Court Opinion

ID: 24858
Source: CourtListenerOpinion
Date Created: 2010-04-25 08:27:52+00
Date Added: 2024-06-11T08:17:17.775365
License: Public Domain

UNITED STATES COURT OF APPEALS
                           For the Fifth Circuit

                               No. 00-20176

       ANESTIS PAPADOPOULOS, doing business as Spoilers Etc.

                                                   Plaintiff-Appellant,

                                  VERSUS

ANDREW JACKSON DOUGLAS, III, doing business as Andy’s Autosport;
                        AUTOSPORT, INC.,

                                                  Defendants-Appellees.

           Appeal from the United States District Court
       For the Southern District of Texas, Houston Division
                              (H-99-CV-1114)
                              July 18, 2001
Before GARWOOD, PARKER, and DENNIS, Circuit Judges.
PER CURIAM:*

      Anestis   Papadopoulos    appeals    the   district   court   order

dismissing his claims of copyright infringement (17 U.S.C. § 101 et

seq.), Lanham Act violations (15 U.S.C. § 1051 et seq.), and unfair

competition.    We affirm the judgment of the district court.

                 I.    Factual and Procedural History

  *
   Pursuant to 5TH CIR. R. 47.5, the Court has determined that this
opinion should not be published and is not precedent except under
the limited circumstances set forth in 5TH CIR. R. 47.5.4.

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       Papadopolous, doing business as Spoilers Etc. (“Spoilers”),

began selling a variety of automobile accessories, including ground

effects kits, in 1986 in Texas.        Andrew Jackson Douglas III, doing

business as Andy’s Autosport (“Autosport”), began manufacturing and

selling ground effects kits in 1980 in California.

       In 1998, Autosport sued Spoilers for trademark infringement,

unfair     competition,    trademark       dilution,     injury   to     business

reputation, and deceptive trade practices in a California federal

court. Autosport alleged that Spoilers was duplicating Autosport’s

ground effects designs and infringing on Autosport’s trademarks

“Combat,” “The Bomb,” and “Andy’s Auto Sport” through the use of

Spoilers’ “Kamikaze” ground effects kit.               The kits at issue were

manufactured for installation on the following cars: 1994-1998

Acura Integra, 1994-1997 Honda Accord, 1992-1995 Honda Civic, 1996-

1997 Honda Civic, 1992-1996 Honda Prelude, 1995-1997 Mitsubishi

Eclipse, 1995-1998 Nissan 200SX, and 1993-1997 Volkswagen Jetta.

Spoilers filed no counterclaims in this California action, which

was then set for trial.        When Spoilers subsequently filed suit

against Autosport in a Texas federal court, the California district

court declined to issue an injunction; however, the court concluded

that     Spoilers   had   asserted     what    amounted     to    a    compulsory

counterclaim and expressed willingness to accept the transfer of

the Texas suit.      In 1999, the California district court granted

summary judgment for Spoilers on some of Autosport’s claims, and in

2000, it granted judgment as a matter of law for Spoilers on the

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remaining claims.

     In 1999, Spoilers brought suit against Autosport in a Texas

federal court, alleging that Autosport had used Spoilers’ ground

effects   designs   and    photographs      in   a   Spoilers’   catalog   and

attempted to sell Spoilers’ products as that of Autosport’s.

Spoilers also alleged that Autosport copied Spoilers’ designs and

sold “knock-off” ground effects kits.            At issue in this suit were

kits manufactured for installation on the following cars: 1989-1994

Nissan Maxima, 1991-1994 Nissan 240SX, 1995-1999 Nissan 240SX,

1989-1991   Isuzu   Amigo,      1992-1996   Isuzu     Amigo,   and   1990-1994

Mitsubishi Eclipse.        The Texas federal district court granted

Autosport’s motion to dismiss on the basis that Spoilers’ claims

were barred as compulsory counterclaims required in the California

federal suit.

                          II.   Standard of Review

     This court reviews the district court's decision that the

claim was barred as a compulsory counterclaim de novo.                     Tank

Insulation Int’l, Inc. v. Insultherm, Inc., 104 F.3d 83, 86 (5th

Cir. 1997).

                                III.   Analysis

     Federal Rule of Civil Procedure 13(a) provides:

          A pleading shall state as a counterclaim any claim
     which at the time of serving the pleading the pleader has
     against any opposing party, if it arises out of the
     transaction or occurrence that is the subject matter of
     the opposing party's claim and does not require for its
     adjudication the presence of third parties of whom the
     court cannot acquire jurisdiction. But the pleader need

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      not state the claim if (1) at the time the action was
      commenced the claim was the subject of another pending
      action, or (2) the opposing party brought suit upon the
      claim by attachment or other process by which the court
      did not acquire jurisdiction to render a personal
      judgment on that claim, and the pleader is not stating
      any counterclaim under this Rule 13.

“A   counterclaim     which     is     compulsory         but    is     not   brought    is

thereafter barred[.]”         Baker v. Gold Seal Liquors, Inc., 417 U.S.
467, 469 n.1 (1974); see also          FED.   R.   CIV.   P. 13 advisory committee’s

note (“If the action proceeds to judgment without the interposition

of a counterclaim as required by subdivision (a) of this rule, the

counterclaim is barred.”); McDaniel v. Anheuser-Busch, Inc., 987
F.2d 298, 304 (5th Cir. 1993) (citing Baker, 417 U.S. at 469 n.1);

Cleckner v. Republic Van & Storage Co., 556 F.2d 766, 768-69 (5th

Cir. 1977); 6    CHARLES ALAN WRIGHT, ARTHUR R. MILLER,          &    MARY KAY KANE, FEDERAL

PRACTICE AND PROCEDURE: CIVIL   2D § 1409 (2d ed. 1990) (“Perhaps the most

important characteristic of a compulsory counterclaim is that it

must be asserted in the pending case.                      A failure to do so will

result in its being barred in any subsequent action, at least in

the federal courts.”).

      The   Fifth   Circuit      has    developed          the   following       test   for

determining if claims are compulsory counterclaims:

      (1) whether the issues of fact and law raised by the

      claim and counterclaim largely are the same; (2) whether

      res judicata would bar a subsequent suit on defendant’s

      claim   absent    the     compulsory         counterclaim          rule;    (3)

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     whether substantially the same evidence will support or

     refute    plaintiff’s      claim       as     well    as    defendant’s

     counterclaim;    and    (4)   whether        there    is   any   logical

     relationship between the claim and the counterclaim.

Park Club, Inc. v. Resolution Trust Corp., 967 F.2d 1053, 1058 (5th

Cir. 1992); see also 3      JAMES WM.   MOORE    ET AL., MOORE’S FEDERAL PRACTICE   §

13.10[1][b] (3d ed. 2001).         “An affirmative answer to any of the

four questions indicates the claim is compulsory.” Underwriters at

Interest on Cover Note JHB92M10482079 v. Nautronix, Ltd., 79 F.3d
480, 483 n.2 (5th Cir. 1996).      The Fifth Circuit’s approach focuses

on whether the claim and counterclaim share an “aggregate of

operative facts,” drawing on the similarity of facts and legal

issues prong. 3,   MOORE’S FEDERAL PRACTICE,      supra, § 13.10[1][b] (citing

McDaniel, 987 F.2d at 303-04).

     The issues of fact and law within the Texas and California

federal suits, while not identical, are largely the same.                       Most

important is the continuing business relationship that Spoilers and

Autosport maintained prior to these suits, an ongoing business

relationship in the ground effects market that was interrupted when

Spoilers and Autosport accused each other of trademark infringement

and unfair    trade   practices.         The     claims,    which     both   include

allegations of Lanham Act violations and unfair trade practices,

arose around the same time, 1997 and 1998, and both concern each

business’s manner of selling ground effects.                    Although the kits

were customized for different models of cars, both the Texas and

                                        5
California actions involved ground effects kits that were identical

or similar in design.              “[T]he identity of issues test does not

require a complete overlap between the claim and counterclaim.”                          6

WRIGHT, MILLER,    &   KANE,   supra, § 1410.

        Spoilers attempts to argue that it has raised new issues of

law     in   its       complaint,       specifically    copyright       infringement.

However,     in    both        suits,   copyrights     are    at   issue,    Spoilers’

copyright      concerning         the    pictures    and     Autosport’s     copyright

concerning sales.              As the district court correctly noted, “[T]he

infringement and unfair trade issues would be material to both the

claim and counterclaim. A court would need to examine the parties’

course of dealing in the claim and the counterclaim.”

        Although finding that the Texas suit meets just one of the

elements of the compulsory counterclaim test would be sufficient,

we also find that the Texas suit has a logical relationship to the

California suit.          “According to this test, any claim a party has

against an opposing party that is logically related to the claim

being asserted by the opposing party and that is not within the

exceptions listed in Rule 13(a) is a compulsory counterclaim.                       The

hallmark of this approach is its flexibility.”                     6   WRIGHT, MILLER,   &

KANE,   supra, § 1410.              “Basically, [this factor] allows the court

to apply Rule 13(a) to any counterclaim that from an economy or

efficiency perspective could be profitably tried with the main

claim.”      Id.   The district court correctly noted that this factor

was met because “[t]he crux of both the claim and the counterclaim

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is the distinctiveness and the labeling of the kits.” Furthermore,

a   logical     relationship       exists       between    the    two   suits    because

reciprocal       sales      occurred       between        two     normally     competing

manufacturers and it was the nature of these sales, i.e., selling

“knock-off” products by copying designs and “passing off” another’s

product as one’s own, that led to the disputes.                         Lastly, it is

judicially more efficient to avoid piecemeal litigation of these

claims.

      Therefore, we find that Spoilers’ claims were compulsory

counterclaims, and the failure to plead them in the California suit

bars Spoilers from bringing an independent action.                       See New York

Life Ins. Co. v. Deshotel, 142 F.3d 873, 879 (5th Cir. 1998); see

also 6    WRIGHT, MILLER,    &   KANE,   supra, § 1417 (“A failure to plead a

compulsory      counterclaim        bars    a    party     from    bringing     a   later

independent action on that claim.”); Shmuel Shmueli, Bashe, Inc. v.

Lowenfeld, 68 F. Supp. 2d 161, 165 (E.D. N.Y. 1999) (“Having

failed, for whatever reason, to assert their counterclaims in one

action, plaintiffs may not institute a second action in which those

counterclaims become the basis of the complaint.”).                          Because the

California suit has become final and operates as res judicata to

this suit, we also affirm the dismissal with prejudice.                               See

RESTATEMENT   (SECOND)   OF JUDGMENTS    § 14 cmt. a (1982) (“In order that a

final judgment shall be given res judicata effect in a pending

action, it is not required that the judgment shall have been

rendered before that action was commenced.”); see also id. § 22 (“A

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defendant who may interpose a claim as a counterclaim in an action

but fails to do so is precluded, after the rendition of judgment in

that action, from maintaining an action on the claim if [t]he

counterclaim is required to be interposed . . . .”); Deshotel, 142
F.3d at 882 (affirming the dismissal with prejudice of a compulsory

counterclaim raised in an independent suit).

AFFIRMED.

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