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Lizard Apparel and Promotions, LLC v. Impact Design, LLC

United States District Court, S.D. Ohio, Western Division

May 11, 2017

LIZARD APPAREL AND PROMOTIONS, LLC, et al., Plaintiffs,
v.
IMPACT DESIGN, LLC, d/b/a ALLCUSTOMWEAR.COM, et al., Defendants.

         DECISION AND ENTRY SUSTAINING DEFENDANTS IMPACT DESIGN LLC, D/B/A ALLCUSTOMWEAR.COM, AND JOSHUA BATZ'S MOTION TO DISMISS CLAIMS II, III, IV, V, VI, VIM AND IX OF PLAINTIFFS LIZARD APPAREL AND PROMOTIONS, LLC, AND ELIZABETH L. LYBROOK'S SECOND AMENDED COMPLAINT (DOC. #33); CLAIMS II (DETRIMENTAL RELIANCE/PROMISSORY ESTOPPEL), III (UNJUST ENRICHMENT), IV (TORTIOUS INTERFERENCE WITH CONTRACT, V (ACCOUNTING), VI (BREACH OF FIDUCIARY DUTY), VIII (PUNITIVE DAMAGES) AND IX (INJUNCTIVE RELIEF) OF THE SECOND AMENDED COMPLAINT (DOC. #29) ARE DISMISSED WITH PREJUDICE, AND JUDGMENT SHALL ULTIMATELY ENTER IN FAVOR OF DEFENDANTS AND AGAINST PLAINTIFFS ON THOSE CLAIMS; PLAINTIFFS' PRAYER FOR INJUNCTIVE RELIEF IS STRICKEN; PLAINTIFFS MAY, WITHIN FOURTEEN DAYS OF THIS ENTRY, FILE A THIRD AMENDED COMPLAINT THAT SETS FORTH AN APPROPRIATE PRAYER FOR INJUNCTIVE RELIEF; PLAINTIFFS' CLAIMS ONE (BREACH OF CONTRACT) AND SEVEN (DEFAMATION) AGAINST DEFENDANTS SHALL PROCEED TO DISCOVERY

          WALTER H. RICE UNITED STATES DISTRICT JUDGE.

         In 2013, Plaintiffs LIZard Apparel and Promotions, LLC ("Lizard" or "LIZard") and Elizabeth L. Lybrook ("Lybrook"), Lizard's owner and operator (collectively "Plaintiffs"), entered into a contract with Defendant Impact Design, LLC, d/b/a Allcustomwear.com ("Impact" or "Impact/ACW"), by which Impact would design and host e-commerce websites, through which Lizard's customers would order and pay for Lizard's products. Also, Impact was responsible for collecting payments from Lizard's customers and remitting a portion of those payments to Lizard. See Doc. #29, ¶¶ 9-19, PAGEID #234-35 (overview of relationship between Lizard and Impact). The relationship between the parties soured, and on or about February 22, 2016, Impact President Joshua Batz ("Batz") proposed to Lybrook that Impact and Lizard "separate their business relationship at the end of their contract terms[, ] which was [sic] June 30, 2016[.]" Id., ¶ 37, PAGEID #238. However, on April 15, 2016, Impact "unilaterally terminated its relationship and contracts [with Lizard, ] including access to all sites except Signature Healthcare." Id., ¶ 42. Further, Impact did not remit to Lizard its contractually-allotted portion of sale proceeds after January 31, 2016. Id., ¶ 44, PAGEID #239.

         On October 20, 2016, Plaintiffs filed their Second Amended Complaint. Doc. #29. On October 25, 2016, Impact and Batz (collectively "Defendants") filed a Motion to Dismiss Claims I! (Detrimental Reliance/Promissory Estoppel), III (Unjust Enrichment), IV (Tortious Interference), V (Accounting), VI (Breach of Fiduciary Duty), VIII (Punitive Damages) and IX (Injunctive Relief) ("Motion"). Doc. #33. For the reasons set forth below, their Motion is SUSTAINED.

         I. FACTUAL BACKGROUND[1]

         In 2013, Lybrook founded Lizard to "sell[] custom uniform programs to the healthcare industry and other industries." Doc. #29, ¶ 6, PAGEID #233. Lybrook "approached [D]efendant Impact/ACW to provide an online platform (i.e.[, ] to host online webstores) and to assist her in the development of her customer specific online e-commerce webstores, as well as, provide order fulfillment, product returns and back office support." Id., ¶ 9, PAGEID #234. Through a March 7, 2013, Engagement Letter, Lizard and Impact entered into a contract, under which Impact agreed to provide website design, hosting and customer service ("Bilateral Agreement") for Lizard. Doc. #29-1, §§1.1, 1.3-1.5, PAGEID #249. Further, Impact would collect payment from Lizard's end users and remit twenty percent of the proceeds to Lizard on a monthly basis. Id. §§ 3.1-3.2, PAGEID #250. As part of the Bilateral Agreement, Impact agreed to "not knowingly provide an eCommerce site to any of [Impact's] competitors that is intended for presentation or use at one of [Lizard's] own customers where the Impact Design solution has been presented." Id., § 4. The Bilateral Agreement was terminable at-will, Id., §10.1, PAGEID #251.

         "As LIZard sold their [sic] custom e-commerce webstore uniform program, LIZard and Impact/ACW entered into specific agreements[2] which related to each party's obligations to ] LIZard's clients/end users." Doc. #29, ¶ 20, PAGEID #235. Impact agreed that it would not solicit the Lizard customer that was the subject of the particular Sales Representative Agreement. Doc. #29-2, PAGEID #253. Each such Agreement was terminable at-will.

         Finally, Lizard entered into bilateral contracts ("Service Agreements") with each of its end users. These Service Agreements were to continue for an initial term of thirty-six months. Doc. #29-3, § 5.1, PAGEID #259. However, the Service Agreements allowed both Lizard and its end user to terminate the Agreement prior to the expiration of the initial term, without cause, subject to the terminating party providing timely written notice. Id., § 5.4; Doc. #29-7, § 5.4, PAGEID #268.

         In 2015, however, Impact began selling "custom uniform programs in direct competition with LIZard." Doc. #29, ¶ 32, PAGEID #237. After Plaintiffs rejected Defendants' offer for Lizard to become a subsidiary of Impact, "LIZard began exploring other options for her [sic] business[, ] including a different platform vendor[.j" Id., ¶ 35. "On February 22, 2016, Impact/ACW . . . proposed that the parties separate their business relationship at the end of their contract terms[, ] which was [sic] June 30, 2016[, J and pledged to support LIZard's end users/customers until that date." Id., ¶ 37, PAGEID #238. In response, Plaintiffs, in April 2016, began using a new host for the clients they acquired after February 22, 2016, id., ¶ 41, and on April 15, 2016, Impact "unilaterally terminated its relationship and contacts [with] LIZard[, ] including access to all sites except Signature Healthcare." Id., ¶ 42.

         In June 2016, Lizard filed the initial Complaint, Doc. #2, and two Motions for Temporary Restraining Order and Preliminary Injunction ("TRO Motions"), Doc. #3, 12, against Impact and Batz. The parties subsequently resolved the subject matter of the TRO Motions, Doc #24, and Plaintiffs filed a Second Amended Complaint, Doc. #29, adding Lybrook as a plaintiff.

         II. LEGAL STANDARDS

         Federal Rule of Civil Procedure 8(a) provides that a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." The complaint must provide the defendant with "fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2L.Ed.2d80(1957)).

         Rule 12(b)(6) allows a party to move for dismissal of a complaint on the basis that it "fail[s] to state a claim upon which relief can be granted." The moving party "has the burden of showing that the opposing party has failed to adequately state a claim for relief." DirecTV, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007) (citing Carver v. Bunch, 946 F.2d 451, 454-55 (6th Cir. 1991)). The purpose of a Rulel 2(b)(6) motion "is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true." Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). In ruling on a Rule 12(b)(6) motion, the Court must "construe the complaint in the light most favorable to the plaintiff, accept its [well-pleaded] allegations as true, and draw all reasonable inferences in favor of the plaintiff." Handy-Clay v. City of Memphis, 695 F.3d 531, 538 (6th Cir. 2012) (quoting Treesh, 487 F.3d at 476).

         Nevertheless, to survive a Rule 12(b)(6) motion, the complaint must contain "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. Unless the facts alleged show that the plaintiff's claim crosses "the line from conceivable to plausible, [the] complaint must be dismissed." Id. Although this standard does not require "detailed factual allegations, " it does require more than "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Id. at 555. "Rule 8 . . . does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Ashcroft v. Iqbal, 556 U.S. 662, 678-79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Legal conclusions "must be supported by well-pleaded factual allegations . . . [that] plausibly give rise to an entitlement of relief." Id. at 679. "Although for the purposes of this motion to dismiss we must take all the factual allegations in the complaint as true, we are not bound to accept as true a legal conclusion couched as a factual allegation." Papasan v. Main, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986).

         The Court's review of a Rule 12(b)(6) motion is generally confined to the four corners of a complaint; nonetheless, "a [C]ourt may consider 'exhibits attached to the complaint, public records, items appearing in the record of the case and exhibits attached to defendant's motion to dismiss' without converting the motion to dismiss into a motion for summary judgment." Thomas v. Noder-Love, No. 13-2495, 621 F.App'x 825, 828 (6th Cir. 2015) (quoting Rondigo, LLC. v. Twp. of Richmond, 641 F.3d 673, 681 (6th Cir. 2011)).

         III. ...


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