HD Supply Constr. Supply, Ltd. v. Mowers

HD SUPPLY CONSTRUCTION SUPPLY, LTD., Plaintiff, v. REEF R. MOWERS and WASHOUTPAN.COM, LLC, Defendants.

Civil Action No. 1:19-cv-02750-SDG

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

September 28, 2020

OPINION AND ORDER

This matter is before the Court on Defendants' Motion to Dismiss the First Amended Complaint [ECF 28]; Plaintiff's Motion to Hold in Abeyance Ruling on Defendants' Motion to Dismiss [ECF 60]; Plaintiff's Motion for Leave to File Limited Supplemental Briefing in Support of its Response in Opposition to Defendants' Motion to Dismiss [ECF 64]; and, Plaintiff's Motion for Fed. R. Civ. P. 11 Sanctions and Attorneys' Fees [ECF 67].

For the reasons stated below, the Court DENIES Defendants' motion to dismiss and DENIES Defendants' request to file a second motion to dismiss under Fed. R. Civ. P. 12(b)(6). Plaintiff's motion to file a supplemental brief is GRANTED, its motion to hold this ruling in abeyance is DENIED AS MOOT, and its motion for sanctions under Fed. R. Civ. P. 11 is DENIED.

I. Background

a. Facts

The following facts are accepted as true for purposes of this motion.¹ Plaintiff HD Supply Construction Supply, Ltd. (HDS) is a limited partnership organized under the laws of Florida with its principal place of business in Atlanta, Georgia.² HDS's parent company is HD Supply, Inc., which is incorporated in Delaware with its principle place of business in Georgia.³ None of HDS's general or limited partners are residents of California.⁴ Defendant Mowers is a resident of San Diego, California.⁵ Defendant Washoutpan.com, LLC (WP) is organized under and has its principal place of business in California.⁶ Mowers is WP's owner andsole controlling member.⁷

HDS is an industrial products distributor that provides a broad range of products and services to professional customers.⁸ WP imports pop-up containment products and industrial washout pans used to receive and contain liquid concrete waste.⁹

From approximately October 2012 through December 2013, Defendants solicited HDS to sell WP's pans to HDS's customers.¹⁰ In November 2013, Defendants traveled to Georgia to meet with HDS employees.¹¹ In January 2014, the parties entered into a Supplier Buying Agreement (SBA).¹² Under the SBA, Defendants delivered WP's products to HDS in Georgia for HDS to sell.¹³ From 2016 to 2018, Defendants derived a total of $89,272.38 in revenue selling their products through HDS.¹⁴ During the course of the SBA, Defendants traveled toGeorgia three times to visit HDS and attend a HDS supplier summit.¹⁵ Defendants also frequently communicated with HDS employees via email and telephone.¹⁶

On February 7, 2018, the parties terminated the SBA and entered into a Confidential Settlement Agreement and Release (Settlement Agreement).¹⁷ In 2018, after the SBA was terminated, HDS began purchasing pans for resale from a different vendor.¹⁸ Since the termination of the SBA, Defendants have continued to make their products available to Georgia residents through at least one e-commerce site, and through third-party retailers that sell to Georgia residents.¹⁹

Around October 2018, Mowers started posting allegedly false and disparaging information about HDS and its products on LinkedIn and WP's website.²⁰ Mowers's posts claimed that HDS was falsely marketing and selling WP's pans as its own.²¹ Mowers stated that these allegedly counterfeit pans were not certified by the Occupational Safety and Health Administration (OSHA) andwere likely to injure the buyer.²² He also asserted that HDS was committing "Blatant. Criminal. Felony Fraud," tax evasion, and RICO violations.²³ Mowers sent text messages and emails to HDS employees asserting the same and that he would "do everything in my power to put you in jail."²⁴

On November 14, 2018, Mowers visited HDS's website and purchased two pans with an American Express credit card.²⁵ After receiving the pans, Mowers contacted American Express, claimed the pans were counterfeit, and disputed the charges as fraudulent.²⁶ Defendants then filed a report with American Express to review and suspend merchant processing for HDS.²⁷ HDS had to pay freight and pick-up costs due to the disputed transactions.²⁸

On November 30, 2018, HDS's counsel sent Mowers a cease and desist letter.²⁹ However, Mowers did not stop posting disparaging claims about HDS.HDS alleges that between January and April 2019, Mowers appeared at the construction sites of one of HDS's customers, Adolfson & Peterson Construction (APC), three different times.³⁰ Mowers allegedly impersonated an OSHA inspector while at the sites and made slanderous and defamatory statements about HDS to APC's employees.³¹ As a result, APC contacted HDS and requested a return and refund of HDS's products.³² HDS also alleges that Mowers appeared at the construction site of The Conco Companies (Conco), another one of HDS's customers, and made the same allegedly slanderous and defamatory statements about HDS, negatively affecting HDS's relationship with Conco.³³

b. Procedural History

HDS filed this action on June 17, 2019.³⁴ Defendants moved to dismiss the original Complaint on August 19, 2019.³⁵ In support of that motion, Defendantsfiled a request for judicial notice regarding certain pieces of evidence, including filings from a related action in the Central District of California.³⁶

On September 9, 2019, HDS filed its First Amended Complaint (FAC).³⁷ The FAC alleges the following causes of action against both Defendants: false advertising and unfair competition under the Lanham Act, 15 U.S.C. § 1125(a)(1) (Count I); defamation/libel per quod and defamation/libel per se (Counts II and III); slander per quod and slander per se (Counts IV and V); tortious interference with business relations (Count VI); deceptive trade practices under O.C.G.A. § 10-1-372 (Count VII); punitive damages (Count X); and, attorneys' fees (Count XI).³⁸ It also asserts federal and state RICO claims against Mowers (Counts VIII and IX).³⁹

On October 7, 2019, Defendants filed a Motion to Dismiss the FAC based (among other things) on an alleged lack of personal jurisdiction and impropervenue.⁴⁰ HDS filed its response in opposition on November 4.⁴¹ In support of its response, HDS filed a request for judicial notice of the Second Amended Complaint filed in the California action.⁴² On December 17, Defendants filed their reply brief and a supplemental declaration by Mowers.⁴³ Both parties have filed supplemental affidavits and declarations since the close of briefing.⁴⁴

II. HDS's Motions to Hold Ruling in Abeyance and to File Supplemental Brief

On May 11, 2020, HDS filed a Motion to Hold in Abeyance Ruling on Defendants' Motion to Dismiss.⁴⁵ The motion asked for a 30-day stay while HDS collected more information regarding Brienne Owens, whom it had uncovered during discovery in the pending California action.⁴⁶ The motion states that HDS had reason to believe Owens worked for Defendants while living in Georgia.⁴⁷ Defendants omitted any reference to Owens in their motion to dismiss in this caseand falsely represented that they had disclosed all of their contacts with Georgia.⁴⁸ HDS requested that the Court hold its ruling on the pending motion to dismiss in abeyance while it gathered additional information about Owens related to the personal jurisdiction inquiry. Defendants opposed the motion.⁴⁹

On June 5, HDS filed a Motion for Leave to File Limited Supplemental Briefing in Support of its Opposition to Defendants' Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue, based on the information it had discovered regarding Owens.⁵⁰ The supplemental briefing was provided as Exhibit 1 to HDS's memorandum in support of this motion.⁵¹ Defendants opposed the motion.⁵²

As explained in its motions, HDS was unaware of Owens until discovery in the California action.⁵³ Defendants oppose HDS's motions and argue that Owenshas no bearing on the current motion to dismiss; HDS's motions are untimely because it should have known about Owens earlier because she (under her maiden name Gamelier) had emailed HDS employees in 2018; and, in any event, the evidence is incomplete and misleading.⁵⁴ Defendants also claim that the omissions of Owens in the motion to dismiss and Mowers's declaration in support thereof were inadvertent.⁵⁵

The Court has reviewed HDS's motions and Defendants' objections thereto and finds that HDS has shown good cause for its late filing. The supplemental filing and motions by HDS were only necessary because Defendants failed to do their due diligence before representing a false account of their Georgia contacts to this Court in their motion to dismiss. HDS timely investigated and sought to supplement when it discovered Owens.

Further, contrary to Defendants' assertions, Owens is most certainly relevant to Defendants' motion to dismiss for lack of personal jurisdiction. HDS has provided a declaration from Owens and other evidence that show Owens worked as a WP Executive Director for a period of three to four months in 2018.⁵⁶Owens asserts that she was hired to assist Mowers with organization, customer communication, and sales.⁵⁷ As part of her sales role, Owens states she was to "sell WP products over the phone and by e-mail, and go out in person and sell WP products to construction companies in Georgia since I was located in Georgia."⁵⁸ Defendants admit that Owens worked for WP intermittently from March through May 2018.⁵⁹

Accordingly, the Court GRANTS HDS's motion to file supplemental briefing. HDS's motion to hold the Court's ruling on Defendants' motion to dismiss in abeyance is DENIED AS MOOT.

III. Motion to Dismiss

Defendants argue that the action should be dismissed because (1) this Court lacks personal jurisdiction over them; (2) the action violates the first-filed rule; (3) HDS is forum shopping; and, (4) some of HDS's claims are fatally defective.⁶⁰The Court first addresses the personal jurisdiction and venue challenges. Madara v. Hall, 916 F.2d...