Case Information
*1 UNITED STATES DISTRICT COURT manufacturing unique wooden toy blocks. SOUTHERN DISTRICT OF GEORGIA
ECF No. 1 at 1, 3. The Dutch blocks are SAVANNAH DIVISION made of French wood but are processed, packaged, and shipped from Morocco. Id. at
T.V.D.B. SARL; KAPLA FRANCE 3. Each block is "precision cut to a single SARL; and TOM'S TOYS, LLC, size and shape" with a ratio of 1 unit of thickness to 3 units of width to 15 units of
Plaintiffs, length. Id. "[W]hen stacked, [the blocks] 4: 12-cv-230 remain in place through forces of gravity, V . and owing to the distinct size and KAPLA USA, LP; KAPLA USA GP, configuration of the blocks." Id LLC; CITIBLOCS, LLC; and MARJORIE I. CHAYETTE, In 2005, Kapla sought a new distribution
partner in the United States. Id at 4. Kapla Defendants. management interviewed and selected Chayette, memorializing an exclusive
ORDER distribution relationship with her in 2005. I. INTRODUCTION Id Chayette then formed KAPLA USA as the corporate distributor of the wooden T.V.D.B. Sari ("TVDB"), Kapla France blocks and also formed GP to serve as the SARL ("Kapla"), and Tom's Toys, LLC corporate general partner of KAPLA USA. ("Tom") bring this action against KAPLA Id. From 2005 to 2008, the distribution USA, LP ("KAPLA USA"), KAPLA USA relationship proceeded as all parties OP. LLC ("GP"), CITIBLOCS, LLC intended, with blocks shipping from ("CITIBLOCS"), and Marjorie I. Chayette Morocco to Savannah and then on to 2,500 alleging breach of contract and numerous retailers throughout the United States. Id. at business torts. Plaintiffs and Defendants 4-5. cross moved for summary judgment. ECF Nos. 49; 50. The Court GRANTS IN PART In September, 2008, KAPLA USA and DENIES IN PART both motions. The placed two orders for blocks in the amounts Court also ORDERS the parties to submit of €37,925 and €51,330. Id. at 5. KAPLA briefs on the proper conversion rate from USA never paid the invoice amounts to Euros to Dollars and the proper pre-
Kapla.' ECF Nos. 1 at 6; 56 at 7-8. judgment interest rate. KAPLA USA is now insolvent and out of business. ECF Nos. 56 at 3. Kapla alleges
II. BACKGROUND the failure to pay amounts to a breach of This is the story of what happens when contract, unjust enrichment, and conversion. an international business relationship ECF No. 1 at 9, 18, 23. This dispute would established to market children's building blocks comes crashing to the ground. Kapla, a French company, and TVDB, a
'Due to an accounting adjustment, Kapla claims that KAPLA USA currently owes a total of €61,769. Moroccan company, are in the business of ECF Nos. I at 6; 1-2at2-3. *2 El be straightforward if it ended here, but the Court must dismiss Tom4 because it is story continues. unable to demonstrate an injury, and thus the
claims are not justiciable under Lujan v. In October 2008, CITIBLOCS, a Defenders of Wildlife, 504 U.S. 555, 560 company selling blocks very similar to those (1992). that Chayette previously distributed for Kapla, was formed . 2 ECF No. 1 at 8. This order 1) defines the appropriate Plaintiffs allege that the CITIBLOCS standard of review; 2) addresses the venture breaches fiduciary duties, breaches a dismissal of Tom's claims; 3) evaluates the duty to properly represent business contract related claims; 4) evaluates the information, violates state trade secret laws, claims related to CITIBLOCS's conduct; 5) violates federal intellectual property laws, analyzes CITIBLOCS as a successor in amounts to unfair competition and deceptive interest to KAPLA USA; and 6) analyzes practices, and tortuously interferes with their corporate veil piercing claims. businesses? ECF No. 1 at 14-17, 18-21, 23.
Ill. ANALYSIS Plaintiffs also ask the Court to hold A. Standard of Review CITIBLOCS accountable for KAPLA USA's debts through successor liability. Id
Courts "grant summary judgment if the at 11-12. Finally, Plaintiffs allege that movant shows that there is no genuine Chayette is personally responsible and liable dispute as to any material fact and the for all breaches and torts, and asks the Court movant is entitled to judgment as a matter of to pierce the corporate veil. Id. law." Fed. R. Civ. P. 56(a). Specifically, the moving party must identify the portions
Plaintiffs contend that they are entitled of the record which establish that there are to summary judgment on the breach of no "genuine dispute[s] as to any material contract claim and the unjust enrichment fact and the movant is entitled to judgment claim against KAPLA USA, the claim under as a matter of law." Moton v. Cowart, 631 the Georgia Deceptive Trade Practices Act, F.3d 1337, 1341 (11th Cir. 2011). In and their claim that CITIBLOCS is the determining whether a summary judgment successor in interest to KAPLA USA and motion should be granted, a court must view thus liable for its debts. ECF No. 49-1 at the record and all reasonable inferences that 11-21. Defendants contend they are entitled can be drawn from the record in a light most to summary judgment on all claims for lack favorable to the nonmoving parties. Peek- of evidence except the breach of contract A—Boo Lounge of Bradenton, Inc. v. claim against KAPLA USA. ECF No. 51 at Manatee Co., Fla., 630 F.3d 1346, 1353 10-31. Defendants also contend that the (11th Cir. 2011). Courts, moreover, may consider all materials in the record, not just [2] Chayette first became a member of CITIBLOCS in June, 2009. ECF No. 49-8 at 3.
Plaintiffs also abandoned claims for breach of ' Tom is not present in the narrative discussing the contract accompanied by a fraudulent act, conversion parties because it formed in May, 2009. ECF No. 51 of customer lists, and defamation. ECF No. 55 at I. at 31. [11] *3 those cited by the parties. Fed. R. Civ. P. C. Claims related to the unpaid order 56(c)(3).
1. Breach of Contract B. Dismissal of all claims by Tom for Plaintiffs and Defendants both agree that lack of standing summary judgment is proper on the claim of A plaintiff must demonstrate three things breach of contract against KAPLA USA. to establish standing in federal courts under ECF Nos. 49-1 at 11-12; 56 at 7-8. But the Article III of the Constitution: 1) "he must analysis does not end there. Plaintiffs have show that he has suffered an 'injury-in- claimed an unpaid balance of €61,769. fact;" 2) he must draw a "causal connection Once a federal court determines damages between the asserted injury-in-fact and the calculated in a foreign currency, it must challenged action of the defendant;" and 3) determine the "proper rate at which to the injury must be redressable by a favorable convert this amount into United States decision. Shotz v. Cates, 256 F.3d 1077, dollars." Jam. Nutrition Holdings, Ltd. v. 1081 (11th Cir. 2001). "In addition, United Shipping Co., 643 F.2d 376, 379 (5th standing must exist with respect to each Cir. Unit A Apr. 1981). Neither party has claim." Parker v. Scrap Metal Processors, addressed the conversion issues. So, the 386 F.3d 993, 1002 (11th Cir. 2004). Court instructs the parties to submit briefs
on the proper conversion date and rate Defendants argue that Tom has suffered within 21 days of this Order. no injury-in-fact because it was not formed until May, 2009, months after KAPLA USA Furthermore, the parties must brief the ordered and received the unpaid blocks. Court on the proper pre-judgment interest ECF No. 51 at 31-32. The Court agrees that rate in light of the proper date to select the Tom could not suffer injury from a breach of exchange rate, as a victorious party may not contract that occurred prior to Tom's reap a windfall by applying a favorable existence. Tom's claims related to the interest rate to currency converted at a unpaid order therefore are dismissed. favorable exchange rate. See Seguros Del
Estado, S.A. v. Scientific Games, Inc., 262 Nevertheless, Tom correctly notes that F.3d 1164, 1179-81 (11th Cir. 2001) any ongoing use of Kapla's advertising (holding that the district court erred by material by CITIBLOCS harms Tom's sales, applying the exchange rate from the date of and it therefore has standing to assert claims a contract breach and then applying a high related to CITIBLOCS's conduct. 5 See ECF pre-judgment interest rate to the converted No. 55 at 24-26. sum that should have only applied to deposits of Colombian pesos).
Along similar lines, the Court rejects Defendants' 2. Unjust Enrichment contention that all claims except the breach of contract must be dismissed because Plaintiffs can
In Georgia, a claim for unjust show no damages. ECF No. 51 at 32-34. Even if the actual damages are immeasurable, the jury may enrichment "does not lie where there is an award nominal damages if "the violation of a right is
express contract." Arko V. Cirou, 700 shown." MTW Inv. Co. v. Alcovy Props., Inc., 616 S.E.2d 604, 608 (Ga. Ct. App. 2010). Both S.E.2d 166,169 (Ga. Ct. App. 2005).
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*4 parties have concede that a contract exists grants Defendants' motion for summary and therefore Plaintiff's unjust enrichment judgment on this claim. claim fails as a matter of law.
4. Breach of Fiduciary Duty by KAPLA 3. Conversion of Inventory USA In Georgia, "[c]onversion consists of an Plaintiffs claim that KAPLA USA
unauthorized assumption and exercise of the breached a fiduciary duty to Kapla as right of ownership over personal property exclusive distributor and in the debtor- belonging to another, in hostility to his creditor relationship. EFC No. 1 at 14. The rights; an act of dominion over the personal Court first determines if such a duty exists property of another inconsistent with his as a matter of law under these relationships rights; or an unauthorized appropriation." and then investigates whether the evidence Maryland Cas. Ins. Co. v. Weichel, 356 creates an issue of material fact as to a S.E.2d 877, 880 (Ga. 1987) (internal breach. quotations omitted). But not "every breach
In Georgia, when two parties enter into of a contractual obligation to pay money" certain business relationships, the courts will constitutes conversion. LaRoche Indus., Inc. enforce fiduciary duties between the parties. v. AIG Risk Mgmt., 959 F.2d 189, 191 (11th Optimum Techs. v. Henkel Consumer Cir. 1992). Instead, a pre-existing fiduciary Adhesives, 496 F.3d 1231, 1249 (11th Cir. duty to the aggrieved party must also exist 2007). for a breach of contract to become [I]n order for a business arrangement conversion. See ULQ, LLC v. Meder, 666 between two parties to rise to the S.E.2d 713, 718-19 (Ga. Ct. App. 2008). level of a confidential relationship, it Also, in Georgia, consent to possession of must be shown either that the parties the property is a valid defense to a have a long history with each other, conversion claim. Lamb v. State Farm Mut. or that the arrangement was not at Auto Ins. Cos., 522 S.E.2d 573, 575 (Ga. Ct. arm's length, but was in the nature of App. 1999) ("[S]hould the jury find that a legal partnership or a joint venture. [plaintiff] provided his consent, no action A confidential relationship does for conversion would lie as a matter of law not arise, however, where the because an essential element of that tort, business transaction is merely an unauthorized appropriation of personal arrangement in which each party is property, would be absent."). attempting to further [its] own The conversion claim fails because separate business objectives, rather Kapla consented to possession of the than entering into some sort of joint inventory when it shipped the blocks to venture. KAPLA USA. See ECF No. I at 5. Even if Id (internal quotations omitted) (alterations KAPLA USA owed a fiduciary duty to in original). "The burden is on the plaintiff Kapla as Plaintiffs contend, they cannot to establish that a confidential relationship overcome the defense of consent. The Court existed between the parties . . . ." Id.
I,
*5 Evidence of such relationship includes a LLC). "[O]fficers and directors may not... right to share profits or equal control of the use their position for the purpose of putative business enterprise. Id. preferring themselves over any creditor, and
any scheme or device the purpose of which In Optimum, the Eleventh Circuit held is to indemnify themselves against loss that a typical distributor relationship—"one constitutes legal fraud." Ware, 104 S.E.2d in which [plaintiff] manufactured and at 559. "The test is the intent or purpose supplied its product and [defendant] which induced the making of the payment or distributed it to retailers"—did not give rise the giving of the security." Id. to a fiduciary relationship. Id. This is exactly the relationship in this case. As The parties here disagree as to whether evidenced by the Plaintiffs' breach of Plaintiffs provide sufficient evidence to contract claim, Kapla sold blocks to KAPLA create a jury issue. Defendants contend that USA. See ECF No. 1 at 9. KAPLA USA there is "absolutely no evidence" that then resold the blocks for its own benefit. KAPLA USA was insolvent at the time it The parties had no sort of profit- or control- placed the unpaid orders from Kapla, and sharing agreement. even if it was, it treated all creditors equally,
so Plaintiffs therefore did not breach Nor does five-year term of the fiduciary obligations. ECF No. 51 at 22 distribution agreement alter the non- (emphasis in original). Plaintiffs point to fiduciary nature of the parties' relationship. Chayette's testimony that KAPLA USA See ECF No. 55 at 10 (arguing that the transferred money to CITIBLOCS instead of extended, fixed term of this relationship paying Kapla because CITIBLCOS needed distinguishes it from the business the money. ECF No. 55 at 11. relationship in Optimum.) Plaintiffs have failed to produce evidence that this business Defendants are wrong here for two relationship was anything but an arm's reasons. First, Georgia law does not require length transaction, so there is no fiduciary that a debt be incurred at the time the duty based solely on KAPLA USA being an defendant is insolvent to create a fiduciary exclusive distributor. duty, only that a transaction occur at the
time the defendant is insolvent. Ware, 104 Both parties agree that "Georgia [c]ourts S.E.2d at 559. Here, KAPLA USA's may in limited circumstances impose transfer of $30,000 to CITIBLOCS at the fiduciary obligations where a corporate time it owed Kapla for the unpaid orders is a [d]efendant engages in transactions at the sufficient transaction. 6 See ECF 49-3 at 16 time it is insolvent. . . ." ECF No. 51 at 22 (discussing that KAPLA USA had (emphasis in original); ECF No. 55 at 10-12; insufficient assets to pay off all creditors at WOre v. Rankin, 104 S.E.2d 555, 558-59 (Ga. Ct. App. 1958); see also Tindall v. H & S Homes, LLC, No. 5:10-CV-044, 2011 WL [6] Chayette testified that she may have transferred 5827227, at *2..3 (M.D. Ga. Nov. 18, 2011) more than $30,000 from KAPLA USA to (applying the doctrine to members of an CITIBLOCS, ECF No. 49-8 at 3, so the damages for this claim are not limited to $30,000. *6 A negligent misrepresentation "claim
the time that it transferred money to CITIBLOCS). must be based upon misrepresentations
related to pre-existing or present fact and not Second, Chayette's testimony that she, a promise of future conduct." Nat'l Elite herself was a creditor of KAPLA USA, and Transp., LLC v. Angel Food Ministries, Inc., KAPLA USA made a choice to not pay No. 3:11-CV-41, 2011 WL 2728408, at *6 Kapla but rather transfer funds to (M.D. Ga. July 12, 2011). Plaintiffs argue CITIBLOCS, thus favoring Chayette, rebuts that for this instance of negligent Defendants' contention that no evidence misrepresentation, the false information is supports a breach of fiduciary duty to KAPLA USA's promise to pay for the Plaintiffs.7 Plaintiffs have created a jury blocks upon receipt. ECF No. 1 at 21. issue on the claim of breach of fiduciary Thus, Plaintiffs may not predicate a claim of duty by KAPLA USA as a creditor to negligent misrepresentation on the breach of Plaintiffs.' the purchase contract and this claim fails. 5. Negligent Misrepresentation by D. Claims involving conduct of KAPLA USA as to its intention to pay
CITIBLOCS
Kapla for blocks purchased 1. Misappropriation of trade secrets Negligent misrepresentation requires "(1) the defendant's negligent supply of false Georgia protects trade secrets as information to foreseeable persons, known valuable intellectual property and provides or unknown; (2) such persons' reasonable for injunctive and monetary relief when reliance upon that false information; and (3) defendants have misappropriated such economic injury proximately resulting from information. O.C.G.A. §§ 10-1-761 to 767. such reliance." Marquis Towers, Inc. v. A trade secret is: Highland Grp., 593 S.E.2d 903, 906 (Ga. Ct.
information, without regard to form, App. 2004). The parties argue over the including, but not limited to applicability of the economic loss rule to financial data. . . or a list of actual or this tort, but that issue is not dispositive potential customers or suppliers here. ECF No. 51 at 23-24; ECF No. 55 at which is not commonly known by or 12-13. available to the public and which information:
Chayette became the sole member and manager of (A) Derives economic value, actual CITIBLOCS in June, 2009. ECF No. 49-8 at 3. [8] The Court wishes to make clear that under Georgia
or potential, from not being generally law, GP, CITIBLOCS, and Chayette may be liable known to, and not being readily for breach of this fiduciary duty. Ware, 104 S.E.2d at ascertainable by proper means by, 559. That said, "[s]uch an action does not pierce the corporate veil. Instead, it simply rescinds improper
other persons who can obtain payments to shareholders or directors so that funds economic value from its disclosure are available for payment of corporate debts." Hickman v. Hyzer, 401 S.E.2d 738, 740 (Ga. 1991). or use; and Therefore, the Court's ruling on veil piercing or successor interest liability does not apply to this claim.
*7 (B) Is the subject of efforts that are 2. Tortious Interference with Business reasonable under the circumstances Relations to maintain its secrecy.
In Georgia, a plaintiff must support a § 10-1-761(4); A plaintiff must present claim of tortious interference with business evidence of both prongs of the definition to relations with evidence that "defendant (1) survive summary judgment. Bacon v. Volvo acted improperly and without privilege, (2) Serv. Dr., Inc., 597 S.E.2d 440, 443 (Ga. Ct. purposely and with malice with the intent to App. 2004). injure, (3) induced a third party or parties
not to enter into or continue a business Defendants argue that suggested retail relationship with the plaintiff, and (4) for prices and wholesale prices are not trade which the plaintiff suffered some financial secrets because they are of no value to the injury." Amerigas Propane, L.P. v. T-Bo Plaintiffs. ECF No. 51 at 17. Defendants Propane, Inc., 972 F. Supp. 685, 694 (S.D. also argue that Plaintiffs took no steps to Ga. 1997). protect any secret information because they never demanded a confidentiality Defendants cleverly contend that agreement, never kept any records of Plaintiffs only ever had one customer at a dissemination, and because they waited time in the United States, and at the relevant three and a half years to pursue a lawsuit to time it was KAPLA USA, so Defendant attempt to protect the secrets, likening the could not have interfered with itself. ECF facts to those in Bacon, 597 S.E.2d at 443. No. 51 at 20-21. Plaintiffs counter that the Id at 19. relevant third parties in this case were
former customers of KAPLA USA who Plaintiffs counter that the factory costs, switched to purchase CITIBLOCS's or those that the Defendants would pay to product. ECF No. 55 at 7. This is a valid the factory for Plaintiffs' goods, are the argument, but a "plaintiff must present protected trade secret, and the testimony of a direct evidence that the relationships were former member of CITIBLOCS supports likely to develop absent the interference." this contention. ECF No. 55 at 5. The fact Trilink Saw Chain, LLC v. Blount, Inc., 583 that Plaintiffs did not provide this pricing F. Supp. 2d 1293, 1324 (N.D. Ga. 2008). information to anybody but Chayette, they Circumstantial or, even worse, speculative argue, is sufficient evidence of reasonable evidence of future business relationships is efforts to maintain secrecy, and is insufficient. Id at 1325. distinguishable from Bacon, 597 S.E.2d at 443, where many low-level technicians had Here, contrary to Plaintiffs' contentions access to the secrets. Id. The Court agrees. about CITIBLOCS interfering with Resolution of this debate is a material business, Tom speculated that prospective question of fact for a jury, so the Court relationships were actually harmed by denies Defendants' motion for summary actions of other non-party block companies. judgment as to the claim for ECF No. 51-3 at 9. Not only have Plaintiffs misappropriation of trade secrets. failed to produce direct evidence of potential
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*8 business relationships, they have actually Furthermore, the complaint boasts that presented evidence harming their case. The Kapla blocks, "when stacked, remain in Court grants summary judgment to place through the forces or gravity, and Defendants on the tortious interference with owing to the distinct size and configuration business relations claim. of the blocks." ECF No. 1 at 3 (emphasis
added). Finally, the word "dimensions" is 3. Violation of Federal Trade Dress just a sophisticated synonym for the word Protection "size," so dimensions, too, are functional The Lanham Act protects the trade dress here.9 See Merriam-Webster's Collegiate of products that inherently create a Dictionary 351 (11th ed. 2008). secondary meaning to consumers because of Plaintiffs attempt to save their claim by shape, color, or other non-functional contending that the color of the block is non- characteristic. 15 U.S.C. § 1125(a); e.g. functional. ECF No. 55 at 3. This may be John H. Harland Co. v. Clarke Checks, Inc., true, but Plaintiffs failed to allege 711 F.2d 966, 980 (11th Cir. 1983). "In infringement of the color of their blocks in order to prevail on a claim for trade dress their complaint. Because the Plaintiffs have infringement under § [1125](a), plaintiff not shown evidence of any properly-plead must prove three basic things: [T]hat the non-functional infringing characteristic of trade dress of the two products is CITIBLOCS's blocks, the Court grants confusingly similar, that the features of the summary judgment to Defendants on the trade dress are primarily non-functional, and trade dress infringement claim. that the trade dress has acquired secondary meaning." Id. (internal quotations omitted). 4. Violation of the Georgia Uniform
Deceptive Trade Practices Act The Defendants focus their argument on the non-functional requirement of the trade Both parties move for summary dress features, vehemently contending that judgment as to the deceptive trade practices by Plaintiffs' own admission, the allegedly claim. infringed characteristics are functional. ECF
A person engages in a deceptive No. 51 at 14-16. After a close reading of the trade practice when, in the course of complaint and deposition testimony, the his business, vocation, or occupation, Court agrees that, as described by the he: (1) Passes off goods or services Plaintiffs, all allegedly infringed as those of another; (2) Causes characteristics are functional. likelihood of confusion or of Plaintiffs allege that Defendants misunderstanding as to the source, infringed the shape, size, and dimensions of sponsorship, approval, or Kapla Blocks. ECF No. 1 at 18-19. certification of goods or services; (3) T.V.D.B. admits in its deposition that "the Causes likelihood of confusion or of CitiBlocs [blocks] size and shape, which is identical [to Plaintiffs' blocks], is also
Plaintiffs also equated dimensions to ratio, ECF No. 55 at 3, but previously admitted that the ratio of the functional." ECF No. 51-1 at 64. blocks is also functional, ECF No. 51-I at 64.
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*9 misunderstanding as to affiliation, of the images clearly shows that CITIBLOCS crudely removed the Kapla connection, or association with or certification by another; (4) Uses logo from the picture. Compare ECF No. 49-12, with ECF 49-13. CITIBLOCS also deceptive representations or designations of geographic origin in occupied a space at a toy fair originally connection with goods or services; reserved for Kapla's products which (5) Represents that goods or services Plaintiffs contend is circumstantial evidence have sponsorship, approval, of an intent to deceive consumers that they characteristics, ingredients, uses, were actually purchasing Kapla's blocks. benefits, or quantities that they do ECF No. 49-1 at 20. not have or that a person has a
On the same note, however, the Court is sponsorship, approval, status, unwilling to step into the shoes of the affiliation, or connection that he does factfinder and conclude that these acts by not have; . . . (7) Represents that CITIBLOCS caused confusion. The Court goods or services are of a particular denies both motions for summary judgment standard, quality, or grade or that as to the deceptive trade claims act and will goods are of a particular style or leave the resolution of this material dispute model, if they are of another; (8) of fact to the jury. Disparages the goods, services, or 5. Negligent Misrepresentation by business of another by false or CITIBLOCS as to the availability of misleading representation of fact; (9) Kapla 's blocks in the United States Advertises goods or services with intent not to sell them as advertised;.
As initially discussed above, Georgia or (12) Engages in any other recognizes the tort of negligent conduct which similarly creates a misrepresentation, and the elements are "(1) likelihood of confusion or of the defendant's negligent supply of false misunderstanding. information to foreseeable persons, known or unknown; (2) such persons' reasonable
O.C.G.A. § 10-1-372(a); ECF No. 49-1 at reliance upon that false information; and (3) 17-18. A plaintiff "need not prove economic injury proximately resulting from competition between the parties or actual such reliance." Marquis Towers, Inc. v. confusion or misunderstanding" to prevail. Highland Grp., 593 S.E.2d 903, 906 (Ga. Ct. § 10-1-372(b). App. 2004). As to this claim, Plaintiffs The Defendants argue that there is no allege in their complaint that Defendants evidence that they ever sought to "deceive falsely represented to Kapla 's customers anyone" or "otherwise engaged in any sort that Kapla products were no longer available of. . . deceptive behavior," ECF No. 51 at in the United States. ECF No. 1 at 21. 30, but this is just not true. Plaintiffs present The Defendants argue that Plaintiffs can photographs used as marketing material by show no reliance on the statements because CITIBLOCS that featured Kapla's blocks. they were made to third parties, not directly ECF Nos. 49-12; 49-13; 49-14; 49-15. One *10 to the Plaintiffs. ECF No. 51 at 24 (citing outlets and customers; (5) similarity of Potts v. UAP-GA AG CHEM Inc., 567 advertising media; (6) defendant's intent; S.E.2d 316, 319 (Ga. Ct. App. 2002)). and (7) actual confusion. Of these, the type Plaintiffs do not directly respond to this of mark and the evidence of actual argument, but rather try to recraft their claim confusion are the most important." Id. to Defendant's motion for summary
As with their deceptive trade practices judgment to allege that the claim, Defendants argue that there is no misrepresentation was made directly to actionable wrong here. ECF No. 51 at 30. Kapla. ECF No. 55 at 13. "Upon entering Plaintiffs, however, have presented evidence into the exclusive distribution agreement, of a deceptive act, specifically the alteration and placing orders from Plaintiffs, KAPLA and use of advertising material. See ECF USA represented that it was working Nos. 49-12; 49-13; 49-14; 49-15. That exclusively for Plaintiffs, and in Plaintiffs' evidence creates a jury question on this best interest." Id. Regardless of the merit of matter and the Court accordingly denies this claim, Plaintiffs did not allege this in summary judgment. their complaint so the Court may not E. Liability of CITIBLOCS as consider it. Because Plaintiffs fail to show successor in interest to KAPLA USA reliance on the statements made to the third- party customers, the Court grants summary
Both parties move for summary judgment on this allegation of negligent judgment as to whether CITIBLOCS is a misrepresentation. successor in interest to KAPLA USA and, thus, liable for the contractual debt. ECF
6 Unfair Competition Nos. 49-1 at 14-17; 51 at 28-29. An entity "Any attempt to encroach upon the "is but a continuance of the old" entity "by business of a trader or other person by the reason of such identity of name, objects, use of similar trademarks, names, or assets, and stockholders." Ney-Copeland & devices, with the intention of deceiving and Assocs., Inc. v. Tag Poly Bags, Inc., 267 misleading the public, is a fraud for which S.E.2d 862, 863 (Ga. Ct. App. 1980). The equity will grant relief." O.C.G.A. § 23-2- identity need not be complete; only "some 55. "Fraud may be consummated by signs identity of ownership" is necessary to apply or tricks, or through agents employed to the successor-in-interest theory. Pet Care deceive, or by any other unfair way used to Prof'l Ctr., Inc. v. BellSouth Adver. & cheat another." Id at § 23-2-56. Georgia Publ'g Corp., 464 S.E.2d 249, 251 (Ga. Ct. employs a seven-factor likelihood of App. 1995) (emphasis eliminated). confusion test for unfair competition claims. Plaintiffs argue that all signs here point Caliber Auto. Liquidators, Inc. v. Premier to a common identity between KAPLA USA Chrysler, Jeep, Dodge, LLC, 605 F.3d 931, and CITIBLOCS: Chayette used the 935 (11th Cir. 2010). Those factors are "(1) KAPLA USA name to apply for a credit line type of mark; (2) similarity of mark; (3) for CITIBLOCS, ECF No. 49-1 at 15; the similarity of the products the marks entities used the same bank accounts, id.; represent; (4) similarity of the parties' retail *11 Chayette is at the heart of both ventures, Id. sufficient as described in Pet Care at 16; the employees of the companies are Professional Center, 464 S.E.2d at 251—the the same, Id.; and the companies used the similarity of the names being the only same mailing address, id at 17. Defendants incompleteness. CITIBLOCS will be liable contend that CITIBLOCS was wholly for KAPLA USA's contractual debts. separate from KAPLA USA with its own
F. Liability of Chayette by veil contractors, facilities, operations, piercing manufacturers, and procedures, and the Defendants move for summary judgment absence of a transfer of stock precludes to protect Chayette from veil piercing successor liability. ECF No. 51 at 29 (citing through any of the other Defendants. ECF Bakers Carpet Gallery v. Mohawk Indus., No. 51 at 26-28. In order to pierce the veil 942 F.Supp. 1464, 1471 n.7 (N.D. Ga. of a limited liability company, "there must 1996)). be evidence that [an individual defendant] Nearly all signs point to CITIBLOCS as abused the forms by which the LLC was being a continuation of and successor in maintained as a separate legal entity apart interest to KAPLA USA. Chayette is indeed from his personal business." Bonner v. at the heart of both ventures. ECF No. 49-3 Brunson, 585 S.E.2d 917, 918 (Ga. Ct. App. at 3. Although she did not become a 2003). CITIBLOCS member until June, 2009, Plaintiffs make a compelling case that Chayette held herself Out as one in a credit Chayette comingled the KAPLA USA and application for CITIBLOCS in May, 2009. CITIBLOCS entities, ECF No. 55 at 16-18, ECF No. 49-19 at 2. Chayette also claimed but this alone is insufficient to justify CITIBLOCS owned 51% of KAPLA USA piercing the corporate veil. Insituform and attached its financial statements to Techs., LLC v. Cosmic TopHat, LLC, F. CITIBLOCS's credit application. Id at 2, 9- Supp. 2d -, No. 1:08-CV-333-TCB, 2013 16. WL 4038722, at *8 (N.D. Ga. Aug. 9, KAPLA USA and CITIBLOCS had at 2013). As the Defendants argue, KAPLA least some of the same employees, and some USA and CITIBLOCS were validly even worked for both companies organized, maintained the corporate simultaneously. Compare ECF No. 49-3 at formalities such as a registered agent, 3, with ECF No. 49-8 at 9. Mike Lauter, the maintained bank accounts separate from founding member of CITIBLOCS sold Chayette, and borrowed money in the KAPLA USA inventory and then received corporate name. ECF No. 51 at 27. payment from CITIBLOCS for his efforts. Although Chayette prematurely identified ECF No. 49-8 at 9. CITIBLOCS occupied a herself as a member of CITIBLOCS on the space at a toy fair reserved for and credit application discussed above, the designated as KAPLA USA. Id at 11. "failure of a limited liability company to KAPLA USA transferred at least $30,000 of observe formalities relating to the exercise assets (cash) to CITIBLOCS to fund its of its powers or the management of its start-up. Id. at 3. The identity is more than
I.
*12 Finally, the Court ORDERS the parties business and affairs is not a ground for to 1) submit briefs on the proper conversion imposing personal liability on a member." rate from Euros to Dollars and the proper O.C.G.A. § 14-11-314. In light of Georgia pre-judgment interest rate and 2) submit a case law and statute,' ° Plaintiffs have failed to present sufficient evidence to justify proposed joint pretrial order, all within 21 days of this order. piercing the corporate veil to reach Chayette, and the Court grants summary judgment in favor of Defendants on this matter.'
This/lay of December 2013. - - — III. CONCLUSION 6 ~ el The Court GRANTS IN PART and - ~ /// ,. ~ DENIES IN PART both motions for summary judgment. The Court grants
B. V A " Nf t ENFIELb, JUDGE '--' summary judgment in favor of (1) the
UNITED STATES DISTRICT OURT
Plaintiffs as to the breach of contract claim
SOUTHERN DISTRICT OF GEORGIA
and concludes that CITIBLOCS is a successor in interest to KAPLA USA; and (2) Defendants as to the unjust enrichment, conversion of inventory, negligent misrepresentation, tortious interference with business relations, and federal trade dress infringement claims and concludes that Plaintiffs may not pierce the veil to reach Chayette.
The Court denies summary judgment and leaves for the jury Plaintiffs' claims of breach of fiduciary duty, misappropriation of trade secrets, violation of the Georgia Uniform Deceptive Trade Practices Act, and unfair competition. '° This issue rests with the State, and the Court will respect Georgia's statutes and case law in its decision. Given a clean slate, the Court would strongly consider piercing the corporate veil.
This ruling does not completely absolve Chayette of liability for two reasons: first, as stated above, Chayette may be liable for breach of fiduciary duty, see supra note 8, and second, "a corporate officer who takes part in the commission of a tort committed by the corporation is personally liable therefor." Almond v. McCranie, 643 S.E.2d 535, 537 (Ga. Ct. App. 2007).