Diesel Power Source et al v. Crazy Carl's Turbos et al

Filing 83

MEMORANDUM DECISION AND ORDER finding as moot 51 Motion to Dismiss for Failure to State a Claim; granting 58 Motion for Leave to File 2nd Amended Complaint. Pla is to file the 2nd Amended Complaint on or before 3/31/17. Signed by Judge David Nuffer on 3/24/17 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
DIESEL POWER SOURCE a Utah limited
liability company; BRET PARK, an
individual Utah resident;
Plaintiffs,

MEMORANDUM DECISION AND
ORDER
GRANTING [58] MOTION TO AMEND
AND

v.
CRAZY CARL’S TURBOS, INC., a
Tennessee corporation; CARL TETREAULT,
an individual Tennessee resident,

FINDING AS MOOT [51] MOTION TO
DISMISS

Defendants.
Case No. 2:14-cv-00826-DN
District Judge David Nuffer

This order grants a motion to amend and finds as moot a motion to dismiss a prior
version of a complaint.
BACKGROUND
On September 23, 2014, Plaintiffs Diesel Power Source and Bret Park (collectively
“DPS”) filed a complaint (“Complaint”) against Defendants Crazy Carl’s Turbos, Inc. and Carl
Tetreault (collectively “Crazy Carl’s”). 1 The Complaint was filed in state court and asserted the
following causes of action:
1. Tortious Interference with Prospective Economic Relations
2. Defamation
3. Commercial Disparagement

1

Complaint, docket no. 4-1, filed Nov. 12, 2014 (filed in state court Sep. 23, 2014).

4. Product Disparagement
5. Business Disparagement
6. Trade Libel
7. False Light
8. Unfair Competition
9. Deceptive Practices/False Advertising
10. Injunctive Relief 2
The lawsuit was removed to federal court on November 12, 2014 based on diversity. 3
On December 1, 2014, Crazy Carl’s moved to dismiss the Complaint. The motion to
dismiss suspended the need for Crazy Carl’s to file a responsive pleading. 4 However, when the
motion to dismiss was denied on March 10, 2015, 5 Crazy Carl’s was required to file an answer to
the Complaint. On March 31, 2015, Crazy Carl’s filed an answer to the Complaint (“Answer”). 6
On July 7, 2016, the parties filed a joint motion for leave to file an amended complaint. 7
That motion was granted, and on July 8, 2016, DPS filed the First Amended Complaint. 8 The
First Amended Complaint eliminated the tortious interference and business disparagement
claims, and added a claim for “alter ego-piercing the corporate veil.” The First Amended
Complaint asserted the following causes of action:
1. Defamation per se

2

Id. at 9-19.

3

Defendant Crazy Carl’s Turbos Inc. Notice of Removal, docket no. 2, filed Nov. 12, 2014.

4

Defendants Crazy Carl’s Turbos and Carl Douglas’s Motion to Dismiss Complaint Pursuant to 12(b)(2), 12(b)(3),
docket no. 11, filed December 1, 2014.

5

Memorandum Decision and Order Denying Defendants’ Motion to Dismiss, docket no. 17, filed Mar. 10, 2015.

6

Answer, docket no. 18, filed Mar. 31, 2015.

7

Joint Motion Allowing Plaintiff Leave to File Amended Complaint, docket no. 47, filed July 7, 2016.

8

First Amended Complaint, docket no. 49, filed July 8, 2016.

2

2. Commercial Disparagement
3. Product Disparagement
4. Trade Libel
5. False Light
6. Unfair Competition
7. Deceptive Practices/False Advertising
8. Injunctive Relief
9. Alter Ego-Piercing the Corporate Veil 9
On July 22, 2016, Crazy Carl’s moved to dismiss the First Amended Complaint (“Motion
to Dismiss”). 10 The Motion to Dismiss argues that DPS “has failed to adequately plead any claim
against” Crazy Carl’s, 11 but only describes two alleged failures: failure to adequately plead
defamation and failure to adequately plead alter ego-piercing the corporate veil. 12 DPS opposes
the Motion to Dismiss (“Opposition to Motion to Dismiss”). 13 Crazy Carl’s did not submit a
reply in support of the Motion to Dismiss.
On August 12, 2016, after the Motion to Dismiss was filed, DPS moved to amend its
First Amended Complaint (“Motion to Amend”). 14 DPS argued that the defamation per se claim
“was clearly an error[,]” and that it should have been a claim for defamation only. 15 DPS argued

9

Id. at 15-24.

10

Defendants Crazy Carl’s Turbos and Carl Douglas’ Motion to Dismiss Complaint Pursuant to 12(b)(6) (“Motion
to Dismiss”), docket no. 51, filed July 22, 2016.
11

Id. at 5 (emphasis added).

12

Id. at 5-9.

13

Plaintiff’s Response Memorandum to Defendants’ Motion to Dismiss (“Opposition to Motion to Dismiss”),
docket no. 59, filed Aug. 12, 2016.
14

Plaintiff’s Motion for Leave to Amend/Correct Complaint (“Motion to Amend”), docket no. 58, filed Aug. 12,
2016.
15

Id. at 2.

3

that it had been in discussions with Crazy Carl’s prior to filing the First Amended Complaint,
and all parties agreed that Bret Park would be removed, the claims for tortious interference with
prospective business relations and business disparagement would be removed, and the claim for
alter ego-piercing the corporate veil would be added. 16 DPS argued that by simple oversight,
likely the “poor use of the copy and paste function,” the claim for Defamation per se was added
instead of a claim for defamation. Crazy Carl’s argues that these are “unbelievable assertions”
and DPS should not be allowed to amend. 17
DISCUSSION
Because amendment may affect the Motion to Dismiss, the Motion to Amend will be
addressed first.
Motion to Amend
Amendment to pleadings is governed by Rule 15, which provides:
(1) Amending as a Matter of Course. A party may amend its pleading once as a
matter of course within:
(A) 21 days after serving it, or
(B) if the pleading is one to which a responsive pleading is required, 21 days
after service of a responsive pleading or 21 days after service of a motion
under Rule 12(b), (e), or (f), whichever is earlier.
(2) Other Amendments. In all other cases, a party may amend its pleading only
with the opposing party’s written consent or the court’s leave. The court
should freely give leave when justice so requires. 18
The First Amended Complaint was filed on July 8, 2016. This was done with both
parties’ consent. Crazy Carl’s then had the option to file a responsive pleading or file a motion

16

Id.

17

Defendants Crazy Carl’s Turbos and Carl Douglass’ Response to Plaintiff’s Motion for Leave to Amend/Correct
Complaint (“Opposition to Motion to Amend”) at 2, docket no. 62, filed Aug. 24, 2016.
18

Fed. R. Civ. P. 15(a)(1).

4

under Rule 12. Crazy Carl’s opted to file the Motion to Dismiss under Rule 12(b)(6) on July 22,
2016. 19 DPS was not allowed to amend the First Amended Complaint “as a matter of course”
because Rule 15 allows amendment only “once as a matter of course[,]” 20 and DPS had already
amended the Complaint once. Thus, DPS seeks leave of court to file a second amended
complaint. 21
“The court should freely give leave when justice so requires.” 22 Leave to amend may be
refused if there is a “showing of undue delay, undue prejudice to the opposing party, bad faith or
dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of
amendment.” 23
Crazy Carl’s argues that allowing amendment would be unduly prejudicial because the
thrust of the lawsuit “continues to shift” almost two years after the filing of the original
complaint; because they consented to the filing of a claim for defamation per se, not a claim for
defamation; and they would be prejudiced in the preparation of a defense. 24 Crazy Carl’s is
incorrect. It is not unduly prejudicial to allow DPS to assert a claim for defamation instead of
defamation per se. Defamation was one of the claims brought in the original Complaint. It is not
a new claim that is outside the general scope of the lawsuit. Crazy Carl’s cannot credibly argue
that a defamation claim is a wholly new argument that changes the landscape of the litigation.
Thus, while Crazy Carl’s may be inconvenienced in having to shift its focus from defamation per

19

Motion to Dismiss at 1.

20

Fed. R. Civ. P. 15(a)(1).

21

Fed. R. Civ. P. 15(a)(2).

22

Fed. R. Civ. P. 15(a)(2).

23

Bylin v. Billings, 568 F.3d 1224, 1229 (10th Cir. 2009).

24

Opposition to Motion to Amend at 5, 6.

5

se to defamation, there is no undue prejudice. Additionally, the Motion to Amend was filed at
least a month before the deadline to amend pleadings expired. 25
Crazy Carl’s also argues that allowing amendment would be futile. 26 Crazy Carl’s argues
that statements which are merely “nettlesome or embarrassing to a plaintiff” do not constitute
defamation, and a claim for defamation fails if “no defamatory meaning can reasonably be
inferred by reasonable persons from the communication.” 27 Crazy Carl’s then contends that the
“changing of the standard from defamation to defamation per se and now back to defamation is
evidence that the comments that [DPS] has filed suit over are not defamatory.” 28 Crazy Carl’s
does not explain how the changing of the claim from defamation to defamation per se and then
back to defamation would constitute evidence of non-defamatory comments. Therefore, Crazy
Carl’s has failed to support its futility argument on these grounds.
Crazy Carl’s also argues that DPS’s defamation claim is futile because DPS failed to
allege special damages in its Proposed Second Amended Complaint. 29 Crazy Carl’s is correct
that special damages must be alleged to state a claim for defamation. 30 “Special damages are

25

The deadline for DPS to amend pleadings was September 30, 2016. Second Amended Scheduling Order at 2,
docket no. 82, entered Mar. 15, 2017; see also Order Granting Joint Stipulation to Extend Dates and Deadlines,
docket no. 46, entered June 13, 2016 (extending deadline to amend pleadings to November 15, 2016 for Plaintiffs
and December 30, 2016 for Defendants). DPS filed its Motion to Amend on August 12, 2016, over a month before
the deadline set forth in the March 15, 2017 Scheduling Order and over three months before the deadline set forth in
the June 13, 2016 Scheduling Order. The discrepancy in these two scheduling orders may need to be rectified by
motion of the parties.
26

Opposition to Motion to Amend at 6-9.

27

Id. at 7 (quoting Int’l Ass’n of United Mine Workers Union v. United Mine Workers of Am., Case No. 2:04-cv00901-DB, 2006 WL 1183245, *3 (D. Utah May 1, 2006) (unpublished) (citing Cox v. Hatch, 761 P.2d 556, 561
(Utah 1988)).
28

Opposition to Motion to Amend at 8.

29

Id. (citing Proposed Second Amended Complaint at 18-19, ¶ 100, Ex. A to Motion to Amend, docket no. 58, filed
Aug. 12, 2016).
30

Computerized Thermal Imaging, Inc. v. Bloomberg LP, 312 F.3d 1291, 1297-98 (10th Cir. 2002) (analyzing Utah
defamation law) (emphasis omitted); Nichols v. Daily Reporter Co., 83 P. 573, 574 (Utah 1905) (explaining that to
state a claim for defamation, “special damages must be averred”).

6

those elements of damages that are the natural, but not the necessary or usual, consequence of the
defendant’s conduct, and typically stem from and depend upon the particular circumstances of
the case.” 31 Special damages “require the pleading of considerable detail.” 32 When special
damages are “an essential ingredient of the plaintiff’s claim for relief,” such as “in cases of
defamation,” they “must be specially pleaded with some specificity in order to demonstrate the
sufficiency of the plaintiff’s claim for relief, particularly to defeat a motion to dismiss under Rule
12(b)(6) as well as to inform the defendant of the nature of the claim.” 33
The Proposed Second Amended Complaint alleges special damages with adequate detail.
It alleges the following special damages:
a. Corrective Branding at $8,000.00 for at least 12 months.
b. Online reputation Management: $10,000.00 to $15,000.00 per month for
potentially 36 months.
c. Plaintiff will have to paid [sic] monthly sponsor fee of at least $150 to become
a vendor on the forums, so that he will have the ability to logon to the forum
and identify himself as Diesel Power Source and rebut all the derogatory
comments and questions that are results of the Defendant’s false and
misleading statements, for approximately three years.
d.

Attorneys fees ranging between $175 per hour and $335 per hour. 34

Unlike other cases where “no special damages were alleged in the complaint, 35 DPS’s
allegations of special damages in the Proposed Second Amended Complaint “defeat a motion to

31

5A Charles Alan Wright et al., Fed. Prac. & Proc. Civ. § 1310 (3d ed. Jan. 2017).

32

Id.; Fed. R. Civ. P. 9(g) (“If an item of special damage is claimed, it must be specifically stated.”).

33

5A Charles Alan Wright et al., Fed. Prac. & Proc. Civ. § 1310 (3d ed. Jan. 2017).

34

Proposed Second Amended Complaint at 18-19, ¶ 100, docket no. 58, filed Aug. 12, 2016. See Computerized
Thermal Imaging, 312 F.3d at 1300 n. 15 (“Attorney’s fees . . . are permitted as special damages in a slander of title
action if incurred ‘to clear title or to undo any harm created by whatever slander of title occurred.’” (emphasis
added)).
35
Allred v. Cook, 590 P.2d 318, 320 (Utah 1979) (“No special damages were alleged in the complaint” for
defamation).

7

dismiss under Rule 12(b)(6) as well as . . . inform [Crazy Carl’s] of the nature of the claim.” 36
The conclusion that special damages have been adequately pled does not mean they are
conclusively proven. Rather, accepting the factual allegations as true, the Proposed Second
Amended Complaint adequately alleges special damages. Thus, it would not be futile to allow
DPS to amend its complaint to include a claim for defamation. Crazy Carl’s is incorrect.
Because amendment would not be unduly prejudicial or futile, the Motion to Amend is
granted. DPS is granted leave to file the Proposed Second Amended Complaint. The following
causes of action are alleged in the Proposed Second Amended Complaint:
1. Defamation
2. Commercial Disparagement
3. Product Disparagement
4. Trade Libel
5. False Light
6. Unfair Competition
7. Deceptive Practices/False Advertising
8. Injunctive Relief
9. Alter Ego-Piercing the Corporate Veil
Motion to Dismiss
As explained above, the Motion to Dismiss argues that DPS “has failed to adequately
plead any claim against” Crazy Carl’s, 37 but only describes two alleged failures: failure to
adequately plead defamation and failure to adequately plead alter ego-piercing the corporate

36

5A Charles Alan Wright et al., Fed. Prac. & Proc. Civ. § 1310 (3d ed. Jan. 2017).

37

Motion to Dismiss at 5 (emphasis added).

8

veil. 38 The Motion to Dismiss, however, analyzes the First Amended Complaint which will be
supplanted by the Proposed Second Amended Complaint. Accordingly, the Motion to Dismiss is
moot.
ORDER
IT IS HEREBY ORDERED that the Motion to Amend 39 is GRANTED. DPS is granted
leave to file the Proposed Second Amended Complaint on or before March 31, 2017.
IT IS FURTHER ORDERED that the Motion to Dismiss 40 is MOOT.

Dated March 24, 2017.
BY THE COURT:
____________________________
David Nuffer
United States District Judge

38

Id. at 5-9.

39

Plaintiff’s Motion for Leave to Amend/Correct Complaint (“Motion to Amend”), docket no. 58, filed Aug. 12,
2016.
40

Defendants Crazy Carl’s Turbos and Carl Douglas’ Motion to Dismiss Complaint Pursuant to 12(b)(6) (“Motion
to Dismiss”), docket no. 51, filed July 22, 2016.

9