Donut Joe's, Inc. v. Beiersdoerfer et al

Filing 27

MEMORANDUM OPINION AND ORDER DISMISSING WITHOUT PREJUDICE the state-law claims filed by Donut Joe's and the state-law counterclaims filed by Werner Beiersdoerfer, Michael Kenneth Flowers, and Interveston Food Services, LLC. TERMED AS MOOT 8 10 14 MOTIONS to Dismiss. There being no remaining claims against Brock and Kimberly Beiersdoerfer, the Clerk is DIRECTED to show them as dismissed from this action. Signed by Judge Virginia Emerson Hopkins on 12/18/2013. (JLC)

FILED
2013 Dec-18 AM 11:40
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
DONUT JOE’S, INC.,
Plaintiff,
v.
BEIERSDOERFER, WERNER, et
al,
Defendants.

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) Case No.: 2:13-CV-1578-VEH
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MEMORANDUM OPINION AND ORDER
INTRODUCTION
There are three motions before the court. Three defendants – Werner
Beiersdoerfer, Michael Kenneth Flowers, and Interveston Food Services, LLC
(Interveston) – have filed a Motion to Dismiss the plaintiff’s fraud claim against
them. Doc. 8. The remaining defendants – Brock and Kimberly Beiersdoerfer – have
filed a Motion to Dismiss all of the plaintiff’s claims against them. Doc. 10. Finally,
the plaintiff (Donut Joe’s) has filed a Motion to Dismiss the counterclaims asserted
by Werner Beiersdoerfer, Mr. Flowers, and Interveston. Doc. 14. After considering
these motions, the referenced pleadings, and the accompanying memoranda, the court
finds that it lacks supplemental jurisdiction over the state-law claims in this action.

The court will thus DISMISS WITHOUT PREJUDICE any and all such claims
filed by the respective parties. Accordingly, the court will TERM AS MOOT the
competing Motions to Dismiss in this case.
STATEMENT OF THE CASE
Donut Joe’s commenced this action by filing a Complaint with this court on
August 27, 2013. Doc. 1. Although the Complaint does not lay out formal counts, the
document variably alleges the following:
•

Werner Beiersdoerfer and Mr. Flowers unlawfully infringed on the
plaintiff’s registered trademark by opening a competing “Donut Chef”
establishment and adopting a donut character as its logo.

•

Werner Beiersdoerfer and Mr. Flowers’s ownership and operation of the
Donut Chef establishment – through their company, Interveston –
amounted (and continually amounts) to unfair competition.

•

Werner Beiersdoerfer and Mr. Flowers’s ownership and operation of
Donut Chef violated the “Confidentiality and Non-disclosure
Agreement” (the Confidentiality Agreement) signed between Mr.
Beiersdoerfer, Mr. Flowers, and Richard Byrd, the President of Donut
Joe’s, on November 12, 2010.

•

After signing the Confidentiality Agreement, Werner Beiersdoerfer
illicitly provided confidential information obtained through his
relationship with Donut Joe’s to his son and daughter-in-law, Brock and
Kimberly Beiersdoerfer.

•

Brock and Kimberly Beiersdoerfer later opened their own retail donut
establishment, Heavenly Donut Co. (Heavenly Donut), offering goods
and services nearly identical to both Donut Joe’s and Donut Chef.

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•

Brock and Kimberly Beiersdoerfer are currently using illegally-obtained
information to unfairly compete with Donut Joe’s.

•

Werner Beiersdoerfer intentionally induced Donut Joe’s to provide him
confidential information under the guise of the Confidentiality
Agreement. He never intended to obey the Agreement terms and instead
unlawfully used the confidential information therein to open his own
retail donut business and to aid his son and daughter-in-law to do the
same.

Doc. 1 at 2-4.
Werner Beiersdoerfer, Mr. Flowers, and Interveston answered the Complaint
on September 27, 2013. Doc. 7. The Answer generally denied Donut Joe’s material
allegations and raised several affirmative defenses. Id. at 2-8. Attached to the Answer
was a counterclaim charging Donut Joe’s with breach of contract and fraud. Id. at 817. Werner Beiersdoerfer, Mr. Flowers, and Interveston claimed that Donut Joe’s
breached a Letter of Understanding signed between them and Mr. Byrd on February
25, 2011. Id. at 13-14. They asserted that Donut Joe’s did so by refusing to honor
these defendants’ alleged exclusive rights to develop Donut Joe’s shops in Alabama
(excluding certain cities).1 Id. These defendants also alleged that Mr. Byrd
fraudulently induced them into signing the Letter by intentionally making false oral
representations promising them exclusive Alabama rights. Id. at 14-16.

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Donut Joe’s argues that no exclusive rights were given. This court takes no position,
given its finding that it lacks supplemental jurisdiction over any of the state law claims asserted
by any party.
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Werner Beiersdoerfer, Mr. Flowers, and Interveston also filed their Motion to
Dismiss on September 27, 2013. Doc. 8. On that day, Brock and Kimberly
Beiersdoerfer filed their Motion to Dismiss. Doc. 10. On October 11, 2013, Donut
Joe’s filed the following documents:
•

An Answer to the defendants’ counterclaim;

•

Responses to the two Motions to Dismiss; and

•

A Motion to Dismiss the counterclaims.

Docs. 11-14. On October 18, 2013, the defendants separately replied to the plaintiff’s
Responses. Docs. 16-17. On October 25, 2013, Werner Beiersdoerfer, Mr. Flowers,
and Interveston filed a response to the plaintiff’s Motion to Dismiss. Doc. 18. Donut
Joe’s replied on November 1, 2013. Doc. 19. On November 8, 2013, with the court’s
permission, Werner Beiersdoerfer, Mr. Flowers, and Interveston filed a surreply. Doc.
21.
STANDARD OF REVIEW
Generally, the Federal Rules of Civil Procedure require only that the complaint
provide “a short and plain statement of the claim showing that the pleader is entitled
to relief.” Fed. R. Civ. P. 8(a). However, to survive a motion to dismiss brought under
Rule 12(b)(6), a complaint must “state a claim to relief that is plausible on its face.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007) (“Twombly”). “A claim has
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facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556)
(“Iqbal”). That is, the complaint must include enough facts “to raise a right to relief
above the speculative level.” Twombly, 550 U.S. at 555 (citation and footnote
omitted). Pleadings that contain nothing more than “a formulaic recitation of the
elements of a cause of action” do not meet Rule 8 standards, nor do pleadings suffice
that are based merely upon “labels or conclusions” or “naked assertion[s]” without
supporting factual allegations. Id. at 555, 557 (citation omitted). “[O]nce a claim has
been stated adequately, it may be supported by showing any set of facts consistent
with the allegations in the complaint.” Id. at 563 (citation omitted). When ruling on
a motion to dismiss, a court must “take the factual allegations in the complaint as true
and construe them in the light most favorable to the plaintiff.” Pielage v. McConnell,
516 F.3d 1282, 1284 (11th Cir. 2008) (citing Glover v. Liggett Group, Inc., 459 F.3d
1304, 1308 (11th Cir. 2006)).
DISCUSSION
Before the court may examine the sufficiency of any claims in this case,
however, it must first satisfy itself that it has subject matter jurisdiction over each and
every one of them. See Morrison v. Allstate Indem. Co., 228 F.3d 1255, 1261 (11th
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Cir. 2000) (“[A] federal court must inquire sua sponte into the issue whenever it
appears that jurisdiction may be lacking.”) (citation omitted). The court finds that it
lacks jurisdiction over the state-law claims marshaled by both sides in this action.
Donut Joe’s – on the one hand – and Werner Beiersdoerfer, Mr. Flowers, and
Interveston – on the other – respectively allege fraud and breach of contract claims
against each other. However, these claims are legally and factually distinct from the
plaintiff’s federal claims – over which the court clearly has subject matter
jurisdiction. Because of this fact, the court may not exercise supplemental jurisdiction
over the state claims, and they must be dismissed. This dismissal moots the competing
Motions currently before the court.
I.

The Court Lacks Supplemental Jurisdiction Over the Plaintiff’s State-Law
Claims.
In its Complaint, Donut Joe’s asserts claims for trademark infringement, unfair

competition, breach of contract, and fraud. See Doc. 1. It correctly maintains that this
court has original jurisdiction over its trademark infringement and unfair competition
claims. Id. at 1 (citing 28 U.S.C. §§ 1338(a)-(b)). Donut Joe’s then argues that this
court has supplemental jurisdiction over the other asserted claims because they all
“arise out of the same transaction or occurrence.” Id. This is incorrect. 28 U.S.C. §
1367(a) provides federal district courts with supplemental jurisdiction “over all other

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claims that are so related to claims in the action within such original jurisdiction that
they form part of the same case or controversy under Article III of the United States
Constitution.” Id. In deciding whether a state law claim is part of the “same case or
controversy” as a federal issue, this court must “look to whether the claims arise from
the same facts, or involve similar occurrences, witnesses or evidence.” Hudson v.
Delta Air Lines, Inc., 90 F.3d 451, 455 (11th Cir. 1996) (citing Palmer v. Hosp. Auth.
of Randolph County, 22 F.3d 1559, 1566 (11th Cir. 1994)).
The connection between the plaintiff’s federal and state-law claims does not
meet this standard. First, the evidence required to establish the respective claims is
markedly different. Trademarks are “any word, name, symbol, or device, or any
combination thereof [used] to identify and distinguish [one's] goods . . . from those
manufactured or sold by others and to indicate the source of the goods . . .” 15 U.S.C.
§ 1127. Because Donut Joe’s alleges infringement of a federally-registered trademark,
Doc. 1 at 1, the claim is covered by § 32(a) of the Lanham Act. Tana v. Dantanna's,
611 F.3d 767, 773 n.5 (11th Cir. 2010) (citing 15 U.S.C. § 1114(1)). Section 32(a)
creates a federal cause of action for unfair competition by prohibiting the
unauthorized use in interstate commerce of “any reproduction, counterfeit, copy, or
colorable imitation of a registered mark in connection with the sale, offering for sale,
distribution, or advertising of any goods or services on or in connection with which
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such use is likely to cause confusion, or to cause mistake, or to deceive . . .” 15 U.S.C.
§ 1114(1). “[T]he critical question in most actions under [this provision] is whether
there is a likelihood of confusion, mistake, or deception between the registered mark
and the allegedly infringing mark.” John H. Harland Co. v. Clarke Checks, Inc., 711
F.2d 966, 972 (11th Cir. 1983) (citation and footnote omitted). Courts examining §
32(a) claims must consider several factors, including “the type of trademark, the
similarity of design, the similarity of the product, the identity of retail outlets and
purchasers, the similarity of advertising media used, defendant's intent, and actual
confusion.” Id. (quoting Exxon Corp. v. Texas Motor Exch., Inc., 628 F.2d 500, 504
(5th Cir. 1980)).
These considerations differ significantly from those involved in fraud or breach
of contract claims. Under Alabama law, a plaintiff must prove the following elements
to establish fraud:
•

a false representation;

•

of a material existing fact;

•

reasonably relied upon by the plaintiff;

•

who suffered damage as a proximate consequence of the
misrepresentation.

Mantiply v. Mantiply, 951 So. 2d 638, 653 (Ala. 2006) (quoting Waddell & Reed, Inc.

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v. United Investors Life Ins. Co., 875 So. 2d 1143, 1160 (Ala. 2003)). Conversely, a
plaintiff claiming breach of contract must show the following elements:
•

the existence of a valid contract between the plaintiff and the defendant;

•

the plaintiff’s performance under the contract;

•

the defendant’s nonperformance; and

•

damage to the plaintiff.

Capmark Bank v. RGR, LLC, 81 So. 3d 1258, 1267 (Ala. 2011) (citing Reynolds
Metals Co. v. Hill, 825 So. 2d 100, 105 (Ala. 2002)). Evaluating these state-law
claims, then, will require noticeably different evidence and different analysis from
that needed to examine federal trademark infringement and unlawful competition
arising out of that infringement.
Donut Joe’s also has not shown a sufficient factual nexus between the federal
and state claims. The fraud and contract breach claims arise out of the Confidentiality
Agreement signed between Mr. Byrd, Werner Beiersdoerfer, and Mr. Flowers on
November 12, 2010. See Doc. 1 at 2-4. Donut Joe’s argues that these defendants
breached the Agreement in the following respects:
•

by opening a competing donut establishment before the termination of
the five-year maximum term in the Agreement; and

•

by disclosing confidential information to Brock and Kimberly
Beiersdoerfer.
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Id. Donut Joe’s further asserts that these defendants fraudulently induced it to sign
the agreement with these unlawful purposes in mind. Id. at 4.
On the other hand, Donut Joe’s argues that Werner Beiersdoerfer and Mr.
Flowers unlawfully infringed on its registered trademark by using the name “Donut
Chef” for its competing donut establishment and by adopting a donut character as its
logo that was a “colorable imitation” of the one created by Donut Joe’s. Id. at 3.
According to Donut Joe’s, these defendants unfairly competed with it by deploying
these unlawful trademarks and by “marketing products and services almost identical
to [Donut Joe’s], using similar vendors, marketing, and locations.” Id. at 2-4.
The relationship between these federal and state-law claims does not trigger
supplemental jurisdiction. The alleged breach of the Confidentiality Agreement – and
the alleged fraud underlying it – involved events and occurrences that were separate
and distinct from the later alleged trademark infringement and unfair competition.
They also involved different interested parties – the contract breach claim involves
Brock and Kimberly Beiersdoerfer, whereas the federal claims do not. The fact that
all the claims somehow concern Donut Joe’s, on the one hand, and Donut Chef, on
the other, is not sufficient. 28 U.S.C. § 1367(a) mandates a greater proximity than that
found here.

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II.

The Court Also Does Not Have Supplemental Jurisdiction Over the
Defendants’ Counterclaims.
The court also lacks supplemental jurisdiction over the state-law counterclaims

asserted by Werner Beiersdoerfer, Mr. Flowers, and Interveston. In its Counterclaim,
these defendants claim that Donut Joe’s breached a Letter of Understanding signed
between them and Mr. Byrd on February 25, 2011. Doc. 7 at 13-14. Donut Joe’s
allegedly did so by refusing to honor the (allegedly) exclusive development rights it
promised them in the Letter. Id. Werner Beiersdoerer, Mr. Flowers, and Interveston
also allege that Mr. Byrd fraudulently induced them into signing the Letter by
intentionally making false oral representations promising them such exclusive
development rights. Id. at 14-16. Finally, they argue that this court has supplemental
jurisdiction over these counterclaims under 28 U.S.C § 1367 because the claims arise
“out of the same transaction or occurrence that is the subject-matter of the
Complaint.” Id. at 9.
This is incorrect for reasons similar to those outlined above. The defendants’
fraud and contract breach counterclaims are legally distinct from the plaintiff’s
trademark infringement and unlawful competition claims. Moreover, the defendants’
counterclaims arise out of an alleged agreement that is factually separate from the
events surrounding the plaintiff’s federal allegations. The only factor the claims share

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in common is – once again – that they all somehow involve two competing businesses
– Donut Joe’s and Donut Chef. This connection “does not provide a sufficient nexus
between the federal and state causes to support supplemental jurisdiction.” Hudson,
90 F.3d at 456.
CONCLUSION
For the foregoing reasons, the court hereby DISMISSES WITHOUT
PREJUDICE the state-law claims filed by Donut Joe’s and the state-law
counterclaims filed by Werner Beiersdoerfer, Michael Kenneth Flowers, and
Interveston Food Services, LLC. Further, the court accordingly TERMS AS MOOT
the Motions to Dismiss filed by:
•

Mr. Beiersdoerfer, Mr. Flowers, and Interveston;

•

Brock and Kimberly Beiersdoerfer; and

•

Donut Joe’s.

There being no remaining claims against Brock and Kimberly Beiersdoerfer, the
Clerk is DIRECTED to show them as dismissed from this action.
DONE this the 18th day of December, 2013.

VIRGINIA EMERSON HOPKINS
United States District Judge

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