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Old South Apparel, LLC v. Jeb Designs, Inc.

United States District Court, E.D. North Carolina, Western Division

September 26, 2017




         This matter is before the Court on defendants' motions to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure [DE 15, 17] and plaintiffs' motion for a preliminary injunction [DE 1-7]. The matter has been fully briefed and is ripe for ruling. For the reasons discussed below, the motions to dismiss are granted. As such, plaintiffs' motion for a preliminary injunction is dismissed as moot.


         Plaintiffs James T. Hair and Old South Apparel, his clothing company, based in Fayetteville, North Carolina, contracted with JEB Designs, a printing company, to print t-shirts bearing the phrase "Old South." Plaintiffs would inspect the printed shirts, rejecting those that were misprinted or defective. In 2016, Plaintiffs decided to change the way the t-shirts were tagged. The new process, called 'inside tagging, ' involved printing the contents of the putative tag on the inside of the shirt, instead of attaching a nylon tag. Plaintiffs and Defendant JEB Designs agreed to split the cost of the specialized retagging machine needed for this new process.

         When these new shirts were completed, plaintiffs rejected 1, 498 of them due to their quality. Plaintiffs signed a release regarding the rejected shirts, which read that JEB Designs "could dispose of them as they chose." JEB Designs, in exchange, reimbursed plaintiffs for their contribution to the retagging machine. Then, JEB Designs sold the 1, 498 shirts to the Presleys, who sold them at their shop. After the Presleys bought the 'inside tagged' shirts, JEB Designs also sold the Presleys a second batch of 240 shirts which plaintiffs had also declined to accept.

         Plaintiffs sued in Cumberland County Superior Court, alleging federal trademark infringement, state trademark infringement, fraud, deceptive trade practices and conversion. Judge Claire Hill granted a temporary restraining order on June 5, 2017. Defendants removed the case to this Court on the basis of federal question jurisdiction, as plaintiffs have alleged a Lanham Act violation, 15 U.S.C. § 1114. This Court exercises supplemental jurisdiction over the attendant state law claims under 28 U.S.C. § 1367.


         A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of the complaint. Papasan v. Attain, 478 U.S. 265, 283(1986). When acting on a motion to dismiss under Rule 12(b)(6), "the court should accept as true all well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff." Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). A complaint must allege enough facts to state a claim for relief that is facially plausible. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Facial plausibility means that the facts pled "allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged, " and mere recitals of the elements of a cause of action supported by conclusory statements do not suffice. Ashcroftv. Iqbal, 556 U.S. 662, 678 (2009). A complaint must be dismissed if the factual allegations do not nudge the plaintiffs claims "across the line . from conceivable to plausible." Twombly, 550 U.S. at 570. The complaint must plead sufficient facts to allow a court, drawing on judicial experience and common sense, to infer more than the mere possibility of misconduct. Nemet Chevrolet, Ltd. v., Inc., 591 F.3d 250, 256 (4th Cir. 2009). The court need not accept the plaintiffs legal conclusions drawn from the facts, nor need it accept as true unwarranted inferences, unreasonable conclusions, or arguments. Philips v. Pitt County Mem. Hosp., 572 F.3d 176, 180 (4th Cir. 2009).

         In considering a motion to dismiss pursuant to Rule 12(b)(6), the Court may consider documents attached to the complaint, as well as those attached to the motion to dismiss so long as they are integral to the complaint and authentic. Fed.R.Civ.P. 10(c); Sec 'y of State for Defence v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007); Philips v. Pitt County Mem 7 Hosp., 572 F.3d 176, 180 (4th Cir. 2009). A court ruling on a motion to dismiss under Rule 12(b)(6) may also properly take judicial notice of matters of public record. Sec'y of State for Defense, 484 F.3d at 705.

         Plaintiffs' claims must be separated into two categories: the first 1, 498 shirts, and the second group of 240 shirts.

         I. The 1, 498 Shirts

         All of plaintiffs' claims regarding the 1, 498 'inside tagged' shirts are dismissed because plaintiff Hair signed a release disclaiming all rights in the shirts.

         If a contract's meaning is clear and unambiguous, the text of the contract will govern. Prichard Enterprises, Inc. v. Adkins, 858 F.Supp.2d 576, 586 (E.D. N.C. 2012). Interpretation of an unambiguous contract is a question of law. Briggs v. Am. & Efird Mills, Inc., 251 N.C. 642, t 644, 111 S.E.2d 841, 843 (1960). A valid contract requires consideration. Restatement (Second) of Contracts§71 (1981).

         Here, the text of the release plaintiff Hair signed is clear and unambiguous: "JEB Designs, Inc. does hereby assume ownership of the returned merchandise and as sole owner of this merchandise may dispose of it in any manner. Tyler Hair and Old South Apparel relinquish all claims, rights and ownership to this returned inventory." [Dkt. 1-7]. Second, plaintiffs received consideration for signing ...

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