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Magistrate Judge Thynge Recommends Partial Dismissal of Complaint under Twombly and Iqbal

In this case, Plaintiff T-Jat systems alleged in its operative complaint that the three Defendants, Expedia, Inc. (Delaware), Expedia, Inc. (Washington), and Orbitz Worldwide Inc. “operate as a single entity” with a high degree of intermingling. T-Jat Systems 2006 Ltd. v. Expedia, Inc., et al., C.A. No. 16-581-RGA-MPT, Report and Recommendation at 1-3 (D. Del. Mar. 7, 2017). In response to this allegation, the Defendants moved to dismiss, arguing that “the first amended complaint fails to satisfy the pleading requirements of FED. R. CIV. P. 8(a) because it does not set forth facts sufficient for a facially plausible claim from which the court can infer the alleged misconduct . . . [particularly because] T-Jat’s allegations that Expedia-DE and Expedia-WA acted as one entity because of the companies’ parent-subsidiary relationship [is] far fetched, and the first amended complaint fails to show ‘facts that justify piercing the corporate veil.’” Id. at 5.

Magistrate Judge Thynge first rejected Plaintiff’s alter-ego theory, finding that “T-Jat has, at best, alleged sufficient facts to establish . . . a failure to observe corporate formalities and subsidiary companies acting as a façade for the parent companies” but not additional factors that would help prove a true alter-ego relationship. Plaintiff alleged sharing of certain officers and directors, sharing of a headquarters and offices, and a collective identify on marketing and promotional materials. “However, T-Jat does not allege the second element of fraud or injustice of use of the corporate form in either case. Recent case law from this court establishes that factual allegations of ‘nothing more than a close relationship and coordination among defendants,’ including operational control of the parent company over subsidiaries, is insufficient under Rule 12(b)(6). As such, the alter-ego theory against all three defendants is inadequate to meet the minimum pleading requirements.” Id. at 9-12.

Judge Thynge refused to dismiss, however, Plaintiff’s agency theory, explaining that “[o]ne can reasonably infer Expedia-DE’s control over Expedia-WA and Expedia’s control over Orbitz from the alleged facts. Further, the court can reasonably deduce Expedia-DE directed Expedia-WA’s actions, and likewise Expedia directed Orbitz’s activities relating to the underlying cause of action, the allegedly infringing mobile and website applications, based on the close connection between the respective companies. Although this corporate closeness may not be sufficient to succeed on agency theory at later stages in litigation, it is sufficient to survive a motion to dismiss, if the parties are properly and individually identified.” Id. at 12-13.

Finally, Judge Thynge agreed with Defendants that the complaint improperly conflated separate entities into a generic “Defendants” rather than pleading sufficient facts against each individual Defendant: “Although T-Jat’s assertions of Orbitz’s individual infringement may be facially plausible, the allegations as to Expedia-DE and Expedia-WA do not clarify that each defendant committed at least one infringing act. Therefore, the first amended complaint fails to provide Defendants with adequate notice of the direct infringement allegations against them and fails to meet the minimum pleadings standard.” Id. at 14-15.

T-Jat Systems 2006 Ltd. v. Expedia, Inc., et al., C.A. No. 16-581-RGA-MPT (D. Del. Mar. 7, 2017).

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