DLC Dermacare LLC v. Castillo et al

Filing 209

ORDER that Fox Defendants' motion to dismiss Doc. 199 is denied. Signed by Judge David G Campbell on 11/18/2011.(KMG)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 DLC Dermacare, LLC, Plaintiff, 10 11 ORDER vs. 12 No. CV10-00333-PHX-DGC Sixta Castillo, RN, et al., Defendants. 13 14 Defendants Fox Development Company, James E. Fox, and Shannon C. Fox (the 15 “Fox Defendants”) move to dismiss Plaintiff’s action against them, with prejudice, 16 pursuant to Fed. R. Civ. P. 12(b)(6). Doc. 199. The motion has been fully briefed. 17 Docs. 199, 202, 203. Fox Defendants’ request for oral argument is denied because it 18 would not aid the Court’s decision. Fed. R. Civ. P. 78(b). For the reasons below, the 19 Court will deny the motion to dismiss. 20 I. Background. 21 Plaintiff DLC DermaCare, LLC filed an initial complaint on February 17, 2010. 22 Doc. 1. On July 13, 2011, Plaintiff filed its first amended complaint alleging breach of 23 contract, breach of the implied covenant of good faith and fair dealing, misappropriation 24 of trade secrets, trademark and service mark infringement, unfair competition, tortious 25 interference with contract, civil conspiracy, and defamation. Doc. 184. These allegations 26 arose from franchise agreements between Plaintiff and Defendants. Doc. 1, at 2. The 27 franchise agreements contain a Limitation of Action clause which provides: 28 1 The parties further agree that no cause of action arising out of or under this agreement may be maintained by either party against the other unless brought before the expiration of two years after the act, transaction or occurrence upon which such action is based or the expiration of one year 1 (sic) after the complaining party becomes aware of facts or circumstances reasonably indicating that such party may have a claim against the other party hereunder, whichever occurs sooner, and that any action not brought within this period shall be barred as a claim, counterclaim, defense or setoff. 2 3 4 5 6 7 Doc. 199, at 4. 8 II. Legal Standard. 9 When analyzing a motion to dismiss for failure to state a claim to relief under 10 Fed. R. Civ. P. 12(b)(6), the Court must accept all factual allegations of the complaint as 11 true and draw all reasonable inferences in favor of the nonmoving party. TwoRivers v. 12 Lewis, 174 F.3d 987, 991 (9th Cir. 1999). “[A] complaint cannot be dismissed unless it 13 appears beyond a reasonable doubt that the plaintiff can prove no set of facts that would 14 establish the timeliness of the claim.” 15 68 F.3d 1204, 1207 (9th Cir. 1995) (citing Conley v. Gibson, 335 U.S. 41, 78 (1957)). At 16 this stage of the litigation, the Court must resolve any ambiguities in the considered 17 documents in the plaintiff’s favor. See Int’l Audiotext Network, Inc. v. AT&T Co., 18 62 F.3d 69, 72 (2d Cir. 1995). 19 III. 20 Supermail Cargo, Inc. v. United States, Discussion. Fox Defendants assert that Plaintiff’s claims are time barred and that Plaintiff has 21 therefore failed to state a claim to relief. 22 franchise agreement, Plaintiff must file a claim within one year of becoming aware of 23 facts or circumstances reasonably indicating that the claim exists. See Doc. 199, at 4-5. 24 Fox Defendants cite email correspondence from Carl Mudd, Plaintiff’s President and 25 Chief Executive Officer, to Fox Defendants, dated January 12, 2008. Doc. 199-1. The 26 email appears to give notice of termination of the franchise agreement. Fox Defendants 27 argue that this email reveals that Plaintiff was aware of the facts or circumstances 28 -2- Doc. 199, at 2. Pursuant to the parties’ 1 reasonably indicating that it might have a claim against Fox Defendants prior to 2 January 12, 2008, and that Plaintiff’s complaint is time barred because it was filed on 3 February 17, 2010, well past the one-year time limit. Doc. 199, at 5. 4 Plaintiff disputes the authenticity of the email and suggests that it has been altered. 5 Doc. 202, at 5. Plaintiff also distinguishes pre-termination breach of contract allegations 6 addressed in the email from post-termination claims. Plaintiff argues that the email 7 containing the termination notice does not indicate that it was aware at that time of Fox 8 Defendants’ post-termination conduct giving rise to claims for misappropriation of trade 9 secrets, trademark infringement, tortious interference with contract, and civil conspiracy. 10 Doc. 202, at 3. Fox Defendants agree that the email did not trigger the one-year time 11 limit with respect to the post-termination claims, and ask the Court to dismiss all of 12 Plaintiff’s claims arising from alleged pre-termination conduct. Doc. 203, at 3. 13 The timing suggested in the email presented by Fox Defendants contradicts 14 Plaintiff’s factual allegations. In both the initial complaint and the first amended 15 complaint, Plaintiff claims that it terminated the franchise agreements in March 2009. 16 Docs. 1, at 17; 184, at 17 (“On or about March 20, 2009, DermaCare’s bankruptcy 17 attorney sent notices to some Franchisees, that the Clinic Franchise Agreements would 18 terminate 10 days from the date of the notice . . . . Sometime in March 2009, Dermacare 19 terminated the Clinic Franchise Agreements with the other Franchisees.”). At this stage 20 of the proceedings, the Court must accept the factual allegations in Plaintiff’s complaint 21 as true. Given that the parties dispute the authenticity of the email and that the email 22 contradicts Plaintiff’s factual allegations, the Court must resolve the ambiguity in favor 23 of Plaintiff. It does not appear beyond a reasonable doubt that Plaintiff can prove no set 24 of facts that would establish the timeliness of its claims. 25 IT IS ORDERED that Fox Defendants’ motion to dismiss (Doc. 199) is denied. 26 Dated this 18th day of November, 2011. 27 28 -3-

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