Blair Mielke v. Standard Metals Processing, Inc.

Filing 24

ORDERED that defendant Standard Metals Processing, Inc.s motion to dismiss plaintiffs complaint 6 be, and the same hereby is, GRANTED as to plaintiffs claim for specific performance, and DENIED as to all other claims. Signed by Judge James C. Mahan on 4/24/2015. (Copies have been distributed pursuant to the NEF - DKJ)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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***

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BLAIR MIELKE,

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Plaintiff(s),

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Case No. 2:14-CV-1763 JCM (NJK)
ORDER

v.
STANDARD METALS PROCESSING, INC.,

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Defendant(s).

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Presently before the court is defendant Standard Metals Processing, Inc.’s (“Standard”)

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motion to dismiss the complaint. (Doc. # 6). Plaintiff Blair Mielke filed a response (doc. # 8) and

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defendant filed a reply (doc. # 15).

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I.

Background

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On or about August 2011, Standard approached plaintiff to serve on its board. (Doc. # 1-

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1 at 2). Plaintiff alleges that, in exchange for serving on the board, Standard offered to pay him

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90,000 restricted stock units of the company’s common stock. (Id.). Plaintiff agreed, and Standard

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appointed him a board member on or about August 24, 2011.

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Plaintiff asserts that his agreement with Standard “was commemorated by the filing of

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Form 8-K with the Securities and Exchange Commission (“SEC”) on August 30, 2011.” (Id.).

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Plaintiff further asserts that the Form 8-K stated that “the board approved a grant of 90,000

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restricted stock units of the company’s common stock for Mr. Mielke’s membership on the board

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and his appointment to the board’s audit and compensation committees. All RSUs vest annually.”

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(Id.).

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James C. Mahan
U.S. District Judge

On or about August 31, 2011, Standard filed a Form 4 with the SEC, detailing the dates
when plaintiff’s 90,000 shares would vest from November 2011, through August 2012. (Id.).

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Plaintiff resigned from the board on September 27, 2012, after one year of service. (Id.).

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Plaintiff states that, “[o]n or about 2014, [he] sought to obtain the stock certificates for his 90,000

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shares,” but that Standard has refused to deliver certificates for any of the 90,000 shares. (Id.).

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Plaintiff initiated this case in the Eighth Judicial District Court of Nevada on October 1,

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2014. (Doc. # 1-1). Standard removed this case on October 24, 2014, based on diversity

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jurisdiction. (Doc. # 1).

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II.

Legal Standard

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A court may dismiss a plaintiff’s complaint for “failure to state a claim upon which relief

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can be granted.” Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide “[a] short and

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plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2);

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Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 does not require detailed

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factual allegations, it demands “more than labels and conclusions” or a “formulaic recitation of the

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elements of a cause of action.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citation omitted).

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“Factual allegations must be enough to rise above the speculative level.” Twombly, 550 U.S. at

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555. Thus, to survive a motion to dismiss, a complaint must contain sufficient factual matter to

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“state a claim to relief that is plausible on its face.” Iqbal, 129 S.Ct. at 1949 (citation omitted).

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In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply

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when considering motions to dismiss. First, the court must accept as true all well-pled factual

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allegations in the complaint; however, legal conclusions are not entitled to the assumption of truth.

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Id. at 1950. Mere recitals of the elements of a cause of action, supported only by conclusory

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statements, do not suffice. Id. at 1949. Second, the court must consider whether the factual

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allegations in the complaint allege a plausible claim for relief. Id. at 1950. A claim is facially

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plausible when the plaintiff's complaint alleges facts that allows the court to draw a reasonable

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inference that the defendant is liable for the alleged misconduct. Id. at 1949.

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Where the complaint does not “permit the court to infer more than the mere possibility of

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misconduct, the complaint has alleged, but it has not shown, that the pleader is entitled to relief.”

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Id. (internal quotations and alterations omitted). When the allegations in a complaint have not

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James C. Mahan
U.S. District Judge

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crossed the line from conceivable to plausible, plaintiff's claim must be dismissed. Twombly, 550

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U.S. at 570.

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The Ninth Circuit addressed post-Iqbal pleading standards in Starr v. Baca, 652 F.3d 1202,

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1216 (9th Cir. 2011). The Starr court stated, “First, to be entitled to the presumption of truth,

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allegations in a complaint or counterclaim may not simply recite the elements of a cause of action,

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but must contain sufficient allegations of underlying facts to give fair notice and to enable the

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opposing party to defend itself effectively. Second, the factual allegations that are taken as true

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must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing

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party to be subjected to the expense of discovery and continued litigation.” Id.

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III.

Discussion

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Plaintiff asserts six causes of action: (1) breach of contract; (2) breach of the covenant of

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good faith and fair dealing; (3) unjust enrichment; (4) promissory estoppel; (5) quantum meruit;

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and (6) specific performance. Standard moves to dismiss the complaint in full.

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A. Breach of Contract

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To state a claim for breach of contract, the plaintiff must allege: (1) the existence of a valid

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agreement between the plaintiff and the defendant; (2) a breach by the defendant; and (3) damages

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as a result of the breach. Versatility, Inc. v. Capitol Indem. Corp., No. 2:10-cv-1942-JCM-PAL,

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2011 WL 3444187, at *1 (D. Nev. Aug. 5, 2011) (citing Calloway v. City of Reno, 993 P.2d 1259

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(Nev. 2000) (overruled on other grounds)). Once a plaintiff proves these prima facie elements, the

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burden shifts to the defendant to show that his nonperformance was excused or otherwise

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defensible. Hewitt v. Allen, 43 P.3d 345, 349 (Nev. 2002).

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Plaintiff alleges that Standard offered to pay him 90,000 restricted stock units of the

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company’s stock in exchange for his service on Standard’s board. (Doc. # 1-1 at 6). Plaintiff

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further alleges that he accepted Standard’s offer and was appointed as a member of the board on

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or about August 24, 2011. (Id.). Plaintiff served on the board for approximately one year. (Id.).

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He resigned on September 27, 2012. (Id.). Plaintiff asserts that Standard breached its contract

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with plaintiff by failing to deliver stock certificates for his 90,000 shares. (Doc. # 1-1 at 7).

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James C. Mahan
U.S. District Judge

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Defendant asserts that plaintiff’s breach of contract claim should be dismissed because

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plaintiff’s pleading is conclusory. (Doc. # 6 at 3). Defendant asserts that plaintiff “pleads nothing

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as to the formation of the alleged contract, and does not even plead whether it is oral or written.”

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(Id.).

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The court finds plaintiff has sufficiently alleged the existence of a valid and enforceable

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contract. Plaintiff asserts that he and Standard made an agreement where he would serve on

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Standard’s board in exchange for 90,000 restricted stock units. Plaintiff asserts that defendants

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filed various forms with the SEC detailing the agreement and when his shares would vest. Finally,

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plaintiff asserts that defendants have failed to distribute the agreed upon stock certificates,

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depriving plaintiff of his payment for his service to the board. The court will allow plaintiff’s

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claim for breach of contract to proceed.
B. Breach of the covenant of good faith and fair dealing

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Under Nevada law, “[e]very contract imposes upon each party a duty of good faith and fair

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dealing in its performance and execution.” A.C. Shaw Constr. v. Washoe Cnty., 105 Nev. 913, 784

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P.2d 9, 9 (1989) (quoting Restatement (Second) of Contracts § 205). To prevail on a breach of

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implied covenant of good faith and fair dealing claim, a plaintiff must show: (1) the plaintiff and

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the defendant were parties to a contract; (2) the defendant owed a duty of good faith and fair

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dealing to the plaintiff; (3) the defendant breached his duty by performing in a manner unfaithful

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to the purpose of the contract; and (4) the plaintiff’s justified expectations were denied. See Perry

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v. Jordan, 900 P.2d 335, 338 (2008).

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Plaintiff asserts that defendant breached the covenant of good faith and fair dealing by

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failing to deliver the stock certificates and, thus, failing to compensate plaintiff as required by the

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parties’ contract. (Doc. # 1-1 at 7). Defendant attempts to argue that plaintiff cannot assert both

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a claim for breach of contract and a claim for breach of the covenant of good faith and fair dealing

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where the actions allegedly constituting both violations are the same. (Doc. # 6 at 5). Discovery

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may yield evidence supporting this claim rather than a breach of contract claim. The court will

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allow plaintiff’s claim for breach of the covenant of good faith and fair dealing to proceed.

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...

James C. Mahan
U.S. District Judge

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C. Unjust enrichment

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“An action based on a theory of unjust enrichment is not available when there is an express,

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written contract, because no agreement can be implied when there is an express agreement.”

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Ramos v. Liberty Mut. Ins. Co., No. 2:14-cv-839-KJD-PAL, 2014 WL 4354138, at *5 (D. Nev.

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Sept. 3, 2014) (quoting Leasepartners Corp. v. Robert L. Brooks Trust Dated November 12, 1975,

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942 P.2d 182, 187 (Nev. 1997)). Unjust enrichment applies to situations where there is no legal

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contract but where the defendant is in possession of money or property which it, in good

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conscience and justice, should not retain. Id. (citing Leasepartners, 942 P.2d at 187).

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Plaintiff asserts that Standard’s retention of the 90,000 shares of stock that were promised

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to him in exchange for his service on the board constitutes unjust enrichment. (Doc. # 1-1 at 7).

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Defendant asserts that, because plaintiff pleads that there is a valid and binding contract, and does

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specifically state that it pleads unjust enrichment in the alternative, the claim must fail.

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Under Federal Rule of Civil Procedure 8(d)(2), “[a] party may set out two or more

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statements of a claim or defense alternatively or hypothetically, either in a single count or defense

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or in separate ones. If a party makes alternative statements, the pleading is sufficient if any one of

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them is sufficient.” Thus, a party may state a claim for breach of contract, premised on the

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existence of a valid contract, and state a claim for unjust enrichment, premised on the nonexistence

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of a valid contract. See Winnemucca Farms, Inc. v. Eckersell, No. 3:05-cv-385-RAM, 2010 WL

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1416881, at *6 (D. Nev. Mar. 31, 2010).

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Here, the parties dispute whether any contract or agreement exists between plaintiff and

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Standard. If the court determines that the parties had a valid and enforceable contract, then an

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express agreement would exist, and plaintiff would not be able to recover under an unjust

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enrichment theory. Jung v. BAC Home Loans Servicing, LP, No. 2:10-cv-2236-JCM-GWF, 2011

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WL 2462248, at *5 (D. Nev. June 17, 2011). If the court determines that the parties do not have a

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valid agreement, then there is the possibility that an implied agreement exists in the alternative.

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Id. Because additional discovery may be required, now is not the appropriate time for the court to

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make a determination on this issue. Accordingly, the court will allow plaintiff’s claim for unjust

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enrichment to proceed as an alternative to his breach of contract claim.

James C. Mahan
U.S. District Judge

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D. Promissory estoppel

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To establish promissory estoppel four elements must exist: (1) the party to be estopped

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must be apprised of the true facts; (2) he must intend that his conduct shall be acted upon, or must

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so act that the party asserting estoppel has the right to believe it was so intended; (3) the party

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asserting the estoppel must be ignorant of the true state of facts; and (4) he must have relied to his

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detriment on the conduct of the party to be estopped. Lalli v. Bank of Am., N.A., No. 2:12-cv-

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1221-JCM-PAL, 2014 WL 334810, at *2 (D. Nev. Jan. 29, 2014) (citing Pink v. Busch, 691 P.2d

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456, 459 (Nev. 1984)). “The doctrine of promissory estoppel, which embraces the concept of

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detrimental reliance, is intended as a substitute for consideration, and not as a substitute for an

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agreement between the parties.” Id. (quoting Vancheri v. GNLV Corp., 777 P.2d 366, 369 (Nev.

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1989)).

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Although Rule 9(b) does not expressly apply to promissory estoppel claims, Rule 9(b)’s

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heightened pleading standard applies because promissory estoppel involves false statements and

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conduct amounting to misrepresentation. Blanford v. SunTrust Mortgage, Inc., No. 2:12-cv-852-

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JCM-RJJ, 2012 WL 4613023, at *4 (D. Nev. Oct. 1, 2012); see Branch Banking & Trust Co. v.

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Eloy Bus. Park, LLC, No. 2:12-cv-01679-LRH, 2014 WL 1304649, at *6 (D. Nev. Mar. 31, 2014);

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Hasan v. Ocwen Loan Servicing, LLC, No. 2:10-cv-00476-RLH, 2010 WL 2757971, at *2 (D.

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Nev. July 12, 2010); Pacific Maxon, Inc. v. Wilson, 619 P.2d 816, 818 (Nev. 1980) (finding that

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misrepresentation is a form of fraud where a false representation is relied upon in fact). Pleading

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with Rule 9(b)’s particularity requires “an account of the time, place, and specific content of the

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false representations, as well as the identities of the parties to the misrepresentations.” Swartz v.

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KPMG, LLP, 476 F.3d 756, 764 (9th Cir. 2007); see also Morris v. Bank of Nev., 886 P.2d 454,

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456 n.1 (Nev. 1994).

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Plaintiff argues that his claim falls within a recognized exception to Rule 9(b)’s

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particularized pleading requirement, because the facts constituting the circumstances of the alleged

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fraud are within the defendant’s knowledge or are readily obtainable by Standard. The court need

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not address this argument, because plaintiff’s claim, as pled, meets the particularized pleading

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requirement.

James C. Mahan
U.S. District Judge

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The complaint specifically sets forth that Standard promised plaintiff in August 2011 that

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plaintiff would be compensated with 90,000 restricted stock units in exchange for his service on

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Standard’s board. Plaintiff alleges he served on Standard’s board for one year based on Standard’s

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promise. The court will allow plaintiff’s promissory estoppel claim to proceed as an alternative to

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his breach of contract claim.

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E. Quantum meruit

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The Nevada Supreme Court has explained that quantum meruit may be pled in two distinct

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contexts: contract and restitution. See Certified Fire Prot. Inc. v. Precision Constr., 283 P.3d 250,

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256 (Nev. 2012). In the former, quantum meruit applies in actions based upon contracts implied-

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in-fact. Id. In other words, contract quantum meruit is found when “the parties intended to contract

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and promises were exchanged, the general obligations for which must be sufficiently clear.”

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Risinger v. SOC LLC, 936 F. Supp. 2d 1235, 1246-47 (D. Nev. 2013) (quoting Certified Fire, 283

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P.3d at 256). In this circumstance, “a party may invoke quantum meruit as a gap-filler to supply

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the absent term.” Id. Plaintiff does not plead contract quantum meruit. C.f. id. (allowing plaintiff

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to proceed with a contract quantum meruit claim to the extent that he could demonstrate that he

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and defendant intended to abide by various employment terms and benefits missing in the parties’

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express contract).

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“Quantum meruit’s other role is in providing restitution for unjust enrichment: ‘Liability

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in restitution for the market value of goods or services is the remedy traditionally known as

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quantum meruit.’” Certified Fire, 283 P.3d at 256 (quoting Restatement (Third) of Restitution and

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Unjust Enrichment § 49 (2011)). Restitution quantum meruit serves as a remedy available after a

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finding of unjust enrichment.

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Plaintiff asserts that he performed work for Standard by serving on its board and related

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committees, for which he was not compensated. (Doc. # 1-1 at 8). Defendant essentially repeats

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its same argument as it presented for unjust enrichment. Defendant asserts that plaintiff’s claim

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fails because it is “based entirely on the alleged agreements that form the basis of Plaintiff’s breach

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of contract claim and relies on the terms of the alleged contract . . . .” (Doc. # 6 at 7).

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James C. Mahan
U.S. District Judge

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Plaintiff will be able to seek restitution quantum meruit as a remedy to the extent he can

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demonstrate unjust enrichment under his third cause of action. The court will allow plaintiff’s

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claim for restitution quantum meruit to proceed.

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F. Specific performance

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Specific performance is a form of contractual remedy and not an independent cause of

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action. Blanford, 2012 WL 4613023, at *3; see Carcione v. Clark, 618 P.2d 346, 348 (Nev. 1990).

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To be entitled to specific performance plaintiff must establish the breach of a contract by

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defendant. Blanford, 2012 WL 4613023, at *3.

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“Under the 12(b)(6) standard, a request for a specific remedy is not sufficient to state a

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claim upon which relief can be granted.” Silver State Broad., LLC v. Beasley FM Acquisition

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Corp., No. 2:11-cv-01789-MMD, 2012 WL 3996369, at *2 (D. Nev. Sept. 11, 2012).

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Plaintiff argues that, though specific performance is a remedy rather than a stand-alone

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cause of action, it is not necessary to dismiss the specific performance claim. (Doc. # 8 at 8).

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Plaintiff cites no controlling authority for this proposition. The court will dismiss plaintiff’s claim

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for specific performance, but notes that specific performance may still be available to plaintiff as

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a remedy.

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Accordingly,

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IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that defendant Standard

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Metals Processing, Inc.’s motion to dismiss plaintiff’s complaint (doc. # 6) be, and the same hereby

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is, GRANTED as to plaintiff’s claim for specific performance, and DENIED as to all other claims.

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DATED April 24, 2015.
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UNITED STATES DISTRICT JUDGE

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James C. Mahan
U.S. District Judge

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