The opinion
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
MADDENCO INC. CIVIL ACTION
VERSUS
JAMES REED, ET AL. NO. 23-01391-BAJ-SDJ
RULING AND ORDER
In this action, Plaintiff (MaddenCo Inc.), a corporation that develops and
supports integrated software systems for independent tire dealers and truck stop
services centers, pursues claims of copyright infringement, breach of contract, and
breach of fiduciary duties against its former employees (Defendants Reed and Darby)
and their new employer (Defendant HG AutoTech). Plaintiff alleges that Defendants
Reed and Darby infringed upon Plaintiff’s copyright by using its confidential software
code to develop competing software for Defendant HG AutoTech.
Defendants brought five counterclaims against Plaintiff: (1) a wrongful
copyright claim; (2) violation of the Louisiana Unfair Trade Practices Act (“LUTPA”),
La. Stat. Ann. § 51:1405; (3) breach of contract; (4) defamation; and (5) abuse of
process. (Doc. 151). Now before the Court is Plaintiff’s Motion For Partial
Summary Judgment (Doc. 165), which seeks to dismiss all counterclaims besides
breach of contract. Defendants oppose Plaintiff’s motion. (Doc. 168). Plaintiff filed a
reply. (Doc. 169). For the reasons stated herein, Plaintiff’s Motion will be GRANTED.
I. BACKGROUND
The following facts are undisputed, as set forth in MaddenCo’s Statement Of
Material Facts In Support Of Motion For Partial Summary Judgment (Doc. 166, “MC
SOF”), Plaintiff’s Response To MaddenCo’s Statement Of Material Facts and
Statement Of Additional Material Facts (Doc. 168 at 1–11, “Response SOF” and
“Response SOAF”), the Parties’ Joint Pretrial Order (Doc. 179, “Joint PTO”), and the
record evidence submitted in support of these pleadings.
Defendant Darby left employment as a software developer for Plaintiff in 2021
and began working for Defendant HG AutoTech immediately after. (Joint PTO ¶¶
4–5). Defendant Reed left employment as a software development manager for
Plaintiff in 2021 and began working for Defendant HG AutoTech shortly after. (Id.
¶¶ 2–3). Both MaddenCo and HG AutoTech utilize GeneXus, an auto-generation tool,
in the development of their respective software programs. (Id. ¶ 7). Defendants Darby
and Reed had full access to MaddenCo’s source code and GeneXusKnowledge Base, a
feature of GeneXus used in the development of software, while employed there. (Joint
PTO ¶ 6). However, Defendants Darby and Reed claim that upon leaving MaddenCo,
they did not take MaddenCo’s files with them. (Response SOAF ¶ 1).
In September and October 2022, MaddenCo enlisted an IT company to
investigate whether Defendant Darby had taken any confidential information with
him when he left MaddenCo. (Doc. 168-6). The company’s forensic report concluded
that: “No strong evidence of Intellectual Property theft was found at this time.
Several obstacles prevented the capture of forensic artifacts from the time frame in
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question.” (Id. at 6). An accompanying email from the company stated: “At this time,
we have not found any evidence of IP theft and/or data exfiltration.” (Id. at 1). In
October 2022, MaddenCo sued Defendants Darby, Reed, and HG AutoTech for
allegedly using MaddenCo’s confidential information, including its software code, to
recreate, copy, or develop an alternative code for products competitive to MaddenCo’s
products. (Doc. 2 ¶ 17).
In August 2023, the parties engaged Quandary Peak Research (“Quandary”) to
conduct a neutral review of Plaintiff and Defendant HG AutoTech’s source code to
determine if Defendant HG AutoTech infringed on or misappropriated MaddenCo’s
copyrighted system. (Response SOAF ¶ 61). However, following the issuance of
Quandary’s report, MaddenCo asserted that it did not provide all of its source code to
Quandary, and therefore Quandary would need to conduct the analysis again. (Doc.
168-9 ¶ 32). MaddenCo agreed to pay for the new analysis, but did not complete the
new analysis or pay Quandary for the new analysis. (Id. ¶ 32).
Prior to the filing of the lawsuit, Tireweb was considering working with HG
AutoTech. (Response SOAF ¶ 21). MaddenCo informed Tireweb that it was
considering filing a lawsuit against HG AutoTech. (Id. ¶ 26). In August 2023, Tireweb
stopped doing business with HG AutoTech (Id. ¶¶ 28–29). Thereafter, Southern Tire
Mart, an important client of HG AutoTech, also terminated its contract with HG
AutoTech. (Id. ¶ 38). Two more companies, Champion Tire and National Tire, were
considering entering a business partnership with HG AutoTech but later decided not
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to. (Id. ¶¶ 48, 49, 52). HG AutoTech contends that MaddenCo convinced these clients
to end their business relationships with HG AutoTech. (Id. ¶¶ 19–54).
Now, Plaintiff moves for summary judgment on the following counterclaims
asserted by Defendants: (1) a wrongful copyright claim, in which Defendants request
attorney’s fees; (2) violation of LUTPA; (3) defamation; and (4) abuse of process.
II. LEGAL STANDARD
A district court should “grant summary judgment if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a); see Funches v. Progressive Tractor
& Implement Co., L.L.C., 905 F.3d 846, 849 (5th Cir. 2018) (“This occurs when a party
fails to make a showing sufficient to establish the existence of an element essential
to that party’s case, and on which that party will bear the burden of proof at trial.”).
For issues on which the movant bears the burden of proof at trial, they “must
come forward with evidence which would entitle [them] to a directed verdict if the
evidence went uncontroverted at trial.” Int’l Shortstop, Inc. v. Rally’s, Inc.,
939 F.2d 1257, 1264–65 (5th Cir. 1991). The nonmoving party can then defeat the
motion by either countering with evidence establishing a genuine dispute of material
fact, or “showing that the moving party’s evidence is so sheer that it may not persuade
the reasonable fact-finder to return a verdict in favor of the moving party.” Id. at
1265.
Where the nonmovant bears the burden of proof at trial, the moving party must
offer evidence that undermines the nonmovant’s claim or point out the absence of
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evidence supporting essential elements of the claim. See Lujan v.
Nat’l Wildlife Federation, 497 U.S. 871, 885 (1990). Once the movant shows
entitlement to judgment as a matter of law, the nonmovant must bring forward
evidence to create a genuine issue of material fact. Giles v. Gen. Elec. Co.,
245 F.3d 474, 493 (5th Cir. 2001). “The evidence of the non-movant is to be believed,
and all justifiable inferences are to be drawn in [its] favor.” Darden v.
City of Fort Worth, 880 F.3d 722, 727 (5th Cir. 2018).
III. ANALYSIS
A. Choice-of-Law for State Law Claims.
As a preliminary matter, the Court addresses whether Louisiana or Indiana
law applies to Defendants’ counterclaims. Plaintiff argues in its Motion that
Louisiana law applies to HG AutoTech’s state law counterclaims, and Indiana law
applies to Defendants Reed and Darby’s state law counterclaims.1 Defendant argues
that Louisiana law applies to all Defendants’ state law counterclaims, and that
MaddenCo waived any arguments to the contrary when it accepted the application of
Louisiana law to all Defendants’ state law counterclaims at the motion to dismiss
stage.
1 Plaintiff argues that because the Court previously determined that Louisiana law applies
to Plaintiff’s state law claims against Defendant HG AutoTech and Indiana law applies to
Plaintiff’s state law claims against Defendants Reed and Darby (see Doc. 150 at 16–17),
Louisiana law applies to Defendant HG AutoTech’s state law counterclaims against Plaintiff
and Indiana law applies to Defendants Reed and Darby’s state law counterclaims against
Plaintiff. (Doc. 167 at 6). The Court determined that because Defendants Reed and Darby did
not contest that Indiana state law applies to Plaintiff’s state law claims, they waived any
choice-of-law arguments with respect to Plaintiff’s state law claims. (Doc. 150 at 13 n.3).
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The Court agrees that Plaintiff has accepted that Louisiana law applies to all
Defendants’ counterclaims. Defendants asserted their counterclaims under
Louisiana law (by bringing a counterclaim specifically under the Louisiana Unfair
Trade Practices Act and by citing only to Louisiana case law in their briefing at the
motion to dismiss stage), and Plaintiff conceded that Louisiana law applied (by citing
only to Louisiana case law in their briefing at the motion to dismiss stage). (See Doc.
151; Doc. 156) Therefore, Louisiana law applies to all Defendants’ counterclaims, as
the failure to raise an argument or adequately brief an issue in a motion to dismiss
generally amounts to a waiver of the same. See JMCB, LLC v. Bd. of Com. & Indus.,
336 F. Supp. 3d 620, 634 (M.D. La. 2018) (“[F]ailure to brief an argument in the
district court waives that argument in that court.”).
B. Wrongful Copyright Claim.
Defendants “wrongful copyright claim” counterclaim asserts that Plaintiff’s
copyright infringement claim against them is frivolous and that, pursuant to 17
U.S.C. § 505, which allows courts to discretionarily award full costs and attorney’s
fees to prevailing parties in copyright infringement cases, they are entitled to full
costs and attorney’s fees for defending against Plaintiff’s copyright infringement
claim. (Doc. 151 ¶¶ 29–31). Plaintiff moves for summary judgment on this
counterclaim, asserting that the statute does not create an independent cause of
action to be asserted as a counterclaim by a party defending a copyright infringement
claim.
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The Court finds Sater Design Collection v. Guerra instructive on this matter.
2010 U.S. Dist. LEXIS 164135 (S.D. Tex. April 8, 2010). In Guerra, defendants
brought a counterclaim against the plaintiff for filing a frivolous copyright
infringement lawsuit, in which they sought costs, attorney’s fees, and expenses. The
United States District Court for the Southern District of Texas dismissed the
counterclaim, holding that it was not legally cognizable. Id. at 2. The court found “no
legal basis supporting the existence of an independent counterclaim under federal or
[state] law for bringing an allegedly frivolous lawsuit.” Id. at 4. The Southern District
of Texas also elaborated that “the existence of such a claim is unlikely, since the relief
sought by the Defendants through their counterclaim is available to them either
through a request for costs and attorney’s fees under 17 U.S.C. § 505, or through a
motion for sanctions pursuant to [Federal Rule of Civil Procedure] Rule 11.” Id. at 4–
5.
This Court, too, finds no independent cause of action under federal or
Louisiana law for a “wrongful copyright claim” counterclaim. Because there is no
independent cause of action, and because granting cost and attorney’s fees prior to
the adjudication of the federal copyright claim would be inappropriate, this Court
dismisses the “wrongful copyright claim” counterclaim without prejudice. However,
Plaintiff may still be entitled to these costs and fees under 17 U.S.C. § 505 at a later
stage of the litigation.
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C. LUTPA.
Defendants assert two theories for its contention that Plaintiff violated
LUTPA: (1) Plaintiff filed its lawsuit to deter clients from working with Defendant
HG AutoTech, despite knowing there was no evidence behind its copyright
infringement counterclaim; and (2) Plaintiff colluded with other businesses to harm
Defendant HG AutoTech and prevent it from successfully working with customers.
(Doc. 151 ¶¶ 32–36). Plaintiff argues that a LUTPA claim cannot be premised on the
filing of a lawsuit, and that Defendants have no evidence to support their collusion
theory.
LUTPA prohibits “[u]nfair methods of competition and unfair or deceptive acts
or practices in the conduct of any trade or commerce[.]” La. Stat. Ann. § 51:1405. “To
recover, the plaintiff must prove some element of fraud, misrepresentation, deception
or other unethical conduct.’” IberiaBank v. Broussard, 907 F.3d 826, 839
(5th Cir. 2018) (citation modified). “It has been left to the courts to decide, on a case-
by-case basis, what conduct falls within the statute’s prohibition.”
Cheramie Servs., Inc. v. Shell Deepwater Prod., Inc., 2009-1633 (La. 4/23/10),
35 So. 3d 1053, 1059.
Courts have determined that “the range of prohibited practices under LUTPA
is extremely narrow.” Id. “Therefore, only egregious actions involving elements of
fraud, misrepresentation, deception, or other unethical conduct will be sanctioned
based on LUTPA.” Id. at 1055. In establishing a LUTPA claim, “the plaintiff must
show the alleged conduct offends established public policy and . . . is immoral,
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unethical, oppressive, unscrupulous, or substantially injurious.” Id. at 1059 (citation
modified). However, “LUTPA does not prohibit sound business practices, the exercise
of permissible business judgment, or appropriate free enterprise transactions.” Id. at
1060 (citing Turner v. Purina Mills, Inc., 989 F.2d 1419, 1422 (5th Cir. 1993)).
With respect to Defendants’’ first LUTPA theory—that bringing the lawsuit is
a violation of LUTPA—the Court finds Newton v. Brenan and Ring St., LLC v.
Cypress Connects, LLC instructive on this topic. Newton v. Brenan, 14-423 (La. App.
5 Cir. 12/16/14), 166 So. 3d 285; Ring St., LLC v. Cypress Connects LLC, No. CV 23-
1486, 2023 WL 6121792 (E.D. La. Sept. 19, 2023). In Newton, the plaintiff sued his
former business partner for theft of company assets. Newton, 166 So. 3d 285 at 288.
The defendant counterclaimed that the plaintiff’s filing of the lawsuit was retaliatory
in nature and therefore qualified as a LUTPA violation. Id. The trial court dismissed
the LUTPA counterclaim. Id. The appellate court affirmed the trial court’s dismissal,
reasoning: “while the lawsuit filed by [the plaintiff] was arguably the result of months
of rancorous disputes between the parties, a review of the record reveals that [the
plaintiff] may arguably have some cognizable legal claims against [the defendant].
[The plaintiff’s] effort to exercise his juridical rights in connection with these claims
is not an unfair trade practice under LUTPA. Accordingly, because the underlying
behavior was not an unethical trade practice, the trial court’s dismissal of [the
defendant’s] LUTPA claim was appropriate.” Id. at 290.
Similarly, in Ring St., LLC, the plaintiff claimed that its former employees
stole confidential business information to start a competing business. Ring St., LLC,
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2023 WL 6121792 at 1. The defendant filed a counterclaim accusing the plaintiff of
violating LUTPA by filing the action. Id. at 2 (defendant arguing “that the bad faith
filing of litigation, brought to harass, oppress, or destroy a business competitor, is
actionable under LUTPA”). The court found that the plaintiff had pleaded cognizable
legal claims against the defendant at that stage of the litigation. Id. at 5. Therefore,
plaintiff’s filing of the lawsuit “[did] not rise to the level of an unfair trade practice
under LUTPA,” and the court dismissed defendant’s LUTPA counterclaim. Id. at 5.
Here, Plaintiff “may arguably have some cognizable legal claims” against
Defendants, as multiple claims against Defendants remain following this Court’s
previous Ruling on Defendants’ Motion to Dismiss. Newton, 166 So. 3d 285 at 290;
Doc. 150. To the extent that Defendants’ LUTPA counterclaim is premised on
Plaintiff’s filing of the still-pending lawsuit, this counterclaim is dismissed without
prejudice.
The Court next turns to Defendants’ second LUTPA theory: that Plaintiff
violated LUTPA by “actively conspire[ing] with other businesses to harm HG
AutoTech and prevent it from successfully working with customers.” (Doc. 151 ¶ 34).
Defendants argue that “While HG AutoTech does not have direct evidence of
MaddenCo’s conspiratorial actions and plans to harm HG AutoTech, the
circumstantial evidence showing MaddenCo’s connections to certain individuals, the
harmful actions those individuals took against HG AutoTech, and MaddenCo’s use of
the lawsuit to prevent HG AutoTech from gaining or keeping customers, clearly
establishes unfair competition.” (Doc. 168 at 16–17). As Plaintiff points out, most of
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Defendants’ facts are inadmissible hearsay or unsupported allegations. Both of these
are insufficient to support a counterclaim at the summary judgment stage. See
Roberson v. Alltel Info. Servs., 373 F.3d 647, 654 (5th Cir. 2004) (“[C]onclusory
allegations, speculation, and unsubstantiated assertions are inadequate to satisfy the
nonmovant’s burden in a motion for summary judgment.”); Floyd v.
Chilly’s L.L.C. of Ala., No. CV 15-00544-BAJ-RLB, 2017 WL 1455024, at *4
(M.D. La. Apr. 21, 2017) (“As to [p]laintiff’s hearsay objection, plaintiff is correct that
when the affidavit contains hearsay, such hearsay from the affidavit is
inadmissible.”); Hensley v. Harrell, No. CV 21-517-SDD-SDJ, 2024 WL 3513869, at
*1 (M.D. La. July 22, 2024) (“[T]he portions of the affidavit that speak to the issues
of this case are hearsay and cannot be considered” on summary judgment.); Warfield
v. Byron, 436 F.3d 551, 559 (5th Cir. 2006) (“[T]he hearsay rule applies with equal
force in the context of a summary judgment.”). The exception is MaddenCo’s
communications with Tireweb, which come in the form of an email exhibit. (Doc. 168-
7; Doc. 168-10). However, these sets of emails only indicate that Tireweb issued a
cease-and-desist letter against HG AutoTech for using its logo without permission;
and that MaddenCo informed Tireweb it was proceeding with litigation. These email
exchanges do not indicate the kind of egregious wrongdoing sufficient to meet the
high bar set by LUTPA.
Accordingly, the Court finds that Defendants have not produced sufficient
summary judgment evidence to support their LUTPA counterclaim. Therefore,
Defendants’ LUTPA counterclaim is dismissed without prejudice. However, this
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ruling does not preclude Defendants’ ability to bring a LUTPA claim against Plaintiff
at a later time should evidence developed at trial support such a claim.
D. Defamation.
Defendants next claim that Plaintiff made defamatory statements about them
with knowledge of the falsity of the statements, by: (1) publishing those statements
in its lawsuit and (2) boasting about the lawsuit to Defendant HG AutoTech’s clients
and potential clients.
There are five elements to a defamation claim under Louisiana law. Those are:
“(1) defamatory words; (2) publication to a person other than the one defamed; (3)
falsity; (4) malice; and (5) resulting injury.” Hoffman v. Bailey, 257 F. Supp. 3d 801,
819 (E.D. La. 2017) (quoting Bell v. Rogers, 29,757 (La. App. 2 Cir. 8/20/97),
698 So.2d 749, 753). Plaintiff argues that the Court must resolve Plaintiff’s copyright
infringement claim before Defendants can bring this counterclaim. That is, the Court
must determine whether Plaintiff’s copyright infringement statements are false (by
resolving Plaintiff’s copyright infringement claim) before it can turn to Defendants’
defamation counterclaim. The Court agrees with Plaintiff.
With respect to Defendants’ first theory of defamation—that Plaintiff’s mere
act of publishing allegations against them in its lawsuit is defamatory—established
law makes clear that such theory is premature. “For defamation claims arising out of
allegations made in judicial proceedings and against a party to those proceedings,
Louisiana law states that the defamation action cannot be brought until those
proceedings are terminated.” Ortiguerra v. Grand Isle Shipyard, LLC, No. CV 22-309,
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2023 WL 346089, at 3 (E.D. La. Jan. 20, 2023) (citing 5-Star Premium Finance, Inc.
v. Wood, No. 99-3705, 2000 WL 1678010, at 3 (E.D. La. 2000)). “A party must have
the opportunity to prove the truth or falsity of their allegations before an opposing
party can counterclaim for defamation and reputational harm.” Id. (citing 5-Star
Premium Finance, Inc., 2000 WL 1678010, at 1) (cleaned up). “Providing this
opportunity allows . . . for the determination of the outcome of the original
proceedings, which may bear on a party’s ability to recover for defamation.” Id.
“Defendants must wait until the conclusion of the instant litigation, which will most
likely determine the truth or falsity of the statements, before bringing a claim for
defamation or defamation per se based on statements Plaintiffs made in their
pleadings. After this Court resolves this phase of litigation, Defendants may choose
whether or not to pursue their defamation claims.” Id. Thus, while the Court makes
no judgment as to the ultimate merits of Defendants’ defamation counterclaim, this
Court must resolve Plaintiff’s copyright infringement claim before adjudging
Defendants’ defamation counterclaim.
With respect to Defendants’ second theory of defamation—that Plaintiff’s act
of discussing the lawsuit (and/or the allegations contained in the lawsuit) with
Defendants’ clients and potential clients is defamatory—this Court similarly finds
little merit. Defendants first allege that MaddenCo discussed the lawsuit with four
of Defendants’ clients or potential clients (Tireweb, Southern Tire Mart, Champion
Tire, and Beacon). (See “Response SOAF” ¶¶ 26, 42, 50, 54). Most of these statements
are inadmissible hearsay, which, as Defendants are aware, are not competent
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summary judgment evidence. The exception is MaddenCo’s communications with
Tireweb, which come in the form of an email exhibit. However, the communications
in the email do not support a defamation counterclaim. MaddenCo merely informs
Tireweb that MaddenCo was planning to file a lawsuit against Defendants, which is
a true statement and cannot satisfy the defamation falsity element. (Doc. 168-7 at 1).
Therefore, Defendants have not provided evidence sufficient to satisfy their second
defamation theory at this stage of the litigation.
Accordingly, Defendants’ defamation counterclaim is dismissed without
prejudice.
E. Abuse of Process.
Finally, Defendants bring an abuse of process claim against Plaintiff.
Defendants argue that Plaintiff filed the lawsuit and shared the lawsuit’s allegations
with Defendant HG AutoTech’s clients and potential clients in order to damage
Defendants’ professional reputation, despite knowing that its copyright infringement
allegations were false. Plaintiff argues that the Court should only address the abuse
of process counterclaim once its copyright infringement claim is resolved.
“An abuse of process occurs when the actor employs [the] legal process in a
manner technically correct, but for a wrongful and malicious purpose to obtain an
unjustifiable end or an object which is was not the purpose of the particular process
employed to effect.” Delcambre v. Mancuso, 268 So. 3d 325, 331 (La. App. 3 Cir.
4/10/19) (cleaned up). “An abuse of process claim has two essential elements: (1) the
existence of an ulterior purpose and (2) a willful act in the use of the process not
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proper in the regular prosecution of the proceeding.” Panepinto v. Panepinto, 23-297
(La. App. 5 Cir. 3/20/24), 384 So. 3d 1089, 1094. Although in some states an abuse of
process claim cannot be made where the alleged abuse is the mere filing of a lawsuit,
see, e.g., Moon v. Condere Corp., 690 So.2d 1191, 1197 (Miss. 1997), in Louisiana,
courts employ a more fact-dependent analysis. See ENTU Auto Servs. Inc. v.
PickMyRide.Biz LLC, No. CIV. 6:15-1183, 2015 WL 6692144, at 5 (W.D. La.
Oct. 5, 2015), report and recommendation adopted, No. CIV. 6:15-1183, 2015 WL
6736845 (W.D. La. Nov. 3, 2015) (declining to dismiss abuse of process claim premised
on the filing of a lawsuit in the wrong venue to raise costs and compete with business);
Ratcliff v. Boydell, 93-0362 (La. App. 4 Cir. 4/3/96), 674 So. 2d 272, 280–81, as
amended on reh’g (May 31, 1996) (affirming judgment for abuse of process arising
from the filing of multiple malicious lawsuits); Palazzo v. Berry, 2011 U.S. Dist.
LEXIS 121731, at *4 (an abuse of process count erclaim “will not be ripe until the
[copyright infringement] claims asserted in the complaint are resolved”). Defendants
argue that their facts prove that MaddenCo filed the lawsuit to dissuade potential
customers from doing business with HG AutoTech and attempt to convince current
customers not to do business with HG AutoTech. However, as noted, these facts are
inadmissible hearsay or purely speculative, and thus not sufficient to support the
abuse of process counterclaim at this stage of the litigation. Courts have not “allowed
a party’s otherwise unsupported, conclusional testimony to create a factual dispute
sufficient to defeat a motion for summary judgment.” Hathcock v.
Acme Truck Lines, Inc., 262 F.3d 522, 526–27 (5th Cir. 2001). Therefore, the Court
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dismisses Defendants’ abuse of process counterclaim without prejudice.
IV. CONCLUSION
Accordingly,
IT IS ORDERED that Plaintiff's Motion For Partial Summary Judgment
(Doc. 165) is GRANTED.
IT IS FURTHER ORDERED that Defendants’ “wrongful copyright claim”
counterclaim, Louisiana Unfair Trade Practices Act counterclaim, defamation
counterclaim, and abuse of process counterclaim are DISMISSED WITHOUT
PREJUDICE.
Baton Rouge, Louisiana, this 11th day of August, 2026
{ DGE BRIAN
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
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