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Health Insurance Association of America v. Novelli

February 21, 2003


The opinion of the court was delivered by: Reggie B. Walton, United States District Judge


This is a copyright and trade dress infringement lawsuit. On December 20, 2002, plaintiff, the Health Insurance Association of America ("HIAA"), filed a motion for leave to file a supplemental complaint pursuant to Federal Rule of Civil Procedure 15(d). *fn1 In its supplemental complaint, plaintiff seeks to add claims against defendant Goddard Claussen Porter Novelli ("Goddard") for breach of duty, negligence, and indemnification (counts V, VI, and VII of the supplemental complaint), which arise out of a separate lawsuit that has recently been filed against HIAA and is currently pending before another judge of this Court. For the reasons set forth below, the Court concludes that it must deny HIAA's request to file its supplemental complaint.

I. Background

At the center of the substantive controversy in this matter are advertisements that defendant Goddard created for HIAA and defendant CuresNow. The parties characterize these advertisements as the "Harry and Louise" advertisements, based on the names of the actors who are featured in the advertisements, Harry Johnson and Louise Caire Clark. HIAA claims that defendant Goddard violated HIAA's copyright and trademark rights in these advertisements by creating advertisements regarding therapeutic cloning for defendant CuresNow, which utilized the same format and featured the same actors as the advertisements that were created by Goddard for HIAA. In its four count complaint that was initially filed in this case, HIAA asserts claims against both defendants for violations of the copyright act, 17 U.S.C. §§ 101 et seq. (2000), (count one), the trademark act, 15 U.S.C. §§ 1501 et seq. (2000) (count two), seeks declaratory relief regarding the alleged trademark and copyright infringement violations (count three) and in count four asserts a claim against Goddard for indemnification for plaintiff's "costs and liabilities in this action (including attorney's fees), [because] Goddard Claussen's performance under the agreement is the subject of this action[]" and Goddard has agreed to indemnify HIAA regarding "all costs and liabilities arising out of the performance of this Agreement . . ." Compl. ¶¶ 51-52. *fn2

On June 18, 2002, actors Harry Johnson and Louise Caire Clarke filed a lawsuit against HIAA based upon HIAA's alleged unauthorized use of the actors' images. Defendant Goddard's Memorandum in Opposition to Plaintiff's Motion for Leave to File a Supplemental Complaint ("Def.'s Opp'n), Exhibit ("Ex.") A (Complaint filed in Clark v. Health Insurance Association of America, ("Clark") 02cv1204 (Kennedy, J.)). HIAA now seeks leave to file a supplemental complaint in this action wherein it seeks to assert the following additional claims against defendant Goddard: breach of agent's duty and negligence (count five); indemnification under the 1993 and 1994 agreements between Goddard and HIAA (count six); and indemnification under the 1998 agreement between Goddard and HIAA (count seven). Plaintiff's Statement of Points and Authorities in Support of its Motion for Leave to File Supplemental Complaint ("Pl.'s Mem."), Exhibit A (Proposed Supplemental Complaint). In each of these supplemental claims HIAA seeks indemnification from Goddard for any monetary liability and expenses it may incur in the Clark litigation. Thus, HIAA argues that the contracts at issue in this litigation and common law "establish that [Goddard] is liable to HIAA for the claims that the actors assert against HIAA." Pl.'s Mem. at 3. HIAA has also filed a motion to dismiss in the Clark case, and notes that Judge Kennedy, to whom the case was initially assigned, had not ruled on the motion to dismiss and that the case was recently reassigned to the newest member of this Court, Judge Collyer. Id. "Thus, [HIAA argues, it] is now seeking to assert the additional claims against [Goddard] in the Supplemental Complaint [in this case], to avoid delaying [the resolution of] this case." Id.

Defendant Goddard offers two reasons why this Court should deny HIAA's motion to file the supplemental complaint: First, because HIAA has waited six months to seek the filing of these supplemental claims, there would be no time to conduct discovery regarding these additional claims before the date designated for the close of discovery, which would seriously prejudice Goddard. Currently, defendant notes, expert reports were due to be submitted by January 31, 2003, and discovery is scheduled to close May 1, 2003. Id. at 6. Additional discovery would be needed if plaintiff is permitted to file the supplemental complaint, defendant argues, because these additional claims are not related to the claims currently before the Court in this lawsuit. Def.'s Mem. at 6. *fn3 With the limited amount of time available to conduct further discovery before the discovery period closes, Goddard contends that it would not have sufficient time to conduct the additional discovery regarding these new and distinct claims, which would prejudice its ability to defend against the supplemental claims. Id.

Second, Goddard argues that the additional claims HIAA wants to add to its complaint in this matter seek indemnification for losses HIAA may suffer in the Clark case, and therefore, these additional claims should be asserted as third-party claims in the Clark litigation. Id. Goddard notes that this was the course HIAA indicated it was going to pursue in the parties' Joint Report that was submitted to this Court. See Joint Report dated September 18, 2002, at 3, 5 ("HIAA will file a third-party complaint in [the Clark] action against [Goddard] and may seek to consolidate that case with this case. Further amendment of the pleadings in this case will also be required."). In addition, Goddard argues that it will be prejudiced if HIAA does not plead the claims it seeks to add in this lawsuit as third party claims in the Clark case because Goddard would then be unable to participate as a party in the Clark litigation, thus obliterating its right to discovery, which would unfairly impair its ability to determine whether HIAA is in fact liable to the actors. Def.'s Mem. at 8.

In reply, HIAA argues that Goddard would not be prejudiced if this Court grants HIAA's motion to file its supplemental complaint because the supplemental claims evolve from contracts that are at issue in this case, and because Goddard's delay in producing discovery *fn4 "will necessitate some modification of the current schedule" in any event. Plaintiff's Reply Brief in Support of its Motion for Leave to File a Supplemental Complaint ("Pl.'s Reply") at 1. In addition, HIAA notes that the only deadline Goddard claims it would be unable to meet if HIAA is permitted to file its supplemental complaint was the January 31, 2003, deadline for the identification of experts and Goddard fails to state whether it would need an expert witness to testify regarding the supplemental claims. Id. at 5. HIAA argues that the supplemental claims are being properly asserted in this case because, if the Clark action is dismissed, HIAA would then have to bring its supplemental claims in this case in any event or would have to file a separate action that it would then seek to have consolidated with this case. Id. at 2. HIAA further argues that the court's focus should be "on the factual overlap between the original complaint in this action and the supplemental facts[,]" in the supplemental complaint, which it contends are closely related to each other. Id. at 3 (citing Quarantino v. Tiffany & Co., 71 F.3d 58, 66 (2d Cir. 1995)). Finally, because according to HIAA, the pending claims and the claims in the supplemental complaint are so closely related, there is a risk of inconsistent verdicts if the claims are not litigated in one proceeding. Id. at 3-4.

II. Analysis

Federal Rule of Civil Procedure 15(d) provides, in part, that a party may file "a supplemental pleading setting forth transactions or occurrences or events which have happened since the date of the pleading sought to be supplemented." A supplemental pleading "may introduce new causes of action not alleged in the original complaint so long as their introduction does not create surprise or prejudice to the rights of the adverse party." Aftergood v. Central Intelligence Agency, 225 F. Supp. 2d 27, 30 (D.D.C. 2002) (citation omitted). The purpose for filing a supplemental pleading "is to facilitate a proper decision on the merits and avoid the dismissal of potentially meritorious claims due to procedural missteps." Id. (citation and internal quotation marks omitted). Thus, the court should freely grant a party's request to file a supplemental pleading "when the supplemental facts connect it to the original pleading." Id. (citation and internal quotation marks omitted).

"A supplemental pleading, however, is designed to cover matters subsequently occurring but pertaining to the original cause." Rowe v. United States Fidelity & Guaranty Co., 421 F.2d 937, 942 (4th Cir. 1970). The rule is designed to "give a party 'every opportunity to join all of his grievances against another party regardless of when they arose . . .'" Matthew Bender & Co. v. West Publishing Co., No. Civ.A. 94-0589, 1995 WL 702389, at *2 (S.D.N.Y. Nov. 28, 1995) (citation omitted). Leave to file a supplemental complaint should be "freely granted . . . where such supplementation will promote the economic and speedy disposition of the controversy between the parties, will not cause undue delay of trial, inconvenience and will not prejudice the rights of any other party." Wells v. Harris, 185 F.R.D. 128, 132 (D. Conn. 1999) (citations omitted).

Perhaps "[t]he strongest argument in favor of granting [a] motion [to file a supplemental complaint] is economy -- judicial economy as well as the cost of litigation." Medtronic Inc. v. Siemens-Pacesetter, Inc., No. Civ.A. 88-121, 1992 WL 88452, at *2 (N.D. Ill. Apr. 27, 1992). In this case, judicial economy does not favor granting HIAA's motion. The supplemental claims here will put into issue contracts regarding defendant Goddard's alleged duty to indemnify plaintiff regarding claims that will not directly be at issue in this case. Moreover, the inclusion of the supplemental claims will raise additional issues regarding Goddard's alleged negligence and breach of its duty for failing to inform plaintiff of any limitations regarding the use of Johnson's and Clark's images. Pl.'s Mot., Ex. A ¶ 17. These factors therefore weigh against granting plaintiff's motion. See, e.g., Mitchell v. RKO Rhode Island Corp., 148 F. Supp. 245, 247 (D. Mass. 1956) (denying plaintiff's motion to file a supplemental complaint where the facts and evidence introduced by the supplemental complaint would "increase the difficulty of trying both the original and supplemental proceedings in a single proceeding. Any advantage which might normally be gained by disposing of this whole controversy in a single trial would be outweighed by the difficulties that would be involved."). Even assuming that the introduction of the supplemental claims here would not necessarily complicate the resolution of the issues currently pending before this Court, judicial economy would not be served by permitting HIAA to file its supplemental complaint in this case since another case (Clark), which contains matters more closely related to the claims asserted in HIAA's supplemental complaint, is pending before another member of this Court. See, e.g., Medtronic, Inc., 1992 WL 88452, at *1-2 (denying plaintiff's motion to file a supplemental complaint where plaintiff was "not foreclosed from joining the claim of the supplemental complaint" in another suit pending in another jurisdiction.); Minnesota Mining & Mfg. Co. v. Superior Insulating Co., 284 F.2d 478, 483 (8th Cir. 1960) (affirming district court's denial of plaintiff's motion for leave to file a supplemental complaint where issues in original complaint had been resolved and judicial economy would not be served by permitting plaintiff to file a supplemental complaint for claims that were being litigated in another forum.).

Another important consideration the Court must weigh "[w]hen determining whether to grant leave [to file a supplemental complaint] . . . [is] whether the denial of the amendment or supplement compromises plaintiff['s] chances of recovery." See Streicher v. Washington, No. Civ.A. 83-3295, 1992 WL 73508, at *4 (D.D.C. March 20, 1992) (citations omitted). There is no such potential in this case. HIAA's argument that if it is not permitted to file its supplemental complaint in this case and the Clark case is dismissed, that it would then be unable to assert its claims for indemnification against Goddard without having to initiate another case that it would then have to seek to consolidate with this action, is unavailing. Rather, if HIAA impleads Goddard as a third-party defendant in the Clark case, then, even if the current claims in that underlying lawsuit were dismissed, HIAA's claims against Goddard would remain alive in Clark because diversity *fn5 or supplemental jurisdiction would still exist. See, e.g., Ametex Fabrics, Inc. v. Just in Materials, Inc., 140 F.3d 101, 105 (2d Cir. 1998) (holding that district court properly exercised supplemental jurisdiction over third-party claims after main copyright action had been settled.). Thus, even if HIAA is successful in obtaining the dismissal of the Clark case, HIAA would still be able to pursue its claims for negligence, breach of duty, and indemnification against Goddard in the Clark litigation.

In addition, the Court concludes that Goddard would be prejudiced by the inclusion of new issues that are not related to HIAA's copyright and trademark claims. See Aftergood, 225 F. Supp. 2d at 30 (supplemental pleadings may be filed where their introduction will not "create surprise or prejudice to the rights of the adverse party.") (citation omitted). As stated previously, in the original complaint filed in this lawsuit, HIAA seeks a declaration that Goddard and CuresNow violated the trademark and copyright laws by creating advertisements that were allegedly identical in format to advertisements created by Goddard on behalf of HIAA. The supplemental complaint would insert additional facts and issues into this ...

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