United Capital Mgmt. of Kan. v. Nelson

• Decision Date: 18 January 2023
• Docket Number: 22-4008-JWB
• Parties: UNITED CAPITAL MANAGEMENT OF KANSAS, INC. and CHAD M. KOEHN, Plaintiffs, v. MICHAEL E. NELSON, Defendant.
• Court: U.S. District Court — District of Kansas

UNITED CAPITAL MANAGEMENT OF KANSAS, INC. and CHAD M. KOEHN, Plaintiffs,
v.
MICHAEL E. NELSON, Defendant.

No. 22-4008-JWB

United States District Court, D. Kansas

January 18, 2023

MEMORANDUM AND ORDER

JOHN WBROOMES, UNITED STATES DISTRICT JUDGE.

Before the court is Plaintiffs' motion to dismiss (Doc. 85) Defendant's^[1] first amended counterclaims (Doc. 83). Defendant has not filed a response, and the time to do so has now expired. The motion is fully briefed and ready for decision. (Doc. 86.) For the reasons stated herein, Plaintiffs' motion is GRANTED IN PART and TAKEN UNDER ADVISEMENT IN PART. Defendant is granted leave to amend only his counterclaim for defamation.

I. Background

This contentious litigation began in state court when Plaintiffs filed their petition against Defendant alleging defamation and tortious interference with business expectations. (Doc. 1-1.) Defendant removed the case to this court (Doc. 1), and in less than a year, Plaintiffs and Defendant have filed more than 300 entries on the docket.

Defendant originally filed both an answer (Doc. 72) and counterclaims and crossclaims (Doc. 74). Plaintiffs moved to dismiss Defendant's counterclaims and crossclaims. (Doc. 79, 80.)

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Defendant opted to file amended counterclaims and crossclaims at that time rather than respond to Plaintiffs' motion to dismiss. (Doc. 83.)

Defendant's first amended counterclaims and crossclaims span 80 pages and include 15 claims against Plaintiffs and others. (Id.) The first 51 pages of the pleading appear to be the facts alleged to support Defendant's counterclaims and crossclaims. (Id. at 1-51.) Those claims include defamation, tortious interference with business prospects and right of employment, unfair and deceptive trade practices, and securities fraud to name a few. (Id. at 51-56.)

Plaintiffs filed this motion to dismiss under Federal Rules 9(b) and 12(b)(6) and District of Kansas Local Rules 7.1(a) and 7.6. (Doc. 86 at 1.) Plaintiffs argue about specific claims Defendant makes but generally argue that Defendant has failed to state a claim upon which relief can be granted. (Id.) Defendant has not filed a response to Plaintiffs' motion to dismiss and approximately seven months have elapsed since the motion to dismiss was filed. (See id., filed June 13, 2022.)

II. Standard

To withstand a motion to dismiss for failure to state a claim, a complaint or in this case, counterclaim, must contain enough allegations of fact to state a claim for relief that is plausible on its face. Archuleta v. Wagner, 523 F.3d 1278, 1283 (10th Cir. 2008). All well-pleaded facts and the reasonable inferences derived from those facts are viewed in the light most favorable to Defendant, the non-moving party. Id. Conclusory allegations, however, have no bearing upon the court's consideration. Shero v. City of Grove, Okla., 510 F.3d 1196, 1200 (10th Cir. 2007).

The heightened pleading standard under Rule 9(b) is applicable to claims of fraud or mistake. Fed.R.Civ.P. 9(b). “[A] party must state with particularity the circumstances constituting fraud or mistake.” Id. On a motion to dismiss, a party must “set forth the time, place

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and contents of the false representation, the identity of the party making the false statements and consequences thereof.” Andes Cap. Fin. LLC v. Crossed Keys LLC, Case No. 21-127-KHV, 2022 WL 1658861, at *10 (D. Kan. May 25, 2022) (slip copy) (quoting Plastic Packaging Corp. v. Sun Chem. Corp., 136 F.Supp.2d 1201, 1203 (D. Kan. 2001)).

Under the local rules for the District of Kansas, the court is permitted to decide a motion as uncontested if a response is not filed by the applicable response deadline and will ordinarily grant the motion “without further notice.” D. Kan. Rule 7.1(c).^[2] “However, the Tenth Circuit has directed that a district court may not grant a motion to dismiss or a motion for summary judgment based solely on the plaintiff's [or counter-plaintiff's] failure to respond.” Ellison v. English, Case No. 18-3070-SAC, 2019 WL 3716448, at *1 (D. Kan. Aug. 7, 2019) (citing Issa v. Comp USA, 354 F.3d 1174, 1177-78 (10th Cir. 2003)). Accordingly, the court here examines the merits of Defendant's claims.

III. Choice of Law

In his counterclaims and crossclaims, Defendant suggests that New York or Nevada are the proper jurisdiction and venue for the claims. (Doc. 83 at 7.) Defendant does not mention which state's law should apply to his state law claims. Plaintiffs' memorandum in support of their motion to dismiss analyzes each claim under Kansas law. (See Doc. 86.)

“When exercising diversity jurisdiction, the court must apply the forum state's choice of law rules to determine which state's substantive law applies.” Bushnell Corp. v. ITT Corp.,

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973 F.Supp. 1276, 1286 n.2 (D. Kan. 1997). For tort actions, Kansas applies the doctrine of lex loci delicti. Swimwear Solution, Inc. v. Orlando Bathing Suit, LLC, 309 F.Supp.3d 1022, 1031 (D. Kan. 2018). Kansas would apply the law of the state where the wrong occurred which is where the injury was suffered. Id. Here, the court has concluded that Defendant is a citizen of Nevada (Doc. 31), which is presumably where Defendant was located at the time these events took place, so the court applies Nevada law to Defendant's tort claims.

For Defendant's claims sounding in contract, the analysis is more complicated. A Kansas court would apply an enforceable choice-of-law provision, but here, there are no allegations about a written contract and thus, there is no choice-of-law provision to examine. Swimwear Solution Inc., 309 F.Supp.3d at 1031. Kansas courts also apply the doctrine of lex loci contractus, applying the law of the state where the contract was formed to disputes about the substance of the contractual obligations. Moses v. Halstead, 581 F.3d 1248, 1252 (10th Cir. 2009). “It is only when the question goes to the manner and method of performance that the law of the place of performance applies.” Id.

Defendant's factual allegations and legal claims are not a model of clarity. It is difficult for the court to discern what specific issues he is raising with respect to an alleged breach of contract. Further, Defendant does not identify any facts which would allow the court to determine where a contract was formed or where a contract was to be performed. Accordingly, the court applies Kansas law to Defendant's contract claims, as Defendant does not allege facts about the formation or performance of any contracts, Plaintiffs briefed the issues on Kansas law, and Defendant did not respond to Plaintiffs' motion. To be thorough, the court also looks to Nevada law to determine if the outcome would be different.

IV. Analysis

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At the outset, the court will address Defendant's claims against John and Jane Does 1-15 and Doe Corporations 1-15. (Doc. 83 at 1.) Defendant explains that each counterclaim and crossclaim is against Chad Koehn, United Capital Management of Kansas, Inc., all of the John and Jane Does, and all of the Doe Corporations. (Id. at 8.) Plaintiffs move to dismiss the counterclaims against them. The court will address Defendant's counterclaims against Plaintiffs. This order does not address Defendant's claims against parties other than Plaintiffs.

A. Defamation

Defendant brings a claim of defamation against Plaintiffs. Under Nevada law, to state a claim for defamation, a party must show: “(a) a false and defamatory statement concerning another; (b) an unprivileged publication to a third party; (c) fault amounting at least to negligence on the part of the publisher; and (d) either actionability of the statement irrespective of special harm, or the existence of special harm caused by the publication.” Lubin v. Kunin, 17 P.3d 422, 425 (Nev. 2001) (internal quotation omitted). Generally, damages must be proved. Id. “However, if the defamatory communication imputes a person's lack of fitness for trade, business, or profession, or tends to injure the plaintiff in his or her business, it is deemed defamation per se and damages are presumed.” Clark Cnty. Sch. Dist. v. Virtual Educ. Software, Inc., 213 P.3d 496, 503 (Nev. 2009).

It is difficult to narrow down which of Defendant's factual allegations relate to which claims, as Defendant's introduction includes 51 pages of facts. (Doc. 83.) While the court attempts to review the facts Defendant pleads in support of each claim, the court will not take the role of Defendant's attorney in searching the record and making his arguments. Smith v. Hollinghead, Case No. 20-3179-SAC, 2022 WL 2355401, *1 (D. Kan. June 30, 2022) (citing Garrett v. Selby Connor Maddux & Janer, 425 F.3d 836, 840 (10th Cir. 2005)).

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Defendant alleges that Plaintiffs have contacted individuals disparaging his reputation. (Id. at 49-50, ¶195.) Defendant states that Plaintiffs have contacted individuals and businesses with which Defendant had business relationships and with which Defendant had sought employment and that Plaintiffs told these individuals and businesses that Defendant is a convicted felon, criminal, diseased, and is going to prison for life. (Id. at 11-12, ¶¶27-34.) Defendant also alleges that Plaintiffs have “contacted individuals and published globally” that Defendant's passport has been flagged and that Defendant is wanted by the FBI and Interpol for criminal acts. (Id. at 14, ¶44.) Defendant does not allege when these statements were made or to whom they were made, nor does he plead any facts related to the damages he suffered.

Taking all these factual allegations as true, Defendant has failed to state a claim for defamation. Defendant has not identified to whom Plaintiffs allegedly made these defamatory statements or how the statements were published to these third parties (e.g., by email, text message, letter, etc.). Defendant has also failed to plead any facts related to his damages. While Defendant indicates that these statements...