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Data Research and Handling Inc. v. Vongphachanh

United States District Court, N.D. Indiana, Fort Wayne Division

September 30, 2017



          William C. Lee, Judge United States District Court.

         This matter is before the Court for resolution of several pending motions, including motions to dismiss filed by all of the Defendants and the Plaintiff's motion to amend its Complaint. For the reasons discussed below, the Plaintiff's motion to file a Second Amended Complaint (ECF 41) is GRANTED. The Clerk of the Court is directed to file and docket the proposed Second Amended Complaint (attached as Exh. 1 to the Plaintiff's motion), together with the supplemental exhibits submitted by the Plaintiff at ECF 42 and ECF 43. The motions to dismiss-ECF 20, ECF 29, and ECF 34-all challenged the First Amended Complaint, which is no longer controlling, and therefore are DENIED AS MOOT.[1]


         Data Research and Handling is an Indiana corporation based in Fort Wayne that is “engaged in providing relocation benefit plans to employers, unions, affinity groups and membership organizations which in turn are offered to employees, as union benefits or affinity benefits.” First Amended Complaint (ECF 5), p. 2. The program Data Research was attempting to launch was designed to provide financial assistance to individuals purchasing homes and was purportedly a type of Employer-Assisted Housing Benefit Plan. Data Research filed its original Complaint in state court in March of 2014 and a First Amended Complaint was filed on October 1, 2015. Id. Defendant National Association of Realtors, Inc., removed the case to this Court on November 16, 2016. Notice of Removal (ECF 1).[2] The First Amended Complaint is the controlling Complaint before this Court (and the one Plaintiff seeks to amend). In that First Amended Complaint, Data Research asserts state law claims against the Defendants for libel per se; slander per se; tortious interference with contract; tortious interference with a business relationship; negligent training, supervision and retention; and violations of the Indiana Fair Trade Regulations, I.C. § 24-1-1-1, et seq. Id. Data Research also asserts federal claims for violations of the Lanham Act, 15 U.S.C. § 1125 et seq., and violations of the Sherman Act, 15 U.S.C. § 1, et seq. Id. Data Research alleges that the Defendants engaged in coordinated efforts to damage Plaintiff's business by defaming Data Research just as it was about to launch its major marketing initiative consisting of a “substantial rollout and on-site promotion in northeast Indiana on February 27, 2014.” First Amended Complaint, p. 3. According to Data Research, the Defendants ruined the planned rollout by telling others that “Plaintiff was operating an illegal down payment assistance program, and that Plaintiff was an illegal company.” Id., pp. 3-4. Data Research claims that the Defendants communicated these assertions “to parties contracting with Plaintiff, to parties in a business relationship with the Plaintiff, . . . to the general public, ” and even to a U.S. Congressman. Id. Data Research claims that the Defendants' conduct was deliberate and calculated to suppress market competition. Plaintiff's case is summarized by the following sentence from its First Amended Complaint: “The Defendants have, through a combination of acts and through conspiracy, incorporated illegal and oppressive measures to prevent an innovative business model from forming and thriving in the market, and have acted to restrain trade.” Id., p. 6.


         Federal Rule 15 governs amendments and provides that “[a] party may amend its pleading once as a matter of course. . . . In all other cases, a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires.” Fed.R.Civ.P. 15(a)(1)-(2). Pursuant to the Rule's express language, leave to amend a complaint is generally liberally granted. Murphy v. Vill. of Hoffman Estates, 959 F.Supp. 901, 904 (N.D.Ill. 1997). Nevertheless, the Court can deny the Plaintiff's motion to amend if it concludes that there exists “undue delay, bad faith, dilatory motive, undue prejudice to the opposing party, or when the amendment would be futile.” Bethany Pharmacal Co. v. QVC, Inc., 241 F.3d 854, 861 (7th Cir. 2001); Villa v. City of Chicago, 924 F.2d 629, 632 (7th Cir. 1991). Also, “‘the right to amend as a matter of course is not absolute, ' and a district court may deny a motion to amend ‘if the proposed amendment fails to cure the deficiencies in the original pleading, or could not survive a second motion to dismiss[.]'” Foster v. DeLuca, 545 F.3d 582, 584 (7th Cir. 2008) (quoting Crestview Vill. Apartments v. United States HUD, 383 F.3d 552, 557 (7th Cir. 2004)).

         If a proposed amended complaint fails to state a viable claim under the Rule 12(b)(6) standard, then amendment would be futile and the plaintiff's motion to amend must be denied. The Rule allows a defendant to move to dismiss a complaint that fails to “state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). When deciding a motion to dismiss under Rule 12(b)(6), the court accepts as true all factual allegations in the complaint and draws all inferences in favor of the plaintiff. Bielanski v. County of Kane, 550 F.3d 632, 633 (7th Cir. 2008). The complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). In Bell Atlantic Corp. v. Twombly, the Supreme Court explained that the complaint must allege facts that are “enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. 544, 555 (2007). The complaint must include “enough facts to state a claim to relief that is plausible on its face.” Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (internal citation and quotation marks omitted). To be facially plausible, the complaint must allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). Stated differently, “[a] motion under Rule 12(b)(6) challenges the sufficiency of the complaint and not the merits of the suit.” Neal v. Backs, 2016 WL 5933429, *2 (N.D.Ind. Oct. 12, 2016) (citing Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990)). In Twombly the Supreme Court articulated the following standard regarding factual allegations that are required to survive dismissal:

While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the “grounds” of his “entitlement to relief” requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).

Twombly, 550 U.S. at 555. A plaintiff can also plead himself out of court if he pleads facts that preclude relief. See Atkins v. City of Chi., 631 F.3d 823, 832 (7th Cir. 2011); Edwards v. Snyder, 478 F.3d 827, 830 (7th Cir. 2007); McCready v. Ebay, Inc., 453 F.3d 882, 888 (7th Cir. 2006). Finally, determining whether a complaint states a plausible claim for relief requires a reviewing court to “draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.

         These applicable standards, in tandem, guide the Court in resolving the pending motions in this case.


         The Defendants oppose the Plaintiff's motion to amend, arguing that it is dilatory in nature as well as futile. See Response by Indiana Association of Realtors (IAR) (ECF 47); Response by Upstate Alliance, Upstate Alliance MLS, and Pone Vongphachanh (collectively referred to as “Upstate Alliance”) (ECF 48); Response by National Association of Realtors (NAR) (ECF 50). The Defendants contend that Plaintiff's motion to amend, coming nearly three years after the filing of the original complaint, is an attempt to avoid directly confronting the motions to dismiss. They also insist that despite Plaintiff's contention, the proposed amended complaint does nothing to bolster Plaintiff's claims or save them from dismissal and is therefore futile.

         Data Research claims in its motion to amend that its proposed Second Amended Complaint includes allegations that “overcome the arguments of Defendants supporting dismissal[, ] . . . raises no new legal causes of action, ” and provides “greater specificity” regarding claims and jurisdictional bases. Motion to Amend, p. 2. Accordingly, Data Research argues that the issues raised in the motions to dismiss are mooted by the purportedly fine-tuned Second Amended Complaint. Id.[3]

         Defendant IAR devoted most of its brief in opposition to the Plaintiff's motion to amend to arguing that Plaintiff fails to state a cognizable claim against it for defamation, be it libel or slander, while only a page or so is devoted to Plaintiff's federal claims under the Lanham Act and the Sherman Act. IAR Response, generally. The opposition brief filed by Upstate Alliance doesn't argue the merits of any claim, but states that Plaintiff's proposed Second Amended Complaint is “an attempt to substitute a proposed amended complaint for a reply to the three pending Motions to Dismiss. The consequence of such action is dilatory in nature.” Upstate Alliance Response, p. 3. They contend that Plaintiff's motion to amend is “an exercise in futility[]” and that “[o]ther than delaying a ruling on the three pending Motions to Dismiss, there is no reason for Plaintiff's Motion.” Id. The NAR's brief echos the “dilatory nature” and “futility” arguments, and also challenges the facial validity (that is, the Rule 12(b)(6) sufficiency) of Plaintiff's Lanham Act and Sherman Act claims. NAR Response (ECF 50), generally.

         Federal Rule of Civil Procedure 15(a) provides that if a party is not entitled to amend a pleading as a matter of course, he may do so only with the opposing party's written consent or leave of court. District courts are afforded broad discretion to decide motions for leave to amend pleadings. Maxwell v. S. Bend Work Release Ctr., 2010 WL 3239319, at *2 (N.D. Ind. Aug. 13, 2010) (citing Soltys v. Costello, 520 F.3d 737, 743 (7th. Cir. 2008)). And “‘[a]lthough the rule reflects a liberal attitude towards amending pleadings, courts in their sound discretion may deny a proposed amendment if the moving party has unduly delayed filing the motion, if the opposing party would suffer undue prejudice, or if the pleading is futile.'” Id. (quoting Soltys, 520 F.3d at 743). Undue delay alone, however, is not a sufficient basis for denying leave to amend. Id. (citing Dubicz v. Commonwealth Edison Co., 377 F.3d 787, 793 (7th Cir. 2004)). “Rather, to support denial, such delay must be coupled with another reason-most commonly unfair prejudice, but also bad faith, a dilatory motive, or when the proposed amendment would be futile.” Id. (citations omitted). As Judge Simon also explained in Maxwell:

Generally, undue delay occurs when a motion to amend would “transform” or prolong the litigation unnecessarily. Eckstein v. Balcor Film Investors, 58 F.3d 1162, 1170 (7th Cir. 1995). In determining whether undue delay has occurred, courts consider the similarity of the factual basis for the claims in the original complaint to the proposed new claims, the movant's explanation for waiting to raise the new claims, whether the movant is attempting to introduce a new theory of the case, and whether granting the motion to amend will require new or duplicated discovery efforts.

Maxwell, 2010 WL 3239319, at *2 (additional internal citations omitted).

         In this case the Court finds no undue delay or dilatory motive on the part of Data Research. Recall that the Defendants support their argument by noting that the latest proposed amended complaint comes almost “three years after the filing of the original complaint, ” is “an attempt to substitute a proposed amended complaint for a reply to the three pending Motions to Dismiss[, ] [t]he consequence of [which] is dilatory in nature[, ]” and that “[o]ther than delaying a ruling on the three pending Motions to Dismiss, there is no reason for Plaintiff's Motion.” But these arguments ignore some important facts. First, while the Plaintiff's motion to file a Second Amended Complaint was filed almost three years after the filing of the original complaint, a fair portion of that time gap was due in part to procedural oddities that caused this case to bounce from state court to this court not once but twice. See Data Research & Handling, Inc. v. Upstate Alliance, et al., No. 1:15-CV-336 (N.D. Ind. Sept. 8, 2016). This case was removed to this Court in 2015 but Judge Lozano remanded it to state court because the original complaint stated no federal claims and the First Amended Complaint, which did allege federal claims under the Sherman Act and the Lanham Act, had not been formally filed in state court prior to removal. So the case went back to state court, where the First Amended Complaint was filed, and was removed to this Court a second time since federal claims were included in the First Amended Complaint. The Upstate Alliance Defendants filed their motion to dismiss about one month after the case was removed to this Court and IAR and NAR followed suit just weeks later. In response, Data Research filed its motion to amend its complaint. So while nearly three years passed between the filing of the original complaint and the present motion to amend, that time gap was not due to a dilatory conduct on the part of Data Research.

         Also, while filing a motion to amend might not be the most direct or efficient way to respond to motions to dismiss-after all, the Court directed Data Research to file a responsive brief for purposes of helping elucidate the Plaintiff's arguments-there is nothing inherently improper, let alone prejudicial or dilatory, in doing so. In addition, as Data Research points out, the proposed Second Amended Complaint does not add any new claims; instead, according to the Plaintiff, it adds greater factual detail to support all the claims already asserted. Plaintiff's Response, p. 4. The Court concludes that the facts and circumstances of this case do not support the Defendants' argument that Data Research was dilatory or guilty of undue delay in filing its present motion to amend.

         As to the Defendants' arguments that the proposed Second Amended Complaint is futile, Data Research “urges the Court to review [specific] paragraphs [of the proposed Second Amended Complaint] to gain a better understanding of the allegations[]” and then discusses dozens of those paragraphs in response to the arguments raised in the motions to dismiss and in opposition to the motion to amend. Plaintiff's Response, pp. 4-17. Since this Court would lack subject matter jurisdiction over this case if the Plaintiff fails to plead a cognizable federal claim-under the Lanham Act or the Sherman Act-the Court must begin by reviewing the sufficiency of the Plaintiff's allegations as to those claims. Even though the asserted federal claims are factually intertwined with Plaintiff's state law defamation claims, they are, of course, legally distinct creatures. If the Plaintiff's allegations create only mythical creatures then this case must be remanded to state court, but if they are at least plausible creatures then this Court has subject matter jurisdiction over all the claims asserted. The Court concludes, for the reasons discussed below, that the allegations in the proposed Second Amended Complaint are sufficient to state claims against all the Defendants under the Sherman Act and the Lanham Act and to vest this Court with subject matter jurisdiction.

         I. ...

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