Case: 1:09-md-02050-SSB Doc #: 161 Filed: 07/15/10 Page: 1 of 10 PAGEID #: 4449

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION

: MDL Docket No. 1:09-md-2050

IN RE: Bill of Lading Transmission and :
Processing System Patent Litigation. :
________________________________ :
:
THIS DOCUMENT APPLIES TO: : Case No. 2:08-cv-862 (D. Utah)
: Case No. 1:09-cv-532
R&L Carriers, Inc., : Case No. 09-cv-144 (D. Minn.)
: Case No. 1:09-cv-531
Plaintiff, :
:
v. :
:
DriverTech LLC, Intermec Technologies Corp., :
PeopleNet Communications Corp., and Berry & :
Smith Trucking Ltd., :
:
Defendants. :
:

ORDER

Before the Court are R&L Carriers’ motions for judgment on the pleadings on the

complaints filed against it by DriverTech LLC (Doc. 134) and PeopleNet Communications Corp.

(Doc. 135), and on the counterclaims filed by Berry & Smith Trucking Ltd. (Doc. 136) and

Intermec Technologies Corp. (Doc. 137). R&L’s motions are premised on Rule 12(c) and argue

that the complaints and counterclaims, all of which are seeking judgments of non-infringement

and invalidity of R&L’s asserted ‘078 patent, fail to plausibly state a claim for relief under Bell

Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009).

Also pending before the Court are the motions for leave to file amended claims and

counterclaims by Berry & Smith, PeopleNet, and DriverTech (Doc. 138); Intermec’s motion to

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dismiss its counterclaims without prejudice or, alternatively for leave to amend (Doc. 141), and

Intermec’s motion to expedite determination of its motion to dismiss (Doc. 140).

All of these motions have been fully briefed.

FACTUAL BACKGROUND

R&L sent a cease and desist letter to DriverTech in September 2008 regarding its

DT4000 truck computer, and advising DriverTech of the ‘078 patent. R&L also sent a cease and

desist letter to PeopleNet in January 2009 about its g3 computers. Both of those companies

responded by filing declaratory judgment actions against R&L in their respective home district

courts, seeking declarations that they were not infringing R&L’s patent and that the patent was

invalid. R&L answered both complaints and filed infringement counterclaims. Later on, R&L

filed infringement complaints against Intermec and Berry & Smith in this district. Both of those

Defendants answered the complaint and filed non-infringement/invalidity counterclaims against

R&L.

In December 2009, after the MDL consolidation, DriverTech, PeopleNet and Intermec

filed motions for judgment on the pleadings on R&L’s infringement claims, motions that this

Court granted in its February 23, 2010 order (see Doc. 113). R&L sought and was granted leave

to amend those claims.

At an April 6, 2010 status conference following entry of the Court’s dismissal order and

just before filing its amended claims, R&L informed the Court that it was considering filing Rule

12(c) motions against these four Defendants’ pleadings. The Court ordered the parties to meet

and confer about R&L’s concerns prior to April 27, the deadline for filing any additional Rule 12

motions. R&L filed its pending Rule 12(c) motions on April 21, seeking dismissal with

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prejudice of the four Defendants’ claims. R&L argues that DriverTech and PeopleNet

improperly obtained “home court advantage” by filing their preemptive, “bare bones”

declaratory judgment complaints. Those complaints do not allege any facts that plausibly

suggest that R&L’s patent is invalid, or that Defendants are not infringing R&L’s patent. R&L

repeatedly notes that both DriverTech and PeopleNet answered R&L’s original infringement

counterclaim, and only much later filed Rule 12(c) motions attacking the sufficiency of those

counterclaims when other Defendants moved to dismiss. R&L insists that the same pleading

standard articulated in the Court’s February order must apply to all parties, and that both

DriverTech and PeopleNet knew when they filed their complaints that they failed to meet the

pleading burdens they later argued R&L must meet.

R&L attacks the Berry & Smith and Intermec counterclaims on similar grounds, arguing

that their “bare bones” counterclaims are insufficient under Twombly/Iqbal. R&L contends that

Defendants’ “egregious violations” of these known pleading standards requires dismissal of all

of the Defendants’ claims with prejudice.

Defendants responded to R&L’s motions on May 11. (Docs. 143, 144 and 145) Each

Defendant argues that R&L’s motions are a needless imposition on the Court’s time because,

when R&L first raised concerns in April, Defendants told R&L that they would willingly amend

their pleadings to address those concerns. Defendants also told R&L that they would seek leave

of Court to amend before R&L filed its Rule 12(c) motions. They contend that R&L did not

reasonably meet and confer to avoid this round of Rule 12 motions, refused to agree to

Defendants’ amendments, and stated it would adamantly oppose any motions for leave to amend,

which Defendants argue are sufficient grounds to deny R&L’s motions.

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Furthermore, Defendants note that should the Court grant Defendants leave to amend,

and grant Intermec’s motion to dismiss its counterclaim without prejudice, R&L’s Rule 12

motions would be rendered moot. They note that denial of leave to amend is appropriate only if

there is undue delay, bad faith or dilatory motives, repeated failures to cure deficiencies, futility

of the amendment, or undue prejudice to R&L. None of these factors is present in this case.

PeopleNet notes that it filed its original complaint in January 2009, before Iqbal expressly held

that Twombly applies to all civil actions. Berry & Smith filed its original counterclaims in

December 2009, after Iqbal, but it notes that R&L did not challenge its counterclaims until the

April 6 status conference. Intermec notes that its counterclaims were filed in response to R&L’s

own deficient infringement complaint, and that its recent offer to amend or to dismiss without

prejudice was rebuffed by R&L. DriverTech’s original complaint was filed in November 2008

after it received and responded at some length to R&L’s cease and desist letter. On March 3,

2009, DriverTech amended its complaint to add an invalidity claim. It was more than a year

later, only after the Court dismissed R&L’s infringement claim against DriverTech, that R&L

decided to challenge DriverTech’s pleadings.

R&L’s reply (Doc. 148) contends that the Defendants’ own “pleading perfidies” created

this situation, and that their motions to amend implicitly concede that the original claims do not

satisfy Twombly. R&L argues at some length that the Twombly/Iqbal standard must be applied

to all pleadings, including the Defendants’ claims. R&L rejects Defendants’ accusations that it

did not meet and confer in good faith, noting that after that conference it did not move to dismiss

Interstate’s non-infringement/invalidity counterclaim. (That counterclaim appears to suffer from

the same deficiencies that R&L complains of in its pending motions.) R&L contends that, at

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least with respect to DriverTech and PeopleNet, their act of filing a bare-bones complaint in their

home districts is the kind of bad faith that warrants dismissal with prejudice of their claims.

On April 23, two days after R&L filed its Rule 12 motions, Berry & Smith, PeopleNet,

and DriverTech filed a joint motion for leave to amend, together with their proposed amended

claims and counterclaims for non-infringement and invalidity. (Doc. 138) Intermec filed a

separate motion, seeking leave to dismiss its counterclaim without prejudice if the Court grants

Intermec’s motion to dismiss R&L’s amended infringement complaint. (Doc. 141) In the

alternative, if its motion to dismiss is denied, Intermec seeks leave to amend its counterclaim in

similar fashion to those proffered by Berry & Smith, PeopleNet and DriverTech. Defendants

argue that leave to amend pursuant to Rule 15 should be freely granted, and noting that this

Court granted R&L leave to amend its claims following the February dismissal order.

R&L opposes the motions to amend filed by DriverTech, PeopleNet, and Berry & Smith.

(Doc. 149) It accuses Defendants of undue delay and bad faith, because they “knew” their

original claims were deficient. Granting them leave to amend would “reward” them for such

“inappropriate” conduct. R&L contends that Defendants either knew their original

counterclaims were deficient, or they filed their original counterclaims knowing that they lacked

any factual support for their non-infringement/invalidity arguments. The proposed amended

pleadings do not set forth any newly-discovered facts that could not have been originally alleged,

which R&L contends demonstrates Defendants’ “lack of good faith” in filing their original

claims.

While recognizing that leave to amend should be freely granted, R&L also contends that

the proposed amended counterclaims are futile, and only add conclusory allegations. It argues

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that the amendments are not sufficiently fact-based concerning Defendants’ alleged non-

infringement, because (for example) Berry & Smith did not explain “how” it actually uses

PeopleNet’s products in a non-infringing way. R&L also contends that leave to amend

contravenes the purpose of the MDL transfer, which is to “streamline” this litigation. R&L

promises to file Rule 12 motions if the Court grants Defendants leave to amend.

R&L also opposes Intermec’s request to dismiss without prejudice (Doc. 150), arguing

that Intermec has been “caught” in its own “pleading trap” and the Court should not reward such

“hypocrisy.” R&L contends that an appropriate sanction is that Intermec’s counterclaim should

be dismissed with prejudice, and its motion for voluntary dismissal denied.

DISCUSSION

Iqbal plainly held that the plausibility standards articulated in that case apply to all civil

claims, including those alleged in a counterclaim. In the Court’s experience, it is quite common

for a party to respond to a Rule 12 motion to dismiss or for judgment on the pleadings, with an

amended pleading or a motion for leave to amend. R&L’s Rule 12 motions accuse Defendants

of highly improper conduct by seeking leave to amend, rather than respond to R&L’s arguments

concerning the deficiencies of Defendants’ prior pleadings. The Court rejects that accusation, as

an offer to cure deficiencies is an accepted and expeditious way to more quickly reach the merits

of a dispute.

It is also beyond question that leave to amend a pleading under Fed. R. Civ. P. 15 should

be freely granted when “justice so requires.” This rule is well-established and grounded in the

sound principle that cases should be determined on their merits whenever possible. See, e.g.,

Foman v. Davis, 371 U.S. 178 (1962). The Court may exercise its discretion to deny a proposed

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amendment based on “... undue delay, bad faith or dilatory motive on the part of the movant,

repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the

opposing party by virtue of allowance of the amendment, [or] futility of the amendment ...”. Id.

at 182-183. Indeed, R&L argued in its own conditional motion for leave to amend its own

claims that a court’s “outright refusal to grant leave without any justifying reason is not an

exercise of discretion; it is merely an abuse of discretion and inconsistent with the spirit of the

Federal Rules.” (Doc. 109 at p. 9, quoting Fisher v. Roberts, 125 F.3d 974, 977 (6th Cir. 1997)).

R&L accuses these Defendants of “bad faith” and dilatory motives in seeking leave to

amend. The Court is puzzled by R&L’s vociferous attacks on Defendants’ motives. R&L had

the right and the opportunity to challenge Defendants’ claims under Rule 12 any time after they

had been filed. It chose not to do so until after this Court’s ruling concerning R&L’s own

original infringement claims. There are many economic and strategic reasons that a party to

litigation may choose not to challenge what it may perceive to be a deficient pleading. But

R&L’s own delay in challenging Defendants’ claims does not mean that it is the Defendants who

have been dilatory in seeking leave to amend. In any event, delay alone does not ordinarily

justify denying an otherwise proper motion for leave to amend. See, e.g., Sec. Ins. Co. v. Kevin

Tucker & Assocs., Inc., 64 F.3d 1001, 1009 (6th Cir. 1995).

Nor can the Court conclude that the Defendants are guilty of “bad faith” by seeking leave

to amend in response to R&L’s recent challenge to their claims. DriverTech and PeopleNet

elected to file declaratory judgment complaints in their home districts after receiving R&L’s

cease and desist letters, which warned both companies that R&L “aggressively protects” its

patent rights, and that any infringement “will not be tolerated by R&L Carriers.” (Doc. 125,

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Exhibit Q) It would not be unreasonable to treat the letter as a prelude to a lawsuit. After those

Defendants filed their “home court” complaints against R&L, R&L did not challenge those

pleadings under Rule 12 but answered them. Absent some basis to conclude (for example) that

the PeopleNet and DriverTech complaints were utterly frivolous, or were filed in a court that

plainly lacked jurisdiction, dismissal with prejudice of those complaints at this stage of the case

would be inappropriate and a disproportionate result. The Court cannot conclude that the

complaints were utterly frivolous in view of R&L’s cease and desist letters, and R&L has not

argued that jurisdiction was plainly lacking.

With respect to all the moving Defendants, R&L is essentially advocating for a rule that

if a party files a pleading that it allegedly knows or should know fails to meet the developing

Twombly/Iqbal civil pleading standards, that party must be sanctioned by a dismissal with

prejudice. That is not the proper standard for amendments under Rule 15, which provides that

leave to amend should be freely granted when justice so requires. Moreover, the still-evolving

jurisprudence after Twombly and Iqbal counsels in favor of freely granting leave to amend when

the Court finds that the claims as pled do not satisfy those standards. See, e.g., Kasten v. Ford

Motor Co., 2009 U.S. Dist. LEXIS 101348 (E.D. Mich., October 30, 2009), granting motion to

dismiss employment discrimination complaint after Iqbal that likely would have been sufficient

pre-Iqbal, and granting leave to amend even though plaintiffs had refused defendant’s request

that they amend their claims before defendant filed its Rule 12 motion. See also, Lawson v.

Techtronic Industries North America, 2010 U.S. Dist. LEXIS 41468 (W.D. Ky, April 28, 2010),

concluding that defendants’ post-Iqbal motion for judgment on the pleadings in a product

liability case was well-taken, but denying that motion in view of plaintiff’s motion to amend its

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complaint to address the deficiencies raised in defendants’ motion.

The Court has carefully considered all of the arguments presented concerning R&L’s

Rule 12 motions and Defendants’ motions for leave to amend, and concludes that R&L’s

motions should be denied, and Defendants should be granted leave to amend. The Court has also

perused the proposed amended non-infringement and invalidity claims proffered by DriverTech,

PeopleNet and Berry & Smith, and cannot conclude that they are so deficient that leave to amend

should be denied. The Court’s resources are better spent addressing R&L’s promised motions to

dismiss those amended pleadings, should R&L choose to file those motions.

Finally, the Court also grants Intermec’s motion to dismiss its counterclaims without

prejudice, in view of the Court’s order granting Intermec’s motion to dismiss R&L’s

infringement claims. R&L argues that it will be prejudiced if the counterclaims are dismissed

without prejudice because it would face “Intermec’s constant threat to launch its counterclaims

at any point in time in the future.” (Doc. 150, p. 4) Intermec’s motion states that it seeks

dismissal without prejudice in view of the Court’s February order dismissing R&L’s claim, and

because R&L has not identified any direct infringer using any Intermec product. Intermec states

there is no need for it to prosecute its counterclaims absent a valid infringement claim, and states

that it wants to remove its counterclaims “in order to expedite any appeal issues and simplify the

case.” (Doc. 141, p. 2) R&L’s arguments about Intermec’s motives do not persuade the Court

that Intermec’s motion is not based on its stated arguments. Any subsequent conduct by

Intermec that contradicts those stated goals can be more appropriately addressed if and when it

occurs.

CONCLUSION

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For all of the foregoing reasons, R&L’s motions for judgment on the pleadings on the

complaints of PeopleNet (Doc. 134) and DriverTech (Doc. 135), and its motions for judgment on

the pleadings on the counterclaims of Intermec (Doc. 136) and Berry & Smith (Doc. 137) are

denied. The motions for leave to file amended pleadings by PeopleNet, DriverTech and Berry &

Smith (Doc. 138) are granted, and the amended pleadings attached to that motion are deemed

filed as of the date of entry of this Order, July15, 2010. If R&L intends to challenge these

amended pleadings under Rule 12, it shall file its motions no later than August 5, 2010.

Intermec’s motion to dismiss its counterclaim without prejudice (Doc. 141) is granted,

and its motion for expedited determination (Doc. 140) is denied as moot.

SO ORDERED.

Dated: July 15, 2010 s/Sandra S. Beckwith

Sandra S. Beckwith
Senior United States District Judge

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