Tatuyou LLC v. One Ink Seven LLC

Background

Tatuyou LLC sued One Ink Seven LLC (OIS) for breach of contract. The claim arose from a March 12, 2021, Settlement Agreement that resolved an earlier patent-infringement lawsuit between the parties. Both companies make and sell products for the tattoo industry.

Paragraph 5 of the Settlement Agreement stated that OIS’s stencil ink products, “when manufactured, have or will have particles greater than 25 microns therein.” In March 2022, Tatuyou accused OIS of violating that provision by producing stencil ink products without particles larger than 25 microns. Tatuyou submitted an analysis of an OIS product that allegedly showed that it contained no particles larger than 25 microns. Tatuyou initially filed the breach-of-contract claim in Minnesota state court, and OIS removed it to federal court. The opinion states that Tatuyou did not challenge removal and that the court had diversity jurisdiction.

Motion to dismiss

OIS moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. OIS argued that Tatuyou had not adequately alleged that the product failed to meet the particle-size requirement when it was manufactured, as opposed to when Tatuyou tested it.

At this stage, the court was required to accept the complaint’s factual allegations as true and decide whether they stated a claim that was plausible on its face. The court could also consider documents attached to the complaint when those documents did not conflict with the allegations.

Court’s analysis

The court concluded that Tatuyou had alleged enough facts to support the breach-of-contract claim. OIS’s argument assumed that the product complied with the agreement when manufactured and that its particles later decreased in size, but OIS did not explain how that could have happened. The court also noted that the record did not make clear how long after manufacture the product was tested.

Even if a significant amount of time had passed, the court held that Tatuyou’s alleged evidence of the product’s particle sizes supported a reasonable inference that OIS manufactured products violating the Settlement Agreement. The court also stated that it could reasonably infer that the particle diameter had not significantly changed. Because the existing amended complaint was sufficient, the court found that Tatuyou’s request for permission to amend was unnecessary.

Disposition

The court denied OIS’s Motion to Dismiss. The ruling addressed only whether Tatuyou had adequately pleaded its claim; it did not decide whether OIS ultimately breached the Settlement Agreement.