govinfo:USCOURTS-moed-4_19-cv-00011-0

UNITED STATES DISTRICT COURT 
 EASTERN DISTRICT OF MISSOURI 
 EASTERN DIVISION 
  
LADS NETWORK SOLUTIONS, INC., ) 
 ) 
Plaintiff, ) 
 ) 
v. )  No. 4:19-cv-00011-AGF 
 ) 
AGILIS SYSTEMS, LLC, et al.,  ) 
 ) 
Defendants. ) 
 
 MEMORANDUM & ORDER 
 This matter comes before the Court on the motion of Defendants Agilis Systems, 
LLC (“Agilis LLC”) and Gilead Group, LLC (“Gilead”) for leave to file a third party 
complaint.  ECF No. 27.  Plaintiff LADS Network Solutions, Inc. (“LADS”) opposes the 
motion.  ECF No. 28, 37.  For the reasons set forth below, Defendants’ motion will be 
denied. 
BACKGROUND 
 The pleadings filed in this copyright infringement lawsuit allege the following 
facts.  LADS is a provider of dispatching software, wireless data communications, and 
mobile GPS-based software solutions, and it is the owner of a registered copyright 
concerning logistic software (“Copyrighted Software”).  LADS alleges in its complaint 
that in 2004, it entered into a bilateral intellectual property transfer and license agreement 
with Siliga Systems, Inc. (“Siliga”)1 for use of the Copyrighted Software.  LADS alleges 
                                                 
1  Siliga was formed in 2004.  ECF No. 33-1 at ¶ 55.  It was formerly known as 
Agilis Systems, Inc., which appears to be a separate entity from Defendant Agilis LLC. 
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that it entered into subsequent licensing agreements with Siliga for Siliga’s use of the 
Copyrighted Software in 2006 and 2007. 
 LADS alleges that in October 2007, without the permission or consent of LADS, 
Siliga assigned its rights under the license agreement to Agilis LLC.  Thereafter, Agilis 
LLC used the Logistic Software without license or authorization.  Then, LADS alleges 
that in July 2017, Gilead created Defendant Archlogix, LLC (“Archlogix”), which began 
using the Logistic Software without license or authorization.  Plaintiff asserts copyright 
infringement (Count I) against Agilis and Archlogix and seeks to pierce the corporate veil 
of all Defendants (Count II).2   
On February 5, 2019, Defendants filed a counterclaim for breach of contract, 
asserting that LADS is barred from asserting copyright infringement claims against them 
under the terms of a July 9, 2014 Settlement Agreement, which Defendants allege was 
signed by Daniel Huber (“Huber”), the “President, Chief Executive Officer, and majority 
owner of LADS.”3  ECF No. 16 at ¶ 6.  That Settlement Agreement was signed in the 
context of a state court action filed by Huber for his wrongful termination for cause from 
Agilis, Inc., where he had been serving as Chief Executive Officer.
4  The terms of the 
Settlement Agreement include a provision waiving, on behalf of LADS, all claims against 
                                                 
2  The factual allegations underlying Count II are complex and reveal the degree to 
which Defendants are intertwined.  However, because they are not determinative of the 
issues presently before the Court, the Court will not detail those allegations here. 
 
3  LADS, in its opposition brief, states that Huber “is not the sole owner, but is 
instead a minority shareholder” of LADS.  ECF No. 33 at 4 n. 2. 
 
4  From the pleadings, it appears to the Court that prior to his termination, Huber 
held simultaneously held positions with LADS and Agilis, Inc. 
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Agilis LLC and Gilead, including intellectual property claims.  Defendants argue that 
LADS is violating the terms of that Settlement Agreement by filing this copyright 
infringement lawsuit.  Specifically, Defendants allege that “The Settlement Agreement is 
a valid and enforceable contract” and that pursuant to the terms of that agreement, LADS 
“waived, released, and renounced any and all claims, including any purported Intellectual 
Property claims and/or royalty claims.”  Id. at ¶¶ 31-32.  Defendants also assert a breach 
of contract claim related to the November 1, 2007 license agreement entered into by the 
parties, as well as an abuse of process claim. 
 On February 21, 2019, LADS filed its answer and affirmative defenses to 
Defendants’ counterclaim.  ECF No. 21.  Relevant to this motion for leave to file a third 
amended complaint, LADS maintains that it was not a party to the Settlement Agreement, 
and thus cannot be held to its terms.  See, e.g., ECF No. 21 at ¶ 18. 
 Now, Defendants seek leave to file a third party complaint against Huber for 
breach of contract, breach of implied covenant of good faith and fair dealing, and 
detrimental reliance, based on his execution of the Settlement Agreement and affirmative 
representations that he was the agent of LADS and that the Settlement Agreement would 
be binding on LADS.  ECF No. 27-1.  Defendants contend that if the Court determines 
that LADS is not bound by the Settlement Agreement, Huber should be held liable for his 
contractual promises. 
 LADS opposes Defendants’ request to file a third party complaint, arguing that 
Defendants’ state law claims concerning the Settlement Agreement are not part of the 
same case or controversy as LADS’s infringement claims and assert issues of state law.  
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Further, LADS maintains that a Missouri state court has already determined that LADS is 
not bound by the Settlement Agreement.  Specifically, in another unrelated state court 
lawsuit filed by LADS against Siliga and Agilis Systems, Inc., the state court held: 
This Court finds that LADS was not a Party in the Settlement Agreement, 
LADS did not execute the release, nor was LADS given any consideration 
under the release.  Therefore, LADS did not release any claims and has a 
right to execute on the Warrant issues to LADS. 
 
ECF No. 33-6.   
LADS also argues that the third party complaint raises a novel and complex issue 
of state law: whether an individual can be sued for executing a settlement agreement that 
binds a corporation that is not a party to the agreement or the underlying lawsuit.  Lastly, 
LADS argues that principles of res judicata based on the state court’s decision may 
preclude the claims asserted by Defendants, and thus requests the Court to decline to 
exercise supplemental jurisdiction under 28 U.S.C. § 1367. 
Defendants reply that this copyright infringement litigation falls squarely within 
the terms of the Settlement Agreement executed by Huber.  Thus, if Huber executed the 
Settlement Agreement without authorization by LADS, then “he should be held 
accountable for those promises and representations as part of this lawsuit.”  ECF No. 34 
at ¶ 12.  Defendants contend that, as a result, the terms of the Settlement Agreement and 
Huber’s representations thereof are central to Defendants’ defense of this case.   
DISCUSSION 
“A defending party may, as third-party plaintiff, serve a summons and complaint 
on a nonparty who is or may be liable to it for all or part of the claim against it.”  Fed. R. 
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Civ. P. 14.  “The court should freely give leave when justice so requires.”  Fed. R. Civ. P. 
15(a)(2).  However, “Rule 14 does not allow a third-party complaint to be based on a 
defendant’s independent cause of action against a third-party defendant.”  Constr. Indus. 
Laborers Pension Fund v. X-L Contracting, Inc., No. 4:13-CV-1462 NAB, 2014 WL 
3805498, at *3 (E.D. Mo. Aug. 1, 2014).  “A third-party complaint must be found on 
a third-party’s actual or potential liability to the defendant for all or part of the plaintiff’s 
claim against the defendant.”  Id. 
Defendants assert that “Pursuant to 28 U.S.C. § 1367 this Court has supplemental 
jurisdiction over the claims asserted in the Third Party Complaint because they are so 
related to the claims alleged within the original action that they form part of the same 
case or controversy.”  ECF No. 27-1 at ¶ 4.  28 U.S.C. § 1367 provides, in relevant part, 
that 
in any civil action of which the district courts have original jurisdiction, 
the district courts shall have supplemental jurisdiction over all other claims 
that are so related to claims in the action within such original jurisdiction 
that they form part of the same case or controversy under Article III of the 
United States Constitution. Such supplemental jurisdiction shall include 
claims that involve the joinder or intervention of additional parties. 
 
28 U.S.C. § 1367(a).  “Claims within the action are part of the same case or controversy 
if they ‘derive from a common nucleus of operative fact.’”  Myers v. Richland Cnty., 429 
F.3d 740, 746 (8th Cir. 2005) (quoting United Mine Workers v. Gibbs, 383 U.S. 715, 725 
(1966)).  “A plaintiff’s claims derive from a common nucleus of operative fact if the 
‘claims are such that he would ordinarily be expected to try them all in one judicial 
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proceeding.’”  OnePoint Solutions, LLC v. Borchert, 486 F.3d 342, 350 (8th Cir. 2007) 
(quoting Gibbs, 383 U.S. at 725).   
Here, there is little commonality of facts between the complaint and the third party 
complaint.  Count I of the complaint asserts facts solely related to LADS’s copyrighted 
software and various license agreements entered between the parties.  The third party 
complaint does not allege that Huber is liable for some or all of the alleged copyright 
damages.  Rather, Defendants assert claims against Huber for his alleged breach of a 
separate Settlement Agreement and misrepresentations made to Defendants regarding his 
capacity to bind LADS in waiving all claims, including copyright infringement claims, 
against Defendants, pursuant to the Settlement Agreement.  Thus, the third party 
complaint is based on Defendants’ contingent and “independent cause of action” against 
Huber. 
Moreover, although there is some commonality of facts between the third party 
complaint and the counterclaim, the issues are very different.  The counterclaim centers 
on the terms of the Settlement Agreement and its enforceability against LADS, whereas 
the third party complaint centers on the fraudulent promises and representations made by 
Huber to Defendants, the reasonableness of Defendants’ reliance on those 
representations, and whether Huber directed LADS to file the instant copyright 
infringement action.  These allegations, which sound in fraud, are quite different from the 
allegations contained in the counterclaim.  Accordingly, the third party complaint does 
not form part of the same case or controversy as the original complaint and raises issues 
distinct from the counterclaim. 
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 Moreover, even if the Court were to determine that the third party complaint forms 
part of the same case or controversy as the complaint, the Court may decline to exercise 
its supplemental jurisdiction over the third party action in one of four circumstances: (1) 
if the claim involves complex issues of state law; (2) state law claims predominate over 
federal claims; (3) all federal claims have been dismissed; or, (4) under exceptional 
circumstances, a compelling reason exists to decline supplemental jurisdiction.  See 28 
U.S.C. § 1367(c); Schmucker v. Precision Irrigation, Inc., No. 4:15-CV-00567-JCH, 
2015 WL 6438351, at *2 (E.D. Mo. Oct. 22, 2015) (citing Innovative Home Health Care, 
Inc. v. P.P.–O.T. Assocs. of the Black Hills, 141 F.3d 1284, 1287 (8th Cir. 1998)). 
“[I]f it appears that the state issues substantially predominate, whether in terms of 
proof, of the scope of the issues raised, or of the comprehensiveness of the remedy 
sought, the state claims may be dismissed without prejudice and left for resolution to 
state tribunals.”  JPMorgan Chase Bank, N.A. v. Gorman & Gorman Residential, Mortg. 
Servs., Inc., No. 4:08CV0489 TCM, 2008 WL 11391362, at *2 (E.D. Mo. Sept. 9, 2008) 
(citing Gibbs, 383 U.S. at 726-27); see also City of Chicago v. International College of 
Surgeons, 522 U.S. 156, 173 (1997) (holding that a district court may decline to exercise 
its supplemental jurisdiction over state law claims by considering a “host” of factors, 
“including the circumstances of the particular case, the nature of the state law claims, and 
the character of the governing state law, and the relationship between the state and 
federal claims[.]”).   
In the instant case, the complaint arises under federal law, having its genesis in a 
series of license agreements regarding Defendants’ use of LADS’s copyrighted software 
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and the resulting breach of those agreements.  While the counterclaim arises under state 
law, it asserts two fairly straightforward breach of contract claims against LADS under 
the terms of one of those license agreements and the Settlement Agreement.   Huber’s 
legal authority to bind LADS under the Settlement Agreement will be relevant to 
Defendants’ breach of contract counterclaim.  The third party complaint, on the other 
hand, contains allegations of breach of the implied covenant of good faith and fair 
dealing and detrimental reliance, which are based on Huber’s representations to 
Defendants, as well as Huber’s intent and mental state, during settlement negotiations in 
an unrelated state lawsuit, to which LADS was not a party.   
Upon careful consideration, the Court concludes that the state law issues raised in 
the third party complaint are complex and would substantially predominate this litigation, 
since the claims asserted—and the evidence required to prove those claims—are 
considerably different from those raised in the complaint and counterclaim.  Moreover, 
Defendants have not asserted that they would be unable to pursue their claims against 
Huber in state court.   
The Court further concludes that allowing the third party complaint to be joined in 
this litigation would vastly expand the scope of the issues raised and will require more of 
the Court’s time and attention.  See Gorman & Gorman Residential, Mortg. Servs., Inc., 
2008 WL 11391362, at *3 (holding that a third party action alleging the real estate agent 
intentionally created false financial records for those seeking loans required a significant 
quantity of evidence that would not be relevant to the bank’s breach of contract suit and 
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would thus too greatly expand the scope of the litigation).  Accordingly, the Court will 
decline to exercise supplemental jurisdiction over the third party complaint.   
CONCLUSION 
Accordingly,  
IT IS HEREBY ORDERED that Defendants Agilis Systems, LLC and Gilead 
Group, LLC’s motion for leave to file a third party complaint is DENIED.  ECF No. 
27.   
 Dated this 30th day of July, 2019. 
  
AUDREY G. FLEISSIG  
UNITED STATES DISTRICT JUDGE 
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