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Multi Holsters, LLC v. Tac Pro Inc.

United States District Court, E.D. Michigan, Southern Division

September 15, 2017




         Plaintiff Multi Holsters, LCC (Multi Holsters) alleges various fraud and trade secret violations under Michigan statutory and common law, as well as federal law, against defendant Tac Pro Inc. and its president, Steven Minuskin (collectively “Defendants”), arising out of a failed joint venture between the parties. Currently, related litigation between these same parties and others is pending in Ontario Superior Court of Justice, Canada. For this reason, Defendants move to dismiss this action under the Colorado River abstention doctrine. Because all of Multi Holsters claims in this federal lawsuit arise out of the same alleged material facts as those pled in the ongoing Ontario litigation, the court will stay this case pending resolution of the Ontario action. Oral argument was held on September 14, 2017, and informs the court's decision.

         I. Factual Background

         The facts as summarized below are garnered from the Statement of Claim and Counterclaim filed in the related litigation pending in the Ontario Superior Court and from the federal Complaint pending here.

         Plaintiff Multi Holsters is a Michigan company which designs, manufactures, and distributes holsters for handguns using a product known as Kydex. Multi Holsters is located in Plymouth, Michigan. Multi Holsters is owned by Judy Catner. Judy and her husband, Anthony Catner, are the directors and shareholders of Multi Holsters. Mr. Catner started the business from his basement in 2010. Multi Molds was incorporated in February, 2014 and is associated with Multi Holsters. Both operate out of the same facility in Plymouth, Michigan. Multi Molds manufactures and sells molds for the manufacture of plastic holsters for pistols.

         Defendant Tac Pro is a Canadian company that manufactures and sells plastic pistol holsters. Defendant Steven Minuskin is the president of Tac Pro. Because of strict gun laws in Canada, the American market is much more favorable for pistol holsters and gun related products.

         Beginning in August, 2013, Minuskin contacted Mr. Catner to discuss the possibility of a joint venture by which Multi Holsters would use Tac Pro's confidential process to manufacture plastic pistol holders. Tac Pro and Multi Holsters entered into a Confidentiality and Non-Disclosure Agreement on September 26, 2013 prohibiting the disclosure of confidential information. The Non-Disclosure Agreement also contains a choice-of-law provision:

9. Governing Law: This agreement shall be governed by and enforced in accordance with the laws of the Province of Ontario and shall be binding upon the Recipient in Canada, The United States and worldwide.

(Doc. 4-3 at PgID 69). From September 26, 2013 until July 24, 2014, Minuskin claims he communicated most of the confidential processes to the Catners, orally and in writing, culminating in a visit by the Catners to the Tac Pro facility in Canada on March 1, 2014. Multi Holsters, on the other hand, claims that the visit to Tac Pro's facility on March 1, 2014 was a bust as they were forced to remain seated on two stools far from the manufacturing process, and that the machinery was covered by tarps, shielding them from viewing anything that would inform them about Tac Pro's confidential processes. Multi Holsters claims it never learned any of Tac Pro's purported confidential processes.

         Negotiations between Tac Pro and Multi Holsters broke down in July, 2014. On October 16, 2014, Tac Pro filed suit in the Superior Court of Justice in Ontario, Canada against Multi Holsters, Multi Molds, and Anthony and July Catner. In the Ontario lawsuit, Tac Pro alleges that Multi Holsters and the related company, Multi Molds, have been using Tac Pro's secret processing information to make plastic holsters, molds for making guns, and other plastic related products. Tac Pro further alleges that Multi Holsters has been using pictures of Tac Pro's holsters on the internet and in other promotional materials representing that the products are its own. Further, Tac Pro claims that its holsters have appeared in YouTube videos and gun magazine articles under the Multi Holster name, and alleges that Multi Holsters has sent Tac Pro holsters to gun accessory reviewers claiming the products as its own.

         On January 13, 2015, Multi Holsters filed a counterclaim in the pending Ontario lawsuit against Tac Pro and Minuskin. Multi Holsters alleges that it shared confidential communications with Minuskin for several months before he attended its business premises and observed firsthand its confidential manufacturing processes, designs, and potential future products. Multi Holsters claims Minuskin was able to visually inspect all of its machinery and equipment and spoke with all of its employees on the floor. Multi Holsters claims Tac Pro and Minuskin violated their Confidentiality and Non-Competition Agreement, executed in the summer of 2013, [1] by using its confidential processes to manufacture and market Kydex holsters. Specifically, Multi Holsters claims that Tac Pro and Minuskin are using Multi Holster's confidential information, design processes, and manufacturing and marketing processes to sell Kydex holsters in America.

         Multi Holster's counterclaim against Tac Pro and Minuskin alleges breach of confidence, breach of fiduciary duty, and arguably misappropriation of trade secrets. It also seeks injunctive relief to enjoin Tac Pro from manufacturing or marketing Kydex holsters and using Multi Holster's proprietary and confidential processes.

         On February 10, 2017, Multi Holsters filed the instant lawsuit against Tac Pro and Minuskin in this court. The underlying factual allegations are essentially identical to those in the pending Ontario counterclaim, although the theories of recovery differ slightly. Multi Holsters has not sued for breach of contract or breach of fiduciary duty here, but asserts nine separate counts including five common law fraud claims under Michigan law, as well as statutory claims for violations of trade secrets under Michigan and federal law, unfair competition under Michigan common law, and tortious interference with business relationships. Specifically, the counts are as follows: (1) fraudulent misrepresentation, (2) fraudulent inducement, (3) silent fraud, (4) innocent misrepresentation, (5) negligent misrepresentation, (6) tortious interference with business relationships, (7) misappropriation of trade secrets in violation of Michigan's Uniform Trade Secret Act (“MUTSA”), MCL § 445.1902 et seq., (8) violations of the Defend Trade Secret Act in violation of 18 U.S.C. § 1836(b)(3)(C), and (9) unfair competition.

         II. Standard of Law

         A federal court has a “virtually unflagging obligation” to exercise the jurisdiction bestowed upon it. Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817-18 (1976). This obligation should be avoided in only a few “extraordinary and narrow” circumstances. Id. Under the Colorado River doctrine, the federal court may decline to exercise jurisdiction where a parallel state matter is pending. Id. Federal courts have expanded the Colorado River abstention doctrine to apply when parallel proceedings are ongoing in a foreign court. Grammar, Inc. v. Custom Foam Sys., Ltd., 482 F.Supp.2d 853, 856-57 (E.D. Mich. 2007) (citing Finova Capital Corp. v. Ryan Helicopters USA, Inc., 180 F.3d 896, 898 (7th Cir.1999)).

         The threshold inquiry in deciding whether to abstain in deference to ongoing proceedings in a foreign court is whether the actions are truly parallel. Romine v. Compuserve Corp., 160 F.3d 337, 340 (6th Cir. 1998). To answer that question, the court must find that the two proceedings are “substantially similar.” Id. The parties need not be identical as long as they are substantially similar, and the two suits involve the same allegations as to the same material facts. Id. at 340. Although the cases need not be identical, the resolution of the foreign court action must provide complete relief for the federal action. See Baskin v. Bath Twp. Bd. of Zoning Appeals, 15 F.3d 569, 572 (6th Cir. 1994); Heitmanis v. Austin, 899 F.2d 521, 528 (6th Cir. 1990); Healthcare Capital, LLC v. Healthmed, Inc., 213 F.Supp.2d 850, 856-57 (S.D. Ohio 2002). “Broadly, the relevant inquiry is whether resolution on the state case will resolve the contested issues in the federal action.” Cass River Farms, LLC. v. Hausbeck Pickle Co., No. 16-cv-12269, 2016 WL 5930493, at *2 (E.D. Mich. Oct. 12, 2016). Once the court determines ...

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