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Secret of Islands Inc. v. Hymans Seafood Co., Inc.

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

March 30, 2018

SECRET OF THE ISLANDS, INC., Plaintiff,
v.
HYMANS SEAFOOD COMPANY INC., ELI HYMAN, AARON HYMAN, BRAD GENA, HOLY CITY SKIN PRODUCTS, INC., U.S. FOODS, INC., USA DISTRIBUTIONS, LLC. Defendants.

          ORDER

          DAVID C. NORTON UNITED STATES DISTRICT JUDGE.

         This matter is before the court on a motion to dismiss filed by U.S. Foods, Inc., ECF No. 23, and a motion to dismiss filed by Hymans Seafood Company, Inc., Eli Hyman, Aaron Hyman, Brad Gena, and Holy City Skin Products Inc., ECF No. 16. For the reasons set forth below, the court grants in part and denies in part the motions to dismiss. Additionally, the court orders plaintiff Secret of the Islands (“SOTI”) to file an amended complaint and instructs it to delineate which facts apply to what claims as well as which claim is levied against which defendant.

         I. BACKGROUND

         SOTI is in the business of selling soaps and personal skin care products to retailers and packaging the products in mason jars. Compl. ¶ 16. SOTI uses a marketing method including slogans such as “Turn your bathroom into a profit center, ” “turn your bathroom into a display, ” “turn your bathroom into a showroom, ” and “turn your bathroom into a display and showroom.” Id. ¶ 1(A). SOTI brought this action against defendants, Hymans Seafood Company, Inc. (“Hymans”), Eli Hyman (“Eli Hyman”), Aaron Hyman (“Aaron Hyman”), and Brad Gena (“Gena”) (Hymans, Eli Hyman, Aaron Hyman, and Gena collectively “Hyman Group”), Holy City Skin Products, Inc., (“HC”), (Hyman Group, and HC collectively “Hyman defendants”), and U.S. Foods, Inc. (“US Foods”), USA Distributions, LLC (“USA Distributions”) (all defendants collectively referred to as “defendants”). Id. at 1. Hyman defendants were SOTI's clients before creating and operating their own company called Holy City Skin Products, a company that sells personal skin care products. Id. ¶ 1(A)-(P).

         SOTI alleges that defendants have been displaying similar products, samples, and displays using a similar marketing method and display of “Turn your bathroom into a display.” Id. ¶ 1(B). In some cases, SOTI alleges defendants have used SOTI's products to fill mason jars and sell it as their own product. Id. ¶ 1(C). SOTI alleges that its manager and then its sales representative contacted Eli Hyman to inform him that Hymans was selling SOTI's product in infringing jars and that it was a violation of SOTI's intellectual property rights. Id. ¶ 1(E). In July 2012, SOTI's manager Johnny Hoy (“Hoy”) spoke to U.S. Foods and informed U.S. Foods that Hymans had stolen SOTI's marketing and products. Id. ¶ 8. As a result of defendants' intellectual property infringement, SOTI was forced to decrease the sales price of its products from 35% to 60% and has lost a number of sales accounts to Hyman defendants. Id. ¶ 1(K).

         SOTI filed this action on February 3, 2017, alleging a number of claims against defendants:[1] (1) unfair competition in violation of the Lanham Act, 15 U.S.C. § 1051 et seq.; (2) false advertising in violation of the Lanham Act; (3) false designation of origin in violation of section 1125 of the Lanham Act, which protects both registered trademarks and unregistered and valid trademarks; (4) trademark violation under the Lanham Act; (5) trade dress infringement in violation of the Lanham Act; (6) unfair competition under the South Carolina Unfair Trade Practices Act, SC Code Ann. § 39- 5-10, et seq. (“SCUTPA”); (7) deceptive trade practices under SCUTPA; (8) common law unfair competition; (9) action for damages due to federal copyright infringement; (10) injunctive relief to impound records and destroy infringing articles under 17 U.S.C. § 503; (11) accruing damages for U.S. Patent Pending; (12) trade secrets including formulas, methods of marketing, general sales practices, customer lists under the S.C. Trade Secrets Act; (13) trade secret formulas and reverse engineering under the S.C. Trade Secrets Act. Compl. pp. 1-32. The court groups the claims into the following categories for ease of reference: (1) Lanham Act; (2) SCUTPA; (3) common law unfair competition; (4) action for damages due to federal copyright infringement; (5) injunctive relief under 17 U.S.C. § 503; (6) damages for U.S. Patent Pending; (7) S.C. Trade Secrets Act. SOTI asks the court for injunctive relief and to grant damages of $20, 160, 000 for the decrease in sales prices, $31, 104, 000 for loss of accounts, and $129, 600, 000 for online reorders, as well as full costs and attorneys' fees.

         Hyman defendants brought a motion to dismiss on March 7, 2017. ECF No. 16. SOTI responded on March 21, 2017. ECF No. 18. U.S. Foods filed a motion to dismiss on March 24, 2017. ECF No. 21. SOTI responded on April 4, 2017. ECF No. 23. U.S. Foods replied on April 18, 2017. ECF No. 29. Both motions have been fully briefed and are now ripe for the court's review.

         II. STANDARD

         A Rule 12(b)(6) motion for failure to state a claim upon which relief can be granted “challenges the legal sufficiency of a complaint.” Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009) (citations omitted); see also Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir.1992) (“A motion to dismiss under Rule 12(b)(6) . . . does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”). To be legally sufficient, a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2).

         A Rule 12(b)(6) motion should not be granted unless it appears certain that the plaintiff can prove no set of facts that would support his claim and would entitle him to relief. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). When considering a Rule 12(b)(6) motion, the court should accept all well-pleaded allegations as true and should view the complaint in a light most favorable to the plaintiff. Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir. 1999); Mylan Labs., Inc., 7 F.3d at 1134. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         III. DISCUSSION

         SOTI may have a number of meritorious claims against defendants.[2] However, the court is precluded from considering a number of these claims by procedural bars, namely the statute of limitations.[3] The court organizes its analysis by first discussing procedural doctrines that bar entire sets of claims, and then moves to discuss each count in the complaint. It gives SOTI leave to amend the complaint.

         1. Statute of Limitations

         Hyman defendants first argue that the statute of limitations bars all of SOTI's SCUTPA and S.C. Trade Secrets claims. ECF No. 16 at 4. The court agrees.

         The applicable statute of limitations for SCUTPA is three years. Abrasives-S., Inc. v. Awuko Abrasives Wandmacher GmbH & Co. KG, 2016 WL 8116893, at *2 (D.S.C. Aug. 17, 2016). The statute of limitations for trade secret misappropriation is also three years. S.C. Code Ann. § 39-8-70 (2016). Under “the discovery rule, the statute of limitations begins to run from the date the injured party either knows or should know, by the exercise of reasonable diligence, that a cause of action exists for the wrongful conduct.” True v. Monteith, S.E.2d 615, 616 (S.C. 1997).

         With that starting point, the court now turns to determining which claims are time-barred under the statute of limitations. In a section of the complaint headlined “history of Plaintiffs putting defendant USF on notice since 2012, ” SOTI discusses that in July 2012, Johnny Hoy, the manager at SOTI, “told [US Foods] that Hymans stole the marketing, product, intellectual property and put him on notice.” Compl. ¶ 8. SOTI alleges that in response, the U.S. Foods Representative answered that “that is between you and Hymans.” Id. This proves that at least by July 2012, SOTI was aware that Hyman defendants were embarking on infringing activity and that U.S. Foods was selling the “pirated” goods. The complaint was not filed until February 3, 2017-nearly five years after SOTI knew that a cause of action for intellectual property infringement existed. Applying the discovery rule, the statute of limitations for SOTI's claims against the Hyman defendants and U.S. Foods related to intellectual property and infringement began to run in July 2012 at the latest. Even viewing the pleadings in a light most favorable to SOTI, it is clear that the SCUTPA and S.C. Trade Secret claims accrued by July 2012. Therefore, all of SOTI's SCUTPA and S.C. trade secret misappropriation claims are barred by the three-year statute of limitations.

         The statute of limitations analysis for SOTI's Lanham Act claims is more nuanced. Although the Lanham Act does not provide an express statute of limitations, the Fourth Circuit has stated that “it is proper to use the analogous state limitations period for Lanham Act suits.” PBM Prod., LLC v. Mead Johnson Co., 639 F.3d 111, 121 (4th Cir.2011). Under South Carolina law, the relevant and applicable statutory period is three years. See S.C. Code Ann. § 15-3-530 (three-year limitations period for actions other than for recovery of real property); S.C. Code Ann. § 39-5-150 (three-year limitations period for actions under the South Carolina Unfair Trade ...


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