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Bailey v. Pride Manufacturing Company, LLC

United States District Court, Ninth Circuit

January 7, 2014

MAURICE BAILEY, Plaintiff,
v.
PRIDE MANUFACTURING COMPANY, LLC, a limited liability company organized under the laws of Wisconsin; SOFTSPIKES, LLC, a limited liability AND ORDER company organized under the laws of Delaware; MCMULLIN LABORATORIES, INC, d/b/a MCMULLIN LABS, an administratively dissolved corporation organized under the laws of Idaho; MICHAEL J. MCDONAGH, as statutory trustee for MCMULLIN LABORATORIES, INC; FARIS W. MCMULLIN, an individual; INOVIN, INC., an administratively dissolved corporation organized under the laws of Idaho; JAMISON ROSS SPENCER, an individual; JAMES MCMULLIN, an individual; CADWELL THERAPEUTICS, INC., a corporation organized under the laws of Wyoming; WAYNE H. JONES, an individual; NEW PHASE DEVELOPMENT, LLC, a limited liability company organized under the laws of Idaho; DUANE M. JOHNSON, an individual; and other as yet unknown John or Jane Does or unknown entities; Defendants.

MEMORANDUM DECISION AND ORDER

EDWARD J. LODGE, District Judge.

Before the Court in the above entitled matter are the Defendant's Motion to Dismiss pursuant to Rule 12(b)(6) and Motion for Sanctions and the Plaintiff's Motions to Supplement. The parties have filed their responsive briefing and the matter is ripe for the Court's review. Having fully reviewed the record herein, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, the Motion shall be decided on the record before this Court without oral argument.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff Maurice Bailey initiated this action against a number of Defendants seeking a declaration that he is the owner of certain property. (Dkt. 1.) Specifically, whether or not an Amended Default Judgment entered in a related bankruptcy proceeding quiets title to the subject property in Mr. Bailey's favor. The property in question is a number of golf cleat patents invented by Faris McMullin.[1]

The related bankruptcy proceedings involved the case of an entity named ConectL Corporation (ConectL).[2] On January 31, 2007, ConectL filed a Chapter 11 Bankruptcy Petition (Case No. 07-00137-JDP) which was later converted to a Chapter 7 (Case No. 09-06008-JDP) and a Trustee, Gary L. Rainsdon, was appointed. On January 26, 2009, the Trustee filed an Adversary Proceeding Complaint against various defendants in that action including Mr. McMullin and three companies in which he was a majority equity owner: Anestel Corporation, formerly known as ConectL Test Corporation; Inovin, Inc., formerly known as Exact Research, Inc.; and R-Tech Corporation. (Dkt. 1, Ex. A.)[3] The Trustee's Complaint requested the turning over of certain documents, avoidance of fraudulent transfers, quiet title, and avoidance of preferences against the defendants as to sixteen specific patents and various trademarks. The Trustee's Complaint further alleged:

Other specific and general schemes and artifices of transfers of property or debts by the Debtor to, or among the defendants, may exist and may be discovered in the discovery and investigatory process of this adversary proceeding. The Defendants are placed on notice that the Trustee seeks to avoid all such transfers and recover all such properties or value of the transfers for the benefit of the estate even though not specifically identified or known at this time. Such transfers may include creations of debt, transfers of cash, cash equivalent, stock or shares, property, intellectual property, payments made without consideration, obligations incurred for the benefit of others or any other such transfers to the defendants and/or John or Jane Does and other unknown Entities for less than reasonable equivalent value or for the purpose of concealment.

(Dkt. 1, Ex. A at ¶ 29.) Ultimately, on October 25, 2009, an Amended Default Judgment was entered against all defendants in the Adversary Proceeding which quieted title to patents and trademarks as specifically identified therein as well as avoidance of any and all claims of interest or ownership in and to patents, royalties, foreign patents, copyrights, trademarks, and license agreements by the listed corporations to those listed patents and trademarks. (Dkt. 1, Ex. B at ¶¶ 2, 3.) The Amended Default Judgment placed ownership of those properties in the bankruptcy estate of ConectL. On April 22, 2010, the Trustee assigned to Mr. Bailey all of the patents and judgments held by the bankruptcy estate of ConectL including those contained in the Amended Default Judgment. (Dkt. 1, Ex. C.)

Mr. Bailey filed an Adversary Proceeding in the United States Bankruptcy Court in this District (Case No. 12-06020-JDP) against these Defendants claiming the property at issue is owned by Mr. Bailey pursuant to the Amended Default Judgment. The Bankruptcy Court concluded that it lacked subject matter jurisdiction and the case was dismissed. Accordingly, Mr. Bailey then filed his Complaint in this matter pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202 and Title 11 of the Bankruptcy Code raising the same claim.

Defendants Pride Manufacturing Company, LLC and Softspikes, LLC (collectively referred to as Pride Defendants) manufacture golf equipment, including golf cleats that Mr. McMullin invented. Pride Defendants argue the golf cleats invented by Mr. McMullin were invented independent from his work for ConectL and the patents are separate and apart from those that are the subject of the Amended Default Judgment in the ConectL bankruptcy. Essentially, that the golf cleat patents are not a part of the ConectL bankruptcy estate. The Pride Defendants have now filed the instant Motion to Dismiss. (Dkt. 38.) The Pride Defendants have also filed a related Motion for Rule 11 Sanctions and Mr. Bailey has filed Motions to Supplement. (Dkt. 66, 77, 84.) These Motions are ripe for the Court's consideration and the Court finds as follows.

DISCUSSION

1. Motions to Supplement

Plaintiff filed two Motions to Supplement. (Dkt. 77, 84.) The materials sought to be supplemented relate to the Motion to Dismiss and Motion for Sanctions filed by the Pride Defendants. Plaintiff asserts the materials were not available to the Plaintiff until after the Motion to Dismiss had been filed and briefed. The Pride Defendants oppose the Motions to Supplement arguing the Motion to Dismiss should be based upon the sufficiency of the Complaint alone, the materials are extraneous and largely irrelevant and prejudicial to the Pride Defendants, and the supplemental materials amount to a motion to amend the Complaint. (Dkt. 85.) The Pride Defendants further argue the materials raise new facts and theories for recovery after the briefing on the Motions was completed.

The Court has reviewed the parties briefing concerning the requested supplementation and denies the Motions to Supplement as to their consideration on the Motion to Dismiss. The question on the Motion to Dismiss concerns the sufficiency of the pleadings and, therefore, the supplemental materials are not relevant to that Motion. As to the Motion for Sanctions, however, the Court finds the ...


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