Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_02-cv-01815/USCOURTS-azd-2_02-cv-01815-0/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1114 Trademark Infringement

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 1The introductory paragraph recites that only "Rhino Sports, Inc. moves to amend

its answer." However, considering that the attorneys for Rhino Sports, Inc. also represent

John E. Shaffer and that the subsequent reply was filed on behalf of both defendants, the

Court assumes Mr. Shaffer joins in the motion to amend. 

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Rhino Sports, Inc., an Arizona

corporation; and John E. Shaffer,

individually, 

Plaintiffs/Counterdefendants, 

v.

Sport Court, Inc., a Delaware

corporation, 

Defendant/Counterclaimant. 

Connor Sport Court International, Inc., a

California corporation,

Plaintiff,

vs.

Rhino Sports, Inc., an Arizona

Corporation, John E. Shaffer, individually,

Defendants. _________________________________

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

CV-02-1815-PHX-JAT (Lead)

CV-06-3066-PHX-JAT (Cons)

ORDER

Pending before the Court is Defendant Rhino Sports, Inc.'s Motion to Amend (Doc.

# 122).1

 Rhino Sports, Inc. and John E. Shaffer (collectively referred to as "Rhino") seek to

Case 2:02-cv-01815-JAT Document 137 Filed 04/05/07 Page 1 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 -

amend their answer to Connor Sport Court International, Inc.'s Complaint by asserting

additional affirmative defenses and counterclaims for violations of the Sherman Act and the

Arizona Antitrust Law, and for unfair competition.

II. Legal Standards

Rhino seeks leave to amend pursuant to Rules 13(f) and 15(a) of the Federal Rules of

Civil Procedure. Leave to file a counterclaim is governed by Rule 13(f). Leave to file an

amended answer is governed by Rule 15(a). Although technically different, "the standards

for granting each are similar and thus will be considered simultaneously." Unispec

Development Corp. v. Harwood K. Smith & Partners, 124 F.R.D. 211, 213 (D.Ariz. 1988).

A motion to amend a pleading is governed by Federal Rule of Civil Procedure 15(a),

which provides:

A party may amend the party's pleading once as a matter of

course at any time before a responsive pleading is served or, if

the pleading is one to which no responsive pleading is permitted

and the action has not been placed upon the trial calendar, the

party may so amend it at any time within 20 days after it is

served. Otherwise a party may amend the party's pleading only

by leave of court or by written consent of the adverse party; and

leave shall be freely given when justice so requires. 

Fed. R. Civ. P. 15(a). While the decision to grant or deny a motion to amend is within the

discretion of the district court, "Rule 15(a) declares that leave to amend 'shall be freely given

when justice so requires'; this mandate is to be heeded." Foman v. Davis, 371 U.S. 178, 182

(1962); see, e.g., Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330 (1971);

United States v. SmithKline Beecham, Inc., 245 F.3d 1048, 1052 (9th Cir. 2001) ("A district

court's discretion to deny leave to amend . . . is not absolute.") (citing Foman);

Cal. Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d. 1466, 1472

(9th Cir. 1987). "In exercising its discretion[,] . . . 'a court must be guided by the underlying

purpose of Rule 15—to facilitate decision on the merits rather than on the pleadings or

technicalities. . . . Thus, 'Rule 15's policy of favoring amendments to pleadings should be

applied with extreme liberality.'" Eldridge v. Block, 832 F.2d 1132, 1135 (9th Cir. 1987)

(citations omitted); Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079

Case 2:02-cv-01815-JAT Document 137 Filed 04/05/07 Page 2 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 -

(9th Cir. 1990) (stating that leave to amend is generally allowed with "extraordinary

liberality"). "This liberality . . . is not dependent on whether the amendment will add causes

of action or parties." DCD Programs, LTD. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987).

The extremely liberal policy in favor of amendments, however, is subject to some

limitations. The United States Supreme Court has established that motions to amend

should be granted unless the district court determines that there has been a showing of:

(1) undue delay; (2) bad faith or dilatory motives on the part of the movant; (3) repeated

failure to cure deficiencies by previous amendments; (4) undue prejudice to the opposing

party; or (5) futility of the proposed amendment. Foman, 371 U.S. at 182; see SmithKline

Beecham, 245 F.3d at 1052; Texaco, Inc. v. Ponsoldt, 939 F.2d 794, 798 (9th Cir. 1991);

W. Shoshone Nat'l Council v. Molini, 951 F.2d 200, 204 (9th Cir. 1991); Cal. Architectural

Bldg. Prods., 818 F.2d. at 1472; Poling v. Morgan, 829 F.2d 882, 886 (9th Cir. 1987).

"Generally, this determination should be performed with all inferences in favor of granting

the motion." Griggs v. Pace Am. Group, Inc., 170 F.3d 877, 880 (9th Cir. 1999) (citing DCD

Programs, 833 F.2d at 186). Significantly, "[t]he party opposing amendment bears the

burden of showing prejudice," futility, or one of the other permissible reasons for denying

a motion to amend. DCD Programs, 833 F.2d at 187; see Richardson v. United States,

841 F.2d 993, 999 (9th Cir. 1988) (stating that leave to amend should be freely given unless

opposing party makes "an affirmative showing of either prejudice or bad faith"). 

A motion to amend a pleading to assert a counterclaim is governed by Federal Rule

of Civil Procedure 13(f). Under Rule 13(f), "[w]hen a pleader fails to set up a counterclaim

through oversight, inadvertence, or excusable neglect, or when justice requires, the pleader

may by leave of court set up the counterclaim by amendment." Like Rule 15(a), Rule 13(f)

is interpreted liberally to settle all claims in one action. Unispec Development Corp., 124

F.R.D. at 213 (citing 2001, Inc. v. Novaglas Corp., 60 F.R.D. 649 (E.D.N.Y. 1973)).

However, leave to file a counterclaim may be denied if the counterclaim "is totally lacking

in merit." Id. (citing United Brick & Clay Workers v. Hydraulic Press Brick Co., 371

F.Supp. 818 (S.D.Mo. 1974). 

Case 2:02-cv-01815-JAT Document 137 Filed 04/05/07 Page 3 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 -

Like the court in Unispec Development Corp., this Court "will consider whether the

proposed amendment and counterclaim are meritorious, i.e., survive the 'futility' test and

whether . . . [the] motion constitutes bad faith, dilatory action or would cause undue delay

or prejudice." Id. at 214. 

II. Discussion

In opposition to Rhino's motion to amend, Connor Sport Court International, Inc.

("Sport Court") first argues that the proposed amendment is futile because Rhino released the

affirmative defenses and counterclaims in whole or in part pursuant to the parties' prior

settlement agreement dated March 9, 2004. The settlement agreement provides, in part, that

the parties:

completely release, acquit, and forever discharge one another ...

from and against any and all claims, demands, rights,

obligations, debts, expenses, liabilities, defenses, or causes of

action, whether or not alleged, recited, described, or currently

asserted, whether known or unknown, suspected or unsuspected,

fixed or contingent, which they have, may have, or could assert

against the other.

Sport Court notes that Rhino's proposed amendment seeks redress for anti-competitive

acts within the past four years and that the settlement agreement was entered into three years

ago. According to Sport Court, this shows that Rhino is improperly seeking to assert claims

and defenses for alleged conduct that occurred prior to the settlement agreement and which

conduct was subject to release under the terms of the agreement. In contrast, Rhino argues

that, at most, the settlement agreement bars claims that may have existed before March 9,

2004, and that it is entitled to assert claims against Sport Court based on conduct occurring

thereafter. Rhino further avers that the affirmative defenses and counterclaims rely only on

conduct occurring after March 9, 2004. At this stage of the proceedings, and considering

Rhino's representations concerning the timing of the conduct made subject of the proposed

affirmative defenses and counterclaims, the Court is unable to conclude, as Sport Court

requests, that the proposed amendment is futile because of the March 9, 2004, settlement

agreement.

Second, Sport Court argues that the proposed amendment is untimely because Rhino

Case 2:02-cv-01815-JAT Document 137 Filed 04/05/07 Page 4 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 5 -

was aware of the facts underlying its present antitrust counterclaims as evidenced by Rhino's

answer, filed in December 2002, to Sport Court's counterclaim. In contrast, Rhino argues

that the proposed amendment is timely because Sport Court's complaint was filed on

December 21, 2006, and Rhino filed its original answer on February 7, 2007, less than two

months ago. Rhino further argues that the proposed amendment is timely because the

affirmative defenses and counterclaims rely only on conduct occurring after March 9, 2004,

which conduct was not the subject of the prior proceedings between the parties. The Court

agrees with Rhino, finding that the proposed amendment, which Rhino represents relates to

conduct occurring after the March 9, 2004, settlement agreement, is not untimely. 

Third, Sport Court argues that the proposed antitrust counterclaim fails to allege and

define a proper antitrust "product market" as a matter of law. Under Ninth Circuit case law,

Plaintiff must identify a relevant product market when asserting an antitrust claim. Tanaka

v. University of Southern California, 252 F.3d 1059, 1063 (9th Cir. 2001). As the Tanaka

court explained, a relevant product market:

encompasses notions of geography as well as product use,

quality, and description. The geographic market extends to the

"'area of effective competition' ... where buyers can turn for

alternative sources of supply." The product market includes the

pool of goods or services that enjoy reasonable

interchangeability of use and cross-elasticity of demand.

Id. (quoting Oltz v. St. Peter's Community Hospital, 861 F.2d 1440, 1446 (9th Cir. 1988)).

The failure "to identify a relevant market is a proper ground for dismissing" an antitrust

claim. Id. (citing Big Bear Lodging Ass'n v. Snow Summit, Inc., 182 F.3d 1096, 1105 (9th

Cir. 1999)).

Sport Court contends that Rhino has failed to reference or analyze the rule of

"reasonable interchangeability" or explain why substitute products, such as concrete, wood,

rubber, vinyl or painted acrylic, are not included in the narrow product market of recreational

flooring. Sport Court further contends that there is "no allegation concerning cross-elasticity

of demand or other consumer considerations." Thus, Sport Court concludes that "Rhino's

relevant product market allegation fails to satisfy the required pleading standards as a matter

Case 2:02-cv-01815-JAT Document 137 Filed 04/05/07 Page 5 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 6 -

of law." 

Countering, Rhino quotes Twombly v. Bell Atlantic Corp., 425 F.3d 99, 108 (2nd Cir.

2005), which rejected the argument "that antitrust complaints merit a more rigorous pleading

standard, whether because of their typical complexity and sometime amorphous nature, or

because of the related extraordinary burdens that litigation beyond the pleading stage may

place on defendants and the courts." Further, Rhino quotes Todd v. Exxon Corp., 275 F.3d

191, 199-200 (2nd Cir. 2001), which stated that "[b]ecause market definition is a deeply factintensive inquiry, courts hesitate to grant motions to dismiss for failure to plead a relevant

product market." As the Todd court explained: "To survive a Rule 12(b)(6) motion to

dismiss, an alleged product market must bear a 'rational relation to the methodology courts

prescribe to define a market for antitrust purposes - analysis of the interchangeability of use

or the cross-elasticity of demand . . . and it must be 'plausible.'" Todd, 275 F.3d at 200

(citations omitted). The Todd court further explained:

Cases in which dismissal on the pleadings is appropriate

frequently involve either (1) failed attempts to limit a product

market to a single brand, franchise, institution, or comparable

entity that competes with potential substitutes or (2) failure even

to attempt a plausible explanation as to why a market should be

limited in a particular way.

Id. (citations omitted). 

Based on the foregoing case law, and the federal notice pleading standards, Rhino

argues that it has adequately alleged a relevant product market, that being "indoor and

outdoor modular recreational flooring." Rhino also argues that Sport Court's position, that

the product definition could include other alternative recreational substitutes such as

concrete, wood, rubber, vinyl or painted acrylic, involves questions of fact and is inconsistent

with the admissions of Sport Court's former president in these proceedings. In other words,

Rhino argues that the relevant product market allegation is the same market that Sport Court's

former president described and that it is "disingenuous" for Sport Court to now complain that

the relevant product market is inadequately pleaded. The Court agrees with Rhino and finds

that the relevant product market allegation in the proposed amendment is adequately

Case 2:02-cv-01815-JAT Document 137 Filed 04/05/07 Page 6 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 2In addition, Sport Court's argument that Rhino's antitrust claim faces a high

hurdle and is rarely successful, which Sport Court argues highlights the importance of

requiring precise and accurate allegations, is insufficient to allow a finding that the

antitrust claim cannot proceed as a matter of law at this stage of the proceedings.

- 7 -

pleaded.2

Finally, Sport Court argues that the proposed antitrust counterclaim violates the

Noerr-Pennington doctrine, which provides that "the Sherman Act does not prohibit ...

persons from associating together in an attempt to persuade the legislature or the executive

to take particular action with respect to a law that would produce a restraint or a monopoly."

Professional Real Estate Investors, Inc. v. Columbia, 508 U.S. 49, 56 (1993) (quoting

Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 136

(1961)). Rhino counters that its antitrust counterclaim is not about efforts to influence

government action; instead the Rhino states that the counterclaim concerns abusive

contractual relations, improper economic interference, improper harassment of dealers and

distributors, industrial espionage, and other alleged unlawful activities perpetrated with the

intent to maintain a monopoly. The Court agrees, finding that the proposed antitrust

counterclaim is not based on the Noerr-Pennington doctrine.

For the foregoing reasons, the Court finds that Sport Court has failed to show that the

proposed amended answer and counterclaim will cause undue delay, is being made in bad

faith or with a dilatory motive, will cause undue prejudice to Sport Court, or is futile. 

Accordingly,

IT IS ORDERED that Defendant Rhino Sports, Inc.'s Motion to Amend (Doc. # 122)

is GRANTED;

IT IS FURTHER ORDERED that the Clerk of Court shall file the lodged amended

answer and counterclaim (Doc. # 123) as of the date of this Order.

DATED this 4th day of April, 2007.

Case 2:02-cv-01815-JAT Document 137 Filed 04/05/07 Page 7 of 7