Opinion
CIVIL ACTION NO: 03-1917, SECTION: "J"(3)
October 29, 2003
ORDER AND REASONS
Before the Court is Plaintiff's 12(b)(6) Motion to Dismiss the Counterclaim by defendants Crescent Chemical, LLC and Mark Andel (Rec. Doc. 12). Defendants oppose the motion (Rec. Doc. 13). The motion was set for hearing on Wednesday, October 22, 2003, without oral argument. Upon consideration of the briefs and evidence submitted by counsel, the record, and applicable law, the Court finds that Plaintiff's Motion to Dismiss should be GRANTED IN PART and DENIED IN PART.
Although plaintiff's Motion to Dismiss seeks dismissal of the entire counterclaim, plaintiff's memorandum only addresses ¶¶ 9-10 as related to Louisiana's Unfair Trade Practices Act ("LUTPA"). Accordingly, defendants' opposition addresses the same portion of the counterclaim. Thus, other claims asserted in the counterclaim remain and are not dismissed by this Court.
BACKGROUND
On July 3, 2003, plaintiff, Chemtreat, Inc. ("ChemTreat") brought suit against defendants (Rec. Doc. 1). According to the complaint, Chemtreat employed the defendant, Mark Andel, as a salesman of ChemTreat's products and services until his termination on or about June 3, 2003. ChemTreat claims that Andel violated his employment contract, violated Louisiana Unfair Trade Practices Act ("LUTPA")/ and unjustly enriched himself before ChemTreat terminated his employment. Specifically, ChemTreat alleges that Andel sold non-ChemTreat products, concealed information, did not service ChemTreat customers, underbid ChemTreat, diverted customers and prospects to himself and his company Crescent Chemical, L.L.C. ("Crescent") and other co-defendants, and submitted improper expense reimbursements to ChemTreat.In response, on August 13, 2003, the defendants answered and alleged in their counterclaim violations of LUTPA (Rec. Doc. 5). According to the answer submitted by defendants, Andel and Crescent, the plaintiff participated in practices that are unfair and unethical under LUTPA. Specifically, defendants urge that plaintiff contacted Crescent's customers explaining that the customers would become "embroiled in this litigation" if they did not switch their business to ChemTreat and that ChemTreat offered to undercut ChemTreat's prices by 30% to shift business.
Subsequently, the plaintiff filed a 12(b)(6) motion to dismiss the counterclaim stating that the defendants failed to state a claim under LUTPA (Rec. Doc. 12). Defendants oppose the motion (Rec. Doc. 13).
STANDARD OF REVIEW
A court may dismiss a complaint for "failure to state a claim upon which relief can be granted" pursuant to Fed.R.Civ.Pro. 12(b)(6). In reviewing a motion to dismiss under Rule 12(b)(6), a district court is to take as true all material allegations in the complaint and construe them in the light most favorable to the non-moving party. Kaiser Aluminum Chem. Sales, Inc. v. Avondale Shipyards. Inc., 677 F.2d 1045, 1050 (5th Cir. 1982). A dismissal under Rule 12(b)(6) is appropriate only if it appears to a certainty that the non-moving party is not entitled to relief under any set of facts that could be proven. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). In that case, a district court must dismiss the complaint. Baton Rouge Bldg. Constr. Trades Council AFL-CIO v. Jacobs Constructors. Inc., 804 F.2d 879, 881 (5th Cir. 1986).
DISCUSSION
LUTPA declares that " [u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce" are illegal. Turner v. Purina Mills, Inc., 989 F.2d 1419, 1422 (5th Cir. 1993) (citing LA. REV. STAT. ANN. § 51:1405). A cause of action for damages exists for "any person that suffers an ascertainable loss of money or movable property, corporeal or incorporeal, as a result of the use or employment by another person of an unfair or deceptive method, act or practice declared unlawful by R.S. 51:1405." Id. (citing LA. REV. STAT. ANN. § 51:1409). The courts must decide what constitutes an "unfair trade practice" on a case-by-case basis. Id. (citing Marshall v. Citicorp., 601 So.2d 669, 670 (La.App. 5th Cir. 1992)). LUTPA does not prohibit sound business practices, the exercise of permissible business judgment, or appropriate free enterprise transactions. Id. (citing Monroe Med. Clinic, Inc. v. Hosp. Corp. of Am., 522 So.2d 1362, 1365 (La.App. 2d Cir. 1988)). Businesses in Louisiana are not prohibited from making money and are still free to pursue profit at the expense of a competitor; the means used must not be egregious. Id. The statute aims to punish breaches of ethical standards arising from the employer-employee relationship; specifically, the breach of the special relationship of trust. Id.
1) Is Contacting a Competitor's Customers a Violation of LUTPA?
The court goes on to analyze the breach of the special relationship of trust by explaining that employees, through their work experience, gain access to privileged information regarding the employer's particular business practices, methods of production, names of customers, and so forth. The court does not address any breach of trust owed by the employer to the employee as is argued in the present case.
Not all activity that arguably injures a competitor is actionable under LUTPA. Oreck Holdings, L.L.C. v. Euro-Pro Corporation, No. CIV.A 01-1245, 2002 WL 59405, at *2 (E.D. La. Jan. 15, 2002)'. An intent to eliminate competition by itself does not violate LUTPA.Turner, 989 F.2d at 1423. The statute forbids businesses destroying each other through improper means. Id. When two business competitors are simply vying for the same customers in the free market, contacting customers is not a violation. Id. Thus, solicitation of customers after the end of an employment relationship does not form the basis for a claim of unfair competition. Boncosky Services. Inc. v. Lampo, 751 So.2d 278, 288 (La.App. 1st Cir. 1999). Moreover, a claim made to customers and vendors based on threats of litigation appears to be a claim based on the theory of tortious interference, not LUTPA. Oreck. 2002 WL 59405, at *2. Courts have refused to expand LUTPA causes of action to encompass threats of litigation. Id.
The defendants argue that the plaintiff engaged in unfair practices by contacting and threatening customers who were outside of the employment contract's non-compete provisions. Defendants state that these customers could not possibly be legitimately involved in the litigation, and thus, plaintiff's threat was a clear intent to injure defendants' business. Defendants support their argument with Prof'l Oil Serv. v. Brown. 381 So.2d 1269, 1274 (La.App. 4th Cir. 1980). Although the court inBrown noted that the employees, after their termination, made misrepresentations and untrue statements to the customers of the former employer, the court specifically recognized that any single act, considered alone, may not amount to unfair competition. Id. The court acknowledged that the actions of the employees established a course of calculated misconduct over a considerable period of time. Id.
Even ignoring the fact that Brown addressed the actions of a former employee and not a former employer, Brown clearly acknowledged that one action alone may not amount to unfair competition. Accepting the reasoning in Brown and the holding in OreCk, defendants do not state a claim of action under LUTPA.
2) Is Offering a Reduced Price to a Customer a Violation of LUTPA?
It is a perfectly normal negotiating tactic for a customer to disclose his current cost to a competing provider in the hope that the competitor could better the price. First Page Operating Under the Name and Corp. Entity. Groome Enterprises, 628 So.2d 130, 133-34 (La.App. 4th Cir. 1993). There is no legal impediment to customers disclosing prices to competitors or competitors asking the customers for the price information. Id.
Defendants argue that the plaintiff's threats to customers accompanied with an offer to undercut prices is egregious and prohibited under LUTPA. However, as the plaintiff argues, it appears that an offer to beat a competitor's price is a lawful exercise of business judgment. Accordingly, normal business practices do not violate LUTPA.
3) Must Defendants Demonstrate an "Ascertainable Loss" Under LUTPA?
As explained in Louisiana Revised Statute 51:1409, "a right of private action is conferred on any person that suffers an ascertainable loss of money or movable property, corporeal or incorporeal" from unfair trade practices. LA. REV. STAT. ANN § 51:1409 (West 2003). Therefore, according to the act, defendants must show that they suffered an "ascertainable loss." Strahan v. State of La., 633 So.2d 886, 887 (La.App. 1st Cir. 1994).
Defendants argue that asking for damages in the counterclaim should be sufficient to demonstrate an "ascertainable loss." If not, defendants request leave to amend the counterclaim to more specifically assert the elements of LUTPA. First, simply requesting damages is not enough to demonstrate such a loss. Moreover, it seems unnecessary to allow the defendants leave to amend the counterclaim. Even if the defendants present a more carefully drafted complaint, as they wish to do, such a complaint would provide little assistance in stating a claim under LUTPA. Thus, taking as true all material allegations in the counterclaim and construing them in the light most favorable to the defendants, the defendants have failed to state a claim under LUTPA upon which relief can be granted. Therefore;
It is HEREBY ORDERED that Plaintiff's 12(b)(6) Motion to Dismiss the counterclaim is GRANTED IN PART and DENIED IN PART. Plaintiff's Motion is GRANTED IN PART regarding ¶¶ 9-10 of the Counterclaim and is DENIED IN PART regarding remaining claims as asserted in the Counterclaim.