Allen v. Quest Online, LLC
| Decision Date | 22 September 2011 |
| Docket Number | No. CV-11-138-PHX-GMS,CV-11-138-PHX-GMS |
| Parties | David Allen, a married man, Plaintiff, v. Quest Online, LLC, an Arizona limited liability company; Greg Wexler and Jane Doe Wexler, husband and wife; Larry O'Rourke, III and Jane Doe O'Rourke, husband and wife; Rick Hupp, an individual; Greg Klipstein and Jane Doe Klipstein; Bob Carlson, an individual; Jim Haney and Jane Doe Haney, husband and wife; Willard Olauson and Jane Doe Olauson, husband and wife; Kelly Olauson and Janis Doe Olauson, husband and wife; Eileen O'Rourke, an individual; Larry O'Rourke, Jr. and Janis Doe O'Rourke, husband and wife; 3000AD, Inc., a Florida corporation; Derek Smart and Jane Doe Smart, husband and wife, Defendants. |
| Court | U.S. District Court — District of Arizona |
Pending before the Court are the following motions: (1) a Motion to Dismiss filed by Defendants Quest Online, LLC ("QOL"),1 3000AD, Inc. ("3000AD"), and Derek and JaneDoe Smart ("Smart") (Doc. 8); (2) a Motion to Dismiss filed by Defendants Gregory and Jane Doe Wexler ("Wexler"), Willard and Jane Doe Olauson ("Willard Olauson"), and Kelly and Janis Doe Olauson ("Kelly Olauson") (Doc. 30); (3) Motion for Preliminary Injunction filed by Plaintiff David Allen (Doc. 1, Ex. 7); and (4) a Motion for Partial Summary Judgment filed by Plaintiff (Doc. 54). For the following reasons, the Court grants in part and denies in part the Motion to Dismiss filed by Defendants Quest, 3000AD, and Smart; grants the Motion to Dismiss filed by Defendants Wexler, Willard Olauson, and Kelly Olauson; and denies the Motion for Preliminary Injunction and Motion for Partial Summary Judgment filed by Plaintiff.
Plaintiff David Allen alleges that in 2006, he and Defendant Wexler founded QOL, a limited liability company in the business of multi-player online games. Plaintiff ran QOL for more than four years, acting as a Member, Manager, President and CEO. During his tenure at QOL, Plaintiff created a large multi-player online game entitled Alganon.
On or around March 1, 2010, Plaintiff alleges that he was forcibly removed by QOL Member Defendants and replaced by Defendant Derek Smart. On or around June 4, 2010, Smart was appointed as the new Manager by the QOL Member Defendants.2 On March 25, 2010, Plaintiff filed suit against the Defendants in Maricopa County Superior Court. The suit was subsequently settled out of court on September 27, 2010 through the execution of a Limited Liability Company Membership Interest Purchase Agreement, which also contained a Release Agreement. (Doc. 70). The parties jointly moved to dismiss the action with prejudice.
Plaintiff's Complaint includes a total of twelve counts against Defendants, including:(1) breach of contract; (2) breach of good faith and fair dealing; (3) defamation, libel, and slander; (4) blacklisting; (5) trade libel (injurious falsehood); (6) breach of implied duty; (7) civil conspiracy; (8) negligence; (9) intentional infliction of emotional distress; (10) compensatory damages; (11) consequential damages; (12) punitive damages. The first Motion to Dismiss, filed on behalf of Defendants Quest, 3000AD, and Smart (Doc. 8), moves the Court to dismiss all counts for failure to state a claim pursuant to Rule 12(b)(6). The second Motion to Dismiss, filed on behalf of Defendants Wexler, Willard Olauson, and Kelly Olauson (Doc. 30), joins the first Motion, and separately moves for dismissal on the bases of insufficient service and lack of personal jurisdiction. Before the case was removed to this Court, Plaintiff filed a Motion for Preliminary Injunction (Doc. 1, Ex. 7). He provided notice to this Court of that motion on April 22, 2011. (Doc. 36). Finally, Plaintiff filed a Motion for Partial Summary Judgment (Doc. 54) against Defendant Smart on the claims of breach of contract, breach of good faith and fair dealing, defamation, trade libel (injurious falsehood), and negligence.
A. Legal Standard
To survive dismissal for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint must contain more than "labels and conclusions" or a "formulaic recitation of the elements of a cause of action"; it must contain factual allegations sufficient to "raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). While "a complaint need not contain detailed factual allegations . . . it must plead 'enough facts to state a claim to relief that is plausible on its face.'" Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 2008) (quoting Twombly, 550 U.S. at 570). "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." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556). The plausibility standard Id. (internal citations omitted) (quoting Twombly, 550 U.S. at 557).
When analyzing a complaint for failure to state a claim under Rule 12(b)(6), "[a]ll allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party." Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). However, legal conclusions couched as factual allegations are not given a presumption of truthfulness, and "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss." Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998).
The Court must construe the Complaint liberally since Plaintiff is proceeding pro se. See Hughes v. Rowe, 449 U.S. 5, 9 (1980) () (citations omitted); Eldridge v. Block, 832 F.2d 1132, 1137 (9th Cir. 1987) () (citation omitted); Ashelman v. Pope, 793 F.2d 1072, 1078 (9th Cir. 1986) (). Nevertheless, even pro se litigants are held to the requirements of the federal and local rules, and a failure to appropriately follow those rules may result in sanctions up to dismissal. Ghazali v. Moran, 46 F.3d 52, 54 (9th Cir. 1995).3
B. Analysis
Plaintiff alleges that Defendant Smart breached the binding and enforceable ReleaseAgreement by "posting, republishing, linking, communicating and hosting defamatory materials and making defamatory statements related to [Plaintiff]." (Doc. 1, Ex. 2, ¶ 219). Specifically, Plaintiff alleges that Smart "purposely published and republished materials to the public space knowing they would persist and be replicated by other individuals and websites," and "purposely republished previously removed defamatory materials to support his continued agenda of inflicting harm upon Allen and ignoring the terms of the Settlement." (Id. at ¶¶ 220-221). Plaintiff alleges that these actions are in violation of the non-disparagement provision of the Agreement, which provides that Defendant "will not make, or cause to be made, any disparaging remarks or statements" or "engag[e] in any other conduct intended to negatively affect the reputation." (Id. at ¶ 217).
Under Arizona law, a plaintiff asserting a claim for breach of contract must demonstrate the existence of a contract between plaintiff and defendant, breach of that contract by defendant, and resulting damage to plaintiff. Frank Lloyd Wright Found. v. Kroeter, 697 F.Supp.2d 1118, 1125 (D. Ariz. 2010). The parties do not dispute the existence or authenticity of the Agreement, entered on September 27, 2010.4 As alleged by Plaintiff, §1(c) of the Release Agreement provides the following:
The Parties will not make, or cause to be made, any disparaging remarks or statements about or concerning the other. This restriction includes, but is not limited to, posting disparaging remarks on the internet (whether anonymously or under another name), providing disparaging statements in interviews, recirculating, republishing, or reposting previously authored disparaging remarks or statements, or engaging in any other conduct intended to negatively affect the reputation of another Party.
Thus, to the extent Plaintiff is alleging that Smart violated the non-disparagement provisionof the Release Agreement after it was executed, he has satisfied the breach element. This would include Plaintiff's allegations regarding the following defamatory actions: 1) the September 29, 2010 press release (Doc. 1, Ex. 2, ¶¶ 48-53), 2) Smart's public post on September 28, 2010 (Id. at ¶ 93), 3) the Allison & Taylor reference check (Id. at ¶¶ 63-67), and 4) Smart's interview with "Lore Hound" on December 9, 2010 (Id. at ¶¶ 113-114).5
To the extent, however, that Plaintiff's general allegations recount postings and other materials which existed prior to the September 27, 2010 effective date of the Agreement, those claims are barred by § 1(b) of the Release Agreement.6 The Release provides:
Allen . . . releases QOL, the Members, Derek Smart, 3000 AD, and Millenium Trust, and each of them, as well as their respective employees, members, spouses and attorneys [ ] from any and all claims asserted in the Lawsuit or that could have been asserted in the Lawsuit, by reason of any matter, cause, or claim arising prior to the date of this Release Agreement.
While Plaintiff alleges that § 1(c) of the Release Agreement indicates that Defendants are "obligated to remove...
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