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Copperhead Agricultural Products, LLC v. KB AG Corporation, LLC

United States District Court, D. South Dakota, Southern Division

December 20, 2019

COPPERHEAD AGRICULTURAL PRODUCTS, LLC, a South Dakota Limited Liability Company, and COPPERHEAD CONCAVE LLC, a South Dakota Limited Liability Company, Plaintiffs,
v.
KB AG CORPORATION, LLC, KIMBER MITCHELL, and BRIAN ROBERTSON, Defendants.

          MEMORDANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS

          LAWRENCE L. PIERSOL UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         On September 27, 2018, Plaintiffs Copperhead Agricultural Products, LLC, and Copperhead Concave LLC (hereinafter referred to as "Copperhead") filed a complaint against Defendants KB Ag Corporation, LLC, Kimber Mitchell, and Brian Robertson (collectively referred to as "Defendants") alleging federal claims of false designation of origin, false association, and cyberpiracy under the Section 43(a) of Lanham Act, 15 U.S.C. § 1125(a), (d), and state law claims of defamation/trade libel; tortious interference; unfair competition; and unjust enrichment, and deceptive trade practices. Doc. 1. This Court has federal question jurisdiction over Copperhead's Lanham Act claims and diversity jurisdiction over Copperhead's state law claims. Copperhead alleges that the amount in controversy is greater than $75, 000 that the parties are completely diverse. Doc. 1; see OnePoint Solutions, LLC v. Borchert, 486 F.3d 342, 346 (8th Cir. 2007) ("Complete diversity of citizenship exists where no defendant holds citizenship in the same state where any plaintiff holds citizenship.").

         On September 25, 2019, this Court issued its Memorandum Opinion and Order granting Defendants' Motion for Joinder (Doc. 42); denying Defendants' Motion to Dismiss for Lack of Jurisdiction (Doc. 14); denying Copperhead's motion to set hearing for preliminary injunctive relief (Doc. 23); denying Copperhead's motion for preliminary and declaratory relief (Doc. 26); and denying Defendants' motion to stay (Doc. 66). Doc. 78. Still pending before this Court is Defendants' Motion to Dismiss under Federal Rules of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted, Doc. 14, as well as Copperhead's Motion to Compel Discovery, Doc. 43, which has been referred to Magistrate Judge Veronica Duffy. For the following reasons, Defendants' Motion to Dismiss is granted in part and denied in part.

         STANDARD OF REVIEW

         In considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the factual allegations of a complaint are assumed true and construed in favor of the plaintiff, "even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely." See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007) (internal quotations omitted). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss 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." Id. at 555 (internal citations omitted). The complaint must allege facts, which, when taken as true, raise more than a speculative right to relief. Id.; Benton v. Merrill Lynch & Co., Inc., 524 F.3d 866, 870 (8th Cir. 2008). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but has not 'show[n]'-'that the pleader is entitled to relief.'" Ashcroft v. Iqbal 556 U.S. 662. 679 (2009) (citing Fed.R.Civ.P. 8(a)(2)). "Determining whether a complaint states a plausible claim for relief is a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. (citation omitted).

         When considering a motion to dismiss under Rule 12(b)(6), the court generally must ignore materials outside the pleadings, but it may consider '"some materials that are part of the public record or do not contradict the complaint,' as well as materials that are 'necessarily embraced by the pleadings.'" Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999) (citations omitted). In general, material embraced by the complaint include "documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleadings." Ashanti v. City of Goden Valley, 666 F.3d 1148, 1151 (8th Cir. 2012).

         BACKGROUND

         For purposes of this motion, the factual allegations of the complaint are assumed true and construed in favor of Copperhead, the plaintiffs in this matter. Don Estes is the patent holder of certain concave technologies that have previously been affiliated with his name, and the patents cover certain concave products that attach to farm machinery such as combines and are used to secure a more efficient harvesting process. Doc. 1, ¶ 10.

         In July 2018, Copperhead Concave entered into two agreements with Don Estes, the Exclusive Distribution Agreement and Exclusive License Agreement (collectively referred to as the "Exclusive License and Distribution Agreement"). Doc. 1, ¶ 12. Pursuant to the Exclusive License Agreement, Don Estes granted Copperhead Concave the exclusive right to "make, have made, use, sell, offer for sale, distribute, develop, and create derivative works, improvements, and derivations" from and to the technology any "licensed products". Docs. 20-4; 15-4. "Licensed product" is defined in the Exclusive License Agreement as "any product covered by or produced using information, know how, or concepts contained within or based upon" the patents owned by Don Estes and includes "further development of the licensed product, any packaging, and any products previously sold by or on behalf of the Seller utilizing the information or concepts contained directly or indirectly within [Don Estes's patents]." Docs. 20-4; 15-4. In the Exclusive License Agreement, Don Estes also granted Copperhead Concave the exclusive right and license to use the "licensed marks" in connection with "any making, use, sale, offer for sale, and distribution of any licensed products." Docs. 20-4; 15-4. Licensed marks is defined as "any of the marks of [licensor, Don Estes] under which [Don Estes] offered or sold any [licensed product] prior to the [e]ffective [d]ate" of the License Agreement. Docs. 20-4; 15-4. The Exclusive Distribution Agreement grants Copperhead "the exclusive right and license to use the product marks," defined as "the marks 'RPR Conclave (sic) Patents', including any marks previously used relative to the product except those marks over which [Don] Estes has no control." Docs. 20-5; 15-3.

         Copperhead markets and sells products pursuant to the Exclusive License and Distribution Agreement. Doc. 1, ¶ 17. The products are marketed as the Copperhead Concave System and include products that are correlate with Case International Holland combines and John Deere combines. Doc. 1, ¶ 17. On its website, Copperhead describes the Copperhead Concave System as follows: "Copperhead Concave Systems is proud to manufacture the original RPR Combine Concave System that was designed by Donnie Estes from Frankfurt Indiana. His original design includes a notched round bar, increased space between round bars and adjustable/removable cover plates." Doc. 1, ¶ 18. In addition to consideration paid to Don Estes for exclusive licensing and distribution rights, Copperhead has devoted resources to marketing and selling the Copperhead Concave System, including advertising online, attending trade shows, and directly engaging potential customers. Doc. 1, ¶ 19.

         In September 2017, defendants Mitchell and Robertson formed Defendant KB Ag Corp, LLC. Doc. 1, ¶ 20. Defendants market and sell a concave product under the label XPR Concave System and the XPR Threshing/Separating Concave System. Doc. 1, ¶ 21. Defendants market and sell products through various commercial channels, including through a website www.estesperformanceconcaves.com. Doc. 1, ¶ 22. In addition, Defendants market their products with the trade-name "Estes Performance Concaves" and their website and other marketing materials refer to Defendants' products as "Estes Concaves." Doc. 1, ¶ 23. Don Estes objects to the use of the "Estes" name by Defendants to market the XPR Concave System. Doc. 1, ¶ 28. Copperhead alleges that the use of the "Estes" name creates the false and misleading impression that its products are manufactured by, authorized by, or otherwise associated with Don Estes and contain, incorporate, or reflect the patents and product designs that are known to be associated with his name, work, and intellectual property. Doc. 1, ¶ 75.

         Copperhead attended the DakotaFest Farm Show in Mitchell, South Dakota, which featured agricultural events and activities on August 21-13, 2018. Doc. 1, ¶ 37. During the DakotaFest Farm Show, Defendants approached the Copperhead booth and allegedly "began loudly making defamatory statements about Copperhead, its product line, and the ownership group's affiliation with Don Estes." Doc. 1, ¶ 38. Kimber Mitchell made statements about Copperhead's concave products that Copperhead alleges were both false and disparaging, and could be heard and understood by individual attendees of DakotaFest in and around the Plaintiffs' booth. Doc. 1, ¶¶ 38, 40.

         DISCUSSION

         Pending before the Court is Defendants' Motion to Dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Therein, Defendants move to dismiss Copperhead's federal Lanham Act claims alleging false designation of origin/false association under 15 U.S.C. § 1125(a), Copperhead's cyberpiracy claim arising under § 1125(d), as well as Copperhead's state law claims alleging defamation/trade libel, tortious interference, unfair competition, unjust enrichment, and deceptive trade practices. The court will address, in turn, each of Copperhead's claims that are the subject of Defendants' motion to dismiss.

         A. Defamation/Trade Libel

         Defamation is either libel or slander. SDCL § 20-11-2. In South Dakota, libel is defined as "a false and unprivileged publication by writing, printing, picture, effigy, or other fixed representation to the eye which exposes any person to hatred, contempt, ridicule, or obloquy, or which causes him to be shunned or avoided, or which has a tendency to injure him in his occupation." SDCL § 20-11-3. Slander is defined under South Dakota law as "a false and unprivileged publication," which:

(1) Charges any person with crime, or with having been indicted, convicted, or punished for crime;
(2) Imputes to him the present existence of an infectious, contagious, or loathsome disease;
(3) Tends directly to injury him in respect to his office, profession, trade, or business, either by imputing to him general disqualification in those respects which the office or other occupation peculiarly requires, or by imputing something with reference to his office, profession, trade, or business that has a natural tendency to lessen its profit;
(4) Imputes to him impotence or want to chastity; or
(5) By natural consequence, causes actual damage.

SDCL § 20-11-4. A statement is actionable if it implies a false assertion of an objective fact. Paint Brush Corp. v. Parts Brush Div. v. Neu, 599 N.W.2d 384, 397 (S.D. 1999) (citing Milkovich v. Lorain Journal Co., 497 U.S. 1, 18-19 (1990)).

         In their complaint, Copperhead alleges that Defendants have made "false oral and written representations about Plaintiffs and their products" to third parties. Doc. 1, ¶ 44. Copperhead alleges that Defendants "impugned, disparaged, and defamed Plaintiffs' products in and through their marketing materials, website testimonials, and other business activities" and that Defendants' "defamatory statements and misrepresentations have occurred in other media as well." Doc. 1, ¶¶ 35, 36. In addition to these more general allegations, Copperhead describes an incident that took place at DakotaFest Farm Show in Mitchell, South Dakota, during which Kimber Mithcell allegedly "made statements about Plaintiffs' concave products that were both false and disparaging" and that such statements could be heard by individuals attendees of DakotaFest in and around the Plaintiffs' trade booth. Defendants allege further that "[t]he subject matter of the false representations would tend to injure Plaintiffs in their occupation."

         Because Copperhead fails to set forth the alleged defamatory statements made to third parties at DakotaFest, in marketing materials, website testimonials, and other business activities, the Court concludes that Copperhead fails to state a claim for defamation upon which relief may be granted. See Freeman v. Bechtel Contr. Co., 87 F.3d 1029, 1031 (8th Cir. 1996) (quoting Asay v. Hallmark Cards, Inc., 594 F.2d 692, 699 (8th Cir. 1979) ("[U]nless the complaints set forth the alleged defamatory statements and identify the persons to whom they were published, [the defendant] is unable 'to form responsive pleadings.'")); Holliday v. Great Ail. & Pacific Tea Co., 256 F.2d 297, 302 (8th Cir. 1958) ("In an action for slander or libel the words alleged to be defamatory must be pleaded and proved."); Hernandez v. Aver a Queen of Peace Hosp., 886 N.W.2d 338, 346 (S.D. 2016) (dismissing defamation claim based on allegations that hospital administrator wrote inaccurate, false, and malicious statements to people associated with the hospital because plaintiff failed to "identify an objectively false fact published by [the administrator].").

         To the extent that Copperhead alleges that the use by Defendants of the "Estes" name in their advertising is the basis of their defamation claim, [1] the Court finds that this too fails to state a claim upon which relief may be granted. The South Dakota Supreme Court has stated that in order to bring a defamation claim under South Dakota law, "it must appear that the alleged defamatory language refers to some ascertained or ascertainable person and that person must be the plaintiff." See Brodsky v. Journal Pub. Co.,42 N.W.2d 855, 857 (S.D. 1950) ("We recognize that an action may be maintained where the defamed person is not named, but is sufficiently identified by reference in the article to facts and circumstances from which others may understand that such person is referred to."); see also Restatement of the Law - Torts § 564, Applicability of Defamatory Communication to Plaintiff (updated Oct. 2019) ("It is necessary that the recipient of the defamatory communication understand it as intended to refer to the plaintiff."). The use of the name "Estes" by Defendants in KB Ag's website address and marketing materials to market its own products is not "a false assertion ...


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