throbber
Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 1 of 16
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`UNITED STATES DISTRICT COURT
`WESTERN DISTRICT OF TEXAS
`AUSTIN DIVISION
`
`
`
`
` No. A-21-CV-00645-LY
`
`
`
`MULTITRACKS, LLC, A TEXAS
`LIMITED LIABILITY COMPANY;
`Plaintiff
`
`v.
`
`SHALON PALMER, AN
`INDIVIDUAL; AND WORSHIP
`ONLINE INC., A WYOMING
`CORPORATION;
`Defendants
`
`
`§
`§
`§
`§
`§
`§
`§
`§
`§
`§
`§
`
`
`REPORT AND RECOMMENDATION
`OF THE UNITED STATES MAGISTRATE JUDGE
`
`
`
`TO: THE HONORABLE LEE YEAKEL
`
`UNITED STATES DISTRICT JUDGE
`
`
`Before the Court is Defendants Shalon Palmer and Worship Online, Inc.’s
`
`Motion to Dismiss the Amended Complaint, Dkt. 23; and all related briefing. After
`
`reviewing these filings and the relevant case law, the undersigned issues the
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`following report and recommendation.
`
`I.
`
`BACKGROUND
`
`Plaintiff MultiTracks is a Texas-based company that modifies and enhances
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`original master recordings to allow isolated portions of those recordings to be played
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`by subscribers for use during live church meetings or rehearsals. Dkt. 18, at 2-3.
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`Multitracks provides its product through their website, which requires subscribers,
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`typically churches and church music leaders, to agree to Multitracks’ terms of use.
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`Id. at 3. Under the terms of use, subscribers may use the Multitracks recordings
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`
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`1
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`

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`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 2 of 16
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`during live performances in a church setting for “personal and non-commercial use”
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`and are subject to “a fine of $1,000 per Download Product for each instance of a
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`violation.” Id.; Dkt. 2-3, at 11. To identify and prevent misuse of its product,
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`Multitracks embeds each of its recordings with a digital watermark that it can use to
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`identify its products in subsequent recordings. Dkt. 18, at 3.
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`Multitracks claims that Defendant Palmer, despite agreeing to the terms of
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`use, has misused its recordings to build his own company, Defendant Worship Online,
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`Inc. Id. at 4. Multitracks alleges that Worship Online’s “entire business is built on its
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`historical misuse of the MultiTracks Product and its continued violations of
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`MultiTracks’ Terms of Use.” Id. According to Multitracks, Palmer has used the
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`recordings he accessed from Multitracks to create video tutorials of songs customarily
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`played by church leaders, “going so far as embedding the MultiTracks Product into
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`the video tutorials that Worship Online sells to its customers.” Id. When Multitracks
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`discovered its digital watermark on Worship Online’s commercial products in 2016,
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`it demanded Worship Online remove the content from its website. Id. at 5.
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`Despite promising to remove the misused content, Worship Online allegedly
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`continued to publish commercial products bearing Multitracks’ watermark. Id. 5-8.
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`In early 2021, Multitracks disabled Palmer’s account to prevent him from further
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`misusing its products. Id. at 6. Palmer then created a new MultiTracks account under
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`the name “Jenson Davidson” to continue accessing its products. Id. Multitracks
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`alleges that Worship Online has “generated millions of dollars in revenues by
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`exploiting the investments that MultiTracks has made in its business.” Id. at 7-8.
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`2
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`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 3 of 16
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`Multitracks brings three causes of action against Worship Online for: (1) breach of
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`contract; (2) fraudulent inducement; and (3) fraud. Id. at 9-10.
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`At the time Multitracks filed its complaint, it also moved for a temporary
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`restraining order and preliminary injunction enjoining Worship Online’s alleged
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`continued unlawful conduct. Dkt. 2. After holding a hearing on the motion, the
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`undersigned recommended that the district court deny Multitracks’ requested
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`injunctive relief. Dkt. 28. The district court adopted this report and recommendation,
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`Dkt. 31, and subsequently referred Worship Online’s motion to dismiss to the
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`undersigned, Dkt. 32.
`
`A.
`
`12(b)(1)
`
`II.
`
`LEGAL STANDARD
`
`A party moving to dismiss based on preemption does so under Federal Rule of
`
`Civil Procedure 12(b)(1). See, e.g., Griener v. United States, 900 F.3d 700, 702-03 (5th
`
`Cir. 2018). Rule 12(b)(1) allows a party to assert lack of subject-matter jurisdiction as
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`a defense to suit. Fed. R. Civ. P. 12(b)(1). Federal district courts are courts of limited
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`jurisdiction and may only exercise such jurisdiction as is expressly conferred by the
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`Constitution and federal statutes. Kokkonen v. Guardian Life Ins. Co. of Am., 511
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`U.S. 375, 377 (1994). A federal court properly dismisses a case for lack of subject-
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`matter jurisdiction when it lacks the statutory or 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
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`(5th Cir. 1998). “The burden of proof for a Rule 12(b)(1) motion to dismiss is on the
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`party asserting jurisdiction.” Ramming v. United States, 281 F.3d 158, 161 (5th Cir.
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`
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`3
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`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 4 of 16
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`2001), cert. denied, 536 U.S. 960 (2002). “Accordingly, the plaintiff constantly bears
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`the burden of proof that jurisdiction does in fact exist.” Id. In ruling on a Rule 12(b)(1)
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`motion, the court may consider any one of the following: (1) the complaint alone; (2)
`
`the complaint plus undisputed facts evidenced in the record; or (3) the complaint,
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`undisputed facts, and the court’s resolution of disputed facts. Lane v. Halliburton,
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`529 F.3d 548, 557 (5th Cir. 2008).
`
`B.
`
`12(b)(6)
`
`Pursuant to Rule 12(b)(6), a court may dismiss a complaint for “failure to state
`
`a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In deciding a
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`12(b)(6) motion, a “court accepts ‘all well-pleaded facts as true, viewing them in the
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`light most favorable to the plaintiff.’” In re Katrina Canal Breaches Litig., 495 F.3d
`
`191, 205 (5th Cir. 2007) (quoting Martin K. Eby Constr. Co. v. Dall. Area Rapid
`
`Transit, 369 F.3d 464, 467 (5th Cir. 2004)). “To survive a Rule 12(b)(6) motion to
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`dismiss, a complaint ‘does not need detailed factual allegations,’ but must provide the
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`plaintiff’s grounds for entitlement to relief—including factual allegations that when
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`assumed to be true ‘raise a right to relief above the speculative level.’” Cuvillier v.
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`Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550
`
`U.S. 544, 555 (2007)). That is, “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.’” Ashcroft v.
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`Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).
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`A claim has facial plausibility “when the plaintiff pleads factual content that
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`allows the court to draw the reasonable inference that the defendant is liable for the
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`4
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`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 5 of 16
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`misconduct alleged.” Id. “The tenet that a court must accept as true all of the
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`allegations contained in a complaint is inapplicable to legal conclusions. Threadbare
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`recitals of the elements of a cause of action, supported by mere conclusory statements,
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`do not suffice.” Id. A court ruling on a 12(b)(6) motion may rely on the complaint, its
`
`proper attachments, “documents incorporated into the complaint by reference, and
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`matters of which a court may take judicial notice.” Dorsey v. Portfolio Equities,
`
`Inc., 540 F.3d 333, 338 (5th Cir. 2008) (citations and internal quotation marks
`
`omitted). A court may also consider documents that a defendant attaches to a motion
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`to dismiss “if they are referred to in the plaintiff’s complaint and are central to her
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`claim.” Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004).
`
`But because the court reviews only the well-pleaded facts in the complaint, it may
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`not consider new factual allegations made outside the complaint. Dorsey, 540 F.3d at
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`338. “[A] motion to dismiss under 12(b)(6) ‘is viewed with disfavor and is rarely
`
`granted.’” Turner v. Pleasant, 663 F.3d 770, 775 (5th Cir. 2011) (quoting Harrington
`
`v. State Farm Fire & Cas. Co., 563 F.3d 141, 147 (5th Cir. 2009)).
`
`III.
`
`DISCUSSION
`
`A.
`
`Preemption by the Copyright Act
`
`Worship Online contends that the Copyright Act preempts Multitracks’
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`breach-of-contract claim, which is based on Worship Online’s alleged violation of the
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`license Multitracks granted Worship Online. Dkt. 23-1, at 16-24; Dkt. 33, at 6-9.
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`Courts “employ a two-prong test to determine whether the Act preempts a state law
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`cause of action.” Digit. Drilling Data Sys., L.L.C. v. Petrolink Servs., Inc., 965 F.3d
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`
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`5
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`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 6 of 16
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`365, 377 (5th Cir. 2020) (citing 17 U.S.C. § 301(a)). First, a court must “examine the
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`state claim to determine whether it falls within the subject matter of copyright.” Id.
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`at 377-78 (internal quotation marks omitted). If so, the court will then “consider the
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`state cause of action to determine if it protects rights that are equivalent to any of
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`the exclusive rights of a federal copyright.” Id. (internal quotation marks omitted).
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`The parties here do not dispute that the first prong is satisfied, see Dkts. 29, at 17-
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`19; 33, at 6, so the undersigned will limit the preemption analysis to the second
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`prong—equivalency.
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`The Fifth Circuit “evaluate[s] the equivalency of the protected rights by
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`applying the ‘extra element’ test: Preemption does not occur if the state law claim
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`requires ‘one or more qualitatively different elements.’” Digit. Drilling Data Sys., 965
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`F.3d at 378 (quoting Alcatel USA, Inc. v. DGI Techs., Inc., 166 F.3d 772, 787 (5th Cir.
`
`1999)). “The party arguing against preemption must show ‘the presence of any
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`element that renders different in kind its rights under state and federal law.’” Id.
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`(quoting Alcatel, 166 F.3d at 789); see also Ultraflo Corp. v. Pelican Tank Parts, Inc.,
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`845 F.3d 652, 658 (5th Cir. 2017) (“The question is not whether state law provides a
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`right identical to federal copyright law, but whether state law provides a right akin
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`to those ‘within the general scope of copyright as specified by section 106.’” (quoting
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`17 U.S.C. § 301)). In other words, does “the conduct for which the plaintiff is seeking
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`protection under state law amount[] to the copying that copyright law also
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`proscribes”? GlobeRanger Corp. v. Software AG USA, Inc., 836 F.3d 477, 484 (5th Cir.
`
`2016). Or, “is state law protecting the same rights that the Copyright Act seeks to
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`6
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`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 7 of 16
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`vindicate, or is it protecting against different types of interference?” Id. “Whether a
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`claim is equivalent requires looking to the actual alleged misconduct and not merely
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`the elements of the state cause of action.” Id. at 485 (citing Alcatel, 166 F.3d at 788).
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`After considering the elements of Multitracks’ breach-of-contract claim, the
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`undersigned concludes that it is not preempted by the Copyright Act. Courts
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`throughout the Circuit have recognized the Act’s limited preemptive effect in breach-
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`of-contract claims. See, e.g., Taquino v. Teledyne Monarch Rubber, 893 F.2d 1488,
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`1501 (5th Cir. 1990) (“[C]ontract claims are rarely preempted because they involve
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`extra elements like a ‘contract promise’ or the ‘existence of a binding contract.’”);
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`Motio, Inc. v. BSP Software LLC, No. 3:16-CV-00331-O, 2016 WL 9559916, at *9 (N.D.
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`Tex. May 27, 2016) (“[T]here is no need to reinvent the wheel with a lengthy
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`reexamination, as simply stated, well-established law teaches that claims for breach
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`of contract … are not preempted by the Copyright Act.”); McConley v. Boise Bldg.
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`Sols. Mfg., L.L.C., No. CIV.A. 05-1006-A, 2006 WL 709599, at *4 (W.D. La. Mar. 21,
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`2006) (“Courts in the Fifth Circuit have consistently concluded that a legitimate
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`breach of contract action defeats preemption.” (collecting cases)); Recursion Software,
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`Inc. v. Interactive Intel., Inc., 425 F. Supp. 2d 756, 766 (N.D. Tex. 2006) (“[A] majority
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`of courts have found that breach of contract claims escape the preemptive reach of
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`the Copyright Act.”) Courts reaching this conclusion have done so when the state-law
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`claim involved more than “mere reproduction, distribution or display” of the
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`copyright-protected material. Taquino, 893 F.2d at 1501.
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`7
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`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 8 of 16
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`The undersigned finds the analysis in Recursion instructive. In that case, a
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`software developer, Recursion, sued another software company, Interactive, for
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`breach of Recursion’s licensing agreement. Recursion had discovered that Interactive
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`had embedded certain components of Recursion’s software product, Voyager, in a
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`product that Interactive sold. Recursion, 425 F. Supp. 2d at 763. As the court
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`explained, “Recursion’s breach of contract claim does not concern itself with
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`Interactive’s mere distribution of Voyager, but rather that Interactive downloaded
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`that program, incorporated it in its software (Interaction Recorder), and then offered
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`Interaction Recorder for sale to the public.” Id. at 766; see id. (“[I]t is Interactive’s
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`conduct of embedding the Voyager program into software that is sold, not the naked
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`distribution of it, that allegedly invades Recursion’s private contract rights.”). The
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`court concluded that “[t]he scope of a licensee’s permissible distribution of Voyager is
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`determined by reference to the contract itself, not the copyright law. The Court thus
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`finds that Recursion’s contract claim is not equivalent to the exclusive rights of
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`copyright and is accordingly not preempted.” Id.
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`The same reasoning applies here. Multitracks’ breach-of-contract claim alleges
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`more than “mere reproduction, distribution or display” of its product. Instead,
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`Multitracks alleges that when Worship Online acquired access to the Mulitracks
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`product, it agreed it was “receiving a ‘limited license’ to use the MultiTracks Product
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`during live performances in a church setting for ‘personal and non-commercial use’”
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`and that Worship Online breached the terms of the “limited license” when it
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`“embedd[ed] the MultiTracks Product into the video tutorials that Worship Online
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`8
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`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 9 of 16
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`sells to its customers.” Dkt. 18, at 3, 4. Resolution of this claim requires more than a
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`mere determination of rights under the Copyright Act—it will require factual findings
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`and application of state law related to Worship Online’s contractual promise that are
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`“different in kind” from federal copyright law. Alcatel, 166 F.3d at 789. Multitracks’
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`breach-of-contract claim, therefore, is not preempted by the Copyright Act.
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`Worship Online contends Recursion was wrongly decided. Dkt. 33, at 9 n.1.
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`Worship Online’s own authority, however, demonstrates the applicability of
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`Recursion in this case. Worship Online relies on Genesys Software Sys., Inc. v.
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`Comerica Bank, No. 3:12-CV-2682-N, 2013 WL 12126264 (N.D. Tex. Apr. 9, 2013), to
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`argue that a claim based on a defendant’s merely exceeding the terms of a licensing
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`agreement sounds in copyright and is therefore preempted. See Dkt. 23-1, at 19. But
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`the court in Genesys distinguishes Recursion, observing that “the contract [in
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`Recursion] specifically provided that the copyrighted material was not to be used in
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`a certain manner. … Here, Genesys does not point to any provision of the licensing
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`agreement that prohibits Comerica’s use. Unlike the licensing agreement[] in
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`Recursion …, Genesys’s claim is that Comerica used Genesys’s software without
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`permission, not that Comerica promised not to use Genesys’s software in a particular
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`way but did so anyway.” Genesys, 2013 WL 12126264, at *3 n.1 (emphasis added).
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`That same distinction applies here—Multitracks does not merely complain that
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`Worship Online used Multitracks’ product without permission, rather, Multitracks
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`complains that Worship Online agreed to not use Multitracks’ product in a particular
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`way but then did so anyway.
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`9
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`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 10 of 16
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`For the foregoing reasons, the undersigned concludes that Multitracks’ claims
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`are not preempted by the Copyright Act and will therefore recommend that Worship
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`Online’s motion to dismiss asserting preemption be denied.
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`B.
`
`Copyright Misuse
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`Worship Online argues that Multitracks’ attempt to assert a breach-of-contract
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`claim based on its “unduly restrictive licensing scheme” is barred by the doctrine of
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`copyright misuse. Dkt. 23-1, at 13-16; Dkt. 33, at 9-12. Multitracks has not sued
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`Worship Online for copyright infringement. As Multitracks explains in its response
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`to Worship Online’s motion, courts have observed that copyright misuse “is not a
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`defense to state law claims.” Apple Inc. v. Psystar Corp., 658 F.3d 1150, 1157 (9th Cir.
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`2011); see also Davidson & Assocs., Inc. v. Internet Gateway, Inc., 334 F. Supp. 2d
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`1164, 1182-83 (E.D. Mo. 2004) (noting “reluctan[ce] to apply the copyright misuse
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`defense as a defense to a contract claim, because the defense is normally used in
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`copyright infringement actions”). It would “make[] little sense to allow” Worship
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`Online to assert this affirmative defense as a basis for dismissal “when there has been
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`no allegation of copyright infringement.” Altera Corp. v. Clear Logic, Inc., 424 F.3d
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`1079, 1090 (9th Cir. 2005). Having declined Worship Online’s invitation to shoehorn
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`Multitracks’ claims into the Copyright Act, the undersigned likewise concludes that
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`the copyright-misuse doctrine does not bar Multitracks’ claims. See id. (“We have
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`already rejected Clear Logic’s copyright preemption argument. We cannot now void
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`the license agreements under the pretext of refusing to enforce a copyright that has
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`not been asserted.”).
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`10
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`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 11 of 16
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`C. Multitracks’ Fraud Claims
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`
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`Statute of Limitations
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`Worship Online contends that because Multitracks alleges that Worship
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`Online’s wrongdoing began in 2014, the four-year statute of limitations found in the
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`Texas Civil Practice and Remedies Code bars Multitracks’ claim for fraud. Dkt. 23-1,
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`at 25 (citing Tex. Civ. Prac. & Rem. Code § 16.004(a)(4)). Multitracks responds that:
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`(1) Worship Online “accepted” Multitracks’ terms of use on multiple occasions, not
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`just in 2014, but as recently as April 2020; and (2) to the extent the claims can be
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`viewed as tied to the 2014 contract, the doctrine of equitable tolling applies, rendering
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`its fraud claims timely. Dkt. 29, at 15-17. Regarding the first argument, Multitracks
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`acknowledges that its Amended Complaint does not explicitly refer to Worship
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`Online’s acceptance of terms in April 2020 and requests leave to amend its complaint
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`to make this more clear. See id. at 16 n.1. The undersigned concludes, however, that
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`amendment is not necessary—when considering the totality of the allegations in the
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`Amended Complaint, including the factual background set out in the “General
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`Allegations” section, it is reasonable to conclude that Multitracks alleges ongoing
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`fraud that took place within the statute of limitations. Dkt. 18, at 2-9.
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`As for the fraudulent conduct that allegedly occurred outside of the limitations
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`period, the undersigned agrees that Multitracks’ invocation of the doctrine of
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`equitable tolling is sufficient to avoid dismissal under Rule 12(b)(6). “‘[E]quitable
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`tolling [is] the judge-made doctrine ... that excuses a timely filing when the plaintiff
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`could not, despite the exercise of reasonable diligence, have discovered all the
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`11
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`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 12 of 16
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`information he needed in order to be able to file his claim on time.’” In re United Servs.
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`Auto. Ass’n, 307 S.W.3d 299, 311 (Tex. 2010) (quoting Taliani v. Chrans, 189 F.3d
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`597, 597 (7th Cir. 1999)). Multitracks argues that its Amended Complaint sufficiently
`
`alleges facts supporting equitable tolling, pointing to Palmer’s agreeing to the terms
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`of use with no intent of complying, something Multitracks could not know at the time,
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`and Palmer’s allegedly false promise to stop violating the terms once Multitracks
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`confronted him about it in 2016. Dkt. 29, at 20.
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`Worship Online’s reply primarily takes issue with Multitracks’ depiction of the
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`facts supporting this argument. See Dkt. 33, at 13-14. These sorts of factual disputes,
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`though, are not properly resolved in the 12(b)(6) context. While the operation of the
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`statute of limitations may later be the subject of a motion for summary judgment, the
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`undersigned concludes that it is not an appropriate basis for dismissal at this
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`procedural juncture. Adhikari v. KBR Inc., No. 4:16-CV-2478, 2017 WL 4237923, at
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`*9 (S.D. Tex. Sept. 25, 2017) (“[C]ourts have held that because the question whether
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`a particular party is eligible for equitable tolling generally requires consideration of
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`evidence beyond the pleadings, such tolling is not generally amenable to resolution
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`on a Rule 12(b)(6) motion.” (collecting cases) (internal quotation marks omitted)); see
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`also Rogers v. Buchanan, No. 3:12-CV-2458-M-BN, 2014 WL 4449800, at *2 (N.D.
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`Tex. Sept. 9, 2014) (noting that the question of equitable tolling “is not generally well-
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`suited to being resolved on a Rule 12(b)(6) motion” (citing Abecassis v. Wyatt, 785 F.
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`Supp. 2d 614, 652 (S.D. Tex. 2011))).
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`12
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`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 13 of 16
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`
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`Rule 9(b)
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`Worship Online complains that Multitracks’ fraud allegations are conclusory
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`and do not meet the heightened pleading-particularity requirement set out in Federal
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`Rule of Civil Procedure 9(b) for fraud claims. Dkt. 23-1, at 18-19. The undersigned
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`disagrees. Rule 9(b) requires that “[i]n alleging fraud or mistake, a party must state
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`with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P.
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`9(b). A fraud claim requires pleading with particularity the “‘who, what, when, where,
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`and how’ of the alleged fraud.” United States ex. rel. Nunnally v. West Calcasieu
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`Cameron Hosp., 519 F. App’x 890, 892 (5th Cir. 2013) (quoting United States ex rel.
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`Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997)).
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`Multitracks’ Amended Complaint meets this basic requirement. See Dkt. 18, at 10-
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`11. Namely, Multitracks alleges that Palmer and Worship Online fraudulently
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`induced Multitracks into a contract for the use of its product when Palmer
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`intentionally misrepresented his intent, beginning in 2014, to comply with the terms
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`of use that he purported to accept but never intended to abide. Id. While Multitracks
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`could have alleged more detail in its complaint, the undersigned does not conclude
`
`that more is required to comply with Rule 9(b). Worship Online’s motion to dismiss
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`on this basis, therefore, should be denied.
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`
`
`Economic Loss Rule
`
`Worship Online argues that Multitracks’ fraud claims are also barred by the
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`“economic loss rule.” Dkt. 23-1, at 19-20; Dkt. 33, at 8-9. The economic loss rule
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`precludes recovery in tort when the loss is the subject matter of a contract between
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`13
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`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 14 of 16
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`the parties. E.g., Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 495 (Tex. 1991) (“The
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`acts of a party may breach duties in tort or contract alone or simultaneously in both.
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`The nature of the injury most often determines which duty or duties are breached.
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`When the injury is only the economic loss to the subject of a contract itself the action
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`sounds in contract alone.”). Multitracks responds that because it alleges fraudulent
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`inducement, its fraud claims are not barred by the economic loss rule. See Dkt. 29, at
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`19 (citing Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960
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`S.W.2d 41, 45 (Tex. 1998)). In Formosa Plastics, the Texas Supreme Court held that
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`“tort damages are recoverable for a fraudulent inducement claim irrespective of
`
`whether the fraudulent representations are later subsumed in a contract or whether
`
`the plaintiff only suffers an economic loss related to the subject matter of the
`
`contract.” 960 S.W.2d at 47. The court reasoned that “an independent legal duty,
`
`separate from the existence of the contract itself, precludes the use of fraud to induce
`
`a binding agreement.” Id.
`
`“Fraudulent inducement is a species of common-law fraud that shares the
`
`same basic elements: (1) a material misrepresentation; (2) made with knowledge of
`
`its falsity or asserted without knowledge of its truth; (3) made with the intention that
`
`it should be acted on by the other party; (4) which the other party relied on; and
`
`(5) which caused injury.” Anderson v. Durant, 550 S.W.3d 605, 614 (Tex. 2018). Here,
`
`Multitracks’ fraud claims allege that “Palmer intended to cause Worship Online to
`
`deceive Plaintiff by misrepresenting that it agreed to the Terms of Use when it had
`
`no intention of performing under the Terms of Use,” and “Palmer intended for
`
`
`
`14
`
`

`

`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 15 of 16
`
`Worship Online to deceive Plaintiff by using a fake name to create a MultiTracks
`
`account, agree to the MultiTracks Terms of Use, and purchase MultiTracks
`
`Products.” Dkt. 18, at 10, 11. These allegations sufficiently allege a cause of action for
`
`fraudulent inducement to survive Worship Online’s motion on this basis.
`
`IV.
`
`RECOMMENDATION
`
`In
`
`accordance with
`
`the
`
`foregoing discussion,
`
`the undersigned
`
`RECOMMENDS that the District Court DENY Worship Online’s motion to dismiss,
`
`Dkt. 23, in its entirety. IT IS FURTHER ORDERED this cause of action is removed
`
`from the docket of the undersigned and RETURNED to the docket of the Honorable
`
`Lee Yeakel.
`
`V.
`
`WARNINGS
`
`The parties may file objections to this Report and Recommendation. A party
`
`filing objections must specifically identify those findings or recommendations to
`
`which objections are being made. The District Court need not consider frivolous,
`
`conclusive, or general objections. See Battle v. United States Parole Comm’n, 834 F.2d
`
`419, 421 (5th Cir. 1987). A party’s failure to file written objections to the proposed
`
`findings and recommendations contained in this Report within fourteen days after
`
`the party is served with a copy of the Report shall bar that party from de novo review
`
`by the District Court of the proposed findings and recommendations in the Report
`
`and, except upon grounds of plain error, shall bar the party from appellate review of
`
`unobjected-to proposed factual findings and legal conclusions accepted by the District
`
`
`
`15
`
`

`

`Case 1:21-cv-00645-LY Document 37 Filed 03/01/22 Page 16 of 16
`
`Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53 (1985);
`
`Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc).
`
`SIGNED March 1, 2022.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`DUSTIN M. HOWELL
`UNITED STATES MAGISTRATGE JUDGE
`
`
`
`
`
`16
`
`

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