Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_11-cv-01510/USCOURTS-azd-2_11-cv-01510-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Quantum Wave, LLC, 

Plaintiff, 

vs.

Michael Russell, Tinka Smith, Michael

Haarlander, The Avalon Effect, LLC, and

Wes Burwell,

Defendants.

Michael Russell, Tinka Smith, Michael

Haarlander, The Avalon Effect, LLC, and

Wes Burwell,

Counterclaimants,

vs.

Quantum Wave, LLC, Paul Weisbart, and

Lillian Weisbart,

Counterdefendants. 

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No. CV 11-01510-PHX-FJM

ORDER

We have before us counterdefendants Quantum Wave, LLC, Paul Weisbart, and

Lillian Weisbart's motion to dismiss or strike (doc. 35) and counterclaimants' response (doc.

39). We also have before us counterdefendants' motion to dismiss or strike defendant Wes

Burwell's counterclaims and affirmative defenses (doc. 38), Burwell's response (doc. 41), and

counterdefendants' reply to both responses (doc. 42). Counterdefendants request us to

dismiss or strike counterclaimants Michael Russell, Tinka Smith, Michael Haarlander, The

Avalon Effect, LLC, and Wes Burwell's declaratory judgment counterclaims, dismiss claims

Case 2:11-cv-01510-FJM Document 44 Filed 01/12/12 Page 1 of 4
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for declaratory judgment, breach of contract, and unjust enrichment against the Weisbarts,

and strike two affirmative defenses.

I

Under the Declaratory Judgment Act, we have discretion, but not the duty, to declare

the rights and legal relations of interested parties. 28 U.S.C. § 2201(a). If a counterclaim for

declaratory relief is redundant, we may exercise our discretion to strike the counterclaim.

See 6 Charles Alan Wright et al., Federal Practice and Procedure § 1406 (3d ed. 2010).

Count two of the complaint, misappropriation of trade secrets, contends that Quantum

Wave, LLC's "confidential information, including its distributor/customer database,

constitutes trade secrets subject to protection under the law" and defendants wrongfully

disclosed and used this information without consent (doc. 25 ¶ 56). Defendants deny these

allegations in their answer. Defendants also seek a declaration that: (1) Michael Russell,

Tinka Smith, Michael Haarlander, and Wes Burwell were independent contractors, (2)

contact lists, business methods, and work product are their personal property, (3) this

information is not a trade secret, and (4) they may use this information. 

"[T]he safer course for the court to follow is to deny a request to dismiss a

counterclaim for declaratory relief unless there is no doubt that it will be rendered moot by

the adjudication of the main action." Wright, supra, § 1406. The relief requested in the

counterclaims would not necessarily be granted even if the counterclaimants prevailed on

all claims asserted by plaintiff. Moreover, it will not impose any additional burden on the

counterdefendants. On the other hand, if the plaintiff prevails, then the requested

declarations will simply be moot. At this early point in the litigation, we prefer to err on the

side of caution and allow the claims to stand.

In a related action in the United States District Court for the Middle District of

Tennessee, the court dismissed counterclaimants' action for declaratory relief as a coercive

action. The court found that the action would serve no useful purpose because it "involve[d]

disputed factual issues by an alleged tortfeasor and [did] not present all of the claims between

the parties." The Avalon Effect, LLC v. Weisbart, No. 3:11-00744 (M.D. Tenn. Sept. 20,

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2011) (Doc. 42, ex. B at 2). These problems are not present here, though, and the declaratory

judgments sought in the counterclaim are not asserted to obtain the defendants' preferred

forum. Cf. AmSouth Bank v. Dale, 386 F.3d 763 (9th Cir. 2004) ("[W]here a putative

defendant files a declaratory action whose only purpose is to defeat liability in a subsequent

coercive suit, no real value is served by the declaratory judgment except to guarantee to the

declaratory plaintiff her choice of forum . . . .") (cited in The Avalon Effect, LLC v.

Weisbart, supra).

II

Counterdefendants ask us to strike or dismiss the declaratory judgment, breach of

contract, and unjust enrichment claims against Paul and Lillian Weisbart. They contend the

counterclaims do not make any allegations against the Weisbarts as individuals. 

"A motion to strike may be filed only if it is authorized by statute or rule . . . or if it

seeks to strike any part of a filing or submission on the ground that it is prohibited (or not

authorized) by a statute, rule, or court order." LRCiv 7.2(m). The claims against the

Weisbarts are not "redundant, immaterial, impertinent, or scandalous" and thus a motion to

strike is not authorized by Rule 12(f), Fed. R. Civ. P. Nor do counterclaimants point to any

other rule or statute authorizing us to strike these claims.

When considering a motion to dismiss pursuant to Rule 12(b)(6), Fed. R. Civ. P., "a

court must construe the complaint in the light most favorable to the plaintiff and must accept

all well-pleaded factual allegations as true." Shwarz v. United States, 234 F.3d 428, 435 (9th

Cir. 2000). On the other hand, a court is "not bound to accept as true a legal conclusion

couched as a factual allegation." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct.

1955, 1965 (2007) (quoting Papasan v. Allain, 478 U.S. 265, 286, 106 S. Ct. 2932, 2944

(1986)). To survive a motion to dismiss, the complaint must contain "enough facts to state

a claim to relief that is plausible on its face." Id. at 570, 127 S. Ct. at 1974. "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." Ashcroft v.

Iqbal, 556 U.S. ___, 129 S. Ct. 1937, 1949 (2009).

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Counterclaimants allege that the Weisbarts failed to follow corporate formalities for

Quantum Wave, LLC and commingled funds. If these allegations are true, then

counterclaimants will be able to pierce the corporate veil and the Weisbarts will be liable for

everything for which Quantum Wave, LLC is liable. In addition, the factual allegations in

the counterclaims may be able to support claims for unjust enrichment and breach of contract

against the Weisbarts individually. The requested declaratory relief also includes

declarations of rights involving the Weisbarts. For these reasons, we deny

counterdefendants' motion to strike or dismiss the claims against the Weisbarts as

individuals.

III

"The key to determining the sufficiency of pleading an affirmative defense is whether

it gives plaintiff fair notice of the defense." Wyshak v. City Nat'l Bank, 607 F.2d 824, 827

(9th Cir. 1979). In count two of the complaint, plaintiffs allege misappropriation of trade

secrets. Defendants have asserted as their second and third affirmative defenses that

information alleged to be confidential or a trade secret is their property and/or not a

protectable trade secret. (Doc. 37 at 11). These assertions give plaintiffs fair notice of the

basis of the defense and are not redundant, immaterial, impertinent, or scandalous. 

IV

Accordingly, IT IS ORDERED DENYING counterdefendants' motion to dismiss or

strike counterclaimants' declaratory judgment counterclaims, claims against Paul and Lillian

Weisbart, and second and third affirmative defenses (doc. 35). 

DATED this 12th day of January, 2012.

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