CheckPoint Fluidic Systems International, Ltd. v. RAM Repairs, LLC et al

Filing 41

ORDER & REASONS: for the reasons stated, the Court GRANTS 15 Motion to Dismiss dfts' counterclaim with leave to amend. Signed by Chief Judge Sarah S. Vance on 7/28/2011. (rll, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

CHECKPOINT FLUIDIC SYSTEMS

CIVIL ACTION

INTERNATIONAL, LTD.

VERSUS

NO: 10-4505

RAY GUCCIONE, SR. and RAM

SECTION: R(1)

REPAIRS, LLC.

ORDER AND REASONS
In this trademark infringement, false advertising and unfair
competition case, plaintiff CheckPoint Fluidic Systems
International, Ltd., C-Pace and Andrew Elliott, move to dismiss
the counterclaims of defendants Ray Guccione, Sr. and RAM
Repairs, LLC.

Because defendants’ counterclaims for an

accounting, breach of contract and breach of fiduciary duty are
not asserted against an opposing party, they must be dismissed.
The Court has jurisdiction over defendants’ compulsory
counterclaims for violations of Louisiana Unfair Trade Practices
Act (“LUTPA”), tortious interference with business relations and
civil conspiracy, but defendants’ allegations fail to state
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plausible claims and also must be dismissed.

The Court GRANTS

plaintiff’s motion to dismiss defendants’ counterclaim with leave
to amend.

I. BACKGROUND
Plaintiff CheckPoint is a limited partnership that designs,
manufactures and sells chemical injection pumps and pump
components.

Defendant Guccione was formerly the vice president

of Cross Pumps International, Inc., a company that designed
chemical injection pumps.

On October 18, 1993, Cross Pumps

entered into a sale agreement with Elliott/Ellis Enterprises,
Inc. (“Elliott Enterprises”), in which it transferred to Elliott
Enterprises its physical inventory, all of the patents it owned
or was developing, and exclusive rights to its intellectual
property.

Elliott Enterprises paid Cross Pumps $15,000 for its

goodwill,1 and $22,000 for its patents, intellectual property and
inventory.

Elliott Enterprises also agreed to pay royalties to

Cross Pumps for 99 years in the amount of three percent of the
domestic revenues and one percent of the international revenues
generated by the assets transferred in the sale.

The sales

contract contains a confidentiality agreement, as well as a noncompetition covenant that bound the seller and its officers not

1

A portion of the goodwill payment was made as a prepayment on July 19, 1993.
2

to compete either directly or indirectly with the buyer.
CheckPoint represents that Elliott Enterprises assigned
CheckPoint its rights under the sales agreement when the
CheckPoint limited partnership was formed on November 1, 1993.
CheckPoint does not attach the limited partnership agreement to
its complaint.

CheckPoint asserts that it paid $35,000 for the

assignment and that it assumed the royalty obligation to Cross
Pumps as part of the deal.

CheckPoint further alleges that it

has made royalty payments and is entitled to enforce the
confidentiality and non-competition covenants granted by Guccione
as part of the sales contract.
Guccione became an employee and limited partner of
CheckPoint in November 1993.

CheckPoint alleges that in this

role, he had access to valuable proprietary information.
Guccione’s employment with CheckPoint ended on December 15, 2005.
Guccione continues to be a limited partner of CheckPoint.
After leaving CheckPoint, Guccione became the managing
partner and a thirty-six percent owner of RAM, a company that
manufactures chemical injection pumps called “Monkey Pumps”.
CheckPoint alleges that RAM was formed one business day after
Guccione’s employment with CheckPoint came to an end.

CheckPoint

complains that RAM and Guccione designed the Monkey Pump through
the use of its confidential and proprietary information and trade
secrets.

As a result, CheckPoint sued Guccione and RAM for

3

violations of the Lanham Act, trademark infringement and
dilution, and false advertising.2

Plaintiff also asserts

violations of the Louisiana Trade Secrets Act, the Louisiana
Unfair Trade Practice and Consumer Protection Act, state law
trademark infringement, and breach of fiduciary duty.
In response, defendants filed counterclaims against
CheckPoint, as well as C-Pace, LLC, the general partner of
CheckPoint, and Andrew Elliott, the alleged principal of C-Pace.3
Defendants assert some of their counterclaims exclusively against
C-Pace and Elliott.

Specifically, defendants allege that C-Pace

and Elliott breached the royalty agreement and owe an accounting
of “all transactions upon which Royalty Payments are/were to be
paid”.

Defendants contend that in 2000, Guccione received the

right to receive twenty percent of the royalties due Cross Pumps.
Second, defendants allege that C-Pace, under the direction of
Elliott, has breached its fiduciary duty as a general partner of
CheckPoint.

Third, defendants allege that CheckPoint, C-Pace and

Elliott violated LUTPA, tortiously interfered with business
relations, and engaged in a civil conspiracy.
CheckPoint, C-Pace and Elliot now move to dismiss
defendants’ counterclaims for lack of subject matter jurisdiction
under FED. R. CIV. P. 12(b)(1) and for failing to state a claim

2

R. Doc. 1.

3

R. Doc. 9.
4

upon which relief can be granted under FED. R. CIV. P. 12(b)(6).
CheckPoint, C-Pace and Elliot argue that defendants’ asserted
counterclaims are not counterclaims.

They next argue that if the

allegations are considered counterclaims, they are permissive
counterclaims, and as such, they require an independent basis for
jurisdiction.

Checkpoint, C-Pace and Elliot contend that such a

basis does not exist.

CheckPoint, C-Pace and Elliot further

assert that if the Court has jurisdiction over the claims for
violations of LUTPA, tortious interference with business
relations, and conspiracy, the claims should be dismissed for
failure to state a claim.

II.

STANDARD OF REVIEW
Fed. R. Civ. P. 12(b)(1) permits dismissal for lack of

jurisdiction over the subject matter of the claim.

When a Rule

12(b)(1) motion is filed in conjunction with other Rule 12
motions, subject matter jurisdiction must be decided first
because “the court must find jurisdiction before determining the
validity of a claim.”

Moron v. Kingdom of Saudi Arabia, 27 F.3d

169, 172 (5th Cir. 1994).
In ruling on a Rule 12(b)(1) motion to dismiss, the court
may rely on (1) the complaint alone, presuming the allegations to
be true, (2) the complaint supplemented by undisputed facts, or
(3) the complaint supplemented by undisputed facts and by the

5

court’s resolution of disputed facts.

Den Norske Stats

Oljeselskap As v. HeereMac Vof, 241 F.3d 420, 424 (5th Cir.
2001); see also Barrera-Montenegro v. United States, 74 F.3d 657,
659 (5th Cir. 1996).

A court generally cannot go outside the

complaint in determining a motion to dismiss.

Fin. Acquisition

Partners LP v. Blackwell, 440 F.3d 278, 286 (5th Cir. 2006).

A

court may, however, “rely on documents incorporated into the
complaint by reference, and matters of which a court may take
judicial notice.”

Tellabs, Inc. v. Makor Issues & Rights, Ltd.,

551 U.S. 308 (2007).

The party asserting jurisdiction bears the

burden of establishing that the district court possesses
jurisdiction.
Cir. 2001).

Ramming v. United States, 281 F.3d 158, 161 (5th

A court’s dismissal of a case for lack of subject

matter jurisdiction is not a decision on the merits, and the
dismissal does not ordinarily prevent the plaintiff from pursuing
the claim in another forum.

See Hitt v. City of Pasadena, 561

F.2d 606, 608 (5th Cir. 1977).
When a defendant attacks the complaint because it fails to
state a legally cognizable claim, Rule 12(b)(6) provides the
appropriate challenge.

To survive a Rule 12(b)(6) motion to

dismiss, the plaintiffs must plead enough facts “to state a claim
to relief that is plausible on its face.”

Ashcroft v. Iqbal, 129

S.Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 547 (2007)).

A claim is facially plausible when
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the plaintiff pleads facts that allow the court to “draw the
reasonable inference that the defendant is liable for the
misconduct alleged.”

Iqbal, 129 S.Ct. at 1949.

A court must

accept all well-pleaded facts as true and must draw all
reasonable inferences in favor of the plaintiff.

Lormand v. U.S.

Unwired, Inc., 565 F.3d 228, 232-33 (5th Cir. 2009); Baker v.
Putnal, 75 F.3d 190, 196 (5th Cir. 1996).

But the Court is not

bound to accept as true legal conclusions couched as factual
allegations.

Iqbal, 129 S.Ct. at 1949-50.

A legally sufficient complaint must establish more than a
“sheer possibility” that plaintiffs’ claim is true.

Id.

It need

not contain detailed factual allegations, but it must go beyond
labels, legal conclusions, or formulaic recitations of the
elements of a cause of action.

Twombly, 550 U.S. at 555.

In

other words, the face of the complaint must contain enough
factual matter to raise a reasonable expectation that discovery
will reveal evidence of each element of the plaintiffs’ claim.
Lormand, 565 F.3d at 255-57.

If there are insufficient factual

allegations to raise a right to relief above the speculative
level, Twombly, 550 U.S. at 555, or if it is apparent from the
face of the complaint that there is an insuperable bar to relief,
Jones v. Bock, 549 U.S. 199, 215 (2007); Carbe v. Lappin, 492
F.3d 325, 328 & n.9 (5th Cir. 2007), the claim must be dismissed.

7

III. DISCUSSION
A. Opposing Party Requirement
As noted, three of defendants’ counterclaims are asserted
only against nonparties, C-Pace and Elliott.

A counterclaim may

not be directed “solely against persons who are not already
parties to the original action.” United States ex. rel. Branch
Consultants, L.L.C. v. Allstate Ins. Co., 265 F.R.D. 266, 270
(E.D. La 2010)(citing 6 CHARLES ALAN WRIGHT, ET AL., FEDERAL
PRACTICE AND PROCEDURE § 1435); See FED. R. CIV. P. 13; FDIC v.
Bathgate, 27 F.3d 850, 873-74 (3d Cir. 1994) (finding that
because Rule 13(h) authorizes the court to join additional
parties only in order to adjudicate a counterclaim already before
the court, a counterclaim may not be directed solely against
persons who are not already parties to the original lawsuit);
Operating Eng’rs Pension Trust v. Cecil Backhoe Serv., Inc., 795
F.2d 1501, 1504 n.1 (9th Cir. 1986) (stating that a claim
“styled” as a counterclaim “was in fact a third party claim
because Local 12 and Chaves were not already parties to the
action”); Johansen v. United States, 392 F. Supp. 2d 56, 59 (D.
Mass 2005)(observing that “[i]t is a fairly basic premise that
counterclaims can be lodged only against those entities which are
already parties to the action.”).

If the counterclaim is not

asserted against an existing party, “neither the counterclaim nor

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the party to be added will be allowed in the action.”

Branch

Consultants, 265 F.R.D. at 270 (citing 6 CHARLES ALAN WRIGHT, ET
AL., FEDERAL PRACTICE AND PROCEDURE § 1435).

Thus, defendants’

counterclaims for an accounting, breach of contract, and breach
of fiduciary duty, which are asserted only against C-Pace and
Elliott, nonparties to the original action, are not cognizable as
counterclaims under Rule 13.
Defendants contend that because CheckPoint, C-Pace and
Elliott are related, they should qualify as “opposing parties”
for purposes of Rule 13(a).

Defendants merely allege that C-Pace

is the general partner of CheckPoint, and that Elliott is the
sole member of C-Pace.

Defendants counterclaims fail to assert a

plausible factual basis to disregard the separate legal status of
the CheckPoint partnership, the C-Pace LLC, and the individual,
Andrew Elliott, and to treat all of the parties as one entity for
the purposes of this litigation.

Defendants have not alleged or

briefed an alter ego relationship or a single business
enterprise.

See e.g., Jackson v. Tanfoglio Giuseppe, S.R.L., 615

F.3d 579, 587 (5th Cir. 2010) (explaining that the tests for an
alter ego relationship and a single business enterprise are
similar and include an analysis of such factors as common
ownership, directors, officers, employees, and offices; unified
control; inadequate capitalization; non-compliance with corporate

9

formalities; centralized accounting; unclear allocation of
profits and losses between corporations; one corporation paying
the salaries, expenses or losses of another corporation; and
undocumented transfers of funds between entities.)

These

analyses are highly fact-specific, and defendants’ conclusory
allegation that Elliott, as the “principal” of C-Pace, controls
both C-Pace and CheckPoint, does not provide a plausible basis
for the Court to make such a determination.

Moreover,

defendants’ breach of fiduciary duty claim against Elliott and CPace is not tantamount to a claim against CheckPoint, as
defendants plainly allege that CheckPoint is a victim of their
breach of fiduciary duty.4
The cases that defendants cite as support for their argument
do not alter the Court’s conclusion.

In Avemco Ins. Co. v.

Cessna Aircraft Co., an insurer brought a separate suit for
indemnity and contribution against a party that sued its insured
in an earlier suit.

11 F.3d 998 (10th Cir. 1993).

The defendant

argued that the claim should have been asserted as a counterclaim
in the first action.

The Tenth Circuit agreed.

The Court noted

that because Rule 13 would bar the party-insured from raising a
compulsory counterclaim in later litigation, the subrogated
insurer was likewise barred.

4

The insurer had “no greater rights

See R. Doc. 9 at ¶ 30.
10

than those possessed by its insured, and its claims [we]re
subject to the same defenses.” Id. at 1000.

The present case

does not involve the relationship between an insurer and insured.
Nor does it raise issues of subrogation.

The Avemco case is

inapposite.
In Banco Nacional v. Cuba, the Second Circuit concluded that
because Banco Nacional and the government of Cuba were one and
the same for purposes of the litigation, Cuba qualified as an
opposing party under Rule 13. 478 F.2d 191, 193 n.1 (2d Cir.
1973).

Importantly, in that case the Court determined that Banco

Nacional was the alter ego of the government of Cuba.

As noted,

defendants do not allege that CheckPoint, C-Pace and Elliott are
alter egos, nor do they set forth facts from which such a legal
conclusion could be drawn.

Banco Nacional’s alter ego analysis

is not helpful here.
In Rohm & Haas Co. v. Brotech Corp., a patent holder sued in
the District of Delaware for a preliminary injunction.

The

defendant in that case filed a separate suit against the
plaintiff and six of its past and present subsidiaries in the
Eastern District of Pennsylvania, asserting antitrust, fraud and
RICO violations.

770 F.Supp 928, 929 (D. Del. 1991).

The Court

held that the claims in the Pennsylvania case were compulsory
counterclaims that should have been asserted in the Delaware

11

action.

Rohm is inapposite because the claims were asserted

against a party to the original suit, as well as against
additional parties.

Here, the purported counterclaims are not

asserted against an existing party.
Because defendants’ claims against C-Pace and Elliott for an
action for accounting, breach of contract, and breach of
fiduciary duty are asserted against non-parties and do not name
the plaintiff, they are not counterclaims.
i. Defendants’ Claims do not Satisfy Rule 14
Nor are C-Pace and Elliott properly made parties under Rule
14 of the Federal Rules of Civil Procedure, which governs thirdparty practice.

Under Rule 14(a)(1), “[a] defending party may,

as a third-party plaintiff, serve a summons and complaint on a
nonparty who is or may be liable to it for all or part of the
claim against it.”

FED. R. CIV. P. 14(a)(1).

This rule is

permissive, not mandatory, and to make a proper claim under Rule
14, the defendant must show that the third-party is liable to the
defendant and that the liability is “in some way derivative of
the outcome of the main claim.”

United States v. Joe Grasso &

Son, Inc., 380 F.2d 749, 751 (5th Cir. 1967); see also Hassan v.
La Dep't of Transp., 1999 WL 642861, at *2 (5th Cir. July 26,
1999) (stating that Rule 14 ‘exists to bring in third parties who
are derivatively liable to the impleading party)(emphasis in

12

original); American Zurich Ins. Co. v. Cooper Tire & Rubber Co.,
512 F.3d 800, 805 (6th Cir. 2008) (finding that the district
court’s joinder of a party was proper when the claim was
derivative of the original action and the party’s liability was
dependent on the outcome of the original action); Martin v. Lafon
Nursing Facility of the Holy Family, 2007 WL 4163678, at *2 (E.D.
La. Nov. 20, 2007)(explaining that joinder of a third-party
defendant is not proper unless their potential liability to the
third-party plaintiff is dependent on the outcome of the main
claim).

The defendants have not demonstrated that either C-

Pace’s or Elliott’s liability to them is dependent upon or
derivative of the outcome of the main claims against defendants
in this litigation.

Hence, defendants’ claims against C-Pace and

Elliott do not meet the requirements of Rule 14.

Defendants’

counterclaims for an accounting, breach of fiduciary duty and
breach of contract must therefore be dismissed.

B. Jurisdiction Over Defendants’ Counterclaims for
Violations of LUTPA, Tortious Interference with Business
Relations, and Civil Conspiracy
The Court next considers whether it has jurisdiction over
defendants’ counterclaims for violations of LUTPA, tortious
interference with business relations and civil conspiracy.

These

counterclaims are asserted against CheckPoint, in addition to C-

13

Pace and Elliott. The Court will first consider whether it has
jurisdiction over these counterclaims as asserted against
CheckPoint.
Supplemental jurisdiction permits a federal court to
entertain a claim that does not itself invoke an independent
basis of subject matter jurisdiction.

Under 28 U.S.C. § 1367(a),

when a federal court has original jurisdiction, it has
“supplemental jurisdiction over all other 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.” 28 U.S.C. § 1367(a);
State Nat’l Ins. Co. v. Yates, 391 F.3d 577, 579 (5th Cir. 2004).
“The question under § 1367(a) is whether the supplemental claims
are so related to the original claims that they form part of the
same case or controversy, or in other words, that they ‘derive
from a common nucleus of operative fact.’”

Mendoza v. Murphy,

532 F.3d 342, 346 (5th Cir. 2008)(citing United Mine Workers v.
Gibbs, 383 U.S. 715, 725 (1966)).

When a counterclaim is

compulsory it is within the supplemental jurisdiction of the
court because it must arise out of the same transaction or
occurrence as the original claim.

See Transitional Hosps. Corp.

of Louisiana v. DBL N. Am., Inc., 2002 WL 27767, at *2 (E.D. La.
Jan. 8, 2002)(explaining that “it is well-settled” that a

14

compulsory counterclaim is within the ancillary jurisdiction5 of
a federal court)(citing Zurn Indus., Inc. v. Acton Constr. Co.,
847 F.2d 234, 236 (5th Cir. 1988)(stating that a court has
jurisdiction over a compulsory counterclaim even without an
independent basis)). This means that if defendants’ counterclaims
are compulsory, this Court has supplemental jurisdiction over
them.
A compulsory counterclaim is a claim of the defendant’s that
arises out of the same transaction or occurrence as the
plaintiff’s claim. FED. R. CIV. P. 13(a).

A compulsory

counterclaim must be asserted in a pending case or it will be
barred.

McDaniel v. Anheuser-Busch, Inc., 987 F.2d 298, 304 (5th

Cir. 1993)(noting that a counterclaim arising out of the same
occurrence must be brought in the instant action, or it would be
barred)(citing Baker v. Gold Seal Liquors, Inc., 417 U.S. 467,
469 n.1 (1974)(“A counterclaim which is compulsory but is not
brought is thereafter barred”)).

A permissive counterclaim is

one that a defendant “may” assert against a plaintiff that does
not arise out of the transaction or occurrence as plaintiff’s
claim. FED. R. CIV. P. 13(b).

To determine whether a claim is a

5

The term supplemental jurisdiction encompasses what
courts historically called “ancillary” and “pendent”
jurisdiction. See Griffin v. Lee, 621 F.3d 380, 384-5 (5th Cir.
2010); 13 CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE &
PROCEDURE § 3657.
15

compulsory counterclaim, the Fifth Circuit applies the test
articulated in Tank Insulation Int’l, Inc. v. Insultherm, Inc.,
which asks: (1) whether the issues of fact and law raised by the
claim and counterclaim largely are the same; (2) whether res
judicata would bar a subsequent suit on defendant’s claim absent
the compulsory counterclaim rule; (3) whether substantially the
same evidence will support or refute plaintiff’s claim and
defendant’s counterclaim; and (4) whether there is any logical
relationship between the claim and the counterclaim. 104 F.3d 83,
85-86 (5th Cir. 1997)(citing Park Club, Inc. v. Resolution Trust
Corp., 967 F.2d 1053, 1058 (5th Cir. 1992)).

If the answer to

any of these four questions is yes, then the counterclaim is
compulsory. Tank Insulation, 104 F.3d at 86.
Defendants’ claims that CheckPoint violated LUTPA,
tortiously interfered with their business relations and engaged
in a civil conspiracy are compulsory counterclaims.

Defendants

allege that CheckPoint made wrongful accusations to third parties
that RAM and Guccione stole plaintiff’s confidential information
and used it to market competing products.

Defendants allege that

plaintiffs knew or should have known that the alleged
confidential information was publicly available.

Defendants also

contend that the counterclaim defendants attempted to influence
customers and suppliers to stop doing business with RAM and

16

Guccione.

Clearly these claims are logically connected to

plaintiff’s claims against defendants as they revolve around the
same competitive relationship and the use of the same product
information.

Further, the case law supports this conclusion.

In

Official Airline Guides, Inc. v. Churchfield Publications, the
Court held that a trademark infringement defendants’ counterclaim
for intentional interference with business relations was a
compulsory counterclaim. 756 F. Supp. 1393, 1407 (D. Or. 1990).
There, as here, plaintiffs and defendants were business
competitors.

In their counterclaim, defendants sought to prove

that the plaintiffs filed the lawsuit for oppressive reasons and
attempted to interfere with defendants’ business relations with
third-parties.

Id. at 1406-07.

The Court found that these

counterclaims were sufficiently related to the plaintiffs’ claim
for trademark infringement and dissemination of false and
misleading promotional materials to be deemed compulsory.

See

also, United Artists Corp. v. Masterpiece Prods., 221 F.2d 213
(2d Cir. 1955)(holding that a claim for unfair trade practices
and conspiracy arose from the same transaction as plaintiff’s
claim alleging copyright infringement and unfair trade practices
by defendant).

Similarly, in Papadopoulos v. Douglas, 2001 WL

877608, at *2 (5th Cir. July 18, 2001), the Court found that
claims asserted in a second suit for intentional copying of

17

plaintiff’s designs were compulsory counterclaims that should
have been filed in an earlier action against this party.

In so

holding, the Court found that there was a logical relationship
between the plaintiff’s claim and defendant’s counterclaim
because the crux of the dispute was the labeling and
distinctiveness of the products the plaintiff and defendant sold
in competition with each other.

Likewise, plaintiff and

defendants here sell allegedly similar products, and a central
issue is whether plaintiff’s product information is legally
protected.

Further, the claim and counterclaim arise out of the

same facts, Guccione’s sale of products in competition with
CheckPoint.

Although there are differences between facts of the

claims and the counterclaims, “the identity of issues test does
not require a complete overlap between the claim and
counterclaim.”

Id. (citing 6 CHARLES ALAN WRIGHT, ARTHUR R.

MILLER & MARY KAY KANE, FEDERAL PRACTICE & PROCEDURE § 1410).
The counterclaims for violations of LUTPA and tortious
interference are therefore sufficiently related to claims
plaintiff asserts to be compulsory, and the Court therefore has
jurisdiction over these counterclaims against CheckPoint.
Next, the Court must determine whether it has jurisdiction
over the non-parties named in the counterclaims for violations of
LUTPA, tortious interference and conspiracy.

18

Significantly,

unlike the claims for an accounting, breach of contract and
breach of fiduciary duty, these counterclaims are asserted
against the plaintiff in addition to the non-parties.

If a

counterclaim is asserted against an existing party, that
counterclaim may also name non-parties in addition to the
existing party, subject to Rules 19 and 20 of the Federal Rules
of Civil Procedure.

FED. R. CIV. P. 13(h); State Nat. Ins. Co.

Inc. v. Yates, 391 F.3d 577, 577 n.2 (5th Cir. 2004)(explaining
that Rule 13(h) permits the joinder of additional parties to a
counterclaim “in accordance with Rules 19 and 20")(citing FED. R.
CIV. P. 13(h)); see also Core 4 Kebawk, LLC, et al v. Ralph’s
Concrete Pumping, Inc., 2011 WL 743455, at *1 (E.D. La. Feb. 22,
2011)(finding that a non-party to the suit was properly made a
party through a counterclaim).
i. Rule 19
Rule 19 provides for the compulsory joinder of “all parties
whose presence in a lawsuit is required for the fair and complete
resolution of the dispute at issue.
327 F.3d 432, 438 (5th Cir. 2003).

HS Res., Inc. v. Wingate,
A party should be joined

under Rule 19 if: (A) in that person's absence, the court cannot
accord complete relief among existing parties; or (B) that person
claims an interest relating to the subject of the action and is
so situated that disposing of the action in the person's absence

19

may: (i) as a practical matter impair or impede the person's
ability to protect the interest; or (ii) leave an existing party
subject to a substantial risk of incurring double, multiple, or
otherwise inconsistent obligations because of the interest.

FED.

R. CIV. P. 19; Hood ex rel. Mississippi v. City of Memphis, 570
F.3d 625, 629 (5th Cir. 2009).
Defendants have not argued that C-Pace and Elliot should be
joined to the litigation under Rule 19, nor do they assert
sufficient facts from which the Court could draw such a
conclusion.

Defendants make no claim that in the absence of C-

Pace or Elliott, the Court will be unable to provide complete
relief to CheckPoint, RAM and Guccione.

Nor have defendants

demonstrated that either C-Pace or Elliot claim an interest
relating to the subject of the present action that they would be
impeded in protecting without their joinder.

Absent any

assertion that C-Pace and Elliott are indispensable parties or
factual support for the proposition that complete relief cannot
be granted to CheckPoint, RAM and Guccione without the presence
of C-Pace and Elliott, the Court will not compel joinder under
Rule 19.
ii. Rule 20
Federal Rule of Civil Procedure 20 governs the permissive
joinder of additional parties.

Rule 20(a)(2) permits the joinder

20

of defendants6 in one action if (1) plaintiffs assert a right to
relief against the defendants jointly or severally; (2) that
right to relief arises from a single transaction or occurrence;
and (3) there is a question of law or fact common to all of the
defendants.

See Fed. R. CIV. P. 20(a)(2).

The Fifth Circuit has

described Rule 20 as creating a two-prong test that allows
joinder when (1) claims arise out of the same transaction,
occurrence, or series of transactions and (2) there is at least
one common question of law or fact linking all of the claims.
Acevedo v. Allsup’s Convenience Stores, Inc., 600 F.3d 516, 521
(5th Cir. 2010)(finding that the district court did not abuse its
discretion in denying joinder of over 800 decertified Fair Labor
Standards Act claimants under Rule 20).

When this test is

satisfied, a district court may still refuse joinder in the
interest of avoiding prejudice and delay, ensuring judicial
economy, or safeguarding principles of fundamental fairness.
Id.(finding that district courts have considerable discretion to
deny joinder)(citing inter alia Applewhite v. Reichhold Chems.,
Inc., 67 F.3d 571, 574 (5th Cir. 1995)).
To determine what constitutes a “transaction or occurrence”

6

Because defendants assert a counterclaim, they are
considered plaintiffs and the parties they join are viewed as
defendants for the purpose of Rule 20, making Rule 20(a)(2) the
applicable rule. 7 CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE
AND PROCEDURE § 1657.
21

for purposes of Rule 20(a) and the first prong of the test
allowing joinder, courts look to the definitions of these same
terms in the analysis of compulsory counterclaims under Rule
13(a).

Nor-Tex Agencies, Inc. v. Jones, 482 F.2d 1093, 1100 (5th

Cir. 1973)(citing Rule 13 to affirm the district court’s joinder
under Rule 20(a)); Porter v. Milliken & Michaels, Inc., 2000 WL
1059849, at *2 (E.D. La. Aug. 1, 2000)(relying on Alexander v.
Fulton Cnty, 207 F.3d 1303 (11th Cir. 2000)); see also, 7 CHARLES
ALAN WRIGHT, ET. AL., FEDERAL PRACTICE AND PROCEDURE § 1653
(explaining that the transaction and occurrence test is
“reminiscent” of the logical-relationship test used to determine
the meaning of transaction or occurrence for purposes of Rule
13(a)).

Based on the above analysis finding that defendants’

counterclaims satisfy the logical relationship test of Rule
13(a), the Court finds that the counterclaims for violations of
LUTPA, tortious interference with business relations, and
conspiracy are part of the same transaction or occurrence as
plaintiff’s claims.

The counterclaims therefore pass the first

prong of the Rule 20(a) test.
The second requirement of a Rule 20 joinder is that a
question of law or fact common to all of the defendants will
arise in the action.

Rule 20(a) does not require that every

question of law or fact in the action be common among the

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parties, but rather allows for joinder if there is even one
common question.

Porter, 2000 WL 1059849, at *2 (relying on

Alexander, 207 F.3d at 1324). There are common questions among
the parties as to whether CheckPoint, C-Pace and Elliott engaged
in activities and behavior that violated LUTPA or caused tortious
interference with defendants’ business relations.

The Court

therefore finds the second prong of the Rule 20(a) joinder test
satisfied, and permits the joinder of C-Pace and Elliott.

C. 12(b)(6) Analysis of Counterclaims for Violations of
LUTPA, Tortious Interference with Business Relations and
Civil Conspiracy
Because the Court finds that it has jurisdiction over
defendants’ counterclaims for violations of LUTPA, tortious
interference with business relations and civil conspiracy, it
must next address plaintiffs’ contention that defendants fail to
allege plausible claims under these legal theories.
i. Violations of LUTPA
LUTPA provides a cause of action for “any person who suffers
any ascertainable loss of money or movable property...as a result
of the use or employment by another person of an unfair or
deceptive method, act, or practice declared unlawful by [the
Act].”

LA. REV. STAT § 51:1409.

Despite the statute’s broad

language, the Fifth Circuit defines the prohibited conduct

23

narrowly.
Cir. 1993).

Turner v. Purina Mills, Inc., 989 F.2d 1419, 1422 (5th
An unfair practice is “a practice that is unethical,

oppressive, unscrupulous, or substantially injurious.” Id.
(citing Bolanos v. Madary, 609 So. 2d 972, 977 (La. Ct. App.
1992)).

LUTPA does not prohibit “sound business practices”. Id.

This means that not all activity that arguably injures a
competitor is a LUTPA violation.

Chemtreat, Inc. v. Andel, 2003

WL 22466235, at *2 (E.D. La Oct. 29, 2003)(explaining that when
two businesses are competing for the same customers, contacting
those customers is not a violation of LUTPA).

Louisiana

businesses may still pursue profit, even at the expense of
competitors, as long as the means used to pursue profit are not
egregious. Id.
To recover under LUTPA, a plaintiff must show an
“ascertainable loss of money or moveable property” as a result of
the practices of the defendant.

LA. REV. STAT § 51:1409; Strahan

v. State, 633 So. 2d 886, 887 (La. Ct. App. 1994); Chemtreat,
2003 WL 22466235, at *3.

The plaintiff must also “prove some

element of fraud, misrepresentation, deception or other unethical
conduct.” Omnitech Int’l, Inc. v. Clorox, 11 F.3d 1316, 1332 (5th
Cir. 1994)(affirming the district court’s grant of summary
judgment in part because there was no allegation or evidence of
fraud).

A single action is not sufficient to constitute a LUTPA

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violation.

Chemtreat, Inc., 2003 WL 22466235, at *2.

An intent

to eliminate competition alone is also insufficient to constitute
a LUTPA violation, and if two businesses are competitors vying
for the same customers, contacting customers is permitted.
Turner, 989 F.2d at 1423.

The determination of what constitutes

an unfair trade practice is made by the courts on a case-by-case
basis. Id.
Defendants do not state a claim under LUTPA because
defendants do not allege actual injury.

An ascertainable loss of

money or property is an essential element of a LUTPA violation.
See Bobby & Ray Williams P’ship v. Shreveport Louisiana Hayride
Co., 873 So.2d 739, 746 (La. Ct. App. 2004) (finding that
plaintiff failed to state a claim under LUTPA where he did not
allege that defendant’s conduct caused him to lose money or
property).

Defendants assert that CheckPoint, C-Pace and Elliot

“attempted” to influence others to stop doing business with
Guccione and RAM, but they do not allege that these attempts
resulted in an actual loss of business or any other form of
identifiable damage to their business.

Defendants assert that

they “have been injured,” but this vague and general statement is
wholly unsupported by any factual allegations.

The use of

conclusory labels alone is insufficient to state a claim for a
violation of LUTPA. See Twombly, 550 U.S. at 555 (explaining that

25

“a plaintiff’s obligation to provide the grounds of his
entitlement to relief requires more than labels and conclusions”
(internal citations omitted)).
Defendants’ pleadings suffer from other shortcomings in
addition to the failure to allege an injury.

Defendants allege

that Elliott accused them of stealing confidential information
when he was “in a position to know” that the information was
publicly available.

Defendants do not even allege to whom the

statements were made.

More significantly, defendants do not

allege that these statements were intentionally false.

“[W]hile

in a position to know” is language of constructive knowledge and
negligence, and negligence is not a grounds for liability under
LUTPA.

See Turner, 989 F.2d at 1422 (explaining that “mere

negligence” is not prohibited conduct under LUTPA).

Next,

defendants rely on conclusory labels to describe conduct that
could be a legitimate business practice.

Defendants use the

terms “maliciously and wantonly”7 to describe the manner in which
CheckPoint, C-Pace and Elliott contacted RAM suppliers and
clients “to suggest” that they stop doing business with RAM and
Guccione.

That this was done “maliciously and wantonly” is a

conclusion.

Defendants allege no specifics as to who was

contacted, what was said, whether any coercive means were used,

7

R. Doc. 9 at 23-4.
26

or what, if any, effect the alleged conduct had.

In Twombly, 550

U.S. 544 (2007), the Court was concerned that the plaintiffs’
complaint did not set forth a plausible basis to distinguish
between prohibited anticompetitive conduct and legitimate
business practices.
allegations here.

The same defect infects defendants’

Defendants do not state a claim under LUTPA,

and their LUTPA claim must be dismissed.
ii. Tortious Interference with Business Relations
Louisiana courts recognize a cause of action for tortious
interference with business relations. Junior Money Bags, Ltd. v.
Segal, 970 F.2d 1, 10 (5th Cir. 1992).

Article 2315 provides the

basis for the tortious interference action. LA. CIV. CODE art.
2315(a).

The cause of action protects businesses from malicious

and wanton interference, and permits only interference that is
designed to protect an actor’s legitimate interest.

Dussony v.

Gulf Coast Inv. Corp., 660 F.2d 594, 602 (5th Cir. 1981).
Louisiana courts view this cause of action with disfavor. JCD
Mktg. Co. v. Bass Hotels & Resorts, Inc., 812 So. 2d 834, 841
(La. Ct. App. 2002)(noting that despite its “ancient vintage,”
Louisiana courts have limited the application of the cause of
action).

A claim of tortious interference requires a plaintiff

to show improper and intentional influence. Dussony, 660 F.2d at
602.

The plaintiff must allege that the defendant actually

27

prevented the plaintiff from dealing with a third party.
Marshall Invs. Corp. v. R.P. Carbone Co., 2006 WL 2644959, at *5
(E.D. La Sept. 13, 2006)(allegations that statements made by
plaintiff’s employee improperly influenced an unknown lender not
to grant defendant a loan satisfied the requirement of actual
interference).

In addition, the plaintiff must demonstrate

actual malice. JCD Mktg., 812 So.2d at 841.

The malice element

“seems to require a showing of spite or ill will, which is
difficult (if not impossible) to prove in most commercial cases
with profit motive present.”

Marshall, 2006 WL 2644959, at *5

(internal citations omitted).
Defendants assert that CheckPoint, C-Pace, and Elliott
tortiously interfered with their business by engaging in the same
conduct alleged to be a LUTPA violation.
pleadings are insufficient.

Here, too, defendants’

First, defendants fail to allege

that CheckPoint, C-Pace and Elliott actually prevented them from
dealing with a third party, an allegation that is a requirement
of a tortious interference claim.

See Marshall Invs. Corp., 2006

WL 2644959, at *5 (explaining that it “[i]s not enough to allege
that a defendant’s actions affected plaintiff’s business
interests; the plaintiff must allege that the defendant actually
prevented the plaintiff from dealing with a third party”); Junior
Money Bags, 970 F.2d at 10 (affirming the district court’s

28

finding that the plaintiffs did not state a claim for tortious
interference where they made no showing that the defendants
influenced third parties not to do business with plaintiff).
Defendants do not allege that the actions of CheckPoint, C-Pace
and Elliott had any specific effect on their business
relationships or economic opportunities.

Indeed, they do not

complain that counterclaim defendants’ actions were coercive, but
only that they were designed “to suggest” that clients and
suppliers stop doing business with Guccione and RAM.

Second,

defendants have not supplied any specifics about the challeneged
conduct that would permit the Court to distinguish between
legitimate business conduct grounded in the protection of a
legitimate interest and impermissible interference.

Because

defendants have not sufficiently pleaded their claim for tortious
interference, the Court must dismiss it.
iii. Civil Conspiracy
Under article 2324 of the Louisiana Civil Code, a person
“who conspires with another person to commit an intentional or
willful act is answerable, in solido, with that person, for the
damage caused by such act.” LA. CIV. CODE art. 2324.

To recover

under a conspiracy theory, a plaintiff must demonstrate that an
agreement to commit an illegal or tortious act existed, that act
was actually committed, that act resulted in the plaintiff’s

29

injury, and there was an agreement as to the intended outcome or
result.

Crutcher-Tufts Res., Inc. v. Tufts, 38 So. 3d 987, 991

(La. Ct. App. 2010)(citing Butz v. Lynch, 710 So.2d 1171, 1174
(La. Ct. App. 1998)).

Civil conspiracy is not an independently

actionable claim under Louisiana law.

Crutcher-Tufts, 38 So. 3d

at 991 (La. Ct. App. 2010)(citing Ross v. Conoco, 828 So. 2d 546,
552 (La. 2002)).

Rather, the actionable element is the “tort

which the conspirators agreed to perpetrate and which they
actually commit in whole or in part.” Crutcher-Tufts, 38 So. 3d
at 991 (citing Ross, 828 So.2d at 552).

A claim of civil

conspiracy cannot stand alone, but must be based on an underlying
tort.
Defendants allege that CheckPoint, C-Pace, and Elliott
“conspired with one another and others to commit intentional and
willful acts causing harm to Mr. Guccione and RAM.”8

Defendants

assert a general claim of conspiracy, but fail to base that claim
on any underlying tort.

Defendants make no allegations that

CheckPoint, C-Pace and Elliott entered into an agreement to
commit an identifiable intentional tort.

A conclusory allegation

that CheckPoint C-Pace and Elliott “conspired” is not an
actionable claim under Louisiana law.

In addition, the Court has

already determined that defendants counterclaim for tortious

8

Id.
30

interference with business relations is insufficient.

Therefore,

even if defendants intended to assert that counterclaim
defendants conspired to commit tortious interference with
business relations, the conspiracy claim cannot stand when the
underlying tort fails.

See e.g., Crutcher-Tufts, 38 So. 3d at

991 (affirming the trial court’s finding of no cause of action
for conspiracy where, among other deficiencies, there was no
underlying intentional tort).

The Court must dismiss defendants’

claim of civil conspiracy as insufficiently pleaded.

IV. CONCLUSION
Because the Court finds that the counterclaims for an action
for accounting, breach of contract, and breach of fiduciary duty
are not asserted against an opposing party, and the compulsory
counterclaims for violations of LUTPA, tortious interference with
business relations, and civil conspiracy are insufficiently
pleaded, the Court GRANTS plaintiff, C-Pace and Elliott’s motion
to dismiss the counterclaims with leave to amend.

28th
New Orleans, Louisiana, this ___ day of July 2011.
_________________________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE

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