United States District Court, E.D. Pennsylvania
M.H. EBY, INC., Plaintiff,
TIMPTE INDUSTRIES, INC. d/b/a TIMPTE, INC., Defendant.
G. SMITH, J.
plaintiff originally commenced this action seeking a
declaratory judgment that it was blameless in (1) ending its
40-year relationship with the defendant in which it served as
an authorized dealer of the defendant's trailers and
parts and (2) starting to manufacture and sell its own
trailers. Specifically, the plaintiff seeks declarations that
it properly terminated an agreement between the parties, that
it is not required to return anything to the defendant, and
that it did not violate the defendant's intellectual
property rights. Unsurprisingly, the defendant's newly
asserted counterclaims allege a different story. The
defendant alleges that plaintiff fraudulently induced it to
enter into the agreement, that the plaintiff breached the
agreement, that the plaintiff misappropriated trade secrets,
and that the plaintiff engaged in unfair competition by
misusing the defendant's confidential information.
response to these allegations, the plaintiff has now filed
this motion pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure to dismiss the defendant's counterclaims.
After thoroughly reviewing the allegations in the amended
counterclaim and the parties' submissions, the court
finds that the defendant has set forth plausible
counterclaims against the plaintiff, and the various
arguments that the plaintiff invokes are insufficient to bar
the counterclaims. Therefore, the court will deny the motion
to dismiss in its entirety. However, the court will provide
plaintiff with the ability to reassert its arguments at a
later stage in the litigation when these arguments are no
longer premature and when the record is more fully developed.
ALLEGATIONS AND PROCEDURAL HISTORY
plaintiff, M.H. Eby Inc. (“M.H. Eby”), filed a
complaint for declaratory judgment against Timpte Industries
Inc., d/b/a Timpte Inc. (“Timpte”), on January
25, 2019. See generally Compl., Doc. No. 1. In the
complaint, M.H. Eby alleges that it acted as an authorized
dealer of Timpte trailers and parts pursuant to a dealer
agreement, which the parties had renewed annually for more
than 40 years. See Compl. at ¶ 9. In December
2018, M.H. Eby notified Timpte that it intended to terminate
the parties' 2018 dealer agreement (the
“Agreement”) and not execute a new agreement for
2019. See Id. at ¶ 16. In response to this
notice, Timpte requested that M.H. Eby, inter alia,
provide Timpte with its customer lists and return parts for
which it already paid. See Id. at ¶ 17. Timpte
also accused M.H. Eby of misappropriating its trade secrets
by developing its own “hopper bottom” trailer.
See Id. at ¶ 19.
threatened to file a lawsuit for breach of contract against
M.H. Eby and indicated that it would attempt to stop it from
showing its “hopper bottom” trailers at an
upcoming trade show. See Id. at ¶ 24. In
response to Timpte's actions, M.H. Eby filed the instant
action in which it seeks declarations that (1) it properly
terminated the Agreement, (2) it is not required to return
already-paid-for parts or customer lists to Timpte, and (3)
it did not violate Timpte's intellectual property rights.
See Id. at 5-8.
February 27, 2019, Timpte answered the complaint.
See Doc. No. 8. The court held an initial pretrial
conference with counsel for the parties on April 4, 2019, and
entered a scheduling order the following day. See
Doc. Nos. 16, 17. The parties filed a joint motion to have
the court extended the deadlines in the original scheduling
order and, after a telephone conference the prior day, the
court granted that motion on August 8, 2019. See
Doc. Nos. 29, 30, 32, 33.
September 30, 2019, the final day permitted for amendment
under the court's August 8, 2019 amended scheduling
order, Timpte filed a motion for leave to amend and a
proposed amended answer with counterclaims. See Doc.
No. 35. The court entered an order on October 7, 2019,
denying the motion for leave to file an amended answer and
counterclaims as moot and directing the clerk of court to
docket Timpte's amended answer and counterclaims per the
amended scheduling order. See Order, Doc. No. 37.
amended answer and counterclaims, Timpte alleges that it (and
its predecessors-in-interest) have manufactured
bulk-commodity transportation equipment for over 130 years.
Countercls. at ¶ 5, Doc. No. 38. Timpte currently
“manufactures and sells state-of-the-art aluminum
bulk-commodity trailers known as hopper-bottom trailers, as
well as repair and replacement parts for hopper-bottom
trailers.” See Id. From 1978 through December
2018, Timpte and M.H. Eby entered into agreements, typically
one-year dealer agreements, through which M.H. Eby sold
Timpte's hopper-bottom trailers, parts, and accessories
to the public. See Id. at ¶ 11. M.H. Eby also
performed warranty work on these trailers for Timpte's
customers. See Id. M.H. Eby's sales territory
for Timpte products included Ohio and Pennsylvania, although
there was also a several-year period where M.H. Eby sold
Timpte products in Indiana. See id. at ¶ 16.
alleges that it had to terminate M.H. Eby's dealership
rights in Indiana due to weak sales there. See Id.
Due to the termination of this dealership arrangement in
Indiana, Timpte asserts that M.H. Eby “embark[ed] on a
plan to compete directly with Timpte in the market for
hopper- bottom grain trailers.” Id. at ¶
17. As part of this plan, it renewed its dealership
agreements with Timpte for Ohio and Pennsylvania and used
that year to
(a) design and manufacture its own hopper-bottom grain
trailer to compete with Timpte; (b) maintain and enhance its
relationships with Timpte customers; (c) take advantage of
Timpte's goodwill, production systems, customer lists,
favorable dealer pricing, and confidential pricing
information, all of which provided a benefit to M.H. Eby in
its plan to compete against Timpte.
addition, on October 29, 2018, M.H. Eby placed an order for
Timpte hopper-bottom trailer parts totaling $52, 166.36,
which “was the largest parts order Timpte had ever
received and included multiple quantities of many of
Timpte's most valuable and unique hopper-bottom trailer
parts, including proprietary extruded aluminum parts.”
Id. at ¶ 28. When asked about the large parts
order, M.H. Eby told Timpte that the request was part of its
new strategy to become more responsive to its customers and
reduce freight costs of multiple orders. See Id. at
¶ 29. Timpte asserts that this “new
strategy” had nothing to do with reducing freight costs
or improving responsiveness to customers; rather, M.H. Eby
was stockpiling the parts to offer more competitive pricing
on parts sold at retail after it terminated the 2018 dealer
agreement. See Id. at ¶ 30.
also alleges that M.H. Eby failed to give it timely notice of
its intent to terminate the Agreement. See Id. at
¶¶ 33, 34. In this regard, the Agreement provided
that M.H. Eby had to give Timpte 30 days' notice of its
intent to terminate the Agreement. See Id. at ¶
33. The Agreement was set to expire on December 31, 2018, and
M.H. Eby did not notify Timpte of its intent to terminate the
Agreement until December 4, 2018. See Id. at
¶¶ 34, 36.
on these allegations, Timpte asserts the following
counterclaims against M.H. Eby: (1) breach of contract; (2)
fraudulent misrepresentation and concealment; (3)
misappropriation of trade secrets; (4) violation of the
Defend Trade Secrets Act; and (5) unfair competition.
See Amended Answer and Countercls. at 14-19. For its
requests for relief, Timpte seeks monetary damages,
injunctive relief, and its attorney's fees and costs.
Id. at 19-20.
October 28, 2019, M.H. Eby filed a motion to dismiss these
counterclaims for failure to state a claim. See Doc.
No. 42. Timpte filed a response in opposition to the motion
to dismiss on November 12, 2019. See Doc. No. 46.
After receiving an extension, M.H. Eby timely filed a reply
brief on November 25, 2019. See Doc. Nos. 48, 51.
The motion to dismiss is now ripe for resolution.
Standard of Review Under Fed.R.Civ.P.
considering a motion to dismiss under Rule 12(b)(6), a court
must accept as true all well-pleaded allegations in the
complaint, or in this case the counterclaims, and construe
all reasonable inferences flowing from those facts in the
light most favorable to the non-moving party. See Jordan
v. Fox, Rothschild, O'Brien & Frankel, Inc., 20
F.3d 1250, 1261 (3d Cir. 1994). “To survive a motion to
dismiss, the factual allegations in a complaint, assumed
true, must suffice ‘to state a claim to relief that is
plausible on its face.'” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). This standard does
not require detailed factual allegations, but it demands more
than “an unadorned accusation.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009).