Phyllis Schlafly Revocable Tr. v. Cori

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PHYLLIS SCHLAFLY REVOCABLE TRUST, et al., Plaintiffs, v. ANNE CORI, et al., Defendants.

No. 4:16-cv-01631-JAR

United States District Court, E.D. Missouri, Eastern Division

March 28, 2022

MEMORANDUM AND ORDER

JOHN A. ROSS, UNITED STATES DISTRICT JUDGE.

This matter is before the Court upon the parties' Phase I motions for summary judgment. (Doc. Nos. 194, 198, &amp 201). Phase I is limited to the following four issues: 1) Plaintiffs' ownership of certain intellectual property and their standing to pursue claims related to that intellectual property; 2) whether the Schlafly Database qualifies as a trade secret; 3) Defendants' ongoing use of Plaintiffs' alleged intellectual property for fundraising purposes; and 4) any alleged damages. The motions are fully briefed and ready for disposition. For the reasons set forth below, Plaintiffs' Motion for Partial Summary Judgment^[1] and Defendant Eagle Forum's Motion for Summary Judgment will be denied. Defendant Anne Cori's Motion for Summary Judgment will be granted in part and denied in part as set forth below.

I. Background

The background of this case is set out in detail in the Court's April 17, 2017 and February 7, 2021 Orders and incorporated by reference herein. (See Doc. Nos. 56 & 168). Briefly, this case is one of several involving a number of the late Phyllis Schlafly's organizations and two of her adult children. Phyllis Schlafly's daughter, Defendant Anne Cori controls Defendant Eagle Forum. Phyllis Schlafly's son, John Schlafly, is the trustee of Plaintiffs Phyllis Schlafly Revocable Trust (“PSRT”), Eagle Trust Fund (“ETF”) and Eagle Forum Education and Legal Defense Fund (“EFELDF”). The parties contest the ownership of several pieces of intellectual property: a database of conservative cause donors compiled by Phyllis Schlafly over the course of her life (the “Schlafly Database”), five wordmarks and trademarks, and Phyllis Schlafly's publicity rights.

Phyllis Schlafly executed a transfer of all her intellectual property rights, copyrights, moral rights, and trademark rights to PSRT via an assignment on August 31, 2016 (the “Assignment”). (Doc. No. 202-7). On that same day, Phyllis Schlafly also executed an amendment (the “Amendment”) to PSRT to insert “Clause Five: Disbursements After Death Of The Grantor.” (Eagle Forum's Statement of Uncontroverted Material Facts (Doc. No. 196 (“Eagle Forum's SUMF”) at ¶ 21). Subsection A of the Amendment states that, upon Phyllis Schlafly's death, PSRT shall give all of her “copyrights, moral rights, intellectual property rights, and trademark rights” to the Phyllis Schlafly Royalty Trust II (the “Royalty Trust”). Id. at ¶ 22. Phyllis Schlafly's will devises “all of the rest, residue, and remainder of my property, real and personal” to PSRT. (Doc. No. 202-8 at 3). However, the estate has not distributed assets yet. (Eagle Forum's SUMF at ¶ 36). It remains open in St. Louis County Circuit Court, with claims pending. Id.

The motions implicate the following claims asserted by all Plaintiffs against both Defendants: violation of the Defend Trade Secrets Act (“DTSA”) (Count I), trademark infringement (Count III), violation of the Missouri Uniform Trade Secrets Act (“MUTSA”) (Count VI), infringement of publicity rights (Count VIII), and declaratory judgment (Count X). The motions also implicate PSRT and ETF's claim for trademark dilution against both Defendants (Count V).

II. Legal Standard

Summary judgment is appropriate when no genuine issue of material fact exists in the case and the movant is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The initial burden is placed on the moving party. City of Mt. Pleasant, Iowa v. Associated Elec. Co-op., Inc., 838 F.2d 268, 273 (8th Cir. 1988). If the record demonstrates that no genuine issue of fact is in dispute, the burden then shifts to the non-moving party, who must set forth affirmative evidence and specific facts showing a genuine dispute on that issue. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). In determining whether summary judgment is appropriate in a particular case, the evidence must be viewed in the light most favorable to the nonmoving party. Osborn v. E.F. Hutton & Co., Inc., 853 F.2d 616, 619 (8th Cir. 1988). When multiple parties move for summary judgment, the Court must analyze each motion individually and on its own merits. Wermager v. Cormorant Township Bd., 716 F.2d 1211, 1214 (8th Cir. 1983).

III. Defendant Cori's Motion for Summary Judgment

Defendant Anne Cori moves for partial summary judgment on Plaintiffs' trade secret claims (Counts I and IV), infringement of mark claims (Counts III, V, and IX), and the claim related to Phyllis Schlafly's publicity rights (Count VIII). Eagle Forum joins Cori in her motion. (Doc. No. 193). Defendants raise four arguments in favor of summary judgment. First, they claim EFELDF cannot maintain Counts I and IV for misappropriation of trade secrets because it is neither an owner nor licensee of the Schlafly Database. Second, they argue the infringement claims may only be maintained by the owner of the marks, and as such the claims should be dismissed to the extent Plaintiffs admit they are mere licensees. Third, Defendants argue ETF and EFELDF cannot maintain a claim for violation of a right to publicity because they are licensees. Finally, Defendants argue PSRT has failed to show it suffered damages based on the claims at issue, and as such it does not have standing.

Plaintiffs allege that either ETF or PSRT own the intellectual property at issue in this case, and the non-owner Plaintiffs are either licensees or should be treated as owners due to the organizations' close relationships. Plaintiffs further argue that PSRT has shown the value of its intellectual property has been damaged by Defendants' actions. Cori's motion will be granted in part and denied in part.

1. Trade Secret Claims

Defendants claim that EFELDF cannot maintain a claim for misappropriation pursuant to the DTSA (Count I) or MUTSA (Count IV) because it is not the owner or a licensee of the Schlafly Database, the trade secret at issue. Plaintiffs agree that EFELDF is neither the owner nor a direct user of the Schlafly Database; they claim PSRT owns the intellectual property rights and ETF exclusively possesses and uses the database. However, Plaintiffs nevertheless contend that EFELDF has rights associated with the Schlafly Database because it is “the organization most harmed by [Defendants'] wrongful action….” (Doc. No. 210 at 7). Plaintiffs further claim that all three entities “should be treated as an owner or licensee of the Database for standing purposes” because they function in harmony to advance EFELDF's ultimate goals. Id. They note EFELDF pays a portion of ETF's administrative costs, including the costs of maintaining the Schlafly Database. EFELDF does not have standing to sue for misappropriation under the DTSA because it is neither a licensee nor owner of the Schlafly Database. However, it does have standing to bring its claim under the MUTSA.

The language of the DTSA limits standing to only owners and licensees. The DTSA allows “[a]n owner of a trade secret” to bring a civil action. 18 U.S.C. § 1836(b)(1). Owner is defined as “the person or entity in whom or in which rightful legal or equitable title to, or license in, the trade secret is reposed.” 18 U.S.C. §1839(4). “To state a DTSA claim, a plaintiff must show that he is the owner or licensee of the alleged trade secret.” Lamont v. Krane, No. 5:18-CV-04327-EJD, 2019 WL 2113903, at *3 (N.D. Cal. May 14, 2019). See also Focused, Inc. v. Sourcing Group, LLC, No. 19-CV-11307-ADB, 2020 WL 1892062, at *4 (D. Mass. Apr. 16, 2020) (Ownership is an essential element of a DTSA claim); AlterG, Inc. v. Boost Treadmills LLC, 388 F.Supp.3d 1133, 1144 (N.D. Cal. 2019).

Plaintiffs urge this Court to treat EFELDF as an “owner” of the Schlafly Database pursuant to the DTSA because of its close relationship with ETF and PSRT; they claim EFELDF should fictionally be treated as the owner or licensee of the database due to the “harmony” it shares with the actual owner and licensee. (Doc. No. 210 at 7). The Court will not treat EFELDF as the owner of the Schlafly Database for the purpose of its DTSA claim. The language of the DTSA is clear-the cause of action is limited to owners and licensees exclusively. EFELDF is neither and it cannot maintain a cause of action pursuant to the DTSA.

Unlike the DTSA, the MUTSA contains no language expressly limiting claims to owners of a trade secret. Defendants urge the Court to conclude that, like the DTSA, the MUTSA limits its cause of action to owners and licensees. They point out this Court previously stated “[t]he elements of Plaintiffs' trade secret misappropriation claims under the DTSA and MUTSA are essentially the same.” (Doc. No. 27 at 4). However, the Court went on to list the similar elements: “(1) the existence of a protectable trade secret; (2) misappropriation of those trade secrets by the defendant; and (3) damages.” Id. Notably missing from this list is ownership of the secret.

Furthermore the Missouri Supreme Court does not list ownership among the elements required to bring an MUTSA claim. See, Cent. Tr. & Inv. Co. v. Signalpoint Asset Mgmt., LLC, 422 S.W.3d 312, 320 (Mo. 2014) (The elements of misappropriation pursuant to the MUTSA are: “(1) a trade secret exists, (2) the defendant misappropriated the trade secret, and (3) the plaintiff is entitled to either damages or injunctive relief.”). Because neither the language of the MUTSA nor decisions interpreting the statute limit the cause of action to owners and licensees, this Court will not create such a requirement. Defendants are...