United States District Court, D. New Jersey
For NEWTECHBIO INC., Plaintiff: ARTHUR L. LESSLER, LEAD ATTORNEY, LESSLER & LESSLER, SOUTH RIVER, NJ.
For SEPTICLEANSE, INC., BRADLEY A. MARKIN, also known as BRAD MARKIN, SABRINA GARCIA MARKIN, also known as SABRINA GARCIA, also known as SABRINA LOAIZA GARCIA, also known as SABRINA G. GARCIA LOAIZA, LORI BETH KAPLAN MULTZ, also known as LORI MULTZ, also known as LORI BETH MULTZ, also known as BETH WILSON, also known as LORI KAPLAN, ROBERT A. MARKIN, Defendants: JOSEPH P. LASALA, LEAD ATTORNEY, WILLIAM F. O'CONNOR, JR., MCELROY, DEUTSCH, MULVANEY & CARPENTER, LLP, MORRISTOWN, NJ; JAMES J. DIGIULIO, MCELROY DEUTSCH MULVANEY & CARPENTER, MORRISTOWN, NJ.
HONORABLE TONIANNE J. BONGIOVANNI, UNITED STATES MAGISTRATE JUDGE.
Currently pending before the Court is Plaintiff Newtechbio Inc.'s (" Plaintiff") renewed motion seeking leave to file a Second Amended Verified Complaint [Docket Entry No. 60] to redefine the RICO enterprise, add jurisdictional allegations as to Defendant Bradley A. Markin, add four counts against Bradley A. Markin and make the nationwide service provisions of the civil RICO statute applicable to the other individual Defendants. Defendants Septicleanse, Inc., Bradley A. Markin, Robert A. Markin, Sabrina Garcia Markin, Lori Beth Kaplan Multz, Jorge Rodriguez and Sabrigl (collectively, " Defendants") oppose Plaintiff's motion. [See Docket Entry Nos. 63 & 76]. The Court has reviewed all arguments made in support of and in opposition to Plaintiff's motion along with Plaintiff's proposed Second Amended Verified Complaint and its RICO Supplement to the proposed Second Amended Verified Complaint. The Court considers Plaintiff's motion without oral argument pursuant to L.Civ.R. 78.1(b). For the reasons set forth more fully below, Plaintiff's motion is DENIED.
I. Background and Procedural History
Plaintiff initiated this matted on September 19, 2012 by filing a Verified Complaint (the " Complaint") against Defendants seeking to enjoin them from selling a competing septic system cleaning product and seeking to force Defendants to cease and desist their allegedly unfair competition practices. ( See generally Compl.; Docket Entry No. 1). Plaintiff markets chemicals for use in cleaning septic systems. (Id. ¶ 15). Its primary line of septic system products is marketed under the name NT-MAX. (Id. ¶ 16). Through its Complaint, Plaintiff alleges that Defendants, starting in June 2012, began to engage in a pattern of unfair competition when they: (1) created fictitious consumer review websites that published derogatory reviews of Plaintiff's product, thereby negatively affecting Plaintiff's sales; and (2) purchased advertisements on various major search engines using Plaintiff's trademarks and trade names so that when consumers search for Plaintiff's products, Defendants advertisements and websites are displayed ahead of Plaintiff's. (Id. ¶ ¶ 12-14). The websites at issue are: www.septicleanse.com, www.bestsepticproducts.com, www.septictreatments.net, www.bestseptictreatments.com, www.homesepticproducts.com, www.sewertreatment.net and www.cloggedsepticsystem.com. (Id. ¶ 23). Plaintiff contends that all of these sites are owned and operated by Defendants with the sole purpose of disparaging Plaintiff's product and redirecting sales to Defendant Septicleanse, Inc.'s (" Septicleanse") product, Septicleanse, via the website www.septicleanse.com.
Based on Defendants' alleged conduct, Plaintiff asserted the following claims in the Complaint: (1) participation in a Racketeer Influenced and Corrupt Organizations (" RICO") Enterprise through a Pattern of Racketeering Activity, 18 U.S.C. § 1961(5), 1962(c) (Id. ¶ ¶ 57-61); (2) Trade Libel and Unfair Competition (Id. ¶ ¶ 62-66); (3) Intentional Interference with Prospective Economic Advantage (Id. ¶ ¶ 67-73); (4) Common Law Trademark Infringement (Id. ¶ ¶ 74-78); and (5) False Advertising -- Violation of 15 U.S.C. § 1125(a) (Id. ¶ ¶ 79-86). Plaintiff also requested various forms of relief including: (1) Defendants' immediate cessation of all websites that market septic system chemicals or purport to review such chemicals; (2) temporary and permanent injunctions barring Defendants from acquiring a business related to septic chemicals, disparaging Plaintiff's product or reviewing said product; (3) an accounting of all sales of septic system products made by Defendants after June 14, 2012; (4) Plaintiff's lost sales, trebled; (5) punitive damages; and (6) attorney's fees and post judgment fees required to collect any judgment. (Id. at 27-31).
Along with the Complaint, Plaintiff also filed an application for an order to show cause for a preliminary injunction and temporary restraining order without notice (the " Application"). [Docket Entry Nos. 1 & 6]. In response to Plaintiff's Application, the District Court entered an Order to Show Cause (" OTSC"), requiring all Defendants to show cause on October 26, 2012 why they should not be enjoined from undertaking the actions outlined in the OTSC. [Docket Entry No. 5]. Through the OTSC, the District Court also denied Plaintiff's request for an ex parte temporary restraining order. (Id.)
The hearing on the OTSC was adjourned until November 29, 2012. Prior to the hearing, Defendants filed a motion to dismiss for lack of jurisdiction and failure to state a claim. [Docket Entry No. 27]. The District Court heard argument on Plaintiff's application and Defendants' motion to dismiss during the scheduled OTSC hearing.
Following said argument, the District Court dismissed without prejudice all claims against the individually named Defendants, Bradley A. Markin, Robert A. Markin, Sabrina Garcia Loaiza Markin and Lori Beth Kaplan Multz. (Order of 11/30/2012; Docket Entry No. 36). The District Court also denied without prejudice Plaintiff's Application and set a deadline by which the parties were to complete certain limited jurisdictional discovery as to Septicleanse. (Id.)
Within a week of the entry of that Order, Plaintiff filed an Amended Verified Complaint (the " Amended Complaint'). [Docket Entry No. 37]. Defendants moved to strike the Amended Complaint [Docket Entry No. 41] and the District Court granted that motion, holding that Plaintiff's original Complaint remained the operative pleading. (Order of 1/14/2013; Docket Entry No. 48).
Thereafter, the limited jurisdictional discovery as to Septicleanse concluded. The District Court determined that it had personal jurisdiction over Septicleanse and that Plaintiff's claims as to Septicleanse would go forward. (Memorandum Opinion & Order of 6/27/2013; Docket Entry Nos. 54 & 55). In its Order confirming jurisdiction over Septicleanse, the District Court instructed Plaintiff to indicate within 10 days whether it would seek to have its Application for a preliminary injunction renewed. (Id.) Plaintiff withdrew its Application for a preliminary injunction. ( See Letter Order of 7/22/2013; Docket Entry No. 59). It then moved to amend its Complaint. [Docket Entry No. 60].
The Court initially terminated Plaintiff's motion to amend, finding that a RICO case management statement as outlined in Appendix O of the Local Civil Rules (the " RICO statement") would assist the Court in its determination of whether the amendments included in Plaintiff's proposed Second Amended Verified Complaint were appropriate. ( See Letter Order of 2/19/2014; Docket Entry No. 67). As such, the Court instructed Plaintiff to file a RICO statement by March 21, 2014. The Court also informed Plaintiff that after the RICO statement was filed, Plaintiff should notify the Court whether it wanted its original motion to amend reinstated or if it would prefer to file a new motion.
Plaintiff filed its RICO statement on March 20, 2014. (Docket Entry No. 68). It later informed the Court that it would like its original motion to amend reinstated. The Court deemed Plaintiff's motion refiled on April 3, 2014 and set a briefing schedule with respect to same. (See Letter Order of 4/3/2014; Docket Entry No. 73). The Court now addresses the substance of Plaintiff's motion to amend.
A. Standard of Review
According to Fed.R.Civ.P. 15(a), leave to amend the pleadings is generally granted liberally. See Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962); Alvin v. Suzuki, 227 F.3d 107, 121 (3d Cir. 2000). However, the Court may deny a motion to amend where there is " undue delay, bad faith . . . repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment." Foman, 371 U.S. at 182. Nevertheless, where there is an absence of the above factors: undue delay, bad faith, prejudice or futility, a motion for leave to amend a pleading should be granted freely. Long v. Wilson, 393 F.3d 390, 400 (3d Cir. 2004).
As noted above, Plaintiff seeks leave to file a Second Amended Verified Complaint in order to redefine the RICO enterprise to include Septicleanse, add jurisdictional allegations as to Defendant Bradley A. Markin, add four counts against Bradley A. Markin and make the nationwide service provisions of the civil RICO statute applicable to the other individual Defendants.
The three main arguments asserted by Defendants in opposition to Plaintiff's motion to amend are that (1) Plaintiff should be judicially estopped from asserting that Septicleanse is now part of the RICO enterprise; (2) even if Plaintiff is permitted to include Septicleanse as a member of the RICO enterprise, Plaintiff's proposed RICO claim still fails as a matter of law and is therefore futile; and (3) the proposed individual claims against Bradley A. Markin are futile. The Court, therefore, focuses on these three issues.
1. Judicial Estoppel
Judicial estoppel represents one sanction a court has " inherent equitable authority" to impose when it believes a party has engaged in malfeasance. Montrose Medical Group Participating Savings Plan v. Bulger 243 F.3d 773, 779 (3d Cir. 2001). " [J]udicial estoppel bars a litigant from asserting a position that is inconsistent with one he or she previously took before a court or ...