PTT, LLC v. GIMMIE GAMES et al
OPINION re 171 MOTION to Amend/Correct First Amended Complaint filed by HIGH 5 GAMES, LLC. Signed by Magistrate Judge Mark Falk on 1/24/17. (LM, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
HIGH 5 GAMES, LLC,
f/k/a PTT, LLC,
Civil Action No. 13-7161 (JMV)
DANIEL MARKS; JOSEPH MASCI;
BRIAN KAVANAGH; MARKS STUDIO
LLC d/b/a GIMMIE GAMES;
ARISTOCRAT TECHNOLOGIES, INC.,
JOHN SMITH(s) 1-7; and XYZ
Before the Court is Plaintiff’s motion for leave to file a second amended
complaint. [ECF No. 171.] The motion is opposed. No argument is necessary. Fed.
R. Civ. P. 78(b). For the reasons stated below, Plaintiff’s motion is GRANTED.
Plaintiff—High Five Games, LLC (at times, “H5G”)—develops, among other
things, slot machine games for the casino gaming industry. This case involves two
This section is drawn from the briefs and papers submitted. Citations are omitted.
The background is limited to that which is necessary to decide the motion; additional
discussion can be found in prior Opinions. See PTT v. Gimmie Games, No. 13-7161,
2014 WL 5343304 (D.N.J. Oct. 20, 2014).
H5G-developed gaming methodologies and inventions known as “Super Symbols”
and “Super Stacks.” Defendants Daniel Marks, Joseph Masci and Brian Kavanagh
were prior employees of H5G (the “individual defendants”) and allegedly privy to
confidential information during their employment. During the time period in which
H5G was developing Super Symbols and Super Stacks, Marks resigned from H5G and
founded Defendant Marks Studios, LLC (d/b/a “Gimmie” Games). Marks then hired
Masci and Kavanagh as Chief Creative Officer and Director of Motion Graphics,
In 2013, at a gaming industry convention, H5G discovered that another large
game distributor—Defendant Artistocrat Technologies—was featuring two of
Gimmie’s games called “Mega Symbols” and “Max Stacks,” which had the same look
and feel as Super Symbols and Super Stacks. H5G alleges that Artisocrat had
received these games and/or features by working with the other Defendants who had
misappropriated H5G’s trade secrets.
On November 26, 2013, H5G filed its initial Complaint in this Court, alleging
trademark infringement, unfair competition, and breach of contract. H5G asserted that
Marks, Masci, and Kavanagh breached their contractual obligations to H5G by
utilizing H5G’s confidential, proprietary, and trade secret information relating to its
“Super Symbols” and “Super Stacks” games. H5G further alleged that Gimmie,
Marks, Masci, and Kavanagh used H5G’s confidential information relating to the two
games and then unfairly competed with H5G by creating, marketing, and selling
games to companies in the gaming industry (including Aristocrat) under the “Mega
Symbols” and “Max Stacks” names.
On July 1, 2014, H5G filed a first amended complaint, which added a patent
infringement claim against Aristocrat claiming infringement of U.S Patent No.
8,734,223 (the “‘223 patent”). The ‘223 patent was issued on May 27, 2014, and
covers H5G’s “Super Symbols” invention.
On February 25, 2016, the case was reassigned to the Honorable John M.
Since being assigned to the case, I have held nine (9) conferences. Many of
these conferences were scheduled to address basic discovery and case management
disputes that probably should have been resolved without the need for courtintervention.
On or about October 18, 2016, H5G advised that, based on Defendants’ recent
production of 500,000 pages of documents, it would be seeking leave to amend its
complaint a second time.
On or about November 29, 2016, Plaintiff was instructed to circulate a
proposed, amended complaint and determine whether Defendants would consent to its
On December 6, 2016, Defendants declined to consent to Plaintiff’s request to
On December 23, 2016, Plaintiff filed a formal motion for leave to file a
second amended complaint. The proposed amendments are:
(1) to assert trade secret misappropriation and unfair competition claims against
Defendant Aristocrat (these claims are currently asserted only against the individual
defendants and Marks Studios);
(2) to assert breach of contract, tortious interference, and breach of good faith
and fair dealing claims against Marks and Aristocrat (breach of contract claims are
already pending against the individual defendants);
(3) to assert a new patent infringement claim against Marks Studios and
Aristocrat, arising out a second patent issued in May 2015 covering the Super Stacks
invention (U.S. Patent No. 9,022,852 (the “‘852 patent”); and
(4) to assert trade secret misappropriation under New Jersey common law and
the Defend Trade Secrets Act, 18 U.S.C. § 1836 et seq.
On January 11, 2017, Defendants opposed the motion to amend, arguing that
Plaintiff has unduly delayed in seeking to amend its Complaint; failed to show good
cause for the amendment pursuant to Rule 16; that the amendment would cause them
unfair prejudice and delay the case; and that some of the claims are futile.
1. Rule 15 vs. Rule 16
The parties dispute whether H5G is required to show “good cause” under
Rule 16(b) to file its second amended complaint or whether the analysis should be
controlled by the general and liberal Rule 15 principles.
Defendants’ position is that deadline for the amendment of pleadings should
have been November 14, 2016, because it was the date the parties allegedly agreed-to
and was placed in a proposed scheduling order that was submitted to the Court
(although it was never entered due to ongoing discovery and scheduling issues), see
ECF No. 147. Because H5G did not file its motion until December 23, 2016,
Defendants contend that Plaintiff should be required to show “good cause” before
being permitted to file an amended complaint.2
H5G counters that Rule 15 alone should apply. H5G’s position is a practical
one: the parties had been involved in nearly two years of preliminary discovery and
scheduling problems, and the parties had different proposed provisions for another
amended scheduling order, including the deadline for amending pleadings.
The Court will apply Rule 15. There is no need for H5G to show good cause
under Rule 16 based on the circumstances of this case. The supposed “November
deadline” is not a true deadline because the proposed order was never entered.
Moreover, the scheduling order has repeatedly been extended with the involvement
Rule 16(b)(4) provides in relevant part: “A schedule may be modified only for good
cause.” Good cause largely depends on the diligence of the moving party. Harrison
Beverage Co. v. Dribeck Importers, Inc., 133 F.R.D. 463, 469 (D.N.J. 1990). To
establish good cause, the movant must show that “despite its diligence, it could not
reasonably have met the scheduling order deadline.” Hutchins v. United Parcel
Service, No. 01-1462, 2005 WL 1793695, at *3 (D.N.J. July 26, 2005). What will
constitute “good cause” to warrant modification “necessarily varies with the
circumstances of each case.” 6A Alan Wright et al., Federal Practice & Procedure §
1522.2, at 313 (3d ed. 2010). The Court therefore has “great discretion in determining
what kind of showing the moving party must make in order to satisfy the good cause
requirement of Rule 16(b).” Thoman v. Philips Med. Sys., No. 04-3698, 2007 WL
203943, at *10 (D.N.J. Jan. 24, 2007) (citing 3 James W. Moore et al., Moore's
Federal Practice § 16.14[b] (3d ed.1997)). A request to file an amended pleading
after a deadline contained in a scheduling order generally implicates Rule 16(b).
See Dimensional Commc’n Inc. v. Oz Optics, Ltd., 148 Fed. Appx. 82, 85 (3d Cir.
and consent of both parties. And there have been prolific delays and disputes over
scheduling and discovery in this case that have made the entry of a basic scheduling
order difficult.3 Indeed, it seems undisputed that in October 2016, more than three
years into the case, Plaintiff received 500,000 pages of documents. It seems
reasonable to allow some time to completely review those documents before rushing
to amend the complaint. This is especially so because fact discovery has been
extended until March 31, 2017, and it has always been the Court’s contemplation that,
as in nearly every case, the deadline for the amendment of pleadings should be near
the close of fact discovery. See, e.g., In re L’Oreal, No. 12-3571, 2015 WL 5770202,
at *2 (D.N.J. Sept. 30, 2015) (Falk, J.) (“The contemplation in preparing the original
scheduling order was to have the amendment deadline close to the deadline for the
close of discovery.”).
Finally, the concept of an amended complaint was informally raised with the
Court in mid-October 2016 following Defendant’s document production—prior to
Defendants’ un-entered November 14 deadline. Therefore, Defendants were clearly
on notice that such a motion would be coming. More important, Plaintiff was directed
that, prior to filing a formal motion to amend, it should circulate the proposed
amended complaint to see if there would be consent. Thus, to the extent H5G did not
Specifically, prior to the Court’s recent entry of a scheduling order on January 11,
2017, the Court had requested a proposed case management order on four separate
occasions. Moreover, as evidence of the discovery history in this case, the District
Judge recently appointed a Special Master to handle ongoing disputes.
formally meet the scheduling order deadline (again, which was never entered), part of
the reason may have been compliance with the Court’s attempts to resolve the issue
without the need for a formal motion, a practice endorsed by the Court’s Local Civil
Rule 15 Standard
Rule 15 provides that once a responsive pleading has been filed, “a party may
amend its pleadings only with the opposing party’s written consent or the court’s
leave.” Fed. R. Civ. P. 15(a)(2). Leave to amend is generally granted unless there is:
(1) undue delay or prejudice; (2) bad faith; (3) dilatory motive; (4) failure to cure
deficiencies through previous amendment; or (5) futility. Foman v. Davis, 371 U.S.
178, 182 (1962). The ultimate decision to grant or deny leave to amend is a matter
committed to the court’s sound discretion. See, e.g., Zenith Radio Corp. v. Hazeltine
Research, Inc., 401 U.S. 321, 330 (1970). The Third Circuit has “made clear that
there is to be a liberal use of Rule 15 to amend complaints so as to state additional
Even if the Court were to apply Rule 16, the amendment would still be appropriate,
as Plaintiff has shown sufficient good cause, including: the entire lengthy and
contentious discovery history in the case; the length of time occupied by discovery
and scheduling delays in this case, which eroded the discovery period and delayed the
exchange of information; the alleged revelations in 500,000 pages of documents that
Defendants served in October 2016, which had to be reviewed before the proposed
amendment could be brought; and the Court’s directive that the parties attempt to
informally discuss the concept of amendment prior to filing a formal motion. The
Court has “great discretion” in determining “good cause” in a particular case, see, e.g.,
Thoman, 2007 WL 203943, at *10. Given the Court’s long standing involvement in
the case and first hand observation of the proceedings, the Undersigned is satisfied
that the above constitutes ample good cause.
causes of action.” Leased Optical Dep’t, Inc. v. Opti-Center, Inc., 120 F.R.D. 476,
479 (D.N.J. 1988) (quotes omitted).
“Prejudice to the non-moving party is the touchstone for the denial of an
amendment.” Lorenz v. CSX Corp., 1 F.3d 1406,1414 (3d Cir. 1993). Incidental
prejudice is insufficient grounds on which to deny leave to amend. See In re
Caterpillar, Inc. , 67 F. Supp. 3d 663, 668 (D.N.J. 2014). Prejudice is generally
evaluated by looking at whether the amendment would: (1) require the non-moving
party to expend significant additional resources to conduct discovery and prepare for
trial; (2) significantly delay the resolution of the dispute; or (3) prevent the nonmoving party from bringing a timely action in another forum. See, e.g., Long v.
Wilson, 393 F.3d 390, 400 (3d Cir. 2004).
Defendants will not suffer unfair prejudice as a result of the amendment. First,
discovery is ongoing and no dispositive motions have been filed. The new claims are
limited, and essentially amount to adding additional defendants to claims that are
already in the case; no new parties are being added. While the parties have a
discovery end-date in March, it is unclear how realistic that date is, given that no
depositions have been taken in the case. The amendment may result in some
additional discovery, but even that is not clear and seems disputed. Regardless, the
fact that no depositions have been held, and thus the amendment will not cause any
party or witness to be deposed twice, suggests that no undue prejudice could result
from re-ordering and expanding certain of the claims. Nor does the proposed
amendment add dramatically new subject matter to the case. The theories in the
amended complaint involve the same general allegations, even if the allegations are
used to support slightly different claims. While this may require some additional
paper discovery, that does not amount to undue prejudice warranting denial of leave to
Second, the new patent claim arising out of the ‘852 patent will not cause
unfair prejudice. All concede that the new patent claim will add additional discovery
and age to the proceedings. However, even that claim will not realistically delay
resolution of the case. This case is a long way from conclusion, regardless of any
amendment. Moreover, it would not make sense, from a judicial economy
perspective, to have the new patent claim proceed as a second case. It would require a
new docket, with perhaps a new judge, delving into a dispute that really belongs
together. Given the overlap in allegations and parties and the interconnectedness of
the dispute in this case, it is hard to envision a scenario where severance makes sense.
While the new patent claim may result in some delay, it is not enough to find undue
prejudice warranting denial of the motion to amend.
No Undue Delay
“Delay alone . . . is an insufficient ground to deny an amendment, unless the
delay unduly prejudices the non-moving party.” Cornell & Co., Inc. v. Occupational
Safety & Health Review Comm’n, 573 F.2d 820, 823 (3d Cir. 1978); Boileau v.
Bethlehem Steel Corp., 730 F.2d 929, 938 (3d Cir. 1984) (district court erred in not
permitting amendment 10 years after original complaint when there was no
demonstrated prejudice). Delay is only undue when it places a burden on the Court or
causes prejudice to the non-moving party. Marlowe Patent Holdings v. Dice
Electronics, LLC, 293 F.R.D. 688, 695 (D.N.J. 2013).
Delay is not a serious impediment to amendment. As has already been
explained, the amendment will not cause Defendants to suffer any undue prejudice.
The absence of prejudice renders any arguable delay materially irrelevant. Moreover,
the motion is not brought on the eve of trial or after Defendants have prevailed on a
summary judgment motion. Indeed, at most, Defendants claim approximately a
month and a half of delay from November 14, 2016 (the alleged deadline to file
amended pleadings) to December 23, 2016 (when the motion was filed). Forty-five
days of “delay” in a case that is nearly 4-years-old is insignificant when viewed
through the prism of the case at large, which contains large periods of delay
attributable to both sides. Despite the age of the case, the fact is H5G brought its
motion to amend relatively early in the proceedings—before document discovery was
complete; before any depositions were held; before summary judgment motions were
filed; and before any Markman proceeding was held.
The Amendment is Not Clearly Futile
The futility analysis on a motion to amend compares to a Rule 12(b)(6) motion.
See In re NAHC, Inc. Sec. Litig., 306 F.3d 1314, 1332 (3d Cir. 2002) (“An
amendment would be futile when ‘the complaint, as amended, would fail to state a
claim upon which relief could be granted.’”). For a complaint to survive dismissal, it
“must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that
is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662 (2009) (citing Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570, (2007)). Given the liberal standard for the
amendment of pleadings, “courts place a heavy burden on opponents who wish to
declare a proposed amendment futile.” Pharmaceutical Sales and Consulting Corp. v.
J.W.S. Delavau Co., Inc., 106 F. Supp. 2d 761, 764 (D.N.J. 2000) (citations omitted).
Although tracking Rule 12(b)(6), Rule 15 futility does not contemplate substantive
motion practice on the merits of the claims:
If a proposed amendment is not clearly futile, then
denial of leave to amend is improper. This does not
require the parties to engage in the equivalent of
substantive motion practice upon the proposed new
claim or defense; [it] does require, however, that the
newly asserted defense appear to be sufficiently wellgrounded in fact or law that it is not a frivolous pursuit.
Harrison Beverage Co. v. Dribeck Importers, Inc., 133 F.R.D. 463, 468 (D.N.J.1990)
(emphases added) (citations omitted); see also 6 Wright, Miller & Kane Federal
Practice and Procedure, §1487 (2d ed. 1990). Effectively, this means that the
proposed amendment must be “frivolous or advance a claim or defense that is legally
insufficient on its face . . . .” Marlowe Patent Hold., 293 F.R.D. at 695.
Defendants claim that Plaintiff’s unfair competition claims are preempted and
futile because they are based on alleged patent infringement; that Plaintiff’s noncompete claims fail because Mr. Marks allegedly did not compete with H5G during
the relevant period and merely was involved in “laying the groundwork” for future
employment; and finally, that Plaintiff’s Defend Trade Secrets Act claim is futile
because it is supposedly based entirely on acts that occurred prior to its enactment on
May 11, 2016.
There is no clear futility in this case. Clear futility refers to patently frivolous
or prohibited claims—e.g., a claim barred by the statute of limitations. That is not the
case with H5G’s claims. For example, H5G claims that the non-compete claim is
based on an allegation that Marks was competing against H5G during the relevant
time period, not merely “laying groundwork” for future employment. This is a fact
dispute that is not susceptible to an amendment analysis.
The same can be said for the various trade secret and unfair competition claims.
Both groups of claims contain fact disputes about the nature of the trade secrets, when
they were disclosed, and whether they were published in an abandoned patent
application in 2012. As the briefing shows, these claims are lathered in fact disputes
that are inappropriate to conclusively resolve in the context of a motion to amend.
Amendment to the pleadings is a fairly basic practice that does not rise to the level of
dispositive motion practice. And delving into the morass of fact questions inherent in
these claims usurps dispositive motion practice and amounts to making embedded
factual findings and dispositive decisions in the non-dispositive amendment context.
Finally, the Court does not find Plaintiff’s Defend Trade Secrets Act (“DTSA”)
claim futile on what has been presented. Defendants are correct that courts have
dismissed DTSA claims when the alleged conduct occurred prior to enactment of the
statue. See, e.g., Dazzle Software v. Kinney, No. 16-12191, 2016 WL 6248906, at *1
(E.D. Mich. Aug. 22, 2016). However, as certain courts have explained, the issue may
not be that straightforward, as there are different theories available under the statute,
including consideration of continuing post-enactment conduct. See, e.g., Adams
Arms, LLC v. Unified Weapons Sys., No. 16-1503, 2016 WL 5391394, at *5-7 (M.D.
Fla. Sept. 27, 2016). The parties do not sufficiently examine this issue in the briefing,
and deeming the claim clearly futile at this time seems premature based on what has
been presented, including allegations of continuing misappropriation of trade secrets.
(See Proposed Second Amended Complaint, ¶ 140 (“Marks Studios and Aristocrat
acquired and/or used, and continue to acquire and/or use . . . .” (emphasis added)).)
To the extent any claim is viable under this statute, it will depend on the adequacy and
specificity of the allegations in the pleading, which is more appropriate for a full Rule
12(b)(6) motion, not a Rule 15 motion to amend.
Some of Plaintiff’s claims seem somewhat adventurous, and some may
ultimately fail. However, for purposes of this motion and Rule 15, the Court is not
able to conclude that any of Plaintiffs’ claims are clearly futile. Harrison Beverage
Co., 133 F.R.D. at 468.
For the reasons stated above, Plaintiff’s motion to amend [ECF No. 171] is
United States Magistrate Judge
DATED: January 24, 2017
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