Mrs. Fields Franchising v. MFGPC
Filing
171
MEMORANDUM DECISION AND ORDER Granting in Part 139 MFGPC's Motion to Amend and Ordering Supplemental Briefing: The court grants MFGPC leave to file an amended counterclaim and crossclaim/third-party complaint adding claims for injunctive and declaratory relief. But the court reserves judgment on whether MFGPC may add the Doe Defendants and whether MFGPC may revise the case caption. Within TEN DAYS of this Order, MFGPC shall file a supplemental memorandum of no more than 5 pages specifying whether the claims against Famous Brands and the proposed claims against Doe Defendants, are crossclaim or third-party claims. MFGPC may also move to cure the joinder of Famous Brands. Failure to do so will result in the dismissal of Famous Brands for improper joinder. Within seven days of the court's ruling on the motion to revise the case caption, MFGPC shall file its amended complaint. Signed by Judge Jill N. Parrish on 1/8/19. (dla)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
MFGPC, INC., a California corporation,
Counterclaim and
Crossclaim/Third-Party
Plaintiff,
v.
MRS. FIELDS FRANCHISING, LLC, a
Delaware limited liability company,
MEMORANDUM DECISION AND
ORDER GRANTING IN PART
MFGPC’S MOTION TO AMEND AND
ORDERING SUPPLEMENTAL
BRIEFING
Case No. 2:15-cv-00094-JNP-DBP
District Judge Jill N. Parrish
Magistrate Judge Dustin B. Pead
CounterclaimDefendant,
and
MRS. FIELDS FAMOUS BRANDS, a
Delaware limited liability company, d.b.a.
Famous Brands International,
Crossclaim/Third-Party
Defendant.
Before the court is the Motion for Leave to File Amended Complaint and Revise Case
Caption filed by defendant and counterclaim and crossclaim/third-party plaintiff MFGPC, Inc.
(“MFGPC”). Plaintiff and counterclaim defendant Mrs. Fields Franchising, LLC (“Mrs. Fields”)
and crossclaim/third-party defendant Mrs. Fields Famous Brands (“Famous Brands”) oppose the
motion. The court grants the motion in part, granting leave to amend the claims, but reserving
judgment on the addition of “Doe Defendants” and the proposed revisions to the case caption.
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BACKGROUND
In 2003, MFGPC and Mrs. Fields entered into a Trademark Licensing Agreement (the
“Agreement”). 1 MFGPC received a license to manufacture and sell prepackaged popcorn bearing
the “Mrs. Fields” trademark. In exchange, Mrs. Fields received royalties. The parties performed
under the Agreement for over a decade. In the eleventh year, Mrs. Fields purported to terminate
the Agreement, citing MFGPC’s failure to pay the “Guaranteed Royalty.” But MFGPC had paid
the Guaranteed Royalty in full, so MFGPC informed Mrs. Fields that the termination was
ineffective. Mrs. Fields never responded and instead filed suit.
Mrs. Fields’ lawsuit sought a declaration that it had properly terminated the Agreement. In
response, MFGPC filed counterclaims against Mrs. Fields as well as “crossclaims” against Mrs.
Fields Famous Brands (“Famous Brands”) and Mrs. Fields Confections (“Confections”) for breach
of contract, account stated, and breach of the implied covenant of good faith and fair dealing. 2
MFGPC alleged that Mrs. Fields’ attempted termination was without basis and therefore
constituted a repudiation of the Agreement.
Mrs. Fields moved to dismiss the counterclaim, and the court granted the motion, holding
that MFGPC had failed to state a claim for breach of contract. Mrs. Fields then moved to
1
On April 30, 2003, Mrs. Fields, through a predecessor entity, entered into a Trademark Licensing
Agreement with LHF, Inc. Under the Agreement, LHF obtained a license to develop, manufacture,
package, distribute, and sell prepackaged popcorn products bearing the “Mrs. Fields” trademark.
Christopher Lindley executed the Agreement on behalf of LHF. On June 30, 2003, LHF assigned
its right and obligations under the Agreement to MFGPC—another entity owned and operated by
Mr. Lindley.
2
Although originally filed by MFGPC as “cross-claims,” the Court of Appeals for the Tenth Circuit
characterized the claims as third-party claims in its Mandate (“Tenth Circuit Order”) (ECF No.
97). As explained below, the court requests supplemental briefing on the issue of how the claims
should be characterized.
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voluntarily dismiss its complaint for declaratory judgment as moot. The court granted the motion
and dismissed Mrs. Fields’ complaint.
MFGPC appealed, arguing, among other things, that the court erred when it dismissed
MFGPC’s counterclaim and crossclaim/third-party claim for breach of contract. The Tenth Circuit
agreed, reversing the dismissal of the breach of contract counterclaim and crossclaim/third-party
claim and remanding the case for further proceedings. Because Mrs. Fields’ Complaint had been
voluntarily dismissed, only MFGPC’s counterclaim and crossclaim/third-party claim for breach of
contract against Mrs. Fields and Famous Brands remained viable on remand.
On remand, both parties moved for summary judgment. On August 20, 2018, the court
granted summary judgment in favor of MFGPC, holding that MFGPC had established the first
three elements of its breach of contract counterclaim: (1) the parties’ relationship was governed by
a valid contract; (2) MFGPC substantially performed under the Agreement; and (3) Mrs. Fields
improperly repudiated the Agreement, thereby committing an actionable breach. Because MFGPC
had not moved for summary judgment on the issue of a remedy, the court left that issue for another
day.
At the time of the court’s order, MFGPC had a pending motion for leave to amend. In the
order granting summary judgment, the court directed MFGPC to notify the court within seven days
if it still sought leave to amend. On September 20, 2018, MFGPC filed the present motion seeking
leave to amend and to correct the case caption. The court struck MFGPC’s former motion for leave
to amend as moot. The court now addresses the present motion to amend.
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ANALYSIS
I.
Leave to Amend
MFGPC filed its first counterclaim and crossclaim complaint on February 24, 2015.
MFGPC amended those claims on May 14, 2015. After the appeal to the Tenth Circuit and
subsequent remand, Mrs. Fields answered the First Amended Counterclaim and Crossclaim
Complaint on February 13, 2018. MFGPC filed a motion for leave to file an amended complaint
on March 8, 2018. MFGPC filed its present motion to amend on September 20, 2018, one month
after the court’s order granting summary judgment in favor of MFGPC. MFGPC moves the court
for leave to amend the counterclaim and crossclaim complaint to add claims for equitable relief
and to add 100 “Doe Defendants.”
Because the named counterclaim and crossclaim defendants have answered and more than
21 days have passed since the filing of the answer, MFGPC may amend only with permission of
the court pursuant to Fed. R. Civ. P. 15(a)(2). “The grant of leave to amend the pleadings pursuant
to Fed. R. Civ. P. 15(a) is within the discretion of the trial court.” Castleglen, Inc. v. Resolution
Tr. Corp., 984 F.2d 1571, 1584–85 (10th Cir. 1993) (internal citation omitted). “The court should
freely give leave [to amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2). “Refusing leave
to amend is generally only justified upon a showing of undue delay, undue prejudice to the
opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously
allowed, or futility of amendment.” Bylin v. Billings, 568 F.3d 1224, 1229 (10th Cir. 2009)
(citation omitted). As none of the elements for refusing leave to amend are present, the court grants
MFGPC leave to amend in part, but reserves judgment on the addition of the “Doe Defendants”
due to MFGPC’s failure to comply with the Federal Rules of Civil Procedure.
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1. Bad Faith
Mrs. Fields has not alleged that MFGPC acted in bad faith, nor does the court find any
evidence of bad faith in the pleadings.
2. Undue Delay
MFGPC has not unduly delayed. Although a substantial amount of time has passed since
the inception of this suit, MFGPC filed its first motion to amend just five weeks after remand, and
the present motion just over a month after the summary judgment order. Moreover, both motions
to amend were filed before the entry of a scheduling order. There was not a scheduling order
because the parties did not hold a Rule 26(a) Planning Meeting until after the order on the motions
for summary judgment. Consequently, there was no deadline for seeking to amend the pleadings.
The court is therefore unpersuaded by Mrs. Fields’ argument that MFGPC delayed in seeking leave
to amend.
3. Prejudice
“The second, and most important, factor in deciding a motion to amend the pleadings, is
whether the amendment would prejudice the nonmoving party.” Minter v. Prime Equip. Co., 451
F.3d 1196, 1207–08 (10th Cir. 2006) (citing United States v. Hougham, 364 U.S. 310, 316 (1960)).
“Courts typically find prejudice only when the amendment unfairly affects the defendants ‘in terms
of preparing their defense to the amendment.’” Id., at 1208 (quoting Patton v. Guyer, 443 F.2d 79,
86 (10th Cir. 1971)). The court concludes that Mrs. Fields will not be unduly prejudiced. MFGPC
does not seek to inject entirely new claims into the proceedings. Rather, MFGPC seeks only to add
separate claims for declaratory judgment and equitable relief. And even these claims are not
entirely new because MFGPC’s active counterclaim already requests both damages and equitable
relief. First Amended Counterclaim and Cross-Claims at ¶ 25. Mrs. Fields will be able to fully
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prepare its defenses because, despite four years of litigation, the parties did not begin discovery
until recently. Thus Mrs. Fields will have ample opportunity to develop its defenses.
4. Futility
“‘A proposed amendment is futile if the complaint, as amended, would be subject to
dismissal.’” United States ex rel. Barrick v. Parker-Migliorini Int'l, LLC, 878 F.3d 1224, 1230
(10th Cir. 2017), cert. denied sub nom. U.S. ex rel. Barrick v. Parker-Migliorini Int'l, LLC, 139 S.
Ct. 78 (2018) (quoting Barnes v. Harris, 783 F.3d 1185, 1197 (10th Cir. 2015)). “A complaint is
subject to dismissal under Federal Rule of Civil Procedure 12(b)(6) if the plaintiff fails to allege
facts that would allow the court to draw the reasonable inference that the defendant is liable for
the misconduct alleged.” Id. (quoting Fields v. City of Tulsa, 753 F.3d 1000, 1012–13 (10th Cir.
2014)). Mrs. Fields argues that the proposed amendments adding claims for declaratory and
injunctive relief are futile because the court’s finding that Mrs. Fields breached the Agreement
precludes equitable relief. Mrs. Fields also argues that adding Doe Defendants would be futile.
a. Equitable Relief
The court finds that the claims for equitable relief are not futile. Both legal and equitable
remedies are available for a breach of contract. See Adams v. Cyprus Amax Minerals Co., 149 F.3d
1156, 1162 (10th Cir. 1998) (comparing equitable and legal remedies in breach of contract suits).
MFGPC is not estopped from seeking equitable relief merely because the court has already ruled
that Mrs. Fields breached the Agreement. See Dairy Queen, Inc. v. Wood, 369 U.S. 469, 479 (1962)
(“the legal claims involved in the [breach of contract] action must be determined prior to any final
court determination of respondents’ equitable claims”). Indeed, MFGPC has also filed a motion
for temporary restraining order, on which the court has ordered a full evidentiary hearing. At that
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hearing, the merits of the claim will be determined, but for purposes of amendment, the claim is
not futile on its face.
b. Doe Defendants
Mrs. Fields argues that adding 100 Doe Defendants would be futile because they would
not be liable as licensees of the trademark agreement that Mrs. Fields breached. In so arguing, Mrs.
Fields relies on ICEE Distributors, Inc. v. J&J Snack Foods Corp., 445 F.3d 841, 847 (5th Cir.
2006). In ICEE, the court held that “[a]n exclusive licensee does not have a claim for trademark
infringement against a subsequent licensee. The claim arises instead under inducing breach against
the subsequent licensee and for breach of contract against the licensor.” Id. But MFGPC does not
seek damages against the subsequent licensees. Rather, it seeks injunctive relief. And the ICEE
court actually upheld injunctive relief against the licensees based on the underlying breach of
contract, even though it refused to award damages for breach of contract against the licensees. Id.,
at 850. Similarly, in this case, MFGPC seeks only injunctive relief against the Doe Defendants.
Thus, MFGPC’s motion to add Doe Defendants is not futile.
However, the court reserves judgment on whether to allow MFGPC to add the Doe
Defendants at this juncture. First, the court cautions MFGPC that it will not award injunctive relief
against nameless parties that have not been properly joined. The law is clear that parties are not
entitled to a declaratory judgment that would affect non-parties to the suit. See Fed. R. Civ. P. 57
advisory committee’s note to 1937 adoption. Although MFGPC may amend its complaint with
“Doe Defendants” as placeholders, MFGPC must properly identify and properly join any parties
before they can be subject to injunctive relief.
Moreover, the court declines to rule on MFGPC’s motion to add the Doe Defendants until
MFGPC identifies under which Federal Rule of Civil Procedure it seeks to add them. MFGPC
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previously has failed to distinguish between “crossclaim” and “third-party” claims. Crossclaims
are governed by Fed. R. Civ. P. 13(g), while third-party claims are governed by Fed. R. Civ. P. 14.
In order to amend its complaint, MFGPC must clarify via which Federal Rule it seeks to add the
Doe Defendants.
II.
Request to Revise Case Caption
The court also reserves judgment on MFGPC’s request to revise the case caption. MFGPC
asks that the case caption be revised and that MFGPC be renamed the plaintiff for simplicity. But
MFGPC fails to cite any authority that would allow such a revision. Moreover, the court is
concerned that changing the caption may give rise to additional confusion.
The court does, however, find it necessary to clarify the status of the current parties.
Although MFGPC filed “cross-claims” (see ECF Nos. 11 and 41) against Famous Brands and
Confections, 3 neither company was party to Mrs. Fields’ original complaint. 4 “Cross-claims” can
only be brought against co-parties. See Fed. R. Civ. P. 13(g). In order to bring crossclaims, MFGPC
first would have needed to move to join Famous Brand and Confections pursuant to Fed. R. Civ.
P. 19 or 20. Alternatively, MFGPC could have added Famous Brand and Confections as thirdparty defendants, pursuant to Fed. R. Civ. P. 14, after “serv[ing] a summons and complaint on a
nonparty.” 5 It appears that MFGPC failed to comply with the Federal Rules of Civil Procedure
when joining these parties. But Famous Brands is still a purported party to the suit, despite
MFGPC’s apparent failure to properly join it. The uncertainty in Famous Brands’ role in the suit
3
All claims against Confections were dismissed with prejudice on October 29, 2015. As
Confections was not a party to the breach of contract claim that was reinstated, Confections
remains dismissed on remand. The clerk of court is asked to terminate Confections as a party.
4
Famous Brands and Confections were added without motion by either party.
5
In its Order, the Tenth Circuit Court of Appeals characterized the claims as third-party claims.
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has caused much confusion. The court hereby orders MFGPC to file a supplemental memorandum,
no longer than 5 pages, clarifying Famous Brands’ role in the suit, and showing cause as to why
Famous Brands should not be dismissed for failure to properly join it as a party. The court also
orders MFGPC to clarify whether it proposes to add the “Doe Defendants” as third-party or
crossclaim defendants.
ORDER
The court HEREBY GRANTS IN PART MFGPC’s Motion to Amend and Revise the
Case Caption (ECF No. 139). The court grants MFGPC leave to file an amended counterclaim and
crossclaim/third-party complaint adding claims for injunctive and declaratory relief. But the court
reserves judgment on whether MFGPC may add the Doe Defendants and whether MFGPC may
revise the case caption. Within TEN DAYS of this Order, MFGPC shall file a supplemental
memorandum of no more than 5 pages specifying whether the claims against Famous Brands and
the proposed claims against Doe Defendants, are crossclaim or third-party claims. MFGPC may
also move to cure the joinder of Famous Brands. Failure to do so will result in the dismissal of
Famous Brands for improper joinder. Within seven days of the court’s ruling on the motion to
revise the case caption, MFGPC shall file its amended complaint.
DATED January 8, 2019
BY THE COURT:
________________________
JILL N. PARRISH, Judge
United States District Court
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