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Ezfauxdecor, LLC v. Appliance Art Inc.

United States District Court, D. Kansas

February 17, 2017

EZFAUXDECOR, LLC, et al., Plaintiffs,
v.
APPLIANCE ART INCORPORATED, et al., Defendants/Third-Party Plaintiffs,
v.
DIGITAL CONSULTING KC, LLC, et al., Third-Party Defendants.

          MEMORANDUM AND ORDER.

          CARLOS MURGUIA United States District Judge.

         Plaintiffs Ezfauxdecor, LLC, and Amber Shank filed the instant lawsuit against defendants Appliance Art Incorporated, Instant One Media, Inc., Alison Smith, and Easy Home Renewals for claims of false advertising and unfair competition under the Lanham Act, tortious interference with a contract, commercial disparagement and unfair competition, declaration of trademark rights, and cancellation of trademark registration. (Doc. 1.) All of the claims were related to a dispute involving plaintiffs' and defendants' products. In response, defendants filed counterclaims against plaintiffs (Doc. 40) and a third-party complaint (Doc. 49) against third-party defendants Digital Consulting KC, LLC, Alexandre J. Abi-Mikhael, Teresa Nobrega, Teresa S. Clough, and Chereese A. Voise for deceptive trade practices under the Georgia Uniform Deceptive Trade Practices Act (“GUDTPA”) and conspiracy to commit deceptive trade practices under GUDTPA. Before the court is third-party defendants'[1] motion to dismiss the third-party complaint pursuant to Fed.R.Civ.P. 12(b)(6). (Doc. 63.) For the reasons set forth below, the court denies the motion.

         I. Procedural Background

         At the center of this litigation is a dispute over trademark rights. Plaintiffs claim that since 2003, they have been in the business of marketing and selling self-adhesive films imprinted with patterns of stainless steel, marble, and granite used to cover appliances and countertops for decorative uses. Plaintiffs allege that defendants began copying and selling their products using deceptive representations. On June 25, 2015, plaintiffs filed their complaint against defendants for various claims involving the product dispute. Defendants filed their answer on March 3, 2016, and denied liability on plaintiffs' claims. (Doc. 40.) Defendants also asserted counterclaims against plaintiffs for deceptive trade practices under GUDTPA and conspiracy to commit deceptive trade practices under GUDTPA. On March 3, 2016, defendants also filed a third-party complaint (Doc. 41) against third-party defendants for similar claims under GUDTPA.

         On March 9, 2016, plaintiffs and defendants moved to stay all deadlines in the case for 90 days. (Doc. 42.) Third-party defendants had not yet been served with the third-party complaint. Magistrate Judge Kenneth Gale granted the motion to stay and ordered that all deadlines would be reset after third-party defendants were served and had the opportunity to respond to the third-party complaint. (Doc. 43.)

         Plaintiffs and defendants attempted to mediate the case on June 2, 2016, however no settlement was reached. (Doc. 47.) Defendants then voluntarily dismissed the third-party complaint without prejudice and refiled it on June 6, 2016. (Docs. 48 and 49.) The refiled third-party complaint is identical to the original third-party complaint. Service of the complaint was executed on third-party defendants on June 14, 2016.

         II. Discussion

         Third-party defendants filed their motion to dismiss the third-party complaint on August 1, 2016. (Doc. 63.) Third-party defendants state four grounds for dismissal: 1) the third-party complaint was improperly filed under Rule 14 of the Federal Rules of Civil Procedure, 2) the allegations in the third-party complaint are not derivative of or dependent upon plaintiffs' claims against defendants, 3) the third-party complaint fails to state a claim because there is no basis for applying Georgia law, and 4) neither Kansas nor Georgia recognize the cause of action stated in the third-party complaint. The motion is thus based on both procedural and substantive grounds for dismissal.

         a. Procedural Bases for Dismissal

         Third-party defendants argue the third-party complaint should be dismissed for procedural defects, more specifically that the third-party complaint was not properly brought under Rule 14 of the Federal Rules of Civil Procedure.

         Under Fed.R.Civ.P. 14(a)(1), a defendant may implead a third party “who is or may be liable to it for all or part of the claim against it.” This standard contemplates that a third-party claim is derivative of an original claim in the action. King Fisher Marine Serv., Inc. v. 21st Phoenix Corp., 893 F.2d 1155, 1158 n.1 (10th Cir. 1990); Admin. Comm. of the Wal-Mart Assocs. Health & Welfare Plan v. Willard, 216 F.R.D. 511, 513 (D. Kan. 2003). It is insufficient that the third-party claim is based on the same factual background or otherwise related to the original claim. Bethany Med. Ctr. v. Harder, 641 F.Supp. 214, 217 (D. Kan. 1986) (citing 6 Wright & Miller, Federal Practice & Procedure § 1446, at 257 (1971)). Rather, as a general rule, the alleged liability of the third-party must depend on the outcome of the original claim, or the third-party defendant must be secondarily liable to the impleading party. Willard, 216 F.R.D. at 513.

         The defending party has 14 days after serving its original answer to implead a third-party defendant. Fed.R.Civ.P. 14(a)(1). The defendant must move the court for leave to file a third-party complaint if outside the 14 day deadline. Id. The purpose of Rule 14 is to “expedite the final determination of the rights and liabilities of all the interested parties in one suit.” Baicker-McKee, et al., Federal Civil Rules Handbook, at 529 (2017 ed.); see also, Nat'l Fire Ins. Co. of Hartford v. Nat'l Cable Television Coop., Inc., No. 10-2532-CM, 2011 WL 1430331, at *1 (D. Kan. Apr. 14, 2011) (“Rule 14(a) strives to promote judicial efficiency by reducing multiplicitous litigation.”). Courts construe Rule 14(a) liberally, but can exercise their discretion to strike, sever, or separately try third-party claims. See Nat'l Fire Ins. Co. of Hartford, 2011 WL 1430331, at *1, Fed.R.Civ.P. 14(a)(4).

         Third-party defendants assert that the third-party complaint should be dismissed because defendants did not obtain leave from the court before filing the complaint, as mandated by the rule. Third-party defendants also argue the claims in the third-party complaint are not properly brought under Rule 14 because they are not derivative of the claims asserted by plaintiffs against defendants. Instead, the claims in the third-party complaint relate directly to the counterclaims, not the original claim brought by plaintiffs.

         In their response, defendants concede that under Rule 14, third-party claims “must be derivative of, and dependent upon the success of the plaintiff's claim against the defendant.” (Doc. 66 at 19.) Defendants, however, argue that third-party defendants' motion to dismiss is based more on form over substance, and the court should instead interpret the third-party complaint as an ...


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