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finding that sufficient allegations of lack of probable cause allowed an inference of malice so as to overcome a motion to dismiss
Summary of this case from Sherman v. HolecekOpinion
99 Civ. 4677 (WK).
April 25, 2002
MEMORANDUM ORDER
Plaintiffs Tommy Hilfiger Licensing, Inc. ("Tommy Hilfiger"), PRL USA Holdings, Inc. ("Polo"), Nike, Inc. ("Nike"), Adidas-Salomon AG, Adidas International BV, and Adidas America, Inc. (the last three manufacturers hereinafter referred to as "Adidas") brought this action against, among others, Defendants MD Sportswear Corp. ("MD") and Dalia Wallach ("Wallach") (collectively "Defendants") for trademark counterfeiting, trademark infringement (in violation of both the Lanham Act and the common law), false designation of origin, trademark dilution in violation of the Lanham Act, common law unfair competition, and violations of New York General Business Law §§ 349 and 360-1. The Defendants filed an Answer with counterclaims for malicious prosecution against Plaintiffs Nike, Polo, and Adidas, and the Plaintiffs moved to dismiss these counterclaims. Although the Defendants have since amended and supplemented their original counterclaims by way of an Amended Answer, the Plaintiffs continue to press their motion to dismiss and, in addition, now move to strike various allegations from the Amended Answer.
For the reasons that follow, we deny both the motion to dismiss and the motion to strike.
BACKGROUND
In Tommy Hilfiger Licensing, Inc. v. Bradlees, Inc. (S.D.N.Y. Jan. 11, 2002) 2001 WL 1702151, we set out the factual background and procedural history underlying this litigation in extensive detail. Since we assume familiarity with the facts and procedural history set forth therein, we do not now further elaborate on such facts beyond setting out the convoluted procedural history relevant to the Plaintiffs' motion to dismiss and motion to strike.
On June 28, 1999, Plaintiffs Tommy Hilfiger and Polo initiated this action against Defendants Bradlees, Inc., BL Enterprises of NY, Inc., Summit Merchandising, Ltd., Jack Schwartz, and Mayer Parets. In their Complaint, Tommy Hilfiger and Polo asserted causes of action under the Lanham Act for trademark counterfeiting, trademark infringement, trademark dilution, and false designation of origin. They also asserted causes of action for common law unfair competition, common law trademark infringement, and violations of New York's antidilution and deceptive practices statutes. On July 8, 2000, these Plaintiffs amended their Complaint to include additional Plaintiffs (i.e. Nike and Adidas), additional causes of action, and additional exhibits. On July 24, 2000, Plaintiffs Tommy Hilfiger, Polo, Nike, and Adidas (collectively "Plaintiffs") further amended their Amended Complaint to include claims against additional parties, namely Defendants Marty Mirkin, Andrez Shops, Inc., Shahin Ghaderi, Consolidated Stores Corp., MD, and Wallach. The Plaintiffs' actions against Defendants MD and Wallach are based on their sale of allegedly counterfeit Nike and Polo socks as well as Nike t-shirts to three retailers, DSW Shoe Warehouse Stores, Ammar's Inc., and Bradlees, Inc.
On August 28, 2000, MD and Wallach filed their Answer to the Plaintiffs' Second Amended Complaint. In that Answer, the Defendants asserted counterclaims against Plaintiffs Polo, Nike, and Adidas (but not against Plaintiff Tommy Hilfiger) for malicious prosecution. The allegations underlying these counterclaims stemmed from the initiation of a criminal action against Wallach and a civil forfeiture action against MD by Bronx District Attorney Robert T. Johnson (the "Bronx D.A."). Specifically, the Defendants alleged that the Trademark Infringement Unit of the New York City Police Department's ("NYPD") Organized Crime Investigation Division had pursued an undercover criminal investigation into whether the Defendants were engaged in the sale of counterfeit apparel. On June 21, 2000, this investigation culminated in a raid on MD's premises in which a wide variety of allegedly counterfeit apparel was seized. Shortly thereafter, as a result of the investigation and the goods seized in the raid, the Bronx D.A. initiated the criminal proceeding and the civil forfeiture action upon which the counterclaims here are predicated. The Defendants now seek to recover against Plaintiffs Polo, Nike, and Adidas for malicious prosecution on the grounds that these Plaintiffs allegedly instigated and assisted with the criminal investigation, the June 21, 2000 seizure of apparel, and the subsequent criminal prosecution and civil forfeiture action which ensued therefrom.
The Plaintiffs moved to dismiss the counterclaims pursuant to Federal Rule of Civil Procedure 12(b)(6). However, before that motion was fully briefed, both the criminal proceeding and the civil forfeiture action were dismissed. As the Defendants concede, the criminal prosecution was dismissed without prejudice on November 15, 2000. On November 16, 2000, the Bronx D.A. also agreed voluntarily to discontinue the civil forfeiture action with prejudice, and that action was dismissed around November 18, 2000.
When they submitted their opposition papers to the Plaintiffs' motion to dismiss, the Defendants discussed such further facts, as well as a number of new allegations relating to events preceding the filing of their Answer, by way of an affidavit from Wallach with exhibits. These allegations had never been raised in their initial Answer. In replying to the Defendants' opposition brief, the Plaintiffs asserted that these additional allegations were an improper basis on which to oppose the motion to dismiss since they fell outside the four corners of the Answer.
While our decision with respect to the Plaintiffs' motion to dismiss was still pending, the Defendants moved for leave to amend their Answer. The Amended Answer they submitted in conjunction with that motion would have both (a) added new counterclaims and additional parties and (b) amended and supplemented the original malicious prosecution counterclaims by incorporating within the Amended Answer the various earlier allegations and exhibits which had been presented by way of Wallach's affidavit in support of the Defendants' opposition to the motion to dismiss. Although we denied them leave to add the new counterclaims and additional parties, we granted the Defendants' request to amend and supplement their original malicious prosecution counterclaims. See Tommy Hilfiger Licensing, Inc., 2001 WL 1702151 at *7.
Since the Amended Answer modified the allegations underlying the very counterclaims which were the subject of the motion to dismiss, we permitted the parties to file supplemental memoranda addressing any new arguments raised as a result of the amendments. See Tommy Hilfiger Licensing, Inc. v. Bradlees, Inc. (S.D.N.Y. Jan. 17, 2002) 2002 WL 64365, * 1. As all the parties have now filed their supplemental memoranda, we treat the Plaintiffs' motion to dismiss the original malicious prosecution counterclaims as a fully briefed motion to dismiss the amended counterclaims. In addition, the Plaintiffs, by way of their supplemental brief, now also move to strike various allegations from the Amended Answer. Through the following discussion, we address each of their motions respectively.
DISCUSSION
I. THE MOTION TO DISMISS
The Plaintiffs move to dismiss the Defendants' counterclaims "for failure to state a claim upon which relief can be granted" pursuant to Federal Rule of Civil Procedure 12(b)(6). "On such a motion, the Court is required to accept the material facts alleged in [the] defendants' answer and counterclaims as true and to construe all reasonable inferences in favor of the defendants." Twinlab Corp. v. Signature Media Services, Inc. (S.D.N.Y. Dec. 7, 1999) 1999 WL 1115237, *3. See also Jaghory v. New York State Dept of Education (2d Cir. 1997) 131 F.3d 326, 329. Dismissal of the counterclaims is proper only where it appears beyond doubt that the non-moving parties can prove no set of facts in support of their claims that would entitle them to relief. See Conley v. Gibson (1957) 355 U.S. 41, 45-46. See also Commer v. Keller (S.D.N.Y. 1999) 64 F. Supp.2d 266, 269.
In this instance, the Plaintiffs assert that the Defendants have failed to satisfy any of the elements of a malicious prosecution cause of action. In order to state a claim for the tort of malicious prosecution under New York law, a party must show (1) the initiation of a proceeding against that party; (2) the termination of the proceeding in that party's favor; (3) lack of probable cause for commencing the proceeding; and (4) malice as a motivating factor. See Murphy v. Lynn (2d Cir. 1997) 118 F.3d 938, 947. With these considerations in mind, we turn to the merits of the Plaintiffs' arguments.
A. Initiation of Proceedings
The Plaintiffs contend that the Defendants cannot state causes of action against them for malicious prosecution because it was the Bronx D.A. and not they who initiated the criminal proceeding and civil forfeiture action on which the counterclaims are predicated. They argue that they merely reported their suspicions concerning the Defendants' alleged criminal activity to the police.
Had this been the nature of the Defendants' allegations against them, we would be compelled to dismiss the counterclaims. "It is well-settled that one who discloses to a prosecutor all he knows concerning a potential criminal matter is not liable for commencing any ensuing prosecution." Baer v. Sprint Long Distance (S.D.N.Y. 1999) 60 F. Supp.2d 209, 212. Hence, where a party merely states what it believes and leaves the decision to prosecute entirely to the uncontrolled discretion of the officer, then that party will not be regarded as having instigated a prosecution. See id.
However, the Defendants do not allege that the Plaintiffs merely informed the Bronx D.A. of potential wrongdoing on their part. Rather, the Defendants assert that Plaintiffs Polo, Nike, and Adidas "instigated" the criminal prosecution and the civil forfeiture action "through their financing and conduct" by helping to select the targets of the undercover investigation, funding that investigation, and examining the Defendants' apparel in a conclusory fashion in order to provide much of the evidence supporting both the June 21, 2000 police raid on MD's premises as well as the initiation of the criminal prosecution and the civil forfeiture action against them. See Am. Answer ¶ ¶ 44, 46-51, 53-55, 60, 107-109, 112-1 14, Ex. B, and Ex. C.
"A defendant can initiate a prosecution by actively providing advice and encouragement to the complaining party." Noga v. City of Schenectady Police Officers (N.D.N.Y. 2001) 169 F. Supp.2d 83, 90. See also Mazza v. City of New York (E.D.N.Y. July 13, 1999) 1999 WL 1289623, *6 (holding that a person who does not file a complaint commencing a proceeding nevertheless may be found to have instituted the proceeding for malicious prosecution purposes when the person plays an active role in the initiation and continuation of a proceeding against the party claiming malicious prosecution). Indeed, "[w]here a party is responsible for providing false information or manufactured evidence that influences a decision to prosecute, he may be held liable for malicious prosecution." Chimurenga v. City of New York (S.D.N.Y. 1999) 45 F. Supp.2d 337, 343. See also Babi-Ali v. City of New York (S.D.N.Y. 1997) 979 F. Supp. 268, 276 ("[i]f "it is found that [the defendant's] persuasion was a determining factor in inducing the officer's decision, or that he gave information which he knew to be false and so unduly influenced the authorities, he may be liable"). Since we must assume that their allegations are true, the Defendants have sufficiently pled the "influence" necessary to survive this motion to dismiss. If they can prove their allegations, they may be able to show that the Plaintiffs' conduct was a determining factor in inducing the Bronx D.A. to initiate the criminal proceeding and the civil forfeiture action.
B. Termination of The Proceedings In The Defendants' Favor
To sustain a claim for malicious prosecution, a party must show that the criminal or civil proceeding underlying such a claim was terminated in the party's favor. See Sundbye v. Ogunleye (E.D.N.Y. 1998) 3 F. Supp.2d 254, 260. Since Wallach and MD have each premised their malicious prosecution counterclaims on different proceedings, we consider each respectively to determine whether they were terminated in favor of the Defendants.
1. The Criminal Action Against Wallach
Where, as here, a criminal prosecution did not result in an acquittal, it is deemed to have ended in favor of the accused only when its final disposition was such as to indicate the innocence of the accused. Murphy, 118 F.3d at 949. Whether or not the termination is indicative of innocence depends on the nature and circumstances of the termination, and the dispositive inquiry is whether the failure to proceed implicates a lack of reasonable grounds for the prosecution. Id.
Wallach bases her malicious prosecution counterclaim solely on the initiation of the criminal action against her for trademark counterfeiting. See Am. Answer ¶ ¶ 112-116. The criminal action was dismissed on November 15, 2000. See Am. Answer, Ex. H. However, although an exhibit to the Amended Answer reflects that the criminal action against Wallach was dismissed on the motion of the Bronx D.A., see Am. Answer, Ex. H, and although the Defendants have since conceded that the criminal action was dismissed without prejudice, see Defs.' Opp'n Brief at 9, neither that exhibit nor the Amended Answer indicate the Bronx D.A.'s reasons for moving to dismiss the charges against Wallach. At best, the Defendants suggest that the district attorney abandoned the prosecution after they submitted voluminous documentary exhibits purportedly establishing Wallach's innocence of any trademark counterfeiting activity. See Am. Answer ¶ 71. See also Defs.' Opp'n Brief at 9 ("The Bronx District Attorney simply abandoned the criminal proceeding against Dalia [Wallach], five months after it was commenced").
The Second Circuit has held, in the context of a summary judgment motion, that "when the grounds for the dismissal of a criminal proceeding are unclear, New York courts consider whether the proceeding was terminated in plaintiffs favor to be a question of fact that prevents summary judgment." Rounseville v. Zahl (2d Cir. 1994) 13 F.3d 625, 629. In Rounseville, a group of taxpayers initiated a criminal prosecution against the town assessors. Rounseville, 13 F.3d at 627. The local district attorney recommended that the criminal charges be dismissed and the town justice subsequently entered a dismissal. Id. The town assessors thereafter sought a measure of revenge by instituting, among other things, a malicious prosecution claim against both the taxpayers and the town justice. See id. These plaintiffs argued that the district attorney's dismissal recommendation amounted to a formal abandonment of the prosecution and that this constituted a termination in their favor. See id. at 629. Although the district court emphasized that the plaintiffs had failed to present specific evidence as to why the criminal proceeding had been terminated and therefore dismissed the plaintiffs' action, the Second Circuit reversed that dismissal.
The Second Circuit noted that, under New York law, the formal abandonment of a prosecution may constitute a favorable termination. See id., citing Loeb v. Teltelbaum (N.Y.App.Div. 198 0) 432 N.Y.S.2d 487, 493-494. The court then explained that the record did not contain any specific evidence as to why the charges which were brought by the defendants against the plaintiffs had been dismissed. See Rounseville, 13 F.3d at 629. At most, the record only revealed that the district attorney had moved to dismiss the action and that this motion had been granted. Id. Faced with these circumstances, the Second Circuit held that "when `a termination is indecisive because it does not address the merits of the charge, the facts surrounding the termination must be examined to determine `whether the failure to proceed implies a lack of reasonable grounds for the prosecution.'" Id. Consequently, because the grounds for the dismissal of the criminal action were unclear and the facts surrounding the termination were in dispute, the court found that a factual dispute existed as to whether the criminal action had been terminated in the plaintiffs' favor and that this precluded summary judgment. See id.
A similar conclusion was reached in Scheiner v. Wallace (S.D.N.Y. Aug. 4, 1995) 1995 WL 464944. In that case, the plaintiffs had initiated an action against the defendants for malicious prosecution. In pleading the termination of a criminal proceeding in their favor, they simply alleged that the charges against them had been dropped. See Scheiner, 1995 WL 464944 at *5, As in Rounseville, the record in Scheiner was "devoid of any specific evidence concerning why the charges brought against Plaintiffs were dropped." Id. Therefore, the termination was indecisive and failed to address the merits of the charge. In accordance with Rounseville, the district court explained that if, under such circumstances, the question of whether an action had been terminated in favor of the plaintiffs was "inappropriate for resolution on [a] motion for summary judgment, then still greater caution must be applied when the question arises, as it does here, on a motion to dismiss." Id. Hence, the district court held that, "[i]nasmuch as this Court is required to accept all of Plaintiffs material factual allegations as true and draw all reasonable inferences therefrom in the light most favorable to the Plaintiffs . . . it cannot be said that Plaintiffs' have failed to plead their malicious prosecution claim." Id.
The circumstances here are analogous to those addressed by the courts in Rounseville and Scheiner. Although the available record shows that the Bronx D.A. moved to dismiss the criminal action against Wallach and that the charges against her were therefore dropped, the record is devoid of any specific evidence as to why the Bronx D.A. moved to dismiss the criminal action. The Defendants rely on this murkey record to contend that the "Bronx District Attorney simply abandoned the criminal proceeding against Dalia [Wallach], five months after it was commenced." Defs.' Opp'n Brief at 9. As the New York Court of Appeals recently held, "[a] dismissal without prejudice qualifies as a final, favorable termination if the dismissal represents `the formal abandonment of the proceedings by the public prosecutor.'" Smith-Hunter v. Harvey (N.Y. 2000) 95 N.Y.2d 191, 198. See also Loeb, 432 N.Y.S.2d at 493; Halberstadt v. New York Life Ins. Co. (N.Y. 1909) 194 N.Y. 10-11.
In contrast, the Plaintiffs rely on that same opaque record to contend that the criminal action was not resolved in a manner that establishes Wallach's innocence. Since the basis for the dismissal of the criminal action is unclear at this stage, and inasmuch as we must accept the Defendants' allegations as true and draw all reasonable inferences therefrom in the light most favorable to the Defendants, we find that Wallach has sufficiently pled a termination in her favor to withstand a motion to dismiss. See Bacquie v. City of New York (S.D.N.Y. July 31, 2000) 2000 WL 1051904, *3 (finding that a malicious prosecution claim could survive a motion to dismiss where the plaintiffs had alleged that the charges against them were dismissed by the motion of the district attorney and where, at this early stage in the litigation, it was impossible to tell why the charges had been dropped). See also Rounseville, 13 F.3d at 629; Noga, 169 F. Supp.2d at 91; Scheiner, 1995 WL 464944 at *5.
2. The Civil Forfeiture Action Against MD
A party asserting a malicious prosecution claim based on a civil proceeding must similarly establish a termination in favor of itself. See Sundbye, 3 F. Supp.2d at 260. As with a malicious prosecution claim stemming from an underlying criminal action, the termination of a civil proceeding must have been of such a character so as to fairly imply the lack of a reasonable ground for the prosecution. See Levy's Stores, Inc. v. Endicott Johnson Corp. (N.Y. 1936) 272 N.Y. 155, 162.
MD premises its malicious prosecution counterclaim on the initiation of the civil forfeiture action against it. See Am. Answer ¶ ¶ 107-111. On November 16, 2000, Assistant District Attorney Cristina Paquette, acting on behalf of the Bronx D.A., voluntarily stipulated to a discontinuance of the civil forfeiture action with prejudice. See Am. Answer, Ex. G. MD contends that, as a consequence thereof, the action was dismissed around November 18, 2000. See Am. Answer ¶ 71.
As the Second Circuit has explained, albeit with respect to malicious prosecution claims arising in the criminal context, whether the abandonment of a prosecution resulting in a termination with prejudice constitutes a termination favorable to a party depends on the cause of the abandonment. Murphy, 118 F.3d at 949. The prevailing view is that if the abandonment was the result of a compromise to which the party agreed, or an act of mercy requested or accepted by the party, it is not a favorable termination for the purposes of a malicious prosecution claim. See id. These principles are equally applicable in the context of a malicious prosecution claim predicated on a civil proceeding. See Miller v. Jamaica Savings Bank (N.Y.App.Div. 1975) 377 N.Y.S.2d 89, 90 (recognizing that a malicious prosecution claim based on a civil lawsuit will not lie where the civil suit was terminated by settlement); Levy's Stores, Inc., 272 N.Y. at 162 (holding that where a proceeding has been terminated without regard to its merits because of an agreement or settlement or solely by the procurement of the party as a matter of favor, such a termination cannot support a malicious prosecution claim).
However, courts have repeatedly held that in the absence of a compromise or inducement offered by the plaintiff party in the underlying civil proceeding, the voluntary discontinuance with prejudice by that party is tantamount to a successful termination on the merits in favor of the defendant in the underlying civil proceeding. Aquilina v. O'Connor (N.Y.App.Div. 1977) 399 N.Y.S.2d 919, 457; Marion Steel Co. v. Alderton Dock Yards (N.Y.App.Div. 1928) 227 N.Y.S. 678, 680. See also Chrysler Corp. v. Fedders Corp. (S.D.N.Y. 1982) 540 F. Supp. 706, 719 n. 4 (recognizing that a voluntary discontinuance of a civil suit can serve as the basis for a malicious prosecution claim). Although the voluntary discontinuance of the civil forfeiture action against MD states that it is being entered because the action had been "settled," see Am. Answer, Ex. G, Defendants specifically allege that they "made no admission of guilt, provided no testimony against others, paid no fine and never agreed to forfeit any property in connection with the dismissal of the . . . Forfeiture Action." See Am. Answer ¶ 71.
Given MD's allegations, there is at least some question as to whether or not the discontinuance of the civil forfeiture action with prejudice was procured by way of settlement or whether it was merely a voluntary discontinuance with prejudice which did not involve any compromise. Drawing all reasonable inferences in favor of MD, we find that it has sufficiently pled a termination in its favor to survive the motion to dismiss.
C. Lack of Probable Cause
To state a claim for malicious prosecution under New York law, the Defendants must also demonstrate that there was a lack of probable cause for commencing the proceedings against them. See Murphy, 118 F.3d at 947. In their Amended Answer, the Defendants contend that no probable cause existed to initiate either the criminal proceeding or the civil forfeiture action. See Am. Answer ¶ 53-55, 60, 109, 114.
"[T]he existence of probable cause depends on whether "the knowledge of facts, actual or apparent, [are] strong enough to justify a reasonable man in the belief that he has lawful grounds for prosecuting the defendant in the manner complained of." Pritzker v. City of Hudson (N.D.N Y 1998) 26 F. Supp.2d 333, 442. In this instance, according to the allegations of three Assistant District Attorneys, "[o]n or about June 21, 2000, police officers from [the] O[rganized] C[riminal] I[nvestigation] D[ivision] executed search warrants for MGM Apparel, located at 350 5th Avenue in Manhattan, and at the location of the M D Sportswear, located in Buildings 77 and 280 in the Brooklyn Navy Yard, in Brooklyn." See Am. Answer, Ex. C at 12. The raid came after an undercover investigation by the NYPD into MD and Wallach's purported sale and distribution of counterfeit trademark garments in the New York metropolitan area. See Am. Answer, Ex. C at 9-12. Over the course of several months, the NYPD had obtained various pieces of apparel from MD, including Nike and Polo t-shirts and socks as well as Adidas t-shirts. See id. The NYPD provided samples of the apparel to representatives of Nike, Polo, and Adidas, and these representatives determined that the items were counterfeit. See Am. Answer, Ex. C at 10-12, 36, 38-39, 44, 46-47, 51-53, 57.
During the raid which resulted from this investigation, the police arrested Wallach and seized additional allegedly counterfeit apparel from MD's premises. See id. at 12. Shortly thereafter, the Bronx D.A. filed the civil forfeiture action against the Defendants to recover $2,555,089, which represented the estimated value of the purportedly counterfeit apparel seized by the police during the June 21, 2000 raid. See id. at 21. At the same time, the Bronx D.A. sought and obtained a temporary restraining order ("TRO") from Justice De Marco of the New York Supreme Court, Bronx County, which restrained the Defendants' assets on the basis that probable cause existed to believe that those assets were the proceeds of illegal activity by the Defendants. See id. at 1-5. Around June 22, 2000, the Bronx D.A. also commenced a criminal action against Wallach for trademark counterfeiting. See Am. Answer ¶ 58. The Defendants, the Bronx D.A., and the various Assistant District Attorneys indicate that this criminal action was based on both the NYPD undercover investigation and the results of the raid. See Am. Answer ¶ ¶ 53, 112, and Ex. C at 12-13, 21-22.
In essence, the Defendants contend that both the criminal prosecution and the civil forfeiture action were premised in large measure on the accusations of the Plaintiffs' experts, who had examined the merchandise obtained during the undercover investigation and through the police raid and deemed such apparel to be counterfeit. They assert that although the Plaintiffs' representatives concluded that the apparel obtained during the undercover investigation was counterfeit, these representatives generally either (a) provided no explanation for those conclusions; (b) when they did provide explanations, those statements were consistent with non-counterfeit but irregular merchandise; or (c) actually found that the apparel was not counterfeit or found that they could not determine whether the garments were authentic. See Am. Answer ¶ 51. Moreover, the Defendants also attack the representatives' determinations with respect to the supposedly counterfeit nature of the apparel seized during the raid; they contend that the Plaintiffs' representatives did not actually inspect each piece of apparel seized by the NYPD and that the representatives have not provided any explanations as to how they determined such apparel to be counterfeit. See Am. Answer ¶ 54. Indeed, the Defendants note that the supposedly counterfeit apparel which was seized on June 21, 2000 included garments bearing the trademarks of Major League Baseball, Champion, Calvin Klein, Nautica, Chaps, and Fila even though no representatives from the companies who own those trademarks were present to examine the nature of such apparel during the raid. Id. Hence, the Defendants assert that since the criminal and civil actions were based on the biased, self-interested, and uncorroborated determinations of the Plaintiffs' representatives, no probable cause existed to believe that either the criminal prosecution or the civil forfeiture action would succeed. See Am. Answer ¶ ¶ 107, 114.
In an effort to counter these allegations, the Plaintiffs attempt to rely on the TRO issued by Justice De Marco to raise a presumption of probable cause. Although the Plaintiffs do not refer as extensively to the warrant which preceded that TRO, we are also generally aware that a search warrant was purportedly executed for the June 21, 2000 raid on MD's premises. See Am. Answer, Ex. C at 12.
Where a search warrant has been issued by a neutral magistrate, that warrant, which depends on a finding of probable cause, is sufficient to create a presumption that probable cause existed. See Golino v. City of New Haven (2d Cir. 1991) 950 F.2d 864, 870, cert denied (1992) 505 U.S. 1221 ("Normally, the issuance of a warrant by a neutral magistrate, which depends on a finding of probable cause, creates a presumption that it was objectively reasonable for the officers to believe there was probable cause . . ."); Barber v. Winn (N.D.N.Y. Mar. 31, 1997) 1997 WL 151999, *6, aff'd (1997) 131 F.3d 130 ("The issuance of a [search] warrant by an independent magistrate creates a presumption that it was objectively reasonable" for the officer to rely on that warrant); Hornstein v. Wolf (N.Y.App.Div. 1985) 491 N.Y.S.2d 183, 186, aff'd (1986) 67 N.Y.2d 721 (recognizing that presumption of probable cause arises from "a decree or order of a judicial officer"). A presumption of probable cause also arises where a TRO has been issued by a court. See Hornstein v. Wolf (N.Y 1986) 67 N.Y.2d 721, 723.
Accordingly, a party which argues that a warrant or other judicial decree was issued on less than probable cause faces a heavy burden. See Golino, 950 F.2d at 870. To overcome the presumption of probable cause which would arise from such judicial determinations, the party asserting the malicious prosecution claim would generally need to show that the order had been obtained through fraud, perjury, or the withholding of evidence. See Hornstein, 491 N.Y.S.2d at 186. See also Golino, 950 F.2d at 870 ("In order to mount such a challenge, the plaintiff must make a "substantial preliminary showing' that the affiant [on whose accusation the order was issued] knowingly and intentionally, or with reckless disregard for the truth, made a false statement in his affidavit and that the allegedly false statement was `necessary to the finding of probable cause'"). Since the Defendants failed to assert either fraud, perjury, or the withholding of evidence in their Amended Answer, we would, under ordinary circumstances, dismiss their malicious prosecution counterclaims for failing to state allegations sufficient to overcome the presumption of probable cause created by either the search warrant or Justice De Marco's TRO.
However, these are no ordinary circumstances. First, we have not, as of yet, been provided with any information as to the search warrant which was purportedly "executed" for the raid on MD's premises. As such, we do not know the grounds on which that warrant was issued or whether it had been issued by a neutral magistrate.
Moreover, although Justice De Marco did issue a TRO, he did so only after the goods were seized by the police on June 21, 2000 and Wallach had already been arrested. The parties have not discussed whether a TRO issued after the seizure of goods or an arrest raises the same presumption of probable cause as a TRO issued prior to the seizure or arrest. However, even assuming arguendo that a TRO issued after such a seizure or arrest could raise the same presumption of probable cause as a TRO issued before the seizure or arrest, any such presumption of probable cause which would generally arise from that TRO would still be inapplicable under these circumstances. Presumptions of probable cause are inapplicable where they are issued by a judge on the basis of sworn accusations of the defendant in the malicious prosecution counterclaim. See Pritzker, 26 F. Supp.2d at 442. See also Russo v. State of New York (2d Cir. 1982) 672 F.2d 1014, 1018, modfied on other grounds (2d Cir. 1983) 721 F.2d 410.
Here, Justice De Marco expressly premised his TRO on, among other things, "the annexed affirmation of Assistant District Attorneys MAUREEN DUFFY, CHRISTINA PAQUETTE and LAURIE SPARROW, of counsel to the District Attorney of Bronx County, ROBERT T. JOHNSON . . . together with all the exhibits annexed thereto." Am. Answer, Ex. C at 1-2. In turn, each of the aforementioned Assistant District Attorneys based their affirmations in large measure on the conclusions reached by the Plaintiffs' experts with respect to the counterfeit nature of the Defendants' apparel. See Am. Answer, Ex. C at 7-8 ("In an effort to ascertain defendants' criminal liability, experts of the trademark companies examined the merchandise purchased during the investigation . . . The experts have determined that all of the merchandise purchased by the Undercover Detective assigned to this case was counterfeit. Therefore, defendants' entire business is predicated on the manufacture, sale, and distribution of counterfeit trademark merchandise. Experts have also preliminarily examined the large volume of merchandise recovered pursuant to a search warrant, and have determined that the wholesale value of the merchandise seized to be $2,555,089.00 in United States currency.") See also Am. Answer, Ex. C at 10-14. Given Justice De Marco's reliance on affirmations which themselves heavily relied on determinations made by the Plaintiffs' representatives, no presumption of probable cause can arise from Justice De Marco's TRO.
Drawing all reasonable inferences and resolving all ambiguities in favor of the non-moving parties, we conclude that, under these circumstances, the Defendants have sufficiently pled a lack of probable cause to withstand the motion to dismiss.
D. Malice
Finally, to state a counterclaim for malicious prosecution under New York law, the Defendants must also demonstrate actual malice as a motivation for the Plaintiffs' actions. See Murphy, 118 F.3d at 947. Pursuant to Federal Rule of Civil Procedure 9(b), malice may be averred generally. FED.R.CIV.P. 9(b). Moreover, "[u]nder New York law, malice does not have to be actual spite or hatred, but means only `that the defendant must have commenced the proceeding due to a wrong or improper motive, something other than a desire to see the ends of justice served.'" Lowth v. Town of Cheektowaga (2d Cir. 1996) 82 F.3d 563, 573.
The Defendants contend, inter alia, that the Plaintiffs instigated the criminal prosecution and the civil forfeiture action against them through their financing and conduct (particularly in determining, in a conclusory manner, that the Defendants' apparel was counterfeit), that they did not have probable to cause to believe that the criminal prosecution or civil forfeiture action would succeed, and that they "maliciously instigated" the criminal and civil actions "in the hopes that any adverse outcome of those actions would financially benefit them, by facilitating the Manufacturers' recovery of a monetary judgment in this Federal Action against Wallach and MD." See Am. Answer ¶ ¶ 51, 53-55, 60, 66, 107-109. These allegations are sufficient to give rise to an inference that the criminal prosecution and civil forfeiture action were commenced due to a wrong or improper motive.
Moreover, as we have already discussed, we lack sufficient information to determine whether probable cause existed to support the initiation of either the criminal proceeding against Wallach or the civil forfeiture action against MD, and when we draw all reasonable inferences and resolve all ambiguities in favor of the non-moving parties, the Defendants have successfully pled a lack of probable cause. "[L]ack of probable cause generally raises an inference of malice." Ricciuti v. N.Y.C. Transit Authority (2d Cir. 1997) 124 F.3d 123, 131. See also Babi-Ali, 979 F. Supp. at 277 ("actual malice can be inferred from a lack of probable cause for the initiation of . . . proceedings"). Accordingly, we find that an inference of malice has sufficiently been raised by the Defendants' allegations so as to overcome the motion to dismiss. See Pritzker, 26 F. Supp.2d at 443 (holding that the complaint sufficiently alleged malice since, "Wit is determined that the defendants acted without probable cause, then this would support an inference of malice sufficient to overcome defendants' Rule 12(b)(6) motion"); Babi-Ali, 979 F. Supp. at 277 ("Because Plaintiff has stated a lack of probable cause, an inference can be drawn under New York law that the prosecution was initiated with actual malice. Thus, this Court finds that Plaintiff has stated a claim [for malicious prosecution] upon which relief can be granted").
Recently, by way of a letter dated April 9, 2002, the Defendants sought to introduce various purported "admissions" made by the NYPD and the Bronx D.A. in an Answer filed in MD Sportswear Corp. v. PRL U.S.A. Holdings, Inc., et al., No. 02 Civ. 1562 (S.D.N.Y.) (Judge Lynch). After we denied the Defendants leave to add new counterclaims and new parties to this action, MD filed the aforementioned lawsuit wherein it asserted causes of action against, among others, Polo, Nike, Adidas, the NYPD, and the Bronx D.A. for their wrongful destruction of the property seized during the June 21, 2000 raid. That action is currently pending before Judge Lynch, and the NYPD and the Bronx D.A. recently filed an Answer therein which, according to the Defendants, supposedly made a number of admissions relevant to the Defendants' counterclaims in the action here. Hence, the Defendants have sought to admit those statements in the instant action in a further effort to persuade us to deny the motion to dismiss. However, since we have determined that the allegations in the Amended Answer are themselves sufficient to survive the motion to dismiss, we need not consider the statements made by the NYPD and the Bronx D.A. in their Answer in MD Sportswear Corp. and therefore need not determine whether such statements are admissible here or whether they are binding on the Plaintiffs in this action.
E. Lack of Subject Matter Jurisdiction
Separate and apart from their contention that the Defendants failed to state causes of action for malicious prosecution, the Plaintiffs also assert that we lack subject matter jurisdiction over the Defendants' counterclaims. In their initial Answer, the Defendants made no allegations as to how we had subject matter jurisdiction over their counterclaims. In their Amended Answer, they alleged for the first time that the "Court has subject matter jurisdiction over the subject matter of the counterclaims asserted by MD and Wallach against Counterclaim-Defendants Polo, Nike, Adidas AG, Adidas BV and Adidas America . . . pursuant to 28 U.S.C. § 1331, 1343 and 1367 and the principles of supplemental jurisdiction." Am. Answer ¶ 32. Having been afforded the opportunity to examine the specific grounds for the Defendants' jurisdictional allegations, the Plaintiffs now contend that 28 U.S.C. § 1331 and 1343 are no longer applicable bases for jurisdiction and that we lack supplemental jurisdiction pursuant to 28 U.S.C. § 1367.
We need not resolve whether we lack subject matter jurisdiction pursuant to 28 U.S.C. § 1331, 1343, or 1367, for even assuming arguendo that the Defendants' jurisdictional allegations were defective, we still have an independent basis for jurisdiction with respect to the Defendants' malicious prosecution counterclaims. Although the Defendants failed to allege diversity jurisdiction pursuant to 28 U.S.C. § 1332 in their Amended Answer, they have since argued by way of their supplemental brief that we have diversity jurisdiction under 28 U.S.C. § 1332 over their counterclaims.
Diversity jurisdiction exists where the suit is between citizens of different states and the amount in controversy exceeds the statutorily prescribed amount of $75,000. See 28 U.S.C. § 1332 (a). "A case falls within the federal district court's `original' diversity `jurisdiction' only if diversity of citizenship among the parties is complete, i.e., only if there is no plaintiff and no defendant who are citizens of the same State." Wisconsin Dept of Corrections v. Schacht (1998) 524 U.S. 381, 388. In this instance, the parties to the counterclaims are, in large measure, corporations. "For jurisdictional purposes, a corporation is deemed to be a citizen of both the state in which it has been incorporated and the state in which it has its principal place of business." Advani Enterprises, Inc. v. Underwriters At Lloyds (2d Cir. 1998) 140 F.3d 157, 160. See also 28 U.S.C. § 1332 (c). Both the Plaintiffs and the Defendants have alleged that: (a) Plaintiffs Tommy Hilfiger and Polo are organized under the laws of Delaware and maintain their principal places of business in that state; (b) Plaintiff Nike is organized under the laws of Oregon and maintains its principal place of business in that state; (c) Plaintiff Adidas-Salomon AG is organized under the laws of the Federal Republic of Germany and maintains its principal place of business in that country; (d) Plaintiff Adidas International BV is organized under the laws of the Netherlands and maintains its principal place of business in that country; and (e) Plaintiff Adidas America, Inc. is organized under the laws of Delaware and maintains its principal place of business in Oregon. See Second. Am Compl. ¶¶ 4-9; Am. Answer ¶¶ 21-25. Moreover, both the Plaintiffs and the Defendants have further alleged that Defendant MD is a New York corporation with its principal place of business in New York and that Wallach is a resident of New York. See Second Am. Compl. ¶ ¶ 19-20; Am. Answer ¶¶ 19-20. In other words, according to both the Second Amended Complaint and the Amended Answer, the Plaintiffs and the Defendants in this action enjoy complete diversity of citizenship. In addition, with respect to the amount in controversy implicated by the malicious prosecution counterclaims, MD has demanded compensatory damages of no less than $417,000 as well as $5 million in punitive damages, and Wallach has demanded compensatory and punitive damages each in the sum of $5 million. See Am. Answer, Ad Damnum Clause ¶ ¶ E and F.
In light of the undisputed allegations with respect to the citizenship of the parties and the Defendants' allegations with respect to the amount in controversy, the Defendants have sufficiently established that we have diversity jurisdiction over their counterclaims. As such, the purported deficiencies in their initial jurisdictional allegations are not fatal to their counterclaims. According to 28 U.S.C. § 1653, "[d]efective allegations of jurisdiction maybe amended, upon terms, in the trial or appellate courts." See 28 U.S.C. § 1653. Where a new theory of subject matter jurisdiction is supported by the allegations underlying a complaint, we may simply deem that complaint to be amended to state that new theory of jurisdiction in furtherance of judicial economy. See Advani Enterprises, Inc., 140 F.3d at 161. See also American National Fire Ins. Co. v. Mirasco, Inc. (S.D.N.Y. Sept. 20, 2000) 2000 WL 1368009, *3 ("If the record established complete diversity then the Court could simply deem the complaint to have been amended and the jurisdictional problem would be cured"). Accordingly, we deem the Amended Answer to be further amended to allege diversity jurisdiction and therefore any purported deficiencies in the Defendants' previous jurisdictional allegations are now cured.
II. THE MOTION TO STRIKE
In their supplemental memorandum in support of their motion to dismiss, the Plaintiffs also ask us to strike Paragraphs 46, 49-50, 56-57, and 73-106 of the Amended Answer. See Pls.' Supplemental Brief at 9-10. The Plaintiffs note that the Amended Answer had originally been submitted by the Defendants in the hopes of introducing several new counterclaims against both the Plaintiffs and a number of new parties. Since we denied the Defendants leave to add these new counterclaims or parties by way of the Amended Answer, the Plaintiffs contend that the aforementioned paragraphs should be stricken as they relate solely to such new counterclaims and parties and "have no bearing whatsoever on the malicious prosecution counterclaims" which remain. See id.
Under Federal Rule of Civil Procedure 12(f), we are permitted to strike "from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." FED.R.CIV.P. 12(f). However, "[t]he Federal Rules of Civil Procedure have long departed from the era when lawyers were bedeviled by intricate pleading rules and when lawsuits were won or lost on the pleadings alone. Thus the courts should not tamper with the pleadings unless there is a strong reason for doing so." Lipsky v. Commonwealth United Corp. (2d Cir. 1976) 551 F.2d 887, 893. Accordingly, "[m]otions to strike are disfavored and will not be granted `unless it is clear that the allegations in question can have no possible bearing on the subject matter.'" See Thomas v. NASL Corp. (S.D.N.Y. Nov. 20, 2000) 2000 WL 1725011, *11. See also Lipsky, 551 F.2d at 893 ("it is settled that the motion [to strike] will be denied unless it can be shown that no evidence in support of the allegation would be admissible").
We have thoroughly examined Paragraphs 46, 49-50, 56-57, and 73-106. Although the Plaintiffs may contend that the allegations contained therein are immaterial to the Defendants' malicious prosecution counterclaims, questions of relevancy and admissibility usually "require the context of an ongoing and unfolding trial in which to be properly decided." Lipsky, 591 F.2d at 893. Therefore, "ordinarily neither a district court nor an appellate court should decide to strike a portion of . . . [a pleading] on the grounds that the material could not possibly be relevant on the sterile field of the pleadings alone." Id.
The paragraphs at issue here largely either address (a) the purported relationship between the Plaintiffs, the NYPD, and the Bronx D.A., or (b) the treatment and nature of the very apparel which served as a predicate for the criminal prosecution and civil forfeiture action that were initiated against the Defendants after the June 21, 2000 raid on MD's premises. There is no basis, at this stage, to conclude from the barren field of the pleadings alone that the allegations in the disputed paragraphs can have no possible bearing on the subject matter of the malicious prosecution counterclaims. As such, we deny the motion to strike.
In fact, the Plaintiffs themselves conceded the relevancy of the goods seized in the course of the June 21, 2000 raid to the malicious prosecution counterclaims when they explained that "the malicious prosecution counterclaims . . . relate to the seized goods in the Criminal Proceedings." See Pls.' Supplemental Brief at 6. Since Paragraphs 46, 49-50, 56-57, and 73-106 often discuss those goods and the events leading up to their seizure, we give little credence at this stage to the Plaintiffs' subsequent contention that the allegations in those paragraphs "do not relate" to the malicious prosecution counterclaims. See Pls.' Supplemental Brief at 10.
CONCLUSION
For the foregoing reasons, the motion to dismiss and the motion to strike are denied.
SO ORDERED.