Arch Wood Protection, Inc. v. Flamedxx, LLC

932 F. Supp. 2d 858, 2013 WL 1150714, 2013 U.S. Dist. LEXIS 37416
CourtDistrict Court, E.D. Tennessee
DecidedMarch 19, 2013
DocketCase No. 1:10-CV-282
StatusPublished
Cited by4 cases

This text of 932 F. Supp. 2d 858 (Arch Wood Protection, Inc. v. Flamedxx, LLC) is published on Counsel Stack Legal Research, covering District Court, E.D. Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Arch Wood Protection, Inc. v. Flamedxx, LLC, 932 F. Supp. 2d 858, 2013 WL 1150714, 2013 U.S. Dist. LEXIS 37416 (E.D. Tenn. 2013).

Opinion

MEMORANDUM

CURTIS L. COLLIER, District Judge.

Before the Court is Counter-Defendant Arch Wood Protection, Inc.’s (“Defendant”) motion to dismiss Counter-Plaintiff Flamedxx’s (“Plaintiff’) amended counterclaim (“counterclaim”) (Court File No. 66).1 Defendant argues Plaintiffs counterclaim fails to state a claim on which relief can be granted because Defendant was not obligated to perform the duties serving as the basis of Plaintiffs claims and Plaintiff has failed to allege damages. Plaintiff responded in opposition to Defendant’s motion (Court File No. 68), arguing its factual allegations are sufficient to survive Defendant’s motion to dismiss. Defendant replied to Plaintiffs response (Court File No. 69). For the following reasons, the Court will GRANT IN PART and will DENY IN PART Defendant’s motion (Court File No. 66).

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Plaintiff is a Tennessee limited liability company that produces a fire-retardant substance used to coat oriented strand board (“OSB”), which is a wood product used in the construction industry. Plaintiff produces the substance and applies the coating. Defendant supplies OSB to customers in the construction industry. In February 2009, the parties began discussing the creation of a business relationship, and executed a confidentiality agreement in order to protect proprietary information during these discussions (Court File No. 64-1). The discussions proved successful, and on May 14, 2009, the parties entered into an “Exclusive Production Services and Distribution Agreement” (“the Contract”) a redacted version of which was attached to Defendant’s complaint (Court File No. 7-1). An unredacted version of the Contract was also provided to the Court, but filed as a separate document (Court File No. 3).

Under the Contract, Plaintiff agreed to produce coated OSB for Defendant. Plaintiff agreed that, during the relationship under contract, it would not sell the product to Defendant’s customers, providing Defendant semi-exclusive sale rights over the product. Plaintiff also agreed not to produce, authorize, or assist others to produce a similar product for sale in North America, and would forward all leads and potential customers to Defendant. Plaintiff did, however, reserve the right to sell its product to certain specifically identified customers. Additionally, if Defendant failed to purchase an amount specified in the “Threshold Service Level,” which required minimum-quantity purchases dur[861]*861ing certain time periods, Defendant could cancel its obligations with thirty-days notice. However, these threshold levels were only applicable if Plaintiff satisfied the “Product Certification Requirement.” Pursuant to this provision, Plaintiff was required to obtain evaluation reports by IAMPO Evaluation Service LLC (“LAM-PO”) and ICC Evaluation Service, Inc. (“ICC”). If this requirement was not met, the threshold level would be zero until Plaintiff satisfied the requirement. If Plaintiff satisfied the requirement during one of the listed periods, the threshold levels would be prorated to the date Plaintiff obtained the evaluations.

Plaintiff successfully satisfied the IAM-PO requirement. As a result, and pursuant to the Contract, Defendant paid Plaintiff a deposit. In July 2009, Defendant and its customers began delivering OSB to Plaintiff for coating in compliance with the Contract. Subsequently, Plaintiff sought an evaluation by ICC. However, ICC informed Plaintiff it did not have “acceptance criteria or guidelines” that applied to Plaintiffs product, and as a result Plaintiff was unable to obtain an ICC report. Plaintiff alleges Defendant was aware ICC had no such evaluation, both before and after execution of the Contract, but entered the agreement fraudulently. During this time period, Defendant and its customers continued to send OSB to Plaintiff for coating. Defendant also marketed its product as protected by Plaintiffs coating. Sometime during this period, Defendant offered to purchase Plaintiff, but Plaintiff refused to sell.

During the twelve months following execution of the Contract, Defendant did not satisfy the threshold levels. Accordingly, and pursuant to the Contract, Plaintiff informed Defendant it was canceling its obligations. Plaintiff later discovered Defendant disclosed confidential information, including proprietary information about Plaintiffs product and results of tests performed on Plaintiffs product, to OSMOSE Holdings, Inc., a competitor ■ of Plaintiffs. Plaintiff also alleges Defendant has failed to return confidential information and items, including samples of its product. Plaintiff believes Defendant is attempting to reverse engineer its product, and has revealed more confidential information to Hoover Treated Wood Products, Inc., another of Plaintiffs competitors.

In October 2010, Defendant filed a complaint against Plaintiff alleging breach of contract. The complaint relates to Plaintiffs refusal to return Defendant’s deposit, and Plaintiffs refusal to reimburse Defendant for product in Plaintiffs possession that was damaged as a result of flooding. Defendant also alleged Plaintiff removed product against Defendant’s instruction to a third-party facility, who then refused to release the product unless substantial storage fees were paid. After Defendant’s complaint was filed, Plaintiff failed to respond and' the Clerk of Court entered default. Before default judgment was entered, Plaintiff moved to set aside the Clerk’s entry of default. The Court granted that motion, and awarded Defendant attorney’s fees incurred in obtaining service, entry of default, and in opposing Plaintiffs motion to set it aside.

Plaintiff then filed its answer, and included a counterclaim against Defendant. Plaintiff alleges promissory fraud, breach of contract, breach of the confidentiality agreement, and a violation of the Tennessee Consumer Protection Act (“TCPA”), TenmCode Ann. §§ 47-18-101 et seq. Plaintiffs promissory fraud claim is based on .its allegation Defendant knew ICC had no applicable evaluation and entered into the contract without intent to comply with the threshold levels so that it would receive Plaintiffs product at a reduced rate. Plaintiff also argues Defendant never intended to comply with the confidentiality [862]*862agreement, and so committed promissory fraud when executing that agreement as well:' Plaintiffs breach of contract claim relates to Defendant’s failure to Comply with the threshold levels. Plaintiffs breach of confidentiality agreement claim alleges Defendant divulged proprietary information to two of Plaintiffs competitors. Finally, Plaintiffs TCPA claim alleges Defendant’s deceitful actions constitute unfair and deceptive trade practices. Defendant filed the instant motion seeking dismissal of all four claims.

II. STANDARD OF REVIEW

A Rule 12(b)(6) motion should be granted when it appears “beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Lewis v. ACB Bus. Servs., Inc., 135 F.3d 389, 405 (6th Cir.1998). For purposes of this determination, the Court construes the complaint in the light most favorable to the plaintiff and assumes the veracity of all well-pleaded factual allegations in the complaint. Thurman v. Pfizer, Inc., 484 F.3d 855, 859 (6th Cir.2007).

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Cite This Page — Counsel Stack

Bluebook (online)
932 F. Supp. 2d 858, 2013 WL 1150714, 2013 U.S. Dist. LEXIS 37416, Counsel Stack Legal Research, https://law.counselstack.com/opinion/arch-wood-protection-inc-v-flamedxx-llc-tned-2013.