Moody v. Aqua Leisure International et al
Filing
57
MEMORANDUM OPINION granting in part, denying in part 39 MOTION for Summary Judgment Aqua Leisure International's Motion for Summary Judgment and Brief in Support.(Signed by Magistrate Judge Nancy K. Johnson) Parties notified.(sbutler, )
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
JAMES C. MOODY,
Plaintiff,
v.
AQUA LEISURE INTERNATIONAL,
et al.
Defendants.
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CIVIL ACTION NO. H-10-1961
MEMORANDUM OPINION
Pending
before
the
court1
is
Defendant
Aqua
Leisure
International’s (“Aqua Leisure”) Motion for Summary Judgment (Doc.
39).
The court has considered the motion, the other relevant
briefs, the summary judgment evidence and the applicable law.
For
the reasons set forth below, the court GRANTS IN PART AND DENIES IN
PART Defendant Aqua Leisure’s motion.
I.
Case Background
Plaintiff filed this action against one individual and five
businesses, alleging infringement of U.S. Patent No. 4,805,896 (the
“‘896 Patent”) and violations of state common law.2
A.
Factual Background
Plaintiff invented the “low rise water ride,” which is the
1
The parties consented to proceed before the undersigned magistrate
judge for all proceedings, including trial and final judgment, pursuant to 28
U.S.C. § 636(c) and Federal Rule of Civil Procedure 73. Doc. 42, Consents to
Proceed Before Magis. Judge & Order Dated June 21, 2011.
2
See Doc. 1, Pl.’s Original Compl.
subject of the ‘896 Patent.3
Trademark
Office
issued
The patent, which the U.S. Patent and
on
February
21,
1989,
describes
the
invention as “[a] water ride for swimmers [that] utilizes the
linear movement of a large quantity of water of swimming depth at
minimal slopes so that the swimmer is moved by the water rather
than through it.”4
The swimmer is propelled through a circuitous
channel.5
On
January
19,
1999,
Plaintiff
and
Defendant
NBGS
International, Inc., (“NBGS Int’l”) entered an Assignment and
Consulting Agreement (“Agreement”) related to the ‘896 Patent.6
The Agreement acknowledged Plaintiff’s ownership of the patent
rights and rights to the mark “TUBESCAPE” and related logos and
designs.7
Plaintiff assigned to Defendant NBGS Int’l all rights in
the ‘896 Patent and the “TUBESCAPE” mark in exchange for $24,000
plus a one percent commission of the gross sales revenues and
licensing revenues received by Defendant NBGS Int’l “directly
attributable to the Tubescape Technology.”8
Plaintiff also agreed
to provide consulting services as requested by Defendant NBGS Int’l
3
See Doc. 31-1, Ex. A to Pl.’s Opening Cl. Constr. Br., ‘896 Patent.
4
Id. at Abstract.
5
Id. at Summary of the Invention.
6
See Doc. 50-2, Ex. A to Pl.’s Decl. in Supp. of his Resp. to Def.
Aqua Leisure’s Mot. for Summ. J., Agreement.
7
Id. at p. 1.
8
Id. at pp. 1-2, 6-7.
2
for hourly compensation.9
Defendants NBGS Int’l, Water Ride Concepts, Inc., (“WRC”) or
Henry Schooley and Associates (“HS&A”) paid Plaintiff the agreed
amount of $24,000, consulting fees as they accrued, and a portion
of the license fees.10
Among other missing compensation was any
commission on Defendants’ Dubai waterpark project.11
In 2009, Jeff
Henry (“Henry”), chief executive officer of Defendant NBGS Int’l,
informed Plaintiff that “NBGS is effectively out of business,”
explaining that it had no employees or sales but a lot of debt.12
B.
Procedural Background
Plaintiff brought suit in June 2010 against Defendants Aqua
Leisure, Bad Schloss Inc., (“Schloss”), NBGS Int’l, Henry, WRC, and
HS&A.13 In addition to patent infringement, Plaintiff alleged that:
1) Defendant NBGS Int’l and “its successors” Defendants Aqua
Leisure, WRC, and/or Henry breached the Agreement; 2) all of the
defendants breached the covenant of good faith and fair dealing; 3)
all of the defendants “misappropriated, used and disclosed . . .
trade secrets and proprietary information in violation of [the]
9
See id. at p. 1.
10
Doc. 50-1, Pl.’s Decl. in Supp. of his Resp. to Def. Aqua Leisure’s
Mot. for Summ. J., ¶ 30.
11
Id.
12
Doc. 50-6, Ex. E to Pl.’s Decl. in Supp. of his Resp. to Def. Aqua
Leisure’s Mot. for Summ. J., Letter from Henry to Plaintiff Dated Aug. 20, 2009;
see also Doc. 50-1, Pl.’s Decl. in Supp. of his Resp. to Def. Aqua Leisure’s Mot.
for Summ. J., Agreement, ¶ 32.
13
See Doc. 1, Pl.’s Original Compl.
3
Agreement;” 4) Defendants NBGS Int’l and Henry made fraudulent
representations to induce Plaintiff to enter into the Agreement;
and 5) Plaintiff was entitled to payment under theories of unjust
enrichment and/or quantum meruit.14
Plaintiff also requested that
the patent title be returned to him as well as compensatory and
punitive
damages,
injunctive
relief,
an
accounting,
costs,
expenses, disbursements, and attorneys’ fees.15
Defendant Aqua Leisure answered separately from the other
defendants.16
It concurrently filed a motion to dismiss based on
improper venue, which it withdrew shortly thereafter.17
The court held a scheduling conference in December 2010 and
set dates, including deadlines for initial and responsive claim
construction
briefs.18
The
parties
timely
filed
construction briefs in February and March 2011.19
their
claim
Defendant Aqua
Leisure joined the initial and responsive briefs filed by the other
defendants.20
A few months later, the court referred the case to
the undersigned, and the parties consented to have the undersigned
14
Id. at pp. 6-9.
15
Id. at pp. 8-10.
16
See Doc. 9, Def. Aqua Leisure’s Answer.
17
See Doc. 10, Def. Aqua Leisure’s Mot. to Dismiss; Doc. 12, Def. Aqua
Leisure’s Notice of Withdrawal.
18
See Doc. 25, Min. Entry Order Dated Dec. 3, 2010; Doc. 26, Scheduling
Order Dated Dec. 3, 2010.
19
See Docs. 30-34, Cl. Constr. Brs.
20
Doc. 30, Def. Aqua Leisure’s Cl. Constr. Br.
4
conduct
all
further
proceedings.21
At
that
time,
the
court
terminated all remaining scheduling deadlines.22
Prior to the transfer of the case, Defendant Aqua Leisure
filed the pending motion for summary judgment.23 In connection with
his response, Plaintiff filed a Federal Rule of Civil Procedure
(“Rule”) 56(d) motion.24
Defendant Aqua Leisure filed a reply in
support of its motion and objections to the summary judgment
evidence submitted by Plaintiff.25
Until March 9, 2012, when the
court issued a ruling on Plaintiff’s motion to dismiss and strike
the other defendants’ pleading, there had been no docket activity
since August 2011.
The court first considers Plaintiff’s Rule
56(d) motion.
II.
When
the
Plaintiff’s Rule 56(d) Motion
nonmovant
lacks
access
to
facts
essential
for
mounting an opposition to a summary judgment motion, Rule 56(d)
allows the court to: “(1) defer considering the motion or deny it;
(2) allow time to obtain affidavits or declarations or to take
discovery; or (3) issue any other appropriate order.” Fed. R. Civ.
P. 56(d).
The decision to grant or deny a Rule 56 motion is within
21
See Doc. 35, Order Dated June 3, 2011; Doc. 42, Consents to Proceed
Before Magis. Judge & Order Dated June 21, 2011.
22
See Docket Entry Dated June 30, 2011.
23
See Doc. 39, Def. Aqua Leisure’s Mot. for Summ. J.
24
See Doc. 50, Pl.’s Req. Under Rule 56(d).
25
See Doc. 51, Def. Aqua Leisure’s Reply.
5
the discretion of the district court.
Chevron U.S.A., Inc. v.
Traillour Oil Co., 987 F.2d 1138, 1156 (5th Cir. 1993).
The nonmovant must present by way of a sworn statement
“specified reasons” that he cannot present facts essential to
justify
his
opposition.
Fed.
R.
Civ.
P.
56(d).
The
key
information is why additional discovery is needed and “how that
discovery will create a genuine issue of material fact.”
v.
Madison
Cnty.
Sch.
Dist.,
254
F.3d
595,
606
Beattie
(5th
Cir.
2001)(ruling on a motion filed under the substantially identical
prior subdivision 56(f)); see also Chenevert v. Springer, 431 Fed.
App’x 284, 287 (5th Cir. 2011)(unpublished)(citing Stearns Airport
Equip. Co. v. FMC Corp., 170 F.3d 518, 534-35 (5th Cir. 1999)). The
Fifth Circuit has stated that Rule 56(d) motions “are generally
favored and should be liberally granted.”
Hosp.
Sys.,
409
Fed.
App’x.
Guzman v. Mem’l Hermann
769,
772
(5th
Cir.
2011)(unpublished)(quoting Stearns Airport Equip. Co., 170 F.3d at
534).
In order to determine whether Plaintiff’s Rule 56(d) motion
should
be
granted,
the
court
must
begin
with
a
synopsis
of
Defendant Aqua Leisure’s arguments in favor of summary judgment.
Defendant Aqua Leisure moves for summary judgment on all causes of
action
asserted
against
it.
Concerning
patent
infringement,
Defendant Aqua Leisure claims that Plaintiff has no evidence that
it “made, used, offered to sell, knowingly induced others to sell
6
and/or sold, constructed, developed or designed water park rides in
the Unite[d] States which infringe the ‘896 Patent.”26
Defendant Aqua Leisure also contends that Plaintiff has no
evidence that it ever entered into a contract with Plaintiff and,
therefore, cannot be liable for either breach of contract or breach
of the covenant of good faith and fair dealing. The same argument,
no evidence, is what Defendant Aqua Leisure relies on to support
dismissal
of
the
misappropriation
of
trade
secrets
claim.
Defendant Aqua Leisure argues that Plaintiff failed to plead fraud
with the particularity required by Rule 9(b) and that Plaintiff has
no evidence to support that claim against Defendant Aqua Leisure.
Defendant Aqua Leisure contends there is no evidence supporting all
of the elements of unjust enrichment or quantum meruit.
Recognizing that Plaintiff’s claims against it are not based
solely on its actions but on derivative liability, Defendant Aqua
Leisure devotes the largest subdivision of its argument section to
the assertion that it is not the alter ego or agent of any other
defendant.
Therein, Defendant Aqua Leisure specifically contends:
In the instant case, Plaintiff has no evidence that Aqua
Leisure is the alter ego of any of the Co-Defendants’
corporations. Aqua Leisure was not—and is not—involved
in the creation or operation of the Galveston, South
Padre Island, Texas Water Parks or the Atlantis III Water
Park in Nassau, Bahamas. Aqua Leisure does not and has
not used the Tubescape Technology referenced in
Plaintif’s Original Complaint in Texas, Dubai, Kansas
City or any other location. Aqua Leisure is a separate
26
Doc. 39, Def. Aqua Leisure’s Mot. for Summ. J., p. 5.
7
and distinct company from NBGS [Int’l]. Aqua Leisure is
not a successor in all or part of NBGS’ business. Aqua
Leisure does not have a controlling interest in NBGS
International or NBGS UK, LTD. Aqua Leisure has only
arms-length business connections with NBGS International.
. . . All corporate formalities between Aqua Leisure,
Water Ride Concepts, and NBGS have been maintained. Aqua
Leisure is not the alter ego of NBGS. Plaintiff has no
evidence to prove that Aqua Leisure is the alter ego
NBGS.27
To support these statements, Defendant Aqua Leisure relies on the
declarations
of
Keith
Palmer,
its
director,
and
Michael
claims
against
Jaroszewski, its employee and registered agent.
In
response,
Plaintiff
argues
that
its
Defendant Aqua Leisure are based on three theories of derivative
liability: 1) Defendant Aqua Leisure’s status as a successor to
NBGS
Int’l;
2)
alter
ego;
and
3)
joint
enterprise
theory.
Plaintiff briefly discusses each in its response but requests
additional time to conduct discovery on issues related to these
theories.
Plaintiff’s
counsel
submitted
an
affidavit
stating
that
discovery was in its early stages, that the parties were awaiting
a decision on claim construction, that Defendants’ asserted claim
construction was relevant also to the breach of contract claim, and
that no party had noticed any deposition.
The counselor affirmed
that additional discovery was necessary to assess the issues of
alter ego and joint enterprise.
27
Id. at pp. 6-7 (internal record citations omitted).
8
Attached to Plaintiff’s counsel’s declaration are a webpage
from NBGS UK’s 2008 website indicating that Defendant Aqua Leisure
was “formally NBGS,” a certificate of incorporation indicating that
NBGS UK Limited changed its name to Aqua Leisure International
Limited, and two sets of answers to interrogatories, one by
Defendant Aqua Leisure and one by the other defendants, indicating
overlap
among
the
principals
of
Defendant
Aqua
Leisure
and
Defendant NBGS Int’l.28
To warrant granting a Rule 56(d) motion, the nonmovant does
not need to establish the existence of a genuine dispute of
material fact but only needs to show specified reasons that he
cannot present facts essential to creating a genuine issue of
material fact.
Here, Plaintiff has indicated that, at the time
Defendant Aqua Leisure’s motion was filed, the parties had only
begun discovery and were waiting on the court’s claim construction
ruling before conducting depositions for efficiency reasons.
The
parties appear to have remained in a holding pattern awaiting the
court’s ruling on claim construction.
28
Additional discovery is
See Doc. 50-9, Ex. G to James D. Petruzzi’s Decl., Webpage; Doc. 5010, Ex. H, to James D. Petruzzi’s Decl., Certificate of Incorporation on Change
of Name; Doc. 50-16, Ex. N to James D. Petruzzi’s Decl., Defs. Schloss, NBGS
Int’l, Henry, WRC, & HS&A’s Resps. to Pl.’s 2nd Set of Interrogs.; Doc. 50-17,
Ex. O to James D. Petruzzi’s Decl., Def. Aqua Leisure’s Resps. to Pl.’s 2nd Set
of Interrogs.
Defendant Aqua Leisure objects to consideration of the webpage, as well as
other summary judgment evidence submitted by Plaintiff. As the court is not
considering the evidence for purposes of summary judgment, but, rather, reviewing
it to determine whether Plaintiff has shown why additional evidence is needed and
how it will create a genuine issue of material fact, the court OVERRULES
Defendant Aqua Leisure’s objections.
9
necessary to allow Plaintiff to test the declarations submitted by
Defendant Aqua Leisure and to investigate the relationship between
Defendants Aqua Leisure and NBGS Int’l.
If discovery reveals
evidence of one of Plaintiff’s theories of derivative liability,
that information would be material to the outcome of Defendant Aqua
Leisure’s motion.
Despite the need for additional discovery, one of Defendant
Aqua Leisure’s arguments can be addressed at this time.
Defendant
Aqua Leisure’s Rule 9(b) contention does not depend on a ruling as
to derivative liability.
Defendant Aqua Leisure argues that
Plaintiff’s fraud claim is not supported by sufficiently particular
factual allegations.
Rule 9(b) requires that a party alleging fraud “state with
particularity the circumstances constituting fraud.”
The Fifth
Circuit requires that the complaint specify what statements were
fraudulent, who made them, when and where they were made, and why
they were fraudulent. Dorsey v. Portfolio Equities, Inc., 540 F.3d
333, 339 (5th Cir. 2008)(stating also that, simply put, fraud
pleadings must contain “‘the who, what, when, where, and how’ of
events at issue”).
Neither Plaintiff’s recitation of facts nor his statement of
the fraud cause of action identified any allegedly fraudulent
statement attributable to Defendant Aqua Leisure.
Rather, only
Defendants NBGS Int’l and Henry were implicated in Plaintiff’s
10
allegations, which asserted that those two defendants made false
representations to induce Plaintiff to enter into the Agreement.
Rule 9(b) is a pleading requirement, and, thus, even proof of
successorship, alter ego, or joint enterprise would not remedy the
deficiencies of the complaint.
Plaintiff provided no details in
his complaint connecting Defendant Aqua Leisure with the fraudulent
statements or with Defendants NBGS Int’l and Henry during that time
period.
Plaintiff’s fraud claim against Defendant Aqua Leisure should
be dismissed.
The court may reconsider this dismissal upon the
filing of a motion with a proposed amended complaint that comports
with Rule 9(b).
IV.
Conclusion
Based on the foregoing, the court GRANTS Plaintiff’s Rule
56(d) motion and GRANTS IN PART AND DENIES IN PART Defendant Aqua
Leisure’s summary judgment motion.
After the court issues a
decision on claim construction, it will set deadlines for discovery
and the filing of motions.
refile
its
summary
judgment
Defendant Aqua Leisure may timely
motion
after
the
completion
discovery on alter ego.
SIGNED in Houston, Texas, this 22nd
11
day of March, 2012.
of
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