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Fleming v. Parnell

United States District Court, W.D. Washington, Tacoma

April 18, 2014

DERRAL FLEMING, and MAG ENTERPRISES, LLC, Plaintiffs,
v.
SCOTT PARNELL, and SAMSON SPORTS, LLC, Defendants.

ORDER DENYING CROSS MOTIONS FOR PARTIAL SUMMARY JUDGMENT

BENJAMIN H. SETTLE, District Judge.

This matter comes before the Court on the parties' cross motions for partial summary judgment (Dkts. 89, 94). The Court has considered the pleadings filed in support of and in opposition to the motions and the remainder of the file and hereby denies the motions for the reasons stated herein.

I. PROCEDURAL HISTORY

This case involves a dispute between former business associates. Derral Fleming ("Fleming") is the owner of MAG Enterprises, LLC ("MAG"), collectively referred to as Plaintiffs. Plaintiffs sometimes do business under the name "Northwest Access Products." Dkt. 98 at 2; 109 at 7. Scott Parnell ("Parnell") is the owner of Samson Sports, LLC ("Samson"), collectively referred to as Defendants. Dkt. 98 at 2; Dkt. 97-2 at 3.

A. Complaint and Counterclaims

On January 29, 2013, Plaintiffs filed a civil complaint alleging that: (1) Defendants do not own the copyrights asserted and Plaintiffs did not infringe on any copyright owned by Defendants; (2) the copyrights are invalid; (3) the copyrights are actually owned and authored by Fleming; (4) Defendants breached fiduciary duties to Plaintiffs by misappropriating and/or converting partnership assets; and (5) the partnership has dissolved and the Court should equitably distribute the partnership assets, including the disputed copyrights ("Pl. Fed. Claims"). Dkt. 1.

On March 6, 2013, Defendants counterclaimed for: (1) copyright infringement against Plaintiffs before registration; (2) copyright infringement against Plaintiffs after registration; (3) violations of the Lanham Act by false designation of origin, false advertising, and reverse passing off; (4) violations of Washington's Unfair Competition Act by false advertising and reverse passing off; (5) breach of fiduciary duty by conversion and misuse of partnership property against Fleming; (6) breach of fiduciary duty by concealment of overcharges against Fleming; (7) breach of the duty of good faith and fair dealing by conversion and misuse of partnership property against Fleming; (8) breach of the duty of good faith and fair dealing by concealment of overcharges against Fleming; (9) improper accounting against Fleming; (10) conversion of partnership property against Plaintiffs; (11) tortuous interference with business relations against Plaintiffs; (12) unjust enrichment against Plaintiffs; and (13) breach of contract against MAG ("Def. Fed. Claims"). Dkt. 7.

On November 1, 2012, before Plaintiffs filed this federal court action, Defendants in this case initiated an action in Clark County Superior Court, seeking to bar Plaintiffs from using disputed technical drawing or any similar drawings. Samson Sports, LLC v. MAG Enterprises, LLC, et al., XX-X-XXXXX-X (Clark County Sup.Ct. 2012); Dkt. 95-14 at 1; Dkt. 95-20. In the First Amended Complaint in the state court action, Defendants made the same claims as in Def. Fed. Claims 4-12. Dkt. 95-19. It is unclear which claims Plaintiffs alleged in state court because no answer or counterclaim to the First Amended Complaint was provided by either party. See Dkt. 97-9 (includes only the first seven pages of the original answer and counterclaims in the state court action, which includes Pl. Fed. Claim 4). On December 21, 2012, the state court judge placed all the disputed drawings into escrow. Dkt. 95-20. The case was stayed with respect to the parties' substantive claims and counterclaims, but the Superior Court of Clark County apparently issued an order retaining jurisdiction to resolve "certain non-substantive issues." Dkt. 97 at 2.

B. Motions for Partial Summary Judgment

On February 28, 2014, Plaintiffs filed their Motion for Partial Summary Judgment, arguing for the dismissal of all Defendants' counterclaims. Dkt. 89. The same day, Defendants filed their Motion for Partial Summary Judgment, requesting that the Court find in their favor on Def. Fed. Claims 1-4. Dkt. 94. Defendants assert that a finding in their favor on Def. Fed. Claims 1-2 necessitates dismissal of Pl. Fed. Claims 1-3. Id.

II. FACTUAL BACKGROUND

A. Undisputed Facts

The business dispute in this case relates to the design, manufacture, and sale of handicap access ramps compliant with the Americans with Disabilities Act ("ADA"). Dkts. 89, 94. Headed by Parnell, Samson is a metal fabrication business that principally produces wakeboard towers. Dkt. 98 at 2. Fleming's company, MAG, designs, manufactures, and installs anchor holders and handicap access modules. Dkt. 97-2 at 3.

In 2009, Fleming approached Parnell at a boat show and proposed that the two manufacture and sell ADA handicap access ramps together. Dkt. 98 at 2; Dkt. 97-2 at 4-5; Dkt. 90 at 2-3. Fleming proposed that he would sell the ramps to his contacts for 49% of the profits and Parnell would receive the remaining 51%. Id. Parnell agreed, but the agreement was never memorialized in writing. Dkt. 98 at 2. Fleming agreed to contribute to design and manufacturing labor, while Parnell agreed to pay labor and startup costs, which later included payments to engineer Kevin Frederickson ("Frederickson"). Dkt. 90 at 3; Dkt. 98 at 2. Later in the relationship, MAG was contracted to install many of the ramp systems and was separately invoiced at $500 per installation. Dkt. 90 at 5; Dkt. 107 at 2-3.

After developing a prototype, the parties sought an engineer to create technical drawings and construction details, ultimately settling on Frederickson. Dkt. 90 at 3; Dkt. 106 at 1. There is no dispute that Frederickson drew the technical drawings on which this litigation is based. Dkt. 97-2 at 4. Samson later applied for copyright registrations for these drawings, after Frederickson transferred them to Samson by written instrument. Dkt. 84.

By late 2010, Parnell began to suspect overcharging by MAG and Fleming complained that there had been no distribution of profits to him, which caused unrest in the relationship. Dkt. 107 at 3; Dkt. 90 at 6. In January 2012, Fleming told Parnell that he "wanted out." Dkt. 90 at 6. The parties went their separate ways but disputed how to liquidate and divide assets and inventory, whether non-compete provisions applied, and which parties would continue using the drawings. Dkt. 90 at 6-7; Dkt. 107 at 3-4. This dispute developed into the state court litigation, and then into the filing of this lawsuit. Id.

B. Disputed Facts

At the center of this case, the parties dispute: (1) who owned the copyrighted drawings prior to the parties' state court stipulation that their relationship was a partnership, (2) who could use the copyrighted drawings on behalf of the partnership, (3) who authored the copyrights, and (4) any partnership agreement that governed the relationship. See Dkt. 89; Dkt. 94. In addition, there are several specific factual disputes, as outlined herein.

Plaintiffs argue that the copyrighted drawings were authored by the design group, including Fleming; Defendants contend that Frederickson alone authored the drawings. Plaintiffs contend that, before meeting Parnell, Fleming authored his own ramp drawings, which were used to build a prototype product and later relied on by Frederickson. Dkt. 90 at 3-4. Plaintiffs further allege that Frederickson was directed by multiple people, including Fleming, to make changes to the drawings throughout the drafting process. Dkt. 90 at 3. Specifically, Plaintiffs state that the "particular views" of the drawings were directed by the "design group, " and that Fleming directed additions and modifications of "elements of the drawing." Dkt. 90 at 3-4. In contrast, Defendants claim that Frederickson revised and updated the drawings to increase functionality, meet building code requirements, and minimize the amount of aluminum. Dkt. 106 at 2. Defendants state that the design group made suggestions for changing the drawings, some written but mostly verbal, and Frederickson would decide how to incorporate these changes. Dkt. 106 at 3-4. Defendants define the "design group" as Kevin Frederickson, Scott Parnell, Mike Wallway, and Derral Fleming. Dkt. 105 at 13.

Another issue among the parties arises out of the characterization of the business relationship. Plaintiffs allege that the business relationship was always a partnership, while Defendants allege that Fleming was an independent contractor at the beginning of the relationship. Dkt. 90 at 3; Dkt. 107 at 2. Parnell asserts that he told Fleming at an initial meeting that he was not interested in a partnership. Dkt. 107 at 2. However, while litigating this issue in state court, Defendants stipulated that the relationship was a partnership. Dkt. 95-12 at 1-2. The stipulation makes no reference to effective dates and Defendants argue that the relationship was not a partnership before the date of the stipulation. Id.

With regard to damages, Plaintiffs allege that Defendants were not paying Fleming's earned distribution and that requests to see the business accounting were denied. Dkt. 90 at 6. Plaintiffs contend that Fleming received an $8, 000 check but there was no documentation or explanation for it. Dkt. 90 at 6. Defendants contend that Fleming had not been paid because there was no revenue to distribute and that the $8, 000 ...


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