Opinion
Civil Action 20-cv-01580-RM-STV
10-07-2021
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.
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
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, 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 and Claims Two, Four, Seven, Eight, Nine, Eleven, and Twelve against CDI. [#89]
The caption to the Amended Complaint names CDI twice, first as a dissolved Colorado limited liability company and second as a Florida limited liability company. [#87] Nonetheless, the Amended Complaint treats CDI as a single entity and does not distinguish between the dissolved entity and the operating entity. [See generally id.]
It appears from the Amended Complaint that Claims One, Two, Four, Five, Nine, Eleven, and Twelve are all asserted against Mr. Dieter. [See generally #87] CDI's Motion states that during conferral with Plaintiffs' counsel, Plaintiffs' counsel indicated that only Claims Two, Nine, Eleven, and Twelve were asserted against Mr. Dieter in his personal capacity. [#89 at 1] Plaintiffs' Response does not challenge this assertion. [See generally #100] Nonetheless, during oral argument, Plaintiffs' counsel indicated that he had not intended to concede the additional claims apparently alleged against Mr. Dieter. As a result, out of an abundance of caution, the Court will analyze whether Plaintiff has plausibly alleged Claims One, Four, and Five against Mr. Dieter.
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]
The facts in this Section are drawn from the allegations in Plaintiffs' Amended Complaint [#87], which must be taken as true when considering IDT's Motion to Dismiss and CDI's Motion to Dismiss. See Wilson v. Montano, 715 F.3d 847, 850 n.1 (10th Cir. 2013) (citing Brown v. Montoya, 662 F.3d 1152, 1162 (10th Cir. 2011)).
Plaintiff IIT is a Colorado corporation owned by Plaintiff Abdi. [#87 at ¶¶ 1-2]Mr. Abdi is originally from Somalia and his native language is Somali. [Id. at ¶ 2]Defendant CDI is a dissolved Colorado limited liability company and recently formed Florida limited liability company. [Id. at ¶ 3] Defendant Dieter owns and manages CDI and serves as CDI's registered agent. [Id. at ¶¶ 3, 5] Defendant IDT is a Delaware corporation. [Id. at ¶ 4]
The Complaint has two sets of Paragraphs 1-5. In this instance, the Court cites to the second set of Paragraphs 1 and 2.
In this instance, the Court cites to the second Paragraph 2.
In this instance, the Court cites to the second Paragraph 3.
In this instance, the Court cites to the second set of Paragraphs 3 and 5.
In this instance, the Court cites to the second Paragraph 4.
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] 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]
In this instance, the Court cites to the first Paragraph 1.
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 channel.” [Id. at ¶ 20; see also #80-2 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]
The Agreement was referenced as an attachment to the Amended Complaint [##87, ¶ 20; 80-2] and is therefore properly considered by the Court in evaluating both IDT's Motion to Dismiss and CDI's Motion to Dismiss. Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009) (“In evaluating a Rule 12(b)(6) motion to dismiss, courts may consider not only the complaint itself, but also attached exhibits . . . and documents incorporated into the complaint by reference.” (citations omitted)).
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 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. [#87 at ¶¶ 2, 51] Thus, Mr. Dieter and Patricia Rumero began contacting distributors seeking to amend or terminate the distributors' master distributor agreements. [Id. at ¶¶ 3, 52-58] 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]
The Court has done its best to attempt to reconstruct the exact timeline of events outlined in the Amended Complaint. The Amended Complaint is often disjointed- jumping from one timeframe to another-and it is difficult to determine when various actions were alleged to have occurred.
The Amended Complaint identifies Ms. Rumero as an “employee” but does not indicate whether she was an employee of IDT or CDI. [Id. at ¶ 3] Given that Plaintiffs allege that Ms. Rumero “performed the bulk of the work in stealing Plaintiffs' retailers” [id. at ¶ 90], Plaintiffs failure to precisely identify Ms. Rumero's employer is especially troubling. It appears from CDI's counterclaims that Ms. Rumero is CDI's Sales Director. [#90 at ¶ 24]
In this instance, the Court cites to the first Paragraph 3.
“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.” [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 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]
Again, it is not clear from the Amended Complaint whether this was a new “scheme” or was merely a continuation of the actions that allegedly began in 2014. This distinction does not affect the Court's analysis.
“[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, 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 commissions for leads that IIT developed or assisted in developing. [Id. at ¶ 47]
Once again, the Amended Complaint rarely provides specific dates and instead generally refers to the four-year timeframe of 2014-2018.
At some unspecified date, CDI presented Mr. Abdi and IIT with a new master distributor agreement. [Id. at ¶ 77] When Mr. Abdi was asked to amend the Agreement, he hired a lawyer and refused to do so. [Id. at ¶¶ 2, 58, 80] In response, CDI threatened to terminate the Agreement. [Id. at ¶ 2] After IIT's and Mr. Abdi's attorneys intervened, however, CDI backed down. [Id.]
From the Amended Complaint, it is impossible to determine whether this incident occurred before or after CDI and IDT stopped providing leads. It is likewise impossible to determine whether this incident occurred before or after the correspondence described below.
In this instance, the Court cites to the first Paragraph 2.
Still, “[w]hen Plaintiffs declined to enter into the new master distributor agreement, Defendants retaliated against Plaintiffs.” [Id. at ¶ 81] “IDT, CDI, and [Mr.] Dieter[] agreed to steal Plaintiffs['] retailers from Plaintiffs' network.” [Id. at ¶ 82] IDT and CDI told Plaintiffs' retailers that they could get a better rate than the rate provided by Plaintiffs. [Id. at ¶¶ 83, 85-95] This created discontent with the retailers and required IIT to provide a different rate, causing IIT to lose money. [Id. at ¶ 84] CDI and IDT also stopped providing IIT a promotion code to give customers; instead, CDI and IDT provided customers promotion codes themselves-“rais[ing] questions in the [r]etailer's minds about why Plaintiffs did not provide them the promotional code.” [Id.at ¶ 101] In some instances, new accounts were set up for the retailers and the retailers' use of the Service would be billed through these new numbers, thereby depriving Plaintiffs of the commissions from those retailers. [Id. at ¶ 102]
Although the Amended Complaint alleges that both IDT and CDI were involved in these calls, the only individuals specifically identified as having made the calls are Mr. Dieter and Ms. Rumero. [Id. at ¶¶ 83, 85-95]
It is possible, though far from clear from the Amended Complaint, that Ms. Rumero- the person who is alleged to have been primarily involved in the conversations with retailers [id. at ¶ 90]-may have allegedly engaged in other actions related to the retailers besides offering the retailers better rates. In Paragraph 96, Plaintiffs allege verbatim: “At times, during her visit, Ms. Rumero, acting on the orders of Defendants, would make changes to the retailers' account with the ultimate goal of changing the retailers' account number to make it appear as if there was no.” [Id. at ¶ 96] And that is where the sentence ends. The Court is left to forever wonder why Ms. Rumero would allegedly change the retailers' account numbers. In the next two paragraphs, Plaintiffs allege that Ms. Rumero made various representations and omissions, but do not identify these representations and omissions. [Id. at ¶¶ 97-98] The Court does not know whether these representations or omissions were supposed to have been included in the unfinished Paragraph 96, or whether Paragraphs 97 and 98 are merely conclusory statements.
On August 24, 2015, CDI's legal counsel sent Plaintiffs a letter alleging breach of the Agreement and giving Plaintiffs fifteen days to cure. [Id. at ¶¶ 104-05] The letter alleged that Plaintiffs did not use their best efforts to promote, market, and distribute the Service. [Id. at ¶ 104] The letter further alleged that Plaintiffs were not favorably conducting business. [Id. at ¶ 105]
The Amended Complaint refers to the date of this letter as both “August 24, 2015” and “August 24, 2014.” [#87 at ¶¶ 104-105] The Court assumes, based on the dates provided in the surrounding paragraphs, that the correct year is 2015.
On September 9 and 15, 2015, Plaintiffs disputed the allegation and sought clarification. [Id. at ¶ 106] On September 23, 2015, CDI responded and cited Plaintiffs' decline in sales as evidence of the breach. [Id. at ¶ 107] In that same letter, without providing specifics, CDI indicated that Plaintiffs had disparaged CDI and IDT. [Id. at ¶ 108] Nonetheless, the letter stated that CDI did not wish to terminate its relationship with IIT. [Id. at ¶ 109]
On January 11, 2016, CDI told Plaintiffs about a new INACTIVE Retailer Campaign designed to reduce the number of inadequately performing accounts; this program was not part of the Agreement. [Id. at ¶ 110] On February 3, 2016, CDI again alleged that Plaintiffs were in breach of the Agreement for failing to use their best efforts to promote the Service and disparaging CDI, IDT, and the Service. [Id. at ¶ 111-12] On February 16, 2016, IIT responded to the breach allegation, asked CDI to stop unilaterally amending the Agreement, and requested an accounting. [Id. at ¶¶ 113-14] CDI never provided an accounting. [Id. at ¶ 116]
In total, CDI removed approximately 700 retail accounts from IIT's distributor network. [Id. at ¶ 118] On July 18, 2018, Mr. Abdi sent a text message to an IDT employee stating that CDI was stealing IIT's business. [Id. at ¶ 119] On July 24, 2018, Mr. Abdi sent Mr. Dieter an email asking that CDI and IDT stop calling Plaintiffs' retailers and customers and stop creating new accounts for IIT's retail stores. [Id. at ¶ 120] Mr. Abdi also demanded the return of the stolen stores to IIT's network and compensation for lost commissions. [Id. at ¶ 121]
On October 26, 2018, CDI terminated the Agreement “as a result of IIT's multiple breaches of the same.” [Id. at ¶ 123] CDI did not provide any specific details about the breaches. [Id. at ¶ 124] CDI did not provide fifteen days' notice for cure. [Id. at ¶ 127] CDI stopped paying IIT commissions in November 2018. [Id. at ¶ 131] On January 2, 2019, CDI sent Mr. Abdi a letter threatening to withhold post-termination commissions and including a post-termination agreement, which Mr. Abdi and IIT did not sign. [Id. at ¶¶ 128-29] On January 15, 2019, CDI sent another letter to Mr. Abdi and IIT stating that it was withholding payment of commissions and placing those commissions in an escrow account. [Id. at ¶ 130]
The facts in this Section are drawn from the allegations in CDI's Counterclaims [#90 at 17-22], which must be taken as true when considering Plaintiffs' Motion to Dismiss. See Wilson, 715 F.3d at 850 n.1.
CDI is a distributor of the Service. [#90, ¶ 1] In addition to distributing the Service directly, CDI also contracts with independent distributors. [Id. at ¶ 2] On April 6, 2012, CDI and IIT entered into the Agreement. [Id. at ¶ 3] The Agreement provides:
The terms and conditions of this Agreement, and all proprietary information regarding the Service and its distribution, shall be confidential between the parties, and neither shall reveal such terms, conditions or information to any third parties other than its accountants or attorneys or as required by process of law. The obligations of this confidentiality provision shall survive the expiration or any termination of this Agreement.[Id. at ¶ 5] This provision is critical to CDI as its distributors and retailers receive different commissions based upon a number of factors, including sales volume. [Id. at ¶ 6]
Mr. Abdi and IIT breached this confidentiality provision on several occasions by revealing to other distributors and retailers specific commissions paid by CDI to IIT and other retailers. [Id. at ¶ 8] In a malicious attempt to sow discord and damage CDI, Mr. Abdi revealed to other distributors his commission structure and suggested that they demand more from CDI. [Id. at ¶ 9] For example, in August of 2018, Mr. Abdi revealed his commission structure to CDI's Kentucky distributor and encouraged the Kentucky distributor to demand a higher commission from CDI. [Id. at ¶ 10] Mr. Abdi also revealed his commission rates to retailers. [Id. at ¶ 11] Mr. Abdi's revelation of these rates to distributors and retailers was intended to damage, and did indeed damage, CDI. [Id. at ¶¶ 12-13]
Another core requirement of the Agreement is the obligation to be available and responsive to retailers. [Id. at ¶ 14] It required IIT and Mr. Abdi to manage accounts and review sales to set margins. [Id. at ¶ 16] CDI also required distributors, including IIT and Mr. Abdi, to align commission rates based on sales. [Id. at ¶ 17] As sales rates increased, so should commissions, particularly if requested by retailers. [Id. at ¶ 18] But, for many years, even with strong sales, Plaintiffs failed to align commissions paid to retailers with sales. [Id. at ¶ 19] As a result, CDI's competitors gained a competitive advantage with retailers served by IIT. [Id. at ¶ 20] At the same time, Mr. Abdi told retailers that he could not provide them a higher commission because the commission he received from CDI was too low, providing the retailers with fabricated commission figures. [Id. at ¶ 21]
In addition to providing retailers with false commission figures, Plaintiffs also ignored retailers. [Id. at ¶ 23] CDI received numerous complaints from retailers that Mr. Abdi could not be reached. [Id.] When CDI tried to reach Mr. Abdi about the complaints, Mr. Abdi would not answer. [Id.] Often, Mr. Abdi's voicemail was full. [Id. at ¶¶ 24-25] As a result of Mr. Abdi's inattentiveness to consumers, sales of the Service at retail stores serviced by Mr. Abdi declined precipitously. [Id. at ¶ 28] This resulted in lost revenue for CDI. [Id. at ¶ 32]
The Agreement further provides: “Distributor shall use its best efforts to promote, market and distribute the Service to Retailers.” [Id. at ¶ 33] On January 1, 2015, Boss Revolution instituted a program call BR Rewards that incentivized distributors to increase sales of the Service. [Id. at ¶ 34] All distributors, including IIT, were required to encourage retailers to sign up for the BR Rewards program. [Id. at ¶ 35] Ten months after the program began, over 100 retailers that IIT serviced had not signed up for the BR Rewards program. [Id. at ¶ 36] Similarly, Boss Revolution engaged in a marketing initiative called “Paint the Town Red.” [Id. at ¶ 38] CDI instructed distributors such as IIT to contact their retailers to encourage participation. [Id. at ¶ 39] IIT refused to participate in the Paint the Town Red program, and by one year into the program not a single IIT retailer had enrolled. [Id. at ¶ 40]
On an ongoing basis, Mr. Abdi made racist and anti-Semitic comments about Mr. Dieter to IDT employees, CDI employees, distributors, and retailers. [Id. at ¶ 43] Retailers and distributors informed CDI employees that Mr. Abdi consistently emphasized Mr. Dieter's Jewish heritage. [Id. at ¶ 44] After CDI terminated IIT, Mr. Abdi told several people in the industry that the sole reason for the termination was that Mr. Dieter is Jewish and Mr. Abdi is Black and Muslim. [Id. at ¶ 45] Mr. Abdi also threatened to “make war” with CDI. [Id. at ¶ 46]
On several occasions, Mr. Abdi falsely told retailers that CDI would steal money from them. [Id. at ¶ 47] For example, in July 2018, Mr. Abdi called a Denver retailer and falsely claimed that CDI diverted funds from their account. [Id. at ¶ 48] That same month, Mr. Abdi told the owner of another Denver retailer that CDI would “take full control of his credit card.” [Id. at ¶ 49] The next month, Mr. Abdi told the owner of an Omaha retailer that CDI would steal her residuals. [Id. at ¶ 50] These actions were taken to damage CDI and caused quantifiable losses. [Id. at ¶ 51]
CDI provided numerous notices to Plaintiffs, formally and informally, of IIT's failure to meet its contractual obligations. [Id. at ¶ 52] Plaintiffs were given opportunities to comply and cure the breaches, but failed to do so. [Id. at ¶ 53] As a result, CDI validly terminated the Agreement. [Id. at ¶ 56] Nonetheless, CDI paid Mr. Abdi for twelve months commissions. [Id. at ¶ 57]
II. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(1) empowers a court to dismiss a complaint for “lack of subject-matter jurisdiction.” Dismissal under Rule 12(b)(1) is not a judgment on the merits of a plaintiff's case, but only a determination that the court lacks authority to adjudicate the matter. See Castaneda v. INS, 23 F.3d 1576, 1580 (10th Cir. 1994) (recognizing federal courts are courts of limited jurisdiction and may only exercise jurisdiction when specifically authorized to do so). A court lacking jurisdiction “must dismiss the cause at any stage of the proceedings in which it becomes apparent that jurisdiction is lacking.” Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974).
Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” In deciding a motion under Rule 12(b)(6), a court must “accept as true all well-pleaded factual allegations . . . and view these allegations in the light most favorable to the plaintiff.” Casanova v. Ulibarri, 595 F.3d 1120, 1124 (10th Cir. 2010) (alteration in original) (quoting Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009)). Nonetheless, a plaintiff may not rely on mere labels or conclusions, “and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
“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) (quoting Twombly, 550 U.S. at 570). Plausibility refers “to the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs ‘have not nudged their claims across the line from conceivable to plausible.'” Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (quoting Twombly, 550 U.S. at 570). “The burden is on the plaintiff to frame a ‘complaint with enough factual matter (taken as true) to suggest' that he or she is entitled to relief.” Id. (quoting Twombly, 550 U.S. at 556). The ultimate duty of the court is to “determine whether the complaint sufficiently alleges facts supporting all the elements necessary to establish an entitlement to relief under the legal theory proposed.” Forest Guardians v. Forsgren, 478 F.3d 1149, 1160 (10th Cir. 2007).
Pursuant to Federal Rule of Civil Procedure 12(f), the Court-sua sponte or on a motion made by a party-”may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” The Court “possesses considerable discretion in disposing of a Rule 12(f) motion to strike” and “[a]ny doubt about whether the challenged material is redundant, immaterial, impertinent, or scandalous should be resolved in favor of the non-moving party.” 5C Charles A. Wright et al., Fed. Prac. & Proc. § 1382 (3d ed. 2019).
“[A]s a general matter, motions to strike under Rule 12(f) are disfavored.” Broach v. Yegappan, No. 17-CV-02791-MSK-NYW, 2019 WL 6724246, at *2 (D. Colo. Dec. 11, 2019) (quotation omitted). “[B]ecause federal judges have made it clear, in numerous opinions they have rendered in many substantive contexts, that Rule 12(f) motions to strike on any of the[ ] grounds [articulated in the text of the Rule] are not favored, often being considered purely cosmetic or ‘time wasters,' there appears to be general judicial agreement, as reflected in the extensive case law on the subject, that they should be denied unless the challenged allegations have no possible relation or logical connection to the subject matter of the controversy.” 5C Charles A. Wright et al., Fed. Prac. & Proc. § 1382 (3d ed. 2019) (footnotes omitted). Motions to strike thus “are usually only granted when the allegations have no bearing on the controversy and the movant can show that he has been prejudiced.” Kimpton Hotel & Rest. Grp., LLC v. Monaco Inn, Inc., No. CIV.A. 07-CV-01514-W, 2008 WL 140488, at *1 (D. Colo. Jan. 11, 2008).
III. ANALYSIS
As set forth above, Plaintiffs' Amended Complaint asserts twelve claims: (1) breach of contract against CDI, IDT, and Mr. 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 the Agreement 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 and Claims Two, Four, Seven, Eight, Nine, Eleven, and Twelve against CDI. [#89]
CDI has 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]
The Court will first address IDT's Motion to Dismiss. Next, the Court will turn to CDI's Motion to Dismiss. Third, the Court will address Plaintiffs' Motion to Dismiss. Finally, the Court will address Plaintiffs' Motion to Strike.
A. IDT's Motion to Dismiss
IDT has moved to dismiss all claims against it. [#88] The Court addresses each claim in turn.
1. Claim One: Breach of Contract
Under Colorado Law, a breach of contract claim requires: (1) existence of a contract; (2) performance by the plaintiff; (3) failure to perform by the defendant; and (4) damages. Shell v. Am. Fam. Rights Ass'n, 899 F.Supp.2d 1035, 1058 (D. Colo. 2012) (citing W. Distrib. Co. v. Diodosio, 841 P.2d 1053, 1058 (Colo. 1992)). With respect to the first element, a plaintiff “must show that the contract was properly formed, ” with “mutual assent to an exchange between competent parties-where an offer is made and accepted-regarding a subject matter which is certain, and for which there is legal consideration.” Galvin v. McCarthy, No. 07-cv-00885-PAB-BNB, 2009 WL 890717, at *6 (D. Colo. Mar. 31, 2009) (citing Indus. Prods. Int'l, Inc. v. Emo Trans, Inc., 962 P.2d 983, 988 (Colo.App. 1997)).
IDT argues that the Amended Complaint fails to allege the existence of a contract between Plaintiffs and IDT. [#88 at 7-8] The Court agrees. The Agreement itself states that it is “by and between [Mr. Abdi] and IIT . . . and [CDI].” [#80-2 at 1] And IDT is neither a signatory nor party to the contract. [See generally Id.]
In their response, Plaintiffs argue that a contract need not be in writing to be enforceable and that a written contract need not be signed. [#100 at 5] It is true that “common law contract principles . . . allow for the formation of contracts without the signatures of the parties bound by them.” Yaekle v. Andrews, 195 P.3d 1101, 1107 (Colo. 2008). But such a principle does not negate the other requirements of contract formation. See Galvin, 2009 WL 890717, at *6. In other words, even without IDT's signature, Plaintiffs could successfully plead that IDT was bound to the Agreement, but only by pleading other facts that plausibly allege “mutual assent . . . where an offer is made and accepted-regarding a subject matter which is certain, and for which there is legal consideration.” Id.; see also I.M.A., Inc. v. Rocky Mountain Airways, Inc., 713 P.2d 882, 888 (Colo. 1987) (stating that the parties' agreement to establish a contract can be inferred from conduct or oral statements). The Complaint contains no such allegations.
Plaintiffs also argue that the Agreement “includes a number of provisions under which IDT is obligated to perform obligations owed to Plaintiffs.” [#100 at 6] For example, the Agreement states that “IDT and CDI hereby authorize” IIT to promote the Service. [#80-2 at 2] Elsewhere, the Agreement states that commissions will be paid “by CDI or IDT.” [Id. at 3] But the Amended Complaint fails to plausibly allege that IDT assented to be bound by these terms or that IDT authorized CDI to bind IDT to the Agreement. The Court declines to find that the mention of IDT by name in the contract between CDI and Plaintiffs could, on its own, bind IDT to that Agreement.
The Amended Complaint states: “IDT developed the Service, but IDT could not sell the service without distributors. IDT contracted with CDI and with Plaintiffs to distribute the Service.” [#87 at ¶ 10] But this does not allege that IDT gave CDI permission to contract on its behalf; it alleges only that CDI's contract with IDT permitted CDI to take additional actions in order to distribute the Service. And the conclusory statement that IDT contracted with Plaintiffs is insufficient to demonstrate an actual contract where the Agreement does not include IDT as a party and the Amended Complaint fails to allege the terms of any other agreement-oral or written-between IDT and Plaintiffs.
Plaintiffs further argue that the Amended Complaint plausibly alleges a breach of contract claim because it “alleges that IDT performed under the Agreement by sending Plaintiffs leads, by sending Plaintiffs Point of Sale . . . materials, by requiring that Plaintiffs adhere to the confidentiality provision in the [Agreement], by providing training directly to Plaintiffs, [and] by paying Plaintiffs commissions as called for under the [Agreement].” [#100 at 6-7] But nothing in the Amended Complaint plausibly alleges that IDT performed these tasks because they were a party to the Agreement-as opposed to performing these tasks out of its own self-interest, such as generating additional revenue, or out of a separate obligation, such as an agreement between IDT and CDI. Thus, the fact that IDT performed some of the actions listed in the Agreement does not in turn mean that IDT was a party to the Agreement.
Accordingly, this Court RECOMMENDS that Claim One be DISMISSED as to Defendant IDT for failure to allege the existence of a contract between Plaintiffs and IDT. This Court further RECOMMENDS that Claims Three and Ten be DISMISSED as to IDT. Claim Three requests a declaratory judgment invalidating the noncompetition and nonsolicitation provisions of the Agreement between Plaintiffs and CDI. Because the Complaint does not sufficiently allege that Defendant IDT was a party to that, or any, contract, the Complaint does not sufficiently allege a claim regarding the provisions of that Agreement as to IDT. Similarly, Claim Ten requests an accounting, which Plaintiffs allege they are entitled to as part of the terms of the Agreement between Plaintiffs and CDI. Because this Court finds that Plaintiffs have not sufficiently alleged that IDT was a party to that Agreement, the Complaint fails to sufficiently allege that Plaintiffs are entitled to an accounting by IDT.
“Although an accounting is an extraordinary remedy, it may be ordered if the plaintiff is unable to determine how much, if any, money is due him or her from another.” Patterson v. BP Am. Prod. Co., 159 P.3d 634, 642 (Colo.App. 2006), overruled on other grounds by 185 P.3d 811 (Colo. 2008) (citing Andrikopoulos v. Broadmoor Mgmt. Co., 670 P.2d 435 (Colo.App. 1983)). “Under Colorado law, a demand for an accounting and a refusal to comply with the demand must be pleaded and proved.” Postal Instant Press v. Jackson, 658 F.Supp. 739, 743 (D. Colo. 1987) (citing Am. Woodmen's Life Ins. Co. v. Supreme Camp of Am. Woodmen, 549 P.2d 423, 425 (Colo.App. 1976)). However, exceptions to the pre-suit demand requirement apply where preclusion of the accounting claim would be unreasonable, such as where the accounting claim is ancillary to a breach of contract claim and its main purpose is to facilitate an accurate calculation of damages once the breach of contract is found. See Kirzhner v. Silverstein, 09-CV-02858-CMA, 2010 WL 2985615, at *12 (D. Colo. July 23, 2010); Patterson, 159 P.3d 634 at 642. Here, Plaintiffs' accounting claim centers on its assertion that the Agreement requires CDI and IDT to provide records regarding commissions due under the Agreement. [#87 at ¶ 219] But because Plaintiffs have not sufficiently alleged that IDT was a party to the Agreement, they are not entitled to an accounting from IDT.
2. Claim Two: Tortious Interference
Claim Two alleges both tortious interference with an existing contract and tortious interference with a prospective business relation. [#87 at ¶¶ 153-66] “Except in one respect, the elements of the[se] claims are the same; the Plaintiff must allege: (i) it had either a valid existing contract with a third party or that it expected to enter into a contract with a third party; (ii) the Defendants induced or otherwise caused the third party to breach the contract or not enter into the contractual relation; and (iii) the Defendants did so intentionally and via improper means.” Tara Woods Ltd. P'ship v. Fannie Mae, 731 F.Supp.2d 1103, 1119 (D. Colo. 2010) (citing Harris Grp., Inc. v. Robinson, 209 P.3d 1188, 1195-96 (Colo.App. 2009)).
IDT argues that Plaintiffs have failed to allege either an existing or expected contract or that IDT engaged in intentional or improper interference. [#88 at 10-13] In response, Plaintiffs maintain that they had relationships with various retailers, the Agreement provided Plaintiffs an exclusive right to commissions from those retailers, and IDT acted to remove those retailers from Plaintiffs' distribution network. [#100 at 8-9] Because the Court agrees that the Amended Complaint does not sufficiently allege that IDT engaged in intentional and improper interference, and therefore does not sufficiently allege a tortious interference claim, the Court does not address whether Plaintiffs have sufficiently alleged a valid existing or expected contract with a third party.
Here, the Amended Complaint cites to three allegedly improper means of interference. [#87 at ¶ 163] Specifically, the Amended Complaint alleges that IDT, CDI and Mr. Dieter: (1) provided promotional discounts directly to the retailers without providing such codes to Plaintiffs, (2) opened new retail accounts for retailers in Plaintiffs' distribution network, contrary to the Agreement's terms, and (3) took leads that Plaintiffs identified and developed by telling those leads that IDT, CDI and Plaintiffs were the same. [Id.] The first two of these allegedly improper means of interference do not constitute improper interference, and the third is insufficiently pled.
Under Colorado law it is not enough for a plaintiff to allege mere interference; “[i]n order to be tortious, the interference must also be by improper means.” Bolsa Res., Inc. v. Martin Res., Inc., No. 11-cv-01293-MSK-KMT, 2014 WL 4882132, at *9 (D. Colo. Aug. 28, 2014) (citing Amoco Oil Co. v. Ervin, 908 P.2d 493, 500 (Colo. 1995), recommendation aff'd and adopted, 2014 WL 4980045 (Sept. 30, 2014). “Threats of physical violence or law suits, economic pressure, and misrepresentations qualify as improper inducements to breach contractual or business relationships.” Id. (citing Restatement (Second) of Torts § 767 cmt c (1979)). But competitive self-interest, including persuading third parties to change providers, is not improper on its own. Id.; see also Campfield v. State Farm Mut. Auto. Ins. Co., 532 F.3d 1111, 1123 (10th Cir. 2008) (stating that competitive self-interest is not, by itself, improper, even if it harms competitors); Amoco Oil, 908 P.2d at 502 (“[A]n actor may use persuasion . . . without engaging in wrongful means”). Thus, the mere fact that IDT attempted to remove the retailers from Plaintiffs' network-through actions such as offering the retailers better rates or discounts-does not constitute improper interference. For this reason, the first two allegedly improper means of interference fail to support Plaintiffs' claim.
Nor does the “exclusivity” provision of the Agreement make the interference improper. Initially, the Agreement appears to disclaim any exclusivity, specifically stating that the “Agreement shall not confer upon [Plaintiffs] any type of exclusive right pertaining to the marketing and sale of the Service and CDI and IDT shall retain the right to enter into the same or similar arrangements with other entities.” [#80-2 at 4] But, in any event, as detailed above, IDT was not a party to the Agreement and therefore cannot have acted improperly by failing to comply with the terms of the Agreement.
The third allegedly improper means of interference has been insufficiently pled. To the extent the Amended Complaint makes vague references to IDT taking improper actions-such as by misrepresenting information to Plaintiffs' retailers-the allegations are insufficient to support an intentional interference claim. [See #87 at ¶¶ 97-101] “In the context of a tortious interference claim, ‘the heightened pleading standard [of Rule 9(b)] . . . applies to the fraudulent inducement element of the tortious interference claim.'” Purac Am. Inc. v. Birko Corp., No. 14-cv-01669-RBJ, 2015 WL 1598065, at *6 (quoting Dawson v. Litton Loan Servicing, LP, No. 12-CV-01334-CMA-KMT, 2013 WL 1283848, at *8 (D. Colo. Mar. 28, 2013)); see also N. Am. Catholic Educ. Programming Found., Inc. v. Cardinale, 567 F.3d 8, 14 (1st Cir. 2009) (Rule 9(b) apples where “fraudulent misrepresentation is the lynchpin” of tortious interference claim). Rule 9(b) requires that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). This heightened pleading standard requires the Complaint to “‘set forth the who, what, when, where and how of the alleged fraud,' or, in other words, ‘the time, place, and contents of the false representation, the identity of the party making the false statements and the consequences thereof.'” Purac, 2015 WL 1598065, at *6 (quoting U.S. ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 726-27 (10th Cir. 2006)).
As applied here, the Amended Complaint alleges that Ms. Rumero made false “misrepresentations (and omissions)” to the retailers. [#87 at ¶ 97] But it does not provide the time, place, or contents of those false representations or omissions. And, in any event, Ms. Rumero is a representative of CDI, not IDT. The Amended Complaint also makes reference to “CDI and IDT . . . lower[ing] the percentage IIT's retailers received for the Service in CDI's computer system” and attempting to convince retailers that IIT was not providing truthful information to retailers. [Id. at ¶ 99] But, once again, this allegation lacks sufficient information to plausibly plead improper interference-the Amended Complaint does not allege the identity of the party making the false statements or the time or place of those false statements. “Indeed, the [Amended Complaint] provide[s] little information about those statements beyond alleging their content” and is therefore insufficient to state a claim under Rule 9(b) for fraudulent misrepresentation leading to tortious interference. Purac, 2015 WL 1598065, at *6.
As explained earlier, in Paragraph 96 of the Amended Complaint, Plaintiff alleges: “At times, during her visit, Ms. Rumero, acting on the orders of Defendants, would make changes to the retailers' account with the ultimate goal of changing the retailers' account number to make it appear as if there was no.” [Id. at ¶ 96] But the sentence ends without explaining the changes to the retailers' accounts or how those changes were fraudulent.
Accordingly, because the Amended Complaint fails to sufficiently allege a claim for tortious interference with contract or prospective business relationship, this Court RECOMMENDS that Claim Two be DISMISSED as to IDT.
3. Claim Four: Violation of State and Federal Antitrust Laws
The Amended Complaint next asserts that IDT violated the Colorado Antitrust Act and Section 1 of the Sherman Antitrust Act. [#87 at ¶¶ 173-84] “Because federal antitrust law principles apply to both the federal and state antitrust claims, both claims may be analyzed together.” Arapahoe Surgery Ctr., LLC v. CIGNA Healthcare, Inc., 80 F.Supp.3d 1257, 1262-63 (D. Colo. 2015); see also Colo. Rev. Stat. § 6-4-119 (“[T]he courts shall use as a guide interpretations given by the federal courts to comparable federal antitrust laws”).
Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations”. 15 U.S.C. § 1; see also Colo. Rev. Stat. § 6-4-104 (“Every contract, combination in the form of a trust or otherwise, or conspiracy in restraint of trade or commerce is illegal.”). “[A] person asserting a claim under § 1 must prove not only the existence of an agreement or conspiracy between two or more competitors to restrain trade, but also that the restraint is unreasonable.” Buccaneer Energy (USA) Inc. v. Gunnison Energy Corp., 846 F.3d 1297, 1306 (10th Cir. 2017). And “[b]ecause § 1 of the Sherman Act does not prohibit all unreasonable restraints of trade but only restraints effected by a contract, combination, or conspiracy, the crucial question is whether the challenged anticompetitive conduct stems from independent decision or from an agreement, tacit or express.” Twombly, 550 U.S. at 553 (internal citations and brackets omitted). Accordingly, the pleading stage of an antitrust claim “requires a complaint with enough factual matter (taken as true) to suggest that an agreement was made . . . [and] to raise a reasonable expectation that discovery will reveal evidence of illegal agreement.” Id. at 556. “Such an agreement is established by evidence that the conspiring parties ‘had a conscious commitment to a common scheme designed to achieve an unlawful objective.'” Arapaho Surgery Center, 80 F.Supp.3d at 1263 (quoting Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984)).
IDT argues that Plaintiffs have failed to plead a contract, combination, or conspiracy, and have failed to plausibly plead any wrongdoing by IDT. [#88 at 13-14] The Court agrees that Plaintiffs have failed to plausibly plead a violation of the antitrust laws. “Most claims under [Section 1 of the Sherman Act] are subject to the ‘rule of reason' which requires [the Court] to analyze the relevant market power of defendants and therefore require the plaintiff to allege a valid market.” Campfield v. State Farm Mut. Auto. Ins. Co., 532 F.3d 1111, 1119 (10th Cir. 2008). Here, Plaintiffs' Amended Complaint is devoid of any facts concerning the market definition and this failure would ordinarily require dismissal of Plaintiffs' antitrust claims. See Id. (“Those claims brought by [plaintiff] that fall under the rule of reason must fail because of the legally inadequate market definition within his complaint.”).
At oral argument, however, counsel for Plaintiffs clarified that Plaintiffs were pursuing a price fixing claim. “Horizontal price fixing . . . [is a] per se violation[], so [Plaintiffs'] failure to allege a relevant market is not fatal to [that] claim[].” Id. (quotation omitted). “Per se violations are restricted to those restraints that would always or almost always tend to restrict competition and decrease output.” Id. (quotation omitted). “This concern is greatest when actual competitors enter agreements because cooperation among would-be competitors will deprive[] the marketplace of the independent centers of decisionmaking that competition assumes and demands, and risk anti-competitive effects.” Id. (quotation omitted). Here, however, the Amended Complaint does not allege that CDI and IDT are competitors and, during oral argument, counsel for Plaintiffs acknowledged that CDI and IDT had a vertical arrangement.
Despite acknowledging that CDI and IDT had a vertical arrangement, during oral argument Plaintiffs' counsel nonetheless argued that the Amended Complaint's allegations were sufficient to support a per se violation. But the Tenth Circuit has recognized that, unlike horizontal arrangements between competitors, “[v]ertical arrangements . . . do not generally give rise to the same concerns and often have pro-competitive effects.” Id. As a result, “[t]o support a per se violation of the Sherman Act, a complaint alleging price fixing . . . must allege conspiracy by competitors.” Id. Because Plaintiffs' Amended Complaint fails to allege a conspiracy by competitors, Plaintiffs cannot pursue a per se violation of the antitrust laws. And because the Amended Complaint does not contain any other allegations concerning other actions that might violate antitrust law by impacting competition in the market, Plaintiffs' antitrust claims fail. Bright v. Moss Ambulance Serv., Inc., 824 F.2d 819, 824 (10th Cir. 1987) (“Whether a practice violates the antitrust laws is determined by its effect on competition, not its effect on an individual competitor.”); Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977) (finding that antitrust laws are designed to protect competition, not competitors). Accordingly, this Court RECOMMENDS that Claim Four be DISMISSED as to IDT.
During oral argument, Plaintiff argued that vertical arrangements could indeed support a per se violation and relied on Budicak, Inc. v. Lansing Trade Grp., LLC for the proposition that “a typical price-fixing claim involves collusion . . . between two levels in the same supply chain for a particular product (vertical price-fixing).” 452 F.Supp.3d 1029, 1054 (D. Kan. 2020). But the Budicak court, too, determined that “the Court has uncovered [no cases] where a court afforded per se analysis to a price-fixing conspiracy between non-competitors.” Id.
4. Claims Five and Six: Conversion and Civil Theft
The Complaint also asserts two related claims, for conversion and civil theft. [#87 at ¶¶ 185-95] “Conversion is any distinct, unauthorized act of dominion or ownership exercised by one person over personal property belonging to another.” Byron v. York Inv. Co., 296 P.2d 742, 745 (Colo. 1956). “[P]redicates to a successful claim for conversion are the owner's demand for the return of property, and the controlling party's refusal to return it.” Glenn Arms Assoc. v. Century Mortg. & Inv. Corp., 680 P.2d 1315, 1317 (Colo.App. 1984). “While Colorado statutes do not define ‘civil theft,' Colorado courts only grant triple damages for civil theft under § 18-4-405 when a plaintiff has proven conduct that satisfies the statutory definition of criminal theft under Colo. Rev. Stat. § 18-4-401.” Internet Archive v. Shell, 505 F.Supp.2d 755, 764 (D. Colo. 2007) (citing Itin v. Ungar, 17 P.3d 129, 133 (Colo. 2000)). “A person commits theft under section 18-4-401(1) when he or she ‘knowingly obtains, retains, or exercises control over anything of value of another without authorization or by threat or deception,' and acts intentionally or knowingly in ways that deprive the other person of the property permanently.” Van Rees v. Unleaded Software, Inc., 373 P.3d 603, 608 (Colo. 2016) (citing § 18-4-401(1)(a)-(d)). The statute requires “the specific intent to permanently deprive the owner of the benefit of property.” Itin, 17 P.3d at 134.
A successful claim of civil theft entitles a plaintiff to triple damages, attorney fees and costs. Colo. Rev. Stat. § 18-4-405.
The Complaint alleges that IDT, CDI, and Mr. Dieter “exercised control over Plaintiffs' commissions that IDT and CDI were required to pay Plaintiffs but instead stole from Plaintiffs.” [#87 at ¶ 187; see also Id. at ¶ 193]. IDT argues that these claims fail because IDT did not contract with Plaintiffs and therefore did not owe Plaintiffs any commissions. [#88 at 15] The Court agrees.
As explained above, Plaintiffs have failed to plausibly plead that IDT was a party to the Agreement or any other contract with Plaintiffs. Absent such a contractual relation, Plaintiffs have failed to plausibly plead any obligation on the part of IDT to pay Plaintiffs' commissions. Nor have Plaintiffs pled facts that would enable the Court to conclude that IDT “knowingly obtain[ed], retain[ed], or exercise[ed] control” over Plaintiffs' commissions in some other manner-such as by hacking into Plaintiffs' bank account and taking those commissions after they had been paid. C.R.S. § 18-4-401(1)(a)-(d); Itin, 17 P.3d at 134.
And, in any event, a mere breach of contract will not support an action for conversion. Byron v. York Investment Co., 296 P.2d 742, 745 (Colo. 1956).
In their response, Plaintiffs argue that their “claims for conversion and civil theft are independent of the [Agreement and] . . . the allegation is that Defendants (IDT included) stole Plaintiffs' commissions.” [#100 at 14] But neither the Amended Complaint nor the response describe any actions taken by IDT to steal Plaintiffs' commissions. Rather, the Amended Complaint simply alleges that IDT failed to pay commissions that Plaintiffs believe they are owed. But if IDT did not have any obligation to pay such commissions-and as set forth herein, the Amended Complaint has not plausibly pled any such obligation-then IDT cannot have “stolen” the commissions it was under no obligation to pay.
Accordingly, the Court concludes that Plaintiffs have not plausibly pled a civil theft or conversion claim against IDT. The Court therefore RECOMMENDS that Claims Five and Six be DISMISSED as to IDT.
5. Claim Seven: Breach of Fiduciary Duty
The Complaint next asserts a claim for breach of fiduciary duty. [#87 at ¶¶ 196-203] As a prerequisite for a breach of fiduciary duty claim under Colorado law, a plaintiff must show that the defendant was “acting as a fiduciary to the plaintiff.” Oaster v. Robertson, 173 F.Supp.3d 1150, 1179 (D. Colo. 2016) (internal quotations omitted). “Although a fiduciary relationship typically involves a special relationship, such as an attorney-client relationship, a fiduciary duty can be created ‘when one party has a high degree of control over the property or subject matter of another, or when the benefiting [sic] party places a high level of trust and confidence in the fiduciary to look out for the beneficiary's best interest.'” Id. (quoting MDM Grp. Assoc., Inc. v. CX Reinsurance Co., 165 P.3d 882, 889 (Colo.App. 2007)).
In support of this Claim, the Amended Complaint states that IDT “acted as Plaintiffs' fiduciary in preserving records, holding on commissions generated from Plaintiffs' retailers, and otherwise agreeing to allow Plaintiff[s] to provide discounted rates to [their] retailers exclusively.” [#87 at ¶ 197] But, “[f]iduciary relationships that derive from a special relationship of trust, reliance, influence and control are distinguishable from business relationships involving parties dealing at arm's length for mutual benefits.” Accident & Injury Med. Specialists, P.C. v. Mintz, 279 P.3d 658, 663 (Colo. 2012). And “[m]ost business relationships or contractual relationships . . . do not by themselves create fiduciary obligations, and fiduciary obligations should be extended reluctantly to commercial or business transactions.” Id. (quotation omitted).
Plaintiffs have failed to plead sufficient facts to justify extending a fiduciary relationship to their business dealings with IDT. Conclusory statements that Plaintiffs “placed a high level of trust in Defendants” [#87 at ¶ 200] do not support a finding of a fiduciary relationship. Nor does the fact that “Defendants held all the records” [id. at ¶ 201] create a fiduciary relationship where that fact arises only from the business relationship itself. Id.
The Agreement states that CDI and IDT shall “upon request, provide [Plaintiffs] with such other records as are necessary to show the amount of [c]ommissions that [Plaintiffs] and [r]etailers within [Plaintiffs'] [n]etwork are entitled to receive under this Agreement.” [#80-2 at 4]
Simply put, the Amended Complaint does not allege facts suggesting that Plaintiffs placed a “high level of trust” in IDT or that a confidential relationship existed. Nor does it allege that IDT had a high level of control over Plaintiffs' property or had assumed a duty to represent Plaintiffs' interests. Oaster, 173 F.Supp.3d at 1179. In fact, Plaintiffs make no allegations as to any direct contact between IDT and Plaintiffs such that a “high level of trust and confidence” would reasonably flow from that relationship. Id.
In their response, besides providing citations to the law on fiduciary relationships generally, Plaintiffs' sole statement in support of their fiduciary duty claim is that it “is related to Plaintiffs' claims for conversion and civil theft.” [#100 at 13] This statement does not provide the Court any assistance in analyzing Plaintiffs' fiduciary duty claim.
Thus, Plaintiffs have failed to plausibly plead a breach of fiduciary duty claim against IDT. Accordingly, this Court RECOMMENDS that Claim Seven be DISMISSED as to IDT.
6. Claim Eight: Civil Conspiracy
Claim Eight of the Amended Complaint asserts a civil conspiracy claim. [#87 at ¶¶ 204-11] This claim requires a plaintiff to show: “1) two or more persons; 2) an object to be accomplished; 3) a meeting of the minds on the object or course of action; 4) an unlawful overt act; and 5) damages as the proximate result.” F.D.I.C. v. First Interstate Bank of Denver, N.A., 937 F.Supp. 1461, 1473 (D. Colo. 1996) (citing Jet Courier Service, Inc. v. Mulei, 771 P.2d 486, 502 (Colo. 1989)). IDT argues that the Amended Complaint fails to sufficiently allege an overt unlawful act and fails to adequately allege an agreement or conspiracy between CDI and IDT. [#88 at 16-17] The Court disagrees.
Although IDT states in its Motion that the Amended Complaint does not allege any unlawful act, IDT does not elaborate on, nor provide support for, this assertion. [#88 at 17]
Initially, the Amended Complaint sufficiently alleges an agreement between CDI and IDT. It alleges that “IDT and CDI engaged in a scheme whereby they planned to cut out Plaintiffs from the sales process and retain Plaintiffs' clients for themselves.” [#87 at ¶ 205] As part of that scheme, Plaintiffs allege that “IDT instructed CDI to begin cutting distributors to generate additional profits for IDT and CDI.” [Id. at ¶ 51] The Amended Complaint then alleges that Mr. Dieter and Ms. Rumero began contacting distributors in multiple states. [Id. at ¶ 52] Mr. Dieter and Ms. Rumero allegedly told the distributors that IDT had asked CDI to ban the distributors from selling the Service and had given false reasons for breaking the agreements. [Id. at ¶ 53] The Amended Complaint then provides specific examples of these conversations. [Id. at ¶¶ 54-56] Finally, the Amended Complaint alleges that CDI did the same thing to Plaintiffs. [Id. at ¶¶ 57, 123-34] The Court finds these allegations sufficient to plausibly allege an agreement or conspiracy between CDI and IDT.
The Amended Complaint further alleges at least one unlawful overt act. “[T]he elements for a civil conspiracy claim require that the underlying acts be unlawful and create an independent cause of action.” Double Oak Constr., LLC. v. Cornerstone Dev. Int'l, LLC, 97 P.3d 140, 146 (Colo.App. 2003). Plaintiffs allege that CDI and IDT engaged in the scheme to “terminate[] the Agreement with Plaintiff[s] and st[eal] Plaintiffs[‘] retailers . . . because Plaintiff is African and black” and in violation of 42 U.S.C. § 1981(a). [#87 at ¶¶ 224-228] Because-as this Court will describe in more detail below-Plaintiffs plausibly plead an equal rights violation, the Court finds the allegations sufficient at this stage of the pleadings to allege an overt unlawful act.
Colorado courts have left open the possibility that a claim for civil conspiracy to a breach of contract could be pursued against a non-party to the contract, Logixx Automation v. Lawrence Michels Fam. Tr., 56 P.3d 1224, 1232 (Colo.App. 2002), and courts in this district have reached conflicting results on this topic, Ubel v. Progressive Direct Ins. Co., No. 20-cv-00204-RM-NYW, 2020 WL 9432929, at *22 (D. Colo. Oct. 22, 2020), report and recommendation adopted, 2020 WL 6701102 (D. Colo. Nov. 13, 2020) (civil conspiracy claim cannot be premised upon a conspiracy to breach a contract, even against non-signatories); McNees v. Ocwen Loan Servicing, LLC, No. 16-cv-1055-WJM-KLM, 2019 WL 1762947, at *12 (D. Colo. Apr. 22, 2019) (same); Bituminous Cas. Corp. v. Hartford Cas. Ins. Co., No. 12-cv-000433-WYD-KLM, 2013 WL 452374, at *10 (D. Colo. Feb. 6, 2013) (civil conspiracy claim may be premised upon a conspiracy to breach a contract provided the claim is brought against a non-party to the contract). Because IDT has not briefed this issue, and because at least one other overt act is proceeding, the Court will not reach whether civil conspiracy for breach of contract can be pursued against IDT.
Thus, the Court finds that Plaintiffs have plausibly pled a civil conspiracy claim against IDT. Accordingly, this Court RECOMMENDS that the Motion be DENIED as to Claim Eight against IDT.
7. Claim Eleven: Equal Rights Violation
Claim Eleven alleges that IDT violated Plaintiffs' equal rights, in violation of 42 U.S.C. §1981(a). Section 1981 states in relevant part:
All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.42 U.S.C. § 1981(a). The statute protects the ability to contract or purchase property free from impairment “so long as the impairment arises from intentional discrimination.” Hampton v. Dillard Dep't Stores, Inc., 247 F.3d 1091, 1106 (10th Cir. 2001). “Thus the proper focus is on whether the defendant had the intent to discriminate on the basis of race, and whether that discrimination interfered with the making or enforcing of a contract.” Id. at 1106-1107.
To establish a prima facie case under Section 1981, a plaintiff must demonstrate: “(1) that the plaintiff is a member of a protected class; (2) that the defendant had the intent to discriminate on the basis of race; and (3) that the discrimination interfered with a protected activity as defined in [the statutes].” Hampton, 247 F.3d at 1102. Here, the Amended Complaint alleges that Mr. Abdi is African and black, thus satisfying the first element. [#87 at ¶ 228] The Amended Complaint further alleges that IDT, CDI, and Mr. Dieter targeted African and black distributors-including Mr. Abdi-in an attempt to amend these distributors' master distributor agreements. [Id. at ¶¶ 65-68] The Amended Complaint alleges that Defendants targeted these individuals because of their race; specifically, that Defendants “reasoned that immigrants who were African or Muslim were stupid.” [Id. at ¶ 67] Thus, the Amended Complaint sufficiently alleges that IDT had the intent to discriminate on the basis of race, thereby satisfying the second element. Finally, the Amended Complaint alleges that the end result of this targeting was that CDI improperly canceled its contract with Plaintiff, thereby alleging the third element-interference with the protected activity of enforcing contracts. See Reynolds v. School Dist. No. 1, Denver, Colo., 69 F.3d 1523, 1532 (10th Cir. 1995) (“Section 1981 prohibits racial discrimination in ‘the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.'”) (quoting 42 U.S.C. § 1981); Shawl v. Dillard's Inc., 17 Fed.Appx. 908, 910 (10th Cir. 2001) (“By its language, Section 1981 establishes four protected interests: (1) the right to make and enforce contracts; (2) the right to sue, be parties, and give evidence; (3) the right to the full and equal benefit of the laws; and (4) the right to be subjected to like pains and punishments.” (quotations omitted)).
IDT argues that Plaintiffs failed to allege a specific contract that IDT interfered with and that, in any event, Plaintiffs failed to allege that IDT “possessed sufficient authority to significantly interfere with contracts between Plaintiffs and their alleged retailers, or that IDT actually exercised that authority to . . . [Plaintiffs'] detriment.” [#88 at 18 (quotations omitted)] But while the Amended Complaint does rely upon the contracts with the retailers in support of Plaintiffs' Section 1981 claims, it also cites to CDI's termination of the Agreement. [#87 at ¶ 227] And the Amended Complaint does plausibly allege that IDT had the ability to influence CDI's decisions with respect to the master distribution agreements, including the Agreement at issue here. [Id. at ¶¶ 53-57]
Thus, the Court finds that Plaintiffs have plausibly pled a Section 1981 claim. Accordingly, the Court respectfully RECOMMENDS that the Motion be DENIED to the extent it seeks to dismiss Claim Eleven.
8. Claim Twelve: Unjust Enrichment
Finally, in Claim Twelve Plaintiffs assert an unjust enrichment claim against IDT. [#87 at ¶¶ 234-38] “To prove unjust enrichment, a plaintiff must demonstrate that (1) at [his or her] expense, (2) the defendant received a benefit, (3) under circumstances that would make it unjust for the defendant to retain the benefit without paying.” Oaster, 173 F.Supp.3d at 1176. IDT first argues that Plaintiffs cannot pursue an unjust enrichment claim because the Agreement covers the same subject matter. [#88 at 19] But while it is true that a plaintiff cannot succeed on an unjust enrichment claim where an express contract covers the same subject matter, courts in this District have allowed plaintiffs to pursue both alternative theories at the pleadings stage. See United Water & Sanitation Dist. v. Geo-Con, Inc., 488 F.Supp.3d 1052, 1058 (D. Colo. 2020); Robert W. Thomas and Anne McDonald Thomas Revocable Tr. v. Inland Pac. Colo., LLC, No. 11-cv-03333-WYD-KLM, 2012 WL 2190852, at *4 (D. Colo. June 14, 2012).
IDT also argues that Plaintiffs have failed to allege any factual allegations suggesting that IDT received benefits under circumstances that would make it unjust for it to retain the benefit. [#88 at 19-20] The Court disagrees. The Amended Complaint generally alleges that Plaintiffs recruited numerous retailers to the Service, IDT received payments and otherwise benefitted from those retailers' participation in the Service, and IDT for racially motivated reasons then encouraged CDI to break its Agreement with Plaintiffs, thereby depriving Plaintiffs of commissions to which they were entitled and transferring those commissions to IDT. [See generally #87] The Court concludes that such allegations plausibly allege that IDT received benefits under circumstances that would make it unjust for it to retain the benefit.
Thus, the Court concludes that Plaintiffs have plausibly alleged an unjust enrichment claim against IDT. The Court thus RECOMMENDS that IDT's Motion to Dismiss be Denied as to Claim Twelve.
9. Conclusion
For the foregoing reasons, the Court respectfully RECOMMENDS that IDT's Motion to Dismiss be GRANTED IN PART and DENIED IN PART. Specifically, the Court RECOMMENDS that IDT's Motion to Dismiss be GRANTED to the extent it seeks dismissal of Claims One, Two, Three, Four, Five, Six, Seven, and Ten but DENIED to the extent it seeks dismissal of Claims Eight, Eleven, and Twelve.
B. CDI's Motion to Dismiss
CDI's Motion to Dismiss seeks to dismiss all claims against Mr. Dieter and Claims Two, Four, Seven, Eight, Nine, Eleven, and Twelve against CDI. [#89] The Court addresses these claims in turn.
1. Claim One: Breach of Contract
As explained earlier, it appears from the Amended Complaint that Claim One was asserted against Mr. Dieter. [See #87 at ¶¶ 144-52] CDI's Motion, however, states that during conferral with Plaintiffs' counsel, Plaintiffs' counsel indicated that only Claims Two, Nine, Eleven, and Twelve were asserted against Mr. Dieter in his personal capacity. [#89 at 1] Plaintiffs' Response does not challenge this assertion. [See generally #100] Nonetheless, during oral argument, Plaintiffs' counsel indicated that he had not intended to concede Claim One against Mr. Dieter. As a result, despite Plaintiffs' apparent concession of Claim One against Mr. Dieter, and without any briefing by the parties, the Court will analyze whether Claim One alleges a plausible breach of contract claim against Mr. Dieter.
Ordinarily, the Court would not make such a sua sponte analysis. But the Court cannot fault Mr. Dieter for not briefing the merits of a claim that Plaintiffs' counsel apparently conceded was not being pursued against Mr. Dieter. As a result, and because Plaintiffs will have the opportunity to object to this Recommendation and present their arguments about the merits of this claim to Judge Moore, the Court will sua sponte address whether Plaintiffs have plausibly pled a breach of contract claim against Mr. Dieter.
The Agreement itself states that it is “by and between [Mr. Abdi] and IIT . . . and [CDI].” [#80-2 at 1] Although Mr. Dieter signed the contract, he did so on behalf of CDI and as CDI's managing partner. [Id. at 8] And in Colorado, “[i]f he has proper authorization, an individual is not liable under a contract signed by him on behalf of another when he has given notice to the third party that there is a principal for whom he acts and also notice of the name or identity of the principal.” Beneficial Fin. Co. of Colorado v. Bach, 665 P.2d 1034, 1036 (Colo.App. 1983) (citing Fink v. Montgomery Elevator Co., 421 P.2d 735 (1966)). Thus, because the Amended Complaint does not allege that Mr. Dieter lacked authorization to enter into the Agreement on CDI's behalf, and because the Agreement clearly indicates that Mr. Dieter is acting on CDI's behalf, Mr. Dieter is not personally liable on the Agreement.
Thus, the Court concludes that Plaintiffs have failed to plausibly plead a breach of contract claim against Mr. Dieter. Accordingly, the Court respectfully RECOMMENDS that Claim One as asserted against Mr. Dieter be DISMISSED.
CDI does not separately challenge the breach of contract claim.
2. Claim Two: Tortious Interference
As explained earlier, Claim Two alleges both tortious interference with an existing contract and tortious interference with a prospective business relation. [#87 at ¶¶ 153-66] CDI and Mr. Dieter argue that this claim is barred by the economic loss rule. [#89 at 3-5] The Court agrees.
Plaintiffs did not bother to reply to this argument. [#100]
The Colorado Supreme Court has held that “a party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such a breach absent an independent duty of care under tort law.” Town of Alma, 10 P.3d at 1264. “Two conditions must be met for the economic loss rule to apply. First, the duty must arise from a source other than the contract. Second, the duty must not also be a duty imposed by the contract.” Great Am. Opportunities, Inc. v. Kent, 352 F.Supp.3d 1126, 1138 (D. Colo. 2018). “If the duty is also ‘memorialized in the contracts, it follows that the plaintiff has not shown any duty independent of the interrelated contracts and economic loss rule bars the tort claim.'” Id. (quoting BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66, 74 (Colo. 2004)).
Here, Plaintiffs allege that Mr. Dieter and CDI interfered with Plaintiffs' relationships with the retailers by: (1) providing discounts to Plaintiffs' retailers without providing such codes to Plaintiffs “contrary to the terms of the Agreement” [#87 at ¶ 163.a]; (2) opening new retail accounts for retailers in Plaintiffs' distribution network and removing them from Plaintiffs' distribution network “contrary to the Agreement's terms” [id. at ¶ 163.b]; and (3) taking leads that Plaintiffs developed and then signing them under a CDI account number [id. at ¶ 163.c]. As the Amended Complaint expressly acknowledges with respect to the first two methods of interference, the duty allegedly violated arises from the terms of the Agreement. As a result, the economic loss rule prohibits Plaintiffs from relying upon the alleged breach of these duties to support their intentional interference claims. Great Am. Opportunities, 352 F.Supp.3d at 1138. With respect to the third method of interference, Plaintiffs have not identified a source independent of the Agreement that would prohibit CDI and Mr. Dieter from attempting to take leads that Plaintiffs developed and signing them to a CDI account number. Thus, once again, the economic loss rule bars such a claim. Id.
In 2019 the Colorado Supreme Court revisited the economic loss rule and the Town of Alma case in Bermel v. Blueradios, Inc., 440 P.3d 1150 (Colo. 2019). The Bermel court noted that “[o]ur previous cases have applied the economic loss rule to bar only certain common law negligence claims.” Id. at 1153; see also id. at 1153 (“we have applied the [economic loss] rule only to common law tort claims for negligence and negligent misrepresentation”); id. at 1155 (“Notably, however, since adopting the economic loss rule, we have applied it only to bar common law tort claims of negligence or negligent misrepresentation.”). The court went on to state in a footnote that “the economic loss rule generally should not be available to shield intentional tortfeasors from liability for misconduct that happens to also breach a contractual obligation.” Id. at 1154 n.6. Although these statements are dicta, courts in this district have considered them alongside Town of Alma in determining whether intentional tort claims fall under the economic loss rule. See Western State Bank v. Cosey, L.L.C., No. 19-cv-01155-JLK, 2019 WL 5694271, at *4 (D. Colo. Nov. 4, 2019) (“Western State's fraud claim alleges an intentional tort. So, under Bermel, the economic loss rule would not bar Western State's fraud claim.”); Mcwhinney Holding Co., LLLP v. Poag, No. 17-cv-02853-RBJ, 2019 WL 9467529, at *2 (D. Colo. Dec. 6, 2019) (“The Bermel footnote [Footnote No. 6] clarifies that intentional torts depend on duties independent of contract and therefore are not barred by the economic loss rule. . . . The plain language clearly indicates the [Colorado Supreme Court] does not believe intentional torts should be covered by the economic loss rule.”); In re Bloom, 622 B.R. 366, 428 (Bankr. D. Colo. 2020) (finding that in light of Bermel, the “intentional tort claims . . . are simply ‘outside the scope' of the economic loss rule.”). However, even considering the Bermel dicta, this Court nonetheless concludes that the economic loss rule bars Plaintiffs' tortious interference claims against CDI. Although this claim is an intentional tort, Plaintiff does not identify actions taken by CDI that would be wrongful or improper but for the existence of the contract. Compare Bermel, 440 P.3d at 1151, 1153 (tortfeasor knowingly forwarded thousands of company emails containing proprietary information to his personal email account without authorization, and was found at trial to have committed civil theft). Indeed, as noted in Section III.A.2 supra, competitive actions to obtain retailers are not on their own improper-except that here they allegedly violate the parties' contractual obligations. Moreover, to the degree that Plaintiffs allege that CDI engaged in fraudulent misrepresentations-which could raise a duty separate from the contractual obligations, see Western State Bank, 2019 WL 5694271, at *4- Plaintiffs have failed to sufficiently plead their fraud claim under Federal Rule 9(b). Section III.A.2., supra.
The Court therefore concludes that the economic loss rule bars Plaintiffs' tortious interference claims against CDI and Mr. Dieter. Accordingly, the Court RECOMMENDS that Claim Two be dismissed against those Defendants.
3. Claim Four: Violation of State and Federal Antitrust Laws
Claim Four alleges that CDI and Mr. Dieter violated the Colorado Antitrust Act and Section 1 of the Sherman Antitrust Act. [#87 at ¶¶ 173-84] This claim fails for the reasons identified above. See supra Section III.A.3. Accordingly, this Court RECOMMENDS that Claim Four be DISMISSED as to CDI and Mr. Dieter.
4. Claim Five: Conversion
As with the breach of contract claim, based upon counsels' conferral and Mr. Dieter's belief that the conversion claim was not being asserted against Mr. Dieter, the parties did not brief the validity of the conversion claim against Mr. Dieter. Nonetheless, for the reasons articulated above, the Court will address the plausibility of the conversion claim as pled against Mr. Dieter. See supra n.34.
Claim Five is premised upon CDI, IDT, and Mr. Dieter's alleged conversion of Plaintiffs' commissions. [##87 at ¶ 187] But the Amended Complaint fails to plausibly allege that Mr. Dieter personally exercised dominion or control over these commissions. The Amended Complaint alleges that CDI or IDT would pay the commissions [#87 at ¶ 24] and that it was these entities that ultimately refused to pay these commissions [id. at ¶ 47]. Plaintiffs' conclusory statement that Mr. Dieter “exercised control over Plaintiffs' commissions” is wholly insufficient to plead a conversion claim against Mr. Dieter.
Thus, the Court concludes that Plaintiffs have failed to plausibly allege a conversion claim against Mr. Dieter. Accordingly, the Court RECOMMENDS that Claim Five be DISMISSED as to Mr. Dieter.
5. Claim Seven: Breach of Fiduciary Duty
Claim Seven asserts a claim for breach of fiduciary duty against CDI. [#87 at ¶¶ 196-203] CDI argues that this claim is barred by the economic loss rule. Colorado courts have held that the economic loss rule bars a breach of fiduciary duty claim when the fiduciary duties are set forth by the contractual relationship. Casey v. Colorado Higher Educ. Ins. Benefits All. Tr., 310 P.3d 196, 202-04 (Colo.App. 2012). On the other hand, Colorado courts have refused to apply the economic loss rule if the special relationship, by its very nature, automatically triggers an independent fiduciary duty of care. Id.; A Good Time Rental, LLC v. First Am. Title Agency, Inc., 259 P.3d 534, 540 (Colo.App. 2011).
As detailed earlier, the Court does not believe that Plaintiffs plausibly alleged that IDT owed Plaintiffs a fiduciary duty. [See supra Section III.A.5] Plaintiffs make the same allegations against CDI and thus, for the reasons previously articulated, Plaintiffs have not plausibly pled a breach of fiduciary duty claim. But, in any event, any such fiduciary obligations could only have arisen from the duties set forth in the Agreement, and, as a result, this claim is barred by the economic loss rule. Casey, 310 P.3d at 202-04.
Accordingly, the Court concludes that Plaintiffs have failed to plausibly plead a breach of fiduciary duty claim against CDI that is not otherwise barred by the economic loss rule. Accordingly, the Court RECOMMENDS that Claim Seven be dismissed against CDI.
To the extent the breach of fiduciary duty claim is alleged against Mr. Dieter, it fails for the same reasons.
6. Claim Eight: Civil Conspiracy
Claim Eight of the Amended Complaint asserts a civil conspiracy claim against CDI. [#87 at ¶¶ 204-11] In the Motion, CDI's only argument regarding Plaintiffs' civil conspiracy claim is that “Plaintiffs have failed to plead factual allegations sufficient to establish ‘a meeting of the minds' between CDI and IDT.” [#89 at 6] As explained earlier, Plaintiffs have sufficiently pled both an agreement between CDI and IDT and an unlawful overt act. Section III.A.6, supra. Thus, Plaintiffs have plausibly pled a civil conspiracy claim against CDI. Accordingly, the Court RECOMMENDS that the Motion be DENIED as to Claim Eight against CDI.
At oral argument, Plaintiffs' counsel conceded that Claim Eight was not brought against Mr. Dieter in his individual capacity. To the extent that it was, this Court finds that Plaintiffs have not pled facts sufficient to show that Mr. Dieter in his individual capacity-and not as the acting agent for CDI-engaged in a conspiracy with IDT. And as an agent for CDI, Mr. Dieter and CDI cannot conspire with each other. Lockwood Grader Corp. v. Bockhaus, 270 P.2d 193, 196 (Colo. 1954) (person acting on behalf of corporation cannot conspire with himself individually); Pittman v. Larson Distrib. Co., 724 P.2d 1379, 1390 (Colo.App. 1986) (“A corporation and its employees do not constitute the ‘two or more persons' required for a civil conspiracy . . . at least if the employees are acting on behalf of the corporation and not as individuals for their individual advantage.”). Accordingly, this Court RECOMMENDS that Claim Eight be DISMISSED as to Mr. Dieter.
7. Claim Nine: Promissory Estoppel
Claim Nine is a claim for promissory estoppel against CDI and Mr. Dieter. [#87 at ¶¶ 212-17] Under Colorado law, a claim for promissory estoppel has four elements: “(1) a promise; (2) that the promisor reasonably should have expected would induce action or forbearance by the promisee or a third party; (3) on which the promisee or third party reasonably and detrimentally relied; and (4) that must be enforced in order to prevent injustice.” Pinnacol Assurance v. Hoff, 375 P.3d 1214, 1221 (Colo. 2016).
CDI and Mr. Dieter argue that the undisputed existence of a contract between Plaintiffs and CDI bars Plaintiffs' promissory estoppel claim. [#89 at 7-9] According to CDI and Mr. Dieter, promissory estoppel is “applicable only in the absence of an otherwise enforceable contract.” [#89 at 8 (quoting Scott Co. of Cal. v. MK-Ferguson Co., 832 P.2d 1000, 1003 (Colo.App. 1992), overruled on other grounds by Lewis v. Lewis, 189 P.3d 1134, 1140 (Colo. 2008))]. Because “the alternative remedy of promissory estoppel is never reached when there has been mutual agreement by the parties on all essential terms of a contract, ” CDI and Mr. Dieter argue that Plaintiffs' promissory estoppel claims must be dismissed. [Id.]
While the Court agrees with the basic premise of this argument, the Court believes that the argument is premature. In Colorado, “inconsistent contract and tort claims may be pled in the alternative.” Gorsuch, Ltd. v. Wells Fargo Nat'l Bank Ass'n, No. 11-cv-00970-PAB-MEH, 2013 WL 6925132, at *3 (D. Colo. Dec. 13, 2013) (collecting cases). And “Colorado law recognizes promissory estoppel as an alternative theory of recovery to the formation of a contract.” Carthon v. Balfour Senior Care, LLC, No. 21-cv-00007-MEH, 2021 WL 2954685, at *3 (D. Colo. June 16, 2021). Courts have thus permitted, at the early stages of the proceedings, plaintiffs to pursue both a breach of contract claim and a promissory estoppel claim. Carthon, 2021 WL 2954685, at * 3; BBG Holding Corp. v. K Capital, LLC, No. 20-cv-03268-MEH, 2021 WL 147085, at *3 (D. Colo. Jan. 15, 2021).
In making this argument, CDI and Mr. Dieter rely upon the assertion that “[n]o party at any point has challenged the enforceability of the [Agreement].” [#89 at 8] Though not explicitly cited in their response, to determine whether any party has questioned the enforceability of the Agreement, the Court would need to look to the answers filed by CDI, IDT, and Mr. Dieter-without referencing these answers, the Court would not know whether any party has challenged the enforceability of the Agreement. But CDI and Mr. Dieter have filed a motion to dismiss pursuant to Rule 12(b)(6), not a motion for judgment on the pleadings pursuant to Rule 12(c). [See generally #89] And while it may be possible for the Court to convert the motion into a Rule 12(c) Motion, see Muller v. Vilsack, No. CV 13-0431 MCA/KK, 2015 WL 13665433, at *4 (D.N.M. Mar. 30, 2015); Nicks v. Brewer, No. 10-CV-1220-JAR-JPO, 2010 WL 4868172, *2 (D. Kan. Nov. 23, 2010), the Court declines to do so in the absence of a request from CDI and Mr. Dieter.
CDI and Mr. Dieter nonetheless argue that dismissal is especially appropriate here because the Agreement contains an integration clause prohibiting oral amendments to the Agreement. But in Colorado, “a subsequent oral agreement between the parties may modify a provision of an earlier written contract, even in the face of a provision in the original contract that modifications must be in writing.” Agritrack, Inc. v. DeJohn Housemoving, Inc., 25 P.3d 1187, 1193 (Colo. 2001); see also James H. Moore & Assocs. Realty, Inc. v. Arrowhead at Vail, 892 P.2d 367, 372 (Colo.App. 1994) (“[G]enerally, a written contract may be modified by a later oral agreement even in the face of a specific provision in the written agreement that all modifications must be in writing.” (citation omitted)). Thus, the Court cannot conclude, at this early stage of the litigation, that the existence of the Agreement bars Plaintiffs' promissory estoppel claims. Accordingly, the Court RECOMMENDS that the CDI Motion be DENIED with respect to Claim Nine.
8. Claim Eleven: Equal Rights Violation
Claim Eleven asserts an equal rights violation against CDI and Mr. Dieter pursuant to 42 U.S.C. § 1981. [#87 at ¶¶ 223-33] CDI and Mr. Dieter move to dismiss Claim Eleven arguing that Plaintiffs have failed to provide specific factual allegations supporting actionable discrimination. [#89 at 9-10] For the reasons outlined in Section III.A.7, the Court disagrees. Accordingly, the Court respectfully RECOMMENDS that the Motion be DENIED to the extent it seeks dismissal of Claim Eleven.
9. Claim Twelve: Unjust Enrichment
Finally, in Claim Twelve Plaintiffs assert an unjust enrichment claim against CDI and Mr. Dieter. [#87 at ¶¶ 234-38] CDI and Mr. Dieter maintain that Plaintiffs' unjust enrichment claim should be dismissed because the Agreement “covers the same subject matter [and therefore] precludes any implied-in-law contract.” [#89 at 10 (quoting Interbank Invs., LLC v. Eagle River Water & Sanitation Dist., 77 P.3d 814, 816 (Colo.App. 2003)] For the reasons outlined in Section III.A.8 above, the Court concludes that Plaintiffs may, at this stage, plead unjust enrichment as an alternative to their breach of contract claims. United Water & Sanitation Dist., 488 F.Supp.3d at 1058; Robert W. Thomas and Anne McDonald Thomas Revocable Tr., 2012 WL 2190852, at *4.
Alternatively, Mr. Dieter argues that Plaintiffs have failed to plausibly allege that Mr. Dieter-as opposed to CDI-has been unjustly enriched. Plaintiffs did not respond to this argument [#100 at 15-16], and the Court agrees with Mr. Dieter:
At most, the complaint alleges that [IDT and CDI] received a benefit at [Plaintiffs'] expense, not [Mr. Dieter] personally. There are no non-conclusory allegations in the complaint regarding what benefits [Mr. Dieter] received, and the complaint does not explain how [CDI] distributed revenues from the [retailers] it allegedly poached from [IIT].” Thus, this claim fails against [Mr. Dieter].”DTC Energy Grp., Inc. v. Hirschfeld, 420 F.Supp.3d 1163, 1178 (D. Colo. 2019) (internal citations omitted).
Thus, the Court concludes that Plaintiffs have plausibly pled an unjust enrichment claim as an alternative to their breach of contract claim against CDI, but not against Mr. Dieter. Accordingly, the Court RECOMMENDS that Claim Twelve be DISMISSED as to Mr. Dieter but that CDI's Motion to Dismiss be DENIED to the extent it seeks to dismiss Claim Twelve against CDI.
10. Conclusion
For the foregoing reasons, the Court respectfully RECOMMENDS that CDI's Motion to Dismiss be GRANTED IN PART and DENIED IN PART. Specifically, the Court RECOMMENDS that CDI's Motion to Dismiss be GRANTED to the extent it seeks dismissal of Claims One against Mr. Dieter, Claim Two against both Defendants, Claim Four against both Defendants, Claim Five against Mr. Dieter, Claim Seven against both Defendants, Claim Eight against Mr. Dieter, and Claim Twelve against Mr. Dieter. The Court RECOMMENDS that CDI's Motion to Dismiss be DENIED to the extent it seeks dismissal of Claim Eight, Claim Nine, Claim Eleven, or Claim Twelve against CDI.
C. Plaintiffs' Motion to Dismiss
In its response, CDI states that Plaintiffs failed to confer with CDI prior to filing Plaintiffs' Motion to Dismiss, in contravention of Judge Moore's practice standards. [#105 at 1-2] In response, Plaintiffs' state that “Plaintiffs long warned [Mr.] Dieter and CDI that the[ir] counterclaims were suspect and injected in this proceeding to be tough.” [#107 at 3 n. 1] It thus appears that Plaintiffs did not confer about the specific alleged deficiencies in the counterclaims or whether those deficiencies could be cured, and therefore did indeed violate Judge Moore's practice standards. Indeed, in response to Plaintiffs' Motion to Dismiss, CDI has agreed that it did not plead a plausible tortious interference cause of action and has withdrawn that counterclaim. [#105 at 5] Plaintiffs are cautioned that future failures to confer may result in sanctions.
Plaintiffs have moved to dismiss all three counterclaims filed by CDI. [#98] Initially, Plaintiffs contend that CDI lacks standing to bring its counterclaims. [Id. at 5-6] Alternatively, Plaintiffs argue that CDI has failed to plausibly plead its tortious interference and defamation counterclaims. [Id. at 7-11] In its response, CDI admits that it has failed to plausibly allege a tortious interference with contract cause of action, and the Court therefore RECOMMENDS that Plaintiffs' Motion to Dismiss be GRANTED to the extent it seeks to dismiss Counterclaim Two. The Court, therefore, first addresses CDI's standing, then addresses the plausibility of CDI's defamation counterclaims.
Plaintiffs' Motion to Dismiss does not bring a Rule 12(b)(6) challenge to CDI's breach of contract claim. [See generally #98]
1. Standing
Plaintiffs first argue that CDI lacks standing to bring its counterclaims. [Id. at 5-6] “Article III of the Constitution confines the judicial power of federal courts to deciding actual ‘Cases' or ‘Controversies.'” Hollingsworth v. Perry, 570 U.S. 693, 704 (2013) (quoting U.S. Const. art. III, § 2). “Plaintiffs must demonstrate a personal stake in the outcome in order to assure that concrete adverseness which sharpens the presentation of issues necessary for the proper resolution of constitutional questions.” City of Los Angeles v. Lyons, 461 U.S. 95, 101 (1983) (quotations omitted). “Plaintiffs must show they have sustained or are immediately in danger of sustaining some direct injury, and the injury or threat of injury must be real and immediate, not conjectural or hypothetical.” Faustin v. City & Cty. of Denver, 268 F.3d 942, 947 (10th Cir. 2001). As a result, “[t]o establish standing, plaintiffs must show injury in fact, a causal relationship between the injury and the challenged action of the defendant, and a likelihood that the injury will be redressed by a favorable decision.” Id.
According to Plaintiffs, the Colorado CDI has been dissolved and “CDI failed to allege any facts as part of its counterclaims that it has continued its existence to maintain counterclaims.” [#98 at 5] The entire premise of this argument, however, is that the Colorado CDI has been dissolved. But CDI's counterclaims do not reference such a dissolution and, indeed, allege that it was the entity that entered into the Agreement with Plaintiffs. [See generally #90 at 17-22] Thus, to the extent Plaintiffs are making a facial attack of the Counterclaims under Rule 12(b)(1), their facial attack fails. See Holt v. United States, 46 F.3d 1000, 1002 (10th Cir. 1995) (holding that, “[i]n reviewing a facial attack on the complaint [under Rule 12(b)(1)], a district court must accept the allegations in the complaint as true”).
Plaintiffs' Motion to Dismiss fails to indicate whether Plaintiffs are making a facial attack to CDI's standing or whether they are asking the Court to go beyond the allegations contained in the Counterclaim and consider evidence challenging the factual basis upon which subject matter jurisdiction rests. At oral argument, counsel for Plaintiffs indicated that Plaintiffs were making a facial attack on the Court's subject matter jurisdiction.
In their Motion to Dismiss, Plaintiffs state that they “incorporate[] the factual background in [their] First Amended Complaint. [#98 at 3] Plaintiffs fail to offer any support for the notion that this Court can consider facts alleged in the First Amended Complaint when considering a Rule 12(b)(1) or Rule 12(b)(6) challenge to CDI's counterclaims.
To the extent Plaintiffs are asking the Court to go beyond the allegations contained in the Counterclaim and consider evidence challenging the factual basis upon which subject matter jurisdiction rests, that challenge likewise fails. Simply put, Plaintiffs have not presented any evidence for the Court to consider. And while Plaintiffs reference “information available on the Colorado Secretary of State's website about CDI” [#98 at 5], Plaintiffs have neither submitted that “information, ” asked the Court to take judicial notice of that “information, ” or provided necessary details for the Court to be able to take judicial notice of that “information.” See Operating Eng'rs Local 101 Pension Fund v. Al Muehlberger Concrete Constr., Inc., No. 13-2050-JAR-DJW, 2013 WL 5409116, at *2 (D. Kan. Sept. 26, 2013) (refusing to take judicial notice of information from secretaries of state websites where the printouts were not certified as official documents and the offering party did not provide sufficient information about the authenticity of the documents).
Accordingly, to the extent Plaintiffs challenge CDI's counterclaims based upon an alleged lack of standing, the Court RECOMMENDS that Plaintiffs' Motion to Dismiss be DENIED.
2. Counterclaim Three: Defamation
Counterclaim three alleges defamation against both Plaintiffs. [#90 at ¶¶ 69-73] To state a cause of action for defamation in Colorado, a plaintiff must plausibly plead: “(1) a defamatory statement concerning another; (2) published to a third party; (3) with fault amounting to at least negligence on the part of the publisher; and (4) either actionability of the statement irrespective of special damages or the existence of special damages to the plaintiff caused by the publication.” Williams v. Dist. Court, Second Judicial Dist., City & Cty. of Denver, 866 P.2d 908, 911 n.4 (Colo. 1993). Without identifying the particular element that Plaintiffs believe CDI has failed to plausibly plead, Plaintiffs generally assert that CDI has failed to plausibly plead a defamation claim. [#98 at 8-11] The Court disagrees.
“Oral defamation is slander while that which is written is libel.” Nguyen v. Mai Vu, No. 18-CV-01132-CMA-NRN, 2018 WL 5622634, at *5 n.12 (D. Colo. Oct. 30, 2018), report and recommendation adopted, 2018 WL 6603955 (D. Colo. Nov. 15, 2018). Here, we are dealing with oral statements, or slander.
The Counterclaim alleges that, after CDI terminated IIT, Mr. Abdi told several people in the industry that CDI terminated the Agreement because Mr. Dieter is Jewish and Mr. Abdi is black and Muslim. [#90 at ¶ 45] The Counterclaim further states that the real reason for terminating the Agreement was Plaintiffs' breach of the Agreement and failure to cure those breaches. [Id. at ¶¶ 52-56] If these allegations are true, then CDI has successfully pled the first three elements of a defamation claim: (1) a defamatory statement concerning another, (2) published to a third party, (3) with fault amounting to at least negligence on the part of Plaintiffs. Williams, 866 P.2d at 911 n.4. Similarly, the Counterclaim alleges that in July of 2018, Mr. Abdi called a Denver retailer and falsely claimed that CDI diverted residuals from the retailer's account. [Id. at ¶ 48] Once again, if true, these allegations plausibly plead the first three elements of a defamation claim.
As to the last element, a defamatory statement can be “either defamatory per se or defamatory per quod, depending upon the certainty of the defamatory meaning of the publication.” Gordon v. Boyles, 99 P.3d 75, 79 (Colo.App. 2004). If a defamatory communication is defamatory per se, damage is presumed, and a plaintiff need not plead special damages. Id. This arises where the defamatory meaning is apparent from the face of the publication, or if the subject matter of the publication falls into one of the traditional defamatory per se categories. Id. The traditional defamatory per se categories include “imputation of (1) a criminal offense; (2) a loathsome disease; (3) a matter incompatible with the individual's business, trade, profession, or office; or (4) serious sexual misconduct.” Id.; see also Examination Bd. of Prof. Home Inspectors v. Int'l Ass'n of Certified Home Inspectors, 519 F.Supp.3d 893, 913 (D. Colo. 2021).
Here, both statements identified above are defamatory on their face and also accuse CDI of matters incompatible with its business. Specifically, the first statement accuses CDI of terminating the Agreement for improper reasons and the second statement accuses CDI of improperly diverting residuals from the Denver retailer's account. Indeed, this second statement may even allege criminal conduct-theft-and thus fall into yet another traditional defamatory per se category. Gordon, 99 P.3d at 79. The Court therefore concludes that the defamation alleged constitutes defamation per se, and the Court need not evaluate whether the Third Counterclaim sufficiently alleges special damages.
Thus, the Court concludes that CDI has plausibly alleged a claim for defamation. Accordingly, the Court RECOMMENDS that Plaintiffs' Motion to Dismiss be DENIED to the extent it seeks to dismiss the Third Counterclaim.
3. Conclusion
For the foregoing reasons, the Court respectfully RECOMMENDS that Plaintiffs' Motion to Dismiss be GRANTED to the extent it seeks dismissal of Counterclaim Two but DENIED to the extent it seeks dismissal of Counterclaims One or Three.
D. Plaintiffs' Motion to Strike
Finally, the Court turns to Plaintiffs' Motion to Strike, which seeks to strike the First and Sixth Affirmative Defenses pled by Mr. Dieter and CDI. [#99] In response, CDI and Mr. Dieter have agreed to withdraw their Sixth Affirmative Defense. [#104 at 3] Thus, the Court addresses only the First Affirmative Defense, failure to state facts sufficient to constitute a cause of action against Mr. Dieter and CDI. [#90 at 16]
Once again, Plaintiffs appear to have disregarded the conferral requirement prior to filing their Motion to Strike. [#104 at 2] Had Plaintiffs conferred, Mr. Dieter and CDI could have simply withdrawn their Sixth Affirmative Defense.
Plaintiffs provide no authority for their assertion that the defense of failure to state a claim upon which relief can be granted should not be presented as an affirmative defense “because, beyond the motions to dismiss stage, [that] defense will have no impact.” [#106 at 2] Indeed, Plaintiffs' assertion runs contrary to the plain language of Rule 12(b)(6) which states that a party “may assert” failure to state a claim by motion. Fed.R.Civ.P. 12(b)(6) (emphasis added). Indeed, “[t]he defense of failure to state a claim can be raised at any time, including at trial.” Chavez v. Thornton, No. 05-cv-00607-REB-MEH, 2007 WL 2908293, at *1 (D. Colo. Oct. 3, 2007). And courts routinely allow parties to plead such a defense as an affirmative defense. See, e.g., id.; Bruner v. Midland Funding, LLC, No. CIV-16-1371-D, 2018 WL 563183, at *3 (W.D. Okla. Jan. 25, 2018); Resol. Trust Co. v. Thomas, No. CIV.A. 92-2084-GTV, 1995 WL 261641, at *1 (D. Kan. Apr. 25, 1995). Indeed, on multiple occasions, counsel for Plaintiffs has himself filed answers in which he has asserted as an affirmative defense that the opposing party's complaint failed to state a claim for relief pursuant to Rule 12(b)(6). Rivard v. Gates & Rymph, Inc., No. 12-cv-00236-REB-KMT [#7 at 7]; Spokas v. Am. Fam. Mut. Ins. Co., No. 12-cv-00380-WYD-KLM [#13 at 8]; McIntosh v. Vida Salon, LLC, No. 12-cv-00874-MSK-MJW [#14 at 4]. In any event, Plaintiffs have not demonstrated in the Motion to Strike that the first affirmative defense “ha[s] no bearing on the controversy” or that Plaintiffs “ha[ve] been prejudiced” by the inclusion of such a defense. Kimpton Hotel & Rest. Grp., LLC, 2008 WL 140488, at *1. As a result, Plaintiffs have not satisfied their burden of demonstrating that the First Affirmative Defense should be stricken.
Accordingly, the Court RECOMMENDS that Plaintiffs' Motion to Strike be DENIED.
IV. CONCLUSION
For the foregoing reasons, the Court respectfully RECOMMENDS that: (1) IDT's Motion to Dismiss [#88] be GRANTED IN PART and DENIED IN PART. Specifically, the Court RECOMMENDS that IDT's Motion to Dismiss be GRANTED to the extent it seeks dismissal of Claims One, Two, Three, Four, Five, Six, Seven, and Ten but DENIED to the extent it seeks dismissal of Claims Eight, Eleven, and Twelve. Because this is the second round of motions to dismiss briefing, and because Plaintiffs have had prior opportunities to cure deficiencies in their pleadings, the Court respectfully RECOMMENDS that Claims One, Two, Three, Four, Five, Six, Seven, and Ten as asserted against IDT be DISMISSED WITH PREJUDICE. S.D. v. Lajeunesse, No. 15-CV-02404-WJM-CBS, 2017 WL 262692, at *4 n.4 (D. Colo. Jan. 20, 2017) (“By the time of a second amended complaint it is often the case that pleading deficiencies such as those evident here may be deemed irreparable, and the complaint will be dismissed with prejudice.”).
(2) CDI's Motion to Dismiss [#89] be GRANTED IN PART and DENIED IN PART. Specifically, the Court RECOMMENDS that CDI's Motion to Dismiss be GRANTED to the extent it seeks dismissal of Claims One against Mr. Dieter, Claim Two against both Defendants, Claim Four against both Defendants, Claim Five against Mr. Dieter, Claim Seven against both Defendants, Claim Eight against Mr. Dieter, and Claim Twelve against Mr. Dieter. The Court RECOMMENDS that CDI's Motion to Dismiss be DENIED to the extent it seeks dismissal of Claim Eight, Claim Nine, Claim Eleven, or Claim Twelve against CDI. Because this is the second round of motions to dismiss briefing, and because Plaintiffs have had prior opportunities to cure deficiencies in their pleadings, the Court respectfully RECOMMENDS that Claims One, Two, Four, Five, Seven, Eight, and Twelve asserted against Mr. Dieter and Claims Two, Four, and Seven asserted against CDI be DISMISSED WITH PREJUDICE. Lajeunesse, 2017 WL 262692, at *4 n.4.
(3) Plaintiffs' Motion to Dismiss [#98] be GRANTED IN PART and DENIED IN PART. Specifically, the Court RECOMMENDS that Plaintiffs' Motion to Dismiss be GRANTED to the extent it seeks to dismiss Counterclaim Two but DENIED to the extent it seeks to dismiss Counterclaims One and Three. Because CDI acknowledges that it cannot plausibly plead a tortious interference claim [#105 at 5], the Court respectfully RECOMMENDS that Claim Two be DISMISSED WITH PREJUDICE.
(4) Plaintiffs' Motion to Strike [#99] be DENIED.
Within fourteen days after service of a copy of this Recommendation, any party may serve and file written objections to the magistrate judge's proposed findings of fact, legal conclusions, and recommendations with the Clerk of the United States District Court for the District of Colorado. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); Griego v. Padilla (In re Griego), 64 F.3d 580, 583 (10th Cir. 1995). A general objection that does not put the district court on notice of the basis for the objection will not preserve the objection for de novo review. “[A] party's objections to the magistrate judge's report and recommendation must be both timely and specific to preserve an issue for de novo review by the district court or for appellate review.” United States v. 2121 East 30th Street, 73 F.3d 1057, 1060 (10th Cir. 1996). Failure to make timely objections may bar de novo review by the district judge of the magistrate judge's proposed findings of fact, legal conclusions, and recommendations and will result in a waiver of the right to appeal from a judgment of the district court based on the proposed findings of fact, legal conclusions, and recommendations of the magistrate judge. See Vega v. Suthers, 195 F.3d 573, 579-80 (10th Cir. 1999) (holding that the district court's decision to review magistrate judge's recommendation de novo despite lack of an objection does not preclude application of “firm waiver rule”); Int'l Surplus Lines Ins. Co. v. Wyo. Coal Refining Sys., Inc., 52 F.3d 901, 904 (10th Cir. 1995) (finding that cross-claimant waived right to appeal certain portions of magistrate judge's order by failing to object to those portions); Ayala v. United States, 980 F.2d 1342, 1352 (10th Cir. 1992) (finding that plaintiffs waived their right to appeal the magistrate judge's ruling by failing to file objections). But see, Morales-Fernandez v. INS, 418 F.3d 1116, 1122 (10th Cir. 2005) (holding that firm waiver rule does not apply when the interests of justice require review).