Schmelzle v. Goddard et al

Filing 56

MEMORANDUM OPINION OF THE COURT. Signed by Magistrate Judge Juliet E. Griffin on 3/6/15. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(afs)

IN THE UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
AMY SCHMELZLE
v.
KAILEN GODDARD, et al.

)
)
)
)
)

No. 3:14-0843

MEMORANDUM
Pursuant to the provisions of 28 U.S.C. § 636(c) and Rule 73(b) of the Federal Rules of Civil
Procedure, the parties in this action have consented to have the Magistrate Judge conduct any and
all proceedings in the action, including the entry of a final judgment. See Order entered July 18,
2014 (Docket Entry No. 49).
Pending before the Court is the Defendant Linda Didonato’s Motion to Dismiss the Second
Amended Complaint (Docket Entry No. 41), to which the Plaintiff has filed a response in opposition
(Docket Entry Nos. 46-47). For the reasons set forth, the motion is denied.

I. BACKGROUND
The Plaintiff, Amy Schmelzle (“Schmelzle”) is a resident of Kansas. Defendant Kailen
Goddard (“Goddard”) is a resident of Tennessee. At some point during the late 2000's, both the
Plaintiff and Goddard worked remotely from their homes for MidTen Media in the internet
marketing/advertising field. The Plaintiff alleges that when their employment with MidTen Media
ended, the Plaintiff and Goddard entered into a partnership in late 2008 to form an internet marketing
company called Lead Me Marketing Group, LLC (“Lead Me”). The Plaintiff alleges that upon the
advice of Goddard and attorney David Ridings, who assisted with the formation of the company, she
agreed to be a silent, but equal, partner and was not included in the Articles of Organization for the
company that were filed with the Tennessee Secretary of State. The Plaintiff asserts that over the
next several years, she and Goddard worked together at Lead Me, shared costs and profits equally,

made decisions about the company jointly, and created proprietary software and internet websites,
including a website known as RDN2020.com. She asserts that on June 5, 2013, she raised the issue
of having written papers drafted to memorialize her 50% ownership/interest in Lead Me and that
Goddard assured her that he would do whatever was necessary to that effect, and that he reiterated
that assurance in an email the next day. See Exhibit E to Second Amended Complaint (Docket Entry
No. 38, at 53). However, written papers showing the Plaintiff’s purported ownership interest were
never created.
The Plaintiff alleges that, beginning in August 2012, Goddard began to engage in actions for
his own self interest and to the detriment of Lead Me by creating and/or operating businesses that
directly competed with and diverted business away from Lead Me. She identifies Just One Vision,
Inc. (“Just One Vision”), Everyday Business Solutions, Inc. (“Everyday Business Solutions”), and
Goddard Enterprises, Inc. (“GEI”) as three of these businesses. The Plaintiff alleges that Goddard
duplicated Lead Me’s proprietary product, RDN2020.com, and registered it as LGA4040.com,
created numerous internet domains that copied and were replicated from Lead Me domains, and
eventually moved LGA4040.com and the duplicate domains to a hosting server, Net Standard, that
he paid for by using Lead Me funds. The Plaintiff contends that all of these action were taken to
divert customer orders and business from Lead Me to operations controlled by Goddard. The
Plaintiff alleges that Linda Didonato (“Didonato”) was the sales manager and a shareholder in Just
One Vision and played an active role in diverting business away from Lead Me to Just One Vision.
The Plaintiff alleges that in late 2013 and early 2014, she inadvertently received e-mails that
made her aware that BMI Elite Holdings, LLC and/or BMI Ventures, Inc. (“BMI”), one of Lead Me’s
largest customers, was having its business diverted from Lead Me to Just One Vision. See Exhibits
F (Docket Entry No. 38, at 55) and G (Docket Entry No. 38, at 57-58). She asserts that when she
confronted Goddard about the matter, he refused to discuss it with her and stated that Brandon
Rosen, a BMI officer, knew about the duplicate domain sites and had ordered the redirection of
BMI’s customers from Lead Me to Just One Vision. The Plaintiff states that she traveled to
2

Tennessee in February of 2014, to personally confront Goddard about his activities and the situation
with Lead Me, at which time Goddard declared to her that he was the sole owner of Lead Me, that
she was merely a highly compensated employee, and that she was terminated from her employment.
The Plaintiff alleges that within 30 minutes of their conversation, Goddard cancelled her access to
all Lead Me sites and that she was subsequently sent a letter, dated February 24, 2014, stating that
her services were no longer needed by Lead Me and that she would be given a final commission
check. See Exhibit H (Docket Entry No. 38, at 60).
On March 25, 2014, the Plaintiff filed this action pursuant to diversity jurisdiction under
28 U.S.C. § 1332 against Goddard, Lead Me, Just One Vision, Everyday Business Solutions, GEI,
BMI, Rosen, and Didonato. She sets out 13 specific claims:
1.

a request for declaratory judgment as to her legal interest in Lead Me;

2.

a claim for breach of fiduciary duty against Goddard under Tenn. Code Ann.
§ 48-249-407, against Goddard;

3.

a claim for breach of the duty of loyalty and care against Goddard under
Tenn. Code. Ann. § 61-1-104 and the common law;

4.

a claim against Goddard for breach of contract;

5.

a claim against Rosen and Didonato for inducement to breach of contract
under Tenn. Code Ann. § 47-50-109 and the common law;

6.

a claim against all Defendants for unjust enrichment;

7.

a claim against all Defendants for intentional interference with a business
relationship;

8.

a claim against Goddard for usurpation of corporate opportunity;

9.

a claim against Goddard for intentional misrepresentation.

10.

a claim against Goddard for promissory fraud;

11.

a claim against all Defendants for civil conspiracy;

12.

a request for a declaration to pierce the corporate veil; and

13.

a request for declaratory judgment that Defendants Goddard, Rosen, and
Didonato were in partnership.

3

See Second Amended Complaint (Docket Entry No. 38), at 11-23. In addition to her requests for
declaratory relief, she seeks compensatory damages, punitive damages, and statutory damages under
Tenn. Code. Ann. § 47-50-109. Defendants Goddard, Just One Vision, Lead Me, EBS, GEI, BMI,
and Rosen have filed answers. See Docket Entry Nos. 39 and 43. Pursuant to a case management
order, the action is set for a jury trial on February 16, 2016. See Docket Entry No. 51.
In lieu of an answer, Defendant Didonato has filed the pending motion to dismiss. See
Docket Entry No. 41. Didonato contends that the Plaintiff has not sufficiently pled facts supporting
the proximate cause element for the inducement to breach of contract claim (Claim 5) and that the
Plaintiff, by alleging that Didonato and Goddard had a partnership or agency relationship, has
negated a claim for inducement to breach of contract because Tennessee law is settled that a party
to a contract cannot be held liable for procuring its own breach of that contract. With respect to the
Plaintiff’s unjust enrichment claim (Claim 6), Didonato argues that the Plaintiff’s claim is not yet
ripe because the Plaintiff has not exhausted her remedies against Goddard, the principal to whom
the Plaintiff alleges she had contracted to form Lead Me. Didonato contends that the Plaintiff has
not sufficiently alleged that Didonato acted with improper motives or improper means as is required
for the claim of intentional interference with a business relationship (Claim 7), and has likewise not
alleged specific facts supporting the civil conspiracy claim (Claim 11). Didonato further argues that
if the Plaintiff’s claim for inducement to breach of contract fails, the civil conspiracy claim
necessarily fails. Finally, Didonato contends that the Plaintiff’s request for a declaration of the
agency relationship between Goddard, Rosen, and herself is a “catch-all” claim without any
specificity and fails to state a claim.

II. STANDARD OF REVIEW
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure is reviewed
under the standard that the Court must accept as true all of the allegations contained in the complaint,
resolve all doubts in the Plaintiff’s favor. See Kottmyer v. Maas, 436 F.3d 684 (6th Cir. 2006);
4

Boswell v. Mayer, 169 F.3d 384, 387 (6th Cir. 1999); Morgan v. Church’s Fried Chicken, 829 F.2d
10, 11-12 (6th Cir. 1987). While a complaint need not contain detailed factual allegations, the
Plaintiff must provide the grounds for his entitlement to relief, and this “requires more than labels
and conclusions, and a formulaic recitation of the elements of a cause of action.” Bell Atlantic Corp.
v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (abrogating Conley v.
Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). See also Ashcroft v. Iqbal, 556 U.S. 662,
129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
The factual allegations supplied must be enough to show a plausible right to relief.
Twombly, 550 U.S. at 555-61. More than bare assertions of legal conclusions are required to
withstand a motion to dismiss and the complaint must contain either direct or inferential allegations
respecting all of the material elements to sustain a recovery under some viable legal theory. Id.;
Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436-37 (6th Cir. 1988). The Court need
not accept as true legal conclusions or unwarranted factual inferences. See Gregory v. Shelby Cnty.,
220 F.3d 433, 446 (6th Cir. 2000), abrogated in part on other grounds, Buckhannon Bd. & Care
Home, Inc. v. West Va. Dep’t of Health & Human Res., 532 U.S. 598, 121 S.Ct. 1835, 149 L.Ed.2d
855 (2001).

III. CONCLUSIONS
A. Inducement to Breach a Contract (Claim 5)
Tennessee law provides for both a common law action and a statutory action for tortious
inducement to breach a contract. Edwards v. Travelers Ins. of Hartford, Conn., 563 F.2d 105, 120
(6th Cir. 1977); Polk & Sullivan, Inc. v. United Cities Gas Co., 783 S.W.2d 538, 542 (Tenn. 1989);
Tenn. Code. Ann. § 47–50–109. Under both the common law and Section 47-50-109, the Plaintiff
must show that: 1) there must be a legal contract; 2) the wrongdoer must have knowledge of the
existence of the contract; 3) there must be an intention to induce its breach; 4) the wrongdoer must
have acted maliciously; 5) there must be a breach of the contract; 6) the act complained of must have
5

proximately caused the breach of the contract; and 7) there must have been damages resulting from
the breach of the contract. Givens v. Mullikin, 75 S.W.3d 383, 405 (Tenn. 2002); Myers v.
Pickering Firm, Inc., 959 S.W.2d 152, 158 (Tenn.Ct.App. 1997).
The Defendant first argues that the Plaintiff’s allegations are insufficient to satisfy the
proximate cause element of this claim. The Court is not persuaded by this argument. Although it
is not yet known whether there will be evidence that will ultimately support such a claim, including
the issue of whether Defendant Didonato proximately caused the alleged harm to the Plaintiff, the
Court finds that the Plaintiff has sufficiently pled facts to state a claim for relief.
The Defendant then argues that the position taken by the Plaintiff in this lawsuit that
Didonato and Goddard had a partnership or agency relationship negates the Plaintiff’s claim for
inducement to breach of contract. While “a party to a contract cannot be liable for tortious
interference with that contract,” see Cambio Health Solutions, LLC v. Reardon, 213 S.W.3d 785,
789 (Tenn. 2006), the Plaintiff does not contend that Didonato’s agency or partnership relationship
with Goddard rendered Didonato a party to the purported partnership agreement between the Plaintiff
and Goddard. The purported agency or partnership relationship between Goddard and Didonato is
alleged to be something entirely separate and distinct from the purported partnership arrangement
between the Plaintiff and Goddard at Lead Me. Thus, the Defendant’s argument is misplaced and
fails to require dismissal of this claim.

B. Unjust Enrichment (Claim 6)
To state a claim for unjust enrichment under Tennessee law, the Plaintiff must demonstrate:
(1) a benefit conferred upon the Defendant by the Plaintiff, (2) appreciation by the Defendant of such
benefit, and (3) acceptance of such benefit without payment of the value thereof. See Chase
Manhattan Bank, N.A. v. CVE, Inc., 206 F. Supp. 2d 900, 909 (M.D. Tenn. 2002); Paschall's, Inc.
v. Dozier, 219 Tenn. 45, 407 S.W.2d 150, 154 (Tenn. 1966). The remedy for unjust enrichment

6

requires that the person who has been unjustly enriched at the expense of another make restitution
to that person. See Browder v. Hite, 602 S.W.2d 489, 491 (Tenn.Ct.App. 1980).
Didonato argues that the Plaintiff’s claim against her for unjust enrichment is not yet ripe
because the Plaintiff has not exhausted her remedies against Goddard, the principal to whom the
Plaintiff alleges she had contracted to form Lead Me. The Court is not persuaded by this argument.
While Tennessee law provides that a Plaintiff who is afforded recovery from the person with whom
she has a contract cannot also recover under a theory of unjust enrichment from third persons
incidentally benefitted by her performance, Paschall's, 407 S.W.2d at 154, the Plaintiff may plead
alternative theories of recovery. See Rule 8(d)(3) of the Federal Rules of Civil Procedure; Town of
Smyrna, Tenn. v. Municipal Gas Auth. of Ga., 2012 WL 1313340, *13 (M.D. Tenn. Apr. 17, 2012)
(Sharp, J.). Furthermore, in the instant action, the Plaintiff has named both Goddard and Didonato
as Defendants. While the Plaintiff may ultimately be barred from obtaining a remedy under the
theory of unjust enrichment because she obtains a contractual recovery against Goddard, this is a
limitation on recovery and does not prevent the Plaintiff from pursuing both her claims against
Goddard and a quasi-contractual claim against the other Defendants in the same action. Pureworks,
Inc. v. Brady Corp., 2010 WL 3724229, *13 (M.D. Tenn. Sept. 15, 2010) (Haynes, J.).

C. Intentional Interference with Business Relationship (Claim 7)
This claim requires the Plaintiff to show: (1) an existing business relationship between the
Plaintiff and specific third parties or a prospective relationship with an identifiable class of third
persons; (2) the Defendant's knowledge of that relationship and not a mere awareness of the
plaintiff's business dealings with others in general; (3) the Defendant's intent to cause the breach or
termination of the business relationship; (4) the Defendant's improper motive or improper means and
(5) damages resulting from the tortious interference. Trau–Med of Am., Inc. v. Allstate Ins. Co., 71
S.W.3d 691, 701 (Tenn. 2002).

7

Defendant Didonato contends that the Plaintiff has not sufficiently alleged that Didonato
acted with improper motives or improper means as required for the claim. In Trau-Med, the court
indicated that “improper motive” required a showing “that the defendant's predominant purpose was
to injure the plaintiff” and that “improper means” would include “those means that are illegal or
independently tortious” and “those methods that violate an established standard of a trade or
profession, or otherwise involve unethical conduct.” 71 S.W.3d at 701 n.5. However, the court also
recognized that the determination of whether an “improper” motive or action on the part of the
defendant existed was dependent on the facts and circumstances of a given case. Id.
While the Court agrees that there are insufficient allegations in the Second Amended
Complaint to support a showing that Didonato acted with a predominant purpose to injure the
Plaintiff, i.e., that she acted with an improper motive, the Plaintiff nonetheless alleges that Didonato
was knowingly engaged in a plan with Goddard to purposefully sever the business relationships
between Lead Me customers and Lead Me and to move those customers to Just One Vision in a
covert or clandestine manner unbeknownst to the Plaintiff and to her detriment. This plan is also
alleged to have involved replicating domain sites and the replication of the proprietary web-based
platform. At this point of the proceedings and upon a Rule 12(b)(6) motion, the Plaintiff’s
allegations are sufficient to satisfy the “improper means” requirement of the claim. See Trau-Med,
71 S.W.3d at 701 n.5 (examples of improper means include misrepresentation or deceit, misuse of
inside or confidential information, or methods that involve established standards of a trade or
profession or involve unethical conduct). Accordingly, the Defendant’s motion will be denied as
to this claim.

D. Civil Conspiracy (Claim 11)
In Tennessee, a civil conspiracy is defined as 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,” which results in damage to the plaintiff. Chenault v. Walker, 36 S.W.3d 45, 52
8

(Tenn. 2001); Birmingham-Jefferson Cnty. Transit Auth. v. Boatright, 2009 WL 2601926, *5 (M.D.
Tenn. Aug. 20, 2009) (Campbell, J.). Participating in a civil conspiracy is not an independent tort.
Stanfill v. Hardney, 2007 WL 2827498, *7 (Tenn.Ct.App. Sept. 27, 2007). It is a derivative claim
that requires the existence of an underlying tort or wrongful act committed by one or more of the
conspirators in furtherance of the conspiracy. Id. If the underlying wrongful conduct is found to be
not actionable, the conspiracy claim must also fail. Greene v. Brown & Williamson Tobacco Corp.,
72 F.Supp.2d 882, 887 (W.D. Tenn.1999).
Under Tennessee law, the elements of a cause of action for civil conspiracy are: (1) a
common design between two or more persons, (2) to accomplish by concerted action an unlawful
purpose, or a lawful purpose by unlawful means, (3) an overt act in furtherance of the conspiracy,
and (4) resulting injury. Menuskin v. Williams, 145 F.3d 755, 770 (6th Cir. 1998); Kincaid v.
SouthTrust Bank, 221 S.W.3d 32, 38 (Tenn.Ct.App. 2006). Civil conspiracy claims must be pled
with some degree of specificity. Kincaid, 221 S.W.3d at 38.
Defendant Didonato argues that if the Plaintiff’s claim for inducement to breach of contract
is dismissed, the civil conspiracy claim must necessarily be dismissed because there will not be a
claim of an underlying predicate tort committed pursuant to the conspiracy. This argument lacks
merit because the Court has found that the claim for inducement to breach of contract is not subject
to dismissal for failure to state a claim.
Defendant Didonato also argues that the Plaintiff has not pled the conspiracy claim with
sufficient particularity. After review of the Second Amended Complaint, the Court disagrees.
Contrary to the Defendant’s contention, the Plaintiff has made specific factual allegations against
Didonato, see Docket Entry No. 38, ¶¶ 21, 27, and 35, and has pled her involvement in the alleged
conspiracy and underlying torts. Id. at ¶¶ 67-69, 77-78, and 97-98. The Court concludes that there
are “enough facts to state a claim to relief that is plausible on its face” for a civil conspiracy and that
the Plaintiff has pled a claim that is plausible. Twombly, 550 U.S. at 570.

9

E. Request for a Declaration that the Defendants were in a Partnership (Claim 13)
Defendant Didonato argues that the Plaintiff’s request for a declaration as to the relationship
between Goddard, Rosen, and Didonato is a “catch-all” claim without any specificity. Without
suggesting whether or not the Plaintiff’s request for declaratory relief has merit, the Court finds that
the Defendant has not set forth an actual basis for dismissal of this request for declaratory relief.

CONCLUSION
Based on the foregoing, Defendant Linda Didonato’s Motion to Dismiss the Second
Amended Complaint (Docket Entry No. 41) is denied.
An appropriate Order will enter.

JULIET GRIFFIN
United States Magistrate Judge

10