Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-02326/USCOURTS-azd-2_09-cv-02326-0/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 28:1331 Federal Question: Other Civil Rights

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Calvin Matthews, Tyrone Hunt, and

Michael Buckner, 

Plaintiffs, 

vs.

NPMG Acquisition Sub, LLC, 

Defendant. 

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No. CV 09-2326-PHX-MHM

ORDER

Currently pending before the Court is Defendant NPMG Acquisition Sub, LLC’s

Motion to Dismiss. (Doc. 12). Also before the Court are Plaintiffs Calvin Matthews,

Tyrone Hunt, and Michael Buckner’s Motion to Extend Time to Respond to Motion to

Dismiss, (Doc. 16), and Motion to Convert Defendant’s Rule 12(b)(6) Motion to Dismiss

into a Motion for Summary Judgment. (Doc. 18). Having reviewed the Parties pleadings,

the Court issues the following Order:

I. BACKGROUND

This is an action for employment discrimination brought pursuant to 42 U.S.C. §

1981. Plaintiffs’ Complaint, filed November 4, 2009, alleges that their employer, Defendant

NPMG Acquisition Sub, LLC, discriminated against them based on their race. (Doc. 1).

Defendant filed the instant Motion to Dismiss on January 6, 2010. (Doc. 12). On January

27, 2010, five days after a responsive pleading was due, Plaintiffs filed their Motion to

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Extend Time to Respond to Motion to Dismiss, explaining their tardiness and basing their

request for additional time on the fact that counsel’s daughter underwent major surgery on

January 22, 2010, in Chicago. (Doc. 16). Over two weeks later, on February 16, 2010,

before the Court ruled on their extension of time motion, Plaintiff’s filed their Motion to

Convert Defendant’s Rule 12(b)(6) Motion to Dismiss into a Motion for Summary Judgment.

(Doc. 18). In that motion, Plaintiffs stated that this Court consider it to be their Response

to Plaintiff’s Motion to Dismiss in the event that this Court declines to convert Defendant’s

Motion to Dismiss into a motion for summary judgment. (Id., p.6). Plaintiff’s Motion to

Dismiss became fully briefed on February 25, 2010. (Doc. 20).

II. DISCUSSION

Defendant’s Motion to Dismiss is based on three independent grounds: (1) Plaintiffs

waived and released these claims pursuant to the court-approved Consent Decree; (2)

Plaintiffs attempt to assert claims that could have been resolved in the previous lawsuit and,

as a result, are barred by Res Judicata; and (3) Plaintiff’s Complaint fails on its face to state

a claim under the “plausibility” pleading standard set by the Supreme Court in Bell Atlantic

Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, __U.S. __, 129 S. Ct. 1937

(2009). The Court turns first to Defendant’s waiver and Res Judicata arguments, as they

implicate Plaintiffs’ Motion to Convert Defendant’s Rule 12(b)(6) Motion to Dismiss into

a Motion for Summary Judgment.

A. Wavier and Res Judicata

Defendant’s waiver and Res Judicata arguments are predicated on a Consent Decree

entered by Judge Bolton in the case Equal Employment Opportunity Commission v.

iPayment, Inc. and NPMG Acquisition Sub, LLC (“EEOC v. iPayment”) (CV-08-01790,

Doc. 69). Before discussing the content of this decree and it applicability to this case, the

Court must address Plaintiff’s argument that reliance on the Consent Decree and the

underlying Complaint necessitates transforming Defendant’s Motion to Dismiss into a

motion for summary judgment. As a general rule, district courts may not consider materials

not attached to a plaintiff’s complaint. United States v. 14.02 Acres, 547 F.3d 943, 955 (9th

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Cir. 2008). Plaintiff’s position is incorrect, however, as the Ninth Circuit has held that

courts “may take judicial notice of matters of public record and consider them without

converting a Rule 12 motion into one for summary judgment.” Id. (internal quotation marks

omitted) (citing Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001)). The Court,

therefore, may properly consider the Complaint filed in EEOC v. iPayment and the Consent

Decree which resolved that matter without transforming Defendant’s dismissal motion into

one for summary judgment.

EEOC v. iPayment was an action brought under Title VII of the Civil Rights Act of

1964, 42 U.S.C. § 2000e et seq., by the Equal Employment Opportunity Commission

(“EEOC”) to “correct unlawful employment practices on the basis of race and to provide

appropriate relief to Calvin Matthews, Tyrone Hunt, Michael Buckner, and a class of

employees, who were adversely affected by such practices.” (CV-08-01790, Doc. 10, p.1).

On September 15, 2009, Judge Bolton entered the Consent Decree, which ordered payment

of $100,000.00 to Calvin Matthews, $90,000.00 to Tyrone Hunt, and $90,000.00 to Michael

Buckner as compensatory damages, in addition to a number of other forms of non-monetary

relief, such as personalized apology letters (CV-08-01790, Doc. 67). Additionally, the

Consent Decree stated:

This Consent Decree resolves all claims of the Commission and of Mssrs.

Matthews, Hunt, Buckner, Gawarecki (each a “Charging Party,” and

collectively the “Charging Parties”) and a class of former employees identified

in Exhibit B hereto (each a “Class Member,” and collectively the “Class

Members”) against Defendant (including, but not limited to, Defendant’s

officers, members, directors, and employees), including any and all claims for

back pay, compensatory and punitive damages, interest, injunctive relief, and

attorney’s fees and costs arising out of the issues that were or could have been

raised in this lawsuit up until the date of the execution of this Consent Decree

by the parties.

(emphasis added) (Id., p.2, ¶1).

In construing the provisions of a consent decree, courts utilize contract principles.

Wicker v. Oregon, 543 F.3d 1168, 1174 (9th Cir. 2008) (“Because a consent decree has

attributes of both a contract and a judicial act, courts use contract principles in construing

it.”). Under basic contract principles of the State of Arizona, this Court must first look to the

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1

The Court acknowledges that the Consent Decree would not bar Plaintiffs from suing

this Defendant for racial harassment stemming from events that occurred subsequent to the

execution of the Consent Decree. It does not appear, however, that Plaintiffs’ instant lawsuit

raises new allegations of discrimination. In fact, Plaintiffs’ line of argumentation in

opposition to Defendant’s Motion to Dismiss seems to acknowledge that the underlying

factual predicate is the same between this lawsuit and EEOC v. iPayment. Plaintiffs respond

to Defendant’s waiver and res judicata arguments by arguing that they were not parties to the

Consent Decree (Doc. 18, p.3), not by asserting the factual predicate in this lawsuit is

different from that of EEOC v. iPayment

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plain meaning of the Consent Decree’s language, without reference to extrinsic evidence.

See Marvin Johnson, P.C. v. Shoen, 876 F. Supp. 1109, 1111 (D. Ariz. 1995) (noting that

under Arizona law “extrinsic evidence cannot be used to add to, subtract from, vary, or

contradict the terms of a complete and unambiguous written agreement.” (internal quotations

omitted)). The Court finds that paragraph 1 of the Consent Decree is unmistakably clear; all

claims of Plaintiffs Matthews, Hunt, and Buckner, that could have been raised in EEOC v.

iPayment have been expressly waived. In their response, Plaintiffs do not appear to dispute

the plain meaning of the Consent Decree. They argue instead that EEOC’s attorney informed

them that the Consent Decree would not preclude them from filing a subsequent action under

42 U.S.C. § 1981.1

 This Court, however, cannot consider such extrinsic evidence, as the

language of the consent decree is plain and unmistakable: “any and all claims . . . arising out

of the issues that were or could have been raised in this lawsuit up until the date of the

execution of this Consent Decree by the parties” have been waived. (CV-08-01790, Doc.

10, p.2, (emphasis added)); Marvin Johnson, P.C., 876 F. Supp. at 1111. Accordingly, if the

Consent Decree is binding on Plaintiffs, it clearly precludes them from bringing this lawsuit.

The Court says “if” because Plaintiffs’ primary defense to Defendant’s motion is that

they are not bound by the Consent Decree. This assertion, which the Court will address

momentarily, also affects Defendant’s Res Judicata arguments. “Res judicata, also known

as claim preclusion, bars litigation in a subsequent action of any claims that were raised or

could have been raised in the prior action.” Western Radio Servs. Co. v. Glickman, 123 F.3d

1189, 1192 (9th Cir. 1997). “In order for res judicata to apply there must be: 1) an identity

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Please see footnote 1, supra.

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of claims, 2) a final judgment on the merits, and 3) identity or privity between parties.” Id.

“The central criterion in determining whether there is an identity of claims between the first

and second adjudications is whether the two suits arise out of the same transactional nucleus

of facts.” Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001)

(internal quotations omitted). In other words, a plaintiff is barred from bringing “grounds

for recovery which could have been asserted, whether they were or not, in a prior suit

between the same parties” Id. (internal quotations omitted). 

Turning to the res-judicata test, the Court notes that consent decrees are considered

final judgments on the merits, which are afforded res judicata effect. See Gilmore v. Cal.,

220 F.3d 987, 1001 n.17 (9th Cir. 2000) (citing Securities & Exch. Comm'n v. Randolph,

736 F.2d 525, 528 (9th Cir. 1984) (“A consent decree is a judgment, [and] has the force of

res judicata”)). There is also an identity of claims between this lawsuit and EEOC v.

iPayment, as both actions are predicated on the same nucleus of operative facts; racial

harassment by Defendant NPMG.2

 As for the third prong of the test, privity, the Court notes

that Plaintiffs can only have privity with Defendant if Plaintiffs were parties to the Consent

Decree, which Plaintiffs deny. Thus, as with Defendant’s waiver claim, the Court cannot

make a determination concerning res judicata until it address Plaintiff’s contention that they

were not parties to EEOC v. iPayment and are not, therefore, bound by it. 

In support of their position, Plaintiffs cite the Supreme Court case Martin v. Wilks,

which expounds the general rule that a “stranger” to prior litigation ending in judgment or

a consent decree is not precluded from later litigating his or her own individual claims. 490

U.S. 755, 763 (1989) (“A judgment or decree among parties to a lawsuit resolves issues as

among them, but it does not conclude the rights of strangers to those proceedings.”). At first

blush, Plaintiffs’ position is puzzling, as the First Amended Complaint in EEOC v.

iPayment specifically stated that the case was brought to “to correct unlawful employment

practices on the basis of race and to provide appropriate relief to Calvin Matthews, Tyrone Hunt,

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3

The Adams case pre-dates the Supreme Court’s holding in General Telephone, but

in subsequent years, post-General Telephone, the Fourth Circuit has declined to overturn

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[and] Michael Buckner.” (CV-08-01790, Doc. 10, p.1). Additionally, each Plaintiff is

specifically identified, by name and as a charging party, in the Consent Decree, including in

the release paragraph, which states that: “This Consent Decree resolves all claims ... of

Mssrs. Matthews, Hunt, Buckner, ...against Defendant.” (Doc. 69, p.2). The Eleventh

Circuit, however, has held that a consent decree issued in an EEOC case is not always an

absolute bar to a subsequent suit. Riddle v. Cerro Wire & Cable Group, Inc., 902 F.2d 918,

922 (11th Cir. 1990). When during the course of the EEOC’s litigation the interests of the

aggrieved individual on whose behalf the EEOC initiated litigation and the EEOC diverge,

privity between those parties is destroyed and, as a result, the aggrieved individual is not

barred by the doctrine of re judicata from bringing suit, even where the EEOC sought and

achieved individualized relief for the aggrieved individual. Id. 

In arguing that their instant suit is not precluded by the Consent Decree, Plaintiffs rely

exclusively on Riddle in combination with Wilks. Defendant, on the other hand, cites this

Court to and primarily relies on a Fourth Circuit case holding that a charging-party in a case

litigated by the EEOC who does not exercise his right to intervene in the EEOC action is

bound by the outcome, without exception. Adams v. Proctor & Gamble Mfg. Co., 697 F.2d

582, 583 (4th Cir. 1983). It does not appear the Ninth Circuit has weighed in on this specific

issue. Because it has not done so, this Court is hesitant to adopt the hardline rule endorsed

by the Fourth Circuit in Adams. Additionally, the Court finds more reasonable the approach

taken by the Eleventh Circuit, which acknowledges that in some, limited circumstances, an

individual on whose behalf the EEOC litigates may not always have his interest properly

represented by the EEOC and should not, therefore, be bound by the outcome of that action.

Additionally, Riddle relies on and appears to comport with the Supreme Court’s finding in

General Telephone. Co. of the Northwest, Inc. v. EEOC, that the interests of the EEOC and

of an individual may be divergent,3

 446 U.S. 318, 326 (1980) (“When the EEOC acts, albeit

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Adams, even in light of Riddle. See Francis v. American Tel. & Tel. Co., 1994 U.S. App.

LEXIS 774 (4th Cir, Jan. 19, 1994).

4

The Riddle Court’s discussion of how the interest of an aggrieved individual and the

EEOC can diverge is instructive: “The EEOC is primarily interested in securing equal

employment opportunity in the workplace. That interest is often most completely advanced

through conciliation agreements or consent decrees of the kind involved in this case, where

the employer agrees to take broad remedial steps to eradicate discrimination. The aggrieved

individual, on the other hand, is primarily interested in securing specific personal relief of

the kind Riddle is seeking in her private action against Cerro. The differing interests of the

EEOC and of the aggrieved individual are not necessarily compatible.” 902 F.2d at 922–23.

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at the behest of and for the benefit of specific individuals, it acts also to vindicate the public

interest in preventing employment discrimination.”); see Riddle, 902 F.2d at 922 (explaining

how the interests of the EEOC and an aggrieved individual are not necessarily compatible)4

;

see also Vines v. Univ. of La., 398 F.3d 700, 707 (5th Cir. 2005) (relying on General

Telephone Co. for the proposition that “the interests of the EEOC and of the individual may

be divergent.”); Loveridge v. Fred Meyer, 72 Wn. App. 720, 731 (Wash. Ct. App. 1993)

(applying Riddle, instead of Adams, in part because Adams was decided before General

Telephone and Wilks).

In Riddle, the EEOC brought suit under Title VII on behalf of Nora Riddle against her

employer, Cerro Wire and Cable Group, Inc. (“Cerro”). The EEOC’s Complaint identified

Riddle by name, stating, “this is an action under Title VII of the Civil Rights Act of 1964 to

correct unlawful employment practices on the basis of sex and to make whole Mrs. Nora E.

Riddle,” and sought general relief against Cerro, in addition to personal relief for Riddle. Id.

at 918 n.1. Shortly before trial was set to occur, EEOC and Cerro negotiated a settlement.

The settlement agreement displeased Riddle, causing her to retain an attorney to seek

assurance from EEOC that in the event of settlement, it would issue her a right-to-sue letter

and that she would be allowed to institute an individual action against Cerro. Id. The EEOC

sent Riddle a letter agreeing to issue the right-to-sue letter and informing Riddle that she

would not be bound by the settlement unless she signed a release and, as a result, received

money damages from Cerro. Riddle did not sign the release and received no money

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damages. Id. The Eleventh Circuit held that Riddle and EEOC had divergent interests and

were not, therefore, in privity because:

Riddle made clear to the EEOC and Cerro before the consent decree was

finalized that she was dissatisfied with the Commission's handling of her

interests. Riddle's interests and those of the EEOC diverged at that point. The

EEOC acknowledged that fact when it informed Riddle that she was not bound

by the EEOC's resolution of the matter but was free to institute a private action

against Cerro. Riddle did not, in fact, accept the terms of the consent decree;

she did not sign a release, and she did not receive any money from Cerro. 

In making its ruling, the Riddle Court specifically noted that it expressed “no opinion

whether another case might present facts sufficient to demonstrate an identity of interests and

privity between the aggrieved individual and the EEOC. We hold only that here, where there

was a clear divergence of interests, Cerro has not shown that Riddle and the EEOC were in

privity.” Id. at 923 n.5.

Based on the foregoing, it is clear to this Court that the holding in Riddle is a narrow

one, defying blanket application, and limited only to those situations where an aggrieved

individual can marshal facts that demonstrate that his interests clearly diverged with those

of the EEOC. In the instant case, the factual record is insufficient to make a determination

under Riddle. On the one hand, in their response to Defendant’s Motion to Dismiss,

Plaintiffs direct the Court to the Affidavit of Defendant Hunt, in which Hunt purportedly

states that he was displeased with the result obtained by the EEOC, and that all Plaintiffs

were told by the EEOC attorney that they could pursue a private action under 42 U.S.C.

§1981 notwithstanding entry of the Consent Decree obtained by the EEOC. Plaintiffs,

however, failed to attach the affidavit to their response, so this Court has not had opportunity

to examine it. On the other hand, Defendant claims that all of the Plaintiffs accepted the

damage payments to which the Consent decree entitled them, thereby binding them to its

provisions, including the provision in which Plaintiffs agreed to waive all future claims

arising out of the same nucleus of common facts. Defendant, however, has not provided

evidence to support its assertion that Plaintiffs received damage payments pursuant to the

Consent Decree. And, even if such evidence were in the record, the Court could probably

not consider it in the context of a motion to dismiss and would have to convert Defendant’s

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motion to one for Summary Judgment. See 14.02 Acres, 547 F.3d at 955; Scott v.

Kuhlmann, 746 F.2d 1377, 1378 (9th Cir. 1984) (noting that the affirmative defense of res

judicata may only be decided on a motion to dismiss where there are no disputed issues of

fact concerning the issue). Consequently, at this time, the Court cannot grant Defendant’s

motion to dismiss based on waiver and res judicata.

B. Failure to State a Claim

The Court turns next to Defendant’s argument that Plaintiffs’ Complaint fails to state

a claim for relief. To survive a motion to dismiss for failure to state a claim under

Fed.R.Civ.P. 12(b)(6), the plaintiff must allege facts sufficient “to raise a right to relief above

the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167

L. Ed. 2d 929 (2007). The “complaint must contain sufficient factual matter, accepted as true,

to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S.Ct. 1937,

1949, 173 L. Ed. 2d 868 (2009) (quoting Twombly, 550 U.S. at 570). Compare Wyler

Summit Partnership v. Turner Broad. Sys. Inc., 135 F.3d 658, 661 (9th Cir. 1998) ("[A]ll

well-pleaded allegations of material fact are taken as true and construed in a light most

favorable to the nonmoving party.") with Sprewell v. Golden State Warriors, 266 F.3d 979,

988 (9th Cir. 2001) (“[T]he court [is not] required to accept as true allegations that are merely

conclusory, unwarranted deductions of fact, or unreasonable inferences.”). “Threadbare

recitals of the elements of a cause of action, supported by mere conclusory statements, do not

suffice." Iqbal, 129 S.Ct. at 1949; Twombly, 550 U.S. at 555 (“[A] formulaic recitation of

the elements of a cause of action will not do.”). However, “[a] dismissal for failure to state

a claim is appropriate only where it appears, beyond doubt, that the plaintiff can prove no set

of facts that would entitle it to relief.” Morley v. Walker, 175 F.3d 756, 759 (9th Cir. 1999).

Also, in evaluating a motion to dismiss, a district court need not limit itself to the allegations

in the complaint; but may take into account any "facts that are [ ] alleged on the face of the

complaint [and] contained in documents attached to the complaint." Knievel v. ESPN, 393

F.3d 1068, 1076 (9th Cir. 2005).

Defendant argues that Plaintiffs’ Complaint fails to state a claim for relief under 42

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U.S.C. § 1981. “Among other things, § 1981 guarantees ‘all persons’ the right to ‘make and

enforce contracts.’ This right includes the right to the ‘enjoyment of all benefits, privileges,

terms, and conditions of the Contractual relationship,’ including the relationship between

employer and employee. Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1122 (9th Cir.

2008) (internal citations omitted) (quoting 42 U.S.C. § 1981(a); Id. § 1981(b)). To state a

hostile work environment claim under § 1981, a plaintiff must allege that “(1) he was

subjected to verbal or physical conduct because of his race, (2) the conduct was unwelcome,

and (3) the conduct was sufficiently severe or pervasive to alter the conditions of his

employment and create an abusive work environment.” Id.

Although § 1981 claims are not subject to heightened pleading requirements, a

Complaint still must still allege facts sufficient to give a defendant notice of the grounds on

which the claim rests. Williams v. Boeing Co., 517 F.3d 1120, 1130 (9th Cir. 2008) (“Even

though heightened pleading is not required in discrimination cases, the complaint must still

give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it

rests.”) Plaintiff’s allegations, however, are completely devoid of specific factual allegations

pertaining to any individual acts of discrimination or the consequences of that discrimination,

other than the obtuse statement “racial discrimination by defendant diminished and destroyed

the contractual relationship between plaintiffs and defendant.” And as this Court has

previously mentioned, it is not clear from the face of the Complaint whether Plaintiffs allege

acts of discrimination subsequent to those addressed in EEOC v. iPayment, or have brought

new allegations against Defendant. 

The Court agrees with Defendant that Plaintiff’s Complaint does nothing more than

make a threadbare recital § 1981's elements in violation of Twombly. 127 S. Ct. at 1965 (“a

formulaic recitation of the elements of a cause of action will not do.”). The factual allegations

and charging sections of Plaintiff’s Complaint are combined into one section and limited to

three sentences: (1) “This is an employment discrimination case by former employees of

defendant alleging discriminatory conduct against them because of their race. Plaintiffs

allege that they had employment contracts with the defendant”; (2) “Defendant subjected

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plaintiffs, as employees, to unwelcome racial harassment, including racial comments and

slurs by Defendant’s managers and/or employees, which fractured plaintiffs’ contractual

relationship because of race”; and (3) “That discriminatory conduct and racial discrimination

by defendant diminished and destroyed the contractual relationship between plaintiffs and

defendant, and caused plaintiffs to be discriminated against because of their race.” (Doc.

1, p.2). Plaintiffs’ Complaint is plainly deficient and must be dismissed.

Defendant requests that this dismiss with prejudice, arguing amendment would be

futile because of the waiver and res judicata issues already addressed by this Court. See

Newland v. Dalton, 81 F.3d 904, 907 (9th Cir. 1995) (“While Fed. R. Civ. P. 15(a)

encourages leave to amend, district courts need not accommodate futile amendments.”).

Because, however, the Court has found that neither one of those issues necessitates dismissal,

it cannot say that amendment would be futile. To the contrary, the fact that the EEOC was

able to negotiate a Consent Decree that included sizeable cash damages for Plaintiffs

suggests they Plaintiffs may yet be able to state a claim for relief. The Court, therefore, will

grant Defendant’s Motion to Dismiss, but with leave to amend within fifteen days of the

receipt of this Order. 

Accordingly,

IT IS HEREBY ORDERED granting Defendant’s Motion to Dismiss. (Doc. 

12).

IT IS FURTHER ORDERED granting Plaintiffs leave to amend their Complaint. 

Any amended complaint must be received by this Court within fifteen days of the date of

this Order.

IT IS FURTHER ORDERED denying as moot Plaintiffs’ Motion to Extend

Time to Respond to Motion to Dismiss, (Doc. 16).

/ / / 

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IT IS FURTHER ORDERED denying Plaintiffs’ Motion to Convert Defendant’s

Rule 12(b)(6) Motion to Dismiss into a Motion for Summary Judgment. (Doc. 18). 

DATED this 29th day of July, 2010.

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