Allen v. Quest Online LLC et al

Filing 105

ORDER - As to the Motion to Dismiss filed by Smart, QOL, and 3000 AD (Doc. 8), IT IS HEREBY ORDERED that: (1) the motion is DENIED as to Counts 1, 2, and 3. Count 3 is denied only with respect to Defendants Smart and QOL; it is granted with respec t to 3000AD. (2) the motion is GRANTED as to Counts 6, 10, 11 and 12. (3) the motion is GRANTED with leave to amend as to Counts 4, 5, 7, 8 and 9. Plaintiff shall have 30 days from the date of this Order to file an amended complaint with respect t o Counts 5 and 7. If an amended complaint is not filed by October 21, 2011, Counts 4, 5, 7, 8 and 9 will be terminated consistent with this Order. IT IS FURTHER ORDERED that the Motion to Dismiss filed by Defendants Gregory and Jane Doe Wexler, Wi llard and Jane Doe Olauson, and Kelly and Janis Doe Olauson (Doc. 30) is GRANTED. The Clerk of the Court is directed to terminate these Defendants from this action. IT IS FURTHER ORDERED that Plaintiff's Motion to Partial Summary Judgment (Do c. 54) is DENIED as premature in part and moot in part and Defendant Smarts Rule 56 (d) Motion (Doc. 78) is granted. IT IS FURTHER ORDERED that Defendants Larry ORourke, III and Jane Doe O'Rourke, Rick Hupp, Greg Klipstein and Jane Doe Klipst ein, Bob Carlson, Jim Haney and Jane Doe Haney, Eileen O'Rourke, Larry O'Rourke, Jr. and Janis Doe O'Rourke will be dismissed 14 days from the date of this Order if Plaintiff fails to show good cause before that date for his failur e to serve the Summons and Complaint. IT IS FURTHER ORDERED directing the Clerk of the Court to terminate Defendants Larry O'Rourke, III and Jane Doe O'Rourke, Rick Hupp, Greg Klipstein and Jane Doe Klipstein, Bob Carlson, Jim Haney and Jane Doe Haney, Eileen ORourke, Larry O'Rourke, Jr. and Janis Doe O'Rourke, without further notice, if Plaintiff fails to respond to this Order within the time stated. IT IS FURTHER ORDERED that Plaintiffs other pending motions, includin g Motion to Strike Response and Motion to Seal (Doc. 76 ) and Motion for Order Directing the Preservation of Documents and Things (Doc. 81) are DENIED. IT IS FURTHER ORDERED that Plaintiff's Motion to Rule upon Outstanding Motion for Prelimin ary Injunction originally filed in Superior Court (Doc. 80) is DENIED as moot. Plaintiff's Motion for Preliminary Injunction, originally filed in Maricopa County Superior Court, is denied. IT IS FURTHER ORDERED that Defendants' Response to, or in the alternative, Motion to Strike Plaintiffs supplemental memorandum and request for expedited ruling on his preliminary injunction motion (Doc. 101) is GRANTED. The Clerk of the Court is directed to strike Doc. 89. (See document for further details). Signed by Judge G Murray Snow on 9/22/11.(LAD)

1

WO

2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7

FOR THE DISTRICT OF ARIZONA

8
9
10
11
12
13
14
15
16
17
18
19
20
21

David Allen, a married man,

)
)
Plaintiff,
)
)
vs.
)
)
Quest Online, LLC, an Arizona limited)
liability company; Greg Wexler and Jane)
Doe Wexler, husband and wife; Larry)
O’Rourke, III and Jane Doe O’Rourke,)
husband and wife; Rick Hupp, an)
individual; Greg Klipstein and Jane Doe)
Klipstein; Bob Carlson, an individual; Jim)
Haney and Jane Doe Haney, husband and)
wife; Willard Olauson and Jane Doe)
Olauson, husband and wife; Kelly Olauson)
and Janis Doe Olauson, husband and wife;)
Eileen O’Rourke, an individual; Larry)
O’Rourke, Jr. and Janis Doe O’Rourke,)
husband and wife; 3000AD, Inc., a Florida)
corporation; Derek Smart and Jane Doe)
Smart, husband and wife,
)
)
Defendants.
)
)

No. CV-11-138-PHX-GMS
ORDER

22
23

Pending before the Court are the following motions: (1) a Motion to Dismiss filed by

24

Defendants Quest Online, LLC (“QOL”),1 3000AD, Inc. (“3000AD”), and Derek and Jane

25
26
27
28

1

Because this is a diversity case and Quest Online is a defendant domiciled within the
State of Arizona, it removed this case without a basis for doing so. See 28 U.S.C. § 1441(b)
(2007). Nevertheless, to the extent that Plaintiff might have objected to removal, he has
failed to timely do so, and has thus waived any such objection. Lively v. Wild Oats Markets,

1

Doe Smart (“Smart”) (Doc. 8); (2) a Motion to Dismiss filed by Defendants Gregory and

2

Jane Doe Wexler (“Wexler”), Willard and Jane Doe Olauson (“Willard Olauson”), and Kelly

3

and Janis Doe Olauson (“Kelly Olauson”) (Doc. 30); (3) Motion for Preliminary Injunction

4

filed by Plaintiff David Allen (Doc. 1, Ex. 7); and (4) a Motion for Partial Summary

5

Judgment filed by Plaintiff (Doc. 54). For the following reasons, the Court grants in part and

6

denies in part the Motion to Dismiss filed by Defendants Quest, 3000AD, and Smart; grants

7

the Motion to Dismiss filed by Defendants Wexler, Willard Olauson, and Kelly Olauson; and

8

denies the Motion for Preliminary Injunction and Motion for Partial Summary Judgment filed

9

by Plaintiff.
BACKGROUND

10
11

Plaintiff David Allen alleges that in 2006, he and Defendant Wexler founded QOL,

12

a limited liability company in the business of multi-player online games. Plaintiff ran QOL

13

for more than four years, acting as a Member, Manager, President and CEO. During his

14

tenure at QOL, Plaintiff created a large multi-player online game entitled Alganon.

15

On or around March 1, 2010, Plaintiff alleges that he was forcibly removed by QOL

16

Member Defendants and replaced by Defendant Derek Smart. On or around June 4, 2010,

17

Smart was appointed as the new Manager by the QOL Member Defendants.2 On March 25,

18

2010, Plaintiff filed suit against the Defendants in Maricopa County Superior Court. The suit

19

was subsequently settled out of court on September 27, 2010 through the execution of a

20

Limited Liability Company Membership Interest Purchase Agreement, which also contained

21

a Release Agreement. (Doc. 70). The parties jointly moved to dismiss the action with

22

prejudice.

23

Plaintiff’s Complaint includes a total of twelve counts against Defendants, including:

24
25
26

Inc., 456 F.3d 933, 939 (9th Cir. 2006).
2

27
28

Defendants Wexler, Larry O’Rourke III, Hupp, Carlson, Haney, Willard Olauson,
Kelly Olauson, Eileen O’Rourke, and Larry O’Rourke (collectively “QOL Member
Defendants”) all have an equity share in QOL and are considered the QOL Investors.
-2-

1

(1) breach of contract; (2) breach of good faith and fair dealing; (3) defamation, libel, and

2

slander; (4) blacklisting; (5) trade libel (injurious falsehood); (6) breach of implied duty; (7)

3

civil conspiracy; (8) negligence; (9) intentional infliction of emotional distress; (10)

4

compensatory damages; (11) consequential damages; (12) punitive damages. The first

5

Motion to Dismiss, filed on behalf of Defendants Quest, 3000AD, and Smart (Doc. 8), moves

6

the Court to dismiss all counts for failure to state a claim pursuant to Rule 12(b)(6). The

7

second Motion to Dismiss, filed on behalf of Defendants Wexler, Willard Olauson, and Kelly

8

Olauson (Doc. 30), joins the first Motion, and separately moves for dismissal on the bases

9

of insufficient service and lack of personal jurisdiction. Before the case was removed to this

10

Court, Plaintiff filed a Motion for Preliminary Injunction (Doc. 1, Ex. 7). He provided notice

11

to this Court of that motion on April 22, 2011. (Doc. 36). Finally, Plaintiff filed a Motion for

12

Partial Summary Judgment (Doc. 54) against Defendant Smart on the claims of breach of

13

contract, breach of good faith and fair dealing, defamation, trade libel (injurious falsehood),

14

and negligence.

15
16

DISCUSSION
I.

Motion to Dismiss filed by Defendants Quest, 3000AD, and Smart

17

A.

18

To survive dismissal for failure to state a claim pursuant to Federal Rule of Civil

19

Procedure 12(b)(6), a complaint must contain more than “labels and conclusions” or a

20

“formulaic recitation of the elements of a cause of action”; it must contain factual allegations

21

sufficient to “raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly,

22

550 U.S. 544, 555 (2007). While “a complaint need not contain detailed factual allegations

23

. . . it must plead ‘enough facts to state a claim to relief that is plausible on its face.’”

24

Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 2008) (quoting Twombly,

25

550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content

26

that allows the court to draw the reasonable inference that the defendant is liable for the

27

misconduct alleged.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550

28

U.S. at 556). The plausibility standard “asks for more than a sheer possibility that a

Legal Standard

-3-

1

defendant has acted unlawfully. Where a complaint pleads facts that are ‘merely consistent

2

with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of

3

entitlement to relief.’” Id. (internal citations omitted) (quoting Twombly, 550 U.S. at 557).

4

When analyzing a complaint for failure to state a claim under Rule 12(b)(6), “[a]ll

5

allegations of material fact are taken as true and construed in the light most favorable to the

6

nonmoving party.” Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). However, legal

7

conclusions couched as factual allegations are not given a presumption of truthfulness, and

8

“conclusory allegations of law and unwarranted inferences are not sufficient to defeat a

9

motion to dismiss.” Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998).

10

The Court must construe the Complaint liberally since Plaintiff is proceeding pro se.

11

See Hughes v. Rowe, 449 U.S. 5, 9 (1980) (“It is settled law that the allegations of [a pro se

12

plaintiff’s] complaint, ‘however inartfully pleaded’ are held ‘to less stringent standards than

13

formal pleadings drafted by lawyers.’”) (citations omitted); Eldridge v. Block, 832 F.2d 1132,

14

1137 (9th Cir. 1987) (“The Supreme Court has instructed federal courts to liberally construe

15

the ‘inartful pleading’ of pro se litigants.”) (citation omitted); Ashelman v. Pope, 793 F.2d

16

1072, 1078 (9th Cir. 1986) (“[W]e hold [plaintiff’s] pro se pleadings to a less stringent

17

standard than formal pleadings prepared by lawyers.”). Nevertheless, even pro se litigants

18

are held to the requirements of the federal and local rules, and a failure to appropriately

19

follow those rules may result in sanctions up to dismissal. Ghazali v. Moran, 46 F.3d 52, 54

20

(9th Cir. 1995).3

21

B.

Count 1: Breach of Contract

22
23

Analysis

Plaintiff alleges that Defendant Smart breached the binding and enforceable Release

24
25
26
27
28

3

Plaintiff is reminded that Local Rule 7.2 provides that “[u]nless otherwise permitted
by the Court, a motion including its supporting memorandum, and the response including its
supporting memorandum, each shall not exceed seventeen (17) pages, exclusive of
attachments and any required statement of facts.” Should Plaintiff choose to not comport
with this rule in future submissions, the Court will strike the materials.
-4-

1

Agreement by “posting, republishing, linking, communicating and hosting defamatory

2

materials and making defamatory statements related to [Plaintiff].” (Doc. 1, Ex. 2, ¶ 219).

3

Specifically, Plaintiff alleges that Smart “purposely published and republished materials to

4

the public space knowing they would persist and be replicated by other individuals and

5

websites,” and “purposely republished previously removed defamatory materials to support

6

his continued agenda of inflicting harm upon Allen and ignoring the terms of the Settlement.”

7

(Id. at ¶¶ 220–221). Plaintiff alleges that these actions are in violation of the non-

8

disparagement provision of the Agreement, which provides that Defendant “will not make,

9

or cause to be made, any disparaging remarks or statements” or “engag[e] in any other

10

conduct intended to negatively affect the reputation.” (Id. at ¶ 217).

11

Under Arizona law, a plaintiff asserting a claim for breach of contract must

12

demonstrate the existence of a contract between plaintiff and defendant, breach of that

13

contract by defendant, and resulting damage to plaintiff. Frank Lloyd Wright Found. v.

14

Kroeter, 697 F.Supp.2d 1118, 1125 (D. Ariz. 2010). The parties do not dispute the existence

15

or authenticity of the Agreement, entered on September 27, 2010.4 As alleged by Plaintiff,

16

§1(c) of the Release Agreement provides the following:
The Parties will not make, or cause to be made, any disparaging
remarks or statements about or concerning the other. This restriction
includes, but is not limited to, posting disparaging remarks on the
internet (whether anonymously or under another name), providing
disparaging statements in interviews, recirculating, republishing, or
reposting previously authored disparaging remarks or statements, or
engaging in any other conduct intended to negatively affect the
reputation of another Party.

17
18
19
20
21

Thus, to the extent Plaintiff is alleging that Smart violated the non-disparagement provision
22
23
4

24
25
26
27
28

Because the Release Agreement is referenced extensively in Plaintiff’s Complaint,
the Court may consider it in resolving Defendants’ Motion to Dismiss. See Van Buskirk v.
Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir. 2002) (noting that documents outside
of the pleadings may be considered if they are “referenced extensively” in the pleadings); see
also Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006) (holding that a district court may
consider the “contents of the complaint” and “evidence on which the complaint ‘necessarily
relies’ if: (1) the complaint refers to the document; (2) the document is central to the
plaintiff’s claim; and (3) no party questions the authenticity of the copy attached”).
-5-

1

of the Release Agreement after it was executed, he has satisfied the breach element. This

2

would include Plaintiff’s allegations regarding the following defamatory actions: 1) the

3

September 29, 2010 press release (Doc. 1, Ex. 2, ¶¶ 48–53), 2) Smart’s public post on

4

September 28, 2010 (Id. at ¶ 93), 3) the Allison & Taylor reference check (Id. at ¶¶ 63–67),

5

and 4) Smart’s interview with “Lore Hound” on December 9, 2010 (Id. at ¶¶ 113–114).5

6

To the extent, however, that Plaintiff’s general allegations recount postings and other

7

materials which existed prior to the September 27, 2010 effective date of the Agreement,

8

those claims are barred by § 1(b) of the Release Agreement.6 The Release provides:
Allen . . . releases QOL, the Members, Derek Smart, 3000 AD, and
Millenium Trust, and each of them, as well as their respective
employees, members, spouses and attorneys [ ] from any and all claims
asserted in the Lawsuit or that could have been asserted in the Lawsuit,
by reason of any matter, cause, or claim arising prior to the date of this
Release Agreement.

9
10
11
12

While Plaintiff alleges that § 1(c) of the Release Agreement indicates that Defendants are
13
“obligated to remove any previous press releases that are engaging in defamatory harm”,
14
(Doc. 1, Ex. 2, ¶ 61; see also ¶¶ 171–72), a plain reading of § 1(c) does not support such an
15
interpretation. Section 1(c) does not impose on any Party an affirmative obligation to remove
16
or delete previously published interviews, blogs, web postings, or other articles from the
17
Internet, or to see that third parties remove or delete such materials. Thus, Allen cannot
18
satisfy the breach element by relying on Defendants’ alleged failure to remove previously
19
posted material because, pursuant to § 1(b), Plaintiff is barred from asserting claims that
20
could have been raised prior to the date of the Agreement. Nevertheless, to the extent
21
22
23
24
25
26
27
28

5

The Court cannot precisely determine from the face of the Complaint, beyond what
has been noted, which allegations fall before or after the effective date of the Release
Agreement.
6

These include the June 4, 2010 press release (Id. at ¶ 85), the September 7, 2010 post
on the VooddooExtreme3D message board while allegedly posing as a Sock Puppet (Id. at
¶ 127), and allegations that Smart made public statements designed to take credit for the
work of Allen and others after “only a few weeks” or “less than 60 days” after being put in
control of QOL, (Id. at ¶¶ 174–200).
-6-

1

Plaintiff alleges that Smart modified previously posted material and re-posted and re-

2

published them, (See Doc. 1, Ex. 2, ¶¶ 77, 104–105, 109), or specifically referenced and

3

linked to material that existed prior to the Agreement in material that was posted subsequent

4

to it (Id. at ¶¶ 96, 99, 111), those actions would not be barred by the release provision.

5

Therefore, Plaintiff has adequately pled facts to support the breach element of his claim to

6

the extent that he relies on allegedly disparaging remarks made after the execution of the

7

Agreement.7

8

Finally, construing the Complaint liberally, Plaintiff has adequately pled resulting

9

damages, including that the statements caused “irreparable harm to [his] reputation, business

10

standing, integrity, and professional career.” (¶ 142). Specifically, he alleges damage to his

11

source of future income, harm to his professional and personal credibility, and his ability to

12

conduct business in an industry in which he has experience. (¶ 143).

13

Additionally, in his general allegations, Plaintiff asserts that Defendants also breached

14

§ 2.1(e) of the Membership Agreement, which provides that Allen may keep the MSDN

15

Subscription, by not turning over the subscription after the settlement. (¶ 144–45). Although

16

Defendants assert that the reason the subscription was not turned over is because it had

17

expired, Plaintiff contends that the subscription still has value despite being expired because

18

it would allow Plaintiff to purchase a new subscription at a discounted price. (Doc. 13 at 18).

19

Plaintiff has pled sufficient facts to survive dismissal of his breach of contract claim in this

20

regard.

21

Plaintiff’s allegations against QOL and 3000 AD pursuant to the theory of respondeat

22

superior fails because that theory only exists in the context of tort claims, not breach of

23
24
25
26
27
28

7

In his response, Plaintiff indicates that Defendant continued to make disparaging
remarks about him after the Complaint in the present action was filed. Specifically, Plaintiff
references a series of emails sent from Smart to Plaintiff, with QOL investors bcc’d, in
January 2011, and an interview with the website “Rock, Paper, Shotgun” on February 2,
2011. (Doc. 13 at 7–11). Plaintiff’s claims are governed by his Complaint. Kirby v. Atiyeh,
814 F.2d 565, 567 (9th Cir. 1987). To the extent such matters are not already covered by the
existing Complaint, Plaintiff cannot amend by raising additional claims in his motion papers.
-7-

1

contract actions. The doctrine of respondeat superior imposes vicarious liability on an

2

employer for the torts of an employee if they are committed within the scope of his

3

employment. Baker ex rel. Hall Brake Supply, Inc., v. Stewart Title & Trust of Phx., Inc., 197

4

Ariz. 535, 540, 5 P.3d 249, 254 (App. 2000). However, because Plaintiff also alleges that

5

QOL and 3000 AD may be directly liable for breaching the contract (¶ 224), and they are

6

both parties to the Agreement, his claim against them survives. Thus, to the extent that

7

Plaintiff does not rely on events that occurred prior to the Release Agreement, he has alleged

8

sufficient facts with regard to his breach of contract claim to survive dismissal.

9

Count 2: Breach of Good Faith and Fair Dealing

10

A covenant of good faith and fair dealing is legally implied in every contract, Wells

11

Fargo Bank v. Ariz. Laborers, 201 Ariz. 474, 38 P.3d 12, 28 (Ariz. 2002). This covenant

12

prohibits a party from acting in such a way that would prevent another party from receiving

13

the benefits and entitlements of their agreement. Id. Either party can breach the covenant of

14

good faith and fair dealing by exercising discretion under the contract in such a way as to

15

deny the other party a reasonably expected benefit of the bargain. Id. Plaintiff alleges that

16

Smart “has not acted in good faith and has not dealt fairly with Allen, and has otherwise

17

breached his duties” as referenced in count one. (¶ 233). To the extent that Plaintiff has stated

18

a breach of contract claim, his breach of implied covenant of good faith and fair dealing

19

survives as well. Therefore, Plaintiff’s breach of the implied covenant of good faith and fair

20

dealing is adequately pled and survives dismissal for the same reasons stated with respect to

21

count one.
Count 3: Defamation, Libel, and Slander8

22
23

Plaintiff alleges that Smart “published or caused to be published false and defamatory

24

statements and communications which Smart knew or should have known were a violation

25

of [§ 1(c) and (d)] of the Settlement and would be republished.” (¶ 240). Because Plaintiff

26
8

27
28

The law of defamation encompasses both libel and slander. Boswell v. Phx.
Newspapers, Inc., 152 Ariz. 1, 730 P.2d 178, 183 n.4 (App. 1985), approved as supplemented
by Boswell v. Phx. Newspapers, Inc., 152 Ariz. 9, 730 P.2d 186 (1986).
-8-

1

alleges that he is a public figure,9 he faces a higher burden in his defamation claim. Dombey

2

v. Phx. Newspapers, Inc., 150 Ariz. 476, 481, 724 P.2d 562, 567 (1986). Specifically,

3

Plaintiff cannot collect damages unless he proves that Defendants’ statements were made

4

with actual malice. Id. Thus, in order to recover damages for defamation a public figure must

5

prove that: (1) a speaker made a false statement concerning the public figure; (2) the

6

statement was defamatory; (3) the statement was published to a third party; (4) the speaker

7

made the statement with actual malice; and (5) the public figure was damaged as a result of

8

the statement. Morris v. Warner, 160 Ariz. 55, 62, 770 P.2d 359, 366 (App. 1988). “To be

9

defamatory, a publication must be false and must bring the defamed person into disrepute,

10

contempt, or ridicule, or must impeach plaintiff’s honesty, integrity, virtue, or reputation.”

11

Godbehere v. Phx. Newspapers, Inc., 162 Ariz. 335, 341, 783 P.2d 781, 787 (1989).

12

As with the previous two counts, Plaintiff’s defamation claim is necessarily limited

13

to defamatory actions or materials that came about after the effective date of the Release

14

Agreement.

15

The September 29, 2010 press release provides, in part, that

16

Quest Online, LLC, today announced that the lawsuit filed in the
Maricopa County Superior Court (Case #CV2010-010391) in June
2010 against previous LLC Manager and Alganon creator, David Allen,
has been settled with the purchase of Allen’s equity in the LLC; and
that Allen is no longer associated with Quest Online, LLC.

17
18
19

(Id. at ¶ 48). Plaintiff alleges that the press release was “purposely misleading because Quest

20

Online did not file the Previous Lawsuit against Allen. Just the opposite, Allen filed the

21

Previous Lawsuit against Defendants.” The Court takes judicial notice of the Membership

22

Interest Purchase Agreement and Release Agreement entered into between the parties on

23

September 27, 2010. See discussion supra n.3. The Purchase Agreement indicates that while

24

Plaintiff initially filed the lawsuit in Superior Court, “in that Lawsuit Purchaser [QOL] also

25

asserted counterclaims against Seller.” (Doc. 70). The Release Agreement also provides that

26
27
28

9

See Doc. 1, Ex. 2, ¶ 30 (“Allen is a public figure and recognized for his work in cofounding QOL and creating Alganon.”).
-9-

1

“QOL, the Members, Derek Smart and 3000 AD collectively and individually release David

2

Allen and his spouse from all claims against him asserted in the Lawsuit.” (Id.). Based on

3

these facts, Plaintiff alleges that the “word play” in the press release is “designed to mislead

4

the public and inflict harm upon Allen and his reputation by insinuating Allen was sued and

5

then settled due to the countersuit filed by the Defendants.” (Doc. 1, Ex. 2, ¶ 50). At this

6

stage of the litigation Plaintiff has pled sufficient facts to defeat a 12(b)(6) motion. Plaintiff

7

has satisfied the actual malice element at this stage by pleading that “Smart acted with

8

reckless disregard in making such statements and comments” (¶ 247). See Citizen Publ’g Co.

9

v. Miller, 210 Ariz. 513, 115 P.3d 107, 111 n.2 (2005) (actual malice requires that defendants

10

either have knowledge that their statements were false or that they recklessly disregarded

11

whether it was false or not). Finally, Plaintiff alleges that as a result he suffered permanent

12

damage to his reputation and career. (¶ 255). Thus, to the extent Plaintiff’s defamation claim

13

is based on the press release, the claim survives dismissal at this stage.

14

Plaintiff also alleges that Smart’s September 28, 2010 blog post, “Let Sleeping Dogs

15

Lie”, “had the purpose of inflicting harm by discrediting, attacking, and defaming Allen and

16

includes numerous fabrications and inaccuracies.” (¶ 94). Plaintiff also alleges that the blog

17

post references earlier posts, including one from March 2010, wherein Smart states that Allen

18

did not depart, but rather that Smart fired him for insubordination and for acting against the

19

best interests of the company. (¶¶ 96–99). Plaintiff alleges that this was inaccurate because

20

Allen never worked for Smart, thus Smart never had the authority to fire him. (Id.). For the

21

reasons set forth above, Plaintiff has also sufficiently pled the actual malice and damages

22

elements. Accepting all allegations of material fact as true and construing them in light most

23

favorable to Plaintiff, the defamation claim survives Defendants’ motion to dismiss in so far

24

as it relies on the September 28, 2010 blog post.

25

Plaintiff’s allegations regarding Smart’s interview with “Lore Hound”, an online

26

gaming website, on December 9, 2010 (Id. at ¶¶ 113–114) similarly survives dismissal.

27

Plaintiff alleges that the interview contains numerous false and defamatory statements,

28

including the following: “When I took over the Alganon team earlier this year, milestones
- 10 -

1

were pretty much nonexistent and the development was, well, all over the place. Which

2

explains the state in which the game was when it was first released in late 2009 in an

3

unfinished form. It also explained all the previously missed dates, a lot of money wasted,

4

etc”. (¶ 114). Even though Smart refrains from directly referencing Allen in his statements,

5

under Arizona law, “[t]o be actionable as a matter of law, defamatory statements must . . .

6

reasonably relate to specific individuals. While the individual need not be named, the burden

7

rests on the plaintiff to show that the publication was ‘of and concerning’ him.” Hansen v.

8

Stoll, 130 Ariz. 454, 458, 636 P.2d 1236, 1249 (App. 1981); see also RESTATEMENT

9

(SECOND) OF TORTS § 564 cmt. b (“It is not necessary that the plaintiff be designated by

10

name; it is enough that there is such a description of or reference to him that those who hear

11

or read reasonably understand the plaintiff to be the person intended.”).10 Accepting as true

12

Plaintiff’s allegation that the “gaming community is fully aware Allen ran QOL before Smart

13

was put in control,” Plaintiff has adequately alleged that the interview involved false and

14

defamatory statements against Allen to survive Defendants’ 12(b)(6) motion.

15

Finally, Plaintiff alleges that in October 2010 he “hired Allison Taylor, a law firm

16

specializing in reference checks to conduct a reference check for Quest Online to ensure no

17

improper references or activity engaging in a breach of the Settlement Agreement was taking

18

place.” (¶ 63). Allen alleges that he subsequently received a report from the firm

19

documenting their contact with QOL and Smart to ask questions in reference of Allen as a

20

company looking to hire Allen as Chief Technical Officer. (¶ 64). The reference Smart

21

provided for Allen was allegedly defamatory because, among other things, he indicated that

22

the QOL investors were not happy with Allen, that Allen had sued QOL, and that QOL had

23

countersued him for fraud and embezzlement. (¶ 65). In addition, Smart allegedly stated that

24

Allen “had no skills” and “rated him at the lowest rating for nearly every single question.”

25

(¶ 66). The facts, as alleged, indicate that Allen pretended to be an employer so that he could

26
10

27
28

“Arizona views the Restatement as authority for resolving questions concerning
rules in defamation cases.” Burns v. Davis, 196 Ariz. 155, 162, 993 P.2d 1119, 1126 (App.
1999) (citing Sanchez v. Coxon, 175 Ariz. 93, 95, 854 P.2d 126, 128 (1993)).
- 11 -

1

utilize the law firm to conduct a reference check on himself with the sole purpose of

2

determining whether the Agreement was being breached. Thus, Plaintiff simply cannot meet

3

the damages element with respect to the comments Smart made to the representative from

4

Allison & Taylor. However, Plaintiff also alleges that Smart had “spoken with others” in

5

relation to the defamatory statements made to Allison & Taylor. (¶¶ 72, 243). Thus, to the

6

extent that Plaintiff alleges that Smart’s communications with others in relation to the

7

defamatory statements made to Allison & Taylor damaged his reputation and career, his

8

claim survives.

9

Plaintiff further alleges that QOL and 3000 AD are directly liable and/or vicariously

10

liable for Smart’s defamation pursuant to respondeat superior. Neither Defendant can be held

11

directly liable for Smart’s allegedly defamatory actions because Plaintiff has alleged no facts

12

to suggest that either QOL or 3000 AD directly engaged in the defamatory actions. However,

13

Plaintiff’s allegation that “Smart held the position of Manager and/or President at QOL

14

during these allegations”, (¶ 218), and that some of the allegedly defamatory materials were

15

hosted on the QOL website is sufficient to give rise to a reasonable inference that Smart was

16

acting within the scope of his employment at this stage of the litigation. On the contrary

17

though, Plaintiff’s mere allegation that 3000 AD is a “Florida corporation” “owned in whole

18

or in part by Smart” and that Smart’s “representation of 3000 AD is implied” does not plead

19

facts sufficient to indicate why 3000AD should be held liable under respondeat superior.

20

Defendant 3000 AD is dismissed, without prejudice. In sum, Plaintiff’s defamation claims

21

survives dismissal against Defendants Smart and QOL.

22

Count 4: Blacklisting

23

Plaintiff alleges that Smart’s interview with Allison & Taylor “shows intention to

24

prevent Allen from securing work” (¶ 260) in violation of Arizona’s Blacklisting statute,

25

A.R.S. § 23-1361. As previously set forth, Plaintiff alleges that in October 2010 he hired

26

Allison & Taylor to ask questions in reference of Allen as a company looking to hire Allen

27

as Chief Technical Officer. (¶¶ 63–64).

28

Arizona’s blacklisting statute provides that “[a] person commits blacklisting if he
- 12 -

1

knowingly exchanges, solicits or gives out any labor blacklist.” § 23-1361. The statute

2

defines “blacklist”as
any understanding or agreement whereby the names of any person or
persons, list of names, descriptions or other means of identification
shall be spoken, written, printed or implied for the purpose of being
communicated or transmitted between two or more employers of labor,
or their bosses, foremen, superintendents, managers, officers or other
agents, whereby the laborer is prevented or prohibited from engaging
in a useful occupation.

3
4
5
6
7

§ 23-1361 (emphasis added). Plaintiff’s claim for blacklisting fails as a matter of law because

8

he has not alleged that Smart entered into an “understanding or agreement between

9

employers” to interfere with Allen’s ability to obtain employment. (Doc. 8 at 13). The facts,

10

as alleged, indicate that Allen instigated the reference check under false pretenses so that he

11

could utilize the law firm to test whether the Agreement was being breached. Therefore,

12

Plaintiff has not, and cannot, allege that Smart entered into an agreement with another

13

“employer of labor” to interfere with Allen’s employment. Indeed, another employer never

14

existed.

15
16

Accordingly, Plaintiff’s claim for blacklisting is dismissed, without prejudice, for
failure to state a claim upon which relief can be granted.
Count 5: Injurious Falsehood/Trade Libel

17
18

To state claim for trade libel, Plaintiff must prove that Defendants intentionally

19

published an injurious falsehood disparaging the quality of his property or product, with

20

resulting pecuniary loss. Gee v. Pima Cnty., 126 Ariz. 116, 612 P.2d 1079 (1980).11 Within

21

his specific allegations, Plaintiff does not indicate the basis for this claim as he makes no

22

reference to a libelous activity on the part of Defendants with regard to Plaintiff’s product

23

or business. Because it remains unclear to the Court on what basis Plaintiff sets forth this

24

claim, count five is dismissed with leave to amend.
Count 6: Breach of Implied Duty

25
26
11

27
28

“In the modern law the tort of ‘injurious falsehood’ is the general umbrella term for
a collection of torts such as . . . ‘product disparagement’ or ‘trade libel’ . . . .” See Fillmore
v. Maricopa Water Processing Sys., 211 Ariz. 269, 120 P.3d 697, 703 (2005).
- 13 -

1

In Count six, Plaintiff claims that “Defendants have wrongfully exercised the

2

contractual power for a reason beyond the risks that Allen assumed and for a reason

3

inconsistent with Allen’s justified expectations.” (¶ 284). He clarifies within the Complaint

4

that this “qualifies as a breach of the implied duty of good faith” and cites to Wells Fargo

5

Bank v. Arizona Laborers, Teamsters and Cement Masons, an Arizona Supreme Court case

6

that deals, in part, with a breach of the implied covenant of good faith and fair dealing. 201

7

Ariz. 474, 38 P.3d 12.

8

As Defendants assert in their motion, this count appears to be a repetition of count 2,

9

which alleges a breach of good faith and fair dealing. In response, Plaintiff contends that

10

there is a difference between an implied covenant of good faith and fair dealing and an

11

“implied duty.” However, the case that Plaintiff cites in his complaint and those that he relies

12

on in his response all concern a duty of good faith and fair dealing. Specifically, Plaintiff’s

13

reliance on Emerson Radio Corp. v. Orion Sales, Inc., 80 F.Supp.2d 307 (D.N.J. 2000), to

14

conclude that the “the duty of good faith and fair dealing is broader than an implied duty

15

. . .” is inaccurate. The remainder of the sentence, which Plaintiff leaves out, reads “to use

16

best efforts in marketing.” Id. The case distinguishes between the implied duty of good faith

17

and fair dealing and an implied obligation to use best efforts, a duty which has no relevance

18

to the facts alleged. Accordingly, count six is dismissed, with prejudice, because it is

19

identical to count 2.

20

Count 7: Civil Conspiracy

21

Plaintiff alleges that “each Defendant joined in, acted in concert with, and conspired

22

with the other to persist defamatory materials of all kinds throughout the internet without any

23

regard to obligations defined within the Settlement Agreement to remove or prevent the

24

propagation of said material, resulting in committing the tortious acts alleged herein.” (¶

25

294). “[L]iability for civil conspiracy requires that two or more individuals agree and

26

thereupon accomplish an underlying tort which the alleged conspirators agreed to commit.”

27

Wells Fargo Bank, 201 Ariz. at 498, 38 P.3d at 36 (internal quotation marks and citation

28

omitted) (emphasis added). Thus, to the extent Plaintiff is alleging that the purported
- 14 -

1

conspiracy was to disregard the obligations defined in the Agreement, the claim fails as a

2

matter of law because conspiracy requires an agreement to commit a tort, and a breach of

3

contract is not a tort.

4

To the extent Plaintiff alleges that the purported conspiracy was to accomplish the

5

underlying defamation tort, he must allege “specific facts showing an agreement and

6

concerted action.” Wasco Prods., Inc. v. Sw. Techs., Inc., 435 F.3d 989, 990–91 (9th Cir.

7

2006) (quoting Montgomery v. City of Ardmore, 365 F.3d 926, 940 (10th Cir. 2004)). “The

8

existence of a conspiracy may sometimes be inferred form the nature of the acts done, the

9

relations of the parties, the interests of the alleged conspirators, and other circumstances.

10

However, a plaintiff must allege specific facts which support the inference of an agreement.”

11

S. Union Co. v. Sw. Gas Corp., 165 F.Supp.2d 1010, 1021 (D. Ariz. 2001) (internal quotation

12

marks and citation omitted).

13

In his specific allegations relating to this count Plaintiff merely states that “Defendants

14

have formed and operated together in furtherance of common agenda executing harm against

15

Allen for mutual benefit” (¶ 297). In his general allegations regarding conspiracy, Allen

16

states that while the Defendants were aware of the defamatory materials that Smart had

17

“planted throughout the internet” they “took no action of any kind to clean up or give

18

direction to have the defamatory materials cleaned up, or to prevent additional defamatory

19

materials from being publicly republished and distributed.” (¶ 211). At most, Plaintiff alleges

20

that because Defendants took no action to remove previously released materials, or to prevent

21

Smart from releasing new material, they must have “actively collaborated in an effort to

22

defame, discredit, harm, and prevent Allen from securing acceptable gainful work.” (¶ 212).

23

Plaintiff’s complaint lacks the factual specificity required to support a civil conspiracy claim

24

based on a concerted effort to defame. See Karim-Panahi v. L.A. Police Dep’t, 839 F.2d 621,

25

626 (9th Cir. 1988) (“A mere allegation of conspiracy without factual specificity is

26

insufficient.”). Plaintiff has failed to allege specific facts that would establish that the

27

Defendants formed some agreement to defame Allen; therefore, the Court dismisses this

28

claim, with leave to amend.
- 15 -

1

Count 8: Negligence

2

Negligence claims are established by proving the existence of a duty of care, a breach

3

of that duty by the defendant, causality between the defendant’s conduct and the resulting

4

injury, and actual damages. Gipson v. Kasey, 214 Ariz. 141, 143, 150 P.3d 228, 230 (2007).

5

For a negligence claim to proceed, Plaintiff must establish the existence of Defendants’ duty

6

in the pleadings. Markowitz v. Ariz. Parks Bd., 146 Ariz. 352, 354, 706 P.2d 364, 366 (1985)

7

(“Whether the defendant owes the plaintiff a duty of care is a threshold issue; absent some

8

duty, an action for negligence cannot be maintained.”). Duty is defined as an “obligation,

9

recognized by law, which requires the defendant to conform to a particular standard of

10

conduct in order to protect others against unreasonable risks of harm.” Id.

11

Plaintiff alleges that Defendants were negligent by “supporting Smart and putting him

12

in control of QOL.” (¶ 305). He contends that “Defendants conduct falls below the standard

13

of behavior established by law for the protection of others against unreasonable risk of

14

harm.” (Id.). To the extent Plaintiff may have asserted a duty owed to him as the outgoing

15

President of QOL, Plaintiff’s claim is barred by the clear terms of the release provision of

16

the Agreement. According to his own allegations, Smart was appointed Manager by QOL

17

Member Defendants on or around June 4, 2010, well before the effective date of Release

18

Agreement, and Plaintiff could have asserted any claims he may have had against Defendants

19

for their decision to hire Smart during the previous suit.

20

Moreover, to the extent that Plaintiff alleges that Defendants had a duty to perform

21

per the terms of the Settlement Agreement (¶ 307), such a claim sounds in contract, and has

22

been addressed in Counts one and two. Simply put, Plaintiff has failed to point to any duty

23

of care owed to him by Smart separate and apart from that owned by virtue of the parties’

24

contractual relationship. Because Plaintiff has failed to allege any facts to support the

25

threshold issue of the existence of a duty, the negligence claim is dismissed, without

26

prejudice.

27
28

Count 9: Intentional Infliction of Emotional Distress
Plaintiff claims that Defendants committed the tort of intentional infliction of
- 16 -

1

emotional distress by “engag[ing] in intentional behavior which has inflicted extensive harm

2

of emotional distress upon Mr. Allen through public attacks, defamation, destruction of

3

reputation and credibility, using the company Allen built as a platform for the basis of the

4

allegations herein, and harassment.” To recover for intentional infliction of emotional

5

distress, Plaintiff must prove that (1) the Defendants’ conduct was “extreme” and

6

“outrageous”; (2) the Defendants either intended to cause emotional distress or recklessly

7

disregarded the near certainty that distress would result from the conduct; and (3) the conduct

8

caused Plaintiff severe emotional distress. See Citizen Publ’g Co., 210 Ariz. at 516, 115 P.3d

9

at 110.

10

To satisfy the first element of this inquiry, Plaintiff must show that the Defendants’

11

acts were “‘so outrageous in character and so extreme in degree, as to go beyond all possible

12

bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized

13

community.’” Mintz v. Bell Atl. Sys. Leasing Int’l, Inc., 183 Ariz. 550, 554, 905 P.2d 559,

14

563 (App. 1995) (quoting Cluff v. Farmers Ins. Exch., 10 Ariz.App. 560, 562, 460 P.2d 666,

15

668 (App. 1969)). It is not enough “that the [Defendants have] acted with an intent which is

16

tortious or even criminal, or that [they have] intended to inflict emotional distress, or even

17

that [their] conduct has been characterized by ‘malice,’ or a degree of aggravation which

18

would entitle the plaintiff to punitive damages for another tort.” RESTATEMENT (SECOND) OF

19

TORTS § 46, cmt. d (1965). Viewing the facts in the light most favorable to Plaintiff and

20

assuming that Allen suffered harm to his reputation and credibility as well as financial harm

21

as a result of Smart’s actions, including interviews, press releases, blog posts, and internet

22

postings after the effective date of the Release Agreement, this does not, in itself,

23

demonstrate conduct by the Defendants that is “so extreme in degree, as to go beyond all

24

bounds of decency.” See Mockler v. Multnomah Cnty., 140 F.3d 808, 814 (9th Cir. 1998)

25

(noting that a name-calling incident was insufficient to give rise to a claim for intentional

26

infliction of emotional distress); see also Daemi v. Church’s Fried Chicken, Inc., 931 F.2d

27

1379, 1388 (10th Cir. 1991) (holding that an employer did not commit intentional infliction

28

of emotional distress when it called an employee derogatory names and accused him of
- 17 -

1

criminal conduct). Without more, Plaintiff fails to plead factual content that allows the Court

2

to draw the reasonable inference that Defendants may be liable for intentional infliction of

3

emotional distress. Therefore, the claim is dismissed.

4

Counts 10-12: Damages

5

In Counts 10 through 12, Plaintiff asserts claims for compensatory, consequential and

6

punitive damages. To the extent that counts 10 through 12 seek to assert independent claims

7

for damages separate from a legal wrong, these counts are dismissed for failure to state a

8

claim upon which relief may be granted. Damages cannot stand alone as a separate claim.

9

See, e.g., Sisemore v. Farmers Ins. Co. of Ariz., 161 Ariz. 564, 566, 779 P.2d 1303, 1305

10

(App. 1989) (finding that a request for punitive damages does not state a separate claim for

11

relief under Arizona law). Rather, these counts appear to be designed to invoke certain

12

remedies. Therefore, while counts 10 through 12 are dismissed as separate claims, they are

13

not foreclosed to the extent that they satisfy the damages element, where relevant, of the

14

aforementioned substantive claims.

15

Moreover, Defendants move to dismiss Plaintiff’s demand for punitive damages as

16

a matter of law because they are not available in contract actions. See Cont. Nat’l Bank v.

17

Evans, 107 Ariz. 378, 382, 489 P.2d 15, 19 (1971). While punitive damages cannot be

18

awarded for a breach of contract, they are recoverable when there is an accompanying tort.

19

Miscione v. Bishop, 130 Ariz. 371, 374–75, 636 P.2d 149, 152–53 (App. 1981). Because

20

Plaintiff’s breach of contract claim constitutes a tort, the claim for punitive damages survives.

21

II.

Motion to Dismiss filed by Defendants Wexler, Willard Olauson, and Kelly
Olauson

22
A.

Legal Standard

23
Under Rule 12(b)(5), a defendant may move to dismiss an action if service of process
24
is insufficient. FED. R. CIV. P. 12(b)(5); accord Direct Mail Specialists v. Eclat Computerized
25
Techs., Inc., 840 F.2d 685, 688 (9th Cir. 1988) (“[a] federal court does not have jurisdiction
26
over a defendant unless the defendant has been served properly under Fed. R. Civ. P. 4”).
27
When a defendant challenges the sufficiency of service, the plaintiff bears the burden of
28
- 18 -

1

demonstrating that proper service was made. Brockmeyer v. May, 383 F.3d 798, 801 (9th Cir.

2

2004).

3

B.

4

Defendants Wexler, Willard Olauson, and Kelly Olauson join the prior Motion to

5

Dismiss, and separately move for dismissal on the bases of insufficient service, lack of

6

personal jurisdiction, and failure to state a claim upon which relief may be granted.

7

Defendants request that the Court dismiss them because Allen failed to properly serve them

8

with a federal court summons and copy of the Complaint, and thus the Court lacks

9

jurisdiction over them. In response, Plaintiff provides Declarations of Diligence from the

10

Analysis

three process servers. (Doc. 39, Ex. G).

11

With respect to Defendant Wexler, the process server provides that the guard at the

12

gated community in which Wexler resides confirmed his address but that the individual who

13

opened the door indicated that the server was at the wrong address. Despite the individual’s

14

refusal, the process server served him as he was 18 years or older and stated that he resided

15

at the address. Defendant Wexler provides that he was away from the house at the alleged

16

time of process and denies knowledge of the individual who opened the door, but he does not

17

deny that he resided there. (Doc. 30, Ex. 1).

18

Similarly, the process server for Kelly Olauson declares that after several attempts to

19

effect personal service, an individual who refused to share his name answered the door, and

20

after the server informed him of the documents, the individual closed the door, prompting

21

the process server to leave the documents in front of the door. Defendant Kelly Olauson

22

asserts that he and his family were away on vacation at the alleged time of service and only

23

their female housekeeper, who is not authorized to accept process on his behalf, had access

24

to the home at that time. (Doc. 30, Ex. 3).

25

Finally, the Declaration of Diligence for Defendant Willard Olauson provides that

26

after several attempts, a “live-in female” named Emily Freeman was served. Defendant

27

asserts that he and his ex-wife only occasionally stay at the address stated and that the

28

process server left the materials with a female housekeeper who was not authorized to accept
- 19 -

1

service on his behalf. (Doc. 30, Ex. 2).

2

Notwithstanding the clear discrepancies between the declarations of the process

3

servers and Defendants’ affidavits, Plaintiff has satisfied his burden of serving Defendants

4

by leaving a copy of the summons and complaint at the individual’s dwelling or usual place

5

of abode with someone of suitable age and discretion who resides there in accordance with

6

Federal Rule 4(e).

7

Nevertheless, the moving Defendants are nonetheless dismissed because, according

8

to his own allegations, Plaintiff’s suit against them is in their capacity as equity

9

shareholders/investors in QOL, an Arizona limited liability company. (Doc. 1, Ex. 2, ¶¶ 2,

10

14–15). To the extent Plaintiff wishes to implicate Defendants for their failure to take action

11

while Defendants Smart engaged in tortious conduct and breach of the settlement agreement,

12

Defendants are protected under A.R.S. § 29-651, which provides that “[a] member, manager,

13

employee, officer or agent of a limited liability company is not liable, solely by reason of

14

being a member, manager, employee, officer or agent, for the debts, obligations and liabilities

15

of the limited liability company whether arising in contract or tort, under a judgment, decree

16

or other of a court or otherwise.” Moreover, § 29-656 provides that “[a] member of a limited

17

liability company, solely by reason of being a member, is not a proper party to proceedings

18

by or against a limited liability company unless the object is to enforce a member’s right

19

against or liability to the limited liability company.”

20

Additionally, to the extent that Plaintiff’s complaint alleges that Defendants are

21

directly liable for Smart’s actions because they “put him in control of the company”, (¶ 165),

22

those claims are barred by the Release Agreement, as previously set forth, because the

23

appointment of Smart as Manager occurred before the effective date of the Release

24

Agreement. Section 1(b) of the Release Agreement provides that “Allen . . . releases QOL,

25

the Members . . . from any and all claims asserted in the Lawsuit or that could have been

26

asserted in the Lawsuit, by reason of any matter, cause, or claim arising prior to the date of

27

this Release Agreement.” Plaintiff could have raised such claims during the previous lawsuit,

28

and thus is barred from doing so here. Moreover, Plaintiff has not alleged that the moving
- 20 -

1

Defendants acted in their personal capacities, or acted outside the scope of their role as

2

members of the LLC, Therefore, Defendants Gregory Wexler, Kelly Olauson and Willard

3

Olauson are dismissed.

4

III.

Plaintiff’s Motion for Preliminary Injunction

5

A.

6

A preliminary injunction is “an extraordinary remedy never awarded as of right.”

7

Winter v. Natural Res. Def. Council, Inc., 129 S.Ct. 365, 376 (2008). “A plaintiff seeking a

8

preliminary injunction must establish that he is likely to succeed on the merits, that he is

9

likely to suffer irreparable harm in the absence of preliminary relief, that the balance of

10

equities tips in his favor, and that an injunction is in the public interest.” Id. at 374. All four

11

factors must be satisfied for the Court to grant a preliminary injunction. Alliance for the Wild

12

Rockies v. Cottrell, 632 F.3d 1127, 1132 (9th Cir. 2011). The Ninth Circuit considers these

13

four elements using a “sliding scale” approach, where “the elements of the preliminary

14

injunction test are balanced, so that a stronger showing of one element may offset a weaker

15

showing of another.” Id. at 1131. However, the element of irreparable injury is not subject

16

to balance; the moving party must “demonstrate that irreparable injury is likely in the absence

17

of an injunction.” Winter, 55 U.S. at 23 (emphasis in original).

Legal Standard

18

At the preliminary injunction stage, Plaintiff has the burden of proof. Preminger v.

19

Principi, 422 F.3d 815, 823 n.5 (9th Cir. 2005). In addition, because the function of a

20

preliminary injunction is to preserve status quo pending determination of the merits, there

21

is heightened scrutiny where a movant seeks to alter, as is the case here, rather than maintain

22

the status quo. Dahl v. HEM Pharms. Corp., 7 F.3d 1399, 1403 (9th Cir. 1993) (holding that

23

mandatory, as opposed to prohibitory, injunctions are subject to heightened scrutiny).

24

B.

Analysis

25

On December 29, 2010, while Plaintiff’s case was pending in the Superior Court, he

26

filed a motion for preliminary injunction. Soon after, Defendant QOL removed the matter to

27

this Court. On April 22, 2011, after Defendants had filed the motions to dismiss discussed

28

above, Plaintiff filed a notice of his pending preliminary injunction motion. (Doc. 36).
- 21 -

1

Plaintiff’s motion seeks injunctive relief requiring Defendants Smart and QOL “to cease all

2

contractual breaching, defamatory, blacklisting and tortious behavior, and remove all

3

contractual breaching, blacklisting and defamatory content on the internet related in any

4

fashion to Allen, publicly posted in the form of interviews, press releases, forum posts, blog

5

posts, public statements and online comments.” (Id.).

6

To meet the “irreparable harm” requirement, Plaintiff must do more than simply allege

7

imminent harm; he must demonstrate it. Caribbean Marine Servs. Co., Inc. v. Baldrige, 844

8

F.2d 668, 674 (9th Cir. 1988). This requires Plaintiff to demonstrate by specific facts that

9

there is a credible threat of immediate and irreparable harm. See FED. R. CIV. P. 65(b). Mere

10

“[s]peculative injury does not constitute irreparable injury sufficient to warrant granting a

11

preliminary injunction.” Caribbean Marine, 844 F.2d at 674. Allen has failed to demonstrate

12

any imminent risk of irreparable harm. Plaintiff’s only assertion with respect to this element

13

is that he will suffer irreparable harm to his “reputation and credibility” if Defendants are not

14

enjoined. (Doc. 1, Ex. 7). To support his claim, he relies on various materials, including

15

interviews, blog posts, and online comments, many of which predate the Release Agreement.

16

As discussed above, the Release Agreement executed by the parties did not contain an

17

affirmative obligation that Defendants remove or delete previously published interviews,

18

blogs, web postings, or other articles from the internet. See discussion supra section I.B.

19

However, even limiting Plaintiff’s claim to the allegedly defamatory statements made after

20

the Agreement, he nevertheless fails to allege any connection between these materials and

21

the risk of irreparable injury to him. Plaintiff has not made a clear showing of the likelihood

22

of irreparable injury, and that alone is fatal to his motion.

23

Even if Plaintiff had established a likelihood of irreparable harm, injunctive relief

24

would still be inappropriate because he has failed to demonstrate a likelihood of success on

25

the merits. Even though some of Plaintiff’s claims survive the motions to dismiss, the

26

analysis set forth above does not establish that Plaintiff will likely succeed on those claims,

27

but rather only that he has succeeded in stating a claim upon which relief may be granted.

28

Accordingly, Plaintiff’s Motion for Preliminary Injunction is denied.
- 22 -

1

IV.

Plaintiff’s Motion for Partial Summary Judgment

2

A.

3

Summary judgment is appropriate if the evidence, viewed in the light most favorable

4

to the nonmoving party, demonstrates “that there is no genuine dispute as to any material fact

5

and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a).

6

Substantive law determines which facts are material and “[o]nly disputes over facts that

7

might affect the outcome of the suit under the governing law will properly preclude the entry

8

of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “A fact

9

issue is genuine ‘if the evidence is such that a reasonable jury could return a verdict for the

10

nonmoving party.’” Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002)

11

(quoting Anderson, 477 U.S. at 248). Thus, the nonmoving party must show that the genuine

12

factual issues “‘can be resolved only by a finder of fact because they may reasonably be

13

resolved in favor of either party.’” Cal. Architectural Bldg. Prods., Inc. v. Franciscan

14

Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987) (quoting Anderson, 477 U.S. at 250).

Legal Standard

15

B.

Analysis

16

Plaintiff moves for partial summary judgment against Defendant Smart on his breach

17

of contract, breach of covenant of good faith and fair dealing, defamation, injurious

18

falsehood/trade libel, and negligence. (Doc. 54). Along with his response, Defendant Smart

19

filed a Rule 56(d) motion to defer consideration of, or to deny, the motion. (Doc. 78).

20

As a initial matter, in its ruling on the Motion to Dismiss, filed by Smart, QOL and

21

3000 AD (Doc. 8), the Court dismissed, with leave to amend, count five (injurious

22

falsehood/trade libel), and dismissed, with prejudice, count eight (negligence). Therefore, to

23

the extent Plaintiff moves for summary judgment on those two counts, his motion is denied

24

as moot.

25

With respect to the remaining three counts, which survived dismissal, a motion for

26

summary judgment is premature at this stage: a Rule 16 conference has not been set, the

27

parties have not been authorized to engage in discovery, and Defendant has not yet answered

28

the Complaint. See FED. R. CIV. P. 56(b), (c); see also Celotex Corp. v. Catrett, 477 U.S. 317,
- 23 -

1

322 (1986) (indicating that summary judgment is appropriate after “adequate time for

2

discovery”). Accordingly, Plaintiff’s motion for partial summary is denied as premature in

3

part and moot in part. Defendant Smart’s Rule 56(d) Motion (Doc. 78) is granted.

4

CONCLUSION

5

Under Rule 15, “[t]he court should freely give leave [to amend] when justice so

6

requires.” FED. R. CIV. P. 15(a)(2). Given that Plaintiff may be able to allege sufficient facts

7

to state a claim with regard to Counts 5 and 7, dismissal is with leave to amend.

8
9
10
11

As to the Motion to Dismiss filed by Smart, QOL, and 3000 AD (Doc. 8), IT IS
HEREBY ORDERED that:
(1) the motion is DENIED as to Counts 1, 2, and 3. Count 3 is denied only with
respect to Defendants Smart and QOL; it is granted with respect to 3000AD.

12

(2) the motion is GRANTED as to Counts 6, 10, 11 and 12.

13

(3) the motion is GRANTED with leave to amend as to Counts 4, 5, 7, 8 and 9.

14

Plaintiff shall have 30 days from the date of this Order to file an amended complaint with

15

respect to Counts 5 and 7. If an amended complaint is not filed by October 21, 2011, Counts

16

4, 5, 7, 8 and 9 will be terminated consistent with this Order.

17

IT IS FURTHER ORDERED that the Motion to Dismiss filed by Defendants

18

Gregory and Jane Doe Wexler, Willard and Jane Doe Olauson, and Kelly and Janis Doe

19

Olauson (Doc. 30) is GRANTED. The Clerk of the Court is directed to terminate these

20

Defendants from this action.

21

IT IS FURTHER ORDERED that Plaintiff’s Motion to Partial Summary Judgment

22

(Doc. 54) is DENIED as premature in part and moot in part and Defendant Smart’s Rule

23

56(d) Motion (Doc. 78) is granted..

24

IT IS FURTHER ORDERED that Defendants Larry O’Rourke, III and Jane Doe

25

O’Rourke, Rick Hupp, Greg Klipstein and Jane Doe Klipstein, Bob Carlson, Jim Haney and

26

Jane Doe Haney, Eileen O’Rourke, Larry O’Rourke, Jr. and Janis Doe O’Rourke will be

27

dismissed 14 days from the date of this Order if Plaintiff fails to show good cause before that

28

date for his failure to serve the Summons and Complaint.
- 24 -

1

IT IS FURTHER ORDERED directing the Clerk of the Court to terminate

2

Defendants Larry O’Rourke, III and Jane Doe O’Rourke, Rick Hupp, Greg Klipstein and

3

Jane Doe Klipstein, Bob Carlson, Jim Haney and Jane Doe Haney, Eileen O’Rourke, Larry

4

O’Rourke, Jr. and Janis Doe O’Rourke , without further notice, if Plaintiff fails to respond

5

to this Order within the time stated.

6

IT IS FURTHER ORDERED that Plaintiff’s other pending motions, including

7

Motion to Strike Response and Motion to Seal (Doc. 76 ) and Motion for Order Directing

8

the Preservation of Documents and Things (Doc. 81) are DENIED.

9

IT IS FURTHER ORDERED that Plaintiff’s Motion to Rule upon Outstanding

10

Motion for Preliminary Injunction originally filed in Superior Court (Doc. 80) is DENIED

11

as moot. Plaintiff’s Motion for Preliminary Injunction, originally filed in Maricopa County

12

Superior Court, is denied.

13

IT IS FURTHER ORDERED that Defendants’ Response to, or in the alternative,

14

Motion to Strike Plaintiff’s supplemental memorandum and request for expedited ruling on

15

his preliminary injunction motion (Doc. 101) is GRANTED. The Clerk of the Court is

16

directed to strike Doc. 89.

17

DATED this 22nd day of September, 2011.

18
19
20
21
22
23
24
25
26
27
28
- 25 -