Third Millennium Materials, LLC v. Baker

THIRD MILLENNIUM MATERIALS, LLC, et al., Plaintiffs, v. WILBURN L. BAKER, et al., Defendants.

Case No. 2:19-cv-169

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO EASTERN DIVISION

March 20, 2020

JUDGE GEORGE C. SMITH

Magistrate Judge Deavers

OPINION AND ORDER

This matter is before the Court upon Defendants Aerospace Business Development Associates, Inc., Couch Management Enterprises, LLC, GDC Industries, LLC, Michael D. Braydich, David G. Couch, Harry Couch, Fawn E. Couch, and Louis A. Luedtke's Motion to Dismiss (Doc. 19); Defendants Munro & Associates, Inc. and Sandy Munro's Motion to Dismiss (Doc. 20); Defendant Roger Scherer's Motion to Dismiss (Doc. 27); and Defendant Wilburn Baker's Motions to Dismiss (Docs. 31 and 32). Plaintiff filed Responses (Docs. 33 and 34) and Defendants have replied (Docs. 37-41). The Motions are ripe for review. For the following reasons, Defendants' Motions to Dismiss are GRANTED.

I. BACKGROUND

Plaintiffs Third Millennium Materials, LLC ("TMM") and Third Millennium Materials Management, LLC ("TMMM") (collectively, "Plaintiffs" or "Third Millennium") are both Ohio limited liability companies with their principal place of business at 4677 Winterset Drive, Columbus, Ohio 43220. TMMM was organized as an Ohio limited liability company on March 7, 2005, with two initial members, Jason Shugart and Roger Scherer¹, each of whom held 50% of the Membership interests and each of whom were the initial Managers, each with 50% voting interests. (Id. ¶ 38).

TMM was organized as an Ohio limited liability company on December 27, 2004, to research and commercialize the technology of covetics.² On January 27, 2007, the Members of TMM adopted and executed the Third Millennium Operating Agreement. (Doc. 10, Am. Compl. ¶ 31; Operating Agreement attached as Ex. A to Doc. 1). The Third Millennium Operating Agreement imposes noncompetition, non-use and nondisclosure obligations upon each Member (Roger Scherer, Louis Luedtke, Harry Couch, Michael Braydich and CME), including section, 7.6 Company Property, section 8.2, Non-Use and Non-Disclosure of Confidential Information, Section 8.6, Non-Competition, Section 8.7, Reasonableness of Restrictions and 8.6, Enforceability of Restrictions. (Id. ¶¶ 34-35). In 2009, Louis Luedtke was hired as CEO and Harry Couch as Chief Science Office of Third Millennium. Third Millennium was renting a building from Couch Management Enterprise, an LLC owned by David Couch. Third Millennium began working with Munro & Associates in 2010, and Aerospace Business Development Associates, Inc. in 2013.

Third Millennium developed and owns intellectual property related to the process to create covetics as well as the unique compositions of matter described by the term covetics, including but not limited to several composition of matter Patents issued by the United States Patent and Trademark Office and a comprehensive array of International Patents relating to the new, novel compositions of matter, unique chemical bonds and resulting properties of covetic materials, aswell as pending patents, trademarks, copyrights, trade secrets and confidential information (collectively referred to as "Third Millennium's Intellectual Property"). (Doc. 10, Am. Compl. ¶ 41).

Seven of the Defendants are former Third Millennium executives and consultants subject to ongoing noncompetition, non-use and nondisclosure obligations.³ Five of the Defendants are Third Millennium Members, whose Operating Agreement imposes comprehensive and continuing noncompetition, non-use and nondisclosure obligations, binding upon them and four of the other Defendants as Affiliates (as defined in the Third Millennium Operating Agreement) of these Third Millennium Members. The remaining Defendant, Wilburn Baker, is an Ohio attorney for several of the Defendants and their enterprise, GDCI.

Plaintiffs allege that all of the Defendants "have engaged in a multi-year, ongoing, coordinated, and arranged conspiracy to keep their activities and intentions secret; to stonewall all inquiries from the TMMM Managers; to refuse to cooperate in the investigation conducted by oneof the TMMM Managers; and to refuse to provide the TMMM Managers with instruments purporting to obligate TMM and benefitting the enterprise, GDCI, including a Confidential Settlement Agreement and Release and IP License Agreement." (Doc. 10, Am. Compl. ¶ 25).

In Count I of the Amended Complaint, Plaintiffs allege that Defendants Baker, Luedtke, Harry Couch, Braydich, Munro, Roger Scherer, CME, David and Fawn Couch (collectively, the "Defendants" or "RICO Defendants"), each associated with GDCI, a RICO Enterprise pursuant to 18 U.S.C. § 1961(4), whose activities affect interstate commerce, violated § 1962(c) by committing the following predicate acts:

at least two instances of Interstate Transportation of Stolen Property, in violation of 18 U.S.C. 2314; at least one instance of Sale or Receipt of Stolen Goods which have crossed State Lines in violation of 18 U.S 2315; Use of the Interstate Wires to Execute a Scheme or Artifice to Defraud TMM on January 21, 2015, February 3, 2015, March 2, 2015, March 6, 2015 and March 10, 2015, all in violation of 18 U.S.C. 1343, each constituting Wire Fraud; at least four instances of Extortion of TMM and its members in violation of the Hobbs Act, 18 U.S.C. 1952(b)(2); at least eight instances of extortion of TMM and its members in violation of Ohio Revised Code sections 2905.(A)(4) and/or 2905.11(A)(5); at least four instances of Using the Interstate Wires to Execute a Scheme to Defraud the US Department of Energy, the US Naval Academy, Emerson Climate Technologies and Strategic Marketing Innovations, and numerous other similar predicate acts and victims not alleged herein, all in violation of 18 U.S.C. section 1343; at least four instances of Use of the US Mail to Execute a Scheme or Artifice to Defraud, in violation of 18 U.S.C. 1343; and numerous and continuing instances of possessing, utilizing, misappropriating or communicating the trade secrets of TMM after May 11, 2016, constituting multiple and continuing violations of 18 U.S.C. 1832, Theft or Misappropriation of Trade Secrets.

(Doc. 10, Am. Compl. ¶ 114).

Plaintiffs assert that the RICO Defendants engaged in three schemes: 1) stole Plaintiff's covetic inventory and transferred it across state lines; 2) fraudulently obtained Plaintiff's laboratory, manufacturing equipment, covetic inventory and the exclusive rights to all of its IP; and 3) fraudulently marketed Plaintiffs' IP to the US Government and customers and potential customers of the enterprise to obtain research grants and licensing fees for their enterprise. With respect to the first scheme, Plaintiffs describe:

On February 13, 2015, GDCI contracted in writing to transport 20 pounds of aluminum covetic belonging to TMM to Freeport McMoRan in Elizabeth NJ for $7,200, with instructions to extrude such aluminum covetic materials into wire. As a result of this transaction, the aluminum covetic material belonging to TMM, which had a value of at least $5,000, crossed a state line after having been stolen, unlawfully converted or taken, with CME, Baker, Luedtke, Harry Couch, Braydich, Munro, and David and Fawn Couch knowing the same to have been stolen, unlawfully converted or taken by GDCI, in violation of 18 U.S.C. section 2314, Interstate Transportation of Stolen Property.

(Doc. 10, Am. Compl. ¶ 63).

On or about March 3, 2015, was the scheduled date of delivery by Freeport McMoRan of the stolen twenty pounds of TMM Aluminum Covetics to Munro Associates in Michigan. Munro and Munro Associates received and possessed these goods, wares or merchandise with a value in excess of $5,000 belonging to TMM which crossed a state line after having been stolen, unlawfully converted or taken, with Munro knowing the same to have been stolen, unlawfully converted or taken, in violation of 18 U.S.C. section 2315, Receipt of Stolen Goods.

(Doc. 10, Am. Compl. ¶ 70).

With respect to the third scheme, Plaintiffs allege:

Luedtke, acting on behalf of the Enterprise as either the "CEO" or "Managing Partner" of GDCI, sent at least 4 interstate email communications between May of 2015 and June 30 of 2016 in which he knowingly falsely stated that GDCI had the exclusive rights to the TMM intellectual property and that GDCI desired to work with the recipients on potential covetic projects utilizing such intellectual property. Specifically, Defendant Luedtke, who was located in Dayton, Ohio sent such emails to: (i) David Forrest of the U.S. Department of Energy on May 12, 2015; (ii) Carrie Davis of the U.S. Naval Academy on August 17, 2015; (iii) Claudia Andre de Silva of Emerson Climate Technologies on March 29, 2016; and Drew Rosenberg of Strategic Marketing Innovations on June 30, 2016. Each of the recipients of these emails was located outside of the State of Ohio. Each of these email communications was knowingly sent by Defendant Luedtke with the specific intent to execute a scheme to defraud the recipient into believing that GDCI had the exclusive rights to TMM's intellectual property, including TMM's trade secrets, with the specific intent to obtain money or property from the recipient based upon the knowingly false representation that GDCI had the exclusive rights to TMM's Intellectual Property, including TMM's trade secrets.

(Doc. 10, Am. Compl. ¶ 90).

Plaintiffs allege that the aforementioned schemes constitute the predicate acts of racketeering, violating, inter alia, 18 U.S.C. §§ 1341, 1343, 2314, 2315 and 1832; as well asextortion under Ohio law. Plaintiffs specifically reference email communications among and between Defendants to support their allegations. Defendants do not dispute that they formed GDCI on February 6, 2015, after resigning from Third Millennium. Defendants then brought suit against Plaintiffs in Montgomery County Court of Common Pleas for breach of contract, fraud, unjust enrichment, and unpaid compensation. The case...