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Patel v. Hughes

United States District Court, M.D. Tennessee, Nashville Division

September 16, 2014

KRISHNA PATEL, VIJAY PATEL, and ACTAX SOLUTIONS, INC., Plaintiffs,
v.
TERRELL D. HUGHES, JR., and TRX SOFTWARE DEVELOPMENT, INC., Defendants.

MEMORANDUM

KEVIN H. SHARP, District Judge.

Pending before the Court in this copyright infringement action is the fully briefed Motion to Dismiss filed by Defendants Terrell D. Hughes, Jr., and TRX Software Development, Inc. (Docket No. 15). After setting forth the applicable standard of review, the Court will consider the parties' arguments in the order presented by Defendants.

I. STANDARD OF REVIEW

"To 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 Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). As further explained in Twombly,

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, " Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, ibid.; Sanjuan v. American Bd. of Psychiatry and Neurology, Inc., 40 F.3d 247, 251 (7th Cir. 1994), a plaintiff's obligation to provide the "grounds" of his "entitle[ment] to relief" requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do, see Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) (on a motion to dismiss, courts "are not bound to accept as true a legal conclusion couched as a factual allegation"). Factual allegations must be enough to raise a right to relief above the speculative level...

550 U.S. at 555. "The pleading standard Rule 8 announces does not require detailed factual allegations, ' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555).

II. CLAIMS AGAINST MR. HUGHES

Defendants argue that the complaint as to Mr. Hughes should be dismissed in its entirety because none of the claims assert that he committed any wrongdoing and, even if they did, there is no allegation that Mr. Hughes is the alter ego of Defendant TRX. In response, Plaintiffs argue that "[t]he complaint sets forth myriad fact alleging that Doug Hughes participated in the tortious acts against Plaintiffs, " and "pleading a cause of action to pierce the corporate veil is unnecessary at this stage in the litigation[.]" (Docket No. 19 at 3).

Defendants are correct that Mr. Hughes is not specifically named in any of the seven counts of the Complaint. In fact, all of the counts reference only TRX - they do not even reference Defendant s in the plural.

However, the Complaint does allege that Mr. Hughes "is the founder, owner, chief executive officer, president, and registered agent for TRX, " and that he and TRX also operate or control various other entities. (Complaint, Docket No. 1 ΒΆΒΆ 5 & 6). The Complaint also contains a host of allegations against Mr. Hughes, including, but not limited to, that he:

(1) met with Plaintiff Vijay Patel "and discussed using Mr. Hughes's company to market and sell or license copies of SalestaxExact, AccountExact, and TaxExact in the United States on behalf of AcTax Solutions";
(2) "signed a Product Distribution Agreement' to sell private label versions of AccountExact and ClientExact under the TRX name";
(3) negotiated with others "for the sale of various software products including TaxExact to TRX";
(4) sent a Letter of Intent "to AcTax Solutions on behalf of TRX regarding the sale of TaxExact to TRX";
(5) signed a Software Maintenance Agreement for Tax Exact that "specified payment of $20, 000 per month to AcTax Solutions for updating TaxExact for new software versions and tax code changes" and demanded that Mr. Patel sign it the day it was presented;
(6) was required "to pay $30, 000 per month for eight years to purchase TaxExact in conjunction with the Software Maintenance Agreement" and "understood that signing both the Software Maintenance Agreement and the Asset Purchase Agreement was needed in order to complete the transaction so that AcTax Solutions could draw on the full payment of $50, 000 per month to get the software updated";
(7) sent a "binding Letter of Intent' to AcTax Solutions reaffirming his desire to buy TaxExact on behalf of TRX";
(8) explained to AcTax Solutions "that he could not pay the $30, 000 per month according to the proposed terms Asset Purchase Agreement, " and claimed "the Software Maintenance Agreement was unenforceable without the accompanying Asset Purchase Agreement";
(9) "announced that he was changing the payment plan" and "instead of paying $30, 000 per month to AcTax Solutions for the next eight years, he would pay $3, 500 minimum per month for the next eight years, ...

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