United States District Court, W.D. Texas, Austin Division
SPARKS UNITED STATES DISTRICT JUDGE
REMEMBERED on this day the Court reviewed the file in the
above-styled cause, and specifically Defendant A Better Way
of Life, Inc. d/b/a Platypus Co. (ABWOL)'s Motion to
Dismiss [#24], Plaintiff Laura Morgan-Rinehart
(Plaintiff's Response [#31] in opposition, and
ABWOL's Reply [#38] in support, as well as Defendant Fred
Van de Perre (Van de Perre)'s Motion to Dismiss [#25],
Plaintiffs Response [#32] in opposition, Van De Perre's
Reply [#37] in support, and Plaintiffs Sur-Reply [#43-1] in
opposition. Having reviewed the documents, the
governing law, and the file as a whole, the Court now enters
the following opinion and orders granting the motions to
brings this action alleging ABWOL, Van De Perre, and PDT
failed to pay Plaintiff royalties as required under the
parties' various licensing and shareholder agreements,
and attempted to deprive Plaintiff of her ownership in her
Plaintiff Develops the Prototype.
a dental hygienist based in Austin, Texas, works primarily
with children and orthodontic patients. Am. Compl. [#16]
¶¶ 8-9. After witnessing the problems her patients
with braces encountered while flossing, Plaintiff invented a
prototype of a flossing device "to combat the increasing
risks to her patients from a lack of flossing."
Id. ¶¶ 9-10. Plaintiff applied for a
provisional application for her "Ultimate Orthodontic
Floss Aid" (Prototype) with the United States Patent and
Trademark Office (USPTO), and on March 14, 2007, she received
confirmation of her application. Id. ¶ 11.
Plaintiff discussed manufacturing the Prototype with a
plastics manufacturer in Austin, but never began production
due to financial reasons. Id. ¶ 12.
Plaintiff and PDT Begin to Work Together.
May 10 to 12, 2007, Plaintiff attended the annual Texas
Dental Association Conference (TDA Conference) in San
Antonio, Texas, where she first engaged with Defendant PDT, a
Montana-based dental instrument company. Id. ¶
14. Plaintiff alleges PDT has attended the TDA Conference for
the past fifteen years to market its dental products.
Id. At the TDA Conference, Plaintiff met PDT's
then-co-owners, Van De Perre and his then-wife Laura Miller.
Id. ¶¶ 13-14. During their first meeting,
Plaintiff shared the general concept for her Prototype and
Van De Perre expressed an interest in forming a business
relationship. Id. ¶ 15. Before any further
discussions occurred, Plaintiff and Van de Perre, on behalf
of himself and PDT, signed a nondisclosure agreement.
Id. ¶ 16. Once the agreement was signed,
Plaintiff showed Van de Perre a sample of the Prototype.
Id. Van de Perre confirmed his interest in entering
a business relationship with Plaintiff to develop,
manufacture, and sell the Prototype. Id. ¶ 17.
in June 2007, Van de Perre contacted Plaintiff and asked her
to mail him 20 units of the Prototype so he could introduce
it to the dental community in Montana and solicit feedback.
Id. ¶ 18. Plaintiff sent the samples to Van de
Perre. Id. After considering the feedback, Van de
Perre and Plaintiff discussed the design, purpose,
production, marketing, pricing, and name of the final
product. Id. ¶ 19. Van de Perre told Plaintiff
he wanted to have the final product ready to market by
February 2008. Id. ¶ 20.
Plaintiff and PDT Market and Sell the Platypus
October 2007, Van de Perre told Plaintiff he wanted to
formalize PDT's business relationship with Plaintiff.
Id. ¶ 21. Accordingly, in November 2007, Van de
Perre and Plaintiff entered into a non-exclusive license
agreement that allowed PDT to develop, manufacture, market,
sell, and/or distribute Plaintiffs product based on the
patented Prototype in exchange for a 5% royalty of the Net
Selling Price of the product (2007 PDT Agreement).
Id. ¶ 22. Van de Perre signed the 2007 PDT
Agreement on behalf of PDT. Id. ¶ 23.
February 2008, PDT launched the final product in Chicago,
Illinois, under the name "Platypus." Id.
¶ 24. On February 28, 2008, Van de Perre told Plaintiff
approximately 20, 000 units of the Platypus flosser had sold
during the launch. Id. ¶ 25. After the launch,
PDT sold the Platypus flosser to stores and dental offices in
Texas. Id. ¶ 28. Beginning in May 2008, PDT
sent monthly royalty checks and sales reports to Plaintiff.
Id. ¶¶ 26-27. On March 14, 2008, Plaintiff
and her attorney Rick Yeager (Yeager) filed a non-provisional
patent application for the Platypus flosser with the USPTO
entitled "Method and Apparatus for Orthodontic Floss
Aid" (Patent). Id. ¶ 29. Van de Perre and
Plaintiff verbally agreed PDT would pay Yeager's fees for
his work on the patent application. Id. ¶ 30.
fall of 2008, Plaintiff and Van de Perre continued to market
and distribute the Platypus flosser. Id. ¶ 34.
Plaintiff provided interviews, attended trade shows, and
visited dental offices in Texas. Id. For instance,
Van de Perre set up an interview of Plaintiff with
Hygienetown magazine in Texas, which was published
with the title "PDT Invention Borne of Passion" and
distributed in Texas. Id. ¶ 35. Van de Perre
and Plaintiff also attended the American Dental
Association's 149th Annual Session (ADA Session) in San
Antonio to market the Platypus flosser. Id. ¶
36. On January 31, 2009, Orthtown magazine published
an article about PDT, stating PDT had sold more than 1.4
million Platypus flossers. Id. ¶ 37. However,
the sales reports Plaintiff received up until January 2009
stated only 1, 096, 800 Platypus flossers were sold.
Id. ¶ 38.
ABWOL Begins to Market and Sell Platypus Flossers.
December 22, 2008, without Plaintiffs knowledge, Van de Perre
and his then-wife Miller formed and incorporated Defendant
ABWOL to distribute and sell the Platypus flosser.
Id. ¶ 31. When ABWOL was incorporated, it
authorized 50, 000 shares of common stock and listed Van de
Perre and Miller as shareholders. Id. Van de Perre,
on behalf of ABWOL, agreed to supply over 7, 000 CVS stores
with the Platypus flosser. Id. ¶ 32. Plaintiff
did not receive any royalty payments from ABWOL's sales
of the Platypus flosser until 2011. Id. ¶ 33.
October 2009, Plaintiff discovered Van de Perre and Miller
were engaged in divorce proceedings. Id. ¶ 39.
On October 12, 2009, PDT informed Plaintiff that Van de Perre
no longer worked there. Id. ¶ 40. Later, on
November 19, 2009, Miller, on behalf of PDT, and Plaintiff
entered into a new license agreement that granted PDT an
exclusive license to develop, manufacture, market, sell, and
distribute the Platypus flosser in exchange for a 5% royalty
on products sold to "the dental professional
market" and a 2% royalty on products sold to the
"consumer market" (2009 PDT Agreement).
Id. ¶¶ 41, 43. The 2009 PDT Agreement
states that it supersedes any prior agreements between the
parties. Id. ¶ 43.
early September 2010, Van de Perre, now working solely at
ABWOL, told Plaintiff for the first time that ABWOL was
selling the Platypus flosser. Id. ¶ 48. He said
he was interested in engaging in a new business relationship
with Plaintiff and offered her an equity stake in ABWOL.
Id. On September 18, 2010, Van de Perre flew to
Austin to meet with Plaintiff and her attorney Yeager to
discuss a business relationship between Plaintiff and ABWOL.
Id. ¶ 49. Van de Perre told Plaintiff
"Miller was defrauding Plaintiff, was not devoting
sufficient business resources to the Platypus flosser, had
lost an important deal with CVS and other retailers, and was
emotionally and mentally unstable." Id. ¶
these conversations, Van de Perre sent Plaintiff a proposed
Memorandum of Understanding, which states Plaintiff agrees to
sell all licensing and patent rights in the Platypus flosser
to ABWOL, and ABWOL agrees to transfer 10% equity in ABWOL to
Plaintiff (2010 MOU). Id. ¶ 51. The 2010 MOU
also states ABWOL intended to pay royalties to Plaintiff in
an amount "not less than the agreement stipulated in the
existing [2009 PDT Agreement] between [Plaintiff] and
PDT." Id. In addition, the 2010 MOU provides
"within 30 days of the official dissolution of Fred and
Lina Van de Perre's marriage, [Plaintiff]/ABWOL will
finalize this agreement in its entirety." Id.
October 4, 2011, Van de Perre and Miller finalized their
divorce. Id. ¶ 56. As part of the divorce
agreement, all of Van de Perre's stock in PDT was awarded
to Miller, all of Miller's stock in ABWOL was awarded to
Van de Perre, and all rights associated with the Platypus
flosser were awarded to Van de Perre. Id. Plaintiff
was not notified of the divorce agreement until
December 9, 2011, Plaintiff and Van de Perre signed a
shareholder agreement (2011 Shareholder Agreement), providing
Plaintiff held 100 shares and Van de Perre held 900 shares of
the 1, 000 issued shares in ABWOL. Id. ¶ 59.
However, Plaintiff was never listed as a shareholder in ABWOL
documents or tax returns, asked to participate in board
meetings, or updated about ABWOL's business. Id.
Plaintiff also never received any distributions or dividends
from ABWOL. Id. Further, ABWOL's 2011 tax return
listed Van de Perre as owning 64.75% of the shares.
Id. ¶ 61. ABWOL's tax returns from 2012,
2013, and 2014 list Van de Perre as owning 100% of the
shares. Id. ¶¶ 62-64.
March 2013, Plaintiff asked Van de Perre to send her certain
tax forms required for shareholders. Id. ¶ 69.
Van de Perre told Plaintiff if she wanted the forms, she
would have to be officially listed as a shareholder, and as
such would be required to pay 10% of ABWOL's loans,
losses, and additional investments. Id. He also
represented that in 2013 ABWOL had a loss of $140, 000.
Id. ABWOL's 2013 tax return, however, states
ABWOL reported a loss of $18, 274. Id. ¶ 70.
Plaintiff Assigns Her Patent Rights to
2012, Plaintiffs Patent application was still pending.
Id. ¶ 67. Around that time, Van de Perre told
Plaintiff her attorney Yeager was not effectively handling
the application and stopped paying Yeager's
attorneys' fees. Id. Van de Perre explained he
thought assigning the Patent to ABWOL would help the Patent
application get approved and identified a new attorney, David
Johnson, to assist. Id. On March 28, 2013, Van de
Perre and Plaintiff signed an agreement assigning full and
exclusive rights in the Patent to ABWOL for $10.00 (2013
Patent Assignment). Id. ¶ 71.
ABWOL Continues Sales of the Platypus Flosser.
2012 until the present lawsuit, ABWOL continued to sell the
Platypus flosser to retail stores and dental offices.
Id. ¶ 72. At least some of these stores and
offices are located in Texas. Id. In early 2016, Van
de Perre's former assistant Misty Saldana-Williams
informed Plaintiff that Van de Perre and ABWOL were lying to
Plaintiff about her ownership and interest in ABWOL and that
Van de Perre was converting some of ABWOL's assets for
his personal use. Id. ¶ 73.
filed her Original Petition in state court on November 21,
2016, and Van de Perre and ABWOL timely removed to this Court
on December 21, 2016. Not. Removal [#1]. Plaintiff filed her
Amended Complaint on January 30, 2017, alleging seven counts
against Van de Perre and ABWOL-interference with an existing
contract, fraud, statutory fraud, negligent
misrepresentation, breach of fiduciary duty, a violation of
§ 152.202 of the Texas Business and Organizations Code,