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Progress Solar Solutions, LLC v. Fire Protection, Inc.

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

August 1, 2019

FIRE PROTECTION, INC., et al., Defendants.



         On June 27, 2018, Progress Solar Solutions, LLC ("Progress Solar" or "plaintiff') filed a second amended complaint against Solar Mod Systems, Inc. ("SMS") and other defendants [D.E. 89]. On July 18, 2018, SMS answered Progress Solar's second amended complaint and alleged counterclaims against Progress Solar for tortious interference with contract, misappropriation of trade secrets, and defamation [D.E. 93]. On October 23, 2018, Progress Solar answered SMS's counterclaims [D.E. 102]. On October 24, 2018, Progress Solar moved for partial judgment on the pleadings on SMS's defamation counterclaim [D.E. 103] and filed a memorandum in support [D.E. 104]. On November 14, 2018, SMS responded in opposition [D.E. 107]. On November 28, 2018, Progress Solar replied [D.E. 110]. As explained below, the court grants Progress Solar's motion for partial judgment on the pleadings and dismisses SMS's defamation counterclaim.


         SMS, a Texas corporation, designs products for the United States military, including a "Solar Gen Power Cube." See Countercl. [D.E. 93] ¶¶ 1, 6-7. Progress Solar produces portable, solar-powered light towers. See id. ¶ 8.

         On July 18, 2016, Progress Solar wrote a letter to SMS stating that SMS's Solar Gen Power Cube may infringe Progress Solar's patent for a similar device (U.S. Patent No. 8, 833, 985 or the '"985 Patent"). See id. ¶ 11; [D.E. 103-1]. Progress Solar noted that it had also applied for a patent for a second, similar device (U.S. Patent App. No. 14/459, 421 or the "'421 Application"). See[D.E. 103-1] 3. Progress Solar also stated that it "welcome[d] the opportunity to discuss the matter further" to "abate any potentially infringing activities by" SMS. Id. SMS alleges that its product is distinguishable from Progress Solar's patent and that Progress Solar's representations concerning infringement were false, malicious, and made with the intent to harm SMS. See Countercl. [D.E. 103] ¶¶ 12, 40.

         Progress Solar sent copies of the letter to two of SMS's potential or existing clients, Nobles Supply and Logistics ("Nobles Supply") and ADS, Inc. ("ADS"). See id ¶¶ 14-16. In response to the letter, ADS expressed concern with making further purchases of SMS's Solar Gen Power Cube. See Id. ¶ 17. SMS alleges that it has lost business because of the letter. See Id. ¶ 18. Progress Solar admits that ADS has "consistently declined to order light towers" from either SMS or its distributors. See [D.E. 102] ¶ 17. Progress Solar contends, however, that SMS has sold at least 438 units of its product to Nobles Supply after Progress Solar sent the letter to SMS. See Id. at 9.


         A party may move for judgment on the pleadings at any time "[a]fter the pleadings are closed-but early enough not to delay trial." Fed.R.Civ.P. 12(c). A court should grant the motion if "the moving party has clearly established that no material issue of fact remains to be resolved and the party is entitled to judgment as a matter of law." Park Univ. Enters, v. Am. Cas. Co. of Beading, 442 F.3d 1239, 1244 (10th Cir. 2006) (quotation omitted), abrogated on other grounds by Magnus. Inc. v. Diamond State Ins. Co., 545 Fed.Appx. 750 (10th Cir. 2013) (unpublished); see Mayfield v. Nat'l Ass'n for Stock Car Auto Racing. Inc., 674 F.3d 369, 375 (4th Cir. 2012); Burbach Broad. Co. of Del. v Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir. 2002). A court may consider the pleadings and any materials referenced in or attached to the pleadings, which are incorporated by reference. See Fed.R.Civ.P. 10(c); Fayetteville Inv'rs v. Commercial Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991). A court also may consider "matters of which a court may take judicial notice." Tellabs. Inc. v. Makor Issues & Rights. Ltd., 551 U.S. 308, 322 (2007).

         The same standard applies under Rule 12(c) and Rule 12(b)(6). See Mayfield, 674 F.3d at 375; Burbach Broad. Co., 278 F.3d at 405-06. Thus, a motion under Rule 12(c) tests the legal and factual sufficiency of the claim. See, e.g., Ashcroft v. Iqbal, 556 U.S. 662, 677-80, 684 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554-63 (2007); Coleman v. Md. Court of Appeals, 626 F.3d 187, 190 (4th Cir. 2010), aff'd, 566 U.S. 30 (2012); Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). To withstand a Rule 12(c) motion, a pleading "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 678 (quotation omitted); see Twombly, 550 U.S. at 570; Giarratano, 521 F.3d at 302. In considering the motion, the court must construe the facts and reasonable inferences in the "light most favorable to the [nonmoving party]." Massey v Ojaniit, 759 F.3d 343, 347, 352-53 (4th Cir. 2014) (quotation omitted); see Clatterbuck v. City of Charlottesville. 708 F.3d 549, 557 (4th Cir. 2013), abrogated on other grounds by Reed v. Town of Gilbert, 135 S.Ct. 2218 (2015); Burbach Broad. Co. of Del., 278 F.3d at 406. A court need not accept as true a complaint's legal conclusions, "unwarranted inferences, unreasonable conclusions, or arguments." Giarratano, 521 F.3d at 302 (quotation omitted): see Iqbal, 556 U.S. at 678-79. Rather, a plaintiff s allegations must "nudge[] [its] claims," Twombly, 550 U.S. at 570, beyond the realm of "mere possibility" into "plausibility." Iqbal, 556 U.S. at 678-79.

         Subject-matter jurisdiction is based on diversity, and the court applies state substantive law and federal procedural rules. See Erie R.R. v. Tompkins, 304 U.S. 64, 78-80 (1938); Dixon v. Edwards, 290 F.3d 699, 710 (4th Cir. 2002). North Carolina law applies to SMS's defamation counterclaim. Accordingly, this court must predict how the Supreme Court of North Carolina would rule on any disputed state-law issues. See Twin City Fire Tns. Co. v. Ben Arnold-Sunbelt Beverage Co. of S.C., 433 F.3d 365, 369 (4th Cir. 2005). In doing so, the court must look first to opinions of the Supreme Court of North Carolina. See id.; Stahle v. CTS Corp., 817 F.3d 96, 100 (4th Cir. 2016). If there are no governing opinions from that court, this court may consider the opinions of North Carolina Court of Appeals, treatises, and "the practices of other states." Twin City Fire Ins. Co., 433 F.3d at 369 (quotation omitted).[1] In predicting how the highest court of a state would address an issue, this court "should not create or expand a [s]tate's public policy." Time Warner Entm't-Advance/Newhouse P'ship v. Carteret-Craven Elec. Membership Corp., 506 F.3d 304, 314 (4th Cir. 2007) (alteration and quotation omitted); see Day & Zimmerman. Inc. v. Challoner, 423 U.S. 3, 4 (1975) (per curiam); Wade v. Danek Med., Inc., 182 F.3d 281, 286 (4th Cir. 1999). Moreover, in predicting how the highest court of a state would address an issue, this court must "follow the decision of an intermediate state appellate court unless there [are] persuasive data that the highest court would decide differently." Toloczko, 728 F.3d at 398 (quotation omitted); Hicks ex rel. Feiock v. Feiock, 485 U.S. 624, 630 & n.3 (1988).

         To establish a defamation claim under North Carolina law, a "plaintiff must allege and prove that the defendant made false, defamatory statements of or concerning the plaintiff, which were published to a third person, causing injury to the plaintiff s reputation." Griffin v. Holden, 180 N.C.App. 129, 133, 636 S.E.2d 298, 302 (2006) (quotation omitted); see Renwick v. News & Observer Publ'g Co., 310 N.C. 312.316-19.312 S.E.2d 405.408-10 (1984); Bovce & Isley, PLLC v. Cooper, 211 N.C.App. 469, 478, 710 S.E.2d 309, 317 (2011); Craven v. Cope, 188 N.C.App. 814, 816, 656 S.E.2d 729, 732 (2008); Smith-Price v. Charter Behavioral Health Sys., 164 N.C.App. 349, 356, 595 S.E.2d 778, 783 (2004). A statement is defamatory if it either, directly or by implication, ascribes dishonesty, fraud, lack of integrity, or reprehensible conduct to the subject of the statement. See Flake v. Greenboro News Co., 212 N.C. 780, 785-86, 195 S.E. 55, 60 (1938); Donovan v. Fiumara, 114 N.C. App. 524, 526, 442 S.E.2d 572, 574 (1994); Beane v. Weiman Co., 5 N.C.App. 276, 277, 168 S.E.2d 236, 237 (1969). A defamatory statement "tend[s] to prejudice another in his reputation, office, trade, business, or means of livelihood." Donovan, 114 N.C.App. at 526, 442 S.E.2d at 574; see West v. King's Dep't Store. Inc., 321 N.C. 698, 703, 365 S.E.2d 621, 624 (1998); Renwick, 310 N.C. at 317-18, 312 S.E.2d at 409; Flake, 212 N.C. at 786, 195 S.E. at 60. Defamation can be either libel or slander. See, e.g., Craven, 188 N.C.App. at 816, 656 S.E.2d at 732; Tallent v. Blake, 57 N.C.App. 249, 251, 291 S.E.2d 336, 338 (1982); cf Renwick, 310 N.C. at 323-24, 312 S.E.2d at 412-13. Generally, libel is written and slander is oral. See Bell v Simmons, 247 N.C. 488, 404, 101 S.E.2d 383, 387 (1958); Aycock v. Padgett, 134 N.C.App. 164, 165, 516 S.E.2d 907, 909 (1999).

         SMS alleges that Progress Solar's statements are libelous per se. See [D.E. 107]. Libel per se is a false written statement communicated to a third party that "tends to impeach a person in that person's trade or profession [or] otherwise tends to subject one to ridicule, contempt or disgrace." Renwick, 310 N.C. at 317, 312 S.E.2d at 408-09; see Flake, 212 N.C. at 782, 195 S.E. at 59-60; Cherry v. United Parcel Serv., Inc., No. 5:07-CV-403-D, 2009 WL 8641019, at *9 (E.D. N.C. Sept. 28, 2009) (unpublished). In evaluating whether a publication constitutes libel per se, a court must analyze whether the publication is defamatory when "stripped of all insinuations, innuendo, colloquium, and explanatory circumstances." Griffin, 180 N.C.App. at 134.636 S.E.2d at 303: see, e.g., Nucor Corp. v. Prudential Equity Grp., LLC, 189 N.C.App. 731, 736, 659 S.E.2d 483, 487 (2008).

         Whether a statement is defamatory per se is a question of law. See, e.g., Ellis v. N. Star Co., 326 N.C. 219, 224, 388 S.E.2d 127, 130 (1990). When a plaintiff alleges that statements are defamatory per se, the statements "must be susceptible of but one meaning and of such nature that the court can presume as a matter of law that they tend to disgrace and degrade the party or hold him up to public hatred, contempt or ridicule, or cause him to be shunned and avoided." Boyce & Isley, PLLC v. Cooper, 153 N.C.App. 25, 30-31, 568 S.E.2d 893, 898-99 (2002); see, e.g., Renwick, 310 N.C. at 317-18.312 S.E.2d at 409: Oates v. Wachovia Bank & Tr. Co., 205 N.C. 14, 16, 169S.E.2d 869, 871 (1933). "The question always is how would ordinary men naturally understand the publication." Renwick, 310 N.C. at 318, 312 S.E.2d at 409 (quotation omitted).

         In Badame v. Lampke, the Supreme Court of North Carolina held that "false words imputing to a merchant or business man conduct derogatory to his character and standing as a business man and tending to prejudice him in his business are actionable." 242 N.C. 755, 757, 89 S.E.2d 466, 468 (1955); see Boyce & ...

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