Ward et al v. Knox County Board of Education et al (TV1)

Filing 48

MEMORANDUM OPINION AND ORDER; the Court hereby GRANTS in part and DENIES in part the Motion to Dismiss Counts V, VI, and VIII of Plaintiffs' Complaint on Behalf of Defendant Scott Bacon 26 ; GRANTS in part, DENIES in part, and DENIES as moot in part the Motion to Dismiss on Behalf of Mary Kerr 29 ; and GRANTS in part, DENIES in part, and DENIES as moot in part Defendant, Walsworth Publishing Co., Inc.'s Partial Motion to Dismiss Complaint or, in the Alternative, Mot ion for More Definite Statement 36 . As to Bacon, Count V and Count VI are hereby DISMISSED; as to Kerr Counts IV, VI, and VII are hereby DISMISSED; and as to Walsworth, Counts IV, V, VI, VII, and VIII are hereby DISMISSED. Plaintiff is DIRECTED to file an amended complaint designed to address the defects complained of by Walsworth within fourteen (14) days of the entry of this order. Signed by District Judge Thomas A Varlan on 4/23/12. (ADA)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
MICHAEL SCOTT WARD d/b/a
FEREDONNA COMMUNICATIONS, et al.,
Plaintiffs,
v.
KNOX COUNTY BOARD OF
EDUCATION, et al.,
Defendants.

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No.:

3:11-CV-438
(VARLAN/SHIRLEY)

MEMORANDUM OPINION AND ORDER
This civil action is before the Court on three motions: (1) the Motion to Dismiss
Counts V, VI, and VIII of Plaintiffs’ Complaint on Behalf of Defendant Scott Bacon [Doc.
26]; the Motion to Dismiss on Behalf of Mary Kerr [Doc. 29]; and Defendant, Walsworth
Publishing Co., Inc.’s Partial Motion to Dismiss Complaint or, in the Alternative, Motion for
More Definite Statement [Doc. 36]. Plaintiff responded to all three motions [Docs. 32, 33,
34, 35, 40, 41]. The Court has thoroughly considered the filings, and for the reasons stated
herein, the Court will grant in part and deny in part the Motion to Dismiss Counts V, VI, and
VIII of Plaintiffs’ Complaint on Behalf of Defendant Scott Bacon [Doc. 26], grant in part,
deny in part, and deny as moot in the Motion to Dismiss on Behalf of Mary Kerr [Doc. 29],
and grant in part, deny in part, and deny as moot in part Defendant, Walsworth Publishing
Co., Inc.’s Partial Motion to Dismiss Complaint or, in the Alternative, Motion for More
Definite Statement [Doc. 36].

I.

Background
Plaintiffs commenced this civil action on September 6, 2011, seeking emergency

injunctive relief, a permanent injunction, and damages [Doc. 1]. The Court previously
denied plaintiffs’ request for injunctive relief as well as plaintiffs’ request for sequestration
of proceeds [Doc. 16].
Plaintiff Michael Scott Ward (“Ward”) is citizen and resident of Knox County,
Tennessee [Id. ¶ 1]. Plaintiff WeDo Fundraising, Inc. (“WeDo Fundraising”) is a Tennessee
corporation and Ward is its principal shareholder [Id. ¶ 2]. Plaintiff PrintVenture, Inc.
(“PrintVenture”) was a Tennessee corporation and Ward was its principal shareholder [Id.
¶ 3]. Ward, WeDo Fundraising, and PrintVenture all conduct business under the trade name
Feredonna Communications (“Feredonna”) [Id. ¶ 4]. Feredonna is a publisher with over
eighteen years of experience in designing, branding, publishing, printing, and distributing
fund-raising materials, as well as organizing, marketing, managing, and conducting fundraising campaigns, including fund-raising campaigns for schools and school districts in
Alabama, Georgia, Ohio, and Tennessee [Id. ¶¶ 5–6].
Defendant Knox County is a municipal corporation organized and existing as such
under the laws of the State of Tennessee [Id. ¶ 8]. Defendant Knox County Board of
Education is an agency of Knox County and is vested with the management and control of
the Knox County School system [Id. ¶ 7]. Plaintiff alleges it is the ultimate policy-making
body with regard to all policy determinations in the operation of the school system [Id.].

2

Defendants Scott Bacon (“Bacon”) and Mary Kerr (“Kerr”) are both residents of Knox
County, Tennessee, and employees of Knox County Schools [Id. ¶¶ 9–11]. Defendant
Walsworth Publishing Company, Inc. (“Walsworth”) is a corporation formed under the laws
of the state of Missouri and has its principal place of business there [Id. ¶ 12].
In 1994, “Knox County Schools awarded Feredonna the contract for a system-wide
fundraising program centered around the sale of a coupon book” [Id. ¶ 15]. With respect to
the coupon book program, and during a period of seventeen years, Feredonna’s role included
assistance with merchant and sponsor recruitment, branded merchandise and materials, and
other aspects of the program not traditionally provided by a printing company [Id. ¶ 17].
Feredonna designed a new format for the coupons and book design, introduced standardized
branding and placement for merchant sponsors on the cover and throughout the book, tabbed
coupons with merchant names, developed photo recognition to reward top-selling students,
and developed styles guides to standardize wording and descriptions for the coupons [Id. ¶¶
18–22]. Feredonna alleges its “innovations enhanced the image of the coupon books,” which
increased their value to Knox County Schools, and that Feredonna continues to use this
“trade dress” [Doc. 1 ¶¶ 23–24]. Also, independent from the coupon book program,
Feredonna contracted with Knox County Schools to provide other materials, including, for
example, curriculum guides [Id. ¶ 16].
Feredonna alleges that it has used the trade name “School Coupons” on coupon book
fund-raising products since at least 1994 [Id. ¶ 25]. Feredonna “sought and received federal

3

trademark registration of the ‘School Coupons’ mark (Supplemental Register, serial number
75365161)” [Id. ¶ 26]. Knox County Schools and Jefferson County, Alabama, the two
markets in which Feredonna produced and published coupon book programs, were notified
in writing that Feredonna was registering the “School Coupons” trade name, but neither
contested the registration [Id. ¶¶ 27–28]. As early as 1998, “Feredonna began claiming
copyright rights to the School Coupons® coupon books and their design, format, layout, and
contents that they were producing for the Knox County Schools,” and did so allegedly with
Knox County Schools’ knowledge and assent [Id. ¶¶ 29–30]. Knox County Schools
allegedly “claimed no trademarks or copyrights related to the School Coupons® program
produced by Feredonna for the Knox County Schools” [Id. ¶ 32]. Feredonna registered its
copyright as well as the web domain “schoolcoupons.com” [Id. ¶¶ 31, 33]. Knox County
Schools later registered the web domain “schoolcoupons.org,” and Feredonna claimed
infringement and demanded that the domain be relinquished to Feredonna, a request with
which Knox County Schools complied [Id. ¶¶ 34–36]. Feredonna also owns the web domain
names “schoolcoupons.net” and “schoolcoupons.info” [Id. ¶ 37].
Allegedly, Feredonna published the School Coupons program for both private and
parochial schools and school districts throughout East Tennessee, including Knox County
Schools, as well as in Birmingham, Alabama, Cleveland, Ohio, and Nashville, Tennessee [Id.
¶¶ 38–39]. With respect to Knox County Schools, as the relationship developed, “an
unwritten division of responsibilities also developed,” wherein “Knox County was

4

responsible for merchant recruitment for the book inside Knox County, and Feredonna was
responsible for merchant recruitment outside Knox County, and for any regional or national
merchant accounts,” in addition to its role in designing, developing, and publishing the
materials [Id. ¶ 40].
Plaintiffs allege that, at several events, Bacon “tried to claim credit for the School
Coupons® program” [Id. ¶ 42]. Bacon allegedly referred to Feredonna as “merely the
printer” of the book [Id. ¶ 43]. Ward allegedly corrected him when such statements were
made in his presence, “noting that Feredonna developed, produced, and published the School
Coupons® coupon book on behalf of its client, Knox County Schools, and that Bacon was
an employee of Knox County Schools” [Id. ¶ 44].
In March 2008, a meeting was held between Feredonna and Knox County Schools to
discuss the upcoming twentieth anniversary of the coupon program; Bacon, Kerr, Ward, and
Alanna Fletcher, an employee of Ward’s, were present [Id. ¶¶ 45–46]. Ward allegedly
“suggested that the 20th anniversary campaign provided an opportunity to raise the price of
the School Coupons® book . . . and to introduce a new discount card program that could be
developed into a spin-off fundraising campaign” [Id. ¶ 47]. The discount card program
proposal was “to add a loyalty-card style discount card into the School Coupons® book that
could be removed and used at the participating merchants’ businesses repeatedly and, thus,
add to the overall value of the product” [Id. ¶ 49]. Ward sought to introduce the discount
card because “many fundraising companies offer more than one product so as to better meet

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the needs of schools that traditionally hold two or more fundraisers per year” [Id. ¶ 48].
Bacon allegedly refused the suggestion of a price increase, but expressed serious interest in
the discount card proposal, indicating that “he wanted ‘full control’ and ‘ownership’ over it”;
Ward understood this statement to mean Bacon would have to receive some sort of financial
interest or benefit in order to approve any discount card program [Id. ¶¶ 50–52].
Ward continued developing the discount card concept as a stand-alone product, “with
the goal of introducing it as a spring fundraising program” [Id. ¶ 53]. Ward finalized the
concept by January 2009 and began recruiting merchants for participation [Id. ¶ 55]. In April
2009, Ward received a telephone call from Bacon, in which Bacon allegedly informed Ward
that he “‘caught wind’ of Ward’s efforts to develop a working prototype of the card product,
and he was furious” [Id. ¶ 57]. Bacon allegedly “threatened that no schools would sell the
discount card without Bacon’s ‘involvement’ and ‘ownership,’” which Ward understood to
mean “personal benefit” [Id. ¶¶ 58–59].
A week later, a meeting was held; present at the meeting was Bacon, Kerr, and Ward
[Id. ¶ 60]. Allegedly, Bacon was “belligerent that Ward had developed the discount card
project without Bacon’s personal involvement” and demanded “ownership” of the card [Id.
¶¶ 61–62]. Although most fund-raising companies pay only twenty-five to fifty percent of
campaign revenue to the campaign beneficiary, Ward offered Knox County Schools eighty
percent of the proceeds raised through the sale of the discount cards [Id. ¶¶ 63–64]. Bacon
made comments regarding the cost of producing, and Ward interpreted his comments as

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Bacon wanting to reap profits personally as a middle-man re-selling to Knox County Schools
or the one credited for the program [Id. ¶¶ 66–67]. Allegedly, all subsequent offers of the
discount program were “rebuffed” [Id. ¶ 70]. Plaintiffs allege that, upon information and
belief, Bacon is contemplating copying Ward’s concept and developing a similar discount
card program himself [Id. ¶ 68].
After the April 2009 meeting, “Feredonna’s representatives began encountering
merchants who refused to participate in the discount card program specifically because of
information received from Bacon and Kerr” [Id. ¶ 71]. Upon information and belief,
plaintiffs allege that “Bacon and Kerr worked together to derail the discount card program
by, among other things, discouraging merchant participation and tortiously inserting
themselves into Feredonna’s relationships with its clients” [Id. ¶ 72]. Allegedly, Knox
County Schools denied Feredonna access to contact information for merchants participating
in the coupon program by altering and cutting contract documents, at the direction of Bacon
and Kerr [Id. ¶¶ 73–75].
In May 2009, Ward met with Russ Oakes (“Oakes”), Bacon’s immediate supervisor;
Ward “discussed ways to streamline coupon book merchant recruitment, offered the discount
card program to Knox County Schools again at a greatly reduced rate, raised the issue of
Bacon’s and Kerr’s destruction of documents, and otherwise informed him that Bacon’s and
Kerr’s insertion of themselves into Feredonna’s business dealings was inappropriate at best”
[Id. ¶¶ 76–77]. Subsequent to the meeting, Ward’s working relationship with Oakes

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“chilled,” and Oakes “cancelled a major printing project for school curriculum guides that
Feredonna had produced for many years” [Id. ¶¶ 78–79]. Knox County Schools also did not
exercise its “option to renew the contract for print management and design services under
which the school curriculum guides and other materials had been produced” [Id. ¶ 80].
Feredonna continued the discount card program in East Tennessee, hiring eight sales
representatives [Id. ¶ 83]. Allegedly, it was well received; however, days after the beginning
of initial sales calls, an undated memo, allegedly sent at Bacon’s direction, “went out to all
Knox County schools directing them to not do business or have any contact with Feredonna
because it was purportedly not an approved vendor” [Id. ¶¶ 84–85]. At the time the memo
was distributed, Feredonna’s vendor account was listed as “PrintVenture Inc., also DBA
Feredonna” [Id. ¶ 86]. On November 20, 2009, an attorney for Feredonna sent a letter to
Knox County Schools, demanding immediate retraction of the memo; however, Knox County
Schools stood by the memo [Id. ¶¶ 88, 90]. Allegedly, as a result of the memo, one of
Feredonna’s sales representatives was informed that Feredonna was merely the printer and
that Knox County Schools owned “School Coupons” [Id. ¶ 91]. Feredonna allegedly lost
$250,000 in sales of the discount card in 2010 [Id. ¶ 92].
Upon defendants’ alleged insistence, Knox County cancelled PrintVenture’s approved
vendor status due to back business tangible personal property taxes owed [Id. ¶ 93].
Plaintiffs claim that such tax issues had been addressed almost ten years prior, and had been
resolved; further, PrintVenture received no correspondence regarding the alleged tax issues

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and the tax issue had never been an impediment to PrintVenture servicing contracts with
Knox County, including the contract for the school coupon program [Id. ¶¶ 94–96].
Allegedly, Hugh Holt (“Holt”), Knox County’s Director of Purchasing, informed Ward that
Bacon had raised the tax issue in an effort to cancel PrintVenture’s vendor status, and Holt
informed Ward that Knox County Schools’ counsel had determined that the tax issue was
sufficient grounds to terminate PrintVenture’s vendor status [Id. ¶¶ 97–98]. As a result,
PrintVenture could not bid on new business from Knox County Schools or Knox County, and
allegedly, all efforts by PrintVenture to resolve the issue have been rebuffed [Id. ¶¶ 99–100].
After PrintVenture lost its approved vendor status in late 2009, Jeffrey Hobbs
(“Hobbs”) assisted Ward in investigating the process by which businesses can be added to
or removed from the approved vendor list [Id. ¶ 101]. According to plaintiffs, Knox County
maintains an online application system for vendors to become approved [Id. ¶ 102]. Hobbs
began the process of registering Jireh Group, LLC (“Jireh Group”), a Tennessee limited
liability company he owns [Id. ¶ 103]. The online registration system asked for basic
information about the business, but nothing required credit information or character
references [Id. ¶¶ 104–05]. Hobbs had difficulty completing the registration application and
called the help number provided online; he spoke with a representative from Knox County
who informed him, upon Hobbs’s inquiry, that fraud, criminal activity, and similar issues
would be the only legitimate reason for removing a business from the approved vendor list
[Id. ¶¶ 106–10]. He also inquired whether there was a separate vendor list that he had to join

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in order for Jireh Group to solicit Knox County Schools for the sale of fund-raising products,
and the representative answered in the negative, a response different from what Martha
McCampbell (“McCampbell”), Knox County Schools’ counsel, had asserted previously
during a meeting with Ward and Cole [Id. ¶¶ 111–13].
Upon information and belief, plaintiffs assert that no such approved fund-raising list
existed at that time or currently, and that no other fund-raising company conducting business
in Knox County has been asked to submit to such a process [Id. ¶¶ 115–16]. Further upon
information and belief, plaintiffs allege that the memo sent to schools directing schools not
to do business with Feredonna and the attempt to require Feredonna to submit to an approval
process, was without precedent and directed at denying Feredonna the opportunity to conduct
business with Knox County Schools [Id. ¶ 117].
According to plaintiffs, despite not participating in Feredonna’s discount card
program, Knox County Schools proceeded with the sale of plaintiffs’ “School Coupons”
book in 2009 [Id. ¶ 119]. When it went on sale in September 2009, signage at schools did
not include either the “School Coupons” logo as it had in prior years, but instead used “Knox
County Schools Coupon Book” [Id. ¶ 120]. Also, Bacon allegedly failed to include the
registered mark with the “School Coupons” logo, and frequently used an incorrect type font
as a logo; Feredonna repeatedly sent correspondence and corrected logo artwork in response
[Id. ¶¶ 121–22].

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In January 2010, Bacon and Kerr allegedly sent a letter on behalf of Knox County
Schools to past-participating merchants in the school coupons program claiming credit for
the school coupons program and diminishing Feredonna’s ownership and contributions [Id.
¶¶ 124–25]. The letter also announced an intention to “re-brand” the school coupons
program [Id. ¶ 126]. A follow-up letter was sent on February 5, 2010, which allegedly
sought to steal all credit for past program success and included several damaging and false
statements [Id. ¶¶ 127–28]. The letter claimed that “the product that has been known as the
School Coupons Campaign will now be known as the Knox County Schools Coupon Book”
and used the language “Same Book, New Look” [Id. ¶ 129]. Feredonna responded in
writing, warning Knox County Schools that it was infringing upon Feredonna’s trademark
and copyright rights and demanded Knox County Schools cease and desist from going
forward with plans to produce a rival coupon book [Id. ¶ 131].
Feredonna copied Knox County Mayor Ragsdale on the cease and desist letter, and
his office scheduled a meeting [Id. ¶¶ 132–33]. Ward, Cole, Mayor Ragsdale, and the
County Law Director attended the meeting [Id. ¶ 134]. Allegedly, Mayor Ragsdale “stated
something to the effect that:
What I want to know is why are we suddenly not doing business with
this guy who has done a great job for us for over fifteen years. In the
time I’ve been Mayor, I have not heard anything but good things about
him. Well, I started asking around and the word I’m hearing in the
halls is that we have a Knox County employee nearing retirement age
and he is posturing himself to take over the program when he retires
and needs Mr. Ward out of the picture. I’m not really sure how I feel
about that.
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[Id. ¶ 135]. Similar statements allegedly were made in an earlier meeting with Ward and
Hobbs, and the parties allegedly understood the employee to be Bacon [Id. ¶¶ 136–37].
Meanwhile, Feredonna was actively recruiting merchants for the 2010 School
Coupons program for the Greater East Tennessee edition on behalf of schools in Knox
County and surrounding counties [Id. ¶ 138]. Merchants that had dealt with Feredonna
almost exclusively responded quickly and affirmatively, while merchants who had dealt
primarily with Bacon and Kerr did not renew their participation [Id. ¶¶ 139–40]. Several
such merchants informed Ward that they would not participate in plaintiffs’ school coupons
program because of what they had heard about Feredonna from Bacon and Kerr [Id. ¶ 141].
Also, area McDonald’s franchisees reneged on their sponsorship commitment, stating they
wanted to participate only in the Knox County Schools program [Id. ¶ 144]. Approximately
twenty-five merchants out of 230 previously-participating merchants did not participate in
plaintiffs’ school coupons program [Id. ¶ 142]. Allegedly, this refusal to participate
decreased the perceived value of the book and resulted in lower sales [Id. ¶ 143].
In 2011, Feredonna began recruiting for its 2011 School Coupons program [Id. ¶ 146].
Feredonna representatives and Ward were informed by merchants who chose not to renew
their participation that they wanted to participate only in the original or county book, and
others informed them that they would not renew their participation as a result of a letter they
received from Knox County Schools [Id. ¶¶ 146–47]. Others informed them that Bacon and
Kerr told them not to participate [Id. ¶ 148]. Upon information and belief, plaintiffs allege

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that Bacon and Kerr pressured merchants to not participate in plaintiffs’ school coupons
program, suggesting that it might influence their decision to include them in Knox County’s
school coupon book [Id. ¶ 149].
Plaintiffs also allege that, in late 2009, Feredonna bid on the Knox County Schools
2010 coupon book and proffered a proposal to extend the terms of the contract with Knox
County Schools and to commit to a three-year price freeze, among other incentives, which
would have saved Knox County Schools as much as $100,000 per year [Id. ¶ 150]. Knox
County allegedly received no qualified bid for less than the amount of Feredonna’s proposal
[Id. ¶ 152]. Plaintiffs allege upon information and belief that Bacon directed Knox County
to rebid the project rather than consider Feredonna’s proposal [Id. ¶ 153]. The specifications
for the coupon book requested in that bid were identical to those previously published by
Feredonna for Knox County Schools, but the bidding and evaluation criteria changed from
prior bids to rely solely on price [Id. ¶¶ 154–55]. Knox County Schools requested that
Feredonna submit a proposal, and reinstated PrintVenture’s vendor status [Id. ¶¶ 156–58].
PrintVenture and WeDo Fundraising submitted identical bids, but Walsworth submitted a bid
with a significantly lower price and received the contract [Id. ¶¶ 159–60]. After the
rebidding, Knox County again cancelled PrintVenture’s vendor status [Id. ¶ 167].
According to plaintiffs, Bacon later falsely stated that the lower price was the only
reason for ending the relationship with Feredonna [Id. ¶¶ 161–62]. Ward independently
contacted Walsworth to request a price quote and received a quote double than the bid

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Walsworth offered to Knox County Schools; thus, plaintiff alleges, upon information and
belief, Walsworth bid the Knox County Schools’ coupon book project below cost for the
2010–11 program so that it could substantially raise prices for subsequent years or gain
leverage on other printing for Knox County Schools [Id. ¶¶ 163–64]. Ward also contacted
a printer whose bid was rejected because it could not cut the coupon books apart after
printing and binding [Id. ¶ 165]. Ward allegedly learned that the rejected bidder suggested
to Bacon a plan for printing the books and sending them to Feredonna’s bindery for finishing,
but Bacon rejected the idea, stating he would not do business with Ward [Id. ¶ 166].
Plaintiffs further allege defendants created and distributed a coupon book that
appropriates material trademarked and copyrighted by Feredonna (the “2010 Book”) [Id. ¶
168]. Plaintiffs allege that the 2010 Book misrepresented the Knox County Schools Coupon
Book as “School Coupons,” and was “strikingly” similar in format, layout, and coupon
design to plaintiffs’ school coupons book [Id. ¶ 169, 172]. For example, like plaintiffs’
school coupons book, the 2010 Book was rectangular and approximately check-sized in
shape with the same dimensions, featured the logo of the presenting sponsor on the bottom
center of the front cover, displayed the logos of other major sponsors on the bottom center
of the front cover, included a photograph of a top-selling student, and provided that it was
“The Original Knox County Schools Coupon Book Established in 1989” [Id. ¶¶ 173–76,
188]. Likewise, plaintiffs allege defendants created a coupon book for distribution in 2011
(the “2011 Book”), which also is rectangular and approximately check-sized in shape,

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features the logo of the presenting sponsor on the bottom center of the front cover, displays
the logos of other major sponsors on the bottom center of the front cover, includes a
photograph of a top-selling student, and provides that it is “The Original Knox County
Schools Coupon Book Established in 1989” [Id. ¶¶ 179–83, 188].
Plaintiffs allege that defendants advertised the 2010 Book as “SAME BOOK, NEW
LOOK” and admitted through press releases that the 2010 Book was so similar to other
books on the market that one should be cautious as to which book was produced by Knox
County Schools [Id. ¶¶ 189–90]. Plaintiffs also allege that Knox County Schools earned a
profit of $1,319,832.50 from sales of the 2010 Book, and stand to similarly benefit from the
sales of the 2011 Book as a result of their misappropriation of Feredonna’s trademarked and
copyrighted materials [Id. ¶¶ 192–93]. Finally, plaintiffs allege that, in 2011, defendants
began to solicit schools outside of Knox County to sell the 2011 Book [Id. ¶¶ 194–96].
On the basis of these allegations, plaintiffs assert eight claims: Trademark and Trade
Dress Infringement (Count I); Copyright Infringement (Count II); Unfair Trade Practices
(Count III); Tortious Interference (Count IV); Libel (Count V); Defamation and Slander
(Count VI); Conversion (Count VII); and Civil Extortion (Count VIII) [Id. ¶¶ 207–55].
II.

Standard of Review
Federal Rule of Civil Procedure 8(a)(2) sets out a liberal pleading standard, Smith v.

City of Salem, 378 F.3d 566, 576 n.1 (6th Cir. 2004), requiring only “‘a short and plain
statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the

15

[opposing party] fair notice of what the . . . claim is and the grounds upon which it rests,’”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S.
41, 47 (1957)). Detailed factual allegations are not required, but a party’s “obligation to
provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and
conclusions.” Twombly, 550 U.S. at 555. “[A] formulaic recitation of the elements of a
cause of action will not do,” nor will “an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Ashcroft v. Iqbal, 556 U.S. 662, —, 129 S. Ct. 1937, 1949 (2009).
In deciding a Rule 12(b)(6) motion to dismiss, a court must construe the complaint in
the light most favorable to the plaintiff, accept all factual allegations as true, draw all
reasonable inferences in favor of the plaintiff, and determine whether the complaint contains
“enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at
570; Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007) (citation omitted). “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.” Iqbal, 129
S. Ct. at 1949 (citation omitted). “Determining whether a complaint states a plausible claim
for relief will [ultimately] . . . be a context-specific task that requires th[is Court] to draw on
its judicial experience and common sense.” Iqbal, 129 S. Ct. at 1950 (citation omitted).
III.

Bacon’s Motion to Dismiss
Bacon moves the Court to dismiss plaintiffs’ claims for libel (Count V), defamation

and slander (Count VI), and civil extortion (Count VIII) pursuant to Rule 12(b)(6) of the

16

Federal Rules of Civil Procedure [Doc. 26]. Bacon submits that the libel and defamation
claims are barred by the applicable statutes of limitations, or alternatively are vague and
unanswerable, and that Tennessee does not recognize a cause of action for civil extortion
[Id.].
A.

Libel Claim (Count V) and Defamation and Slander Claim (Count VI)

Bacon asserts the complaint alleges that libelous statements were made by Bacon:
•

sometime in 2009 subsequent to when Bacon allegedly provided information
to merchants who refused to participate in Ward’s discount card program;

•

when Bacon sent out and/or authorized an undated memorandum be sent out
sometime before November 20, 2009;

•

when defendants engaged in a “misinformation campaign” in late 2009; and

•

when Bacon sent out letters in January and February of 2010

[Doc. 27 (citing Doc. 1 ¶¶ 71–72, 84–91, 124–28)]. Bacon submits that the statute of
limitations for a claim of libel, or written defamation, is one year from the time of publication
of the statement, and that all of these statements were made more than one year before the
filing of the complaint on September 6, 2011 [Id.].
Bacon also asserts the complaint alleges that slanderous statements were made by
Bacon:
•

prior to March 2008;

•

during a meeting in March 2008;

•

during an April 2009 phone conversation between Bacon and Ward;

17

•

during a meeting held sometime in April 2009;

•

sometime in 2009 subsequent to the April 2009 meeting;

•

when Bacon sent out and/or authorized an undated memorandum that was sent
out sometime before November 20, 2009;

•

when defendants engaged in a “misinformation campaign” in late 2009; and

•

when Bacon sent out letters in January and February of 2010

[Doc. 27 (citing Doc. 1 ¶¶ 42–44, 50–52, 57–59, 61–62, 66, 71–72, 84–86, 88, 91, 124–28)].
Bacon submits that the statute of limitations for a claim of oral defamation, or slander, is six
months from the time of the publication of the statement, and that all of these statements
were made more than six months before the filing of the complaint on September 6, 2011
[Id.].
“The law of defamation includes both slander, which is spoken, and libel, which is
written.” Watson v. Fogolin, No. M2009-00327-COA-R3-CV, 2010 WL 1293797, at *4
(Tenn. Ct. App. Apr. 1, 2010) (citation omitted). Defendant is correct that the applicable
statute of limitations for libel is one year, Tenn. Code Ann. § 28-3-104(a)(1), and that the
applicable statute of limitations for slander is six months, Tenn. Code Ann. § 28-3-103, and
plaintiffs do not dispute such [See Doc. 33]. Rather, plaintiffs assert that the “gravamen” of
their libel and slander claims is that Bacon, along with Kerr, “engaged in a campaign of lies
to pressure merchants into not participating in [the] School Coupons® program . . . and to
discourage schools . . . from fundraising with School Coupons®” [Id.]. They recognize that
while Bacon’s misinformation campaign began outside the statute of limitations, it
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“continued through to times within the statute of limitations, and indeed to the present day”
[Id.]. In support, plaintiffs point to the following allegations in the complaint:
•

“In 2011, when Feredonna began actively recruiting for the 2011 School
Coupons® book, Feredonna’s representatives as well as Ward encountered
merchants who declined to renew their participation in the School Coupons®
program, many stating they were only participating in the ‘original’ or
‘County’ book”;

•

“Several merchants told Feredonna representatives that they would not renew
their participation in the 2011 School Coupons® program because of a letter
they received from Knox County Schools”;

•

“Upon information and belief, this default and other cancellations were the
direct result of disinformation spread by the [d]efendants”;

•

“[d]efendants made false and defamatory statements about [p]laintiffs in
memoranda and letters sent to schools and merchants”; and

•

“[d]efendants made false and defamatory statements about [p]laintiffs in
contacting school officials and merchants”

[Doc. 33 (citing Doc. 1 ¶¶ 145–47, 241, 244)]. These allegations, however, fail to identify
any statements, written or oral, that Bacon made within the applicable statute of limitations
periods. Moreover, “Tennessee courts have never recognized a ‘continuing defamation.’”
Rose v. Cookeville Reg’l Med. Ctr., No. M2007-02368-COA-R3-CV, 2008 WL 2078056, at
*5 (Tenn. Ct. App. May 14, 2008) (“In fact, this Court has previously commented on the
dubiousness of the very concept of a ‘continuing defamation.’” (citation omitted)).
Plaintiffs also point to the affidavit of Aaron Schmissrauter, attached as Exhibit 6 to
plaintiffs’ complaint, which states that Cocoa Moon Café and SAS Shoes, two merchants that
participated in the plaintiffs’ school coupons program in 2010, “declined to renew their
19

participation in the School Coupons® program for 2011–12” around July and August of 2011
[Doc. 1-1 Ex. 6]. Mr. Schmissrauter asked the merchants why they did not renew, and “both
owners told [him] it was because they had received a letter from the Knox County School
District about its coupon book program. They did not show [him] the letter, but they did tell
[him] that after reading it they were no longer comfortable with participating in the Schools
Coupons® book” [Id.]. Plaintiffs argue that this letter “presumably [came] from” Bacon
[Doc. 33]. There, however, are no allegations to this effect and there are no allegations
pertaining to when the letter may have been sent, even if it was from Bacon; indeed, just
because Mr. Schmissrauter met with these merchants in July and August of 2011 does not
mean that the letter from Knox County Schools, even if from Bacon, was issued at that time
or any time after September 6, 2010.
In sum, the Court finds that plaintiffs’ libel and slander claims against Bacon are
barred by the applicable statutes of limitations. These claims will be dismissed.1
B.

Civil Extortion Claim (Count VIII)

Bacon asserts that Tennessee does not recognize a cause of action for civil conspiracy,
citing Perry v. Conley, No. 02A019812CV00369, 1999 WL 270430 (Tenn. Ct. App. May 5,
1999) [Doc. 27]. Plaintiffs counter that “other [c]ourts in Tennessee have permitted an
extortion claim to proceed when pleaded as part of a civil conspiracy,” citing Vafaie v.
Owens, No. 92C-1642, 1996 WL 502133 (Tenn. Ct. App. Sept. 6, 1996), and In re Prebul,
1

In light of the Court’s determination, the Court need not address Bacon’s alternative
argument.
20

No. 09-14010, 2011 WL 2947045 (Bankr. E.D. Tenn. July 19, 2011) [Doc. 33]. They
maintain that so long as they allege that criminal extortion has occurred and the elements of
a civil conspiracy, they may proceed with their claim [Id.].
The Court notes that Tennessee has never recognized a cause of action for civil
extortion. See, e.g., Perry, 1999 WL 270430, at *4 (“We know of no statutory or common
law authority—except in states where statutes provide for civil penalties for the crime of
extortion—which would allow [the plaintiff] to recover damages for ‘extortion’ . . . under
these facts.”). One Tennessee court has, however, “permitted an extortion action to proceed
when pleaded as part of a civil conspiracy.” In re Prebul, 2011 WL 2947045, at *5. In
Vafaie v. Owens, the plaintiff alleged a civil conspiracy, which is “a ‘combination between
two or more persons to accomplish by concert an unlawful purpose, or to accomplish a
purpose not in itself unlawful by unlawful means.’” 1996 WL 502133, at *7 (citation
omitted); see also id. (noting that “[t]he requisite elements of the cause of action are common
design, concert of action, and an overt act” and that there must be “[i]njury to person or
property, resulting in attendant damage”). The Court of Appeals of Tennessee found that the
plaintiff “alleged facts in her complaint that, if proven true, could have constituted a cause
of action for civil conspiracy” “‘to accomplish by concert’ the unlawful purpose of extorting
money.”

Id.

The United States Bankruptcy Court for this district recently had the

opportunity to address these two cases and presumed that a civil extortion action could “be

21

brought where (1) criminal extortion has occurred, and (2) the elements of a civil conspiracy
are present.” In re Prebul, 2011 WL 2947045, at *5.
In light of Vafaie and In re Prebul, the Court finds defendant’s argument without
merit at this time. Here, plaintiffs allege that Bacon and Kerr participated in concert “to
cancel [p]laintiffs contracts with Knox County Schools, remove [p]laintiffs from Knox
County’s approved vendor list, and take further actions to harm [p]laintiffs [sic] business”
[Doc. 1 ¶ 252]. They further claim that defendants acts of extortion, specifically Bacon
“using his position of public employment to demand a payment or compensation in return
for the privilege of conducting business with Knox County Schools,” constituted an overt act
[Id. ¶ 251; see also id. ¶¶ 51–52, 58–59, 69]. Plaintiffs also allege they were damaged
through the loss of sales [See id. ¶ 92].
Bacon’s motion to dismiss the civil extortion claim (Count VIII), therefore, will be
denied.
IV.

Kerr’s Motion to Dismiss
Kerr moves the Court, pursuant to Rule 12(b)(6), to dismiss the complaint against her

[Doc. 29]. She asserts with respect to Counts IV through VII that she is immune pursuant
to the Tennessee Governmental Tort Liability Act (“TGTLA”), Tenn. Code Ann. § 29-20101–29-20-408, and that such claims are barred by the applicable statutes of limitation [Doc.
30].2 With respect to Count III, Kerr asserts she is immune to the extent that it is a common

2

The Court notes that Bacon did not move for dismissal pursuant to the TGTLA.
22

law claim, and alternatively, that the claim should be dismissed because it is not based upon
any state or federal statute [Id.].3
Turning first to Kerr’s assertion that she is immune from Counts IV through
VII—claims for tortious interference, libel, defamation and slander, and conversion,
respectively—pursuant to the TGTLA, particularly section 29-20-205, the Court recognizes
that the TGTLA provides that “all governmental entities shall be immune from suit for any
injury which may result from the activities of such governmental entities wherein such
governmental entities are engaged in the exercise and discharge of any of their functions,
governmental or proprietary,” Tenn. Code Ann. § 29-20-201. “Governmental entity” is
defined to include, among other entities, school districts. Tenn. Code Ann. § 29-20102(3)(A). The TGTLA, however, removes immunity for “injury proximately caused by a
negligent act or omission of any employee within the scope of his employment,” Tenn. Code
Ann. § 29-20-205, except with respect to certain enumerated actions or omissions, including
“those specified torts enumerated in subsection (2),” Limbaugh v. Coffee Med. Ctr., 59
S.W.3d 73, 84 (Tenn. 2001). Subsection (2) allows for immunity when the injury arises out
of “false imprisonment pursuant to a mittimus from a court, false arrest, malicious

3

Kerr also asserts that, by agreement of the parties, Counts I and II should proceed as claims
against Knox County and the Knox County Board of Education [Doc. 29]. The Court entered the
parties’ agreed order, dismissing Bacon and Kerr in their official capacities [Doc. 47]; therefore, it
need not address this point [See Doc. 35 (plaintiff acknowledging that Counts I and II are
“encompassed within the Agreed Order among the parties that such claims will proceed directly
against Knox County and the Knox County Schools”)]. Kerr does not, as plaintiffs point out, move
for dismissal of Count VIII [See id.].
23

prosecution, intentional trespass, abuse of process, libel, slander, deceit, interference with
contract rights, infliction of mental anguish, invasion of right of privacy, or civil rights.”
Tenn. Code Ann. § 29-20-205(2). “An individual employee of a governmental entity is
immune when the governmental entity for which he works is immune from suit, unless the
employee’s act or omission was willful, malicious, criminal, or performed for personal
financial gain . . . .” Autry v. Hooker, 304 S.W.3d 356, 363 (Tenn. Ct. App. 2009); Tenn.
Code Ann. § 29-20-310(c).
Plaintiffs assert three reasons why Kerr is not immune; two of these arguments lack
merit [Doc. 35]. First, plaintiffs argue that Kerr’s conduct was willful, wanton, and grossly
negligent and thus immunity is precluded pursuant to Tenn. Code Ann. § 29-20-201(b)(2)
[Id.]. That section provides:
All members of boards, commissions, agencies, authorities, and other
governing bodies of any governmental entity, created by public or
private act, whether compensated or not, shall be immune from suit
arising from the conduct of the affairs of such board, commission,
agency, authority, or other governing body. Such immunity from suit
shall be removed when such conduct amounts to willful, wanton, or
gross negligence.
Tenn. Code Ann. § 29-20-201(b)(2). There are no allegations that Kerr is a member of a
governing body of any governmental entity; thus, the Court finds this section has no
application here. Second, plaintiffs argue that in operating a coupon book program, Knox
County Schools is not performing a government function [Id.]. Plaintiffs, however, fail to

24

recognize that immunity applies to “governmental or proprietary” functions. Tenn. Code
Ann. § 29-20-201(a) (emphasis added).
Finally, plaintiffs argue that Kerr has a financial stake in Knox County Schools’
coupon book program, as evidenced by Russ Oakes’s testimony from the hearing on
plaintiffs’ request for injunctive relief. As stated, an employee of a governmental entity, like
Kerr, is not immune if her acts are performed for personal financial gain. Autry , 304 S.W.3d
at 363; Tenn. Code Ann. § 29-20-310(c). In light of plaintiffs’ allegations and this exception
to immunity, the Court finds dismissal on the basis of immunity inappropriate at this time.
Kerr also argues that Counts IV through VII are barred by the one year statute of
limitations set forth in Tenn. Code Ann. § 29-20-305 to the extent that they relate to any
activities that occurred prior to September 6, 2010 [Doc. 30]. Likewise, Kerr argues that
plaintiffs’ libel and defamation and slander claims are barred by the statutes of limitation set
forth in Tenn. Code Ann. §§ 28-3-103 and 28-3-104 [Id.]. She claims the only allegations
in the complaint that address her are:
•

that she attended a meeting in March 2008 at which Ward proposed a new
discount card program that Knox County Schools’ did not accept;

•

that, in the spring of 2009, she discouraged merchant participation in the
discount card program and destroyed documents that denied information to
plaintiffs;

•

that she persuaded other Knox County employees to discontinue school
curriculum guides in the spring of 2009;

•

that she signed a letter in January 2010 portraying plaintiffs in a negative light;

25

•

that she sent a follow-up letter February 5, 2010, which contained damaging
and false statements about plaintiffs;

•

that she made statements about the Knox County Schools’ coupon book to the
media in September 2010; and

•

that, in 2011, she told people not to participate in plaintiffs’ coupon book
program

[Id. (citing Doc. 1 ¶¶ 71–75, 81, 124–26, 127–29, 148, 190, Ex. 11)].
Plaintiffs did not respond to Kerr’s argument concerning the applicability of Tenn.
Code Ann. § 29-20-305; instead, plaintiffs assert the same opposition to the applicability of
the statutes of limitation set forth in Tenn. Code Ann. §§ 28-3-103 and 28-3-104 as they did
with respect to Bacon’s argument (indeed, the response is almost verbatim) [See Docs. 33,
35]. The Court has already found those arguments without merit and now finds the same as
to Kerr. Accordingly, and because plaintiffs failed to oppose the applicability of § 29-20305, the Court will dismiss Counts IV through VII against Kerr as time barred, with one
exception. See E.D. Tenn. L.R. 7.2 (noting that failure to respond may be deemed waiver of
opposition). Plaintiff herself recognizes that the complaint asserts she made statements to
the media about the Knox County Schools’ coupon book and plaintiffs’ coupon book that
were published on September 9, 2010 [See Doc. 1 ¶ 190, Ex. 11]. Accordingly, the Court
cannot find that plaintiffs’ claim for libel against Kerr is time barred, either under Tenn.
Code Ann. § 29-20-305 or Tenn. Code Ann. § 28-3-104, both of which provide for a one year
statute of limitations.

26

Kerr’s final argument concerns Count III. Plaintiffs, however, assert that Count III
is encompassed within the agreed order, dismissing Bacon and Kerr in their official
capacities [Doc. 47], and that Count III “will proceed directly against Knox County and the
Knox County Schools” [Doc. 35]. Accordingly, the Court need not address this argument.
V.

Walsworth’s Motion to Dismiss
Walsworth moves the Court, pursuant to Rule 12(b)(6), to dismiss Counts III through

VIII [Doc. 36]. Walsworth maintains that the complaint fails to state these claims against
it and that the claims for unfair trade practices (Count III) and civil extortion (Count VIII)
are not recognized under Tennessee law [Id.]. In response to the motion, plaintiffs withdrew
“Counts IV–VIII . . . as to Walsworth without prejudice to re-filing of same” pursuant to
Rule 41(a) [Docs. 40, 41]. Neither a reply brief nor any other response was filed, so the
Court assumes Walsworth has no objection to the withdrawal of these claims without
prejudice. Accordingly, these claims will be dismissed without prejudice as to Walsworth.
That leaves for the Court’s consideration only defendant’s argument that Count III—
unfair trade practices—should be dismissed. Walsworth asserts that “[n]owhere in the
[c]omplaint is a state or federal statute cited or relied upon in support of [p]laintiffs’ ‘unfair
trade practices’ claim” [Doc. 37]. Further, Walsworth asserts that “[t]here is no Tennessee
common law claim for ‘unfair trade practices’” [Id.].
In response, plaintiffs assert that Tennessee recognizes an action for unfair trade
practices [Doc. 41]. Specifically, plaintiffs point to Tenn. Code Ann. § 47-18-104, which

27

prohibits “unfair or deceptive acts or practices affecting the conduct of any trade or
commerce” and provides a private right of action for those economically harmed by unfair
trade practices [Id.].
While the complaint may not identify any statute, state or federal, upon which
plaintiffs rely for their unfair trade practices claim, the allegation set forth under Count III
(“Defendants have engaged in unfair and deceptive acts affecting the conduct of trade or
commerce . . . .”) [Doc. 1 ¶ 230] mimics the language set forth in the Tennessee Consumer
Protection Act of 1977, specifically Tenn. Code Ann. § 47-18-104(b) (“The following unfair
or deceptive acts or practices affecting the conduct of any trade or commerce are declared
to be unlawful and in violation of this part . . . .”). And Tenn. Code Ann. § 47-18-109
provides for a private right of action for violation of Tenn. Code Ann. § 47-18-104, along
with treble damages, which plaintiffs request with respect to Count III. Thus, some basic
research would have revealed that plaintiffs were attempting to assert a claim pursuant to the
Tennessee Consumer Protection Act of 1977. Although plaintiffs perhaps should have titled
Count III something else (e.g., Tennessee Consumer Protection Act Claim) or referred to the
statute, the Court does not find their failure to do so warrants dismissal of the claim at this
time, given their identification of the relevant statute in response to the motion to dismiss and
that the language employed in the complaint provides notice of this type of claim. See
Minger v. Green, 239 F.3d 793, 801 (6th Cir. 2001) (noting that “dismissal on the basis of

28

a mislabeled claim is not warranted as long as correction of the legal theory does not
prejudice the opposing party”).4
Walsworth alternatively moves the Court, “[i]n the event [the] Court does not grant
[its] motion to dismiss for failure to state a claim,” to “order [p]laintiffs to submit a more
definite statement of its causes of action against Walsworth versus all of the defendants
lumped together” [Doc. 37]. Plaintiffs did not respond to this alternative request [See Doc.
41 (addressing only Walsworth’s motion to dismiss despite setting forth the standard of
review for a motion for a more definite statement)]. Accordingly, and in light of defendant’s
argument pertaining to dismissal of Count III, the Court will grant Walsworth’s alternative
request for a more definite statement. See E.D. Tenn. L.R. 7.2 (noting that failure to respond
may be deemed waiver of opposition). Plaintiff will be directed to file an amended
complaint designed to address he defects complained of within fourteen (14) days of the
entry of this order.
VI.

Conclusion
For the reasons explained herein, the Court hereby GRANTS in part and DENIES

in part the Motion to Dismiss Counts V, VI, and VIII of Plaintiffs’ Complaint on Behalf of
Defendant Scott Bacon [Doc. 26]; GRANTS in part, DENIES in part, and DENIES as
moot in part the Motion to Dismiss on Behalf of Mary Kerr [Doc. 29]; and GRANTS in
4

The Court finds that Walsworth is not prejudiced here because plaintiff identified the statute
upon which it relies in its response to Walsworth’s motion to dismiss. Also, Walsworth had an
opportunity to submit a reply addressing the claim in light of the statutory citation, see E.D. Tenn.
L.R. 7.1(a), but did not do so.
29

part, DENIES in part, and DENIES as moot in part Defendant, Walsworth Publishing
Co., Inc.’s Partial Motion to Dismiss Complaint or, in the Alternative, Motion for More
Definite Statement [Doc. 36]. As to Bacon, Count V and Count VI are hereby DISMISSED;
as to Kerr Counts IV, VI, and VII are hereby DISMISSED; and as to Walsworth, Counts IV,
V, VI, VII, and VIII are hereby DISMISSED. Plaintiff is DIRECTED to file an amended
complaint designed to address the defects complained of by Walsworth within fourteen (14)
days of the entry of this order.
IT IS SO ORDERED.

s/ Thomas A. Varlan
UNITED STATES DISTRICT JUDGE

30