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Annie Sloan Interiors, Ltd. v. Davis Paint Co.

United States District Court, E.D. Louisiana

May 2, 2019

ANNIE SLOAN INTERIORS, LTD., Plaintiff,
v.
DAVIS PAINT COMPANY, KEVIN OSTBY, Defendants.

          MARY ANN VIAL LEMMON JUDGE

          ORDER AND REASONS

          Janis Van Meerveld United States Magistrate Judge

         Before the Court is plaintiff's Motion for Leave to File First Supplemental and Amended Complaint. (Rec. Doc. 52). For the following reasons, the Motion is GRANTED. Plaintiff's First Supplemental and Amended Complaint shall be entered into the record.

         Background

         This dispute arises out of a Manufacturing Agreement between plaintiff Annie Sloan Interiors, Ltd. (“ASI”), defendant Davis Paint Company (“Davis Paint”), and non-party Jolie Design & Décor, Inc. (“JDD”).[1] ASI filed its original complaint against Davis Paint and its principal Kevin Ostby on September 6, 2018, asserting claims for breach of contract in bad faith, detrimental reliance, misrepresentation, contributory infringement and unfair competition in violation of the Lanham Act, and violations of the Louisiana Unfair Trade Practices Act (“LUTPA”). ASI alleged that Davis Paint had promised to use the specifications of the paint products it had agreed to develop and manufacture exclusively for ASI. In the alternative, ASI argued that the doctrine of detrimental reliance bound Davis Paint to keep its promise not to use the specifications developed for ASI for anyone except ASI. It argued that Ostby and Davis Paint intentionally misrepresented their intent to fulfill the promise of exclusivity. And ASI alleged that Davis Paint, JDD, and Jolie Home, LLC (“JHL”)-a company formed by JDD's principals in the wake of the breakdown in the JDD-ASI relationship-are engaging in infringement of ASI's trademarks.

         Defendants filed a partial motion to dismiss on November 2, 2018. On January 25, 2019, the district court granted the motion, dismissing all of ASI's claims, except those for alleged trademark infringement and violations of the Louisiana Unfair Trade Practices Act (“LUTPA”). The other three claims were based on the alleged existence of oral promises made during the negotiation of the Manufacturing Agreement, but the court rejected them because it found that the email purportedly supporting a promise of exclusivity actually indicated that Davis Paint intended to keep open the possibility of selling to others in the future. Thus, the court dismissed ASI's breach of contract claim, holding that ASI had failed to plead sufficient facts to allow a conclusion that there was any meeting of the minds on an exclusivity agreement. The court also rejected the detrimental reliance claim for the same reason that the email did not promise exclusivity. The court added that “the comment relied upon was part of the negotiations for a future written contract which did not include exclusivity in favor of ASI.” ASI's intentional or fraudulent misrepresentation was also dismissed because the court found that reliance on the email as a promise of exclusivity was not justifiable.

         On February 21, 2019, ASI filed a Motion for Leave to Amend seeking to assert a claim for breach of an implied duty of good faith and fair dealing and to supplement its allegations as to its detrimental reliance claim. Among other things, Davis Paint argued in opposition that ASI's proposed pleading was futile because a breach of the implied duty of good faith and fair dealing requires a predicate breach of contract, which had not been alleged. Before any ruling issued on that Motion for Leave to Amend, ASI sought to substitute the proposed pleading with a new pleading that addressed this purported deficiency and plead additional facts. Davis Paint opposed the substitution, but before its opposition could be filed, ASI filed a second motion to substitute the proposed pleading to plead additional facts. To streamline ASI's request to file an amended pleading, the court denied all pending motions related to the proposed pleading and required ASI to file a new motion for leave to amend, which attaches the pleading that ASI seeks to file and the reasons why it should be granted leave to do so.

         On April 5, 2019, ASI filed the present Motion for Leave to Amend. It seeks to delete its negligent misrepresentation claim and its original breach of contract claim, which was based on the email agreement. It seeks to add a new breach of contract claim against Davis Paint for breach of the Manufacturing Agreement, alleging that Davis Paint sold products manufactured for ASI to JHL or to JDD as an alter ego and “front” for JHL with the knowledge that the products would be re-labeled and sold as JHL products and not as ASI products. It submits that this was in breach of the Manufacturing Agreement's requirement that “All Products Manufactured for [ASI] shall be sold exclusively to [JDD] within Territory as laid out in this agreement unless agreed upon and documented by [ASI] and [JDD].” ASI also reasserts its detrimental reliance claim and adds facts in support of the claim. It alleges that Davis Paint's eight years of manufacturing the paint at issue exclusively for ASI establishes that ASI was reasonable in relying on Davis Paint's promise to manufacture this paint exclusively for ASI. It cites testimony by Mr. Ostby that ASI was entitled to rely on his representation that he did not intend to sell chalk paint to anyone else in the future. ASI alleges that throughout the paint development process, Ostby referred to the paint products as Annie Sloan paint and not as Davis Paint paint. It cites an additional email where Ostby stated “we would not represent Annie Sloan products to anyone other then who you tell us, are ok, to deal with.” ASI alleges that it relied on this promise in agreeing to introduce Davis Paint to Lisa Rickert of JDD. It alleges that the Manufacturing Agreement gave ASI the sole right to change the specifications and design of the products. ASI's proposed complaint also includes the Lanham Act and LUTPA claims as alleged in its original complaint.

         Trial in this matter has not yet been set, nor has the court set any deadline for amending pleadings.

         Law and Analysis

         1. Standard for Granting a Motion for Leave to Amend

         Under Federal Rule of Civil Procedure 15(a)(2), when the time period for amending a pleading as a matter of course has passed, a party may amend its pleadings by consent of the parties or by leave of court. “The court should freely give leave when justice so requires.” Fed. R. Civ. Proc. 15(a)(2). Thus, the United States Court of Appeals for the Fifth Circuit instructs that the “district court must possess a ‘substantial reason' to deny a request for leave to amend.” Smith v. EMC Corp., 393 F.3d 590, 595 (5th Cir. 2004). Nonetheless, “that generous standard is tempered by the necessary power of a district court to manage a case.” Yumilicious Franchise, L.L.C. v. Barrie, 819 F.3d 170, 177 (5th Cir. 2016) (quoting Schiller v. Physicians Res. Grp. Inc., 342 F.3d 563, 566 (5th Cir. 2003)). The court may consider numerous factors when deciding whether to grant a motion for leave to amend, including “undue delay, bad faith or dilatory motive on the part of the movant, repeated failures to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, and futility of the amendment.” Schiller v. Physicians Res. Grp. Inc., 342 F.3d 563, 566 (5th Cir. 2003).

         To determine whether a complaint is futile, courts “apply ‘the same standard of legal sufficiency as applies under Rule 12(b)(6).'” Stripling v. Jordan Prod. Co., LLC, 234 F.3d 863, 872-73 (5th Cir. 2000) (quoting Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000)). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). As explained by the United States Supreme Court,

A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a “probability requirement, ” but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a ...

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