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WATERLOOV GUTTER PROTECTION v. ABSOLUTE GUTTER

September 28, 1999

WATERLOOV GUTTER PROTECTION SYSTEMS CO., INC., PLAINTIFF,
v.
ABSOLUTE GUTTER PROTECTION, L.L.C., CHARLES KNIGHT, WILLIAM GUMPPER, GUMPPER'S GUTTER SERVICE, RAY VANDERGRIFT, NELSON SENSENIG, INDIVIDUALLY AND AS AGENT OF SENSENIG SPOUTING AND WHITE OAK MFG., L.L.C., DEFENDANTS, V. RICHARD L. KUHNS, CHARLES LEE THOMASON, RAYMOND R. MOSER, JR., EMON J. WALL, AND THOMASON & MOSER, ADDITIONAL COUNTERCLAIM DEFENDANTS.



The opinion of the court was delivered by: Orlofsky, District Judge.

  OPINION

This case began as a relatively straightforward patent infringement dispute between two rain gutter manufacturers. Plaintiff, Waterloov Gutter Protection Co., Inc. ("Waterloov"), manufactures and sells a patented device that directs rain water into a roof gutter while preventing leaves and other debris from falling into and clogging the gutter. It alleges that Defendant Charles Knight ("Knight"), through his company, Absolute Gutter Protection, L.L.C. ("Absolute"), makes and markets a gutter essentially identical to Waterloov's.

The scope of the case broadened considerably, however, when Knight and Absolute (collectively "Defendants") filed an answer with counterclaims. Four of these counterclaims allege wrongdoing not only on the part of Waterloov, but also by Waterloov's attorneys. The first counterclaim alleges that Waterloov and its attorneys engaged in acts of unfair competition by sending letters to Absolute's customers notifying them that they were infringing Waterloov's patents by purchasing Absolute gutters. The other three counterclaims relate to a failed business venture involving Knight, Waterloov's president and owner, Richard L. Kuhns ("Kuhns"), and one of Waterloov's attorneys, Raymond R. Moser, Jr. ("Moser"). Knight alleges that Kuhns and Moser induced him to invest $16,000 in the start-up of Waterloov International Corporation ("WIC"), a company established to market Waterloov gutters in foreign countries, even though Kuhns and Moser knew that Waterloov gutters were ineligible for foreign patent protection. Based upon that scenario, the Defendants filed counterclaims for common law fraud, violations of the New Jersey Consumer Fraud Act, and attorney malpractice. Moser and Waterloov's other attorneys, Charles Lee Thomason ("Thomason"), Emon J. Wall ("Wall"), and the law firm of Thomason & Moser (collectively "Attorney Defendants"), have filed a motion for summary judgment on all four counterclaims. Two of the four counterclaims raise novel issues of law involving the application of a state-law litigation privilege in a federal question case and whether New Jersey's Consumer Fraud Act governs the conduct of the Attorney Defendants in this case.

Knight and Absolute's unfair competition claim requires this Court to decide whether New Jersey's litigation privilege, a state-law privilege, is preempted by federal law in a federal question case. Specifically, I must determine whether New Jersey's "absolute litigation privilege" protects attorneys who send notices of patent infringement to third parties when federal law permits liability to be imposed for the transmittal of such demand letters on a showing of bad faith. Because the application of New Jersey's "absolute litigation privilege" in this case does not conflict with a federal interest or undermine a federal right and given New Jersey's strong policy interest in the privilege, I hold that the litigation privilege is not preempted under the circumstances of this case. As a result, Knight and Absolute cannot assert an unfair competition claim against the Attorney Defendants, based solely on the Attorney Defendants' demand letters. Accordingly, I will grant the Attorney Defendants' motion for summary judgment on the unfair competition claim.

The Defendants' New Jersey Consumer Fraud Act ("CFA") claim requires the Court to address the applicability of the CFA to attorneys as well as investments in start-up companies. I find that under New Jersey law attorneys are not per se excluded from liability under the CFA. Rather, a determination of whether the CFA applies to any professional requires a weighing of various factors, including an evaluation of the applicable standards governing the conduct of the professional. I need not address whether the CFA applies to the attorneys in this case, however, because I conclude that the CFA is not applicable to investments in start-up companies. Consequently, I will grant the Attorney Defendants' motion for summary judgment on the CFA claim.

I will deny the Attorney Defendants' motion for summary judgment on the common law fraud claim. I find that a genuine material question of fact exists as to whether Moser knew or should have known that Waterloov's gutters are ineligible for foreign patent protection. I also find that a material question of fact exists as to whether Moser made any representations to Knight about foreign patent availability and whether Knight relied on any such representation.

Finally, I will grant the Attorney Defendants' motion for summary judgment on the attorney malpractice claim. Under New Jersey law, a party alleging attorney malpractice must provide expert witness testimony to establish the duty of care against which the attorney's actions are to be measured. Because the Defendants have not provided sufficient expert testimony and because the standard of care applicable to this case is not so basic or obvious that expert testimony is unnecessary, the Attorney Defendants are entitled to summary judgment.

I. Factual and Procedural History

Some of the procedural and factual history of this case has already been recounted in this Court's opinion in a related action. See Thomason v. Lehrer, 182 F.R.D. 121, 123-24 (D.N.J. 1998). What follows below describes the facts and procedural history relevant only to the summary judgment motion currently before the Court.

On May 16, 1997, Waterloov filed a Complaint alleging patent infringement by Absolute and Knight, Absolute's owner. In particular, Waterloov alleged infringement of United States Patent No. 4,411,110 (the "'110 patent"), of which Waterloov is the exclusive licensee. See Compl. ¶¶ 7, 9-11 (dated May 15, 1997).

According to a Declaration submitted by Kuhns, Knight once sold Waterloov products as an authorized dealer and manufacturer representative. See Kuhns Decl. ¶ 7 (dated May 14, 1997). Knight terminated this relationship in a letter to Kuhns in 1996. See id. at ¶¶ 7-8. Kuhns alleges that Knight then went into business for himself, manufacturing, marketing and selling "Gutter ProTech," a gutter Kuhns claims infringes the '110 patent. Id. at ¶¶ 5-6. Kuhns further accuses Knight of co-opting Nelson Sensenig ("Sensenig"), a onetime supplier of gutter components to Waterloov and a successful former Waterloov dealer, into an exclusive supplier-dealer relationship with Absolute. See id. at ¶¶ 9, 13, 15. Finally, Kuhns asserts that Knight lured Ray Vandergrift ("Vandergrift"), another former Waterloov dealer, into the Absolute stable. See id. at ¶¶ 18.

Waterloov amended its Complaint on July 16, 1997, joining Sensenig and Vandergrift as Defendants, et alia. See Am. Compl. ¶¶ 4, 6 (dated July 15, 1997). Waterloov noted in the Amended Complaint that it had sent letters, dated March 20, 1997, to Sensenig and Vandergrift, giving them notice of their infringement. See id. at ¶ 27.

Absolute and Knight filed an Answer, Affirmative Defenses and Counterclaims in response, denying Waterloov's allegations and asserting claims for declaratory relief. In Count I of their Answer, Affirmative Defenses and Counterclaims, they demanded that the '110 patent be declared invalid and uninfringed. See Answer, Affirmative Defenses and Counterclaims Ct. I (dated July 29, 1997) (hereinafter "Answer I"). They also sought declaratory judgments that Patent Nos. 5,216,851 and 5,339,575 ("the '851 patent" and "the '575 patent") were invalid, unenforceable, and uninfringed. See id. Cts. II-III. These patents relate to the same general technical area as the '110 patent, rain gutter covers and roof line protectors. See id. at ¶ 60; Att'y Defs.' Br. Supp. Summ. J. at 2 (filed Feb. 26, 1999).

Absolute and Knight also asserted Counterclaims against a number of parties who had not yet been joined to the action: Kuhns and the Attorney Defendants, Thomason, Moser, Wall, and Thomason & Moser (hereinafter collectively "Additional Counterclaim Defendants"). See id. at ¶¶ 46-51.*fn1 Count IV of these Counterclaims accused Waterloov and the Attorney Defendants of unfair competition for having sent the above mentioned letters to Sensenig and Vandergrift, et alia, threatening enforcement of their rights in the '575 and '851 patents. See id. at ¶¶ 75-78.

Waterloov filed a motion to sever and dismiss the claims asserted against the Additional Counterclaim Defendants, and in an Unpublished Opinion and Order, this Court granted the Plaintiff's Motion with respect to three of the Defendants' nine Counterclaims, finding that because they were directed exclusively at the Additional Counterclaim Defendants and not at all at the Plaintiff, the Additional Counterclaim Defendants could not be properly joined pursuant to Rules 13(h), 19, and 20 of the Federal Rules of Civil Procedure. See Op. and Order (dated Mar. 31, 1997). These dismissed Counts alleged common law fraud, violations of the New Jersey Consumer Fraud Act, and legal malpractice. See Answer I Cts. VII-IX. They were predicated on the same factual allegations: Knight accused the Additional Counterclaim Defendants of inducing him to invest $16,000 in the start-up of WIC even though they knew or should have known that because Waterloov products had been sold to and used by the public prior to October 23, 1991, they would never be eligible for foreign patent protection. See id. at ¶¶ 89-101. The three Counterclaims were dismissed without prejudice. See Op. and Order.

On April 3, 1998, Absolute and Knight amended their Answer, Affirmative Defenses and Counterclaims without leave of Court, asserting all of the same Counterclaims they had previously alleged but taking care to name Waterloov in all counts. See First Amended Answer, Affirmative Defenses and Counterclaims Cts. VII-IX (filed Apr. 3, 1998) (hereinafter "Answer II"). Absolute and Knight were plainly trying to overcome the Rule 13(h), 19, and 20 difficulties that triggered the dismissal of these three Counterclaims just four days earlier.

The Attorney Defendants filed an Answer to Absolute and Knight's First Amended Answer on April 24, 1998. They demanded that Counts VII-IX be dismissed with prejudice for having been improperly interposed, but answered all other allegations and claims. See Answer to Counterclaim and Affirmative Defenses of Counterclaim Defendants Charles Lee Thomason, Raymond R. Moser, Jr., Emon J. Wall, and Thomason & Moser ¶ 5 (filed Apr. 24, 1998) (hereinafter "Answer to Counterclaim"). Despite having sent a letter to this Court giving notice of their intent to submit a dispositive motion, ostensibly to dismiss Counts VII-IX, see Letter of Charles Lee Thomason (dated Apr. 24, 1998), such a motion was never filed.

On January 26, 1999, Waterloov filed a Second Amended Complaint, adding allegations that the Defendants, Sensenig, and Vandergrift, et alia, infringed the '575 and '851 patents in addition to the '110 patent. See Second Am. Compl. ¶¶ 2-10, 16-19 (dated Jan. 25, 1999). Allegations concerning the '851 patent were voluntarily dismissed by Waterloov two weeks later. See Notice of Dismissal of Count III of Second Am. Compl. (dated Feb. 9, 1999).

On February 22, 1999, after the Attorney Defendants had filed their papers in support of their motion for summary judgment, the Defendants filed an answer to Waterloov's Second Amended Complaint. See Answer, Affirmative Defenses and Counterclaims (filed Feb. 22, 1999) (hereinafter "Answer III"). Answer III differed significantly from the Defendants' predecessor answers. Specifically, Wall was omitted from all counts, Thomason was alleged to be vicariously and not personally liable on all Counts, and the law firm of Thomason & Moser was stricken from Counts VII-IX (although they remained named in Count IV on a theory of vicarious liability) and the law firm of Thomason & Spalding was substituted in its stead. Compare Answers I and II ¶¶ 75-78, 88-101 with Answer III ¶¶ 174-180, 190-207.

Counts IV and VII-IX of Defendants' Counterclaims are the subject of the Attorney Defendants' pending motion for summary judgment.

II. Preliminary Matters

A. Jurisdiction

(1) Count IV: Unfair Competition

This Court has original jurisdiction over Counterclaim IV.*fn2 "The district courts shall have original jurisdiction of any civil action asserting a claim of unfair competition when joined with a substantial and related claim under the . . . patent . . . laws." 28 U.S.C. § 1338(b) (1994). A patent claim is "substantial" if, on the basis of the pleadings, it is not frivolous or lacking in substance. See Paine, Webber, Jackson & Curtis, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 564 F. Supp. 1358, 1373 (D.Del. 1983); General Foods Corp. v. Struthers Scientific & International Corp., 297 F. Supp. 271, 274 (D.Del. 1969); Jenn-Air Products, Co. v. Penn Ventilator, 283 F. Supp. 591, 595 (E.D.Pa. 1968). A patent claim is "related" if it is derived from a common nucleus of operative fact. See General Foods Corp., 297 F. Supp. at 275. The term "related" is to be interpreted broadly. See Paine, Webber, Jackson & Curtis, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 587 F. Supp. 1112, 1114 (D.Del. 1984).

There is no question that Defendants Absolute and Knight have alleged a substantial patent claim. Counts II and III of their Answer allege that the '851 and '575 patents are invalid, unenforceable and not infringed and have been filed in response to Waterloov's infringement suit concerning the same patents. Count IV is, moreover, related to Counts II and III. Count IV alleges unfair competition on the ground that letters sent by the Attorney Defendants to Sensenig's and Vandergrift's customers threatening enforcement of the '851 and '575 patents had no purpose but to "disrupt and interfere with Absolute's business and to gain an unfair economic advantage for Waterloov." Answer II ¶ 76. Count IV is related to Counts II and III because the validity and enforceablity of the '851 and '575 patents will be critical in determining whether the Attorney Defendants' letters were sent solely to secure an unfair competitive advantage over Absolute. Count IV, in other words, arises out of a common nucleus of operative fact: the validity and enforceability of the '851 and '575 patents. Thus, jurisdiction over Count IV may be properly exercised under 28 U.S.C. § 1338(b).

(2) Counterclaims VII-IX: Common Law Fraud, New Jersey Consumer Fraud Act Violations, Attorney Malpractice

This Court may also exercise jurisdiction over Counts VII-IX, although on a different ground.*fn3 Jurisdiction cannot be predicated upon 28 U.S.C. § 1338(b) as Defendants argue, see Answer III ¶ 151, because Counts VII-IX do not constitute claims of unfair competition. Counts VII-IX accuse the Attorney Defendants of common law fraud, violations of the New Jersey Consumer Fraud Act, and negligence. The essence of each of these claims is that Waterloov and the Additional Counterclaim Defendants induced the Defendants to invest in and become part owners of an international start-up company, Waterloov International Corporation ("WIC"), established to market Waterloov products abroad even though they knew or should have known that it would be impossible to secure foreign patent protection. It is difficult to see how these claims fit within the rubric of unfair competition. Courts have characterized many different types of claims as claims of unfair competition. See, e.g., O'Brien v. Westinghouse Elec. Corp., 293 F.2d 1 (3rd Cir. 1961) (accusation charging the misappropriation of trade secrets treated as a claim for unfair competition); Hook v. Hook & Ackerman, Inc., 233 F.2d 180 (3rd. Cir. 1956) (copying the appearance of another's patented product construed to be a claim for unfair competition); General Foods Corp. v. Struthers Scientific & International Corp., 297 F. Supp. 271 (D.Del. 1969) (allegations that defendant wrongfully appropriated information from the plaintiff and used that information to secure two patents characterized as claims for unfair competition); Trio Process Corp. v. L. Goldstein's Sons, Inc., 250 F. Supp. 926 (E.D.Pa. 1966) (false statements by defendant that plaintiff's invention was his own formed basis for unfair competition claim). Nonetheless, there is scant evidence that courts are willing to characterize claims essentially alleging fraud as claims for unfair competition.

Jurisdiction must be found elsewhere, and given that diversity*fn4 jurisdiction does not exist between the parties and that Counts VII-IX do not raise federal questions, 28 U.S.C. § 1367 is the only potential basis for jurisdiction.*fn5 Before this Court can determine whether supplemental jurisdiction applies to Counts VII-IX, however, it must first address the pivotal question of whether Counts VII-IX should be characterized as compulsory or permissive counterclaims. As the Third Circuit has indicated:

  It is stated frequently that the determination of
  ancillary jurisdiction of a counterclaim in federal
  court must turn on whether the counterclaim is
  compulsory within the meaning of Rule 13(a). . . .
  What is meant is that the issue of the existence of
  ancillary jurisdiction and the issue as to whether a
  counterclaim is compulsory are to be answered by the
  same test. It is not a coincidence that the same
  considerations that determine whether a counterclaim
  is compulsory decide also whether the court has
  ancillary jurisdiction to adjudicate it. The tests
  are the same because Rule 13(a) and the doctrine of
  ancillary jurisdiction are designed to abolish the
  same evil, viz., piecemeal litigation in the federal
  courts.

Great Lakes Rubber Corp. v. Herbert Cooper Co., 286 F.2d 631, 633-34 (3rd Cir. 1961); see also Phillips Petroleum Co. v. United States Steel Corp., 566 F. Supp. 1093, 1096-97 (D.Del. 1983).

A counterclaim is compulsory if "it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim." Fed.R.Civ.P. 13(a). Courts have held that the Rule 13 standard is satisfied when a "logical relationship" can be established between a counterclaim and one of the claims brought by the opposing party. Great Lakes Rubber Corp., 286 F.2d at 634. Several factors should be considered in evaluating whether a logical relationship exists, including whether separate trials of the different claims would involve a substantial duplication of effort and time and whether the claims and counterclaims involve many of the same factual and legal issues or factual and legal issues that are offshoots of the same basic controversy. See id.; see also Xerox Corp. v. SCM Corp., 576 F.2d 1057, 1059-60 (3rd Cir. 1978). "`Transaction or occurrence' should be interpreted broadly; it is unnecessary that the facts be from the same time or that exactly the same facts will resolve the issues in the complaint and the counterclaim." Centennial School District v. Independence Blue Cross, 885 F. Supp. 683, 685 (E.D.Pa. 1994); see also Metallgesellschaft AG v. Foster Wheeler Energy Corp., 143 F.R.D. 553, 558 (D.Del. 1992). Finally, the "logical relation" inquiry is a fact-intensive, case-specific one, resisting the categorization of different couplings of claims and counterclaims as necessarily compulsory or permissive, see Xerox Corp., 576 F.2d at 1060, although "[a]ny counterclaim involving the same patent as involved in the original action usually is considered to arise from the same transaction as the main claim." 6 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1410, at 73 (2nd ed. 1990).

This Court is satisfied that Counts VII-IX are compulsory counterclaims. In Count II of its Second Amended Complaint, Waterloov asserts that the '575 patent is valid and has been infringed by the Defendants. The Defendants counter that they have not infringed the '575 patent because the '575 patent is invalid. They claim that gutters embodying the '575 patent were advertised and sold to the public more than a year before Waterloov filed an application for United States patent protection — a fact that, if true, would render the patent invalid for failing to meet the novelty requirements of United States patent law. See 35 U.S.C. § 102 (1994).*fn6 Central to a determination of the validity of the '575 patent is an assessment of when, if at all, gutters embodying the '575 patent were put to an invalidating public use.

While it is true that Counts VII-IX of Defendants' counterclaims raise a substantial number of factual and legal issues quite distinct from those raised by Waterloov in its Second Amended Complaint, i.e., Waterloov's Complaint does not mention WIC at all, it is also true that these Counts raise "novelty" issues concerning the '575 patent: Defendants Absolute and Knight allege that foreign patents could never have been obtained for Waterloov gutters because gutters embodying the '575 patent were advertised and sold to the public before Waterloov filed for United States patent protection — a violation of foreign novelty requirements.*fn7 Central to a determination of the eligibility of Waterloov gutters for foreign patent protection will be an examination of precisely when gutters embodying the '575 patent were first in public use in the United States. Thus, the same central factual question is raised by both the Plaintiff's claim and the Defendants' counterclaims: When was the invention embodying the '575 patent first used publicly, sold publicly, or described in a printed publication? Consequently, both the Plaintiff's claims and the Defendants' counterclaims are logically related in that they have in common a critical factual question the resolution of which in one litigation saves this Court and the parties from the needless duplication of effort and time in a second lawsuit.

A decision to label a counterclaim as compulsory is a decision to exercise supplemental jurisdiction over that counterclaim pursuant to 28 U.S.C. § 1367. The only question that remains, then, is whether, the Defendants, given their amendment to their counterclaims, have properly joined the Attorney Defendants. I conclude they have.

Rule 13 permits persons not made parties in an original action to be joined for the purposes of a counterclaim if they meet the requirements set forth in Rules 19 and 20. See Fed.R.Civ.P. 13(h). Rule 20 states that parties may be joined as defendants "if there is asserted against them . . . any right to relief in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact in common to all defendants will arise in the action." Fed.R.Civ.P. 20(a). Courts have interpreted Rule 20(a) to establish a two-part test and require both parts to be met for joinder to be permitted: First, claims brought against defendants to be joined must stem from the same transaction or occurrence, and, second, they must share a common question of law or fact. See Morris v. Paul Revere Insurance Group, 986 F. Supp. 872, 885-86 (D.N.J. 1997); Dougherty v. Mieczkowski, 661 F. Supp. 267, 277-78 (D.Del. 1987); Mesa Computer Utilities, Inc. v. Western Union Computer Utilities, Inc., 67 F.R.D. 634, 636 (D.Del. 1975). Courts have held that the first prong of this test requires an inquiry identical to the "logical relation" inquiry under Rule 13(a). See Dougherty, 661 F. Supp. at 278; King v. Pepsi Cola Metropolitan Bottling Co., 86 F.R.D. 4, 5-6 (E.D.Pa. 1979). Counts VII-IX easily satisfy these joinder requirements. The Defendants are seeking relief against the Attorney Defendants on the same basis they are seeking relief against Waterloov. They claim that the Attorney Defendants, like Waterloov, either knew or should have known that the inventions produced from the '575 patent had been publicly disclosed in a way that would prevent WIC from ever obtaining foreign patents for the Waterloov gutter protection system. Because identical transactions, questions of law, and questions of fact are at issue for all of the Additional Counterclaim Defendants, joinder of the Attorney Defendants is proper.*fn8

  B. The Defendants' Amendment of Their Answer, Affirmative
    Defenses, and Counterclaims

Counsel for the Attorney Defendants contends that the Defendants amended their answer and counterclaims improperly because they did not first seek leave of court. See Answer to Countercl. ¶ 5; Att'y Defs.' Br. Supp. Summ. J. at 1. The Defendants respond by characterizing their initial omission of Waterloov from their counterclaims as a mere "clerical error." Defs.' Mem. Opp'n Summ. J. at 2 (filed Feb. 26, 1998).

The Defendants' amendment was permissible. "A party may amend the party's pleading once as a matter of course at any time before a responsive pleading is served. . . . Otherwise a party may amend the party's pleading only by leave of court or by written consent of the adverse party." Fed.R.Civ.P. 15(a). A motion to dismiss is not a responsive pleading within the meaning of Rule 15. See Hewlett-Packard Co. v. Arch Assoc. Corp., 172 F.R.D. 151, 153 (E.D.Pa. 1997) (citing Fed. R.Civ.P. 7(a)); Schnabel v. Bldg. & Construction Trades Council of Phila., 563 West Page 408 F. Supp. 1030, 1035 (E.D.Pa. 1983). Courts have held generally that a party may amend its pleading without seeking leave of court after the pleading has been dismissed, as long as the amendment is made within a reasonable time and no responsive pleading has been served. See id. (citing 6 Charles A. Wright, Arthur R. Miller & Mary Kay Kane, supra, § 1483 & n. 19 (1990) (citing cases)).

In Hewlett-Packard, three defendants, described collectively in the opinion as the "Jewell Defendants," filed an answer with counterclaims in response to a complaint by Plaintiff Hewlett-Packard ("HP"). See id. at 152. The court dismissed the Jewell Defendants' counterclaims without prejudice. See id. Fifteen months after their counterclaims had been dismissed and after a long and contentious discovery process, the Jewell Defendants filed an amended answer with counterclaims without seeking leave of court. See id. The counterclaims were "essentially the same" as those filed initially, except that they added an additional counterclaim under the Robinson-Patman Act and omitted two others. Id. HP immediately filed a motion to dismiss or strike the amended answer and counterclaims. See id. at 153. The court held that the Jewell Defendants should have sought leave of court because 15 months had passed between the dismissal of their original counterclaims and the filing of their amended counterclaims. See id. Finding that Rule 15 "requires parties to litigate their cases diligently and serves the interest of finality," the court ruled that it would have undermined these interests to have permitted an amendment as a matter of course under those circumstances. See id.

The circumstances in Hewlett-Packard are strikingly similar to the circumstances in this case, with a notable exception, which compels me to reach a different conclusion. Here, as in Hewlett-Packard, the Defendants filed a counterclaim that was dismissed without prejudice and later sought to amend their answer by re-alleging "essentially the same" counterclaims without seeking leave of court. Moreover, the amendments in both cases were made before a responsive pleading had been made.

In the instant case, however, the Defendants filed their amended counterclaims within days of the Court's dismissal.*fn9 Consequently, there is no risk that the interests in diligent litigation and finality outlined in Hewlett-Packard would be sacrificed if, in this case, Defendants' amended answer and counterclaims were found to be permissible pursuant to Rule 15(a). Nor have the Additional Counterclaim Defendants in this case faced the degree of prejudice HP would have faced had the amended counterclaims been permitted in that case. Had the Jewell Defendants' amendment been allowed, HP would have had to complete months more of discovery. See id. at 154-55. In this case, the Additional Counterclaim Defendants were served with the amended counterclaims shortly after having briefed the question of whether the original counterclaims should have been dismissed. They had the opportunity to avoid the additional discovery they had to perform. They could have filed a motion to dismiss, however, they never ...


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