No. 61-1, at 4). Plaintiffs
supposed that CNET "then used the information to sell products in the United States, including to
potential customers of Speed, including TigerDirect. Plaintiffs position had been that CN[ET]
Taiwan and Sapido were subsidiaries of the same parent company E-Top Technology." {IQ,_).
In response to a subpoena served on it, CNET allegedly "denied having any knowledge of
Sapido or its products, or sales of products to vendors of such products" and, as a result, Plaintiffs
believed that "CNET USA was likely a different company then CNET Taiwan and was likely not
connected to the misuse of Plaintiffs' work product and intellectual property."
ffih).
Subsequently, in September of20l5, Plaintiffs discovered that "CNET USA was and is selling the
very same CNET routers (which Plaintiffs thought were being sold by CNET Taiwan) that are the
same as the Sapido routers that Speed was offering for sale in the United States."
ilih at 5).
Within this month, on-line research revealed that CNET USA sold
these routers to TigerDirect, just a month[] after plaintiffs provided
TigerDirect information about identical routers and plaintiffs gave
TigerDirect samples of these identical Sapido routers. This was also
after plaintiffs provided Sapido with information as to what routers
TigerDirect was seeking to acquire. As set forth in their recent
depositions, it is Plaintiffs who provided Sapido (and unknowingly
CNET) the information needed to make the Sapido and the CNET
routers compatible in the United States market, and it is Plaintiffs
who assisted Sapido (and unknowingly CN[ET]) to develop
firmware which allows these routers in the United States.
(Id.).
4
On October 2, 2015, Defendants filed a letter in opposition to Plaintiffs' motion arguing
that: (i) the Court should deny the additional CD's and DVD's claim for undue delay and unfair
prejudice under Federal Rule of Civil Procedure 15; (ii) the Court should deny the new claims
against CNET for further prejudice and; (iii) even if the Court is persuaded by Plaintiffs' motion,
Plaintiffs' proposed Amended Complaint does not accurately reflect the District Court's previous
order dismissing several counts of the complaint for lack of personal jurisdiction. (Defs. Opp. Br.,
ECF No. 64, at 2-5, 6). Plaintiffs replied, arguing that: (i) any delay and prejudice has been Ca.used
by the Defendants' own doing; and (ii) had the current information been kno\vn at the time the
motion to dismiss was heard, the Court would have decided differently on the matter of personal
jurisdiction. (Pis. Rep. Br., ECF No. 65).
II.
LEGALSTANDARD
Federal Rule of Civil Procedure 15(a) governs requests for leave to amend, allowing a party
to amend its pleadings after obtaining the court's leave or the written consent of its adversary. The
decision to grant or deny leave to amend is "committed to the sound discretion of the district
court." Arab African Int'l Bank v. Epstein, 10 F.3d 168, 174 (3d Cir. 1993) .. While courts have
broad discretion to decide motions to amend, they must "heed Rule 15(a)'s mandate that
amendments are to be granted freely in the interests of justice." Voilas et al. v. General Motors
Corp .. et al., 173 F.R.D. 389, 396 (D.N.J. 1997) (internal citations and quotations omitted); see
FED. R. CIV. P. 15(a)(2) ("The court should freely give leave when justice so requires."). This
lenient standard ensures that "a particular claim will be decided on the merits rather than on
technicalities." Dole v. Arco Chem. Co., 921 F.2d 484, 487 (3d Cir. 1990) (internal citation
omitted); see also Sabatino v. Union Township, No., 2013 WL 1622306, at *6 (D.N.J. April 15,
2013) (internal citations omitted) (indicating that "if the underlying facts relied upon by a party
5
might be a proper subject of relief, that party should have the opportunity to test its claims on the
merits.").
The decision to grant or deny leave to amend under Rule l 5(a) is "committed to the sound
discretion of the district court." Arab African Int'l Bank v. Epstein, 10 F.3d 168, 174 (3d Cir.
1993). While courts have broad discretion to decide motions to amend, they must "heed Rule
15(a)'s mandate that amendments are to be granted freely in the interests of justice." Voila$ et al.
v. General Motors Corp., et al., 173 F.R.D. 389, 396 (D.N.J. 1997) (internal citations and
quotations omitted). In the absence of unfair prejudice, futility of amendment, undue delay, bad
faith, or dilatory motive, the court must grant a request for leave to amend. Grayson v. Mayyiew
State Hosp., 292 F. 3d 103, 108 (3d Cir. 2002); see also Arthur v. Maersk, Inc., 434 F. 3d 196, 204
(3d Cir. 2006) (stating that generally, leave to amend should be granted ''unless equitable
considerations render it otherwise unjust.").
Here, Defendants challenge Plaintiffs' proposed amendments based on undue delay and
prejudice. (Defs. Opp. Br., ECF No. 64, at 2-5). Unfair prejudice is the most common factor used
by courts to deny leave to amend. Unfair prejudice is usually found when there has been a
significant unjustified delay in moving to amend that creates an unfair disadvantage fur the
defendant. Delay alone will not justify denying a motion to amend. See Cureton v. N at'l Collegiate
Athletic Ass'n, 252 F.3d 267, 273 (3d Cir. 2001) (holding that mere passage of time does not
require that a motion to amend a complaint be denied on grounds. of delay). Only where delay
becomes "'undue,' placing an unwarranted burden on the court, or ... 'prejudicial,' placing an
unfair burden on the opposing party," will denial of a motion to amend is appropriate. Adams v.
Gould Inc., 739 F.2d 858, 868 (3d Cir. 1984) ("The question of undue delay, as well as the question
of bad faith, requires that [the Court] focus on the plaintifft's] motives for not amending [its]
6
complaint to assert [the] claim[s] earlier; the issue of prejudice requires that [the Court] focus on
the effect on the [defendant].").
Delay may become undue when there has been previous
opportunity to amend the complaint. See Lorenz v. CSX Corp., 1F.3d1406, 1414 (3d Cir. 1993)
(finding that a three-year lapse between the filing of the complaint and the proposed amendment
was ''unreasonable" delay when plaintiff had previous opportunities to amend). In such cases, the
Court must focus on the moving party's reasons for not amending the pleading sooner. USX Corp.
v. Barnhart, 395 F.3d 161, 168 (3d Cir. 2004).
Plaintiffs' application is not, however, governed by Federal Rule of Civil Procedure 15,
but rather Rule 16 because the Pretrial Scheduling Order entered by this Court set the date to
amend the Complaint to add new parties for February 13, 2015. (ECF No. 50). This Court never
extended that date. Accordingly, as explained below, the good cause standard under Federal Rule
of Civil Procedure 16 was triggered on February 13, 2015.
Federal Rule of Civil Procedure 16 authorizes a district court to enter pretrial sche4uling
orders, setting deadlines for the completion of discovery and amendment of pleadings. Rule 16's
purpose is to empower the Court to:
(1) expedit[e] disposition of the action;
(2) establish[ ] early and continuing control so that the case will not
be protracted because of lack of management;
(3) discourag[e] wasteful pretrial activities;
(4) improv[ e] the quality of the trial through more thorough
preparation; and
(5) facilitat[ e] settlement.
FED. R. CIV. P. 16(a). The pretrial scheduling order allows a court to take ')udicial control over a
case and to schedule dates for completion by the parties of the principal pretrial steps." Harrison
Beverage Co. v. Dribeck Imps., Inc., 133 F.R.D. 463, 469 (D.N.J. 1990) (quoting FED. R. CIV. P.
7
16 advisory committee's note to 1983 amendment)); see also Newton v. A.C. & S., Inc .. 918 F.2d
1121, 1126 (3d Cir.1990) (stating that purpose of Rule 16 is to provide for judicial control over
cases, streamline proceedings, maximize efficiency of court system, and actively manage timetable
of case preparation to expedite speedy and efficient disposition of cases). 2 The scheduling order
must, among other things, "limit the time to join other parties, amend the pleadings, complete
discovery, and file motions." FED. R. CIV. P. 16(b)(3)(A). Requiring the court to include a
deadline for amending pleadings in the pretrial scheduling order "assures that at some point ...
the pleadings will be fixed." FED. R. CIV. P. 16(b) advisory committee's note to 1983 amendment;
see also Harrison. 133 F.R.D. at 469 ("The careful scheme ofreasonable framing and enforcement
of scheduling orders for case management would thus be nullified if a party could inject amended
pleadings upon a showing ofless than good cause after scheduling deadlines have expired.'~).
Rule 16(b) provides that "a schedule may be modified only for good cause and with the
judge's consent.'' FED. R. CIV. P. 16(b)(4). A determination of "good cause" under Rule 16
depends on the diligence of the moving party. GlobespanVirata. Inc. v. Tex'lS Instruments Inc ..
No. 03-2854, 2005 WL 1638136, at *3 (D.N.J. July 12, 2005). Specifically, todemonstrate~'good
cause" pursuant to Rule 16, the moving party must show that, despite its diligence, the deadlines
set forth in the scheduling order could not reasonably be met. Id.; see also Harrison, 133 F.R.D.
at 469. The absence of prejudice to the non-moving party does not constitute "good cause" under
Rule 16. GlobespanVirata, 2005 WL 1638136, at *3. Only once the party has shown sufficient
2
See also FED. R. CIV. P. 16(a) Advisory Committee's note (1983 Amendment) (stating that
"scheduling and case management" are express goals of pretrial procedure and emphasized judicial
management of motions and discovery); FED. R. CIV. P. 16(c) advisory committee's note (1993
amendment) (noting the need "to eliminate questions that have occasionally been raised regarding
the authority of the court to make appropriate orders designed ... to provide for an efficient and
economical trial.")
8
"good cause" to amend the Rule 16 Order to extend the deadline will the Court evaluate the
proposed amendment under Rule 15(a). That is, if the moving party is unable to demonstrate
"good cause", the Court will deny the motion and will not proceed to a Rule 15 analysis.
The Court has "discretion in determining what kind of showing the moving party must
make in order to satisfy Rule 16(b)'s good cause requirement." Phillips. 2006 WL 3069475,,at *6.
Under some circumstances, good cause may be found based on a ''mistake, excusable neglect or
any other factor which might understandably account for failure of counsel to undertake to comply
with the [s]cheduling [o]rder." Id. The most common basis for finding a lack of good cause is the
party's knowledge of the potential claim before the deadline to amend has passed. Dimensional
Commc'ns, Inc. v. Oz. Optics, Ltd., 148 Fed. App'x. 82, 85 (3d Cir. 2005) (defendant "could not
satisfy Rule 16(b)'s good cause requirement because [it] was in possession of the facts underlying
the proposed counterclaim well before the amendment deadline."). See also Prime Ins. Syndicate
v. United Risk Mgmt. Srvcs .. No. 03-1050, 2006 WL 2085388, at *5 (D.N.J. July 25, 2006)
("Plaintiff provided no reason for why it could not have asserted these new claims against [the
defendant] within the requisite deadlines. In fact, in Plaintiffs brief for this appeal it acknowledges
that it 'had knowledge of [the allegations] since October 2004."'); Harrison, 133 F.R.D. at 469
("This is most definitely not a motion in which any of defendant's six proposed new affirmative
defenses arose from recent discovery in the case.").
Plaintiffs did not seek leave to amend until September 24, 2015. (ECF No. 61). Therefore,
Plaintiffs must demonstrate good cause as to both the new claims against CNET and the additional
claims regarding the CD's and DVD's in order for this Court to analyze this motion under Federal
Rule of Civil Procedure 15.
9
III.
ANALYSIS
a. CD's and DVD's Claim
Defendants argue that Plaintiffs failed to indicate why the information supporting
Plaintiffs' new claims was not readily available when the Corn,plaint was filed considering
Plaintiffs' "counsel indicates the information was found by Plaintiffs online, without any
indication the information was not available in 2012." (Defs. Opp. Br., ECF No. 64, at 3).
Defendants argue that Plaintiffs have had three years of discovery to come across such information.
ffiL at 2).
Plaintiffs argue in response that Defendants failed to provide any information regarding
the CD's and DVD's in discovery, even though such information "would have been responsive to
plaintiffs' discovery demands." (Pls. Rep. Br., ECF No. 65, at 6). 3 Specifically, Plaintiffs Notice
to Produce requested the following from Defendant Sapido Taiwan:
7.
All documents setting forth any and all sales from March 17,
2010 to present of any and all Products to anyone and/or any
entity located in the United States.
8.
All documents setting forth all monies received by Sapido
Taiwan and/or Sapido VA as the result of any and all sales
from March 17, 2010 to present and of any and all Products
to anyone and/or any entity located in the United States;
9.
All bank and financial records (internal and external) of
Sapido Taiwan from March 1, 2010 to the present that reflect
monies received from the sales of Products that were sold in
the United States and the revenue generated from the sales.
3
Defendants' apparent failure to adequately respond to Plaintiffs' discovery demands (or
supplement their existing responses) raises serious questions. Defendants submitted a declaration
in support of its motion to dismiss for lack of personal jurisdiction asserting that "[o]ut of the total
worldwide sales, the U.S. market accounted for a total of $53,423.70 in 2010, or 3.2% of
worldwide sales; $223,049 in 2011, or 5.4% of worldwide sales; and $83,876.50 in 2012, or 1.9%
of worldwide sales." (Sun Rep. Deel., ECF No. 41, ~ 1). These figures appear to be irreconcilable
with the sale of 30,000,000 CD's and DVD's. Defendants have not addressed those alleged sales
in their response to Plaintiffs' motion. This motion, however, is not the appropriate forum to
address these issues. The parties are, nevertheless, reminded of their discovery obligations under
ยท
the Federal Rules of Civil Procedure.
10
10.
All documents showing all gross and net sales and profits of
Sapido Taiwan and Sapido VA since March 17, 2010
resulting from sales of Products sold in the United States.
11.
All documents showing all the customers of Sapido Taiwan
and Sapido VA in the United States since March 17, 2010.
"Customers" is to mean any person or entity that purchased
Products from Sapido Taiwan or Sapido VA.
14.
All documents exchanged, including all written
communications, from March 17, 2010 to the present
between either defendant, their employees, agents and/or
representatives (other than plaintiffs) and any customer,
retailer, resellers, distributor and/or any other entity or
person involved in the purchase or sale of Products,
regarding the sale, re-sale, purchase, supply and/or
distribution of the Products in the United States.
(Eichhorn Rep. Cert., ECF No. 65-1, Ex. A., at 3-5).
Additionally, Plaintiffs' first set of
Interrogatories served on Defendant Sapido Taiwan requests the following:
16.
Set forth in detail all information related to any and all sales
from March 1, 2010 to present of any and all Products to
anyone or any entity located in the United States, other than
sales of the Product made by the plaintiffs. The information
requested shall include, but are not limited to: the name and
address of the purchaser (purchaser includes anyone who
purchased the product at any point in the retail chain,
including retailers, distributors, suppliers, customers,
resellers, etc ... ) the date of the sale, the name and quantity
of the product sold and the amount of revenue received by
defendants as a result of the sale.
17.
Set forth the total dollar amount of sales of Sapido Taiwan
and Sapido VA from March 17, 2010 to present from the sale
of all Products in the United States, other than sales made by
plaintiffs.
(Eichhorn Rep. Cert., ECF No. 65-1, Ex. B, at 5). Defendants' answers to these requests, which
apparently do not reference the CD's and DVD's, preclude Defendants from claiming that
11
Plaintiffs failed to exercise the due diligence required to satisfy the good cause standard of Federal
Rule of Civil Procedure 16.
Despite Defendants' failure to disclose the CD and DVD sales, Plaintiffs discovered
information regarding these sales on August 6, 2015. While conducting research in response to
Defendants' discovery demands, Plaintiffs found a website containing information indicating that
Sapido shipped CD's and DVD's to the United States in 2010 and 2011. (Pis. Br., ECF No. 61-1,
at 1-2; Eichhorn Cert., ECF No. 61-4,
~~
4, 5). In other words, despite Defendants' lack of
disclosure, Plaintiffs exercised further diligence and discovered the information now at issue.
Plaintiffs have satisfied the good cause standard to amend the scheduling order regarding CD's
and DVD's under Rule 16, and the claim will be analyzed under Rule 15(a).
Defendants contend that the additional CD's and DVD's claims would cause "immense
prejudice" because "nearly three and a half years have passed since the complaint was originally
filed" and "the parties have engaged in extensive discovery." (Defs. Opp. Br., ECF No. 64; at 2).
Defendants further argue that they would suffer prejudice because the claim, which it approximates
to be worth nine million dollars, and would "require defendants to expend significant additional
resources" and "would significantly delay the resolution of the dispute."
CM: at 4) (citing Forman
v. Davis, 371U.S.178, 182 (1962)).
"It is well-settled that prejudice to the non-moving party is the touchstone for the denial of
an amendment." Cornell & Co. v. Occupational Safety & Health Review Comm'n, 573 F.2d 820,
823-24 (3d Cir. 1978) (citing Zenith Radio Com. v. Hazeltine Research, Inc., 401 U.S. 321, 33031 (1971)). The issue of prejudice requires the Court to "focus on the hardship to the defendants
if the amendment were permitted."
Cureton, 252 F.3d at 273 (internal citation omitted).
Specifically, this Court must consider "whether allowing an amendment would result in additional
12
discovery, cost, and preparation to defend against new facts or new theories." Id. None of these
0
factors weigh in favor of denying Plaintiffs' motion to amend on the basis of prejudice. Prior to
Plaintiffs' filing of the motion to amend, this Court extended the fact discovery end date to
December 15, 2015. (ECF No. 59). The parties, therefore, expected to engage in discovery even
after the motion to amend was filed. Additionally, the new claim for the sale of CD's and DVD's
is not a "new theory". Plaintiffs' original Complaint is premised on the allegations that "Sapido
has and continues to sell and distribute Sapido products directly in the United States, even though
Speed is the exclusive distributor." (Compl., ECF No. 1, il 43). Furthermore, while the Court is
cognizant that the addition of a nine-million dollar claim may require Defendants to incur
additional litigation expenses, "frustrated expectations [do not] constitute undue prejudice
sufficient to overcome the Rule 15(a) right to amend a pleading." See Long v. Wilson, 393 F. 3d
390, 400 (3d Cir. 2004) (internal citations and quotations omitted).
With regard to delay, Defendants argue that "the time upon which to amend the Complaint
as a matter of course has long expired," and that such delay would be unduly bttrdensome. (Defs.
Opp. Br., ECF No. 64, at 2). Plaintiffs assert that any "undue delays in this matter were created
by the unnecessary gamesmanship and intentional delays of Sapido Taiwan" and if any subsequent
prejudice exists, it "is of defendants' own making." (Pls. Rep. Br., ECF No. 65, at 3). The question
of whether there was undue delay requires Courts to focus on the movant's reasons for not
amending sooner. Cureton, 252 F.3d at 273. Plaintiffs were unable to amend sooner because the
information was not known before August of 2015, one month before Plaintiffs' motion to amend
was filed. Moreover, there is "no presumptive period in which a motion for leave to amend is
deemed 'timely' or in which delay becomes 'undue."' Arthur v. Maersk, Inc., 434 F .3d 196, 205
13
(3d Cir. 2006). Delay alone does not justify denying a motion to amend. Cureton, 252 F .3d at
273.
Given Federal Rule of Civil Procedure 15's liberal standard, this Court finds that neither
unfair prejudice nor undue delay exist here. The Court must, however, take this new claim into
consideration with the original Complaint and this Court's previous rulings. Plaintiffs' proposed
amendment alleges: that as a result of the sale of CD's and DVD's, "Sapido breached the at law
and in fact 2010 and 2011 Exclusive Distribution Agreements with Speed as a result of Sapido's
sale the Sapido branded CDs and DVDs in the United States"; that "Sapido breached the legal duty
it owed to Speed as a result of Sapido' s sale the Sapido [sic] branded CDs and DVDs in the United
States"; and that "Sapido utilized the work product and intellectual property of Plaintiffs in:order
to assist with its sales of the Sapido branded CDs and DVDs in the United States." (Prop. Am.
Compl., ECF No. 62, Count Sixteen,
iii!
10-12). Ultimately, Plaintiffs assert that they have
"suffered damages as a result of Sapido's contractual breaches, its breaches oflegal duties, and its
misuse of the work product and intellectual property of Speed as a result of Sapido 's sale of the
Sapido branded CDs and DVDs in the United States."
ffih if 13).
These allegations appear to implicate several claims that Plaintiffs alleged in their original
Complaint: the Fourth (Defendants unjustly enriched themselves at Plaintiffs' expense by
misappropriating Speed's intellectual property), the Sixth (Defendants converted Speed's
intellectual property), the Seventh (that Defendants breached their fiduciary duty to Plaintiffs), the
Eighth (that Defendants breached the March 2010 Distribution Agreement), the Ninth (that
Defendants breached an implied contract following the expiration of the March 2010 Distribution
Agreement), and the Tenth and Eleventh Counts (that Defendants breached both the explicit terms
and the implied covenant of good faith and fair dealing of the Proposed 2011 Agreement).
14
This Court has already dismissed the Fourth, Seventh, and Eighth Counts for lack of
personal jurisdiction. The allegations regarding the sale of CD's and DVD's do not, as they are
currently pled, give rise to theories or a basis for reinstatement of causes of actions dismissed for
lack of personal jurisdiction (as described in more detail below). The Sixth, Ninth, Tenth, and
Eleventh Counts, however, remain viable claims in this matter.
Therefore, the allegations
regarding CD's and DVD's will not be a separate claim, but rather will be added as facts to bolster
these allegations and the damages associated with them. It is "in the interests of justice" to allow
Plaintiffs' to amend their Complaint to add facts regarding the alleged sales of CD's and DVD's
based on the newly discovered information. See Voilas et al., 173 F.R.D. at 396.
b. New Claims Against CNET
Defendants oppose Plaintiffs' new claim against third party CNET for similar reasons.
Defendants maintain that a significant amount of time has passed since the original Complaint was
filed and that Plaintiffs' "desire to add CNET as a party is not based upon genuinely new
information." (Defs. Opp. Br., ECF No. 64, at 4-5). Additionally, Defendants contend they will
suffer further prejudice if CNET is added because CNET will have the right to serve Defendants
with discovery and bring additional claims against them.
ilib at 4).
Plaintiffs argue, however, that
delay is justified because, upon serving CNET with a subpoena in March of 2015, CNET
responded in such a way that "misled plaintiffs into believing CNET USA was not the CNET that
used their work product and intellectual property." (Pis. Rep. Br., ECF No. 65, at 6).
Plaintiffs assert that the evidence supporting their new claims against CNET was not
discovered until September of2015. (Eichhorn Cert., ECF No. 61-4, 1[ 19). Plaintiffs allege that,
during the exclusive relationship between Speed and Sapido, Sapido improperly transferred
Speed's work product and proprietary information to CNET Technology (Taiwan). (Mb 1[ 11).
15
Plaintiffs also assert that CNET Technology then utilized Speed's firmware and work product to
sell Sapido routers through CNET USA. (Id. ~ 20).
In the original Complaint filed on May 21, 2012, Plaintiffs alleged that Sapido breached
the exclusive distribution agreement with Speed by distributing products through CNET. (Compl.,
ECF No. 1,
~~
55-65). Through internet research, Plaintiffs discovered that CNET sold Sapido
routers to a Speed customer in February of201 l. (Eichhorn Cert., ECF No. 61-4, 119). Plaintiffs
contend that FCC documents "reveal that the routers being sold by CNET USA in San Jose, are
the same as the Sapido routers (accept for brand label) that Plaintiffs were selling on behalf of
Sapido as its exclusive distributor."
(Id.~
16). Before analyzing the proposed amendment adding
claims against CNET under Rule 15, this Court must determine if Plaintiffs have satisfied the good
cause standard of Rule 16.
While Plaintiffs assert that they discovered new information regarding CNET in September
of 2015, (Eichhorn Cert., ECF No. 61-4,
~
19), they were aware of CNET's involvement at the
time the original Complaint was filed. There, Plaintiffs asserted that CNET and Sapido shared a
CEO and that Sapido used CNET to distribute products in breach of the exclusive distribution
contract. (Compl., ECF No. 1, iMf 55-65). Plaintiffs contend that they "thought that the CNET
located in San Jose, California, was the same CNET located in Taiwan, and in March 2015 sent a
subpoena to the CNET located in San Jose." (Eichhorn Cert., ECF No. 61-4,
~
13). Plaintiffs
further argue that CNET's attorney gave the impression that CNET USA "had no relationship to
Sapido, or the claims of plaintiffs." (Eichhorn Cert., ECF No. 61-4, ~ 14).
Regardless of what CNET's attorney suggested, Plaintiffs had the opportunity to exercise
due diligence and conduct research that would have revealed the same findings prior to the
February 13, 2015 deadline. Unlike the claim for CD's and DVD's, Plaintiffs were aWa.re of
16
CNET's connection to the litigation and could have discovered this information much sooner. As
such, this Court finds that Plaintiffs have not demonstrated sufficient diligence to satisfy' good
cause for claims against CNET pursuant to Federal Rule of Civil Procedure 16. This Court shall
not, therefore, permit the proposed amendments against CNET, especially in light of the alternative
forum available to address such grievances.
c. Claims Previously Dismissed
Defendants accurately state that Plaintiffs' proposed Amended Complaint does not
"properly reflect that the First, Second, Third, Fourth, Fifth, Seventh, Eighth, Twelfth, and
Thirteenth Counts of the Complaint were dismissed for lack of personal jurisdiction." (Defs, Opp.
Br., ECF No. 64, at 6). Defendants request that if this Court grants Plaintiffs' motion to atnend,
Plaintiffs Amended Complaint should be altered to "reflect the law the Court's previous rulings."
(Id. at 5).
Plaintiffs argue, however, that they should be permitted to add the
claim~
which were
previously dismissed for lack of personal jurisdiction because if the newly discovered information
had been known at the time of the ruling, "the issue of personal jurisdiction would have likely been
decided differently." (Pis. Rep. Br., ECF No. 65, at 7). At the time the motion to dismiss was
adjudicated, the record indicated that Defendant Sapido Taiwan's American sales represented only
a small percentage of its total business. (See Sun Rep. Deel., ECF No. 41, ~ 1) (declaring that, in
recent years, Sapido Taiwan's U.S. sales accounted for only 3.2% (2010), 5.4% (2011) and 1.9%
(2012) of the company's worldwide sales). Plaintiffs now allege that Sapido Taiwan's sales in the
United States are "l 000% greater than the $357 ,464 in sales that the Sapido defendants had advised
at the time of their motion to dismiss." (Pis. Rep. Br., ECF No. 65, at 7).
17
Plaintiffs, however, do not provide the Court with sufficient analysis regarding the reinstatement of the claims previously dismissed. Notably, Plaintiffs, and not this Court, bear '"the
burden of demonstrating that the defendants' contacts with the forum state are sufficient to give
the court in personam jurisdiction.' These contacts must be shown 'with reasonable particularity."'
Wellness Publ'g v. Barefoot, 128 F. App'x 266, 269 (3d Cir. 2005). In issuing its Report and
Recommendations, this Court went through a lengthy claim by claim analysis with regard to
personal jurisdiction because . (ECF No. 46). Plaintiffs have not made any such effort here.
Plaintiffs simply state that this Court "would have likely []decided differently," yet provide no
arguments or analysis to support their contention. (Pls. Rep. Br., ECF No 65, at 7). This court
will not undertake Plaintiffs' burden of demonstrating personal jurisdiction a second time.
Plaintiffs' Amended Complaint will, therefore, properly reflect the previous rulings in this ease.
IV.
CONCLUSION
Based on the foregoing, Plaintiffs' Motion for Leave to File an Amended Complaint, (ECF
No. 61), is GRANTED in part and DENIED in part. An appropriate form of Order accompanies
this Opinion.
cc:
Hon. Jose L. Linares, U.S.D.J.
18
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