United States District Court, W.D. Washington, Seattle
C. COUGHENOUR, UNITED STATES DISTRICT JUDGE.
matter comes before the Court on Plaintiff Microsoft
Corporation's first motion to strike or in the
alternative dismiss for failure to state a claim (Dkt. No.
98), Plaintiff's second motion to strike or in the
alternative dismiss for failure to state a claim (Dkt. No.
107), Defendant My Choice Software, LLC's
(“MCS”) motion to file a third-party complaint
(Dkt. No. 112), Defendant Nathan Mumme's (“Mr.
Mumme”) motion to dismiss for lack of personal
jurisdiction (Dkt. No. 115), and MCS and Mr. Mumme's
(collectively “Defendants”) motion to strike
Plaintiff's praecipe (Dkt. No. 129).
Court will provide a detailed summary of this action's
factual and procedural background to give context to its
rulings on the parties' pending motions.
December 9, 2016, Plaintiff initiated this lawsuit against
Defendants in the Central District of California. (Dkt. No.
1.) Plaintiff alleges that Defendants “advertised,
marketed, copied, offered and/or distributed unauthorized,
infringing and/or illicit Microsoft software and components
after being previously sued by Microsoft for the infringement
of Microsoft's copyrights, trademarks and/or service mark
and after entering into a permanent injunction.”
(Id. at 7; see also Dkt. No. 34.)
Plaintiff's initial complaint asserted eight causes of
action against Defendants regarding their alleged trademark
and copyright infringement of Plaintiff's software. (Dkt.
No. 1 at 9-18.)
April 6, 2017, Plaintiff filed its first amended complaint,
which added allegations and claims regarding Plaintiff's
Managed Partner Network (“MPN”) in which MCS was
a participant. (Dkt. No. 20.) Pursuant to the parties'
MPN Agreement, Plaintiff made incentive payments to MCS for
its sale of qualifying Microsoft software and licenses.
(Id.; see also Dkt. No. 100-1 at 60-93.) In
the first amended complaint, Plaintiff alleged that
Defendants were selling Microsoft Office 365 subscriptions to
customers without the customers' knowledge in order to
“increase the amount of the MPN incentive payments they
were receiving from Microsoft.” (Dkt. No. 20 at 14.)
Plaintiff asserted that Defendants' conduct regarding the
MPN agreement constituted unlawful, unfair, or fraudulent
business practices in violation of California Business &
Professions Code § 17200, and resulted in unjust
enrichment. (Id. at 23-24.)
12, 2017, Defendants moved to dismiss the first amended
complaint or in the alternative to compel a more definite
statement. (Dkt. No. 27.) On October 10, 2017, the Honorable
David O. Carter, United States District Judge, granted in
part and denied in part Defendants' motion, and dismissed
one of Plaintiff's 11 causes of action without prejudice
and with leave to amend. (Dkt. No. 33 at 14.)
October 30, 2017, Plaintiff timely filed a second amended
complaint, which alleged the same causes of action as the
first amended complaint. (Dkt. No. 34.) After filing their
answer, Defendants filed counterclaims against Plaintiff.
(Dkt. No. 39.) Defendants alleged that Plaintiff
wrongfully terminated them from the MPN and withheld
incentive payments that were owing under the MPN Agreement.
(See id.) Defendants additionally asserted that
Plaintiff had misrepresented that its approved vendors sold
authentic software, which MCS purchased had and re-sold.
December 18, 2017, Plaintiff filed a motion to sever
Defendants' counterclaims and transfer them to the
Western District of Washington. (Dkt. No. 41 at 2.) Plaintiff
argued that adjudicating the counterclaims required
interpretation of the MPN Agreement, which contained a forum
selection clause placing exclusive jurisdiction over such
claims in the Western District of Washington. (Dkt. No. 41-1
at 16.) In the alternative, Plaintiff asked the Court to
dismiss the counterclaims for failure to state a claim. (Dkt.
No. 41 at 2.)
Plaintiff's motion was pending, Judge Carter issued a
scheduling order, which established March 26, 2018 as the
deadline for pleading amendments and third-party practice.
(Dkt. No. 50 at 2.) On March 26, 2018, Defendants filed a
motion for leave to file a third-party complaint against
Flex-Tech Solutions, Inc., Southern Technology Solutions,
Inc., Teri Reeves, Thomas Reeves, and 10 Doe defendants.
(Dkt. No. 62.) Defendants asserted that the proposed
third-party defendants sold them the allegedly infringing
software and would therefore be liable to indemnify
Defendants in the event a judgment was entered against them.
(Dkt. No. 62-1 at 8.)
April 23, 2018, Judge Carter held a hearing on
Plaintiff's motion to sever and transfer Defendants'
counterclaims. (Dkt. No. 70.) Judge Carter stated that he was
“inclined to transfer the entire action” to the
Western District of Washington and directed Plaintiff to file
a request to transfer the entire action. (Id.) On
April 25, 2018, Judge Carter issued an order transferring the
case to the Western District of Washington. (Dkt. No. 72.)
transfer, the case was assigned to the Honorable Richard A.
Jones, United States District Judge. (Dkt. No. 76.) The
parties then filed a stipulation to re-note Plaintiff's
motion to dismiss Defendants' counterclaims and
Defendants' motion for leave to file a third-party
complaint, which Judge Jones adopted on May 3, 2018.
(See Dkt. No. 82.) On June 6, 2018, Mr. Mumme
voluntarily dismissed his counterclaims against Plaintiff
pursuant to Federal Rule of Civil Procedure 41(a)(1). (Dkt.
September 12, 2018, Judge Jones denied Defendants' motion
for leave to file a third-party complaint. (Dkt. No. 95.)
Judge Jones ruled that Defendants' proposed third-party
complaint would “complicate an already dense record,
further prolong trial and pretrial proceedings, and introduce
extraneous claims and potential cross claims.”
(Id. at 3.) Judge Jones concluded that there was
“no reason to inject further delays by adding a host of
out-of-state defendants and separate claims that are not
germane to the present dispute.” (Id. at 4.)
September 26, 2018, Judge Jones granted Plaintiff's
motion to dismiss MCS's counterclaims. (Dkt. No. 96.)
Judge Jones ruled that the counterclaims failed to state a
claim upon which relief could be granted. (Id. at
5.) Although expressing skepticism that MCS could
“overcome certain factual and legal deficiencies,
” Judge Jones granted MCS “one opportunity to
amend” its counterclaims to cure the identified
deficiencies. (Id. at 20.)
October 12, 2018, MCS timely filed its first amended
counterclaim. (Dkt. No. 97.) The first amended counterclaim
asserted several new theories of liability against Plaintiff.
(See generally id.) In addition to its initial
claims related to the MPN Agreement, MCS asserted that it had
entered into a “Microsoft Cloud Solution Reseller
Agreement” (the “Reseller Agreement”) with
Synnex Corporation (“Synnex”), who is
Microsoft's “preferred and only cost-effective
distributor for Office 365 to small businesses like [My
Choice].” (Id. at 3-5.) MCS asserted that the
Reseller Agreement enabled it “to order Office 365
licenses from Synnex, ” and that it entered into the
Reseller Agreement because its sales of Office 365 licenses
qualified “for incentive payments from Microsoft
through the MPN.” (Id. at 5.) MCS further
stated that “[t]he wrongful distribution practices
allegations in [Plaintiff's] Second Amended Complaint are
based on MCS's sales of Office 365 licenses made pursuant
to and in accordance with the [Reseller Agreement].”
to the Reseller Agreement, MCS alleges that it
“registered approximately 35, 000 Office 365 license
seats with Synnex.” (Id. at 6.) MCS further
alleges that Synnex charged it for all registered Office 365
licenses, regardless of whether they were activated or
cancelled prior to expiration of a 30-day trial period.
(Id.) As a result, MCS asserted that Synnex
overbilled it for the licenses, in an amount estimated to
exceed two million dollars. (Id. at 7.) MCS alleged
that Synnex was acting as Plaintiff's agent in entering
into and performing under the Reseller Agreement. (See
generally id.) MCS also alleged that Plaintiff
terminated the MPN agreement while still owing MCS
approximately $140, 000 in incentive payments. (Id.
at 8.) The first amended counterclaim asserted the following
causes of action against Plaintiff: (1) breach of the
Reseller Agreement and the MPN Agreement, (2) violation of
the duty of good faith and fair dealing with regard to the
Reseller Agreement and the MPN Agreement, (3) unjust
enrichment, (4) conversion, (5) an accounting, and (6)
imposition of a constructive trust. (Id. at 9-13.)
October 25, 2018, Plaintiff filed a motion to strike or in
the alternative dismiss MCS's amended counterclaim. (Dkt.
No. 98.) Plaintiff asserts that the amended counterclaim
should be struck because MCS exceeded the leave that Judge
Jones granted to amend. (Id. at 5.) Alternatively,
Plaintiff asserts that MCS's counterclaims fail to state
a claim upon which relief can be granted because ...