Singlepoint Direct Solar LLC v. Curiel

• Decision Date: 03 February 2022
• Docket Number: CV-21-1076-PHX-JAT(Lead),CV-21-0989-PHX-JAT (Cons)
• Parties: SinglePoint Direct Solar LLC, et al., Plaintiffs/Counterdefendants, v. Pablo Diaz Curiel, et al., Defendants/counterclaimants.
• Court: U.S. District Court — District of Arizona

SinglePoint Direct Solar LLC, et al., Plaintiffs/Counterdefendants,
v.
Pablo Diaz Curiel, et al., Defendants/counterclaimants.

Nos. CV-21-1076-PHX-JAT(Lead), CV-21-0989-PHX-JAT (Cons)

United States District Court, D. Arizona

February 3, 2022

ORDER

James A. Teilborg Senior United States District Judge

Pending before the Court are Defendants Solar Integrated Roof Corporation's (“SIRC”) and David Massey's Motion for Partial Dismissal of Plaintiff's Second Amended Complaint (Doc. 98) and both Plaintiffs' Motion to Compel Arbitration (Doc. 116) and Plaintiffs' Partial Motion to Dismiss Verified First Amended Counterclaim (Doc. 117). The Court has reviewed the pleadings, briefs, declarations, and exhibits submitted by the parties. For the reasons cited herein, the Court grants in part and denies in part Defendants SIRC's and David Massey's Motion for Partial Dismissal of Second Amended Complaint (Doc. 98), grants Plaintiffs' Motion to Compel Arbitration (Doc. 116) and grants in part and denies in part Plaintiffs' Partial Motion to Dismiss Verified First Amended Counterclaim (Doc. 117).

I. Procedural Background

On June 8, 2021, Defendants/Counterclaimants SinglePoint Direct Solar, LLC (“SDS”), Pablo Diaz, JAGUSA Holdings, Inc. (“JAGUSA”), Dan Shikiar, Elijah Lee Chaffino, and Kjelsey Johnson in this case filed a lawsuit, No. CV-21-00989-PHX-SMB,

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against Plaintiffs/Counterdefendants SinglePoint, Inc. (“SinglePoint”), Greg Lambrecht, Wil Ralston, and Corey Lambrecht to bring claims for securities fraud, breach of fiduciary duty, multiple breaches of contract, tortious interference of contract, breach of covenant of good faith and fair dealing, breach of Diaz's employment agreement, violation of state and federal whistleblower statutes, acts of civil conspiracy, aiding and abetting criminal conduct, various fraud claims, and violations of RICO. SinglePoint Direct Solar, LLC et al. v. SinglePoint, Inc. et al., CV-21-00989-PHX-SMB, Doc. 1.

Separately, on June 21, 2021, Plaintiffs filed their Complaint in this case against Defendants Diaz, Johnson, and Brian Odle claiming trademark infringement, breach of the asset purchase agreement, breach of Diaz's employment agreement, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, unfair competition, state and federal trade secret misappropriation, intentional interference with contract, conversion, and unjust enrichment. (Doc. 1 at 1, 20-21). On the same day, Plaintiffs filed a Motion for a Temporary Restraining Order (TRO) and Preliminary Injunction, seeking to enjoin Defendants from misappropriating SDS's confidential and other proprietary data and breaching noncompete and non-solicitation covenants in the Asset Purchase Agreement and Diaz's Employment Agreement. (Doc. 3 at 11-13).

At a June 30, 2021 hearing, the parties stipulated to a TRO requiring Defendants Diaz and Johnson to provide Plaintiffs with all login information for SDS accounts and enjoining them from soliciting SDS clients or otherwise using SDS client lists or other confidential or proprietary information, using the name Direct Solar in their business dealings, and destroying or deleting any materials related to Plaintiffs' claims. (Doc. 32 at 2-3).

On July 13, 2021, Plaintiffs filed a motion for an order to show cause regarding Defendants' violation of the TRO. (Doc. 34). Following the appointment of a special master to oversee the parties' compliance with the TRO, the Court denied Plaintiff's motion without prejudice as moot. (Doc. 36).

On July 14, 2021, Plaintiffs filed a First Amended Complaint, adding Defendants

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SIRC, Massey, USA Solar Network, LLC (“USA Solar”), Elijah Chaffino, Christa Berume, and Jessica Hernandez. (Doc. 37). On July 16, 2021, Plaintiffs filed an Application for an Amended TRO and Preliminary Injunction (Doc. 44), which the Court denied (Doc. 56). On the same day, the parties filed a Stipulated Motion for Leave to Take Limited Expedited Discovery relating to the upcoming preliminary injunction hearing and Defendant SIRC's involvement with Defendant USA Solar (Doc. 47), which the Court granted (Doc. 49). In their response to Plaintiffs' Application for an Amended TRO and Preliminary Injunction, Defendants also included a Motion to Dismiss Plaintiffs' First Amended Complaint. (Doc. 51 at 14).

On August 2, 2021, the parties filed a Stipulated Motion to Consolidate Case No. CV-21-00989-PHX-SMB with this case. (Doc. 71). On August 10, 2021, the cases were consolidated. (Doc. 82).

On August 4, 2021, the Court held a preliminary injunction hearing, and on August 6, 2021, the Court granted in part and denied in part Plaintiff's Motion, enjoining Defendants Diaz and Johnson from “using any information specific to SDS that was the subject of the Asset Purchase Agreement or Employment Agreement” including “any specific customer information, price lists, accounts, web pages, and the like.” (Doc. 77 at 1, 9, 16). The Court also found the noncompete and non-solicitation clauses in both the Asset Purchase Agreement and Diaz's Employment Agreement unenforceable. (Id.) In that same order, the Court denied Defendants' Motion to Dismiss Plaintiff's First Amended Complaint without prejudice for failure to comply with the certification requirements of Local Rule of Civil Procedure 12.1(c). (Doc. 77 at 1, n. 1).

On August 27, 2021, Plaintiffs filed their Second Amended Complaint (“SAC”), adding a copyright infringement claim against USA Solar and a defamation claim against Diaz. (Doc. 90 at 28-30). On September 10, 2021, Defendants SIRC and David Massey filed a Motion for Partial Dismissal of Plaintiffs' SAC arguing that this Court does not have personal jurisdiction over either party, or, in the alternative, Plaintiffs failed to state a claim for relief against them. (Doc. 98).

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On September 11, 2021, Defendants/Counterclaimants filed their complaint from Case No. CV-21-00989-PHX-SMB as a Counterclaim, adding Odle as a Counterclaimant, adding DOES I-X and ROE Corporations I-X as Counterdefendants, and removing SDS as a Counterclaimant and adding it as a Counterdefendant. (Doc. 100 at 1). On October 12, 2021, Counterclaimants filed their First Amended Counterclaim, adding Direct Solar, LLC (“Direct Solar”) and AI Live Transfers, LLC as Counterclaimants, removing Dan Shikiar as a Counterclaimant, and asserting derivative action claims on behalf of SDS, multiple breaches of various contracts, breach of the implied covenant of good faith and fair dealing, nonpayment of wages, accounting and appointment of a receiver over SDS, securities fraud, fraud by inducement and concealment, conversion, civil conspiracy, and alternatively, negligent misrepresentation and unjust enrichment. (See Doc. 110). On October 19, 2021, Plaintiffs filed a Motion to Compel Arbitration of Defendant Diaz's counterclaims arising under his employment agreement with SDS (Doc. 116) and a Motion to Dismiss the First Amended Counterclaim for failure to state a claim (Doc. 117).

On January 21, 2022, the Court held oral arguments on the pending motions. (Doc. 136).

II. Evidence Considered by the Court

As a threshold matter, the Court must determine whether the parties' proffered exhibits are properly before it at the motion to dismiss stage.

On August 27, 2021, Plaintiffs filed the SAC that cites to, but does not properly attach, Plaintiffs' exhibits. (Doc. 90). Upon realizing their failure to properly attach exhibits to the SAC, Plaintiffs filed a Notice of Errata on October 20, 2021, effectively refiling the SAC with the exhibits attached. (Doc. 123). Plaintiffs did not seek leave to amend or refile the SAC, therefore those exhibits are not properly before the court. Defendants did not file a motion to strike Plaintiffs' exhibits, but Defendants SIRC and Massey raised authenticity concerns in their Reply Brief regarding the Court's consideration of the exhibits at the motion to dismiss stage. (Doc. 119 at 5). Additionally, on October 12, 2021, in response to Defendants' Motion to Dismiss, Plaintiffs attached a

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two-page excerpt from Defendant Odle's deposition transcript. (Doc. 109-1). In their Reply Brief, Defendants objected to the authenticity of the deposition transcript excerpt because the excerpt did not include the court reporter's certification. (Doc. 119 at 6). Finally, in support of their Motion to Dismiss, Defendants reference (Doc. 119 at 7), but do not attach, a previously filed affidavit from Defendant Massey (Doc. 51-1).

When reviewing a motion to dismiss for lack of personal jurisdiction brought under Federal Rule of Civil Procedure 12(b)(2), “a court may consider extrinsic evidence-that is, materials outside the pleadings, including affidavits submitted by the parties.” Stewart v. Screen Gems-EMI Music, Inc., 81 F.Supp.3d 938, 951 (N.D. Cal. 2015) (citing Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004)). Conversely, in the Federal Rule of Civil Procedure 12(b)(6) context, courts are generally prohibited from considering evidence outside the pleadings without conversion of the motion to dismiss into a motion for summary judgment. See Fed. R. Civ. P. 12(d) (“If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.”).

However, the Ninth Circuit allows its courts to discretionarily consider extra-pleading evidence contained in documents referenced in a complaint that are essential to the underlying claims via the doctrine of incorporation by reference. Stewart, 81 F.Supp.3d at 951 (citing Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295 (9th Cir. 1998)). Incorporation by reference allows courts to consider “documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not attached to the...