Roof Maxx Technologies LLC v. Rourk et al
Filing
37
ORDER granting in part and denying in part 22 Motion to Dismiss for Failure to State a Claim. The Court DENIES Roof Maxxs motion to dismiss with respect to Counts One, Five, and Six. (ECF No. 22). The Court GRANTS IN PART and DENIES IN PART the m otion to dismiss as to Count Two. The Court DENIES Roof Maxxs motion to dismiss with respect to Roof Savers breach of the implied duty of good faith but GRANTS the motion to dismiss with respect to Roof Savers claim alleging a breach of Section 8.11 of the August 2019 Agreement. Signed by Chief Judge Algenon L. Marbley on 8/16/2021. (cw)
Case: 2:20-cv-03151-ALM-CMV Doc #: 37 Filed: 08/16/21 Page: 1 of 24 PAGEID #: 419
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
ROOF MAXX TECHNOLOGIES, LLC,
Plaintiff,
v.
CYNTHIA ROURK, et al.,
Defendants.
:
: Case No. 2:20-cv-03151
:
: CHIEF JUDGE ALGENON L. MARBLEY
:
: Magistrate Judge Chelsea M. Vascura
:
:
:
OPINION & ORDER
I. INTRODUCTION
This matter is before the Court on a Partial Motion to Dismiss by Plaintiff and
Counterclaim Defendant Roof Maxx Technologies, LLC (“Roof Maxx”) and Third-Party
Defendants Michael Feazel and Todd Feazel (the “Feazels”) (collectively, the “Roof Maxx
Litigants”). (ECF No. 22). The Roof Maxx Litigants move to dismiss Counts I, II, V, and VI of
the Counterclaim and Third-Party Complaint, which was brought by Defendants and Counterclaim
Plaintiffs Roof Savers, LLC (“Roof Savers”) and Cynthia Rourk (collectively, the “Roof Savers
Litigants”). (ECF No. 11). For the following reasons, the Court GRANTS IN PART and DENIES
IN PART the Roof Maxx Litigants’ motion.
II. BACKGROUND
A. The Complaint
Roof Maxx describes itself as an Ohio limited liability company and national distributor
of a soy-based liquid product that is sprayed on asphalt shingle roofs to extend the life of the
shingles (the “Product”). (Compl. ¶¶ 1, 10, ECF No. 4). Roof Maxx enters into agreements with
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dealers across the country, who then typically become exclusive dealers of the Product for a
specific geographic region. (Id. ¶ 11).
On February 6, 2019, Roof Maxx entered into an agreement with Cynthia Rourk and her
business, Roof Savers, (the “Exclusive Dealership Agreement” or “February 2019 Agreement”).
(Id. ¶ 11). Roof Savers is a South Carolina limited liability company that contracted with Roof
Maxx to sell the Product in the Southeast region of the United States. (ECF No. 4, Ex. 1). The
Exclusive Dealership Agreement’s initial term was one year, and it provided for automatic renewal
for successive one-year terms, unless the agreement was terminated. The Agreement also
contained a covenant not to compete, which prohibited Roof Savers from conducting business
competitive to Roof Maxx “for a period of five (5) years from and after the termination of [the]
Agreement . . .” (ECF No. 4 ¶ 16). Additionally, on August 10, 2019, Roof Maxx presented to
Roof Savers and Ms. Rourk a new Exclusive Dealership Agreement (“August 2019 Agreement”).
(ECF No. 11, Ex. 4). The new agreement contained additional obligations and restrictions. (ECF
No. 11 ¶¶ 59–60).
Roof Savers sent Roof Maxx a letter on May 1, 2020, giving notice of their termination of
the August 2019 Agreement (the “Termination Letter”). (ECF No. 4, Ex. 2). In the Termination
Letter, Roof Savers explained it was rescinding the agreement due to alleged misrepresentations
by Roof Maxx. (Id.). Roof Maxx responded to the Termination Letter on May 4, 2020, denying
the alleged misrepresentations, and arguing that the agreement and its covenant not to compete
remained in effect. (ECF No. 4 ¶ 22).
On May 21, 2021, Roof Maxx filed a lawsuit against Ms. Rourk and Roof Savers in the
Franklin County Court of Common Pleas. (ECF No. 1-1). Roof Maxx alleged a single claim,
seeking declaratory judgment on the enforceability of the February 2019 Agreement and its
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covenant not to compete. (ECF No. 4 ¶ 32). The Roof Savers Litigants removed the case to the
Southern District of Ohio on June 22, 2020. (ECF No. 1).
B. The Counterclaim and Third-Party Complaint
After the case was removed, the Roof Savers Litigants then answered the Complaint and
filed Counterclaim and a Third-Party Complaint against Roof Maxx and its owners, Michael
Feazel and Todd Feazel, on July 28, 2020. (ECF No. 11). In the Third-Party Complaint and
Counterclaim, Roof Savers allege the following: fraudulent inducement or misrepresentation
against Roof Maxx and Michael D. Feazel (Count One); breach of contract against Roof Maxx
(Count Two); promissory estoppel against Roof Maxx (Count Three); declaratory judgment
regarding the enforceability and applicability of the Exclusive Dealership Agreement against Roof
Maxx (Count Four); false advertising under the Lanham Act, 15 U.S.C. § 1125(A) against Roof
Maxx and the Feazels (Count Five); and violation of the Ohio Deceptive Trade Practices Act, Ohio
Rev. Code § 4165.02 (“ODTPA”) against Roof Maxx and the Feazels (Count Six).
According to Roof Savers, the Roof Maxx Litigants enticed Ms. Rourk to sign the
Exclusive Dealership Agreement by falsely representing that two generations of the Product were
patented. (Countercl. ¶¶ 1–2, ECF No. 11). Roof Savers submits that the Roof Maxx Litigants
knew the patent lapsed in December of 2014 due to their failure to pay the patent maintenance
fees. (Id. ¶¶ 2, 18–23). Ms. Rourk learned of the misrepresentations in early 2020. (Id. ¶ 57).
Around the same time, the Roof Savers Litigants allege that the Roof Maxx “started
imposing system-wide operational directives upon dealers that fundamentally changed the
relationship between the parties, in contravention of their written agreements.” (Id. ¶ 62). The
directives ordered Roof Savers to take down its website and convert to a microsite, to set up autopurchases and auto-billing, and to agree to a new strict payment plan. (Id.¶¶ 63–64). Roof Maxx
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imposed an automatic fine policy for any deal that did not comply. (Id.). Roof Maxx also
“threatened to take away Roof Savers’ territories and give them to another dealer if Roof Savers
did not agree to the new payment plan.” (Id. ¶ 64). Roof Savers alleges that the purpose of the new
payment plan was to force out some dealers so that Roof Maxx could resell their territories. (Id.).
According to Roof Savers, Roof Maxx’s misrepresentations and its attempt to impose additional
material obligations caused Roof Savers to terminate and rescind the agreement. (Id. ¶ 67). The
parties were engaged in confidential negotiations when Roof Maxx filed its Complaint without
notice.
On October 5, 2020, the Roof Maxx Litigants filed a partial motion to dismiss Counts One,
Two, Five, and Six of Roof Savers’ Counterclaim and Third-Party Complaint. (ECF No. 22). This
motion is now fully briefed and ripe for review.
III. STANDARD OF REVIEW
Under Rule 12 of the Federal Rules of Civil Procedure, a party may move to dismiss any
count of a complaint due to the opponent’s “failure to state a claim upon which relief can be
granted.” Fed. R. Civ. P. 12(b)(6). A “motion to dismiss for failure to state a claim is a test of the
plaintiff’s cause of action as stated in the complaint, not a challenge to the plaintiff’s factual
allegations.” Golden v. City of Columbus, 404 F. 3d 950, 958–59 (6th Cir. 2005). Consequently,
the Court must construe the complaint in the light most favorable to the non-moving party, accept
all factual allegations as true, and make reasonable inferences in favor of the non-moving party.
Scooter Store, Inc. v. SpinLife.com, LLC, 777 F. Supp. 2d 1102, 1109 (S.D. Ohio 2011) (citing
Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th
Cir. 2008)). The Court is not required, however, to accept as true mere legal conclusions that are
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not supported by factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
Accordingly, although liberal, the Rule 12(b)(6) standard requires more than the bare
assertion of legal conclusions to survive a motion to dismiss. Allard v. Weitzman, 991 F.2d 1236,
1240 (6th Cir. 1993) (citation omitted). The complaint must “give the defendant fair notice of what
the claim is, and the grounds upon which it rests.” Nader v. Blackwell, 545 F.3d 459, 470 (6th Cir.
2008) (quoting Erickson v. Pardus, 551 U.S. 89, 93 (2007)). While a complaint need not contain
“detailed factual allegations,” its “[f]actual allegations must be enough to raise a right to relief
above the speculative level.” Twombly, 550 U.S. at 545. A complaint that suggests “the mere
possibility of misconduct” is insufficient because the complaint must state “a plausible claim for
relief.” Iqbal, 556 U.S. at 679 (citing Twombly, 550 U.S. at 556).
When a plaintiff’s claim sounds in fraud, the plaintiff must also satisfy Federal Rule of
Civil Procedure 9(b) to survive a motion to dismiss. Rule 9(b) requires that, “in any complaint
averring fraud or mistake, the circumstances constituting fraud or mistake shall be stated with
particularity.” Yuhasz v. Brush Wellman, Inc., 341 F.3d 559, 563 (6th Cir. 2003) (quoting Fed. R.
Civ. P. 9(b)). The requirement “reflects the rulemakers’ additional understanding that, in cases
involving fraud and mistake, a more specific form of notice is necessary to permit a defendant to
draft a responsive pleading.” In re EveryWare Global, Inc. Sec. Litig., 175 F. Supp. 3d 837, 849
(S.D. Ohio 2016) (quoting United States ex rel. SNAPP, Inc. v. Ford Motor Co., 532 F.3d 496,
504 (6th Cir. 2008) (internal quotation marks omitted)). In the analysis that follows, the Court will
specify which claims sound in fraud and therefore must satisfy the more stringent requirements of
Rule 9(b).
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IV. LAW & ANALYSIS
A. Fraudulent Inducement or Misrepresentation (Count One)
As required by Federal Rule of Civil Procedure 12(c), the Court accepts as true the factual
allegations set forth in the pleadings at issue here: the Roof Savers Litigants’ Counterclaim and
Third-Party Complaint. With respect to their claim of fraudulent inducement or misrepresentation,
the Roof Savers Litigants allege that Roof Maxx and Michael Feazel knowingly and falsely told
Roof Savers that the Product was subject to an active, valid patent. Roof Savers’ claim of
fraudulent inducement or misrepresentation is subject to the heightened particularity pleading
standard of Rule 9(b).
The Roof Maxx Litigants argue that Roof Savers’ fraud claim should be dismissed because
it fails to meet the Rule 9(b) requirements. Alternatively, Roof Maxx argues that the claim fails
because the Roof Savers Litigants did not adequately allege that they justifiably relied on an
alleged misrepresentation.
1. Rule 9(b) Pleading Requirements
To satisfy Rule 9(b), a plaintiff must, at minimum, “allege the time, place, and content of
the alleged misrepresentation” as well as “the fraudulent scheme; the fraudulent intent of the
defendants; and the injury resulting from the fraud.” Bennet v. MIS Corp., 607 F.3d 1076, 1100
(6th Cir. 2010) (internal citations omitted). Plaintiffs may plead fraud based on “information and
belief,” but the complaint “must set forth a factual basis for such belief, and the allowance of this
exception must not be mistaken for license to base claims of fraud on speculation and conclusory
allegations.” Sanderson v. HCA-The Healthcare Co., 447 F.3d 873, 878 (6th Cir. 2006) (internal
quotations omitted).
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At the same time, Rule 9 of the Federal Rules of Civil Procedure “is to be read in
conjunction with Rule 8(a).” Lambert v. Kazinetz, 250 F. Supp. 2d 908, 915 (S.D. Ohio 2013)
(citing Michaels Bldg. Co. v. Ameritrust Co., N.A., 848 F. Supp. 2d 674, 679 (6th Cir. 1988) (noting
that Rule 9’s particularity requirement must be read in harmony with Rule 8’s “simplicity of
pleading”)). This is because “it is inappropriate to focus exclusively on the fact that Rule 9(b)
requires particularity in pleading fraud.” Michael Bldg. Co., 848 F.2d at 679. Such a view is “too
narrow an approach and fails to take account of the general simplicity and flexibility contemplated
by the rules.” Id. Rather, the purpose of Rule 9(b)’s particularity requirement is “to provide a
defendant fair notice of the substance of a plaintiff’s claim in order that the defendant may prepare
a responsive pleading.” Id. As such, “[t]he threshold test is whether the complaint places the
defendant on sufficient notice of the misrepresentation, allowing the defendant to answer,
addressing in an informed way plaintiffs [sic] claim of fraud.” Lambert, 250 F. Supp. 2d at 915
internal quotations omitted) (quoting Coffey v. Foamex L.P., 2 F.3d 157 (6th Cir. 1993)). Roof
Maxx contends that Roof Savers has not pled its fraudulent misrepresentation claim with sufficient
particularity for several reasons.
To start, the Roof Maxx Litigants argue the Counterclaim is “entirely silent as to an alleged
scheme” and makes “only cursory allegations as to intent.” (ECF No. 22 at 5). The Counterclaim,
however, provides a detailed history of Roof Maxx’s failed patent efforts and explains how the
Roof Maxx Litigants knowingly designed its marketing materials to mislead individuals like Ms.
Rourk into believing the Product was patented and exclusive. (Countercl. ¶¶ 17–23, 43–44, 46).
The Counterclaim also alleges that Roof Maxx and Mr. Feazel took these steps with the express
intent of locking Ms. Rourk and others into restrictive contracts, preventing them from selling nonRoof Maxx products, and thus increasing Roof Maxx’s sales, profits, and dealership network. (Id.
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¶¶ 47–49, 77). These allegations provide ample notice and specificity of the fraudulent scheme
and intent the Roof Maxx Litigants employed to respond in an informed way. Accordingly, Roof
Savers has satisfied Rule 9 with respect to its claim of fraudulent inducement or misrepresentation.
Next, the Roof Maxx Litigants claim that Roof Savers makes only “general allegations as
to time and place.” (ECF No. 22 at 5–6). But the Counterclaim provides detail on the time and
place of the alleged misrepresentations. As to place, the Counterclaim provides sufficient notice
that the misrepresentations were made in the form of oral communications, in written marketing
materials, and on YouTube, Facebook, and Roof Maxx’s website. (Countercl. ¶¶ 35–38, 42–43,
73–75, 77, ECF No. 11); Rikos, 782 F. Supp. at 537 (allegations that false statements were made
on the internet, package labels, and on certain websites gave defendant fair notice). Roof Savers
also attached the documents containing the allegedly fraudulent statements to the Counterclaim.
(ECF No. 11, Exs. 1, 2); FRC Int’l v. Taifun Feuerloschgeratebau Und Vertriebs Gmbh, No. 3:01
CV 7533, 2002 WL 31086104, at *11 (N.D. Ohio Sept. 4, 2002) (attaching exhibits containing the
misrepresentations at issue, among other things, was sufficient to plead fraud); Michaels Bldg. Co.,
848 F.2d at 679 (denying a motion to dismiss and noting that plaintiffs identified and attached the
fraudulent documents).
As to time, Roof Savers alleges that the misrepresentations were made “in the weeks
leading up to the parties contracting on February 6, 2019.” (Countercl. ¶ 77). Roof Savers is not
required to identify the specific date on which each misrepresentation took place where the alleged
wrong was ongoing over a period of time, so long as the allegations’ details provide sufficient
notice as to the time of the misrepresentations. See Alsbrook v. Concorde Career Colls., 469 F.
Supp. 3d 805, 844 (W.D. Tenn. 2020) (allegation that the statements were made “[a]fter Plaintiffs
graduated” was specific enough to provide notice); Rikos, 782 F. Supp. 2d at 537 (allegation that
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the statements were made “[i]n March 2009” and were ongoing was sufficiently particular); Jewell
Coke Co., L.P. v. ArcelorMittal USA, Inc., 756 F. Supp. 2d 858, 864 (N.D. Ohio 2010)
(misrepresentations beginning “in July 2005” and made “throughout late 2005 and 2006” and
“between March and May 2008” were sufficient). Because the Counterclaim provides enough
detail about the time and place the alleged misrepresentations occurred, the Roof Maxx Litigants
have enough notice to respond to the statements in its own documents, and the Rule 9(b)
requirement is satisfied.
Finally, the Roof Maxx Litigants contend that Roof Savers has not alleged a sufficiently
particular injury. (ECF No. 22 at 6). The Counterclaim describes how the Roof Maxx Litigants’
fraudulent misrepresentations caused Roof Savers to lose its initial investment and a subsequent
investment, for a total loss of $52,820. (Countercl. ¶¶ 54, 80). Roof Savers also seeks a declaration
that its contract with Roof Maxx is void. Additionally, the Counterclaim puts the Roof Maxx
Litigants on notice that their misrepresentations caused Roof Savers to suffer injury in the form of
lost profits, goodwill, and other business opportunities. (Id. ¶¶ 80–81). Although these latter
amounts are not yet specific, the parties have not engaged in substantive discovery in this case,
and the Roof Savers Litigants cannot quantify the exact amount of these damages without
information Roof Maxx possesses. Ferron v. Metareward, Inc., 698 F. Supp. 2d 992, 997, 1001
(S.D. Ohio 2010) (“Rule 9(b) may be relaxed when there has been a lack of discovery and the
information needed for a plaintiff to achieve particularity is held exclusively by the opposing
party.”). Rikos v. Procter & Gamble Co., 782 F. Supp. 522, 537 (S.D. Ohio 2011) (upholding
plaintiff’s fraud claim even though the “allegations could have been more detailed” because
“additional details [were] the appropriate subject of discovery, and this [was] not a case where
Defendant [would] be forced to do discovery in the absence of a plausible claim for relief”).
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Indeed, the Sixth Circuit holds that “[i]t is a principle of basic fairness that a plaintiff should have
an opportunity to flesh out her claim through evidence overturned in discovery. Rule 9(b) does not
require omniscience . . .” Michaels Bldg. Co., 848 F.2d at 680. Instead, the Rule requires that the
allegations are specific enough to put defendants on notice as to the nature of the claim. Id. Here,
Roof Savers has met this requirement.
Accordingly, this Court finds that the Roof Savers Litigants’ claim of fraudulent
inducement or misrepresentation meets the heightened pleading requirements of Rule 9(b) with
respect to both Roof Maxx and Michael D. Feazel.
2. Justifiable Reliance
Under Ohio law, a claim of fraudulent inducement or misrepresentation requires a plaintiff
to allege: (1) a representation, or a concealment of fact where there is a duty to disclose; (2) that
is material to the transaction at issue; (3) made falsely, either with knowledge or with utter
disregard to its truthfulness; (4) with the intent of misleading another into relying upon it; (5)
justifiable reliance on the representation or concealment; and (6) an injury proximately caused by
the reliance. Stuckey v. Online Res. Corp., 819 F. Supp. 2d 673, 682 (S.D. Ohio 2011). Roof Maxx
argues that Roof Savers has not established the fifth element, justifiable reliance.
The issue of justifiable reliance “is one of fact and requires an inquiry into the relationship
between the parties.” Pacifica Loan Five, LLC v. Fifth Third Bank, No. 1:09-cv-930, 2011 WL
13228111, at *8 (S.D. Ohio Apr. 14, 2011) (citing Leal v. Holtvogt, 702 N.E.2d 1246, 1263 (Ohio
Ct. App. 1998)). Reliance might be justified when “the representation does not appear
unreasonable on its face, and if, under the circumstances, the [plaintiff] had no reason to doubt the
veracity of the representation.” Id. (citing Lepera v. Fuson, 613 N.E.2d 1060, 1065–66 (Ohio Ct.
App. 1992) (internal citations omitted)). Courts consider various circumstances involved in the
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transaction, such as “the nature of the transaction, the form and materiality of the representation,
the relationship of the parties,” and the respective experience and savviness of the parties. See
W.D.I.A. Corp. v. McGraw-Hill Inc., 34 F. Supp. 2d 612, 626 (S.D. Ohio 1998) (quoting Finomore
v. Epstein, 18 Ohio App. 3d 88, 90, 481 N.E.2d 1193, 1196 (1984)).
Here, the circumstances involved in the agreement show that Ms. Rourk had no reason to
doubt the veracity of Roof Maxx’s representation that the Product was subject to a valid patent.
The Feazels have a long history of starting roofing companies, and Roof Maxx (his most recent
roofing company) is a national distributor of roofing products. Ms. Rourk, on the other hand, is a
layperson with no previous experience in the roofing industry. Indeed, Roof Savers alleges that
Roof Maxx and the Feazels specifically targeted individuals with no roofing or business
background for the purpose of entering into exclusive dealer agreements. Moreover, the alleged
misrepresentations concerned the nature of Roof Maxx’s own roofing Product and were presented
in official marketing material and conversations. Given Ms. Rourk’s relative inexperience and the
formality in which the representations were made, it was not unreasonable for Ms. Rourk to trust
them and rely upon them when she signed the agreement.
Roof Maxx does not dispute these circumstances, but instead argues that Ms. Rourk could
not justifiably rely on the patent statements because patents are a matter of public record. In
support, Roof Maxx cites cases from the real estate context and asks the Court to extend their
holdings to the facts of this case. See, e.g., Barna v. Paris, No. 99-L-084, 2000 WL 1458967, at
*6 (Ohio Ct. App. Sept. 29, 2000) (finding that the buyers of real property could not justifiably
rely on the sellers’ representations about zoning restrictions because they were public record); see
also State Plaza Assocs. v. Hillsboro Assocs., No. 96CA898, 1998 WL 394370, at *13 (Ohio Ct.
App. June 29, 1998) (“Where any adversities regarding title to property, such as flood plain
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restrictions, are matters of public record . . . the Plaintiff is not entitled to rely on the alleged
concealment of material facts by the Defendant.”); see also United Nat’l Bank & T. Co. v. N.
Canton Ctr., No. CA 9202, 1993 WL 535503, at *2 (Ohio Ct. App. Dec. 6, 1993).
This Court declines to extend these holdings to the case sub judice. Inapposite to the cases
Roof Maxx cites, Ms. Rourk did not enter the agreement to purchase a patented Product and then
fail to complete basic due diligence. Instead, the transaction at issue here revolved around forming
a dealership relationship, and the patent representations constituted an inducement to enter the
dealership agreement. See W.D.I.A. Corp., 34 F. Supp. 2d at 626 (noting that “the nature of the
transaction” is a factor to consider in determining justifiable reliance). Under these facts, a person
“is under a duty to reasonably investigate” only if she was “put on notice as to any doubt about the
truth of representation.” Pacifica Loan Five, 2011 WL 13228111, at *8. Thus, even if Ms. Rourk
could have checked the status of the patent on the USPTO website, she was “not required to
investigate unless it was apparent that [she was] being deceived.” Yazdianpour v. Safeblood Techs.,
Inc., 779 F.3d 530, 534–37 (8th Cir. 2015) (holding that there was a disputed issue of material fact
as to justifiable reliance, even when plaintiffs had heard rumors of deception and defendants
expressly told plaintiffs how to check the USPTO website). There are no facts before the Court
that suggest Ms. Rourk should have known she was being deceived, so she was not obligated to
verify the patent status by independently checking the USPTO website.
For these reasons, the Court DENIES Roof Maxx’s motion to dismiss Count One of the
Counterclaim and Third-Party Complaint.
B. Breach of Contract (Count Two)
Roof Savers asserts two primary bases for its breach of contract claim against Roof Maxx,
both of which pertain to the August 2019 Agreement. First, Roof Savers asserts that Roof Maxx
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breached the agreement by failing to act in good faith when it issued unfair operational directives
on topics on which the agreement was silent. Second, Roof Savers asserts that Roof Maxx violated
Section 8.11 of the August 2019 Agreement by publishing disparaging remarks about Roof Savers.
1. Operational Directives
In Ohio, “a party can be found to have breached its contract if it fails to act in good faith.”
Eggert Agency , Inc. v. NA Mgmt. Corp., No. C2-07-1011, 2008 WL 3474148, at *4 (S.D. Ohio
Aug. 12, 2008) (quoting Littlejohn v. Parrish, 163 Ohio App. 3d 456, 458, 839 N.E.2d 49, 50
(Ohio Ct. App. 2005)). This is because the “duty of good faith [and] fair dealing is an implied term
in all contracts.” Id.
The duty of good faith “requires the parties to deal reasonably with each other, and it
applies where one party has discretionary authority to determine certain terms of the contract.”
Connectivity Sys., Inc. v. Nat’l City Bank, No. 2:08-cv-01119, 2009 WL 10709117, at *4 (S.D.
Ohio Aug. 20, 2009) (citing DavCo Acquisition Holding, Inc. v. Wendy’s Int’l, Inc., No. 2:08-cv1064, 2008 WL 755283, at *6 (S.D. Ohio Mar. 19, 2008). While the implied covenant of good
faith and fair dealing does not apply when one party to a contract has exclusive authority to make
the decision at issue, the duty may be applied “where a contract is silent as to an issue, in which
case good faith is used to fill the gap.” Id. (citing Savedoff v. Access Grp., Inc., 524, F.3d 754, 764
(6th Cir. 2008) (“Good faith is a compact reference to an implied undertaking not to take
opportunistic advantage in a way that could not have been contemplated at the time of drafting,
and which therefore was not resolved explicitly by the parties.”).
The agreement at issue in this case is silent on matters such as payment plans, the type of
website a dealer may use, auto-billing, and the imposition of fines. (See ECF No. 11, Ex. 3). The
Counterclaim alleges Roof Maxx subsequently issued operational directives that: (a) imposed a
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new and strict payment plan for the Product; (b) required dealers to remove their websites and
convert to a microsite, fining those who did not comply; and (c) required dealers to set up an autobill system. (Countercl. ¶¶ 63, 86, ECF No. 11). Roof Savers alleges that Roof Maxx took
opportunistic advantage of the agreement’s silence on these topics to impose strict requirements
that the parties did not contract for, in an effort to convert the contract to a franchisor-franchisee
relationship. (Id. ¶¶ 62, 64). According to Roof Savers, these new requirements frustrated the
purpose of the parties’ agreement and impaired Roof Savers’ ability to do business according to
its terms. (Id. ¶ 86). Accepting these factual allegations as true, Roof Savers has sufficiently pled
a breach of contract claim with respect to the imposition of the new operational directives.
2. Disparagement
The Roof Savers Litigants also claim Roof Maxx breached Section 8.11 of the agreement
by publishing certain statements. Section 8.11 of the August 2019 Agreement reads:
Non-disparagement: The parties acknowledge the good-faith of the other party in
their commercial efforts in carrying out the terms of this Agreement. As such, any
disagreements or criticisms of the other party shall be conducted civilly and
professionally between the parties. The parties jointly agree to not post for
public consumption, any disparaging remarks, comments, accounts, or other
relationship detail. Such disagreements shall be first submitted to a licensed
Mediator/Arbitrator for informal adjudication. . . . Any violation of this paragraph
is a material breach, and breaching party will remove, caused to be removed, or
authorize removal, of such offending public statements.
(ECF No. 11, Ex. 4) (emphasis added).
On May 22, 2020, Roof Maxx published the following statements to a group of Roof Maxx
Certified Dealers:
Recently, there have been some questions regarding why certain Roof Maxx dealers
terminated their dealerships. Roof Maxx and these dealers have disagreements
regarding various practical and legal matters pertaining to those dealerships and
their related activities.
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Roof Maxx and those dealers engaged in good faith attempts to informally resolve
these issues. Initial discussions failed to resolve the matter. In the meantime, Roof
Maxx has filed lawsuits in Franklin County, Ohio, pursuant to the terms of the
respective EDAs, to have these matters adjudicated according to law.
Roof Maxx has filed these actions to preserve the integrity of the industry and brand
that all our dedicated dealers have built (and continue to build), as well as ensure
that the time, dedication, and resources that you have committed your success to
are not diluted . . . .
Roof Maxx respects the legal process and will not comment on or discuss pending
litigation.
(Countercl. ¶ 70, ECF No. 11).
Roof Savers argues Roof Maxx violated Section 8.11 by posting these statements to the
dealer network because Section 8.11 prohibits Roof Maxx from posting “disparaging remarks,
comments, accounts, or other relationship detail.” Roof Savers also asserts that, because Roof
Maxx stated it filed its lawsuit to “preserve the integrity of the industry and brand,” it insinuated
that Roof Savers was a threat to such integrity. (ECF No. 30 at 16).
The Court finds that the Counterclaim allegations are not sufficient to support a finding
that Roof Maxx breached Section 8.11 of the August 2019 Agreement. The statements Roof Maxx
made on May 22, 2020 do not name Roof Savers as one of the dealers subject to termination and
the resulting lawsuit. Without specifying Roof Savers as one of the dealers, Roof Maxx could not
disclose details about Roof Savers in contravention of the agreement. Thus, Roof Savers cannot
sustain their breach of contract claim on this basis.
In sum, the Court DENIES Roof Maxx’s motion to dismiss with respect to Roof Saver’s
breach of the implied duty of good faith but GRANTS the motion to dismiss with respect to Roof
Saver’s claim alleging a breach of Section 8.11 of the August 2019 Agreement.
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C. Lanham Act and ODTPA Claims (Counts Five and Six)
The Roof Savers Litigants have also alleged one count of false advertising under Section
43(a) of the Lanham Act (Count Five) and one count of violating Ohio’s correlating statute, the
ODTPA (Count Six). Because these two claims are substantially similar, courts in the Southern
District of Ohio hold that “an analysis appropriate for a determination of liability under [S]ection
43(a) of the Lanham Act is also appropriate for determining liability under the Ohio Deceptive
Trade Practices Act.” Clark v. Walt Disney Co., 642 F. Supp. 2d 775, 784–85 (S.D. Ohio 2009)
(quoting Worthington Foods v. Kellogg Co., 732 F. Supp. 1417, 1431 (S.D. Ohio 1990)); see also
Corrova v. Tatman, 2005-Ohio-6877, ¶ 23, 164 Ohio App. 3d 784, 788 (5th Dist.); Dawson v.
Blockbuster, Inc., 2006-Ohio-1240, ¶ 23 (8th Dist.). Accordingly, this Court applies the same
analysis to both claims.
Section 43(a)(1)(B) of the Lanham Act, in relevant part, provides:
(a)(1) Any person who, on or in connection with any goods or services, or any
container for goods, uses in commerce any word, term, name, symbol, or device,
or any combination thereof, or any false designation of origin, false or misleading
description of fact, or false or misleading representation of fact, which . . .
(B) in commercial advertising or promotion, misrepresents the nature,
circumstances, qualities or geographic origin of his or her or another person’s
goods, services or commercial activities
shall be liable in civil action by any person who believes that he or she is or is likely
to be damaged by such act.
15 U.S.C. § 1125(a)(1)(B) (emphasis added).
To allege a commercial advertising violation, the alleged misrepresentations must also
meet the following four-prong test:
(1) commercial speech; (2) by a defendant who is in commercial competition
with plaintiff; (3) for the purpose of influencing consumers to buy defendant’s
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goods or services. While the representations need not be made in a “classical
advertising campaign,” but may consist instead of more informal types of
“promotion,” the representations (4) must be disseminated sufficiently to the
relevant purchasing public to constitute “advertising” or “promotion” within that
industry.
Azko Nobel Surface Chemistry LLC v. Stern, No. 2:13-cv-00826, 2014 WL 6982674, at *3 (S.D.
Ohio Dec. 9, 2014) (emphasis added) (quoting LidoChem, Inc. v. Stroller Enters., 500 F. App’x
373, 379 (6th Cir. 2012)).
Roof Maxx argues that Roof Savers’ Lanham Act and ODTPA claims fail because Roof
Savers has not alleged any misrepresentations as to the nature, characteristics, or quality of the
Product. Alternatively, Roof Maxx argues that the alleged misrepresentations do not meet the
statutory requirements because Roof Maxx is not “in commercial competition” with Roof Savers.
Roof Maxx also contends that Roof Savers has not sufficiently alleged that the Feazels violated
the Lanham Act.
1. Nature, Circumstances, Qualities or Geographic Origin
Roof Savers alleges that Roof Maxx represented in the marketplace that they patented the
Product and were the first to bring them to the market by authoring and distributing a “Prospective
Dealer Guide” (“Guide”) to Ms. Rourk and hundreds of other potential dealers. (ECF No. 11 ¶ 35;
ECF No. 30 at 16). The Guide represented that “Roof Maxx has worked closely with our strategic
partners, Battelle Laboratories and the Ohio Soybean Council to develop an optimal formula . . . .
The product formula is patented.” (ECF No. 11, Ex. 1 at 9). According to Roof Savers, Roof Maxx
also published the following statements in a “Patents Information Document” and made the same
representations during a sales pitch:
In 2016, Roof Maxx entered into a worldwide exclusive licensing agreement with
Shingle Life, a Canadian company, for the rights to the patent covering the Roof
Maxx product. The original patent was held by Clipper Roof Coatings, Inc.
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Click HERE to review the patent1
In an effort to continually bring value to our Dealers and their customers (property
owners), Roof Maxx has entered into another worldwide exclusive licensing
agreement with the Ohio Soybean Council (2018), for a new and improved Roof
Maxx formulation. This formulation is the subject of a separate patent filed in
2017 and is currently in the final phases of testing.
Provisional Patent Application No. 623/543, 105
Full Patent Application no. 16/059, 936
Despite Roof Maxx’s best efforts to provide superior products which are covered
by various patents, the business opportunity should be evaluated on the basis of
the underlying value of the Roof Maxx product, Roof Maxx’s world-class
Onboarding and Success teams and resources, national brand recognition, and the
other systems and resources provided to the Dealer as part of the Roof Maxx
opportunity.
(ECF No. 11, Ex. 2) (emphases added).
Furthermore, Roof Savers alleges that Roof Maxx and the Feazels knew these
representations were false. Specifically, because Roof Maxx petitioned the United States Patent
and Trademark Office (“USPTO”) to accept a late payment of the maintenance fee and was
rejected, they were “keenly aware” that the original patent lapsed at the end of 2014. (ECF No. 11
¶¶ 39–41). Roof Savers also contends that the Roof Maxx Litigants knew they were being
deceptive when they claimed the “new and improved Roof Maxx formulation” was the “subject of
a separate patent filed in 2017” because the USPTO rejected the patent application for this secondgeneration Product numerous times. (Id.).
1
The hyperlink included in the Guide directs to the Product’s patent on the USPTO’s Patent Full-Text and
Image Database. The information contained on this website does not indicate that the patent had lapsed or
was otherwise invalid.
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The Roof Maxx Litigants argue unpersuasively that Roof Savers’ counterclaim places the
ownership of the Product at issue, but does not raise the “nature, characteristics, qualities, or
geographic origin” of the Product, as the Lanham Act requires. Citing the seminal case, Dastar
Corporation v. Twentieth Century Fox Film Corporation, and its progeny, Roof Maxx asserts that
Lanham Act claims are not actionable where they are based on misrepresentations of creation or
ownership. (ECF No. 22 at 13). The cases upon which Roof Maxx relies, however, are readily
distinguishable from the case sub judice.
As a threshold matter, Dastar involved the unaccredited copying of uncopyrighted work.
539 U.S. 23, 36–38 (2003). The television series at issue had previously been subject to copyright,
but the copyright had expired, and the episodes were part of the public domain. Id. at 23. Dastar
later edited, relabeled, and marketed the new product as its own creation. Id. at 28. The Supreme
Court concluded that Fox could not receive damages from Dastar for misrepresenting the “origin”
of the new film series because Dastar was the “origin” of the products it sold as its own. Id. at 38
(finding that the “origin of goods” phrase in the Lanham Act was “incapable of connoting the
person or entity that originated the ideas or communications that ‘goods’ embody or contain”). Id.
at 32. Thus, Dastar stands for the proposition that the Lanham Act does not protect a company
against a rival that “steal[s] its product ideas to manufacture a rival, facsimile product.” Kehoe
Component Sales Inc. v. Best Lighting Products, Inc., 796 F.3d 576, 589–90 (6th Cir. 2015) (noting
that the Lanham Act “does not encompass misrepresentations about the source of the ideas
embodied in the object (such as false designation of authorship)”). The Dastar facts are quite
different from the issue in the case sub judice, which revolves around Roof Maxx’s
misrepresentations that its Product was subject to an active, valid patent—not around the person
or entity who originated the Product’s formula.
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The facts underlying this Court’s decision in Akzo Nobel Surface Chemistry LLC v. Stern
also differ significantly from the facts in the instant case. 2014 WL 6982674, at *1. In Akzo, this
Court found that a plaintiff could not successfully bring a Lanham Act false advertising claim
based solely on the defendants’ filing of a patent for chemical additives. Id. at *4. The Court found
that, by filing the patent, the defendants claimed ownership of the chemical additives, but did not
make any representations as to their nature, characteristics, or qualities. Id. (“To claim that
information contained in a patent application equates to misrepresentation of the details underlying
the goods or services is, at best, a stretch.”). Here, however, Roof Savers has asserted that Roof
Maxx made misrepresentations about the Product by falsely describing that the Product was
covered by an active patent on marketing materials and in meetings with prospective dealers—
Roof Savers’ claim does not center on claims of ownership through the patent application itself.
Indeed, Roof Savers does not raise a false authorship claim, nor does it argue that Roof
Maxx infringed on some ownership right Roof Savers has in the same or similar goods. Instead,
Roof Savers alleges that Roof Maxx misrepresented that the Product was subject to an active
patent, creating a false impression that Roof Maxx was the exclusive source of the Product and
that prospective dealers would face little or no direct competition. As such, these statements go
directly to the Products’ nature, characteristics, and qualities. See, e.g., Blank v. Pollack, 916 F.
Supp. 165, 172 (S.D.N.Y. 1996) (“In keeping with the broad construction of the language of the
[Lanham] Act, the court finds that the misrepresentation [in a brochure] that a product is patented
relates to the nature and qualities of the product.”); BPI Sports, LLC v. ThermoLife Internat’l, LLC,
No. 19-60505-CIV, 2020 WL 10180910, at *5–6 (S.D. Fla. Jan. 9, 2020) (denying motion to
dismiss Lanham Act claim where, among other things, plaintiff alleged that defendants’ website
falsely claimed a certain compound fell within the scope of its patents and that defendant was the
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only legitimate source of the compound). In other words, Section 43(a) of the Lanham Act “does
reach a seller who, by exaggerating the scope of a patent, creates a false impression that he is the
exclusive source of the product.” Zenith Elec. Corp. v. Exzec, Inc., 182 F.3d 1340, 1344 (Fed. Cir.
1999) (citation omitted). Since this is precisely what Roof Savers have alleged in the Counterclaim,
the Court finds that Roof Savers has adequately pled the misrepresentations involve the “nature,
circumstances, and qualities” of the Product.
2. Commercial Competition
Roof Maxx also claims that it and Roof Savers are not in “commercial competition,” as
required by the four-prong test, so Roof Savers cannot allege a discernibly competitive injury.
Most cases Roof Maxx cites, however, precede the Supreme Court’s decision in Lexmark
International, Inc. v. Static Control Components, Inc. 572 U.S. 118, 140 (2014).2
In Lexmark, Static Control manufactured and sold components in Lexmark printer
cartridges. Id. at 122–23. Static Control sued under the Lanham Act, claiming that Lexmark
engaged in false advertising by misrepresenting that it was illegal to sell refurbished Lexmark
cartridges, which resulted in lost sales and damage to Static Control’s business reputation. Id.
Although the two parties were not direct competitors—they did not sell identical products or
provide the same services—the Supreme Court ruled that Static Control was “entitled to a chance
2
Two of the cases that Roof Maxx cites came after Lexmark. The first, Welk Resort Grp., Inc. v. Reed &
Hein Assocs., LLC, No. 3:17-cv-01499-L-AGS, 2019 WL 1242446, at *6 (S.D. Cal. Mar. 18, 2019), fails
to cite Lexmark at all and instead refers to a Ninth Circuit case that pre-dates Lexmark and has been called
into question by it. See Jack Russell Terrier Network of N. Cal. v. Am. Kennel Club, Inc., 407 F.3d 1027
(9th Cir. 2005).
The second, ThermoLife Internat’l LLC v. Am. Fitness Wholesalers LLC, No. CV-18-04189-PHS-JAT,
2020 WL 122874, at *7 (D. Ariz. Jan. 10, 2020), diverts from Lexmark’s holding. (“To properly plead a
Lanham Act claim, a plaintiff mut allege the defendant’s false advertising was harmful to the plaintiff’s
ability to compete with the defendant. Plaintiff and Defendant are not in the same market, and are thus not
in competition. Plaintiff’s failure to allege a competitive injury is fatal to its Lanham Act claim.”). This
Court believes that ThermoLife misread Lexmark and therefore disregards this non-binding authority.
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to prove its case” because the alleged injuries fell within the “zone of interests” protected by the
statute. Id. at 136–38, 140 (“Static Control is suing not as a deceived customer, but as a perso[n]
engaged in commerce within the control of Congress whose position in the marketplace has been
damaged by Lexmark’s false advertising.” (internal quotations omitted)). More specifically, the
Supreme Court observed:
[A] plaintiff who does not compete with the defendant will often have a harder time
establishing proximate causation. But a rule categorically prohibiting all suits by
noncompetitors would read too much into the [Lanham] Act’s reference to “unfair
competition” in § 1127 . . . . It is thus a mistake to infer that because the Lanham
Act treats false advertising as a form of unfair competition, it can protect only the
false-advertiser’s direct competitors.
Id. at 136 (emphasis in original).
Courts relying on Lexmark have similarly declined to dismiss Lanham Act claims where a
party has moved for dismissal because the parties do not directly compete. See, e.g., Educ. Impact,
Inc. v. Danielson, No. CIVA 14-937 FLW LHG, 2015 WL 38132, at *14 (D.N.J. Jan. 28, 2015)
(“Here, although [the defendant] is not in direct competition with [the plaintiff], the claims made
on its website, if shown to be false, likely have the effect of limiting [the plaintiff’s] sales. Under
current law, this allegation is sufficient to state a claim under the Lanham Act.”); Wyndham
Vacation Ownership v. Reed Hein & Assocs., LLC, No. 6:18-cv-02171-GAP-DCI, 2019 WL
3934468, at *5 (M.D. Fla. Aug. 20, 2019) (“Competition is not required to bring a claim under the
Lanham Act.”).
Here, as Roof Savers pleads damages to its commercial interest in sales and business
reputation, it falls within the zone of interests protected by the Lanham Act. Accordingly, this
Court will not dismiss Roof Saver’s claims against Roof Maxx on this ground. See Orange Lake
Country Club, Inc. v. Reed Hein & Assocs., No. 6:17-cv-1542-ORL, 2018 WL 5279135, at *9
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(M.D. Fla. Oct. 24, 2018) (declining to dismiss a Lanham Act claim where the defendant submitted
the same argument).
3. Claims Against the Feazels
Finally, Roof Maxx argues that Roof Savers’ statements about the Feazels’ individual
involvement in the Lanham Act claims do not meet the legal standard or Rule 9(b)’s specificity
requirements.
Corporate officers may be held personally liable for Lanham Act violations. State Farm
Mut. Auto. Ins. Co. v. Sharon Woods Collision Ctr., Inc., 2007 WL 4207158, at *1 (S.D. Ohio
Nov.
26,
2007)
(citation
omitted).
For
example,
“corporate
officers
are liable if
they personally take part in the infringing activity or direct others to do so.” Simmons v. Cook, 701
F. Supp. 2d 965, 989–90 (S.D. Ohio 2010) (citing CCA Global Partners, Inc. v. CarpetMax
Flooring Ctr., No. 4:02CV-215-M, 2006 WL 581016, at *2 (W.D. Ky. Mar. 6, 2006)); see also
Tri-State Hosp. Supply Corp. v. Medi-Pac, No. 1:06cv824, 2008 WL 11351556, at *6 n.8 (S.D.
Ohio June 2, 2008). Similarly, Ohio courts hold that corporate officers can be held personally
liable for violating Ohio Revised Code § 1345.02 if the officer took part in the commission of the
act, directed the act to be done, or participated or cooperated. Sharon Woods Collision Ctr., 2007
WL 4207158, at *2. The Counterclaim repeatedly alleges that the Feazels participated in the acts
pertaining to false advertising: it describes that the Feazels were aware the Product’s patent had
lapsed but created marketing materials that advertised the Product as patented and exclusive. As
such, Roof Savers has satisfied the legal standard for this claim.
Roof Maxx also submits that Roof Savers has failed to meet allegations with the specificity
required under Rule 9(b). The Sixth Circuit, however, has never imposed such a requirement. See
Williamson v. Rexam Beverage Can Co., 497 F. Supp. 2d 900, 909 (S.D. Ohio 2007) (“The federal
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courts are currently divided as to whether Rule 9(b) should apply to Lanham Act claims . . . The
Sixth Circuit has yet to decide this question.”); Elcometer, Inc. v. TQC-USA, Inc., No. 12-cv14628, 2013 WL 1433388, at *5 (E.D. Mich. Apr. 9, 2013) (“[Defendant] fails to provide the Court
with any controlling authority from this Circuit applying the particularity standards of Rule 9(b)
to allegations of false advertising or unfair competition. This is because this is not the law.”).
Conversely, courts within this Circuit recognize that Rule 9(b) “provides that fraud claims must
be pleaded with particularity, but it makes no mention of false advertising claims.” Id. (citing Dow
Corning Corp. v. Jie Xiao, No. 11-10008, 2011 WL 2015517, at *9 n.2 (E.D. Mich. May 20,
2011)). The Roof Maxx Litigants fail to identify a Sixth Circuit case requiring a heightened
pleading standard for Lanham Act claims. Accordingly, Roof Savers’ allegations regarding the
Feazels are sufficient to sustain the Lanham Act and ODTPA claims against them. The Court
DENIES Roof Maxx’s motion to dismiss with respect to Counts Five and Six of the Counterclaim
and Third-Party Complaint.
V. CONCLUSION
For the reasons articulated above, the Court DENIES Roof Maxx’s motion to dismiss with
respect to Counts One, Five, and Six. (ECF No. 22). The Court GRANTS IN PART and DENIES
IN PART the motion to dismiss as to Count Two. The Court DENIES Roof Maxx’s motion to
dismiss with respect to Roof Saver’s breach of the implied duty of good faith but GRANTS the
motion to dismiss with respect to Roof Saver’s claim alleging a breach of Section 8.11 of the
August 2019 Agreement.
IT IS SO ORDERED.
_
ALGENON L. MARBLEY
CHIEF UNITED STATES DISTRICT JUDGE
DATED: August 16, 2021
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