PTT, LLC v. GIMMIE GAMES et al
Filing
316
OPINION re 242 MOTION for Leave to File Third Amended Complaint filed by HIGH 5 GAMES, LLC. Signed by Magistrate Judge Mark Falk on 5/9/18. (LM, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
HIGH 5 GAMES, LLC,
f/k/a PTT, LLC,
Plaintiff,
v.
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
COMPANIES 1-7,
OPINION
Defendants.
FALK, U.S.M.J.
Before the Court is Plaintiff’s motion for leave to file a third amended
complaint. [ECF No. 242.] The motion is opposed. No argument is necessary. Fed.
R. Civ. P. 78. For the reasons stated below, the motion is GRANTED.
BACKGROUND1
Plaintiff—High Five Games, LLC (at times, “H5G”)—develops, among other
things, slot machine games for the casino gaming industry. The case involves two
This section is drawn from the papers submitted and from prior opinions in the case.
See, e.g., PTT v. Marks, 2017 WL 349375 (D.N.J. Jan. 24, 2017); PTT v. Gimmie
Games, 2014 WL 5343304 (D.N.J. Oct. 20, 2014). Citations are omitted. The
background is limited to what is necessary to decide the motion.
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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 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, respectively.
In 2013, at a gaming industry convention, H5G discovered that another large
game distributor—Defendant Artistocrat Technologies—was featuring two 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
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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.
Vazquez, U.S.D.J. The Undersigned was assigned case management responsibility.
Since being assigned to the case, I have held ten (10) conferences. Many of
these conferences were scheduled to address complex case management and discovery
disputes. The parties appear to dispute every issue, procedural and substantive,
endlessly.2 As a result, on January 18, 2017, after repeated disputes and timeconsuming attempts to resolve them, the Court appointed the Honorable Dennis M.
Cavanaugh, U.S.D.J. (ret.) as a Special Discovery Master.
On January 24, 2017, H5G was granted leave to file a second amended
complaint, which was based on the production of 500,000 documents
This has been the case since the Complaint was filed. In fact, the parties spent
nearly a year arguing over whether trade secrets placed in the Complaint had been
sufficiently identified and whether Defendants were also required to disclose their
own trade secrets. This, despite a prior Magistrate Judge entering a clear order on the
subject. And the discord continues to the present. For example, at this time, there is
is a motion by Plaintiff to disqualify Defendants’ counsel; a motion to quash a thirdparty subpoena; a motion to strike infringement contentions; a motion for leave to file
amended infringement contentions; and an appeal of the Special Master – all pending.
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in October 2016. This amendment added certain trade secret misappropriation and
unfair competition claims, as well as patent infringement claims relating to a second
patent, the ‘852 patent.
On February 27, 2017, Defendant moved to dismiss the second amended
complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).
On August 9, 2017, Jon Fallon, Esq., General Counsel for H5G (but not
counsel of record for H5G in this case), filed a motion for a temporary restraining
order and for a preliminary injunction, arguing that Defendant Marks was improperly
filing patent applications with the USPTO covering inventions that Marks invented
while employed by H5G, which he claimed made H5G the rightful owner.
On September 7, 2017, District Judge Vazquez heard the TRO and preliminary
injunction motion, which was denied. However, at the hearing, H5G informed Judge
Vazquez that it was contemplating filing a motion for leave to file a third amended
complaint, seeking to join to the case some of the issues relating to the allegedly
improper USPTO applications. In response, Judge Vazquez allowed H5G to file a
motion to amend.
On November 11, 2017, H5G filed the present motion to amend. The motion
proposes amending the Complaint to include claims based on (1) the issues discussed
in the August and September injunction proceedings; and (2) discovery provided in
mid-to-late 2017. The crux of the amendment is to bring in certain Aristocrat-related
parties and claims. Most of the Aristocrat-related parties have been mentioned during
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the prior proceedings and are not entirely new or foreign entities. Indeed, Plaintiff
refers to these parties as having “overlapping businesses and executives” with the
current Aristocrat defendants. (Pl.’s Br. 4.) According to the redlined proposed
pleading accompanying the motion, the following specific amendments are proposed:
With respect to new parties:
•
•
•
•
Product Madness, Inc., an Aristocrat Technologies “affiliate company” that has a
contractual relationship with Marks Studios and Aristocrat to deploy games
through social media-related casino platforms;
Grant Bolling, a former H5G employee who now works for Aristocrat and is
alleged to have discussed and disclosed H5G trade secrets and inventions to his
new employer;
Aristocrat Technologies Australia PTY Ltd., the entity listed on the USPTO patent
application that was the subject of the TRO; and
Aristocrat Leisure Ltd., the “parent company alter ego of the current Aristocrat
defendants, “all of whom have overlapping businesses and executives.”
With respect to new claims, the pleading includes:
•
•
•
•
Indirect infringement claim against Product Madness relating to the ‘223 patent;
Indirect infringement against all company defendants with respect to the ‘852
patent;
Breach of contract against existing party Aristocrat Technologies;
As it relates to the alleged wrongful patent applications, claims for Declaratory
Judgment of Owner of Intellectual Property Rights; Conversion; Unfair
Competition; Breach of Contract; Unjust Enrichment; and Constructive Trust.
On December 4, 2017, Defendants opposed the motion, 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 unfair prejudice
and delay the case; and that the amendments are futile.
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DISCUSSION
A.
Legal Standard3
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 to be freely granted unless there
is undue delay or prejudice, bad faith or dilatory motive, failure to cure deficiencies
through previous amendment, or 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 causes of action.”
Leased Optical Dep’t, Inc. v. Opti-Center, Inc., 120 F.R.D. 476, 479 (D.N.J. 1988)
(quotes omitted); see also Mullin v. Balicki, 875 F.3d 140 (3d Cir. 2017) (“liberal
amendment regime” aids policy “favoring resolution of cases on their merits”).
Defendants contend in their brief that Rule 16(b)’s “good cause” standard should
apply to Plaintiff’s motion. This argument is premised on a proposed amendment
deadline in an old, proposed scheduling order that was never entered by the Court.
Defendants made the identical arguments based on the same un-entered scheduling
order in response to Plaintiff’s motion for leave to file a second amended complaint –
and the Undersigned explained, at length, why that argument fails in the context of
this case. See 2017 WL 349375, at *2-4. For the same reasons, which are
incorporated herein, it fails again. Simply put, there is no operative scheduling order
and no time limit or outer bound on when motions to amend must be filed. Any claim
based on a long outdated scheduling order entered years ago is illusory. The Court
will apply Rule 15 to Plaintiff’s motion. Id.
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B.
Analysis
1.
No Prejudice
“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).
The Court finds no genuine or unexpected prejudice that will result from this
amendment. The progress of the case does not match the age of the case. Though the
case has been pending for a number of years, it is effectively at square one. This is
unfortunate, but it is the fact. There is no operative scheduling order in the case and
the parties continue to fight nearly all discovery issues and are being guided by a
Special Master. Depositions have not begun. Dispositive motions have not been filed
and are a long way off. No trial date has been set. The parties continue to blame each
other for obstructionist discovery behavior and there is still much to be accomplished.
While the amendment will introduce some slightly different theories and subjects into
the case – e.g., the declaratory judgment of patent ownership question – even the new
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claims still involve the same general parties and issues. While the amendment may
cause Defendants to expend some additional resources to defend the case, it is not
necessarily so. And it is quite likely the same resources would be required to defend
the amended claims if brought as a separate action, which is likely. Furthermore,
given the difficult history and the current stage of the case, the Court does not believe
the amendments would significantly delay resolution of the dispute.
2.
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).
When opposing Plaintiff’s motion for leave to file a second amended
complaint, Defendant advanced nearly the same concerns about delay. What was said
then still applies today:
Delay is not a serious issue in this case. 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
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prevailed on a summary judgment motion. . . . [D]espite 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.
2017 WL 349375, at *4.
All of this begs the question whether any delay here was justified. The parties
take different positions on the subject, each making some valid points. But due to the
contentiousness of the proceedings, the production of millions of documents and
ongoing discovery, the Court is unpersuaded that there was any undue delay. More
importantly, the motion to amend was brought relatively quickly after the basic issues
were brought before Judge Vazquez on a motion for a preliminary injunction—and
following Judge Vazquez giving Plaintiff express permission to file the current
motion.
3.
No Futility
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
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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’ futility arguments are brief and not fully articulated. Defendants
have not established the claims are futile, much less clearly futile. In addition, for the
patent declaratory judgment claims, Defendants claim the patent venue statute and
personal jurisdiction are impediments to the claim, supposedly rendering them futile.
However, these are certainly not “clear futility” questions. Whether a party is subject
to personal jurisdiction may involve jurisdictional discovery. Whether a pleading is
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adequate is a pure Rule 12 issue. These are not questions properly tackled in an
undeveloped opposition to a motion to amend.
4.
Additional Considerations
Judicial efficiency and effective case management are matters that can be
considered in deciding whether amendment should be allowed. Mullin v. Balicki, 875
F.3d 140, 150 (3d Cir. 2017). Mullin is a June 2017-precedential Third Circuit
opinion, with a substantially distinguishable factual scenario, that nevertheless
reaffirmed the liberality with which amendment should be allowed in the interest of
justice. In this four-plus-year-old case, one might think these considerations favor
denial of the amendment. But we suspect the opposite is true.
Despite any delay that would result from adding these parties and claims, it
makes sense for the parties and the Court to allow these parties to litigate all their
issues in one place and with one judge. If the amendment were denied Plaintiff could
simply file a new case with the same contentiousness, the same discovery problems,
the same costs—just under a new docket number. And if a new case were filed, it
would likely be that a party would seek to consolidate the two related-cases. Or at
least have them heard by the same judge. And it would make consummate sense. In
addition, it also seems likely that final resolution or settlement would not be possible
unless both cases resolved or settled. Bottom line; these parties will continue to incur
costs and expenses and the Court will be involved until the universe of their disputes
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are resolved, which again, it makes sense to do in one place and at one time. An
additional practical reason to grant amendment.
CONCLUSION
For the reasons set forth below, Plaintiffs’ motion for leave to file a third
amended complaint [ECF No. 242] is GRANTED.
s/Mark Falk
MARK FALK
United States Magistrate Judge
Dated: May 9, 2018
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