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Stonecoat of Texas, LLC v. Procal Stone Design, LLC

United States District Court, E.D. Texas, Sherman Division

January 8, 2018

PROCAL STONE DESIGN, LLC, JOHN D. PROFANCHIK, SR., individually, JUSTIN KINSER, individually, IRMA VILLARREAL, individually, ALFREDO GONZALES, individually, PHILIPPE MERGAUX, individually, and PIERRE-LAURENT CHEMIELEC, individually



         Pending before the Court is Defendants' Motion to Dismiss or Stay Under Colorado River, or in the Alternative, Motion to Dismiss Under Rule 12(b)(6), or in the Alternative, Motion for More Definite Statement Under Rule 12(e) (Dkt. #19). The Court, having considered the relevant pleadings, finds that Defendants' motion should be denied.


         Stonecoat of Texas, LLC (“Stonecoat, LLC”), Stonecoat GP, LLC (“Stonecoat GP”), and Stonecoat LP (“Stonecoat LP”) (collectively “the Stonecoat entities”) are companies that are in the business of making and selling spray-on stone facing. Ken Morrison (“Morrison”) was involved in the origination of the spray-on stone facing and the formation of the Stonecoat entities. Because of the specialized nature of the business, the Stonecoat entities required employees and business partners to sign certain agreements pertaining to permissible competition, confidentiality, and non-disclosure.

         In the winter of 2011, an investor group, which included Michael C. Hopkins (“M. Hopkins”), approached Stonecoat GP to invest in the business. After M. Hopkins signed a confidentiality agreement, Morrison and M. Hopkins agreed that M. Hopkins would make a capital infusion into the business and in exchange would become the managing member of Stonecoat GP in name, while Morrison would continue to handle day-to-day operations. At the last minute, M. Hopkins requested to give his interest and role to his son, Frederick Hopkins (“F. Hopkins”). By Fall 2012, Morrison began to question F. Hopkins's and M. Hopkins's loyalty, care, and good faith business judgment and actions, and he began to investigate their practices. After an investigation, Morrison uncovered what he alleged to be a conspiracy between M. Hopkins, F. Hopkins, and several others, including two employees of the Stonecoat entities', Pierre-Laurent Chamielec (“Chamielec”) and Philippe Mergaux (“Mergaux”).

         In October 2015, Stonecoat, Morrison, and the Morrison Family Trust (“the Hopkins Plaintiffs”) brought suit in the 116th Judicial District Court of Dallas County against these alleged conspirators arguing that they conspired to: (1) usurp business opportunities from Stonecoat; (2) create a competing business; (3) misappropriate Stonecoat's business and its knowledge processes, sourcing, and information; (4) violate written agreements of non-competition and confidentiality signed by M. Hopkins, Chamielec, and Mergaux;[1] (5) interfere with vendor and supplier relationships; (6) interfere with dealer relationships; (7) and deceive and misrepresent material facts (“the Hopkins lawsuit” or “the Hopkins case” or “the Hopkins suit”). M. Hopkins and F. Hopkins settled their dispute with the Hopkins Plaintiffs, and only Stonecoat GP continued to trial against Mergaux.[2] The jury found that Mergaux violated the Products Rights, Formula Purchase, and Royalty Agreement he had signed dated December 21, 2011 and did not violate his Confidentiality/Non-Disclosure Agreement dated July 6, 2011. The district court entered a final judgment based on the jury verdict.

         Separate from the Hopkins business deal, in January 2015, Justin Kinser (“Kinser”) approached the Stonecoat entities concerning employment. Kinser signed a Non-Disclosure Agreement as part of his employment (“Kinser NDA”). Kinser introduced Morrison to John D. Profanchik (“Profanchik”), who expressed an interest in buying the Stonecoat entities. Profanchik also signed a Non-Disclosure Agreement (“Profanchik NDA”). Profanchik ended up creating and forming Procal Stone Design, LLC (“Procal”), which is involved in the same business as the Stonecoat entities. The business relationship between the Stonecoat entities and Profanchik deteriorated.

         Based on this business relationship, Profanchik sued Morrison, Rick Adams, Stonecoat, LLC, and Sam Hance (collectively “Profanchik Defendants”) in May 2015 alleging fraud among other causes of action in the 416th Judicial District Court of Collin County, Texas (“the Profanchik suit” or “the Profanchik case” or “the Profanchik lawsuit”). Stonecoat, LLC filed a counterclaim in this suit arguing that Profanchik conspired with Irma Villarreal (“Villarreal”), Alfredo Gonzales (“Gonzales”), Kinser, Mergaux, Chamielec to create Procal, which is alleged to directly compete with Stonecoat. In its counterclaim, Stonecoat, LLC alleged breach of the Profanchik NDA, breach of fiduciary duty by Profanchik, misappropriation of trade secrets by Profanchik according to Texas law, unlawful appropriation of Stonecoat's property, and tortious interference with the contracts between the Stonecoat entities and Villarreal, Gonzales, Kinser, Mergaux, Chamielec. The Profanchik lawsuit proceeded and the Collin County District Court granted Profanchik's partial summary judgment as to Stonecoat, LLC's counterclaims. The case then proceeded to trial, and the Collin County District Court entered a final judgment, on October 16, 2017, incorporating the summary judgment ruling and the jury verdict rendering. The final judgment states:

IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that judgment is rendered in favor of [Profanchik Defendants] as to [Profanchik's] claims for fraud, fraud by nondisclosure, and negligent misrepresentation and that [Profanchik] takes nothing by way of those claims.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that judgement [sic] is rendered in favor of [Profanchik] as to all of StonecCoat's counterclaims and that StoneCoat takes nothing by way of those claims.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that [Profanchik's] declaratory judgment action is rendered in favor of [Profanchik] and that the Court finds that the Non-Disclosure/Non-Compete Agreement between [Profanchik] and Stonecoat is unenforceable as a matter of law.
IT IS FURTHER ORDERED, ADJUDGED and DECREED that each party will bear his or its own costs of suit and attorneys' fees.
This judgment finally disposes of all claims and all parties and is appealable.

(Dkt. #42, Exhibit 1 at p. 2).

         On May 5, 2017, the Stonecoat entities filed suit in the Eastern District of Texas against Procal, Profanchik, Kinser, Villarreal, Gonzales, Mergaux, and Chamielec based on the same set of facts as alleged in Stonecoat, LLC's counterclaim in the Profanchik lawsuit: Profanchik conspired with Villarreal, Gonzales, Kinser, Mergaux, and Chamielec to create Procal. In Plaintiffs' First Amended Original Complaint, the Stonecoat entities allege: a violation of the Lanham Act for engaging in unfair competition and false advertising; misappropriation of trade secrets and confidential and proprietary information against all Defendants; misappropriation of trade secrets and confidential information in violation of the United States Defend Trade Secrets Act of 2016; conversion; a violation of the Texas Theft Liability Act against all Defendants; a breach of contract against all Defendants, a breach of fiduciary duty against the Individual Defendants; tortious interference with existing business relationships against Procal and Profanchik as to Villarreal, Gonzales, Kinser, Mergaux, Chamielec; unfair competition against all Defendants; and various theories regarding the alleged scheme against all Defendants.

         On July 12, 2017, Defendants filed the present motion (Dkt. #19). On August 10, 2017, Plaintiffs filed its response to the motion (Dkt. #25). Defendants filed their reply on August 17, 2017 (Dkt. #26) and Plaintiffs filed their sur-reply on August 23, 2017 (Dkt. #27). Further, Profanchik filed a Notice of Rulings on Partial Summary Judgment (Dkt. #35) on September 27, 2017, and a Notice of Final Judgment (Dkt. #42) on October 20, 2017.


         1. Colorado River Abstention

         The Colorado River doctrine allows a court to abstain from exercising jurisdiction over federal claims under “exceptional circumstances.” Brown v. Pacific Life. Ins. Co., 462 F.3d 384, 394 (5th Cir. 2006). The existence of the following six (6) factors determine whether “exceptional circumstances” exist:

(1) assumption by either state or federal court over a res; (2) relative inconvenience of the fora; (3) avoidance of piecemeal litigation; (4) order in which jurisdiction was obtained by the concurrent fora; (5) extent federal law provides the rules of decision on the merits; and (6) adequacy of the state proceedings in protecting the rights of the party invoking federal jurisdiction

Id. at 395. The decision to abstain must be based on a careful balancing of important factors as they apply to a case, “with the balance heavily weighted in favor of the exercise of jurisdiction.” Id. Additionally, the doctrine only applies when there are parallel proceedings pending in federal and state court. Id. at 395 n.7. Proceedings are considered parallel if they “involve the same parties and the same issues.” Id. It is not necessary that there be “a mincing insistence on precise identity of parties and issues.” Id. The Colorado River test “should be applied in a pragmatic, flexible manner with a view to the realities of the case at hand.” Allen v. La. State Bd. of Dentistry, 835 F.2d 100, 104 (5th Cir. 1988).

         2. Motion to Dismiss Pursuant to 12(b)(6)

         The Federal Rules of Civil Procedure require that each claim in a complaint include a “short and plain statement . . . showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Each claim must include enough factual allegations “to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         A Rule 12(b)(6) motion allows a party to move for dismissal of an action when the complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When considering a motion to dismiss under Rule 12(b)(6), the Court must accept as true all well-pleaded facts in plaintiff's complaint and view those facts in the light most favorable to the plaintiff. Bowlby v. City of Aberdeen, 681 F.3d 215, 219 (5th Cir. 2012). The Court may consider “the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint.” Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). The Court must then determine whether the complaint states a claim for relief that is plausible on its face. ‘“A claim has facial plausibility when the plaintiff pleads factual content that allows the [C]ourt to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “But where the well-pleaded facts do not permit the [C]ourt to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Iqbal, 556 U.S. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         In Iqbal, the Supreme Court established a two-step approach for assessing the sufficiency of a complaint in the context of a Rule 12(b)(6) motion. First, the Court should identify and disregard conclusory allegations, for they are “not entitled to the assumption of truth.” Iqbal, 556 U.S. at 664. Second, the Court “consider[s] the factual allegations in [the complaint] to determine if they plausibly suggest an entitlement to relief.” Id. “This standard ‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary claims or elements.'” Morgan v. Hubert, 335 F. App'x 466, 470 (5th Cir. 2009) ...

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