Cont'l Credit Corp. v. Garcia
| Decision Date | 16 February 2016 |
| Docket Number | Civil Action No. 15-cv-1251-NYW |
| Parties | CONTINENTAL CREDIT CORPORATION, NATIONAL CREDIT CARE CORPORATION, Plaintiffs, v. PAUL C. GARCIA, Defendant. |
| Court | U.S. District Court — District of Colorado |
This matter is before the court on the Motion to Dismiss Counterclaims filed by Plaintiffs Continental Credit Corporation and National Credit Care Corporation [#10, filed July 23, 2015], Defendant's Motion to Dismiss (Rule 12(b)(6)) or for Judgment on the Pleadings (Rule 12(c)) [#35, filed Oct. 19, 2015], and the Motion to Strike Portions of the Kyle Kolb Affidavit [#39, filed Dec. 3, 2015]. These motions are before the undersigned Magistrate Judge pursuant to 28 U.S.C. § 636(c), the Parties' Consent to the Exercise of Jurisdiction by a United States Magistrate Judge dated October 9, 2015 [#32], and the Order of Reference dated October 14, 2015 [#34].
The court has reviewed the motions and the associated briefing. Having considered the Parties' briefing and the applicable case law, and being fully advised of the premises, the court ORDERS that: (1) Plaintiffs' Motion to Dismiss Counterclaims [#10] is DENIED as MOOT; (2) Defendant's Motion to Dismiss (Rule 12(b)(6)) or for Judgment on the Pleadings (Rule 12(c)) [#35] is GRANTED IN PART and DENIED IN PART; and (3) Defendant's Motion to Strike Portions of the Kyle Kolb Affidavit [#39] is DENIED as MOOT.
Plaintiffs Continental Credit Corporation and National Credit Care Corporation ("Continental Credit" and "National Credit Care"; collectively, "Plaintiffs") initiated this action on June 12, 2015 by filing a Complaint against Defendant Paul C. Garcia ("Defendant" or "Mr. Garcia"). [#1]. The two claims for relief in the Amended Complaint, for breach of contract and unjust enrichment, stem from Mr. Garcia's alleged breach of a covenant not to compete that he purportedly signed as an employee of Continental Credit. Mr. Garcia answered and asserted a counterclaim for abuse of process on July 2, 2015. See [#7 at 4]. Plaintiffs then filed an Amended Complaint on July 6, 2015. [#8]. When Mr. Garcia answered the Amended Complaint, he did not include his counterclaim for abuse of process. See generally [#11].
The following facts found in Plaintiffs' Amended Complaint are taken as true for the purpose of consideration of the merits of Defendant's Motion to Dismiss or for Judgment on the Pleadings. The Amended Complaint states that Plaintiffs are Colorado corporations and Defendant is a citizen of Idaho. [#8 at ¶¶ 2-3]. Plaintiffs invoke diversity jurisdiction on the basis of diversity of citizenship of the parties and an amount in controversy exceeding $75,000. [#8 at ¶¶ 3-5].
The Amended Complaint states that National Credit Care, Continental Credit, and a third company, Home Loans Assist Corporation ("Home Loans Assist"), are related companies that share the same owners, officers, management, office location, and employees. [#8 at ¶ 6]. The three companies are described as being divisions within the same umbrella company, referred toas "National Credit Care." [#8 at ¶ 7]. All three businesses provide credit repair services for their clients. [#8 at ¶ 16]. According to Plaintiffs, these companies are treated by both employees and management as divisions within the same company, National Credit Care. [#8 at ¶ 7]. Nonetheless, these three companies operate separately so that they can take advantage of different marketing and pricing opportunities. [#8 at ¶ 7].
Plaintiffs allege that when any one of the three companies hires a new employee, that employee is asked to sign a non-compete agreement with National Credit Care before he or she begins training. [#8 at ¶¶ 9, 14]. They also are asked to review and sign a "Receipt and Acknowledgement of National Credit Care Employee Handbook." [#8 at ¶ 14]. When Mr. Garcia began work, he signed the non-compete document, entitled "Confidentiality Agreement and Covenant Not to Compete" (the "Confidentiality Agreement") [#8 at ¶ 9]. Mr. Garcia signed the Employee Handbook on October 14, 2013 (his first day of training). [#8-2]. Plaintiffs allege that the Employee Handbook makes it clear in numerous locations that it applies to all three divisions. [#8 at ¶ 15].
After an employee is trained by National Credit Care, he or she is randomly assigned to work for National Credit Care, Continental Credit, or Home Loans Assist. [#8 at ¶ 11]. Sometimes employees transfer between National Credit Care, Continental Credit, or Home Loans Assist during their employment. [#8 at ¶ 12]. When an employee transfers between divisions, the employee is not considered a "new" employee and does not receive a new start date within the new division. [#8 at ¶ 12]. From the end of his training until he resigned on December 15, 2014, Defendant was a "Regional Sales Manager" for Continental Credit. [#8 at ¶¶ 17, 20].
After Mr. Garcia left Continental Credit, Mr. Garcia began operating a business under the name "Sprint Credit Restoration" and advertising that company through his website, www.sprintrestoration.com. Plaintiffs allege that this business competes against National Credit Care, Continental Credit, and Home Loans Assist and that Mr. Garcia began working there within the one-year non-competition period required by the covenant not to compete in the Confidentiality Agreement. [#8 at ¶ 22]. Plaintiffs further allege that Mr. Garcia has approached a substantial number of referral sources (primarily mortgage brokers) and persuaded them to give business to him. [#8 at ¶ 26]. Plaintiffs state that a number of referral sources have contacted them regarding Mr. Garcia's activities. [#8 at ¶ 27].
On June 23, 2015, Plaintiffs filed a motion to dismiss Mr. Garcia's abuse of process counterclaim ("Plaintiffs' Motion to Dismiss"). [#10]. Plaintiffs characterize Mr. Garcia's abuse of process counterclaim as including within it two additional counterclaims for intentional infliction of emotional distress and negligent infliction of emotional distress. [#10 at 3]. Plaintiffs argue that all three of these counterclaims should be dismissed for failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6).
On October 19, 2015, Defendant filed a motion to dismiss or for judgment on the pleadings ("Defendant's Motion for Judgment on the Pleadings"). [#35]. Defendant argues that Plaintiffs' claims should all be dismissed pursuant to Fed. R. Civ. P. 12(b)(6) or Fed. R. Civ. P. 12(c) because the admissions and allegations in Plaintiffs' pleadings show beyond doubt that Plaintiffs can prove no set of facts upon which they can be granted their requested relief.
On November 9, 2015, Plaintiffs filed a response in opposition to Defendant's Motion to Dismiss or for Judgment on the Pleadings. [#37]. In support of their opposition brief, Plaintiffssubmit an affidavit from Kyle Kolb, the President and a shareholder of Plaintiff National Credit Care. [#37-1]. Defendant filed his reply in support of his Motion to Dismiss on December 3, 2015. [#38]. In addition to rebutting Plaintiffs' arguments, he also filed on the same day a motion to strike the Kyle Kolb affidavit. [#39].
Plaintiffs filed a motion to dismiss Mr. Garcia's counterclaim for abuse of process, which they argue also includes within it counterclaims for intentional infliction of emotional distress and negligent infliction of emotional distress. That counterclaim appears in Mr. Garcia's Answer to the original complaint. See [#7]. However, when Mr. Garcia answered what is now the operative Complaint in this case, the July 6, 2015 Amended Complaint, he did not include that counterclaim. See generally [#11]. When Plaintiffs filed the Amended Complaint, that Amended Complaint became Plaintiffs' operative pleading in this case. Defendant's previous answer became moot and was superseded by the answer he filed to the Amended Complaint. See Franklin v. Kansas Dep't. of Corrs., 160 F. App'x 730, 734 (10th Cir. 2005) () (citing Miller v. Glanz, 948 F.2d 1562, 1565 (10th Cir. 1991)). Mr. Garcia's answer to the Amended Complaint is the operative answer in this action, and does not include the abuse of process counterclaim. Accordingly, the court denies Plaintiffs' Motion to Dismiss as moot. See Malibu Media, LLC v. Fantalis, No. 12-CV-00886-MEH, 2012 WL 5187840, at *5 (D. Colo. Oct. 18, 2012) ()(citing Franklin, 160 F. App'x at 734); Am. Family Mut. Ins. Co. v. Gustafson, No. 08-CV-02772-MSK, 2011 WL 782574, at *10 (D. Colo. Feb. 25, 2011) (); see also Righthaven, LLC v. Eiser, No. 2:10-CV-3075-RMG, 2012 WL 527569, at *1 (D.S.C. Feb. 16, 2012).
Defendant's Motion to Dismiss purports to be a motion to dismiss under Fed. R. Civ. P. 12(b)(6) and/or a motion for judgment on the pleadings under Fed. R. Civ. P. 12(c). See [#35 at 1]. Because Defendant answered the Amended Complaint on July 24, 2015, almost three months prior to filing his Motion, it is appropriate to consider the Motion as a motion for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c). See Davis v. City of Aurora ex rel. City Council, No. 08-CV-002107-PAB-MJW, 2011 WL 2799539, at *2 (D. Colo. July 14, 2011); Lowe v. Town of Fairland, Okla., 143 F.3d 1378, 1381 n.5 (10th Cir. 1998) (...
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