ART Corporate Solutions, Inc. et al v. Laney et al

Filing 94

ORDER granting in part and denying in part 72 Motion for Summary Judgment by Judge R. Brooke Jackson on 3/14/16.(jdyne, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge R. Brooke Jackson
Civil Action No 14-cv-03086-RBJ
ART CORPORATE SOLUTIONS, INC., a Colorado corporation, and
ACTIVE RELEASE TECHNIQUES, LLC, a Colorado limited liability company,
Plaintiffs,
v.
DARYL LANEY, D.C., an individual,
LANEY CHIROPRACTIC AND SPORTS THERAPY, P.A., a Texas professional association,
and
NEUROMUSCULAR CORPORATE SOLUTIONS, LLC, a Texas limited liability company,
Defendants.

ORDER

Defendants move for summary judgment. ECF No. 72. The Court has reviewed the
motion, plaintiffs’ response, ECF No. 84, and defendants’ reply, ECF No. 90. No party has
requested oral argument. The Court grants the motion in part and denies it in part as explained in
this order.
BACKGROUND
Dr. Laney is a chiropractor in Texas. The plaintiffs apparently pioneered a soft-tissue
massage technique called Active Release Techniques or “ART,” and among other things
plaintiffs train chiropractors in the technique. Dr. Laney obtained the training in order to become
certified in the technique and to qualify to provide this type of service to customers.
In 2004, after Dr. Laney had obtained his certification, plaintiffs authorized him to enter
into an arrangement with plaintiffs’ client, Sabre, Inc. Sabre paid plaintiff Active Release

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Techniques, LLC (“ARTCS”) $75 per 15-minute massage, and ARTCS paid Dr. Laney (or his
business Laney Chiropractic and Sports Therapy, P.A.) a percentage of that total. This
relationship among the three parties apparently continues to this day.
In 2009 a similar arrangement was established with another Texas company, Atmos
Energy. However, plaintiffs allege that Dr. Laney later induced Atmos Energy to terminate its
contract with ARTCS and to enter into a contract with a new company formed by Dr. Laney
called Neuromuscular Corporate Solutions, LLC.
In their Amended Complaint, ECF No 46, plaintiffs assert eight claims: (1) federal
trademark infringement; (2) violation of the Uniform Trade Secrets Act; (3) false and misleading
advertising in violation of 15 U.S.C. § 1125(a)(1)(A) and(B); (4) deceptive business practices in
violation of Colorado Revised Statutes § 6-1-105; (5) unfair competition; (6) breach of contract;
(7) breach of the duty of good faith and fair dealing; and (8) tortious interference with contract.
In their pending motion defendants ask the Court to dismiss all these claims.
STANDARD OF REVIEW
The Court may grant summary judgment if “there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The
moving party has the burden to show that there is an absence of evidence to support the
nonmoving party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The nonmoving
party must “designate specific facts showing that there is a genuine issue for trial.” Id. at 324. A
fact is material “if under the substantive law it is essential to the proper disposition of the claim.”
Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986)). A material fact is genuine if “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248.

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The Court examines the factual record and makes reasonable inferences therefrom in the light
most favorable to the party opposing summary judgment. Concrete Works of Colorado, Inc. v.
City & Cnty. of Denver, 36 F.3d 1513, 1517 (10th Cir. 1994).
ANALYSIS
In their response brief plaintiffs confess the motion insofar as it seeks dismissal of the
Second Claim for Relief (violation of the Uniform Trade Secrets Act) and the Fourth Claim for
Relief (deceptive business practices in violation of C.R.S. § 6-1-105. The motion is therefore
granted as to those claims.
In addition, the Court finds that plaintiffs misunderstand the nature of the contractual
theory, “breach of the covenant of good faith and fair dealing,” as asserted in plaintiffs Seventh
Claim for Relief. In Colorado every contract contains an implied covenant of good faith and fair
dealing. Amoco Oil Co. v. Ervin, 908 P.2d 493, 498 (Colo. 1995). The covenant applies “when
one party has discretionary authority to determine certain terms of the contract, such as quantity,
price, or time.” Id. “Discretion in performance occurs ‘when the parties, at formation, defer a
decision regarding performance terms of the contract’ leaving one party with the power to set or
control the terms of performance after formation.” City of Golden v. Parker, 138 P.3d 285, 292
(Colo. 2006) (quoting Amoco, 908 P.2d at 498). Simply put, if a party to a contract is vested
with discretion, then that party must exercise its discretion in good faith so as not to defeat the
reasonable expectations of the other party to the contract.
Plaintiffs allege that in April 2005 Dr. Laney entered into an Active Release
Techniques® EPN Participating Provider Agreement with a predecessor entity to ARTCS called
Active Release Techniques Elite Providers Network, LLC. Plaintiffs refer to what I take to be
the same contract sometimes as the “Laney/ARTCS Contract,” e.g., ECF No. 46 at ¶29, and

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sometimes as the “Laney/ART Contract, e.g. Id. at ¶ 86. In their Sixth Claim for Relief plaintiffs
allege that Dr. Laney and Laney Chiropractic breached the Laney/ART Contract. Id. at 85-90.
In their Seventh Claim for Relief plaintiffs allege that Dr. Laney and Laney Chiropractic
breached the covenant of good faith and fair deal implied in the Laney/ART Contract. Id. at ¶¶
91-95.
However, there is no allegation in the Amended Complaint that the Laney/ARTCS
Contract or the Laney/ART Contract vests discretion in Dr. Laney (or his practice) in his
performance of his contractual obligations. Similarly, there is no argument in plaintiffs’
response to the pending motion with respect to the Seventh Claim for Relief that Dr. Laney was
vested with discretion by the contract, or that he exercised his discretion in bad faith. Plaintiffs
state that “[w]hile a breach of implied covenant claim can be part of a breach of contract claim,
the Plaintiff’s breach of contract claim and breach of implied covenant are different.” ECF No.
84 at 26-27. To this Court’s knowledge (and plaintiffs cite no authority to the contrary), the only
circumstance where breach of the implied covenant of good faith and fair dealing is not part of a
breach of contract claim is in the insurance context, not an issue here.
Plaintiffs state: “Specifically, the ART Companies claim that the Laney Practice breached
the implied covenant of good faith and fair dealing by failing to tell ARTCS that Dr. Laney had
created a new entity, NCS, and was using that entity to steal Atmos (and potentially others) as a
client, and by inducing ARTCS’s customer to leave ARTCS.” It appears that plaintiffs interpret
the implied covenant as creating a cause of action when a party to a contract does during the
course of the contractual relationship that is inherently unfair (and thereby violates the other
party’s reasonable expectation that a contracting party will act in good faith). But that is not the
thrust of the covenant. Rather, there must be an unfair exercise of some grant of discretion in the

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contract. Plaintiffs have not shown or alleged any such conduct here. Accordingly, the Court
concludes that defendants are entitled to a summary judgment dismissing the Seventh Claim for
Relief.
With the exception of the Second, Fourth and Seventh Claims, the motion for summary
judgment is denied. My review of the briefs and exhibits demonstrates that the remaining five
claims are replete with disputes of material fact. Frankly, defendants did not make much of an
attempt to demonstrate otherwise.
ORDER
Defendants’ motion for summary judgment, ECF No. 72, is granted in part and denied in
part. Plaintiffs’ Second, Fourth and Seventh Claims for Relief are dismissed with prejudice. The
motion is otherwise denied.
DATED this 11th day of March, 2016.
BY THE COURT:

___________________________________
R. Brooke Jackson
United States District Judge

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