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Glacier Pool Coolers LLC v. Cooling Tower System Inc.

United States District Court, D. Arizona

July 27, 2016

Glacier Pool Coolers LLC, et al., Plaintiffs,
v.
Cooling Tower System Incorporated, Defendant.

          ORDER

          Douglas L. Rayes United States District Judge

         Before the Court is Plaintiffs Glacier Pool Coolers LLC and RAM Innovations LLC’s (collectively Glacier) Motion for Leave to Amend Complaint and Request to Set Scheduling Conference, (Doc. 31), and Defendant Cooling Tower System Inc.’s (CTS) Cross-Motion for Leave to Amend Answer and Counterclaim, (Doc. 32). Glacier has also filed a motion to continue deadlines. (Doc. 37.) For the following reasons, Glacier’s motion to amend is granted, CTS’ motion to amend is denied, and Glacier’s motion to continue deadlines is denied.

         BACKGROUND

         In November 2015, Glacier filed suit against CTS alleging, inter alia, patent infringement, common law unfair competition, and breach of contract/request to compel arbitration arising out of CTS’ sale of pool cooling devices. (Doc. 1.) The patent at issue involves a special method of installing the pool coolers (‘589 Patent). (Id., ¶ 1.) In January 2016, CTS answered the complaint and alleged a counterclaim for breach of contract. (Doc. 16.) During discovery, Glacier learned that CTS had not sold any pool coolers, and that on April 28, 2016, CTS took down the website on which the allegedly infringing pool coolers had been advertised. Consequently, Glacier sought leave to dismiss the patent infringement claim and add a claim for intentional interference with a contract. (Doc. 31.) CTS opposed the motion and moved to amend its counterclaim to add a claim for a declaratory judgment of non-infringement. (Doc. 32.) In response, Glacier covenanted not to sue CTS “with respect to any of CTS’s alleged past or present infringement with respect to [the ‘589 Patent].” (Doc. 36 at 7.)

         On June 22, 2016, CTS sold a pool cooler. (Doc. 39-1.) The Court ordered Glacier to file a sur-reply to address whether the sale of a pool cooler, without instructions regarding the patented method of installation, constituted infringement. (Doc. 45.) In response, Glacier stated that the sale did not infringe on its patent given that CTS did not include instructions regarding the patented method of installation. (Doc. 46 at 2.)

         MOTIONS TO AMEND

         I. Legal Standard

         The scheduling order entered in this matter set the deadline for amending pleadings for March 31, 2016. The deadline has passed, and thus Fed. R. Civ. P 16(b) requires that the parties demonstrate good cause to amend their respective pleadings. See Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 607-08 (9th Cir. 1992) (“Once the district court had filed a pretrial scheduling order pursuant to [Rule 16, ] which established a timetable for amending pleadings[, ] that rule’s standards controlled.). “Unlike Rule 15(a)’s liberal amendment policy which focuses on the bad faith of the party seeking to interpose an amendment and the prejudice to the opposing party, Rule 16(b)’s ‘good cause’ standard primarily considers the diligence of the party seeking the amendment.” Id. at 609. The Court may consider the following factors in determining whether to grant a motion to amend: “(1) bad faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of amendment[, ] and (5) whether [the party] has previously amended [the] complaint.” Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990).

         II. Glacier’s Motion

         CTS does not oppose Glacier’s request to dismiss its patent infringement and unfair competition claims. As such, Glacier’s motion is granted in that respect. Regarding Glacier’s request to include an intentional interference with contractual relations claim, CTS argues that Glacier fails to demonstrate good cause because “the facts giving rise to the amendments were known when the complaint was originally filed.” (Doc. 32 at 2.) CTS also argues that the claim is futile because it is speculative and barred by the economic loss doctrine. The Court disagrees.[1]

         In the amended complaint, Glacier alleges the following:

Since April 2015, CTS has supplied several Glacier pool coolers to Glacier customers. Upon information and belief, CTS has intentionally and with an evil mind provided Glacier’s customers with substandard and deficient pool coolers. In at least once instance, CTS shipped a pool cooler directly to a Glacier customer that had an exposed wire. When the pool cooler was installed, the exposed wire caused the installer to be shocked. . . . When CTS was alerted to this issue, CTS accepted the return of the pool cooler and shipped a replacement pool cooler directly to the customer. The replacement pool cooler was clearly damaged. At least three pool coolers that CTS shipped directly to Glacier customers have been damaged when received by the customer. . . . The conduct described in the above paragraphs caused Glacier to loss [sic] at least one significant customer, SCP Distributors LLC. As Glacier’s supplier, CTS had knowledge of Glacier’s contractual relationship with SCP Distributors LLC. SCP Distributors LLC has refused to do business with Glacier since SCP Distributors LLC received the pool coolers described above. Upon information and belief, these pool coolers were intentionally damaged by CTS in order to cause Plaintiffs to lose customers, like SCP Distributors LLC.

(Doc. 31-1 at 15-16.) These allegations plausibly allege the elements of a claim for intentional interference with contractual relations. See Wagenseller v. Scottsdale Mem’l Hosp., 710 P.2d 1025, 1041 (Ariz. 1985) (elements of claim include: “(1) [t]he existence of a valid contractual relationship or business expectancy; (2) knowledge of the relationship or expectancy on the part of the interferer; (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy; and (4) resultant damage to the party whose relationship or expectancy has been disrupted”). In addition, contrary to CTS’ argument, the intent element is not based on pure speculation. Glacier alleges that faulty pool coolers were sent to the same customer three times, which resulted in the customer ceasing to do business with Glacier. This is sufficient to plausibly allege that CTS intended to damage Glacier’s relationship with SCP Distributors LLC.

         CTS also argues the claim is barred by the economic loss doctrine. The economic loss doctrine “bars a party from recovering economic damages in tort unless accompanied by physical harm, either in the form of personal injury or secondary property damage.” Carstens v. City of Phx., 75 P.3d 1081, 1083 (Ariz.Ct.App. 2003). In other words, damages may not be recovered if the claim alleges “only economic damages resulting from an alleged breach of contract.” S.W. Pet Prod., Inc. v. Koch Indus., Inc., 89 F.Supp.2d 1115, 1126 (D. Ariz. 2000). The doctrine, however, has rarely, if ever, been applied outside the product liability and construction defect contexts, see Firetrace USA, LLC v. Jesclard, 800 F.Supp.2d 1042, 1052 ...


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