Silliman et al v. Hawes Financial Group, Inc. et al

Filing 26

OPINION AND ORDER: Plaintiff's motion to dismiss 22 is DENIED as to defendants' fee-related claims and GRANTED in all other respects. Any motion for leave to amend counterclaims shall be filed within 10 days of the date of this Opinion. See formal OPINION AND ORDER. Joint written status report due by 9/8/2015. Signed on 8/26/2015 by Chief Judge Ann L. Aiken. (rh)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
MARTHA SILLIMAN and JANET
MALMBERG,

Case No.6:15-cv-00285-AA
OPINION AND ORDER

Plaintiffs,

v.
HAWES FINANCIAL GROUP, INC.,
originally an Oregon
corporation; HeRO OUTSOURCING,
INC., originally an Oregon
corporation; RAY KLEIN, INC.,
originally an Oregon
corporation but now a
Washington corporation,
Defendants.
Jessica Ashlee Albies
Beth Ann Creighton
Creighton & Rose, PC
815 S.W. Second Ave., Suite 500
Portland, Oregon 97204
Erik Strindberg
Strindberg & Scholnick LLC
675 E. 2100 S., Suite 350
Salt Lake City, Utah 84106
Attorneys for plaintiffs
Dennis W. Percell
Arnold Gallagher Saydack Percell Roberts & Potter
P.O. Box 1758
800 Willamette St., Suite 800
Eugene, Oregon 97440
Attorney for defendants
Page 1 - OPINION AND ORDER

AIKEN, Chief Judge:
Plaintiffs Martha Silliman and Janet Malmberg move to dismiss
defendants Hawes Financial Group, Inc., HeRO Outsourcing, Inc., and
Ray Klein, Inc.'s counterclaims under Fed. R. Civ. P. 9(b) and Fed.
R. Civ. P. 12(b) (6). For the reasons set forth below, plaintiffs'
motion is granted in part and denied in part.
BACKGROUND

On February 18,
Court

alleging

defendants'

six

2015,

plaintiffs filed a complaint in this

contractually-based

acquisition

of

plaintiffs'

employment of plaintiffs. On March 20,

claims
company

arising
and

out

of

subsequent

2015, plaintiffs filed an

amended complaint, realleging their original six claims, as well as
adding claims for discrimination and retaliation.
On April

1,

2015,

defendants

moved

to

file

the

original

complaint under seal because it referred to information that was
purportedly

confidential,

and

to

strike

the

amended

complaint

because it was too long and contained impertinent material. On May
6, 2015, the Court granted defendants' motion as to the sealing of
the original complaint and denied it in all other respects.
On
amended

May

20,

complaint,

counterclaims.
claims:

2015,

( 1)

defendants

asserting

Specifically,

several

relations;

(3)

answered

affirmative

defendants

misrepresentation;

contractual/business

timely

allege

( 2)

breach

plaintiffs'
defenses

the

following

interference
of

the

and

with

employment

agreement and covenant not to compete; (4) breach of the employment
Page 2 - OPINION AND ORDER

agreement;
fees

for

(5) attorney fees; and (6) attorney and expert witness
lack

of

an

objectively

discrimination.

On

June

22,

2015,

reasonable

basis

plaintiffs

moved

to
to

allege
dismiss

defendants' counterclaims.

STANDARDS OF REVIEW
"Where a counterclaim 'fail[s]

to state a claim upon which

relief can be granted,' it must be dismissed." Unum Life Ins. Co.
of Am. v. Martin, 2013 WL 3995005, *2 (D.Or. Aug. 1, 2013)
Fed.

R.

Civ.

P.

12 (b) (6)).

(quoting

To survive a motion to dismiss,

the

complaint must allege "enough facts to state a claim to relief that
is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 570 (2007). For purposes of a motion to dismiss, the complaint
is

liberally construed in favor

allegations are taken as true.
14 2 4

(9th Cir.

198 3) .

of the counterclaimant and its

Rosen v.

Bare assertions,

Walters,

719 F.2d 1422,

however,

that

amount to

nothing more than a "formulaic recitation of the elements" of a
claim

"are

Ashcroft v.

conclusory
Iqbal,

and

556 U.S.

not
662,

entitled
681

to

(2009).

be

assumed

Rather,

true."

to state a

plausible claim for relief, the complaint "must contain sufficient
allegations of underlying facts" to support its legal conclusions.
Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011), cert. denied,
132 S.Ct. 2101
Moreover,

(2012).
where

fraud

or

misrepresentation

heightened pleading standards apply.

Fed.

R.

Ci v.

is
P.

alleged,
9 (b) .

The

counterclaimant "must state the time, place, and specific content
Page 3 - OPINION AND ORDER

of the

false

representations

as well as

the

identities of the

parties to the misrepresentations." Schreiber Distrib. v. ServWell
Furniture Co., 806 F.2d 1393, 1401
internal

quotations

required

to

nset

omitted).

forth

what

(9th Cir. 1986)

Likewise,

the

is

or

false

(citation and

counterclaimant
misleading

about

is
a

statement, and why it is false." Vess v. Ciba-Geigy Corp. USA, 317
F.3d 1097, 1106 (9th Cir. 2003)
omitted) .

nRule 9 (b)

(citation and internal quotations

does not allow a complaint to merely lump

multiple defendants together but

[requires counterclaimants]

differentiate their allegations

to

and inform each defendant

separately of the allegations surrounding his alleged participation
in fraud." Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007)
(citation and internal quotations omitted)
DISCUSSION
Plaintiffs argue that defendants'

counterclaims fail at the

pleadings level because they are vague,
factual support.

conclusory,

and/or lack

Defendants contend, to the contrary, that their

nallegations are sufficient under the liberal pleading requirements
set forth in the Federal Rules of Civil Procedure." Defs.' Resp. to
Mot. Dismiss 1. 1

1

According to defendants, plaintiffs' motion should also be
denied because they did not comply with LR 7-1(a). Plaintiffs
concede that they nfailed to confer" before filing the present
motion; however, on July 14, 2015, plaintiffs spoke with ncounsel
to determine if Defendants might be willing to amend their
counterclaim[s] to include factual assertions [and] Defendants'
counsel declined [maintaining that] the Court [should first]
decide whether the counterclaims have been sufficiently plead."
Page 4 - OPINION AND ORDER

I.

Preliminary Matter
Defendants

include

several

new

allegations,

which

do

not

appear in their complaint, in opposing dismissal. For example, as
discussed
contain

in

few

greater
and,

in

detail
some

below,

instances,

defendants'
no

factual

counterclaims
allegations

in

support; their response brief, in contrast, contains references to
certain

specific

events

and

contractual

provisions.

Compare

generally Am. Answer, with Defs.' Resp. to Mot. Dismiss.
These additional facts would have been known by defendants
when answering plaintiffs' amended complaint. Defendants' attempt
to introduce such facts via their opposition will be construed as
an

implicit

deficient.

recognition that
Furthermore,

[defendants']

"'new'

opposition

purposes." Schneider v. Cal.
n.1

(9th Cir.

1990).

their counterclaims
allegations

are,

in

contained

in

fact,
the

are irrelevant for Rule 12 (b) ( 6)
Dep't of Corr.,

151 F.3d 1194,

In evaluating plaintiffs' motion,

1197

the Court

Pls.' Reply to Mot. Dismiss 2 n.1. Because LR 7-1 requires, in
pertinent part, the moving party to certify that it made "a good
faith effort" to resolve the matter and was unable to do so which is what transpired here, albeit belatedly - the Court
declines to deny plaintiffs' motion on this basis. See Strong v.
City of Eugene, 2015 WL 2401395, *1-2 (D.Or. May 19, 2015)
(presumption towards reaching the merits exists under
discretionary LR 7-1(a) where all issues are adequately briefed).
Further, defendants' contention - that, if "the Court should find
any of [their] counterclaims to be inadequately pled, [they]
should be granted leave to replead"- is without merit. Defs.'
Resp. to Mot. Dismiss 1-2. At this stage in the proceedings,
amendment is not allowed as a matter of right and defendants'
request does not comply with either LR 7-1(b) or LR 15. Fed. R.
Civ. P. 15 (A) (1).
Page 5 - OPINION AND ORDER

cannot

consider

disregards

the

materials
new

beyond

factual

the

pleadings

allegations

and

first

therefore

articulated

in

defendants' response brief.
II.

Misrepresentation Claim
The elements of a fraud or misrepresentation claim are: "the

defendant made a material misrepresentation that was false;

the

defendant did so knowing that the representation was false;

the

defendant

the

intended

the

[counterclaimant]

to

rely

on

misrepresentation; the [counterclaimant] justifiably relied on the
misrepresentation;

and

the

[counterclaimant]

result of that reliance." Strawn v.

was

damaged

as

a

Farmers Ins. Co. of Or., 350

Or. 336, 351-52, 258 P.3d 1199, adh'd to on recons., 350 Or. 521,
256 P.3d 100 (2011), cert. denied, 132 S.Ct. 1142 (2012)

(citations

omitted).
Initially,

defendants

representations,

knowing

or

neither

identify

otherwise,

as

the

any
basis

counterclaim nor do they differentiate between parties.
the

entirety

of

their

complaint

states

that

discrete
of

their

In fact,

"[p]laintiffs

misrepresented the financial condition, customer base and business
expectations

for

Eligibility

Plus,"

which

"[d] efendants

relied

upon" and have been damaged "in the sum of $475,000." Am. Answer 'II'II
10-11.
Accordingly,

plaintiffs

are

correct

that

defendants'

misrepresentation claim fails at the pleadings level, as it does
not allege the identities of the parties or the time, place, and
Page 6 - OPINION AND ORDER

specific content of a material misstatement that was justifiably
relied upon.

See Defs.'

Resp.

to Mot.

plaintiffs'

allegations provide "context

who,

when,

Dismiss

what,

identifying
Similarly,

any

where,

(arguing that

[that] makes clear

and how'" of their claim,

particular

defendants

7

dates,

neglect

to

comments,
identify

or

what

'the

but without
individuals).

was

false

or

misleading about plaintiffs' purported misrepresentations. Even the
counterclaimants in the 100 year old case that defendants rely on
"[set] out particularly the said representations [that] were made
fraudulently." Neilson v. Masters,
(1914)

7 2 Or.

4 63,

4 7 3,

14 3 P.

1132

(internal quotations omitted). In sum, defendants did not

establish the requisite elements of a misrepresentation claim or
meet

Fed.

R.

Civ.

P.

9(b)'s

heightened

pleading

standards.

Plaintiffs' motion is granted in this regard.
III. Interference With Contractual/Business Relations Claim
"To state a claim for intentional interference with economic
relations, a [counterclaimant] must allege:

(1) the existence of a

professional or business relationship; (2) intentional interference
with that relationship;

(3)

by a third party;

(4)

through improper means or for an improper purpose;
effect

between

the

interference

and

damage

to

accomplished
( 5)

a causal

the

economic

relations; and (6) damages." N.W. Natural Gas Co. v. Chase Gardens,
Inc., 328 Or. 487, 497, 982 P.2d 1117 (1999)

(citations omitted).

Defendants fail to include the requisite elements. Notably,
defendants

do

not

specify

Page 7 - OPINION AND ORDER

the

existence

of

a

business

or

contractual

relationship

interfered with,

with

a

third

party

that

plaintiffs

any damage to their economic relations,

improper purpose/means.

Rather,

or an

defendants merely conclude that

plaintiffs interfered with their business by "recently" attending
a

conference

"where

[they]

held

them

themselves

out

as

representatives of Eligibility Plus," which caused "confusion
. in the business community" and "irreparable harm." Am.
12; see also Lyden v. Nike Inc., 2013 WL 5729727,
22,

2013)

*3

Answer~

(D.Or. Oct.

(dismissing an intentional interference with economic

relations claim where the plaintiff did "not specify that he had a
business relationship with specific investors or buyers; that [the
defendant]

interfered

with

these

relationships;

and

that

investors and buyers discontinued their relationship with

the
[the

plaintiff] because of [the defendant]").
Lastly, defendants'

reliance on a trademark case concerning

customer confusion is insufficient to demonstrate the existence of
an improper purpose or improper means,

especially because their

counterclaim is silent as to this element. See A & B Asphalt, Inc.
v.

Humbert Asphalt,

Inc.,

adopted by 2014 WL 3695474

2014 WL 3695480,

*7-8

(D.Or. July 24, 2014)

(D.Or.

May 8),

("[i]f liability

in tort is to be based on an actor's purpose, then the purpose must
be to inflict injury"; "[f]or means to be improper,
wrongful

in

some manner other than

[they] must be

simply causing the

damages

claimed as a result of the conduct, such as the use of violence,
threats,

intimidation,

Page 8 - OPINION AND ORDER

deceit,

misrepresentations,

bribery,

unfounded

litigation,

defamation

and

disparaging

falsehood")

(citations and internal quotations omitted). Plaintiffs' motion is
granted as to defendants'

interference with contractual/business

relations claim.
IV.

Contract-Related Claims
To state a counterclaim for breach of contract, the defendant

"must allege the existence of a contract, its relevant terms,

[the

defendant's]

[the

full

performance

and

lack

of

breach,

and

plaintiff's] breach resulting in damage to the [defendant]." Staton
v. BAC Home Loans Servicing, LP, 2014 WL 1803376, *5 (D.Or. May 6,
2014)

(citing Slover v. Or.

State. Bd. of Clinical Soc. Workers,

144 Or.App. 565, 570, 927 P.2d 1098
Here,

in

two

separate

(1996)).

claims,

defendants

plaintiffs "breached their Employment Agreement[s]
meet

their

duties

as

a

result

of

failing

to

allege

that

by failing to

promote

employer

services, devote full time and attention to performing services [on
their behalf,] comply with the policies, standards and regulations
of the business and [covenant not to compete]," and by "divulging
trade secrets." Am. Answer

<JI<JI

14-18. According to defendants, they

are entitled to $1,000,000 in damages and an injunction precluding
plaintiffs from further violating the covenant not to compete. Id.
Thus,

although defendants

identify the contracts at issue,

they do not articulate the relevant terms;
conclude

that

plaintiffs

breached

those

instead,
agreements

they simply
in

myriad

respects. They also neglect to describe the factual circumstances
Page 9 - OPINION AND ORDER

that gave rise to plaintiffs' purported breaches. See Iqbal,

566

U.S. at 678-79 ("[t]hreadbare recitals of the elements of a cause
of action"
whether

are

the

inference

to be

"well

that

the

omitted). Moreover,

ignored and courts

pleaded
pleader

facts"
is

defendants'

give

are

entitled

to

consider

to

rise

to

a

only

"plausible"

relief)

(citations

complaint is silent as to their

full performance and absence of breach. See Commerce & Indus. Ins.
Co. v. HR Staffing, Inc., 2015 WL 133677, *2-3 (D.Or. Jan. 8, 2015)
(dismissing a counterclaim that "lack[ed] any allegation of [the
defendant's]

full performance under the contract and absence of

breach," and noting that even "a conclusory statement

[of]

full

performance and the absence of breach" would have been inadequate).
This shortcoming is especially problematic given that plaintiffs'
complaint is wholly to the contrary; they provide a plethora of
factual allegations evincing their lack of breach and when and how
defendants failed to perform under the parties'
~'

Am.

Compl.

'!I'll 43-69.

Plaintiffs'

contracts.

See,

motion is granted as to

defendants' contract-related claims.
V.

Fee-Related Claims
It is undisputed that the underlying contracts provide for

attorney fees to the prevailing party. Am. Compl.
'II

'II

131; Am. Answer

19. In addition, as defendants' complaint acknowledges, statutory

attorney fees are available under Oregon law where the plaintiff
lacked an "objectively reasonable basis for asserting the claim."
Or.

Rev.

Stat.

§

20.105; Am. Answer

Page 10 - OPINION AND ORDER

'II

20.

Regardless of whether

pled as a remedy or independent claim, neither party is entitled to
attorney fees without first prevailing and then filing a separate
motion. Romani v. N.W. Tr. Servs., Inc., 2014 WL 1072698, *1 (D.Or.
Mar.

17,

related

2014)

(citations

claims

recovery

of

merely

fees

if

omitted).

furnish
they

As

such,

"notice

prevail"

that
and/or

defendants'
[they]

fee-

will

seek

"establish

that

[plaintiffs' state law] claims are frivolous." Amort v. NWFF, Inc. ,
2012 WL 3756330,

*4

(D.Or.

Aug.

27,

2012)

(citations omitted).

Plaintiffs' motion is denied as to these claims.
Finally,

the

Court

strongly

encourages

the

parties

to

efficiently work together, including conferring in good faith and
declining to file inadequate pleadings or frivolous motions. The
failure to do so may result in sanctions.
CONCLUSION

Plaintiffs'

motion

to

dismiss

(doc.

22)

is

DENIED

as

to

defendants' fee-related claims and GRANTED in all other respects.
Any motion for leave to amend counterclaims shall be filed within
10 days of the date of this Opinion.
IT IS SO ORDERED.
Dated

this~

of August 2015.

Ann Aiken
United States District Judge

Page 11 - OPINION AND ORDER