ICM of America Inc v. Leica Geosystems Inc et al

Filing 57

ORDER denying 22 Defendant Leica Geosystems, Inc.'s motion to dismiss and denying 48 Defendant Jerry Swanson's motion to dismiss. Signed by Judge Susan Webber Wright on 7/26/2016. (mef)

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
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ICM OF AMERICA, INC.
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Plaintiff
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V.
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NO: 4:16CV00160 SWW
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LEICA GEOSYSTEMS, INC.;
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STRIBLING EQUIPMENT LLC; and
JERRY SWANSON
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Defendants
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ORDER
Plaintiff ICM of America, Inc. (“ICM”) brings this diversity action against Defendants
Leica Geosystems, Inc. (“Leica”), Stribling Equipment LLC (“Stribling”), and Jerry Swanson
(“Swanson”), asserting multiple claims including intentional interference with business
expectancies. Before the Court are (1) Leica’s motion to dismiss, pursuant to Fed. R. Civ. P.
12(b)(6) (ECF Nos. 22, 23) and ICM’s response in opposition (ECF Nos. 38, 39) and (2)
Swanson’s motion to dismiss, pursuant to Fed. R. Civ. P. 12(b)(2) and 12(b)(6) (ECF Nos. 48,
49), ICM’s response in opposition (ECF Nos. 52, 53), and Swanson’s reply (ECF No. 55). After
careful consideration, and for reasons that follow, the motions to dismiss are denied.
I. Complaint Allegations
The following facts are taken from the second amended complaint. Plaintiff ICM sells
construction equipment in Arkansas and Oklahoma, and Defendant Leica manufactures machine
control (“MC”) products, which are used in the operation of heavy construction equipment. In
2013, ICM and Leica entered an oral agreement (the “Agreement”) that granted ICM a nonexclusive license to use the Leica trade name, trademark and related characteristics and to sell

Leica MC products in Arkansas and Oklahoma. Subsequently, ICM purchased inventory from
Leica and devoted significant time developing a customer base for Leica’s products. Before and
after the Agreement, Leica’s representative David Rowlett (“Rowlett”) told ICM that Leica did
not grant exclusive licenses to sell the company’s MC products.
In 2014, Defendant Stribling, a Mississippi LLC that sells construction equipment,
became a Leica dealer.

Defendant Swanson, a Mississippi resident, is Stribling’s CEO. In

December 2014, an Arkansas excavating contractor requested and verbally accepted a sales
quote from ICM to replace stolen MC equipment, which he had purchased from Stribling.
Leica’s Rowlett demanded that ICM provide him a copy of the quote, claiming that Stribling had
accused ICM of giving the MC equipment away. After Rowlett reviewed ICM’s quote, he
agreed that ICM’s price was fair.
In early 2015, Rowlett demanded that ICM provide him a list of the company’s top
twenty sales prospects, and he requested similar information from Stribling in order to “police
any prospective deals that both ICM and Stribling were working on.”1
In July 2015, ICM provided a sales quote for MC equipment to a long-time Arkansas
customer, Arco Excavating of Pea Ridge, Arkansas (“ARCO”). Following orders from
Swanson, Rowlett demanded that ICM rescind the quote because Stribling was also pursuing a
sale to ARCO. Rowlett informed ICM’s representative Bruce McFadden (“McFadden”) that “if
ICM and Stribling were pursuing the same customer[,] Stribling would always prevail[,] and if
ICM received the order, Leica would not ship the order.”2 Rowlett also told McFadden that

1

ECF No. 37, at 5, ¶ 30.

2

ECF No. 37, at 5, ¶ 31.
2

“Stribling was about to make a large stock order from Leica and that Leica would not under any
circumstance risk losing the Stribling stock order.”3
Based on Rowlett’s statements to McFadden, ICM ceased efforts to sell to ARCO.
Subsequently, Swanson demanded that Leica terminate its agreement with ICM, and on January
12, 2016, Leica cancelled ICM’s license to sell Leica equipment. In connection with this
cancellation, Rowlett told ICM representatives that “Stribling wanted to be the exclusive [Leica]
dealer in Arkansas and insisted that Leica cancel ICM’s . . . franchise for Arkansas.” 4
With its second amended complaint, ICM brings civil conspiracy and tortious
interference claims against Leica, Stribling, and Swanson. Additionally, ICM sues Leica for
breach of contract and violation of the Arkansas Franchise Practices Act and seeks to recover
under the theory of promissory estoppel.
II. Leica’s Motion to Dismiss
On April 11, 2015, Leica filed a motion to dismiss ICM’s original complaint pursuant to
Rule 12(b)(6) of the Federal Rules of Civil Procedure. On May 2, 2016, twenty-one days later,
ICM filed an amended complaint as permitted under Rule 15(a)(B),5 and on May 11, 2016, ICM
filed a second amended complaint with leave of Court, to correct a typographical error contained
in the amended complaint. The second amended complaint eliminates certain parties and claims,
which renders moot several of Leica’s arguments in support of dismissal. Accordingly, the

3

Id.

4

ECF No. 37, at 6, ¶ 34.

5

Rule 15(a)(B) provides that a party my amend its pleading as a matter of course within
21 days after service of a responsive pleading or 21 days after service of a motion under 12(b),
(e), or (f), whichever is earlier.
3

Court will address Leica’s motion only to the extent that the asserted grounds for dismissal
remain applicable.
When ruling on a Rule 12(b)(6) motion to dismiss for failure to state a claim, the Court
must take as true the alleged facts and determine whether they are sufficient to raise more than a
speculative right to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56 (2007). The Court
does not, however, accept as true any allegation that is a legal conclusion. Ashcroft v. Iqbal, 556
U .S. 662, 678 (2009). The complaint must set forth “enough facts to state a claim to relief that is
plausible on its face.” Twombly, 550 U.S. at 570. “A claim has 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.” Iqbal, 556 U.S. at 678.
Count II - Tortious Interference
Under Arkansas law,6 the elements of tortious interference are as follows: (1) the
existence of a valid contractual relationship or a business expectancy; (2) knowledge of the
relationship or expectancy on the part of the interfering party; (3) intentional interference
inducing or causing a breach or termination of the relationship or expectancy; and (4) resultant
damage to the party whose relationship or expectancy has been disrupted. Vowell v. Fairfield

6

The parties cite Arkansas law in their respective briefs, without discussion as to which
state’s law governs the substantive issues in this case. When federal jurisdiction is based on
diversity of citizenship, a federal court looks to the choice-of-law principles of the forum
state–in this case Arkansas--and applies those principles as the forum state would. Simpson v.
Liberty Mut. Ins. Co., 28 F.3d 763, 764 (8th Cir. 1994). In tort cases, the Arkansas Supreme
Court considers the doctrine of lex loci delicti, which favors the law of the place where the
alleged wrong occurred, in conjunction with five factors promulgated by Dr. Robert A. Leflar.
See Ganey v. Kawasaki Motors Corp., U.S.A., 366 Ark. 238, 251, 234 S.W.3d 838, 847 (2006).
The Court finds that Arkansas law is applicable to the claims in this case, as ICM’s place of
business is located in Arkansas and the alleged injury occurred in the state.
4

Bay Community Club, 58 S.W.3d 324, 329 (Ark. 2001). Arkansas also requires that the conduct
of the interfering party be at least “improper,” and the following factors set forth in the
Restatement (Second) of Torts provide guidance as to what is improper in this context:
(a) the nature of the actor’s conduct, (b) the actor’s motive, (c) the interests of the
other with which the actor’s conduct interferes, (d) the interests sought to be
advanced by the actor, (e) the social interests in protecting the freedom of action of
the actor and the contractual interests of the other, (f) the proximity or remoteness
of the actor’s conduct to the interference and the relations between the parties.
See Baptist Health v. Murphy, 2010 Ark. 358, 15-16, 373 S.W.3d 269, 281-82 (2010)(citing K.C.
Props. of N.W. Ark., Inc., 373 Ark. at 26-27, 280 S.W.3d at 11-12 (2008)).
If a plaintiff establishes the foregoing elements, a defendant may still prevail if it can
show that its conduct was justified or privileged. See Conway Corp. v. Construction Engineers,
Inc., 300 Ark. 225, 782 S.W.2d 36, 40 (1989). This affirmative defense permits the defendant to
“show that the interference is privileged by reason of the interests furthered by his conduct, but
the burden rests upon him to do so.” Stebbins & Roberts, Inc. v. Halsey, 265 Ark. 903, 906, 582
S.W.2d 266, 267 (1979). The defendant’s economic interest may qualify as the basis for a
privilege, but that interest must be more than mere business expectation:
Where the defendant acts to further his own advantage, other distinctions have been
made. If he has a present, existing economic interest to protect, such as the
ownership or condition of property, or a prior contract of his own, or a financial
interest in the affairs of the person persuaded, he is privileged to prevent
performance of the contract of another which threatens it.
But where his interest is merely one of prospective advantage, not yet realized, he
has no such privilege. The typical case is that of business competition. The courts
have held that the sanctity of the existing contract relation takes precedence over any
interest in unrestricted competition, and have enforced as law the ethical precept that
one competitor must keep his hands off the contracts of another. This is true of
contracts of employment, where workmen are hired away from an employer, as well
as competitive business dealings in general.

5

Stebbins & Roberts, Inc. v. Halsey, 265 Ark. 903, 906-07, 582 S.W.2d 266, 267-68
(1979)(emphasis added).
Here, ICM alleges that Leica interfered with its business expectancy for the purpose of
assisting Stribling. Specifically, ICM charges that Leica “intentionally, improperly, and without
justification” required ICM to submit a list of prospective customers and forced it to withdraw a
quote to Arco in order to prevent ICM from competing with Stribling. ICM alleges that as a
direct result of these actions, it suffered actual damages including lost profits. Viewing the
allegations in a light most favorable to ICM, the Court finds that ICM states a plausible claim for
tortious interference.
Leica argues that the complaint allegations establish, as a matter of law, that any alleged
conduct on its part amounted to privileged competition. However, ICM alleges that it sold
Leica’s products, not that Leica was its business rival or competitor. See Kinco, Inc. v. Schueck
Steel, Inc., 283 Ark. 72, 77-78, 671 S.W.2d 178, 181 (1984)(quoting W. Prosser, Law of Torts, §
130 (3rd ed. 1971)(recognizing a privilege to compete, noting “it is no tort to beat a business rival
to prospective customers”). The complaint allegations charge that Leica forced ICM to withdraw
its price quote to ARCO in order to help Stribling because “Stribling was about to make a large
stock order from Leica and . . . Leica would not under any circumstances risk losing the Stribling
stock order.”7 These allegations simply do not indicate that Leica engaged in privileged
competition or that Leica acted to protect an existing contract or a present, existing economic
interest. The affirmative defense of privilege is not established on the face of the complaint and
therefore does not provide a basis for dismissal under Rule 12(b)(6).

7

ECF No. 37, ¶ 31.
6

Count IV - Breach of Contract
ICM asserts that the Agreement amounted to an oral franchise agreement, which Leica
breached by, among other things, failing the duties of good faith and fair dealing. Leica argues
that ICM fails to allege that it breached a specific term of the Agreement and that ICM’s “bald
recitations” are insufficient to state a claim for breach of contract.
“Under Arkansas law, every contract contains an implied covenant of good faith and fair
dealing.” Yarborough v. DeVilbiss Air Power, Inc., 321 F.3d 728, 732 (8th Cir. 2003)(citing
TCBY Sys., Inc. v. RSP Co., Inc., 33 F.3d 925, 928–29 (8th Cir.1994); Richard Short Oil Co. v.
Texaco, Inc., 799 F.2d 415, 421–22 (8th Cir.1986); Cantrell–Waind & Assoc. v. Guillaume
Motorsports, Inc., 62 Ark. App. 66, 71–72, 968 S.W.2d 72, 75 (1998)). “As is the case with the
contract’s express terms, the implied covenant is part of the contract and creates contractual
obligations that are actionable.” Yarborough v. DeVilbiss Air Power, Inc., 321 F.3d at 732. The
Eighth Circuit has recognized that “under Arkansas law there are circumstances in which the
implied duty of good faith and fair dealing may create obligations that operate to constrain actions
that are inherently in a party’s control.” Yarborough, 321 F.3d at 733.
This is not a case in which the plaintiff fails to allege any breach separate from the breach
of a duty to act in good faith. ICM charges that Leica terminated the Agreement without cause,
without notice, and without giving ICM an opportunity to cure. Accepting these allegations as
true, as the Court must do at this stage in the case, the Court finds that ICM has stated a plausible
claim for breach of contract.
Count VI - Civil Conspiracy
ICM charges that “Leica, Stribling, and Swanson, through their agents and employees

7

agreed with, conspired with and acted in concert with each other to cause . . . Leica to violate the
AFPA and to interfere with [ICM’s] business expectancies . . . . ”8 Under Arkansas law, civil
conspiracy is an intentional tort requiring a specific intent to accomplish the contemplated wrong.
See Dodson v. Allstate Ins. Co., 345 Ark. 430, 445, 47 S.W.3d 866, 876 (2001). To prove a civil
conspiracy, ICM must show “a combination of two or more persons to accomplish a purpose that
is unlawful or oppressive or to accomplish some purpose, not in itself unlawful, oppressive or
immoral, by unlawful, oppressive or immoral means, to the injury of another.” Id. A conspiracy
may be shown by evidence of an actual agreement or understanding between conspirators, but it
may also be shown by circumstantial evidence:
A conspiracy may be shown by direct evidence of an actual agreement or
understanding between conspirators, but it may also be shown by circumstantial
evidence. It also may be inferred from actions of alleged conspirators, if it be shown
that they pursued the same unlawful object, each doing a part, so that their acts,
although apparently independent, are in fact connected and cooperative, indicating a
closeness of personal association and a concurrence of sentiment.
Mason v. Funderburk, 247 Ark. 521, 529, 446 S.W.2d 543, 548 (1969)(citations omitted).
Leica argues that ICM fails to state a civil conspiracy claim because no facts show the
existence of an agreement between Leica and Stribling. However, from the facts alleged, it could
be inferred that Stribling complained about ICM, urged Leica to commit the complained-of
conduct, and Leica agreed. For example, ICM alleges that Rowlett demanded a copy of ICM’s
customer list after Stribling accused ICM of “giving . . . MCE away.” ICM further alleges
Stribling “insisted” that Leica cancel ICM’s franchise agreement. In light of these allegations,
the Court finds that ICM states a plausible civil conspiracy claim.

8

ECF No. 37, ¶ 89.
8

III. Swanson’s Motion to Dismiss for Lack of Personal Jurisdiction
Swanson contends that the second amended complaint is void of a single allegation
supporting personal jurisdiction over him in this forum. Although ICM bears the ultimate burden
of proof on the issue, personal jurisdiction over a defendant need not be proved by a
preponderance of the evidence until trial or until the court holds an evidentiary hearing. See
Dakota Industries, Inc. v. Dakota Sportswear, Inc. 946 F.2d 1384, 1387 (8th Cir. 1991)(citing
Cutco Ind. v. Naughton, 806 F.2d 361, 365 (2d Cir.1986)). To survive the motion to dismiss,
ICM must allege sufficient facts to support a reasonable inference that Snowden may be subjected
to jurisdiction in Arkansas. See Steinbuch v. Cutler, 518 F.3d 580, 585 (8th Cir. 2008). ICM
need only make a prima facie showing of jurisdiction, and the Court must look at the facts in the
light most favorable to ICM, and resolve all factual conflicts in ICM’s favor. See Dakota
Industries, Inc. v. Dakota Sportswear, Inc. 946 F.2d 1384, 1387 (8th Cir. 1991).
This Court may assume jurisdiction over Swanson to the extent permitted by the long arm
statute of the forum state. Arkansas’s long-arm statute permits the assertion of jurisdiction to the
fullest extent allowed by the Fourteenth Amendment’s Due Process Clause, which permits the
exercise of personal jurisdiction over a nonresident defendant that has “certain minimum contacts
with [the forum state] such that the maintenance of the suit does not offend ‘traditional notions of
fair play and substantial justice.’” International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.

The Supreme Court has held that in order to exercise personal jurisdiction, "it is essential
in each case that there be some act by which the defendant purposefully avails itself of the
privilege of conducting activities within the forum State, thus invoking the benefits and

9

protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228 (1958). Five
factors are normally considered when resolving a personal jurisdiction inquiry: (1) the nature and
quality of the defendant’s contacts with the forum state; (2) the quantity of those contacts; (3) the
relation of the cause of action to the contacts; (4) the interest in the forum state in providing a
forum for its residents; and (5) the convenience of the parties. Digi-Tel Holdings, Inc. v. Proteq
Telecommunications (PTE), Ltd., 89 F.3d. 519, 522-23 (8th Cir. 1996).9 The first three factors are
closely related and are of primary importance, while the last two factors are secondary. Id. at
523.
Citing Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482 (1984), ICM argues that “even if
Swanson had limited physical contact with the state, his tortious conduct, from his official
capacity as CEO of Stribling, caused harmful effects in Arkansas.”10 In Calder, a California
actress filed a libel suit in California against Florida newspapermen, who wrote an article that was
published in the National Enquirer. Although the defendants wrote and edited the article in
Florida, the Supreme Court held that personal jurisdiction was proper because the defendants’
“intentional, and allegedly tortious, actions were expressly aimed at California” and “they knew
[it] would have a potentially devastating impact . . . there.” Calder, 465 U.S. at 789, 104 S. Ct. at

9

The Supreme Court has identified two types or theories of personal jurisdiction: general
and specific. General personal jurisdiction exists when the defendant has “continuous and
systematic” contacts with the forum state, even if the injuries at issue in the lawsuit did not arise
out those contacts. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408,
415-16, 104 S.Ct. 1868 (1984). Specific personal jurisdiction, in contrast, exists only if the
injury giving rise to the lawsuit occurred within or had some connection to the forum state. Id. at
414, 104 S.Ct. 1868. Here, Snowden’s alleged conduct is related to the dispute giving rise to
this litigation, and general jurisdiction analysis is not warranted.
10

ECF No. 53, at 4.
10

1487. The Calder Court “thus approved an ‘effects’ test that allows the assertion of personal
jurisdiction over non-resident defendants whose acts “are performed for the very purpose of
having their consequences felt in the forum state.” Dakota Indus., Inc. v. Dakota Sportswear,
Inc., 946 F.2d 1384, 1390-91 (8th Cir. 1991).
Applying the Calder “effects” test, the Eighth Circuit has held that
a defendant's tortious acts can serve as a source of personal jurisdiction only where
the plaintiff makes a prima facie showing that the defendant's acts (1) were
intentional, (2) were uniquely or expressly aimed at the forum state, and (3) caused
harm, the brunt of which was suffered-and which the defendant knew was likely to
be suffered-[in the forum state].
Johnson v. Arden, 614 F.3d 785, 796 (8th Cir. 2010)(quoting Lindgren v. GDT, LLC, 312 F.
Supp.2d 1125, 1132 (S.D. Iowa 2004)).
Here, ICM alleges that Snowden, the CEO of Stribling, interfered with its business
expectancies by insisting that Leica force ICM to withdraw its price quote to ARCO and by
demanding that Leica terminate ICM’s license to sell Leica products. By affidavit, Swanson
denies that he had any involvement in the decision to terminate ICM as a Leica dealer, but he
offers no testimony regarding the allegation that he insisted that Leica force ICM to withdraw its
price quote to ARCO.11 Swanson further testifies that so far as he can recall, he never entered
Arkansas or sent communications into the state for the purpose of taking action against ICM.
Swanson notes that his position as the CEO of Stribling does not, without more, subject
him to suit in Arkansas. However, ICM charges that Swanson was a primary participant in
alleged wrongdoing that is the subject of this lawsuit and that his tortious conduct was

11

See Swanson Aff., ECF No. 48-1.
11

intentionally directed at Arkansas. Viewing the allegations in a light most favorable to ICM, the
Court finds that Swanson’s dictate to Leica regarding ARCO was intentionally directed at
business and residents in Arkansas.12 Furthermore, Swanson knew that ICM would feel the
consequences of losing its long-time customer in Arkansas, and he should have reasonably
anticipated being haled to court in this forum. The Court finds that ICM has met its burden to
make a prima facie showing of personal jurisdiction over Swanson.
IV. Swanson’s Motion to Dismiss for Failure to State a Claim
Swanson contends that the second amended complaint is void of factual allegations
concerning his conduct and that all allegations related to him are conclusory. To the contrary,
ICM alleges that Swanson interfered with and conspired to interfere with ICM’s business
expectancies by demanding that Leica force ICM to withdraw its price quote to ARCO and
terminate ICM’s distributor license. Just as ICM states plausible claims against Leica for tortious
interference and civil conspiracy, it has alleged facts sufficient to sustain its claims against
Swanson.
V. Conclusion
For the reasons stated, Defendant Leica Geosystems, Inc.’s motion to dismiss (ECF No.
22) is DENIED, and Defendant Jerry Swanson’s motion to dismiss (ECF No. 48) is DENIED.
IT IS SO ORDERED THIS 26TH DAY OF JULY, 2016.
/s/Susan Webber Wright
UNITED STATES DISTRICT JUDGE

12

Stribling was also pursuing ARCO, and it is reasonable to infer that he knew that
ARCO or “Arco Excavating of Pea Ridge, Arkansas” was located in Arkansas.
12