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Summit Process Design Inc. v. Hemlock Semiconductor, L.L.C.

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

December 21, 2017




         Plaintiffs Summit Process Design Inc. and Bruce Hazeltine (referred to herein, collectively, in the singular, as “Summit”) have filed suit against defendant Hemlock Semiconductor, L.L.C. (“Hemlock”), seeking to recover, as damages for the prior breach of a settlement agreement, the attorney fees incurred as a result of that breach. Now before the court is Hemlock's Motion to Dismiss. (Doc. No. 13.) For the reasons set forth herein, the court will grant the motion and dismiss this case.

         I. Factual and Procedural Background

         In June 2015, Hemlock filed suit in this court against Summit (and others), claiming misappropriation of trade secrets and seeking a preliminary and permanent injunction. Hemlock Semiconductor, L.L.C. v. Summit Process Design Inc., No. 3:15-cv-00664 (M.D. Tenn.) (“Prior Litigation”). On June 24, 2015, after two weeks of intensive litigation concerning Hemlock's preliminary injunction motion, while the parties and their attorneys were gathered for depositions, counsel for Hemlock approached counsel for Summit with a suggestion that the parties settle the matter. “After several hours of negotiations, the parties and attorneys gathered in a conference room with a court reporter and read into the record what was described as a ‘Confidential Memorandum of Understanding' (the ‘MOU').” (Compl. ¶ 13, Doc. No. 1.) Point Number 4 of the MOU was that “the lawsuit will be dismissed with prejudice except the injunctive language.” (MOU, Doc. No. 1-2, at 5.) The parties contemplated that additional negotiations would be necessary to hammer out the precise language of the settlement agreement but agreed that they had, in principle, reached an agreement. (See MOU, Doc. No. 1-2, at 2 (“This is a framework of basic points that the parties have discussed and with which we believe we have agreement. There will be further negotiations over the language.”).)

         The next day, the parties began carrying out the terms of the MOU, beginning with notifying the court that they had reached a settlement. (Compl. ¶¶ 15-16.) Over the next several weeks, the parties worked on drafting a formal settlement agreement. In August, according to Summit, Hemlock circulated a new draft settlement instrument that included new and substantive changes. Ultimately, the parties found themselves unable to agree on the wording of the settlement and began litigating the matter again. Summit maintains that its attorneys were required to engage in substantial activities related to the original claims in the action as a result of Hemlock's failure to abide by the terms of the MO U.Summit ultimately filed a Motion to Enforce Settlement. The presiding judge[1] denied Summit's motion to stay the matter pending resolution of the Motion to Enforce Settlement, so the parties continued to litigate the underlying claims while that motion was pending.

         In May 2016, the court entered an Order and Memorandum granting Summit's Motion to Enforce Settlement and dismissing the case. The court specifically held that the parties had reached a binding and enforceable settlement agreement on June 24, 2015, as memorialized by the MOU. Thereafter, both parties filed Motions to Alter or Amend Judgment, but, “pursuant to a confidential second settlement agreement, ” the court entered an Agreed No-Fault Permanent Injunction and Agreed Order on March 29, 2017, thus mooting the dueling Motions to Alter or Amend Judgment.

         Five months later, Summit filed this lawsuit, alleging that Hemlock had breached a binding settlement agreement by continuing to litigate its claims in the Prior Litigation after the parties reached the agreement memorialized by the MO U.Summit asserts that it suffered “substantial damages as a direct and foreseeable result of Hemlock's refusal to dismiss the Prior Litigation.” (Compl. ¶ 36.) Specifically, Summit claims that it incurred attorney fees from June 24, 2015 through March 29, 2017, in the amount of $121, 710.46, as a result of the breach. (Compl. ¶ 37.)

         Summit clarifies that it does not seek “recovery of damages for attorneys' fees and costs related to the drafting of Motion to Enforce Settlement, including reply and related motion to ascertain status; negotiations and party-resolution of the Motions to Alter or Amend, including the drafting of the second settlement agreement; or work that relates to the recovery of damages as a result of Hemlock's breach of the MOU.” (Compl. ¶ 39.) Instead, it seeks to recover only those fees incurred in relation to the underlying claims in the Prior Litigation, against which Summit was forced to defend itself as a result of the breach, including the fees associated with preparing and submitting a proposed Initial Case Management Order, participating in the initial case management conference, answering Hemlock's Complaint and Amended Complaint, conducting and responding to discovery, drafting a motion for summary judgment, and so forth. (Compl. ¶ 25.)

         In lieu of answering, Hemlock filed its Motion to Dismiss, arguing that, under the so-called “American rule, ” each party must bear its own costs of litigation, absent an express contractual or statutory basis for recovering attorney fees, that the Complaint fails to state a viable basis for the recovery of damages that consist solely of attorney fees, and that the claim for fees is untimely under Rule 54(d) of the Federal Rules of Civil Procedure and Rule 54.01(b) of this court's Local Rules.

         Summit responds that it simply seeks as compensatory damages the attorney fees that were “the normal and foreseeable result of the breach of a contract.” (Doc. No. 21, at 3 (quoting Bush v. Cathey, 598 S.W.2d 777, 783 (Tenn. Ct. App. 1979)).) In its Reply, Hemlock generally argues that the precedent upon which Summit relies is inapposite or from jurisdictions the law of which differs from that of Tennessee. (Doc. No. 27.)

         II. Standard of Review

         In deciding a motion to dismiss for failure to state a claim under Rule 12(b)(6), the court must “construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff.” Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007); Inge v. Rock Fin. Corp., 281 F.3d 613, 619 (6th Cir. 2002). The Federal Rules of Civil Procedure require that a plaintiff provide “‘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.” Conley v. Gibson, 355 U.S. 41, 47 (1957) (quoting Fed.R.Civ.P. 8(a)(2)). The court must determine whether “the claimant is entitled to offer evidence to support the claims, ” not whether the plaintiff can ultimately prove the facts alleged. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511 (2002) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

         The complaint's allegations, however, “must be enough to raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). To establish the “facial plausibility” required to “unlock the doors of discovery, ” the plaintiff cannot rely on “legal conclusions” or “[t]hreadbare recitals of the elements of a cause of action”; instead, the plaintiff must plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         IV. ...

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