Ultimate Outdoor Movies, LLC v. FunFlicks, LLC

• Decision Date: 23 May 2019
• Docket Number: Civil Case No.: SAG-18-2315
• Parties: ULTIMATE OUTDOOR MOVIES, LLC, et al., Plaintiffs, v. FUNFLICKS, LLC, et al., Defendants.
• Court: U.S. District Court — District of Maryland

ULTIMATE OUTDOOR MOVIES, LLC, et al., Plaintiffs, v. FUNFLICKS, LLC, et al., Defendants.

Civil Case No.: SAG-18-2315

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

May 23, 2019

AMENDED MEMORANDUM OPINION

PlaintiffsUltimate Outdoor Movies, LLC and Laura Landers("Plaintiffs") filed suit against DefendantsCharles Hunter, Matthew Dias, and FunFlicks Audiovisuals (collectively "the California Defendants"); Todd Severn and FunFlicks, LLC(collectively, "the Severn Defendants"); and James Gaither and NATJAY, LLC(collectively, "the Gaither Defendants").ECF 1.Plaintiffs allege fraud; aiding and abetting; breach of contract; violations of the Maryland Uniform Trade Secrets Act, Md. Code Ann., Com. Law § 11-1201 et seq., and the Federal Trade Secrets Act, 18 U.S.C. § 1836; defamation; intentional interference with contract; violations of the Federal Wiretap Act, 18 U.S.C. § 2511, and the Texas Wiretap Act, Tex. Civ. Prac. & Rem. Code Ann. §123.001 et seq.; violations of the Federal Lanham Act,15 U.S.C. §§ 1125(a)(1)(A)-(B); unfair competition; intentional interference with economic relations; and civil conspiracy.ECF 21.Presently pending are the Severn Defendants' Motion to Dismiss for Failure to State a Claim, ECF 29, the Gaither Defendants' Corrected Motion to Dismiss for Failure to State a Claim, ECF 31, and the California Defendants' Motion to Dismiss for Lack of Personal Jurisdiction and Failure to State a Claim, ECF 26.Plaintiffs opposed each motion, ECF 32, 44, 46, and the California Defendants and the Severn Defendants each filed a Reply, ECF 45, 61.The Gaither Defendants did not file a Reply.This Court also granted Plaintiffs' Motion for Leave to File a Supplemental Response in Opposition to the California Defendants' Motion to Dismiss, and will consider Plaintiffs' Supplemental Opposition, ECF 40.ECF 99.

This Court held a hearing on Defendants' Motions on January 23, 2019, ECF 86, and granted Plaintiffs limited jurisdictional discovery as to the California Defendants, ECF 99.The Court also granted Plaintiffs an opportunity to supplement their opposition to the California Defendants' Motion to Dismiss, and granted the California Defendants an opportunity to file a response.ECF 99.After conducting the limited jurisdictional discovery, Plaintiffs supplemented their opposition, ECF 102, and the California Defendants filed a response, ECF 104.On April 10, 2019, the Severn Defendants filed a Third Party Complaint and a Motion for Preliminary Injunction against Darrell Landers("Darrell Landers") and his company, LND Technologies, LLC("LND").ECF 105, 106.

On May 8, 2019, the Court entered a Memorandum Opinion and Order granting in part and denying in part the Severn Defendants' Motion to Dismiss, ECF 29, granting in part and denying in part the Gaither Defendants' Corrected Motion to Dismiss, ECF 31, and granting in part and denying in part the California Defendants' Motion to Dismiss, ECF 26.ECF 120, 121.Plaintiffs filed a Motion for Reconsideration on May 22, 2019, seeking reconsideration of the Court's dismissal of Count VII against the Severn Defendants.I shall grant Plaintiffs' Motion for Reconsideration, ECF 127, and hereby amend the Court's reasoning as to Count VII.

For the reasons stated below, I shall grant in part and deny in part the Severn Defendants' Motion to Dismiss, ECF 29, grant in part and deny in part the Gaither Defendants' CorrectedMotion to Dismiss, ECF 31, and grant in part and deny in part the California Defendants' Motion to Dismiss, ECF 26.

I.Factual Background¹

PlaintiffUltimate Outdoor Movies, LLC("UOM") is a Texas-based outdoor inflatable movie screen rental company.ECF 21 ¶ 2.UOM was incorporated in Texas in 2010. Id.¶ 56.PlaintiffLaura Landers("Laura Landers"), a Texas resident, is the sole owner of UOM.Id.¶¶ 1, 56 n.2.Laura Landers's husband, Darrell Landers, is CEO and Vice President of UOM.Id.¶ 56 n.2.

DefendantTodd Severn("Severn") is the original owner and creator of the outdoor inflatable movie screen rental brand known as FunFlicks. ECF 21 ¶ 48.Severn operated the business as FunFlicks, LLC("FF-Severn") from 2002 until January 1, 2013.Id.During this time, FF-Severn granted non-exclusive licenses to individuals and small business owners, including Darrell Landers in April, 2008, for the purpose of operating a business under the FunFlicks name.Id.¶¶ 49, 55.When UOM was formed in 2010, Darrell Landers transferred his FunFlicks licenses to UOM.Id.¶ 56.As of December 31, 2012, UOM operated FunFlicks businesses in Dallas, Fort Worth, Houston, San Antonio, Oklahoma City, Tulsa, Memphis, Nashville, Huntsville, and Little Rock.Id.¶57.In December, 2012, Darrell Landers incorporated a separate entity, FunFlicks, Inc., in Texas ("FF-Landers").Id.¶ 58.FF-Landers eventually changed from FunFlicks, Inc. to FunFlicks, LLC.Id.¶ 13.In January, 2013, FF-Landers bought the rights to the FunFlicks brand, including additional FunFlicks territories, from the Severn Defendants through an asset purchase agreement ("2013 APA"), executing a promissory note and granting FF-Severn a security interestin FF-Landers's business assets.Id.¶¶ 15, 58-61.After that transaction, FF-Landers allowed UOM to begin operating additional FunFlicks territories in Maryland, Delaware, and D.C. Id.¶ 61.

In or about the fall of 2017, FF-Landers did not make payment to FF-Severn under the promissory note,² and the parties began negotiating a restructuring of the 2013 APA.Id.¶¶ 96-125.In or about December, 2017, unbeknownst to FF-Landers, FF-Severn sought a replacement buyer, and approached California DefendantsCharles Hunter("Hunter") and Matthew Dias("Dias") about purchasing the FunFlicks brand through their California-based FunFlicks company, Defendant FunFlicks Audiovisual ("FF-AV").Id.¶¶ 115-125.Individual Defendants Dias and Hunter are residents of California.ECF 26-5 ¶ 7, 26-6 ¶ 8.Corporate Defendant FF-AV, a company that provides outdoor movie entertainment, was incorporated in California and maintains its principal place of business in Bakersfield, California.ECF 26-5 ¶¶ 3-4, 26-6 ¶¶ 4-5.Dias is the Vice President and Chief Financial Officer of FF-AV, ECF 26-5 ¶ 2, and Hunter is the Chief Executive Officer of FF-AV, ECF 26-6 ¶ 3.FF-AV does not have an office or any employees in Maryland, does not own property in Maryland, does not have a resident agent for service of process in Maryland, does not have a mailing address or telephone number in Maryland, and does not maintain a bank account in Maryland.ECF 26-5 ¶¶ 5-6, 26-6 ¶¶ 6-7.Dias and Hunter have never lived in Maryland, have never owned, rented or leased any real or personal property in Maryland, have never worked or attended school in Maryland, have never paid taxes in Maryland ormaintained any type of bank or securities account in the state, and have never traveled to Maryland to participate in any judicial proceedings or arbitrations.ECF 26-5 ¶¶ 8-15, 26-6 ¶¶ 9-16.

On or about December 21, 2017, the California Defendants and FF-Severn executed an asset purchase agreement ("2017 APA"), selling the assets covered under the 2013 APA to the California Defendants.ECF 21 ¶116.The 2017 APA is governed by Maryland law.Id.¶¶ 118, 119, Exh. 4.Plaintiffs allege that the 2013 APA did not cover the after-acquired property of FF-Landers and, when FF-Landers learned of the 2017 APA, FF-Landers and FF-Severn began a second round of negotiations to resolve their remaining disputes over the 2013 APA.Id.¶¶ 129, 130, 139.During those negotiations, FF-Severn had control of the www.FunFlicks.com URL, held in escrow on a separate DNS server, pursuant to the 2013 APA.Id.¶ 137 (l) n.4.Plaintiffs allege, however, that FF-Landers, not FF-Severn, had control over the "web/email servers containing the FunFlicks email addresses and data."Id.

While negotiations were ongoing between FF-Landers and FF-Severn, the California Defendants contacted Laura Landers to discuss UOM's continuation of its license under the FunFlicks brand.Id.¶ 140.Plaintiffs allege that Defendant Hunter promised Laura Landers, over the phone, that he would not "screw" her over.Id.¶ 155.Based on this promise, Plaintiffs allege that UOM refrained from switching its brand from FunFlicks to UOM, and continued to operate under the FunFlicks name without objection from the California Defendants.Id.¶ 157.On March 3, 2018, Darrell Landers and FF-Severn executed a Release and Settlement Agreement ("the Release"), settling their dispute over the 2013 APA.Id.¶¶ 245-255, Exh. 13.

James Gaither worked as an independent contractor for UOM for 6 years.Id.¶ 172.Plaintiffs allege that Gaither was contracted with UOM through December 31, 2018.Id.¶ 175.However, in January, 2018, Gaither formed NATJAY, LLC in Maryland, to operate a moviebusiness.Id.¶ 180.On or about February 5, 2018, Gaither executed a licensing agreement with the California Defendants to operate as a FunFlicks licensee.Id.¶ 182.On February 18, 2018, Gaither and Darrell Landers spoke on the phone about UOM's plans for the 2018 season.Id.¶ 198.On February 20, 2018, UOM switched its brand to "Ultimate Outdoor Movies," and sent a notice to all of its customers about the switch from FunFlicks to UOM, including its new email contacts, using the URL www.ultimateoutdoormovies.com.³Id.¶ 206.

On or about February 27, 2018, Plaintiffs allege that Gaither, on behalf of all of the Defendants, sent an email to all FunFlicks customers from UOM's Mid-Atlantic Client List, warning clients that a "Texas business has been marketing outdoor movies using the FunFlicks® name without authorization."Id.¶ 212.The email also stated, "[y]our events and deposits are at risk!This out of state company formed in August and is attempting to undermine FunFlicks business across America.Most importantly, they MAY NOT have infrastructure in Maryland or other states to handle...