American Management v. Solid Rock Wall Systems

• Decision Date: 11 February 2002
• Docket Number: No. CIV.3:00CV01582(HL).,CIV.3:00CV01582(HL).
• Citation: 186 F.Supp.2d 69
• Parties: AMERICAN MANAGEMENT AND ADMINISTRATION CORP., et al, Plaintiffs, v. SOLID ROCK WALL SYSTEMS, et al, Defendants.
• Court: U.S. District Court — District of Puerto Rico

186 F.Supp.2d 69

AMERICAN MANAGEMENT AND ADMINISTRATION CORP., et al, Plaintiffs, v. SOLID ROCK WALL SYSTEMS, et al, Defendants.

No. CIV.3:00CV01582(HL).

United States District Court, D. Puerto Rico.

February 11, 2002.

Jane A. Becker-Whitaker, Law Offices of Jane Becker, Whitaker, PSC, San Juan, for Unlimited Entertainment Group of San Juan, Inc., American Management and Administration Corp., plaintiffs.

Heriberto J. Burgos-Perez, Fiddler, Gonzalez & Rodriguez, San Juan, David B. Kuhlman, Ramseyer & Kuhlman, APLC, San Diego, CA, for Solid Rock Wall Systems, Solid Rock Wall Systems, Inc., Cortland A. Gariepy, Jane Doe 00CV1582, Conjugal Partnership Gariepy-Doe, Scott R. Hansen, Joan Roe 00CV1582, Conjugal Partnership Hansen-Roe, A to Z Insurance Companies, defendants.

OPINION AND ORDER

LAFFITTE, Chief Judge.

Before the Court is a motion to dismiss by Defendants Solid Rock Wall Systems ("SRWS"), Solid Rock Wall Systems, Inc., Cortland Gariepy, and Scott Hansen. SRWS is a California general partnership. Solid Rock Wall Systems, Inc. is a California corporation. Gariepy and Hansen are partners of SRWS. Plaintiffs American Management and Administration Corporation ("AMAC") and Unlimited Entertainment Group of San Juan, Inc. ("UE") are Puerto Rico corporations. They bring claims based on the Lanham Act,¹ Puerto Rico trademark law,² and the Puerto Rico Civil Code provisions on fraud and breach of contract.³

Defendants bring their motion pursuant to Federal Rule 12(b)(6). In ruling on a motion to dismiss for failure to state a claim, a court must accept as true all well-pled facts in the complaint and draw every reasonable inference in the plaintiff's favor. Berezin v. Regency Savings Bank, 234 F.3d 68, 70 (1st Cir.2000). In the present case, both parties have submitted documentary evidence in support of their briefs regarding the motion to dismiss.⁴ Ordinarily, a court may not consider such evidence unless the motion to dismiss has been converted to a motion for summary judgment. Fed.R.Civ.P. 12(b); Alternative Energy, Inc. v. St. Paul Fire and Marine Ins., 267 F.3d 30, 33 (1st Cir.2001). There are exceptions to this rule when the documents' authenticity is not in dispute, when the documents consist of official public records, when the documents are central to the plaintiff's claim, or when they are sufficiently referred to in the complaint. Watterson v. Page, 987 F.2d 1, 3 (1st Cir.1993). In the present case, Plaintiffs base their claim, in part, on alleged breaches of contract. Among the documents submitted by the parties are copies of the contracts. These documents are central to Plaintiffs' claims and their authenticity is not in dispute. Accordingly, the Court will consider them in ruling on the motion to dismiss. See Alternative Energy, 267 F.3d at 34; Beddall v. State Street Bank and Trust Co., 137 F.3d 12, 16-17 (1st Cir.1998). Additionally, the parties have submitted copies of pleadings from a California state court case and a Puerto Rico local court case, both of which involved AMAC and SRWS. The proceedings in that case are official public records, and the Court may consider them as well. See Henson v. CSC Credit Services, 29 F.3d 280, 284 (7th Cir.1994); Watterson, 987 F.2d at 4.

The allegations in the amended complaint, which the Court takes to be true, and the submitted documents mentioned above, portray the following history: In early 1997 AMAC entered into negotiations with Gariepy over the construction of an indoor rock climbing facility in Puerto Rico. As a result of these negotiations, AMAC entered into a contract with SRWS to build a climbing wall.⁵ AMAC also entered into an "Exclusive Operation and Construction Agreement" with SRWS. That agreement stated that AMAC intended to build a permanent wall-climbing facility; that it intended to use SRWS' products in these operations; and that once the facility was built, the parties would enter into a formal agreement which would include a provision on the royalties that SRWS would receive from the operation of the facility.⁶ As part of these agreements, SRWS granted AMAC the exclusive use of the name "SolidRock" for wall-climbing facilities and related products in Puerto Rico. Gariepy had told AMAC that he owned this name. Additionally, Gariepy offered to show AMAC his business records so that it could determine how financially viable a wall-climbing business would be in Puerto Rico. AMAC also entered into an agreement with SRWS whereby SRWS would provide AMAC with "operations support" for the operation of a pizza restaurant at the wall-climbing site in Puerto Rico.

The allegations in the amended complaint go on to describe how this business relationship broke down: First, in August 1998, AMAC received a letter from an attorney representing California Climbing Centers, LLC ("CCC"), a California limited liability company. The letter stated that CCC had purchased the rights to the name "SolidRock" in 1996 from a partnership whose members included Gariepy and Hansen and that CCC had begun in 1997 the federal trademark registration for this name. Gariepy and Hansen had never disclosed this information to AMAC.⁷ Second, the business records that Gariepy had shown AMAC belonged to CCC. Third, the assistance that SRWS provided for developing the pizza restaurant menu consisted solely of a menu copied from a textbook on restaurant development. Fourth, in March 1999 Defendants sold a wall-climbing structure to a third party in Puerto Rico. Plaintiffs claim that under the contracts they had exclusive rights to these operations in Puerto Rico. Fifth, UE, which Plaintiffs describe as "an affiliated corporation," and AMAC have invested more than a million dollars in the development of this business. Plaintiffs allege that Defendants have not provided the level of ongoing support that they had promised when the parties began their business relationship. And sixth, the business plan that Defendants provided did not accurately reflect the profits and revenues that Plaintiffs have earned from their Puerto Rico operations.

Plaintiffs also allege that Defendants attempted to evade paying Puerto Rico taxes; that Defendants asked Plaintiffs to file for them a fraudulent Puerto Rico tax return; but that Plaintiffs refused to do so. In October 1999, AMAC filed an action in Puerto Rico local court to determine whether certain moneys it owes SRWS for performance of the "Exclusive Operation and Construction Agreement" are subject to Puerto Rico taxes.⁸

The controversy between these parties has engendered one other lawsuit. In May 1999, SRWS brought a claim against AMAC in California Superior Court. In its complaint, SRWS alleged that it entered into a contract with AMAC to build a wall-climbing structure in Puerto Rico; that SRWS fully performed its obligations under the contract; but that AMAC failed to pay the amount still owed under the contract for the work performed.⁹ In its answer, AMAC denied these allegations and asserted as affirmative defenses that SRWS had breached this contract; that SRWS had failed to perform in accordance with any contracts which were the subject of the lawsuit; and that AMAC was entitled to a set-off for any amounts owed due to SRWS' failure to perform under these agreements and for any losses that AMAC had suffered in the business dealings between the two parties.¹⁰ AMAC also filed a cross-complaint¹¹ against SRWS in which it alleged that SRWS breached the agreement to develop a pizza restaurant for AMAC. In its cross-complaint, AMAC also sought declaratory relief to determine the parties' respective rights and obligations under the pizza restaurant contract and the contract to build the wall-climbing structure.¹² A trial was held in May and August 2000 and judgment for SRWS was entered in the amount of $166,665.30. This amount included damages, interest, attorney's fees, and costs.¹³

In the case before the Court, Plaintiffs seek a declaratory judgment determining that they have the right to the name "SolidRock" in Puerto Rico; request damages in the event of a finding that they do not have a right to this name; and seek damages for what they claim were fraudulent acts and breaches of contract by Defendants. In their motion dismiss, Defendants argue that because AMAC could have raised these claims in its cross-complaint in the California case, the claims may not be raised now. In their motion Defendants also move to strike pursuant to Rule 12(f) the allegations in the amended complaint that Defendants are attempting to evade the payment of Puerto Rico taxes. Defendants also move for a more definite statement pursuant to Rule 12(e). Plaintiffs have opposed the motion. For the reasons set forth below, the Court grants the motion to dismiss.

DISCUSSION

Defendants argue that Plaintiffs' claims are barred because they should have been brought as cross-complaints in SRWS' lawsuit against AMAC in California state court. Generally, federal courts faced with this issue have, in determining whether the subsequent federal case was barred, applied the law of the state where the earlier case was filed. See, e.g., Conopco, Inc. v. Roll Int'l, 231 F.3d 82, 87-90 (2nd Cir.2000); Pochiro v. Prudential Ins. Co. of Amer., 827 F.2d 1246, 1249 (9th Cir.1987); Carnation Co. v. T.U. Parks Constr. Co., 816 F.2d 1099, 1103-04 (6th Cir.1987); Podhorn v. Paragon Group, 795 F.2d 658, 660-61 (8th Cir.1986); Chapman v. Aetna Finance Co., 615 F.2d 361, 364 (5th Cir.1980); Safway Steel Products v. Casteel Constr. Co., 1998 WL 792189, at *3 (N.D.Ind. Nov.3, 1998). The Court will follow the lead of the above-cited cases and apply California law. The relevant provision of the California Code of Civil Procedure provides

[I]f a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not...