Information Planning and Management Service Inc. v. Dollar General Corporation

Filing 22

ORDER Granting 18 Motion to Dismiss for Failure to State a Claim. Despite contention over the proper standard that applies to sufficiently plead affirmative defenses. Defendant must provide facts to support its counterclaims and affirmati ve defenses. Defendant fails to provide any facts to support its counterclaim and affirmative defense of invalidity. For the reasons slated herein, Plaintiffs Motion to Dismiss Count Two of the Counterclaim and to Strike the Third Affirmative Defense is GRANTED. However, Defendant is GRANTED leave to amend its Answer within FIFTEEN (15) DAYS of the date of this Order. IT IS SO ORDERED. Signed by District Judge Raymond A. Jackson and filed on 1/5/16. Copies distributed to all parties 1/5/16. (ldab, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Norfolk Division

INFORMATION PLANNING AND

MANAGEMENT SERVICE INC.,
Plaintiff,
CIVIL ACTION NO. 2:15cv206

DOLLAR GENERAL CORPORATION,
Defendant.

MEMORANDUM OPINION AND ORDER

Before the Court is Information Planning and Management Service Inc.'s ("Plaintiff")
Motion to Dismiss Counterclaim and Strike Affirmative Defense. For the reasons stated below.
Plaintiffs Motion to Dismiss Count Two of the Counterclaim and to Strike the Third Affirmative

Defense is GRANTED. However, Defendant is GRANTED leave to amend its Answer.
I. FACTUAL AND PROCEDURAL HISTORY

On May 13. 2015, Plaintiff filed its Complaint alleging that Dollar General Corporation
("Defendant") committed patent infringement and tortious interference with a contract. ECF No.

1. Specifically, Plaintiff asserts that Defendant misrepresented to Foxfire Printing and
Packaging. Inc. ("Foxfire"), a third party in contract with Plaintiff, that Defendant had a license

to United States Patent No. 7,287,001 ("'001 patent"). Compl. 1 29. The '001 patent is assigned
to Plaintiff. Id. at ^j 20. Foxfire obtained a license for the "001 patent from Plaintiffand was in
contract to pay Plaintiff for printed matter Foxfire provided to any unlicensed retailer. Id. at *'\

34. Defendant's alleged misrepresentation that it held a license to the '001 patent caused Foxfire
to infringe on the patent by not paying royalties to Plaintiff for Defendant's use of the '001

patent. Id. at ^38. Plaintiff alleges that Defendant had knowledge ofthe contract between
Plaintiff and Foxfire. Id. at 1| 36.

On July 30, 2015, Defendant filed its Answer, Affirmative Defenses, and Counterclaims.
ECF No. 13. Defendant asserted numerous affirmative defenses and two counterclaims

requesting declaratory judgment of non-infringement and invalidity of the "001 patent. Answer
fflj 8-19. On August 20, 2015, Plaintiff filed the instant Motion to Dismiss Counterclaim and
Strike Affirmative Defense requesting dismissal of count two of Defendant's counterclaim and
its third affimiative defense, both alleging invalidity of the '001 patent. ECF No. 18. On August
31, 2015, Defendant filed its Response in Opposition. ECF No. 19. On September 3, 2015,

Plaintiff filed its Reply. ECF No. 20. On September 15, 2015, Plaintiff filed a Notice of
Hearing requesting that a hearing regarding this matter be held on October 13, 2015 at 9:30 am
or as soon thereafter as it may be heard. ECF No. 21. The Court declined to conduct a hearing
on this matter finding it sufficiently briefed in the pleadings.
II. STANDARD OF REVIEW
A. Motion to Dismiss

Rule 12(b)(6) of the Federal Rules of Civil Procedure provides for dismissal of actions
that fail to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). The
United States Supreme Court has stated that in order "| tjo 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." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell All. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)) (internal quotations omitted). Specifically, "[a] claim has

facial plausibility when the plaintiff pleads factual content that allows the court to draw the

reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at

678. Moreover, at the motion to dismiss stage, the court is bound to accept all of the factual

allegations in the complaint as true. Id. However, "[t]hreadbare recitals of the elements ofa
cause of action, supported by mere conclusory statements, do not suffice." Id. Assessing the
claim is a "context-specific task that requires the reviewing court to draw on itsjudicial
experience and common sense." Id. at 679.

In considering a Rule 12(b)(6) motion to dismiss, the Court cannot consider "matters

outside the pleadings" without converting the motion to a summary judgment proceeding. Fed.
R. Civ. P. 12(d). Nonetheless, the Court may still "consider documents attached to the

complaint, see Fed. R. Civ. P. 10(c), as well as those attached to the motion to dismiss, so long as
they are integral to the complaint and authentic." Sec y ofStatefor Defence v. Trimble
Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007); see also Basset! v. Nat'l Collegiate Athletic
Ass'n, 528 F.3d 426,430 (6th Cir. 2008) ("When a court is presented with a Rule 12(b)(6)

motion, it may consider the Complaint and any exhibits attached thereto, public records, items
appearing in the record of the case and exhibits attached to defendant's motion to dismiss so long
as they are referred to in the Complaint and arc central to the claims contained therein.").
B. Motion to Strike

Rule 12(1) allows the court on its own or on motion to strike from a pleading an
insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. Fed. R.
Civ. P. 12(0- In granting a Rule 12(0 motion to strike, the court must determine that "the

challenged allegations arc so unrelated to the plaintiffs claims as to be unworthy of any
consideration as a defense and that their presence in the pleading throughout the proceeding will
be prejudicial to the moving party." Grant v. Bank ofAm.. N.A., No. 2:13cv342,2014 WL

792119. at *2 (E.D. Va. Feb. 25, 2014) (internal quotation marks and citations omitted). A

3

motion to strike usually requires a showing that denial of the motion would prejudice the moving

party. United States v. Gwinn, No. 5:06-cv-00267, 2006 WL 3377636, at *1 (S.D. W. Va. Nov.
20. 2006). Prejudice may be demonstrated if the answer does not clearly articulate to which
claims the affirmative defenses apply. Francisco v. Verizon S.. Inc.. No. 3:09cv737, 2010 WL
2990159, at *5 (E.D. Va. July 29, 2010).

However, the Fourth Circuit has held, "Rule 12(0 motions are generally viewed with

disfavor because striking a portion of a pleading is a drastic remedy and because it is often
sought by the movant simply as a dilator) tactic." Waste Mgmt. Holdings. Inc. v. Gilmore. 252
F.3d 316, 347 (4th Cir. 2001) (internal quotations omitted). Further, Rule 12(f) "imposes a
sizable burden on the movant, and courts typically strike defenses only when they have no

possible relation to the controversy." Lopez v. Asmar's Mediterranean Food, Inc., 2011 WL
98573, at *1 (E.D. Va. Jan. 10, 2011) (internal quotations omitted). When a motion to strike is

granted, the Court should generally grant leave to amend the stricken pleading. Old Dominion
Univ. Research Found, v. Aqua Terra Int'l, LLC, No. 2:14CV305, 2014 WL 5790944, at *3
(E.D. Va. Nov. 5. 2014) (citing Grant. 2014 WL 792119, at *3).
III. DISCUSSION

In its Motion to Dismiss Counterclaim and Strike Affimiative Defense. Plaintiff asserts

that Defendant merely lists code sections and fails to allege any facts to support its counterclaim
or affirmative defense of invalidity. In its Opposition. Defendant argues that different standards

govern the pleading of counterclaims and affirmative defenses and asserts that it has complied
with the requisite standards. Defendant contends that Rule 8(c) requiring a defendant to

"affirmatively state any avoidance or affirmative defense" and the pre-TwomhlylIqbal standard

of "whether the challenged defense are contextually comprehensible and possibly related to the

controversy" govern affirmative defenses rather than Rule 8(a) and the Twombly/Iqbal standards
as Plaintiff alleges. Flame S.A. v. Indus. Carriers, Inc., No. 2:13-CV-658, 2014 WL 2871432, at
*2 (E.D. Va. June 24, 2014). Defendant also contends that although Rule 8(a) and

Twombly/Iqbal govern counterclaims. Defendant's counterclaim is sufficiently detailed to meet
these standards.

Defendant offers three public policy concerns to support its position: 1)the Federal

Circuit has approved the use of the"bare bones" template of Form 18 in the Appendix of the
Federal Rules of Civil Procedure by plaintiffs, so Defendant's pleading should be considered

sufficiently detailed. 2) Plaintiff had seven years to develop its claim, which does not identify
which of the 61 claims of the patent have been infringed, while Defendant only had two months

to respond to Plaintiffs Complaint, and 3) based on the orderly course of patent infringement
cases. Plaintiffshould first provide its infringement contentions in order for Defendant to provide
a more detailed response. Defendant also adds details in its response regarding the specific

grounds on which the patent is invalid and requests leave to amend its Answer pursuant to Rule
15(a)(2) if the Court grants Plaintiffs Motion.
Defendant's counterclaim alleging invalidity stales in relevant part:
"Dollar General denies IPMS's allegations of infringement and asserts that one or

more of the claims of the '001 Patent arc invalid because they fail to meet the

patentability requirements of Title 35, United States Code, including but not limited
to35U.S.C. § 101. 102. 103 and/or 112." Answer 10-11.11 16.

Defendant agrees with Plaintiff that Twombly/lqbal provides the appropriate standard to
evaluate the sufficiency of the counterclaim. The Fourth Circuit has held, "To survive the
motion [to dismiss], a complaint (or counterclaim, as is the case here) must contain sufficient
facts to state a claim that is 'plausible on its face.'" E.I. du Pont de Nemours & Co. v. Kolon
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Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011) (quoting BellAll. Corp. v. Twombly. 550 U.S.

544. 570 (2007)). In accordance, the Eastern District of Virginia has held, "[A] complaint or
counterclaim must raise •more than a sheer possibility" that the party is liable, and go beyond

pleading facts that arc 'merely consistent with a [party's] liability.'" Meijer v. Thompson, 655 F.
Supp. 2d 607. 623 (E.D. Va. 2009) (citing Ashcroft v. Iqbal. 556 U.S. 662, 677 (2009)).
According to this standard, Defendant has failed to provide any facts to support its
counterclaim. In a similar case, the Eastern District of Virginia held, "[A]s evidenced by

defendant's answer, the claim of patent invalidity is based on a laundry list of United States Code
sections. ... Sections 101, 102, 103, and 112 offer numerous grounds for finding a patent invalid,

and thus a defendant must provide a more specific statement of the grounds for invalidity in

order to give the patent holder notice of the defense." TecSec, Inc. v. Protegrity, Inc., No.
CIVA2:01CV233. 2001 WL 802064, at *2 (E.D. Va. June 27, 2001) (internal citations omitted)

(citing Advanced CardiovascularSys., Inc. v. Medtronic, Inc., 41 U.S.P.Q.2d 1770, 1773 (N.D.

Cal. 1996); Boss Prods. Corp. v. Tapco lnt'l Corp., 2001 WL 135819, at *2 (W.D.N.Y. Feb. 16.
2001)). As in TecSec, Defendant merely lists code sections without referencing specific content
of the sections or any facts supporting its counterclaim of invalidity. Therefore, Defendant's
counterclaim fails to state a claim upon which relief can be granted.
Defendant's affirmative defense alleging invalidity states:

"Each and every claim of United States Patent No. 7.287.001 is invalid,

unenforceable, and/or void due to failure to meet the requirements of the United
States patent laws. 35 U.S.C. § 100, et seq.. including without limitation 35 U.S.C. §§

101-103. 112, I I6and for double patenting." Answer 6. «i 45. ECF No. 13.

Prior to the Supreme Court's decisions in Twombly and Iqbal. the Court held:

[A]ll the Rules require is "a short and plain statement of the claim that will give the
defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests.
The illustrative forms appended to the Rules plainly demonstrate this. Such simplified

"notice pleading* is made possible by the liberal opportunity for discovery and the other
pretrial procedures established by the Rules to disclose more precisely the basis of both
claim and defense and to define more narrowly the disputed facts and issues. Conley v.
Gibson, 355 U.S. 41, 47-48 abrogated by Bell All. Corp. v. 'Twombly, 550 U.S. 544
(2007).

In accordance, the Fourth Circuit held that "general statements of affirmative defenses were

sufficient provided they gave plaintiffs fair notice of the defense." Flame S.A. v. Indus. Carriers,
Inc.. No. 2:13-CV-658, 2014 WL 2871432, at *2 (E.D. Va. June 24, 2014); see Clem v. Corbeau,

98 Fed. Appx. 197. 203 (4th Cir. 2004) ("'An affirmative defense may be pleaded in general
terms and will be held to be sufficient... as long as it gives plaintiff fair notice of the nature of
the defense."') (quoting 5 Charles Allan Wright & Arthur R. Miller. Federal Practice &
Procedure § 1274, at 455-56 (2d ed. 1990)).

Since the Twombly and Iqbal decisions, Fourth Circuit district courts are divided on
whether the Twombly/lqbal standard applies to affimiative defenses, and the Fourth Circuit

Court of Appeals has not yet resolved this issue. Racick v. Dominion Law Assocs., 270 F.R.D.

228, 233-34 (E.D.N.C. 2010) ("Neither the Fourth Circuit Court of Appeals, nor any other circuit

court of appeals, has addressed whether Twombly and Iqbal should be interpreted as applying to
affirmative defenses. There is a split of authority among the district courts to address the

question. The majority of the district courts—including every district court within the Fourth
Circuit to have considered the issue—have concluded that the plausibility standard articulated in

Twombly and Iqbal applies to the pleading of affirmative defenses.") (citing Francisco v. Verizon
S, Inc., No. 3:09cv737, 2010 WL 2990159, at *7-8 (E.D. Va. July 29, 2010) (collecting cases);
Bradshaw v. Ililco Receivables. LLC, 725 F. Supp. 2d 532, 535-37 (D. Md. July 27, 2010):
Palmer v. Oakland Farms. Inc., No. 5:10cv00029. 2010 WL 2605179, at *5 (W.D. Va. June 24.

2010)); see also Pennell v. Vacation Reservation Ctr., LLC, No. 4:11CV53, 2011 WL 6960814,

at *3 (E.D. Va. Sept. 20, 2011) ("This conflict is not confined to the courts of this district. Our
sister court, the Western District of Virginia, is similarly divided, compare Odyssey Imaging.
LLC v. Cardiology Assocs. ofJohnston, LLC. 752 F. Supp. 2d 721, 726-27 (W.D. Va. 2010)

{Twombly/lqbal standard does not apply to affirmative defenses), with Palmer v. Oakland
Farms, Inc., No. 5:10cv29, 2010 WL 2605179, at *3-*5 (W.D. Va. June 24, 2010)

(Twombly/Iqbal standard does apply to affirmative defenses)...."). There are also conflicting
decisions on this issue within federal district courts nationwide. See. e.g., Wells Fargo & Co. v.

UnitedStates, 750 F. Supp. 2d 1049, 1051-52 (D. Nev. 2014) (holding that Twombly/Iqbal
standard does not apply to affirmative defenses and noting intra-district split).
There is substantial difference within the Eastern District of Virginia's decisions

regarding application of the Twomblv/Iqbal standard to affirmative defenses. See Francisco.
2010 WL 2990159 at *1 (applying the Twombly/Iqbal pleading standard to affirmative defenses):
but see Malibu Media. LLC v. Guastaferro. No. 1:14-CV-l 544. 2015 WL 4603065. at *2 (E.D.

Va. July 28, 2015) ("[T]his Court has held that the heightened pleadings requirements of Iqbal
and Twombly do not apply to affimiative defenses."); Flame S.A. v. Indus. Carriers, Inc., No.
2:13-CV-658, 2014 WL 2871432, at *2 (E.D. Va. June 24, 2014) ("Having reviewed the law, the
Court agrees that Twombly/lqbal do not apply to the pleading of affirmative defenses."); Grant v.
Bank ofAm.. N.A. 2014 WL 792119 (E.D. Va. Feb. 25. 2014) ("[T]his Court declines to hold

affirmative defenses to the same pleading standards required by Rule 8(a). Instead, this Court
looks to whether the challenged defenses are contextually comprehensible."): Lopez v. Asmar's
Mediterranean Food. Inc.. No. L10CV1218 JCC, 2011 WL 98573, at *l-*2 (E.D. Va. Jan. 10,

2011) ("To date, no appeals courts have considered whether this standard should apply to
affirmative defenses as well as claims for relief. A number of district courts have addressed the

issue however. Most—including every Fourth Circuit court so far—have found that
Twombly/Iqbal should apply to affirmative defenses, though a sizeable minority has found
otherwise. This Court finds itself in the minority.... |U]nder Rule 8(b)(1)(A). *[a]n affirmative
defense may be pleaded in general terms and will be held to be sufficient... as long as it gives

plaintiff fair notice of the nature of the defense.'") (citing Clem v. Corbeau. 98 F. App'x 197 (4th
Cir. 2004)).

Despite disagreement over the appropriate standard that applies to the pleading of
affirmative defenses, as with the counterclaim of invalidity, Defendant's affirmative defense of

invalidity lacks sufficient factual support. Even applying the prc-Twombly/Iqbal standard,
Defendant does not provide Plaintiff with sufficient information to be put on notice of the

specific grounds on which the patent is allegedly invalid. Accordingly, Defendant's pleading
also does not meet the more stringent Twombly/Iqbal standard requiring sufficient facts to

indicate a plausible claim. Moreover, Defendant's policy arguments are unpersuasive and do not
save its insufficient pleading.

Defendant merely lists code sections and fails to provide any facts to support its
counterclaim or affirmative defense of invalidity. Defendant did not provide details about the

specific grounds of the alleged invalidity until its Opposition to Plaintiffs Motion to Dismiss in

which it states, "Dollar General even gives Plaintiff further context by identifying specific statutes
that support invalidity due to unpatentable subject matter (35 U.S.C. § 101), anticipation (35 U.S.C. §
9

102), obviousness (35 U.S.C. § 103), defects in the specification (35 U.S.C. § 112), failure to

correctly list inventors (35 U.S.C. § 116), and double patenting." Opp. 4, ECF 19. However,
Defendant does not provide facts to support these assertions. Therefore, Defendant failed to

sufficiently plead the counterclaim and affimiative defense of invalidity in its Answer.
IV. CONCLUSION

Despite contention over the proper standard that applies to sufficiently plead affirmative

defenses. Defendant must provide facts to support its counterclaims and affirmative defenses.
Defendant fails to provide any facts to support its counterclaim and affirmative defense of
invalidity. For the reasons slated herein, Plaintiffs Motion to Dismiss Count Two of the
Counterclaim and to Strike the Third Affirmative Defense is GRANTED. However, Defendant

is GRANTED leave to amend its Answer within FIFTEEN (15) DAYS of the date of this
Order.
IT IS SO ORDERED.

rsL

Norfolk, Virginia

Raymond A. Jackson

JanuaryT ,2016

UmtedStatesD,strictJudSe