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Tyler v. Cashflow Technologies Inc.

United States District Court, W.D. Virginia

November 3, 2016

Lynchburg Division William Tyler, Plaintiff,
v.
Cashflow Technologies, Inc., Defendant.

          MEMORANDUM OPINION

          NORMAN K. MOON UNITED STATES DISTRICT JUDGE.

         William Tyler (“Plaintiff”), acting pro se, initiated this case, seeking declaratory and injunctive relief for allegations of trademark infringement by Cashflow Technologies, Inc. (“Defendant”), as well as damages “in excess of $150, 000” based upon claims of defamation, libel per se, unfair competition, and unjust enrichment. (Dkt. 1 at 18). This case arises out of the use of the term “Cashflow” in the title of a mobile phone application created by Plaintiff, which Defendant believes violates one or more of its trademarks. (Dkts. 1 & 4).

         Defendant filed an Answer, Defenses, and Counterclaim to Plaintiff's Complaint. The counterclaim named Plaintiff and NDL, Inc. (“NDL”), which is owned by Plaintiff, as counter defendants. (Dkt. 4). Defendant's counterclaim alleges trademark infringement and unfair competition in violation of 15 U.S.C. § 1125(a), common law trademark infringement, and common law unfair competition. (Dkt. 4 at 12-13). In addition, Defendant seeks a declaratory judgment that its actions were not defamatory, libelous, or unfairly competitive, as well as an injunction prohibiting NDL from using “Cashflow” as the name of its software. (Dkt. 4 at 15- 16).

         This matter is before the Court upon NDL's and Plaintiff's motions to dismiss all counterclaims pursuant to Rule 12(b)(6). (Dkts. 11 & 15). NDL's motion was also styled as a motion for summary judgment. (Dkt. 15). Lastly, Plaintiff filed a motion for sanctions against Defendant. (Dkt. 29).

         Based on the pleadings and the applicable case law, the motions to dismiss will be denied in part and granted in part. Defendant's counterclaims of trademark infringement and unfair completion will be retained because they state a claim upon which relief can be granted. Defendant's declaratory judgment counterclaims, however, will be dismissed as duplicative. Defendant's declaratory judgment counterclaims are merely defenses masquerading as counterclaims; they ask the Court to essentially rule in Defendant's favor on the merits of Plaintiff's claims. That is not the purpose of a declaratory judgment, and thus the declaratory judgment claims will be dismissed. Because genuine issues of material fact remain and additional discovery would aid in resolving such issues, NDL's motion for summary judgment is premature and will be denied. Lastly, Plaintiff's motion for sanctions will be denied because Defendant's counterclaims are not frivolous.

         I. Legal Standard

         A. Motion to Dismiss A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) tests the legal sufficiency of a complaint to determine whether the plaintiff has properly stated a claim; “it does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Republican Party of North Carolina v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). Although a complaint “does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted).

         A court need not “accept the legal conclusions drawn from the facts” or “accept as true unwarranted inferences, unreasonable conclusions, or arguments.” Eastern Shore Markets, Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000). “Factual allegations must be enough to raise a right to relief above the speculative level, ” Twombly, 550 U.S. at 555, with all allegations in the complaint taken as true and all reasonable inferences drawn in the plaintiff's favor. Chao v. Rivendell Woods, Inc., 415 F.3d 342, 346 (4th Cir. 2005). Rule 12(b)(6) does “not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. Consequently, “only a complaint that states a plausible claim for relief survives a motion to dismiss.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).

         B. Motion for Summary Judgment

         Summary judgment is warranted if the Court concludes that no genuine issue of material fact exists for trial and that the moving party is entitled to judgment as a matter of law, based on the totality of the evidence, including pleadings, depositions, answers to interrogatories, and affidavits. Whiteman v. Chesapeake Appalachia, L.L.C., 729 F.3d 381, 385 (4th Cir. 2013) (citing Fed.R.Civ.P. 56). A genuine issue of material fact exists “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         To demonstrate that a genuine issue of material fact exists, a party may not rest upon his own mere allegations or denials. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). Rather, the party must “proffer[] sufficient proof, in the form of admissible evidence, that could carry the burden of proof of his claim at trial.” Mitchell v. Data Gen. Corp., 12 F.3d 1310, 1316 (4th Cir. 1993). To this end, a district court has an “affirmative obligation . . . to prevent ‘factually unsupported claims [or] defenses' from proceeding to trial.” Felty v. Graves-Humphreys Co., 818 F.2d 1126, 1128 (4th Cir. 1987) (quoting Celotex, 477 U.S. at 323-24).

         C. Motion for Sanctions

         Under Rule 11(c)(2) of the Federal Rules of Civil Procedure, a party may ask the Court to issue sanctions against another party who violates Rule 11(b). The Fourth Circuit has held that the primary purpose of Rule 11 is to “deter future litigation abuse.” Hunter v. Earthgrains Co. Bakery, 281 F.3d 144, 151 (4th Cir. 2002).

         Substantively, Rule 11(b) imposes four different requirements upon litigants. See Fed. R. Civ. P. 11(b)(1)-(4). Although Plaintiff does not cite as specific section in his motion, two of the four requirements appear relevant to Plaintiff's motion. When a lawyer submits a document to the court, he or she certifies that:

to the best of [his or her] knowledge, information, and belief, formed after an inquiry reasonable under the circumstances: . . . (2) the legal contentions are warranted by existing law or by a nonfrivolous argument . . . and (3) the factual contentions have evidentiary support or . . . will likely have evidentiary support after a reasonable opportunity for further investigation or discovery.

Fed. R. Civ. P. 11(b).

         Courts evaluate alleged Rule 11(b)(2) violations using an objective reasonableness standard. A legal argument fails to satisfy Rule 11(b)(2) when “a reasonable attorney in like circumstances could not have believed his actions to be legally justified.” Morris v. Wachovia Securities, Inc., 448 F.3d 268, 277 (4th Cir. 2006). The legal argument must have absolutely no chance of success under the existing precedent to contravene the rule. Id.

         Only factual allegations that are wholly “unsupported by any information obtained prior to filing” will fail to satisfy Rule 11(b)(3). Brubaker v. City of Richmond, 943 F.2d 1363, 1373 (4th Cir. 1991). While certain legal claims may not survive a motion to dismiss, a sanction under Rule 11 is entirely different. Id. “Only the lack of any legal or factual basis is sanctionable.” Hunter, 281 F.3d at 153. In dicta, this Court agreed, “neither the certification requirement on evidentiary support, nor Rule 11 in its entirety, ” requires that a party proves its case before filing a complaint or another ...


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