Xereas v. Heiss , 933 F. Supp. 2d 1 ( 2013 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
_______________________________
)
JOHN XEREAS, )
)
Plaintiff, )
)
v. ) Civil Action No. 12-456 (RWR)
)
MARJORIE HEISS, et al., )
)
Defendants. )
_______________________________)
MEMORANDUM OPINION AND ORDER
Plaintiff John Xereas brings this action against Marjorie
Heiss, Geoffrey Dawson, Riot Act D.C., LLC (“the LLC”), and
Squiid, Inc., alleging claims of trademark infringement, unfair
competition, conversion, breach of contract, breach of the
implied duty of good faith and fair dealing, fraudulent
inducement, conspiracy, tortious interference, unjust enrichment,
a violation of the Anti-Cybersquatting Consumer Protection Act
(“ACPA”), 15 U.S.C. § 1125(d), and defamation. The defendants
moved to dismiss eight of Xereas’s counts in the amended
complaint under Federal Rule of Civil Procedure 12(b)(6) for
failure to state claims for relief. The claims of breach of the
implied duty of good faith and fair dealing against Dawson and
Heiss, unjust enrichment against the LLC and cyber-squatting
against Dawson, Heiss and the LLC are adequately pled, and the
motion to dismiss will be denied as to those claims but granted
as to the remaining challenged claims.
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BACKGROUND
In 2005 and 2009, Xereas registered a group of domain names
using the Riot Act comedy name, including “riotactcomedy.com.”
Am. Compl. ¶¶ 14, 23. He conducted his entertainment business
for years using those names. Id. ¶¶ 18-19, 23. In May 2010,
Xereas, Dawson and Heiss agreed to launch a new comedy club in
Washington, D.C. called the Riot Act Comedy Club. Id. ¶ 30.
Xereas, Dawson and Heiss executed an Operating Agreement and, in
November 2010, an Amended Operating Agreement to establish the
LLC. Id. ¶¶ 32-35, Ex. 13, Am. and Restated Operating Agreement
of Riot Act DC, LLC (“Am. Operating Agreement”). After forming
the LLC, Dawson, Heiss and Xereas created a Business Plan. Id.
¶¶ 36-38, Ex. 14, Business Plan for Start Up Business for Riot
Act Comedy Theater (“Business Plan”). Starting in December 2010,
Xereas served as the club’s general manager and worked in a
variety of roles in preparing for the club’s opening and
thereafter. Id. ¶¶ 38, 44, 48. In January 2011, the LLC hired
Squiid to create a website for Xereas’s domain name
“riotactcomedy.com.” Id. ¶ 40. In November 2011, Xereas
completed paying his $100,000 capital contribution to the LLC.
Id. ¶ 45, 54. Dawson and Heiss agreed to compensate Xereas at an
annual salary of $42,000 starting in December 2011. Id. ¶ 56.
In January 2012, Dawson and Heiss removed Xereas from his
management role and, without Xereas’s knowledge or approval,
instructed Squiid to revise the domain name registration
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information for “riotactcomedy.com” to transfer ownership of the
domain names to the LLC. Id. ¶¶ 58, 60.
In March 2012, Xereas filed his complaint, and later, he
filed an eleven-count amended complaint which includes claims of
unlawful conversion and an ACPA violation against all defendants,
id., Counts IV, X; unjust enrichment claims against Dawson, Heiss
and the LLC, id., Count IX; and breach of contract, breach of the
duty of good faith and fair dealing, fraudulent inducement,
conspiracy to defraud, tortious interference, and defamation
claims against Dawson and Heiss, id., Counts V-VIII, XI.1
Dawson, Heiss and the LLC moved to dismiss under Rule 12(b)(6)
for failure to state a cause of action the unlawful conversion,
breach of contract, fraudulent inducement, conspiracy to defraud,
tortious interference, unjust enrichment, ACPA, and defamation
claims. Squiid moved to dismiss under Rule 12(b)(6) for failure
to state a cause of action the unlawful conversion and ACPA
claims against Squiid.
DISCUSSION
In considering a motion to dismiss under Rule 12(b)(6) for
failure to state a claim, a court accepts well-pleaded factual
allegations in the complaint as true and interprets them in the
light most favorable to the plaintiff. Howard Univ. v. Watkins,
857 F. Supp. 2d 67, 71 (D.D.C. 2012) (citing Warren v. District
1
The amended complaint also includes common law and Lanham
Act claims of trademark infringement and unfair competition
against Dawson, Heiss and the LLC. Am. Compl., Counts I-III.
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of Columbia, 353 F.3d 36, 39 (D.C. Cir. 2004)). The motion to
dismiss may be granted where facts alleged in the complaint “do
not raise a right to relief above the speculative level, or fail
to state a claim to relief that is plausible on its face.” Henok
v. Chase Home Finance, Civil Action No. 12-335 (RWR), 2013 WL
525696, at *4 (D.D.C. Feb. 13, 2013) (internal quotation marks
omitted).
I. CONVERSION
Xereas’s amended complaint alleges that the defendants
unlawfully converted the “RIOT ACT” and “hireacomic.com” domain
names.2 To state a claim for conversion under D.C. law, the
plaintiff must allege “‘(1) an unlawful exercise, (2) of
ownership, dominion, or control, (3) over the personal property
of another, (4) in denial or repudiation of that person’s rights
thereto.’” Johnson v. McCool, 808 F. Supp. 2d 304, 308 (D.D.C.
2011) (quoting Gov’t of Rwanda v. Rwanda Working Grp., 227 F.
Supp. 2d 45, 62 (D.D.C. 2002)); see also Baltimore v. District of
Columbia, 10 A.3d 1141, 1155 (D.C. 2011).
2
Domain names are unique combinations of alphanumeric
characters which allow users to connect to particular internet
sites. See Thomas v. Network Solutions, Inc., 176 F.3d 500, 502-
04 (D.C. Cir. 1999) (explaining the purpose and function of
domain names on the internet); Vizer v. VIZERNEWS.COM, 869 F.
Supp. 2d 75, 77 (D.D.C. 2012) (stating that “the internet domain
name system . . . links user-friendly names . . . to unique
numeric addresses that identify servers connected to the
internet”).
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Although D.C. courts have not addressed whether internet
domain names are intangible or tangible property,3 domain names
are generally considered intangible property. See Kremen v.
Cohen, 337 F.3d 1024, 1030 (9th Cir. 2002) (identifying an
interest in a domain name as an intangible property right);
Famology.com Inc. v. Perot Sys. Corp., 158 F. Supp. 2d 589, 591
(E.D. Pa. 2001) (same); but see In re Paige, 413 B.R. 882, 917-18
(Bankr. D. Utah 2009) (stating that a domain name is a type of
tangible property), aff’d on other grounds, 685 F.3d 1160 (10th
Cir. 2012).4 Whether D.C. courts would apply the tort of
3
Courts in this jurisdiction have recognized that
intangible property includes frequent flyer miles, Ficken v. AMR
Corp., 578 F. Supp. 2d 134, 143 (D.D.C. 2008), proprietary data
such as personnel records, 3D Global Solutions, Inc. v. MVM,
Inc., 552 F. Supp. 2d 1, 10 (D.D.C. 2008), and an individual’s
patent rights, Kaempe v. Myers, 367 F.3d 958, 963-64 (D.C. Cir.
2004).
4
Paige relied on Margae, Inc. v. Clear Link Technologies,
LLC, 620 F. Supp. 2d 1284 (D. Utah 2009), which recognized that
the Utah Supreme Court classified software as tangible personal
property for tax purposes because it “‘is information recorded in
a physical form which has a physical existence, takes up space on
the tape, disc, or hard drive, makes physical things happen, and
can be perceived by the senses.’” Id. at 1288 (quoting South
Cent. Utah Tel. Assoc., Inc. v. Auditing Div. of the Utah State
Tax Comm’n, 951 P.2d 218, 223–24 (Utah 1997)). The Margae court
concluded that a web page has all of those attributes. Id. The
Paige court used this analysis and found that domain names had a
“physical presence on a computer drive” and that they qualify as
“a type of tangible property that is capable of conversion.” See
Paige, 413 B.R. at 918. By contrast, the D.C. Circuit has held
that computer software is intangible property because the
software itself is valuable only because of the intangible
information stored in it. District of Columbia v. Universal
Computer Assocs., Inc., 465 F.2d 615, 617-19 (D.C. Cir. 1972).
Here, the value of a domain name arises from the electronic
information which matches a user’s query to the website
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conversion to intangible property is unsettled.
While other courts have concluded that the law of
conversion in other jurisdictions may protect
electronic data or information, . . . it remains an
open question whether District of Columbia law would
protect intangible property of this kind, see Kaempe v.
Myers, 367 F.3d 958, 963 (D.C. Cir. 2004) (observing
that the District of Columbia courts have provided
limited guidance on the protections to be afforded to
intangible property); Equity Grp., Ltd. v. PaineWebber
Inc., 48 F.3d 1285, 1286 (D.C. Cir. 1995) (per curiam)
(same). Meanwhile, Maryland, to which the District of
Columbia courts often look for guidance in the absence
of other precedent, . . . does not extend the tort of
conversion to cover intangible property rights beyond
those that “are merged or incorporated into a
transferable document[.]”
Council on American-Islamic Relations Action Network, Inc. v.
Gaubatz, 793 F. Supp. 2d 311, 339-40 (D.D.C. 2011) (internal
citations omitted). Maryland law continues to follow directly
Section 242 of the Restatement (Second) of Torts (1965) which
limits application of the tort of conversion of intangible
property rights to those that have been “‘merged or incorporated
into a transferable document’” and Maryland courts have not
extended the tort of conversion to “‘situations in which the
relevant document itself has not been transferred.’” Brass Metal
Products, Inc. v. E-J Enters., Inc., 984 A.2d 361, 378 (Md. Ct.
Spec. App. 2009) (quoting Allied Inv. Corp. v. Jasen, 731 A.2d
957, 965 (1999)) (finding that Maryland law does not recognize
the tort of conversion to protect the plaintiff’s intellectual
property rights in designs or shapes of aluminum railings); see
also Joe Hand Promotions, Inc. v. Md. Food & Entm’t, LLC, No.
associated with the domain name. See Thomas, 176 F.3d at 503.
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CCB-11-3272, 2012 WL 5879127, at *4 (D. Md. Nov. 19, 2012)
(granting motion to dismiss for failure to state a claim under
Maryland law of conversion of a television broadcast signal
because the complaint contains no factual allegation that
tangible documents incorporating the plaintiff’s intangible
property interests were transferred).
Here, the plaintiff alleges that “[a]t the direction of
Defendants Dawson and Heiss, . . . Defendant Squiid unlawfully
converted the RIOT ACT Domain Names and hireacomic.com domain
name by revising the Domain Name Registration information to
effectuate the . . . transfer of ownership of the [domain names]
from Plaintiff to the LLC[.]” Am. Compl., Count IV, ¶ 89.
Xereas relies upon Kremen v. Cohen, 337 F.3d 1024 (9th Cir.
2002), which held that a domain name is within the class of
property protected by the tort of conversion. Id. at 1030-35.
Kremen reasoned that under California law, a domain name is
property capable of being converted because a domain name is a
“well-defined interest” similar to “a share of corporate stock or
a plot of land,” domain name registrants have a “legitimate claim
to exclusivity” similar to deeds with plots of land, and domain
names are “valued, bought and sold, often for millions of
dollars.” Id. at 1030. The Kremen court explained that
California had rejected the Restatement’s requirement that
intangible property could be protected only where the intangible
rights are “merged in a document[.]” Id. at 1031-1033(discussing Restatement (Second) of Torts § 242 (1965)).
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D.C. courts have not directly addressed this issue, but also
have not extended the tort of conversion to intangible property
such as domain names, and Maryland courts hold to the Restatement
rule limiting the tort of conversion of intangible property to
where the property is merged into a document. Gaubatz, 793 F.
Supp. 2d at 339-40. Xereas has not asserted any basis for his
cause of action beyond relying on Kremen which interpreted
California law and rejected the Restatement’s strict rule that
Maryland applies. Kremen, 337 F.3d at 1031-1033. Xereas does
not allege that his property interests were merged in any
tangible documents which were transferred to the defendants. In
sum, the plaintiff has failed to show that his claim against the
defendants for conversion states a cognizable cause of action.
II. BREACH OF CONTRACT
To state a claim for breach of contract under D.C. law, the
plaintiff must plead facts to state four elements: “(1) a valid
contract between the parties; (2) an obligation or duty arising
out of the contract; (3) a breach of that duty; and (4) damages
caused by breach.” Tsintolas Realty Co. v. Mendez, 984 A.2d 181,
187 (D.C. 2009). Also, “‘all contracts contain an implied duty
of good faith and fair dealing[,]’” which means that “‘neither
party shall do anything which will have the effect of destroying
or injuring the right of the other party to receive the fruits of
the contract.’” Murray v. Wells Fargo Home Mortg., 953 A.2d 308,
321 (D.C. 2008) (quoting Allworth v. Howard Univ., 890 A.2d 194,
201 (D.C. 2006)). “Liability lies for breach of the duty [of
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good faith and fair dealing] if a party (1) evades the spirit of
the contract, (2) willfully renders imperfect performance, or (3)
interferes with performance by the other party.” C & E Servs.,
Inc. v. Ashland Inc., 601 F. Supp. 2d 262, 276 (D.D.C. 2009)
(citing Allworth, 890 A.2d at 201). A claim for “breach of the
duty of good faith and fair dealing must necessarily arise out of
the performance or enforcement of the contract, not out of the
contract negotiations.” Id. at 275 (citing Ellipso, Inc. v.
Mann, 541 F. Supp. 2d 365, 373-74 (D.D.C. 2006)). D.C. law is
unsettled about whether a breach of the implied duty of good
faith and fair dealing claim may be brought as an independent
cause of action without a breach of an express contractual duty
claim. C & E Servs., 601 F. Supp. 2d at 274-75. However,
“breach of the implied covenant is not an independent cause of
action when the allegations are identical to other claims for
relief under [an] established cause of action.” Washington
Metro. Area Transit Auth. v. Quik Serve Foods, Inc., Civil Action
Nos. 04-838, 04-687 (RCL), 2006 WL 1147933, at *5 (D.D.C.
Apr. 28, 2006) (citing Jacobson v. Oliver, 201 F. Supp. 2d 93, 98
n.2 (D.D.C. 2002)).
Xereas’s breach of contract claim alleges that Dawson and
Heiss “breached their duty of good faith and fair dealing by
fraudulently inducing [Xereas] to enter into a business
relationship with them . . . and then terminating Plaintiff
Xereas’s participation, involvement, and ownership in the Venture
shortly after the club’s opening.” Am. Compl., Count V, ¶ 94.
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Dawson and Heiss move to dismiss the breach of contract claim
arguing in part that Xereas’s allegations do not specify the
express contractual duty owed or how the defendants allegedly
breached the contract. Defs. Heiss’, Dawson’s and the LLC’s Mem.
of Law in Supp. of Mot. to Dismiss (“Defs.’ Mem.”) at 7. Xereas
argues that there are two relevant contracts -- the Amended
Operating Agreement and the Business Plan -- and that these
contracts recognize his position as general manager. Pl.’s Resp.
to Defs.’ Mot. to Dismiss at 3, 5. Xereas also argues that Heiss
and Dawson entered the contract in bad faith and abruptly
terminated employees who assisted Xereas. Id. at 4-5.
Xereas’s amended complaint does not identify any express
contractual duty which Dawson and Heiss allegedly have breached.
The Amended Operating Agreement vests the broad authority to
engage and employ persons in the Managing Members and states that
“[a]ny vote, consent, approval, determination or other action
required or permitted to be taken by the Managing Members must be
approved by a majority . . . of the Managing Members.” Am.
Compl., Ex. 13, Am. Operating Agreement, Art. VI, ¶ 6.1(e).
Xereas’s amended complaint confirms that “any management
decisions should be controlled and dictated by a two-thirds vote
of the Class A Members.” Id. ¶ 35. Xereas’s allegations that
Heiss and Dawson terminated employees and removed Xereas as
general manager do not state a claim for breach of the Amended
Operating Agreement because Dawson and Heiss were empowered to do
so as the majority of Managing Members.
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Xereas also states that the Business Plan “specifically
recognized and detailed Plaintiff Xereas’ longstanding rights in,
and use of, the RIOT ACT Trademarks[.]” Am. Compl. ¶ 37.
Whether the Business Plan is in fact a contract is an open
question. “[A] valid contract requires ‘both (1) agreement as to
all material terms; and (2) intention of the parties to be
bound.’” Duk Hea Oh v. Nat’l Capital Revitalization Corp., 7
A.3d 997, 1013 (D.C. 2010) (quoting Jack Baker, Inc. v. Office
Space Dev. Corp., 664 A.2d 1236, 1238 (D.C. 1995)). It is
unnecessary to resolve this issue because even if the Business
Plan is a contract, Xereas has not identified any statement
within the Business Plan which created a contractual duty
regarding his trademarks which Heiss and Dawson violated. Thus,
Xereas’s claim of breach of an express contractual duty fails
because Xereas has identified no provision of either purported
contract that created any contractual duty that Heiss and Dawson
are alleged to have violated.
The defendants also move to dismiss Xereas’s implied duty of
good faith and fair dealing claim. The first portion of Xereas’s
implied duty claim alleges that the defendants caused Xereas “to
enter into a business relationship with them” and “to sign the
Operating Agreement[.]” Am. Compl., Count V, ¶ 94. This
allegation regarding “pre-contract negotiations” cannot state an
implied duty claim under D.C. Law. See Ellipso, 541 F. Supp. 2d
at 373-74.
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Xereas also alleges that Dawson and Heiss caused Xereas “to
contribute $100,000, and to contribute his time and industry
expertise, contacts, and business plans . . . [and] the right to
use [Xereas’s] RIOT ACT Trademarks and Domain Names, to the
Venture.” Am. Compl., Count V, ¶ 94. The defendants argue that
the allegations supporting this claim are identical to the
allegations underlying the Xereas’s fraudulent inducement claim
in Count VI of the amended complaint. Defs.’ Mem. at 10. While
the relevant factual allegations for the fraudulent inducement
claim are Heiss and Dawson’s actions before the parties entered
into the contract, the factual allegations for an implied duty
claim must have occurred after a contract was executed. Here,
Xereas has alleged that after Xereas, Heiss and Dawson entered
into a contract, Heiss and Dawson induced him to contribute the
$100,000 and continue his efforts in furtherance of the LLC by
giving Xereas “repeated verbal assurances . . . regarding their
continued interest in the Venture and, in particular, in working
together with Plaintiff Xereas to ensure the club’s success[.]”
Am. Compl. ¶ 53. These assurances allegedly were given to Xereas
before he paid his remaining $50,000 contribution and Xereas
continued to work for the club from that time through December
2011. Id. In addition, Xereas alleges that Heiss and Dawson
“terminat[ed] Plaintiff Xereas’ participation, involvement and
ownership in the Venture shortly after the club’s opening.” Id.,
Count V, ¶ 94.
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These allegations of actions by Dawson and Heiss after the
contract went into force support Xereas’s claim that Dawson and
Heiss “evade[d] the spirit of the contract” or “interfere[d] with
[Xereas’s] performance” of the contract by causing Xereas to
contribute further financial contribution and his professional
services despite an intention to terminate Xereas and deprive him
of the club’s future earnings. The plaintiff’s allegations, if
true, would show that Dawson and Heiss violated the standard that
“‘neither party shall do anything which will have the effect of
destroying or injuring the right of the other party to receive
the fruits of the contract.’” Murray, 953 A.2d at 321 (quoting
Allworth, 890 A.2d at 201). Xereas’s amended complaint states a
claim for breach of contract under an implied duty of good faith
and fair dealing theory against Dawson and Heiss.
III. FRAUDULENT INDUCEMENT, CONSPIRACY TO DEFRAUD
Under District of Columbia law, “[f]raudulent inducement
requires proof of: 1) a false [representation]; 2) made in
reference to a material fact; 3) with knowledge of its falsity;
4) with the intent to deceive; and 5) action taken in reliance
upon the misrepresentation.” McWilliams Ballard, Inc. v. Level 2
Dev’t, 697 F. Supp. 2d 101, 108 (D.D.C. 2010) (citing In re
Estate of McKenney, 953 A.2d 336, 342 (D.C. 2008)). Under D.C.
law, the elements of fraud and fraudulent inducement are the
same, In re U.S. Office Prod. Co. Sec. Litig., 251 F. Supp. 2d
77, 100 (D.D.C. 2003), and a claim of fraudulent inducement must
plead with particularity the circumstances constituting fraud
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under Federal Rule of Civil Procedure 9(b), Buy Back District of
Columbia, LLC v. Home Depot USA, Inc., Civil Action No. 04-1429
(PLF), 2004 WL 4012265, at *1 (D.D.C. Dec. 14, 2004). This rule
requires the claimant to plead specifically “‘the time, place and
content of the false [representations], the fact misrepresented
and what was retained or given up as a consequence of the
fraud.’” Kowal v. MCI Communic’ns Corp., 16 F.3d 1271, 1278
(D.C. Cir. 1994) (quoting United States ex rel. Joseph v. Cannon,
642 F.2d 1373, 1385 (D.C. Cir. 1981)). To establish a prima
facie case of civil conspiracy, a plaintiff must prove: “(1) an
agreement between two or more persons; (2) to participate in an
unlawful act; and (3) injury caused by an unlawful overt act
performed by one of [the] parties to the agreement, and in
furtherance of the common scheme.” Hill v. Medlantic Health Care
Grp., 933 A.2d 314, 334 (D.C. 2007) (citing Paul v. Howard Univ.,
754 A.2d 297, 310 (D.C. 2000)). However, “[c]ivil conspiracy ‘is
not an independent tort but only a means for establishing
vicarious liability for an underlying tort.’” Id. (citing Paul,
754 A.2d at 310 n.27).
In this case, Xereas claims that Dawson and Heiss
fraudulently induced him to
enter into a business relationship with them, to sign
the Operating Agreement, to contribute $100,000, and to
contribute his time and industry expertise, contacts,
and business plans, and to allow use of the RIOT ACT
Trademarks and Domain Names by the Venture, all while
intending to terminate without cause Plaintiff Xereas’
participation, involvement, and ownership shortly after
the club’s opening.
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Am. Compl., Count VI, ¶ 97. Xereas states that the fraudulent
inducement claim relies on the “representations made that
resulted in the Operating Agreement.” Pl.’s Resp. to Defs.’ Mot.
to Dismiss at 6. In particular, Xereas cites paragraphs 33, 34,
and 36 of the amended complaint as identifying the
representations which resulted in the Operating Agreement. Id.However, these paragraphs only describe the formation of the
operating agreements and do not include any specific
representations by Dawson or Heiss which support the plaintiff’s
fraudulent inducement claim. See Am. Compl. ¶¶ 33, 34, 36.
Xereas may be referring to his assertion that he “permitted use
of his trademarks by the Venture relying upon his ownership
interest and role as General Manager to insure quality control
and proper use of his RIOT ACT Trademarks and RIOT ACT domain
names.” Id. ¶ 31. However, this statement does not satisfy the
requirement that the plaintiff plead with particularity the
“time, place and content of the false [representations]” by an
alleged tortfeasor. See Kowal, 16 F.3d at 1278. Because
Xereas’s amended complaint does not identify any particular
misrepresentation by Dawson and Heiss which induced Xereas to
sign the contract, Xereas has failed to state a claim for either
conspiracy to defraud or its underlying tort of fraudulent
inducement.
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IV. TORTIOUS INTERFERENCE WITH PROSPECTIVE BUSINESS
RELATIONSHIPS5
Under D.C. law, a claim for tortious interference with
prospective business relationships requires: “‘(1) the existence
of a valid business relationship or expectancy, (2) knowledge of
the relationship or expectancy on the part of the interferer, (3)
intentional interference inducing or causing a breach or
termination of the relationship or expectancy, and (4) resultant
damage.’” Jankovic v. Int’l Crisis Grp., 593 F.3d 22, 29 (D.C.
Cir. 2010) (quoting Bennett Enterprises v. Domino’s Pizza, Inc.,
45 F.3d 493, 499 (D.C. Cir. 1995)). “Valid business expectancies
may include lost future contracts and lost opportunities to
obtain customers.” Command Consulting Grp., LLC v. Neuraliq,
Inc., 623 F. Supp. 2d 49, 52 (D.D.C. 2009). However, any
business expectancy must be “‘commercially reasonable to
anticipate.’” Id. (quoting Browning v. Clinton, 292 F.3d 235,
242 (D.C. Cir. 2002)). “A valid business expectancy requires a
probability of future contractual or economic relationship and
not a mere possibility.” Robertson v. Cartinhour, 867 F. Supp.
2d 37, 60 (D.D.C. 2012) (internal quotation marks omitted); see
also Nat’l R.R. Passenger Corp. v. Veolia Transp. Servs., Inc.,
791 F. Supp. 2d 33, 56 (D.D.C. 2011) (stating that the plaintiff
5
The amended complaint captions this claim as “Tortious
Interference with Contractual Relations[.]” Am. Compl., Count
VIII. However, Xereas conceded that the amended complaint’s
caption was inaccurate and argued that the allegations in the
amended complaint support the claim of tortious interference with
prospective business relationships. Pl.’s Resp. to Defs.’ Mot to
Dismiss at 8.
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must show a “reasonable likelihood” of receiving a contract and
“mere speculative contractual expectations or hope are
insufficient” to state a claim for tortious interference with
prospective business relationships (internal quotation marks
omitted)). A claim of tortuous interference with prospective
business relations cannot survive where the plaintiff does not
allege any specific future business relations or expectancies and
only provides general references to potential opportunities. See
e.g., Command Consulting Grp., LLC, 623 F. Supp. 2d at 52-53;
Sheppard v. Dickstein, Shapiro, Morin & Oshinsky, 59 F. Supp. 2d
27, 34 (D.D.C. 1999); Kwang Dong Pharm. Co. v. Han, 205 F. Supp.
2d 489, 496-97 (D. Md. 2002) (dismissing a tortuous interference
claim under D.C. law because the plaintiff “has not pointed to
any specific contractual relations that [the defendant] allegedly
interfered with”).
Here, Xereas has not alleged an identified prospective
business relationship which is commercially reasonable to
anticipate. Xereas generally alleges that Dawson and Heiss
interfered with his “long standing business relationships with
numerous persons in the comedy field[.]” Pl.’s Resp. to Defs.’
Mot. to Dismiss at 8; see Am. Compl. ¶¶ 12, 71-73. Xereas
further alleges that Dawson and Heiss’s actions interfered with
“his ability to maintain contact and relationships, and continue
doing business” with Xereas’s contacts in the entertainment
industry, specifically “current and prospective customers and
industry players[.]” Am. Compl., Count VIII, ¶¶ 104-05.
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Xereas’s claim focuses on his past positions and relationships;
Xereas’s failure to identify any specific future employment
prospect undermines his claim. The amended complaint has not
stated a cause of action for tortious interference with
prospective business relations against Dawson and Heiss.
V. UNJUST ENRICHMENT
“Unjust enrichment occurs when: (1) the plaintiff conferred
a benefit on the defendant; (2) the defendant retains the
benefit; and (3) under the circumstances, the defendant’s
retention of the benefit is unjust.” Peart v. District of
Columbia Hous. Auth., 972 A.2d 810, 813 (D.C. 2009) (quoting News
World Communic’ns, Inc. v. Thompsen, 878 A.2d 1218, 1222 (D.C.
2005)). “For defendants to be liable for unjust enrichment,
their actions must be ‘unjust,’ that is to say, they must have
committed some ‘wrongful act.’” Griffith v. Barnes, 560 F. Supp.
2d 29, 34 (D.D.C. 2008) (citing Thompsen, 878 A.2d at 1225).
“‘[T]here can be no claim for unjust enrichment when an express
contract exists between the parties.’” Albrecht v. Comm. on Emp.
Benefits of the Fed. Reserve Emp. Benefits Sys., 357 F.3d 62, 69
(D.C. Cir. 2004) (quoting Schiff v. AARP, 697 A.2d 1193, 1194
(D.C. 1997)). The court must evaluate unjust enrichment claims
on a “case-by-case basis, considering the particular
circumstances giving rise to the claim.” Peart, 972 A.2d at 814.
Xereas concedes that he has not stated an unjust enrichment
claim against Heiss and Dawson because the existence of an
express contract between the managing members of the LLC
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precludes such a claim. Pl.’s Resp. to Defs.’ Mot. to Dismiss at
8. Xereas instead argues that his unjust enrichment claim can
survive as to the LLC, because there is no express contract
between Xereas and the LLC. Id.As an initial matter, the Amended Operating Agreement does
not expressly state whether the LLC is a party to the agreement.
The provision of the D.C. Code in force in 20106 that governed
the creation of limited liability companies, Chapter 10 of Title
29, did not specify whether an LLC is a party to its own
operating agreement, and D.C. courts have not addressed this
precise issue. Other courts addressing this issue have focused
on the text of the relevant state statute governing the creation
of limited liability companies. See Elf Atochem North America,
Inc. v. Jaffari, 727 A.2d 286, 293 (Del. 1999) (holding that a
limited liability corporation was bound by its operating
agreement, even though the agreement was signed only by the LLC’s
members and not by the corporation itself because Delaware Code
tit. 6 § 18-101(7) states that “[a] limited liability company is
bound by its limited liability company agreement whether or not
the limited liability company executes the limited liability
company agreement”); Trover v. 419 OCR, Inc., 397 Ill. App. 3d
403, 408-09 (2010) (holding that two LLCs were not parties to
6
The amended complaint states that Xereas, Heiss and Dawson
executed the original Operating Agreement in May 2010 and the
Amended Operating Agreement at issue here in November 2010. Am.
Compl. ¶¶ 33-34. The section of the D.C. Code governing the
creation of LLCs at that time was repealed and replaced in July
2011.
-20-
their own operating agreements where no member signed the
agreement on behalf of the LLC because the Illinois Limited
Liability Company Act stated that “[a] limited liability company
is a legal entity distinct from its members” and it was clear
from the Operating Agreement that the members understood how to
legally bind the LLC but did not do so).
The D.C. statute applicable at the time stated that “[t]he
members of a limited liability company may enter into an
operating agreement to regulate or establish the affairs of the
limited liability company[.]” D.C. Code § 29-1018(a) (2001).
This language did not reflect that a limited liability company
itself was a party to its operating agreement. The Amended
Operating Agreement here does not list the LLC on the signatories
page, and it does not include the LLC in the first paragraph as
one of the parties entering into the agreement. The “Formation
and Name” section of the Amended Operating Agreement
distinguishes between the parties and the LLC in stating that
“[t]he parties to this Agreement agree to and do hereby form a
limited liability company under the name Riot Act DC, LLC.” Am.
Compl., Ex. 13, Am. Operating Agreement, Art. II, ¶ 2.1. The
Amended Operating Agreement also provides that managing members
have the power to legally bind the LLC. Id., Ex. 13, Am.
Operating Agreement, Art. VI, ¶ 6.1(b)(ii-iii). As happened in
Trover, the parties here could legally bind the LLC to an
agreement, but did not do so. Under these circumstances, the
Amended Operating Agreement did not create a contract between the
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LLC and Xereas. Xereas’s claim for unjust enrichment survives
the first challenge.
Heiss, Dawson, and the LLC also argue that Xereas’s unjust
enrichment claim against the LLC cannot survive because litigants
may not assert an unjust enrichment claim “‘where there is an
express contract that governs the parties’ conduct.’” Defs.’
Reply at 14 (quoting Plesha v. Ferguson, 725 F. Supp. 2d 106, 112
(D.D.C. 2010)). The defendants state that the Amended Operating
Agreement governs the rights and responsibilities of the parties
and Xereas’s unjust enrichment claim against the LLC is
foreclosed. Id. However, Plesha stands for the proposition that
a claim for unjust enrichment is inappropriate where the parties
entered a contract with one another. Plesha cited only cases
which follow this distinction, and it reinforced the principle by
quoting the D.C. Court of Appeals: “‘One who has entered into a
valid contract cannot be heard to complain that the contract is
unjust, or that it unjustly enriches the party with whom he or
she has reached agreement.’” Plesha, 725 F. Supp. 2d at 112(quoting Jordan Keys & Jessamy, LLP v. St. Paul Fire and Marine
Ins. Co., 870 A.2d 58, 64 (D.C. 2005)) (emphasis added). Since
the LLC is not a party to the Amended Operating Agreement, the
defendants’ reliance on Plesha is misplaced. The D.C. Court of
Appeals has recognized that the unjust enrichment doctrine could
apply despite the presence of a contract with another party
“where A, who claims that B has been unjustly enriched at A’s
expense, has a contract with C rather than with B. It is not at
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all clear to us that in such a situation, the existence of a
contract with C should automatically bar A’s claim of unjust
enrichment against B.” Jordan Keys & Jessamy, 870 A.2d at 64.
Xereas’s unjust enrichment claim must reflect that “under
the circumstances, the defendant’s retention of the benefit is
unjust.” Peart, 972 A.2d at 813. Here, Xereas alleges that his
substantial efforts for the LLC in working on the website,
developing the company’s marketing, advertising and social media
strategies, fostering relations with managers, agents, comics,
and other contacts, booking talent for shows, and various other
aspects was provided “for no compensation . . . in anticipation
of future earnings from club operations.” Am. Compl. ¶ 44. By
November 2011, Xereas had paid his $100,000 contribution in full.
Id. ¶¶ 45, 54. Under the Amended Operating Agreement, Xereas was
entitled to “a reasonable, market-based salary as compensation
for the performance of his . . . management responsibilities.
Any consideration to be paid as salaries by the [LLC] to the
Managing Members shall be determined by the Managing Members in
their reasonable discretion.” Id., Ex. 13, Am. Operating
Agreement, Art. VI, ¶ 6.4. Xereas alleges that in December 2011,
Dawson and Heiss agreed to pay Xereas an annual salary of $42,000
and Xereas has received only “a little over $8,000 for 2 years of
work and dedication.” Id. ¶ 56. Any complaint about Xereas’s
compensation after Xereas secured the annual salary agreement in
December 2011 cannot be the basis of Xereas’s unjust enrichment
claim. On the other hand, the complaint’s allegations of
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Xereas’s uncompensated efforts for the LLC from December 2010 to
December 2011, when viewed in the light most favorable to Xereas,
plead sufficient facts to state a cause of action for unjust
enrichment against the LLC.
VI. CYBER-SQUATTING UNDER THE ACPA
The ACPA makes liable to the owner of a mark any person who
“has a bad faith intent to profit from that mark . . . and . . .
registers, traffics in, or uses a domain name that . . . is
identical or confusingly similar to that mark . . . [if it] is
famous [or distinctive] at the time of registration of the domain
name[.]” 15 U.S.C. § 1125(d)(1)(A). The statute “prohibits the
bad faith registration of trademarks as domain names.” Vizer v.
VIZERNEWS.COM, 869 F. Supp. 2d 75, 76 (D.D.C. 2012). “To succeed
on an ACPA claim, Plaintiff must demonstrate that: (1) its
trademark is a distinctive or famous mark entitled to protection;
(2) Defendants’ domain name is identical or confusingly similar
to the Plaintiff’s mark; and (3) Defendants ‘register[],
traffic[] in, or use[]’ a domain name with the bad faith intent
to profit from it.” Hanley-Wood LLC v. Hanley Wood LLC, 783 F.
Supp. 2d 147, 152 (D.D.C. 2011) (quoting 15 U.S.C.
§ 1125(d)(1)(A)). Under the first element, the mark must be
either distinctive or famous “at the time of registration of the
domain name.” 15 U.S.C. § 1125(d)(1)(A)(ii)(I)-(II). “In
determining whether a person has acted with bad faith, the Court
may consider such factors as . . . whether the person has
previously used the name to offer goods or services for sale, and
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whether the person intended to divert consumers from the
infringed owner’s website either for commercial gain or to
tarnish or disparage the mark by creating a likelihood of
confusion as to the source or sponsorship of the site.” Hanley-
Wood, 783 F. Supp. 2d at 152 (citing 15 U.S.C. § 1125(d)(1)(B)).7
7
The statute provides a list of nine factors to consider in
determining whether a person has a bad faith intent to profit:
(I) the trademark or other intellectual property rights
of the person, if any, in the domain name;
(II) the extent to which the domain name consists of
the legal name of the person or a name that is
otherwise commonly used to identify that person;
(III) the person’s prior use, if any, of the domain
name in connection with the bona fide offering of any
goods or services;
(IV) the person’s bona fide noncommercial or fair use
of the mark in a site accessible under the domain name;
(V) the person’s intent to divert consumers from the
mark owner’s online location to a site accessible under
the domain name that could harm the goodwill
represented by the mark, either for commercial gain or
with the intent to tarnish or disparage the mark, by
creating a likelihood of confusion as to the source,
sponsorship, affiliation, or endorsement of the site;
(VI) the person’s offer to transfer, sell, or otherwise
assign the domain name to the mark owner or any third
party for financial gain without having used, or having
an intent to use, the domain name in the bona fide
offering of any goods or services, or the person’s
prior conduct indicating a pattern of such conduct;
(VII) the person’s provision of material and misleading
false contact information when applying for the
registration of the domain name, the person’s
intentional failure to maintain accurate contact
information, or the person's prior conduct indicating a
pattern of such conduct;
(VIII) the person’s registration or acquisition of
multiple domain names which the person knows are
identical or confusingly similar to marks of others
that are distinctive at the time of registration of
such domain names, or dilutive of famous marks of
others that are famous at the time of registration of
such domain names, without regard to the goods or
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The defendants move to dismiss the ACPA claim arguing that
Xereas has not stated a claim for cyber-squatting. They argue
that the ACPA does not apply to the Riot Act domain names because
it was Xereas who registered them and that occurred before the
Riot Act trademarks became distinctive.8 Although Xereas admits
that he registered the domain names originally, he argues that
the defendants re-registered the domain names for “unlawful and
deceptive purposes.” Pl.’s Resp. to Def. Squid’s Mot. to Dismiss
at 3; see Am. Compl. ¶ 60.
This dispute turns on whether the term “registers” and
“registration” in the ACPA refer only to the initial registration
of a domain name or also to the “re-registration” of a domain
name. The defendants rely on GoPets Ltd. v. Hise, 657 F.3d 1024(9th Cir. 2011), which held that “re-registration of a currently
registered domain name by a new registrant . . . is not a
‘registration’ within the meaning of § 1125(d)(1).” Id. at
1026.9 Xereas seeks to distinguish his case from GoPets because
services of the parties; and
(IX) the extent to which the mark incorporated in the
person’s domain name registration is or is not
distinctive and famous within the meaning of subsection
(c) of this section.
15 U.S.C. § 1125(d)(1)(B)(i).
8
Although this argument is in Squiid’s motion to dismiss,
Heiss, Dawson and the LLC’s motion to dismiss incorporated “all
arguments set forth in Squiid’s motion to dismiss that are
applicable to them.” Defs.’ Mem. at 2.
9
The GoPets court explained that:
[T]here are three primary actors in the domain name
system. First, companies called “registries” operate a
database (or “registry”) for all domain names within
the scope of their authority . . . . Second, companies
called “registrars” register domain names with
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in that case, there was a lawful transfer of ownership of the
domain name to a new entity which later sought to register the
name, whereas here, Xereas alleges that “the re-registration was
done for unlawful and deceptive purposes.” Pl.’s Resp. to Def.
Squiid’s Mot. to Dismiss at 3.
In GoPets, plaintiff GoPets Ltd. alleged that defendants
Edward and Joseph Hise and their company Digital Overture
violated the ACPA through re-registering the domain name
gopets.com. Edward Hise registered gopets.com in his own name in
1999 -- years before GoPets Ltd. was founded in 2004 –- and later
transferred the registration of the domain name to Digital
Overture in 2006. GoPets, 657 F.3d at 1026-27. The parties
agreed that the domain name was not “identical or confusingly
similar to” a distinctive trademark in 1999 when Edward Hise
originally registered it, and that the domain name was
distinctive in 2006 when the domain name was transferred to
Digital Overture. Id. at 1030. The GoPets court noted that the
ACPA did not define the term registration, id., but held that the
term registration in the ACPA did not refer to “re-registrations”
because that interpretation does not comport with traditional
registries on behalf of those who own the names.
Registrars maintain an ownership record for each domain
name they have registered with a registry. Action by a
registrar is needed to transfer ownership of a domain
name from one registrant to another. Third,
individuals and companies called “registrants” own the
domain names. Registrants interact with the
registrars, who in turn interact with the registries.
GoPets, 657 F.3d at 1030 (quoting Office Depot Inc. v. Zuccarini,
596 F.3d 696, 699 (9th Cir. 2010)).
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property law principles which grant a property owner the right to
sell all of his rights in property to another. Id. at 1031-32.
In particular, GoPets stated that the original registrant Edward
Hise would have had all rights to the domain name if he had kept
the domain name in his own personal name and that there was “no
basis in [the] ACPA to conclude that a right that belongs to an
initial registrant of a currently registered domain name is lost
when that name is transferred to another owner.” Id. at 1031.
GoPets explained that the ACPA should not be interpreted to deny
Edward Hise the ability to validly transfer the rights in the
domain name to a third party after the GoPets mark became
distinctive because Hise’s property rights in the domain name
would be inalienable.10
Presumably, the GoPets court viewed the potential
inalienability11 of Hise’s property rights in the domain name as
the potential ACPA liability to which Hise or his company might
have been subject if re-registration were covered under the ACPA.
10
Courts have come to opposite conclusions when considering
whether the terms “register” and “registration” in the ACPA refer
only to the initial registration. Compare Ricks v. BMEzine.com,
LLC, 727 F. Supp. 2d 936, 954 (D. Nev. 2010) (“The statute
[§ 1125(d)(1)(A)] does not refer to an original registration or
the registration that creates the domain name. . . . The Act
provides no exception for re-registrations by the same owner.
Any registration thus may bring the registrant within the
statute’s purview.”), with Vizer, 869 F. Supp. 2d at 81-82
(citing the GoPets decision for the proposition that re-
registration of a domain name is not a “registration” under 15
U.S.C. § 1125(d)(1)), and AIRFX.com v. AirFX LLC, No. CV 11-1064
FJM, 2012 WL 3638721, at *3-4 (D. Ariz. Aug. 24, 2012) (same).
11
An inalienable property interest is one that is “not
transferable or assignable[.]” Black’s Law Dictionary (9th ed.
2009).
-28-
But, the statute does not take away the initial registrant’s
rights to sell or transfer all of the rights he or she owns in a
distinctive or famous domain name to any other party. The
statute simply requires that a domain name registrant not
register the domain name with a bad faith intent to profit. The
ACPA’s focus is on the transferee’s bad faith intent to profit
from re-registering a domain name, not on restricting the ability
of a domain name owner to sell or transfer his property interest
in the domain name to anyone he would prefer. GoPets is not
persuasive as it failed to address how Digital Overture’s good
faith would free Hise from worry about liability or alienability
of his domain name.12 By interpreting the term registration as
applying to re-registrations, the scope of coverage extends to
each registrant of a domain name rather than only the first
registrant. This interpretation furthers the statute’s purpose
of eliminating cyber-squatting. The congressional conference
report on the ACPA stated that the ACPA applies “only to cases
where the plaintiff can demonstrate that the defendant
registered, trafficked in, or used the offending domain name with
bad-faith intent to profit from the goodwill of a mark belonging
to someone else.” H.R. Conf. Rep. No. 106-464 at *109 (1999),
1999 WL 1095089. The Senate report said “the abusive conduct
that is made actionable is appropriately limited just to
bad-faith registrations and uses of others’ marks by persons who
12
Interestingly, GoPets did discuss the good faith factor
in discussing domain name grabs that Hise engaged in after GoPets
Ltd. was up and running.
-29-
seek to profit unfairly from the goodwill associated therewith.”
S. Rep. No. 106-140 at *8 (1999), 1999 WL 594571. These
statements of congressional intent apply with equal force to the
initial registration and later re-registrations. See Ricks, 727
F. Supp. 2d at 954 (“If a domain name was registered in good
faith originally, but thereafter re-registered in bad faith, the
cybersquatter would escape liability, a result not supportable by
the statutory scheme.”). In addition, the ACPA provides no
reason why any party who registers a distinctive or famous domain
name with bad faith intent to profit after the original
registration should escape the statute’s enforcement. The terms
“register” and “registration” in § 1125(d)(1)(A) should be read
to refer to the initial registration and later re-registrations
of the domain name.
In this case, many of the domain names at issue were
registered by Xereas in 2005. Am. Compl. ¶ 14. Xereas alleges
that the defendants re-registered the domain names by revising
the registration information for the Riot Act domain names in
2012 when the Riot Act trademarks were distinctive. Id. ¶¶ 60,
111. Xereas also alleges that the defendants had bad faith
intent to profit from the use of the Riot Act domain names which
were identical or confusingly similar to the Riot Act trademarks.
Id. ¶¶ 110, 112. In particular, Xereas alleges that continued
use of the Riot Act domain names and trademarks by Dawson, Heiss
and the LLC has caused “confusion, mistake, and deception on the
part of consumers” and mislead the public and individuals in the
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entertainment industry “into believing that the LLC’s business
and activities are authorized by, attributable to, sponsored by,
or associated with[] Plaintiff.” Id. ¶¶ 71, 72. Here, the
factual allegations in the amended complaint state a claim for
cyber-squatting under the ACPA against Dawson, Heiss and the LLC.
However, the cyber-squatting claim will be dismissed against
Squiid. Squiid argued that the ACPA does not apply to Squiid
because it did not register, traffic in, or use the Riot Act
domain names, and that the amended complaint does not allege any
facts supporting a reasonable inference of Squiid’s bad faith
intent to profit. Def. Squiid’s Mot. to Dismiss at 7-10. Xereas
did not respond to these arguments relating only to Squiid, and
the arguments will be deemed conceded. See Stephenson v. Cox,
223 F. Supp. 2d 119, 121 (D.D.C. 2002) (“[W]hen a plaintiff files
a response to a motion to dismiss but fails to address certain
arguments made by the defendant, the court may treat those
arguments as conceded[.]”).
VII. DEFAMATION
To state a claim for defamation under D.C. law, the
plaintiff must show four elements: “‘(1) that the defendant made
a false and defamatory statement concerning the plaintiff; (2)
that the defendant published the statement without privilege to a
third party; (3) that the defendant’s fault in publishing the
statement amounted to at least negligence; and (4) either that
the statement was actionable as a matter of law irrespective of
special harm or that its publication caused the plaintiff special
-31-
harm.’” Solers, Inc. v. Doe, 977 A.2d 941, 948 (D.C. 2009)
(quoting Oparaugo v. Watts, 884 A.2d 63, 76 (D.C. 2005)).
“District of Columbia courts have held that a defamation claim
survives a Rule 12(b)(6) motion to dismiss only if ‘the contested
statements are both verifiable and reasonably capable of
defamatory meaning.’” Franklin v. Pepco Holdings, Inc., 875 F.
Supp. 2d 66, 74 (D.D.C. 2012) (quoting Weyrich v. New Republic,
Inc., 235 F.3d 617, 620 (D.C. Cir. 2001)). “A publication is
defamatory ‘if it tends to injure plaintiff in his trade,
profession or community standing, or lower him in the estimation
of the community.’” Rosen v. American Israel Pub. Affairs Comm.,
Inc., 41 A.3d 1250, 1256 (D.C. 2012) (quoting McBride v. Merrell
Dow and Pharm., Inc., 540 F. Supp. 1252, 1254 (D.D.C. 1982)).
“[A]n allegedly defamatory remark must be more than unpleasant or
offensive; the language must make the plaintiff appear odious,
infamous, or ridiculous.” Id. (citing Howard Univ. v. Best, 484
A.2d 958, 989 (D.C. 1984)) (internal quotation marks omitted).
As a general rule, . . . a statement of fact may be the
basis for a defamation claim, [but] a statement of pure
opinion cannot. Nonetheless, . . . statements of
opinion can be actionable if they imply a provably
false fact, or rely upon stated facts that are provably
false. Thus, a statement of opinion is actionable if
-- but only if –- it has an explicit or implicit
factual foundation and is therefore objectively
verifiable. On the other hand, if it is plain that a
speaker is expressing a subjective view, an
interpretation, a theory, conjecture, or surmise,
rather than claiming to be in possession of objectively
verifiable facts, the statement is not actionable.
Rosen, 41 A.3d 1250, 1256 (D.C. 2012) (internal quotation marks
omitted).
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In this case, Xereas alleges that Heiss and Dawson made oral
and written statements to “members of the entertainment industry
and the general public” representing that Xereas’s employment was
terminated because of his “incompetence, dishonest business
practices, deceptive sales practices, and other like false and
defamatory claims.” Am. Compl. ¶ 63, see also id., Count XI,
¶ 114. Xereas further alleges that Dawson and Heiss acted with
“reckless disregard for the truth or falsity” and that the
statements “irreparably harmed Xereas[.]” Id., Count XI, ¶¶ 117-
19.
Dawson and Heiss move to dismiss the defamation claim
arguing that Xereas does not sufficiently allege facts to state
that the statements are actionable under D.C. law. Dawson and
Heiss argue that the statements are “generalized critical
statements” which “cannot form the basis of a defamation claim
unless the statements reference specific incidents that can be
found to be provably false.” Defs.’ Reply at 15. Defendants
rely on the Rosen case arguing that the alleged statements are
not actionable because they are statements of opinion which do
not have “‘an explicit or implicit factual foundation[.]’”
Defs.’ Mot to Dismiss at 17 (quoting Rosen, 41 A.3d at 1256). In
response, Xereas states, without citation to any authority, that
accusing a business person of dishonesty is not a statement of
opinion, but rather is a statement of fact. Pl.’s Resp. to
Defs.’ Mot. to Dismiss at 10.
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In Rosen, the American Israel Public Affairs Committee
terminated Rosen’s employment and later published a statement
that Rosen’s behavior “did not comport with the standards that
AIPAC expects of its employees[.]” Id. at 1256 (internal
quotation marks omitted). The D.C. Court of Appeals found that
this statement was not provably false because the reference to
“standards” was too general to form the basis of the defamation
action. Id. at 1258-60. Rosen cited with approval another case
that affirmed summary judgment for a defendant employer on a
defamation claim where the employer stated that it had fired an
employee for actions that were “‘prejudicial to the company’” and
that the employees had “engaged in ‘disloyal and disruptive
activity’” and “‘conduct unacceptable by any business standard.’”
Id. at 1258 (quoting McClure v. American Family Mut. Ins. Co.,
223 F.3d 845, 853 (8th Cir. 2000)). The Rosen court reasoned
that although certain events could have formed the basis for the
statements in McClure, “no one learned of particular incidents
from the words used” and the statements “exuded merely a
subjective evaluation –- essentially a statement of opinion
without an explicit or implicit factual foundation.” Id. at 1259
(internal quotation marks omitted). Similarly, Xereas’s amended
complaint alleges only statements of opinion which do not
affirmatively provide a factual foundation. In particular, the
characterization of his “incompetence” is a statement of opinion
not unlike a characterization of disloyalty. The alleged
statements that Xereas engaged in “dishonest business practices”
-34-
and “deceptive sales practices” are also not sufficiently
verifiable or provably false and are similar to the statement
that one engaged in “conduct unacceptable by any business
standard.” See McClure, 223 F.3d at 853. Shor Int’l Corp. v.
Eisinger Enterprises, Inc., No. 90 Civ. 2353 (RJW), 2000 WL
1793389, at *3 (S.D.N.Y. Dec. 5, 2000), too, found a statement
that a plaintiff engaged in dishonest business and sales
practices to be “a statement of opinion” which “is not a
verifiable statement of fact.”
Nor does Xereas allege that the publication of the
statements caused him special harm. Special harm, also known as
“special damages,” are limited to “actual pecuniary loss, which
must be specially pleaded and proved.” Fed. Aviation Admin. v.
Cooper, 132 S. Ct. 1441, 1451 (2012). Here, Xereas alleges only
that the statements have “harmed Plaintiff, his personal and
professional reputation and his future business prospects.” Am.
Compl., Count XI, ¶ 119. Simply asserting the risk of future
harm is insufficient. Xereas must allege some specific harm and
the actual pecuniary loss arising from that harm. Franklin, 875
F. Supp. 2d at 75. Xereas does not do so here.
Because Xereas does not allege that the statements were
actionable as a matter of law or that the publication of the
statements caused the plaintiff special harm, Xereas does not
state a claim against Heiss and Dawson for defamation.
-35-
CONCLUSION AND ORDER
Xereas’s amended complaint pleads sufficient facts to state
a claim for relief for the breach of the duty of good faith and
fair dealing against Dawson and Heiss, unjust enrichment against
the LLC and cyber-squatting against Dawson, Heiss and the LLC.
However, Xereas does not plead facts to state his conversion,
breach of contract, fraudulent inducement, conspiracy to defraud,
tortious interference or defamation claims. Accordingly, it is
hereby
ORDERED that defendants’ motions [15, 16] to dismiss be, and
hereby are, GRANTED IN PART and DENIED IN PART. The amended
complaint’s conversion, breach of contract, fraudulent
inducement, conspiracy to defraud, tortious interference and
defamation claims in Counts IV through VIII and XI, the cyber-
squatting claim against Squiid in Count X and the unjust
enrichment claim against Heiss and Dawson are DISMISSED.
However, the motion to dismiss the breach of the implied duty of
good faith and fair dealing claim in Count V, the unjust
enrichment claim against the LLC in Count IX, and the cyber-
squatting claim against Heiss, Dawson and the LLC in Count X of
the amended complaint is denied.
SIGNED this 27th day of March, 2013.
/s/
RICHARD W. ROBERTS
United States District Judge