Crosby Legacy Co. v. TechnipFMC PLC
| Decision Date | 13 September 2019 |
| Docket Number | Civil Action 18-10814-MLW |
| Parties | CROSBY LEGACY COMPANY, LLC, d/b/a PHILIP CROSBY ASSOCIATES, Plaintiff, v. TECHNIPFMC PLC, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
REPORT AND RECOMMENDATION ON MOTION TO DISMISS [DOCKET NO. 8]
Plaintiff Crosby Legacy Company, LLC, d/b/a Philip Crosby Associates (“PCA”) alleges that defendant TechnipFMC plc improperly used PCA materials, thereby breaching agreements between the parties, committing fraud and violating intellectual property laws. TechnipFMC has moved to dismiss the complaint in its entirety. Docket No. 8.[1] For the following reasons, this Court recommends[2] that the District Judge grant in part and deny in part that motion.
On April 26, 2018, PCA filed its complaint, which contains nine causes of action: count I - breach of the “Executory Amended and Restated License Agreement” (“2017 email exchange”); count II - breach of the January 1, 2014 License Agreement (“2014 License Agreement”); count III - breach of the implied covenant of good faith and fair dealing with respect to the 2017 email exchange; count IV - fraud/intentional misrepresentation; count V -violation of M.G.L. c. 93A, § 11; count VI - violation of Lanham Act/trademark infringement, 15 U.S.C. § 1114; count VII - violation of Lanham Act/15 U.S.C. § 1125(a); count VIII -copyright infringement, 17 U.S.C. § 501, et seq.; and count IX - unjust enrichment. Docket No. 1 (“Compl.”).
On July 2, 2018, TechnipFMC filed its motion to dismiss, which PCA opposed. Docket Nos. 8, 15. TechnipFMC filed a reply brief. Docket No. 19. This Court heard oral argument on August 28, 2019. On September 12, 2019, PCA filed a supplemental brief. Docket No. 28.
PCA is a limited liability company with a principal place of business in Boston, Massachusetts. Compl. ¶ 1. Its sole member is a citizen of Massachusetts. Id. Founded by Philip Crosby, PCA works with client organizations to integrate “principles of quality” into the management and operation of their businesses. Id. ¶¶ 8-10. Through implementation of its methods and with strategic guidance by its quality management professionals, PCA alleges that it helps clients reduce inefficiencies and achieve substantial cost savings. Id. ¶ 13.
PCA's materials and services contain trademarks, including “Absolutes of Quality Management, ” “Absolutes of Quality” and the “Price of Nonconformance” (collectively, the “PCA marks”). Id. ¶ 14. The cornerstone of Philip Crosby's philosophy is his “Absolutes of Quality Management, ” which is the foundation of PCA's approach to implementing and maintaining quality in every aspect of a business' operations. Id. ¶ 9. PCA also owns federally registered copyrights in Crosby's published works, including the titles “Quality is Free, ” “Quality is Still Free, ” “Quality Without Tears, ” “The Absolutes of Leadership” and the “The Eternally Successful Organization: The Art of Corporate Wellness.” Id. ¶ 135. PCA's licensed materials include, but are not limited to, direct use of these copyrighted works as well as any derivative works. Id. ¶ 136.
FMC was a provider of equipment and services for clients in the exploration and production of oil and gas energy sources. Id. ¶ 22.
Defendant TechnipFMC, the successor to FMC, is a public liability company registered under the laws of England and Wales with a United States headquarters in Houston, Texas. Id. ¶ 2.
In or about July 2008, FMC approached PCA to assist FMC in reducing inefficiencies and costs in its quality control programs. Id. ¶ 23. On December 3, 2008, the parties executed a Master Service and License Agreement (“2008 MSLA”) in which PCA agreed to license its materials to certain FMC employees for the purpose of educating them in methods of quality improvement and management. Id. On May 26, 2009, the parties executed a second Master Service and License Agreement (“2009 MSLA”) for the purpose of extending the license of PCA's proprietary materials and processes to a separate FMC division. Id. ¶ 24. Both agreements provided for a separate service and license fee for each FMC employee trained in a PCA program, and restricted FMC's ability to use PCA materials without prior approval and consent. Id. ¶¶ 23-24.
In 2009, FMC created and launched “Impact Quality, ” an internal communications program based on PCA's “Absolutes of Quality.” Id. ¶ 25. In 2011, PCA helped the FMC executive team update the “FMC Core Values, ” specifically incorporating language from the “Absolutes of Quality” and key PCA concepts. Id. ¶ 26. PCA alleges that this provision of quality management materials and processes continued to outgrow the division-specific, limited uses set forth in the 2008 and 2009 MSLAs. Id. ¶ 27.
On or about January 1, 2014, PCA and FMC executed the 2014 License Agreement, which provides FMC with an “enterprise-wide, non-exclusive, non-transferable, perpetual right and license to use the materials specified” in the 2014 License Agreement. Docket No. 1-1 at 4; see Compl. ¶¶ 28-29. It allowed FMC to reproduce the licensed PCA materials in any format or medium and embed PCA's methods and tools into its own business processes without restriction. Compl. ¶ 29. Unlike the 2008 and 2009 MSLAs, the 2014 License Agreement permitted any FMC employee, temporary employee or contractor to use PCA materials to perform their job duties. Id.
Given these “expansive rights, ” the 2014 License Agreement includes several provisions designed to adequately protect FMC's use of the materials. Id. ¶ 30. In particular, the 2014 License Agreement specifies the rights and obligations of the parties in the event of a “Change of Control, ” which includes a “consolidation or merger of [FMC] into or with any other entity or entities.” Id. ¶ 36; Docket No. 1-1 at 7. In the event of a “Change of Control, ” PCA had the right to terminate the Agreement upon written notice to FMC, and the “newly controlling entity” was required to obtain PCA's prior written consent before using the licensed materials. Id.
In addition, Section 2 of the 2014 License Agreement provides that the PCA marks are PCA-owned trademarks that FMC could use solely for its own internal business purposes. Compl. ¶¶ 15-16; Docket No. 1-1 at 2. Section 11 sets forth a procedure for resolving disputes arising out of or relating to the 2014 License Agreement, which contemplates that the parties use their best efforts to resolve such disputes up to the level of each party's President or CEO. Compl. ¶ 75; Docket No. 1-1 at 7. Section 12(v) provides PCA with the right, upon reasonable prior notice, to conduct an audit “reasonable in scope of [FMC's] relevant activities, books and records solely for the purpose of confirming compliance with the use restrictions of [the] Agreement.” Compl. ¶ 71; Docket No. 1-1 at 8.
FMC allegedly used its expanded rights under the 2014 License Agreement to embed PCA's materials and processes throughout the company, and even put the materials on a corporate server accessible to all FMC employees. Compl. ¶¶ 31-32. PCA alleges that by 2016, nearly a thousand FMC executives and managers were provided with PCA materials and had attended one or more PCA workshops and trainings. Id. ¶¶ 34-35.
On or about May 19, 2016, FMC announced its intention to merge with Technip S.A., a company that provided project life cycle services for clients in the energy industry. Id. ¶ 37. The merger was consummated in or about January 2017 and resulted in the creation of defendant TechnipFMC. Id. ¶ 39.
PCA alleges that the merger constituted a “Change of Control” under the 2014 License Agreement. Id. ¶ 40. PCA also alleges that, following the merger, TechnipFMC continued to use the licensed materials without obtaining written consent. Id. ¶¶ 42-43. PCA claims that TechnipFMC availed itself of the materials to integrate them into the business processes of the new company. Id. ¶ 44. To date, TechnipFMC employees allegedly continue to use the Impact Quality name in both internal and external communications, and PCA modified works both internally and on the TechnipFMC public website. Id. ¶ 45.
In or about November 2016, PCA executives, including principal Kevin Weiss, met with Mark Scott, the Executive Vice President responsible for TechnipFMC “Quality, ” in Houston, Texas to discuss the implications of the merger. Id. ¶¶ 46-47. At the meeting, Scott allegedly acknowledged that TechnipFMC needed a license to use PCA's materials. Id. ¶ 47. Scott also disclosed that Doug Pferdehirt, the new CEO of TechnipFMC intended to staff key quality positions within the new company with former FMC managers. Id. ¶ 46. In addition, TechnipFMC requested a proposal to continue and extend the license to cover its employees. Id. ¶ 48.
After the meeting, PCA proposed several new agreements based on the amounts FMC had paid under the 2014 License Agreement. Id. ¶ 49. PCA specifically proposed options for FMC to purchase both a license and bundle of services, with fees ranging between $5 and $12 million. Id.
TechnipFMC representatives traveled to Boston to further negotiate the license fee structure. Id. ¶ 51. They indicated that completion of a new contract with PCA was “urgent” given TechnipFMC's need to create an integrated quality program. Id. PCA alleges that the representatives said it was unfair that due to the merger they could not continue to use the materials without further payment. Id. Another TechnipFMC representative allegedly indicated that...
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