Snow Ingredients, Inc. et al v. SnoWizard, Inc.
Filing
72
ORDER AND REASONS granting 62 Motion to Dismiss for Failure to State a Claim. Plaintiffs claims are DISMISSED WITH PREJUDICE.Signed by Judge Nannette Jolivette Brown on 3/27/2014. (my)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
SNOW INGREDIENTS, INC., ET AL.
CIVIL ACTION
VERSUS
NO. 12-1412
SNOWIZARD, INC., ET AL.
SECTION: “G” (1)
ORDER AND REASONS
Before the Court is a Motion to Dismiss the Second Amended and Supplemented
Complaint1 filed by Defendants SnoWizard, Inc., Ronald R. Sciortino, Jack E. Morris, and
Kenneth L. Tolar (collectively, “Defendants”). Defendants contend that the Second Amended
and Supplemented Complaint (“Second Amended Complaint”), filed by Plaintiffs Snow
Ingredients, Inc., Simeon, Inc., Southern Snow Manufacturing, Co., Inc., Parasol Flavors, LLC,
Theodore Eisenmann, Raggs Supply LP, and Special “T” Ice Co., Inc. (collectively, “Plaintiffs”),
fails to state a claim for which relief can be granted. The Court has considered the Second
Amended Complaint, the parties’ respective briefs, the record, and the applicable law. For the
reasons set forth below, the Court will grant the motion. Specifically, the Court grants the motion
to dismiss with regards to the RICO, antitrust, Lanham Act, unfair trade practices, and fraud
claims against SnoWizard on the basis of res judicata. Further, the Court grants the motion to
dismiss with regards to the RICO claims against Morris and Tolar on the basis of there being no
underlying predicate act to support a RICO claim. Finally, the Court grants the motion to dismiss
regarding the malicious prosecution claims against all Defendants because there was no bona
fide termination in Plaintiffs’ favor in the lawsuits SnoWizard brought against Plaintiffs, as
required by law for such claims to be successful.
1
Rec. Doc. 62.
1
I. Background
A. Procedural Background
Plaintiffs filed this action against Defendants in the Eastern District of Louisiana on June
1, 2012, and it was transferred to this section, Section G, because it is related to cases that were
already pending in this Court in consolidated Civil Action No. 06-9170.2 Defendants answered
the complaint on July 19, 2012.3 The next day, Plaintiffs filed an Amended Complaint.4 With
leave of Court, Plaintiffs filed a Second Amended and Supplemented Complaint on February 4,
2013.5 On March 12, 2013, Defendants filed the instant Motion to Dismiss Second Amended
Complaint under Rule 12(b)(6).6 Plaintiffs opposed the motion on April 2, 2013.7
B. Factual Background
Although the above-captioned case was not consolidated with Civil Actions Nos. 069170, 09-3394, 10791, and 11-1499 (hereinafter, the “Consolidated Cases”), the factual
background of this case is deeply intertwined with the consolidated cases. All parties, except for
the attorney-defendants, Jack Morris and Kenneth Tolar, are involved in the sale, distribution, or
manufacturer of snowballs, snowball flavor concentrates, and ice-shaving machines.
Between 2003 and 2008, SnoWizard began to acquire and enforce various patent and
trademark rights, and this litigation ensued when Southern Snow first filed suit in 2006. In the
consolidated cases, the claims and counterclaims predominantly covered the scope, existence,
and ownership of certain patents and trademarks and the fairness of the parties’ business
2
See Rec. Doc. Nos. 1, 8.
3
Rec. Doc. 11.
4
Rec. Doc. 12.
5
Rec. Doc. 53 (hereinafter “Second Amended Compl.”).
6
Rec. Doc. 62.
7
Rec. Doc. 64.
2
practices. Throughout the litigation, Plaintiffs have claimed that Defendants have fraudulently
and unfairly procured and enforced their claimed intellectual property rights. After significant
motion practice over the course of multiple years, the remaining claims were submitted to a jury
in an eight-day trial. On February 28, 2013, the jury returned a verdict, and the Court entered a
judgment on the basis of the jury verdict on March 5, 2013.8
The jury found for Plaintiffs on a single cause of action: that Plum Street Snoballs owns a
valid and enforceable trademark for the unregistered term ORCHID CREAM VANILLA and
that SnoWizard used a reproduction, counterfeit, copy or colorable imitation of that trademark in
a manner that was likely to cause confusion, or to cause mistake, or to deceive as to the source,
origin, sponsorship, or approval of such product under Lanham Act §§ 43(a) and 35, 15 U.S.C.
§§ 1125(a) and 1117.9 With regards to this cause of action, the jury further found that
SnoWizard’s conduct was “unethical, oppressive, unscrupulous, or deceptive,” and that Plum
Street Snoballs was entitled to the costs of the action.10 The jury rendered judgment against
Plaintiffs on all of their other causes of action11 including additional claims involving
infringement of Plaintiffs’ claimed trademarks to ORCHID CREAM VANILLA and claims
involving infringement of Plaintiffs’ claimed trademarks to SNOW SWEET as well as
SnoWizard’s alleged fraudulent assertions of rights in the trademarks ORCHID CREAM
VANILLA, SNOSWEET, SNOBALL, SNOBALL MACHINE, HURRICANE, MOUNTAIN
MAPLE, BUTTER-CREAM, BUTTERED POPCORN, CAKE BATTER, CAJUN RED HOT,
COOKIE DOUGH, DILL PICKLE, GEORGIA PEACH, KING CAKE, MUDSLIDE,
8
Civ. Action No. 06-9170, Rec. Doc. 665.
9
Id. at 3.
10
Id. at 4.
11
Id. at 1–6.
3
PRALINE, and WHITE CHOCOLATE & CHIPS.12 The jury found for Defendants on six of
their eight counter-claims.13
In addition to the trademarks claims, both Plaintiffs and SnoWizard raised multiple
claims regarding SnoWizard’s patent in U.S. Patent No. 7,536,871 (“Icemaker with Improved
Cam Assembly”).14 The jury found against Plaintiffs on all of its false and invalid patent claims
against SnoWizard and found for SnoWizard on most of its counterclaims, including all but one
of its patent infringement claims.15
According to the Second Amended Complaint in this case, “Defendant SnoWizard is
attempting to manipulate the snowball market through a scheme to assert exclusive monopoly
rights to sell products in that market, threatening and bringing litigation to force withdrawal of
legitimate products and producers from the market based on fraudulently asserted and obtained
patent and trademark rights.”16 Plaintiffs claim that SnoWizard’s attorneys Kenneth Tolar and
Jack Morris have conspired with SnoWizard and Sciortino to acquire, maintain, and enforce
bogus patents and trademark registrations as a means of asserting unwarranted monopoly rights,
through abusive litigation and obstruction of justice.17
In particular, Plaintiffs allege the following:
In what Plaintiffs identify in their Second Amended Complaint as “Count 1,” they allege
that SnoWizard, Sciortino, Tolar, and Morris engaged in a litigation scheme that constitutes
12
Id. at 5.
13
Id. at 6–11.
14
Id. at 2–11.
15
Id.
16
Rec. Doc. 53 at ¶ 14.
17
Id. at ¶ 14.
4
obstruction of justice and a violation of the Racketeer Influenced and Corrupt Organizations Act
(“RICO”), 18 U.S.C. §§ 1961, et seq.18
In “Count 2” and “Count 6,” Plaintiffs allege that SnoWizard has engaged in sham
litigation against Plaintiffs and made material misstatements in court and to the United States
Patent and Trademark Office (“USPTO”) in a manner that violates both federal and state
antitrust laws.19
In “Counts 3–4,” Plaintiffs accuse SnoWizard of violating the Lanham Act for their
allegedly fraudulent trademark registration of WHITE CHOCOLATE & CHIPS and CAJUN
RED HOT.20
In “Count 5,” Plaintiffs raise another Lanham Act claim wherein they allege unfair
competition in violation of section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). 21
In “Count 7,” Plaintiffs allege that SnoWizard has engaged in conduct that violates the
Louisiana Unfair Trade Practices Act (‘LUTPA”), Louisiana Revised Statute § 51:1401, et seq.22
In “Count 8” and “Count 11”, Plaintiffs claim that, pursuant to Louisiana Civil Code
Article 2315, SnoWizard must pay damages for fraud, obstruction of justice, and abusive
litigation, and that Morris and Tolar conspired to commit those acts and are thus liable under
Louisiana Civil Code Article 2324.23
18
Id. at ¶¶ 312–19.
19
Id. at ¶¶ 320–33, 347–51.
20
Id. at ¶¶ 334–41.
21
Id. at ¶¶ 342–44.
22
Id. at ¶¶ 352–54.
23
Id. at ¶¶ 355–56, 361–62.
5
In “Count 9”, Plaintiffs accuse SnoWizard of malicious prosecution for pursuit of its
claims in Southern Snow Manufacturing Company, Inc. v. SnoWizard, Inc., Case No. 10-4275.24
In “Count 10”, Plaintiffs raise a similar claim for SnoWizard’s role in SnoWizard, Inc. v.
Doty, et al., Case No. 11-0515.25
Finally, in “Counts 10–13,” Plaintiffs allege that Defendants Morris and Tolar are liable
as conspirators for SnoWizard’s alleged wrongdoing as set forth in “Counts 1–9.”26
II. Parties’ Arguments
A. SnoWizard’s Arguments in Support
1. Litigation of the RICO Claims is Barred by Res Judicata
SnoWizard argues that Plaintiffs’ RICO claims here are “identical” to those alleged by
the same plaintiffs in the Consolidated Cases.27 SnoWizard asserts that the raised claims in the
Consolidated Cases “result[ed] in the entry of a Judgment on Jury Verdict’” on March 5, 2013,
and that “[r]elitigation of each of these claims and issues therefore is barred under the doctrine of
res judicata.”28 Accordingly, SnoWizard concludes, “Counts 1–8” and “Count 11” of the Second
Amended Complaint fail to state a claim for which relief can be granted.29
2. Plaintiffs’ RICO Claim Lacks Required Allegations of Predicate Criminal Acts and
a Pattern of Racketeering Activity
Without elaboration, SnoWizard argues that Plaintiff’s civil RICO claim suffers from
“glaringly deficient or nonexistent allegations of a pattern, relatedness, continuity, injury,
24
Id. at ¶ 358.
25
Id. at ¶ 360.
26
Id. at ¶¶ 361–66.
27
Rec. Doc. 62-1 at 5.
28
Id.
29
Id. at 6.
6
proximate cause, and standing among other serious pleading deficiencies.”30 SnoWizard
contends that the alleged “Litigation Scheme” that Plaintiffs accuse SnoWizard of perpetrating
“does not satisfy RICO’s requirements of a predicate criminal act or of a pattern of racketeering
activity.”31 While SnoWizard acknowledges that obstruction of justice qualifies as a predicate
act,32 SnoWizard argues that Plaintiffs’ RICO claim is “implausible on its face because
Plaintiffs’ factual allegations do not allow the Court to draw the reasonable inference that
defendants committed any predicate criminal acts.”33
SnoWizard cites several district court cases from outside the Fifth Circuit for the
proposition that “litigation activities” cannot constitute the basis for a RICO claim.34 SnoWizard
thus argues that its conduct is not actionable under RICO because “[t]his case does not involve
‘bribery of a witness’ . . . or ‘additional allegations of extortion or some other pattern of
racketeering activity.’”35 At most, according to SnoWizard, the allegations in the Second
Amended Complaint give rise to a claim for abuse of process or malicious prosecution.36
Moreover, SnoWizard argues that Plaintiffs have not alleged the required “pattern of
racketeering activity” that is a required element of a RICO claim.37 SnoWizard contends that the
conduct that Plaintiffs have alleged constitutes a “pattern” of racketeering activity were all “part
30
Id. at 8.
31
Id. at 7.
32
Id. at 7–8.
33
Id. at 8.
34
Id. at 9 (citations omitted).
35
Id. at 10 (citations omitted).
36
Id.
37
Id.
7
and parcel of a single, discrete and otherwise lawful commercial transaction” and therefore
cannot form the basis of a RICO clam.38
3. Plaintiffs’ Malicious Prosecution Claim Fails Because the Lawsuits Did Not
Terminate in Their Favor
SnoWizard further argues that “Counts 9–10” and “Counts 12–13” must be dismissed
because the underlying cases forming the basis of those malicious prosecution claims were
dismissed by consent.39 This includes Case No. 10-4275, which forms the basis of the claim
asserted in “Count 9” and “Count 12.” SnoWizard asserts that Case No. 10-4275 was originally
consolidated with the Consolidated Cases and that the parties agreed to dismiss all the claims
alleged in Case No. 10-4275.40
Second, SnoWizard argues that the parties settled Case No. 11-0515, which is the
underlying case for “Count 10” and “Count 13,” on November 6, 2012.41 SnoWizard argues that
“[a]s a matter of law, dismissal by consent or settlement does not constitute termination in a
party’s favor.” Because success on the merits is an element in a malicious prosecution claim,42
SnoWizard contends that “Counts 9–10” and “Counts 12–13” should be dismissed.
B. Plaintiffs’Arguments in Opposition
1. The Second Amended Complaint Alleges a Pattern of Racketeering Activity That is
Substantively Different From That Raised in Prior Actions
Plaintiffs argue that the RICO claim in the Second Amended Complaint derives from the
Defendants’ alleged obstruction of justice “based in part on new transactions or occurrences that
38
Id. at 11.
39
Id. at 12–13.
40
Id. at 12.
41
Id.
42
Id. at 12–13 (citing Adrian v. Selve, 364 F. App’x 934, 938 (5th Cir. 2010)).
8
only became actionable in 2012.”43 Plaintiffs, therefore, claim that it is irrelevant that RICO
claims based upon alleged mail and wire fraud and alleged extortion have been dismissed in
Case No. 11-1499.44
2. Res Judicata is Inapplicable Because Neither the Parties nor the Causes of Action in
This Case are Identical to Parties or Causes of Action in Prior Cases
Plaintiffs contend that only six of the nine plaintiffs in Case No. 11-1499 are party to this
case.45 Moreover, they note that while SnoWizard and Sciortino were defendants in Case No. 111399, Defendants Morris and Tolar were not.46 Likewise, Plaintiffs argue that the claims against
Morris and Tolar are not identical to those levied against SnoWizard and Sciortino, and the
lawyers’ interests are not aligned with those of the clients SnoWizard and Sciortino.47
Plaintiffs assert that issue preclusion cannot apply here to bar their claims. They contend
that “none of the issues of fact or law in the [Second] Amended Complaint in [this case] were
actually litigated and resolved in the 06-9170 consolidated litigation.”48 Plaintiffs contend that
SnoWizard in that litigation “gave up its claims to the vast majority of its asserted trademarks—
admitting that they were generic and not capable of serving as trademarks.”49 In particular,
Plaintiffs claim that the issue here is whether Defendants “obstructed justice by making
misrepresentations” in the relevant proceedings and litigation regarding SnoWizard’s purported
trademarks in ORCHID CREAM VANILLA and KING CAKE50 and whether Plaintiffs make a
43
Rec. Doc. 64 at 2.
44
Id.
45
Id.
46
Id.
47
Id.
48
Id. at 3.
49
Id.
50
Id.
9
similar argument regarding the purported trademarks SNOSWEET, WHITE CHOCOLATE &
CHIPS, and CAJUN RED HOT, which Plaintiffs acknowledge were at issue in the Consolidated
Cases for different reasons.51 Likewise, Plaintiffs argue that the purported trademark
SNOWIZARD at issue here was not at issue at all in the Consolidated Cases.52 Finally, Plaintiffs
argue that the patent issues in the Consolidated Cases are different than the issues regarding the
patents here because Plaintiffs are alleging that Defendants made misrepresentations and
submitted false declarations during the litigation of the patents, noting that “[t]hose patent issues
were not actually litigated or resolved in the 06-9170 trial.”53
Plaintiffs next argue that claim preclusion cannot apply here to bar their claims against
Defendants. They argue that to determine preclusion, the question is whether the claims in the
later action might have been brought in the earlier action. Plaintiffs respond with an emphatic
no.54 Plaintiffs point to Case No. 09-3394, wherein Plaintiffs allege SnoWizard forged and
submitted certain documents to the Court and made false declarations to the Court.55 Plaintiffs
argue that their lawyer “was explicitly threatened with sanctions several times if he dared to try
and raise this issue in” the Consolidated Cases.56 Plaintiffs also note that the pleadings in Case
No. 09-3394 were closed “long before the obstruction of justice happened.”57 Plaintiffs tried to
amend the obstruction-of-justice claims in 11-1499 but were denied that opportunity by the
51
Id.
52
Id.
53
Id.
54
Id. at 4.
55
Id.
56
Id.
57
Id.
10
Court.58 Plaintiffs maintain that there is no other way the obstruction claims might have been
pleaded.59
3. The Amended Complaint Alleges a Predicate Act in Support of its RICO Claim
Plaintiffs also contend that SnoWizard’s alleged conduct constitutes obstruction of
justice, which is a sufficient foundation for their RICO and antitrust claims. In particular,
Plaintiffs assert that the Second Amended Complaint “claims SnoWizard and its attorneys
perpetrated a series of obstructive acts in different civil actions in the District Court, in USPTO
TTAB appeal proceedings, and in USPTO TTAB opposition and cancellation proceedings.”60
Moreover, Plaintiffs contend that under the facts alleged here, bad faith litigation can form the
basis of an obstruction of justice claim for RICO purposes.
4. The Amended Complaint Adequately Alleges a Pattern of Racketeering Activity
Plaintiffs further contend that the Second Amended Complaint sufficiently alleges a
“pattern” of racketeering activity because it complains of conduct SnoWizard committed in
separate, unconsolidated proceedings before the Court and the USPTO.61
5. The Prior Lawsuits Terminated in Plaintiffs’ Favor
Finally, Plaintiffs argue that SnoWizard is unable “to cite any controlling precedent for
their contention that no ‘favorable termination’ occurred” in Case Nos. 10-4275 and 11-0515.62
58
Id.
59
Id.
60
Id. at 7.
61
Id. at 8–9.
62
Id. at 10.
11
Plaintiffs argue that the case upon which SnoWizard relies is unpublished and nonbinding;
moreover, they note that that case involved distinguishable facts and claims not at issue here.63
III. Standard of Review
The Federal Rules of Civil Procedure provide that an action may be dismissed “for failure
to state a claim upon which relief can be granted.”64 “To survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that
is plausible on its face.’”65 “Factual allegations must be enough to raise a right to relief above the
speculative level,”66 and a claim is facially plausible when the plaintiff has pled facts that allow
the court to “draw a reasonable inference that the defendant is liable for the misconduct
alleged.”67 “[T]he motion to dismiss for failure to state a claim is viewed with disfavor and is
rarely granted.”68
On a motion to dismiss, asserted claims are liberally construed in favor of the claimant,
and all facts pleaded are taken as true.69 However, although required to accept all “well-pleaded
facts” as true, a court is not required to accept legal conclusions as true.70 “While legal
conclusions can provide the framework of a complaint, they must be supported by factual
63
Id. at 9–10 (citing Adrian v. Selbe, 364 F. App’x 934 (5th Cir. 2010)).
64
Fed. R. Civ. P. 12(b)(6).
65
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2008)).
66
Twombly, 550 U.S. at 556.
67
Id. at 570.
68
Kaiser Aluminum & Chem Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982)
(internal quotation marks omitted).
69
Leatherman v. Tarrant Cnty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164 (1993); see
also Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322–23 (2007).
70
Iqbal, 556 U.S. 662, 677–78.
12
allegations.”71 Similarly, “[t]hreadbare recitals of the elements of a cause of action, supported by
mere conclusory statements” will not suffice.72 The complaint need not contain detailed factual
allegations, but it must offer more than mere labels, legal conclusions, or formulaic recitations of
the elements of a cause of action.73 That is, the complaint must offer more than an “unadorned,
the defendant-unlawfully-harmed-me accusation.”74 From the face of the complaint, there must
be enough factual matter to raise a reasonable expectation that discovery will reveal evidence as
to each element of the asserted claims.75 If factual allegations are insufficient to raise a right to
relief above the speculative level, or if it is apparent from the face of the complaint that there is
an “insuperable” bar to relief, the claim must be dismissed.76
IV. Law and Analysis
A. Dismissal of Claims Under Doctrine of Res Judicata
The “rule of res judicata encompasses two separate but linked preclusive doctrines: (1)
true res judicata or claim preclusion and (2) collateral estoppel or issue preclusion.”77 To prevail
on its argument that “Counts 1–8” and “Count 11” of the Second Amended Complaint are
precluded under res judicata principles, SnoWizard must establish four elements. First, the
parties in this litigation and the Consolidated Cases must be “identical or in privity.”78 Second,
the judgment in the Consolidated Cases must have been “rendered by a court of competent
71
Id. at 679.
72
Id. at 678.
73
Id.
74
Id.
75
Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 257 (5th Cir. 2009).
76
Moore v. Metropolitan Human Serv. Dep’t, No. 09-6470, 2010 WL 1462224, at * 2 (E.D. La. Apr. 8,
2010) (Vance, C.J.) (citing Jones v. Bock, 549 U.S. 199, 215 (2007); Carbe v. Lappin, 492 F.3d 325, 328 &
n. 9 (5th Cir. 2007)).
77
Comer v. Murphy Oil USA, Inc., 718 F.3d 460, 466 (5th Cir. 2013) (citation omitted).
78
See id. at 467.
13
jurisdiction.”79 Third, the Consolidated Cases must have been “concluded by a final judgment on
the merits.”80 Fourth, and finally, “the same claim or cause of action” must have been involved
in both the Consolidated Cases and this matter.81
SnoWizard argues that “Counts 1–8” and “Count 11” of the Second Amended Complaint
must be dismissed because the doctrine of res judicata bars their re-litigation in this action.82 The
Second Amended Complaint raises “Count 1” against all Defendants for alleged violation of the
civil RICO provisions, “Counts 2–8” solely against SnoWizard, and “Count 11” against Morris
and Tolar. In particular, SnoWizard asserts that the claims asserted in all of those “counts” were
disposed of in the Court’s entry of judgment on the jury verdict in the Consolidated Cases.83 It is
undisputed that a court of competent jurisdiction issued a final judgment on the merits in the
Consolidated Cases.84 Therefore, the Court need only determine whether claims identical to
those raised in “Counts 1–8” and “Count 11” were alleged in the Consolidated Cases and
whether those cases involved the same parties.
1. Identity of Parties in the Consolidated Cases and This Action
SnoWizard asserts that “[a]ll of the plaintiffs in this case were plaintiffs in the
consolidated litigation.”85 That is true, notwithstanding Plaintiffs’ assertion that “the plaintiff
parties are 6 out of the 9 parties who were plaintiffs in the other Civil-RICO action, No. 11-
79
See id.
80
See id.
81
See id.
82
See Rec. Doc. 62-1 at 6.
83
Id. at 5.
84
See id. at 6 (arguing all four elements are satisfied); Rec. Doc. 64 at 2–5 (only arguing that the claim and
parties are different).
85
Rec. Doc. 62-1 at 6.
14
1499.”86 Likewise, defendants SnoWizard and Sciortino were parties to the Consolidated Cases,
as they are here. SnoWizard, Sciortino, and Plaintiffs were parties in the Consolidated Cases.
However, neither Tolar nor Morris was party to the Consolidated Cases.
A defendant who was not party to the prior litigation “can assert res judicata so long as it
is in ‘privity’ with the named defendant” in the prior litigation.87 “Privity” requires a court “to
look to the surrounding circumstances to determine whether claim preclusion is justified.”88 The
rule is that “parties which are sufficiently related to merit the application of claim preclusion are
in privity.”89 In other words, a finding of privity for preclusion purposes is appropriate where
“the party to the first suit is so closely aligned with the nonparty’s interests as to be his ‘virtual
representative.’”90
Under the Supreme Court’s holding in Taylor v. Sturgell,91 “virtual representation” is
constitutional92 under one of six scenarios:
First, a person who agrees to be bound by the determination of issues in an action
between others is bound in accordance with the terms of his agreement. . . .
Second, nonparty preclusion may be justified based on a variety of pre-existing
substantive legal relationships between the person to be bound and a party to the
judgment. . . .
Third, we have confirmed that in certain limited circumstances, a nonparty may
be bound by a judgment because she was adequately represented by someone with
86
Rec. Doc. 64 at 2.
87
See Russell v. SunAmerican Sec., Inc., 962 F.2d 1169, 1173 (5th Cir. 1992) (citation omitted).
88
Id.
89
Id.(emphasis added).
90
Royal Ins. Co. of America v. Quinn-L Capital Corp., 960 F.2d 1286, 1297 (5th Cir. 1992) (citations
omitted).
91
553 U.S. 880, 904 (2008).
92
The Court has found that virtual representation in certain instances would run afoul of the Fifth
Amendment’s right to due process by depriving a party of its day in court. See id.
15
the same interests who was a party to the suit. Representative suits with preclusive
effect on nonparties include properly conducted class actions, and suits brought
by trustees, guardians, and other fiduciaries. . . .
Fourth, a nonparty is bound by a judgment if she assumed control over the
litigation in which that judgment was rendered. . . .
Fifth, a party bound by a judgment may not avoid its preclusive force by
relitigating through a proxy. . . .
Sixth, in certain circumstances a special statutory scheme may expressly foreclose
successive litigation by nonlitigants if the scheme is otherwise consistent with due
process.93
Here, it appears that only the third situation, where a nonparty is adequately represented, could
apply to Morris and Tolar, who were not parties to the earlier action. In this case, virtual
representation would not be appropriate because Morris and Tolar’s interests “are not aligned
with those of SnoWizard and Sciortino.”94 Plaintiffs perceptively point out that Morris and Tolar
“have their own separate ethical obligations to the Court and to the USPTO . . . .”95 Moreover, as
Plaintiffs argue, Morris and Tolar, as SnoWizard’s counsel in the Consolidated Cases, “have a
defense available to them that is not available to SnoWizard and Sciortino—if it turns out that
the
attorneys
always
made
reasonable
inquiry
and
always
relied
on
Sciortino’s
misrepresentations to them, then the attorneys can get out of this case.”96 Even if Plaintiffs’
assertion, which they offer no authority for, is correct, Plaintiffs have not brought forth sufficient
facts to indicate that Morris and Toler are liable as conspirators to SnoWizard’s alleged
wrongdoings to the degree of plausibility required under Bell Atlantic Corp. v. Twombley.97 In
93
Id. at 893–95 (citations, internal quotation marks, and alterations omitted).
94
Rec. Doc. 64 at 2.
95
Id.
96
Id. at 3.
97
550 U.S. 544 (2007)
16
light of the divergent interests between Morris and Tolar, and SnoWizard and Sciortino that
Plaintiffs have highlighted, this Court finds that Morris and Tolar are not “identical parties” to
those involved in the Consolidated Cases but still finds it appropriate to dismiss the claims
against them for the reason given above.
Accordingly, SnoWizard’s motion to dismiss “Count 1” and “Count 11” against Morris
and Tolar cannot be granted on res judicata grounds; however, it is granted on other grounds—
namely, that Plaintiffs have failed to plead sufficient facts that suggest the participation of Morris
and Tolar in the alleged conspiracy. Furthermore, res judicata may still bar “Counts 1–8” against
SnoWizard if those claims are identical to the claims asserted in the Consolidated Cases.
2. Identity of the Claims Alleged in the Consolidated Cases and This Action
To determine whether “Counts 1–8” are sufficiently identical to claims adjudicated in the
Consolidated Cases, the Court must apply the “transactional test” adopted by the Fifth Circuit.98
Under this test,
the critical issue is not the relief requested or the theory asserted but whether the
plaintiff bases the two actions on the same nucleus of operative facts. The rule is
that res judicata bars all claims that were or could have been advanced in support
of the cause of action on the occasion of its former adjudication . . . not merely
those that were adjudicated.99
The Fifth Circuit continued in See Travelers,
What factual grouping constitutes a “transaction”, and what groupings constitute a
“series,” are to be determined pragmatically, giving weight to such considerations
as whether the facts are related in time, space, origin, or motivation, whether the
form a convenient trial unit, and whether their treatment as a unit conforms to the
parties’ expectations or business understanding or usage.100
98
See Travelers Ins. Co. v. St. Jude Hosp. of Kenner, Louisiana, Inc., 37 F.3d 193, 195 (5th Cir. 1994)
(citations omitted).
99
Id. (citation, internal quotation marks and alterations omitted).
100
Petro-Hunt, LLC v. United States, 365 F.3d 385, 396 (5th Cir. 2004) (quoting Restatement (Second) of
Judgments, § 24(2)).
17
SnoWizard does not explain how “Counts 1–8” satisfy this test. Instead, it only concludes
that “both this case and the consolidated litigation involved the same nucleus of operative facts
because the jury in the consolidated litigation decided the identical factual issues alleged in the
Second Amended Complaint in this case.”101 Plaintiffs maintain that the claims in this litigation
all depend on whether Defendants have obstructed justice and that the claims therefore do not
involve the same factual issues as raised in prior litigation or the same claims.102
All of Plaintiffs’ claims in “Counts 1–8” involve alleged conduct by SnoWizard during
the last decade purportedly intended to monopolize the snowball market, fraudulently obtain
patents and trademarks, and unfairly compete against business rivals. The claims involve the
same patents, trademarks, and alleged misstatements that were at issue in the Consolidated
Cases, or are so sufficiently a part of SnoWizard’s alleged plot to ruin competitors that Plaintiffs
could have brought the claims in the Consolidated Cases. “Counts 1–8,” for instance, all allege
that SnoWizard acted “with the specific intent to use the SnoWizard Patent & Trademark
Litigation Scheme for acquisition, enforcement, and litigation of bogus patent and trademark
monopoly and exclusive rights, to injure SnoWizard’s competitors, injure competition in the
market for ice-shaving machines, snowball flavor concentrates, and snowball supplies, and
establish monopoly rights to sell snowball products.”103
Likewise, Plaintiffs claim in “Count 2” that SnoWizard “has engaged in sham litigation
against the Plaintiffs, and has made material misstatements in Court and to the USPTO.”104 In
these claims, Plaintiffs assert that SnoWizard has acted with the specific intent to create a
101
Rec. Doc. 62-1 at 6.
102
See Rec. Doc. 64 at 3–4
103
Second Amended Compl. at ¶ 73 (incorporated into “Counts 2–8”).
104
Id. at ¶ 323.
18
monopoly in the ice-shaving machine and flavor-concentrate markets “by asserting undeserved
and fraudulently obtained patent and trademark monopoly and exclusive rights.”105 There,
Plaintiffs allege that “[t]here is a dangerous probability that SnoWizard’s attempted
monopolization will succeed because the fraudulently obtained patents and trademark
registrations appear to be facially valid and sanctioned by the federal and state
governments[.]”106 Plaintiffs, in essence, accuse SnoWizard of violating 15 U.S.C. § 2, 15 U.S.C.
§ 26.107 In “Count 6,” Plaintiffs accuse SnoWizard of violating in the same manner the
equivalent state law, Louisiana Revised Statute section 51:123.
The jury expressly found for SnoWizard on these claims in the Consolidated Cases.108
Despite Plaintiffs’ repeated assertions that SnoWizard “fraudulently” obtained patents and
trademarks, the jury rejected those claims. Specifically, the jury found that Sciortino did not
make material misstatements to the USPTO; that SnoWizard did not fraudulently obtain its
federal trademarks for WHITE CHOCOLATE & CHIPS and SNOSWEET; that SnoWizard did
not fraudulently obtain its state trademarks for WHITE CHOCOLATE & CHIPS, MOUNTAIN
MAPLE, and SNOSWEET; and that SnoWizard held a valid trademark to CAJUN RED HOT.109
Here, Plaintiffs resuscitate those very same claims. In “Counts 3–4,” Plaintiffs allege that
SnoWizard fraudulently obtained its trademarks for WHITE CHOCOLATE & CHIPS and
105
Id. at ¶ 328.
106
Id. at ¶ 329.
107
Id. at ¶¶ 332–33.
108
See Southern Snow Mfg. Co., et al. v. SnoWizard, et. al., Case No. 06-9170, Rec. Doc. 709-1 at 7–8
(finding no violation of law because there was no “dangerous probability that Defendant SnoWizard would
achieve its goal of monopoly power in the relevant market”).
109
See id. at 1–23.
19
CAJUN RED HOT in violation of 15 U.S.C. § 1120.110 As noted, however, the jury expressly
found that (1) SnoWizard did not fraudulently obtain its WHITE CHOCOLATE & CHIPS
trademark and (2) SnoWizard possesses a valid trademark to CAJUN RED HOT.111
Plaintiffs do not even attempt to argue that the underlying bases for each of “Counts 1–8”
have not been previously litigated. Indeed, the Second Amended Complaint specifically
concedes this. The complaint recites each particular case plaintiffs have brought against
SnoWizard accusing them of various trademark, anti-trust, and business violations.112 For some
reason, Plaintiffs seem to believe that the obstruction-of-justice allegation lodged in the Second
Amended Complaint revives the previously adjudicated or precluded claims.113 While Plaintiffs
maintain that these claims are based on new transactions and occurrences114—SnoWizard’s
application for two “new trademark registrations on flavor names”115—according to the Second
Amended Complaint, those two new registrations are for WHITE CHOCOLATE & CHIPS and
CAJUN RED HOT, two of the four trademarks on which the jury found in SnoWizard’s favor in
the previous action.116 Plaintiffs are seeking to relitigate previously decided claims.
In short, the claims are sufficiently identical to the claims in the previous matter that “the
plaintiff bases the two actions on the same nucleus of operative facts,”117 which precludes them.
Other than the obstruction of justice allegation, there is nothing alleged in the Second Amended
110
Second Amended Compl. at ¶¶ 334–341.
111
See Southern Snow Mfg. Co., et al. v. SnoWizard, et. al., Case No. 06-9170, Rec. Doc. 709-1 at pp. 9–
10, 14.
112
See, e.g., Second Amended Compl. at ¶¶ 182–205 (discussing claims related to WHITE
CHOCOLCATE & CHIPS in context of Consolidated Cases and USPTO proceedings).
113
See Rec. Doc. 64 at 4.
114
Rec. Doc. 64 at 9.
115
Id.
116
See Second Amended Compl. at ¶¶ 193, 212.
117
See Travelers Ins. Co., 37 F.3d at 195.
20
Complaint that was not adjudicated previously or is not precluded because it should have been
adjudicated previously. Everything derives from the same set of facts. The facts alleged in the
Second Amended Complaint “are related in time, space, origin, [and] motivation” and would
have formed, and indeed already did form, the basis of “a convenient trial unit.”118 Accordingly,
“Counts 1–8” are precluded as to SnoWizard and Sciortino because all four elements of res
judicata have been met: (1) the dispute involves the same parties in a prior lawsuit that (2)
involved the same claims, (3) went to a final judgment on the merits and (4) was rendered by a
court of competent jurisdiction.
Res judicata does not apply to these claims against Morrison and Tolar. Plaintiffs,
however, have had three opportunities to properly plead these claims against Morrison and
Tolar.119 Despite this, Plaintiffs have failed to allege any facts indicating Morrison and Tolar
participated in a conspiracy to further the alleged wrongdoing contained in “Counts 2–8.”
Accordingly, Plaintiffs’ claims in “Counts 2–8” against Morrison and Tolar must likewise be
dismissed.
B. Dismissal of RICO Claim
While Plaintiffs are barred from asserting the alleged RICO claim, brought in “Count 1,”
against SnoWizard or Sciortino, they may be able to allege that claim against Morris and Tolar,
who were not parties to the previous action. Thus, the Court must next address Defendants’
assertion that the RICO claim fails as a matter of law.
In St. Germain v. Howard, the Fifth Circuit explained a RICO violation as such:
118
Petro-Hunt, 365 F.3d at 396.
119
See Rec. Docs. 1, 12 & 53.
21
Claims under RICO, 18 U.S.C. § 1962, have three common elements: (1) a person
who engages in (2) a pattern of racketeering activity, (3) connected to the
acquisition, establishment, conduct, or control of an enterprise. A pattern of
racketeering activity consists of two or more predicate criminal acts that are (1)
related and (2) amount to or pose a threat of continued criminal activity. The
predicate acts can be either state or federal crimes.120
SnoWizard challenges the sufficiency of Plaintiffs’ RICO claim on two grounds. First,
SnoWizard asserts that its purported “Litigation Scheme” against Plaintiffs does not constitute a
predicate criminal act. Second, SnoWizard asserts that the purported “Litigation Scheme” lacked
the continuity necessary to constitute a “pattern of racketeering activity.”
1. Predicate Act: Litigation Activity as Obstruction of Justice
Plaintiffs allege that Defendants perpetrated a series of obstructive acts in different civil
actions in district court and USPTO proceedings. This conduct, according to Plaintiffs, violated
18 U.S.C. §§ 1503, 1505, 1512 and qualifies as “racketeering activity” for the purposes of a
RICO claim.
As set forth in 18 U.S.C. § 1961(1), obstruction of justice and witness tampering, as
defined by 18 U.S.C. §§ 1503, 1512, are among those activities that can constitute
racketeering.121 Section 1961(1) does not list a violation of 18 U.S.C. § 1505, which prohibits
obstruction of justice in federal department or agency proceedings, as a predicate act.122 Thus,
this inquiry need only consider 18 U.S.C. §§ 1503 and 1512, which were passed by Congress “to
120
556 F.3d 261, 263 (5th Cir. 2009).
121
See 18 U.S.C. § 1961(1)(B).
122
Id.
22
protect individuals involved in federal judicial proceedings and to prevent miscarriages of
justice.”123
To establish a violation of section 1503, a party must establish the following three
elements: “(1) that a judicial proceeding was pending; (2) that the defendant had knowledge of
the judicial proceeding; and (3) that the defendant acted corruptly with the specific intent to
influence, obstruct, or impede that judicial proceeding in its due administration of justice.”124
Moreover, “the [corrupt] act must have a relationship in time, causation, or logic with the judicial
proceeding.”125
A violation of 18 U.S.C. § 1512(c), the witness tampering statute, is committed when a
person
(1) alters, destroys, mutilates, or conceals a record, document, or other object, or
attempts to do so, with the intent to impair the object’s integrity or availability for
use in an official proceeding; or
(2) otherwise obstructs, influences, or impedes any official proceeding, or
attempts to do so.126
Defendants maintain that as the conduct in question involved litigation activity, it cannot
constitute a predicate act for RICO purposes. The Fifth Circuit has not addressed the issue of
whether activity conducted during prior litigation is immune from RICO prosecution. In St.
Germain, the Fifth Circuit affirmed the district court’s granting of a motion to dismiss a RICO
complaint because the complaint failed to allege the requisite predicate criminal acts:
In their complaint, Appellants allege that the predicate acts committed by
Appellees were mail and wire fraud. However, the district court found, and
123
United States v. Richardson, 676 F.3d 491, 501–02 (5th Cir. 2012) (citation and internal quotation
marks omitted).
124
Id. (citations omitted).
125
Id. (citing United States v. Aguilar, 515 U.S. 593, 599 (1995)).
126
18 U.S.C. § 1512(c).
23
Appellants acknowledged, that the “patterns of racketeering activity” they allege
are at worst violations of the rules of professional responsibility. Because
Appellants have not alleged the requisite predicate criminal acts under RICO,
they have not met the pleading standard of Rule 12(b)(6).127
Defendants interpret St. Germain to stand for the proposition that the predicate criminal act must
be of a criminal nature.128 Because no Fifth Circuit case directly addresses the question of
whether activity related to litigation can be the predicate crime for a requisite action, the
Defendants cite to several cases outside the Fifth Circuit for this proposition.129
The first case cited by Defendants comes from the Eleventh Circuit. The Eleventh Circuit
has articulated clear policy reasons why litigation activity cannot be the basis for a RICO
prosecution. In United States v. Pendergraft, the court opined that, “[P]rosecuting litigation
activities as federal crimes would undermine the policies of access and finality that animate our
legal system. Moreover, allowing such charges would arguably turn many state-law actions for
malicious prosecution into federal RICO actions.”130 Coming to the same conclusion, the Eighth
Circuit in I.S. Joseph Co. v. J. Lauritzen A/S explained that, “If a suit is groundless or filed in bad
faith, the law of torts may provide a remedy. Resort to a federal criminal statute is
unnecessary.”131 Finally, the First Circuit shares the Eighth Circuit and Eleventh Circuit’s
concerns. In Willis v. Lipton, the First Circuit warned that, “An extension of RICO standing [in
127
556 F.3d at 263.
128
Rec. Doc. 62-1 at 8 (“Under St. Germain . . . failure to allege any requisite predicate criminal acts under
RICO is fatal to “Count 1” of plaintiffs’ Second Amended Complaint.”).
129
Id. at 9.
130
297 F.3d 1198, 1208 (11th Cir. 2002).
131
751 F.2d 265, 267 (8th Cir. 1984).
24
cases of malicious prosecution] would serve to ‘federalize’ a substantial volume of common law
fraud litigation traditionally left to state courts.”132
On the other hand, Plaintiffs point to Feld Entertainment, Inc. v. ASPCA133 for the
proposition that “lies or misrepresentations in the course of civil discovery” can form the basis of
an obstruction of justice charge, which Plaintiffs argue is a predicate act for bringing a RICO
suit.134 However, Feld Entertainment involved allegations far more characteristic of obstruction
of justice than the allegations at issue here, namely, “bribery and illegal witness payments.”135
Here, Plaintiffs allege that Defendants are “threatening and bringing litigation to force
withdrawal of legitimate products and producers from the market based on fraudulently asserted
and obtained patent and trademark rights.”136 In Feld Entertainment, in contrast, the allegations
went to the heart of the judicial process. The court was quick to note that the allegations were
“not limited to claims that defendants filed false document or otherwise engaged in frivolous and
harassing litigation,”137 as is the case here. Rather, what brought the matter within the purview
of RICO was that “[plaintiffs] claim[ed] the entire lawsuit was based on bribery of the lead
plaintiff and witness.”138
Contrary to Plaintiffs’ understanding of the case, Feld Entertainment supports dismissal
of the RICO claim in Plaintiffs’ Second Amended Complaint rather than supports it. In Feld
Entertainment, it was something more than abusive litigation that supported the underlying
132
947 F.2d 998, 1001 (1st Cir. 1991).
133
873 F.Supp.2d 288 (D.D.C. 2012)
134
Rec. Doc. 64 at 7.
135
Id. at 302.
136
Rec. Doc. 53 at ¶ 14.
137
873 F.Supp.2d at 319 (emphasis added).
138
Id.
25
criminal predicate acts. Namely, it was the defendant’s alleged bribery of parties and witnesses.
Here, in contrast, Plaintiffs only allege fraud in obtaining trademarks and vexatious litigation.
They make no allegations of bribery or other activity that cuts to the core of the integrity of the
judicial process. Plaintiffs’ allegations of orchestrating a litigation scheme, engaging in shame
litigation, and making material misstatements in court, while extremely serious, are not the types
of conduct that support obstruction of justice and a violation of RICO. The authority cited by
both parties makes this clear. Thus, Plaintiffs have failed to allege a predicate act for a RICO
claim. Accordingly, “Count 1” must be dismissed as alleged against Tolar and Morrison139 for
failure to state a claim for which relief may be granted
2. Allegations of Pattern of Racketeering Activity
Even if Plaintiffs’ allege a predicate act, Plaintiffs still must allege a “pattern of
racketeering activity”140 to make out a prima facie RICO claim. As noted above, a “pattern”
requires both that the alleged acts are “related to each other and that they have ‘continuity.’”141
“Predicate acts are ‘related’ if they have the same or similar purposes, results, participants,
victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics
and are not isolated events.”142 Meanwhile, “continuity is both a closed- and open-ended
concept, referring either to a closed period of repeated conduct, or to past conduct that by its
nature projects into the future with a threat of repetition.”143
139
The RICO claims against SnoWizard and Sciortino can be dismissed on res judicata grounds, as
discussed.
140
St. Germain, 556 F.3d at 263.
141
In re Burzynski, 989 F.2d at 742.
142
Id. (citation and internal quotation marks omitted).
143
H.J., Inc. v. Nw. Bell. Tel. Co., 492 U.S. 229, 241 (1989).
26
Plaintiffs argue that this case is based on new transactions and occurrences that were not
at issue in the Consolidated Cases.144 Specifically, Plaintiffs assert that this cause of action
derives from SnoWizard’s application for two “new trademark registrations on flavor names that
were already in litigation, and submitting false, fraudulent declarations claiming exclusive
use.”145
Defendants reply that Plaintiffs have not alleged continuity because “all of the purported
predicate acts [Plaintiffs] allege were part and parcel of a single, discrete and otherwise lawful
commercial transaction, namely defending against the lawsuits filed by plaintiffs themselves.”146
In support, SnoWizard cites In re Burzynski,147 in which the Fifth Circuit held that a plaintiff
failed to plead the required “continuity” element because all of the predicate acts occurred during
the course of a single lawsuit. The Fifth Circuit held that such conduct “did not constitute or
threaten long-term criminal activity.”148
The Court finds that Plaintiffs’ allegations that SnoWizard and Sciortino engaged in
obstruction of justice by making false statements to the USPTO in proceedings separate and
apart from statements asserted during the previous litigation could show a “pattern of
racketeering activity,” as defined by the Fifth Circuit.149 Moreover, not all of Plaintiffs’
complained-of conduct arose during the Consolidated Cases; thus, In re Burzynski is inapposite
here. For example, Plaintiffs allege that SnoWizard made false material statements to the
USPTO in November 2003, several years before the Consolidated Cases were filed.
144
Rec. Doc. 64 at 9.
145
Id.
146
Rec. Doc. 62-1 at 11.
147
989 F.2d 733 (5th Cir. 1993).
148
Id. at 743.
149
See, e.g., St. Germain, 556 F.3d at 263; In re Burzynski, 989 F.2d at 742.
27
Accordingly, the alleged pattern of activity here is sufficiently pleaded. However, because
Plaintiffs have failed to allege a predicate act, as discussed above, Plaintiffs’ RICO claim must
still fail.
C. Dismissal of Claims for Malicious Prosecution
SnoWizard attacks “Counts 9–10” and “Counts 12–13” of the Second Amended
Complaint as failing to state a claim for which relief may be granted. It contends that the
underlying bases of the two malicious prosecution claims150 did not terminate in Plaintiffs’ favor
and therefore deprive the claim of a required element.
“Under Louisiana law, a malicious prosecution claim requires: 1) the commencement of
an original criminal or civil judicial proceeding; 2) its legal causation by the present defendant
against the present plaintiff who was the defendant in the original proceeding; 3) its bona fide
termination in favor of the present plaintiff; 4) the absence of probable cause for such
proceeding; 5) the presence of malice therein; and 6) damages conforming to legal standards
resulting to the plaintiff.”151 “The obvious purpose of the ‘bona fide termination’ requirement in
malicious prosecution cases is that the underlying litigation should be brought to a conclusion on
the merits before a malicious prosecution suit based on the underlying litigation is allowed to
proceed.”152 Thus, “a merely procedural victory that does not relate to the merits of the suit is not
a bona fide termination for the purposes of a subsequent action for malicious prosecution.”153
150
Plaintiffs brought the malicious prosecution claims under Louisiana state law as state law pendent
claims.
151
St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425, 435 (5th Cir. 2000) (citing Hibernia Nat’l Bank
v. Bolleter, 390 So. 2d 842, 843 (La. 1980)).
152
Savoie v. Rubin, 2001-3275 (La. 6/21/02); 820 So. 2d 486, 488.
153
Milling, Benson, Woodard, Hillyer, Pierson & Miller, LLP v. American Marine Holding Co., 98-1462
(La. App. 4 Cir. 3/3/99); 729 So. 2d 139, 142.
28
1. Case No. 10-4275
In “Count 9” and “Count 12,” Plaintiffs raise a claim for malicious prosecution and
conspiracy to maliciously prosecute against SnoWizard, Morris, and Tolar for claims alleged in
Case No. 10-4275. Plaintiffs allege that SnoWizard sued Southern Snow for trademark
infringement and dilution of the term SNOWIZARD under the Lanham Act and under Louisiana
Law.154 Plaintiffs also allege that SnoWizard sued them for patent infringement of U.S Patent
No. 7,536,871 (“Icemaker with Improved Cam Assembly”).155 Finally, Plaintiffs assert that the
case was dismissed without prejudice.156
Significantly, Plaintiffs have not alleged that Case No. 10-4275 ended in a “bona fide
termination” under Louisiana law. According to judicially noticeable documents that may be
relied upon for this motion to dismiss,157 Plaintiff Southern Snow initiated Case No. 10-4275
against SnoWizard on November 9, 2010.158 SnoWizard filed an answer and asserted
counterclaims against Southern Snow on March 16, 2011.159 On July 11, 2011, the parties agreed
to dismiss all claims in Case No. 10-4275 without prejudice and reassert them in Case No. 11-
154
Second Amended Compl. at ¶¶ 237–241.
155
Id. at ¶¶ 74–98.
156
Id. at ¶¶ 70, 239.
157
Normally, a court must limit its inquiry on a motion to dismiss to the facts alleged in the complaint, any
documents attached to it, and any documents incorporated within it. Lovelace v. Software Spectrum, Inc.,
78 F.3d 1015, 1017 (5th Cir. 1996). However, on a motion to dismiss, a court also may consider matters of
which they make take judicial notice. Id. at 1017–18. Such matters include docket entries. See Brown v.
Lippard, 350 F. App’x 879, 882 n.2 (5th Cir. 2009).
158
Southern Snow Mfg. Co., Inc. v. SnoWizard, Inc., Case No. 10-4275 at Rec. Doc. 1.
159
Id. at Rec. Doc. 17.
29
1499.160 District Court Judge Jay Zainey ordered the case dismissed without prejudice on the
same day.161
Case No. 10-4275 was not adjudicated on its merits; the parties instead agreed to dismiss
their claims and reassert them in one of the many other cases that have spawned from this
dispute. Of the two counterclaims SnoWizard asserted against Southern Snow in Case No. 104275—for misappropriation of the trademark SnoWizard162 and for patent infringement of U.S.
Patent No. 7,536,871 (“Icemaker with Improved Cam Assembly”),163 SnoWizard chose to only
reassert the second one in Case No. 11-1499. In other words, no decision on the merits was made
regarding the first counterclaim, the trademark infringement claim, in Case No. 10-4275. As
such, it cannot be the basis for a malicious prosecution claim. Agreeing to dismiss a case without
prejudice in order to allow it to be reasserted later—as happened in Case No. 10-4275—cannot
be said to be a conclusion on the merits. As the Fifth Circuit has explained, a dismissal “‘without
prejudice’ indicates that the suit is dismissed without a decision on the merits and is not
conclusive of the rights of the parties.”164 As for the patent infringement claim, the jury found for
SnoWizard when SnoWizard re-alleged it in Case No. 11-1499.165
Plaintiffs therefore cannot pursue a claim for malicious prosecution based upon
SnoWizard’s claims in Case No. 10-4275 because under Louisiana law malicious prosecution
requires six elements, including bona fide termination in the prior case in favor of the present
160
Id. at Rec. Doc. 52 at 2.
161
Id.
162
Id. at Rec. Doc. 17.
Id. at Rec. Doc. 34.
163
164
Rivera v. PNS Stores, Inc., 647 F.3d 188, 194 (5th Cir. 2011) (citation and internal quotation marks
omitted).
165
Case No. 11-1499 at Rec. Doc. 12 at 10.
30
plaintiff.166 Neither cause of action brought by SnoWizard in Case No. 10-4275 can be said to
have resulted in a bona fide termination in Plaintiffs’ favor. Either the claim was voluntarily
dismissed before the Court could consider its merits, as in the case of the trademark infringement
claim, or the jury ultimately found in favor of SnoWizard, as in the case of the patent
infringement claim. Accordingly, because “Count 9”—brought against SnoWizard and
Sciortino—and “Count 12”—brought against Morris and Tolar for conspiracy to maliciously
prosecute—derive solely from the alleged malicious prosecution of Case No. 10-4275, which
was either not decided on the merits or not decided in Plaintiffs’ favor, each of these claims must
be dismissed for failure to state a required element of the tort of malicious prosecution.
2. Case No. 11-0515
In “Count 10” and “Count 13,” Plaintiffs raise another state law claim for malicious
prosecution and conspiracy to maliciously prosecute. These claims derive solely from Case No.
11-0515.167 SnoWizard initiated that case against Raggs Supply LP and others on March 3,
2011.168 In that case, SnoWizard accused those defendants of “infringement and dilution of the
SNOWIZARD trademark, and for defamation.”169
Several Louisiana Courts of Appeal have held that a settlement “cannot serve as the basis
for a malicious prosecution” claim.170 However, even if a settlement could serve as the basis for
166
St. Paul Mercury Ins. Co., 224 F.3d at 435.
167
Second Amended Compl. at ¶¶ 359–60, 365–66.
168
SnoWizard, Inc. v. Doty, et al., 11-0515, Rec. Doc. 1. This case initially was before District Court Judge
Ivan Lemelle, who reassigned it to this Court on October 31, 2011. See id.; Rec. Doc. 64.
169
Second Amended Compl. at ¶ 247.
170
See Ulmer v. Frisard, 06-377 (La. App. 5 Cir. 10/31/06); 945 So. 2d 85, 88; see also, Lees v. Smith, 363
So. 2d 974, 978 (La. Ct. App. 1978) (“The trial court erred in allowing Lees’ settlement with Smith’s
insurer to be a ‘bona fide termination in favor of the present plaintiff.’”); but see Waste Mgmt. of Louisiana,
L.L.C. v. Parish of Jefferson ex rel. Jefferson Parish Council, 947 F. Supp. 2d 648, 656–57 (E.D. La. 2013)
(allowing malicious prosecution lawsuit to proceed despite initial lawsuit being voluntarily dismissed
31
a malicious prosecution claim, nothing here can be said to reflect a termination favorable to
Defendant Raggs Supply. As Plaintiffs admitted in the Second Amended Complaint, Raggs
Supply paid SnoWizard $15,000 to settle Case No. 11-0515.171 Additionally, as part of the
settlement, Raggs Supply “agreed to language for a notice to be sent to customers who purchased
SnoWizard quarts and half-gallons from Raggs from 2006 through 2010.”172 That language read:
Raggs Supply LP and SnoWizard, Inc., are sending this notice to customers who
have purchased quarts or half-gallons of SnoWizard snowball flavor concentrate
from Raggs in the past. From 1991 until June 2010, Raggs distributed SnoWizard
snowball flavor concentrates purchased at wholesale from SnoWizard. During
that time, quarts and half-gallons of SnoWizard flavor concentrates sold by Raggs
were re-packaged into quart and half-gallon bottles by Raggs from gallons
purchased from SnoWizard. Raggs placed SnoWizard labels printed by Raggs on
those re-packaged bottles. The re-packaging and labeling by Raggs were done
without SnoWizard’s prior knowledge or approval.173
The Record does not reflect the favorable termination necessary to support a malicious
prosecution cause of action under Louisiana law, even if Louisiana law allows settlements or
voluntary dismissals to constitute “bona fide terminations” in certain circumstances.
Accordingly, “Count 10”—brought against SnoWizard and Sciortino—and “Count 13”—
brought against Morris and Toler for conspiracy to maliciously prosecute Case No. 11-0515—
must be dismissed for failure to state a claim.
“[b]ecause . . . [plaintiff in the initial lawsuit] publicly and judicially acknowledged that its . . . claim lacked
merit”).
171
Second Amended Compl. at ¶¶ 277–78.
172
Case No. 11-0515 at Rec. Doc. 217 at 1.
173
Id. This document in the Record reflects the final language proposed by Defendant Raggs Supply. The
final letter later sent to Magistrate Judge Sally Shusan for review may have contained slight variations from this
version.
32
V. Conclusion
For the foregoing reasons,
IT IS HEREBY ORDERED that Defendant SnoWizard’s Motion to Dismiss Second
Amended Complaint Under Rule 12(b)(6)174 is GRANTED. Plaintiffs’ self-styled “Counts 1–8”
are dismissed against SnoWizard and Sciortino on the basis of res judicata. Furthermore,
“Counts 9 and 10,” each involving malicious prosecution, are dismissed because Plaintiffs
cannot show a bona fide termination on the merits in the underlying lawsuits. Likewise, all
claims against Defendants Morris and Tolar are dismissed. Regarding the RICO claim against
them, Plaintiffs have failed to allege an underlying predicate RICO act to support the cause of
action. Regarding “Count 11,” Plaintiffs fail to allege any facts indicating that Morris and Tolar
conspired to help SnoWizard and Sciortino commit fraud or obstruction of justice. Finally,
“Counts 11 and 12,” which accuse Morris and Tolar of conspiring with SnoWizard and Sciortino
to malicious prosecute Plaintiffs, must also be dismissed. As noted, neither of the lawsuits in
question can be said to have terminated in Plaintiffs’ favor. Accordingly, as Plaintiffs have now
had three opportunities to successfully plead their claims, Plaintiffs claims are DISMISSED
WITH PREJUDICE pursuant to Federal Rule of Civil Procedure 12(b)(6).
NEW ORLEANS, LOUISIANA, this ________ day of March, 2014.
____________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE
174
Rec. Doc. 62.
33
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