Stonecoat of Texas, LLC et al v. Procal Stone Design, LLC et al

Filing 43

MEMORANDUM OPINION AND ORDER. ORDERED that Defendants' Motion to Dismiss or Stay Under Colorado River, or in the Alternative, Motion to Dismiss Under Rule 12(b)(6), or in the Alternative, Motion for More Definite Statement Under Rule 12(e) (Dkt. #19) is hereby DENIED. Signed by District Judge Amos L. Mazzant, III on 1/8/2018. (daj, )

United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

STONECOAT
OF
TEXAS,
LLC,
STONECOAT GP, LLC, and STONECOAT
LP

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v.
PROCAL STONE DESIGN, LLC, JOHN D.
PROFANCHIK, SR., individually, JUSTIN
KINSER, individually, IRMA
VILLARREAL, individually, ALFREDO
GONZALES, individually, PHILIPPE
MERGAUX, individually, and PIERRELAURENT CHEMIELEC, individually

Civil Action No. 4:17-CV-00303
Judge Mazzant

MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendants’ Motion to Dismiss or Stay Under Colorado River,
or in the Alternative, Motion to Dismiss Under Rule 12(b)(6), or in the Alternative, Motion for
More Definite Statement Under Rule 12(e) (Dkt. #19). The Court, having considered the relevant
pleadings, finds that Defendants’ motion should be denied.
BACKGROUND
Stonecoat of Texas, LLC (“Stonecoat, LLC”), Stonecoat GP, LLC (“Stonecoat GP”), and
Stonecoat LP (“Stonecoat LP”) (collectively “the Stonecoat entities”) are companies that are in the
business of making and selling spray-on stone facing. Ken Morrison (“Morrison”) was involved
in the origination of the spray-on stone facing and the formation of the Stonecoat entities. Because
of the specialized nature of the business, the Stonecoat entities required employees and business
partners to sign certain agreements pertaining to permissible competition, confidentiality, and
non-disclosure.

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In the winter of 2011, an investor group, which included Michael C. Hopkins (“M.
Hopkins”), approached Stonecoat GP to invest in the business. After M. Hopkins signed a
confidentiality agreement, Morrison and M. Hopkins agreed that M. Hopkins would make a capital
infusion into the business and in exchange would become the managing member of Stonecoat GP
in name, while Morrison would continue to handle day-to-day operations. At the last minute, M.
Hopkins requested to give his interest and role to his son, Frederick Hopkins (“F. Hopkins”). By
Fall 2012, Morrison began to question F. Hopkins’s and M. Hopkins’s loyalty, care, and good faith
business judgment and actions, and he began to investigate their practices. After an investigation,
Morrison uncovered what he alleged to be a conspiracy between M. Hopkins, F. Hopkins, and
several others, including two employees of the Stonecoat entities’, Pierre-Laurent Chamielec
(“Chamielec”) and Philippe Mergaux (“Mergaux”).
In October 2015, Stonecoat, Morrison, and the Morrison Family Trust (“the Hopkins
Plaintiffs”) brought suit in the 116th Judicial District Court of Dallas County against these alleged
conspirators arguing that they conspired to: (1) usurp business opportunities from Stonecoat; (2)
create a competing business; (3) misappropriate Stonecoat’s business and its knowledge processes,
sourcing, and information; (4) violate written agreements of non-competition and confidentiality
signed by M. Hopkins, Chamielec, and Mergaux; 1 (5) interfere with vendor and supplier
relationships; (6) interfere with dealer relationships; (7) and deceive and misrepresent material
facts (“the Hopkins lawsuit” or “the Hopkins case” or “the Hopkins suit”). M. Hopkins and F.
Hopkins settled their dispute with the Hopkins Plaintiffs, and only Stonecoat GP continued to trial
against Mergaux. 2 The jury found that Mergaux violated the Products Rights, Formula Purchase,

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As employees, Mergaux and Chamielec signed a Confidentiality/Non-Disclosure Agreement. Mergaux and
Chamielec also signed a Product Rights, Formula Purchase, and Royalty Agreement as they were involved in the
creation of the spray-on stone facing.
2
Chamielec was never served in the Hopkins case.

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and Royalty Agreement he had signed dated December 21, 2011 and did not violate his
Confidentiality/Non-Disclosure Agreement dated July 6, 2011. The district court entered a final
judgment based on the jury verdict.
Separate from the Hopkins business deal, in January 2015, Justin Kinser (“Kinser”)
approached the Stonecoat entities concerning employment. Kinser signed a Non-Disclosure
Agreement as part of his employment (“Kinser NDA”). Kinser introduced Morrison to John D.
Profanchik (“Profanchik”), who expressed an interest in buying the Stonecoat entities. Profanchik
also signed a Non-Disclosure Agreement (“Profanchik NDA”). Profanchik ended up creating and
forming Procal Stone Design, LLC (“Procal”), which is involved in the same business as the
Stonecoat entities. The business relationship between the Stonecoat entities and Profanchik
deteriorated.
Based on this business relationship, Profanchik sued Morrison, Rick Adams, Stonecoat,
LLC, and Sam Hance (collectively “Profanchik Defendants”) in May 2015 alleging fraud among
other causes of action in the 416th Judicial District Court of Collin County, Texas (“the Profanchik
suit” or “the Profanchik case” or “the Profanchik lawsuit”). Stonecoat, LLC filed a counterclaim
in this suit arguing that Profanchik conspired with Irma Villarreal (“Villarreal”), Alfredo
Gonzales (“Gonzales”), Kinser, Mergaux, Chamielec to create Procal, which is alleged to directly
compete with Stonecoat. In its counterclaim, Stonecoat, LLC alleged breach of the Profanchik
NDA, breach of fiduciary duty by Profanchik, misappropriation of trade secrets by Profanchik
according to Texas law, unlawful appropriation of Stonecoat’s property, and tortious interference
with the contracts between the Stonecoat entities and Villarreal, Gonzales, Kinser, Mergaux,
Chamielec. The Profanchik lawsuit proceeded and the Collin County District Court granted
Profanchik’s partial summary judgment as to Stonecoat, LLC’s counterclaims. The case then

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proceeded to trial, and the Collin County District Court entered a final judgment, on October 16,
2017, incorporating the summary judgment ruling and the jury verdict rendering. The final
judgment states:
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that
judgment is rendered in favor of [Profanchik Defendants] as to [Profanchik’s]
claims for fraud, fraud by nondisclosure, and negligent misrepresentation and that
[Profanchik] takes nothing by way of those claims.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that
judgement [sic] is rendered in favor of [Profanchik] as to all of StonecCoat’s
counterclaims and that StoneCoat takes nothing by way of those claims.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that
[Profanchik’s] declaratory judgment action is rendered in favor of [Profanchik] and
that the Court finds that the Non-Disclosure/Non-Compete Agreement between
[Profanchik] and Stonecoat is unenforceable as a matter of law.
IT IS FURTHER ORDERED, ADJUDGED and DECREED that each party
will bear his or its own costs of suit and attorneys’ fees.
This judgment finally disposes of all claims and all parties and is appealable.
(Dkt. #42, Exhibit 1 at p. 2).
On May 5, 2017, the Stonecoat entities filed suit in the Eastern District of Texas against
Procal, Profanchik, Kinser, Villarreal, Gonzales, Mergaux, and Chamielec based on the same set
of facts as alleged in Stonecoat, LLC’s counterclaim in the Profanchik lawsuit: Profanchik
conspired with Villarreal, Gonzales, Kinser, Mergaux, and Chamielec to create Procal.

In

Plaintiffs’ First Amended Original Complaint, the Stonecoat entities allege: a violation of the
Lanham Act for engaging in unfair competition and false advertising; misappropriation of trade
secrets and confidential and proprietary information against all Defendants; misappropriation of
trade secrets and confidential information in violation of the United States Defend Trade Secrets
Act of 2016; conversion; a violation of the Texas Theft Liability Act against all Defendants; a
breach of contract against all Defendants, a breach of fiduciary duty against the Individual
Defendants; tortious interference with existing business relationships against Procal and

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Profanchik as to Villarreal, Gonzales, Kinser, Mergaux, Chamielec; unfair competition against all
Defendants; and various theories regarding the alleged scheme against all Defendants.
On July 12, 2017, Defendants filed the present motion (Dkt. #19). On August 10, 2017,
Plaintiffs filed its response to the motion (Dkt. #25). Defendants filed their reply on August 17,
2017 (Dkt. #26) and Plaintiffs filed their sur-reply on August 23, 2017 (Dkt. #27). Further,
Profanchik filed a Notice of Rulings on Partial Summary Judgment (Dkt. #35) on September 27,
2017, and a Notice of Final Judgment (Dkt. #42) on October 20, 2017.
LEGAL STANDARD
1. Colorado River Abstention
The Colorado River doctrine allows a court to abstain from exercising jurisdiction over
federal claims under “exceptional circumstances.” Brown v. Pacific Life. Ins. Co., 462 F.3d 384,
394 (5th Cir. 2006). The existence of the following six (6) factors determine whether “exceptional
circumstances” exist:
(1) assumption by either state or federal court over a res; (2) relative inconvenience of the
fora; (3) avoidance of piecemeal litigation; (4) order in which jurisdiction was obtained by
the concurrent fora; (5) extent federal law provides the rules of decision on the merits; and
(6) adequacy of the state proceedings in protecting the rights of the party invoking federal
jurisdiction
Id. at 395. The decision to abstain must be based on a careful balancing of important factors as
they apply to a case, “with the balance heavily weighted in favor of the exercise of jurisdiction.”
Id. Additionally, the doctrine only applies when there are parallel proceedings pending in federal
and state court. Id. at 395 n.7. Proceedings are considered parallel if they “involve the same
parties and the same issues.” Id. It is not necessary that there be “a mincing insistence on precise
identity of parties and issues.” Id. The Colorado River test “should be applied in a pragmatic,

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flexible manner with a view to the realities of the case at hand.” Allen v. La. State Bd. of Dentistry,
835 F.2d 100, 104 (5th Cir. 1988).
2. Motion to Dismiss Pursuant to 12(b)(6)
The Federal Rules of Civil Procedure require that each claim in a complaint include a “short
and plain statement . . . showing that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). Each
claim must include enough factual allegations “to raise a right to relief above the speculative level.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
A Rule 12(b)(6) motion allows a party to move for dismissal of an action when the
complaint fails to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). When
considering a motion to dismiss under Rule 12(b)(6), the Court must accept as true all well-pleaded
facts in plaintiff’s complaint and view those facts in the light most favorable to the plaintiff.
Bowlby v. City of Aberdeen, 681 F.3d 215, 219 (5th Cir. 2012). The Court may consider “the
complaint, any documents attached to the complaint, and any documents attached to the motion to
dismiss that are central to the claim and referenced by the complaint.” Lone Star Fund V (U.S.),
L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). The Court must then determine
whether the complaint states a claim for relief that is plausible on its face. ‘“A claim has facial
plausibility when the plaintiff pleads factual content that allows the [C]ourt to draw the reasonable
inference that the defendant is liable for the misconduct alleged.’” Gonzalez v. Kay, 577 F.3d 600,
603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “But where the wellpleaded facts do not permit the [C]ourt to infer more than the mere possibility of misconduct, the
complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’” Iqbal,
556 U.S. at 679 (quoting FED. R. CIV. P. 8(a)(2)).

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In Iqbal, the Supreme Court established a two-step approach for assessing the sufficiency
of a complaint in the context of a Rule 12(b)(6) motion. First, the Court should identify and
disregard conclusory allegations, for they are “not entitled to the assumption of truth.” Iqbal, 556
U.S. at 664. Second, the Court “consider[s] the factual allegations in [the complaint] to determine
if they plausibly suggest an entitlement to relief.” Id. “This standard ‘simply calls for enough
facts to raise a reasonable expectation that discovery will reveal evidence of the necessary claims
or elements.’” Morgan v. Hubert, 335 F. App’x 466, 470 (5th Cir. 2009) (citation omitted). This
evaluation will “be a context-specific task that requires the reviewing [C]ourt to draw on its judicial
experience and common sense.” Iqbal, 556 U.S. at 679.
Thus, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.”’ Id. at 678 (quoting
Twombly, 550 U.S. at 570).
3. Motion for More Definite Statement
Rule 12(e) of the Federal Rules of Civil Procedure allows a party to move for a more
definite statement of the pleadings when the pleadings are “so vague or ambiguous that the party
cannot reasonably prepare a response.” FED. R. CIV. P. 12(e). “If a pleading fails to specify the
allegations in a manner that provides sufficient notice, a defendant can move for a more definite
statement . . . before responding.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002).
Motions for a more definite statement are generally disfavored because “in view of the great
liberality of Federal Rule of Civil Procedure 8 . . . it is clearly the policy of the Rules that Rule
12(e) should not be used to . . . require a plaintiff to amend his complaint which under Rule 8 is
sufficient to withstand a motion to dismiss.” Source Data Acquisition, LP v. Talbot Grp., Inc.,
4:07-cv-294, 2008 WL 678645, at *2 (E.D. Tex. Mar. 11, 2008) (citing Mitchell v. E-Z Way

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Towers, Inc., 269 F.2d 126, 132 (5th Cir. 1959)). In addition, “when a defendant is complaining
of matters that can be clarified and developed during discovery, not matters that impede his ability
to form a responsive pleading, an order directing the plaintiff to provide a more definite statement
is not warranted.” Hoffman v. Cemex, Inc., No. H-09-2144, 2009 WL 4825224, at *3 (S.D. Tex.
Dec. 8, 2009) (citing Arista Records LLC v. Greubel, 453 F. Supp. 2d 961, 972 (N.D. Tex. 2006)).
“Nevertheless, parties may rely on Rule 12(e) as a mechanism to enforce the minimum
requirements of notice pleading.” Id.
ANALYSIS
Defendants move to (1) dismiss or stay the suit based on Colorado River abstention; (2)
dismiss the case under Federal Rule of Civil Procedure 12(b)(6); and (3) get a more definite
statement of Plaintiffs’ claim under Federal Rule of Civil Procedure 12(e). The Court will address
each motion in turn.
1. Motion to Dismiss or Stay Based on Abstention
Defendants ask the Court to either dismiss or stay the current proceeding because of the
two state court proceedings arguing that the cases are parallel. Further, Defendants maintain that
three of the Colorado River factors weigh in favor of abstention and the remainder are neutral.
Thus, according to Defendants, the factors support a dismissal or stay. 3 Plaintiffs respond that the
actions are not parallel because the state court proceedings involve different parties and a different
set of operative facts. Additionally, Plaintiffs contend that, if the proceedings are parallel, the
Colorado River factors do not support a dismissal or a stay in this case.

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At the time the motion was filed, the Profanchik lawsuit was still pending. Since then, the Profanchik suit has
concluded and a stay would not serve any purpose. However, because the Court finds that it should not abstain from
exercising jurisdiction under the Colorado River doctrine, it will not address this in detail.

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A. Parallel Proceedings
Defendants maintain that this case is parallel with the Hopkins and Profanchik lawsuits.
Defendants argue that the Plaintiffs in this case, or those in privity, have previously asserted claims
against Defendants in this case, or those in privity, in the two state court actions. Plaintiffs respond
that the Hopkins litigation is based on an entirely different set of facts than the case at bar. Further,
Plaintiffs assert that the parties in the Hopkins and Profanchik cases are not substantially the same
as the parties in this action.
Federal district courts have a “‘virtual unflagging obligation . . . to exercise the jurisdiction
given to them.’” Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976)
(quoting McClellan v. Carland, 217 U.S. 268, 282 (1910)). As such, the rule is that “the pendency
of an action in the state court is no bar to proceedings concerning the same matter in the Federal
court having jurisdiction.” Id. However, a federal court may abstain if a parallel proceeding
presents “extraordinary and narrow” circumstances. Id. at 813. Proceedings are considered to be
parallel if they “involv[e] the same parties and the same issues.” Brown, 462 F.3d at 395 n.7
(quoting RepublicBank Dall., Nat’l Ass’n v. McIntosh, 828 F.3d 1120, 1121 (5th Cir. 1987))
(alteration in original). However, “‘it may be that there need not be applied in every instance a
mincing insistence on precise identity’ of parties and issues.”

Id. (quoting RepublicBank,

828 F.3d at 1121). Some courts have held that cases are still parallel if they involve “‘substantially
the same parties’ litigating ‘substantially the same issues.’” Alpert v. Riley, 2011 WL 801978,
at *12 (S.D. Tex. Dec. 10, 2011) (citing Tyrer v. City of S. Beloit, III., 456 F.3d 744, 752 (7th Cir.
2006); Al-Abood ex rel. Al-Abood v. El-Shamari, 217 F.3d 225, 232 (4th Cir. 2000); Allen v. Bd.
of Educ., United Sch. Dist. 436, 68 F.3d 401, 402 (10th Cir. 1995)). As a guiding principle, certain
courts ask “whether there is a substantial likelihood that the state litigation will dispose of all

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claims presented in the federal case.” Id. (citing TruServ v. Flegles, Inc., 419 F.3d 584, 592 (7th
Cir. 2005); Rowley v. Wilson, No. 05–30189, 2006 WL 2233221, at *1 (5th Cir. Aug. 4, 2006)
(unpublished opinion) (holding that suits were not parallel for Colorado River abstention purposes
because some defendants that were in the federal case were not present in the state suit, and the
plaintiff asserted claims against those defendants in the federal suit, which were not asserted in the
state suit)).
The Court finds that the current proceeding and the state court proceedings are not parallel,
although they are similar. The Court will address each state court proceeding.
i.

Hopkins Suit

Defendants argue that Plaintiffs’ claims are parallel with the Hopkins lawsuit because
Plaintiffs, and those in privity, specifically Morrison and the Morrison Family Trust, asserted
claims in the Hopkins suit against Mergaux and Chamielec. Further, Defendants maintain that the
claims in both suits are based on a violation of the 2011 Product Rights, Formula Purchase
Agreement and Royalty Agreement and the Confidentiality and Non-Disclosure Agreements.
Plaintiffs maintain that the parties are not identical in the two lawsuits and that the factual
allegations are completely different. Therefore, Plaintiffs maintain that their claims are not parallel
with those in the Hopkins suit.
First, the Hopkins suit does not involve identical parties. The plaintiffs in the Hopkins suit
were the Morrison Family Trust, Morrison, and the Stonecoat entities; whereas Plaintiffs in this
suit are just the Stonecoat entities. The defendants in the Hopkins action were F. Hopkins, M.
Hopkins, Brazostone Product LLC, Sheryl Schadt, Mergaux, Chamielec, and Cameron Miller as
opposed to Defendants in this suit, which are Procal, Profanchik, Kinser, Villarreal, Gonzales,
Mergaux, and Chamielec. While there is some overlap between the parties, the parties are not

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identical and the cases are not parallel. See Brown, 462 F.3d at 395 n.7 (quoting RepublicBank,
828 F.3d at 1121). There may be an argument made that the parties are substantially the same, but
the Court need not address that argument because the Court finds the issues are not substantially
the same.
The Hopkins suit arose out of an investment gone badly between M. Hopkins, F. Hopkins
and the Stonecoat entities in 2011 and 2012. This led the Hopkins Plaintiffs to file suit alleging
various causes of action including, but not limited to: (1) fraud and deceit; (2) breach of fiduciary
duty; (3) breach of contract against F. Hopkins, Chamielec, and Mergaux; and (4) tortious
interference with contract. Here, the Stonecoat entities sued Defendants based on the potential
sale of the company to Profanchik and the alleged conspiracy that went along with that transaction.
Plaintiffs alleged similar causes of action in this case, but they arise out of a different business
transaction, involving mostly new people. The fact that there are two overlapping Defendants,
Mergaux and Chamielec, does not convert the Profanchik business transaction that occurred in
2015 into the Hopkins business transaction that happened in 2011. Because the parties are not
identical and the issues are not identical, the Court finds that the current suit is not parallel to the
Hopkins case. See Brown, 462 F.3d at 395 n.7 (quoting RepublicBank, 828 F.3d at 1121).
ii.

Profanchik Suit

Defendants assert that the Profanchik case is parallel to the present action because the two
suits are based on the same set of factual allegations. Indeed, Defendants point to Stonecoat,
LLC’s First Amended Counterclaim in the Profanchik lawsuit and Stonecoat’s First Amended
Original Complaint to demonstrate that the two suits are based on the same set of facts. Plaintiffs
maintain that the parties and the issues are not identical in the two lawsuits.

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While some of the parties are the same and some of the issue are the same, some are not.
See Rowley, F. App’x at 275. The Profanchik suit only involves two similar parties: Profanchik
and Stonecoat, LLC. There are several other defendants to the federal action—Procal, Kinser,
Villarreal, Gonzales, Mergaux, and Chamielec. Further, even though the two lawsuits are based
on the same basic factual allegations—the Profanchik business deal—the issues are not exactly the
same. The Stonecoat entities assert new causes of action against all Defendants, including the
Lanham Act and the violation of the United States Defendant Trade Secrets Act of 2016. Plaintiffs
also assert new causes of action against the Defendants not present in the Profanchik lawsuit. As
such, there is not a substantial likelihood that the state litigation would dispose of the claims
presented in this case. See Alpert, 2011 WL 801978, at *12. Indeed, the Profanchik suit concluded
and did not dispose of all the claims presented in this case, including: all of the claims against the
remaining Defendants and the violation of the Lanham Act, the violation of the United States
Defend Trade Secrets Act of 2016, conversion, unfair competition, conspiracy, assisting or
encouraging, and concert of action against Profanchik. Accordingly, the Court finds that this case
is not parallel to the Profanchik suit. See id.
B. Colorado River Factors
Even if the Court found that this case was parallel to the two state court suits, the Court
finds that the Colorado River factors weigh against abstention in this case. Defendants argue that
the Colorado River factors support the notion that the Court should either dismiss or stay the case
based on the state court proceedings. Plaintiffs respond that it is only in exceptional circumstances
the Court should abstain from exercising jurisdiction, and this is not one of those cases after a
balance of the factors. The Court will address each factor in turn.

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i. Assumption by Either Court of Jurisdiction Over a Res
The parties agree that this case does not involve any res or property for any court, state or
federal, to take control over. Defendants argue that this means this factor is neutral. “The absence
of this factor is not, however, a ‘neutral item, of no weight in the scales.’ Rather, the absence of
this first factor weighs against abstention.” Murphy v. Uncle Ben’s Inc., 168 F.3d 734, 738 (5th
Cir. 1999) (quoting Evanston Ins. Co. v. Jimco, Inc., 844 F.2d 1185, 1191 (5th Cir. 1988)).
ii. Relative Inconvenience of the Fora
Again, the parties agree that this factor is inapplicable because the state court actions are
in Dallas County and Collin County and the federal court action is in the Eastern District of Texas,
Sherman Division.

As such, Defendants aver that this factor is neutral.

However, the

inapplicability of this factor does not render it neutral. Id. (citing Evanston, 844 F.2d at 1191).
Indeed, “its absence weighs against abstention.” Id. (citing Evanston, 844 F.2d at 1191).
iii. The Avoidance of Piecemeal Litigation
Defendants argue that “[g]iven the near identity of issues, parties, claims, and causes of
action between the Hopkins Lawsuit, the Profanchik Lawsuit, and this matter, duplication of effort
is a certainty and inconsistent results a possibility.” (Dkt. #19 at p. 17) (emphasis added).
However, duplicative litigation is not a factor to be considered under Colorado River. See Colo.
River, 424 U.S. at 819. This third factor is concerned with potential “inconsistent dispositions of
property” when multiple parties make claims in separate lawsuits to a single res or underlying
property. Id. This case does not involve the disposition of property or any res, and as such, there
is no danger under this factor. Black Sea Inv., Ltd. v. United Heritage Corp., 204 F.3d 647, 651
(5th Cir. 2006).

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If this factor extends to inconsistent decisions regarding the same issues, this factor still
does not present any meaningful danger. As already mentioned, the Hopkins lawsuit is based on
an entirely different set of facts than this suit, and any issue that has previously been litigated in
that suit, such as validity of Mergaux’s Non-Disclosure Agreement, can be obviated through
collateral estoppel. See id. As to the Profanchik case, the current action presents new causes of
action against the new Defendants, and new causes of action against Profanchik. Any duplicative
cause of action against Profanchik is not an issue under this factor, and any possible “inconsistent
judgment can be obviated through a plea of res judicata.” Id. (emphasis in original); Colo. River,
424 U.S. at 819. Therefore, this factor weighs against abstention.
iv. The Order in Which Jurisdiction Was Obtained by the Concurrent
Fora
Defendants argue that this factor weighs in favor of abstention because the two state court
actions are much further along than the current case. Defendants assert that this matter is in its
beginning stages and the two state court actions are in their final stages or are being appealed.
“The priority element of the Colorado River/Moses H. Cone balance ‘should not be
measured exclusively by which complaint was filed first, but rather in terms of how much progress
has been made in the two actions.’” Murphy, 168 F.3d at 738 (quoting Evanston, 844 F.3d at
1190). Here, the Hopkins and Profanchik cases were filed first, have progressed much further the
current action. The two state court cases have already concluded, and the district courts have
entered final judgments. As such, the state court proceedings are further along and this factor
weighs in favor of abstention. See id.
v. Extent Federal Law Provides the Rules of Decision on the Merits
Two of the asserted claims in Plaintiffs’ First Amended Original Complaint are based on
federal law: a violation of the Lanham Act and misappropriation of trade secrets and confidential
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and proprietary information under the United States Defend Trade Secrets Act of 2016; and the
remaining asserted claims are based in state law (Dkt. #9 at pp. 44–64). Defendants maintain that
because only two claims of the various claims are based in federal law, a majority of the causes of
action are grounded in state law, and because the facts for misappropriation under the United States
Defend Trade Secrets Act of 2016, one of the federal claims, are identical to common state law
claims, that the factor is neutral.
“The presence of a federal law issue ‘must always be a major consideration weighing
against surrender [of jurisdiction],’ but the presence of state law issues weighs in favor of surrender
only in rare circumstances.’” Murphy, 168 F.3d at 738 (quoting Evanston, 844 F.2d at 1193).
“Because [this case] involve[s] both federal and state rules of decision, this factor weighs against
abstention.” Id.
vi. The Adequacy of the State Proceedings In Protecting the Rights of the
Party Asserting Jurisdiction
Defendants argue that Texas state courts are adequate to resolve business disputes,
especially when a majority of the asserted claims are based in state law. Defendants further
maintain that there can be no argument that states courts are inadequate to resolve the present
dispute.
However, adequacy of the state court proceedings does not depend on whether a state court
has the ability to decide an issue. Rather, Supreme Court has held that:
When a district court decides to dismiss or stay under Colorado River, it
presumably concludes that the parallel state-court litigation will be an adequate
vehicle for the complete and prompt resolution of the issues between the parties. If
there is any substantial doubt as to this, it would be a serious abuse of discretion to
grant the stay or dismissal at all. Thus, the decision to invoke Colorado River
necessarily contemplates that the federal court will have nothing further to do in
resolving any substantive part of the case, whether it stays or dismisses.
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 28 (1983).
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As such, the question is whether there would be anything left for the Court to do
substantively after the resolution of the two state court suits. See id. The Court already discussed
a similar question when determining whether the state court actions were parallel with the federal
court action. As to the Hopkins suit, the final judgment did not dispose of any of the claims
presently before the Court, as the issues submitted to the jury were based on a different set of facts.
As to the Profanchik case, some issues in this case were decided by the final judgment: Profanchik
did not breach his NDA, he did not breach his fiduciary duty, he did not misappropriate trade
secrets under Texas law, he did not engage in theft of property, and he did not tortuously interfere
with the contracts of Villarreal, Gonzales, Kinser, Mergaux, and Chamielec, and the Profanchik
NDA is unenforceable. However, there are still several remaining issues for the Court to decide:
all of the claims against the remaining Defendants and the violation of the Lanham Act, the
violation of the United States Defend Trade Secrets Act of 2016, conversion, unfair competition,
conspiracy, assisting or encouraging, and concert of action against Profanchik. Therefore, there is
more for the Court to do to resolve a substantive part of the case, and this factor weighs against
abstention. See id.
vii. Balance of the Factors
It is appropriate for a federal court to abstain from exercising its jurisdiction only in
“extraordinary and narrow” circumstances. Colo. River, 424 U.S. at 813. The Court uses the
Colorado River factors not as a “‘mechanical checklist’” but carefully balancing them “‘as they
apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction.’”
Murphy, 168 F.3d at 738 (quoting Moses H. Cone, 460 U.S. at 16). While the Court acknowledges
that one factor weighs in favor of abstention, five out of the six weigh against abstention. This
case does not present the “extraordinary and narrow” circumstances, which warrant an abstention

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from jurisdiction. See Engenium Sols., Inc. v. Carr, 2012 WL 8432678, at *10 (S.D. Tex. Sept.
28, 2012).
2. Motion to Dismiss
Because the Court is exercising its jurisdiction over the case, it is proper to address
Defendants’ motion to dismiss. Defendants move to dismiss Plaintiffs claims because (A) res
judicata bars Plaintiffs’ claims and Plaintiffs engaged in improper claim splitting; and (B)
Plaintiffs’ First Amended Original Complaint does not meet federal pleading standards.
A. Res Judicata and Claim Splitting
Defendants assert that the Hopkins suit bars Plaintiffs’ claims against Mergaux and
Chamielec because all Plaintiffs’ claims alleged in this suit were raised or could have been raised
in the Hopkins suit. Defendants additionally argue that Plaintiffs’ claims against all Defendants
should be dismissed because Plaintiffs engaged in improper claim splitting referring to both the
Hopkins suit and the Profanchik suit. Plaintiffs respond that claim splitting is just another way of
describing res judicata. 4 Plaintiffs continue that the Hopkins suit does not present any res judicata
issues because the two actions arise out of a completely different operative set of facts. Plaintiffs
further maintain that there is no res judicata effect from the Profanchik suit because there is a lack
of identical parties, claims, transactions, and operative facts.
Res judicata “bars the litigation of claims that either have been litigated or should have
been raised in an earlier suit.” Petro–Hunt, L.L.C. v. United States, 365 F.3d 385, 395 (5th Cir.
2004). A party is precluded from relitigating claims when the following four elements are
satisfied: “(1) the parties are identical or in privity; (2) the judgment in the prior action was

4

Defendants’ argument regarding impressible claim splitting falls under the doctrine of res judicata as claims that
could or should have been brought with the previous action. See Super Van Inc. v. City of San Antonio, 92 F.3d 366,
371 (5th Cir. 1996). Therefore, the Court will address Defendants’ argument under the umbrella of res judicata.

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rendered by a court of competent jurisdiction; (3) the prior action was concluded by a final
judgment on the merits; and (4) the same claim or cause of action was involved in both actions.”
Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 571 (5th Cir. 2005). To determine whether
the two suits are based on the same claim or cause of action, the Fifth Circuit uses the transactional
test. Id. Under this test, the “critical issue is whether the two actions are based on the ‘same
nucleus of operative facts.’” Id. (quoting N.Y. Life Ins. v. Gillispie, 203 F.3d 384, 387 (5th Cir.
2000.
“[G]enerally a res judicata contention cannot be brought in a motion to dismiss; it must be
pleaded as an affirmative defense.” Hall v. Hodgkins, 305 F. App’x 224, 227 (5th Cir. Dec. 23,
2008) (quoting Test Masters, 428 F.3d at 570). “[A]n affirmative defense may serve as the proper
basis for a motion to dismiss for failure to state a claim so long as the district court considers only
those pleaded and judicially noticed facts that are not ‘outside the pleadings’’ according to Rule
12(d).” Id. at 228 n.1 (citing FED. R. CIV. P. 12(d); Cinel v. Connick, 15 F.3d 1338, 1343 n.6 (5th
Cir. 1994)). Defendants have raised legitimate concerns regarding the effect of res judicata from
the Profanchik suit on the present case; however, looking only to the pleadings and looking in the
light most favorably to Plaintiffs, the Court finds that Plaintiffs have a plausible claim and res
judicata would be better addressed at a later stage in the proceeding. 5
B. Pleading Standards
Defendants argue that Plaintiffs’ First Amended Original Complaint is fatally flawed
because it does not contain sufficient factual allegations and should be dismissed. Plaintiffs

5

Addressing res judicata at a later stage gives Plaintiffs an opportunity to respond to the new order and judgment
entered in the Profanchik suit.

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respond that their First Amended Original Complaint contains enough factual allegations to meet
the federal pleading standards.
After reviewing Plaintiffs’ First Amended Original Complaint, the Court finds that
Plaintiffs’ pleaded a plausible complaint that gives a short and plain statement of the claims
presented for relief in accordance with the Federal Rule of Civil Procedure 8(a). Therefore, the
motion to dismiss should be denied.
3. Motion for More Definite Statement
Defendants claim that “Plaintiffs’ claims are so vague and ambiguous that Defendants
cannot respond to claims without Plaintiffs amending their Complaint to provide more specificity
regarding their allegation and claims.” (Dkt. #19 at p. 23). As the Court found that the First
Amended Original Complaint is sufficient to meet the federal pleading requirements, the Court
finds that the compliant is not so vague and ambiguous that Defendant cannot respond.
Accordingly, the Court finds that the motion for more definite statement should be denied.
.

CONCLUSION
It is therefore ORDERED that Defendants’ Motion to Dismiss or Stay Under Colorado

River, or in the Alternative, Motion to Dismiss Under Rule 12(b)(6), or in the Alternative, Motion
for More Definite Statement Under Rule 12(e) (Dkt. #19) is hereby DENIED.
SIGNED this 8th day of January, 2018.

___________________________________
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

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