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Mint Solar, LLC v. Savage

United States District Court, D. Utah

November 13, 2018

MINT SOLAR, LLC, a Utah limited liability company, and KNIGHT WEST CONSTRUCTION, INC., a Utah corporation, Plaintiffs,
v.
BART SAVAGE, an individual, AARON HALDERMAN, an individual, OLIVIA BLACK, an indivdual, PRIZM ENERGY LLC, a Utah limited liability company, PRIZM ENTERPRISES, LLC, a Utah limited liabilty company, PRIZM HOME LLC, a Utah limited liability company, and DOES 1-10, Defendants. BART J. SAVAGE, an individual, AARON HALDERMAN, an individual, OLIVIA BLACK, an individual, PRIZM ENERGY, LLC a Utah limited liability company, Cross-Complainants,
v.
SCOTT SHUMWAY, an individual; SPENCER SHUMWAY, an individual; SIMON KEOGH, an individual; COLTON CHESTNUT, an individual; BYRON SMITH, an individual; BLAINE THATCHER, an individual; BRENDAN HAYS, an individual; TOMAS REYES, an individual; KNIGHT WEST CONSTRUCTION, INC., a Utah Corporation; MINT ENERGY, LLC, a Utah limited liability company; and MNT HOLDINGS, INC., nominally, and ROES 1-100. Cross-Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS

          TED STEWART UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Defendants' Motion to Dismiss. For the reasons discussed below, the Court will grant the Motion in part and deny it in part.

         I. BACKGROUND

         The following allegations are taken from Plaintiffs' Complaint and are accepted as true for purposes of this Motion.

         Plaintiff Mint Solar, LLC (“Mint”) sells home power systems via direct sales. Mint is a party to a Demonstration Agreement with Sam's Club. Under that Agreement, Mint markets its products and services in Sam's Club stores nationwide.

         Plaintiff Knight West Construction Inc. (“Knight”) is a party to a General Merchandise Supplier Agreement with Sam's Club. Pursuant to that agreement, Knight sells home solar power system-related products to Sam's Club. Mint and Knight work together in connection with the sale of home solar systems in Sam's Club locations.

         Knight hired Defendant Bart J. Savage (“Savage”) on July 16, 2017. Savage later transitioned to Mint and became its chief sales officer. Knight also hired Defendant Aaron Halderman (“Halderman”) on July 16, 2017, to serve as president of sales operations. Knight hired Defendant Olivia Black (“Black”) as an accountant.

         Without Plaintiffs' knowledge, Savage and Halderman formed Prizm Energy LLC, Prizm Enterprises LLC, and Prizm Home LLC (collectively, the “Prizm Entities”). Plaintiffs allege that Defendants developed and executed a plan to divert Plaintiffs' confidential customer information, their sales representatives, customers, and business to Defendants. Plaintiffs allege that Defendants took a number of steps to accomplish this goal, including: making false claims to Plaintiffs' sales representatives that they had not been completely paid; instructing sales representatives to refrain from entering customer lead information into Plaintiffs' database and, instead, to pass customer contact and lead information to Prizm Energy for fulfillment; creating a website incorporating Mint's imagery to create the false impression that Prizm Energy was related to, or an outgrowth of, Mint; manipulating Mint's payroll system; purporting to transition Mint's sales team from Mint to Prizm; and falsely representing to Mint's sales representatives that it was Prizm, not Mint, that possessed the Demonstration Agreement with Sam's Club.

         Plaintiffs allege that because of Defendants' conduct, numerous Mint sales representatives have left Mint to work for the Prizm Entities. Plaintiffs further allege that the Prizm Entities have taken over certain customer leads and fulfilled them, which has resulted in Mint losing access to confidential, proprietary sales information. Plaintiffs allege that Defendants' actions have caused devastating harm to Plaintiffs.

         II. STANDARD OF REVIEW

         In considering a motion to dismiss for failure to state a claim upon which relief can be granted under Rule 12(b)(6), all well-pleaded factual allegations, as distinguished from conclusory allegations, are accepted as true and viewed in the light most favorable to Plaintiffs as the nonmoving party.[1] Plaintiffs must provide “enough facts to state a claim to relief that is plausible on its face, ”[2] which requires “more than an unadorned, the-defendant-unlawfully harmed-me accusation.”[3] “A pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.' Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'”[4]

         “The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted.”[5] As the Court in Iqbal stated,

only a complaint that states a plausible claim for relief survives a motion to dismiss. Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not shown-that the pleader is entitled to relief.[6]

         In considering a motion to dismiss, a district court not only considers the complaint, “but also the attached exhibits, ”[7] and “documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.”[8] The Court “may consider documents referred to in the complaint if the documents are central to the plaintiff's claim and the parties do not dispute the documents' authenticity.”[9]

         III. DISCUSSION

         A. REQUEST FOR JUDICIAL NOTICE

         Before reaching the merits of Defendants' arg uments, the Court must first consider their request for judicial notice. Federal Rule of Evidence 201 provides that “[t]he court may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.”

         Defendants request the Court take judicial notice of three items: their Cross-Complaint, [10]the Declaration of Aaron Halderman, [11] and certain documents.[12] As to the Cross-Complaint, the Court can take judicial notice of its own files, which includes the Cross-Complaint.[13] “However, ‘[t]he documents may only be considered to show their contents, not to prove the truth of matters asserted therein.'”[14]

         Here, Defendant requests the Court disregard the allegations made in Plaintiffs' Complaint and instead accept the truthfulness of their own allegations. Such a practice is not permitted by Rule 201 and flies in the face of the standard of review under Rule 12(b)(6). Therefore, the Court will not take judicial notice of the allegations contained in Defendants' Cross-Complaint.

         The request for judicial notice of the contents of Mr. Halderman's declaration suffers from the same flaws. Defendants seek to use Mr. Halderman's declaration to prove the truthfulness of the statements contained therein. As a result, it is not subject to judicial notice.[15]

         Finally, Defendants request the Court take judicial notice of certain documents. Defendants submit a document entitled “Alexander Thomas Group & Mint Solar Sam's Club Residential Solar Program.” The document is largely illegible and, even if the Court could take judicial notice of its contents, it adds nothing to Defendants' Motion.

         Defendants next provide a series of text messages, emails, and unexecuted contracts. Judicial notice is only appropriate if “the matter [is] beyond reasonable controversy.”[16] The contents of these documents are not beyond reasonable controversy and, indeed, relate to the key issues in dispute. Therefore, the Court will not take judicial notice of these documents.

         In sum, the Court will not take judicial notice of any of the documents submitted by Defendants and declines to convert the Motion into one for summary judgment. Therefore, the Court will evaluate Plaintiffs' claims based on the allegations contained in their Complaint.

         B. BREACH OF CONTRACT

         “The elements of a prima facie case for breach of contract are (1) a contract, (2) performance by the party seeking recovery, (3) breach of the contract by the other party, and (4) damages.”[17]

         Plaintiffs allege that Knight entered into employment agreements with Halderman and Black and that Mint was a party to an employment agreement with Savage. Under these agreements, Plaintiffs retained these Defendants to perform certain roles. Plaintiffs allege that an implied term of the agreements was that the individual Defendants would devote their attention to Plaintiffs' businesses, rather than undermine them. Plaintiffs allege that they honored their obligations under the agreements, but that Defendants breached the agreements by forming the Prizm Entities and engaging in the actions alleged. Plaintiffs allege damages in the amount they compensated the individual Defendants after they formed the Prizm Entities.

         Defendants argue that they did not breach their employment agreements because there was an agreement to transition Mint into Prizm. However, this argument is dependent on Defendants' evidentiary submissions, which are not properly before the Court. Defendants also argue that Plaintiffs' request for damages is excessive. The appropriate amount of damages, if any, is not an issue before the Court at this time. Accepting as true Plaintiffs' allegations, as the Court must, the Complaint states a plausible claim for breach of contract.

         For the first time in their Reply, Defendants argue that Plaintiffs failed to allege the second element for a breach of contract claim. Defendants also argue, again for the first time, that Plaintiffs failed to allege how reinstating Prizm Energy breached the alleged contract or covenant of good faith and fair dealing, failed to allege a preexisting contractual relationship, and failed to allege any efforts by Defendants to siphon away sales solely through the reinstatement of Prizm Energy. The Court declines to consider these arguments since they were raised for the first time in the Reply brief and Plaintiffs did not have an opportunity to respond.[18] Therefore, the Motion will be denied on this ground.

         C. BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING

         “‘An implied covenant of good faith and fair dealing inheres in every contract,' and a party breaches the covenant by intentionally injuring ‘the other party's right to receive the benefits of the contract.'”[19]

         Plaintiffs allege that the individual Defendants breached the implied covenant of good faith and fair dealing by forming the Prizm Entities and commencing their plan to divert Plaintiffs' business. Plaintiffs allege that the Prizm Entities ultimately received, by artifice, Plaintiffs' confidential information, customers, sales representatives, and business, resulting in damages.

         Defendants again argue that no breach occurred because they were authorized to take the actions alleged. This argument too depends on the evidentiary submissions that the Court cannot consider. Based upon the allegations contained in the Complaint, the Court finds that Plaintiffs have adequately pleaded a claim for breach of the implied covenant of good faith and fair dealing.

         In their Reply brief, Defendants argue that Plaintiffs fail to contend that the reinstatement of Prizm Energy did anything to destroy or injure the right to receive the benefit of the employment contracts. This argument was made for the first time in reply and will not be considered. Moreover, it misunderstands Plaintiffs' arguments. It is not merely the reinstatement of Prizm Energy that provides the basis for Plaintiffs' claims, but the actions allegedly taken by Defendants through the Prizm Entities to deprive Plaintiffs of their sales representatives, customers, and business. Therefore, Defendants' Motion will be denied on this ground.

         D. UNJUST ENRICHMENT/QUANTUM MERUIT/QUASI-CONTRACT

         In order to prevail on a claim for unjust enrichment, Plaintiffs must show: (1) there was a benefit conferred on one person by another; (2) the conferee must appreciate or have knowledge of the benefit; and (3) “the acceptance or retention by the conferee of the benefit under such circumstances as to make it inequitable for the conferee to retain the benefit without payment of its value.”[20]

         As an alternative to their contract claims, Plaintiffs allege that they conferred a benefit of at least $83, 366.18 upon the individual Defendants. This represents the amount the individual Defendants were paid after the formation of the Prizm Entities. Plaintiffs allege that, under the circumstances alleged here, it would be unjust for the individual Defendants to retain the benefits conferred on them.

         Defendants argue that this claim should be dismissed because the time period when Plaintiffs' business was being transferred to Prizm took place over the Memorial Day weekend in 2018 and Defendants were not compensated during that time. As with Defendants' other arguments, this argument depends on the Court's consideration of evidence outside the Complaint. Moreover, this argument misrepresents Plaintiffs' claims. Plaintiffs do not limit their claims to the alleged actions taking place ...


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