Opinion
Civil No. 02-4774 (JBS)
January 12, 2004
Dennis P. McCooe, Esquire J. Llewellyn Mathews, Esquire, Blank Rome LLP, Cherry Hill, NJ, for Plaintiff Commerce Bancorp, Inc
Roy H. Wepner, Esquire, Lerner David Littenberg Krumholz Mentlik, LLP, Westfield, NJ, for Defendant BankAtlantic
OPINION
This matter comes before the Court upon motion of Plaintiff Commerce Bancorp, Inc. ("Commerce") to strike the declaratory judgment counterclaim that accompanied the Answer to Commerce's Verified Complaint, which Defendant BankAtlantic filed on June 2, 2003. For the reasons discussed herein, Plaintiff's motion to strike will be denied.
BACKGROUND
Commerce's original Verified Complaint, filed on October 2, 2002, asserted trademark infringement and unfair competition based upon BankAtlantic's use of FLORIDA'S MOST CONVENIENT BANK, which was alleged to violate Commerce's rights in AMERICA'S MOST CONVENIENT BANK. BankAtlantic filed its answer to the original Verified Complaint on November 18, 2002. At the time BankAtlantic filed its original answer, it asserted the affirmative defenses of lack of personal jurisdiction and improper venue.
Commerce filed its Verified Amended Complaint on May 22, 2003. In that amended pleading, Commerce asserted trademark infringement and unfair competition based not only on BankAtlantic's use of FLORIDA'S MOST CONVENIENT BANK, but also based on BankAtlantic's use of WOW!. According to the Verified Amended Complaint, Commerce believes it owns trademark rights in a "family of marks" that include the word WOW!.
In preparing its answer to the Verified Amended Complaint, BankAtlantic concluded that it was appropriate to drop its personal jurisdiction and venue defenses, which eliminated any concern about a waiver of those defenses through the assertion of a counterclaim for declaratory judgment.
On June 2, 2003, BankAtlantic filed its answer to the Verified Amended Complaint. It asserted a counterclaim for a declaratory judgment that included the following:
• an allegation that there was an actual and justiciable controversy between the parties regarding AMERICA'S MOST CONVENIENT BANK/FLORIDA'S MOST CONVENIENT BANK, the word WOW!, and common methods of doing business including extended hours, seven-day banking and the like;
• allegations regarding BankAtlantic's right to use FLORIDA'S MOST CONVENIENT BANK, which effectively mirror BankAtlantic's affirmative defenses;
• specific allegations relating to BankAtlantic's right to use WOW!;
• an allegation that general methods of doing business (such as extended hours, seven-day banking and free checking) cannot be protected by the trademark laws or any other laws, and that Commerce has no proprietary rights in such methods in any event; and
• a prayer for declaratory relief that includes a request for a declaration that BankAtlantic's use of FLORIDA'S MOST CONVENIENT BANK and WOW! do not violate any of Commerce's existing trademark or service mark rights, and would not violate any such rights at any time in the future irrespective of the territories in which Commerce may employ the marks AMERICA'S MOST CONVENIENT BANK and WOW!.
Answer to Verified Amended Compl., Affirmative Defenses and Countercl., filed June 2, 2003, Countercl. ¶ 4.
Id. ¶¶ 5, 6, 8, 10, 11, 13.
Id. ¶¶ 8, 9, 12.
Id. ¶ 14.
Id., Prayer for Relief ¶ D.(v).
Commerce's reply to the counterclaim was due on June 25, 2003, but Commerce did not file a timely reply. Instead, Commerce filed its present motion to strike BankAtlantic's counterclaim.
DISCUSSION
Courts have held that when a plaintiff files an amended complaint, a defendant has a right to include counterclaims without leave of court. "If plaintiff's motion for leave to amend the First Amended . . . Complaint . . . was made pursuant to Rule 15(a), Fed.R.Civ.P., as is stated on the face of the pleading, the defendants did not need leave to serve new counterclaims and to assert new defenses." Refuse Fuels, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 139 F.R.D. 576, 578 (D. Mass. 1991). In addition, courts have held that a defendant responding to an amended complaint may assert counterclaims at least under circumstances where the amended complaint has changed or expanded the theory or scope of the case. "[W]hen a plaintiff files an amended complaint which changes the theory or scope of the case, the Defendant is allowed to plead anew as though it were the original complaint filed by the Plaintiff." Brown v. E.F. Hutton Co., 610 F. Supp. 76, 78 (S.D. Fla. 1985) (citing, inter alia, Jos. Bancroft Sons Co. v. M. Lowenstein Sons, Inc., 50 F.R.D. 415 (D. Del. 1970)).
Commerce's amended complaint changed and expanded the scope of this dispute. The dispute now includes claims involving WOW!, as well as assertions by Commerce that BankAtlantic is violating Commerce's rights by employing such practices as free checking, extended hours, and red lollipops. As this Court has previously noted, "the proposed amended complaint in this case involves facts regarding a different set of marks." (May 19, 2003 Opinion and Order, p. 7). It is thus wholly appropriate for Commerce to raise a counterclaim which it has never before raised, in response to the Amended Complaint.
BankAtlantic's counterclaim does not prejudice Commerce in any way. Commerce has already fully availed itself of the opportunity to take all discovery it needs in connection with AMERICA'S MOST CONVENIENT BANK, WOW!, and other banking practices of BankAtlantic. Commerce's present motion to strike does not suggest that any additional discovery would be needed in connection with the counterclaim.
On the other hand, the potential for prejudice to BankAtlantic is great. BankAtlantic's declaratory judgment counterclaim is properly characterized as "compulsory" within the meaning of Fed.R.Civ.P. 13(a).See e.g., J. Lyons Co. v. Rep. of Tea, Inc., 892 F. Supp. 486, 490 (S.D.N.Y. 1995) (action seeking declaratory relief that activities do not infringe trademarks are compulsory counterclaims to pending action asserting infringement of same alleged trademarks); Alltrade, Inc. v. Uniweld Prods., 946 F.2d 622, 625 n. 5 (9th Cir. 1991) (count seeking declaratory judgment of no trademark infringement is compulsory counterclaim to action for trademark infringement); United Fruit Co. v. Standard Fruit Steamship Co., 282 F. Supp. 338, 339-40 (D. Mass 1968) (complaint seeking declaratory judgment that defendant did not infringe plaintiff's trademark was compulsory counterclaim to unfair competition action). It is well settled that "a counterclaim which is compulsory but is not brought is thereafter barred." Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 469 n. 1 (1974). If BankAtlantic's present counterclaim is stricken, BankAtlantic may be barred by the compulsory counterclaim rule from seeking a declaratory judgment at a later date, thus subjecting it to unfair prejudice.
CONCLUSION
For the reasons explained herein, this Court will deny Plaintiff's motion to strike BankAtlantic's counterclaim to the Verified Amended Complaint. The accompanying Order is entered.
ORDER
This matter having come before the Court upon plaintiff Commerce Bancorp, Inc.'s motion to strike BankAtlantic's counterclaim to the Verified Amended Complaint [Docket Item No. 64-1]; and the Court having considered the parties' submissions; and for the reasons explained in the Opinion of today's date; and for good cause shown;
ORDERED that plaintiff's motion to strike BankAtlantic's counterclaim [Docket Item No. 64-1] be, and hereby is, DENIED .