United States District Court, W.D. Kentucky, Bowling Green Division
MEMORANDUM OPINION & ORDER
GREG N. STIVERS, District Judge.
Plaintiff has moved to dismiss Defendants' counterclaims for lack of jurisdiction and failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6), respectively. (DN 31). Plaintiff has also moved to amend their counterclaim. (DN 34). Both motions are fully briefed and ripe for disposition. The Motion to Dismiss (DN 31) is GRANTED IN PART and DENIED IN PART.
I. STATEMENT OF FACTS AND CLAIMS
Defendants Donald E. Smith ("Smith") and Phoenix Synergies, Inc. ("PSI") have asserted counterclaims against Plaintiff John Rickett ("Rickett") and claims against Third-Party Defendant Jack Schoenthaler ("Schoenthaler"). Rickett has moved to dismiss these claims arguing the federal claims against him fail to state a claim upon which relief can be granted, and the remaining claims lack jurisdiction without the original jurisdiction provided in the federal claims. Defendants PSI and Smith are Texas and Florida citizens, respectively. Rickett is a citizen of Kentucky. Schoenthaler appears to be a citizen of Florida, though PSI now questions his citizenship.
The following facts are taken from PSI's proposed amended counterclaim. The current controversy stems from a soured business relationship. Rickett was involved in the creation of two patents purportedly enabling the recycling of Styrofoam. Defendants entered into a business relationship with Rickett sometime in late 2013 in a joint attempt to exploit those patents. Sometime in early 2014, the counterclaim alleges, Defendants began to realize the extent of Rickett's deceptive and illegal practices, including false (according to PSI) statements about his relationship to the company and the company's financial position. Rickett was formally terminated from his position as "president pro tem" on March 28, 2014. Through information disseminated on PSI's website and comments on internet radio, Defendants purportedly aired inaccurate statements about Rickett. PSI maintains the statements were true and were intended to limit the damage Rickett had done to their public image. Rickett maintains these publications give rise to claims of defamation and invasion of privacy. A more detailed recounting of these allegations is included in the Court's earlier ruling on the motion to dismiss. (Memo. Op. & Order 1-3, DN 17).
Since that prior ruling, Defendants have asserted counterclaims against Rickett plus third party claims against Schoenthaler, four unnamed individuals, and four unnamed corporations. (Ans. & Countercl., DN 26; Am. Countercl., DN 34-1). In its proposed amended counterclaim, PSI asserts a violation of the Racketeer Influenced and Corrupt Organization Act ("RICO"), 18 U.S.C. §§ 1961-1968; a violation of the Computer Fraud and Abuse Act ("CFAA") claims, 18 U.S.C. § 1030(a)(c)(2), 1030(a)(4), and 1030(a)(5)(A); and a claim of unjust enrichment. (Am. Countercl. ¶¶ 77-107, 134-39, ). As predicate acts to the RICO claim, Defendants assert mail, wire, and securities fraud, and the CFAA claims. Against Rickett alone, Defendants assert a claim for conversion. (Am. Countercl. ¶¶ 117-19). Against Rickett and Schoenthaler, they assert breach of contract for violation of a non-disclosure agreement ("NDA") and fraud. (Am. Countercl. ¶¶ 124-33).
As alleged in the proposed amended counterclaim, Rickett and the other parties engaged in a pattern of deceit before, during, and after their business relationship with PSI. Before the relationship began, Rickett and Schoenthaler collected up to $22 million from investors for the development of patents. (Am. Countercl. ¶ 26). PSI claims all counterdefendants knew these inventions were unworkable. (Am. Countercl. ¶ 78). Nonetheless, they serially formed "corporations, joint ventures and other enterprises" to deceive unsuspecting investors including Defendants. (Am. Countercl. ¶ 78).
Once the relationship was formed, they allege common law fraud, mail fraud, wire fraud, securities fraud, and breach of contract. The relationship was formalized with the signing of a non-disclosure agreement in November 2013. (Am. Countercl. ¶ 27). In January 2014, PSI hired Rickett as "president pro tem" with a $2, 000/month salary. (Am. Countercl. ¶ 36). They also provided Rickett with a computer and printer for business purposes. (Am. Countercl. ¶ 37). Shortly after this, during an airing of the "Phoenix Rising" internet radio show, a call for investment of $65, 000, 000 was read to the audience. (Am. Countercl. ¶ 54). Rickett called into the show and, according to defendants, falsely reported they had already secured the requested funding. (Am. Countercl. ¶¶ 56-57). Defendants allege Rickett desired to spread this misinformation to help his sale of counterfeit securities. (Am. Countercl. ¶ 60). Rickett and Schoenthaler also allegedly shared confidential information with investors in violation of the NDA during their employment with PSI. (Am. Countercl. ¶ 129).
While the relationship was ongoing, Defendants allege Rickett attempted to manufacture fake stock certificates in furtherance of his attempts to defraud investors and allegedly mailed the certificates. (Am. Countercl. ¶¶ 85-86).
According to PSI, Rickett refused to return the computer that had been provided after the relationship foundered. (Am. Countercl. ¶ 74). After this refusal, and therefore in excess of any authorized access, Rickett used the computer to access and manipulate others' email, to transmit a program intending harm, and to hide his fraudulent activity. (Am. Countercl. ¶ 92). PSI concedes Rickett has now returned the computer but maintains its conversion claim for the loss of its use and consequential damages. (Am. Countercl. ¶¶ 120-22).
Defendants maintain federal question jurisdiction under 28 U.S.C. § 1331 and supplemental jurisdiction under 28 U.S.C. § 1367. Alternatively, Defendants rely upon diversity jurisdiction for their counterclaims under 28 U.S.C. § 1332.
Motions to dismiss under Fed.R.Civ.P. 12(b)(6) allow defendants to test the legal plausibility of the claims against them. Courts "treat all well-pleaded allegations in the complaint as true." Moon v. Harrison Piping Supply, 465 F.3d 719, 723 (6th Cir. 2006) (citation omitted) (alteration in original). Given these assumed facts, "[d]ismissal is proper only if it appears beyond doubt that the plaintiff can prove no set of facts in support of [his] claims that would entitle him to relief.'" Id. (citation omitted). This does not unburden the pleader entirely. Complainants must "state a plausible claim for relief." Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). "[L]abels and conclusions, and a formulaic recitation of the elements of a cause of action[, ]" are insufficient to show the pleader's entitlement. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Complaints must provide "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 679. Ordinarily, court's consideration of 12(b)(6) motions are limited to the pleadings, though the court "may consider exhibits attached [to the complaint], public records, items appearing in the record of the case and exhibits attached to defendant's motion to dismiss so long as they are referred to in the complaint and are central to the claims contained therein[.]" Rondigo, L.L.C. v. Twp. of Richmond, 641 F.3d 673, 680-81 (6th Cir. 2011) (internal quotation marks omitted) (citation omitted).
Fed. R. Civ. P. 9(b) requires allegations of fraud to be pled with particularity. This requirement, however, must be read to coexist with the simplicity and concision mandated by Fed.R.Civ.P. 8. Michaels Bldg. Co. v. Ameritrust Co., N.A., 848 F.2d 674 (6th Cir. 1988). Pleading is further complicated in the context of a RICO claim, where courts are generally sensitive to the particularity requirements of Rule 9. See United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d 634, 643 (6th Cir. 2003); MyVitaNet.com v. Kowalski, No. 2:08-CV-48, 2008 WL 2977889 (S.D. Ohio July 29, 2008) (details of mail and wire fraud insufficiently pled). Plaintiffs pleading RICO claims with fraudulent RICO predicates must therefore strike a fine balance. "Even when heightened pleading standards apply, Plaintiffs must still comply with Rule 8's basic requirements." Arnold v. Alphatec Spine, Inc., No. 1:13-CV-714, 2014 WL 2896838, at *5 (S.D. Ohio June ...