Premier Dealer Services, Inc. v. Duhon et al
Filing
92
ORDER AND REASONS granting in part and denying in part 24 Motion to Dismiss for Failure to State a Claim. Counts three, four, five, eight, nine, and eleven are dismissed with prejudice against the Individual Defendants. Count ten is dismissed wi thout prejudice against the Individual Defendants. Counts one, two, six, and seven remain against the Individual Defendants. Plaintiff has fifteen days to amend only Count Ten. Signed by Judge Jane Triche Milazzo ON 7/30/2013. (Reference: 12-1498)(ecm, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
PREMIER DEALER SERVICES, INC.
CIVIL ACTION
VERSUS
NO. 12‐1498
TROY DUHON, ET AL
SECTION "H"(2)
ORDER AND REASONS
The matter before the Court is a Motion to Dismiss for Failure to State a Claim filed by Troy
Duhon ("Duhon"), Scott Nietert ("Nietert"), Premier Asian Imports, LLC, Premier Automotive
Products, LLC, Premier Automotive, LLC, Premier Nissan, LLC, Premier Nissan of Fremont, Premier
Nissan of San Jose, LLC, Premier Quality Imports, Wayne Skinner ("Skinner"), and Toyota of Poway
(collectively "Moving Defendants"). (Doc. 24.) For the following reasons Moving Defendants'
Motion is GRANTED IN PART and DENIED IN PART.
1
BACKGROUND
Since 2004 Plaintiff has been in the business of creating, marketing, and administering
customer loyalty programs and other products for automobile dealers. Specifically, since May
2008, Plaintiff has been using two service marks ‐ "Lifetime Powertrain Protection" and "Lifetime
Engine Protection." Plaintiff also is the exclusive owner of the copyrighted forms for use in its
business, including a "Lifetime Powertrain Loyalty Program Certificate."
When customers purchase Plaintiff's Lifetime Powertrain Loyalty Program (the "Program")
it gives a Lifetime Powertrain Loyalty Certificate to dealer customers of which the customers
guarantee that certain manufacturer's recommended maintenance be performed by the dealer's
service centers. Covered parts include the drive axle and its subcomponents, the
transmission/transfer case and its subcomponents, and the engine and its subcomponents.
Program customers are required to have all manufacturer recommended oil and filter changes and
tire rotations performed at the dealer's service departments.
Defendant Dealers represented to Plaintiff in 2010 that they were interested in participating
in the Program and incorporating the Program into their dealerships. Plaintiff and its agent, Dealer
Services South, began making regular visits to all dealership locations and conducting regular sales,
management, and finance training with Defendants' key personnel. On September 20, 2011
Plaintiff entered into Administration Agreements with each of the Defendants. Under these
agreements Defendants agreed to participate in the Lifetime Powertrain Protection and Lifetime
2
Engine Protection plans.
Plaintiff learned that Defendants copied the marketing and administrative materials
provided by Plaintiff and used the training material to circumvent Plaintiff and implement a
program substantially similar to the Program developed and provided by Plaintiff. Subsequently,
Plaintiff instituted suit alleging the following: Copyright Infringement (Count One); Federal
Infringement of Unregistered Trademarks (Count Two); Federal Unfair Competition and False
Designation of Origin (Count Three); Misappropriation of Trade Secrets (Count Four); Unfair Trade
Practices (Count Five); Breach of Obligation (Count Six); Contractual Indemnification and Attorneys
Fees (Count Seven); Tortious Interference with Business Relations (Count Eight); Conversion (Count
Nine); Fraud (Count Ten); and Unjust Enrichment (Count Eleven).
In September, 2012 Defendants filed a Partial Motion to Dismiss. (Doc. 7.) Defendants
averred that Plaintiff cannot state a claim against Nietert, Duhon, and Skinner (collectively
"Individual Defendants") because they acted in their corporate capacities. (Id.) Defendants further
maintained that Plaintiff failed to state a claim for counts one, two, three, five, eight, nine, ten, and
eleven against all Defendants. In December, 2012 the Court denied all of Defendants' Motion
except as to Plaintiff's claims against the Individual Defendants.
Plaintiff filed its Amended Complaint on December 28, 2012. Moving Defendants filed the
instant Motion to Dismiss on January 11, 2013. (Doc. 24.) Plaintiff opposed the Motion (Doc. 31)
and Moving Defendants filed a Reply (Doc. 38). The Motion was taken under submission on
3
February 13, 2013.
LEGAL STANDARD
To survive a Rule 12(b)(6) motion to dismiss, a plaintiff 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 “plausible on its face” when
the pleaded facts allow the court to “[d]raw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 129 S. Ct. at 1949. A court must accept the complaint’s factual
allegations as true and must “draw all reasonable inferences in the plaintiff’s favor.” Lormand v.
U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009). The Court need not, however, accept as true
legal conclusions couched as factual allegations. Iqbal, 129 S. Ct. at 1949–50.
To be legally sufficient, a complaint must establish more than a “sheer possibility” that the
plaintiff’s claims are true. Id. “A pleading that offers ‘labels and conclusions’ or ‘a formulaic
recitation of the elements of a cause of action’” will not suffice. Iqbal, 129 S. Ct. at 678 (quoting
Twombly, 550 S. Ct. at 1955). Rather, the complaint must contain enough factual allegations to
raise a reasonable expectation that discovery will reveal evidence of each element of the plaintiffs'
claim. Lormand, 565 F.3d at 255–57. The Court’s review “is limited to the complaint, any
documents attached to the complaint, and any documents attached to the motion to dismiss that
are central to the claim and referenced by the complaint.” Lone Star Fund V (U.S.), L.P. v. Barclays
4
Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010) (citing Collins v. Morgan Stanley Dean Witter, 224 F.3d
496, 498–99 (5th Cir. 2000)).
LAW AND ANALYSIS
The Court must assess the claims against the Individual Defendants on a claim by claim
basis. Because Plaintiff failed to amend counts three, four, five, eight, nine, and eleven those
claims against the Individual Defendants are dismissed with prejudice. After a review of the
Amended Complaint the Court finds that Plaintiff has failed to sufficiently allege with specificity
fraud against the Individual Defendants. Accordingly, count ten is dismissed with prejudice against
the Individual Defendants. The Court finds that Plaintiff has sufficiently alleged claims against the
Individual Defendants with respect to counts one, two, six, and seven. Accordingly, these claims
remain against all Defendants.
I.
Counts One and Two: Copyright and Trademark Infringement
The Court finds that Plaintiff's amendment is sufficient. Accordingly, Moving Defendants'
request to dismiss as to these claims is denied.
A.
Arguments of the Parties
Plaintiff’s Complaint alleges that “Defendants copying of its Lifetime Powertrain Loyalty
Certificate and use of its modified form is in violation of United States copyright law and the
exclusive rights held by Plaintiff.” (See Doc. 7.) Plaintiff’s Amended Complaint adds a paragraph
5
claiming that “Duhon, Neitert and Skinner individually copied Plaintiff’s copyrighted works and
willfully used the Plaintiff’s copyrighted works in advertising and other materials, rendering
Defendants individually liable.” (See Doc. 23 at ¶43(a).)
In response, Defendants claim that this Court has already rejected Plaintiff’s sole legal
argument for preserving the copyright and trademark claims in granting in part the first Motion to
Dismiss. Defendants argue the amended allegation stating that “Duhon, Neitart, and Skinnard
individually infringed [Plaintiff's] copyright and trademarks” was always obvious from Plaintiff's
initial Complaint, therefore Plaintiff has added nothing of substance. Plaintiff claims the Amended
Complaint alleges enough to show that the Individual Defendants violated federal copyright and
trademark law. Plaintiff avers that an individual acting within the corporate capacity does not
relieve individuals of their personal liability.
B.
Copyright Infringement
A copyright infringement claim requires proof of (1) ownership of a valid copyright and (2)
an actionable copying. Eng'g Dynamics, Inc. v. Structural Software, Inc., 26 F.3d 1335, 1340 (5th
Cir.1994) (citing Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991)). "To establish
'ownership,' plaintiff must prove that material is original, that it can be copyrighted, and that he
has complied with statutory formalities. Lakedreams v. Taylor, 932 F.2d 1103, 1107–08 (5th Cir.
1991) (citation omitted). "To establish 'copying,' plaintiff generally must show that defendant had
access to material and that there is substantial similarity between the two works." Id. at 1108.
6
"A plaintiff has complied with statutory formalities when the Copyright Office receives the
plaintiff’s application for registration, fee and deposit." Lakedreams, 932 F.2d at 1108 (citing Apple
Barrel Prods., Inc. v. Beard, 730 F.2d 384, 386–87 (5th Cir. 1984)). Further, an action for copyright
infringement does not require the corporate veil to be pierced in order to hold individuals liable.
Eng'g Dynamics, Inc. 26 F.3d at 1349. This is the case even if they were acting for the corporation,
because acting for the corporation does not relieve an individual of its responsibility. Id.
Plaintiff correctly contends that individuals can be held liable for acts of copyright
infringement when acting within a corporate capacity. The Copyright Office’s receipt of Plaintiff’s
application for registration, fee and deposit is sufficient to satisfy the statutory formalities because
Plaintiff alleges that he has applied for a copyright for the “Lifetime Powertrain Loyalty Program”
form. (Doc. 7 at ¶35.) Additionally, Plaintiff adds that the Individual Defendants “individually
copied” and “willfully used” Plaintiff’s copyrighted works. (Doc. 23 at ¶43(a)). Resolving all
ambiguities in favor of the Plaintiff, the Court finds that this is sufficient to raise a reasonable
expectation of wrongdoing on behalf of the Individual Defendants. Accordingly, the Court denies
Moving Defendants' request to dismiss this claim against the Individual Defendants.
C.
Trademark Infringement
A cause of action for trademark infringement exists where a person “uses (1) any
reproduction, counterfeit, copy, or colorable imitation of a mark; (2) without the registrant's
7
consent; (3) in commerce; (4) in connection with the sale, offering for sale, distribution or
advertising of any goods; (5) where such use is likely to cause confusion, or to cause mistake or to
deceive.” Am. Rice, Inc. v. Producers Rice Mill, Inc., 518 F.3d 321, 329 (5th Cir.2008). Trademark
law is designed to protect consumers from confusion about product's source and to protect
trademark‐owners' investment in goodwill associated with their marks. ICEE Distributors, Inc. v. J&J
Snack Foods Corp., 445 F.3d 841, 846 (5th Cir. 2006).
A trademark, like a patent, can be infringed by an individual. Mead Johnson & Co. v. Baby's
Formula Serv., Inc., 402 F.2d 19, 23 (5th Cir.1968). With respect to actions against individuals, a
trademark is infringed when an individual performs the act or does the things that the patent or
trademark law protects against. Id. The fact that the individual may be working for a corporation
may make the corporation liable as well, however does not relieve the individual of his or her
responsibility. Id. Ultimately, "an individual can be held personally liable if he 'actively and
knowingly caused the infringement.'" Taylor Made Golf Co., Inc. v. MJT Consulting Grp., LLC, 265
F.Supp.2d 732, 746 (N.D. Tex. 2003) (quoting Chanel Inv. v. Italian Activewear of Fla., Inc., 932 F.2d
1472, 1477 (11th Cir. 1991)).
Plaintiff is correct in asserting that a trademark can be infringed by an individual acting
within a corporate capacity. In the Amended Complaint, Plaintiff adds language alleging that
Defendants “Duhon, Nietert, and Skinnard, individually used” the aforementioned Lifetime
8
Powertrain Protection and Lifetime engine Protection service marks of the Plaintiff. (See Doc. 23
at ¶43(a).) The Court finds this allegation sufficient to maintain an action against the Individual
Defendants at this stage of the proceedings. Accordingly, Moving Defendants' Motion to dismiss
this claim against the Individual Defendants is denied.
II.
Counts Six and Seven: Breach of Obligation and Contractual Indemnification
The Court finds that Plaintiff's amendment to the Complaint is sufficient. Accordingly,
Moving Defendants' request to dismiss these claims against the Individual Defendants is denied.
A.
Arguments of the Parties
Plaintiff's Amended Complaint adds that Defendants Duhon, Nietert, and Skinnard “acted
outside the scope of their corporate authority” in contracting with Plaintiff. (See Doc. 23 at ¶90(a).)
In response, Defendants argue that Louisiana law does not recognize individual liability for
actions taken in corporate capacity. (See Doc. 7.) Defendants claim that Plaintiff alleges no
additional facts in the Amended Complaint adding only the legal conclusion that individual
defendants “acted outside the course and scope of their employment.” (See. Doc. 24.) Defendant
further alleges that Plaintiff claims Duhon, Nietert and Skinnard misappropriated intellectual
property in order to establish a competing program in their dealerships from which the only
plausible inference is that they acted solely within their corporate capacity. (Id.)
Plaintiff, on the other hand, claims that its new allegations are sufficient to place
9
Defendants “on notice” for breach of obligation and contractual indemnification claims. (Doc. 24.)
Plaintiff claims that it is “entirely plausible that the individual Defendants acted outside of their
authority in dealing with Premier.” (Id.) Plaintiff further argues that all of the documents and
testimony supporting his claim is in Defendant’s possession and that if the claims are dismissed,
the defendants may “flip flop” by using the defense that Duhon, Neitert and Skinnard acted outside
of their corporate capacities. (Id.)
B.
Analysis
A mandatary who exceeds his authority is personally bound to the third person with whom
he contracts, unless that person knew at the time the contract was made that the mandatary had
exceeded his authority or unless the principal ratifies the contract. La. Civ. Code Ann. art. 3019.
Under Louisiana law, a “mandatary” (agent) is one who acts for or in place of another by authority
from the latter. Butcher v. Superior Offshore Int'l, LLC, 754 F. Supp. 2d 829, 835 (E.D. La. 2010).
Agency is never presumed and must be proven affirmatively. Karl Rove & Co. v. Thornburgh, 39 F.3d
1273 (5th Cir. 1994). To prove an agency relationship, a plaintiff must show that: (1) the principal
indicated the agent was acting for it, (2) the agent acted or agreed to act on the principal's behalf,
and (3) the agent was subject to the principal's control. Butcher v. Superior Offshore Int'l, LLC, 754
F. Supp. 2d 829, 835 (E.D. La. 2010).
"In Louisiana, an agent for a known principal cannot be held personally liable to a third
10
party unless the agent personally binds himself, exceeds his authority, or misrepresents a position
of the principal." Ragas v. Tarleton, No. 06‐4137, 2006 WL 2925448, at *3 (E.D. La. Oct. 10, 2006).
A mandatary‐agent who exceeds his authority is personally bound to the third person, unless that
third person knew at the time the contract was made that the mandatary exceeded his authority
or the principle ratifies the contract. Motin v. Travelers Ins. Co., No. Civ.A. 03‐2487, 2003 WL
22533673, at *3 (E.D. La. Nov. 4, 2003) (citing La. Civil Code Ann. art. 3016 (West Supp.2003)).
“Ratification, as applied to the law of agency, is the adoption or affirmance by principal of acts of
his agent, either expressly, as by a written act, or impliedly as by acceptance of benefits of the
contract." Medallion Tower, Inc. v. Fort Lauderdale Technical Coll., Inc., 323 F. Supp. 180, 185 (E.D.
La. 1970).
Plaintiff alleges that the Individual Defendants “acted outside of their corporate capacity."
While this allegation is tenuous, this Court feels that, at this stage of the proceeding, it would be
improper to dismiss these allegations against the Individual Defendants. It is without doubt that
Plaintiff's statements certainly put the Individual Defendants on notice of the claims being asserted
against them. To the extent that Plaintiff is not able to carry their burden against the Individual
Defendants the Court finds that this argument more properly addressed on a summary judgment
motion. Accordingly, Moving Defendants Motion is denied as to counts six and seven.
11
III.
Count Ten: Fraud and Misrepresentation
The Court finds that Plaintiff has failed to allege with specificity the Individual Defendants'
involvement in the fraud as required by Federal Rule of Civil Procedure 9(b). Accordingly, this claim
is dismissed against the Individual Defendants.
A.
Arguments of the Parties
Plaintiff's Amended Complaint alleges that the Individual Defendants “intentionally
misrepresented their interest in confecting Administrative Agreements with Plaintiff in order to
obtain training, proprietary information, and trade secrets." (Doc. 23 at ¶102(a).) Plaintiff further
maintains that the Individual Defendants had no intention of adhering to these agreements, and
admitted to this plan. (Id.)
Defendants argue that Plaintiff added “nothing of substance” to the amended fraud
allegations and that the fraud claim fails under Rule 9(b). (See Doc. 24.) Plaintiff avers that the
Individual Defendants admitted to perpetrating a detailed scheme in order to deceive Premier and
to acquire Premier’s trade secrets and copyrighted works for the Defendants' use. (Doc. 24.)
Plaintiff claims that because the Individual Defendants misrepresented the position of their
respective principles, they are individually liable. (Id.) Plaintiff does not address whether the
Amended Complaint satisfies Federal Rule 9(b).
12
B.
Analysis
"In Louisiana, the elements of delictual fraud or intentional misrepresentation are: (1)
misrepresentation of a material fact; (2) made with the intent to deceive; and (3) causing justifiable
reliance with resultant injury." Murungi v. Texas Guaranteed, 693 F. Supp. 2d 597, 604 (E.D. La.
2010) (citing Guidry v. U.S. Tobacco Co., Inc., 188 F.3d 619, 627 (5th Cir. 1999)). In essence, "under
Louisiana law, the relevant inquiry [in a fraud case] is whether there was a misrepresentation,
suppression, or omission of true information." Petrohawk Properties, L.P. v. Chesapeake La., L.P.,
689 F.3d 380, 389 (5th Cir. 2012) (citation and quotations omitted).
In alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake. Fed. R. Civ. P. 9. To satisfy Rule 9(b)'s pleading requirements, the
plaintiffs must “specify the statements contended to be fraudulent, identify the speaker, state
when and where the statements were made, and explain why the statements were fraudulent.”
Southland Sec. Corp. v. INSpire Ins. Solutions, Inc., 365 F.3d 353, 362 (5th Cir. 2004) (quoting
Williams v. WMX Technologies, Inc., 112 F.3d 175, 177–78 (5th Cir.1997)). Thus, at a minimum, a
plaintiff must set forth the "[w]ho, what, when, where, and how of the alleged fraud." U.S. ex rel.
Williams v. Bell Helicopter Textron Inc., 417 F.3d 450, 453 (5th Cir. 2005) (citation and quotations
omitted).
The Amended Complaint claims that Defendants “intentionally misrepresented their
13
interest in confecting Administrative Agreements with Plaintiff in order to obtain training,
proprietary information, and trade secrets.” (See Doc. 23 at ¶102(a)). Plaintiff’s allegations of fraud
and misrepresentation clearly fall under rule 9(b). While Plaintiff has identified the speakers,
Plaintiff has failed to allege with specificity the statements contended to be fraudulent, identify
when and where the statements were made, and explain why the statements were fraudulent.
Importantly, Plaintiff blanketly states that the Individual Defendants have admitted to being a part
of this scheme, yet fail to provide any information to corroborate this statement. This is clearly
insufficient to satisfy the heightened requirements of Rule 9(b).
In sum, Plaintiff fails to meet the particularity requirements of Rule 9(b) as applicable to the
Individual Defendants. Accordingly, Plaintiff's fraud and intentional misrepresentation claims
against the Individual Defendants are dismissed without prejudice. To the extent that Plaintiff can
allege sufficient facts to meet the heightened pleading requirement of Rule 9(b), Plaintiff has
fifteen days to amend this claim only.1
1
Denial of leave to amend “may be warranted for undue delay, bad faith or dilatory motive on the
part of the movant, repeated failure to cure deficiencies, undue prejudice to the opposing party,
or futility of a proposed amendment.” See Rosenblatt v. United Way of Greater Houston, 607 F.3d
413, 419 (5th Cir.2010) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). The policy of the federal
rules, however, “is to permit liberal amendment to facilitate determination of claims on the merits
and to prevent litigation from becoming a technical exercise in the fine points of pleading.”
Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 597 ‐598 (5th Cir. 1981). “Thus, unless there is a
substantial reason to deny leave to amend, the discretion of the district court is not broad enough
to permit denial.” Id. (citing Lone Star Motor Import v. Citroen Cars, 288 F.2d 69, 75 (5th Cir.
1961)). The Court finds that allowing the Plaintiff to amend as to the fraud allegations only
14
CONCLUSION
For the foregoing reasons, Moving Defendants' Motion to Dismiss (Doc. 24) is GRANTED IN
PART and DENIED IN PART. Specifically, Counts three, four, five, eight, nine, and eleven are
dismissed with prejudice against the Individual Defendants. Count ten is dismissed without
prejudice against the Individual Defendants. Counts one, two, six, and seven remain against the
Individual Defendants.
Plaintiff has fifteen days to amend only Count Ten.
New Orleans, Louisiana on this 30th day of July, 2013.
_____________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE
comports with the standards of this Circuit.
15
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?