1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

SMARTDOOR HOLDINGS, INC. , Plaintiff,

v. Civil Action No. 1 4
- 657 (JEB) EDMIT INDUSTRIES, INC. , et al
. , Defendant s .

MEMORANDUM OPINION Plaintiff Smartdoor Holdings , Inc. , filed this action against several Defendants, alleging patent infringement and misappropriation of trade secrets

. Defendant ADA EZ now moves to dismiss on the ground that , as a mere division of a company, i t lacks the capacity to be sued.
Plaintif f both opposes and moves to strike the Motion , claiming that Defendant has not adequately explained what ADA E Z is or who own s it

. Because th e Court concludes that , as identified in the Complaint, ADA EZ does lack capacity , it will grant Defendant’s Motio n and deny Plaintiff’s

. I. Background According to the Complaint

– the truth of which must be presumed at this stage

– Smartdoor owns a patent for technology used in automatic doors. See Compl. , ¶¶ 1, 7, 8. In 2001, Plaintiff’s predecessor in interest, S mart Door Systems, Inc. (S DSI ) , entered into a business relationship with an Ontario consulting company to develop intellectual property related

to its patent

. Id. , ¶ 10. Defendant David Johan Van Tuyl was the princip al of that company. Id.
SDSI and Va n Tuyl worked together develop ing trade secrets related to Plaintiff’s patent until they suffered a falling out in April 2004

. Id. , ¶¶ 14, 15. Some time later , a n unnamed third party2 filed a patent application that c ontains and utilizes some of the se trade secrets owned by
Smartdoor. Id. , ¶ 17. This application was then used in support of later utility patent applications owned by the other two named Defendants, Edmit Industries, Inc. and ADA EZ, the
latter of which Plaintiff identifies as “a divisi on of . . . Edmit.” Id. , ¶¶ 3, 4, 18. According to Plaintiff, Edmit and ADA EZ manufacture and sell a product that utilizes technology covered by its patent. Id. , ¶¶ 20, 21

. Smartdoor filed this suit on April 17, 2014, alleging patent infringement, cont ributory patent infringement, and misappropriation of trade secrets. Id. , ¶¶ 19

- 40 . Defendant ADA EZ

now moves to dismiss on the ground that , as a division of a company, it lacks the capacity to be sued. Plaintiff opposes and separately moves to strike the M otion , asserting that Defendant did not adequately clarify its co rporate form through Rule 26 disclosures.
II. Legal Standard Under Federal Rule of Civil Procedure 12(b)( 6), the Court must dismiss a claim for relief when the complaint “fail[s] to state a claim upon which relief can be granted.” In evaluating a motion to dismiss, the Court must “treat the complaint’s factual allegations as true and must grant plaintiff the benefit of all inferences that can be derived from the facts alleged.” Sparrow v. United Air Lines, Inc. , 216 F.3d 1111, 1113 (D.C. Cir. 2000) (citation and internal quotation marks omitted); see also Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009). A court need not accept as true, however, “a legal conclusion couched as a factual allegation,” nor an inference unsupported by the facts set forth in the complaint. Trudeau v. FTC , 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain , 478 U.S. 265, 286 (1986)). Although “detailed factual allegations” are not necessary to withstand a Rule 12(b)(6) motion, Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007), “a complaint must contain sufficient factual matter, [if] accepted as true, to3 state a claim to relief that is plausible on its face.” Iqbal , 556 U.S. at 678 (internal quotation omitted). A plaintiff may survive a Rule 12(b)(6) motion even if “recovery is very remote and unlikely,” but the facts alleged in the complaint “must be enough to raise a r ight to relief above the speculative level.” Twombly , 550 U.S. at 555

- 56 (quoting Scheuer v. Rhodes , 416 U.S. 232, 236 (1974)).
III. Analysis In moving to dismiss, Defendant contends that the Complaint fails to state a separate claim against ADA EZ

. Smartdoor identifies ADA EZ simpl y as “a division of . . . Edmit, ” Compl. , ¶ 4, and, Defendant argue s, such entities lack capacity to be sued as a matter of a law.
ADA EZ is correct.
C apacity for suit in federal court is determined by Federal Rule of Civil Procedu re 17(b).
Under th at rule, for “ an individual who is not acting in a representative capacity, ” the “ law of the
individual ’ s domicile ” determines capacity ; “ for a corporation, ” the “ law under which it was organized ” controls ; and “ for all other parties, ” c ourts are to look to “ the law of the state where
th e court is located . . . .” In its C omplaint, Smartdoor does not allege that ADA EZ is an
individual or a corporation. I ts capacity t o be sued, therefore, is controlled “ by the law of the state where [th is Court] is located , ” Rule 17 (b)(3)

– namely, the District of Columbia

. S ee Busby v. Electric Utilities Employees Union , 323 U.S. 72, 73 (1944)

. There is no dispute that u nder D.C. law, “ unincorporated divisi ons of a corporation lack legal capacity to be sued. ” E.E.O.C. v. St. Francis Xavier Parochial School , 77 F. Supp. 2d 71,
75 (D.D.C. 1999) (collecting cases) , aff ’ d , 254 F.3d 315 (D.C. Cir. 2000)

. “ The rationale for this precedent is, above all, pragmatic, as an unincorporated division does not poss ess separate assets;4 all of its assets are owned by the corporation. ” Id. at 76. Because the Complaint identifies ADA
EZE merely as “a division of . . . Edmit,” Compl., ¶ 4, it lacks capacity to be sued. There is an exception in Rule 17 for non

- individual , non
- incorporated entities , according
to which “ a partnership or other unincorporated association ” that lacks capacity to be sued

“ under that state ’ s law ” “ may [still] sue or be sued in its common name to enforce a substantive right exi sting under the United States Constitution or laws .” Fed. R. Civ. P. 17 (b)(3)(A). This caveat, however, does not save Plaintiff’s claim. “ Federal courts, including courts in this district,
have held that an ‘ unincorporated association ’ under [Rule 17(b) (3 ) (A)] is a body of persons, acting without a charter, for the purposes o f promoting a common objective.’” Murphy v. PriceWaterhouseCoopers, LLP , 357 F. Supp. 2d 230, 241 n.9 (D.D.C. 2004) (quoting St. Francis , 77 F. Supp. 2d at 7 6

- 77) , aff ’ d in part and rev ’ d on other grounds sub nom

. Schuler v. PricewaterhouseCoopers, LLP , 595 F.3d 370 (D.C. Cir. 2010)

. “ [ A ] division of a corporation ,”
however , “ does operate with a charter

– t he charter of the larger corporation.” St. Francis , 77 F. Supp. 2d at 77. S uch a division is thus not an “ unincorporated associ ation[] ” unde r Rule 17(b)( 3 ) (A)

. See i d. (collecting cases); see also Pushkin v. Nat ’ l Academies Bd. on Sci. Educ. , No. 10

- 1765, 2012 WL 4889277, at *3 (D.D.C. Aug. 26, 2012) (dismissing complaint where

“ [p] laintiff . . . [did] not allege that the [d efendant was] a corporation, a governmental department, or otherwise subject to suit”). ADA EZ, therefore, lacks the capacity to be sued in
this Court , even for violations of federal law.
Plaintiff counters l ittle of this directly. It concedes that this Court look s to D.C. law in
this context , but asserts that because ADA EZ is a Canadian entity , that fact should somehow change the capacity analysis. This is a puzzling assertion, considering the clarity of the rule: capacity to be sued is based on “ the law of the state where the court is located

. . . . ” Fed. R. Civ.5 P. 17 (b)(3) (emphasis added) . ADA EZ’s location is thus immaterial. Nor, as Smartdoor claims,
must the Court look outside the C omplaint t o grant this M otion , thereby converting it into one for summary judgment under Rule 12(d)

. On the contrary, i t is the language of the Complaint
itself that decides the issue.
Smar t door’s main lament seems to be that it expected some clarification about AD A EZ through Rule 26 disclosures. It suspects that there is more to ADA EZ than Defendant lets on
and faults Defendant for not establishing its constitution or ownership to Plaintiff’s satisfaction

. Based on this alleged failure, Smartdoor moves to strik e Defendant’s Motion to Dismiss. See
ECF No. 39. The Court has no basis to grant such a motion. It is Plaintiff’s burden to establish, at the very least, the potential for ADA EZ to have the capacity to be sued. Yet Smartdoor’s unequivocal language about Defendant’s status as a division in the Complaint removes all doubt: as identified, Smartdoor cannot be sued. There is, moreover, no subsequent burden on
Defendant to cure this defect. Plaintiff’s Motion to Strike , therefore, is unavailing. As to the disposition, Defendant seeks a dismiss al with prejudice on the ground that

“ amendin g the pleadings would be futile

. ” M ot. at 4. It is , however, too early in the game for
such a ruling

. As the D.C. Circuit has warned , dismissals with prejudice under R ule 12(b)(6) are
disfavored and “warranted only when a trial court determines that the allegation of other facts
consistent with the challenged pleading could not possibly cure the deficiency.” Firestone v.
Firestone , 76 F.3d 1205, 1209 (D.C. Cir. 1996) (internal quotation marks and citations omitted).
In this case , Plaintiff might , through subsequent discovery , determine that ADA EZ can in fact be sued, at which point it may seek leave to amend its Complaint

. The Court will , there fore , dismiss the suit against ADA EZ without prejudice.6 IV. Conclusion
For the for e going reasons, the Court will grant Defendant ’ s Motion to Dismiss and deny
Plaintiff ’ s Motion to Strike

. A separate Order so stating will issue this day

/s/ James E. Boasberg JAMES E. BOASBERG United States District Judge Date: January 23, 2015