Mercury Luggage Manufacturing Company v. Domain Protection LLC

Filing 132

MEMORANDUM OPINION AND ORDER: The Court GRANTS Plaintiff Mercury Luggage's Motion for Leave to File Second Amended Complaint [Dkt. No. 122 ]. (Ordered by Magistrate Judge David L. Horan on 1/6/2022) (mcrd)

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IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
MERCURY LUGGAGE
MANUFACTURING COMPANY,
a Florida corporation,
Plaintiff,
V.
DOMAIN PROTECTION, LLC, a
Texas limited liability company,
Defendants.

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No. 3:19-cv-1939-M-BN

MEMORANDUM OPINION AND ORDER
This case has been referred to the undersigned United States magistrate judge
for pretrial management under 28 U.S.C. § 636(b) and a standing order of reference
from Chief Judge Barbara M. G. Lynn. See Dkt. No. 131.
Plaintiff Mercury Luggage Manufacturing Company (“Mercury Luggage”)
seeks leave to file a First Amended Complaint to add an additional party. See Dkt.
No. 122. Defendant objects to the amendment.
For the reasons and to the extent explained below, the Court GRANTS
Mercury Luggage’s Motion for Leave to File First Amended Complaint [Dkt. No. 122].
Background
Mercury Luggage sued Defendant Domain Protection, LLC (“Domain
Protection Texas”) in August 2019, alleging violations of the Anticybersquatting
Consumer Protection Act, 15. U.S.C. § 1125(d) and seeking to recover
sewardtruck.com (“the Domain”) from the current registrant. The initial discovery
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period concluded on July 10, 2020, and the deadline for joinder of parties and to
amend the pleadings expired on April 2, 2020. But, on January 29, 2021, Domain
Protection Texas stated, purportedly for the first time during the nearly year-and-ahalf-long proceedings, that it does not control the Domain and that a trial would be
pointless because Domain Protection Texas would be unable to transfer the Domain
to Mercury Luggage if the court ordered it to do so. Finding good cause, the Court
granted Mercury Luggage’s motion to continue trial and reopen discovery for 75 days
to allow Mercury Luggage to attempt to identify who has owned and/or controlled the
Domain since this suit was filed in 2019.
In its proposed Amended Complaint, Mercury Luggage seeks to add, in
addition to Domain Protection Texas, an identically named entity organized under
the laws of Virginia: “Domain Protection Virginia.” Mercury Luggage asserts that
Domain Protection Virginia was formed on the same date as Domain Protection
Texas, by the same organizer, Lisa Katz, who managed both entities through at least
2020 and maintained the principal place of business for both entities in Dallas, Texas.
Mercury Luggage further alleges that, in addition to sharing a manager and principal
place of business, the Domain Protection entities share an attorney and store their
records at that shared attorney’s office.
Mercury Luggage alleges that the registrant of the Domain from at least March
1, 2018 through December 1, 2019, nearly four months after Mercury Luggage
initiated suit, was listed as Domain Protection, LLC, with Lisa Katz listed as the
contact. And, on June 18, 2018 and November 14, 2019, respectively, Domain
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Protection Texas and/or Domain Protection Virginia renewed the Domain’s
registration, and the renewals were sent to, and paid for by, Lisa Katz. On December
1, 2019, the Domain was transferred to a new registrar, Name Silo, LLC, paid for
using a credit card in the name of “L. Katz,” with the same listed address as Domain
Protection Virginia’s registered agent. Mercury Luggage alleges that the Domain’s
nominal registrant listed with Name Silo is RCL Systems but that there is no entity
nor any fictitious name filings with the name RCL Systems registered with the
Virginia Secretary of State. And, according to Mercury Luggage, the registered
agent’s office listed as the contact address for RCL Systems allegedly has no record
of providing services to any entity using that name, and the telephone number listed
for the Domain registrant is the same telephone number for Domain Protection
Defendants’ shared attorney.
Mercury Luggage asserts that, in light of these alleged facts, along with the
purported fact that Domain Protection Texas offered in the course of settlement
negotiations to sell the Domain to Mercury Luggage, “the current registrant and
owner of the Domain is Domain Protection Texas, Domain Protection Virginia, or an
entity that is under the control of the Domain Protection Defendants, their agents,
their owners, or some combination thereof.” Due to the conflicting evidence over who
owned and/or had control over the Domain since the lawsuit was filed in August 2019,
and since the purported transfer in December 2019, Mercury Luggage seeks to amend
its complaint to add Domain Protection Virginia as a defendant “to avoid any further
claims that [it] sued the wrong entity” and to prevent what it characterizes as further
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attempts to “obfuscate the true owners/registrants of the domains in [the Domain
Protection Defendants’] control.”
Legal Standards
Because the standards by which the Court evaluates a motion for leave to
amend the pleadings vary according to whether the motion was filed before or after
the deadline established in the scheduling order, the court must determine, as an
initial matter, whether the motion was filed before or after the deadline. See, e.g .,
Orthoflex, Inc. v. Thermotek, Inc., Nos. 3:11-cv-08700-D & 3:10-cv-2618-D, 2011 WL
4398279, at *1 (N.D. Tex. Sept. 21, 2011) (“Motions for leave to amend are typically
governed by Rule 15(a)(2), or, if the time to seek leave to amend has expired, by Rule
16(b)(4) and then by Rule 15(a)(2).”).
When the deadline for seeking leave to amend pleadings has expired, the Court
must first determine whether to modify the scheduling order under the Fed. R. Civ.
P. 16(b)(4) good cause standard. See S&W Enters., L.L.C. v. SouthTrust Bank of Ala.,
N.A., 315 F.3d 533, 536 (5th Cir. 2003). To meet the good cause standard, the party
must show that, despite her diligence, she could not reasonably have met the
scheduling order deadline. See id. at 535. The Court assesses four factors when
deciding whether to grant an untimely motion for leave to amend under Rule 16(b)(4):
“‘(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.’” Id. at 536 (quoting
Reliance Ins. Co. v. La. Land & Exploration Co., 110 F.3d 253, 257 (5th Cir. 1997)).
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If the movant satisfies Rule 16(b)(4)’s requirements, the court must then determine
whether to grant leave to amend under Fed. R. Civ. P. 15(a)(2)’s more liberal
standard, which provides that “[t]he court should freely give leave when justice so
requires.” FED. R. CIV. P. 15(a)(2); see S&W Enters., 315 F.3d at 536.
When the party is not subject to an expired deadline for seeking leave to
amend, Rule 15(a) requires that leave to amend be granted freely “when justice so
requires.” FED. R. CIV. P. 15(a)(2). Leave to amend is not automatic, Jones v. Robinson
Prop. Grp., L.P., 427 F.3d 987, 994 (5th Cir. 2005), but the federal rules’ policy “is to
permit liberal amendment to facilitate determination of claims on the merits and to
prevent litigation from becoming a technical exercise in the fine points of pleading,”
Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 598 (5th Cir. 1981). The Court “may
consider a variety of factors” when deciding whether to grant 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.” Jones, 427 F.3d at 994. But Rule 15(a) provides a “strong
presumption in favor of granting leave to amend,” Fin. Acquisition Partners, LP v.
Blackwell, 440 F.3d 278, 291 (5th Cir. 2006), and the Court must do so “unless there
is a substantial reason to deny leave to amend,” Dussouy, 660 F.2d at 598; accord
Jebaco Inc. v. Harrah's Operating Co. Inc., 587 F.3d 314, 322 (5th Cir. 2009) (“leave
to amend is to be granted liberally unless the movant has acted in bad faith or with
a dilatory motive, granting the motion would cause prejudice, or amendment would
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be futile”).
Analysis
Neither party disputes that Mercury Luggage’s motion to amend the complaint
is untimely. The deadline for both the amendment of pleadings and joinder of parties
was April 2, 2020. See Dkt. No. 20. Mercury Luggage filed its Motion for Leave to File
Second Amended Complaint on October 11, 2021. And so the Court must determine
whether there is good cause to modify the scheduling order under Federal Rule of
Civil Procedure 16(b)(4).
The first factor requires an explanation for the movant's failure to timely
amend. See S&W, 315 F.3d at 536. Courts have found sufficient explanation in cases
involving developments in applicable law and when new facts become known through
depositions and document production while the case is pending. See Robles v. Archer
W. Contractors, LLC, No. 3:14-cv-1306-M, 2015 WL 4979020, at *3 (N.D. Tex. Aug.
19, 2015); Settlement Capital Corp., Inc. v. Pagan, 649 F. Supp. 2d 545, 566-67 (N.D.
Tex. 2009). Courts have not found sufficient explanation when a scheduling mistake
caused a missed deadline, a party misunderstand a statute, or a party did not
understand the scheduling order. See Regions Bank v. Law Offices of Sherin Thawer,
P.C., No. 3:11-cv-1285-L, 2012 WL 1191850, at *6 (N.D. Tex. Apr. 10, 2012) (denying
a motion to amend because Plaintiff could not identify a “reasonable explanation for
the delay”).
Mercury Luggage explains that it did not request leave to file the amendment
within the deadline set by the original scheduling order because it did not know the
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facts forming the basis of the additional claims asserted in the proposed amended
complaint until after the April 2, 2020 deadline passed. Specifically, Mercury
Luggage contends that Domain Protection Texas asserted its ability to transfer or sell
the Domain to Mercury Luggage multiple times between September 2019 and July
2020. And Domain Protection Texas did not provide its initial disclosures until June
2020 and did not identify Domain Protection Virginia or its purported involvement in
any of its disclosures or in its responses to relevant discovery requests. Domain
Protection Texas also purportedly did not expressly disclaim its ability to transfer
ownership or control of the Domain until January 29, 2021, nearly ten months after
the deadline to amend the complaint had passed.
Because of this history, Mercury Luggage claims that it did not know of
Domain Protection Virginia’s involvement, and thus had no reason to join it as a
party, until September of 2021, when Mercury Luggage deposed the Domain
Protection Defendants’ shared manager Lisa Katz. Mercury Luggage alleges that it
was during that deposition that it was first revealed that Domain Protection Virginia
that held the registration for the Domain in August of 2019 when the lawsuit was
initiated.
Domain Protection Texas argues that Mercury Luggage has known of Domain
Protection Virginia’s existence since at least July 2020 and suggests it is therefore
unreasonable for Mercury Luggage to seek to amend its complaint and join Domain
Protection Virginia a year and a half later. Mercury Luggage acknowledges it has
been aware of Domain Protection Virginia’s existence and, in a July 2020 motion to
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compel, identified Domain Protection Virginia as the entity which may have had
ownership or control over the Domain. See Dkt. No. 24. Mercury Luggage maintains
that it inadvertently conflated the identically named entities in its motion to compel
but explains that it was seeking discovery of an agreement that the entities’ shared
manager, Lisa Katz, entered into for “Domain Protection, LLC” to control a portfolio
of domain names and asserts that it at all times believed Domain Protection Texas
had that agreement in its custody, control, or possession.
The fact that Mercury Luggage was aware, well before the scheduling order
deadline, that Domain Protection Virginia existed, was jointly managed by Domain
Protection Texas’s manager, and similarly held a portfolio of domains that might have
included the sewardtrunk.com domain weighs against allowing it to now amend its
complaint to now join Domain Protection Virginia as a party. But, as a review of the
proceedings in this case make clear, Domain Protection Texas has communicated
with Mercury Luggage and with the Court in a manner that suggested it has
ownership or control over the Domain for years. And, most significantly, new
information regarding the entity that held the registration in August 2019, when
Mercury Luggage initiated this suit, was not divulged until Lisa Katz’s deposition,
which occurred long after the April 2, 2020 deadline. Accordingly, Mercury Luggage
has provided sufficient explanation for why it did not join Domain Protection Virginia
as a party within the timeline set by the original scheduling order, and this factor
does not weigh against granting Mercury Luggage’s motion.
The second factor requires that the Plaintiff identify the importance of the
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untimely amendment. Mercury Luggage argues that the proposed amendment is
“important to secure the just, inexpensive, and speedy determination” of the case,
because Domain Protection Texas’s revelation that it is unable to transfer the Domain
and that Domain Protection Virginia controlled the registration when Mercury
Luggage filed this lawsuit requires that the Domain Protection entity that controls,
or controlled and transferred, the Domain, be added as a party.
As Mercury Luggage points out, given that the purpose of its lawsuit is to
recover the Domain, it is essential that the entity that controlled the Domain’s
disposition at the initiation of this lawsuit and either still controls, or has information
regarding to whom control was transferred, be party to the suit. Conflicting evidence
and a pattern of obfuscation by Domain Protection Texas suggests that one or both of
the Domain Protection entities retains control over the Domain or has improperly
transferred control while this suit has been pending. Mercury Luggage thus argues
that amending the complaint to join Domain Protection Virginia as a party, and, to
the extent one of the Domain Protection entities improperly transferred this power,
adding a claim for violation of the Uniform Fraudulent Transfer Act, is important to
avoid a trial against the wrong party, which would waste the time and resources of
the parties and the Court. The Court agrees and finds that this factor weighs in favor
of granting Mercury Luggage’s motion.
The third and fourth factors require consideration of the potential prejudice
that Plaintiff’s amendment will cause Defendant and whether, if there is potential
prejudice, it may be cured by a continuance. Mercury Luggage argues that Domain
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Protection Texas will not face any prejudice because Mercury Luggage gave ample
notice of its intention to move to add parties and claims if the additional discovery
provided a basis to do so – and any prejudice is easily cured by the current trial status
as no trial date is set and the Court may set the trial with sufficient time for the
parties to conduct necessary discovery associated with the new parties and claims.
Domain Protection Texas points to no prejudice that it would suffer if Mercury
Luggage’s motion is granted. And, where Domain Protection Texas appears to assert
that it is neither the past nor current registrant of the Domain, nor has control over
it such that it could transfer the Domain to Mercury Luggage, adding parties and
claims that may lead to discoverable information to corroborate Domain Protection
Texas’s lack of relevant involvement in this suit would be beneficial, not prejudicial.
And, again, the current status of the trial means that no continuance is needed.
Accordingly, the third and fourth factors weigh in favor of granting Mercury
Luggage’s motion.
Considering the four factors as a whole, Mercury Luggage has met its burden
to establish “good cause” to modify the scheduling order deadlines and permit an
untimely amendment to its complaint. Having satisfied the requirements of Rule
16(b)(4), the Court “now decides under the Rule 15(a) standard whether leave to
amend should be granted.” Harrison, 2016 WL 3612124, at *4 (citing S&W Enters.,
315 F.3d at 536). And none of the factors that stand in the way of freely giving leave
to amend under Rule 15(a) – “such as undue delay, bad faith or dilatory motive on
the part of the movant, repeated failure to cure deficiencies by amendments
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previously allowed, undue prejudice to the opposing party, and futility of
amendment,” id. (citing Wimm v. Jack Eckerd Corp., 3 F.3d 137, 139 (5th Cir. 1993))
– are present here.
Conclusion
The Court GRANTS Plaintiff Mercury Luggage’s Motion for Leave to File
Second Amended Complaint [Dkt. No. 32].
SO ORDERED.
DATED: January 6, 2022

______________________________________________________________________________________________________________________

DAVID L. HORAN
UNITED STATES MAGISTRATE JUDGE

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