Match Group, LLC v. Bumble Trading Inc.

Western District of Texas, txwd-6:2018-cv-00080

Response in Opposition to Motion, filed by Match Group, LLC, re [108] MOTION to Dismiss Under Rule 12(b)(6), or in the Alternative, Strike Under Rule 12(f), Plaintiff Match Group, LLCs Fourth Amended Complaint filed by Defendant Bumble Holding, LTD, Defendant Bumble Trading Inc.

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4 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS WACO DIVISION MATCH GROUP, LLC § § § Plaintiff, § § v. § § BUMBLE TRADING INC., BUMBLE § HOLDING, LTD., BADOO TRADING § No. 6:18-cv-00080-ADA LIMITED, MAGIC LAB CO., WORLDWIDE VISION LIMITED, § BADOO LIMITED, BADOO § SOFTWARE LIMITED, and BADOO § JURY TRIAL DEMANDED TECHNOLOGIES LIMITED, § § Defendants. § § BUMBLE TRADING INC. and BUMBLE § HOLDING, LTD., § § Cross-Plaintiffs, v. § § § MATCH GROUP, LLC and § IAC/INTERACTIVECORP., § § § Cross-Defendants. § MATCH GROUP, LLC'S RESPONSE TO DEFENDANTS BUMBLE HOLDING, LTD. AND BUMBLE TRADING INC.'S MOTION TO DISMISS UNDER RULE 12(B)(6), OR IN THE ALTERNATIVE, STRIKE UNDER RULE 12(F), PLAINTIFF MATCH GROUP, LLC'S FOURTH AMENDED COMPLAINT OR, IN THE ALTERNATIVE, OPPOSED MOTION FOR LEAVE TO FILE THE FOURTH AMENDED COMPLAINT 4 TABLE OF CONTENTS I. INTRODUCTION ................................................................................................................... 1 II. PERTINENT FACTUAL BACKGROUND........................................................................... 2 III. ARGUMENT........................................................................................................................... 3 A. Match's Fourth Amended Complaint Was Properly Served Without Leave ...................... 3 1. The Court's Model Patent Order Requires Leave Only if New Patent Claims Are Added.................................................................................................................................. 3 2. The Circumstances of the Parties' Discussions Demonstrate That Bumble Did Not Believe Leave Was Required. ............................................................................................. 4 B. Even If Leave Were Required, Leave Is Plainly Appropriate, and the Period in Which to Request Leave Has Not Expired .......................................................................................... 6 C. The Court Has Jurisdiction over Match's Tenth Counterclaim Against the Bumble Defendants ........................................................................................................................... 8 IV. CONCLUSION........................................................................................................................ 9 i 4 TABLE OF AUTHORITIES Cases Dueling v. Devon Energy, 623 F. App'x 127 (5th Cir. 2015)................................................................................................ 7 El Chico Rests. Tex., Inc. v. Carroll, No. 3:09-CV-2294-L, 2010 WL 2697293 (N.D. Tex. July 8, 2010) .......................................... 8 Ferring B.V. v. Fera Pharm., LLC, No. CV 13-4640(SJF)(AKT), 2014 WL 4829053 (E.D.N.Y. Aug. 13, 2014)........................... 8 Leach v. Ross Heater & Mfg. Co., 104 F.2d 88 (2d Cir. 1939) .......................................................................................................... 8 S&W Enterprises, L.L.C. v. SouthTrust Bank of Alabama, NA, 315 F.3d 533 (5th Cir. 2003)...................................................................................................... 6 Other Authorities Wright & Miller, 6 Fed. Practice & Procedure § 1406 (3d ed.) ..................................................... 8 Rules Fed. R. Civ. P. 15(a)(2) ................................................................................................................... 7 ii 4 I. INTRODUCTION On August 2nd, Match Group, LLC filed a Fourth Amended Complaint. In that Complaint, Match Group, LLC added (i) inducement theories against the non-Bumble Defendants based on their distribution and operation of the Bumble application and a (ii) declaratory judgment of non-liability against both the Bumble Defendants and the non-Bumble Defendants on the facts alleged in the Bumble Defendants' Texas law counterclaims. 1 Rather than answer Match's factual allegations in its declaratory judgment cause of action, the Bumble Defendants instead raise a specious and wasteful motion. This is consistent with Defendants' obfuscation strategy to date; since discovery opened on June 14, they have responded to only one (of 10 served) interrogatories, produced zero documents, and made available for inspection only 17 source code files (compared to Match's 25,000 files for Tinder, a non-accused product). Further, the non-Bumble Defendants have declined to "authorize" their U.S. counsel to accept service of a complaint of which they are aware concerning litigation in which they are participating. In any event, Match timely filed its Fourth Amended Complaint, and leave was not required. This conclusion is clear from the context of the Scheduling Order itself, and from the Bumble Defendants' counsel's actions throughout a negotiation process related to the Fourth Amendment Complaint's filing and immediately afterward. 1As used in this motion, the "Bumble Defendants" refers to Bumble Trading Inc. and Bumble Holding Limited. The "non-Bumble Defendants" refers collectively to Badoo Trading Limited, Magic Lab Co., Worldwide Vision Limited, Badoo Limited, Badoo Software Limited, and Badoo Technologies Limited. "Defendants," without a modifier, refers to all defendants collectively. 4 Even if Match had needed the Court's leave, it is still well within the Scheduling Order's timeframe to amend its complaint and Defendants have no legitimate justification to oppose a motion for leave. Further, the Court can and should retain jurisdiction over the newly added declaratory judgment counterclaim against the Bumble Defendants to ensure that the Bumble Defendants' affirmative claim is not subject to Defendants' procedural whims but is instead litigated to finality. For these reasons, discussed in more detail below, the Court should deny the Bumble Defendants' Motion. II. PERTINENT FACTUAL BACKGROUND The non-Bumble Defendants house a number of relevant witnesses and documents related to the Bumble app because the non-Bumble Defendants (apparently) provide the Bumble Defendants with significant technological support, including providing source code related to the Accused Instrumentalities. 2 And on June 17, 2019, Defendants put out a press release announcing that Defendant Magic Lab is now a holding company for all of Badoo's dating services, including Bumble, stating that "Magic Lab builds, owns, and operates a portfolio of mission driven brands [including Bumble]." 3 Further, the non-Bumble Defendants house sources of information relevant to the Bumble Defendants' counterclaims because individuals such as the CFO and CEO of Badoo negotiated Match Group, Inc.'s proposed acquisition of Bumble and Badoo on behalf of another Defendant entity, Worldwide Vision Ltd. See, e.g., Dkt. 99 at ¶¶ 50-76. 2 https://techcrunch.com/2018/05/13/whitney-wolfe-herd-bumbles-founder-doesnt-care-what- shes-supposed-to-do/ ("[A]ll engineering is still handled in Badoo's London offices. . ."). 3https://www.prnewswire.com/news-releases/andrey-andreev-consolidates-badoo-bumble- chappy-and-lumen-into-new-entity-magic-lab-300869202.html 2 4 In light of these links, Match began discussions with the Bumble Defendants concerning the discovery implications of the affiliated companies shortly after fact discovery opened. See, e.g., Ex. B. On a July 18th meet-and-confer, counsel for Bumble indicated that Bumble refused to agree that information housed in these related entities were in Bumble's custody and control for discovery purposes. Match then indicated it intended to add these entities by the deadline to add parties unless Bumble agreed to produce this discovery and unless these entities agreed to be bound by an adverse judgment against Bumble on Bumble's Texas state-law counterclaims. Ex. C. The parties discussed potential ways to avoid adding parties but ultimately could not come to any resolution. At no point during those lengthy discussions did Defendants' counsel indicate a belief that leave was required to amend. As it promised Defendants it would do, Match filed a Fourth Amended Complaint on the deadline to add parties. Dkt. 100. Defendants' counsel did not reach out to Match to object at any point prior to the Bumble Defendants' answer date. III. ARGUMENT A. Match's Fourth Amended Complaint Was Properly Served Without Leave. 1. The Court's Model Patent Order Requires Leave Only if New Patent Claims Are Added. The operative Scheduling Order sets forth a "deadline to amend pleadings." The Order provides that leave is typically not required to amend. Only if "the amendment adds patents or claims" is a motion necessary. Dkt. 96. The Fourth Amendment did not add patents or patent claims. As such, Match believes that leave was not required. Contextual evidence supports Match's reading of the Scheduling Order. For one, the language is pulled from the Court's patent scheduling order. In that model, the Court also explains in the context of infringement contentions that claims may be added before final 3 4 infringement contentions, but that "leave of court" is required to "add claims." The Court's model goes on to explain that leave in this context is necessary solely "so that the Court can address any scheduling issues." Ex. D at 5 n.2. Match's reading of the Scheduling Order to refer to patent claims rather than any claims makes sense given the remainder of the schedule. If a pleading adds a patent or claims of a patent, the Court would be required to address whether those new claims contain terms that might require construction. If patent claims were added, the Court would also need to allow adequate time for the parties to serve contentions—both for infringement and invalidity. For non-patent claims, however, the fact discovery period lasts until January 24, 2020. This is a sufficient time for new non-patent claims to be added and litigated within that period without scheduling modifications. Given the Court's footnote about leave and adding "claims" to infringement contentions, Match understands that prior to the date in the Court's Scheduling Order, leave would be required only where new patent claims are added, for purposes of addressing scheduling issues. 4 Thus Match's Fourth Amended Complaint was properly filed. 2. The Circumstances of the Parties' Discussions Demonstrate That Bumble Did Not Believe Leave Was Required. As discussed above, Match's reading of the Court's Scheduling Order is correct and reasonable. But even if the Scheduling Order were ambiguous, the parties' discussions leading up to Match's filing of its Fourth Amended Complaint highlight that Match's view was correct. 4 Match's reading of the Scheduling Order is also consistent with other courts implementing similar rules. For example, Judge Gilstrap, Judge Payne, Judge Schroeder, Judge Mitchell, and Judge Payne's standard patent orders in the Eastern District of Texas allow for amendments without leave except if the parties add a new patent prior to the deadline to for pleading amendments.4 Exs. E-G. The Eastern District does not use the word "claim" to refer to a newly added patent claim because the District does not allow for the adding of patent claims of an existing patent except through procedures for amending infringement contentions. 4 4 The Bumble Defendants accuse Match of being "indolent and cavalier" in filing the Fourth Amended Complaint without requesting leave. See Dkt. 108 at 3. But they fail to acknowledge that they knew exactly what Match planned to do and said nothing indicating that they believed leave was required. Long before the August 2nd deadline to add parties, Match made clear that it believed discovery from the non-Bumble Defendants was necessary. Match also made clear that it sought clarity of its rights concerning the non-Bumble Defendants concerning the counterclaims asserted by the Bumble Defendants, which more appropriately belong to the non-Bumble Defendants. When the Bumble Defendants indicated that information from the non-Bumble Defendants was allegedly not within their custody and control, Match informed Defendants' counsel in writing that it intended to add the non-Bumble Defendants. Ex. C. Counsel then attempted by phone to negotiate a deal to avoid adding parties and amending pleadings. Summers Decl. ¶ 2. Defendants' counsel asked Match's counsel what Match had in mind when adding the new parties. Id. ¶ 2. Match's counsel informed Defendants' counsel that Match intended to add an inducement theory against the non-Bumble Defendants and a declaratory judgment of non-liability cause of action against the non-Bumble Defendants. Id. 2. Not once during these discussions did Defendants' counsel indicate he thought leave might be required to do so. Id. ¶ 2-5. Defendants' counsel recalls this statement as to the non-Bumble Defendants and merely does not recall "additional claims against [the Bumble Defendants] as part of your amended pleading." Ex. H. 5 Combined with Match's understanding of the Scheduling Order, 5 While Match did not indicate that it would also add a declaratory judgment of non-liability theory against the Bumble Defendants, this is a distinction without a difference. If a declaratory judgment of non-liability theory is a "claim" for purposes of the Scheduling Order, it would be an added "claim" as the non-Bumble Defendants as much as it would be for the Bumble Defendants. 5 4 the apparent agreement between the parties during negotiations gave Match an additional basis to amend its claims without requesting leave. Defendants' actions after Match filed the Fourth Amended Complaint also support Match's reading of the Scheduling Order. Diligent counsel noticing a "violation" of a Scheduling Order would typically raise the issue with opposing counsel shortly after discovering it. This would allow a quick and easy remedy (like an unopposed motion for leave). The Bumble Defendants, however, waited until the deadline to answer to raise the issue at all, and now seek to dismiss the claim entirely based on the alleged "violation"—accusing Match of being "indolent and cavalier" when the Defendants knew Match's intent every step of the way. B. Even If Leave Were Required, Leave Is Plainly Appropriate, and the Period in Which to Request Leave Has Not Expired. If leave is required, the Court can and should simply grant it. The Fourth Amended Complaint is attached as Exhibit A. The deadline to amend pleadings is not until September 13, 2019. As such, a motion for leave to amend the pleadings is still governed by Rule 15, not the good cause standard of Rule 16. 6 That standard is easily met. As the Court has already 6 The deadline to add parties was August 2, 2019. However, Defendants do not argue that leave was required to add parties, only to add claims. The deadline to add claims is September 13, 2019. In any event, to the extent leave was required on August 2, 2019, there would also be good cause to allow the amendment. To the extent anything was untimely, it would have been based on a good-faith and reasonable understanding of the Scheduling Order, the timing of which was largely dictated by protracted discovery issues related to discovery issues related to alleged distinctions in the corporate form. Adding the parties and claims is important for both discovery and need for finality against all potential claimants in the wake of the Court's denial of Match's Motion to Dismiss. There is no potential prejudice in allowing the amendment, particularly where Defendants were given such advance notice within the Scheduling Order's timeframes. No continuance is required. S&W Enterprises, L.L.C. v. SouthTrust Bank of Alabama, NA, 315 F.3d 533, 536 (5th Cir. 2003) (describing the four relevant factors). 6 4 recognized, leave to amend should be "freely granted," Fed. R. Civ. P. 15(a)(2). The Court also recognized that it should "allow amendment of [a] complaint absent a compelling reason to do so." Dkt. 63 at 1. "The touchstone for denial of leave to amend under Ruel 15(a) is prejudice." Id. (quoting Dueling v. Devon Energy, 623 F. App'x 127, 130 (5th Cir. 2015)). The only stated basis for the Bumble Defendants' opposition is that a motion for leave would be "futile" as to the Bumble Defendants. Ex. H. Here, there can be no prejudice to the Bumble Defendants from the newly added declaratory judgment action, which is directly related to the Bumble Defendants' own Texas law causes of action against Match and IAC. Match did not delay in adding the amendment; the amendment was made prior to the deadline in the Scheduling Order and only a few weeks after the Court denied Match's Motion to Dismiss the Bumble Defendants' related counterclaims. The amendment was not made with bad faith or dilatory motive; indeed, there can be no delay stemming from the new declaratory judgment action at all. 7 There have also been no previous failures to cure any "deficiencies" in Match's complaints. And there is no undue prejudice to the Bumble Defendants as the declaratory judgment is directly related to the Bumble Defendants' own counterclaims raised against Match. Further, as detailed below, the amendment is not "futile." See Dkt. 63 at 2 (indicating that these are the only five considerations that would justify 7 To the extent delay is considered as to the non-Bumble Defendants, there has been no unreasonable delay there either. Match could not know until after discovery opened that the Bumble Defendants would decline to produce discovery from the non-Bumble Defendants. Moreover, Match believed that the Bumble Defendants' counterclaims lacked subject matter jurisdiction and did not know the Court would exercise jurisdiction over that claim until June 26, 2019. Even setting aside that the parties were discussing issues related to the non-Bumble Defendants throughout July 2019, there was less than a month between when the Court issued that ruling and when Match informed Defendants that it intended to add the non-Bumble Defendants absent an agreement on discovery and an agreement for the non-Bumble Defendants to be bound by any adverse judgment against the Bumble Defendants on the Bumble Defendants' acquisition-related claim. Ex. C (July 25, 2019). 7 4 denial of an amendment). Simply put, there can be no prejudice from adding a declaratory judgment of non-liability concerning a claim that the Bumble Defendants have already placed in issue and are actively pursuing. C. The Court Has Jurisdiction over Match's Tenth Counterclaim Against the Bumble Defendants. The Court has discretion to retain jurisdiction over "mirror image" declaratory judgment actions. 8 El Chico Rests. Tex., Inc. v. Carroll, No. 3:09-CV-2294-L, 2010 WL 2697293, at *3 (N.D. Tex. July 8, 2010) (retaining jurisdiction over such declaratory judgment actions); Ferring B.V. v. Fera Pharm., LLC, No. CV 13-4640(SJF)(AKT), 2014 WL 4829053, at *6 (E.D.N.Y. Aug. 13, 2014) (refusing to dismiss "mirror image" counterclaims in light of threat of future litigation); Leach v. Ross Heater & Mfg. Co., 104 F.2d 88, 91 (2d Cir. 1939) (concluding district court abused its discretion in striking an allegedly redundant counterclaim where plaintiff could have "withdraw[n] his lawsuit without prejudice and continue[d] broadcasting allegations [of] wrongdoing]"). Courts should dismiss counterclaims only where there is "no doubt that [they will] be rendered moot by the adjudication of the main action." Wright & Miller, 6 Fed. Practice & Procedure § 1406 (3d ed.). Exercising discretion to hear this claim is particularly appropriate in this case. Although the Bumble Defendants contend that Match's pleading is "improper," Dkt. 108 at 4, the Bumble Defendants themselves have raised "mirror image" claims of non-infringement of the Asserted Patents. See Dkt. 66 at Seventh through Ninth Causes of Action; see also Dkt 53 at 46-47 (non- infringement counterclaims concerning the dropped '314 Patent). Given these pleadings, the Court equitably should allow Match to do the same thing for a similar purpose. This is 8For clarity, Match's "mirror image" arguments apply only to Match's declaratory judgment action against the Bumble Defendants. Such arguments do not apply against the non-Bumble Defendants as the declaratory judgment actions are directed at different parties. 8 4 particularly true given that the Bumble Defendants have previously sought to dismiss claims for forum-shopping reasons. 9 Thus, because Match's DJ action against the Bumble Defendants serves a useful purpose, the Court should not dismiss it. IV. CONCLUSION For the reasons stated above, the Court should deny the Bumble Defendants' Motion. In the alternative, the Court should grant leave to file Match's Fourth Amended Complaint. 9 Match continues to maintain that there is no subject matter jurisdiction concerning the Bumble Defendants' counterclaims because supplemental jurisdiction does not exist. However, because the Court has exercised jurisdiction over those claims, Match would like to see those claims litigated to finality in this Court and not be subject to the Bumble Defendants' procedural whims. 9 4 DATED: August 23, 2019 Respectfully submitted, CALDWELL CASSADY & CURRY By: /s/ Bradley W. Caldwell Bradley W. Caldwell Texas State Bar No. 24040630 Email: bcaldwell@caldwellcc.com John F. Summers Texas State Bar No. 24079417 Email: jsummers@caldwellcc.com Warren J. McCarty, III Texas State Bar No. 24107857 Email: wmccarty@caldwellcc.com CALDWELL CASSADY CURRY P.C. 2101 Cedar Springs Road, Suite 1000 Dallas, Texas 75201 Telephone: (214) 888-4848 Facsimile: (214) 888-4849 John P. Palmer State Bar. 15430600 Email: palmer@namanhowell.com Naman, Howell, Smith & Lee, PLLC 400 Austin Avenue, 8th Floor P.O. Box 1470 Waco, TX 76701 Telephone: (254) 755-4100 Facsimile: (254) 754-6331 ATTORNEYS FOR PLAINTIFF MATCH GROUP, LLC and IAC CERTIFICATE OF SERVICE The undersigned certifies that the foregoing document was filed electronically with the Clerk of Court using the CM/ECF system which will send notification of such filing to all counsel registered as Filing Users on this 23rd day of August, 2019. /s/ Bradley W. Caldwell Bradley W. Caldwell 10 4 CERTIFICATE OF CONFERENCE I, John Summers, counsel for Match Group, LLC, conferred with Matt Caplan, counsel for the all Defendants. On August 23rd, Mr. Caplan confirmed that the Bumble Defendants opposed Match Group, LLC's alternative motion for leave to file the Fourth Amended Complaint. Mr. Caplan did not provide a position on whether the non-Bumble Defendants opposed Match Group, LLC's Motion for Leave. /s/ John F. Summers___ John F. Summers 11