Resource Cen. for Ind. Living v. Ability Resources, 07-2217-JAR.

534 F.Supp.2d 1204

RESOURCE CENTER FOR INDEPENDENT LIVING, INC., Plaintiff, v. ABILITY RESOURCES, INC., et al., Defendants.

No. 07-2217-JAR.

United States District Court, D. Kansas.

February 13, 2008.

COPYRIGHT MATERIAL OMITTED

Brent N. Coverdale, Paul D. Seyferth, Seyferth Knittig & Blumenthal LLC, Kansas City, MO, for Plaintiff.

Chadwick J. Taylor, Law Office of Chadwick J. Taylor, John T. Hiatt, Kevin L. Diehl, Ralston, Pope & Diehl LLC, Topeka, KS, for Defendants.

MEMORANDUM AND ORDER

JULIE A. ROBINSON, District Judge.

Plaintiff Resource Center for Independent Living ("RCIL") brought suit against defendants, former employees of RCIL, alleging defendants conspired and committed tortious behavior while still in the employ of RCIL through their actions in forming Ability Resources, Inc. ("Ability Resources"), a company that would compete with RCIL in substantially, the same, field. This matter is before the Court on defendants' motion to dismiss plaintiff's claim under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted (Doc, 25). For the reasons explained in detail below, defendants' motion is denied.

I. Background

Plaintiffs complaint states that RCIL is an independent living center that provides a wide array of services to individuals with disabilities, families, and communities to enhance independence and to promote individual choice. RCIL works to enhance the capacity of persons with disabilities to the maximum extent possible to control their lives and live independently. RCIL determines whether consumers are eligible for various services and provides independent living counseling and targeted case management for individuals receiving those services. RCIL also serves as a payroll agent for self-directed attendant care services.

Defendant Ability Resources is a Kansas corporation. Defendant Mary Holloway is the former Executive Director and employee of RCIL. Defendants Michael Kirby, Joey Erdman, Mary J. Evans and Shirley Gieber are former Independent Living Counselors and employees of RCIL. Kirby also served as a Target Case Manager.

Plaintiffs complaint alleges six counts against defendants for: (1) unfair competition under the Lanham Act; (2) violations of the Computer Fraud and Abuse Act; (3) breach of the individual defendants' duty of loyalty (individual defendants only); (4) tortious interference with business expectancies or contractual relationships; (5) conversion; and (6) civil conspiracy. Defendants filed an answer on July 2, 2007, followed by the instant Motion to Dismiss filed September 28, 2007.

II. Motion to Dismiss

A. Timeliness of Motion

Defendants move to dismiss plaintiffs complaint pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. As noted above, defendants filed their Motion to Dismiss after filing their answer in this case. Technically, it is impermissible to file an answer and thereafter file a Rule 12(b)(6) motion to dismiss.¹ However, because Rule 12(h)(2) permits the court to consider "[a] defense of failure to state a claim upon which relief can be granted" within a Rule 12(c) motion for judgment on the pleadings,² the court may treat a Rule 12(b)(6) motion as if it had been submitted under Rule 12(c).³ The distinction between the two motions is purely formal, because the court must review a Rule 12(c) motion under the same standard that governs a Rule 12(b)(6) motion.⁴

In light of the above, the Court will treat defendants' post-answer Motion to Dismiss as if it had been styled a Rule 12(c) motion for judgment on the pleadings.

B. Standard

Rule 8

Fed.R.Civ.P. 8(a) states that in any pleading that sets forth a claim for relief, a party must provide "(1) a short and plain statement of the grounds upon which the court's jurisdiction depends ..., (2) a short and plain statement of the claim showing that the pleader is entitled to relief, and (3) a demand for judgment for the relief the pleader seeks."⁵ These requirements ensure that the complaint "give[s] the defendant fair notice of what the plaintiff s claim is and the grounds upon which it rests.'"⁶ The Supreme Court has noted that under the federal rules, liberal discovery procedures and summary judgment help "to define disputed facts and issues and to dispose of unmeritorious claims," while the "simplified notice pleading standard" merely represents the first step in a system "adopted to focus litigation on the merits of a claim."⁷

In setting forth what they believe the Rule 8 pleading standard entails, defendants cite the recent Tenth Circuit decision in Nasious v. Two Unknown B.I.C.E. Agents, at Arapahoe County Justice Center.⁸ In that case, the district court dismissed a pro se inmate litigant's amended 63-page multiple defendant complaint because the plaintiff failed to satisfy the Rule 8 requirement "to provide a clear and concise statement of each claim that identifies the constitutional right that allegedly has been violated and that includes specific facts alleging how the [d]efendant or [d]efendants linked to each claim personally participated in the asserted violation."⁹ Because the dismissal was with prejudice, the Tenth Circuit applied the so-called Ehrenhaus factors to determine whether such a sanction was warranted.¹⁰ In applying these factors, the court stated that the culpability of a pro se litigant for filing a "still-prolix amended complaint depends in great measure on the usefulness of the notice he or she received from the court about what is (and is not) expected in an initial pleading"¹¹ In that case, the court held that the district court merely put the plaintiff on notice that he needed to present a short and plain amended complaint.¹² Instead, the court held that the district court in that case could have included some "modest explanation, aimed at the lay person; describing what judges and lawyers mean when speaking of a short and plain statement consistent with Rule 8."¹³

For example, a district court might helpfully advise a pro se litigant that, to state a claim in federal court, a complaint must explain what each defendant did to him or her; when the defendant did it; how the defendant's action harmed him or her; and, what specific legal right the plaintiff believes the defendant violated.¹⁴

While the above description is, "very basically put, the elements that enable the legal system to get weaving," it was not meant to be a legal standard applicable to a represented litigant, because counsel is expected to know the rules of pleading without personal notice or explanation by the court.¹⁵ Thus, the Court applies the traditional legal standard for Rule 8 as set forth above, rather than the simplified explanatory language for pro se plaintiffs quoted by defendants.¹⁶

Rule 12(b)(6) and (c)

In ruling on a motion to dismiss for failure to state a claim under Rule 12(b)(6), the court assumes as true all well pleaded facts in plaintiffs complaint and views them in a light most favorable to plaintiff.¹⁷ A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require detailed factual allegations, but the complaint must set forth the grounds of plaintiffs entitlement to relief through more than labels, conclusions and a formulaic recitation of the elements of a cause of action.¹⁸ "In other words, plaintiff must allege sufficient facts to state a claim that is plausible — rather than merely conceivable — on its face."¹⁹ The court makes all reasonable inferences in favor of plaintiff²⁰ The court need not accept as true those allegations that state only legal conclusions.²¹ Although plaintiff need not precisely state each element of its claims, it must plead minimal factual allegations on those material elements that must be proved.²²

III. Analysis

A. Lanham Act

Count 1 of plaintiffs complaint alleges that defendants' use of the RCIL marks is in violation of § 43(a) of the Lanham Act, codified at 15 U.S.C. § 1125(a). "Section 43(a) of the Lanham Act, prohibiting the use of false designations of origin, protects against service mark infringement even if the mark has not been federally registered."²³ To prevail in an action for unfair competition under § 43(a), "a plaintiff must establish that (1) her mark is protectable, and (2) the defendant's use of [an identical or similar] mark is likely to cause confusion among consumers."²⁴ The categorization of a mark as protectable is a factual question.²⁵

Defendants argue that plaintiff has failed to plead that, it has a protected mark or identified which marks, if any, defendants have infringed upon. While acknowledging that it must prove its marks are protectable in order to prevail, plaintiff contends that federal notice pleading does not require it to prove or allege in its complaint all facts necessary to so prevail.

Plaintiffs complaint alleges that it invested time and resources in creating and maintaining the goodwill associated with its trade name and trademarks, "RCIL" and "Resource Center for Independent Living;" that defendants utilized RCIL's name, marks and goodwill to the confusion of consumers; that confusion over defendant's use of RCIL's marks is likely; and that RCIL is being damaged by defendants' actions. Plaintiffs complaint does not make reference to a specific protectable mark, other than their trade name, RCIL, nor does it set forth facts alleging whether RCIL is a protected mark. Nevertheless, it would be improper at this time to dismiss plaintiffs claim because the complaint alleges that defendants created confusion concerning RCIL and Ability Resources by making claims to consumers that RCIL was changing its name to Ability Resources and that Ability Resources is a "sister" organization to RCIL. Liberally construing the complaint in favor of plaintiff, the Court finds that the foregoing is sufficient to put defendants on notice of the nature of the claims asserted and, if proved, could support a plausible claim of...