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Smartling, Inc. v. Easyling LLC

United States District Court, D. Massachusetts

March 9, 2016

SMARTLING, INC., Plaintiff,
v.
EASYLING LLC and SKAWA INNOVATION LTD., Defendants.

ORDER

ALLISON D. BURROUGHS U.S. DISTRICT JUDGE

Presently before the Court is Plaintiff’s Motion to Dismiss Defendants’ Counterclaim [ECF No. 35]. For the following reasons, that motion is DENIED.

I. BACKGROUND

On November 4, 2015, Plaintiff Smartling, Inc. (“Smartling”) filed an Amended Complaint in this action, alleging six claims against Defendants Easyling LLC and Skawa Innovation LTD (together, “Skawa”) for alleged acts of unfair competition, passing off, false designation of origin, and trade dress infringement. [ECF No. 25].

On November 30, 2015, Skawa filed an Answer to Plaintiff’s Complaint, as well as a one-count Counterclaim alleging that Smartling committed unfair or deceptive acts or practices and acts of unfair competition, in violation of Massachusetts General Laws Chapter 93A, §§ 2 and 11. [ECF No. 33, hereinafter “Counterclaim”). In support of its Chapter 93A claim, Skawa alleges that Smartling’s claims in this lawsuit are “objectively meritless, ” and that this action represents a “further attempt by [Smartling] to interfere directly with the business relationships of Defendant Skawa and to harm and oppress Defendant through the use of this governmental process as an anticompetitive weapon.” [Counterclaim, ¶ 33]. Skawa specifically alleges that, upon information and belief, Smartling’s agents or employees have “repeatedly claimed to potential clients of Defendant Skawa and others at exhibitions and elsewhere that . . . Skawa would be driven into bankruptcy by this litigation.” Id. ¶ 27. Skawa further alleges that those representations “inherently and falsely suggest” that Skawa was in a precarious financial position, and that these statements are indicative of Plaintiff’s ulterior motives in filing this lawsuit. Id. ¶ 28. The Counterclaim also alleges that although Smartling became aware of Easyling’s allegedly unlawful conduct in March 2012, it did not file the present lawsuit until July 2014, nearly two and one-half years later. Id. ¶ 30. Finally, Skawa alleges that after Smartling filed its Complaint in this action, Smartling’s CEO encountered Skawa’s CEO at a language industry conference. Id. ¶ 30. Smartling’s CEO allegedly told Skawa’s CEO that the United States had a “specific law to protect U.S. companies against foreign ones, ” and that he intended to “vanish Easyling from the ground.” Id.[1]

Smartling moves to dismiss Skawa’s counterclaim pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim upon which relief may be granted. Smartling’s argument is twofold: first, it contends that the facts alleged do not make out a plausible claim under Chapter 93A; second, Smartling argues that the statements it allegedly made to Skawa’s potential clients and others are “protected by the litigation privilege.” [ECF No. 36]. Skawa filed an Opposition to Smartling’s Motion to Dismiss [ECF No. 37], arguing that the Motion should be denied because Skawa adequately pleads a Chapter 93A claim, and because the litigation privilege is not applicable.

II. ANALYSIS

A. Legal Standard

Under the notice pleading standard of Federal Rule of Civil Procedure 8(a)(2), a plaintiff is required to submit “a short and plain statement of the claim” in order to give the defendant “fair notice” of the claim and the grounds upon which it rests. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Although notice pleading does not require detailed factual allegations, “more than labels and conclusions” are needed to survive a motion to dismiss. Id. The facts alleged must “raise a right to relief above the speculative level” and a “formulaic recitation of the elements of a cause of action” is not enough. Id.

On a motion to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6), the Court accepts as true all well-pleaded facts in the complaint and analyzes those facts “in the light most hospitable to the plaintiff’s theory, and drawing all reasonable inferences for the plaintiff.” United States ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 383 (1st Cir. 2011). However, courts are not bound to accept as true legal conclusions couched as factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “Dismissal for failure to state a claim is appropriate ‘if the complaint does not set forth factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory.’” Lemelson v. U.S. Bank Nat’l Ass'n, 721 F.3d 18, 21 (1st Cir. 2013) (quoting United States ex rel. Hutcheson, 647 F.3d at 384) (further internal quotations omitted).

B. Skawa adequately pleads a Chapter 93A claim.

Massachusetts General Laws Chapter 93A, Section 2(a) prohibits “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” Mass. G. L. c. 93A, § 2(a). “It is well established that ‘a practice or act [is] unfair under G.L. c. 93A, § 2, if it is (1) within the penumbra of a common law, statutory, or other established concept of unfairness; (2) immoral, unethical, oppressive, or unscrupulous; or (3) causes substantial injury to competitors or other business people.’” Milliken & Co. v. Duro Textiles, LLC, 451 Mass. 547, 562-63 (2008) (quoting Morrison v. Toys “R” Us, Inc., 441 Mass. 451, 457 (2004) (alteration in original). “‘Although whether a particular set of acts, in their factual setting, is unfair or deceptive is a question of fact ... the boundaries of what may qualify for consideration as a c. 93A violation is a question of law.’” Milliken, 451 Mass. at 563 (quoting Schwanbeck v. Federal-Mogul Corp., 31 Mass.App.Ct. 390, 414 (1991)) (omission in original).

Smartling recognizes that Skawa’s Chapter 93A claim appears to be based primarily on an “abuse of process” theory. “The elements of an abuse of process claim are ‘that “process” was used, for an ulterior or illegitimate purpose, resulting in damage.’” Psy-Ed Corp. v. Klein, 459 Mass. 697, 713 (2011) (quoting Millennium Equity Holdings, LLC v. Mahlowitz, 456 Mass. 627, 636 (2010)). The requirement of an “ulterior purpose, ” however, “is not satisfied merely by a showing that a person commenced litigation knowing it was groundless.” Klein, 459 Mass. at 713. Instead, the ulterior purpose “must be to gain some collateral advantage, ” id. at 713-14, with “collateral” meaning “collateral to the legitimate purposes of the proceeding.” Id. at n. 36; see also Broadway Mgmt. Servs. Ltd. v. Cullinet Software, Inc., 652 F.Supp. 1501, 1503 (D. Mass. 1987) (noting that “ulterior motive” is “more than the intent to harass; there must be intention to use process for coercion or harassment to obtain something not properly part of the suit”). Smartling argues that Skawa’s factual allegations, even taken as true, do not state a plausible Chapter 93 claim based on abuse of process, because “they do not suggest that Smartling is using this suit for a pernicious purpose unrelated to the subject matter of its claims.” [ECF No. 36].

The Court disagrees. Accepting all the allegations as true, and drawing all reasonable inferences in favor of Skawa, the Counterclaim pleads facts sufficient to plausibly suggest that Smartling did in fact use this lawsuit as a tool to ...


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