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Vivid Sites, LLC v. Millsap

United States District Court, E.D. Missouri, Eastern Division

March 29, 2017

VIVID SITES, LLC, Plaintiff,
v.
TIMOTHY MILLSAP, et al., Defendants.

          MEMORANDUM AND ORDER

          JOHN A. ROSS, UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Defendants Timothy Millsap, Matthew Timme, Daniel Benninger, and Tri-State Equipment Company, Inc.'s ("Tri-State") (collectively, "Defendants") Motion to Dismiss Plaintiff Vivid Site, LLC's Second Amended Complaint ("SAC") and for an Award of Attorneys' Fees and Costs under the Copyright Act (Doc. 27), Plaintiffs Motion for Leave to File a Third Amended Complaint (Doc. 30), Plaintiffs Motion for leave to file a Sur-reply in Opposition to Defendants' Motion to Dismiss (Doc. 33), and Plaintiffs Motion to Incorporate an Exhibit to its Third Amended Complaint (Doc. 35). As an initial matter, the Court will grant Plaintiffs Motion for Leave to file a Sur-reply (Doc. 33), and Motion to Incorporate an Exhibit to its Third Amended Complaint (Doc. 35). For the following reasons, the Court will grant in part and deny in part Defendants' motion to dismiss and for an award of attorneys' fees and costs (Doc. 27); and deny Plaintiffs motion for leave to file a third amended complaint (Doc. 30).

         I. Background

         On January 29, 2016, Plaintiff filed its original complaint alleging, inter alia, that Defendants Millsap, Timme, and Benninger converted source code for Plaintiffs proprietary Content Management System and Ecommmerce Software ("VS-CMS") and other propriety software and materials belonging to Plaintiff (Doc. 1). According to Plaintiff, these Defendants also had accessed its hosting and database servers without its permission (Id.). In its original complaint, Plaintiff sought to assert three claims: (1) a copyright infringement claim under the Copyright Act, see 17 U.S.C. § 501 et seq.; (2) a claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), see 18 U.S.C. § 1961, et seq., based on allegations that Defendants had committed mail and wire fraud; and (3) a RICO conspiracy claim which was also based on allegations of mail and wire fraud (Id.). Defendants moved to dismiss the original complaint, arguing, inter alia, that Plaintiffs copyright infringement claim was subject to dismissal because Plaintiff had not registered the VS-CMS source code with the Copyright Office before bringing suit (Docs. 16-17 & Attach.).

         On March 22, 2016, Plaintiff filed its first amended complaint, seeking to assert four claims: (1) a copyright infringement claim; (2) a claim of unfair competition under Missouri law; (3) a RICO claim predicated on allegations of mail and wire fraud; and (4) a RICO conspiracy claim based on allegations of mail and wire fraud (Doc. 18). The next day, Plaintiff filed its second amended complaint ("SAC"), with Defendants' consent and the Court's leave (Docs. 22, 25-26).

         In the now operative SAC, Plaintiff alleges the following facts (Doc. 22). Plaintiff is a Missouri limited liability company engaged in the business of designing and hosting websites, including the drafting of proprietary software that enables the creation, design, and hosting of various websites. Defendants Millsap, Timme, and Benninger are all citizens of Missouri; Tri-State is a Missouri corporation. According to Plaintiff, between November 2012 and December 2015, Millsap, Timme, and Benninger "took with them, " "misappropriated, " and "transferred, converted and/or diverted" source code for VS-CMS, approximately forty of Plaintiffs "database backup service/files, " and other propriety software and materials belonging to Plaintiff (Id. at ¶¶ 8-12, 15, 18-19). Plaintiff alleges that Millsap, Timme, and Benninger also accessed its hosting and database servers without its knowledge or permission, and they did so at Tri-State's request (Id. at ¶¶ 8-13). In its SAC, Plaintiff seeks to assert three claims: (1) a claim under the Missouri Uniform Trade Secret Act ("MUTSA"); (2) a RICO claim predicated on mail and wire fraud; and (3) a RICO conspiracy claim based on mail and wire fraud (Id. at ¶¶ 14-35). As to its RICO claims, Plaintiff alleges that Defendants Millsap, Timme, and Benninger "converted and/or diverted" VS-CMS and other trade secrets in furtherance of a "scheme, " and that they "[o]n dates yet unknown put documents in furtherance of the scheme ... in the U.S. Mail, and thereby committed the crime of Mail Fraud, as defined under 18 U.S.C. § 1341 by mailing the VS-CMS and trade secrets." (Id. at ¶¶ 27, 33). Plaintiff also claims that, in furtherance of a "scheme, " Defendants Millsap, Timme, and Benninger "on dates yet unknown used the telephone and internet to transfer the Source Code and Trade Secrets of Vivid Sit[es], and thereby committed the crime of Wire Fraud, as defined under 18 U.S.C. § 1343 by transmitting the VS-CMS and trade secrets to Tri-State from Vivid Sites" (Id. at ¶¶ 28, 34).

         Defendants now move to dismiss the SAC, and seek an award of attorney's fees under the Copyright Act (Doc. 27). Plaintiff opposes the motion, and alternatively, moves for leave to file a third amended complaint (Docs. 29-30). For the following reasons, the Court will dismiss the SAC, deny Plaintiff's motion for leave to file a third amended complaint, and deny Defendants' request for fees and costs under the Copyright Act.

          II. Discussion

         A. Defendants' Motion to Dismiss the Second Amended Complaint

          In support of their motion to dismiss the SAC, Defendants first argue that Plaintiff has failed to allege sufficient facts to support a claim under MUTSA (Doc. 28 at 5-10). Defendants further argue that Plaintiff has failed to state any viable RICO claims because (1) RICO claims cannot be predicated on claims of trade secret misappropriation; and (2) Plaintiff has not pleaded sufficient facts to support RICO claims predicated on allegations of mail or wire fraud under Rule 9 of the Federal Rules of Civil Procedure (Id. at 10-16).[1]

         Plaintiff opposes Defendants' motion, arguing that it has alleged sufficient facts to support its MUTSA claim, and that it has adequately pleaded its RICO claims based on violations of the federal mail and wire fraud statutes (Doc. 29 at 6-9)[2]

         In reply, Defendants reiterate their arguments that Plaintiffs MUTSA claim cannot serve as a RICO predicate act (Doc. 31). Defendants also note that Plaintiff does not dispute that Rule 9's heightened pleading requirement applies to its RICO claims, and argue that there is no independent basis to support federal jurisdiction over Plaintiffs MUTSA claim (Id.). In sur-reply, Plaintiff contends that its MUTSA claim is a predicate act under RICO, that it has met Rule 9's heightened pleading requirement by pleading its RICO claims with particularity, and that it has stated a cognizable MUTSA claim (Doc. 33.1). For the following reasons, the Court will dismiss the SAC.

         Plaintiffs RICO claims

         First, the Court concludes that Plaintiff has failed to state viable RICO claims. "Section 1962 of the RICO Act makes it 'unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.'" Crest Constr. II, Inc. v. Doe.660 F.3d 346, 353 (8th Cir. 2011) (quoting Nitro Distrib.. Inc. v. Alticor. Inc..565 F.3d 417, 428 (8th Cir. 2009)). "RICO provides a private right of action for any person 'injured in his business or property by ...


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