IIT, Inc. v. Commc'ns Distribs.

• Decision Date: 07 October 2021
• Docket Number: Civil Action 20-cv-01580-RM-STV
• Parties: IIT, INC., a Colorado corporation, ABDI ABAS, an individual, Plaintiffs, v. COMMUNICATIONS DISTRIBUTORS, LLC, a dissolved Colorado limited liability company, IDT CORPORATION, a Delaware corporation, ROBERT DIETER, an individual, and COMMUNICATIONS DISTRIBUTORS, LLC, a Florida limited liability company, Defendants.
• Court: U.S. District Court — District of Colorado

IIT, INC., a Colorado corporation, ABDI ABAS, an individual, Plaintiffs,
v.
COMMUNICATIONS DISTRIBUTORS, LLC, a dissolved Colorado limited liability company, IDT CORPORATION, a Delaware corporation, ROBERT DIETER, an individual, and COMMUNICATIONS DISTRIBUTORS, LLC, a Florida limited liability company, Defendants.

Civil Action No. 20-cv-01580-RM-STV

United States District Court, D. Colorado

October 7, 2021

RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

SCOTT T. VARHOLAK MAGISTRATE JUDGE

This matter is before the Court on four motions: (1) Defendant IDT Corporation's (“IDT”) Motion to Dismiss (“IDT's Motion to Dismiss”) [#88]; (2) Defendants Communications Distributors, LLC (“CDI”) and Robert Dieter's Motion to Dismiss (“CDI's Motion to Dismiss”) [#89]; (3) Plaintiffs' Motion to Dismiss CDI's Counterclaims (“Plaintiffs' Motion to Dismiss”) [#98]; and (4) Plaintiffs' Motion to Strike Affirmative Defenses Nos. 1 and 6 under Fed.R.Civ.P. 12(f) (“Plaintiffs' Motion to Strike”) [#99]. The Motions have been referred to this Court. [## 91, 101] The Court has carefully considered the Motions and related briefing, the entire case file, and the applicable case law, as well as oral argument held on September 30, 2021 [#110]. For the following reasons, the Court respectfully RECOMMENDS that IDT's Motion to Dismiss be GRANTED IN PART and DENIED IN PART, CDI's Motion to Dismiss be GRANTED IN

1

PART and DENIED IN PART, Plaintiffs' Motion to Dismiss be GRANTED IN PART and DENIED IN PART, and Plaintiffs' Motion to Strike be DENIED.

I. BACKGROUND

Plaintiffs' Amended Complaint asserts twelve claims: (1) breach of contract against CDI, ^[1] IDT, and Robert Dieter [#87 at ¶¶ 144-52]; (2) tortious interference with contract against all Defendants [id. at ¶¶ 153-66]; (3) declaratory judgment asking the Court to declare that certain provisions of a Master Distribution Agreement (the “Agreement”) entered into by IIT, Inc. (“IIT”), Abas Abdi, and CDI are unenforceable [id. at ¶¶ 167-72]; (4) violation of the Colorado Antitrust Act and the Sherman Antitrust Act against all Defendants [id. at ¶¶ 173-84]; (5) conversion against all Defendants [id. at ¶¶ 185-89]; (6) civil theft against CDI and IDT [id. at ¶¶ 190-95]; (7) breach of fiduciary duty against CDI and IDT [id. at ¶¶ 196-203]; (8) civil conspiracy against CDI and IDT [id. at ¶¶ 204-11]; (9) promissory estoppel against CDI and Mr. Dieter [id. at ¶¶ 212-17]; (10) a demand for an accounting [id. at ¶¶ 218-22]; (11) equal rights violation pursuant to 42 U.S.C. § 1981 against all Defendants [id. at ¶¶ 223-31]; and (12) unjust enrichment against all Defendants [id. at ¶¶ 234-38]. IDT's Motion to Dismiss seeks to dismiss all claims asserted against it. [#88] CDI's Motion to Dismiss seeks to dismiss all claims against Mr. Dieter^[2] and Claims Two, Four, Seven, Eight, Nine, Eleven, and Twelve against CDI. [#89]

2

In addition to moving to dismiss several claims against it, CDI also filed three counterclaims against both Plaintiffs: (1) breach of contract [#90 at ¶¶ 58-64]; (2) tortious interference with contractual relationships [id. at ¶¶ 65-68]; and (3) defamation [id. at ¶¶ 69-73]. Plaintiffs have moved to dismiss all three counterclaims. [#98] Additionally, Plaintiffs have moved to strike two affirmative defenses raised by CDI: (1) Affirmative Defense One stating that one or more of Plaintiffs' claims fail to state facts sufficient to support a cause of action, and (2) Affirmative Defense Six stating that Plaintiffs' claims are frivolous, groundless, vexatious, and lack substantial justification as contemplated by Federal Rule of Civil Procedure 11 and Colo. Rev. Stat. § 13-17-102. [#99]

A. Plaintiffs' Claims^[3]

Plaintiff IIT is a Colorado corporation owned by Plaintiff Abdi. [#87 at ¶¶ 1-2]^[4]Mr. Abdi is originally from Somalia and his native language is Somali. [Id. at ¶ 2]^[5]Defendant CDI is a dissolved Colorado limited liability company and recently formed Florida limited liability company. [Id. at ¶ 3]^[6] Defendant Dieter owns and manages CDI

3

and serves as CDI's registered agent. [Id. at ¶¶ 3, 5]^[7] Defendant IDT is a Delaware corporation. [Id. at ¶ 4]^[8]

1. The Agreement and Plaintiffs' Initial Performance

BOSS Revolution (“the Service”) is a mobile telephone service developed and owned by Defendant IDT that enables immigrants to call relatives in their home country. [Id. at ¶ 1]^[9] IDT contracted with CDI to distribute the Service. [Id. at ¶ 10] IDT and CDI focused on generating revenue from African immigrants living in the United States who had relatives living in Africa. [Id. at ¶ 12] Because of Mr. Abdi's cultural connection to African retailers and because Mr. Abdi speaks multiple languages, IDT and CDI targeted Mr. Abdi to distribute the service. [Id. at ¶ 14]

IDT and CDI told Plaintiffs that they were looking for distributors who could build markets with foreign customers in the United States. [Id. at ¶ 15] CDI's owner, Mr. Dieter, told Mr. Abdi that IIT could “have the entire African market in Colorado and in other states” and that Mr. Abdi would be paid commissions for sales and leads. [Id. at ¶ 16] Mr. Dieter further told Mr. Abdi that he would be paid a commission on any sales of the Service or leads generated. [Id. at ¶ 17] Mr. Dieter also told Mr. Abdi that if Mr. Abdi developed leads in other states: (1) distributors would be selected for those leads, (2) Mr. Abdi would manage those distributors, and (3) Mr. Abdi would receive commissions from those sales. [Id. at ¶ 18]

“On or about April 6, 2012, IIT, Mr. Abdi, and CDI entered into [the Agreement] that permitted and authorized CDI to offer the ‘Service' through IIT's distribution

4

channel.” [Id. at ¶ 20; see also #80-2^[10] The Agreement authorized IIT to promote, market, distribute, and sell the Service. [Id.] The Agreement set forth discount rates at which CDI and IDT would provide the Service to IIT and discount rates at which IIT could distribute the Service to retailers. [##87 at ¶ 23; 80-2 at 2-3] It also stated that CDI or IDT would pay IIT commissions on sales, provide other benefits, and provide IIT with access to sales and commissions records. [##87 at ¶¶ 24-26; 80-2 at 3-4]

In signing the Agreement, IIT acknowledged that it would not acquire proprietary or other rights in the Service. [##87 at ¶ 29; 80-2 at 4] The Agreement contained a “Non-Compete; Non-solicitation” provision stating that IIT could not engage in competitive business against CDI for a period of three years after termination of the Agreement. [##87 at ¶ 35; 80-2 at 6] Finally, the Agreement stated that CDI could only terminate the Agreement upon the occurrence of: (1) IIT's insolvency or bankruptcy, (2) breach of the Agreement by IIT without a cure within fifteen days of notice, or (3) a finding by a governmental authority that the Agreement is contrary to law. [##87 at ¶ 33; 80-2 at 5] If IIT's breach caused the termination, IIT's commissions were to continue for twelve months. [Id.]

Mr. Abdi and IIT performed their obligations under the Agreement by creating a network of customers for the Service, which generated significant revenue for CDI and IDT. [#87 at ¶¶ 36-38, 42] Indeed, IIT ranked first or second on the list of CDI's distributors. [Id. at ¶ 48] At their peak, Mr. Abdi and IIT had over 950 retail stores in

5

their distributor network and CDI paid IIT between $195, 000 and $225, 000 annually. [Id. at ¶ 49] IIT and Mr. Abdi expended significant resources developing their customer leads. [Id. at ¶¶ 39-41, 44]

2. CDI's Reduction of Distributors Generally

In approximately 2014, IDT instructed CDI to begin cutting distributors to generate additional profits for IDT and CDI.^[11] [#87 at ¶¶ 2, 51] Thus, Mr. Dieter and Patricia Rumero^[12] began contacting distributors seeking to amend or terminate the distributors' master distributor agreements. [Id. at ¶¶ 3, 52-58]^[13] Mr. Dieter and Ms. Rumero falsely stated that they were amending or terminating the master distributor agreements because the distributors were not producing. [Id. at ¶ 53] Mr. Dieter also told some of these distributors that IDT had ordered him to terminate the agreements. [Id. at ¶¶ 54-55]

“Near the end of 2016 and into 2017, IDT and CDI agreed to a scheme whereby they would keep (or not pay) substantial revenues generated by the distributors.”^[14] [Id. at ¶ 64] CDI, stating that it was acting on orders from IDT, told distributors that the master distribution agreements needed to be amended or else CDI and IDT would be

6

forced to bar all distributors from distributing the Service through their respective retailer network. [Id. at ¶ 65] The only distributors targeted, however, were African or Muslim immigrants. [Id. at ¶ 66] These distributors were targeted “because IDT, CDI, and [Mr.] Dieter all reasoned that immigrants who were African or Muslim were stupid, had no access to legal resources, and, in any event, they would not know how to vindicate their claims in court.” [Id. at ¶ 67]

“[Mr.] Dieter, IDT, and CDI did not take kindly when distributors challenged them on the changes to the [m]aster [d]istributor [a]greement[s].” [Id. at ¶ 72] For example, on one occasion, a distributor's commissions were stopped after the distributor questioned the amendment. [Id. at ¶ 73] “Most of the distributors, under economic pressure, caved to IDT and CDI's demands to alter the agreements without additional consideration.” [Id. at ¶ 74]

3. CDI's Specific Actions Toward Plaintiffs

At some point, ^[15] CDI and IDT realized that Mr. Abdi and IIT had built a significant African-based retail and customer market, thereby achieving IDT's and CDI's needs. [Id. at ¶ 50] CDI and IDT decided they no longer needed assistance from Mr. Abdi and IIT. [Id.] CDI and IDT thus refused to provide leads to IIT, preventing IIT from obtaining commissions. [Id. at ¶ 46] CDI and IDT also refused to pay...