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U.S. Data Corp. v. Realsource Inc.

September 22, 2008


The opinion of the court was delivered by: Judge Blanche M. Manning


Plaintiff U.S. Data Corporation helps direct marketers target consumers who meet certain criteria. To do so, it obtains data about consumers from defendant Realsource, Inc., screens the data to identify consumers that meet the specific criteria, and then sells the newly-compiled data to its direct marketing clients. However, U.S. Data contends that Realsource is trying to cut it out of the picture by contacting U.S. Data's clients in order to sell its data to those clients directly.

U.S. Data has sued RealSource and Priority Direct, a company that prints and mails direct mail marketing materials, alleging that Realsource and Priority Direct are working together to steal U.S. Data's clients. Realsource has filed a counterclaim, alleging that U.S. Data has misused the data it obtained from Realsource. Each party has filed a motion to dismiss the claims against it under Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below, the motions to dismiss filed by RealSource [10-1] and Priority Direct [11-1] are denied, and the motion to dismiss filed by U.S. Data [16-1] is granted in part and denied in part as follows: the motion to dismiss Counts I and III are denied, while the motion to dismiss Count II is granted.

U.S. Data has also filed a motion [19-1] seeking fees from both RealSource and Priority Direct for failing to waive service of process. That motion is stricken.


The description that U.S. Data sets forth in its amended complaint about the parties' relationships is markedly different than the relationships described in RealSource's counterclaim. However, it is not entirely clear to the court whether the allegations in the counterclaim are consistent with or contradictory to the allegations in the amended complaint. In any event, the court will set out the allegations in the amended complaint separately from the allegations in the counterclaim. For the purposes of resolving each motion to dismiss, the court will deem the allegations of the pleading that is the subject of the motion to be true. See Marshall-Mosby v. Corporate Receivables, Inc., 205 F.3d 323, 326 (7th Cir. 2000).

I. U.S. Data's Version of the Parties' Relationship

U.S. Data began obtaining data from RealSource in 2005. According to U.S. Data's amended complaint, the parties operated under two agreements they had executed in 2005, a Pre-Screen List Agreement and a Non-Disclosure/Non-Circumvent Agreement. In 2007, the parties re-executed both agreements. Both the 2005 and 2007 non-disclosure agreements prohibited the parties from disseminating information provided by the other party and from circumventing the relationships that each party had with its own clients. The non-disclosure agreements also provide that "in any action or proceeding arising out of this Agreement, the party prevailing in such action shall be entitled to recover its reasonable attorney's fees and costs." (R.1, Ex. 2 at 4; R. 1, Ex. 4 at 4.)

One of the clients that U.S. Data served was Timeshare Relief. U.S. Data contends that Timeshare Relief had been a steady customer but, in June 2007, its orders began to drop off. U.S. Data eventually discovered that Timeshare Relief had begun obtaining data directly from RealSource. It also discovered that defendant Priority Direct, who prepared mailings for many U.S. Data clients, was helping steer those clients to RealSource.

In its amended complaint, U.S. Data alleges the following claims: (a) RealSource breached the 2005 and 2007 Non-Disclosure/Non-Circumvent Agreements by soliciting U.S. Data's customers (Count I); (b) RealSource and Priority Direct tortiously interfered with U.S. Data's prospective economic advantage by soliciting its customers (Count II); (c) RealSource and Priority Direct have engaged in conversion by using confidential information obtained by RealSource to directly solicit U.S. Data's customers (Count III); and (d) Priority Direct was unjustly enriched through the "increased revenue" it received as a result of improperly soliciting U.S. Data's customers (Count IV). (R.8 at 10.)

RealSource and Priority Direct each filed a separate motion to dismiss but the motions are virtually identical except for the sections seeking to dismiss Count I (to which only RealSource is a defendant) and Count IV (to which only Priority Direct is a defendant). In the motions, the defendants set out the following arguments in favor of dismissal: (a) the breach of contract claim based upon the 2007 non-disclosure agreement should be dismissed because RealSource never signed the agreement; (b) the tortious interference claim should be dismissed because the complaint does not allege each element of that tort and did not allege the date on which tortious conduct occurred; (c) the conversion claims should be dismissed because the complaint does not allege each element of that tort; (d) the unjust enrichment claim should be dismissed because Priority Direct has done nothing wrong; and (e) the request for attorney's fees should be stricken from the complaint because there is no contractual or statutory basis for awarding fees.

II. RealSource's Version of the Parties' Relationship

RealSource's counterclaim describes the parties' relationship differently. According to the counterclaim, U.S. Data and RealSource operated under discrete Letters of Acknowledgment. The parties executed a new Letter of Acknowledgment each time U.S. Data obtained data from RealSource. The Letter of Acknowledgment gave U.S. Data access to RealSource's entire database, but limited U.S. Data to a single use of the data obtained.

"At some point," U.S. Data stopped contracting to gain access to RealSource's entire database, and instead paid only to access recent additions to the database. (R.14 at 2.) "Representatives from U.S. Data" told "representatives of RealSource" that U.S. Data needed access only to recent additions to the database because that's the only data that U.S. Data's clients were requesting. (Id. at 3.) However, RealSource later learned that U.S. Data was continuing to use and resell RealSource's entire database in violation of the terms of the Letters of Acknowledgement.

In its counterclaim, RealSource alleges the following claims: (a) U.S. Data breached the Letters of Acknowledgment by using RealSource's data more than once (Count I); (b) U.S. Data engaged in fraud by stating that its clients wanted to purchase only recently-added data (Count II); and (c) U.S. Data engaged in conversion through its unauthorized multiple uses of RealSource's database.

U.S. Data seeks to dismiss the counterclaim based upon the following arguments: (a) the breach of contract claim should be dismissed because the counterclaim fails to allege that the Letters of Acknowledgment were signed and fails to attach them; (b) the fraud claim should be dismissed because the counterclaim did not plead it with the particularity required under Federal Rule of Civil Procedure 9(b); and (c) the conversion claim should be dismissed because the counterclaim does not allege each element of that tort and because RealSource was never deprived of control of its data.


Unfortunately, none of the parties have identified the proper standard for a Rule 12(b)(6) motion to dismiss. Not only do they appear unaware of the Supreme Court's recent retooling of the pleading standard in Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964-65 (2007), but also appear to conflate the notice pleading standard applicable in federal court with the fact pleading standard applicable in state court. The court therefore finds it necessary to comprehensively review the applicable standard.

On a motion to dismiss under Rule 12(b)(6), the court accepts the allegations in the complaint or counterclaim as true, viewing all facts, as well as any inferences reasonably drawn therefrom, in the light most favorable to the plaintiff. See Marshall-Mosby, 205 F.3d at 326. "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a ...

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