Scheu & Scheu, Inc. v. Casey Scheu, Veronica Scheu, & Ape.Com, LLC, CASE NO. 15-10147-CIV-GOODMAN
| Decision Date | 28 June 2017 |
| Docket Number | CASE NO. 15-10147-CIV-GOODMAN |
| Parties | SCHEU & SCHEU, INC., Plaintiff, v. CASEY SCHEU, VERONICA SCHEU, and APE.COM, LLC, Defendants. |
| Court | U.S. District Court — Southern District of Florida |
[CONSENT CASE]
In "Never Let Her Go," a song from Florida Georgia Line's first EP, the country-music duo lamented, "How she got gone when I never let her go."1 Similarly, federal courts can also refuse to let go -- of state law claims that form part of the same case or controversy as federal law claims, but with better results, so long as no exceptions apply.
Here, Defendants Casey Scheu; Veronica Scheu and APE.com, LLC contend that the Court should let go of the state law claims against them because two exceptions exist under 28 U.S.C. § 1367(c). Specifically, Defendants argue that the Court, in its discretion,should decline to exercise supplemental jurisdiction over those claims because they substantially predominate over the federal law claims, or alternatively, dismiss the state law claims after granting summary judgment in Defendants' favor on the federal law claims. [ECF No. 62].
Because the Court has already denied summary judgment as to the federal law claims [ECF No. 84], it will not address that ground for dismissal. As to the other ground, for the reasons discussed below, the Court denies Defendants' motion to dismiss.
On August 11, 2015, Plaintiff sued Defendants, bringing 10 counts stemming from various purported transgressions against Plaintiff's trademarks, internet domains, and business in general. [ECF No. 1]. Plaintiff alleged that it has been in the business of circuit board repair and related services for a long time under various trademarks -- APE and A.P.E. -- and for a relatively shorter time, under similar domain names -- APE.com, etc. [ECF No. 1 ¶ 9]. Plaintiff alleged that two of its former officers -- Defendants Casey Scheu and Veronica Scheu -- secretly incorporated a competing company bearing the same name as the protected marks -- Defendant APE.com, LLC -- and then, among other things, improperly transferred Plaintiff's domains to the competing company. [ECF No. 1 ¶¶ 17-19].
Two claims arise under federal statutes. Under Count I, Plaintiff brought a claim for trademark infringement under the Lanham Act, 15 U.S.C. § 1051 et seq. [ECF No. 1, pp. 7-9]. Under Count IV, Plaintiff brought a claim under the Anticybersquatting Consumer Protection Act ("ACPA"), § 1125(d). [ECF No. 1, pp. 12-13].
The remaining six claims against Defendants arise out of state law. They include (1) common law trademark infringement (Count II); (2) common law unfair competition (Count III); (3) breach of fiduciary duty (Count V); (4) conversion (Count VI); (5) intentional interference with advantageous business relationships (Count VII); and (6) civil conspiracy to intentionally interfere with advantageous business relationships (Count VIII). [ECF No. 1, pp. 9-12, 13-18]. Two other state law claims against a different defendant were voluntarily dismissed. [ECF No. 23].
On April 10, 2017, Defendants moved for summary judgment on both federal law claims. [ECF No. 61]. The Court denied summary judgment. [ECF No. 84].
Also on April 10, 2017, Defendants filed a motion to dismiss the state law claims. [ECF No. 62]. Plaintiff filed an opposition response. [ECF No. 71]. Defendants did not file a reply.
The matter is specially set for a four-day trial, in Key West, Florida, beginning July 24, 2017. [ECF No. 40].
As codified in § 1367(a), "in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy[.]" § 1367(a). Under § 1367(c), however, "[t]he district courts may decline to exercise supplemental jurisdiction over a claim" on various grounds. § 1367(c). The ground implicated here is under subsection (c)(2) -- where "the claim substantially predominates over the claim or claims over which the district court has original jurisdiction[.]" § 1367(c)(2).
"The exercise of supplemental jurisdiction is left to the discretion of the district court[.]" PTA-FLA, Inc. v. ZTE USA, Inc., 844 F.3d 1299, 1304 (11th Cir. 2016).
As the Eleventh Circuit has explained, there is a difference between the Court's "power to exercise supplemental jurisdiction, § 1367(a), and its discretion not to exercise such jurisdiction, § 1367(c)." Milan Exp., Inc. v. Averitt Exp., Inc., 208 F.3d 975, 980 (11th Cir. 2000) (internal quotations omitted) (emphasis added). Here, Defendants do not argue that the Court lacks the power to exercise supplemental jurisdiction under § 1367(a). Although they denied Plaintiff's supplemental-jurisdiction allegation in the Complaint [ECF Nos. 1 ¶ 7; 10 ¶ 7], Defendants never argue that the federal lawclaims and state law claims do not "form part of the same case or controversy." § 1367(a). They also do not argue that the federal and state law claims do not "arise out of a common nucleus of operative fact[,]" which is the standard for determining whether the claims form part of the same controversy. Parker v. Scrap Metal Processors, Inc., 468 F.3d 733, 743 (11th Cir. 2006).
Rather, Defendants argue that the Court should decline exercising its discretion under § 1367(c)(2), because the state law claims "would substantially expand the scope of this pending lawsuit beyond what would be necessary and relevant to the resolution of the federal claims[.]" [ECF No. 62, p. 8]. "Substantial predominance exists 'when it appears that a state claim constitutes the real body of a case, to which the federal claim is only an appendage.'" Morgan v. Christensen, 582 F. App'x 806, 808 (11th Cir. 2014) (quoting Parker, 468 F.3d at 744). As authority for their arguments, Defendants rely heavily on two district court decisions outside our circuit: TransCardiac Therapeutics, Inc. v. Yoganathan, 85 F. Supp. 3d 1351 (N.D. Ga. 2014); and Beard v. Netco Title, Inc., No. CIV. 05-40252, 2005 WL 2072055 (E.D. Mich. Aug. 26, 2005).
The Court disagrees with Defendants' position. Plaintiff's Lanham Act claim and ACPA claim are not "appendages" of its state law claims. The crux of this dispute -- at least as the Complaint frames it -- is that former officers of Plaintiff usurped its protected trademarks by forming a competing company bearing a protected name and also by taking over related domain names. Distilled to its essence, this is a trademarkinfringement and unlawful competition case. The former is a creature of federal statute, and the latter is analyzed by the same rubric. See Planetary Motion, Inc. v. Techsplosion, Inc., 261 F.3d 1188, 1193 n.4 (11th Cir. 2001) ().2 Thus, Plaintiff's Lanham Act claim and ACPA claim are not "appendages" of the state law claims.
The authorities Defendants rely on are readily distinguishable and unpersuasive. In TransCardiac, the plaintiff brought "a host of state law claims, for breach of contract, interference with business relations, fraud, conspiracy, and false advertising[,]" that "arose from Defendants' purported bad faith conduct and breach of contracts" relating to a patent portfolio. 85 F. Supp. 3d at 1353. The plaintiff alleged that the defendants "concealed and supported a competing startup, improperly disclosed to that startup some confidential information concerning IP that is or should be within the [portfolio], and ran a misleading public information campaign seeking to portray the individual Defendants as the owners and inventors of [the] IP." Id. The defendants removed the case, but the matter was then remanded because the "Complaint did not sufficiently implicate issues of patent inventorship and thus failed to establish federal jurisdiction under 28 U.S.C. § 1338(a)." Id. at 1352.
After that inauspicious start, the defendants brought counterclaims and third-party claims for declaratory relief regarding ownership of two patents "that had never before been mentioned by name in the lawsuit and which were not part of [the] portfolio[.]" Id. at 1353. They then removed the case again, seeking "federal jurisdiction over the entire case based on their counterclaims [] and third-party claims[.]" Id. at 1353-54.
The U.S. District Court for the Northern District of Georgia first found that the "nine state law claims [did] not fall within the supplemental jurisdiction of [the] Court under § 1367(a) because they [did] not arise out of a common nucleus of operative fact with the Third-Party claim for a declaration of patent inventorship." Id. at 1355. Then the court found that even if § 1367(a) gave it the power to confer supplemental jurisdiction, the court would nonetheless decline to take on the state law claims because the "nine state law business tort and contract claims substantially predominate[d] over the central, narrow issue of patent inventorship in the surviving third-party claims." Id. at 1356-57.
Here, Defendants do not even argue that the Court lacks the power to exercise supplemental jurisdiction under § 1367(a). While there is a difference between the Court's power under § 1367(a) and its discretion under § 1367(c), Milan, 208 F.3d 975, logically, a matter whose federal and state law claims do not even share a common nucleus of operative fact, and that contains many more state claims than federal claims,is more likely to fall under the § 1367(c)(2) exception. That is not the case before the Court.
Moreover, trademark infringement and cybersquatting are not narrow issues in this case. It is obvious that the TransCardiac declaratory judgment claims concerning patent ownership were stuck unto a non-federal...
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