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MM Sykesville, LLC v. Transitions Healthcare Capitol City, LLC

United States District Court, D. Maryland

May 31, 2017

MM SYKESVILLE, LLC, Plaintiff,
v.
TRANSITIONS HEALTCARE CAPITOL CITY, LLC, et al., Defendants.

          MEMORANDUM OPINION

          Richard D. Bennett United States District Judge.

         Terri Sherman, a member of Plaintiff MM Sykesville, LLC (“plaintiff” or “MMS”), has filed this derivative action on behalf of MMS against corporate defendants Transitions Healthcare Management, LLC (“Transitions Management”), Transitions Healthcare Capitol City, LLC (“Capitol City”), Transitions Healthcare Elkton, LLC (“Elkton”), Transitions Healthcare, LLC (“THL”) (collectively, the “LLC Defendants”) and individual defendants Marc Feldman (“Feldman”), Matthew Maurano (“Maurano”), and Kevin Williams (“Williams”) (collectively, the “Individual Defendants”) alleging federal trademark infringement in violation of 15 U.S.C. § 1114(a), common law service mark infringement, unfair competition, and fraud. (Complaint, ECF No. 1.) Plaintiff alleges, inter alia, that the Individual Defendants-managers of MMS-and defendant THL have wrongfully utilized and fraudulently transferred MMS's “Transitions HealthcareSM” service mark (the “Service Mark”). (Id. at ¶ 15.)

         This case was originally filed in the United States District Court for the District of Columbia on September 8, 2016. (ECF No. 1.) The Individual Defendants and Elkton timely filed a Motion to Dismiss for Lack of Personal Jurisdiction and Failure to State a Claim (“Defendants' Motion”) on November 7, 2016.[1] (ECF No. 6.) While the Motion was pending, the parties filed a Joint Motion for Change of Venue, requesting that the entire case be transferred to the District of Maryland.[2] (ECF No. 9.) By Order dated December 22, 2016, Judge Christopher R. Cooper of the United States District Court for the District of Columbia granted the parties' Joint Motion for Change of Venue, and the case was subsequently transferred to this Court on December 27, 2016. (ECF Nos. 11, 12.)

         Following transfer to this Court, the parties submitted further briefing on the still-pending Motion to Dismiss for Failure to State a Claim filed by the Individual Defendants. (ECF No. 6.) That matter is now fully ripe for this Court's adjudication. (ECF Nos. 14, 20.) The parties' submissions have been reviewed, and no hearing is necessary. See Local Rule 105.6 (D. Md. 2016). For the reasons stated below, the Individual Defendants' Motion to Dismiss for Failure to State a Claim (ECF No. 6) is GRANTED IN PART and DENIED IN PART. Specifically, it is GRANTED as to individual defendants Feldman, Maurano, and Williams' alleged liability under Counts I (statutory infringement), IV (unfair competition), and V (common law infringement). The Motion is DENIED as to Counts II and III, which allege fraud on the part of the individual defendants.

         BACKGROUND

         Derivative plaintiff Terri Sherman and the Individual Defendants-Marc Feldman, Matthew Maurano, and Kevin Williams-are business associates who, through a series of limited liability companies, own and operate a nursing and rehabilitation facility located in Sykesville, Maryland. (ECF No. 1 at ¶¶ 1, 17, 18, 21.) Plaintiff MM Sykesville, LLC (“MMS”) is the LLC through which they operate the nursing home and rehabilitation facility in Sykesville.[3] (Id. at ¶¶ 17, 21.) Since 2007, MMS has used its “Transitions HealthcareSM” service mark to identify its nursing, rehabilitation, and related services. (Id. at ¶ 18.) Sherman and the Individual Defendants also own and operate defendant Transitions Healthcare, LLC (“THL”), an LLC that has provided management services to several nursing and rehabilitation facilities since 2011.[4] (Id. at ¶¶ 22-24.)

         Following a dispute among the business associates in 2014, the Individual Defendants have since established two, new nursing and rehabilitation companies, Transitions Healthcare Capitol City, LLC (“Capitol City”) and Transitions Healthcare Elkton, LLC (“Elkton”), without Sherman's involvement. (ECF No. 1 at ¶¶ 29-31.) The Individual Defendants also established defendant Transitions Healthcare Management, LLC (“Transitions Management”) to provide managerial and back office services to the Elkton and Capitol City facilities. (Id. at ¶¶ 31-32.)

         The gravamen of plaintiff's Complaint is that Capitol City, Elkton, Transitions Management, and the Individual Defendants have used MMS's “Transitions HealthcareSM” service mark without its authorization and, further, that defendants have attempted to wrest control over the Service Mark from MMS through a fraudulent application to the United States Patent and Trademark Office. (Id. at ¶¶ 33-45.)

         STANDARDS OF REVIEW

         Rule 12(b)(6) of the Federal Rules of Civil Procedure authorizes the dismissal of a complaint if it fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The purpose of Rule 12(b)(6) is “to test the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006); see also Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159, 165-66 (4th Cir. 2016). The sufficiency of a complaint is assessed by reference to the pleading requirements of Rule 8(a)(2), which provides that a complaint 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).

         To survive a motion under Fed.R.Civ.P. 12(b)(6), a complaint must contain facts sufficient to “state a claim to relief that is plausible on its face.” Bell Atl., Corp. v. Twombly, 550 U.S. 544, 570 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 684 (2009). Under the plausibility standard, a complaint must contain “more than labels and conclusions” or a “formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555; see Painter's Mill Grille, LLC v. Brown, 716 F.3d 342, 350 (4th Cir. 2013).

         In reviewing a Rule 12(b)(6) motion, a court “‘must accept as true all of the factual allegations contained in the complaint'” and must “‘draw all reasonable inferences [from those facts] in favor of the plaintiff.'” E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011) (citations omitted); see Houck v. Substitute Tr. Servs., Inc., 791 F.3d 473, 484 (4th Cir. 2015); Semenova v. Maryland Transit Admin., 845 F.3d 564, 567 (4th Cir. 2017). While a court must accept as true all the factual allegations contained in the complaint, legal conclusions drawn from those facts are not afforded such deference. Iqbal, 556 U.S. at 678 (“[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice” to plead a claim); see A Society Without a Name v. Virginia, 655 F.3d 342, 346 (4th. Cir. 2011).

         Rule 9(b) of the Federal Rules of Civil Procedure requires that “the circumstances constituting fraud be stated with particularity.” The rule “does not require the elucidation of every detail of the alleged fraud, but does require more than a bare assertion that such a cause of action exists.” Mylan Labs., Inc. v. Akzo, N.V.,770 F.Supp. 1053, 1074 (D. Md. 1991). A court “should hesitate to dismiss a complaint under Rule 9(b) if [it] is satisfied (1) that the defendant has been made aware of the particular circumstances for which [it] will have to prepare a defense at trial, and (2) ...


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