Thogus Products Company v. Bleep, LLC

Filing 43

Memorandum Opinion and Order: For the reasons set forth in this Order, Thogus Products Company's Motion to Dismiss Count VI is GRANTED. 21 Judge Pamela A. Barker on 6/4/2021. (P,K)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
THOGUS PRODUCTS COMPANY,
-vs-

Plaintiff,

BLEEP, LLC,
Defendant.

CASE NO. 1:20-cv-1887
JUDGE PAMELA A. BARKER

MEMORANDUM OF OPINION AND
ORDER

Currently pending is Plaintiff Thogus Products Company’s Motion to Dismiss Count VI of
Defendant Bleep, LLC’s Counterclaim. (Doc. No. 21.) Defendant Bleep, LLC filed a Brief in
Opposition on February 19, 2021, to which Plaintiff replied on February 26, 2021. (Doc. Nos. 31,
35.) For the following reasons, Plaintiff’s Motion to Dismiss is granted.
I.

Background
Defendant Bleep, LLC (hereinafter “Bleep”) develops and sells certain medical devices for

the treatment of sleep apnea, including the DreamWay and DreamPort products. (Doc. No. 12, ¶ 8.)
Both products are designed to work with continuous positive airway pressure (“CPAP”) machines
and are finished medical devices under applicable federal law and regulations promulgated by the
United States Food & Drug Administration (“FDA”). (Id. at ¶ 8, 11.)
While researching potential manufacturers for the DreamWay and DreamPort, Bleep learned
that Plaintiff Thogus Products Company (“Thogus”) was interested in becoming a contract
manufacturer of finished medical devices. (Id. at ¶ 12.) Although Thogus only manufactured medical
device components at the time the two companies entered negotiations, Thogus expressed a desire to
Bleep in becoming a finished medical devices manufacturer. (Id. at ¶ 13.)

Between late 2017 and early 2018, Thogus and Bleep entered into negotiations for an
agreement whereby Thogus would manufacture Bleep’s DreamWay and DreamPort products. (Id. at
¶¶ 12-22.) Bleep claims that, during these negotiations, Thogus represented that it either was already
in compliance with, or would achieve compliance with, manufacturing and regulatory compliance
standards for a “finished medical device” manufacturer under the FDA. (Id. at ¶¶ 16-22.) In addition,
Bleep alleges that Thogus represented that it would be able to satisfy Bleep’s specifications and
quality standards for the DreamWay and DreamPort products. (Id.)
Bleep alleges that, in entering a manufacturing contract with Thogus, it relied on what it
purports were Thogus’s false representations and assurances with respect to Thogus’s ability and
intent to establish manufacturing operations that complied with medical device regulations. (Id. at ¶
25.) On March 2, 2018, Bleep and Thogus entered into a Manufacturing Supply Agreement (“MSA”)
for the manufacture of the DreamWay and DreamPort products. (Id. at ¶¶ 28-29.) Of particular
relevance herein, Section 17.15 of MSA contains the following choice of law provision:
17.15 Governing Law. This Agreement, including all exhibits, schedules,
attachments and appendices attached hereto and thereto, are governed by, and
construed in accordance with, the Laws of the State of Ohio, United States of America,
without regard to the conflict of laws provisions thereof.
(Doc. No. 12-2, PageID# 317.)
On December 29, 2020, Bleep filed its Answer to Thogus’s Complaint, as well as its Verified
Counterclaims. (Doc. No. 12.) In Count VI of its Counterclaims, Bleep asserts that Thogus’s conduct
constituted unfair or deceptive trade practices in violation of North Carolina’s Unfair and Deceptive
Trade Practices Act (“NC UDTPA”). (Id. at ¶¶ 194-99.) Thogus moves to dismiss Count VI, the
NC UDTPA claim, only. (Doc. No. 21.)

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II.

Standard of Review
Thogus moves to dismiss Bleep’s Count VI for failure to state a claim under Fed. R. Civ. P.

12(b)(6). Under Fed. R. Civ. P. 12(b)(6), the Court accepts the plaintiff’s factual allegations as true
and construes the Complaint in the light most favorable to the plaintiff. See Gunasekara v. Irwin,
551 F.3d 461, 466 (6th Cir. 2009). In order to survive a motion to dismiss under this Rule, “a
complaint must contain (1) ‘enough facts to state a claim to relief that is plausible,’ (2) more than ‘a
formulaic recitation of a cause of action’s elements,’ and (3) allegations that suggest a ‘right to relief
above a speculative level.’” Tackett v. M & G Polymers, USA, LLC, 561 F.3d 478, 488 (6th Cir.
2009) (quoting in part Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56, 127 S.Ct. 1955, 167
L.Ed.2d 929 (2007)).
The measure of a Rule 12(b)(6) challenge—whether the Complaint raises a right to relief
above the speculative level—“does not ‘require heightened fact pleading of specifics, but only enough
facts to state a claim to relief that is plausible on its face.’” Bassett v. National Collegiate Athletic
Ass’n., 528 F.3d 426, 430 (6th Cir. 2008) (quoting in part Twombly, 550 U.S. at 555-56, 127 S.Ct.
1955). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court
to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v.
Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Deciding whether a complaint
states a claim for relief that is plausible is a “context-specific task that requires the reviewing court
to draw on its judicial experience and common sense.” Id. at 679.
Consequently, examination of a complaint for a plausible claim for relief is undertaken in
conjunction with the “well-established principle that ‘Federal Rule of Civil Procedure 8(a)(2) requires
only a short and plain statement of the claim showing that the pleader is entitled to relief.’ Specific
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facts are not necessary; the statement need only ‘give the defendant fair notice of what the . . . claim
is and the grounds upon which it rests.’” Gunasekera, 551 F.3d at 466 (quoting in part Erickson v.
Pardus, 551 U.S. 89, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007)) (quoting Twombly, 127 S.Ct.
at 1964). Nonetheless, while “Rule 8 marks a notable and generous departure from the hypertechnical, code-pleading regime of a prior era . . . it does not unlock the doors of discovery for a
plaintiff armed with nothing more than conclusions.” Iqbal, 556 U.S. at 679, 129 S.Ct. 1937.
III.

Analysis
Thogus asserts that Bleep’s Count VI should be dismissed because the MSA’s clear and

unambiguous choice of law provision precludes Bleep from seeking relief under North Carolina law.
(Doc. No. 21-2, PageID# 421-22.) Bleep contends that North Carolina law applies because the
MSA’s choice of law provision governs only contract claims, not tort claims like Bleep’s unfair trade
practices claim in Count VI. (Doc. No. 31, PageID# 505-06.) For the following reasons, the Court
concludes that Ohio law governs and, therefore, Bleep’s Count VI should be dismissed.
A court exercising diversity jurisdiction must apply the choice-of-law rules of the forum state.
Glenway Indus., Inc. v. Wheelabrator-Frye, Inc., 686 F.2d 415, 417 (6th Cir. 1982). Therefore,
Ohio’s choice of law rules apply. The Ohio Supreme Court has adopted the Restatement (Second)
of Conflict of Laws, which provides:
The law of the state chosen by the parties to govern their contractual rights and duties
will be applied, even if the particular issue is one which the parties could not have
resolved by an explicit provision in their agreement directed to that issue, unless either
(a) the chosen state has no substantial relationship to the parties or the transaction and there
is no other reasonable basis for the parties’ choice, or
(b) application of the law of the chosen state would be contrary to a fundamental policy
of a state which has a materially greater interest than the chosen state in the
determination of the particular issue and which, under the rule of § 188, would be the
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state of the applicable law in the absence of an effective choice of law by the parties.
Tele-Save Merch. Co. v. Consumers Distrib. Co., Ltd., 814 F.2d 1120, 1122 (6th Cir. 1987) (quoting
Schulke Radio Prods., Ltd. v. Midwestern Broad. Co., 453 N.E.2d 683 (Ohio 1983)). “[C]ontractual
choice-of-law provisions are valid and enforceable” under Ohio law. CajunLand Pizza, LLC v.
Marco’s Franchising, LLC, --- F. Supp. 3d ---, 2021 WL 149867, at *3 (N.D. Ohio Jan. 15, 2021)
(quoting Miami Valley Mobile Health Servs., Inc. v. ExamOne Worldwide, Inc., 852 F. Supp. 2d 925,
932 (S.D. Ohio 2012)). Further, “[t]he Sixth Circuit has held repeatedly that contractual choice of
law provisions apply to tort claims that are closely related to the contractual relationship, as opposed
to those that are only tangentially related.” Id. (citing Adelman’s Truck Parts Corp. v. Jones Transp.,
797 F. App’x 997, 1000 (6th Cir. 2020); Banek Inc. v. Yogurt Ventures U.S.A., Inc., 6 F.3d 357, 363
(6th Cir. 1993); Moses v. Bus. Card Express, Inc., 929 F.2d 1131, 1139-40 (6th Cir. 1991);
Baumgardner v. Bimbo Food Bakeries Distribution, Inc., 697 F. Supp. 2d 801 (N.D. Ohio 2010));
CajunLand Pizza, LLC, 2021 WL 149867, at *3.
In Adelman, the Sixth Circuit affirmed the dismissal of a counterclaimant’s NC UDTPA claim
because the claim was barred by the contract’s choice-of-law provision. Adelman, 797 Fed. App’x
at 1000-01. The Sixth Circuit rejected the counterclaimant’s argument that his NC UDTPA claim
was “more like a tort claim than a contract claim,” and therefore, “the contractual choice-of-law
provision does not cover his claim.” Id. The court concluded that such an argument was foreclosed
by the Sixth Circuit’s decision in Moses v. Business Card Exp., Inc., 929 F.3d 1131 (6th Cir. 1991):
[In Moses], a party that sought to avoid a contract argued that its fraud and
misrepresentation claims were not covered by a contractual choice-of-law provision
that read, “This Franchise and License Agreement and the construction thereof shall
be governed by the laws of the state of Michigan.” Id. at 1139. We held that the fraud
and misrepresentation claims were indeed covered by that language. Id. at 1140.
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We find no legally significant difference between the choice-of-law clause here and
the choice-of-law clause in Moses. Here, as there, the clause clearly “refers to more
than construction of the agreement; otherwise the first six words would be
surplusage.” Id. at 1139-40. Just as in Moses, the choice-of-law clause here governs
the agreement and any disputes, whether contractual or tortious, that are directly
related to it. See Banek Inc. v. Yogurt Ventures U.S.A., Inc., 6 F.3d 357, 363 (6th Cir.
1993) (holding that a choice-of-law provision was sufficiently broad to cover the
plaintiff’s claims for fraud and misrepresentation that were “directly related to” the
contract). Because Jones’s NC UDTPA claim arose out of and is directly related to the
Purchase Agreement, it is barred by the Purchase Agreement’s choice-of-law clause.
Id. at 1001.
Here, Bleep’s NC UDTPA claim is closely related to the underlying negotiation and
performance of the MSA. (See Doc. No. 12, ¶ 196.) Therefore, the Court concludes that this claim
is subject to the parties’ choice of law provision, and as a result, Ohio law applies. Accordingly, the
MSA bars Bleep’s NC UDTPA claim and it must be dismissed.
Bleep’s argument that Adelman is inapposite and wrongly decided is not persuasive. (Doc.
No. 31, PageID# 510.) First, the MSA’s choice of law provision at issue here is nearly identical to
the Adelman choice of law provision. The instant choice of law provision provides that the agreement
and all related exhibits “are governed by, and construed in accordance with, the Laws of the State
of Ohio,” while the Adelman choice of law provision provides that the contract “shall be governed
by and construed in accordance with the laws of the State of Ohio.” Compare Doc. No. 12-2,
PageID# 317, with Adelman, 797 Fed. App’x at 1000 (emphasis added).

Moreover, the

counterclaimant in Adelman also brought an NC UDTPA claim related to conduct surrounding the
negotiation and formation of a contract. Adelman, 797 Fed. App’x at 999. These provisions are
virtually identical, as is the factual context in which each is implicated. Thus, the Court concludes
that, just as in Adelman, the MSA’s choice of law provision governs the contract, as well as any
disputes—contractual or tortious—directly related to it. Id. at 1001.
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Second, the Court disagrees that Adelman failed to correctly apply substantive Ohio law.
(Doc. No. 31, PageID# 513.) Contrary to Bleep’s position, there is no significant difference between
the choice of law provision in Adelman and the choice of law provision in Moses simply because
each provision applied the substantive laws of different states.

(Id.) Adelman applied well-

established Sixth Circuit precedent and Ohio’s conflict of laws rules in determining that the
counterclaimant’s tortious NC UDTPA claim fell within the scope of the contract’s choice of law
provision and, accordingly, applied Ohio law. Adelman, 797 Fed. App’x at 1001 (citing Moses, 929
F.2d at 1139). The Court disagrees with Bleep’s argument that under Ohio law, 1 the MSA’s choice
of law provision presents no bar to a tort claim under North Carolina law. (Doc. No. 31, PageID#
512-13.) While Bleep’s NC UDTPA claim sounds in tort—just as the claims in Adelman and Moses
did—the question is whether the scope of the parties’ contractual choice of law provision is broad
enough to encompass tort claims that arise directly from the MSA. See Masco Cabinetry Middlefield,
LLC v. Cefla N.A., Inc., 637 Fed. App’x 192, 196 (6th Cir. 2015) (concluding that, while the plaintiff’s
claims sounded in tort, they stemmed from the preexisting contractual relationship and were thus
“properly classified, under Ohio’s choice-of-law rules, as arising out of the contract”). The Sixth
Circuit is abundantly clear that broadly worded choice of law provisions, such as those in Adelman
and Moses, encompass tort claims that arise directly from the making and performance of the contract.
See Adelman, 797 Fed. App’x at 1001; Moses, 929 F.2d at 1139; Banek Inc. v. Yogurt Ventures

Moreover, Bleep’s cited cases, Bentley v. Equity Trust and Isaac v. Alabanza Corp., are inapposite. (Doc. No. 31,
PageID# 512-13.) In Bentley, the Ohio Court of Appeals concluded that investors’ fraud claims fell outside of the scope
of the contracts because at the time the parties entered into the contracts, neither could have contemplated that the
defendant corporation would have perpetrated a fraudulent Ponzi scheme, as such an agreement would violate public
policy. Bentley v. Equity Trust, 2015 WL 7254796, at *3-4 (Ohio 9th Dist. Ct. App. Nov. 16, 2015). In Isaac, the
plaintiff’s fraud and negligent misrepresentation claims arose from conduct related to an employment application
agreement that did not include a choice of law provision. Isaac v. Alabanza Corp., 2007 WL 901596, at *7-8 (Ohio 7th
Dist. Ct. App. Mar. 22, 2007).
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U.S.A., Inc., 6 F.3d 357, 363 (6th Cir. 1993) (concluding that a choice of law provision that read
“[t]his Agreement was made and entered into in the State [of] Georgia and all rights and obligations
of the parties hereto shall be governed by and construed in accordance with the laws of the State of
Georgia” was sufficiently broad so as to cover the plaintiff’s fraud and misrepresentation claims).
See also Baumgardner, 697 F. Supp. 2d at 804 (concluding that a choice of law provision that read
“[t]he validity, interpretation and performance of this Agreement shall be controlled by and construed
in accordance with the laws of New York” was sufficiently broad so as to cover the plaintiff’s
contract, tort, and quasi-contract claims); Jewell Coke Co., L.P. v. ArcelorMittal USA, Inc., No. 1:10cv-01946, 2010 WL 4628756, at *7 (concluding that a choice of law provision that read “[t]his
guaranty and the rights and obligations of Haverhill, Jewell and Guarantor shall be governed by and
construed in accordance with the law of the State of New York” was sufficiently broad so as to cover
the plaintiff’s negligent misrepresentation claim). Here, the MSA’s choice of law provision contains
similar broad language that encompasses tort claims directly related to the MSA within its scope.
Therefore, the Court concludes that Bleep’s NC UDTPA claim is barred by the MSA’s choice of law
provision.
IV.

Conclusion
Accordingly, for the reasons set forth above, Thogus’s Motion to Dismiss Count VI is

GRANTED.
IT IS SO ORDERED.
s/Pamela A. Barker
PAMELA A. BARKER
U. S. DISTRICT JUDGE

Date: June 4, 2021

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