Shield Technologies Corp. v. Paradigm Positioning, LLC

908 F. Supp. 2d 914, 2012 WL 4739263, 2012 U.S. Dist. LEXIS 142861
CourtDistrict Court, N.D. Illinois
DecidedOctober 3, 2012
DocketNo. 11 C 6183
StatusPublished
Cited by4 cases

This text of 908 F. Supp. 2d 914 (Shield Technologies Corp. v. Paradigm Positioning, LLC) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Shield Technologies Corp. v. Paradigm Positioning, LLC, 908 F. Supp. 2d 914, 2012 WL 4739263, 2012 U.S. Dist. LEXIS 142861 (N.D. Ill. 2012).

Opinion

MEMORANDUM OPINION

JOHN F. GRADY, District Judge.

Before the court is the joint motion to dismiss of defendants Thomas W. Nelson and Paradigm Positioning, Inc. (“Paradigm”). For the reasons explained below, we deny their motion as untimely. However,. the court sua sponte dismisses the plaintiffs common law fraud claim without prejudice.

BACKGROUND

Plaintiff Shield Technologies Corporation (“Shield”) manufactures and sells corrosion protective covers for the United States and foreign militaries, industry, and consumer gun purchasers. (Am. Compl. ¶ 1.) The United States Department of De[916]*916fense (“DOD”) is Shield’s largest customer. (Id. at ¶2.) Defendant Transhield manufactures and sells “shrink wrap covers” for a range of applications and it is currently marketing its products to the DOD as an alternative to Shield’s products. (Id. at ¶¶ 3, 5.) Shield, citing Transhield’s website, alleges that Transhield’s products purport to have “at least some of the same technology and performance characteristics as” Shield’s products. (Id. at ¶ 4.) Shield alleges that defendants Nelson and Jeffery Void, two former Shield executives, have given Shield’s confidential information to Transhield and that Transhield is using that information to compete with Shield for the DOD’s business. (Id. at ¶¶ 7-10, 15, 27-31, 33.) Shield further asserts that Nelson and Void are using Paradigm as their alter ego in their dealings with Tran-shield. (Id. at ¶ 14.) Shield has filed a six-count complaint alleging: (1) breach of certain employment agreements executed by Nelson and Void (Counts I (Nelson) and II (Void)); (2) trade secret misappropriation (Count III); (3) tortious interference with a prospective business relationship (Count IV); (4) civil conspiracy (Count V); and (5) common law fraud (Count VI, against Nelson only).

DISCUSSION

Paradigm and Nelson have jointly filed a motion seeking dismissal pursuant to Rule 12(b)(6) and summary judgment pursuant to Rule 56(a). On June 23, 2012, we denied their motion insofar as it sought summary judgment: discovery is still in the early stages and it would be premature to evaluate the sufficiency of Shield’s evidence at this time. However, we directed Shield to respond to the defendants’ motion insofar as it was based upon Rule 12(b)(6). Rather than address the motion’s merits, Shield argues that it is untimely because the defendants have already answered the complaint. See Fed. R.Civ.P. 12(b) (“A motion asserting any of these defenses [including failure to state a claim] must be made before pleading if a responsive pleading is allowed.”). Rule 12(h)(2) provides that a party may assert that the complaint fails to state a claim “(A) in any pleading allowed or ordered under Rule 7(a); (B) by a motion under Rule 12(c); or (C) at trial.” Fed.R.Civ.P. 12(h)(2). The defendants insist that they raised their Rule 12(b)(6) defense in their answer, a pleading “allowed” under Rule 7(a), citing their allegation that Shield brought its “legal claims with no factual basis and without the minimum level .of due diligence.” (Nelson/Paradigm Second Am. Answer at 54, ¶ 4a.) If proven, this would be a basis for sanctions under Rule 11, but it is not an attack on the facial sufficiency of Shield’s allegations. The defendants next argue that we may consider their motion under Rule 12(c). By its terms, Rule 12(e) applies only after the pleadings are “closed.” See Fed.R.Civ.P. 12(c) (“After the pleadings are closed — but early enough not to delay trial — a party may move for judgment on the pleadings.”). “Unless the court orders a reply to an answer or third-party answer, the pleadings close after the last of the following pleadings in the case has been filed: answer, reply to a counterclaim, answer to a crossclaim, and third-party answer.” 2-12 Moore’s Federal Practice — Civil § 12.38; see also Flora v. Home Federal Sav. and Loan Ass’n, 685 F.2d 209, 211 n. 4 (7th Cir.1982) (“In a case such as this when, in addition to an answer, a counterclaim is pleaded, the pleadings are closed when the plaintiff serves his reply.”).1 [917]*917Shield has not yet filed its answer to the defendants’ counterclaims.

The defendants contend that Ennenga v. Starns, 677 F.3d 766, 773 (7th Cir.2012) supports their argument that their motion is timely, but that case dealt with a different issue. The question in Ennenga was whether the defendants could file a motion to dismiss based on a statute-of-limitations defense after failing to raise that defense in a prior Rule 12(b)(6) motion. The Ennenga Court held that they could, observing that such a defense is not subject to Rule 12(h)(l)’s “consolidation requirement.” Id.; see also Fed.R.Civ.P. 12(h)(1) (providing that a party waives the defenses listed in Rule 12(b)(2) — (5)—but not Rule 12(b)(6) — by omitting them from a previous motion). Ennenga makes it clear that the defendants have not waived their right to assert that Shield’s complaint fails to state a claim for relief. But that does not mean that their motion is timely.

Based on the foregoing analysis, it appears that the defendants’ motion to dismiss is untimely. Although it is unclear whether the Federal Rules compel us to deny the defendants’ motion, we think it is the most prudent course. However, we are not persuaded that we cannot still rule on the sufficiency of Shield’s complaint at this time. “Sua sponte 12(b)(6) dismissals are permitted, provided that a sufficient basis for the court’s action is evident from the plaintiffs pleading.” Ledford v. Sullivan, 105 F.3d 354, 356 (7th Cir.1997). It would serve no purpose other than delay to postpone addressing the issues that the defendants raise in their motion while awaiting Shield’s response to their counterclaims. Therefore, in the interests of avoiding unnecessary delay, we will deny the defendants’ motion as untimely but address their substantive arguments on our own motion.

A. Legal Standard

The purpose of a Rule 12(b)(6) motion to dismiss is to test the sufficiency of the complaint, not to resolve the case on the merits. 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1356, at 354 (3d ed. 2004). To survive such a motion, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief , that is plausible on its face.’ 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.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly,

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908 F. Supp. 2d 914, 2012 WL 4739263, 2012 U.S. Dist. LEXIS 142861, Counsel Stack Legal Research, https://law.counselstack.com/opinion/shield-technologies-corp-v-paradigm-positioning-llc-ilnd-2012.