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

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

September 9, 2019

STONECOAT OF TEXAS, LLC, STONECOAT GP, LLC, and STONECOAT LP Plaintiffs/Counter-Defendants
v.
PROCAL STONE DESIGN, LLC, PROCAL STONE DESIGN USA, LLC, PROCAL ENTERPRISES, LLC, JOHN PROFANCHIK, SR., JUSTIN KINSER, IRMA VILLARREAL, ALFREDO GONZALEZ, PHILIPPE MERGAUX, and PIERRE-LAURENT CHAMIELEC Defendants/Counter-Plaintiffs
v.
THE MORRISON FAMILY TRUST and KENNETH W. MORRISON, Individually and in his capacity as Trustee Third-Party Defendants

          Craven Magistrate Judge

          ORDER ADOPTING REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE REGARDING PLAINTIFFS', MORRISON'S, AND MFT'S MOTIONS FOR SUMMARY JUDGMENT

          AMOS L. MAZZANT UNITED STATES DISTRICT JUDGE.

         The above-entitled and numbered civil action was heretofore referred to United States Magistrate Judge Caroline M. Craven pursuant to 28 U.S.C. § 636. On July 25, 2019, the Magistrate Judge issued a Report and Recommendation, recommending Plaintiffs' Motion for Summary Judgment (Dkt. #131) and The Morrison Family Trust and Kenneth Morrison's Motion for Summary Judgment (Dkt. #194) be denied. Plaintiffs-counterdefendants StoneCoat of Texas, LLC (“SCOT”), StoneCoat GP, LLC (“StoneCoat GP”), and StoneCoat, LP (“StoneCoat LP”) (collectively, “Plaintiffs”) filed objections and supplemental objections to the Report and Recommendation. Additional counterdefendants, The Morrison Family Trust (“MFT”) and Kenneth W. Morrison (“Morrison”), individually and in his capacity as Trustee of the MFT, have also filed objections and supplemental objections. Defendants-counterplaintiffs filed responses to the objections and supplement thereto. The Court conducts a de novo review of the Magistrate Judge's findings and conclusions.

         BACKGROUND

         Plaintiffs-counterdefendants' claims

         In May 2017, Plaintiffs filed this case against defendants-counterplaintiffs ProCal Stone Design, LLC (“ProCal Stone Design”), John D. Profanchik, Sr. (“Profanchik”), Justin Kinser (“Kinser”), Irma Villarreal (“Villarreal”), Alfredo Gonzalez (“Gonzalez”), Philippe Mergaux (“Mergaux”), and Pierre-Laurent Chamielec (“Chamielec”). ProCal Stone Design, U.S. LLC (“ProCal USA”) and ProCal Enterprises, LLC (“ProCal Enterprises”) (together with ProCal Stone Design, “ProCal”) were later added as defendants. Plaintiffs allege the following claims against the ProCal entities, Profanchik, Kinser, Villarreal, Gonzalez, Mergaux, and Chamielec:[1] unfair competition; violations of the Lanham Act, 15 U.S.C. § 1125(a), and Defend Trade Secrets Act of 2016, Public Law 114-153 (May 11, 2016); common law and statutory misappropriation of trade secrets; breach of nondisclosure and noncompete contractual covenants; conversion; violation of the Texas Theft Liability Act; tortious interference with exiting contractual relationships; civil conspiracy; assisting and encouraging, concert of action by Defendants; joint enterprise by Defendants; and declaratory relief under the Declaratory Judgment Act, 28 U.S.C § 2201.

         Defendants-counterplaintiffs' claims

         In addition to their claims for attorneys' fees, ProCal Stone Design, Profanchik, Kinser, Villarreal, and Gonzalez (collectively, “Defendants”) have filed the following counterclaims against the StoneCoat entities, MFT, and Morrison: (1) Lanham Act Unfair Competition, 15 U.S.C. § 1125(a) (Dkt. #156, Count 1, ¶¶ 42-50); (2) Lanham Act False Advertising, 15 U.S.C. § 1125(a) (Dkt. #156, Count 2, ¶¶ 51-63); (3) Lanham Act Trademark Dilution by Blurring and Tarnishment, 15 U.S.C. § 1125(c) (Dkt. #156, Count 3, ¶¶ 64-74); (4) Declaratory Relief (Dkt. #156, Count 4, ¶¶ 75-76); (5) Civil Conspiracy (Dkt. #156, Count 5, ¶¶ 77-78); and (6) Aiding and Abetting/Concert of Action/Joint and Several Liability (Dkt. #156, Count 6, ¶¶ 79-83). Defendants further allege Morrison and MFT are responsible for the conduct of SCOT, StoneCoat LP, and StoneCoat GP (Dkt. #156, “Piercing the Corporate Veil, ” ¶ 102).

         Among other things, the amended counterclaim alleges “Morrison is personally responsible for sales and marketing initiatives and the financial results of StoneCoat's products and services and is personally involved in the decision-making as to all of StoneCoat's advertisements, marketing, promotions, and business decisions” (Dkt. #156, ¶ 16). According to the amended counterclaim, in approximately October 2016, ProCal received notice of a fake complaint submitted to the Better Business Bureau (“BBB”) of Houston. Id., ¶ 29. The amended counterclaim alleges ProCal had never had a Houston customer at the time of the complaint's submission, and the allegedly fake complaint was submitted using the name and e-mail address of a person from Wylie, Texas named Ellis Merworth who had been working at StoneCoat at the time. Id. The complaint stated as follows: “DO NOT RECOMMEND: This company is an imitator. They have NOT been in business 17 years as professed. Inferior product. Won't adhere, won't last.” Id.

         The amended counterclaim alleges that at the time of the complaint's submission, Merworth had just ceased negotiations with Morrison to invest in StoneCoat; Merworth says he did not submit the complaint to the Houston BBB; Morrison had access to Merworth's computer and e-mail account at the time and based upon information and belief, used Merworth's account to submit the false complaint to the BBB of Houston. Id.

         The amended counterclaim further alleges in approximately December 2016, ProCal received notice of a “fake, defamatory complaint published on RipoffReport.com regarding ProCal, among others, ” which was “purported to be submitted by a Don Henley of Plano, Texas who claims, among other things, that he was a ProCal customer, that ProCal had treated him poorly and did poor work and that he then became a StoneCoat customer, which he claims gave him a better service at a better price.” Id., ¶ 30. Specifically, on December 7, 2016, a “Don Henley” submitted on RipOffReport: “They ripped me off. Beware of this company and their claims of spray-on stone. They are scam artists.” Id. ProCal is not aware of any actual ProCal customer who could have submitted this allegedly fake review and does not know of a Don Henley who owns property in Plano, Texas. Id.

         According to the amended counterclaim, the person purporting to be “Don Henley” was “actually a Jason France, an individual involved in online business reputation marketing and is associated with a company called Blue Swan.” Id. The amended counterclaim alleges on information and belief, “Jason France was directed or hired by Morrison to post the Fake Reviews for the benefit of StoneCoat.” Id.

         On or about the same day, December 7, 2016, ProCal received notice of another allegedly “fake and false customer review submitted to the Better Business Bureau of Dallas, ” which the amended counterclaim alleges was “also submitted by Jason France purporting to be Don Henley from Allen, Texas.” Id., ¶ 31. On or about the same day, December 7, 2016, ProCal received notice of another allegedly “fake customer review submitted to Google business reviews, ” which the amended counterclaim alleges was also submitted by Jason France purporting to be Don Henley stating: “They ripped me off. Beware of this company and their claims of spray-on stone. They are scam artists.” Id., ¶ 32.

         The amended counterclaim alleges during approximately the same time period, “StoneCoat employees and/or representatives Kimberly Kay, Russell Gran and Eric Golden were submitting complimentary Google reviews about StoneCoat without disclosing their connection to StoneCoat.” Id., ¶ 34. According to the amended counterclaim:

StoneCoat's statements consist of false designations of origin, false or misleading descriptions of fact or false or misleading representations of fact about ProCal's business, goods or services (i.e., the fictitious customer accounts contained in the fake online reviews disparaging ProCal and lauding StoneCoat). The fake customer reviews were published online in order to disparage ProCal, laud StoneCoat and convince/influence customers to choose StoneCoat over ProCal. The intended audience - anyone on the Internet looking for reviews of spray-on stone providers - is thus an actual or potential customer of StoneCoat or ProCal. ProCal lost customers as a result of the fake reviews. Further, the express purpose of Ripoffreport.com complaints is to advise consumers of allegedly bad companies. (Ripoffreport.com's Logo is ‘By consumers, for consumers'). The fake reviews portrayed a customer experience with allegedly shoddy work by ProCal, which never happened, while exalting amazing work performed byStoneCoat, which never happened.

Id., ¶ 36.

         The amended counterclaim alleges the “fake ProCal Stone Facebook page and fake reviews [submitted at the direction of Morrison] contain false or misleading information about ProCal likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of ProCal with StoneCoat, and cause confusion, mistake, or deception as to the origin, sponsorship, or approval of ProCal's goods, services, or commercial activities. The fake ProCal Stone Facebook page and fake reviews also misrepresent the nature, characteristic, qualities or geographic origin of ProCal's goods, services or commercial activities.” Id., ¶ 37.

         Finally, the amended counterclaim alleges “the fake ProCal Stone Facebook page and fake reviews contain false or misleading information about StoneCoat because StoneCoat is not the inventor of the spray-on stone product, the person(s) submitting the Fake Reviews were not StoneCoat customer(s) and StoneCoat has never taken over work for anyone who was ever a ProCal customer.” Id., ¶ 38. The amended counterclaim further alleges “Morrison continues to falsely claim he invented the product and/or process and that StoneCoat has a patent and/or a patent pending, ” even though Morrison and StoneCoat had notice the application (signed by Morrison) was rejected by the Patent Office in November 2016. Id., ¶ 16.

         Movants' motions for summary Judgment

         In two separate motions, Plaintiffs SCOT, Stonecoat GP, and StoneCoat LP and additional counterdefendants MFT and Morrison, individually and in his capacity as Trustee (collectively “Movants”) move the Court to grant a summary judgment against the following counterclaims asserted against them by Defendants: (1) Lanham Act violations; (2) civil conspiracy, aiding and abetting, concert of action, and joint and several liability; (3) declaratory relief; and (4) “piercing the corporate veil.”[2]

         First, Movants assert Defendants' Lanham Act claims are barred by claim preclusion or traditional res judicata because they are the same claims and operative facts which were alleged by ProCal and Profanchik in the Defamation Cases against StoneCoat and Morrison - with whom Defendants allege in their counterclaim that MFT and Morrison aided and abetted, conspired and jointly participated with to violate the Lanham Act. In addition, Movants assert the Lanham Act claims were compulsory claims that were required to be pleaded and proved in the Collin County Litigation in which a final judgment was rendered in October 2017. Movants further assert there is no evidence of any violation of the Lanham Act.

         Second, because there is no affirmative claim that can be brought by Defendants pursuant to the Lanham Act or any other cause of action, Movants argue Defendants' counterclaims alleging civil conspiracy, aiding and abetting, concert of action, and joint and several liability are improperly asserted and should be dismissed as a matter of law.

         Third, Movants contend Defendants' request for declaratory relief fails as a matter of law because there is no evidence supporting declaratory relief and Defendants' claims are ...


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