Arizona Radiation Therapy Management Services Incorporated v. Translation Research Management LLC

Filing 33

ORDER granting in part and denying in part 24 Motion to Dismiss Counts/Claims; denying 24 Motion to Stay. Signed by Judge David G Campbell on 10/22/2015.(DGC, nvo)

Download PDF
1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Arizona Radiation Therapy Management Services Incorporated, 10 Plaintiff, 11 12 13 No. CV-15-01138-PHX-DGC ORDER v. Translation Research Management LLC, Defendant. 14 15 Defendant Translational Research Management, LLC filed a motion to dismiss. 16 Doc. 24. The motion is fully briefed, and no party has requested oral argument. The 17 Court will grant Defendant’s motion in part and deny it in part.1 18 I. Background. 19 In February of 2012, Arizona Radiation Therapy Management Services 20 (“ARTMS”) engaged Translational Research Management (“TRM”) to find medical 21 practitioners to carry out a cancer treatment research program. Doc. 1, ¶ 5. ARTMS 22 agreed to advance TRM $6,000 per practitioner to cover program set-up costs 23 (“Credential Advances”). Id., ¶ 9. Credential Advances were to be repaid by TRM 24 within six months, regardless of whether participating practitioners generated sufficient 25 revenue to cover them. Id., ¶¶ 11, 13. 26 1 27 28 Plaintiffs’ memorandum does not follow the font and format requirements of LRCiv 7.1(b)(1). Plaintiff also failed to file a text-searchable version of its complaint as required by the Court. Plaintiffs’ counsel shall comply with the Court’s local rules and CMECF procedures in all future filings. Defendant has not complied with this Court’s order at Docket 10. Defense counsel shall comply with all Court orders in the future. 1 The research program generated additional fees and costs that were paid to 2 ARTMS or TRM by the participating practitioners (“Research Fees”). Id., ¶ 15. TRM 3 was required to deposit all Research Fees it received into an ARTMS account. Id., ¶ 15. 4 ARTMS agreed to pay 50% of those Research Fees to TRM (“Service Fees”). Id. at 11. 5 TRM was required to provide a monthly accounting of all Research Fees deposited, id., 6 ¶ 16, as well as all Service Fees that should be paid to TRM, id. at 11-12. ARTMS 7 terminated the contract on August 13, 2014. Id., ¶ 18. It now alleges that TRM failed to 8 refund all Credential Advances and failed to deposit all Research Fees. Id., ¶ 23. 9 ARTMS filed its complaint on June 18, 2015, seeking payment of outstanding 10 Credential Advances and Research Fees under four legal theories: (1) breach of contract; 11 (2) promissory estoppel; (3) conversion; and (4) an accounting. Id., ¶¶ 20-41. 12 II. Legal Standard. 13 When analyzing a complaint for failure to state a claim under Rule 12(b)(6), the 14 well-pled factual allegations are taken as true and construed in the light most favorable to 15 the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). Legal 16 conclusions couched as factual allegations are not entitled to the assumption of truth, 17 Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are insufficient to defeat a 18 motion to dismiss for failure to state a claim, In re Cutera Securities Litigation, 610 F.3d 19 1103, 1108 (9th Cir. 2010). To avoid a Rule 12(b)(6) dismissal, the complaint must 20 plead enough facts to state a claim to relief that is plausible on its face. Bell Atl. Corp. v. 21 Twombly, 550 U.S. 544, 570 (2007). “[W]here the well-pleaded facts do not permit the 22 court to infer more than the mere possibility of misconduct, the complaint has alleged B 23 but it has not ‘show[n]’ B ‘that the pleader is entitled to relief.’” Id. at 679 (quoting Fed. 24 R. Civ. P. 8(a)(2)). 25 III. Analysis. 26 Defendant argues that the Court should stay Count I pending mediation. Doc. 25 27 at 11-12. It asks the Court to dismiss Count II because an express contract exists between 28 the parties. Id. at 5-6. It argues the Court should dismiss Count III because the complaint -2- 1 fails to plead conversion and the economic loss rule bars recovery. Id. at 6-10. Finally, it 2 argues the Court should dismiss Count IV because actions for accountings are reserved 3 for parties in a fiduciary relationship. Id. at 10-11. 4 A. 5 Defendant argues that the breach of contract claim should be stayed because the 6 contract contains a mediation clause. Doc. 25 at 12. Defendant argues that because no 7 mediation has occurred, the Court should stay the litigation and compel mediation. Id. 8 Plaintiff responds that nothing in the contract “makes formal mediation mandatory, 9 discretionary, or otherwise.” Doc. 26 at 9. Motion to Stay Contract Claim. 10 Defendant relies on United States v. Sundt Construction, No. CV-07-673-PHX- 11 LOA, 2007 WL 1655976 (D. Ariz. June 7, 2007), where the mediation and arbitration 12 provisions used words such as “shall” and provided substantial detail about which 13 mediation rules to apply, which arbitration rules to apply if mediation failed, and who 14 should hear the arbitration. Id. at *1. The contract also expressly provided that “[t]he 15 party commencing the suit agrees to stay court proceedings pending arbitration under this 16 Agreement.” Id. at *2. 17 The contract in this case includes only one relevant sentence: “In the event of any 18 controversy or dispute related to or arising out of this Agreement, the parties agree to 19 meet and confer in good faith to attempt to resolve the controversy or dispute without an 20 adversary proceeding.” Doc. 1 at 18. This sentence lacks the detail and mandatory 21 language found in Sundt. The sentence does not mention mediation, and it contains no 22 agreement that the party commencing suit would stay the action pending mediation. 23 What is more, Plaintiff’s response describes several communications in which Plaintiff 24 sought Defendant’s agreement to pay the amounts owed, allegedly without success. 25 Doc. 26 at 7-8. The Court will not stay Count I pending mediation. 26 B. 27 Defendant argues that promissory estoppel cannot be pursued where there is an 28 express contract covering the subject matter at issue. Doc. 25 at 5. Defendant also Count II – Promissory Estoppel. -3- 1 argues that “ARTMS cannot establish it justifiably relied upon promises made by TRM 2 outside of the Agreement.” Id. at 6. Plaintiff argues that “promissory estoppel ‘is a 3 proper claim for relief as an alternative to the contract claim.’” Doc. 26 at 12 (citing 4 Arok Constr. Co. v. Indian Constr. Serv., 848 P.2d 870, 878 (Ariz. Ct. App. 1993)). 5 “[A] promise which the promisor should reasonably expect to induce action or 6 forbearance on the part of the promisee or a third person and which does induce such 7 action or forbearance is binding if injustice can be avoided only by enforcement of the 8 promise.” Restatement (Second) of Contracts § 90. Under Arizona law, “[t]here can be 9 no implied contract where there is an express contract between the parties in reference to 10 the same subject matter.” Chanay v. Chittenden, 563 P.2d 287, 290 (1977). Claims that 11 Plaintiff relied upon promises outside the subject matter of the contract must be 12 specifically plead. See Tiffany Inc. v. W.M.K. Transit Mix, Inc., 493 P.2d 1220, 1224 13 (Ariz. Ct. App. 1972). 14 In Arok Construction, the parties disagreed on whether a contract existed and the 15 court allowed a promissory estoppel claim “as an alternative to the contract claim.” Id. 16 Here, Defendant does not dispute the existence of the contract. Promissory estoppel 17 cannot be asserted, therefore, unless it is based on a promise outside the contract. See 18 Chanay, 563 P.2d at 290. Plaintiff alleges no such extra-contract promise, but instead 19 seeks to enforce the promises made in the agreement. See Doc. 1 ¶¶ 28-33 (alleging only 20 that ARTMS breached promises made in the contract). Plaintiff has failed to plead any 21 facts giving rise to a promissory estoppel claim. See Tiffany, 493 P.2d at 1224 (requiring 22 that claims of reliance on promises outside the contract must be affirmatively pleaded). 23 The Court will grant Defendant’s motion to dismiss Count II. 24 C. 25 Defendant argues that Plaintiff cannot establish the facts necessary for conversion 26 of money. Doc. 25 at 6-8. Defendant also argues that the economic loss rule precludes 27 conversion. Doc. 25 at 8-10. 28 Count III – Conversion. Conversion is “an act of wrongful dominion or control over personal property in -4- 1 denial of or inconsistent with the rights of another.” Case Corp. v. Gehrke, 91 P.3d 362, 2 365 (Ariz. Ct. App. 2004) (internal citation omitted). 3 conversion, a plaintiff must have had the right to immediate possession of the personal 4 property at the time of the alleged conversion.” Id. “To maintain an action for 5 Money is not the proper subject of a conversion claim when the claim is used 6 merely “to collect on a debt that could be satisfied by money generally.” Id.; see also 7 Autoville, Inc. v. Friedman, 510 P.2d 400, 403 (Ariz. 1973). 8 obligation to return the identical money, but only a relationship of debtor or creditor, an 9 action for conversion of the funds representing the indebtedness will not lie against the 10 debtor.’” Liberty Life Ins. Co. v. Myers, No. CV 10-2024-PHX-JAT, 2013 WL 530317, 11 at *13 (D. Ariz. Feb. 12, 2013) (quoting Lyxell v. Vautrin, 604 F.2d 18, 21 (5th 12 Cir.1979)). To maintain an action for conversion of money, therefore, a plaintiff must 13 establish that “the money can be described, identified or segregated, and an obligation to 14 treat it in a specific manner is established.” Gehrke, 91 P.3d at 365 (quotation marks and 15 citation omitted). “‘When there is no 16 Plaintiff has failed to state a claim for conversion. Plaintiff does not identify or 17 describe specific funds held by Defendant, or allege that specific moneys were 18 segregated. Plaintiff alleges categories of fees that were to be deposited in an account 19 and the contractual obligations of Defendant, but does not allege the existence of specific 20 moneys in the account. See Liberty, 2013 WL 530317 at *14 (allegation that $478,651 21 remained in a trust as of 2008 adequately described the property for purposes of 22 conversion). 23 Advances and Research Fees.” Doc. 1 at 6. This is a claim for money where the “debt 24 . . . could be satisfied by money generally.” See Liberty, 2013 WL 530317 at *13. Plaintiff merely asks the Court to award “all unpaid Credentialing 25 D. 26 Defendant argues that the claim for an accounting should be dismissed because 27 Plaintiff has failed to allege a breach of any fiduciary relationship. Doc. 25 at 10. 28 “Parties to a fiduciary relationship have a right to an accounting.” Dooley v. O’Brien, Count IV – Accounting. -5- 1 244 P.3d 586, 592 (Ariz. Ct. App. 2010). 2 Plaintiff does not allege a fiduciary relationship. The complaint refers only to a 3 failure to “account for all proceeds received in connection with the Agreement.” Doc. 1, 4 ¶ 40. 5 partnership or joint venture, which could give rise to fiduciary duties. Doc. 1 at 16. 6 Although the parties’ contract states that Defendant will account for funds collected and 7 deposited, Plaintiff cites no authority showing that such a contract term, in the absence of 8 fiduciary duties, entitles Plaintiff to the remedy of an accounting. The Court will dismiss 9 the claim for an accounting. The parties’ agreement specifically states that they are not entering into a 10 E. 11 Plaintiff seeks leave to amend. This step potentially could have been avoided if 12 Leave to Amend. Defendant had complied with the order at Docket 10. 13 The Court is concerned about motion practice resulting in unwarranted attorneys’ 14 fees in this relatively modest case. Plaintiff seems to have whatever remedy it needs 15 under the breach of contract claim, and the Court has difficulty understanding why 16 further amendment would be justified, especially if it would be followed by another 17 motion to dismiss. Plaintiff should raise this issue for discussion at the case management 18 conference scheduled for November 10, 2015. 19 IT IS ORDERED that Defendant’s motion to dismiss (Doc. 24) is granted in 20 part and denied in part. Plaintiff’s claims for promissory estoppel, conversion, and an 21 accounting are dismissed, but the request for a stay is denied. 22 Dated this 22nd day of October, 2015. 23 24 25 26 27 28 -6-

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?