United States District Court, D. Colorado
ORDER DENYING CROCS INC.'S MOTION TO DISMISS
WILLIAM J. MARTNEZ, District Judge.
Plaintiff Brian Witlin ("Plaintiff") brings this action against Defendants Jibbitz, LLC and Crocs Inc. ("Crocs") for breach of contract and the covenant of good faith and fair dealing. (Compl. (ECF No. 1).) This action arises out of an asset purchase agreement executed by Plaintiff's former company, GoLaces, LLC, and Jibbitz. (Id. ¶ 1.)
Before the Court is Defendant Crocs's Motion to Dismiss for Failure to State a Claim ("Motion"). (ECF No. 11.) For the reasons set forth below, the Motion is denied.
I. LEGAL STANDARD
The Motion is brought under Federal Rule of Civil Procedure 12(b)(6), which allows a defendant to move for dismissal of a claim for "failure to state a claim upon which relief can be granted." In evaluating such a motion, a court must "assume the truth of the plaintiff's well-pleaded factual allegations and view them in the light most favorable to the plaintiff." Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007). In ruling on such a motion, the dispositive inquiry is "whether the complaint contains enough facts to state a claim to relief that is plausible on its face.'" Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Granting a motion to dismiss "is a harsh remedy which must be cautiously studied, not only to effectuate the spirit of the liberal rules of pleading but also to protect the interests of justice." Dias v. City & Cnty. of Denver, 567 F.3d 1169, 1178 (10th Cir. 2009) (quotation marks omitted). "Thus, a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.'" Id. (quoting Twombly, 550 U.S. at 556).
II. FACTUAL BACKGROUND
Plaintiff is the co-inventor of the inventions described in U.S. Patent 8, 590, 121 (the "121 Patent"), which covers elastomeric fasteners that can be used in place of shoelaces. (Compl. ¶ 11.) In May 2007, Plaintiff and his co-inventor formed GoLaces, LLC to market their invention. (Id. ¶ 12.) In August 2007, Jibbitz approached GoLaces and expressed an interest in acquiring its product line and rights to manufacture the product line. (Id. ¶ 13.)
In February 2008, GoLaces and Jibbitz entered into a written asset purchase agreement (the "Agreement"). (Id. ¶ 14.) Amongst other terms, the Agreement required Jibbitz to "devote such resources as shall be reasonably required to diligently pursue the prosecution of" the 121 Patent. (Id. ¶ 15.) If the 121 Patent was approved in substantially the same form and substance it had previously been submitted to the patent office, Jibbitz agreed to pay GoLaces an additional $250, 000. (Id. )
Plaintiff alleges that Jibbitz failed to devote adequate resources to approval of the 121 Patent, and that this resulted in GoLaces hiring its own attorneys to ensure that the patent was property prosecuted. (Id. ¶ 17.) GoLaces alleges that it had to expend more than $40, 000 in legal fees, and suffered more than $50, 000 in lost opportunity costs from the delay in approval of the 121 Patent. (Id. ¶ 18.) Plaintiff alleges that the 121 Patent, as approved by the Patent office, was sufficiently similar so as to trigger the additional $250, 000 payment under the Agreement. (Id. ¶ 20.)
On these facts, Plaintiff brings claims for breach of contract and breach of the covenant of the duty of good faith and fair dealing against Jibbitz and Crocs. (Id. pp. 7-11.) Plaintiff asserts his claims against Jibbitz on the basis that it is a signatory to the Agreement. (Id. ) As to Crocs, Plaintiff alleges that it is "jointly and severally liable with Jibbitz" through an alter ego theory. (Id. ¶¶ 6-8, 27.)
Crocs moves to dismiss the claims brought against it on the grounds that it is not a party to the Agreement, and therefore could not have breached the Agreement. (ECF No. 11 at 1.) Plaintiff admits that Crocs is not a party to the Agreement, but alleges that it should remain a defendant in this case because Jibbitz is an alter ego of Crocs. (ECF No. 26 at 1.)
In determining whether a corporate parent is an alter ego of its subsidiary, the Court considers whether the following non-exclusive factors apply: (1) parent corporation owns all or majority of subsidiary's capital stock; (2) parent and subsidiary have common directors or officers; (3) parent corporation finances subsidiary; (4) parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation; (5) subsidiary has grossly inadequate capital; (6) parent corporation pays subsidiary's salaries, expenses or losses; (7) subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to it by the parent corporation; (8) in parent corporation's papers, subsidiary is referred to as such or as a department or division; (9) directors or executives of the subsidiary do not act independently in the interest of ...