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Britt Interactive LLC v. A3 Media LLC

United States District Court, S.D. Indiana, Indianapolis Division

May 16, 2017

BRITT INTERACTIVE LLC, and TOWNEPOST NETWORK INC., Plaintiffs and Counterclaim Defendants,
v.
A3 MEDIA LLC, COLLECTIVE PUBLISHING LLC, YELENA LUCAS, NEIL LUCAS, JANELLE MORRISON, CHILLY PANDA MEDIA, LLC, DANN VELDKAMP, and JODY VELDKAMP, Defendants, Counterclaimants and Third Party Plaintiffs, TOM BRITT, JEANNE BRITT, JOSHUA BROWN, and TONI FOLZENLOGEL, Third Party Defendants.

          ENTRY ON MOTIONS TO DISMISS

          TANYA WALTON PRATT, JUDGE.

         Before the Court is a Motion to Dismiss filed by Third-Party Defendant Joshua Brown (“Brown”) (Filing No. 132), and a Motion for Partial Dismissal filed by Counterclaim Defendants Britt Interactive, LLC (“Britt Interactive”) and TownePost Network, Inc. (“TownePost”), as well as Third-Party Defendants Tom Britt (“Mr. Britt”) and Jeanne Britt (collectively, the “Britt Parties”). (Filing No. 134.) Counterclaimants A3 Media LLC (“A3 Media”), Collective Publishing, LLC (“Collective Publishing”), Neil Lucas (“Mr. Lucas”), Yelena Lucas (“Mrs. Lucas”), Chilly Panda Media, LLC (“Chilly Panda”), Dann Veldkamp, Jody Veldkamp, and Janelle Morrison (collectively, “the Counterclaimants”), oppose the Motion to Dismiss and the Motion for Partial Dismissal. (Filing No. 157.) For the following reasons, the Court GRANTS in part and DENIES in part the respective motions to dismiss.

         I. BACKGROUND

         The following facts are not necessarily objectively true, but as required when reviewing a motion to dismiss, the Court accepts as true all factual allegations in the Counterclaim and Third-Party Complaint and draws all inferences in favor of the Counterclaimants. See Bielanski v. County of Kane, 550 F.3d 632, 633 (7th Cir. 2008).

         Mr. Britt founded Britt Interactive in 2003 and published a monthly newsletter and magazine, known as Geist Community Newsletter. (Filing No. 62 at 42.) Shortly after launching Geist Community Newsletter, Britt Interactive sold licenses to its methods for producing the Geist Community Newsletter, as well as specific community-based domain names to allow third parties to create new community-based newsletters. Id. at 42-43. On December 21, 2012 and October 17, 2013, respectively, Britt Interactive entered into a License Agreement with A3 Media, operated by Mr. and Mrs. Lucas, to produce monthly local publications in Zionsville and Carmel, Indiana. Id. at 43. The magazines were known as “Zionsville Community Newsletter” and “Carmel Community Newsletter” (collectively, “the Newsletters”). Id.

         Pursuant to the License Agreements, Britt Interactive retained ownership of the Newsletters, as well as their website domains, “atZionsville.com” and “atCarmel.com.” Id. at 48. Britt Interactive also retained the naming rights of the Newsletters and domains, as well as ownership of the business processes, customer data, intellectual property and design. Id. at 47-48. Britt Interactive was, however, required to provide management services to A3 Media, including services related to vendor management, invoices, accounts receivable, accounts payable, accounting, income statements, and banking, in exchange for a monthly management fee. Id. at 47-49.

         The License Agreements also provided that A3 Media owns: (1) all advertising sales; (2) all account receivables resulting from advertising sales; (3) all content created for the Newsletters; (4) all advertisements produced in the Newsletters; (5) all stories published in the Newsletters; (6) all videos created for the Newsletters; (7) all final digital files of the Newsletters' content; (8) the list of advertisers for the Newsletters; and (9) all liabilities associated with the Newsletters (the “A3 Media Property”). Id. at 46-47. A3 Media further acquired a license to market the Newsletters through Britt Interactive's network and the License Agreements did not prohibit A3 Media from publishing or marketing any other publications, nor did it contain any covenants not to compete. Id. at 48-49.

         In 2014, Mr. Britt established TownePost, which acquired all of Britt Interactive's intellectual property and License Agreements. (See Filing No. 3-2 at 5-6, 52.)[1] On February 1, 2014, Britt Interactive and TownePost informed Britt Interactive's Licensees that customers and Licensees should submit fees and payments to TownePost. Id. On July 21, 2015, TownePost informed the Licensees that the names and logos of the publications would change from “newsletter” to “magazine.” Id. at 35. A3 Media's magazines changed from “Zionsville Community Newsletter” and “Carmel Community Newsletter” to “Zionsville Magazine” and “Carmel Magazine” (collectively, “the Magazines”). Id. On July 11, 2016, TownePost also informed A3 Media, as well as other Licensees, that it was converting to the franchise model, and offered to sale franchises as opposed to licenses. (Filing No. 32-4 at 1.) TownePost notified its licensees, including A3 Media, that if they chose not to become franchisees, TownePost would exercise its right to terminate their licensing agreements. Id.

         On August 10, 2016, TownePost sent a follow-up letter to undecided licensees, including A3 Media, asking them to inform TownePost of their franchising decisions by September 1, 2016. Id. On August 15, 2016, despite TownePost's request that its licensees respond to the franchise option by September 1, 2016, Brown, on behalf of TownePost, sent a letter to Chilly Panda terminating TownePost's License Agreements with Chilly Panda. (Filing No. 32-5.) In the termination letter, TownePost claimed certain rights and proprietary interests. Id.

         Thereafter, on August 22, 2016, A3 Media learned that TownePost continued to collect advertising income on A3 Media's behalf, as required by the License Agreements, but stopped making weekly transfers of these funds to A3 Media. (Filing No. 32-7.) As a result, A3 Media began invoicing its advertising customers directly in order to protect its advertising income. (Filing No. 62 at 56.) On September 13, 2016, A3 Media informed TownePost that it would not become a franchisee, effectively terminating the License Agreements. (Filing No. 32-8.) Despite termination of the License Agreements, Britt Interactive published editions of the Magazines on its own in early October 2016. (Filing No. 62 at 57.) Britt Interactive also represented to A3 Media's advertising customers that Britt Interactive owned the Magazines, as well as all customer relationships, accounts receivables, and income derived from the Magazines. Id.

         On September 23, 2016, Britt Interactive and TownePost filed a Complaint and Motion for Preliminary Injunction in the Hamilton Superior Court 3 (“Superior Court”) against A3 Media, Mr. and Mrs. Lucas, and Collective Publishing, asserting tortious interference with contracts, tortious interference with business relationships, conversion, trademark infringement, trademark infringement pursuant to the Lanham Act, violations of Indiana trademark act, and breach of contract. (Filing No. 3-2 at 13-22; Filing No. 3-3 at 3-7.) Thereafter, on October 11, 2016, Britt Interactive and TownePost filed an Amended Complaint and a Temporary Restraining Order (“TRO”) Motion. (Filing No. 3-4 at 7-42; Filing No. 3-3 at 43-50.) On October 17, 2016, the Superior Court held a hearing and granted the TRO, restraining and enjoining Counterclaimants from distributing October issues, and any subsequent issues of the Magazines, among other things. (Filing No. 14.)

         On October 21, 2016, Counterclaimants removed the case to federal court pursuant to 28 U.S.C. §§ 1441 and 1446. (Filing No. 3.) In response to Britt Interactive's and TownePost's Second Amended Complaint (Filing No. 23), Counterclaimants filed their Answer, Counterclaim, and Third-Party Complaint, asserting trademark infringement under Indiana and federal law; copyright infringement; unfair competition; civil remedies under the Indiana Crime Victims Act; breach of contract; tortious interference with business relationships; breach of fiduciary duties; defamation; fraud; franchise fraud; constructive fraud; violations of the Federal Stored Communications Act; and abuse of process. (Filing No. 62.)

         Brown seeks to dismiss the Third-Party Complaint, arguing the tortious interference, defamation, and franchise fraud claims are without merit and fails to state a ground upon which relief can be granted. (Filing No. 132.) The Britt Parties also move the Court to partially dismiss the Counterclaimants' claims and Third-Party Complaint for the reasons alleged by Brown. (Filing No. 134.) In response to the Motions to Dismiss, the Counterclaimants argue that they have pled sufficient facts to support their claims for tortious interference with business relationships, defamation, and franchise fraud. (Filing No. 157.)

         II. LEGAL STANDARD

         Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal if the complaint fails to set forth a claim upon which relief can be granted. “The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide the merits.” Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990). Accordingly, when analyzing a Rule 12(b)(6) motion to dismiss, a court construes the complaint in the light most favorable to the plaintiff, accepts all factual allegations as true, and draws all reasonable inferences in favor of the plaintiff. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008).

         At a minimum, the complaint must give the defendant fair notice of what the claim is and the grounds upon which it rests; and the factual allegations must raise a right to relief above the speculative level. See Bissessur v. Ind. Univ. Bd. of Trs., 581 F.3d 599, 602-03 (7th Cir. 2009); Tamayo, 526 F.3d at 1081, 1083. While a complaint need not include detailed factual allegations, a plaintiff has the obligation to provide the factual grounds supporting his entitlement to relief; and neither bare legal conclusions nor a formulaic recitation of the elements of a cause of action will suffice in meeting this obligation. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see also, Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“the pleading standard Rule 8 … demands more than an unadorned, the-defendant-unlawfully-harmed-me-accusation” and “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice”). Therefore, a complaint must generally contain enough facts to state a claim to relief that is plausible on its face. Twombly, 550 U.S. at 570; Tama ...


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