Leapers, Inc. v. Trarms, Inc.

203 F.Supp.3d 969

LEAPERS, INC., Plaintiff,

v.TRARMS, INC. doing business as Presma, Inc., Chuanwen Shi, Defendants.

1:15-cv-01539-SEB-MJD

United States District Court, S.D. Indiana, Indianapolis Division.

Signed August 26, 2016

Anne L. Cowgur, Jonathan G. Polak, M. Zachary Gordon, Tracy Nicole Betz, Taft Stettinius & Hollister LLP, Jeremiah A. Pastrick, Continental Enterprises, Indianapolis, IN, for Plaintiff.

Amie Peele Carter, Daniel E. Pulliam, Louis T. Perry, Faegre Baker Daniels LLP, Indianapolis, IN, Jeffrey I. Pitegoff, Morris Sullivan Lemkul & Pitegoff, Las Vegas, NV, for Defendants.

ORDER DENYING DEFENDANTS' MOTION TO DISMISS

SARAH EVANS BARKER, JUDGE

This matter comes before the Court on Defendants Trarms, Inc.'s and Chuanwen Shi's ("Shi") Motion to Dismiss Plaintiff Leapers, Inc.'s ("Leapers") Amended Complaint [Dkt. No. 34.], filed on January 15, 2016, pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, we DENY Defendants' motion.

Factual and Procedural Background

Leapers is a firearms and outdoor sporting business that sells shooting, hunting, and outdoor gear, including firearm scopes. Am. Compl. at 3. Chuanwen Shi was the former General Manager of Leapers's scope factory before his employment was terminated by Leapers. Id. at 4. Following his termination, Shi became President of Trarms—a California-based corporation that, in part, imports and distributes scopes. Id. Plaintiff alleges that Shi has utilized his experience acquired at Leapers's former factory, his knowledge of Leapers's scopes, and "certain tools associated" with the scopes to enable Trarms to manufacture a line of scopes that were "virtually exact copies" of Leapers's scopes, which were shipped to and sold in Indiana. Id. at 4–5.

Leapers has asserted property rights in the "Markings" affixed to its scopes and alleges that Defendants willingly and intentionally used those "Markings" on their own line of scopes without Leapers's permission. Id. at 3–4. Leapers further alleges that by using the Markings, Defendants are attempting to profit from Leapers's "immediate recognition" and the "substantial goodwill" developed by Leapers with its business and its customers. Id.

On December 31, 2015, Leapers filed an Amended Complaint under the Indiana Crime Victim's Relief Act (ICVRA) alleging that Defendants have violated Leapers's property rights under Indiana criminal law and have caused Leapers to suffer a pecuniary loss as a result. Id. at 1; see Ind. Code § 34–24–3–1. Specifically, Leapers alleges that Defendants committed: Theft and Conversion, in violation of Indiana Code §§ 35–43–4–2, 3; Forgery and Counterfeiting, in violation of Indiana Code § 35–43–5–2 ; and Criminal Mischief, in violation of Indiana Code § 35–43–1–2. Am. Compl. at ¶¶ 5, 7, 8, 10.

On January 15, 2016, Defendants filed a Motion to Dismiss Plaintiff's Amended Complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6). [Dkt. No. 34.] The motion was fully briefed as of February 11, 2016 and is now ripe for disposition by the Court.

Standard of Review

Defendants' 12(b)(6) Motion to Dismiss requires the Court to accept as true all well-pled factual allegations in the Amended Complaint and draw all ensuing inferences in favor of the non-movant. Lake v. Neal , 585 F.3d 1059, 1060 (7th Cir.2009). Nevertheless, the Amended Complaint must "give the defendant fair notice of what the... claim is and the grounds upon which it rests," and its "[f]actual allegations [must] raise a right to relief above the speculative level." Pisciotta v. Old Nat'l Bancorp , 499 F.3d 629, 633 (7th Cir.2007) (citations omitted). The Amended Complaint must therefore include "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ; see Fed. R. Civ. P. 8(a)(2). A facially plausible complaint is one which permits "the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

Discussion

Leapers brought this action against Defendants under the Indiana Crime Victim's Relief Act ("ICVRA"), Ind. Code § 34–24–3–1. The ICVRA provides relief to persons who suffer a pecuniary loss based on violation(s) of the provisions of Article 43 of Indiana's Criminal Code. A criminal conviction, however, is not necessary to maintain an action under the ICVRA; rather, the plaintiff need only prove a violation of the relevant criminal prohibition by a preponderance of evidence in order to pursue civil penalties against the defendant under the act. See Meridian Financial Advisors, Ltd. v. Pence, 763 F.Supp.2d 1046, 1060 (S.D.Ind.2011).

Here, Leapers alleged that Defendants violated five provisions of the Indiana Code: §§ 35–43–4–2 (Theft), 35–43–4–3 (Conversion), 35-43-5-2(a) (Counterfeiting), 35-43-5-2(b) (Forgery), and 35-43-1-1 (Criminal Mischief). Defendants argued that the Amended Complaint fails to state a legally cognizable claim. Dkt. 34. Defendants' argument is three-fold: First, that the underlying criminal statutes are inapplicable to the facts of this case; second, that if the statutes were applicable, then they would be unconstitutionally void-for-vagueness; finally, that this case is duplicative of another ongoing litigation pending in the Eastern District of Michigan. We address each of these contentions in turn below.

I. Applicability of the Underlying Statutes

Defendants argue that applying the underlying criminal statutes to the facts alleged by Leapers would result in inappropriately "novel and expansive" interpretations of Indiana law. More precisely, Defendants argue: (a) that the alleged "Markings" do not constitute "written instruments" under the Counterfeiting and Forgery statutes; (b) that Defendants' alleged actions do not constitute "exertion of control" under the Theft and Conversion statutes; and (c) that the Complaint does not include allegations of maliciousness or wanton cruelty as required by the Criminal Mischief statute. Defs.' Br. at 10–14.

A. Forgery and Counterfeiting

"A person who, with intent to defraud, makes or utters a written instrument in such a manner that it purports to have been made" by another person, commits forgery under Ind. Code § 35–43–5–2(b). Counterfeiting is a lesser-included offense to forgery, requiring only a knowing or intentional mens rea as opposed to the intent to defraud. See Ind. Code § 35–43–5–2(a). For the purposes of each statute, a "written instrument" is defined as "a paper, a document, or other instrument containing written matter and includes money, coins, tokens, stamps, seals, credit cards, badges, trademarks, medals, retail sales receipts, labels or markings (including universal product code (UPC) or another product identification code), or other objects or symbols of value, right, privilege, or identification." Ind. Code § 35–43–5–1(t).

Here, Leapers alleges that all advertisements, promotional materials, packaging and products (i.e., the scopes themselves) containing "unique symbols of identification, value, right and/or privilege that Leapers uses on its rifle scope products" (the "Markings") are written instruments under the law, and that Defendants unlawfully made, uttered, and possessed these instruments in such a manner that they purported to have been made by Leapers. Am. Compl. at ¶ 10, 44.

Defendants argue that because "Plaintiff does not allege [that] Defendants appropriated a brand name or any federally registered property right," the Complaint fails to state a claim under the statutes. Defs. Br. at 11. In other words, Defendants contend that the definition of written instrument under Indiana law is limited to brand names and federally registered trademarks and therefore does not include the alleged "Markings" or a "product's unregistered design." Id. We find Defendants' argument unpersuasive.

No such restriction exists in the Code itself or elsewhere in the law, so far as we could determine. Indeed, the case upon which Defendants rely for this proposition— Heckler & Koch, Inc. v. German Sport Guns GmbH , 2009 WL 3200587 (S.D.Ind. Sept. 25, 2009) (Lawrence, J.)—was explicitly repudiated by the Indiana Supreme Court in An – Hung Yao v. State , which expressly held that an airsoft rifle was a written instrument. 975 N.E.2d 1273, 1279 (Ind.2012). Defendants maintain that Yao supports their position in that a product's design may qualify as a "written instrument" only "when it is backed by a federal trade tress or trade mark registration." Defs. Br. at 11. This clearly misstates the Court's ruling in Yao , however, which provides:

[T]he definition [of a written instrument] includes "other objects or symbols of value, right, or identification." It seems clear enough to us that a handgun or rifle—just as an unsigned Monet painting, Frederick Remington sculpture, or Tiffany vase—could be subject to counterfeiting. To require actual writing or markings on a replica in order to bring it within the reach of the counterfeiting statutes would defeat the purpose of the statute and eliminate a very wide range of items.

Yao, 975 N.E.2d at 1279. Notably absent from this definition is any requirement that the alleged instrument be federally registered. A subsequent passage in the opinion is particularly illuminating with regard to this issue. In discussing whether it is possible to exert control over trademarks, markings, and symbols (an issue we discuss below), the Yao Court stated:

At the heart of and woven throughout the Defendants' argument is the insistence that this case should be resolved under civil trademark infringement law, not criminal law... But whether a theft prosecution is "the ‘wrong tool for the job’ when it comes to defining intellectual property interests," is not our decision to make. Rather, our job is to apply the Indiana criminal statutes as drafted by the Legislature.

Yao , 975 N.E.2d at 1282....