Papadopoulos v. Douglas ( 2001 )

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opinion should not be published and is not precedent except under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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