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Osteostrong Franchising, LLC v. Richter

United States District Court, D. New Mexico

August 22, 2019

OSTEOSTRONG FRANCHISING, LLC, Plaintiff,
v.
ROLAND RICHTER, SHEILA NIXON, JDAP, INC. AND DANCINGBONES, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER DENYING PLAINTIFF'S MOTION FOR LEAVE TO AMEND COMPLAINT

         THIS MATTER comes before the Court upon Plaintiff's Motion for Leave to Amend Complaint, filed June 3, 2019 (Doc. 34). Having reviewed the parties' pleadings and the applicable law, the Court finds that Plaintiff's motion is not well-taken and, therefore, is DENIED.

         BACKGROUND

         This is a trademark infringement case. According to the complaint and Joint Status Report (Doc. 21), OsteoStrong is a global franchise that offers services to promote healthy joints, strong bones and muscles, and better balance and flexibility through a proprietary system and methodology. Each OsteoStrong location is independently owned and operated. Defendants Richter and Nixon (“Defendants”) became interested in opening an OsteoStrong franchise in Santa Fe, and Plaintiff claims that in preparing them to open a franchise, he disclosed to them confidential information and trade secrets about OsteoStrong. Defendants eventually changed their mind about purchasing an OsteoStrong franchise and instead opened a competing business in Santa Fe under the name DancingBones, offering virtually the same services as OsteoStrong and using the same equipment, layout and confidential trade secret information detailing how to successfully operate an OsteoStrong franchise. Defendants also advertised and held themselves out as OsteoStrong on the Internet. Plaintiff is suing Defendants Richter and Nixon for trade infringement and misappropriation in relation to Defendants' opening a business in Santa Fe under the name DancingBones, offering virtually the same services as OsteoStrong and using the same equipment, layout and confidential trade secret information detailing how to successfully operate an OsteoStrong franchise.

         Defendants claim that they were initially excited about the franchise possibility and made several good-faith steps toward becoming franchisees. However, they became concerned about repeated failures of communication and refusals to provide what they considered to be necessary information and documents and were presented with a franchise contract which omitted reference to numerous items they had been promised. Defendants also deny that they were ever provided any confidential or trade secret information and deny using any of the information they obtained from OsteoStrong or their developer and also deny using OsteoStrong's mark without permission. The Complaint and Application for Injunctive Relief asserts five claims for relief:

Count 1 - Misappropriation (Defend Trade Secrets Act of 2016, or “DTSA”);
Count 2 - Misappropriation (New Mexico Uniform Trade Secrets Act (“NMUTSA”);
Count 3 - Breach of Contract;
Count 4 - Unfair Competition, 15 U.S.C. §1125
Count 5 - Trademark Infringement, 15 U.S.C. §1114(1)

         In addition, Plaintiff seeks to enjoin Defendants from using or disclosing OsteoStrong's trade secrets and confidential information.

         DISCUSSION[1]

         Plaintiffs' motion for leave to amend is governed by Rule 15(a)(2) of the Federal Rules of Civil Procedure. See Fed.R.Civ.P. 15(a)(2). Under that rule, “[t]he court should freely give leave” to amend pleadings “when justice so requires.” Id.; see also Foman v. Davis, 371 U.S. 178, 182 (1962); In re Thornburg Mortg., Inc. Sec. Litig., 265 F.R.D. 571, 579-80 (D.N.M. 2010). The decision about whether to provide a party leave to amend pleadings “is within the discretion of the trial court.” Minter v. Prime Equip. Co., 451 F.3d 1196, 1204 (10th Cir. 2006) (quotations and citation omitted). The liberal granting of motion for leave to amend reflects the basic policy that pleadings should enable a claim to be heard on its merits. Albers v. Bd. Of Cnty. Comm'rs, 771 F.3d 697, 706 (10th Cir. 2014). A court should generally refuse leave to amend only on a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment. Duncan v. Manager, Dep't of Safety, City and Cnty. of Denver, 397 F.3d 1300, 1315 (10th Cir. 2005). The purpose of the Rule is to provide litigants “the maximum opportunity for each claim to be decided on its merits rather than on procedural niceties.” Minter, 451 F.3d at 1204 (quoting Hardin v. Manitowoc-Forsythe Corp., 691 F.2d 449, 456 (10th Cir. 1982)).

         Plaintiff seeks to amend the complaint by adding five new defendants whose acts have allegedly harmed Plaintiff: Listory, Inc., Verizon Media LLC, Dex Media Holdings, Inc., Buzzfile, and Local.com.[2] These defendants operate a search engine tool designed to direct consumers using the world wide web to products and services. When a consumer searches for information about Osteostrong services in Santa Fe, New Mexico, these search engines direct consumers to the address currently occupied by Defendant Dancing Bones LLC, whose services are in direct competition with Plaintiff. The gist of these claims is that consumers who were searching for OsteoStrong on the internet were intentionally led to OsteoStrong's competitor instead, thereby funneling business into DancingBones, Plaintiff's competitor. Plaintiff has notified these Defendants that continuing to advertise as such will cause harm to Plaintiff, but each of these five defendants ...


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