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Stuc-O-Flex International, Inc. v. Low And Bonar, Inc.

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

September 26, 2019

STUC-O-FLEX INTERNATIONAL, INC., a Washington corporation, Plaintiff,
v.
LOW AND BONAR, INC., a Delaware corporation; WALFLOR INDUSTRIES, INC., a Washington corporation; WATERWAY RAINSCREEN, LLC, a Washington limited liability company; JOHN URAL, an individual; MIKE CZERWINSKI, an individual; JIM HEWITT, an individual; and PACIFICWEST INDUSTRIES, INC., a Washington corporation, Defendants.

          ORDER GRANTING DEFENDANTS’ PARTIAL MOTION TO DISMISS

          HONORABLE RICHARD A. JONES UNITED STATES DISTRICT JUDGE.

         The Honorable Richard A. Jones This matter comes before the Court on Defendant’s Partial Motion to Dismiss (Dkt. # 12). Having considered the submissions of the parties, the relevant portions of the record, and the applicable law, the Court finds that oral argument is unnecessary. For the reasons stated below, Defendants’ Motion is GRANTED. Dkt. # 12.

         I. BACKGROUND

         The following is taken from Plaintiff’s Amended Complaint (Dkt. # 1-2), which is assumed to be true for the purposes of this motion to dismiss, along with any judicially noticed documents.[1] Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007).

         Plaintiff, Stuc-O-Flex International, Inc. (“Stuc-O-Flex” or “Plaintiff”) is a Washington-based distributor of stucco and siding products. Dkt. # 1-2 at ¶ 3.1. One of the products patented and distributed by Plaintiff is “Waterway Rainscreen, ” a rainscreen product that is installed between the exterior framing of a home and the stucco finish to facilitate drainage of moisture away from the stucco. Id. at ¶ 3.3.

         Defendant John Ural (“Defendant Ural” or “Ural”) was a licensed siding contractor in Washington, when he became a customer of Stuc-O-Flex in 2003. Id. at ¶ 3.4. In 2011, Defendant Ural decided to enter the manufacturing sector and purchased an “extruder” machine which would allow him to manufacture, among other things, rainscreen products. Dkt. # 1-2 at ¶ 3.5. After receiving the machine, Defendant Ural formed a separate manufacturing entity, Defendant Waterway Rainscreen, LLC (“Defendant Waterway” or “Waterway”). Id. at ¶ 3.9.

         In 2012, Plaintiff entered into an exclusive distribution agreement with Defendants Ural and Waterway. Id. at ¶ 3.10. Under the agreement, Plaintiff agreed to be the exclusive distributor of all products manufactured by Defendant Ural within the United States. Id. In March 2013, Plaintiff and Defendants Ural and Waterway entered into an updated distribution agreement, extending the agreement to include both United States and Canadian markets. Id. at ¶ 3.13. In exchange, Defendant Ural agreed not to sell rainscreen products to any other third parties. Id.

         In 2011, Defendant Ural also formed a Canadian company, Water Wave Building Supply, Inc. (“Water Wave”), with Defendant Mike Czerwinski (“Defendant Czerwinski”), for the purpose of distributing and selling its products in Canada. Id. at ¶ 3.7. On September 25, 2012, Defendant Ural sold his interest in Water Wave to Defendant Jim Hewitt (“Defendant Hewitt”) and Water Wave entered into a distribution agreement with Defendant Ural, under which Water Wave agreed to be the exclusive distributor of Defendant Ural’s products in Canada. Id. at ¶ 3.11.

         At some point, Plaintiff began to receive invoices for its rainscreen products from Defendant PacificWest (“PacificWest”), another company owned by Defendants Hewitt and Czerwinski. Id. at ¶ 3.14. According to Plaintiff, Ural said that he was just using the PacificWest name for insurance purposes, when in fact, he was selling the rainscreen products to PacificWest directly, in violation of Plaintiff’s distribution agreement. Id. at ¶¶ 3.16–3.17. Plaintiff alleges that Ural was also selling its rainscreen products to Water Wave and Defendant Walflor Industries, Inc. (“Walflor”), a third Hewitt/Czerwinski entity, and that Water Wave and Walflor were selling the products to other third parties. Id. at ¶¶ 3.18–3.19.

         In 2015, Defendant Ural attempted to sell 100% of his Waterway stock to PacificWest. Id. at ¶ 3.21. According to Plaintiff, the parties ran into an issue because the extruder machine was not owned by Waterway directly, but rather a different Ural entity. Id. at ¶ 3.22. On February 10, 2016, Defendants Ural, Hewitt, and Czerwinski agreed that Ural would sell the extruder machine to Walflor and, in exchange, he would receive a 33% share of Walflor and join Walflor as a Vice President and member of the Board of Directors. Id. at ¶ 3.24. Plaintiff learned of the sale by email in January 2016. Id. at ¶ 3.28. According to Plaintiff, Defendant Ural represented that Plaintiff’s exclusive distribution agreement would still be honored by Walflor when, in fact, Walflor was selling rainscreen products to other third parties. Id. at ¶¶ 3.29–3.30.

         After Walflor purchased the extruder machine, Defendants Ural, Hewitt, Czerwinski, and Walflor executed a letter of intent with Defendant Low & Bonar (“Low & Bonar” or “Defendant Low & Bonar”), a multi-national corporation purportedly interested in expanding into the rainscreen and sound control mat business. Id. at ¶¶ 3.31–3.34. On January 17, 2017, the parties executed a stock purchase agreement, under which Low & Bonar purchased 100% of Walfor’s stock. Id. at ¶ 3.24. Stuc-O-Flex’s exclusive distribution agreement with Defendant Ural was not listed as a material contract during the due diligence process, prior to the sale. Id. at ¶ 3.36. Shortly after the sale closed, Low & Bonar informed Plaintiff that it was increasing the price of the rainscreen product to 7%. Id. at ¶ 3.37. Low & Bonar also proceeded to manufacture and sell rainscreen products to other third parties. Id. at ¶ 3.38.

         On November 29, 2017, Plaintiff filed suit in King County Superior Court, alleging breach of contract, tortious interference, trademark infringement, and Washington Consumer Protection Act claims. Dkt. # 1-1. Plaintiff subsequently amended its complaint (Dkt. # 1-2), incorporating federal trademark claims, and on September 17, 2018, Defendants removed to this Court. Dkt. # 1. Defendants now move to dismiss Plaintiff’s breach of contract claim as to Defendant Low & Bonar and the tortious interference and alter ego/veil piercing claims as to all Defendants. Dkt. # 12.

         II. DISCUSSION

         The question for the Court on a motion to dismiss is whether the facts in the complaint and judicially-noticed documents sufficiently state a “plausible” ground for relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Although a complaint need not provide detailed factual allegations, it must offer “more than labels and conclusions” and contain more than a “formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555. If the complaint fails to state a cognizable legal theory or fails ...


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