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Real Stone Veneers of Tennessee, LLC v. Real Stone of America, LLC

United States District Court, E.D. Tennessee, Chattanooga

August 12, 2019

REAL STONE VENEERS OF TENNESSEE, LLC, and BRIAN MOODY, Plaintiffs,
v.
REAL STONE OF AMERICA, LLC, et al., Defendants.

          Christopher H. Steger, Magistrate Judge

          MEMORANDUM

          CURTIS L. COLLIER, UNITED STATES DISTRICT JUDGE

         Before the Court are three motions to dismiss the third amended complaint (Doc. 28) in this matter. (Docs. 31, 32, 33.) Plaintiffs have responded (Doc. 35), and Defendants have replied (Doc. 39). For reasons stated below, the Court will DENY the motions to dismiss. (Docs. 31, 32, 33.)

         I. BACKGROUND [1]

         This case concerns a business dispute between a company which manufactures stone veneer products and a company which manufactures concrete blocks. (See Doc. 28.)

         Plaintiff Brian Moody (“Moody”) is the sole owner and principal of Plaintiff Real Stone Veneers of Tennessee, LLC (“RSV”). (Id. ¶ 2.) RSV was formed in 2007, and has since manufactured and sold thin, natural-stone veneers which can be adhered to concrete blocks. (Id. ¶¶ 13-14.) RSV is a small, family-owned business with less than ten employees in its office, and approximately forty-five in its manufacturing facilities. (Id. ¶ 21.)

         Around 2016, RSV was asked by one of its distributors, SiteOne Landscaping Supply, to develop a unique line of stone veneer blends which would be endorsed by American artist Bob Timberlake, and dubbed the “Timberlake Line.” (Id. ¶ 27.) RSV invested extensive time, resources, and money developing the specialized line of veneers. (Id.)

         In 2017, RSV was contacted by a company named Pentablock USA, LLC (“Pentablock”). Pentablock was formed on February 17, 2017 by organizer Christopher Wilson to engage in the manufacture of interlocking concrete blocks. (Id. ¶ 37.) Pentablock had no employees in the stone business, and hoped RSV would educate the company about stone veneers and help with research and development. (Id. ¶ 42.) Pentablock also requested to lease an RSV manufacturing facility in Dunlap, Tennessee, for manufacturing its concrete blocks. (Id. ¶ 43.)

         Pentablock was wholly owned by Davis Family Office, LLC (“Davis Family Office”). (Id. ¶ 38.) The managers of Davis Family Office were also employees, board members, or shareholders of a company called Atlantic Pacific Equipment, Inc. (“At-Pac”). (Id.) At-Pac, Davis Family Office, and Pentablock all listed the same principal office location with the Georgia Secretary of State. (Id.)

         The managing director of Pentablock, Phillip Murray, ultimately entered into discussions with Moody about the prospect of Pentablock purchasing RSV. (Id. ¶ 44.) In October 2017, Pentablock and RSV entered into a non-disclosure agreement so that confidential business information and trade secrets could be freely shared between the companies. (Id. ¶ 45.) On March 15, 2018, the parties reached an agreement on the specific details of the sale, and entered into a term sheet contract. (Id. ¶ 46.) The term sheet stated that Moody was to receive 5% of Pentablock's shares, which were to immediately vest in full, even if the parties' planned sale failed, or if an irreconcilable dispute arose between them. (Id. ¶ 49.) The parties then began to exchange proprietary information and trade secrets, including know-how, research, processes, techniques, and designs related to the stone veneer and concrete block manufacturing industries. (Id. ¶ 50.) Additionally, Moody and RSV permitted Pentablock to move into the Dunlap manufacturing facility in February, and provided expertise and employees to assist Pentablock in setting up operations, all before the parties had finalized any lease or manufacturing agreement. (Id.) On April 1, 2018, the parties entered into a formal lease for Pentablock's use of RSV's Dunlap manufacturing facility. (Id. ¶ 51.)

         On May 1, 2018, James Dirr, an in-house attorney for At-Pac, organized Real Stone of America, LLC (“RSA”) as a limited liability company for the purpose of providing billing and marketing services to RSV. (Id. ¶¶ 53, 54.) RSA, however, was set up sharing common ownership and management with Pentablock. (Id. ¶ 53.) To help effectuate a smooth purchase of RSV by Pentablock, RSV agreed to transition one of its key employees, Lance Edwards (“Edwards”), to become an employee of RSA, and to allowed him to continue using a truck owned by RSV while he conducted business for RSA. (Id. ¶ 55.)

         On June 6, 2018, Pentablock and RSV entered into a manufacturing agreement, under which RSV agreed to produce Pentablock products consisting of interlocking cement blocks with natural stone veneer adhered to the blocks. (Id. ¶ 59.) Pursuant to the agreement, RSV was to provide administrative and accounting services related to the manufacture of the Pentablock products. (Id.) The parties' October 2017 non-disclosure agreement was merged into confidentiality obligations contained in the manufacturing agreement. (Id. ¶ 61.)

         In August 2018, Pentablock offered different, much less favorable terms for the purchase RSV, and Moody decided to decline proceeding with the sale of RSV to Pentablock. (Id. ¶ 64.)

         The next month, RSV learned that Edwards had disclosed its Timberlake Line blend sheets to SiteOne, Pentablock, and RSA, without RSV's consent. (Id. ¶ 81.) Around the same time, RSA recruited Maggie Gramling (“Gramling”), an RSV employee, to leave RSV and work for RSA. (Id. ¶ 79.) She left RSV in October 2018. (Id.) Both Edwards and Gramling continued to use the same email addresses they used while employed with RSV for their business communications on behalf of RSA. (Id. ¶¶ 159-163.) In November 2018, Edwards attempted to access and delete RSV's Facebook page, even though he had left RSV's employ months earlier. (Id. ¶ 85.) And in December 2018, RSV discovered that RSA had posted RSV's photographs of RSV's products on RSA's website, purportedly as depictions of products sold by RSA. (Id. ¶ 84.)

         Plaintiffs brought this lawsuit on February 8, 2019, alleging three counts of breach of contract (counts 1-3), two counts of misappropriation of trade secrets (counts 4-5), and sole counts of intentional interference with business relationships (count 6), conversion (count 7), unjust enrichment (count 8), copyright infringement (count 9), unfair competition (count 10), quantum meruit (count 11), and alter ego (count 12). (Docs. 1, 28.) In addition to the allegations in the background section, Plaintiffs made specific allegations regarding the creation and officers of the Defendant companies, as well as further details regarding statements made during negotiations for the purchase of RSV by Pentablock, among other detailed allegations. (See Doc. 28.)

         Pentablock moves to dismiss counts one, eleven, and twelve for failure to state a claim upon which relief can be granted. (Doc. 32.) RSA, Edwards, and Gramling move to dismiss counts six, eleven, and twelve for failure to state a claim for which relief can be granted. (Doc. 33.) Last, At-Pac and Davis Family Office move to dismiss count twelve for failure to state a claim upon which relief can be granted, and join in the motions at Documents 32 and 33. (Doc. 31.)

         II. STANDARD OF REVIEW

         Under Federal Rule of Civil Procedure 8, a pleading that states a claim for relief must contain “a short and plain statement of the claim showing the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) operates to test the sufficiency of a plaintiff's complaint in stating a claim under this rule. See Fed. R. Civ. P. 12(b)(6).

         The first step in testing the sufficiency of the complaint requires the Court to assume the truth of all well-pleaded factual allegations, but not bare legal conclusions couched as factual allegations. See Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009); Papasan v. Allain, 478 U.S. 265, 286 (1986). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice” under the Rule 12(b)(6) pleading standard. Ashcroft, 556 U.S. at 678. That is, “a plaintiff's obligation to provide the ‘grounds' of [his or her] ‘entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Papasan, 478 U.S. at 286).

         After assuming the veracity of all well-pleaded factual allegations, the second step is for the Court to determine whether those allegations “state a claim to relief that is plausible on its face.'” Twombly, 550 U.S. at 570. “Determining whether a complaint states a plausible claim for relief [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679. Plausibility “is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. at 678 (quoting Twombly, 550 U.S. at 556). A claim is facially plausible when the plaintiff “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. At this stage of a case, all reasonable inferences are drawn in favor of the plaintiff. Mills v. Barnard, 869 F.3d 473, 479 (6th Cir. 2017). But “where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Iqbal, 556 U.S. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         Under Federal Rule of Civil Procedure 9(b), when alleging fraud or mistake, “a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). “To satisfy Rule 9(b), a complaint of fraud, ‘at a minimum, must allege the time, place, and content of the alleged misrepresentation on which [the plaintiff] relied; the fraudulent scheme; the fraudulent intent of the defendants; and the injury resulting from the fraud.'” United States v. Brookdale Senior Living Cmtys., Inc., 892 F.3d 822, 830 (6th Cir. 2018) (quoting United States ex rel. Marlar v. BWXT Y-12, LLC, 525 F.3d 439, 444 (6th Cir. 2008)). However, Rule 9 further provides, “[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” Fed.R.Civ.P. 9(b).

         If a party presents matters outside the pleadings in connection with a motion to dismiss, the court must either exclude those matters from consideration, or treat the motion as one for summary judgment. Fed.R.Civ.P. 12(d). Documents attached to pleadings are considered part of the pleadings for all purposes, however, Fed.R.Civ.P. 10(c), and a court's consideration of documents referred to in a complaint and integral to the claims does not convert a motion to dismiss into a motion for summary judgment. Commercial Money Ctr., Inc. v. Ill. Union Ins. Co., 508 F.3d 327, 335-36 (6th Cir. 2007).

         III. ANALYSIS

         A. Count One

         Pentablock moves to dismiss count one of the amended complaint (breach of contract related to the term sheet) for failure to state a claim upon which relief can be granted. (Doc. 32.) At-Pac and Davis Family Office join in the motion, though the parties are not named in count one. (Doc. 31 at 14-15.) In particular, Pentablock argues (1) the count is only brought by RSV, and RSV lacks standing to bring a breach of contract claim on behalf of Moody, and (2) the ...


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