RG Golf Warehouse, Inc. v. The Golf Warehouse, LLC

Background

RG Golf Warehouse, Inc. owned the registered domain name golfwarehouse.com. The Golf Warehouse, Inc. owned and operated websites selling golf merchandise and owned the registered trademark “The Golf Warehouse.” In 2011, the parties entered into a contract under which RG would refer online customers to The Golf Warehouse’s websites in exchange for referral fees and commissions. The contract contemplated using computer-tracking cookies and other mechanisms to track customer traffic and calculate commissions.

RG alleged that The Golf Warehouse disabled the tracking cookies, underreported commissions, failed to provide requested sales reports, and repeatedly assured RG that it was investigating the issue. The Golf Warehouse terminated the contract on November 11, 2014. RG then entered into a similar contract with Golfsmith International. The Golf Warehouse sent Golfsmith a cease-and-desist letter asserting that redirecting traffic from golfwarehouse.com to competitors infringed The Golf Warehouse’s trademark. Golfsmith terminated its contract with RG after receiving the letter.

RG brought claims for breach of contract, breach of the implied covenant of good faith and fair dealing, tortious interference with contract, and fraud. The parties had stipulated to dismissal with prejudice of the implied-covenant claim, leaving Counts I, III, and IV. The current motion sought dismissal of Count III, tortious interference, and Count IV, fraud.

Legal Standard

The court considered the motion under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint fails to state a legally sufficient claim. At this stage, the court accepted the complaint’s factual allegations as true and asked whether they stated a plausible claim for relief.

Count III: Tortious Interference with Contract

The Golf Warehouse argued that Count III was barred by the applicable statute of limitations. RG argued that Minnesota’s six-year limitations period for contract disputes applied, rather than a two-year limitations period.

The court determined that the Indiana choice-of-law provision in the parties’ contract did not govern Count III because the tortious-interference claim concerned The Golf Warehouse’s alleged interference with RG’s separate relationship with Golfsmith, not the interpretation of the contract between RG and The Golf Warehouse. The court found no outcome-determinative conflict among the potentially applicable state laws because each provided a two-year limitations period for the claim as alleged.

RG conceded that Count III was based on allegations that The Golf Warehouse misrepresented its trademark rights in the cease-and-desist letter. Under Minnesota law, tortious-interference claims based on misrepresentation are subject to a two-year limitations period. The court therefore held that Count III was time-barred and dismissed it without prejudice. The court explained that dismissal without prejudice was appropriate because RG had filed only one complaint and the court could not conclude that amendment would be futile.

Count IV: Fraud

The Golf Warehouse argued that RG’s fraud claim was not legally independent from its breach-of-contract claim. The court applied Indiana law because it found the fraud claim closely related to interpretation of the contract, but it stated that the result would be the same under Minnesota law.

Count I alleged that The Golf Warehouse failed to pay amounts due and falsified sales data. Count IV alleged that, during the contract term, The Golf Warehouse made material misrepresentations about commissions and concealed relevant information. The contract required The Golf Warehouse to provide periodic sales and commission reports to RG. Because that reporting obligation arose from the contract, the court concluded that the fraud claim merely recharacterized the alleged contractual breach and was not an independent claim.

RG argued that Count IV should be treated as fraudulent inducement based on an alleged lack of intent to honor the contract. The court rejected that argument because the complaint did not plead fraudulent inducement; instead, it alleged fraud occurring during the contract term. The court dismissed Count IV without prejudice.

Disposition

Judge Wilhelmina M. Wright granted The Golf Warehouse, Inc.’s motion to dismiss Counts III and IV. Count III and Count IV were each dismissed without prejudice. The order did not dismiss Count I, the breach-of-contract claim. Count II had previously been dismissed with prejudice pursuant to the parties’ stipulation.