JIVE Commerce v. Wine Racks America et al

Filing 88

MEMORANDUM DECISION granting in part and denying in part 60 Motion to Dismiss for Failure to State a Claim ; denying 65 Motion to Strike ; granting in part and denying in part 66 Motion for Leave to File; denying 68 Motion to Strike ; denying 81 Motion for Leave to File. Signed by Judge Ted Stewart on 3/21/19. (jlw)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
JIVE COMMERCE, LLC D/B/A VINO
GROTTO, a Utah limited liability company,
MEMORANDUM DECISION AND
ORDER

Plaintiff,
v.
WINE RACKS AMERICA, INC. D/B/A
PREMIER WINE CELLARS, a Utah
corporation; and JEFFREY OGZEWALLA,
an individual,

Case No. 1:18-CV-49 TS-BCW
District Judge Ted Stewart

Defendants.

This matter is before the Court on Counterclaim Defendant JIVE Commerce LLC d/b/a
Vino Grotto (“Vino Grotto”) and Third-Party Defendant Jason Miller’s (“Miller”) (collectively,
“Counterclaim Defendants”) Motion to Dismiss and related motions. Counterclaim Defendants
seek dismissal of Counterclaim/Third-Party Plaintiffs Wine Racks of America, Inc. d/b/a Premier
Wine Cellars (“Premier”) and Jeffrey Ogzewalla’s (“Ogzewalla”) (collectively, “Counterclaim
Plaintiffs”) claims for breach of contract, breach of the implied covenant of good faith and fair
dealing, promissory estoppel, and unjust enrichment. For the reasons discussed below, the Court
will grant in part and deny in part the Motion to Dismiss, grant in part and deny in part the
Motion for Leave to File Surreply, and deny the Motions to Strike and Motion for Leave to
Supplement.

1

I. BACKGROUND
Vino Grotto and Premier are competitors in the wine rack and wine cellar industry. Vino
Grotto’s principal, Jason Miller, was formerly employed by Premier. Mr. Miller founded Vino
Grotto after having a falling out with Ogzewalla, the president of Premier.
Counterclaim Plaintiffs allege that Miller entered into a valid and binding agreement with
Premier in the form of an employee handbook (the “Employee Handbook”). Counterclaim Plaintiffs
allege that Miller violated the Handbook in a number of respects. This gives rise to claims for breach
of contract, breach of the implied covenant of good faith and fair dealing, and promissory estoppel.
Counterclaim Plaintiffs also assert a claim of unjust enrichment against Vino Grotto. Counterclaim
Defendants seek dismissal of all claims.

II. MOTION TO DISMISS STANDARD
In considering a motion to dismiss for failure to state a claim upon which relief can be
granted under Rule 12(b)(6), all well-pleaded factual allegations, as distinguished from
conclusory allegations, are accepted as true and viewed in the light most favorable to
Counterclaim Plaintiffs as the nonmoving party. 1 Counterclaim Plaintiffs must provide “enough
facts to state a claim to relief that is plausible on its face,” 2 which requires “more than an
unadorned, the-defendant-unlawfully-harmed-me accusation.” 3 “A pleading that offers ‘labels
and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’ Nor

1

GFF Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381, 1384 (10th Cir.

2

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

3

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

1997).

2

does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual
enhancement.’” 4
“The court’s function on a Rule 12(b)(6) motion 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.” 5 As the Court in Iqbal stated,
only a complaint that states a plausible claim for relief survives a motion to dismiss.
Determining whether a complaint states a plausible claim for relief will . . . be a
context-specific task that requires the reviewing court to draw on its judicial
experience and common sense. But where the well-pleaded facts do not permit the
court to infer more than the mere possibility of misconduct, the complaint has
alleged—but it has not shown—that the pleader is entitled to relief. 6
In considering a motion to dismiss, a district court not only considers the complaint, “but
also the attached exhibits,” 7 the “documents incorporated into the complaint by reference, and
matters of which a court may take judicial notice.” 8 The Court “may consider documents
referred to in the complaint if the documents are central to the plaintiff’s claim and the parties do
not dispute the documents’ authenticity.” 9

4

Id. (quoting Twombly, 550 U.S. at 557) (alteration in original).

5

Miller v. Glanz, 948 F.2d 1562, 1565 (10th Cir. 1991).

6

Iqbal, 556 U.S. at 679 (internal citations and quotation marks omitted).

7

Commonwealth Prop. Advocates, LLC v. Mortg. Elec. Registration Sys., Inc., 680 F.3d
1194, 1201 (10th Cir. 2011).
8

Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).

9

Jacobsen v. Deseret Book Co., 287 F.3d 936, 941 (10th Cir. 2002).

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III. DISCUSSION
A.

BREACH OF CONTRACT, BREACH OF THE IMPLIED COVENANT, AND
PROMISSORY ESTOPPEL
Counterclaim Plaintiffs’ claims for breach of contract, breach of the implied covenant of

good faith and fair dealing, and promissory estoppel all relate to the Employee Handbook.
Counterclaim Plaintiffs allege that the Employee Handbook constitutes a valid and binding
agreement that was drafted, circulated, and signed by Miller. They allege Miller violated the
Employee Handbook in several respects.
Counterclaim Plaintiffs included a copy of the alleged Employee Handbook with its
Amended Answer, Counterclaim, and Third-Party Complaint (“Amended Answer”). 10 After
Counterclaim Defendants filed their Motion to Dismiss, the parties filed documents related to the
Employee Handbook. First, Counterclaim Plaintiffs filed an Errata, attaching a copy of what
they deem to be the “original” employee handbook. 11 They explain that the version of the
Employee Handbook attached to the Amended Answer was a reformatted version, but that both
are substantially similar. That same day, Counterclaim Defendants filed a Notice of
Supplemental Authority. In that Notice, Counterclaim Defendants purport to provide evidence
that the version of the Employee Handbook attached to the Amended Answer was created later

10

Technically, Counterclaim Plaintiffs provided the Employee Handbook with its Motion
for Leave to File First Amended Answer to Amended Verified Complaint and Counterclaim and
Third-Party Complaint. See Docket No. 45-2. Counterclaim Plaintiffs did not re-file this exhibit
after receiving permission to file their Amended Answer. See Docket No. 53. However, the
parties appear to presume that the Employee Handbook is before the Court as an exhibit to the
Amended Answer.
11

Docket No. 62.

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than originally indicated and could not have been signed by Miller. 12 The parties have moved to
strike the other’s respective filings. 13 Additionally, Counterclaim Defendants have filed a
motion seeking leave to file new evidence that they argue undermines Counterclaim Plaintiffs’
allegations of a valid contract. 14
The parties spend much time debating whether a contract exists, whether Miller signed
the Employee Handbook, which version of the Employee Handbook the Court should consider,
and whether the Court should consider other evidence outside the pleadings. These disputes are
easily resolved by reference to a few basic principles. First, Counterclaim Plaintiffs were not
required to attach a copy of the Employee Handbook to their Amended Answer. Plausible
allegations supporting the existence of a contract would have been sufficient. Since they did
attach a copy of the Employee Handbook, however, it becomes “a part of the pleading for all
purposes.” 15 Second, and relatedly, the Court can consider documents attached as exhibits to the
Amended Answer when considering a motion under Rule 12(b)(6). However, the Court cannot
consider other matters without converting the motion to one for summary judgment. 16 The
parties have not requested the Court convert this matter and the Court declines to do so. Finally,
the Court must view all plausible allegations in the light most favorable to Counterclaim
Plaintiffs and is not in a position to resolve factual disputes.

12

Docket No. 63.

13

Docket Nos. 65, 68.

14

Docket No. 81.

15

Fed. R. Civ. P. 10(c).

16

Fed. R. Civ. P. 12(d).

5

These fundamental principles resolve the bulk of the parties’ arguments. The Court will
consider the allegation in the Amended Answer, along with all of the attached exhibits, including
the Errata. The Court will not consider any other evidence outside the pleadings. Finally, the
Court will not resolve any factual disputes but will instead view the facts in the light most
favorable to Counterclaim Plaintiffs, as it must. This leaves the Court to answer a simple
question: Do Counterclaim Plaintiffs’ allegations and attached exhibits, including the Errata,
support a valid claim with respect to the Employee Handbook? As will be discussed, the answer
is no.
“Utah law allows employers to disclaim any contractual relationship that might otherwise
arise from employee manuals.” 17 The existence of “a clear and conspicuous disclaimer, as a
matter of law, prevents employee manuals or other like material from being considered as
implied-in-fact contract terms.” 18 “[W]hen an employee handbook contains a clear and
conspicuous disclaimer of contractual liability, any other agreement terms must be construed in
the light of the disclaimer.” 19 “Factors relevant in determining whether a disclaimer is clear and
conspicuous include (1) the prominence of the text; (2) the placement of the disclaimer in the
handbook; and (3) the language of the disclaimer.” 20
The Employee Handbook provided with Amended Answer begins as follows: “The
following pages contain information regarding many of the policies and procedures of Wine

17

Tomlinson v. NCR Corp., 345 P.3d 523, 529 (Utah 2014).

18

Johnson v. Morton Thiokol, Inc., 818 P.2d 997, 1003 (Utah 1991).

19

Hodgson v. Bunzl Utah, Inc., 844 P.2d 331, 334 (Utah 1992).

20

Hamilton v. Parkdale Care Ctr., Inc., 904 P.2d 1110, 1112 (Utah Ct. App. 1995).

6

Racks America, Inc. (hereby referred to as “The Company”). This is not an employment contract
and is not intended to create contractual obligations of any kind.” 21 In the “Leave Policies”
provision of the Handbook, it again states that “[t]his statement of leave policies is not intended
to create a contract between The Company and its employees.” 22 Finally, the very last sentence
of the Employee Handbook, located just before the signature line, states: “These policies do not
create any promises or contractual obligations between this company and its employees.” 23 The
Employee Handbook submitted with Counterclaim Plaintiffs’ Errata contains the same
statements. 24 Thus, regardless of which version of the Employee Handbook the Court considers,
the relevant passages and ultimate conclusion remain the same.
Counterclaim Plaintiffs argue that these statements are not sufficiently prominent to
disclaim an employment contract. The Court disagrees. The Utah Supreme Court has “never
required that an employer place disclaimers in any particular location. Rather, the focus of the
analysis is on whether the placement of the disclaimer is sufficiently prominent to place a
reasonable employee on notice that the employer was disclaiming any contractual
relationship.” 25 For example, in Ryan v. Dan’s Food Stores, Inc., 26 the Utah Supreme Court
found that a disclaimer was sufficiently prominent where it was located on the first page of the

21

Docket No. 45-2, at 2 (emphasis added).

22

Id. at 18.

23

Id. at 24.

24

Docket No. 62-1, at 2, 17, 22.

25

Tomlinson, 345 P.3d at 530.

26

972 P.2d 395 (Utah 1998).

7

handbook. 27 The same was true in Johnson v. Morton Thiokol, Inc. There, “the introduction of
the handbook contain[ed] clear and conspicuous language stating that the provisions of the
manual are not intended to operate as terms of an employment contract” 28
Counterclaim Plaintiffs argue that the disclaimer here is not sufficiently prominent
because it “was not accentuated, was not separate, and was not clear.” 29 While courts have
considered the fact that a disclaimer is bolded and set out by a separate text box in determining
whether it is sufficiently prominent, 30 there is no per se rule. Instead, the focus is on whether the
disclaimer is sufficiently prominent. Here, like the disclaimers in Ryan and Johnson, the
disclaimer was placed at the beginning of the Employee Handbook. In addition, further
disclaimers were included in the leave policies section and the final sentence before the signature
line. The combination of these statements is sufficiently conspicuous. Further, unlike the
manual at issue in Reynolds, Counterclaim Plaintiffs point to no statements that would
potentially conflict with the disclaimer.
Counterclaim Plaintiffs also argue that dismissal is not appropriate because the disclaimer
is ambiguous. Whatever other ambiguities may exist in the Employee Handbook, there is
nothing ambiguous about the statement “This is not an employment contract.” Therefore,
Counterclaim Plaintiffs’ contract-based claims must be dismissed. Similarly, Counterclaim
Plaintiffs’ promissory estoppel claim fails because the Employee Handbook disclaims that it

27

Id. at 401.

28

818 P.2d at 999.

29

Docket No. 61, at 5.

30

Tomlinson, 345 P.3d at 530; Reynolds v. Gentry Fin. Corp. & Royal Mgmt., 368 P.3d
96, 101 (Utah Ct. App. 2016).

8

creates any promises between Premier and Miller and any reliance on the alleged promises
would not be reasonable in light of the disclaimer. 31 Based upon this, the Court need not address
the other arguments made in relation to these claims.
B.

STATUTE OF LIMITATIONS
Because the other claims are subject to dismissal for the reasons set forth above, the

Court need only address the statute of limitations as it relates to the unjust enrichment claim. A
four-year statute of limitations applies to Counterclaim Plaintiffs’ unjust enrichment claim. 32
The actions that make up the unjust enrichment claim began in early 2013 and concluded by
April 2014. 33 This action was filed on May 8, 2018, and the Counterclaim was filed on October
24, 2018.
Counterclaim Plaintiffs argue that the discovery rule tolls the statute of limitations. The
fraudulent concealment branch of the equitable discovery rule may operate to toll a statute of
limitations “where a plaintiff does not become aware of the cause of action because of the
defendant’s concealment or misleading conduct.” 34 Here, Counterclaim Plaintiffs contend that
Miller concealed his actions, making them unaware of their claim until after this action
commenced. There are some allegations to support the claim that Miller took actions to conceal
his conduct. For instance, it is alleged that Miller had his assistant clock him in and out each day

31

See Darr v. Town of Telluride, Colo., 495 F.3d 1243, 1260 (10th Cir. 2007); see also
Kuhl v. Wells Fargo Bank, N.A., 281 P.3d 716, 727 (Wyo. 2012).
32

Pero v. Knowlden, 336 P.3d 55, 59 (Utah Ct. App. 2014); see also Utah Code Ann. §
78B-2-307(3).
33

Docket No. 53 ¶¶ 31–54.

34

Russell Packard Dev., Inc. v. Carson, 108 P.3d 741, 747 (Utah 2005).

9

to make it look like he was at work when he was really working to develop his competing
business. 35 However, many of the facts relevant to determining whether the statute of limitations
should be tolled because of this alleged conduct are not properly before the Court.
Consequently, it is improper to dismiss this claim on statute of limitations grounds at this time. 36
Counterclaim Defendants can reassert their statute of limitations defense, if appropriate, after
discovery.
C.

UNJUST ENRICHMENT
Counterclaim Defendants also seek dismissal of the claim for unjust enrichment on

various other grounds. First, Counterclaim Defendants argue that a claim for unjust enrichment
is not available based on the existence of a written contract. Counterclaim Defendants are
correct that a claim for unjust enrichment is “used only when no express contract is present.” 37
However, as discussed above, the Employee Handbook does not constitute a contract.
Moreover, any contract contained in the Employee Handbook is between Miller and Premier.
There is no allegation that a contract exists between Premier and Vino Grotto, against whom the
unjust enrichment claim is pleaded. Thus, the existence of the Employee Handbook does not
necessitate the dismissal of the unjust enrichment claim.
Counterclaim Defendants also argue that Counterclaim Plaintiffs failed to exhaust their
legal remedies and run afoul of the economic loss rule. This argument too depends on the

35

Docket No. 53 ¶ 34.

36

Fernandez v. Clean House, LLC, 883 F.3d 1296, 1299 (10th Cir. 2018) (“To be sure,
on occasion it is proper to dismiss a claim on the pleadings based on an affirmative defense. But
that is only when the complaint itself admits all the elements of the affirmative defense by
alleging the factual basis for those elements.”).
37

TruGreen Cos., L.L.C. v. Mower Bros., Inc., 199 P.3d 929, 933 (Utah 2008).

10

existence of a binding contract between Premier and Vino Grotto, which there is not. Therefore,
dismissal is not required on this ground.
Additionally, Counterclaim Defendants state that “it is not at all clear why an unjust
enrichment claim is even being made against Vino Grotto.” 38 It appears that Counterclaim
Defendants are arguing that the unjust enrichment claim is inadequately pleaded.
A party may prevail on an unjust enrichment theory by proving three elements: (1)
a benefit conferred on one person by another; (2) an appreciation or knowledge by
the conferee of the benefit; and (3) the acceptance or retention by the conferee of
the benefit under such circumstances as to make it inequitable for the conferee to
retain the benefit without payment of its value. 39
Here, it is alleged that Premier, through Miller, conferred a benefit on Vino Grotto when
Miller performed work for Vino Grotto while he was still employed and being paid by Premier.
Counterclaim Plaintiffs allege that Vino Grotto was receiving Miller’s work for free and that it
would be inequitable for Vino Grotto to retain this benefit. Counterclaim Defendants argue that
this theory is insufficient and would lead to unjust enrichment claims any time a competitor
“hires away an employee, solicits another’s customers, or partakes in general business
competition with its competitor.” 40 Counterclaim Plaintiffs’ allegations do more than just allege
“general business competition” and adequately set forth a claim for unjust enrichment.
Therefore, the Motion will be denied as to this claim.

38

Docket No. 60, at 13.

39

Jeffs v. Stubbs, 970 P.2d 1234, 1247–48 (Utah 1998) (internal quotation marks and
citations omitted).
40

Docket No. 60, at 13.

11

D.

ATTORNEY’S FEES
Counterclaim Defendants request their attorney’s fees, arguing that Counterclaim

Plaintiffs “failed to do their due diligence in filing the Claims, made baseless assertions of theft,
and put [Counterclaim Defendants] to expense in bringing the present Motion.” 41 Counterclaim
Defendants cite only DUCivR 1-2 in support of their request.
DUCivR 1-2 states: “The court, on its own initiative, may impose sanctions for violation
of these civil rules. Sanctions may include, but are not limited to, the assessment of costs,
attorneys’ fees, fines, or any combination of these, against an attorney or a party.” Here, there is
no evidence or argument that Counterclaim Plaintiffs violated any of the Court’s local rules.
Therefore, this request fails.
In a belated attempt to bolster their request, Counterclaim Defendants cite to Utah Code
Ann. § 78B-5-825 for the first time in their Reply. That provision allows for attorney’s fees to a
prevailing party if the Court determines that the action was without merit and not brought or
asserted in good faith.
This request fails for the primary reason that it was raised for the first time in reply. As
such, it will not be considered. 42 Moreover, Counterclaim Defendants have failed to prove that
they are entitled to fees under the statute. Therefore, the request for attorney’s fees will be
denied.

41

Id. at 14.

42

See Pickering v. USX Corp., 758 F. Supp. 1460, 1461 n.2 (D. Utah 1990).

12

IV. CONCLUSION
It is therefore
ORDERED that the Motion to Dismiss (Docket No. 60) is GRANTED IN PART AND
DENIED IN PART. Counterclaim Plaintiffs’ claims for breach of contract, breach of the
implied covenant of good faith and fair dealing, and promissory estoppel are dismissed. It is
further
ORDERED that the Motion for Leave to File Surreply (Docket No. 66) is GRANTED IN
PART AND DENIED IN PART. The Court has considered the relevant parts of the proposed
Surreply in considering the Motion to Dismiss. It is further
ORDERED that the Motions to Strike (Docket Nos. 65 and 68) and Motion for Leave to
Supplement (Docket No. 81) are DENIED.
DATED this 21st day of March, 2019.
BY THE COURT:

Ted Stewart
United States District Judge

13