International Academy of Business and Financial Management, Limited et al v. Mentz et al

Filing 48

ORDER denying 31 Motion to Dismiss Defendants Amended Counterclaims by Judge Christine M. Arguello on 7/17/13.(dkals, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 12-cv-00463-CMA-BNB
INTERNATIONAL ACADEMY OF BUSINESS AND
FINANCIAL MANAGEMENT, LIMITED,
BRETT KING, and
GEOFFREY BARING,
Plaintiffs,
v.
GEORGE S. MENTZ, and
AMERICAN ACADEMY OF FINANCIAL MANAGEMENT, LLC,
Defendants.

ORDER DENYING PLAINTIFFS’ MOTION TO
DISMISS AMENDED COUNTERCLAIMS

This matter is before the Court on Plaintiffs’ Motion to Dismiss Defendants’
Amended Counterclaims (Doc. # 31), filed by Plaintiffs Brett King, Geoffrey Baring, and
International Academy of Business and Financial Management (“IABFM”) on March 11,
2013. Diversity jurisdiction is proper under 28 U.S.C. § 1332. For the reasons
discussed below, Plaintiffs’ motion is denied.

I. BACKGROUND
A.

FACTS 1
Defendant/Counterclaim Plaintiff George Mentz (“Mentz”) is the founder and

chairman of Defendant/Counterclaim Plaintiff American Academy of Financial
Management, LLC (“AAFM”) (collectively, “Defendants”). (Doc. # 30, ¶ 3.) A United
States entity, AAFM is a professional society with more than 50,000 members,
associates, and affiliates in more than 150 countries. (Id., ¶ 4.) It offers professional
designations as well as professional development, certification, and copyrighted training
programs. AAFM also evaluates educational partners, promotes and sanctions training,
and adopts trademarks and certification and service marks. (Id.)
Plaintiffs/Counterclaim Defendants Brett King (“King”) and Geoffrey Baring
(“Baring”) are both Australian citizens. (Doc. # 1, ¶¶ 2, 3.) King was employed by
AAFM from 2004 to 2007 as a trainer, event coordinator, webmaster, and teacher; from
March 2007 until he resigned on March 4, 2009, King worked under contract to AAFM
as a training affiliate. (Doc. # 14, ¶ 10.) Baring served as a trainer and teacher for
AAFM from 2006 until he was terminated in March 2009. (Id. at ¶ 11.) “Following their
service to AAFM,” King and Baring formed Plaintiff/Counterclaim Defendant IABFM
(id., ¶ 13), a non-profit worldwide professional society of financial practitioners
incorporated and principally doing business in Hong Kong (Doc. # 1, ¶¶ 1, 9, 10).

1

Unless otherwise noted, the following facts are allegations from Defendants’ Amended
Counterclaims (Doc. # 30 at 4-13) and are deemed true for purposes of the instant motion.

2

King and Baring had access to AAFM’s intellectual property “during their
contractual service to AAFM.” (Doc. # 14, ¶ 14.) As a condition of King’s representation
of AAFM, he signed an agreement prescribing acknowledgments and covenants
regarding AAFM’s intellectual property, fees owed to Defendants, conditional use of
service marks and designations, and non-disclosure of AAFM’s confidential and trade
secret information. (Id., ¶ 12.) Baring also “acknowledged and confessed to such
agreement.” (Id.)
Defendants allege that Plaintiffs converted Defendants’ property to their own use
(id., ¶ 15), sold such property to Defendants’ customers (id., ¶ 16), committed fraud and
identity theft “using sophisticated Phishing methods” to intercept AAFM customer funds
(id., ¶ 17), and published false and defamatory emails about Defendants “which are

still on the internet” (id., ¶ 18). Defendants do not dispute Plaintiffs’ allegation that
IABFM offers no services in the U. S. and has no domestic membership among its over
200,000 members and affiliates located in 145 countries. (Doc. # 1, ¶¶ 17, 19.)
B.

PROCEDURAL HISTORY
Plaintiffs initiated this civil action on February 23, 2012, bringing state law tort

claims for business disparagement, tortious interference with prospective business
advantage, and defamation. (Id., ¶¶ 82-139.) In their answer, Defendants brought
twelve counterclaims: (1) breach of contract, (2) defamation, (3) service mark
infringement, (4) violation of the Colorado Consumer Protection Act, (5) copyright
infringement, (6) civil theft, (7) civil conspiracy, (8) intentional interference with

3

contractual relationships, (9) misappropriation of confidential information and trade
secrets, (10) violation of the Computer Fraud and Abuse Act, (11) violation of the
Electronic Communications Privacy Act, and (12) application for injunctive relief. (Doc.
# 14, ¶¶ 19-110.) Plaintiffs moved to dismiss Defendants’ counterclaims, and the Court
granted the motion in part and denied it in part, allowing Defendants to file amended
counterclaims. Int'l Acad. of Bus. & Fin. Mgmt., Ltd. v. Mentz, No. 12-CV-00463-CMABNB, 2013 WL 212640 (D. Colo. Jan. 18, 2013) (unpublished).
Defendants filed seven amended counterclaims: (1) breach of contract,
(2) defamation, (3) civil theft, (4) intentional interference with contractual relationships,
(5) civil conspiracy, 2 (6) copyright infringement, and (7) violation of the Colorado
Consumer Protection Act. (Doc. # 30, ¶¶ 19-77.) Plaintiffs moved to dismiss five
amended counterclaims on March 11, 2013 (Doc. # 31), Defendants responded on April
1, 2013 (Doc. # 35), and Plaintiffs replied on April 12, 2013 (Doc. # 36).
II. STANDARD OF REVIEW
Plaintiffs bring the instant motion to dismiss under Fed. R. Civ. P. 12(b)(6) for
failure of the pleading to state a claim upon which relief can be granted. The purpose of
such a motion is to “test the sufficiency of the allegations within the four corners of the
complaint.” Mobley v. McCormick, 40 F.3d 337, 340 (10th Cir. 1994). The “question
is whether, if the allegations are true, it is plausible and not merely possible that the
plaintiff is entitled to relief under the relevant law.” Christy Sports, LLC v. Deer Valley
2

Defendants conceded that this counterclaim is “clearly against only Baring and King” and
further amended it to remove IABFM as a Counterclaim Defendant. (Doc. # 35 at 4.)
4

Resort Co., Ltd., 555 F.3d 1188, 1192 (10th Cir. 2009). A complaint will survive a Rule
12(b)(6) motion only if it contains “enough facts to state a claim to relief that is plausible
on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “The plausibility
standard is not akin to a probability requirement, but it asks for more than a sheer
possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quotation marks and citation omitted).
In reviewing a Rule 12(b)(6) motion, a court must accept all the well-pleaded
allegations of the complaint as true and construe them in the light most favorable to
the plaintiff. Williams v. Meese, 926 F.2d 994, 997 (10th Cir. 1991). Nevertheless,
a complaint does not “suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual
enhancement.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). The court’s
function “is not to weigh potential evidence that the parties might present at trial, but to
assess whether the plaintiff’s complaint alone is legally sufficient to state a claim for
which relief may be granted.” Miller v. Glanz, 948 F.2d 1562, 1565 (10th Cir. 1991).
III. ANALYSIS
Plaintiffs filed a motion to dismiss the third through the seventh amended
counterclaims. The Court will consider each of these counterclaims in turn.
A.

THIRD AMENDED COUNTERCLAIM (Original Counterclaim # 6) –
CIVIL THEFT
Defendants allege that Plaintiffs violated Colorado law by “seizing unauthorized

control” of intellectual and other property, “taking over and stealing web sites and
domain names,” and changing “names and addresses in the websites” to deceive
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members of the public out of their membership fees. (Doc. # 30, ¶¶ 36, 37.) Plaintiffs
argue that Defendants do not “allege any facts,” so their counterclaim must fail. (Doc.
# 36 at 2.) A valid claim must show that Plaintiffs obtained control over Defendants’
property in circumstances amounting to theft, robbery, or burglary. See Martinez
v. Nash Finch Co., 886 F. Supp. 2d 1212, 1221 (D. Colo. 2012).
Theft occurs when a person “takes another’s property without authorization, or in
more complicated circumstances, such as where the person, via deception, obtains the
owner’s authorization to take the property.” Martinez, 886 F. Supp. 2d at 1221 (quoting
West v. Roberts, 143 P.3d 1037, 1040 (Colo. 2006)). Defendants allege that after King
left AAFM, he was able to steal websites and other property through his “access to
passwords, the web site host, email accounts, files, service providers and domain name
registrations and all other elements necessary to control the web sites, publications,
member billing, and their content.” (Doc. # 30, ¶ 35). Colo. Rev. Stat. § 18-4-405
provides that the owner of property taken by theft “may maintain an action not only
against the taker thereof but also against any person in whose possession he finds the
property.” Defendants allege that the stolen websites redirected customers from AAFM
to Plaintiffs, who “knowingly, and with intent to do so, took, stole, and permanently
deprived [Defendants] of substantial monies.” (Id., ¶ 37.) Therefore, the claim of theft
is appropriately brought against all Plaintiffs.
Plaintiffs contend that the amended counterclaim is without factual basis
regarding “when the change of control occurred, who participated, what customers were

6

‘tricked,’ [and] how much money was lost.” (Doc. # 36 at 2.) However, Defendants
allege facts in each of these areas: the change in control occurred after termination of
King’s and Baring’s relationship with Defendants, it was Plaintiffs who participated in the
theft, and the customers who were tricked were “members, customers, and potential
customers of AAFM.” (Doc. # 30, ¶¶ 36-38.) Defendants also suggest that the amount
of money lost should be determined at trial. (Id., ¶ 39). Therefore, the Court finds
Defendants’ civil theft allegations sufficient to state a counterclaim upon which relief
may be granted.
B.

FOURTH AMENDED COUNTERCLAIM (Original Counterclaim # 8) –
INTENTIONAL INTERFERENCE WITH CONTRACTUAL RELATIONSHIPS
Defendants allege that Plaintiffs intentionally interfered with their contractual

relationships. Plaintiffs argue that the counterclaim contains no allegations that they
knew of a contract between Defendants and a third party, no facts to permit the
inference that the contract was breached due to Plaintiffs’ action, and no claim of
specific injury suffered by Defendants. 3 (Doc. # 31 at 7.) “To be liable for intentional
interference with contract, a defendant must (1) be aware of a contract between two
parties, (2) intend that one of the parties breach the contract, and (3) induce the party to
breach or make it impossible for the party to perform the contract.” Krystkowiak v. W.O.
Brisben Cos., Inc., 90 P.3d 859, 871 (Colo. 2004).

3

Though Defendants bring a claim for intentional interference with contractual relationships,
Plaintiffs urge the Court to apply a different test that pre-dates Krystkowiak and applies to claims
for tortious interference with contracts. (Doc. # 31 at 6); see R-G Denver, Ltd. v. First City
Holdings of Colo., Inc., 789 F.2d 1469, 1474 (10th Cir. 1986) (citing Comtrol, Inc. v. Mountain
States Tel. and Telegraph Co., 513 P.2d 1082 (Colo. App. 1973)). The Court declines to do so.
7

Defendants’ pleading contains allegations under each of the Krystkowiak factors.
First, Defendants allege that Baring and King were aware of contracts Defendants had
with Messrs. Li and Thong. (Doc. # 30 at ¶ 44.) Second, they allege that Plaintiffs
intended Li and Thong to breach the contract as evidenced by Plaintiffs’ knowing
engagement “in a campaign of defamation, lies, assault and injury against
[Defendants].” (Id. at ¶ 47.) Finally, Defendants allege that Plaintiffs induced Li and
Thong to breach the contract. (Id.) Because the amended counterclaim satisfies the
three Krystkowiak factors, it is sufficient to state a contractual interference claim.
C.

FIFTH AMENDED COUNTERCLAIM (Original Counterclaim # 7) –
CIVIL CONSPIRACY
Defendants allege civil conspiracy in that Plaintiffs Baring and King conspired to

take over and steal websites and other property. (Doc. # 30, ¶ 55.) Plaintiffs contend
that Defendants fail “to articulate what the individual Plaintiffs did, and when and how
they did it, when they allegedly conspired to steal Defendants’ website and materials.”
(Doc. # 31 at 8.) In contending so, Plaintiffs confuse the Tenth Circuit’s suggestion for
how “a district court might helpfully advise a pro se litigant,” Nasious v. Two Unknown
B.I.C.E. Agents, 492 F.3d 1158, 1163 (2007), with the actual elements required to state
a civil conspiracy claim. Parties asserting civil conspiracy claims must allege: “(1) two
or more persons; (2) an object to be accomplished; (3) a meeting of the minds on the
object or course of action; (4) an unlawful overt act; and (5) damages as to the
proximate result.” Scott v. Hern, 216 F.3d 897, 918 (10th Cir. 2000) (internal citation
and quotation marks omitted); Natural Wealth Real Estate, Inc. v. Cohen, No. 05-cv8

01233-LTB-MJW, 2006 WL 3500624, at *7 (D. Colo. Dec. 4, 2006) (unpublished)
(quoting Jet Courier Service, Inc. v. Mulei, 771 P.2d 486, 502 (Colo.1989)).
By naming King and Baring and alleging that they “agreed, by words or conduct
to accomplish the unlawful goals of stealing and converting the web sites” and other
property (Doc. # 30, ¶ 55), Defendants satisfy elements (1), (2), and (3) of the fiveelement Scott test. They satisfy elements (4) and (5) by referring to paragraphs 36-38,
in which the unlawful overt act of theft is described (id., ¶ 36, 37) and damages are
alleged in the form of foregone benefits, financial or otherwise, from the diverted AAFM
members (id., ¶ 38). 4 Therefore, the Court finds Defendants’ allegations of civil
conspiracy sufficient to state a counterclaim (against Plaintiffs Baring and King only).
D.

SIXTH AMENDED COUNTERCLAIM (Original Counterclaim # 5) –
COPYRIGHT INFRINGEMENT
Defendants allege that Plaintiffs violated the United States Copyright Act, 17

U.S.C. § 101, et seq., by making stolen copyrighted works available on the Internet from
“servers located in the State of Arizona in the United States.” (Doc. # 30, ¶ 62).
Plaintiffs argue that Defendants did not allege domestic copyright infringement,
ownership of a valid copyright, or the copying of protected material, and also did not
justify IABFM’s inclusion as a counterclaim defendant. (Doc. # 31 at 8-10.)
To state a copyright infringement claim, Defendants “must show: (1) ownership
of a valid copyright, and (2) copying by the [Plaintiffs] of protected components of the
4

The Court admonished Defendants for “shotgun pleading,” Int'l Acad. of Bus. & Fin. Mgmt.,
Ltd. v. Mentz, No. 12-CV-00463-CMA-BNB, 2013 WL 212640, at *7 (D. Colo. Jan. 18, 2013)
(unpublished), but reference to certain united, enumerated paragraphs here is acceptable.
9

copyrighted material.” Gates Rubber Co. v. Bando Chem. Indus., Ltd., 9 F.3d 823, 831
(10th Cir. 1993). Allegations of completely extraterritorial infringement do not suffice to
state a claim. Subafilms, Ltd. v. MGM-Pathe Commc’ns Co., 24 F.3d 1088, 1094 (9th
Cir. 1994) (en banc); L.A. News Serv. v. Reuters Television Int'l, Ltd., 149 F.3d 987,
990-91 (9th Cir. 1998) (a plaintiff may recover damages for extraterritorial distribution of
copyrighted works if at least one alleged act of infringement is completed entirely within
the United States).
To meet their burden here, Defendants must satisfy both Gates factors, show
domestic infringement, and justify including IABFM as a Counterclaim Defendant. First,
Defendants list five copyright registration numbers (Doc. # 30, ¶ 62) to satisfy the factor
of copyright ownership. 17 U.S.C. § 410(c) (“In any judicial proceedings the certificate
of a registration . . . shall constitute prima facie evidence of the validity of the copyright
. . . .”). Defendants then allege that entire copyrighted works were stolen and
transferred to servers under Plaintiffs’ control (Doc. # 30, ¶¶ 62-64) to satisfy the second
Gates factor – copying protected components of the work. Plaintiffs’ assertion that this
allegation fails because Defendants do not allege facts identifying the particular
protected components of the material (Doc. # 31 at 10) is unavailing; such particularity
is required “in contexts addressing the merits of a claim, [but] not a motion to dismiss.”
Skelton Fibres Ltd. v. Canas, No. 96 Civ. 6031 DLC, 1997 WL 97835, at *3 (S.D.N.Y.
Mar. 6, 1997) (unpublished). Third, Defendants show domestic infringement by alleging
that Plaintiffs stole their copyrighted works, domiciled stolen domains in the United

10

States on GoDaddy.com, and made the works and domains available from servers
located in Arizona. (Doc. # 30, ¶ 62.) Finally, Defendants properly included King,
Baring, and IABFM as Defendants to this counterclaim. Cf. Feder v. Videotrip Corp.,
697 F. Supp. 1165, 1177 (D. Colo. 1988) (copyright infringement claims, which are
typically brought forth against corporations, may also “be asserted against a stockholder
or officer of a corporation . . . .”). Therefore, Defendants’ copyright infringement
allegations are sufficient to state a counterclaim.
E.

SEVENTH AMENDED COUNTERCLAIM (Original Counterclaim # 4) –
VIOLATION OF COLORADO CONSUMER PROTECTION ACT
Defendants assert that Plaintiffs violated the Colorado Consumer Protection

Act (“CCPA” or “Act”), Colo. Rev. Stat. § 6-1-105(1)(a), (b), and (c), by engaging in
deceptive trade practices. (Doc. # 30, ¶ 70.) To bring a private cause of action under
the Act, Defendants must allege: “(1) that [Plaintiffs] engaged in an unfair or deceptive
trade practice; (2) that the challenged practice occurred in the course of [Plaintiffs’]
business, vocation, or occupation; (3) that it significantly impacts the public as actual or
potential consumers of [Plaintiffs’] goods, services, or property; (4) that [Defendants]
suffered injury in fact to a legally protected interest; and (5) that the challenged practice
caused [Defendants’] injury.” Rhino Linings USA, Inc. v. Rocky Mountain Rhino Lining,
Inc., 62 P.3d 142, 146-47 (Colo. 2003) (citation omitted). Plaintiffs contend that the
claim fails because it (1) does not plead with the particularity required by Fed. R. Civ. P.
9 and (2) does not plead the public impact element of the Act. (Doc. # 31 at 10, 11.)

11

1.

Federal Rule of Civil Procedure 9

Plaintiffs contend that the counterclaim fails to meet Fed. R. Civ. P. 9(b)’s
heightened pleading requirement because it does not “identify any particular statements
made by Plaintiffs, how they were allegedly fraudulent, where or when they were made,
and how they impacted the public.” (Doc. # 31 at 11.) Under Rule 9(b), CCPA claims
must be pled with particularity. Gates Corp. v. Dorman Prods., Inc., No. 09-cv-02058,
2009 WL 5126556, at *5 (D. Colo. Dec. 18, 2009) (unpublished); Duran v. Clover Club
Foods Co., 616 F. Supp. 790, 793 (D. Colo. 1985). Fed. R. Civ. P. 9(b) provides that in
“all averments of fraud or mistake, the circumstances constituting fraud or mistake shall
be stated with particularity.” While “claims under the Act are not precisely actions for
fraud . . . allegations of deceptive trade practices under the Act are subject to Rule
9(b)’s requirement of particularity.” Duran, 616 F. Supp. at 793. However, such
particularity “only requires identification of the circumstances constituting fraud.” Id.
(internal quotation marks and citations omitted). Moreover, the Federal Rules of Civil
Procedure
do not require a factual basis for every allegation. Nor must every
allegation, taken in isolation, contain all the necessary information.
Rather, to avoid dismissal under Rules 9(b) and 8(a), plaintiffs need
only show that, taken as a whole, a complaint entitles them to relief.
U.S. ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163, 1173 (10th Cir. 2010).
Therefore, this Court must determine if the allegations are sufficiently particular
regarding the circumstances, when taken as a whole, to entitle Defendants to relief.
Defendants set forth the time as March 2009 to the present. (Doc. # 30, ¶ 69.) They
12

name the place as Arizona – and in the virtual sphere, the websites “www.aafm.org,
www.aapmglobal.com, www.aafm.asia and www.aapmapac.com.” (Id., ¶ 62.) They
identify Plaintiffs as those who allegedly changed “names and addresses in the
web sites” (id., ¶ 70) and engaged in the deceptive trade practices (id., ¶¶ 69-75).
Defendants set forth the consequences of said practices: the public was deceived
into sending money and fees to Plaintiffs instead of to AAFM. (Id., ¶ 70.)
Defendants’ identification of the circumstances of the deceptive trade practices
meets Rule 9(b)’s heightened pleading requirement for CCPA claims. By alleging
“the time, place and contents of the false representation [and] the identity of the party
making the false statements and the consequences thereof,” Koch v. Koch Indus., Inc.,
203 F.3d 1202, 1236 (10th Cir. 2000), Defendants have satisfied Rule 9(b).
2.

Public Impact Element

Plaintiffs contend that the counterclaim is “clearly insufficient” to plead the public
impact element of a CCPA claim because it “generically asserts that actual and
potential customers have been affected – nothing more.” (Doc. # 31 at 11.) For public
impact to be sufficiently pleaded in a CCPA claim, the challenged trade practice must
be shown to have significantly impacted the public. Rhino Linings, 62 P.3d at 146-47.
The three factors a Court analyzes to determine whether such a pleading is sufficient
are: “(1) the number of consumers directly affected by the challenged practice; (2) the
relative sophistication and bargaining power of the consumers affected by the
challenged practice; and (3) evidence that the challenged practice has previously

13

impacted other consumers or has the significant potential to do so in the future.” Id. at
149 (citing Martinez v. Lewis, 969 P.2d 213, 222 (Colo. 1998)).
a)

Number of consumers directly affected by the alleged deceptive
trade practice

Defendants assert that Plaintiffs’ acts “significantly impact the public as actual or
potential customers of [Plaintiffs’] goods and services.” (Doc. # 30, ¶ 73.) By itself, this
“‘formulaic recitation of the elements of a cause of action’” would not pass muster, Iqbal,
556 U.S. at 678 (quoting Twombly, 550 U.S. at 555), and Plaintiffs contention that the
counterclaim is generic and “nothing more” (Doc. # 31 at 11) would be correct.
The counterclaim, however, includes additional, specific allegations of public reach:
Through the controlled and altered web sites and with the aid of the stolen
service marks, domain names, copyrighted manuals, business data and
member information that was included in the content of the web sites,
[Plaintiffs], through impersonation of AAFM, engaged in communications
with members, customers, and potential customers of AAFM, that believed
they were communicating with authorized agents of AAFM, so as to divert
members and potential members and their payments to [Plaintiffs].
(Doc. # 30, ¶ 71.)
The question is whether those allegations are sufficient to meet the requisite
pleading standard – that is, whether the complaint “contain[s] sufficient factual matter,
accepted as true, to ‘state a claim for relief that is plausible on its face.’” Iqbal, 556 U.S.
at 678 (quoting Twombly, 550 U.S. at 570). While not alleging the specific number of
actual or potential customers affected, Defendants suggest a broad scheme that was
perpetrated on at least four websites and involved direct “communications with
members, customers, and potential customers.” (Doc. # 30, ¶¶ 69-71); cf. Hall
14

v. Walter, 969 P.2d 224, 235 (Colo. 1998) (defendants’ practices “implicated the public
as consumers because the misrepresentations were directed at the market generally,
taking the form of widespread advertisements and deception of actual and prospective
purchasers”). Given that the alleged deception prevented Defendants from receiving
communication from their customers and the public at large, it would be unrealistic to
require them to plead the actual number of individuals affected.
b)

Relative sophistication and bargaining power of the consumers
affected by the challenged practice

The second public impact factor is the relative sophistication and bargaining
power of the parties. See Martinez, 969 P.2d at 222. Here, the consumers affected
were “public members, customers, and existing or potential business partners of
AAFM.” (Doc. # 30, ¶ 70.) Plaintiffs, on the other hand, were experienced trainers,
webmasters, and teachers. (See Doc. # 14, ¶¶ 10, 11.) While AAFM members may be
sophisticated businesspeople, neither party has alleged that this sophistication equates
to Internet savvy or the ability to detect when one’s correspondence through a known
website is being transmitted to an unintended recipient. Moreover, neither party has
suggested a way to assess the relative sophistication of the potential customers and
individuals at large who may also have visited the websites. Thus, because of the
nature of the alleged deceptive trade practice, the relative sophistication factor supports
– or at least does not hamper – Defendants’ ability to show significant public impact.

15

c)

Challenged practice has previously impacted other consumers
or has the significant potential to do so in the future

The final factor to consider in deciding if there is a significant public impact is
whether “the challenged practice previously has impacted other consumers or has
significant potential to do so in the future.” Martinez, 969 P.2d at 222. Defendants have
alleged a broad scheme that has had an impact on consumers. (Doc. # 30, ¶¶ 70, 71,
73.) The scheme has the potential to impact consumers in the future, because Plaintiffs
currently maintain control over Defendants’ stolen websites and domains. (Id., ¶ 69.)
Defendants’ factual allegations have “nudged their claims across the line from
conceivable to plausible,” Twombly, 550 U.S. at 547, albeit by a very small margin.
Under Rhino Linings, the three public impact factors are “relevant considerations to
determine whether a challenged practice significantly impacts the public within the
context of a CCPA claim.” 62 P.3d at 149 (emphasis added). And under Rule 9, the
particularity required of the claim is only that the circumstances of fraud be identified.
Duran, 616 F. Supp. at 793. Though Defendants do not directly allege all three public
impact factors or provide copious data to support their counterclaim, their allegations
regarding Plaintiff’s deceptive business practices identify the circumstances and facts
sufficiently to satisfy the heightened pleading requirement under Fed. R. Civ. P. 9(b)
and plead a valid claim for a CCPA violation.

16

IV.

CONCLUSION

Despite Plaintiffs’ repeated and cursory contentions that Defendants have
done little or nothing to cure the defects of their original pleadings, 5 Defendants’
counterclaims, as amended, include sufficient factual bases to state valid claims under
the required pleading standards. Accordingly, Plaintiffs’ Motion to Dismiss Defendants’
Amended Counterclaims (Doc. # 31) is DENIED. It is
ORDERED that all seven of Defendants’ Amended Counterclaims remain, with
the proviso that the Fifth Amended Counterclaim remains only against Plaintiffs King
and Baring.
DATED: July

17

, 2013
BY THE COURT:

_______________________________
CHRISTINE M. ARGUELLO
United States District Judge

5

Plaintiffs’ Motion to Dismiss and Reply largely ignore the additional factual information
provided by Defendants and are replete with statements such as “Defendants’ ‘amended’
Counterclaims continue to suffer from the same issues which plagued them in the first instance
and resulted in their dismissal” (Doc. # 36 at 1) and “Defendants’ complete lack of regard for the
Court’s Order and Opinion, as well as the federal pleading requirements, emphasizes once and
for all that Defendants’ [Amended] Counterclaims are simply an attempt to throw everything
against the wall to see what sticks” (Doc. # 31 at 8).
17