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Power Concepts, LLC v. Powersecure, Inc.

United States District Court, D. South Carolina, Anderson Division

September 8, 2014

Power Concepts, LLC, Sourcetech, LLC, David D. Lowery, and John Bryan Beatenbough, Plaintiffs,
v.
PowerSecure, Inc. and EfficientLights, LLC, Defendants.

ORDER

G. ROSS ANDERSON, Jr., District Judge.

This matter comes before the Court on Defendants' Motion to Dismiss Plaintiffs' Second Amended Complaint or, In the Alternative, Motion to Stay Proceedings. ECF No. 63. For the reasons set forth below, Defendants' Motion is DENIED.

BACKGROUND

Power Concepts, LLC ("Power Concepts") filed a Declaratory Judgment Action in this Court on February 7, 2014 against PowerSecure, Inc. ("PowerSecure") and PowerSecure International, Inc., Powersecure's parent-hodling company. The Plaintiff sought a declaration that "PowerSecure holds no proprietary rights in the LED products that Power Concepts has manufactured and sold for the last six years, and presently seeks to continue to manufacture and sell, " and that "Power Concepts is at liberty to, and there are no legal impediments to, continue to manufacture and sell its LED products on the open market." ECF No. 1. PowerSecure, Inc. and PowerSecure International, Inc. filed separate motions to dismiss on April 18, 2014. ECF Nos. 9 & 10. Plaintiff submitted an Amended Complaint on April 30, 2014, replacing PowerSecure International, Inc. with EfficientLights, LLC ("EfficientLights"), a subsidiary of Defendant PowerSecure, Inc. ECF No. 18. The parties stipulated that the filing of the Amended Complaint superseded the original complaint, mooting Defendants' respective motions to dismiss the original complaint. ECF No. 22-1.

Defendants PowerSecure, Inc. and EfficientLights, LLC filed another Motion to Dismiss Plaintiff's Amended Complaint or, In the Alternative, Motion to Stay Proceedings on June 2, 2014. ECF No. 32. Plaintiff filed a Motion for Leave to Amend Complaint and to Add Party Plaintiffs on June 16, 2014. ECF No. 40. Plaintiff's Motion sought to add three party plaintiffs: David A. Lowery, Owner of Power Concepts; Sourcetech, LLC, "a separate company owned by the owner of Plaintiff"; and John Bryan Beatenbough, former President of EfficientLights. Id. All three Plaintiffs are named in a state court action brought by Defendants. Id. This Court granted the Motion for Leave to Amend Complaint and denied Defendants' Motion to Dismiss as moot on July 18, 2014. ECF No. 57.

Power Concepts filed its Second Amended Complaint, adding the three party Plaintiffs, on July 21, 2014. ECF No. 59. This Amended Complaint again seeks a declaration that "PowerSecure holds no proprietary rights in the LED products that Power Concepts has manufactured and sold for the last six years, and presently seeks to continue to manufacture and sell" and that "Power Concepts is at liberty to, and there are no legal impediments to, continue to manufacture and sell its LED products on the open market." In addition, the Amended Complaint seeks a declaration that "Beatenbough has not breached the purchase agreement, nor violated any duties to his former employer." ECF No. 59.

Defendants filed the current Motion to Dismiss on August 6, 2014. ECF No. 63. Defendants assert that a South Carolina state court proceeding that was filed on June 2, 2014, the same day that Defendants brought the Motion to Dismiss the First Amended Complaint, will better settle the entire controversy among the parties. ECF No. 63-1. Defendants argue that "even with the addition of three new parties and additional factual allegations, by the admission of Plaintiffs' Counsel, the Declaratory Judgment Action still will not resolve the entire controversy among the parties to this case." Id. Defendants assert that the state court proceeding is "the first-filed proceeding to address the entire dispute between the parties, " as the Second Amended Complaint adds the additional defendants from the state court proceeding and "some, but not all, of the issues raised." Id. Plaintiffs responded in opposition to Defendants' Motion on August 21, 2014. ECF No. 66. Defendants replied in support of their Motion to Dismiss on August 28, 2014. ECF No. 69.

STANDARD OF REVIEW

The Federal Declaratory Judgment Act provides that this Court "may declare the rights and other legal relations of an interested party seeking such declaration." 28 U.S.C. ยง 2201(a). When deciding whether to exercise jurisdiction under this Act, this Court must consider:

(i) the strength of the state's interest in having the issues raised in the federal declaratory action decided in the state courts; (ii) whether the issues raised in the federal action can more efficiently be resolved in the court in which the state action is pending; (iii) whether permitting the federal action to go forward would result in unnecessary "entanglement" between the federal and state court systems, because of the presence of "overlapping issues of fact or law"; and (iv) whether the declaratory judgment action is being used merely as a device for "procedural fencing"-that is, "to provide another forum in a race for res judicata" or "to achiev[e] a federal hearing in a case otherwise not removable."

Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 257 (4th Cir. 1996) (quoting Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 377 (4th Cir. 1994)).

DISCUSSION

1. State's Interest in Deciding the Matter

Defendants argue that the "first Nautilus factor weighs in favor of abstention because a decision concerning Plaintiffs' requested declaration would require the Court to resolve close and unsettled issues of South Carolina law." ECF No. 63-1 at 8. They support this argument with language from Mitcheson v. Harris, 955 F.2d 235, 239 (4th Cir. 1992), that says that a state's interest in deciding a controversy is even greater where "the issues of state law are close." Id. Defendants point specifically to ...


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