Advanced Multilevel Concepts, Inc. et al v. Stalt, Inc. et al

Filing 57

ORDER by Judge Samuel Conti denying 34 Motion for Judgment on the Pleadings; denying 50 Motion for Sanctions; granting 27 Motion to Dismiss; denying 29 Motion to Strike (sclc1, COURT STAFF) (Filed on 5/21/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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ADVANCED MULTILEVEL CONCEPTS,
INC. and ABLE DIRECT MARKETING,

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Plaintiffs,

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v.

United States District Court

For the Northern District of California

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STALT, INC., HILLARD M.
STERLING, ESQ., FREEBORN &
PETERS LLP, and DOES 1 through
30, inclusive,

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Defendants.

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Case Nos. 11-6679-SC
ORDER GRANTING MOTION TO
DISMISS, DENYING MOTION TO
STRIKE, DENYING MOTION FOR
SANCTIONS, AND DENYING
MOTION FOR PARTIAL JUDGMENT
ON THE PLEADINGS

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I.

INTRODUCTION
This case arises out of allegedly unlawful "stop orders"

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imposed upon shares of VitaminSpice held by Plaintiffs Advanced

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Multilevel Concepts ("Advanced") and Able Direct Marketing ("Able")

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(collectively, "Plaintiffs").

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bring this action against Stalt, Inc. ("Stalt"), the Transfer Agent

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that allegedly imposed the stop orders; Hillard M. Sterling

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("Sterling"), the attorney who allegedly counseled VitaminSpice to

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issue the stop orders; and Freeborn & Peters LLP ("Freeborn &

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Peters"), an Illinois law firm at which Sterling was a partner

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during the relevant period (collectively, "Defendants").

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filed an Answer denying most of the allegations in Plaintiffs'

ECF No. 1 ("Compl.").

Plaintiffs

Stalt has

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Complaint.

ECF No. 4 ("Answer").

Now before the Court are four motions.

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Sterling and Freeborn

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& Peters (the "Freeborn Defendants") move to dismiss and strike the

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Complaint and also move for Rule 11 Sanctions.

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("MTD"), 29 ("MTS") 50 ("Rule 11 Mot.").1

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judgment on the pleadings against Stalt based on its Answer.

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No. 34 ("MJP").2

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disposition without oral argument.

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below, the Court GRANTS the Freeborn Defendants' motion to dismiss,

ECF Nos. 27

Plaintiffs move for

The Court finds these matters appropriate for
For the reasons set forth

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United States District Court

For the Northern District of California

ECF

and DENIES their motion to strike as moot.

The Court also DENIES

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the Freeborn Defendants' motion for sanctions and Plaintiffs'

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motion for partial judgment on the pleadings.

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II.

BACKGROUND
This case concerns stop orders placed on Plaintiffs' shares of

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VitaminSpice.

Plaintiffs are Wyoming corporations.

Compl. ¶¶ 1-2.

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VitaminSpice is also a Wyoming corporation and has its principal

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place of business in Wayne, Pennsylvania.

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wrongdoing begins with VitaminSpice's Chief Executive Officer

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("CEO"), Edward Bukstel ("Bukstel"), who allegedly abused alcohol

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at work and mismanaged the company's accounting function.

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32-34.

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VitaminSpice's board of directors by Jehu Hand ("Hand"), the

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company's bookkeeper and securities counsel.

Compl. ¶ 6.

The alleged

Id. ¶¶

Bukstel's alleged improprieties were reported to

Id. ¶ 37.

Bukstel

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1

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27
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The Freeborn Defendants' motions to dismiss and strike are fully
briefed. ECF Nos. 43 ("MTD Opp'n"), 46 ("MTD Reply"), 41 ("MTS
Opp'n"), 47 ("MTS Reply"). Plaintiffs have yet to file an
opposition to the motion for sanctions.
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Plaintiffs' motion for judgment on the pleadings is fully
briefed. ECF Nos. 38 ("MJP Opp'n"), 40 ("MJP Reply").
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allegedly retaliated in early July 2010 by terminating Hand and by

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ordering VitaminSpice's transfer agent, Stalt, to impose a stop

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order on the shares of Able, who had hired Hand as corporate

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counsel.

Id. ¶¶ 38-39.

Stalt allegedly sent a letter to Able on July 12, 2010,

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stating that it had placed a stop order on Able's VitaminSpice

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shares "at the request of Vitamin Spice."

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Ltr.").

Compl. Ex. A ("July 12

The July 12 letter further states:

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Stalt, Inc. is treating this as an adverse claim.
If
[Able's common stock] certificate is properly presented
for transfer[,] VitaminSpice will have 30 days to get a
court order or bond in place.
If Stalt, Inc. does not
have written evidence of one of these within 30 days we
will remove the Stop Order and effect the transfer of the
above mentioned certificate as presented if the transfer
request has not been withdrawn.

United States District Court

For the Northern District of California

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In its Answer, Stalt states that the July 12 letter "speaks

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Id.

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for itself" and that Stalt lacks "knowledge or information

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sufficient as to form a belief as to the truth or falsity of the

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allegations" concerning the issuance of the stop order.

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39.

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Answer ¶

Around August 24, 2010, Bukstel had second thoughts about the

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stop order on Able's shares.

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Freeborn Defendants allegedly took actions to ensure that the stop

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order would remain in place.

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of law in Illinois and was a partner at Freeborn & Peters at the

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time the alleged misconduct occurred.

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is a law firm with a principal place of business located in

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Chicago, Illinois.

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VitaminSpice's board of directors to leave the Able stop order in

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place and expand its scope to include Advanced's shares of

Id. at 3.

Id. ¶ 44.

Soon thereafter, the

Sterling is admitted to the practice

Id. ¶ 13.

Freeborn & Peters

Sterling allegedly advised

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VitaminSpice.3

Id. ¶¶ 44-45.

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Plaintiffs allege that Sterling also telephoned Stalt's CEO,

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Bill Senner ("Senner"), in California on October 5, 2010 and made

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"a series of slanderous allegations regarding fraud or other

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malfeasance purportedly surrounding Plaintiffs and the validity of

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their ownership claim over the Shares."

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Senner sent an email to Bukstel stating: "I just spoke with Hillard

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Sterling.

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information to say the least."4

United States District Court

Later that day,

Although I didn't say much, he had some interesting
Compl. Ex. D.

On October 6, 2010, the VitaminSpice board of directors passed

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For the Northern District of California

Id. ¶ 52.

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a resolution placing a stop order on Advanced's shares.

Id. ¶ 55.

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The resolution stated: "[T]he Directors of the Corporation have

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been notified by Hillard Sterling, an attorney engaged in

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litigation against Jehu Hand . . . of potential irregularities with

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Shareholders represented by Jehu Hand."

Id.

The next day, October 7, Stalt sent a letter to Advanced

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informing it that a stop order had been placed on Advanced's

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VitaminSpice shares at the request of VitaminSpice.

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Ex. C ("Oct. 7 Ltr.").

Compl. ¶ 57,

The October 7 letter is, in all relevant

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The Freeborn Defendants' alleged motivations for harming
Plaintiffs are convoluted, though the Court reserves judgment on
their plausibility. Plaintiffs allege that the lawyers were
advancing the interests of one of their other clients, Keith A.
Mazer ("Mazer"), who was engaged in litigation with Hand over a
residential property in Antigua worth over one million dollars.
Id. ¶ 17. Hand and Mazer are also allegedly embroiled in three
other federal court proceedings. Id. Plaintiffs allege that
"Sterling presumed that the damage [to Plaintiffs] would accrue to
Hand by consequence . . . [;] it was his hope that . . . Mazer
would thereby gain an advantage by way of an injured adversary with
diminished resources to continue the litigation in which Mazer and
Hand were . . . vigorously engaged." Id. ¶ 48.
4

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Plaintiffs allege that Sterling called Senner on October 6, 2010,
Compl. ¶ 51, but the email attached to the Complaint indicates that
the conversation took place on October 5, Compl. Ex. D.
4

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respects, identical to the letter Stalt sent to Able on July 12.

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Compare July 12 Ltr. with Oct. 7 Ltr.

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"admits" Plaintiffs allegations regarding the October 7 letter.

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Answer ¶ 57.

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In its Answer, Stalt

Plaintiffs allege that they lost over $2 million as a result

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of the stop orders because VitaminSpice's share price dropped

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precipitously while the stop orders were in place.

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Plaintiffs explain that no broker will accept "stopped shares" for

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deposit because the marketability of those shares has been called

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United States District Court

For the Northern District of California

Id. ¶ 60.

Compl. ¶ 75.

into question.

Thus, according to Plaintiffs, "a 30-day

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stop order amounts to a permanent block of sale."

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allege that, sometime after November 2010, Stalt temporarily

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refrained from reissuing the 30-day stop order "at every single

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step in the chain leading to sale."

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concessions, Plaintiffs were able sell their shares and mitigate

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some of their damages.

Id. ¶ 64.

Id.

Plaintiffs

Pursuant to these

Id. ¶ 65.

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On November 9, 2010, Plaintiffs filed an action against

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VitaminSpice, Bukstel, Stalt, and a number of other defendants in

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Orange County Superior Court.

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The Superior Court dismissed the action without prejudice on venue

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and jurisdiction grounds.

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Plaintiffs filed another suit against Bukstel and VitaminSpice in

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the United States District Court for the Eastern District of

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Pennsylvania (the "Pennsylvania Action"); Stalt and the Freeborn

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Defendants are not named in the action.

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Pennsylvania Action was later transferred to bankruptcy court and

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was stayed when Hand filed an involuntary bankruptcy petition

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against VitaminSpice on August 5, 2011.

ECF No. 31 ("Defs.' RJN") Ex. A.

Compl. at 11, n.4.

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On June 8, 2011,

Defs.' RJN Ex. B.

Defs.' RJN Ex. C.

The

Plaintiffs filed the instant action on December 28, 2011

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against Stalt and the Freeborn Defendants.

They assert two causes

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of action against Stalt: (1) breach of California Commercial Code

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("the Commercial Code") §§ 8401, 8403(b) et seq.;5 and (2)

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conversion.

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against the Freeborn Defendants: (3) intentional interference with

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prospective economic advantage; (4) legal malpractice; and (5)

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libel.

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alleged misconduct, as well as punitive and exemplary damages.

Plaintiffs' last three causes of action are directed

Plaintiffs pray for damages flowing from Defendants'

United States District Court

For the Northern District of California

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III. DISCUSSION

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A.

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The Freeborn Defendants argue that Plaintiffs' claims against

The Freeborn Defendants' Motion to Dismiss

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them should be dismissed under Federal Rule of Civil Procedure

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12(b)(2) because the court lacks personal jurisdiction.

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The argument is predicated on the fact that Sterling is admitted to

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practice law in Illinois and Freeborn & Peters' principal place of

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business is located in Chicago, Illinois.

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Plaintiffs respond that the exercise of general jurisdiction is

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appropriate in light of the Freeborn Defendants' contacts with

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California, or, alternatively, specific jurisdiction is appropriate

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because Plaintiffs' claims arise out of Sterling's phone call to

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Stalt in California.

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Plaintiffs' arguments unavailing and concludes that it lacks

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jurisdiction to hear their claims against the Freeborn Defendants.

MTD Opp'n at 5-7.

MTD at 8.

Compl. ¶¶ 13-14.

The Court finds

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Plaintiffs' first cause of action is styled as "Breach of Uniform
Commercial Code" ("UCC"). Compl. at 14. California has adopted
the UCC as part of the California Commercial Code. For the sake of
clarity, the Court refers to the codified California code sections
rather than the UCC.
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1.

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General Jurisdiction

General jurisdiction exists where the defendant engages in

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"continuous and systematic general business contacts that

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approximate physical presence in the forum state.

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exacting standard, as it should be, because a finding of general

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jurisdiction permits a defendant to be haled into court in the

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forum state to answer for any of its activities anywhere in the

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world."

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(9th Cir. 2004) (internal quotations and citations omitted).

United States District Court

Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 801

Plaintiffs argue that general jurisdiction is appropriate

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For the Northern District of California

This is an

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because Sterling has successfully applied to appear pro hac vice

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before the United States District Court for the Central District of

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California in three separate cases since October 2009.

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at 5-6 (citing ECF No. 44 ("Pls.' RJN") Ex. A).

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represent that these pro hac vice appearances include approximately

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six visits to California for the purposes of mediation, conducting

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depositions, and other trial machinations.

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argument lacks merit.

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and six visits to California hardly approximates a physical

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presence in the state.

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pro hac vice appearances occurred after he left Freeborn & Peters

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and, therefore, have no bearing on Freeborn & Peters' contacts with

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California.

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defendant's contacts with the forum State must be assessed

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individually.").

MTD Opp'n

Plaintiffs

Id. at 6.

This

Pro hac vice status is inherently temporary,

Further, it appears that many of Sterling's

See Calder v. Jones, 465 U.S. 783, 790 (1984) ("[E]ach

Plaintiffs further argue that California Rule of Court 9.40(f)

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requires that the Court exercise personal jurisdiction.

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at 7.

Rule 9.40(f) provides, in relevant part:

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MTD Opp'n

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A person permitted to appear as counsel pro hac vice . .
. is subject to the jurisdiction of the courts of this
state with respect to the law of this state governing the
conduct of attorneys to the same extent as a member of
the State Bar of California.
The counsel pro hac vice
must familiarize himself or herself and comply with the
standards of professional conduct required of members of
the State Bar of California and will be subject to the
disciplinary jurisdiction of the State Bar with respect
to any of his or her acts occurring in the course of such
appearance.

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Cal. Rule of Ct. 9.40(f).

In other words, under Rule 9.40, an out-

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of-state attorney is subject to jurisdiction in California for

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charges of professional misconduct arising out of his or her pro

United States District Court

For the Northern District of California

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hac vice appearance in the state.

Contrary to Plaintiffs'

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assertions, the rule does not provide that a pro hac vice

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appearance subjects an attorney to jurisdiction in California for

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claims unrelated to that appearance.

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not connected to Sterling's pro hac vice appearances in California,

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these appearances cannot support the exercise of jurisdiction here.

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Plaintiffs also argue that Sterling has the requisite minimum

Since Plaintiffs' claims are

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contacts with California since he left Freeborn & Peters to join

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Lewis Brisbois Bisgaard & Smith ("Lewis Brisbois"), a multi-state

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law firm with offices in San Francisco, San Diego, San Bernadino,

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Costa Mesa, and Los Angeles.

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that Sterling has recently filed documents with the Central

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District of California and that these documents provide the Costa

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Mesa address of Lewis Brisbois as Sterling's business address.

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(citing Pls.' RJN Exs. C, D).

MTD Opp'n at 6.

Plaintiffs point out

Id.

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These facts are unpersuasive as they fail to show that

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Sterling has "continuous and systematic" contacts with the forum.

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Missing from Plaintiff's evidence is any indication that Sterling

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regularly works out of Lewis Brisbois's offices in California, as

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opposed to its offices in other states.

Sterling's filings with

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the Central District of California do not support Plaintiffs'

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position.

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on one of these filings lists Sterling's address as Chicago,

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Illinois.

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proof of service executed in Chicago.

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documents indicate that Sterling was appearing pro hac vice and was

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working with other Lewis Brisbois attorneys who are admitted to

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practice law in California.

Indeed, they tend to undermine it.

Pls.' RJN Ex. C at 5.

The signature line

Attached to the other filing is a
Pls.' RJN Ex. D at 8.

See Pls.' RJN Exs. C, D.

Both

It is

United States District Court

For the Northern District of California

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logical to assume that the Costa Mesa address listed in these

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documents belongs to Lewis Brisbois's California attorneys, not to

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Sterling.

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in Illinois, not California.

Taken together, these facts tend to support jurisdiction

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For these reasons, the Court concludes that the Freeborn

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Defendants lack the minimum contacts with California necessary to

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support the exercise of general jurisdiction.

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2.

Specific Jurisdiction

The Ninth Circuit has enunciated a three-prong test for
analyzing a claim of specific jurisdiction:
(1) The non-resident defendant must purposefully direct
his activities or consummate some transaction with the
forum or resident thereof; or perform some act by which
he purposefully avails himself of the privilege of
conducting activities in the forum, thereby invoking the
benefits and protections of its laws;

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(2) the claim must be one which arises out of or relates
to the defendant's forum-related activities; and

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(3) the exercise of jurisdiction must comport with fair
play and substantial justice, i.e. it must be reasonable.

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Schwarzenegger, 374 F.3d at 802.

The first prong is often referred

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to as "the purposeful availment prong."

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"If the plaintiff succeeds

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in satisfying both of the first two prongs, the burden then shifts

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to the defendant to 'present a compelling case' that the exercise

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of jurisdiction would not be reasonable."

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Id.

"[A] foreign act that is both aimed at and has effect in the

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forum state satisfies the purposeful availment prong of the

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specific jurisdiction analysis."

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Augusta Nat'l Inc., 223 F.3d 1082, 1087 (9th Cir. 2000).

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example, in Calder, a California plaintiff sued a national magazine

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and other defendants for an allegedly defamatory article that had

Bancroft & Masters, Inc. v.

United States District Court

For the Northern District of California

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been written and edited in Florida.

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Court upheld the exercise of personal jurisdiction in California,

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even though the defendants had few contacts with the state.

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789-90.

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expressly aimed at California" and "[the defendants] knew that the

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brunt of th[e] injury would be felt by [the plaintiff] in the

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State."

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465 U.S. at 785.

For

The Supreme

Id. at

The court reasoned that the defendants' actions "were

Id.

The Ninth Circuit construes Calder to impose three

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requirements: "the defendant allegedly [must] have (1) committed an

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intentional act, (2) expressly aimed at the forum state, (3)

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causing harm that the defendant knows is likely to be suffered in

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the forum state."

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L'Antisemitisme, 433 F.3d 1199, 1206 (9th Cir. 2006) (quoting

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Schwarzenegger, 374 F.3d at 803).

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"the 'brunt' of the harm need not be suffered in the forum state."

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Id. at 1207.

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suffered in the forum state, it does not matter that even more harm

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might have been suffered in another state."

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Yahoo! Inc. v. La Ligue Contre Le Racisme Et

As to the third requirement,

"If a jurisdictionally sufficient amount of harm is

Id.

Here, Plaintiffs' argument for the exercise of specific

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1

jurisdiction is predicated on Sterling's October 5 telephone call

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with Senner, Stalt's CEO, who was located in California at the

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time.

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that: (1) Sterling initiated the call, (2) Sterling advised Stalt

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regarding potential irregularities in Plaintiffs' VitaminSpice

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shares, and (3) this call was the proximate cause of the stop order

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issued by Stalt the following day.

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MTD Opp'n at 7-8.

Plaintiffs insist that it is plausible

Id. at 8.

Even if the Court were to draw these inferences, the exercise

United States District Court

of specific jurisdiction would be inappropriate since there is no

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For the Northern District of California

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indication that Plaintiffs suffered any harm in California or that

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Sterling's actions were aimed at California.

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Wyoming corporations with no apparent connections to California.

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Compl. ¶¶ 1-2.

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and the stop orders that allegedly resulted from that call could

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not have injured Plaintiffs in California.

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Plaintiffs are

Accordingly, Sterling's telephone call with Senner

The Ninth Circuit's decision in Metropolitan Life Insurance

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Co. v. Neaves, 912 F.3d 1062 (9th Cir. 1990), is instructive.

The

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defendant, an Alabama resident, mailed fraudulent information to an

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insurer in order to claim life insurance policy benefits to which

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she was not entitled, ultimately reducing the share of benefits

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distributed to another beneficiary who resided in California.

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F.3d at 1063.

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jurisdiction, urging the Ninth Circuit "to focus only on her

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conduct in mailing the fraudulent information, contending that it

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was 'only fortuitous' that the mailing was directed to California

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as opposed to, for example, [the insurer's] headquarters in New

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York."

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the letter was sent; the critical inquiry was where the impact of

912

The defendant argued California courts lacked

Id. at 1065.

The Court found that it was irrelevant where

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the fraud took place.

Id.

Likewise, here, Plaintiffs focus on

2

where Sterling's phone call was directed but do not address where

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the harm was sustained.

4

For the reasons set forth above, the Court declines to

5

exercise specific or general jurisdiction over the Freeborn

6

Defendants.

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Plaintiffs' claims against the Freeborn Defendants.

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lacks jurisdiction to address the merits of Plaintiffs' claims, it

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DENIES the Freeborn Defendants' motion to strike.

Accordingly, the Court DISMISSES WITHOUT PREJUDICE
As the Court

United States District Court

For the Northern District of California

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B.

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Plaintiffs have yet to file an opposition to the Freeborn

The Freeborn Defendants' Motion for Rule 11 Sanctions

12

Defendants' motion for Rule 11 sanctions.

13

reviewed the moving papers, the Court can discern no convincing

14

reason to grant the motion.

15

Nevertheless, having

Since the Court lacks subject matter jurisdiction, it is

16

hesitant to rule on the merits of Plaintiffs' claims against the

17

Freeborn Defendants, let alone find that those claims are

18

frivolous.

19

Defendants essentially argue that Plaintiffs' claims must be

20

frivolous because they fail as a matter of law.

21

how Rule 11 works.

22

whether a complaint states an arguable claim -- not whether the

23

pleader is correct in his perception of the law."

24

Bus. Forms, Inc., 836 F.2d 1156, 1159 (9th Cir. 1987).

25

concludes that the Complaint, at the very least, states an arguable

26

claim.

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28

Further, the motion lacks merit.

The Freeborn

But that is not

"The key question in assessing frivolousness is

Hudson v. Moore
The Court

The Freeborn Defendants also argue that Plaintiffs' claims
were filed for an improper purpose.

12

Specifically, they state that:

[T]he history between Plaintiffs' corporate attorney,
Jehu Hand, and the Freeborn Defendants suggests that
Plaintiffs have filed their Complaint in this action in
an effort to drive a wedge between attorney Sterling and
Mr. Mazer and in retaliation for the Freeborn defendants'
zealous representation [of] Mr. Mazer in three unrelated
actions involving Mr. Hand . . . .
Additionally, the
history between VitaminSpice, Plaintiffs[,] and Mr. Hand
suggest that this Complaint was filed in an attempt to
drive a wedge between Mr. Sterling and VitaminSpice . . .
.

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2
3
4
5
6
7

Sanctions Mot. at 15-16.

Plaintiffs have leveled similar

8

allegations against the Freeborn Defendants, claiming that they

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counseled VitaminSpice to impose the stop orders so that Mazer

United States District Court

For the Northern District of California

10

could gain an advantage over Hand in the separately filed actions.

11

Compl. ¶ 17.

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this sanctions motion was filed for that same improper purpose.

13

The Court declines to involve itself in such feuds.

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declines to conclude that Plaintiffs filed this action for an

15

improper purpose.

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conclude that Plaintiffs sued them to harm or settle a score with

17

Mazer.

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action to recover for damages they suffered as a result of the

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Freeborn Defendants' allegedly illicit conduct -- a perfectly

20

proper purpose.

It also

The Freeborn Defendants would have the Court

A more plausible inference is that Plaintiffs filed this

For these reasons, the Court DENIES the Freeborn Defendants'

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22

The Court suspects that Plaintiffs would assert that

motion for sanctions.

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C.

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Plaintiffs move for partial judgment on the pleadings against

25

Stalt as to its liability on Plaintiffs' first cause of action for

26

breach of Division 8 of the Commercial Code.6

27

Plaintiffs' motion is that Division 8 provides that only the

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6

Plaintiffs' Motion for Judgment on the Pleadings

The crux of

Plaintiffs also pray for a hearing to determine the amount of
damages. MJP at 5.
13

1

registered owner of a stock certificate may lawfully instruct a

2

transfer agent to impose a stop order.

3

Plaintiffs argue that VitaminSpice lacked legal authority to

4

instruct Stalt to issue the stop order on Plaintiffs' shares.

5

Plaintiffs further argue that Stalt, as a transfer agent, may be

6

held liable for damages arising from the unauthorized stop orders

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under Section 8407 of the Commercial Code.

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9

MJP at 7.

Accordingly,

Id.

Id.

The legal standard for evaluating a motion for judgment on the
pleadings is well-settled.

"Judgment on the pleadings is proper

United States District Court

For the Northern District of California

10

when the moving party clearly establishes on the face of the

11

pleadings that no material issue of fact remains to be resolved and

12

that it is entitled to judgment as a matter of law."

13

Studios, Inc. v. Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir.

14

1989).

15

are accepted as true, and are construed in the light most favorable

16

to that party."

17

Seventh-Day Adventist Congregational Church, 887 F.2d 228, 230 (9th

18

Cir. 1989).

19

pleadings when the answer raises issues of fact that, if proved,

20

would defeat recovery."

21

the truth of legal conclusions merely because they are cast in the

22

form of factual allegations."

23

618, 624 (9th Cir. 1981).

24

Hal Roach

"All allegations of fact by the party opposing the motion

Gen. Conference Corp. of Seventh-Day Adventists v.

Thus, "a plaintiff is not entitled to judgment on the

Id.

However, the Court does not "assume

W. Mining Council v. Watt, 643 F.2d

In the instant action, it appears that Plaintiffs may have a

25

strong case against Stalt on summary judgment, especially since

26

many of the arguments Stalt raises in its opposition brief appear

27
28

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1

to lack merit.7

2

of Plaintiffs would be premature.

3

infer too much from the pleadings, especially since the Court must

4

construe the allegations in the light most favorable to the non-

5

moving party.

However, at this stage, entering judgment in favor
Plaintiffs ask the Court to

Plaintiffs rely heavily on the July 12 Letter and the October

6
7

7 Letter, both of which were attached to the Complaint.

In these

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letters, Stalt informed Plaintiffs that it had placed a Stop Order

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on certain VitaminSpice Shares at the request of VitmainSpice.

United States District Court

For the Northern District of California

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Stalt has not denied the authenticity or content of these letters.8

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However, there are only so many inferences the Court may draw from

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the documents, especially where those inferences would favor the

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moving party.

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lacked the authority to impose a stop order on their stock

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certificates as "the Certificates in question are not titled in its

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name, nor has ownership of the Certificates ever been assigned to

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[VitaminSpice] via special indorsement."

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not jump to such conclusions since these facts are not apparent

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from the July 12 Letter or the October 7 Letter.

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facts admitted in Stalt's Answer.

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Plaintiffs' VitaminSpice stock certificates.

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response, Stalt states that it "lacks knowledge or information

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sufficient as to form a belief as to the truth or falsity of the

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allegations . . . and, therefore denies them."

For example, Plaintiffs argue that VitaminSpice

MJP at 10.

The Court may

Nor are these

The Complaint describes
Compl. ¶¶ 1-2.

In

Answer ¶¶ 1-2.

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7

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The Court notes that Stalt's interpretation of the Commerical
Code, as enunciated in its opposition papers, is unpersuasive.

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In its Answer, Stalt states that the July 12 Letter "speaks for
itself" and "admits the allegations of paragraph 57 [of the
Complaint]," which references the October 7 Letter. Answer ¶¶ 39,
57.
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The Court also notes that Plaintiffs do not address any of the

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six affirmative defenses alleged in Stalt's Answer.

The Court

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concedes that these affirmative defenses are not particularly well-

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pled -- indeed, many do not appear to be affirmative defenses at

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all.

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in his answer it will usually bar judgment on the pleadings,"

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Seventh-Day Adventists, 887 F.2d at 230, and Plaintiffs have failed

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to explain why Stalt's affirmative defenses are defective.

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Court declines to do the work for Plaintiffs, especially on a

Nevertheless, "if the defendant raises an affirmative defense

The

United States District Court

For the Northern District of California

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dispositive motion that could deprive Stalt of a future opportunity

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to plead its case.9
Accordingly, the Court DENIES Plaintiffs' motion for partial

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judgment on the pleadings.

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Curiously, Plaintiffs' moving papers devote significant space to
defenses which Stalt might have -- but did not -- raise. MJP at 916. Equally curious, Stalt fails to address any of its asserted
affirmative defenses in its opposition papers.
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IV.

CONCLUSION
For the reasons set forth above, the Court GRANTS Defendants

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Hillard M. Sterling, Esq., and Freeborn & Peters LLP's motion to

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dismiss and DISMISSES Plaintiffs Advanced Multilevel Concepts,

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Inc., and Able Direct Marketing's claims against these defendants

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WITHOUT PREJUDICE.

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motion for sanctions are DENIED.

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Plaintiffs' motion for partial judgment on the pleadings against

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Defendant Stalt, Inc.

The Freeborn Defendants' motion to strike and
Further, the Court DENIES

The Court hereby sets a status conference

United States District Court

For the Northern District of California

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for July 6, 2012 at 10:00 a.m. in Courtroom 1, 450 Golden Gate

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Avenue, San Francisco, California.

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IT IS SO ORDERED.

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Dated: May 21, 2012
UNITED STATES DISTRICT JUDGE

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