Carnegie Techs., LLC v. Triller, Inc.
| Decision Date | 05 October 2020 |
| Docket Number | SA-20-CV-00271-FB |
| Parties | CARNEGIE TECHNOLOGIES, LLC, PLAINTIFF; Plaintiff, v. TRILLER, INC., DEFENDANT; Defendant. |
| Court | U.S. District Court — Western District of Texas |
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
This Report and Recommendation concerns Defendant's Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) [#8]. All dispositive pretrial matters in this case have been referred to the undersigned for disposition pursuant to Western District of Texas Local Rule CV-72 and Appendix C [#18]. The undersigned has authority to enter this recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). In issuing this report and recommendation, the undersigned has also considered Plaintiff's Response [#15] and Defendant's Reply [#16]. For the reasons set forth below, it is recommended that Defendant's motion be DENIED.
This case is a breach of contract action between Plaintiff Carnegie Technologies, LLC ("Carnegie") and its affiliate, Defendant Triller, Inc. ("Triller"). Carnegie's Original Complaint alleges that it provided Triller certain administrative services pursuant to an Administrative Services Agreement dated December 1, 2017, but that Triller was unable to pay for the services. (Compl. [#1] at ¶ 5.) The Complaint alleges that Triller was subsequently purchased by a third party in 2019, and the parties executed an Amended and Restated Administrative Services Agreement on September 19, 2019. (Id. at ¶ 6.) A copy of this Agreement is attached to the Complaint in this case. (Services Agreement [#1] at 8-25.)
On October 8, 2019, the closing date of the sale of Triller, Triller signed a Promissory Note payable to Carnegie in the amount of $4,280,109. (Compl. [#1] at ¶ 7.) The Note is also attached to the Complaint. (Promissory Note [#1] at 27-29.) Carnegie alleges that after the sale closed, it continued to pay obligations on behalf of Triller, such as payroll allocations, and to provide services under the parties' agreement, but that Triller failed to pay these invoices. (Compl. [#1] at ¶ 8.) Copies of the alleged unpaid invoices are attached to the Complaint. (Invoices [#1] at 31-33.) Carnegie contends that it made a written demand to Triller for payment of the past-due invoices in an amount of $339,284.53 on January 10, 2020, and gave Triller 30 days to make payment. (Compl. [#1] at ¶ 10.) According to Carnegie, no payment has been received; Triller is in default; and Carnegie has accelerated payment of the unpaid principal amount and interest due under the Promissory Note. (Id. at ¶ 11.)
Carnegie filed this suit on March 5, 2020, to recover the amounts due under the Services Agreement and Promissory Note. The Complaint asserts causes of action for breach of the parties' Services Agreement and Promissory Note. (Id. at ¶¶ 13-18.) Triller has moved to dismiss Carnegie's Complaint for failure to state a claim pursuant to Rule 12(b)(6). Triller argues that documents incorporated by reference into the Promissory Note attached to Carnegie's Complaint establish as a matter of law that Triller's debt was transferred and assigned to a subsidiary of a sister company of Carnegie, Triller Legacy (hereinafter "Legacy"), and that this assignment constitutes a novation extinguishing any contractual obligation of Triller under the Promissory Note. Triller further argues that, even if it were still bound to the Promissory Note, Carnegie fails to state a claim for liability under the Note, as it references the earlier August 29,2019 Services Agreement only and not the September 9, 2019 Amended Agreement. Triller attaches a number of documents to its motion to dismiss: the October 8, 2019 Contribution and Purchase Agreement of Triller (Purchase Agreement [#8-1]) and the October 8, 2019 Assignment of Promissory Note to Triller Legacy (Note Assignment [#8-2]), among other documents.
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "Although a complaint "does not need detailed factual allegations," the "allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. The allegations pleaded must show "more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678.
Generally, in deciding a motion to dismiss, a court may not look beyond the four corners of the Plaintiff's pleadings without converting the motion to a motion for summary judgment. Indest v. Freeman Decorating, Inc., 164 F.3d 258, 261 (5th Cir. 1999); Fed. R. Civ. P. 12(d). The Court may, however, consider documents attached to the complaint and those that are central to the claims at issue and incorporated into the complaint by reference. Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010).
In reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court "accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff."Martin K. Eby Const. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004) (internal quotation omitted). However, a Court need not credit conclusory allegations or allegations that merely restate the legal elements of a claim. Chhim v. Univ. of Tex. at Austin, 836 F.3d 467, 469 (5th Cir. 2016) (citing Iqbal, 556 U.S. at 678). In short, a claim should not be dismissed unless the court determines that it is beyond doubt that the plaintiff cannot prove a plausible set of facts that support the claim and would justify relief. See Twombly, 550 U.S. at 570.
This case pleads a simple breach-of-contract action based on the alleged breach of Triller's obligations under the Amended Services Agreement and Promissory Note. As this case arises under the Court's diversity jurisdiction, Texas law governs this action. See Hermann Holdings Ltd. v. Lucent Techs., Inc., 302 F.3d 552, 558 (5th Cir. 2002). Texas law also governs the construction of the parties' Agreement and the Promissory Note underlying this suit. (Agreement [#1] at 15, ¶ 17.10.) However, California law governs the construction of the Note Assignment that allegedly relieves Triller of its liability to Carnegie. (Note Assignment [#8-2] at ¶ 7.)
Triller's motion to dismiss raises two arguments in favor of the dismissal of Carnegie's Complaint—(1) the pleadings and documents before the Court establish the affirmative defense of novation as a matter of law, and (2) the Promissory Note cannot give rise to Triller's liability because it refers to the original Services Agreement as opposed to the parties' amended agreement. The undersigned will briefly address the latter argument first.
Triller argues that Carnegie fails to state a claim for Triller's default under the Promissory note because the Note is inconsistent with the pleadings in that it refers to the wrong Services Agreement. Triller asks Carnegie to provide a more definite statement to clarify this discrepancy. This argument is without merit, and the Court will not require a more definite statement. The Promissory Note forming the basis of Carnegie's claim is attached to the Complaint as an exhibit and there can be no confusion regarding the identity of the debt underlying this suit. Moreover, as Carnegie points out in its response, any issue regarding the inconsistency between the dates in the Services Agreement and Amended Services Agreement can be addressed in discovery.
Triller's motion to dismiss also argues that the assignment of the Promissory Note to Legacy constitutes a novation and relieves Triller of any contractual obligation to Carnegie. "Novation is the creation of a new obligation in the place of an old one, by which the parties agree that a new obligor will be substituted to perform the duties agreed upon by the old contract, while the original obligor is released from performing those duties." Vandeventer v. All Am. Life & Cas. Co., 101 S.W.3d 703, 712 (Tex. App.—Fort Worth 2003, no pet.). Under Texas law, a novation is an affirmative defense to a claim for breach of contract. Fulcrum Central v. Autotester, Inc., 102 S.W.3d 274, 277 (Tex. App.—Dallas 2003, no pet.). "Although dismissal under rule 12(b)(6) may be appropriate based on a successful affirmative defense, that defense must appear on the face of the complaint." EPCO Carbon Dioxide Products, Inc. v. JP Morgan Chase Bank, NA, 467 F.3d 466, 470 (5th Cir. 2006). Even considering the related contractsbefore the Court, Triller has not established it is entitled to the dismissal of Carnegie's Complaint as a matter of law based on its novation defense.
Carnegie argues that Triller's affirmative defense is not appropriate for resolution on a motion to dismiss because it does not appear on the face of the Complaint. It is true that Carnegie does not reference the Note Assignment in its Complaint. However, Carnegie's Complaint does reference the purchase of Triller by a third party in 2019. (Compl. [#1] at ¶ 6.) And the Promissory Note attached to Carnegie's Complaint expressly states that it was "issued in accordance with the terms of . . . that certain . . . Purchase Agreement of even date herewith." (Promissory Note [#1] at 27.) This Purchase...
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