Thursday, May 19, 2005

California Scents v. Surco Products (9th Cir. - May 6, 2005)

Here's a good one for procedure-minded people, on a couple of different levels. The main issue first. Plaintiff files a federal action and doesn't request a jury trial. Defendant promptly files a counterclaim raising related issues (plaintiff's claim is for trade dress infringement and the counterclaim is for business defamation based upon the cease and desist letters that plaintiff sent) and asks for a jury trial "as to all counterclaims." Plaintiff doesn't amend its complaint; thereafter, defendant dismisses its counterclaims. Given these facts, is plaintiff entitled to a jury trial on its complaint?

The district court (Judge Taylor) says no. Judge Pregerson (and the rest of the panel) disagree and reverse, holding that the plaintiff reasonably relied on the jury demand contained in the counterclaims and that this request accordingly entitled plaintiff to a jury trial on the related claims in the complaint.

This is not the best opinion ever written by Judge Pregerson. The principal problem is that he stretches the cases he relies upon without even addressing the pretty good arguments that these cases are distinguishable. He says, for example, that the situation at issue is identical to those cases in which plaintiff initially files a jury demand and then amends the complaint (without filing another demand), or when a co-defendant requests a jury and, as a result, the other defendants don't. But these are clear cases of reliance; moreover, temporally, in most (if not all) of these cases the waiver of the jury came after the initial request for one. Here, however, plaintiff initially waived the jury absent any reliance upon the defendant, who hadn't even pled yet. If plaintiff is willing to proceed without a jury, and the defendant expressly (as permitted by Rule 38) limits the issues upon which they want a jury trial, it's hard to argue that this is an identical situation to the cases upon which Judge Pregerson relies.

That's not to say that the result he reaches isn't correct. It might well be. But he's got to do the work and make the argument as to why plaintiff shouldn't be stuck to its original decision. After all, when plaintiff filed its original complaint, it was willing -- indeed, apparently wanted -- to have a bench trial. Perhaps its desires changed once it saw that defendant was going to argue counterclaims to a jury. But once defendant dismissed those counterclaims, it's tough to see how it is categorically illegitimate to bind plaintiff to its expressed preference, and similarly hard to establish a clear-cut case of reliance.

One other (marginally related) interesting procedural point is worth mentioning, alongside a warning about the lesson that defendant may have (belatedly) learned. Attentive observers will notice that, here, defendant initially won on summary judgment, thereby resulting in the dismissal of the complaint, and on that basis was willing to dismiss its counterclaims with prejudice. This seems a reasonable approach, since we all know that these "business defamation based upon cease and desist letters" are typically a makeweight anyway. But then plaintiff appeals and gets the summary judgment reversed. Which now means that the counterclaims are gone but the complaint isn't. Which isn't what you wanted as the defendant (after all, if that's what you'd wanted, you'd have never have articulated the counterclaims in the first place).

So watch out before you dismiss counterclaims thinking that the case is basically over. You may not always be right.