Scottrade, Inc. v. Variant, Inc.

• Citation: 122 F.Supp.3d 869
• Decision Date: 07 August 2015
• Docket Number: No. 4:13CV1710 RLW.,4:13CV1710 RLW.
• Parties: SCOTTRADE, INC., Plaintiff, v. VARIANT, INC., and Stephen C. Wren, Defendants.
• Court: U.S. District Court — Eastern District of Missouri

122 F.Supp.3d 869

SCOTTRADE, INC., Plaintiff,

v.VARIANT, INC., and Stephen C. Wren, Defendants.

No. 4:13CV1710 RLW.

United States District Court, E.D. Missouri, Eastern Division.

Signed Aug. 7, 2015.

Felicia R. Williams, Thomas E. Douglass, Booker T. Shaw, John S. Kingston, Thompson Coburn, LLP, St. Louis, MO, for Plaintiff.

Bridget L. Halquist, David S. Corwin, Vicki L. Little, Sher Corwin Winters LLC, St. Louis, MO, for Defendants.

MEMORANDUM AND ORDER

RONNIE L. WHITE, District Judge.

This matter is before the Court on Defendants' Motion for Summary Judgment (ECF No. 106). The motion is fully briefed and ready for disposition. Upon review of the motion and related memoranda and exhibits, the Court will deny Defendants' motion.

Background

Defendant Stephen Wren is the inventor of certain new and useful improvements in a system for electronically communicating between remote facilities and for facilitating transactions between central and remote facilities. (First Am. Compl. ["FAC"] ¶ 9, ECF No. 89; Assignment of Rights, Pl.'s Ex. A, ECF No. 64–2) These inventions are the subject of three patents (‘514, ‘044, and ‘900). (Id. ) On November 6, 2000, Wren assigned his intellectual property rights in the inventions to Variant Holdings, LLC ("Holdings"). (FAC 10) On that same date, Plaintiff Scottrade, Inc. ("Scottrade") entered into a License Agreement with Holdings, creating a partnership called Synerty. (License Agreement, Pl.'s Ex. B, ECF No. 64–3; Jung Depo., Defs.’ Ex. A p. 151, ECF No. 108–1) The purpose of Synerty was to exploit patent rights and know how associated with the inventions. (Id. )

According to the License Agreement, Holdings and Scottrade each had 50% ownership of Synerty. (License Agreement, Pl.'s Ex. B ¶ 8(a), ECF No. 64–3) The agreement granted to Scottrade a nonexclusive, non-assignable license to use Holdings' intellectual property rights throughout the U.S. and all foreign countries and an exclusive, non-assignable license to use Holdings' intellectual property rights throughout the U.S. with regard to financial service companies. (Id. at 3) Holdings also granted Synerty a license to use any future patents. (Id. at ¶ 4) Further, the License Agreement allowed Holdings to license the rights for use of future patents to others with whom Holdings formed a license agreement, subject to Scottrade's right of first refusal. (Id. at ¶¶ 4, 5) Scottrade had the right to enter into any subsequent agreements concerning the intellectual property rights to the exclusion of a third party within 60 days from the time Scottrade was notified in writing of the terms of the third party agreement. (FAC ¶¶ 21–23, License Agreement, Pl.'s Ex. B ¶ 5, ECF No. 64–3) In addition, the agreement required Scottrade to pay minimum royalty payments to Holdings, and, if Scottrade chose not to pay the minimum royalty, the license grant would be converted to a non-exclusive grant. (Id. at 8) Further, Synerty was to bear the cost of all patent prosecutions. (Id. at ¶ 12) Synerty and Holdings agreed to cooperate to prevent any infringement of issued patents. (Id. at ¶ 14) Holdings could terminate the agreement if Synerty defaulted in making any payment or report in accordance with the agreement; if Synerty became insolvent; or if a receiver was appointed to take over Synerty's business. (Id. at ¶ 15) If a dispute arose, the parties agreed to submit to arbitration and abide finally by any decision of the arbitration proceeding. (Id. at ¶ 18)

Although Scottrade and Holdings were equally responsible for the costs of prosecuting patents, Scottrade funded all the expenses and prosecution costs from 2000 to 2003. (Jung Depo., Pl.'s Ex. B p. 70, ECF No. 113–2) Also during that time period, Scottrade invested $700,000 in the Partnership. (Defs.' Ex. H, ECF No. 108–8) Additionally, for those three years after the parties formed Synerty, it suffered losses totaling nearly $700,000. (Jung Depo., Defs.' Ex. App. 62–63, 81–85, ECF No. 108–1) For the fiscal years 2004 and after, there was no income or expense to report, so Scottrade did not file tax returns. (Id. at pp. 84–85) Wren and Scottrade agreed that the losses would be allocated to Scottrade. (Jung Depo., Pl.'s Ex. A pp. 82–84) In March 2004, counsel for Scottrade notified Wren and Holdings that Scottrade would use the royalty payments due to Wren to offset Holdings' portion of the patent prosecution expenses but that Scottrade would not continue to advance Holdings' share of the expenses. (Defs.' Ex. D, ECF No. 108–4)

In October 2003, Wren notified Scottrade that Holdings was terminating the License Agreement because Scottrade had failed to make the required minimum royalty payments. (Jung Depo., Defs.' Ex. A p. 50, ECF No. 108–1; Defs.' Ex. D, ECF No. 108–4) Scottrade declined to honor Wren's attempted termination, and the parties submitted to arbitration. (Jung Depo., Defs.' Ex. A p. 50; ECF No. 108–1; Defs.' Ex. D, ECF No. 108–4) The Arbitrator found that each party retained all of its rights under the agreement and that each party was responsible for 50% of the costs, with any amounts contributed by Scottrade in excess of 50% deemed an advance. (FAC ¶¶ 71–72; Award of Arbitrator, Pl.'s Ex. C, ECF No. 64–4) The Arbitrator did not award monetary damages to either party. (Id. ) Despite this Award of Arbitrator, Holdings never paid or reimbursed Synerty's costs. (FAC ¶ 73)

On January 20, 2005, Holdings sent a second notice of termination of the agreement, arguing that Synerty was insolvent. (Defs.' Ex. F, ECF No. 108–6) Scottrade denied knowledge of any liabilities that would cause Synerty to be insolvent such that Holdings could terminate the agreement. (Defs.' Ex. G, ECF No. 108–7; Jung Depo., Pl.'s Ex. A pp. 79–80, 138, ECF No. 113–1) Scottrade sent Holdings another royalty check, but Holdings rejected the payment and maintained that the joint venture was terminated. (Defs.' Ex. H, ECF No. 108–8; Jung Depo., Pl.'s Ex. A pp. 50–51, ECF No. 113–1) Scottrade then ceased remitting royalty checks. (Defs.' Ex. G, ECF No. 108–7)

According to Scottrade, Wren formed an alter ego corporation called Variant, Inc. ("Variant"), licensed to it all of Holdings' patent rights, including the rights to exploit Wren's intellectual property. (FAC ¶ 26; Jung Depo., Pl.'s Ex. A pp. 29–30, ECF No. 113–1) Wren granted an exclusive license for the Intellectual Property Rights to this new corporation without notifying Scottrade and honoring its right of first refusal. (Jung Depo., Pl.'s Ex. B pp. 39–40) Thus, Variant became the exclusive licensee of patents ‘900 and ‘044, issued on May 27, 2008 and November 24, 2009, respectively. (FAC ¶¶ 19–20, 30–31; Pl.'s Exs. D & E, ECF Nos. 64–5, 64–6) Shortly thereafter, Variant began filing numerous lawsuits against a variety of entities for infringement of the ‘044 and ‘900 patents. (FAC ¶ 33) Scottrade maintains that Variant obtained in excess of four million dollars in settlement payments, which Scottrade was entitled to. (FAC ¶ 34; Jung Depo., Pl.'s Ex. B pp. 75–80, ECF No. 113–2) Plaintiff Scottrade learned of the lawsuits when a defendant in one of the infringement actions subpoenaed Scottrade. (FAC ¶ 35; Jung Depo., Pl.'s Ex. A p. 43, ECF No. 113–1; Pl.'s Ex. B pp. 30–31, ECF No. 113–2)

On July 30, 2015, this Court granted in part and denied in part Defendants' Motion to Dismiss. The remaining counts are Count I for alter ego liability, Count II tortious interference, and Count III for unjust enrichment. Currently pending is Defendants' Motion for Summary Judgment on those counts.

Legal Standards

Pursuant to Federal Rule of Civil Procedure 56(c), a court may grant a motion for summary judgment only if all of the information before the court show "there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court must view the evidence and all reasonable inferences in the light most favorable to the non-moving party. Hutson v. McDonnell Douglas Corp., 63 F.3d 771, 775 (8th Cir.1995).

The moving party has the initial burden to establish the non-existence of any genuine issue of fact that is material to a judgment in its favor. City of Mt. Pleasant, Iowa v. Associated Elec. Co-op., Inc., 838 F.2d 268, 273 (8th Cir.1988). Once this burden is discharged, if the record does in fact bear out that no genuine dispute exists, the burden then shifts to the non-moving party, who must set forth affirmative evidence and specific facts showing there is a genuine dispute on that issue. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

When the burden shifts, the non-moving party may not rest on the allegations in its pleadings, but by affidavit and other evidence must set forth specific facts showing that a genuine issue of material fact exists. Fed.R.Civ.P. 56(e). The non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). In fact, the nonmoving party must present sufficient evidence favoring the non-moving party which would enable a jury to return a verdict for that party. Anderson, 477 U.S. at 249, 106 S.Ct. 2505 ; Celotex, 477 U.S. at 324, 106 S.Ct. 2548. Self-serving, conclusory statements, standing alone, are insufficient to defeat a well-supported motion for summary judgment. O'Bryan v. KTIV Television, 64 F.3d 1188, 1191 (8th Cir.1995).

Count II—Tortious Interference with a Contract

Under Missouri law, to prove a claim for tortious interference with a contract or business expectancy, a plaintiff must show: "(1) a contract or valid business expectancy; (2) defendant's knowledge of the contract or relationship; (3) intentional interference by the defendant inducing or causing a breach of the contract or relationship; (4)...