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Security Systems, Inc. v. Alder Holdings, LLC

United States District Court, D. Utah

October 3, 2019

SECURITY SYSTEMS, INC, individually and on behalf of all others similarly situated, Plaintiff,
v.
ALDER HOLDINGS, LLC, and ALARM PROTECTION TECHNOLOGY, LLC, Defendants.

          MEMORANDUM DECISION AND ORDER ON MOTIONS TO DISMISS

          CLARK WADDOUPS, UNITED STATES DISTRICT COURT JUDGE

         Before the court are Defendant's Rule 12(b)(6) Motion to Dismiss (ECF No. 10) and Defendants' Motion to Dismiss and Strike Damages Class Action Allegations, (ECF No. 11). Having carefully reviewed the Complaint, the pleadings and the law, and being fully informed, the court GRANTS in part and DENIES in part the Rule 12(b)(6) Motion to Dismiss and GRANTS the Motion to Dismiss and Strike Damages Class Action Allegations.[1]

         BACKGROUND

         Plaintiff is a Connecticut corporation that sells, services, and monitors residential and commercial security alarm systems throughout the United States. Plaintiff alleges that Alder Holdings, LLC is the alter ego of Alarm Protection Technology, LLC (APT), and that APT falsely misrepresented to at least 38 of plaintiff's customers in at least eight states that (1) plaintiff had gone out of business, (2) plaintiff had assigned its accounts to APT, (3) plaintiff could not adequately monitor the customer's alarm, and/or (4) plaintiff no longer services the area in which the customer lives. As a result, plaintiff alleges that its customers were fraudulently induced to cancel their contracts with plaintiff. Plaintiff brings a claim for violation of the Connecticut Unfair Trade Practices Act, and claims for unfair competition, intentional interference with economic relations, injurious falsehood, slander, and unjust enrichment under Utah law. Plaintiff also claims that defendants made the same false representations to customers of other security alarm and monitoring businesses throughout the United States and seeks class action resolution for injunctive relief and damages.

         Defendants' Rule 12(b)(6) motion seeks dismissal of the Connecticut Unfair Trade Practices Act and the unjust enrichment claim for failure to state a claim upon which relief can be granted, and dismissal of the remaining Utah state law claims “sounding in fraud” for failure to plead with particularity under Rule 9(b) of the Federal Rules of Civil Procedure. Defendants' also seek to dismiss and strike the class action damages allegations for failure to satisfy the requirements of Rule 23(b)(3) of the Federal Rules of Civil Procedure.

         DISCUSSION

         1. Jurisdiction

         “Subject-matter jurisdiction, because it involves a court's power to hear a case, can never be forfeited or waived.” Arbaugh v. Y&H Corp., 546 U.S. 500, 514 (2006) (quoting United States v. Cotton, 535 U.S. 625, 630 (2002). Consequently, courts “have an independent obligation to determine whether subject-matter jurisdiction exists, even in the absence of a challenge from any party.” Id. The Complaint alleges that this court has subject matter jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d), because (1) the class action involves more than 100 class members, (2) plaintiff is a corporation incorporated in Connecticut and defendants are corporations incorporated in Utah, and (3) the amount in controversy exceeds $5, 000, 000, exclusive of interests and costs. (Compl. ¶ 6, ECF No. 2.) Plaintiff incorrectly asserts a corporation status for the defendant LLCs. Unlike a corporation, which is “a citizen of its state of incorporation and the state where its principal place of business is located, ” Grynberg v. Kinder Morgan Energy, L.P., 805 F.3d 901, 905 (10th Cir. 2015), an LLC is an unincorporated association or entity. And ordinarily, “[d]iversity jurisdiction in a suit by or against [an] entity depends on the citizenship of all [its] members.” Americold Realty Trust v. Conagra Foods, Inc., 136 S.Ct. 1012, 1015 (2016) (quoting Carden v. Arkoma Assoc., 494 U.S. 185, 195-96 (1990)). Moreover, “where an LLC has, as one of its members, another LLC, the citizenship of unincorporated associations must be traced through however many layers of partners or members there may be to determine the citizenship of the LLC.” Lincoln Benefit Life Co. v. AEI Life, LLC, 800 F.3d 99, 105 n.16 (3d Cir. 2015) (quoting Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 420 (3d Cir. 2010)).

         Under the Class Action Fairness Act, however, only minimal diversity is required. 28 U.S.C. § 1332(d)(2)(A) (diversity is met if “any member of a class of plaintiffs is a citizen of a State different from any defendant.”) (emphasis added); Bartels by and through Bartels v. Saber Healthcare Group, LLC, 880 F.3d 668, 673 n.2 (4th Cir. 2018). Additionally, “Under CAFA, unincorporated associations-including limited liability companies-are citizens of the state under whose laws they are organized and of the state where their principal place of business is located.” Id.; 28 U.S.C. § 1332(d)(10). Plaintiffs allege that defendants are “incorporated and headquartered in Utah.” (Compl. ¶ 7, ECF No. 2.) For purposes of this opinion, the court assumes that plaintiff has adequately alleged that the defendant LLCs are organized under Utah law. Thus, the court finds that there is minimal diversity and the Complaint appears to adequately allege subject matter jurisdiction.

         2. Connecticut Unfair Trade Practices Act

         Plaintiff fails to state a claim for relief under the Connecticut Unfair Trade Practices Act (CUTPA). Conn. Gen. Stat. Ann. § 42-110a et seq. CUTPA prohibits “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” Id. at § 42-110b(a). Section 41-110a(4) explains that “trade” and “commerce” means the “advertising, the sale or rent or lease, the offering for sale or rent or lease, or the distribution of any services and any property tangible or intangible, real, personal, or mixed, and any other article, commodity, or thing of value in this state.” (Emphasis added.) The parties dispute whether the alleged wrongful actions meet this definition.

         Connecticut courts “have held that CUTPA does not require that a violation actually occur in Connecticut, ” but do require that the violation be either “tied to a form of trade or commerce intimately associated with Connecticut, ” or that Connecticut law applies “where Connecticut choice of law principles are applicable.” Victor G. Reiling Assocs. & Design Innovation, Inc. v. Fisher-Price, Inc., 406 F.Supp.2d 175, 200 (D. Conn. 2005).

         a. Intimately Associated

         Plaintiff argues that because it is headquartered in Connecticut, has customers in Connecticut, and was subjected to economic injury in Connecticut, defendants' alleged misconduct is “tied to a form of trade or commerce intimately associated with Connecticut.” Reiling, 406 F.Supp.2d at 200. Plaintiff has not, however, alleged that any unfair activity or misconduct occurred within the State of Connecticut or to its Connecticut customers. Instead, it alleges that defendants made certain misrepresentations in Alabama, Arizona, Texas, Louisiana, Tennessee, Arkansas, Florida, and Georgia. (Compl. ¶ 11, ECF No. 2.) In Reiling, the fact that plaintiff was incorporated and headquartered in Connecticut-and thus felt any alleged economic injury in that state-was insufficiently tied or intimately associated with Connecticut when the alleged misconduct took place in another state. 406 F.Supp.2d at 200. The cases cited by plaintiffs do not persuade the court otherwise. Although several of them contain language suggesting that economic harm or impact felt in Connecticut satisfies CUTPA, the facts of each case clarify that much more Connecticut connection was required for that conclusion than merely being headquartered, incorporated or feeling harm there.[2] In each case, the defendant was either located in Connecticut or the defendant purposefully reached out to Connecticut as part of its wrongful activity. Plaintiff has not alleged any such facts. Reiling confirms the court's conclusion.

         b. Choice of ...


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