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LADS Network Solutions, Inc. v. Agilis Systems, LLC

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

July 30, 2019

LADS NETWORK SOLUTIONS, INC., Plaintiff,
v.
AGILIS SYSTEMS, LLC, et al., Defendants.

          MEMORANDUM & ORDER

          AUDREY G. FLEISSIG, UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on the motion of Defendants Agilis Systems, LLC (“Agilis LLC”) and Gilead Group, LLC (“Gilead”) for leave to file a third party complaint. ECF No. 27. Plaintiff LADS Network Solutions, Inc. (“LADS”) opposes the motion. ECF No. 28, 37. For the reasons set forth below, Defendants' motion will be denied.

         BACKGROUND

         The pleadings filed in this copyright infringement lawsuit allege the following facts. LADS is a provider of dispatching software, wireless data communications, and mobile GPS-based software solutions, and it is the owner of a registered copyright concerning logistic software (“Copyrighted Software”). LADS alleges in its complaint that in 2004, it entered into a bilateral intellectual property transfer and license agreement with Siliga Systems, Inc. (“Siliga”)[1] for use of the Copyrighted Software. LADS alleges that it entered into subsequent licensing agreements with Siliga for Siliga's use of the Copyrighted Software in 2006 and 2007.

         LADS alleges that in October 2007, without the permission or consent of LADS, Siliga assigned its rights under the license agreement to Agilis LLC. Thereafter, Agilis LLC used the Logistic Software without license or authorization. Then, LADS alleges that in July 2017, Gilead created Defendant Archlogix, LLC (“Archlogix”), which began using the Logistic Software without license or authorization. Plaintiff asserts copyright infringement (Count I) against Agilis and Archlogix and seeks to pierce the corporate veil of all Defendants (Count II).[2]

         On February 5, 2019, Defendants filed a counterclaim for breach of contract, asserting that LADS is barred from asserting copyright infringement claims against them under the terms of a July 9, 2014 Settlement Agreement, which Defendants allege was signed by Daniel Huber (“Huber”), the “President, Chief Executive Officer, and majority owner of LADS.”[3] ECF No. 16 at ¶ 6. That Settlement Agreement was signed in the context of a state court action filed by Huber for his wrongful termination for cause from Agilis, Inc., where he had been serving as Chief Executive Officer.[4] The terms of the Settlement Agreement include a provision waiving, on behalf of LADS, all claims against Agilis LLC and Gilead, including intellectual property claims. Defendants argue that LADS is violating the terms of that Settlement Agreement by filing this copyright infringement lawsuit. Specifically, Defendants allege that “The Settlement Agreement is a valid and enforceable contract” and that pursuant to the terms of that agreement, LADS “waived, released, and renounced any and all claims, including any purported Intellectual Property claims and/or royalty claims.” Id. at ¶¶ 31-32. Defendants also assert a breach of contract claim related to the November 1, 2007 license agreement entered into by the parties, as well as an abuse of process claim.

         On February 21, 2019, LADS filed its answer and affirmative defenses to Defendants' counterclaim. ECF No. 21. Relevant to this motion for leave to file a third amended complaint, LADS maintains that it was not a party to the Settlement Agreement, and thus cannot be held to its terms. See, e.g., ECF No. 21 at ¶ 18.

         Now, Defendants seek leave to file a third party complaint against Huber for breach of contract, breach of implied covenant of good faith and fair dealing, and detrimental reliance, based on his execution of the Settlement Agreement and affirmative representations that he was the agent of LADS and that the Settlement Agreement would be binding on LADS. ECF No. 27-1. Defendants contend that if the Court determines that LADS is not bound by the Settlement Agreement, Huber should be held liable for his contractual promises.

         LADS opposes Defendants' request to file a third party complaint, arguing that Defendants' state law claims concerning the Settlement Agreement are not part of the same case or controversy as LADS's infringement claims and assert issues of state law.

         Further, LADS maintains that a Missouri state court has already determined that LADS is not bound by the Settlement Agreement. Specifically, in another unrelated state court lawsuit filed by LADS against Siliga and Agilis Systems, Inc., the state court held:

This Court finds that LADS was not a Party in the Settlement Agreement, LADS did not execute the release, nor was LADS given any consideration under the release. Therefore, LADS did not release any claims and has a right to execute on the Warrant issues to LADS.

ECF No. 33-6.

         LADS also argues that the third party complaint raises a novel and complex issue of state law: whether an individual can be sued for executing a settlement agreement that binds a corporation that is not a party to the agreement or the underlying lawsuit. Lastly, LADS argues that principles of res judicata based on the state court's decision may preclude the claims asserted by Defendants, and thus requests the Court to decline to exercise supplemental jurisdiction under 28 U.S.C. § 1367.

         Defendants reply that this copyright infringement litigation falls squarely within the terms of the Settlement Agreement executed by Huber. Thus, if Huber executed the Settlement Agreement without authorization by LADS, then “he should be held accountable for those promises and representations as part of this lawsuit.” ECF No. 34 at ¶ 12. Defendants contend that, as a result, the terms of ...


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