Papadopoulos v. Douglas ( 2001 )


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  •                       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    opinion should not be published and is not precedent except under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
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    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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