Opinion
No. CIV 06-1109 PHX RCB.
May 17, 2006
ORDER
On April 21, 2006, Plaintiffs Siren, Inc. ("Siren") and Jared Kilgore filed a complaint in the Superior Court of Arizona in Maricopa County seeking monetary and injunctive relief for claims sounding in tort, contract, and state antitrust law. Compl. (doc. # 1, pt. 2). The matter was removed to this Court on that same day. Notice (doc. # 1). Currently pending before the Court are Plaintiffs' motion for temporary restraining order (doc. # 4, pt. 7) and Defendants' motion to dismiss or, in the alternative, to stay proceedings (doc. # 5). Both motions have been fully briefed, and the Court heard oral argument on May 15, 2006. Having carefully considered the arguments raised, the Court now rules.
I. BACKGROUND
Defendant Firstline Security, Inc. ("Firstline") is in the business of marketing and selling home security systems and recruiting sales representatives to sell such systems door-to-door. Keyes Aff. (doc. # 14, pt. 2) ¶ 3. Jared Kilgore was employed by Firstline from 2002 through November 2005, at one time as a Vice President and later as an acting Division President. Kilgore Aff. (doc. # 16, pt. 2) ¶¶ 6, 28.
On August 26, 2004, Kilgore and Firstline executed a Vice President Employment Agreement ("VP Agreement"). Three provisions of the VP Agreement are especially relevant to the matters now pending before the Court.
First, the non-compete clause would prohibit Kilgore from (1) "recruit[ing] sales representatives in, or within a fifty (50) mile radius of . . . Mesa, Arizona; Tempe, Arizona"; (2) "market[ing] or sell[ing] home security systems in the States and Territories of the United States in which [Firstline] operates"; (3) "engaging directly in [a competing business] as an owner, shareholder, member, partner, or agent"; and (4) "employing or recruiting any potential employee of [Firstline] for any purpose related to [the business of recruiting sales representative to market and sell home security systems and the marketing and selling of such systems]." VP Agreement (doc # 4, pt. 2) at 45 ¶ 6. These restrictions would remain in effect for the duration of the agreement and for twenty-four months after its termination.Id.
Second, the non-solicitation clause would prohibit Kilgore from "directly or indirectly . . . solicit[ing] or otherwise induc[ing] any employee or former employee of [Firstline] to enter into employment or to participate in any activity that is in competition with [Firstline]." Id. at 46 ¶ 7.
Third, the forum selection and choice of law provisions state as follows:
This Agreement shall be governed by the laws of the State of Utah and any action relating to this Agreement or the breach or enforcement hereof shall be brought and maintained in the Courts of the State of Utah, each of the parties consenting [sic] the exclusive personal jurisdiction of such courts as if they were personally present in Utah.Id. at 47 ¶ 19.
Kilgore carried out his duties as Vice President in Arizona, traveling to that state with a Firstline sales team recruited from other states. Kilgore Aff. ¶ 11.
At the end of the 2005 summer sales season, after informing Firstline executives that he intended to terminate his employment with the company, Kilgore met with Wright Thurston and Defendant Trevor Keyes of Firstline in Utah on August 12, 2005. At this meeting, Kilgore was asked to return to Utah on August 24, 2005 to discuss employment options with Thurston. Id. ¶¶ 16-18.
At the August 24 meeting, Kilgore agreed orally ("Consulting Agreement") to a temporary two-month trial period as an acting Division President for Firstline. Id. ¶¶ 19-22. Kilgore never signed a written agreement or formally accepted a position as a full Division President.
On November 12, 2005, Kilgore formally terminated his employment with Firstline. Id. ¶ 28.
Kilgore subsequently established Siren, Inc. ("Siren") as an Arizona corporation as of March 10, 2006. Like Firstline, Siren is in the business of selling home security systems. Kilgore is Siren's sole owner. Id. ¶¶ 2-3. Siren has recruited sales representatives by email communications to college students in Arizona. Id. ¶ 40. Siren plans to sell security systems in the summer 2006 sales season in three markets: Cleveland and Columbus, Ohio and Indianapolis, Indiana. Id.
On April 4, 2006, Firstline filed a complaint in state court in Utah against Kilgore alleging (1) breach of contract, (2) intentional interference with contractual relations, (3) misappropriation of corporate opportunity, (4) misappropriation of trade secrets, (5) breach of fiduciary duty, (6) unjust enrichment, and (7) conversion, and (8) seeking preliminary and permanent injunctive relief based on those claims. See Compl. (doc. # 4, pt. 2) at 24-41.
After the filing of that lawsuit, Plaintiffs aver that Firstline officials have contacted current and prospective Siren employees to induce them to not join Siren, breach their employment contracts and join Firstline, or to otherwise stop working for Siren. Am. Compl. (doc. # 16) ¶ 43. For example, Plaintiffs claim that Keyes and other Firstline officials have (1) mentioned the Utah lawsuit and made other references to their plans of putting Siren out of business, see id. ¶ 46, (2) threatened that Firstline will have people follow Siren's salesmen around during the summer to make sure they cannot make any sales, id. ¶ 49, (3) said that Keyes would personally set aside $250,000 per Siren office to make sure that Siren employees in those cities do not show up to work, id. ¶ 50, (4) indicated that Keyes would "hire four Mexicans to put up flyers on the doors before and after the employees of Siren have knocked them to kill Siren's business," id. ¶ 51, and (5) stated that Defendants have a "mole" or "inside man" at Siren,id. ¶ 48. Defendants deny these allegations, Keyes Aff. ¶¶ 21-22, Redd Aff. ¶¶ 16-18, but concede that Keyes may have made some statements he later regretted "out of concern for the damage being inflicted on Firstline" at the time. Keyes Aff. ¶ 19.
On April 21, 2006, Siren and Kilgore filed the present action in the Superior Court of Arizona in Maricopa County alleging (1) intentional interference with contractual relations, (2) defamation and trade libel, (3) breach of contract, (4) restraint of trade, (5) abuse of process, and (6) seeking preliminary and permanent injunctive relief based on those claims. See Compl. (doc. # 1, pt. 2). Defendants removed the action to this Court that same day.
Plaintiffs subsequently filed an amended complaint (doc. # 16), naming Jane Doe Keyes in place of Defendant Erin Keyes, and dropping the breach of contract claim. See Am. Compl. (doc. # 16).
II. DEFENDANT ERIN KEYES'S RULE 12(b)(2) MOTION TO DISMISS
Defendant Erin Keyes has moved to dismiss Plaintiffs' Complaint pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. The original complaint contains no allegations against Erin Keyes; her joinder as a party defendant is based solely on her capacity as a potential interest holder in a marital community benefitted by the allegedly tortious conduct of her husband, Trevor Keyes. See Compl. (doc. # 1, pt. 2) ¶ 4. Because Utah, their state of marriage and domicile, is not a community property state, she maintains that there is no such marital community in which she could be a current interest holder. Mot. (doc. # 5) at 6-7. Thus, she contends that the Court cannot exercise personal jurisdiction over her. Id. The Court construes this motion as a request for an order dropping Defendant Erin Keyes for reason of misjoinder.
The only paragraph in the original complaint concerning Erin Keyes reads as follows:
Keyes and his wife, Erin, are residents of the State of Utah and, on information and belief, were at all relevant times herein husband and wife. Accordingly, this action is brought against them and their marital community, as the actions taken by Keyes were done for the benefit of and in furtherance of his marital community.
Compl. (doc. # 1, pt. 2) ¶ 4.
In an apparent effort to evade dismissal on the bases set forth in Defendants' motion to dismiss (doc. # 5), Plaintiffs have filed an amended complaint (doc. # 16). In their response to Defendants' motion to dismiss, Plaintiffs claim that the amended complaint does not name Erin Keyes as a party, thereby mooting her motion. See Resp. (doc. # 15) at 1-2. As Defendants point out, however, the amended complaint (doc. # 16) names "Jane Doe Keyes" instead. Reply (doc. # 19) at 2 n. 1. Accordingly, Defendants seek clarification that Erin Keyes will be dropped as a party, and the Court rules on her motion on that basis.
As the claims in the complaint and amended complaint against the remaining defendants are essentially the same, the analysis would be the same whether directed to the complaint or amended complaint.
Rule 21 of the Federal Rules of Civil Procedure, titled "Misjoinder and Non-Joinder of Parties," provides that "[p]arties may be dropped or added by order of the court on motion of any party or of its own initiative at any stage of the action and on such terms as are just." Id. The power to drop or add parties is vested to the sound discretion of the court. See Sams v. Beech Aircraft Corp., 625 F.2d 273, 277 (9th Cir. 1980); see also Fair Hous. Dev. Fund Corp. v. Burke, 55 F.R.D. 414, 419 (E.D.N.Y. 1972) (citing 3A Moore's Federal Practice § 21.05 (1970)) (Rule 21 affords broad discretion to court in adding or dropping parties).
While Rule 21 does not define "misjoinder," Rule 20 sheds light on the matter by setting forth the standard for permissive joinder of parties defendant.
All persons . . . may be joined in one action as defendants if there is asserted against them jointly, severally, or in the alternative, any right to relief in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all defendants will arise in the action.
Fed.R.Civ.P. 20(a). Rule 17(b) further instructs that "the capacity of an individual . . . to sue or be sued shall be determined by the law of the individual's domicile." Fed.R.Civ.P. 17(b). Finally, the defense of lack of capacity to be sued may only be raised by "specific negative averment, which shall include such supporting particulars as are peculiarly within the pleader's knowledge." Fed.R.Civ.P. 9(a); see, e.g., Comstock v. Pfizer Ret. Annuity Plan, 524 F. Supp 999, 1002 (D. Mass. 1981) (granting motion to dismiss because named defendant was an unincorporated association, not subject to suit under state law).
It is apparent from the face of Plaintiffs' Complaint that Defendant Erin Keyes is a domiciliary of Utah. Compl. (doc. # 1, pt. 2) ¶ 4. Her capacity to be sued must therefore be determined by Utah law. See Fed.R.Civ.P. 17(b). Unlike Arizona, which specifically permits judgment creditors to levy upon community property by joinder of a tortfeasor's spouse as a party defendant, Utah does not operate under principles of community property or provide a similar provision for joinder. Compare Ariz. Rev. Stat. §§ 25-211, -215(D) (West 2006), and Vikse v. Johnson, 137 Ariz. 528, 672 P.2d 193, 196 (Ct.App. 1983), with Utah Code Ann. §§ 30-2-1 to -11 (West 2006). Therefore, in Utah, there does not exist any marital community to which a tort victim may look for satisfaction of a judgment. Moreover, under Utah law, "[n]either spouse is personally liable for the separate debts, obligations, or liabilities of the other . . . incurred during marriage. . . ." Utah Code Ann. § 30-2-5(1)(b) (West 2006).
In light of the foregoing considerations, it is clear that Plaintiffs have no right to relief against Erin Keyes and that she may not be sued for her husband's torts based solely on her marital capacity. These particulars have been amply expounded in Defendant's motion as required by Rule 9(a). See Mot. (doc. # 5) at 6-7. Defendant's motion, construed as a Rule 21 motion for an order dropping her as a party to this action, will be granted.
III. DEFENDANTS' RULE 12(b)(3) MOTION TO DISMISS
All Defendants have moved to dismiss Plaintiffs' Complaint on the basis of a forum selection clause in the VP Agreement rendering venue improper in this Court. Mot. (doc. # 5) at 7-10. That provision states that "any action relating to this Agreement or the breach or enforcement hereof shall be brought and maintained in the Courts of the State of Utah, each of the parties hereof consenting [sic] the exclusive personal jurisdiction of such courts as if they were personally present in the State of Utah." VP Agreement (doc. # 4, pt. 2) at 47 ¶ 19.
A. Standard of Review
In resolving a Rule 12(b)(3) motion to dismiss, the pleadings need not be accepted as true and the district court may consider facts outside the pleadings. See Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1137 (9th Cir. 2003) (citations omitted). When faced with a Rule 12(b)(3) motion based on a forum selection clause, "the trial court must draw all reasonable inferences in favor of the non-moving party and resolve all factual conflicts in favor of the non-moving party." Id. at 1138.
B. Choice of Law
Because this is a diversity case arising from alleged negligence occurring in Arizona, the Court applies federal procedural law and state substantive law. Erie R.R. v. Tompkins, 304 U.S. 64, 78-79 (1938). Although the VP Agreement contains a choice of law provision selecting Utah law, see VP Agreement (doc. # 4, pt. 2) at 47 ¶ 19, the Ninth Circuit has held that, in the context of determining venue, Erie principles require that federal law apply to both the enforcement and interpretation of forum selection clauses. Manetti-Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509, 512-13 (9th Cir. 1988).
C. Discussion
1. Enforceability of the Forum Selection Clause
The enforceability of a forum selection clause is controlled by the Supreme Court's decision in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), in which it was held that forum selection clauses are presumptively valid. See The Bremen, 407 U.S. at 10; Murphy, 362 F.3d at 1140. The party opposing enforcement of the forum selection clause must "clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or over-reaching." The Bremen, 407 U.S. at 15; cf. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n. 14 (1985) (holding that enforcement of freely negotiated forum selection clause that is not "unreasonable and unjust" would not offend due process). Defendants argue that Plaintiffs cannot meet this heavy burden to escape the enforcement of a provision that was freely negotiated. See Mot. (doc. # 5) at 7-8. Because Plaintiffs have not challenged its enforceability, the Court will proceed on the basis that the forum selection clause is enforceable. See Resp. (doc. # 15); Reply (doc. # 21).
Although The Bremen involved an international forum selection clause in a commercial contract, the Ninth Circuit has approved The Bremen framework for domestic forum selection clauses and employment contracts. See Spradlin v. Lear Siegler Mgmt. Servs. Co., 926 F.2d 865, 867-68 (9th Cir. 1991) (employment contract); Pelleport Investors, Inc. v. Budco Quality Theatres, Inc., 741 F.2d 273, 279 (9th Cir. 1984) (domestic forum selection clause).
The Court acknowledges that Plaintiffs' briefs occasionally refer to the "overbroad and otherwise unlawful non-compete clauses." See, e.g., Reply (doc. # 21) at 12. These unelaborated characterizations made in passing are insufficient to overcome the presumption of validity established by The Bremen.
2. Scope of the Forum Selection Clause
A forum selection clause is not axiomatically limited in scope to contract claims, particularly in this case where the "relating to" language generally lends to a broader range of covered disputes. Cf. Mediterranean Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458, 1463-64 (9th Cir. 1983) (discussing how omission of "relating to" language in an arbitration clause results in a narrower scope of covered disputes). Forum selection clauses have frequently been held to apply to pure tort claims where the "resolution of the claims relates to interpretation of the contract." See, e.g., Manetti-Farrow, Inc., 858 F.2d at 511, 514 (claims of tortious interference and tortious interference with contractual relations). A forum selection clause can also apply to litigants who were not parties to the contract provided that the alleged conduct of those parties is "closely related to the contractual relationship." Id. at 514 n. 5.
Although Mediterranean Enterprises dealt with the interpretation of an arbitration clause, the Ninth Circuit has explained that the guidance of such cases is equally applicable to the interpretation of a forum selection clause, because an arbitration clause is simply a specific type of forum selection clause. Manetti-Farrow, Inc., 858 F.2d at 514 n. 4 (citingScherk v. Alberto-Culver Co., 417 U.S. 506, 417 (1974)).
At oral argument, Plaintiffs' counsel argued that Siren cannot be bound by the forum selection clause because it was never a party to the VP Agreement. Counsel also suggested thatManetti-Farrow is distinguishable in that it extended the reach of the forum selection clause only to defendants who had not signed the contract. The Court disagrees. There is nothing in the Ninth Circuit's Manetti-Farrow decision to believe that the court intended such a narrow and imbalanced rule.
Defendants assertion that Kilgore has breached his obligations under the non-compete and non-solicitation covenants of the VP Agreement is plainly traceable to Siren's conduct in hiring former Firstline employees, recruiting in Tempe and Mesa, and entering the Cleveland, Columbus, and Indiana markets. Kilgore is Siren's sole owner. Kilgore Aff. ¶¶ 2-3. It is inescapable to conclude that Siren's conduct is so closely intertwined with Kilgore's contractual relationship with Firstline that the forum selection clause must apply as equally to Siren as it would to Kilgore. See Manneti-Farrow, Inc., 858 F.2d at 514 n. 5.
In the instant case, Plaintiffs assert claims for defamation and trade libel (Count III), abuse of process (Count V), intentional interference with contractual relations (Count II), and restraint of trade in violation of state antitrust laws (Count IV); based on these claims, Plaintiffs also seek injunctive relief (Count I). Am. Compl. (doc. # 16). The Court discusses each claim in turn in considering whether they are within the purview of the forum selection clause.
i. Defamation and Trade Libel
Plaintiffs' claim in Count III alleging defamation and trade libel falls within the scope of the forum selection clause, because it relates in material part to the VP Agreement and whether it was breached by Kilgore. See Am. Compl. (doc. # 16) ¶ 74 (alleging that Defendants have told third parties that Plaintiffs are guilty of improper acts including breach of contract and breach of fiduciary duty); cf. Tracer Research Corp. v. Nat'l Envtl. Servs. Co., 42 F.3d 1292, 1295 (9th Cir. 1994) (discussing approvingly a case from the Southern District of New York finding plaintiff's defamation claims to be within scope of arbitration clause, because they "necessarily turned on whether he was terminated with or without cause, an issue which involved an interpretation of the contractual relationship between the parties") (quoting McMahon v. RMS Elec., Inc., 618 F. Supp. 189 (S.D.N.Y. 1985)). Like the claims in McMahon, Plaintiffs' defamation claims cannot be resolved without an interpretation of the parties' contractual relationship — specifically, the nature of Kilgore's obligations under the VP Agreement. Therefore, Count III will be dismissed without prejudice.
ii. Abuse of Process
Plaintiffs' claim in Count V for abuse of process is likewise within the ambit of the forum selection clause. Because Plaintiffs allege that Defendants filed the Utah lawsuit for improper purposes, the resolution of this claim will depend on whether Defendants had a legitimate reason to pursue that action.See Am. Compl. (doc. # 16) ¶¶ 86-93. In light of the dispute concerning Kilgore's obligations under the non-solicitation and non-compete provisions of the VP Agreement, the determination of this claim necessarily "relat[es] to [the VP Agreement] or the breach or enforcement [t]hereof." See VP Agreement (doc. # 4, pt. 2) at 47 ¶ 19. Count V for abuse of process will therefore be dismissed without prejudice.
Plaintiffs maintain that the standard of liability for abuse of process is much less stringent than the manner in which it is presented by Defendants. Compare Pls.' Resp. (doc. # 15) (plaintiff must show that defendant used process primarily for purpose other than that for which it was intended) (citation omitted) with Defs.' Resp. (doc. # 14) (plaintiff must additionally show that action "could not logically be explained without reference to the defendants' improper motives") (citation omitted). The disagreement over the appropriate standard is of no consequence to the resolution of the pending Rule 12(b)(3) motion. Dismissal must follow even under Plaintiffs' formulation, because resolution of the abuse of process claim will inevitably require some inquiry into Kilgore's alleged breach of the VP Agreement to determine whether Defendants were pursuing the Utah action primarily for an improper purpose.
iii. Intentional Interference with Contractual Relations
Defendants argue that the resolution of Plaintiffs' claim of intentional interference with contractual relations will also turn upon the enforceability and interpretation of the non-compete and non-solicitation provisions of the VP Agreement, thereby bringing that claim within the scope of the forum selection clause. Mot. (doc. # 5) at 9-10. The Court agrees.
To establish a prima facie case of intentional interference with contractual relations under Arizona law, one element a plaintiff must prove is that the defendant's conduct was improper. See Wagenseller v. Scottsdale Mem'l Hosp., 147 Ariz. 370, 710 P.2d 1025, 1042-43 (1985), superseded in part by Ariz. Rev. Stat. § 23-1501 (West 2003). In determining whether the defendant's actions were improper, courts consider the following seven factors:
(a) the nature of the actor's conduct,
(b) the actor's motive,
(c) the interests of the other with which the actor's conduct interferes,
(d) the interests sought to be advanced by the actor,
(e) the social interests in protecting the freedom of action of the actor and the contractual interests of the other,
(f) the proximity or remoteness of the actor's conduct to the interference and
(g) the relations between the parties.See id. at 1042-43 (quoting Restatement (Second) of Torts § 767) (1979). In addition, it is recognized that among competitors certain conduct is privileged and therefore not improper.
One is privileged purposely to cause a third person not to enter into or continue a business relation with a competitor of the actor if
(a) the relation concerns a matter involved in the competition between the actor and the competitor, and
(b) the actor does not employ improper means, and
(c) the actor does not intend thereby to create or continue an illegal restraint of competition, and
(d) the actor's purpose is at least in part to advance his interest in his competition with the other.
Restatement (Second) of Torts § 768(1) (1979); accord Edwards v. Anaconda Co., 115 Ariz. 313, 565 P.2d 190, 193 (Ct.App. 1977).
Plaintiffs Kilgore and Siren allege, inter alia, that they have attempted to recruit sales representatives from colleges in Arizona, and that "Defendants have acted unlawfully by "caus[ing] prospective employees, who Defendants knew were being recruited by Siren, to refuse to come to work for Siren." Am. Compl. (doc. # 16) ¶¶ 38, 68. However, the non-compete and non-solicitation provisions of the VP Agreement would ostensibly prohibit Plaintiffs' recruiting practices. See VP Agreement (doc. # 4, pt. 2) at 45-46 ¶ 6. Thus, Defendants contend that their actions cannot be found improper in light of their interests under the agreement. See Mot. (doc. # 5) at 10 ("Plaintiffs [sic] and the company he formed certainly would have no right to complain that Firstline interfered with contracts Plaintiffs executed unlawfully in the first instance.").
Plaintiffs ask rhetorically "when, in Defendants' view, would their tortious and illegal conduct be sufficient to subject them to sanctions from a court in Arizona? Would Defendants have to be tried criminally in Utah if they chose to burn down Siren's offices in Arizona or committed battery on Kilgore to keep him from doing business in security systems' sales." Resp. (doc. # 15) at 5. This was asked again at oral argument.
Instead of asking questions to define the outer limits of acceptable conduct under the privilege of competition, greater attention could be paid to answering the question of whether Defendants' actual conduct was privileged. Arguments based on egregious factual scenarios tend not to illuminate arguments based on facts in issue.
It is apparent that the resolution of Plaintiff's claim will turn upon the enforceability and interpretation of the VP Agreement as it bears upon the questions of Defendants' motive, the interests sought to be advanced by Defendants, and the relations among the parties. See Restatement (Second) of Torts § 767(a), (d), and (g) (1979). As such, this claim is within the scope of the forum selection clause as a dispute relating to the breach or enforcement of the agreement. See VP Agreement (doc. # 4, pt. 2) at 47 ¶ 19. Count II for intentional interference with contractual relations will be dismissed without prejudice.
iv. Restraint of Trade
Under section 44-1402, "[a] contract, combination or conspiracy between two or more persons in restraint of, or to monopolize, trade or commerce, any part of which is within this state, is unlawful." Ariz. Rev. Stat. § 44-1402 (West 2003). Plaintiffs allege that Defendants, in "seeking to destroy Siren as a business and to prevent Kilgore from doing business as a potential future competitor of Firstline," have acted unlawfully under Ariz. Rev. Stat. § 44-1402. Am. Compl. (doc. # 1) ¶¶ 80-85. In particular, Plaintiffs challenge the non-compete clause in the VP Agreement as imposing an unreasonable restraint on competition. See Am. Compl. (doc. # 16) ¶¶ 80-85; Reply (doc. # 21) at 12:19-26. Adjudication of this claim will therefore require a determination of that clause's enforceability by considering "the facts peculiar to the business in which the restraint is applied, the nature of the restraint and the reasons for its adoption." See Three Phoenix Co. v. Pace Indus., 135 Ariz. 113, 659 P.2d 1258, 1260 (1983) (applying "rule of reason" to determine whether covenant not to compete violated federal antitrust law) (internal quotations omitted); cf. Valley Med. Specialists v. Farber, 194 Ariz. 363, 982 P.2d 1277, 1283-86 (1999) (en banc) (discussing test for determining enforceability of covenant not to compete). Because the inevitable questions of enforceability and interpretation bring this claim within the scope of the forum selection clause, Count IV for restraint of trade will be dismissed without prejudice.
In Three Phoenix, the Supreme Court of Arizona acknowledged Ariz. Rev. Stat. § 44-1402 as the state counterpart to section 1 of the Sherman Act, 15 U.S.C. § 1, making its holding in the context of the federal statute equally applicable to the resolution of claims brought under the state statute.See Three Phoenix Co., 659 P.2d at 1260.
Should Plaintiffs later take the position that their reply (doc. # 21) had errantly characterized Count IV as a challenge to the non-compete clause, or decide to extricate that theory from a subsequent filing, the Court adds that Plaintiffs' antitrust claim would be dismissed pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted. A district court may dismiss a claim sua sponte under Rule 12(b)(6) where, as here, the briefing of a related motion raises the issue upon which the dismissal was based so as to give ample notice and opportunity for the plaintiff to oppose dismissal. See Omar v. Sea-Land Serv., Inc., 813 F.2d 986, 991 (9th Cir. 1987) (citingWong v. Bell, 642 F.2d 359, 361-62 (9th Cir. 1981); accord 5 Charles Alan Wright Arthur R. Miller, Federal Practice Procedure § 1357 (1969). Sua sponte dismissal is also appropriate "where the claimant cannot possibly win relief."Omar, 813 F.2d at 991.
In this case, the Court finds that the briefing of Plaintiffs' motion for temporary restraining order (doc. # 4, pt. 7) provided ample notice and opportunity to argue case dispositive issues. In response to Plaintiffs' motion, Defendants asserted that, "on the face of their Complaint, Plaintiffs have failed to state a claim under Arizona's antitrust statute," Resp. (doc. # 14) at 14, and Plaintiffs, in turn, responded directly to that argument, Reply (doc. # 21) at 12-14.
After reviewing all of the arguments raised in Plaintiffs' motion and reply, and reading the allegations of the Complaint in the light most favorable to Plaintiffs, the Court concludes that Plaintiffs could not possibly obtain relief on their antitrust claim. The weight of authority from the Supreme Court and the Ninth Circuit supports Defendants' position. The named Defendants — an employee, an officer, and the corporation for which they work — are incapable of conspiracy within the meaning of Ariz. Rev. Stat. § 44-1402. See Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 769 (1984) (officers or employees of the same firm are incapable of conspiracy to harm or restrain competition); Freeman v. San Diego Ass'n of Realtors, 322 F.3d 1133, 1147-48 (9th Cir. 2003) (same). Therefore, even if Plaintiffs later decide that they have no quarrel with the non-compete clause, Count IV for restraint of trade would still be dismissed for failure to state a claim upon which relief could be granted.
Federal court interpretations of the Sherman Act, 15 U.S.C. § 1, et seq., may be used as a guide in construing Arizona's Uniform State Antitrust Act, Ariz. Rev. Stat. § 44-1401, et seq. Ariz. Rev. Stat. § 44-1412 (West 2003) (". . . [C]ourts may use as a guide interpretations given by the federal courts to comparable federal antitrust statutes."); see also Johnson v. Pac. Lighting Land Co., 817 F.2d 601, 604 (9th Cir. 1987) (construing Ariz. Rev. Stat. § 44-1402 in light of federal court decisions). Copperweld and Freeman are particularly appropriate guides in this case because the Supreme Court of Arizona has specifically recognized Ariz. Rev. Stat. § 44-1402 as the Arizona counterpart to 15 U.S.C. § 1, the federal statute upon which those cases were based. See Three Phoenix Co., 659 P.2d at 1260.
Plaintiffs cite to the decision of the Court of Appeals of Arizona in Bunker's Glass Co. v. Pilkington PLC, 202 Ariz. 481, 47 P.3d 1119 (Ct.App. 2002), for the proposition that state public policy concerns may override persuasive federal court authority in antitrust matters. Reply (doc. # 21) at 12. InBunker's Glass the court merely observed that public policy favors recognition of an indirect purchaser's standing to sue under state antitrust laws, notwithstanding the contrary position taken by the Supreme Court with respect to claims brought under the Sherman Act. See Bunker's Glass Co., 47 P.3d at 1123-30. However, Plaintiff does not cite any Arizona authority that would support deviation from the "single entity" rule of Copperweld. Moreover, Plaintiffs' vague and belated references to Defendants' arrangements with third parties, Reply (doc. # 21) at 13, are without support from the amended complaint, Am. Compl. (doc. # 16).
v. Injunctive Relief
Finally, Plaintiffs seek injunctive relief based on the aforementioned claims of intentional interference with contractual relations, defamation and trade libel, restraint of trade, and abuse of process. See Am. Compl. (doc. # 16) ¶¶ 56-64. The VP Agreement's forum selection clause requires dismissal of those underlying claims, leaving no basis for equitable relief in the future. Accordingly, Count I for permanent injunction will also be dismissed without prejudice.
Because Defendants' motion to dismiss (doc. # 5) will be granted in its entirety, Defendants' motion to stay (doc. # 5) and Plaintiffs' motion for temporary restraining order (doc. # 4, pt. 7) will be denied and dismissed as moot.
IV. CONCLUSION
In light of the foregoing analysis,
IT IS ORDERED that Defendant Erin Keyes' Rule 12(b)(2) motion to dismiss (doc. # 5), construed as a Rule 21 request for an order dropping her as a party for reason of misjoinder, is GRANTED.
IT IS FURTHER ORDERED that Defendants' Rule 12(b)(3) motion to dismiss (doc. # 5) is GRANTED. Counts I, II, III, IV, and V of Plaintiffs' First Amended Complaint (doc. # 16) are dismissed without prejudice.
IT IS FURTHER ORDERED that Plaintiffs' motion for temporary restraining order (doc. # 4, pt. 7) is DENIED and dismissed as moot.
IT IS FURTHER ORDERED that Defendants' motion to stay (doc. # 5) is DENIED and dismissed as moot.
IT IS FINALLY ORDERED directing the Clerk of the Court to enter judgment in favor of Defendants and terminate this case.