Sensormatic Sec. Corp. v. Sensormatic Electronics

• Decision Date: 10 August 2004
• Docket Number: No. CIV.A. DKC2004-0174.,CIV.A. DKC2004-0174.
• Parties: SENSORMATIC SECURITY CORP. v. SENSORMATIC ELECTRONICS CORP. and ADT Security Services, Inc.
• Court: U.S. District Court — District of Maryland

329 F.Supp.2d 574

SENSORMATIC SECURITY CORP. v. SENSORMATIC ELECTRONICS CORP. and ADT Security Services, Inc.

No. CIV.A. DKC2004-0174.

United States District Court, D. Maryland.

August 10, 2004.

COPYRIGHT MATERIAL OMITTED

David J. Butler, Martin Louis Zerwitz, Tacie Hashida Yoon, Swidler, Berlin, Shereff, Friedman, LLP, Washington, DC, for Plaintiff.

Beth A. Levene, Bruce Roger Genderson, Williams and Connolly LLP, Terence J. Lynam, Michael Lee Converse, Tobias Eli Zimmerman, Akin, Gump, Strauss, Hauer and Feld, LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION

CHASANOW, District Judge.

Presently pending and ready for resolution is the motion of Defendants Sensormatic Electronics Corporation (Sensormatic) and ADT Security Services, Inc. (ADT) to dismiss the amended complaint of Sensormatic Security Corporation (SSC).¹ The issues have been fully briefed and no hearing is deemed necessary. Local Rule 105.6. For the following reasons, Defendants' motion will be denied in part and granted in part.

I. Introduction

This is the second breach of contract action Plaintiff has brought against the same defendants. The original action, hereinafter Sensormatic I, is still pending before this court. See Sensormatic Security Corp. v. Sensormatic Electronic Corp., DKC 02-cv-1565. In that action, SSC alleges, inter alia, that Sensormatic breached its Franchise Agreement with SSC, and that ADT tortiously interfered with that contract.² Also in that action, SSC moved for leave to file a third amended complaint to add an additional breach of contract claim against Sensormatic based upon an alleged breach of paragraph 21 of the Franchise Agreement between SSC and Sensormatic. Paragraph 21 requires that, if Sensormatic enters into any contract with a similarly situated franchisee containing more favorable terms or conditions, the Franchise Agreement must be amended to include the more favorable terms. According to SSC, Sensormatic breached paragraph 21 by not notifying SSC of, or modifying SSC's agreement to include, the terms and conditions contained in an amendment to another franchise agreement entered into between Sensormatic and a former Sensormatic franchisee on or about November 30, 1978. SSC contends that the amendment, "the Winner Addendum," provides more favorable terms or conditions to the former franchisee by expanding the definition of the term "Detection Devices" in the SSC-Sensormatic Franchise Agreement to include a broader range of products, including access control products, which are not encompassed by the SSC-Sensormatic Franchise Agreement. See paper no. 25, at 3. Based on these allegedly more favorable terms, Sensormatic breached the Franchise Agreement when it failed to notify SSC of the addendum and refused to incorporate the more favorable terms into the SSC-Sensormatic Franchise Agreement.

Although SSC learned of the Winner Addendum on May 9, 2003, it did not seek leave to amend its complaint in Sensormatic I until August 28, 2003 — nearly two and one half months after the June 3, 2003 deadline set forth in the scheduling order for amendments of the pleadings. On January 20, 2004, the court denied SSC's motion for leave to amend the complaint on the basis that SSC's lack of diligence in failing timely to amend its complaint was without good cause. The following day, SSC filed this separate action, hereinafter Sensormatic II, asserting, almost verbatim, the same claim that the court prohibited SSC from asserting, by amendment of its complaint, in Sensormatic I.

Thereafter, Sensormatic moved to dismiss the one-count complaint, arguing that SSC's claim was barred under the doctrine against claim splitting and was an improper attempt to circumvent the court's denial of its motion for leave to amend. Sensormatic also asserted that the one count complaint failed to state a claim upon which relief could be granted. SSC filed an opposition on March 22, 2004, to which SSC filed a reply. On May 10, 2004, while Sensormatic's motion to dismiss was pending, SSC filed an amended complaint, which asserts the same allegations concerning the Winner Addendum, but adds ADT as a party and three additional claims: count two alleges that Sensormatic committed an additional breach of the Franchise Agreement when it refused to allow SSC to sell Sensormatic's Radio Frequency Identification (RFID) products; count three alleges that SSC committed a breach of the contract and of good faith and fair dealing by authorizing ADT to sell and service Sensormatic access control and RFID products within SSC's exclusive franchise territory; and count four asserts a tortious interference claim against ADT directly for selling, and ordering SSC to refrain from selling, RFID products.

Defendants now move to dismiss SSC's amended complaint on the following grounds: (1) that the complaint constitutes impermissible claim-splitting; (2) SSC's breach of contract claim represents an improper attempt to evade the court's prior decision denying SSC the right to amend its claims in Sensormatic I; and (3) that, as asserted in its motion to dismiss the original complaint, count one of the complaint fails to state a claim for breach of contract under Fed.R.Civ.P. 12(b)(6). SSC responds by arguing that the claims asserted in the amended complaint rely on significantly different facts then the claims in Sensormatic I and, therefore, it is not barred from bringing a separate suit against Sensormatic for breach of the same Franchise Agreement. Specifically, Plaintiff argues that the claims in Sensormatic II require new evidence regarding the execution and concealment of the Winner Addendum, Sensormatic's development and marketing of access control products, and the recent development and marketing (through ADT) of RFID products. See paper no. 25, at 8.

II. Standard of Review

A motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) ought not be granted 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). All that the Federal Rules of Civil Procedure require of a complaint is that it contain "`a short and plain statement of the claim' that will give the Defendant fair notice of what the Plaintiff's claim is and the grounds upon which it rests." Id. at 47, 78 S.Ct. 99; Comet Enters. Ltd. v. Air-A-Plane Corp., 128 F.3d 855, 860 (4th Cir.1997). "Given the Federal Rules' simplified standard for pleading, `[a] court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514, 122 S.Ct. 992, 998, 152 L.Ed.2d 1 (2002), quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984).

In reviewing the complaint, the court accepts all well-pled allegations of the complaint as true and construes the facts and reasonable inferences derived therefrom in the light most favorable to the Plaintiff. Ibarra v. United States, 120 F.3d 472, 473 (4th Cir.1997). The court must disregard the contrary allegations of the opposing party. A.S. Abell Co. v. Chell, 412 F.2d 712, 715 (4th Cir.1969). The court need not, however, accept unsupported legal conclusions, Revene v. Charles County Comm'rs, 882 F.2d 870, 873 (4th Cir.1989), legal conclusions couched as factual allegations, Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986), or conclusory factual allegations devoid of any reference to actual events, United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir.1979).

III. Analysis

A. Claims Concerning the Winner Addendum and Access Control Products

Two of the newly asserted claims in Sensormatic II involve products not previously at issue in Sensormatic I or encompassed by the terms of the Franchise Agreement. Count one alleges breach of contract based on the existence of the Winner Addendum and is the same claim that SSC was denied leave to amend in Sensormatic I. In count three, SSC alleges, in part, that Sensormatic breached the Franchise Agreement when it authorized ADT to sell access control products in SSC's exclusive territory.³ Count one and this portion of count three arise as a result of the Winner Addendum, its expansion of Detection Devices to include access control products, and Sensormatic's refusal to notify SSC of the addendum and to incorporate access control products into the SSC-Sensormatic Franchise Agreement and definition of Detection Devices. Based on SSC's unsuccessful attempt to include the Winner Addendum claims in Sensormatic I, Sensormatic now argues that these claims should be dismissed under the doctrine of claim splitting and because SSC knew of the alleged conduct but failed to amend the Sensormatic I complaint to incorporate these claims before the amendment deadline passed.

1. The Doctrine of Claim Splitting

It is undisputed that it is within a district court's power to stay or dismiss a suit that is duplicative of another federal court suit. See Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976) ("As between federal district courts, ... the general principle is to avoid duplicative litigation."). This rule against duplicative litigation, also referred to as "claim splitting," is the "`other action pending' facet of the res judicata doctrine.'" Davis v. Sun Oil Co., 148 F.3d 606, 613 (6th Cir.1998).⁴ Like res judicata, claim splitting "prohibits a plaintiff from prosecuting its case piecemeal, and requires that all claims arising out of a single wrong be presented in one action." Myers v. Colgate-Palmolive Co., 102 F.Supp.2d 1208, 1224 (D.Kan.2000) (internal citations omitted). Thus, when a suit is pending in federal court, a plaintiff has no right to assert another action "on the same subject in the same court,...