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Drake Enterprises, Inc. v. Colloid Environmental Technologies Co.

June 24, 2009

DRAKE ENTERPRISES, INC., STRONGSEAL RECYCLED RUBBERIZED PRODUCTS, LLC, STRONGSEAL MANUFACTURING, LLC, AND ROOF TREADS, LLC, PLAINTIFFS,
v.
COLLOID ENVIRONMENTAL TECHNOLOGIES COMPANY, DEFENDANT.



The opinion of the court was delivered by: Judge George M. Marovich

MEMORANDUM OPINION AND ORDER

Defendant Colloid Environmental Technologies Company ("CETCO") removed to this Court the complaint plaintiffs Drake Enterprises, Inc. ("Drake"), Strongseal Recycled Rubberized Products, LLC ("Strongseal Products"), Strongseal Manufacturing, LLC ("Strongseal Manufacturing") and Roof Treads, LLC ("Roof Treads") filed in the Circuit Court of Cook County. Before the Court is defendant CETCO's motion to dismiss Counts I, II and III of plaintiffs' complaint.

I. Background

For purposes of this motion to dismiss, the Court takes as true the allegations in plaintiffs' complaint, as well as the documents attached thereto and referenced therein. See Equal Employment Opportunity Comm'n v. Concentra Health Services, Inc., 496 F.3d 773, 778 (7th Cir. 2007) (a document attached to a motion to dismiss is considered part of the pleadings where the document is referred to in the complaint and is central to the plaintiff's claim); Fed.R.Civ.P. 10(c).

In this case, plaintiffs claim that CETCO failed to pay adequate royalties for use of a patent for a product that is useful for making roofing materials. Plaintiff Drake is the exclusive licensee of the patent, and Drake sublicensed its rights to plaintiffs Strongseal Products, Strongseal Manufacturing and Roof Treads, who are the exclusive sub-licensees. In or about August of 2003, plaintiffs Strongseal Products, Strongseal Manufacturing and Roof Treads entered into an Asset Purchase Agreement with defendant CETCO. As part of the transaction, Drake was asked to sign a consent to the Asset Purchase Agreement's assignment of the sublicenses to CETCO.

Based on those agreements, plaintiffs filed claims against defendant for breach of contract and for an accounting. Defendant moves to dismiss three of the four claims. For the reasons set forth below, the Court grants in part and denies in part defendant's motion to dismiss.

II. Standard on a Motion to Dismiss

The Court may dismiss a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure if the plaintiff fails "to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). In considering a motion to dismiss, the Court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in the plaintiffs' favor. McCullah v. Gadert, 344 F.3d 655, 657 (7th Cir. 2003). Under the notice-pleading requirements of the Federal Rules of Civil Procedure, a complaint must "give the defendant fair notice of what the... claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint need not provide detailed factual allegations, but mere conclusions and a "formulaic recitation of the elements of a cause of action" will not suffice. Bell Atlantic, 127 S.Ct. at 1964-1965. A complaint must include enough factual allegations to "raise a right to relief above a speculative level." Bell Atlantic, 127 S.Ct. at 1965. "After Bell Atlantic, it is no longer sufficient for a complaint 'to avoid foreclosing possible bases for relief; it must actually suggest that the plaintiff has a right to relief, by providing allegations that raise a right to relief above the speculative level.'" Tamayo v. Blagojevich, 526 F.3d 1074, 1084 (7th Cir. 2008) (quoting Equal Employment Opportunity Comm'n v. Concentra Health Services, Inc., 496 F.3d 773, 776 (7th Cir. 2007)).

III. Discussion

A. Plaintiff Drake's Breach of Contract Claim

In Count II, plaintiff Drake asserts that defendant CETCO breached a contract by failing to pay Drake license fees. Drake asserts that CETCO owes it license fees pursuant to a document Drake signed, in which document Drake consented to the Asset Purchase Agreement between CETCO and the other plaintiffs. CETCO moves to dismiss. CETCO argues that Drake cannot state a claim for breach of contract because CETCO did not sign the consent document Drake signed.

It is true that CETCO did not sign Drake's consent to the Asset Purchase Agreement. That consent says, "Drake agrees that CETCO shall pay to Drake a license fee equal to four percent (4%) of CETCO's net sales of the Products in the United States, as opposed to the six percent (6%) license fee" required by the sublicense agreement. What CETCO is alleged to have signed, however, is the Asset Purchase Agreement. In the Asset Purchase Agreement, CETCO appears to have purchased the sublicenses between Drake and the other plaintiffs (see Asset Purchase Agreement Section 1.1.3 and Schedule 1.1.3) and to have agreed to assume the liabilities under those sublicenses (see Asset Purchase Agreement Section 3.1.1 and Schedule 1.1.3). Finally, it appears that CETCO conditioned its obligations under the Asset Purchase Agreement on Drake's signing a consent to the assignment of the sublicenses (see Asset Purchase Agreement Section 8.1.4 and Schedule 5.2). Accordingly, the Court concludes that Drake has stated a claim for breach of contract.

For these reasons, the Court denies defendant's motion to ...


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