ADT Services AG et al v. Brady et al

Filing 208

OPINION AND ORDER DENYING 195 Defendants' Motion for Partial Summary Judgment; GRANTING 198 ADT'S Motion for Summary Judgment on Defendants' Defamation Counterclaim. Signed by U.S. District Judge Robert H. Cleland on 6/30/14. (lgw)

UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

ADT SERVICES, AG, and ADT SECURITY
SERVICES, INC.,
Plaintiffs,
Case No. 10-2197

v.
THOMAS BRADY, et al.,
Defendants.
/

OPINION AND ORDER GRANTING PLAINTIFFS’ MOTION FOR PARTIAL
SUMMARY JUDGMENT, AND DENYING DEFENDANTS’ MOTION FOR PARTIAL
SUMMARY JUDGMENT
Following the court’s order granting in part and denying in part Plaintiffs ADT
Services, AG and ADT Security Services, Inc.’s (collectively, “ADT”) motion to compel,
the court allowed limited supplemental discovery. ADT now moves for partial summary
judgment on Defendants’ sole remaining counterclaim; Defendants move for summary
judgment on ADT’s claim for tortious interference with contractual relationships as well
as on all claims against Defendant Susan Brady. The court held a hearing on May 21,
2014, and directed the parties to submit supplemental briefing regarding whether the
corporate veil of Defendant “The Alarm Company” could be pierced and liability imposed
on Defendant Susan Brady as to ADT’s state-law claims. For the following reasons,
ADT’s motion will be granted and Defendants’ motion will be denied.

I. BACKGROUND1
In 2000, Defendant Tom Brady signed an Authorized Dealer Agreement with
ADT; two years later ADT terminated the agreement. (Dkt. # 198-2, Pg. ID 2529.) ADT
brought an action against Brady to collect on outstanding debt and obtained a default
judgment against Brady. (Id. at Pg. ID 2530.) Once ADT terminated Brady as a dealer,
he was no longer authorized to hold himself or his business out to the public as an ADT
affiliate. (Id.)
Soon after ADT terminated Brady’s former alarm company as an authorized
dealer, Brady’s wife, Sue Brady, formed “The Alarm Company,” through which Tom
Brady continued his alarm services business. (Id.) When ADT learned that Brady was
holding himself out to its customers as an ADT affiliate, it sued Brady. During this
previous action, ADT submitted various affidavits showing that Brady engaged in false
representations to ADT’s customers, including telling an ADT customer that he was
from “the alarm company that was taking over ADT,” as well as displaying an ADT
identification badge as part of his efforts to solicit business. (Id.) When one of ADT’s
customers tried to cancel her contract with Brady, he responded with profanities,
including calling the customer a “f ing bi .” (Id. at Pg. ID 2531.) ADT and Defendants
eventually settled this previous action with terms that Defendants would no longer sell
alarm systems in certain areas. (Id.)
In 2008, two sales agents representing Defendants, including Defendant Lance

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Because Defendants chose not to respond to ADT’s statement of undisputed
material facts, the court takes all of Plaintiffs’ facts as undisputed for the purposes of
summary judgment. W.D. Tenn. Local R. 56.1(d).
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Woods, visited an ADT customer at her home. They stated that they were from ADT,
and were visiting to upgrade the customer’s ADT alarm system. The customer, who
was 82 at the time, did not read the contract they asked her to sign, believing that it was
from ADT. (Id. at Pg. ID 2532.) Defendants repeated these practices with at least four
additional elderly ADT customers. (Id. at Pg. ID 2532–36.) Defendants’ behavior was
the subject of various Better Business Bureau complaints, as well as several news
reports. (Id. at Pg. ID 2536–37.) In 2010, the Better Business Bureau issued its lowest
rating to The Alarm Company reporting:
Complainants and callers have indicated that Mr. Tom Brady and other
representatives of The Alarm Company, LLC used deceptive, misleading and
high-pressure sales tactics. Specifically, consumers stated that company
representatives either directly indicated that they were with the consumer’s
current alarm company or led consumers to believe that they were a
representative of their current alarm company and were at their home to
upgrade their current system.
(Id. at Pg. ID 2537.) For the purposes of the current motions, neither party disputes that
Susan Brady never solicited, attempted to solicit, or contacted any individual regarding
solicitation of The Alarm Company’s home security services. (Dkt. # 202-1, Pg. ID
2832.)
II. STANDARD
Summary judgment is appropriate “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a). “In deciding a motion for summary judgment, the court
must view the evidence in the light most favorable to the non-moving party, drawing all
reasonable inferences in that party’s favor.” Sagan v. United States, 342 F.3d 493, 497
(6th Cir. 2003). The movant has the initial burden of showing the absence of a genuine
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dispute as to a material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The
burden then shifts to the nonmovant, who must put forth enough evidence to show that
there exists “a genuine issue for trial.” Horton v. Potter, 369 F.3d 906, 909 (6th Cir.
2004) (citation omitted). The nonmovant “must do more than simply show that there is
some metaphysical doubt as to the material facts.” Matsushita v. Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586 (1986). Summary judgment, therefore, is not
appropriate when “the evidence presents a sufficient disagreement to require
submission to a jury.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52 (1986).
III. DISCUSSION
ADT moves for summary judgment on Defendants’ sole remaining counterclaim,
while Defendants move for summary judgment on ADT’s tortious-interference-withcontractual-relationships claim, as well as on all claims against Susan Brady. Each
motion will be addressed in turn.
A. Defendants’ Defamation Counterclaim
In order to prove defamation, Defendants must establish:
1) a party published a statement; 2) with knowledge that the statement is
false and defaming to the other; or 3) with reckless disregard for the truth
of the statement or with negligence in failing to ascertain the truth of the
statement.
Wright v. Sodexho Marriott Servs., 30 F. App’x 566, 566 (6th Cir. 2002) (citing Sullivan
v. Baptist Memorial Hosp., 995 S.W.2d 569, 571–72 (Tenn. 1999) (internal citations
omitted). As the parties bringing the defamation counterclaim, Defendants bear the
burden of proving that the statements in question were false. Woodruff v. Ohman, 166
F. App’x 212, 216 (6th Cir. 2006). “Damages from false or inaccurate statements
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cannot be presumed; actual damages must be sustained and proved.” Brown v.
Christian Bros. Univ., No. W2012-01336-COA-R3-CV, 2013 WL 3982137, at *8 (Tenn.
Ct. App. Aug. 5, 2013).
Defendants allege that ADT defamed them by publishing a press release which
quoted David Bleisch, ADT’s Chief Legal Officer, as saying: “We believe it is our
responsibility as the nation[’]s leading home security provider to aggressively pursue
cases against people who lie, mislead and harass unsuspecting victims.” (Dkt. # 201,
Pg. ID 2808.) The press release also cited ADT’s previous legal action against Tom
and Sue Brady, as well as the Better Business Bureau’s “F” rating for The Alarm
Company.
Summary judgment will be granted to ADT on Defendants’ counterclaim for two
reasons. First, despite arguing that ADT did not adequately investigate the facts
surrounding their press release before issuing it, Defendants present no evidence that
the statements were, in fact, false. Because it is their burden to demonstrate falsity, see
Woodruff, 166 F. App’x at 216, Defendants’ defamation claim fails. Alternatively, ADT
also argues that Defendants’ defamation claim should fail because they have presented
no evidence of actual damages. Defendants do not meaningfully address this
argument, instead choosing to canvass the law in a variety of jurisdictions where
damages may be presumed for false and malicious statements. However, Tennessee
law is clear that actual damages must be proven in order to sustain a defamation claim.
See, e.g., Glennon v. Dean Witter Reynolds, Inc., 83 F.3d 132, 137–38 (6th Cir. 1996)
(“Under Tennessee law, the defamation plaintiff must prove actual damages; a court
may not presume them.”); Emerson v. Garner, 732 S.W.2d 613, 617 (Tenn. Ct. App.
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1987) (“The doctrine of presumed damages in libel and slander cases is no longer
applicable in Tennessee.”). Defendants present no evidence of actual damages,
therefore, summary judgment is granted to ADT on Defendants’ counterclaim.
B. Tortious Interference with Contractual Relationships (All Defendants)
Defendants argue that ADT cannot prove its claim of tortious interference with
contractual relationships. Although ADT brings its claim for tortious interference under
both statutory and common law theories, the elements ADT must prove are the same
under either theory:
(1) there was a legal contract; (2) the defendant was aware of the contract;
(3) the defendant maliciously intended to induce a breach; and (4) the
defendant’s actions proximately caused a breach and resulting damages.
Hauck Mfg. Co. v. Astec Indus., Inc., 375 F. Supp. 2d 649, 659 (E.D. Tenn. 2004).
Defendants challenge only ADT’s ability to prove the first element, that is, that
there was a legal contract between ADT and various third-party customers. Without
citation to the record, or to legal authority, Defendants argue that “ADT’s monitoring
contracts provide a buy-out mechanism within the contracts. Exercising that right is not
a breach or otherwise wrongful. To hold defendants in violation is in essence denying
every ADT customer the right to exercise the termination provisions under the very
language ADT provided and agreed to.” (Dkt. # 196, Pg. ID 2501.)
To the extent Defendants challenge ADT’s ability to present evidence regarding
contracts that Defendants tortiously induced its customers to breach, their argument is
without merit. In response to Defendants’ motion, ADT attaches excerpts from
depositions with its customers who state that they had a contract with ADT until
Defendants’ sales representatives induced them to sign a new contract with The Alarm
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Company under the pretense that the sales representatives were agents of ADT. (Dkt.
# 198-3, Pg. ID 2546–47; Dkt. # 198-4, Pg. ID 2572–73; Dkt. # 198-5, Pg. ID 2631–4;
Dkt. # 198-6, Pg. ID 2656–59; Dkt. # 198-7, Pg. ID 2697–2700.) ADT has therefore met
its burden of putting forth enough evidence to show that there is a genuine issue for
trial. Horton, 369 F.3d at 909 (6th Cir. 2004).
And to the extent Defendants argue that ADT cannot recover for tortious
interference with a contract because the contracts were terminable by ADT’s customers,
their argument is without legal support. “[T]he Tennessee Appellate Court has
expressly held that ‘although the contract was terminable at will, an action can still be
maintained for procurement of the breach of the contract.’” Denuke Contracting Servs.,
Inc. v. EnergX, LLC, No. 3:07-CV-114, 2007 WL 2509686, at *4 (E.D. Tenn. Aug. 30,
2007) (quoting New Life Corp. of Am. v. Thomas Nelson, Inc., 932 S.W.2d 921, 926–27
(Tenn. Ct. App. 1996)); see also Trau-Med of Am., Inc. v. Allstate Ins. Co., 71 S.W.3d
691, 701 n.4 (Tenn. 2002) (“Interference with the exercise by a third party of an option
to renew or extend a contract with the plaintiff is also included [in the tort of intentional
interference with business relationships].”).2 Summary judgment on ADT’s tortiousinterference-with-contractual-relationships claim is denied.
C. Susan Brady (All Claims)
Defendants also move for summary judgment on all claims against Susan Brady,

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Although Defendants do not raise the argument, ADT correctly notes that
Tennessee’s “competition privilege” is not applicable here, as ADT claims wrongful
business conduct, alleging that Defendants fraudulently identified themselves as ADT
representatives in order to induce ADT’s customers to breach their contracts. See Polk
and Sullivan, Inc. v. United Cities Gas Co., 783 S.W.2d 538, 543 (Tenn. 1989.)
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arguing that ADT is unable to present any evidence demonstrating that she engaged in
specific acts or practices at issue in any of ADT’s claims.
In response, ADT argues that Susan Brady, as sole owner of The Alarm
Company, entrusted all the operations of the company to her husband, Tom Brady,
despite her knowledge that Tom Brady used The Alarm Company to engage in false
and deceptive sales tactics. ADT further argues that Susan Brady did not investigate
any of the complaints against The Alarm Company, and took no corrective measures to
remedy The Alarm Company’s false and misleading sales practices.
Addressing first ADT’s federal claims for trademark infringement and unfair
competition under the Lanham Act, Defendants argue that there is no evidence that
Susan Brady directed, controlled, ratified, or participated in the alleged trademark
infringement. “Although the Lanham Act refers only to direct trademark infringers, [the
Supreme Court has] established that liability may also be imposed on those who
facilitate the infringement.” Coach, Inc. v. Goodfellow, 717 F.3d 498, 503 (6th Cir.
2013) (citing Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844 (1982)). “An individual
corporate . . . owner . . . can be liable for trademark infringement by the corporation
where the individual is either personally involved in the infringement or is willfully blind to
infringing activity.” Coach, Inc. v. D & N Clothing, Inc., No. 10-12813, 2011 WL
2682969, at *3 (E.D. Mich. July 11, 2011). “[O]strich-like business practices amount to
willful blindness, which is sufficient to show . . . the intent necessary to be a contributory
infringer.” Microsoft Corp. v. Rechanik, 249 F. App’x 476, 479 (7th Cir. 2007).

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At her deposition, Susan Brady testified that although she was aware of
numerous customer complaints to the Better Business Bureau alleging the conduct
outlined above, she did not personally investigate the claims or follow-up with the
employee designated to respond to the complaints. (Dkt. # 84-2, Pg. ID 1061.) She
admits that although she was aware that her husband’s prior company was the subject
of an unfair trade practices lawsuit, she made no effort to train either herself or her
company’s employees on ethical business and sales practices. (Id. at Pg. ID 1062.) As
the sole owner of The Alarm Company, she cannot recall whether she has ever
overruled her husband’s managerial decisions, and she does not review his
performance as general manager. (Dkt. # 195-5, Pg. ID 2458.) The record currently
before the court gives the impression that Susan Brady is a disinterested and
uninvolved manager, who is nevertheless aware of the allegations against her
corporation and husband. Despite being aware of these allegations, she took no action
to correct or remedy the conduct. She cannot avoid liability by refusing to deal with the
actions of her own corporation and its employees.
As to its state-law claims, ADT argues that vicarious liability should be imposed
on Susan Brady because The Alarm Company is, in effect, an alter-ego allowing her
and her husband to engage in spurious business practices, but perennially avoid
liability. “Under Tennessee corporation law, a corporation and its shareholders are
distinct entities.” Cambio Health Solutions, LLC v. Reardon, 213 S.W.3d 785, 790
(Tenn. 2006). This separate legal status “protects [a corporation’s] shareholders from
direct responsibility for the corporation’s debts and other liabilities, except in rare
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circumstances when a plaintiff is successful in persuading a court to disregard the
seperate corporate entity, also referred to as ‘piercing the corporate veil.’” Id. This
equitable doctrine is only applied in extreme circumstances to prevent use of the
corporation’s separate legal status to defraud or perform illegal acts. Pamperin v.
Streamline Mfg., Inc., 276 S.W.3d 428, 437 (Tenn. Ct. App. 2008). “The determination
of whether a corporation is a mere instrumentality of an individual is ordinarily a fact
question for the jury.” Id. As the party seeking to pierce the corporate veil, ADT bears
the burden of proof. Id.
Tennessee courts use the following factors when assessing whether to allow a
party to pierce the corporate veil:
Factors to be considered in determining whether to disregard the corporate
veil include not only whether the entity has been used to work a fraud or
injustice in contravention of public policy, but also: (1) whether there was a
failure to collect paid in capital; (2) whether the corporation was grossly
undercapitalized; (3) the nonissuance of stock certificates; (4) the sole
ownership of stock by one individual; (5) the use of the same office or
business location; (6) the employment of the same employees or attorneys;
(7) the use of the corporation as an instrumentality or business conduit for an
individual or another corporation; (8) the diversion of corporate assets by or
to a stockholder or other entity to the detriment of creditors, or the
manipulation of assets and liabilities in another; (9) the use of the corporation
as a subterfuge in illegal transactions; (10) the formation and use of the
corporation to transfer to it the existing liability of another person or entity;
and (11) the failure to maintain arms length relationships among related
entities.
Id. As mentioned above, the resolution of whether Susan Brady may be held personally
liable for the acts of her corporation is a question reserved for the jury. At this juncture,
the court need only consider whether ADT has advanced sufficient evidence to warrant
a jury’s consideration.
By her own admission, Susan Brady is the sole owner of The Alarm Company,
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thus satisfying the fourth factor above. (Dkt. # 196-5, Pg. ID 2452.) In her deposition,
she further stated that she formed The Alarm Company after her husband’s previous
alarm company filed for bankruptcy, and that although she owns the company, she has
very little personal involvement and her husband handles most of the day-to-day
functions, such as hiring and training. (Id. at Pg. ID 2454–56.) Thus, ADT has
presented evidence weighing in its favor on the sixth and seventh factors. Lastly, the
gravamen of ADT’s claims is that the Bradys use Susan Brady’s corporation, The Alarm
Company, in order to engage in abusive and fraudulent business practices, which
satisfies the ninth factor as well as the court’s general duty to consider whether the
corporate entity is being used “to work a fraud or injustice in contravention of public
policy.” Pamperin, 276 S.W.3d at 437. Although ADT has not presented any evidence
on the remaining factors, “no one factor is conclusive in determining whether to pierce
the corporate veil; rather, courts will rely upon a combination of factors in deciding the
issue.” Id. Accordingly, the court concludes that a reasonable jury could find that The
Alarm Company is a mere instrumentality of Susan Brady, thus exposing her to liability
for The Alarm Company’s actions. Summary judgment in favor of Susan Brady is
denied.
IV. CONCLUSION
IT IS ORDERED that Defendants’ “Motion for Partial Summary Judgment” [Dkt.
# 195] is DENIED.

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IT IS FURTHER ORDERED that ADT’s “Motion for Summary Judgment on
Defendants’ Defamation Counterclaim” [Dkt. # 198] is GRANTED. Judgment will issue
at the conclusion of the litigation.

s/Robert H. Cleland
ROBERT H. CLELAND
UNITED STATES DISTRICT JUDGE
Dated: June 30, 2014

I hereby certify that a copy of the foregoing document was mailed to counsel of record
on this date, June 30, 2014, by electronic and/or ordinary mail.
s/Lisa Wagner
Case Manager and Deputy Clerk
[phone]

S:\Cleland\JUDGE'S DESK\C2 ORDERS\10-2197.ADT.MotsSJ.jac.wpd

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