Case 4:17-cv-00450-ALM Document 46 Filed 11/20/17 Page 1 of 9 PageID #: 1029
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`PERFORMANCE PULSATION
`CONTROL, INC.
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`v.
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`SIGMA DRILLING TECHNOLOGIES,
`LLC, INTREPID CONSULTING, LLC,
`JUSTIN MANLEY, ALLISON MANLEY,
`WILLIAM GARFIELD, and PAMELA
`GOEHRING-GARFIELD
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`United States District Court
`EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
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`Civil Action No. 4:17-CV-00450
`Judge Mazzant
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`§
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`MEMORANDUM OPINION AND ORDER
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`Before the Court is Sigma Drilling Technologies, LLC (“Sigma”), Intrepid Consulting,
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`LLC (“Intrepid”), Justin Manley (“J. Manley”), Allison Manley1 (“A. Manley”), William Garfield
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`(“W. Garfield”), and Pamela Goehring-Garfield’s2 (“P. Garfield”) (collectively “Defendants”)
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`Rule 12(b)(1) and 12(b)(6) Motion to Dismiss Plaintiff’s First Amended Complaint (Dkt. #19).
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`After reviewing the relevant pleadings and motion, the Court finds the motion should be denied.
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`BACKGROUND
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`Performance Pulsation Control, Inc. (“PPC”) specializes in the design and production of
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`pulsation dampeners for pumps used in oil, gas, and mining operations. Such pumps often
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`experience hydraulic shocks and pressure gaps that can damage them over time. PPC’s pulsation
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`dampeners act like shock absorbers against these disturbances to protect pipe system components
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`and promote pump efficiency, safety, and reliability.
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`1 A. Manley is a former Performance Pulsation Control Employee and J. Manley’s spouse. A. Manley is a Defendant
`in this action to the degree that she engaged in the alleged conduct with J. Manley and to the extent that her community
`property is subject to this action.
`2 P. Garfield is W. Garfield’s spouse and is a Defendant in this action to the extent that she maintains ownership in
`community property which is subject to this action.
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`Case 4:17-cv-00450-ALM Document 46 Filed 11/20/17 Page 2 of 9 PageID #: 1030
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`Defendant J. Manley worked at PPC from 2012 to 2016. In 2012, J. Manley worked on a
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`team that developed certain pulsation dampeners and related technologies. In 2013, J. Manley
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`became PPC’s Sales & Marketing Manager. As such, J. Manley crafted sales and marketing
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`strategies, identified target markets, assisted with new product development, and promoted new
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`product introductions.
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`In 2014, J. Manley joined the research and development team for PPC’s Project 1958, the
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`Wave Blocker—System Orifice (“Acoustic Assassin”) and Projects 1980 and 1982—PD 05-15000
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`(the “PD Style Dampeners”). During that time, J. Manley signed a confidentiality agreement with
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`PPC that covered design drawing and specifications, fixtures and fabrication techniques, computer
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`programs and codes, customer marketing strategies, pending projects and proposals, and research
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`and development strategies. J. Manley also agreed to not compete with PPC. In 2016, PPC
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`terminated J. Manley. In a subsequent letter, PPC reminded J. Manley of his enduring obligation
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`to guard PPC’s confidential, proprietary, and trade secret business information.
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`J. Manley formed Sigma in 2014, listing himself as its managing member and registered
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`agent. Sigma created a website in 2014 featuring the following products—the Charge Free
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`Dampening System, the Charge Free Dampener, the Charger Free Conversion Kit, and the
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`Acoustic Assassin. In 2010, J. Manley also formed Intrepid, naming himself as its owner and
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`director.
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`In 2016, PPC determined that J. Manley, individually and as managing member of Sigma
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`and/or as owner and director of Intrepid, along with former PPC employee W. Garfield, were using
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`its confidential and proprietary information. PPC surmised that J. Manley and W. Garfield were
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`using its proprietary information to market and sell pulsation control products and services to oil
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`and gas clients including PPC’s current customers. PPC further deduced that J. Manley and W.
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`Garfield were soliciting its vendors.
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`2
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`Case 4:17-cv-00450-ALM Document 46 Filed 11/20/17 Page 3 of 9 PageID #: 1031
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`On June 27, 2017, PPC sued Defendants for (1) declaratory relief as to ownership of trade
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`secrets; (2) declaratory relief as to ownership of patent rights; (3) declaratory relief as to derivative
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`works under the Copyright Act (17 U.S.C. § 101, et. seq.); (4) declaratory relief as to work-for-hire
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`copyright ownership rights under the Copyright Act (17 U.S.C. § 101, et. seq.); (5) trade secret
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`misappropriation against J. Manley, A. Manley, W. Garfield, Sigma, and Intrepid; (6) civil theft against
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`J. Manley, A. Manley, W. Garfield, Sigma, and Intrepid; (7) conversion against J. Manley, W. Garfield,
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`Sigma, and Intrepid; (8) unfair competition against J. Manley, W. Garfield, Sigma, and Intrepid; (9)
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`breach of contract against J. Manley; (10) breach of fiduciary duty against J. Manley, (11) alter ego
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`against J. Manley, Sigma, and Intrepid; and (12) requested relief in the form of a preliminary and
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`permanent injunction (Dkt. #1). On August 10, 2017, PPC filed its First Amended Complaint,
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`dropping its claim for declaratory relief as to ownership of patent rights (Dkt. #1 at p. 15; Dkt. #17).
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`On August 17, 2017, Defendants filed a Rule 12(b)(1) and 12(b)(6) Motion to Dismiss Plaintiff’s First
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`Amended Complaint (Dkt. #19). On August 31, 2017, PPC filed its response (Dkt. #28). On
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`September 7, 2017, Defendants filed their reply (Dkt. #30).
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`LEGAL STANDARD
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`Motion to Dismiss for Lack of Subject Matter Jurisdiction
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`Federal Rule of Civil Procedure 12(b)(1) authorizes dismissal of a case for lack of subject
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`matter jurisdiction when the district court lacks statutory and constitutional power to adjudicate
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`the case. Home Builders Ass’n of Miss., Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir.
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`1998). If a Rule 12(b)(1) motion is filed in conjunction with other Rule 12 motions, the Court will
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`consider the jurisdictional attack under Rule 12(b)(1) before addressing any attack on the legal
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`merits. Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001).
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`In deciding the motion, the Court may consider “(1) the complaint alone; (2) the complaint
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`supplemented by the undisputed facts evidenced in the record; or (3) the complaint supplemented
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`Case 4:17-cv-00450-ALM Document 46 Filed 11/20/17 Page 4 of 9 PageID #: 1032
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`by undisputed facts plus the [C]ourt’s resolution of disputed facts.” Lane v. Halliburton, 529
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`F.3d 548, 557 (5th Cir. 2008) (quoting Barrera-Montenegro v. United States, 74 F.3d 657,
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`659 (5th Cir. 1996)). The Court will accept as true all well-pleaded allegations set forth in the
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`complaint and construe those allegations in the light most favorable to the plaintiff. Truman v.
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`United States, 26 F.3d 592, 594 (5th Cir. 1994). Once a defendant files a motion to dismiss under
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`Rule 12(b)(1) and challenges jurisdiction, the party invoking jurisdiction has the burden to
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`establish subject matter jurisdiction. See Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511
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`(5th Cir. 1980). The Court will grant a motion to dismiss for lack of subject matter jurisdiction
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`only if it appears certain that the claimant cannot prove a plausible set of facts to support a claim
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`that would entitle it to relief. Lane, 529 F.3d at 557.
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`If a district court has original jurisdiction—i.e. federal question jurisdiction—over a claim
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`it may wield jurisdiction over “all other claims that are so related to the claims in the action with
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`such original jurisdiction that they form part of the same case or controversy under Article III of
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`the United States Constitution.” 28 U.S.C.A. § 1367(a). “Federal question jurisdiction ‘exists in
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`a declaratory judgment action if the plaintiff has alleged facts in a well-pleaded complaint which
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`demonstrate that the defendant could file a coercive action arising under federal law.’” Stuart
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`Weitzmann, LLC v. Microcomputer Res., Inc., 543 F.3d 859, 862 (11th Cir. 2008) quoting
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`Household Bank, 320 F.3d 1249, 1251 (11th Cir. 2003). A civil action to obtain a remedy
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`expressly granted by the Copyright Act or to construe the Copyright Act arises under federal
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`copyright law. See Goodman v. Lee, 815 F.2d 1030, 1031 (5th Cir. 1987); see also Cmty. for
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`Creative Non-Violence v. Reid, 490 U.S. 730, 732, 109 S. Ct. 2166, 2168–60, 104 L. Ed. 2d 811
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`(1989) (explaining that a dispute over work-for-hire ownership requires a court to construe the
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`Copyright Act); Scandinavian Satellite Sys., AS v. Prime TV Ltd., 291 F.3d 839, 845
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`(D.C. Cir. 2002) (“[A] dispute that turns on whether a copyrighted work was created independently
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`Case 4:17-cv-00450-ALM Document 46 Filed 11/20/17 Page 5 of 9 PageID #: 1033
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`or as a “work made for hire” is an ownership dispute that unquestionably arises under the
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`Copyright Act.”) A copyright need not be registered to satisfy a court’s subject matter jurisdiction.
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`See Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 169, 130 S. Ct. 1237, 1248, 176 L. Ed. 2d 18
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`(2010).
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`Motion to Dismiss for Failure to State a Claim
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`The Federal Rules of Civil Procedure require that each claim in a complaint include a “short
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`and plain statement . . . showing that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2).
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`Each claim must include enough factual allegations “to raise a right to relief above the speculative
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`level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
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`A Rule 12(b)(6) motion allows a party to move for dismissal of an action when the
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`complaint fails to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). When
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`considering a motion to dismiss under Rule 12(b)(6), the Court must accept as true all well-pleaded
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`facts in plaintiff’s complaint and view those facts in the light most favorable to the plaintiff.
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`Bowlby v. City of Aberdeen, 681 F.3d 215, 219 (5th Cir. 2012). The Court may consider “the
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`complaint, any documents attached to the complaint, and any documents attached to the motion to
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`dismiss that are central to the claim and referenced by the complaint.” Lone Star Fund V (U.S.),
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`L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). The Court must then determine
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`whether the complaint states a claim for relief that is plausible on its face. ‘“A claim has facial
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`plausibility when the plaintiff pleads factual content that allows the [C]ourt to draw the reasonable
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`inference that the defendant is liable for the misconduct alleged.’” Gonzalez v. Kay, 577 F.3d 600,
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`603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “But where the well-
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`pleaded facts do not permit the [C]ourt to infer more than the mere possibility of misconduct, the
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`complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’” Iqbal,
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`556 U.S. at 679 (quoting FED. R. CIV. P. 8(a)(2)).
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`Case 4:17-cv-00450-ALM Document 46 Filed 11/20/17 Page 6 of 9 PageID #: 1034
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`In Iqbal, the Supreme Court established a two-step approach for assessing the sufficiency
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`of a complaint in the context of a Rule 12(b)(6) motion. First, the Court should identify and
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`disregard conclusory allegations, for they are “not entitled to the assumption of truth.” Iqbal, 556
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`U.S. at 664. Second, the Court “consider[s] the factual allegations in [the complaint] to determine
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`if they plausibly suggest an entitlement to relief.” Id. “This standard ‘simply calls for enough
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`facts to raise a reasonable expectation that discovery will reveal evidence of the necessary claims
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`or elements.’” Morgan v. Hubert, 335 F. App’x 466, 470 (5th Cir. 2009) (citation omitted). This
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`evaluation will “be a context-specific task that requires the reviewing [C]ourt to draw on its judicial
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`experience and common sense.” Iqbal, 556 U.S. at 679.
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`Thus, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter,
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`accepted as true, to ‘state a claim to relief that is plausible on its face.”’ Id. at 678 (quoting
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`Twombly, 550 U.S. at 570).
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`ANALYSIS
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`Defendants argue that PPC’s claims wholly arise under state law, thwarting the Court’s
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`federal question jurisdiction. Defendants aver that PPC cannot identify any intellectual property
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`to invoke the Court’s federal question jurisdiction (Dkt. #19 at p. 1). But PPC claims that the
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`Court has exclusive jurisdiction over the cause of action under the “derivative works” and “work-
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`for-hire” doctrines of the Copyright Act (Dkt. #28 at p. 7). A derivative work is a new product
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`that includes features of a pre-existing copyrighted work. 17 U.S.C. § 101. A work-for-hire
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`product is a copyrightable work created by an employee as part of his or her job. JustMed, Inc. v.
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`Byce, 600 F.3d 1118, 1125 (9th Cir. 2010).
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`PPC’s claims for copyright ownership based on the “work-for-hire” and “derivative works”
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`doctrines squarely arise under the Copyright Act and invoke the Court’s federal question
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`jurisdiction. A claim “arises under” the Copyright Act for purposes of the Court’s subject matter
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`Case 4:17-cv-00450-ALM Document 46 Filed 11/20/17 Page 7 of 9 PageID #: 1035
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`jurisdiction if and only if “the complaint is for a remedy expressly granted by the Act ... or asserts
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`a claim requiring constructing of the Act, ... or, at the very least and perhaps more doubtfully,
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`presents a case where a distinctive policy of the Act requires that federal principles control the
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`disposition of the claim,” (the “T.B. Harms Test”). See Goodman, 815 F.2d at 1031 (quoting T.B.
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`Harms Co., v. Eliscu, 339 F.2d 838, 828 (2nd Cir. 1964)); see also Franchise Tax Bd. of State of
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`Cal. v. Constr. Laborers Vacation Tr. for S. Cal., 463 U.S. 1, 9, 103 S. Ct. 2841, 2846, 77 L. Ed.
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`2d 420 (1983) (“We have often held that a case ‘arose under’ federal law where the vindication of
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`a right under state law necessarily turned on some construction of federal law…”); Royal v.
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`Leading Edge Prods., Inc., 833 F.2d 1, 2–3 (1st Cir.1987) (recognizing that an action “arises
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`under” the Copyright Act if the complaint is for a remedy expressly granted by the Act or where a
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`distinctive policy of the Act obliges federal principles to control a claim’s management and
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`subsequently denying federal question jurisdiction where the work-for-hire doctrine was “at best
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`only tangentially implicated” by a claim arising under state contract law); Bassett v. Mashantucket
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`Pequot Tribe, 204 F.3d 343, 355 (2d Cir. 2000) (recognizing that a cause of action arises under
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`the Copyright Act only if it is for a remedy expressly granted by the Act or requires construction
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`of the Act—i.e. the T.B. Harms Test); Arthur Young & Co. v. City of Richmond, 895 F.2d 967,
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`969–70 (4th Cir. 1990) (recognizing the T.B. Harms Test as the touchstone for deciding federal
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`question jurisdiction over Copyright Act claims); Vestron, Inc. v. Home Box Office Inc., 839 F.2d
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`1380, 1381 (9th Cir. 1988) (recognizing the T.B. Harms Test); MCA Television Ltd. v. Pub. Interest
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`Corp., 171 F.3d 1265, 1269–70 (11th Cir. 1999) (recognizing the T.B. Harms Test).
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`PPC filed this suit seeking “declaratory judgment of ownership by PPC of certain
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`copyrights, patent rights, and trade secrets, as well as a suit for injunctive relief and damages
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`against Defendants for misappropriation of PPC’s trade secrets under Texas common law.” (Dkt.
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`#17 at p. 1–2.) PPC claims it “conceived, invented, created and own[s] the copyrights and
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`Case 4:17-cv-00450-ALM Document 46 Filed 11/20/17 Page 8 of 9 PageID #: 1036
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`intellectual property embodying the substance of the Applications and any other works derived
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`from those copyrights, including the CFC Kit, the Acoustic Assassin, and any such other products
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`derived from these products are, therefore, a derivative work based upon such prior materials,
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`which is subject to PPC’s exclusive ownership and control under federal copyright law.” (Dkt. #17
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`at p. 15). PPC further alleged it is “entitled to a declaration that it owns all copyrights pursuant to
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`the Copyright Act’s work-for-hire doctrine.” (Dkt. #17 at p. 18). Such claims rely on privileges
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`provided by the Copyright Act—derivative work and work-for-hire ownerships rights—and
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`require the Court to construe the Act. In turn, they arise under the Copyright Act for subject matter
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`jurisdiction purposes.
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`The Court has jurisdiction over PPC’s declaratory judgment actions as they arise from
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`claims that could stand alone as causes of action—i.e. PPC’s claims for Copyright Ownership
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`Rights for derivative works and work-for-hire under the Copyright Act. See Stuart Weitzmann,
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`LLC, 542 F.3d at 862 (for a court to determine whether it has subject matter jurisdiction over a
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`declaratory judgment action, it must ask “‘whether, absent the availability of declaratory relief, the
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`instant case could nevertheless have been brought to federal court.’”)
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`The Court has supplemental jurisdiction over PPC’s remaining claims. These actions arise
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`from the same operative facts as PPC’s Copyright claims—J. Manley and W. Garfield’s alleged
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`misappropriation of trade secrets and proprietary and confidential information as PPC’s employees
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`(Dkt. #17 at p. 2). See 28 U.S.C.A. § 1367(a). This entire matter revolves around PPC’s seeking
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`“a declaration from this Court that [it] is the owner of certain copyrights, trade secrets, designs,
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`drawings, and patent applications currently being misappropriated by Defendants to actively
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`compete with PPC and that Defendants are infringing [its] rights associated with such technology.”
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`(Dkt. #17 at p. 2). Thus, PPC’s several claims spring from a common nucleus of operative fact
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`and fall within the Court’s supplemental jurisdiction.
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`Defendants argue that PPC failed to state a claim upon which relief can be granted. PPC
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`counters that it plausibly pleaded several bases for redress and relief. The question is “‘whether
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`in the light most favorable to the plaintiff and with every doubt resolved in his behalf, the complaint
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`states any valid claim for relief.’” Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th
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`Cir. 2000). After reviewing the current complaint, the motion to dismiss, the response, the reply,
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`and the sur-reply, the Court finds that PPC has stated plausible claims for purposes of defeating a
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`Rule 12(b)(6) motion to dismiss.
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`CONCLUSION
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`It is hereby ORDERED that Defendants’ Rule 12(b)(1) and 12(b)(6) Motion to Dismiss
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`Plaintiff’s First Amended Complaint is DENIED.
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