Paris v. Carbon Bio-Engineers Inc. et al
Filing
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ORDER Granting Plaintiff Richard Paris' Motion To Dismiss Counterclaim, Filed April 9, 2012 re 13 . Signed by JUDGE J. MICHAEL SEABRIGHT on 7/9/12. CBE may file an amended Counterclaim by 7/24/12. (gls, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
RICHARD PARIS, an individual,
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Plaintiff,
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vs.
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CARBON BIO-ENGINEERS INC., a )
Hawaii corporation; MICHAEL
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LURVEY, an individual, and DOES 1- )
10, inclusive,
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Defendants.
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________________________________ )
CIVIL NO. 12-00144 JMS/RLP
ORDER GRANTING PLAINTIFF
RICHARD PARIS’ MOTION TO
DISMISS COUNTERCLAIM,
FILED APRIL 9, 2012
ORDER GRANTING PLAINTIFF RICHARD PARIS’ MOTION TO
DISMISS COUNTERCLAIM, FILED APRIL 9, 2012
I. INTRODUCTION
On March 12, 2012, Plaintiff Richard Paris (“Plaintiff”) filed this
diversity action against Defendants Carbon Bio-Engineers Inc. (“CBE”) and
Michael Lurvey (“Lurvey”) (collectively, “Defendants”). Plaintiff asserts claims
for breach of contract, breach of fiduciary duty, and unjust enrichment based on his
allegedly unlawful discharge as Chief Executive Officer (“CEO”) of CBE, a
company in the business of developing and marketing a “green” technology for
waste disposal. On April 9, 2012, Defendants filed an Answer and Counterclaim,
which asserts that Plaintiff misrepresented his educational and business
qualifications and was unable to carry out his duties as CEO.
Currently before the court is Plaintiff’s Motion to Dismiss the
Counterclaim for failure to comply with Federal Rules of Civil Procedure 8, 9(b),
and 12(b)(6). Based on the following, the court finds that Defendants have failed
to assert plausible claims for relief against Plaintiff and therefore GRANTS
Plaintiff’s Motion to Dismiss, with leave for CBE to file an Amended
Counterclaim.
II. BACKGROUND
On March 12, 2012, Plaintiff filed his Complaint asserting the
following factual allegations:1
In 2009, Plaintiff entered into a contract to assist Lurvey in forming
CBE, a company that would develop and exploit certain “green” technology using
a Lurvey-developed system called the Thermal Conversion of Organic Material
System (the “TCOM System”). Doc. No. 1, Compl. ¶ 11. The parties formed
CBE, and on October 23, 2009, Plaintiff entered into a contract with CBE making
him CEO. Id. ¶ 13. On February 12, 2010, Lurvey transferred ownership in the
TCOM System to CBE and entered into a Consulting Agreement whereby he
1
Because the focus of the Motion to Dismiss is the Counterclaim and not the Complaint,
the court outlines the allegations of the Complaint for the purpose of providing context for the
parties’ dispute.
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agreed to work exclusively for, and not compete with, CBE. Id. ¶¶ 13-14.
In the fall of 2011, Plaintiff was in the final stages of bringing in
several large customers to CBE when Lurvey began to obstruct these deals and
attempt to transfer the rights to the TCOM system to another company for his own
benefit. Id. ¶¶ 15-19. When Plaintiff raised Lurvey’s misconduct with CBE’s
Board, it refused to take any action and ultimately terminated Plaintiff without
paying his salary or offering him stock options as required under his employment
contract. Id. ¶¶ 20-30. Based on these allegations, Plaintiff asserts claims for
breach of contract, breach of fiduciary duty, and unjust enrichment.
On April 9, 2012, Defendants filed a Counterclaim, which includes
the following factual allegations:
(1) In applying for and obtaining employment with
Defendants Plaintiff Paris materially misrepresented his
educational and business qualifications and experience
knowing and intending that the Defendants would rely
and did rely upon those misrepresentations to their
detriment and injury;
(2) Plaintiff Paris breached his fiduciary duties and
obligations to Defendants by applying for and assuming
employment responsibilities after failing to accurately
and honestly provide his educational and business
qualifications to the Defendants;
(3) Due to his lack of sufficient educational and
business qualifications Plaintiff Paris failed and refused
and was incapable of carrying out the responsibilities of
his employment to the detriment and injury of
Defendants.
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Doc. No. 7-1, Counterclaim ¶¶ 1-3.
On April 27, 2012, Plaintiff filed his Motion to Dismiss Counterclaim.
Defendants filed an Opposition on June 22, 2012, and Plaintiff filed a Reply on
July 2, 2012. Pursuant to Local Rule 7.2(d), the court determines Plaintiff’s
Motion without a hearing.
III. STANDARDS OF REVIEW
A.
Rule 12(b)(6)
Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss
a claim for “failure to state a claim upon which relief can be granted[.]”
“To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)); see also Weber v. Dep’t of Veterans Affairs,
521 F.3d 1061, 1065 (9th Cir. 2008). This tenet -- that the court must accept as
true all of the allegations contained in the complaint -- “is inapplicable to legal
conclusions.” Iqbal, 556 U.S. at 678. Accordingly, “[t]hreadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Id. (citing Twombly, 550 U.S. at 555); see also Starr v. Baca, 652 F.3d
1202, 1216 (9th Cir. 2011) (“[A]llegations in a complaint or counterclaim may not
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simply recite the elements of a cause of action, but must contain sufficient
allegations of underlying facts to give fair notice and to enable the opposing party
to defend itself effectively.”).
Rather, “[a] claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing
Twombly, 550 U.S. at 556). In other words, “the factual allegations that are taken
as true must plausibly suggest an entitlement to relief, such that it is not unfair to
require the opposing party to be subjected to the expense of discovery and
continued litigation.” Starr, 652 F.3d at 1216. Factual allegations that only permit
the court to infer “the mere possibility of misconduct” do not show that the pleader
is entitled to relief as required by Rule 8. Iqbal, 556 U.S. at 679.
B.
Rule 8
A complaint must also meet the requirements of Federal Rule of Civil
Procedure 8, mandating that a complaint include a “short and plain statement of the
claim,” Fed. R. Civ. P. 8(a)(2), and that “each allegation must be simple, concise,
and direct.” Fed. R. Civ. P. 8(d)(1). A complaint that is so confusing that its “true
substance, if any, is well disguised” may be dismissed sua sponte for failure to
satisfy Rule 8. Hearns v. San Bernardino Police Dep’t, 530 F.3d 1124, 1131 (9th
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Cir. 2008) (quoting Gillibeau v. City of Richmond, 417 F.2d 426, 431 (9th Cir.
1969)); see also McHenry v. Renne, 84 F.3d 1172, 1180 (9th Cir. 1996)
(“Something labeled a complaint but written . . ., prolix in evidentiary detail, yet
without simplicity, conciseness and clarity as to whom plaintiffs are suing for what
wrongs, fails to perform the essential functions of a complaint.”).
Put differently, a district court may dismiss a complaint for failure to
comply with Rule 8 where the complaint fails to provide defendants with fair
notice of the wrongs they have allegedly committed. See McHenry, 84 F.3d at
1178-80 (affirming dismissal of complaint where “one cannot determine from the
complaint who is being sued, for what relief, and on what theory, with enough
detail to guide discovery”); cf. Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d
1097, 1105 n.4 (9th Cir. 2008) (finding dismissal under Rule 8 was in error where
“the complaint provide[d] fair notice of the wrongs allegedly committed by
defendants and [did] not qualify as overly verbose, confusing, or rambling”). Rule
8 requires more than “the-defendant-unlawfully-harmed-me accusation[s]” and “[a]
pleading that offers labels and conclusions or a formulaic recitation of the elements
of a cause of action will not do.” Iqbal, 556 U.S. at 678 (citations and quotations
omitted).
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C.
Rule 9(b)
Federal Rule of Civil Procedure 9(b) requires that “[i]n all averments
of fraud or mistake, the circumstances constituting fraud or mistake shall be stated
with particularity.” “Rule 9(b) requires particularized allegations of the
circumstances constituting fraud.” In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541,
1547-48 (9th Cir. 1994) (en banc), superseded on other grounds by 15 U.S.C.
§ 78u-4.
In their pleadings, parties must include the time, place, and nature of
the alleged fraud; “mere conclusory allegations of fraud are insufficient” to satisfy
this requirement. Id. (citation and quotation signals omitted). However, “[m]alice,
intent, knowledge, and other condition of mind of a person may be averred
generally.” Fed. R. Civ. P. 9(b); see also In re GlenFed, Inc. Sec. Litig, 42 F.3d at
1547 (“We conclude that plaintiffs may aver scienter . . . simply by saying that
scienter existed.”); Walling v. Beverly Enter., 476 F.2d 393, 397 (9th Cir. 1973)
(Rule 9(b) “only requires the identification of the circumstances constituting fraud
so that the defendant can prepare an adequate answer from the allegations.”
(citations omitted)). A motion to dismiss for failure to plead with particularity is
the functional equivalent of a motion to dismiss under Rule 12(b)(6). Vess v. CibaGeigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003).
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IV. DISCUSSION
Plaintiff argues that although the three paragraphs of the Counterclaim
appear to assert claims for fraud, breach of fiduciary duty, and breach of contract
respectively, they are so vaguely asserted that they fail to state plausible claims for
relief. Plaintiff further argues that Lurvey has no standing to pursue any of these
claims. Doc. No. 13-1, Pl.’s Mot. at 11-12. In opposition, Defendants argue that
CBE has asserted claims for fraud and breach of fiduciary duty, but acknowledge
that they currently lack sufficient facts to state a claim against Plaintiff for breach
of fiduciary duty and that Lurvey lacks standing to pursue these claims. See Doc.
No. 21, Defs.’ Opp’n at 2 n.1.
The court GRANTS Plaintiff’s Motion to Dismiss as to paragraph
two of the Counterclaim without prejudice. The court further DISMISSES the
Counterclaim to the extent it asserts claims by Lurvey. Because Defendants agree
that Lurvey lacks standing to bring such claims, the dismissal as to Lurvey is
without leave to amend. The court further finds that the Counterclaim’s assertions
for fraud and breach of contract fail to state plausible claims for the following
reasons.
///
///
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A.
Counterclaim for Fraud
The first Counterclaim, in its entirety, asserts:
In applying for and obtaining employment with
Defendants Plaintiff Paris materially misrepresented his
educational and business qualifications and experience
knowing and intending that the Defendants would rely
and did rely upon those misrepresentations to their
detriment and injury;
Doc. No. 7-1, Counterclaim ¶ 1.
This wholly conclusory allegation is insufficient to meet Rule 9(b)’s
requirement that a party must state with particularity the circumstances constituting
the fraud. Indeed, the Counterclaim fails to include any “particularized allegations
of the circumstances constituting fraud” such as the time, place, and nature of the
alleged fraud. See In re GlenFed, Inc. Sec. Litig., 42 F.3d at 1547-48.
Specifically, although the Counterclaim vaguely asserts that Plaintiff “materially
misrepresented his educational and business qualifications and experience,” the
Counterclaim fails to explain (1) what precise misrepresentations Plaintiff made;
(2) to whom Plaintiff made these misrepresentations; (3) when Plaintiff made these
misrepresentations; and
(4) precisely how CBE relied upon these misrepresentations to its detriment.
In opposition, Defendants argue that the Counterclaim meets the
specificity requirements for a fraud claim because it includes all the requisite
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elements -- that (1) Plaintiff made false representations, (2) with knowledge of
their falsity, (3) in contemplation of CBE’s reliance upon the false representations,
and (4) CBE did rely upon them. Doc. No. 21, Defs.’ Opp’n at 4-5 (citing
Hawaii’s Thousand Friends v. Anderson, 70 Haw. 276, 286, 768 P.2d 1293, 1301
(1989)). Defendants’ argument only highlights their failure to assert a cognizable
claim -- “[t]hreadbare recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice” to assert a plausible claim for relief
under Rule 12(b)(6), Iqbal, 556 U.S. at 678, and certainly do not meet the stricter
particularity requirements of Rule 9(b).
The court therefore GRANTS Plaintiff’s Motion to Dismiss
Defendants’ first Counterclaim.
B.
Counterclaim for Breach of Contract
The other Counterclaim, in its entirety, provides:
Due to his lack of sufficient educational and business
qualifications Plaintiff Paris failed and refused and was
incapable of carrying out the responsibilities of his
employment to the detriment and injury of Defendants.
Doc. No. 7-1, Counterclaim ¶ 3.
Defendants have failed to allege even the basic elements of a breach
of contract claim, much less factual allegations to establish the plausibility of such
claim. See Iqbal, 556 U.S. at 678 (stating that Rule 8 requires more than
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“the-defendant-unlawfully-harmed-me accusation[s]” and “[a] pleading that offers
labels and conclusions or a formulaic recitation of the elements of a cause of action
will not do”). The Counterclaim fails to identify (1) the contract at issue; (2) the
parties to the contract; (3) whether CBE performed under the contract;
(4) the particular provision of the contract allegedly violated by Plaintiff; (5) when
and how Plaintiff allegedly breached the contract; or (6) how Defendants were
injured. See Velez v. The Bank of N.Y. Mellon, 2011 WL 572523, at *3 (D. Haw.
Feb. 15, 2011) (explaining elements of breach of contract claim); Otani v. State
Farm Fire & Cas. Co., 927 F. Supp. 1330, 1335 (D. Haw. 1996) (“In breach of
contract actions, [ ] the complaint must, at minimum, cite the contractual provision
allegedly violated. Generalized allegations of a contractual breach are not
sufficient.”). The Counterclaim therefore fails to state a plausible claim for breach
of contract.
In opposition, Defendants summarily assert that they “sufficiently
allege a claim for breach of contract in alleging that Plaintiff failed, refused, and
was incapable of carrying out the duties and terms of his employment with
Defendants.” See Doc. No. 21, Defs.’ Opp’n at 5-6. This argument merely parrots
the language of their Counterclaim and offers no facts explaining how this
allegation amounts to a breach of contract. Defendants’ bald assertions that they
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have stated a claim do not make it so.
The court therefore GRANTS Plaintiff’s Motion to Dismiss the
Counterclaim for breach of contract.
C.
Leave to Amend
Defendants request leave to amend the Counterclaim, and in
opposition, Plaintiff argues that the court should deny such request because
“Defendants have made no showing as to how amendment of their Counterclaim
would provide the requisite factual basis to satisfy the pleading requirements of
Fed. R. Civ. P. 8 and 9.” Doc. No. 25, Pl.’s Reply at 7. And in fact, the court is
left in the dark as to how Defendants believe they can amend the Counterclaim,
particularly where their first effort in asserting a Counterclaim was so wholly
lacking. Yet given that Defendants have had only one opportunity to assert a
Counterclaim and now have the benefit of this Order, the court cannot say at this
time that granting leave to amend would be futile. This dismissal is therefore with
leave to amend, except as to Lurvey’s claims against Paris.
V. CONCLUSION
Based on the above, the court GRANTS Plaintiff’s Motion to Dismiss
Defendants’ Counterclaim. CBE may file an Amended Counterclaim by July 24,
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2012. If CBE fails to file an Amended Counterclaim by July 24, 2012, this action
will proceed as to Plaintiff’s claims against Defendants only.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, July 9, 2012.
/s/ J. Michael Seabright
_____________________________
J. Michael Seabright
United States District Judge
Paris v. Carbon Bio-Engineers, Inc. et al., Civ. No. 12-00144 JMS/RLP, Order Granting Plaintiff
Richard Paris’ Motion to Dismiss Counterclaim, Filed April 9, 2012
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