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International Association of Certified Home Inspectors v. Homesafe Inspection, Inc.

United States District Court, D. Colorado

February 5, 2018

HOMESAFE INSPECTION, INC., a Mississippi corporation incorporated in 2003; HOMESAFE INSPECTION, INC., a Mississippi corporation incorporated in 2014; and KEVIN SEDDON, Defendants.



         Judge R. Brooke Jackson This matter is before the Court on defendants HomeSafe Inspection, Inc.'s (“HomeSafe”) and Kevin Seddon's motion to dismiss plaintiff International Association of Home Inspectors' (“InterNACHI”) amended complaint, ECF No. 23. For the reasons stated below, defendants' motion to dismiss is GRANTED.


         InterNACHI is a Colorado non-profit corporation and trade association representing more than 20, 000 home inspectors across the United States. ECF No. 22 at 5. HomeSafe is a Mississippi corporation that claimed to own the exclusive right to use infrared technology in home inspections. Id. at 6. Kevin Seddon is the President and a director of HomeSafe.[1] Id. at 3. InterNACHI and HomeSafe first got involved in 2013 after an InterNACHI member explained to InterNACHI's founder, Nick Gromicko, that he had been sued by HomeSafe. Id. at 7. HomeSafe had claimed that it owned a patent giving it the exclusive right to use infrared technology in home inspections and had sued the InterNACHI member for ostensibly violating that patent by using HomeSafe's technology. Id. Mr. Gromicko contacted Mr. Seddon at HomeSafe about the issue, at which point Mr. Seddon represented that HomeSafe held patents giving it the exclusive right to use infrared technology in home inspections and indicated that HomeSafe would continue suing home inspectors who used infrared technology in their inspections. Id. at 8. Following this conversation, Mr. Gromicko and Mr. Seddon continued to communicate by email, and InterNACHI alleges that Mr. Seddon continued to make representations about its patent rights. Id. Soon thereafter, Mr. Gromicko signed a license agreement on behalf of InterNACHI with Mr. Seddon, under which InterNACHI would provide an opportunity for its members to obtain a license to use HomeSafe's technology. ECF No. 23-6.

         A. State Court Litigation.

         In January 2015 HomeSafe sued InterNACHI in the circuit court of Lafayette County, Mississippi. ECF No. 23 at 3. In that suit, HomeSafe alleged that InterNACHI breached the parties' license agreement, and it raised claims for violation of the Mississippi Fair Trade Practices Act, unfair competition, unjust enrichment, breach of contract, and conversion. Id. In January 2016 InterNACHI filed an amended answer and counterclaim against HomeSafe and a third-party complaint against Mr. Seddon. Id. InterNACHI alleged that HomeSafe had misrepresented its patent rights to InterNACHI and its members to induce InterNACHI to enter the license agreement. ECF No. 23-1 at 13. InterNACHI thus asserted counterclaims of fraudulent misrepresentation, negligent misrepresentation, unjust enrichment, declaratory judgment, and rescission of the contract. Id. at 13-15. Additionally, InterNACHI noted in its amended answer that although it was not at the time seeking to add a claim under 18 U.S.C. § 1961 et seq. (“Racketeer Influenced and Corrupt Organizations Act” or “RICO”), it was reserving the right to do so because there “is evidence Plaintiff violated the federal wire fraud statute” and the federal mail fraud statute. Id. at 11. Although InterNACHI did not add a RICO claim in the state court suit, it threatened to do so again at the close of discovery in May 2016 if the parties could not reach a settlement. ECF No. 23 at 4.

         In December 2016 the Mississippi state court granted HomeSafe's motion for summary judgment on InterNACHI's counterclaims. ECF No. 23-5. InterNACHI has admitted that summary judgment was granted because it “was unable to specifically prove damages under Mississippi law.” ECF No. 26 at 4. The Mississippi case is set for trial, and deadlines to assert additional claims have passed. ECF No. 23 at 4. As such, HomeSafe contends that the state court order granting summary judgment is a final adjudication on the merits of InterNACHI's counterclaims.

         B. Present Litigation.

         In the present suit against HomeSafe and Mr. Seddon, InterNACHI relies on much of the same factual background as in its state counterclaims. See ECF No. 22 at 5-12 (recounting the same background about Mr. Gromicko's and Mr. Seddon's communications and negotiations leading to a contract, and relying on the same alleged misrepresentations about the same HomeSafe patents). Unlike its state counterclaims, however, InterNACHI's complaint in the instant case raises claims for RICO violations and conspiracy to violate RICO (hereinafter, the “RICO claims”). Id. at 14. InterNACHI also seeks a declaration of rights and obligations with respect to HomeSafe's patents and common law rights to infrared technology, and it seeks injunctive relief from HomeSafe's alleged continued illegal activity. Id. In support of these claims InterNACHI alleges that HomeSafe and Mr. Seddon misled InterNACHI and its members about the technology HomeSafe owned in an attempt to obtain licensing fees; fraudulently induced Mr. Gromicko into entering a contract; and conducted a “continuing pattern of racketeering activity” by communicating via mail or wire with InterNACHI members to deceive them into believing that they were required to pay a licensing fee to use infrared technology and that they would be sued for using that technology without a license. Id. at 22, 15. As evidence of such communications, InterNACHI cites 34 “threatening letter[s]” from HomeSafe to InterNACHI inspectors between 2008 and 2011. Id. at 18-24. InterNACHI thus alleges that its members were injured when they paid license fees to HomeSafe under false pretenses or when they refused to use infrared technology out of fear that they would be sued if they did. Id. These damages are distinct from those alleged in the Mississippi state counterclaims.


         To survive a 12(b)(6) motion to dismiss, the complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A plausible claim is a claim that “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While the Court must accept the well-pleaded allegations of the complaint as true and construe them in the light most favorable to the plaintiff, Robbins v. Wilkie, 300 F.3d 1208, 1210 (10th Cir. 2002), purely conclusory allegations are not entitled to be presumed true, Iqbal, 556 U.S. at 681. However, so long as the plaintiff offers sufficient factual allegations such that the right to relief is raised above the speculative level, he has met the threshold pleading standard. See, e.g., Twombly, 550 U.S. at 556; Bryson v. Gonzales, 534 F.3d 1282, 1286 (10th Cir. 2008).


         HomeSafe raises five reasons to dismiss InterNACHI's complaint.[2] Because the doctrine of res judicata is dispositive, I need not discuss HomeSafe's alternative arguments. HomeSafe seeks to have InterNACHI's claims for RICO violation, conspiracy to violate RICO, declaratory relief, and injunctive relief dismissed because they are barred by res judicata. Since InterNACHI's state counterclaims were dismissed on summary judgment, HomeSafe argues that InterNACHI's closely related RICO claims, which should also have been raised in the state court, must now be dismissed from federal court.

         As an initial procedural note, HomeSafe's res judicata argument is premised on matters outside InterNACHI's complaint, including InterNACHI's counterclaims before the Mississippi state court and that court's order on summary judgment. Although InterNACHI has not objected to my considering these matters, a court generally must convert a motion to dismiss to a motion for summary judgment when the court considers “matters outside the pleadings.” Fed.R.Civ.P. 12(d). However, it need not do so “if it takes judicial notice of its own files and records, as well as facts which are a matter of public record. . . . The files in the state-court disciplinary proceedings and the two prior cases . . . clearly fall into these excepted categories.” Rose v. Utah State Bar, 471 F. App'x 818, 820 (10th Cir. 2012) (citation ...

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