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D&R Communications, LLC v. John Garett and Garett Group

August 2, 2011


The opinion of the court was delivered by: Brown, Chief Judge



This matter comes before the Court upon the motion of Defendants John Garett and Garett Group, Inc. (collectively "Defendants" or "Garett") to dismiss counts IV through X of the Complaint filed by D&R Communications, LLC ("Plaintiff" or "D&R") for failure to state a claim. (Doc. No. 26). Also before the Court is Plaintiff's cross-motion to amend its pleadings. (Doc. No. 27). The Court has considered the parties' submissions and decided the matter without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons discussed below, the Court denies Defendants' motion to dismiss.

I. Background

Plaintiff D&R and Defendants Garett Group, Inc. had a business relationship lasting about eight months. In February 2009, D&R hired Garett, through Garett Group, Inc., as an independent contractor to generate business for D&R's Rx HealthAdvantage program, which included a patient starter kit, "a device and method for packaging pharmaceutical product samples together with patient drug and disease state information, literature and other forms of media, and related consumer products, consumer package goods, devices, or services." (See U.S. Patent No. 7,677,601 (the "'601 Patent") at 1:11-15; Am. Compl. ¶ 12; Doc. No. 27-2). However, their relationship went sour, and D&R and Garett terminated their consulting agreement in October 2009. (Am. Compl. ¶ 16; Doc. No. 27-2).

After Garett approached D&R's clients alleging D&R's patient starter kits infringed upon Garett's then non-existent patent, (id. at ¶ 19), D&R and Garett entered into a Settlement and Release Agreement (the "Settlement Agreement"). (Am. Compl. at Ex. E; Doc. No. 27-3). The Settlement Agreement's stated purpose was to allow "the parties to engage in legitimate, fair and honest competition in the marketplace, free of interference from the other party." (Id.). In the agreement, D&R "acknowledged that it had no proprietary rights in the Rx HealthAdvantage brand name and that Defendant Garett owned the still-pending Garett Patent Application directed to a certain type of patient starter kit." (Am. Compl. ¶ 23; Doc. No. 27-2). However, the agreement allowed D&R to continue to market other non-infringing patient starter kits. (Id. at ¶24). In Section 2.2, Garett agreed "not to assert any proprietary or exclusive rights in any patient starter kit that D&R is permitted to use or make under the terms of this Agreement and which will not be covered by any patent claim that may issue to Garett." (Am. Compl. at Ex. E; Doc. No. 27-3) (emphasis added). Both parties also agreed in Section 3 that "neither shall disparage or denigrate the other party . . . or say or do anything derogatory, negative or harmful relating to them." (Id.). Thereafter, in March 2010, Garett obtained the '601 Patent protecting certain patient starter kits and methods, as recited by fifteen patent claims. (Am. Compl. ¶¶ 18, 30; Doc. No. 27-2).

Despite the Settlement Agreeement, Garett again began approaching D&R's clients alleging possible patent infringement. In January 2011, Garett sent letters (the "Disparaging Letters")*fn1 to at least two of D&R's clients, ALCON Laboratories, Inc. and DUSA Pharmaceuticals (collectively, the "Clients"), (id. at ¶ 19), stating that the Clients "may be using a service and product, provided by D&R . . . that violates [Garett's] Intellectual Property for a 'Patient Kit' and US Patent No. 7,677,601, as of March, 2010." (Am. Compl. at Ex. G; Doc. No. 27-3). According to the Complaint, the letters also claim, "in loosely veiled language, that D&R effectively stole Defendants' ideas," and that D&R violated the Settlement Agreement by using Garett's invention. (Am. Compl. ¶¶ 44, 128; Doc. No. 27-2). The Amended Complaint alleges that the Disparaging Letters also attempted "to have the Clients switch their business for D&R Kits from D&R to Defendants." (Id. at ¶ 44).

The Clients informed D&R of these letters because D&R agreed to indemnify its Clients for any patent infringement claims arising from the commercial use of D&R patient kits. (Id. at ¶ 35). As a result, D&R alleges that it has had "to expend legal fees to indemnify and respond to the concerns of its clients." (Id. at ¶ 80). D&R also claims that it has been injured "through loss of actual sales, reputation, and/or goodwill." (Id. at ¶ 73).

To settle the issue of patent infringement, D&R filed the present declaratory judgment action alleging it did not infringe the patent. D&R's complaint also included the following counts: Count IV -- Violation of the Lanham Act; Count V -- Breach of the Settlement Agreement; Count VI -- Breach of Covenant of Good Faith and Fair Dealing; Count VII -- Fraud and Misrepresentation; Count VIII -- Interference with Contracts and Existing and Prospective Economic Advantages; Count IX -- Unfair Competition; and Count X --Defamation.

Defendants filed motions to dismiss counts I, II, and III for lack of subject matter jurisdiction (Doc. No. 25) and counts IV-X for failure to state a claim (Doc. No. 26) on April 8, 2011. This opinion involves only the motion to dismiss counts IV-X for failure to state a claim (Doc. No. 26). The motion addressed to counts I, II and III (Doc. No. 25) was denied by memorandum opinion (Doc. No. 30) and order (Doc. No. 31) entered on June 13, 2011.

II. Discussion

A.Motion to Dismiss

1.Failure to State a Claim Standard of Review

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) may be granted only if, accepting all well-pleaded allegations in the complaint as true and viewing them in the light most favorable to the plaintiff, a court concludes that plaintiff has failed to set forth fair notice of what the claim is and the grounds upon which it rests. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citing Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint will survive a motion to dismiss if it contains sufficient factual matter to "'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570). The plausibility standard requires that "the plaintiff plead[] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged" and demands "more than a sheer possibility that a defendant has acted unlawfully." Id. (citing Twombly, 550 U.S. at 556). Although a court must accept as true all factual allegations in a complaint, that tenet is "inapplicable to legal conclusions," and "[a] pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.'" Id. (quoting Twombly, 550 U.S. at 555); see also Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008).

In evaluating a motion to dismiss, a court may consider only the complaint that contains the claims that are the subject of the motion, exhibits attached to the complaint or answer, matters of public record, and undisputedly authentic documents if the claims are based upon those documents. See Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993).

Additionally, "if a complaint is vulnerable to 12(b)(6) dismissal, a district court must permit a curative amendment, unless an amendment would be inequitable or futile." Phillips v. ...

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