Qqc, Inc. v. Hewlett-Packard Co.

• Decision Date: 16 April 2003
• Docket Number: No. CIV. 02-40201.,CIV. 02-40201.
• Parties: QQC, INC., Pravin Mistry, and Manuel Turchan, Plaintiffs/Counter-Defendants, v. HEWLETT-PACKARD COMPANY, Defendant/Counter-Claimant.
• Court: U.S. District Court — Eastern District of Michigan

258 F.Supp.2d 718

QQC, INC., Pravin Mistry, and Manuel Turchan, Plaintiffs/Counter-Defendants, v. HEWLETT-PACKARD COMPANY, Defendant/Counter-Claimant.

No. CIV. 02-40201.

United States District Court, E.D. Michigan, Southern Division.

April 16, 2003.

Gregory L. Curtner, Frederick R. Juckniess, Miller, Canfield, Ann Arbor, for QQC, Incorporated, Pravin Mistry, President, Manuel Turchan, CEO, plaintiffs.

Ann Marie Uetz, Jenice C. Mitchell, Foley & Lardner, Detroit, Sharon R. Barner, Foley & Lardner, Chicago, IL, for Hewlett-Packard, Incorporated, defendant.

OPINION AND ORDER

GADOLA, District Judge.

This civil action is a dispute over the ownership of intellectual property. Before the Court is Defendant's Motion to Dismiss Counts VII, VIII, and IX of Plaintiffs' Amended Complaint. Also before the Court is Plaintiffs' Motion to Dismiss Counterclaim. Both sides filed timely Responses and Reply Briefs to the respective Motions. The Court elects to proceed without a hearing. See E.D. Mich. LR 7.1(e)(2). For the reasons set forth below, the Court will grant Defendant's Motion and deny Plaintiffs' Motion.

I. BACKGROUND

Plaintiff Mistry and Plaintiff Turchan formed Plaintiff QQC in 1993. Plaintiff Mistry and Plaintiff Turehan serve as Plaintiff QQC's president and chief executive officer, respectively. Plaintiffs research and develop technologies, including a system that creates coatings of durable carbon-based material on other objects. This coating material is commonly known as "diamond-like carbon" or "DLC."

Defendant is also a technology research and development firm. As part of its business, Defendant manufactures and sells computers and computer-related equipment including "inkjet printers" and the ink cartridges used by such printers. In the mid-1990s, Defendant identified DLC technology as one of several technologies that might improve printer performance. Defendant subsequently approached Plaintiffs regarding Plaintiffs' knowledge of DLC technology and its possible application to Defendant's inkjet technology.

The parties executed a Development Agreement in September 1997, and it remained in effect until at least February 1999. The Development Agreement primarily concerned the applicability of Plaintiffs' DLC technology to Defendant's inkjet technology. However, the Development Agreement also specifically contemplated that Plaintiffs and Defendant would also explore non-DLC solutions in the inkjet field and/or DLC solutions in other devices, methods, or technologies beyond the inkjet field.

Plaintiffs' Amended Complaint concerns disputes arising out of the Development Agreement and related contracts. Plaintiffs aver that Defendant has wrongfully taken ownership of certain inventions discovered and created by Plaintiffs. The Amended Complaint contains thirteen counts. Counts I and II present claims for breach of contract and breach of confidentiality agreements, respectively. Counts III, IV, V, and VI claim misappropriation of trade secrets. Count VII alleges fraud; Count VIII alleges silent fraud; and Count IX alleges constructive fraud. Count X advances an unjust enrichment claim. Counts XI and XII request correction of patent inventorship pursuant to 35 U.S.C. §§ 116 and 256. Finally, Count XIII seeks declaratory relief pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201-02. Plaintiffs' state law claims are properly before this Court because all of the requirements of diversity jurisdiction, 28 U.S.C. § 1332, have been met. Defendant responded to the Amended Complaint with, inter alia, a Counterclaim that also prays for declaratory judgment.

Defendant's Motion requests dismissal of Plaintiffs' fraud, silent fraud, and constructive fraud claims in Counts VII, VIII, and IX pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Likewise, Plaintiffs' Motion seeks dismissal of Defendant's Counterclaim pursuant to Rule 12(b)(6).

II. CONSIDERATION OF DEVELOPMENT AGREEMENT

To adjudicate a Rule 12(b)(6) motion, the Court must not consider matters outside the pleadings. See Fed.R.Civ.P. 12(b); Ramik v. Darling Int'l, Inc., 60 F.Supp.2d 680, 683 (E.D.Mich.1999) (Gadola, J.) ("If, on a motion pursuant to Rule 12(b)(6), matters outside the pleadings are presented to and not excluded by the court, `the motion shall be treated as one for summary judgment.'" (quoting Fed. R.Civ.P. 12(b))).

Nevertheless, Rule 10(c) of the Federal Rules of Civil Procedure provides that "[a] copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes." Rule 10(c) is permissive, however, and a plaintiff is not obligated to attach to the complaint the written instrument upon which the action is premised. See Weiner v. Klais & Co., Inc., 108 F.3d 86, 89 (6th Cir.1997). Nonetheless, if the plaintiff fails to attach the written instrument upon which he relies, the defendant may introduce the pertinent exhibit. Id. "Otherwise, a plaintiff with a legally deficient claim could survive a motion to dismiss simply by failing to attach a dispositive document." Id. Therefore, although a court may not consider matters outside the pleadings on a motion to dismiss, documents properly introduced by a defendant "`are considered part of the pleadings if they are referred to in the plaintiffs complaint and are central to [the plaintiffs] claim.'" Bowens v. Aftermath Entm't, 254 F.Supp.2d 629 (E.D.Mich. 2003) (Gadola, J.) (quoting Weiner, 108 F.3d at 89).

Here, although Plaintiffs referred to the Development Agreement on numerous occasions in the Amended Complaint, Plaintiffs neglected to attach it to the pleading. As a result, Defendant moved to introduce the Development Agreement so the Court would have access to this dispositive document while resolving the Rule 12(b)(6) issues before the Court. See Weiner, 108 F.3d at 89. The Court granted this request on January 2, 2003, and Defendant subsequently introduced the Development Agreement. Accordingly, the Development Agreement is part of the pleadings, and the Court will consider it in adjudicating the present Motions as Motions to Dismiss under Rule 12(b)(6). See Fed. R.Civ.P. 10(c); Fed.R.Civ.P. 12(b); Weiner, 108 F.3d at 89; Bowens, 2003 WL 1725121, at *6.

III. LEGAL STANDARD

Rule 12(b)(6) authorizes the district courts to dismiss any complaint that fails "to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). Rule 12(b)(6) affords a defendant an opportunity to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true. See Chaness & Simon, P.C., v. Simon, 241 F.Supp.2d 774, 777 (E.D.Mich.2003) (Gadola, J.). In applying Rule 12(b)(6), the Court must presume all well-pleaded factual allegations in the complaint to be true and draw all reasonable inferences from those allegations in favor of the non-moving party. See Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir.1993); Chaness & Simon, 241 F.Supp.2d at 777.

The Court will not, however, accord the presumption of truthfulness to any legal conclusion, opinion, or deduction, even if it is couched as a factual allegation. See Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir.1987); Chaness & Simon, 241 F.Supp.2d at 777. The Court will not dismiss a cause of action under the Rule 12(b)(6) standard "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Chaness & Simon, 241 F.Supp.2d at 777. Although the pleading standard is liberal, bald assertions and conclusions of law will not enable a complaint to survive a motion pursuant to Rule 12(b)(6). See Chaness & Simon, 241 F.Supp.2d at 777-78; see also Leeds v. Meltz, 85 F.3d 51, 53 (2d Cir.1996).

IV. ANALYSIS

A. Motion to Dismiss Counts VII, VIII, and IX

"The law in Michigan is well-settled that an action in tort requires a breach of duty separate and distinct from a breach of contract." Brock v. Consol. Biomed. Labs., 817 F.2d 24, 25 (6th Cir.1987) (citing Haas v. Montgomery Ward & Co., 812 F.2d 1015 (6th Cir.1987); Kewin v. Mass. Mut. Life Ins. Co., 409 Mich. 401, 295 N.W.2d 50 (1980); Hart v. Ludwig, 347 Mich. 559, 79 N.W.2d 895 (1956); Brewster v. Martin Marietta Aluminum Sales, Inc., 145 Mich.App. 641, 378 N.W.2d 558 (1985)). The parties do not dispute the law, but they do dispute how it should be applied in this case.

Defendant contends that Plaintiffs' three fraud claims (Counts VII, VIII, and IX) cannot be sustained because Plaintiffs cannot establish a breach of a legal duty that is separate and distinct from Defendant's contractual duties under the Development Agreement. Plaintiffs disagree. Plaintiffs maintain that the frauds allegedly committed by Defendant are based on legal duties independent of Defendant's contractual duties.

After a review of the terms of the Development Agreement and the allegations in the Amended Complaint, the Court agrees with Defendant. The operative allegations in Plaintiffs' fraud claims would not exist in the absence of the contracts between the parties; thus, such allegations cannot be maintained as tort-based claims under Michigan law. See Bailey Farms, Inc. v. NOR-AM Chem. Co., 27 F.3d 188, 191-92 (6th Cir.1994) (quoting Merchs. Publ'g Co. v. Maruka Mack Corp. of Am., 800 F.Supp. 1490, 1493 (W.D.Mich.1992)); Brock, 817 F.2d at 25; Heidtman Steel Prods., Inc. v. Compuware Corp., 168 F.Supp.2d 743, 751 (N.D.Ohio 2001) (applying Michigan law) (holding that fraud claims brought in conjunction with a breach of contract claim cannot be maintained where, but for the existence of the contract, there is no duty of disclosure).

Counts VII, VIII, and IX are premised on Defendant's purported misrepresentations and/or omissions concerning the development of DLC and certain "non-DLC" technology. However, any duties of disclosure that Defendant owed Plaintiffs...