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Thompson Automotive Labs, LLC v. Illinois Tool Works, Inc.

United States District Court, E.D. North Carolina, Western Division

November 21, 2017

THOMPSON AUTOMOTIVE LABS, LLC, Plaintiff,
v.
ILLINOIS TOOL WORKS, INC., Defendant.

          ORDER

          LOUISE W. FLANAGAN United States District Judge

         This matter is before the court on defendant's motions to compel (DE 85) and for leave to file a second amended affirmative defenses and counterclaims (DE 101). Plaintiff opposes the motions, both of which have been fully briefed. In this posture the issues raised are ripe for ruling. For the following reasons, defendant's motion to compel is granted and its motion for leave to amend is denied as moot.

         BACKGROUND

         On June 24, 2015, plaintiff commenced this action arising from an exclusive supply agreement (“Agreement”) relating to plaintiff's automotive diagnostic tool (the “CPT”), and defendant's marketing of a competing product (the “AutoEKG”). Plaintiff asserts claims of breach of contract, trademark infringement, inducement of trademark infringement, false advertisement, and unfair and deceptive trade practices. On August 21, 2015, plaintiff filed an amended complaint, adding a sixth claim requesting the cancellation of U.S. Trademark Registration No. 4, 771, 676, for AutoEKG. Plaintiff seeks compensatory damages, injunctive relief, disgorgement of profits relating to false advertising and trademark infringement, attorney fees, pre- and post-judgment interest, statutory damages, trebling of damages, and any other relief the court may deem just and proper. (Id.).

         On September 4, 2015, defendant filed answer including 11 affirmative defenses and one counterclaim. (DE 25). Affirmative defenses include failure to state a claim, doctrines of payment, accord and satisfaction, laches, estoppel, and waiver, laches, unclean hands, and statute of limitations. (Id.). Defendant's counterclaim is for breach of contract and alleges “multiple breaches of the Agreement, ” specifically alleging a breach of the workmanship warranty provision found in the Agreement. (Id. at ¶¶ 17-22).[1] Defendant seeks dismissal with prejudice, judgment in favor of defendant, damages in an amount to be determined, disgorgement, attorneys fees, prejudgment and postjudgment interest, to tax the costs of the action to plaintiff, and any other relief the court deems just and appropriate. (Id.).

         On January 15, 2016, defendant filed a motion for leave to file amended affirmative defenses and counterclaims, which the court granted on March17, 2016. (DE 34, 42, 43). Defendant added, among additional allegations, five new affirmative defenses and six new counterclaims. (DE 43). The additional affirmative defenses include mutual mistake, unilateral mistake, fraudulent inducement due to misrepresentation, fraudulent inducement due to concealment, and negligent misrepresentation. (Id.). The counterclaims are, in addition to a claim for unfair and deceptive trade practices, claims for damages arising from mistake, fraudulent inducement, and negligent misrepresentation. (Id. at ¶¶ 53-108).

         On August 30, 2017, defendant filed the instant motion to compel, seeking responses to interrogatories concerning a software warranty provision found in the parties' Agreement. (DE 85) .[2]Additionally, on October 6, 2017, defendant filed the instant motion for leave to file its second amended affirmative defenses and counterclaims. (DE 101). Defendant seeks to add a claim of breach of the same software warranty provision as is the subject of defendant's motion to compel. (DE 102 at 1; DE 101-1 at ¶¶ 38, 49).

         Plaintiff contends that defendant's efforts to assert and seek discovery on this new claim should be denied as irrelevant in that it is outside the scope of claims previously asserted. Defendant has been aware of this claim perhaps as early as September 2015, when defendant filed its original counterclaims, and fact discovery will close December 22, 2017. (DE 89 and 110).

         STATEMENT OF THE FACTS

         The court repeats here with some modification as pertinent to the instant motions the facts as stated in the court's March 16, 2016, order. On February 8, 2010, plaintiff entered into an agreement with Jiffy Lube International (“Jiffy Lube”) under which plaintiff was to develop and deliver a prototype software tool, CPT, to analyze a vehicle's relative combustion efficiency to demonstrate the need or value of performing a fuel system cleaning on their vehicles. (Am. Compl. (DE 21) at ¶ 9). During 2010, plaintiff decided to identify and advertise the CPT using a design meant to evoke a medical electrocardiogram (EKG) display. This design was incorporated into promotional materials and a test tool. (Id. at ¶¶ 14, 15).

         In July 2011, Jiffy Lube introduced plaintiff to defendant, an automotive product company. (Id. at ¶ 18). Representatives of plaintiff and defendant then met, exchanged emails, and contacted one another regarding the CPT on multiple occasions over the next few months. (Id. at ¶¶ 19-28). This culminated in their Agreement, executed November 7, 2011, which provided that plaintiff would sell the CPT exclusively to defendant, and defendant in turn would purchase a minimum of 100 CPTs per month from plaintiff. (Id. at ¶ 29).

         Plaintiff asserts that starting in 2011 and continuing into 2012, defendant began marketing a competing tool (named the “AutoEKG tool”) in violation of the Agreement. (Id. at ¶ 75). Defendant marketed the AutoEKG tool using logos and promotional materials that plaintiff describes as similar to those used by plaintiff to promote the CPT. (Id. at ¶¶ 75-87). Additionally, plaintiff asserts that in 2012 defendant wrongfully terminated the parties' Agreement. (Id. at ¶¶ 64-66).

         The facts alleged in defendant's current counterclaims may be summarized as follows. During negotiations, plaintiff incorrectly and repeatedly represented that the CPT tool “could accurately and reliably analyze the fuel system of a gasoline-powered automotive engine to determine the engine's need for a fuel system cleaning.” (DE 43 at ¶¶ 7, 10-17). Based on these representations, defendant entered into the Agreement with plaintiff. (Id. at ¶ 26). Plaintiff warranted that it would provide CPT units to defendant that would be free from defects in material and workmanship under normal use and service. (Id. at ¶ 38). However, the CPT units provided had substantial issues, and plaintiff failed to correct the issues within the time frame required by the agreement, breaching the agreement. (Id. at ¶¶ 41-43). Defendant then terminated the agreement, and plaintiff acknowledged receipt of the termination. (Id. at ¶ ¶ 45-46).

         COURT'S ...


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