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Admor HVAC Products, Inc. v. Lessary

United States District Court, D. Hawaii

July 30, 2019



          Susan Oki Mollway, United States District Judge.


         Defendants Robert Sonny Lessary and Hicoustix LLC began competing for business with Plaintiff Admor HVAC Products, Inc., while Lessary was an Admor employee. No. longer employed by Admor, Lessary and his company, Hicoustix, remain in competition with Admor, which has sued them. Defendants have counterclaimed.

         Before the court are Admor's motion to dismiss the Counterclaim, and Defendants' countermotion to strike certain matters raised in Admor's motion to dismiss. ECF Nos. 55, 67.

         Defendants' Counterclaim asserts three claims against Admor: (1) unfair competition in violation of section 480-2 of Hawaii Revised Statutes, (2) failure to pay commissions/wages pursuant to chapter 388 of Hawaii Revised Statutes, and (3) violation of the notice requirements in the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). ECF No. 24-1. Admor argues that Defendants' unfair competition claim fails as a matter of law and that their remaining two claims are moot.

         Defendants' countermotion argues that Admor's motion to dismiss presents matters outside the pleadings and should be stricken.

         The court grants in part and denies in part Defendants' countermotion to strike and excludes certain matters from its consideration of Admor's motion to dismiss.

         Defendants have not alleged sufficient facts to state a claim of unfair competition or for statutory damages under COBRA. However, Admor has not established that Defendants' claim for failure to pay is moot. The court therefore grants Admor's motion to dismiss in part, dismisses the unfair competition and COBRA notification claims, and grants Defendants leave to amend the Counterclaim.

         II. BACKGROUND.

         Admor alleges that Lessary, while an Admor salesperson, began soliciting business for Hicoustix, an Admor competitor, and misappropriated Admor's trade secrets. Admor filed its Complaint against Defendants on February 8, 2019, asserting nine claims: (1) violation of the Defend Trade Secrets Act, 18 U.S.C. § 1836; (2) violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962; (3) breach of the duty of loyalty; (4) unfair competition under 15 U.S.C. § 1125(a); (5) unfair competition under section 480-2 of Hawaii Revised Statutes; (6) tortious interference with prospective business advantage; (7) tortious interference with business relations; (8) conversion; and (9) unjust enrichment. ECF No. 1.

         The Complaint seeks several forms of relief, including the “[e]ntry of preliminary and permanent injunctions (1) prohibiting Sonny and Hicoustix from working with any of Admor's customers; (2) prohibiting Sonny and Hicoustix from working with any of Admor's vendors; (3) prohibiting anyone acting in concert with Defendants from working with Admor's customers and vendors; (4) preventing any further use or disclosure of the Trade Secrets by Defendants; (5) preventing Sonny and Hicoustix from using Admor's name, symbols, and logos in association with Hicoustix or any other company, and (6) preventing Defendants from otherwise unfairly competing with Admor.” Id., PageID # 40. The Complaint states that Admor has “approximately 2042 active customer/contractors” and “423 vendors.” Id. at 8-9.

         Admor moved for a preliminary injunction “[p]reserving the status quo by preventing Defendants from servicing any and all entities and individuals who were Admor customers and vendors as of April 1, 2018.” ECF No. 10, PageID # 60.

         On April 5, 2019, Defendants filed a Counterclaim against Admor. ECF No. 24-1. Defendants allege that Lessary had no contractual agreement with Admor containing noncompete, nonsolicitation, or nonacceptance-of-business provisions, and that, while at Admor, Lessary did no work with at least 1, 900 of Admor's 2, 042 customers or with 400 of Admor's 423 vendors. Id., PageID #s 431-35. The Counterclaim argues that Admor violated section 480-2 of Hawaii Revised Statutes by seeking to prohibit Defendants from working with customers and vendors with whom Lessary had done no business and had not engaged in any inappropriate conduct. Id. at 435-40. The Counterclaim further asserts a claim for failure to pay Lessary's full commissions and wages and a claim for failure to provide Lessary with COBRA information following his termination from Admor. Id. at 440-45.

         An evidentiary hearing on Admor's motion for preliminary injunction was held on April 16, 2019.

         On April 26, 2019, Admor filed its motion to dismiss the Counterclaim. ECF No. 55. On June 10, 2019, Defendants filed their countermotion to strike along with their opposition to Admor's motion to dismiss. ECF No. 67.

         The court issued its Findings of Fact, Conclusions of Law, and Order on June 18, 2019, denying Admor's preliminary injunction motion. ECF No. 69.


         A. Rule 12(b)(1) Motion To Dismiss For Lack Of Subject Matter Jurisdiction.

         Admor's motion to dismiss is brought under Rule 12(b)(6) of the Federal Rules of Civil Procedure. However, Admor raises the issue of mootness, which is a matter of subject matter jurisdiction properly considered under Rule 12(b)(1). See Gemtel Corp. v. Cmty. Redev. Agency, 23 F.3d 1542, 1544, 1544 n.1 (9th Cir. 1994); see also Bland v. Fessler, 88 F.3d 729, 732 n.4 (9th Cir. 1996) (citing Gemtel for the principle that “mootness and ripeness [are] properly challenged under Rule 12(b)(1)”). Therefore, the court treats Admor's motion as having been brought in part under Rule 12(b)(1), which governs dismissal for lack of subject matter jurisdiction.

         An attack on subject matter jurisdiction “may be facial or factual.” Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). A facial attack asserts that “the allegations contained in a complaint are insufficient on their face to invoke federal jurisdiction[, ]” while a factual attack “disputes the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction.” Id.

         When the challenge is facial, all allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Fed'n of African Amer. Contractors v. City of Oakland, 96 F.3d 1204, 1207 (9th Cir. 1996). In a facial attack on jurisdiction, the court “confin[es] the inquiry to allegations in the complaint.” Savage v. Glendale Union High Sch., Dist. No. 205, Maricopa Cty., 343 F.3d 1036, 1040 n.2 (9th Cir. 2003).

         Before this court is a factual attack. In a factual attack on jurisdiction, a court “may review evidence beyond the complaint without converting the motion to dismiss into a motion for summary judgment.” Wood v. City of San Diego, 678 F.3d 1075, 1083 n.8 (9th Cir. 2012) (quoting Meyer, 373 F.3d at 1039). In such a challenge, “[t]he court need not presume the truthfulness of the plaintiff's allegations.” Id. “Once the moving party has converted the motion to dismiss into a factual motion by presenting affidavits or other evidence properly brought before the court, the party opposing the motion must furnish affidavits or other evidence necessary to satisfy its burden of establishing subject matter jurisdiction.” Savage, 343 F.3d at 1039 n.2.

         B. Rule 12(b)(6) Motion To Dismiss For Failure To State A Claim.

         Under Rule 12(b)(6), a complaint may be dismissed for failure to state a claim upon which relief can be granted. The court's review is generally limited to the contents of a complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th Cir. 1996). If matters outside the pleadings are considered, the Rule 12(b)(6) motion is treated as one for summary judgment. Keams v. Tempe Tech. Inst., Inc., 110 F.3d 44, 46 (9th Cir. 1997); Anderson v. Angelone, 86 F.3d 932, 934 (9th Cir. 1996). However, the court may take judicial notice of and consider matters of public record without converting a Rule 12(b)(6) motion to dismiss into a motion for summary judgment. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001); Emrich v. Touche Ross & Co., 846 F.2d 1190, 1198 (9th Cir. 1988).

         On a Rule 12(b)(6) motion to dismiss, all allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Fed'n of African Am. Contractors, 96 F.3d at 1207. However, conclusory allegations of law, unwarranted deductions of fact, and unreasonable inferences are insufficient to defeat a motion to dismiss. Sprewell, 266 F.3d at 988; In re Syntex Corp. Sec. Litig., 95 F.3d 922, 926 (9th Cir. 1996). Dismissal under Rule 12(b)(6) may be based on either “lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988) (citing Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir. 1984)).

         To survive a Rule 12(b)(6) motion to dismiss, “[f]actual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted); accord Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“[T]he pleading standard . . . does not require detailed factual allegations, but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” (internal quotation marks omitted)). “[A] plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (internal quotation marks omitted). A complaint must “state a claim to relief that is plausible on its face.” Id. at 570. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

         C. Rule 12(f) Motion To Strike.

         Under Rule 12(f), the “court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter, ” on its own or upon a motion made by a party. Fed.R.Civ.P. 12(f). Redundant matter is an allegation that includes a “needless repetition of other averments or [is] foreign to the issue.” Sligher v. Prospect Mortg., LLC, 789 F.Supp.2d 1212, 1216 (E.D. Cal. 2011) (citations omitted); see also Walter-Cook v. Integrated Health Res., LLC, Civ. No. 12-00146 ACK-RLP, 2012 WL 4461159, at *1-2 (D. Haw. Aug. 10, 2012). Immaterial matter has “no essential or important relationship to the claim for relief or the defenses being pleaded.” Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993) (citations omitted), rev'd on other grounds, 510 U.S. 517 (1994). Impertinent matter “consists of statements that do not pertain, and are not necessary, to the issues in question.” Id. Scandalous matter “improperly casts a derogatory light on someone, most typically on a party to the action.” Guerrero v. Halliburton Energy Servs., Inc., 231 F.Supp.3d 797, 802 (E.D. Cal. 2017) (quoting Germaine Music v. Universal Songs of Polygram, 275 F.Supp.2d 1288, 1300 (D. Nev. 2003)).

         The purpose of a Rule 12(f) motion is to “avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial.” Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). A Rule 12(f) motion to strike is a “severe measure and is generally viewed with disfavor.” United States v. 729.773 Acres of Land, 531 F.Supp. 967, 971 (D. Haw. 1982); see also Sky-Med, Inc. v. Skydiving Sch., Inc., Civ. No. 13-00193 DKW/BMK, 2014 WL 198801, at *2 (D. Haw. Jan. 16, 2014). Because of this, a motion to strike is “not normally granted unless prejudice would result to the movant from the denial of the motion.” 729.773 Acres of Land, 531 F.Supp. at 971. In considering a motion to strike, the court “views the challenged pleadings in the light most favorable to the plaintiffs.” Wailua Assocs. v. Aetna Cas. & Sur. Co., 183 F.R.D. 550, 554 (D. Haw. 1998) (citing Hoeft v. Tucson Unified Sch. Dist., 967 F.2d 1298, 1301 (9th Cir. 1992)).

         IV. ...

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