Southern Audio Services, Inc. v. Carbon Audio, LLC

Filing 41

RULING and ORDER: Defendant's 34 Motion to Dismiss Plaintiff's Second Amended Complaint is DENIED. Signed by Chief Judge Brian A. Jackson on 10/28/2015. (BCL) (Main Document 41 replaced on 10/29/2015 - clerical error) (PJH).

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
SOUTHERN AUDIO SERVICES,
INC.

CIVIL ACTION

VERSUS
CARBON AUDIO, LLC, ET AL.

NO.: 15-00050-BAJ-SCR

RULING AND ORDER
Before the Court is Defendants Headbox, LLC’s and Licon Ventures, Inc.’s
Motion to Dismiss Plaintiff’s Second Amended Complaint (Doc. 34), seeking
an order dismissing Plaintiff’s Second Amended Complaint with prejudice pursuant
to Federal Rule of Civil Procedure (“Rule”) 12(b)(2) and 12(b)(6). Plaintiff filed an
Opposition to Defendants’ Motion. (Doc. 35). Defendants were then granted leave to
file a Reply. (Doc. 38). Plaintiff has been denied leave to file a surreply. (Doc. 40).
Oral argument is not necessary. The Court has jurisdiction pursuant to 28 U.S.C. §
1332.
I.

BACKGROUND

A. Plaintiff’s initial Complaint
On January 1, 2015, Plaintiff Southern Audio Services, Inc. (“Plaintiff”) filed
a Complaint for Breach of Contract against Defendant Carbon Audio, LLC
(“Carbon”). (Doc. 1). Plaintiff’s claim for breach of contract arises from a licensing
agreement (“the Agreement”) it entered into with Carbon on August 17, 2012. (Doc.
1-3 at pp. 1—7). Under the terms of the Agreement, Plaintiff, owner of the

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“BAZOOKA” trademark for high-end audio equipment, permitted Carbon to register
the “ZOOKA” trademark in connection with speakers it produced for computers and
other small portable electronic devices. (Id. at pp. 1—2). Pursuant to the
Agreement, Plaintiff asserted that Carbon was obligated to, inter alia, pay it
royalties from the sale of ZOOKA products and not to “offer for sale or sell” any
products without the ZOOKA trademark until certain royalty payments were made.
(Doc. 1 at ¶¶ 19—25).
Plaintiff claimed in its Complaint that Carbon breached the Agreement in
three ways: 1) by failing to make certain royalty payments; 2) by selling a new
product—the “Pocket Speaker”—without the ZOOKA trademark before it made
certain royalty payments; and 3) by licensing its intellectual property rights in the
Pocket Speaker and other products to a third party in exchange for royalties before
it made certain royalty payments. (Id. at ¶¶ 32—36).

Plaintiff requested a

monetary award of at least $450,000 to compensate it for unpaid royalties or to
satisfy a minimum royalty payment it asserts was contemplated under the
Agreement. (Id. at p. 6).
In addition to monetary damages—and central to the ultimate inclusion of
Headbox, LLC (“Headbox”) and Licon Ventures, Inc. (“Licon”) (collectively,
“Defendants”) in this lawsuit—Plaintiff also requested an injunction preventing
Carbon from selling the Pocket Speaker to third parties or licensing its intellectual
property rights in the Pocket Speaker to third parties. (Id.). Carbon did not respond

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to Plaintiff’s lawsuit. Plaintiff then filed a Motion for Default Judgment, which
included a proposed judgment that provided in pertinent part:
Carbon Audio is enjoined from selling, or licensing any other party to
sell, the Pocket Speaker product, or any other product covered by [the
Agreement], until Carbon Audio . . . has satisfied all the monetary
payment requirements of this Judgment. This injunction expressly
covers any sales made under license, permission, or other authority
granted by Carbon Audio, or in the name of Carbon Audio, to any third
party selling the Pocket Speaker of an equivalent product. This
injunction covers products currently sold by Monster, Inc. or by
Headbox, Inc., to the extent such products are sold under license or
other grant of rights from Carbon Audio or in the name of Carbon
Audio.
(Doc. 11-7 at pp. 8—9).
Prior to a ruling on the Motion for Default Judgment against Carbon,
Defendants filed a Motion to Intervene for the limited purpose of challenging the
injunction. (Doc. 12). In the Motion to Intervene, Headbox asserted that it entered
into a license agreement with Carbon in September 2013, which granted Headbox
an exclusive, royalty-bearing license in the Pocket Speaker intellectual property.
(Id. at p. 6). Licon asserted that it is Carbon’s senior secured lender and that it
foreclosed on all of Carbon’s assets in April, 2014. (Id. at p. 7). Defendants asserted
that Plaintiff’s proposed injunction would impair their lawful interests. (Id. at p. 2).
Plaintiff did not oppose the Motion to Intervene, (Doc. 16), and the Motion
was subsequently granted by the Magistrate Judge for the limited purpose of
allowing Defendants the opportunity to file an opposition to Plaintiff’s Motion for
Default Judgment, (Doc. 17). After Defendants filed their limited opposition, (Doc.
18), Plaintiff filed a Second Amended Complaint naming them both as defendants

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in the underlying lawsuit, (Doc. 22). In its Second Amended Complaint, Plaintiff
added a breach of contract claim against Licon, (Id. at ¶¶ 123—131), a business
enterprise or joint venture liability claim against Headbox, (Id. at ¶¶ 132—137),
and a revocatory action claim against Licon, (Id. at ¶¶ 138—146).
B. Plaintiff’s Second Amended Complaint
Relative to these new claims, Plaintiff now asserts that sometime in April,
2013, Licon purchased an existing loan that was made to Carbon. (Id. at ¶¶ 94—96).
In conjunction with this purchase, Plaintiff claims that Licon took security interests
in Carbon’s intellectual property, some of which were not perfected. (Id. at ¶¶ 96,
114, 117). On April 1, 2014, Plaintiff asserts that Licon obtained a transfer from
Carbon of certain intellectual property. (Id. at ¶ 97). Plaintiff further claims that
Licon accepted a transfer of all rights in the ZOOKA trademark on November 7,
2014. (Id. at ¶ 103). Plaintiff asserts that Carbon “made transfers of money or other
property of value to [Licon] that either left [Carbon] insolvent or worsened
[Carbon’s] existing insolvency.” (Id. at ¶ 110).
In the midst of these transactions, Plaintiff asserts that on September 17,
2013, Carbon and Headbox “entered into an agreement that effectively transferred
all of [Carbon’s] active business operations to Headbox.” (Id. at ¶ 71). Following this
agreement, Plaintiff asserts that Headbox and Carbon “essentially became a single
business enterprise or a joint venture for the purpose of developing and selling all
active products that [Carbon] had previously developed.” (Id. at ¶ 81). Plaintiff
further asserts that Licon was a named third-party beneficiary of the agreement

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between Headbox and Carbon, and that Licon received at least a portion of the
$250,000 Headbox paid to Carbon under the September 17, 2013 agreement. (Id. at
¶¶ 90, 92).
II. STANDARD OF REVIEW
When a nonresident defendant moves to dismiss for lack of personal
jurisdiction under Federal Rule of Civil Procedure (“Rule”) 12(b)(2), the plaintiff
bears the burden of establishing that the court has jurisdiction over the defendant.
Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985). In deciding a motion to
dismiss for lack of personal jurisdiction, courts within the United States Court of
Appeals for the Fifth Circuit accept the plaintiff's allegations as true, other than
those which are conclusory or controverted, and conflicts between the parties' facts
are resolved in the plaintiff's favor. Panda Brandywine v. Potomac, 253 F.3d 865,
868 (5th Cir. 2001).
A motion to dismiss under Rule 12(b)(6) tests the sufficiency of the complaint
against the legal standard set forth in Rule 8, which requires “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). On a Rule 12(b)(6) motion, a district court generally “must limit itself to the
contents of the pleadings, including attachments thereto.” See Collins v. Morgan
Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000).
“To survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (Bell Atl. Corp. v. Twombly, 550 U.S. 544,

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570 (2007)). “Determining whether a complaint states a plausible claim for relief [is]
. . . a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” Id. at 679. “[F]acial plausibility” exists “when the
plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. at 678
(Twombly, 550 U.S. at 556).
Hence, the complaint need not set out “detailed factual allegations,” but
something “more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action” is required. Twombly, 550 U.S. at 555. When
conducting its inquiry, the Court must “accept[] all well-pleaded facts as true and
view[] those facts in the light most favorable to the plaintiff.” Bustos v. Martini Club
Inc., 599 F.3d 458, 461 (5th Cir. 2010) (quotation marks omitted).
The Supreme Court has noted that Rule 12(b)(6) requires dismissal whenever
a claim is based on an invalid legal theory:
Nothing in Rule 12(b)(6) confines its sweep to claims of law which are
obviously insupportable. On the contrary, if as a matter of law it is
clear that no relief could be granted under any set of facts that could be
proved consistent with the allegations . . . a claim must be dismissed,
without regard to whether it is based on an outlandish legal theory, or
on a close but ultimately unavailing one.
Neitzke v. Williams, 490 U.S. 319, 327 (1989) (quotation marks and citations
omitted). However, “[f]ederal pleading rules . . . do not countenance dismissal of a
complaint for imperfect statement of the legal theory supporting the claim
asserted.” Johnson v. City of Shelby, Miss., 574 U.S. ___, ___, 135 S. Ct. 346, 346
(2014) (per curiam).

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III. DISCUSSION
Plaintiff asserts four claims in its Second Amended Complaint: 1) breach of
contract by Carbon Audio; 2) breach of contract by Licon; 3) a single business
enterprise or joint venture liability claim against Headbox; and 4) a revocatory
action claim against Licon. (Doc. 22 at pp. 13—17). Prior to addressing each of these
claims, this Court first addresses Defendants’ assertion that their limited
intervention, (Docs. 12, 17—18), did not subject them to personal jurisdiction in this
case, (Doc. 34-1 at pp. 30—36).
A. 12(b)(2) Personal Jurisdiction
Unlike subject matter jurisdiction, jurisdiction over the person can be waived.
Cactus Pipe & Supply Co. v. M/V Montmartre, 756 F.2d 1103, 1107 (5th Cir. 1985).
A party can consent to jurisdiction by making an appearance. Id. at pp. 1107—08.
“Generally, an appearance in an action involves some presentation or submission to
the court. An appearance may result from the filing of an answer without raising
jurisdictional defects. An appearance may also arise by implication from a
defendant's seeking, taking, or agreeing to some step or proceeding in the cause
beneficial to himself or detrimental to plaintiff other than one contesting only the
jurisdiction or by reason of some act or proceedings recognizing the case as in
court.” Id. at 1108 (citations omitted).
Plaintiff asserts that personal jurisdiction is proper over Defendants because
they both filed a motion to intervene in this action under Rule 24, (Doc. 12), and in
so doing, voluntarily subjected themselves to this Court’s jurisdiction. (Doc. 22 at

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pp. 3—4; Doc. 35 at pp. 8—10).1 Plaintiff asserts that Fifth Circuit precedent
instructs that a party who intervenes in an action voluntarily consents to
jurisdiction, even if the party doesn’t fully intervene. (Doc. 35 at p. 8). Plaintiff cites
Trans World Airlines, Inc. v. Mattox, 897 F.2d 773, 786—87 (5th Cir. 1990), wherein
the Fifth Circuit found that the intervening parties there, “waived any objection to
the jurisdiction of the court” because “they came voluntarily into court and joined
with the [named Defendant] in seeking dismissal of the injunctive action.” Id. at
787. Plaintiff also cites language in Cactus, wherein the Fifth Circuit cited with
approval Grammenos v. Lemos, 457 F.2d 1067, 1070 (2d Cir. 1972) for the
proposition that, “if a party enters a case and fails to object to jurisdiction, and
requests the court to do some affirmative act on its behalf in some substantive way,
the party will be held to have waived further objection.”
Defendants assert that Plaintiff, “induced their intervention by seeking a
baseless injunction aimed directly at them” in its original Complaint. (Doc. 34-1 at
p. 32). Defendants contend that under these circumstances, a limited intervention is
not tantamount to consent to personal jurisdiction. Defendants rely heavily on
S.E.C. v. Ross, 504 F.3d 1130 (9th Cir. 2007), wherein the Ninth Circuit, “decline[d]
to adopt a per-se rule that an intervenor consents to the court’s personal
jurisdiction,” and instructed, “[w]e do not think that anything in the Federal Rules
suggests that a non-named party cannot intervene of right and then contest the

Plaintiff has not asserted that Defendants have purposefully availed themselves to the State of
Louisiana by establishing minimum contacts here. (Doc. 22 at ¶¶ 30—37); Int’l Shoe co. v.
Washington, 326 U.S. 310, 316 (1945).
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federal court’s exercise of personam jurisdiction.” Id. at pp. 1148, 1150; (Doc. 34-1 at
pp. 33—34).
Ross was preceded by a lawsuit in which the Securities and Exchange
Commission brought a civil enforcement action against a telecommunications
company, the company’s sole owner, and the company’s sales and marketing
partners for the sale of unregistered securities. S.E.C. v. Alpha Telcom, Inc., 187 F.
Supp. 2d 1250 (D. Or. 2002). The District Court granted equitable relief against the
company and its owner in the form of a permanent injunction and disgorgement. Id.
at 1263. A court appointed receiver moved to disgorge $21 million in commissions
on the sales of the unregistered securities from the company’s sales agents. Ross,
504 F.3d at 1134. Several agents moved to intervene because the receiver was
attempting to adjudicate their personal liability. Id. at 1135. The District Court
allowed the agents to intervene, after which they asserted the defense of lack of
personal jurisdiction. Id. at 1135—36. The District Court found jurisdiction proper
over the agents for reasons other than their intervention. Id. The Ninth Circuit
disagreed with those reasons and also concluded that the agents’ intervention did
not result in consent to personal jurisdiction.
In reaching its conclusion, the Ninth Circuit observed:
Few courts have directly addressed whether a non-party who
intervenes in ongoing proceedings pursuant to Rule 24(a)(2) can raise
personal jurisdiction objections in conjunction with a motion to
intervene. However, those that have addressed this question have
generally concluded that a party who intervenes, consents, as a matter
of law, to the jurisdiction of the court permitting the intervention. See
In re Bayshore Ford Truck Sales, Inc., 471 F.3d 1233 (11th Cir.2006);
County Sec. Agency v. Ohio Dept. of Commerce, 296 F.3d 477 (6th

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Cir.2002); Pharm. Research & Mfrs. v. Thompson, 259 F.Supp.2d 39
(D.D.C.2003); City of Santa Clara v. Kleppe, 428 F.Supp. 315, 317
(N.D.Cal.1976). Wright and Miller concurs in this view: “[T]he
intervenor submits himself to the personal jurisdiction of the court by
seeking to intervene in the action and cannot move to dismiss on that
ground.” 7C W Right, Miller & Kane, Federal Practice and Procedure,
Civil 3D § 1920, at 612 (3d ed.2007) (citing Kleppe, 428 F.Supp. 315).
Id. at p. 1148. The Ninth Circuit opined that, after “devot[ing] little space to
analyzing this issue,” the Eleventh and Sixth Circuit have held that parties who
intervene necessarily acquiesce to jurisdiction. Id. at 1148 (citing Ford, 471 F.3d at
1248; Country Sec. Agency, 296 F.3d at 483). Unpersuaded, the Ninth Circuit
concluded that intervention of right, “simply puts the intervenor into the position he
would have been in had the plaintiff (or another party) properly named him to begin
with,” so a challenge to personal jurisdiction is proper. Id. at 1150.
Defendants urge this Court to follow the reasoning expressed in Ross because
it is consistent with principles of due process, and because it is the most recent and
persuasive authority on this issue. (Doc. 34-1 at p. 35). Defendants further assert
that the Fifth Circuit has not squarely addressed this issue, (Doc. 34-1 at p. 32), and
that the decisions of other Circuit courts that have addressed this issue cite to
outdated Ninth Circuit precedent. See Country Sec. Agency, 296 F.3d 477; Ford, 471
F.3d 1233; Gradel v. Piranha Capital, L.P., 495 F.3d 729 (7th Cir. 2007). Lastly,
Defendants cite a case from the Eastern District of Texas wherein the court found
that an intervening party was not precluded from requesting a transfer of venue.
TiVo Inc. v. AT&T Inc., No. 2:09-CV-259, 2010 WL 10922068 (E.D. Tex. Mar. 31,

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2010). By analogy, Defendants argue that personal jurisdiction should be treated
the same. (Doc. 34-1 at p. 36).
This Court finds that Defendants have consented to the exercise of personal
jurisdiction in this proceeding. In light of Fifth Circuit precedent set forth, supra,
Defendant’s reliance on Ross goes too far. Simply put, a voluntary appearance, by
intervention or otherwise, has been viewed as an act of consent to personal
jurisdiction in this Circuit. Cactus 756 F.2d 1103, 1107; Trans World Airlines, Inc.,
897 F.2d 773, 786—87. The three judge panel in Ross qualified its decision with an
admission that the weight of federal jurisprudence on this issue equates
intervention with acquiescence to personal jurisdiction. Ross, 504 F.3d at 1148
(“However, those [courts] that have addressed this question have generally
concluded that a party who intervenes, consents, as a matter of law, to the
jurisdiction of the court permitting the intervention.”).
Furthermore, this Court recognizes that Defendants did not raise the issue of
personal jurisdiction in their Motion to Intervene. (See Doc. 12). Once Defendants
were allowed to intervene, they again did not raise the issue of personal jurisdiction
in their Limited Opposition to Plaintiff’s Motion for Default Judgment. (See Doc.
18). Unlike the assertion in Ross that the intervening party there “objected to in
personam jurisdiction as effectively as [he] could have” at every turn, Ross, 504 F.3d
at 1149, Defendants here waited until after they voluntarily appeared to raise the
issue of personal jurisdiction. This Court is persuaded that Defendants’ voluntary

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appearances in this case operated as consent to jurisdiction. Cactus 756 F.2d 1103,
1107; Trans World Airlines, Inc., 897 F.2d 773, 786—87.
Accordingly, this Court finds that exercise of personal jurisdiction is proper
over Defendants. As a result, Defendants’ Motion to Dismiss under Rule 12(b)(2) is
DENIED.
B. 12(b)(6) Failure to State a Claim
Plaintiff’s first claim is for breach of contract against Carbon. (Doc. 22 at ¶¶
118—122). Although the relief sought in conjunction with Plaintiff’s first claim is
what prompted Defendants to intervene, Defendants do not directly address this
claim in their Motion to Dismiss. (See Doc. 34).
1. Breach of Contract by Licon
Defendants assert that Plaintiff’s second claim for breach of contract by Licon
cannot state a plausible claim for relief. (Doc. 34-1 at p. 18). In its Second Amended
Complaint, Plaintiff asserts that Licon accepted an assignment from Carbon of
Carbon’s rights in the ZOOKA trademark. (Doc. 22 at ¶¶ 103, 124). At the time of
the assignment, Plaintiff asserts that Licon was aware of the Agreement. (Id. at ¶
99). Plaintiff further asserts that the Agreement permitted Carbon to assign its
rights in the ZOOKA trademark subject to the requirement that any assignee would
be bound by its terms and conditions. (Id. at ¶ 125). Because it is bound by the
terms of the Agreement, Plaintiff asserts that Licon, like Carbon, breached the
obligation to pay royalties and breached the obligation to refrain from selling
certain products until minimum royalty payments were made. (Id. at ¶¶ 128—129).

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Plaintiff further asserts that Licon breached the Agreement by licensing another
party the right to sell a version of the Pocket Speaker. (Id. at ¶ 130).
Licon counters that it was not a party to the Agreement and never agreed to
be bound by it. (Doc. 34-1 at p. 18). Invoking Article 9 § 9-622 of the Uniformed
Commercial Code (“Article 9”), Licon asserts that as Carbon’s senior secured
creditor, it lawfully foreclosed on Carbon’s assets, including the ZOOKA trademark,
free of any associated liabilities. (Id.). Under LA CIV. CODE ART. 1821, Licon also
asserts that a party to a contract can only seek relief from a third party if there has
been an express assumption in writing, which Plaintiff does not allege existed. (Id.).
In sum, Licon maintains that “[Plaintiff] has not alleged, and cannot plausibly
allege, that Licon, a secured creditor, assumed Carbon’s pre-existing, unsecured
debt—let alone that it did so in writing.” (Id. at 21).
Plaintiff asserts that Carbon did not own unrestricted rights in the ZOOKA
trademark and as a consequence, Licon could not acquire rights broader than those
enjoyed by Carbon. (Doc. 22 at ¶¶ 124—125; Doc. 35 at p. 16).

Accepting the

veracity of Plaintiff’s well-pleaded factual allegations, this Court is satisfied that
they plausibly give rise to an entitlement to relief for breach of contract against
Licon. Accordingly, Defendants’ Motion to Dismiss Plaintiff’s breach of contract
claim against Licon is DENIED.
2. Single Business Enterprise or Joint Venture Liability
Defendants assert that Plaintiff has not plausibly stated a claim for relief
against Headbox under a single business enterprise or joint venture theory of

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liability. (Doc. 34-1 at pp. 26—41). In its Second Amended Complaint, Plaintiff
asserts that Carbon and Headbox entered into an agreement on September 17, 2013
that “purported to give Headbox an exclusive, irrevocable license to develop and sell
all Carbon Audio products except the ZOOKA speaker.” (Doc. 22 at ¶ 74). At the
time Carbon and Headbox entered into their agreement, Plaintiff claims that
Carbon had discontinued the ZOOKA speaker such that it effectively transferred its
entire active business to Headbox. (Id. at ¶¶ 75—76, 83). Plaintiff further asserts
that Carbon and Headbox shared executives and shared revenue for a period of time
after they entered into their licensing agreement, (Id. at ¶¶ 84—85), and that
Headbox had, “almost complete control over Carbon” under the licensing agreement,
(Id. at ¶ 88). For the purposes of Defendants’ Motion to Dismiss, Plaintiff concedes
that Delaware law applies to these two claims. (Doc. 35 at p. 6 n. 10).
To determine if a joint venture is established under Delaware law, Plaintiff
and Defendants both cite Warren v. Goldinger Bros., Inc., 414 A.2d 507, 509
(Del.1980), wherein the Supreme Court of Delaware held that to create a joint
venture, “there must be (1) a community of interest in the performance of a common
purpose, (2) joint control or right of control, (3) a joint proprietary interest in the
subject matter, (4) a right to share in the profits, (5) [and] a duty to share in the
losses which may be sustained.” (Doc. 35 at p. 13; Doc. 34-1 at pp. 26—27).
Defendants assert that Plaintiff’s joint venture claim must fail because it has not
pled facts to satisfy each of the Warren elements. (Doc. 34-1 at p. 26). Alternatively,

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Defendants assert that even if a joint venture was created, Headbox is not liable for
any debt Carbon incurred unrelated to the venture. (Doc. 34-1 at p. 29).
Accepting the veracity of Plaintiff’s well-pleaded factual allegations, this
Court finds that Plaintiff has pled sufficient facts to give rise to a reasonable
inference that a joint venture may have been created. (See Doc. 22 at ¶¶ 74—76, 81,
83—86). Furthermore, this Court finds that a reasonable inference may be drawn
that the relief Plaintiff seeks is related to any such venture. (See Doc. 22 at ¶ 135).
Accordingly, Defendants’ Motion to Dismiss Plaintiff’s joint venture claim is
DENIED. To the extent Defendants treat Plaintiff’s joint venture claim as
indistinguishable from its single business enterprise claim, Defendants’ Motion to
Dismiss Plaintiff’s single business enterprise claim is similarly DENIED.2
3. Revocatory Action against Licon
Defendants assert that Plaintiff has not plausibly stated a claim for relief
against Licon under a revocatory action pursuant to LA CIV. CODE ART. 2036.3 In its
Second Amended Complaint, Plaintiff asserts that certain transfers of Carbon’s
assets to Licon increased Carbon’s insolvency or caused it to become insolvent. (Doc.
22 at ¶ 143). Furthermore, Plaintiff asserts that Licon did not comply with Article 9
requirements, because it included secured property with unsecured property in a
single asset transfer. (Id. at ¶ 141). Consequently, Plaintiff claims that any transfer

Given Defendants’ treatment of these two claims as largely one and the same, this Court declines to
engage in an in-depth analysis of any difference between the two at this stage of this proceeding.
2

LA CIV. CODE ART. 2036 provides: “An obligee has a right to annul an act of the obligor, or the result
of a failure to act of the obligor, made or effected after the right of the obligee arose, that causes or
increases the obligor's insolvency.”

3

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of the ZOOKA trademark to Licon was not protected by Article 9. (Doc. 22 at ¶ 141;
Doc. 35 at p. 19).
Defendants seek to dismiss Plaintiff’s revocatory action on three primary
grounds. First, Defendants assert that Plaintiff seeks to unwind, by way of LA CIV.
CODE ART. 2036, a foreclosure that was executed in Oregon, under Oregon law,
between two Delaware entities. (Doc. 34-1 at pp. 21—22). Under these
circumstances, Defendants maintain that Louisiana law cannot support Plaintiff’s
claim. (Id.).4 Second, Defendants assert that Licon’s secured status—whether
perfected or unperfected—defeats Plaintiff’s claim even if Louisiana law applies to
this dispute. (Id. at pp. 22—23).

Defendants claim that Plaintiff concedes that

assets transferred to Licon were subject to security agreements. (Doc. 34-1 at p. 22
citing Doc. 22 at ¶¶ 96, 114). In connection with this assertion, Defendants
maintain that Plaintiff improperly conflates a secured interest with a perfected
secured interest. (Doc. 34-1 at p. 22). Lastly, Defendants assert that the asset
transfers at issue cannot be annulled because they did not increase Carbon’s
insolvency. (Doc. 34-1 at p. 23). Defendants assert that Plaintiff has not claimed
that the value of the assets Licon received exceeded the value of the debt that was
extinguished. (Id.).
This Court’s review of the facts pled in Plaintiff’s Second Amended Complaint
indicate that Licon accepted money transfers or other property from Carbon at a

Some choice of law issues may not require a full factual record and may be amenable to resolution
on a motion to dismiss. In this case, however, the Court will defer its choice-of-law decision until the
parties present a factual record sufficient to permit this Court to undertake Louisiana’s choice of law
analysis. See LA CIV. CODE ART. 3537; 3542.
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time when Plaintiff asserts Carbon owed it money under the Agreement. Accepting
the veracity of Plaintiff’s well-pleaded factual allegations, this Court finds that they
plausibly give rise to an entitlement to relief under LA CIV. CODE ART. 2036.
Accordingly, Defendants’ Motion to Dismiss Plaintiff’s revocatory action is
DENIED.

V. CONCLUSION
Accordingly,
IT IS ORDERED that Defendants’ Motion to Dismiss Plaintiff’s
Second Amended Complaint (Doc. 34) is DENIED.

Baton Rouge, Louisiana, this 28th day of October, 2015.

______________________________________
BRIAN A. JACKSON, CHIEF JUDGE
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

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