SMD Software, Inc. v. Emove, Inc.

• Decision Date: 22 June 2011
• Docket Number: NO. 5:08-CV-403-FL,5:08-CV-403-FL
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: SMD SOFTWARE, INC., a North Carolina corporation; and SITELINK SOFTWARE, LLC, a North Carolina limited liability company, Plaintiffs, v. EMOVE, INC., a Nevada corporation; U-HAUL INTERNATIONAL, INC., a Nevada corporation; WEB TEAM ASSOCIATES, a Nevada corporation; and A&M ASSOCIATES, an Arizona corporation, Defendants.

SMD SOFTWARE, INC., a North Carolina corporation; and SITELINK SOFTWARE LLC, a North Carolina limited liability company, Plaintiffs, v.EMOVE, INC., a Nevada corporation; U-HAUL INTERNATIONAL, INC. a Nevada corporation; WEB TEAM ASSOCIATES, a Nevada corporation and A&M ASSOCIATES, an Arizona corporation, Defendants.

NO. 5:08-CV-403-FL

THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA WESTERN DIVISION

SO ORDERED: June 22, 2011

ORDER

This matter comes before the court on (1) the motion for summary judgment filed by defendantsU-Haul International, Inc.("U-Haul"), Web Team Associates("Web Team"), and A&M Associates ("A&M")(collectively, the "U-Haul defendants")(DE # 97); (2)plaintiffs' motion for additional discovery to respond to the U-Haul defendants' summary judgment motion pursuant to Rule 56(d)(DE # 108);(3)plaintiffs' motion to compel(DE # 122); and (4)plaintiffs' motion for leave to file a reply in support of their motion to compel(DE # 136).Each of these motions has been fully briefed, and the issues raised now are ripe for adjudication.

STATEMENT OF THE CASE

On July 14, 2008, plaintiffs initiated this action in Wake County Superior Court.On August 20, 2008, the action was removed to this court by U-Haul, at that time the only defendant.Plaintiffs, who sell self-storage management software called "SiteLink," asserted state law claims for defamation, unfair or deceptive trade practices, and tortious product disparagement arising out of allegedly defamatory misrepresentations about plaintiffs' software in the context of advertisements for a competing software program, "WebSelfStorage."

On October 7, 2008, plaintiffs filed an amended complaint.The amended complaint named EMove, Inc.("EMove"), a wholly-owned subsidiary of U-Haul which sells WebSelfStorage, as the sole defendant.Plaintiffs asserted violation of § 43(a) of the Lanham Act,15 U.S.C. § 1125(a), in addition to the state law causes of action contained in their initial complaint.Two days later, plaintiffs filed a voluntary dismissal without prejudice as to U-Haul.

Approximately a year later, on October 6, 2009, plaintiffs requested leave to file another amended complaint.Plaintiffs' motion, which was opposed, was allowed by the magistrate judge on May 25, 2010.Plaintiffs filed their second amended complaint the following day, reasserting their claims against U-Haul, including now the Lanham Act claim, and also asserting those claims against Web Team and A&M, two U-Haul subsidiaries.According to plaintiffs, U-Haul owns WebSelfStorage, Web Team designed the software and provides technical support to users, and A&M produced the advertising materials at issue.All three defendants are alleged to have collaborated with their sister company EMove in the alleged defamatory advertisement.

The three U-Haul defendants filed this motion for summary judgment on March 10, 2011.¹These defendants contend that EMove is solely responsible for the alleged misrepresentations at issue.Plaintiffs responded in opposition on April 14, 2011, arguing that the U-Haul defendantsparticipated in the torts committed by EMove, that they are liable as joint tortfeasors, and that the court should pierce the corporate veil to hold them liable.Plaintiffs also argue that the summary judgment motion comes while discovery is ongoing, and that the U-Haul defendants have wrongly withheld discovery necessary to explore the relationship among all defendants.The U-Haul defendants timely replied.

On May 3, 2011, plaintiffs filed a motion to compeldefendants to provide information relating to their receipt of profits from the sale of goods and/or services other than the sale of WebSelfStorage.Plaintiffs argue that this information is relevant to the issue of damages.Defendants, including EMove, timely responded in opposition.They argue that the information is not relevant, that plaintiffs seek documents not kept in the ordinary course of business, and that it would be unduly burdensome to produce any responsive documents.On June 3, 2011, plaintiffs sought leave to file a reply to defendants' response.

On June 9, 2011, the court held hearing and pretrial status conference regarding discovery issues and all pending motions, including the ones currently before the court.As relevant here, the court inquired into whether plaintiffs' Rule 56(d) request for additional discovery was related to their motion to compel, and stated that it would take up the matters together.

STATEMENT OF THE FACTS

A. SiteLink and WebSelfStorage

The facts, in the light most favorable to plaintiffs, are as follows."SiteLink" is plaintiffs' PC- and internet-based self-storage management software that allows owners and operators of self-storage facilities to manage reservations, tenant insurance, billings, etc. (Lampe Dep. 45:10-25, 69:11-70:20, 73:19-77:18.)"WebSelfStorage" is a competing software program owned by U-Hauland developed by its subsidiary Web Team.(Celaya Oct. 2009Aff. ¶ 11;CelayaDep. 78:20-23, 80:4-5;SettlesDep. 50:25-51:3.)U-Haul's subsidiary EMove has been given the exclusive right to sell WebSelfStorage, with Web Team providing technical support for users of the software.²(Celaya Oct. 2009Aff. ¶¶ 8, 11.)

In 2004, EMove created a chart comparing WebSelfStorage to SiteLink and other competitors, based on a PowerPoint presentation created by EMove's then president, Srini Vassan ("Vassan").(Vassan Dep. 78:2-79:16;CelayaDep. 208:25-209:10.)The brochure was given out to individuals attending trade shows.(VassanDep. 79:8-12, 81:23-82:7.)Neither Vassan nor Elise Sauer("Sauer"), another EMove employee, recall who provided the information about SiteLink for purposes of the chart, although they stated that they did not compile the information themselves.(Idat 84:7-20;SauerDep. 39:11-20.)Although Samuel Celaya("Celaya"), EMove's current director, states that EMove employees researched and investigated SiteLink's features to ensure accuracy of the chart, these employees are not identified.(Celaya Oct. 2009Aff. ¶¶ 5-6.)

In 2005, the chart was updated and redone as a brochure.(VassanDep. 100:4-20.)Comparisons were once again made to SiteLink, as well as additional competing service providers.(Id.at 101:8-21.)Once again, the identity of the individual supplying the comparison information about SiteLink is unknown.(Id.at 101:22-25;FugateDep. 78:4-21; Sauer 57:2-8.)The brochure was updated again in 2008, and this time an EMove program manager named Ozkan Kenes("Kenes") performed research to ensure the accuracy of the information relating to SiteLink and other WebSelfStorage competitors.(KenesDep. 38:21-25, 41:7-25, 48:15-21.)

According to plaintiffs, these charts and brochures contain a number of misrepresentations about SiteLink.These misrepresentations include (1)"erroneously inflating the price of[SiteLink];"(2)"erroneously representing that technical support for [SiteLink] is not included in the price of the software;"(3)"erroneously representing that [SiteLink] does not support real-time confirmed reservations;"(4)"erroneously representing that [SiteLink] does not include integrated credit-card processing;"(5)"erroneously representing that [SiteLink] does not include upgrades in the purchase price;"(6)"erroneously representing that [SiteLink] does not include integrated tenant insurance;"(7)"erroneously representing that [SiteLink] does not include fully integrated online-payment processing;" and (8)"erroneously representing that [SiteLink] does not include fully integrated call-center service."(SecondAm. Compl. ¶ 23.)It appears that, according to plaintiffs, these misrepresentations stem primarily from use of the term "fully integrated" in the 2008 brochure.(Pls.'Resp.Opp. Summ. J. 7;seeCelayaDep. 239:1-7.)

B.The U-Haul Defendants' Role in the Production and Distribution of the 2008 Brochure

In 2007, U-Haul Chief Executive Officer Joe Shoen directed EMove to update its marketing materials.(TonanDep. 47:7-18.)As noted above, that task was delegated by Celaya to Ozkan with respect to updating the information on SiteLink in the 2005 brochure.(CelayaDep. 291:4-11.)After receiving the information from Ozkan, Celaya and Sauer met with representatives of Web Team.(SauerDep. 103:14-25.)At that meeting, the individuals discussed using the aforementioned term "fully integrated" in the 2008 brochure as a "buzzword" to describe thefunctionality offered by WebSelfStorage as opposed to SiteLink and other competing software products.(BiermanDep. 176:15-177:24.)

EMove took the contents of the 2008 brochure to A&M, which then performed design, layout, and printing work on it.(Celaya Dep. 95:20-96:16;Celaya Oct. 2009Aff. 9.)The completed brochure was shown to John Taylor("Taylor"), who is both president of U-Haul and a director of EMove.(CelayaDep. 300:14-301:11; Pls.'Resp.Opp. Summ. J. Ex. 18.)It was then distributed at trade shows and throughout the country via U-Haul's network of state-based marketing companies through "U-Haul's field representatives."(Huberty 30:2-32:8; Sauer Dep. 93:3-94:18.)The 2005 brochure was also distributed by U-Haul's marketing companies, although the 2004 chart appears only to have been distributed at trade shows.(CelayaDep. 192:6-19.)

C.Relationship Between U-Haul and Its Subsidiaries

Many of plaintiffs' arguments are premised on the integration between various U-Haul entities.Plaintiffs note that, in addition to allowing EMove to sell its WebSelfStorage software, U-Haul provides advertising, accounting services, technology support, personnel, and payroll services to EMove in exchange for $25.00 per year.(Master Services Agreement, Pls.'Resp.Opp. Summ. J. Ex. 10;SettlesDep. 50:5-17.)It also notes that EMove, Web Team, and A&M are all located in the same building as U-Haul.(CelayaDep. 84:2-4, 95:25-96:3.)These defendants share a number of common...