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Dental Care Leasing, LLC v. Miller

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

August 12, 2019

DENTAL CARE LEASING, LLC and STEPHANIE G. HACKNEY, D.D.S. II, PLLC d/b/a ASAP URGENT DENTAL CARE, Plaintiffs,
v.
KARL W. MILLER and EXPRESS URGENT DENTAL CARE LLC d/b/a EXPRESS URGENT DENTAL CARE, Defendants.

          ORDER

          TERRENCE W. BOYLE CHIEF UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on defendants' motions to dismiss [DE 22, 32] and plaintiffs' motions for default judgment [DE 18] and a preliminary injunction [DE 19]. The motions have been fully briefed and are ripe for disposition. For the reasons that follow, defendants' first motion to dismiss [DE 22] is denied as moot, plaintiffs' motion for default judgment [DE 18] is denied as moot, defendants' second motion to dismiss [DE 32] is denied, and plaintiffs' motion for a preliminary injunction [DE 19] is denied.

         BACKGROUND

         In October 2017, Dr. Stephanie G. Hackney, a licensed dentist, and defendant Karl W. Miller organized plaintiff Dental Care Leasing, LLC ("DCL"), under the laws of North Carolina. [DE 1, ¶ 16]. DCL was incorporated "to manage and support the 'ASAP Urgent Dental Care' brand and business model." Id. More specifically, DCL was formed to "provide certain management, administrative, leasing, and other contractual services" for ASAP and to "maintain propriety ownership and management of any intellectual property" related to ASAP's practices. Id. ¶ 17. Plaintiff ASAP Urgent Dental Care ("ASAP") is an urgent dental care clinic that Dr. Hackney established, hoping to provide urgent dental services to "underserved areas across the United States, starting with the flagship practice located in Wilmington, North Carolina." Id. ¶ 11-12.

         In September 2017, Dr. Hackney filed two intent-to-use trademark applications to cover "ASAP URGENT DENTAL CARE" as a service mark and logo for "urgent dental care center services." Id. ¶ 26. By December 2017, ASAP had created a "confidential, proprietary business manual," outlining ASAP's business model, which plaintiffs allege "represented a paradigm shift in the provision of urgent dental care and encompassed valuable trade secrets." Id. ¶ 13. Plaintiffs contend that the trade secrets included "the study of market demographics, the development of market strategies, the use of industry partners and technology, the provision of unique delivery platforms and revenue models, and other proprietary and confidential information." Id. Plaintiff DCL owned all of these alleged trade secrets and took reasonable steps to maintain their confidentiality. Id. ¶ 14-15. Around the same time, December 2017, Dr. Hackney incorporated ASAP as a professional limited liability company, with Dr. Hackney as its sole member and manager. Id. ¶¶ 33-35.

         Plaintiff alleges that, at the time DCL was incorporated, defendant Miller was the company's sole member. Id. ¶ 20. At some point thereafter, Mr. Miller transferred all of his rights and interest in DCL to Dr. Hackney and the Jack Preston Miller Irrevocable Trust ("Miller Trust"). Id.21. In March 2018, Dr. Hackney and the Miller Trust entered into an operating agreement that gave Dr. Hackney a 75% interest in DCL and gave the Miller Trust a 25% interest. Id. ¶¶ 22-23. Pursuant to the agreement, Mr. Miller was appointed as DCL's manager. Id. ¶ 24. Importantly, Mr. Miller is not a dentist or healthcare provider. Id. ¶ 25. ASAP then established its first, and to date only, urgent care facility in Wilmington, North Carolina. Id. ¶ 36.

         In June 2018, registration of ASAP's trademarks, Nos. 5, 493, 947 and 5, 493, 948, became effective. Id. ¶ 28. Dr. Hackney assigned all of her rights and interests in the trademarks to DCL. Id. ¶ 29. The trademarks remain in force under DCL's ownership. Id. ¶ 31.

         In September 2018, Dr. Hackney, Mr. Miller, and the Miller trust "terminated their business relationship." Id. ¶ 38. They executed a redemption agreement in which the Miller Trust transferred its 25% interest in DCL back to DCL. Id. ¶ 39. Mr. Miller simultaneously resigned as manager of DCL, agreed to transfer and assign his rights and interests in certain assets to DCL, took title of a vehicle used by DCL, and agreed to a non-compete provision. Id. ¶¶ 40-45. The non-compete required Mr. Miller, during the restricted period and within the restricted territory, to refrain, either "directly or by assisting others," from "perform[ing] services of the type conducted, authorized, offered, or provided by Miller in his capacity as" DCL's manager. Id. ¶ 42-43. The restricted period was defined as 36 months from the effective date of the redemption agreement and the restricted territory was defined as "(a) the United States of America; (b) the States east of the Mississippi River; (c) the State of North Carolina" and various counties in North Carolina. Id.

         A few months later, in December 2018, plaintiffs allege that Mr. Miller "took steps to start a competing urgent dental care practice." Id. ¶ 46. Specifically, plaintiffs allege that Mr. Miller established defendant Express Urgent Dental Care ("Express") in Metairie, Louisiana, and then applied to trademark a logo containing that trade name and a logo similar to ASAP's. Id. ¶¶ 46-50. Mr. Miller registered Express as a Delaware limited-liability company in December 2018 and created a website and various social media accounts to promote the company. Id. ¶¶ 51-53. In February 2019, Express was registered to do business in Louisiana. Id. ¶ 54.

         Plaintiffs initiated this action in March 2019. [DE 1]. Plaintiffs, DLC and ASAP, bring nine causes of action against Mr. Miller and Express. Plaintiffs bring claims for (1) breach of the redemption agreement's non-compete, (2) breach of the redemption agreement's provisions regarding Mr. Miller taking title of a DCL vehicle, (3) trademark infringement under the Lanham Act, (4) trade dress infringement under the Lanham Act, (5) trademark infringement under N.C. Gen. Stat. § 80-11, (6) misappropriation of trade secrets under 18 U.S.C. §§ 1836 and 1839, (7) misappropriation of trade secrets under N.C. Gen. Stat. § 66-153 and common law, (8) unfair competition in violation of 15 U.S.C. § 1125 and North Carolina law, and (9) violation of North Carolina's Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. § 75-1.1. [DE 1, ¶¶ 60-146].

         In May 2019, plaintiffs moved for entry of a preliminary injunction, seeking to enforce the non-compete against Mr. Miller and prevent defendants from "engaging in ongoing infringement of Plaintiffs' protectable marks and unfair competition. [DE 20; 21, p. 29]. At that same time, plaintiffs moved for entry of default judgment against Express. [DE 18]. The following month, Express moved to dismiss plaintiffs' claims against it under Rule 12(b)(2) of the Federal Rules of Civil Procedure for lack of personal jurisdiction. [DE 22]. Ultimately, in July, plaintiffs filed notice of their voluntary dismissal, without prejudice, of Express. [DE 39].

         In June 2019, defendant Miller moved to dismiss plaintiffs' claims against him under Rule 12(b)(6) for failure to state a claim upon which relief can be granted. [DE 32]. Mr. Miller argues that the non-compete is facially overboard and unenforceable, that plaintiffs have failed to adequately plead damages for Mr. Miller's alleged breach regarding the vehicle title, that the trademark claims fail because the two dental clinics operate in remote markets, and that the trade secrets claims fail because plaintiffs have not identified actionable trade secrets. [DE 33]. Plaintiffs have responded in opposition to the motion to dismiss. [DE 38].

         DISCUSSION

         At the outset, because plaintiffs have given notice of their voluntary dismissal of defendant Express Urgent Dental Care, plaintiffs' motion for default judgment against Express and Express's motion to ...


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