Wilferd v. Dig. Equity, LLC

• Decision Date: 20 November 2020
• Docket Number: Civil Action No. 1:20-cv-01955-SDG
• Parties: JACKLYN WILFERD, Plaintiff, v. DIGITAL EQUITY, LLC and KHURAM DHANANI, Defendants.
• Court: U.S. District Court — Northern District of Georgia

JACKLYN WILFERD, Plaintiff, v. DIGITAL EQUITY, LLC and KHURAM DHANANI, Defendants.

Civil Action No. 1:20-cv-01955-SDG

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

November 20, 2020

OPINION AND ORDER

This matter is before the Court on a motion to dismiss filed by Defendants Digital Equity, LLC (Digital Equity) and Khuram Dhanani [ECF 26]. For the reasons stated below, and with the benefit of oral argument, Defendants' motion is GRANTED IN PART and DENIED IN PART.

I. BACKGROUND

The following facts are treated as true for purposes of this motion.¹ On September 19, 1994, Plaintiff Jacklyn Wilferd (Wilferd) purchased the online domain wines.com.² Beginning in 2012, Wilferd resumed active management of the domain, seeking to develop it as a commercial product.³ Wilferd created a website containing articles, videos, discussion boards, and other resources.⁴ Wilferd also developed linking relationships with the website and an e-commerce wine store to increase the value of the domain.⁵ In 2018, Wilferd was introduced to Dhanani as a potential business partner.⁶ Dhanani claimed to have substantial capital he would contribute to the business, as well as experience in developing domains as commercial products.⁷ Specifically, Dhanani represented that he:

(1) would invest $200,000-$300,000 of his own money into further developing wines.com, (2) had a "team" who could help further develop the website to a $3-5 million valuation "fast," and (3) in the arrangement, they would split all profits, including from the sale of the domain and website.⁸

In furtherance of these discussions, Dhanani sent Wilferd two contracts (both drafted by Dhanani) to be entered between Wilferd and Digital Equity, a Georgia limited liability company with Dhanani as the sole member: (1) an agreement transferring wines.com to Digital Equity for $50,000 (Domain Agreement), and (2) a profit-sharing agreement by which Wilferd would receive 50% of the net profits generated by Digital Equity from various sales (Profit Agreement or PS Agreement).⁹ Both the Domain and Profit Agreements contained (1) limitations and warranties clauses and (2) merger clauses.¹⁰

Wilferd alleges that, to induce her to sign the Domain and Profit Agreements, Dhanani promised that:

(1) prospective buyers would not work with him unless the domain was transferred to Digital Equity, (2) he already had an interested company willing to pay $200,000 for advertising on the website, [ ] (3) Wilferd would receive $100,000 within thirty days, in addition to further payments for product sales, which would only increase as the Christmas season approached. . . . (4) Defendants would not sell the website and domain for less than $3-4 million, (5) Wilferd would have the right to approve any sale, and (6) prior to any sale, Defendants would actively operate the website as a "cash cow," producing between $5,000 and $10,000 per month in profits.¹¹

Wilferd and Digital Equity executed the Domain and Profit Agreements on July 15, 2018.¹²

After executing these agreements, Wilferd realized that "virtually everything about Dhanani was and is a fraud."¹³ Wilferd contends Dhanani lied about his business acumen, did not actually have advertising ready for the website, had no personal money to invest, nor an intent to operate or develop the website.¹⁴ Between July 2018 and April 2019, Dhanani allegedly made no effort to fund, operate, or update the website.¹⁵ Wilferd repeatedly offered to return the $50,000 she received from Digital Equity in exchange for the domain, but Dhanani refused.¹⁶

Beginning in April 2019, blog articles attributed to Wilferd (that she did not author) began appearing on the website.¹⁷ Some of these blog articles concerned salacious and pornographic topics.¹⁸ Wilferd contends that Dhanani and Digital Equity were responsible for these articles, which continued to appear on the website until July 2019.¹⁹ In October 2019, Wilferd learned that Dhanani had covertly sold wines.com for $200,000 on August 27, 2019.²⁰ Dhanani acknowledged the sale, but refused to provide any details to Wilferd, asserting that he had no obligation to pay any of the profits to Wilferd.²¹ Wilferd claims she has never received any profits under the Profit Agreement.²² Additionally, neither Dhanani nor Digital Equity have provided Wilferd with an accounting of Digital Equity, which she has repeatedly requested.²³

Wilferd initiated this action on May 6, 2020.²⁴ On June 11, 2020, Wilferd filed her Amended Complaint, asserting eight causes of action: accounting (Count I, against both Defendants); breach of contract (Count II, against Digital Equity; Count III, against both Defendants); breach of fiduciary duty (Count IV, against both Defendants); fraud (Count V, against Dhanani); financial abuse of an elder (Count VI, against both Defendants); defamation (Count VII, against both Defendants); and declaratory judgment (Count VIII, against both Defendants).²⁵ On June 25, 2020, Defendants filed the instant motion to dismiss.²⁶ Wilferd filed her response in opposition to Defendants' motion on July 9, 2020.²⁷ Defendants filed their reply on July 23.²⁸

II. LEGAL STANDARD

Federal Rule of Civil Procedure 8(a)(2) requires a pleading to contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Rule 12(b)(6) provides for the dismissal of a complaint that fails to state a claim upon which relief can be granted. Fed. R. Civ. P 12(b)(6). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A claim is facially plausible if "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556).

This pleading standard "does not require detailed factual allegations." Id. (citing Twombly, 550 U.S. at 555). However, it requires "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Id. (citing Twombly, 550 U.S. at 555). A complaint providing "label and conclusions," "a formulaic recitation of the elements of a cause of action," or "naked assertions devoid of further factual enhancement" will not do. Id. (internal quotation marks omitted) (quoting Twombly, 550 U.S. at 555). Although the "plausibility standard is not akin to a probability requirement at the pleading stage," it demands "enough fact to raise a reasonable expectation that discovery will reveal evidence of the claim." Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1289 (11th Cir. 2010) (citing Twombly, 550 U.S. at 556).

III. DISCUSSION

a. Choice of Law

"In diversity cases, the choice-of-law rules of the forum state determine what law governs." Interface Kanner, LLC v. JPMorgan Chase Bank, N.A., 704 F.3d 927, 932 (11th Cir. 2013). Under Georgia law, for claims arising under contract, "contractual choice-of-law provisions will be enforced unless application of the chosen law would be contrary to the public policy or prejudicial to the interests of this state." Nat'l Freight, Inc. v. Consol. Container Co., LP, 166 F. Supp. 3d 1320, 1326 (N.D. Ga. 2015) (quoting CS-Lakeview at Gwinnett, Inc. v. Simon Prop. Grp., Inc., 283 Ga. 426, 428 (2008)). Paragraph 6 of the Domain Agreement and Paragraph 10 of the Profit Agreement contain choice of law provisions selecting Georgia law. Neither party has suggested the application of Georgia law to the contract claims violates public policy or is prejudicial to the state's interests. Accordingly, the choice of law provisions are valid and Georgia law applies to Wilferd's contract claims.

Wilferd's tort claims present a separate issue. Contractual choice-of-law clauses generally do not apply to tort claims. Ins. House, Inc. v. Ins. Data Processing, Inc., No. 1:07-cv-0286-BBM, 2008 WL 11333547, at *6 (N.D. Ga. Nov. 19, 2008) (citing Manuel v. Convergys Corp., 430 F.3d 1132, 1139-40 (11th Cir. 2005); Rayle Tech, Inc. v. DEKALB Swine Breeders, Inc., 133 F.3d 1405, 1409 (11th Cir. 1998)). See also EarthCam, Inc. v. OxBlue Corp., 49 F. Supp. 3d 1210, 1234 (N.D. Ga. 2014) ("A choice of law provision that relates only to the agreement will not encompass related claims."). The Court instead must apply Georgia's traditional choice of law rules for tort claims. Georgia follows the doctrine of lex loci delicti, pursuant to which "a tort action is governed by the substantive law of the state where the tort was committed." Dowis v. Mud Slingers, Inc., 279 Ga. 808, 809 (2005). "The place where the tort was committed . . . is the place where the injury sustained was suffered rather than the place where the act was committed." Bullard v. MRA Holding, LLC, 292 Ga. 748, 750-51 (2013) (citing Risdon Enter., Inc. v. Colemill Enter., Inc., 172 Ga. App. 902, 903 (1984)). But an exception exists when the law of the foreign state is the common law; "application of another jurisdiction's laws is limited to statutes and decisions construing those statutes. When no statute is involved, Georgia courts apply the common law as developed in Georgia rather than foreign case law." In re Tri-State Crematory Litig., 215 F.R.D. 660, 678 (N.D. Ga. 2003) (citing Frank Briscoe Co. v. Ga. Sprinkler Co., 713 F.2d 1500, 1503 (11th Cir. 1983)).

According to the Amended Complaint, Wilferd is a California resident. As such, Wilferd likely suffered her alleged injuries in that state. This points to the application of California law. However, with the exception of Count VI, all of Wilferd's tort claims are premised on the common law. Count VI is asserted under the California statute prohibiting the financial abuse of an elder; Cal. Welf. & Inst. Code § 15610.30. Therefore, pursuant to Georgia's choice of law rules, the Court applies Georgia law to...