Cisco Systems Inc et al v. Mushkin Inc et al
Filing
169
Memorandum Opinion and Order - Before the Court is Defendants Cisco Systems, Inc. and Cisco Technology Inc.'s Motion to Dismiss Defendant Jeffery Ramey's Amended Counterclaims and Brief in Support (Doc. Nos. 92 & 92-1) (the "Motion& quot;). After careful consideration of the Motion, responsive briefing, relevant portions of the record, and applicable law. The Court GRANTS in part and DENIES in part the Motion pursuant to Federal Rule of Civil Procedure 12(b)(6). Specifically, th e Court denies the Motion as to Ramey's counterclaims for defamation, business disparagement, tortious interference with prospective relations, and tortious interference with contract. The Court grants the Motion to dismiss the intentional infli ction of emotional distress counterclaim and dismisses that counterclaim. Because Ramey states his intent to abandon his unfair competition counterclaim, the Court dismisses the unfair competition counterclaim to avoid Ramey needing to amend the pleadings again. (Ordered by Judge Ed Kinkeade on 8/11/2021) (chmb)
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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
CISCO SYSTEMS, INC., a California
corporation; CISCO TECHNOLOGY,
INC., a California corporation,
Plaintiffs,
v.
MUSHKIN, INC., a Colorado
Corporation (d/b/a ENHANCED
NETWORK SYSTEMS); JEFFREY
RAMEY, an individual; DOES 1-10,
Defendants.
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Civil Action No. 3:20-CV-2588-K
MEMORANDUM OPINION AND ORDER
Before the Court is Defendants Cisco Systems, Inc. and Cisco Technology Inc.’s
Motion to Dismiss Defendant Jeffery Ramey’s Amended Counterclaims and Brief in
Support (Doc. Nos. 92 & 92-1) (the “Motion”). After careful consideration of the
Motion, responsive briefing, relevant portions of the record, and applicable law. The
Court GRANTS in part and DENIES in part the Motion pursuant to Federal Rule
of Civil Procedure 12(b)(6). Specifically, the Court denies the Motion as to Ramey’s
counterclaims for defamation, business disparagement, tortious interference with
prospective relations, and tortious interference with contract. The Court grants the
Motion to dismiss the intentional infliction of emotional distress counterclaim and
dismisses that counterclaim. Because Ramey states his intent to abandon his unfair
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competition
counterclaim,
the
Court
dismisses
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the
unfair
competition
counterclaim to avoid Ramey needing to amend the pleadings again.
I.
Factual and Procedural Background
This case arises from an alleged fraudulent scheme purportedly orchestrated by
Defendant Jeffrey Ramey (“Ramey”), a former Senior Account Manager at Cisco
Authorized Reseller, General Data Tech (“GDT”), and Mushkin, Inc., d/b/a Enhanced
Network Systems, (“ENS”), an unauthorized reseller of Cisco products. Cisco Systems,
Inc. and Cisco Technology Inc. (collectively, “Cisco”) allege that Ramey and ENS
defrauded Cisco by obtain discounts on Cisco products based on false and misleading
information to secure lower prices on products than ENS could otherwise obtain.
Ramey formerly worked for GDT, which is a large IT networking solutions
provider that has a business relationship with Cisco. Cisco investigated Ramey and
ENS’s alleged scheme, which in Ramey’s view was a “campaign of derogatory,
defamatory, and disparaging action aimed at damaging Ramey’s reputation and ending
his 22-year successful career in the IT industry.” Resp., Doc. No. 104, at 2. Ramey
claims Cisco’s investigation of the purported fraudulent scheme led to Cisco supposedly
convince GDT to fire Ramey. Ramey alleges that Cisco then spread untruths regarding
his involvement in the fraudulent scheme to Ramey’s business contacts, which resulted
in Ramey losing long-time and pending contracts. Ramey seeks relief for the alleged
wrongs that Cisco committed against him through their investigation and related
actions adverse to Ramey.
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In terms of procedural background, Cisco filed its Complaint (Doc. No. 1)
concerning the alleged fraudulent scheme on November 14, 2019, in the Northern
District of California. In lieu of answering, Ramey filed his Motion to Dismiss Pursuant
to Federal Rules 12(b)(2) and 12(b)(3) or, in the Alternative, Request for Transfer
(Doc. No. 23). The request for transfer was granted, and the case was transferred to
this Court. Ramey then filed his answer and counterclaims on September 11, 2020
(Doc. No. 74).
Cisco filed its First Amended Complaint (Doc. No. 85) concerning the alleged
fraudulent scheme on October 2, 2020, alleging ten claims against Ramey and ENS:
(1) Inducing Breach and Interfering with Contract; (2) Fraud; (3) Aiding and Abetting
Fraud; (4) Conspiracy; (5) Negligent Misrepresentation; (6) Trademark Infringement;
(7) Trademark Counterfeiting; (8) Federal Unfair Competition; (9) Texas Unfair
Competition; and (10) Unjust Enrichment.
Ramey filed his Answer (Doc. No. 89) to the First Amended Complaint and six
Amended Counterclaims (Doc. No. 87) on October 12, 2020. Ramey’s Amended
Counterclaims include: (1) Defamation; (2) Business Disparagement; (3) Tortious
Interference with Prospective Business Relations; (4) Tortious Interference with
Contract; (5) Unfair Competition; and (6) Intentional Infliction of Emotional Distress.
In sum, Ramey alleges that Cisco engaged in a campaign of false information in which
Cisco allegedly intended to destroy Ramey’s business relationships by defaming him in
making statements related to Cisco’s investigation of Ramey’s purportedly fraudulent
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activity. In this Motion, Cisco moved to dismiss all claims against it pursuant to Federal
Rule of Civil Procedure 12(b)(6). Having received all responsive briefing, the Motion
is ripe for the Court’s review and determination as follows.
II.
Legal Standard
In considering a Rule 12(b)(6) motion, a court must determine whether the
plaintiff sufficiently stated a claim upon which relief may be granted. FED. R. CIV.
P. 12(b)(6). A well-pleaded complaint must allege facts upon which the claims are
based and not be a conclusory recitation of the elements of a cause of action. Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007). A complaint must state sufficient facts
such that the “claim has facial plausibility” and is not merely “possible.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). A plaintiff pleads a claim with facial plausibility when
the “factual content . . . allows the court to draw the reasonable inference that the
defendant is liable.” Id. This pleading standard does not require “‘detailed factual
allegations,’ but it demands more than an unadorned [] accusation . . . that is devoid
of ‘further factual’” support. Iqbal, 556 U.S. at 662 (quoting Twombly, 550 U.S. at
555). The complaint must allege sufficient facts to “give the defendant fair notice” of
plaintiff’s claims against the defendant. Twombly, 550 U.S. at 555 (quoting Conley v.
Gibson, 355 U.S. 41, 47 (1957)).
The Court “accept[s] all well-pleaded facts as true and view[s] those facts in the
light most favorable to the plaintiff.” Stokes v. Gann, 498 F.3d 483, 484 (5th Cir.
2007) (per curiam). The Court “do[es] not accept as true conclusory allegations,
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unwarranted factual inferences, or legal conclusions.” Ferrer v. Chevron Corp., 484 F.3d
776, 780 (5th Cir. 2007) (quoting Plotkin v. IP Axess Inc., 407 F.3d 690, 696 (5th Cir.
2005)).
The sufficiency of a plaintiff’s pleading under Rule 8 may also be challenged
pursuant to a Rule 12(b)(6) motion to dismiss for failure to state a claim. See Bank of
Abbeville & Trust Co. v. Commonwealth Land Title Ins. Co., No. 05-30976, 2006 WL
2870972, at *2 (5th Cir. Oct. 9, 2006) (citing Wright & Miller, supra, § 1203 (3d ed.
2004) (“[T]he form and sufficiency of a statement of a claim for relief under Rule
8(a)(2) may be tested by a motion to dismiss for failure to state a claim upon which
relief can be granted, Rule 12(b)(6) . . . .”)). Federal Rules of Civil Procedure 8(a)(2)
requires that a complaint contain “a short and plain statement of the claim showing
that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). To satisfy Rule 8(a)(2)'s
requirement, “[s]pecific facts are not necessary; the statement need only ‘give the
defendant fair notice of what the . . . claim is and the grounds upon which it
rests.’” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam) (quoting Twombly, 550
U.S. at 555).
III.
Analysis
Cisco moved to dismiss all of Ramey’s counterclaims on various bases. In
accordance with the following, the Court concludes that the Motion should be granted
in part and denied in part. Specifically, the Court denies the Motion as to Ramey’s
counterclaims for defamation, business disparagement, tortious interference with
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prospective relations, and tortious interference with contract. The Court grants the
Motion to dismiss the intentional infliction of emotional distress counterclaim and
dismisses that counterclaim for the reason explained below. As explained below, Ramey
states his intent to abandon his unfair competition counterclaim. To avoid Ramey
needing to amend the pleadings again, the Court dismisses the unfair competition
counterclaim.
A. Defamation Counterclaim
a. Statute of Limitations Issue
Cisco contends that Ramey’s defamation counterclaim is barred by the one-year
statute of limitation. In Texas, a claim for defamation must be brought “no later than
one year after the day the cause of action accrues.” Tex. Civ. PRAC. & REM. CODE §
16.002(a). Cisco points out that the allegedly defamatory statements Ramey identifies
in Paragraph 18 of the Amended Counterclaims purportedly happened between
November 2018 and March 2019. See Am. Counterclaims, Doc. No. 87, at ¶ 18. In
Cisco’s view, this would mean that Ramey’s original defamation counterclaim, filed on
September 11, 2020, is barred.
In Ramey’s response, he argues that the defamation claim is not untimely or
barred by the one-year statute of limitations because the defamation claim is a
compulsory counterclaim and therefore relates back to date of the filing of Cisco’s
initial complaint.
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In the Fifth Circuit, the statute of limitations for compulsory counterclaims is
tolled from the time the plaintiff files the initial complaint, and the counterclaim relates
back to the date the initial complaint was field. Songcharoen v. Plastic & Hand Surgery
Assocs., P.L.L.C., 561 F. App’x. 327, 240-41 (5th Cir. 2014). To determine whether a
claim is compulsory, the Fifth Circuit states that courts should ask:
(1) whether the issues of fact and law raised by the claim and
counterclaim largely are the same; (2) whether res judicata would bar a
subsequent suit on defendant's claim absent the compulsory counterclaim
rule; (3) whether substantially the same evidence will support or refute
plaintiff's claim as well as the defendant's counterclaim; and (4) whether
there is any logical relationship between the claim and the counterclaim.
An affirmative answer to any of the four questions indicates the claim is
compulsory.
Park Club, Inc. v. Resolution Tr. Corp., 967 F.2d 1053, 1058 (5th Cir. 1992)
(citation omitted). If any of the four questions results in an affirmative answer, the
counterclaim is compulsory. Id.
The Court finds that factors are answered affirmatively here. There is a logical
relationship between the alleged defamation and Cisco’s First Amended Complaint.
Just as Ramey explains, because the defamation claim depends on him disproving
Cisco’s fraud claim against him, resolution of both parties’ claims hinge on the same
issues, and therefore the claims are logically related. In addition, the issues of fact and
law raised by both parties’ claims revolve around whether or not Ramey is liable for the
alleged fraudulent scheme and whether or not Cisco’s purportedly defamatory
statements were true. As such, Ramey’s defamation counterclaim is compulsory.
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Because the defamation counterclaim is compulsory, the statute of limitations was
tolled from the date the Cisco filed the initial complaint on November 14, 2019.
In opposition to Ramey, Cisco contends that the defamation counterclaim is
permissive. Cisco cites to a case law outside of this circuit to support its position. While
the Court acknowledges that case law in other circuits may support a different
conclusion, the Court must follow the case law within this circuit. With very little case
law on this exact issue, the Court will address three cases from this circuit that speak
to the issue of compulsory versus permissive counterclaims in the defamation context:
(1) the Fifth Circuit’s decision in Underwriters at Int. on Cover Note JHB92M10582079
v. Nautronix, Ltd. (“Nautronix”), (2) the Western District of Texas’s decision 50-Off
Stores, Inc. v. Banque Paribas (Suisse) S.A. (“50-Off Stores”), and (3) Trugreen Ltd. P’ship
v. Rogers (“Trugreen”).
In Nautronix, a plaintiff vessel owner hired the defendant to install a drillingrelated device on the vessel. Underwriters at Int. on Cover Note JHB92M10582079 v.
Nautronix, Ltd., 79 F.3d 480, 483 n.2 (5th Cir. 1996). Something allegedly went wrong
with the device, causing great damage to plaintiff’s drilling equipment and operations.
Id. The plaintiff sued for negligence and related claims. Id. Defendant brought
counterclaims for slander and commercial disparagement, alleging that the plaintiff
defamed and disparaged the defendant regarding fault for the damage and the quality
and reliability of its products to customers, competitors, and potential customers. Id.
The procedural issues at hand in Nautronix are irrelevant here, but the Fifth Circuit’s
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analysis of whether the defendant’s counterclaim was compulsory is telling for Ramey’s
counterclaim before this Court. While the Fifth Circuit only cited this conclusion in a
footnote to the decision, it is highly persuasive to this Court, as it also was to the court
in 50-Off Stores. The Fifth Circuit stated, “We have no difficulty concluding that
Nautronix’s counterclaims, including slander and commercial disparagement, satisfy
the third and fourth tests cited above. Therefore, these claims were compulsory and
Nautronix was required to bring them once they had been sued . . . .” Id. at 485, n.2.
The Court invokes the same reasoning for its decision here because the defamation
counterclaim concerns purported statements made to Ramey’s business contacts about
his alleged involvement in a fraudulent scheme that is the very basis of Cisco’s
complaint.
Following the Fifth Circuit, the Western District of Texas ruled on similar issues
in 50-Off Stores. There, the court held that a defendant’s defamation counterclaim was
compulsory because the same evidence would support or refute plaintiff’s claims and
defendant’s counterclaims for defamation and business disparagement. 50-Off Stores,
Inc. v. Banque Paribas (Suisse) S.A., No. SA-95-CA-159, 1997 WL 790739, at *1 (W.D.
Tex. May 20, 1997). In 50-Off Stores, the plaintiff brought claims against the defendant
bank alleging its was involved in a fraudulent banking scheme. Id. at *1. The defendant
brought defamation, slander, libel, and business disparagement counterclaims against
the plaintiff and its counsel for allegedly defamatory statements published in a local
newspaper accusing the defendant of “break[ing] the law” by participating in an
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international scam of banks to steal millions from the plaintiff. Id. The plaintiff, like
Cisco, argued that the counterclaims were permissive. Id. The court, however, sided
with the Fifth Circuit’s analysis in Nautronix and found that the same evidence would
support or refute the plaintiff’s claims and defendant’s counterclaims of defamation
and business disparagement. Id. at *3. The court further found that there existed a
logical relationship between the claims and counterclaims, and therefore the
counterclaims for defamation and business disparagement are compulsory. Id.
Notably, Trugreen is a case from the Northern District of Texas in which the
Court found that a defamation counterclaim was permissive because it presented
different legal and factual issues from the principal suit. Trugreen Ltd. P’ship v. Rogers,
No. 3:97-CV-0606-H, 1998 WL 136585, at *3 (N.D. Tex. Mar. 18, 1998) (Sanders,
S.J.). Trugreen, however, is undoubtedly distinguishable from the case before this Court.
The plaintiff pest control company in Trugreen sued defendants, a former employee and
a competitor, alleging misconduct in connection with defendant competitor’s
acquisition of three companies that plaintiff had already targeted. Id. at *3. The
defendants brought counterclaims related to events that took place while defendant
competitor was in negotiations with a fourth company to acquire. Id. The defendant
competitor alleged that the plaintiff’s agent made false statements to the fourth
company about defendants, which resulted in defendant competitor losing the deal. Id.
The plaintiff contended that the slander and business disparagement counterclaims are
permissive because they do not arise out of the same transaction or occurrences that
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are subject matter of the plaintiff’s principal claims. Id. The court was unpersuaded
that the counterclaims arose out of the same transaction or occurrence because
plaintiff’s claims involved a conspiracy between defendant former employee and
defendant competitor to steal trade secrets and usurp plaintiff’s acquisition
opportunities, while the slander-based allegations are separate and distinct and
occurred around four months after the initial lawsuit. Id.
Here, Ramey alleges that the defamatory statements concerned the purported
fraudulent scheme that is the basis of Cisco’s complaint against Ramey, and Ramey
also alleges that the statements happened around the same time as the investigation,
though before Cisco filed the initial complaint. The present circumstances are much
different than those in Trugreen, where the slander counterclaim was unrelated to the
complaint. The Court finds Trugreen distinguishable and instead follows Nautronix and
50-Off Stores. Because Ramey’s counterclaims concern the same issue of the veracity of
whether Ramey was actually involved in the fraudulent scheme, the Court concludes
that Ramey’s counterclaim for defamation is compulsory. Because the Court finds that
the defamation counterclaim is compulsory, the Court also concludes that the date to
timely file the defamation counterclaim was tolled and relates back to Cisco’s initial
complaint filing date. Therefore, Ramey’s defamation counterclaim is not barred by the
statute of limitations.
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b. Pleading the Defamation Claim with Sufficient Specificity
Cisco contends that Ramey’s defamation claim fails because Ramey does not
plead his claim with sufficient factual specificity. “To state a claim for defamation of a
non-public figure under Texas law, a plaintiff must demonstrate that the defendant
published a defamatory statement about him while acting with negligence regarding
the truth of the statement.” Ameen v. Merck & Co., 226 F. App’x 363, 370 (5th Cir.
2007). In the pleading, “the plaintiff must identify the alleged defamatory statement
and the speaker.” Id. The claim must also “state the time and place of the publication.”
Jackson v. Dallas Indep. Sch. Dist., 1998 WL 386158, *5 (N.D. Tex. July 2, 1998), aff’d,
232 F.3d 210 (5th Cir. 2000). “Courts require more particular pleading [for a
defamation claim] to allow the opposing party to raise the appropriate defenses.” Id.
(requiring a plaintiff specify the time, place, content, speaker, and listener).
Cisco argues that Ramey fails to sufficiently plead the speakers, listeners, and
place of the alleged defamatory statements. Cisco posits that Ramey’s counterclaim
fails to provide sufficient allegations regarding who exactly made the allegedly
defamatory statements and to whom the statements were made, despite the fact that
Ramey heard the statements from the “receiving parties”. Ramey rebuts that he
identified the speakers (“Douglass Abbott and other members of ‘Cisco’s Brand
Protection’ division”) and the specific entity listeners (City of Richardson, City of
North Richland Hills, U.S. Net, Arcosa, and Datavox). Cisco concedes that Ramey does
allege that Abbott and other members of the Brand Protection division made these
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statements; however, Cisco essentially says alleged statements need to be attributed to
a specific person and that, as is, Ramey’s identification of speakers is too vague. The
Court disagrees and concludes that requiring such a heightened pleading standard is
unnecessary under these circumstances. The Court finds that identifying Douglass
Abbott and other members of his division as the speakers is sufficient to satisfy Federal
Rule of Civil Procedure 8. “Federal Rule of Civil Procedure 8(a)(2) requires only ‘a
short and plain statement of the claim showing that the pleader is entitled to relief,’ in
order to ‘give the defendant fair notice of what the . . . claim is and the grounds upon
which it rests.’” Twombly, 550 U.S. at 554-55 (citing FED. R. CIV. P. 8).
Cisco also argues that Ramey must do more than just identify the specific
entities to whom the alleged defamatory statements were made. Cisco wants the Court
to require Ramey to state the name of the listener within each specific entity. Ramey
rebuts that identifying City of Richardson, City of North Richland Hills, U.S. Net,
Arcosa, and Datavox, and the specific statements said to each entity, is sufficient under
Rule 8. The Court agrees. Ramey points to Redden v. Smith & Nephew Inc. to support
his contention that he sufficiently pleaded his claim. In Redden, the court dismissed the
plaintiff’s defamation claim because the “sweeping generalizations” that the defendant
“agents” and “sales representatives” communicated “false rumors” to “clientphysicians” and the “orthopedic community” revealed nothing, and only intimate a
“sheer possibility” of wrongdoing. Redden v. Smith & Nephew, Inc., No. 3:09-CV-1380L, 2010 WL 2944598, at *5 (N.D. Tex. July 26, 2010) (Lindsay, J.). Ramey argues
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that he alleged more facts than the plaintiff in Redden by identifying the specific
statements, the timeframe, the specific entity listeners, and Douglas Abbott and
members of the Brand Protection team as speakers. The Court concludes that Ramey’s
allegations far surpass “sweeping generalizations” and his identification of the specific
entity listeners is much more specific than the “client-physicians” and “orthopedic
community” that failed to satisfy Rule 8 in Redden.
In contrast to Redden, the court in Accresa Health LLC v. Hint Health Inc. held the
exact opposite as the Redden court and found that “[a]lthough the counterclaim [did]
not allege specifically the clients, referral sources, and prospective business
relationships, it [did] allege generally to whom the allegedly defamatory statements
were made [and] . . . [gave] a short and plain statement of the claims presented for
relief in accordance with the Federal Rule of Civil Procedure 8(a).” Accresa Health LLC
v. Hint Health Inc., No. 4:18-CV-00536, 2020 WL 4644459, at *30 (E.D. Tex. Mar.
19, 2020), report and recommendation adopted, No. 4:18-CV-00536, 2020 WL 2610908
(E.D. Tex. May 22, 2020). Therefore, the Court concludes that Ramey’s identification
of the specific entity listeners is sufficient to state a claim for defamation under Rule 8
and requiring a heightened pleading would be improper at this stage.
This Court, like others, has been unable to locate case law requiring a plaintiff
to specify the exact time and place of publication as required elements of a defamation
claim. See e.g., Smith v. Shred-It USA, No. 3:10-CV-831-O-BK, 2010 WL 3733902, at
*1 (N.D. Tex. Sept. 23, 2010) (O’Connor, J.). When considering the pleadings as a
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whole and taking the factual allegations as true, the Court concludes that under the
notice pleading standards of Rule 8, Ramey’s defamation claim is sufficiently specific.
The Court declines to raise the threshold and require that Ramey replead the
defamation counterclaim because he already sufficiently pleaded this counterclaim.
Therefore, the Court denies the Motion to dismiss the defamation counterclaim on
the basis that is not sufficiently pleaded.
On a separate but related note, Cisco argues that the alleged defamatory
statements made by Paul Sorensen should be dismissed because Paul Sorensen is not
an individual at Cisco, but rather is someone who works for one of Cisco’s partners.
Given that Ramey’s pleadings state that Paul Sorensen does not work for Cisco, and
that Ramey failed to address this argument in its Response, the Court grants the
Motion to dismiss the defamation claim to the extent its is based on statements
attributed to Paul Sorensen and not Cisco.
c. Pleading Negligence or Actual Malice
Cisco contends that Ramey’s defamation counterclaim should be dismissed
because he fails to sufficiently plead negligence or actual malice. Under Texas law,
Ramey must show Cisco: “(1) published a statement, (2) that was defamatory as to
[Ramey], (3) ‘while acting with either actual malice, if the plaintiff was a public official
or public figure, or negligence, if the plaintiff was a private individual, regarding the
truth of the statement.’” Hill v. Anderson, 420 F. App’x 427, 434 (5th Cir. 2011)
(quoting WFAA–TV, Inc. v. McLemore, 978 S.W.2d 568, 571 (Tex. 1998)).
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Assuming the negligent standard applies, Ramey must allege that Cisco knew or
should have known the defamatory statement was false, and the content of the
publication would warn a reasonably prudent person of its defamatory potential. See
Foster v. Laredo Newspapers, Inc., 541 S.W.2d 809, 819-20 (Tex. 1976). The Court finds
that Ramey has sufficiently alleged negligence. Cisco’s arguments are more properly
raised at the summary judgment stage. It would be improper at this juncture for the
Court to resolve or comment on a factual dispute as to whether Cisco’s conduct was
negligent.
Assuming the actual malice standard applies, Ramey would have to allege that
Cisco knew its statements were false or made them with reckless disregard for their
truth. See Huckabee v. Time Warner Entm’t Co., 19 S.W.3d 413, 420 (Tex. 2000) (“[T]o
establish actual malice, a plaintiff must prove that the defendant made the statement
‘with knowledge that it was false or with reckless disregard of whether it was true or
not.’” (citing New York Times Co. v. Sullivan, 376 U.S. 254, 279-80 (1964))). While
Ramey concedes in his Amended Counterclaims that he “does not yet know whether
Cisco knew the statements made to these companies were false,” Ramey does allege
that even if Cisco did not affirmatively know the statements were false, Cisco still acted
“out of malice, or with reckless disregard for the truth, or at minimum, acted
negligently” and “should have known that the statements were false, and the content
of the statements made would want a reasonably prudent person of their defamatory
potential.” Am. Counterclaims at ¶¶ 22-23, 31.
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At this time, the Court cannot and will not resolve the factual dispute as to
whether negligence or actual malice was committed. Nonetheless, the Court is satisfied
that Ramey has sufficiently pleaded this element regardless of which standard applies
and therefore denies the Motion to dismiss the defamation counterclaim on such
grounds.
d. Compliance with the Defamation Mitigation Act
Cisco argues that Ramey’s defamation claim is barred by the Defamation
Mitigation Act (“DMA”) because Ramey fails to plead that he made a request for
correction, clarification, or retraction of Cisco’s alleged defamatory statements within
one year of the statements’ occurrence. See TEX. CIV. PRAC. & REM. CODE § 73.055.
The DMA requires that “[a] person may maintain an action for defamation only if: (1)
the person has made a timely and sufficient request for a correction, clarification, or
retraction from the defendant; or (2) the defendant has made a correction, clarification,
or retraction.” Id.
Texas appellate courts are split on whether failure to comply with the DMA
requires dismissal of a claim, and the Texas Supreme Court has not directly addressed
the issue. In light of this, the Court will follow Inge v. Walker, a case out of the Northern
District of Texas discussing this issue. See Inge v. Walker, No. 3:16-CV-0042-B, 2017
WL 4838981, at *3 (N.D. Tex. Oct. 26, 2017) (Boyle, J.). In Inge, Judge Boyle
explained that the plaintiff’s “failure to follow § 73.055(a)(1) does not require dismissal
for failure to state a claim.” Id. at *3 (citing Hardy v. Commc’n Workers of Am. Loc. 6215
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AFL-CIO, 536 S.W.3d 38 (Tex. App. 2017)). Judge Boyle ultimately held that
“[a]llowing for dismissal under the DMA would read an additional remedy into the
statute.” Id. The Court declines to dismiss Ramey’s defamation counterclaim under
Rule 12(b)(6) for his failure to follow § 73.055(a)(1).
e. Litigation Privilege Issue
Cisco contends that Ramey’s defamation counterclaim is subject to dismissal
because the purported defamatory statements are protected by the litigation privilege.
Ramey rebuts that the defense of litigation privilege is an affirmative defense that
cannot be decided on a 12(b)(6) motion, given that the alleged statements occurred
before Cisco filed its initial complaint against Ramey.
According to Texas case law, “[c]ommunications in the due course of a judicial
proceeding will not serve as the basis of a civil action for libel or slander, regardless of
the negligence or malice with which they are made.” James v. Brown, 637 S.W.2d 914,
916 (Tex. 1982) (per curiam). “This privilege extends to any statement made by the
judge, jurors, counsel, parties or witnesses, and attaches to all aspects of the proceedings,
including statements made in open court, pre-trial hearings, depositions, affidavits and
any of the pleadings or other papers in the case.” Id. at 916-17 (emphasis added). Texas
courts have even stretched the privilege to communications made in contemplation of
and preliminary to judicial proceedings. See, e.g., Russell v. Clark, 620 S.W.2d 865, 868
(Tex. Civ. App.—Dallas 1981, writ ref’d n.r.e.); see also James, 637 S.W.2d at 916.
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There are some limitations to the privilege for pre-litigation statements. For
instances, the Texas Supreme Court explained in Shell Oil that:
The test for whether a communication is absolutely privileged when it
occurs before judicial proceedings have begun entails both subjective and
objective components. See RESTATEMENT (SECOND) OF TORTS §
588 cmt. e (1977) (“As to communications preliminary to a proposed
judicial proceeding the rule . . . applies only when the communication
has some relation to a proceeding that is actually contemplated in good faith
and under serious consideration by the witness or a possible party to the
proceeding.”) (emphasis added). The fact that a formal proceeding does
not eventually occur will not cause a communication to lose its absolutely
privileged status; however, it remains that the possibility of a proceeding
must have been a serious consideration at the time the communication
was made. See id. (“The bare possibility that the proceeding might be
instituted is not to be used as a cloak to provide immunity for defamation
when the possibility is not seriously considered.”); see also United States v.
Baggot, 463 U.S. 476, 484, 103 S.Ct. 3164, 77 L.Ed.2d 785
(1983) [(Burger, J., dissenting)] (“The words preliminary to” necessarily
refer to judicial proceedings not yet in existence, where, for example, a
claim is under study.”).
Shell Oil Co. v. Writt, 464 S.W.3d 650, 655 (Tex. 2015) (emphasis in original).
“The bare possibility that the proceeding might be instituted is not to be used
as a cloak to provide immunity for defamation when the possibility is not seriously
considered.” Shell Oil, 464 S.W.3d at 655. On the other end of the spectrum, Texas
courts have cautioned that “[t]he privilege . . . cannot be enlarged into a license to go
about in the community and make false and slanderous charges against his court
adversary and escape liability for damages caused by such charges on the ground that
he had made similar charges in his court pleadings.” De Mankowski v. Ship Channel Dev.
Co., 300 S.W. 118, 122 (Tex. Civ. App.—Galveston 1927, no writ).
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“‘Although dismissal under Rule 12(b)(6) is ordinarily determined by whether
the facts alleged in the complaint, if true, give rise to a cause of action, a claim may
also be dismissed if a successful affirmative defense appears clearly on the face of the
pleadings.’” TIB--The Indep. BankersBank v. Canyon Cmty. Bank, 13 F. Supp. 3d 661, 666
(N.D. Tex. 2014) (Fitzwater, C.J.) (quoting Clark v. Amoco Prod. Co., 794 F.2d 967,
970 (5th Cir. 1986)). “In the usual case, this court is unable to grant dismissal under
Rule 12(b)(6) based on an affirmative defense because it rarely appears on the face of
the complaint.” Id. (citations omitted). “It is well settled . . . that in order for a
defendant to prevail on the basis of limitations at the pleadings stage, the plaintiff must
normally plead [it]self out of court.” Id. (citations omitted).
In light of foregoing precedent, the Court evaluates whether, at this stage in the
case, a successful affirmative defense for privilege appears clearly on the face of the
pleadings. That is—whether Cisco contemplated litigation in good faith at the time of
the communication and whether the statement had “some relation” to that
contemplated proceeding. At this juncture, the Court cannot conclude that the
privilege appears clearly on the fact of the pleadings. As such, the Court, at this time,
denies without prejudice the Motion to dismiss the defamation claim on the basis
that the alleged defamatory statements were privileged. The Court finds that
information beyond the pleadings is necessary to make such determination and
therefore declines to rule on the issue prematurely.
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f. Non-Actionable Opinions Issue
Cisco also argues that some of the alleged defamatory statements are nonactionable opinions. A defamation claim is actionable if it is an assertion of fact and
objectively verifiable. See Dallas Morning News, Inc. v. Tatum, 554 S.W.3d 614, 639
(Tex. 2018). “If a statement is not verifiable as false, it is not defamatory.” Id. at 624
(citation omitted). “[S]tatements that cannot be verified, as well as statements that
cannot be understood to convey a verifiable fact, are opinions.” Id. at 639.
Ramey rebuts that his defamation claim is based on Cisco’s statement to several
entities that Ramey defrauded Cisco, which is a direct assertion of a verifiable fact.
Resp. at 17. Ramey concedes that he “may have included other statements by Cisco in
its [sic] recitation of the facts does not diminish the validity of Ramey’s defamation
claim.” Id. The statements regarding whether the entities should continue working with
Ramey are mere surplusage. Because the Court finds that Ramey alleges that actionable
defamatory statements were spoken, the Court will ignore the extraneous opinion
statements that were included to add context to the purportedly slanderous
conversations.
B. Business Disparagement Counterclaim
Cisco argues that Ramey’s business disparagement claim should be dismissed
because Ramey fails to allege lack of privilege, fails to adequately allege malice, bases
his counterclaim on purported statements that are protected by the litigation privilege
or non-actionable, and fails to plead special damages with any specificity.
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“The elements of a claim for business disparagement are publication by the
defendant of the disparaging words, falsity, malice, lack of privilege and special
damages.” Johnson v. Hosp. Corp. of Am., 95 F.3d 383, 391 (5th Cir. 1996) (citing
Hurlbut v. Gulf Atlantic Life Ins., 749 S.W.2d 762, 767 (Tex. 1987)). “To prove special
damages, a plaintiff must provide evidence of direct, pecuniary loss attributable to the
false communications of the defendants.” Id. (citing Hurlburt Gulf Atl. Life Ins. Co., 749
S.W.2d 762, 767 (Tex. 1987) (rejecting a claim for business disparagement where
“[o]ur examination of the record reveals no evidence of the direct, pecuniary loss
necessary to satisfy the special damages element of a claim for business
disparagement”)).
Preliminarily, the Court notes that with respect to Cisco’s contentions that
Ramey’s business disparagement claim fails because he does not adequately allege
malice and bases his claim on purported statements that are protected by the litigation
privilege or are non-actionable opinions, the Court’s ruling is the same as its ruling
above on these issues for the defamation counterclaim.
a. “Lack of Privilege” Issue
Cisco posits that Ramey’s business disparagement claim fails because Ramey did
not allege lack of privilege, which Cisco claims is Ramey’s burden to plead. Cisco
further contends that its arguments concerning privilege for the defamatory statements
also apply for Ramey’s business disparagement claim.
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In opposition, Ramey argues that although “lack of privilege” is listed as an
element of a Texas business disparagement claim, this element is treated as an
affirmative defense, rather than an actual element of the plaintiff’s proof. The Court
agrees with Ramey on this point. While the Texas Supreme Court has listed “lack of
privilege” as an element, which would typically suggest that the plaintiff bears the
burden to negate privilege, the element is not discussed in Texas case law as being the
plaintiff’s burden. Instead, limitations such as absolute privilege and qualified privilege
have been raised and successfully litigated as an affirmative defense to business
disparagement. Daystar Residential, Inc. v. Collmer, 176 S.W.3d 24, 28–29 (Tex. App.—
Houston [1st Dist.] 2004, pet. denied) (absolute privilege); Burbage v. Burbage, 447
S.W.3d 249, 254 (Tex. 2014) (qualified privilege). In addition, the Restatement
Second of Torts § 651(2) supports the idea that privilege is a defense to a business
disparagement claim, not an element of the claim. In light of what exist in Texas case
law on this issue, the Court considers privilege to be an affirmative defense to Ramey’s
business disparagement claim, and so Ramey does not have the burden of pleading
“lack of privilege”.
As previously discussed, a claim may be dismissed at the Rule 12(b)(6) stage “if
a successful affirmative defense appears clearly on the face of the pleadings.” Clark, 794
F.2d at 970. Like the Court already explained, the Court does not find that it is clear
on the face of Ramey’s pleadings that the privilege applies. In addition, the Court does
not find that the qualified privilege is clear from the face of the pleadings either.
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Therefore, the Court denies the Motion to dismiss the business disparagement
claim on the grounds that Ramey failed to allege “lack of privilege” and that it is clear
on the face of the pleadings that the alleged statements fall under a privilege doctrine.
b. Special Damages Issue
Next, the Court turns to the issue of special damages. Cisco argues that Ramey’s
business disparagement counterclaim fails because Ramey inadequately alleges special
damages by making a conclusory, one-sentence allegation that “[s]uch disparagement
caused special damages to [Ramey] . . . .” Am. Counterclaims at ¶ 33. Cisco contends
that this allegation, without more, is insufficient to meet the pleading standard and
therefore the claim should be dismissed. In addition, Cisco posits that “to the extent
Ramey intends to point to any specific damages alleged in his defamation claim, his
business disparagement claim would then suffer from a failure to provide any
meaningful basis upon which to distinguish it from the defamation claim, making it
duplicative and subject to dismissal.” Mot. at 19. Cisco makes no further argument
with respect to Ramey’s special damages allegations. In response, Ramey argues that
he has sufficiently pleaded special damages by alleging economic harm in Paragraph 18
of the Amended Counterclaims. Resp. at 21-22; see also Am. Counterclaims at ¶ 18.
According the Texas Supreme Court, special damages include “pecuniary loss
that has been realized or liquidated as in the case of specific lost sales.” Hurlburt, 749
S.W.2d at 767 (citing W. Page Keeton et al., Prosser and Keeton on the Law of Torts, §
128, at 971 (5th ed. 1984)). “[T]he communication must play a substantial part in
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inducing others not to deal with the plaintiff with the result that special damage, in the
form of the loss of trade or other dealings, is established.” Id. “[T]o assert separate and
distinct claims for defamation and business disparagement, a plaintiff must allege
economic harm beyond the defamatory injury to the plaintiff’s reputation, such as
specific lost sales.” Nationwide Bi-Wkly. Admin., Inc. v. Belo Corp., No. 3:06-CV-0600-N,
2006 WL 8436934, at *4 (N.D. Tex. Oct. 16, 2006), aff’d, 512 F.3d 137 (5th Cir.
2007).
Notably, the Reply does not address Ramey’s arguments on specific damages,
essentially conceding that Ramey alleges specific damages as to lost sales. The Court
concludes that Ramey pleaded sufficient economic harm beyond the defamatory injury
as he lists lost business with specific entities. See Am. Counterclaims at ¶ 18. Therefore,
the Court denies the Motion to dismiss the business disparagement claim for failure
to plead specific damages.
C. Tortious Interference with Prospective Business Relations Counterclaim
Cisco argues that Ramey’s tortious interference with prospective economic
relations counterclaim is time barred because it is inextricably intertwined with and
depends on the defamation counterclaim that, in Cisco’s view, is also barred by the
one-year statute of limitations. See Nationwide, 512 F.3d at 146-47 (applying the statute
of limitations for defamation claim to tortious interference claim based on the same
purportedly defamatory statements). As the Court already explained, Ramey’s
defamation counterclaim was timely because it was a compulsory counterclaim. For the
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same reasons, Ramey’s counterclaim for tortious interference with prospective
economic relations is not barred and was timely filed.
In addition, Cisco posits that Ramey’s tortious interference with prospective
relations counterclaim should be dismissed because Ramey fails to allege an underlying,
independent tort. The elements of a tortious interference with prospective relations
claim are:
(1) there was a reasonable probability that the plaintiff would have
entered into a business relationship with a third party; (2) the defendant
either acted with a conscious desire to prevent the relationship from
occurring or knew the interference was certain or substantially certain to
occur as a result of the conduct; (3) the defendant’s conduct was
independently tortious or unlawful; (4) the interference proximately
caused the plaintiff injury; and (5) the plaintiff suffered actual damage or
loss as a result.
Coinmach Corp. v. Aspenwood Apartment Corp., 417 S.W.3d 909, 923 (Tex. 2013)
(citations omitted). Essentially, Cisco’s argument is that because, in Cisco’s view, the
defamation counterclaim and business disparagement counterclaims fail, there is no
independent tort or unlawful conduct to satisfy the third element. Because the Court
concludes that Ramey sufficiently alleges his defamation and business disparagement
counterclaims, the Court concludes that there is an independent tort, and Ramey
therefore sufficiently alleges his tortious interference with prospective relations
counterclaim. For these reasons, the Court denies the Motion to dismiss the tortious
interference with prospective relations counterclaim.
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D. Tortious Interference with Contract Counterclaim
With respect to Ramey’s tortious interference with contract counterclaim, Cisco
argues that Ramey fails to sufficiently state a claim because (1) he fails to plead the
specifics of any contract with which Cisco interfered and (2) fails to properly allege
proximate cause or recoverable damages.
In Texas, the elements for tortious inference with an existing contract are: “(1)
the existence of a valid contract subject to interference; (2) that the defendant willfully
and intentionally interfered with the contract; (3) that the interference proximately
caused the plaintiff’s injury; and (4) that the plaintiff incurred actual damage or loss.”
Cmty. Health Sys. Prof’l Servs. Corp. v. Hansen, 525 S.W.3d 671, 689 (Tex. 2017).
As Ramey points out, Ramey plainly alleges the existence of valid contracts, and
Cisco does not cite authority on what more Ramey should have alleged with respect to
the existence of valid contracts with GDT, City of Richardson, U.S. Net, and Arcosa.
The Court concludes that Ramey’s pleadings, taken as true, sufficiently allege the
existence of valid contracts.
With regard to Ramey’s allegations about proximate cause and recoverable
damages, Cisco argues that Ramey fails to plead any recoverable damages for his
tortious interference with contract counterclaim. However, the Court disagrees.
Specifically, Ramey pleads, “[a]s a direct and proximate result of cisco’s interference
with Ramey’s ongoing business relationship and contracts, Ramey has suffered damages
including lost profits and wages exceeding $1,000,000.” Am. Counterclaims at ¶ 42.
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Ramey also presents damages and proximate cause allegations in Paragraph 18 of the
Amended Counterclaim’s. Id. at ¶ 18. In light of pleadings as a whole, the Court finds
that Ramey has met his pleading burden with respect to the proximate cause and
damages elements of his tortious interference with contract counterclaim. The Court
therefore denies the Motion to dismiss Ramey’s tortious interference with contract
counterclaim.
E. Unfair Competition Counterclaim
In the Response, Ramey abandons the unfair competition counterclaim.
Therefore, the Court dismisses the unfair competition claim and need not address the
merits of Cisco’s arguments on this counterclaim.
F. Intentional Infliction of Emotional Distress Counterclaim
Cisco argues that Ramey’s intentional infliction of emotional distress (“IIED”)
counterclaim should be dismissed because Ramey fails to allege facts of conduct that is
independent of his defamation counterclaim, and therefore the counterclaim is barred.
Cisco also posits Ramey cannot prove the elements of an IIED counterclaim because
the alleged defamatory statements are not in the same “stratosphere” of conduct that
is extreme or outrageous.
“To recover damages for intentional infliction of emotional distress, a plaintiff
must establish that: (1) the defendant acted intentionally or recklessly; (2) the
defendant's conduct was extreme and outrageous; (3) the defendant's actions caused
the plaintiff emotional distress; and (4) the resulting emotional distress was severe.”
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Hoffmann-La Roche Inc. v. Zeltwanger, 144 S.W.3d 438, 445 (Tex. 2004). “Extreme and
outrageous conduct is conduct so outrageous in character, and so extreme in degree, as
to go beyond all possible bounds of decency, and to be regarded as atrocious, and
utterly intolerable in a civilized community.” Id. (internal quotations and citations
omitted). As both parties concede, IIED is “a ‘gap-filler’ tort, judicially created for the
limited purpose of allowing recovery in those rare instances in which a defendant
intentionally inflicts severe emotional distress in a manner so unusual that the victim
has no other recognized theory of redress.” Id. at 447. Notably, “[w]here the gravamen
of a plaintiff’s complaint is really another tort, intentional infliction of emotional
distress should not be available.” Id. at 447-48.
Because Ramey does not allege conduct that is independent of its defamation
claim, the Court concludes Ramey’s IIED fails. See Johnson v. Knowledge Learning Corp.,
No. 3:08-CV-0468-P, 2008 WL 11348020, at *3 (N.D. Tex. June 24, 2008) (Solis, J.)
(“Plaintiff also has a defamation claim available if she can meet all of the elements. If
Plaintiff cannot meet all of the elements of defamation, then her claim for intentional
infliction of emotional distress fails, as defamation is the basis for her emotional
distress.”); Udoewa v. Plus4 Credit Union, No. CIV A H-08-3054, 2009 WL 1856055,
at *6 (S.D. Tex. June 29, 2009), aff'd, 457 F. App’x 391 (5th Cir. 2012) (“Because the
allegations underlying the intentional infliction of emotional distress claim are the same
as those underlying . . . state-law defamation claims, the intentional infliction of
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emotional distress claim fails.”). Therefore, the Court grants the Motion to dismiss
Ramey’s counterclaim for intentional infliction of emotional distress.
IV.
Conclusion
The Court GRANTS in part and DENIES in part Defendants Cisco Systems,
Inc. and Cisco Technology Inc.’s Motion to Dismiss Defendant Jeffery Ramey’s
Amended Counterclaims. Specifically, the Court denies the Motion as to Ramey’s
counterclaims for defamation, business disparagement, tortious interference with
prospective relations, and tortious interference with contract. The Court grants the
Motion to dismiss the intentional infliction of emotional distress counterclaim and
therefore dismisses that counterclaim. Because Ramey states his intent to abandon his
unfair competition counterclaim, the Court dismisses the unfair competition
counterclaim to avoid Ramey needing to amend the pleadings again.
SO ORDERED.
Signed August 11th, 2021.
____________________________________
ED KINKEADE
UNITED STATES DISTRICT JUDGE
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