Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-01109/USCOURTS-azd-2_06-cv-01109-0/pdf.json

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

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Siren, Inc., an Arizona )

corporation, and Jared )

Kilgore )

)

Plaintiffs, ) No. CIV 06-1109 PHX RCB

)

vs. ) O R D E R 

)

Firstline Security, Inc., a )

Utah corporation, et al. )

)

Defendants. ) )

On April 21, 2006, Plaintiffs Siren, Inc. ("Siren") and Jared

Kilgore filed a complaint in the Superior Court of Arizona in

Maricopa County seeking monetary and injunctive relief for claims

sounding in tort, contract, and state antitrust law. Compl. (doc.

# 1, pt. 2). The matter was removed to this Court on that same

day. Notice (doc. # 1). Currently pending before the Court are

Plaintiffs' motion for temporary restraining order (doc. # 4, pt.

7) and Defendants' motion to dismiss or, in the alternative, to

stay proceedings (doc. # 5). Both motions have been fully briefed,

and the Court heard oral argument on May 15, 2006. Having 

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carefully considered the arguments raised, the Court now rules.

I. BACKGROUND

Defendant Firstline Security, Inc. ("Firstline") is in the

business of marketing and selling home security systems and

recruiting sales representatives to sell such systems door-to-door. 

Keyes Aff. (doc. # 14, pt. 2) ¶ 3. Jared Kilgore was employed by

Firstline from 2002 through November 2005, at one time as a Vice

President and later as an acting Division President. Kilgore Aff.

(doc. # 16, pt. 2) ¶¶ 6, 28.

On August 26, 2004, Kilgore and Firstline executed a Vice

President Employment Agreement ("VP Agreement"). Three provisions

of the VP Agreement are especially relevant to the matters now

pending before the Court.

First, the non-compete clause would prohibit Kilgore from (1)

"recruit[ing] sales representatives in, or within a fifty (50) mile

radius of . . . Mesa, Arizona; Tempe, Arizona"; (2) "market[ing] or

sell[ing] home security systems in the States and Territories of

the United States in which [Firstline] operates"; (3) "engaging

directly in [a competing business] as an owner, shareholder,

member, partner, or agent"; and (4) "employing or recruiting any

potential employee of [Firstline] for any purpose related to [the

business of recruiting sales representative to market and sell home

security systems and the marketing and selling of such systems]." 

VP Agreement (doc # 4, pt. 2) at 45 ¶ 6. These restrictions would

remain in effect for the duration of the agreement and for

twenty-four months after its termination. Id.

Second, the non-solicitation clause would prohibit Kilgore

from "directly or indirectly . . . solicit[ing] or otherwise

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induc[ing] any employee or former employee of [Firstline] to enter

into employment or to participate in any activity that is in

competition with [Firstline]." Id. at 46 ¶ 7.

Third, the forum selection and choice of law provisions state

as follows:

This Agreement shall be governed by the laws of

the State of Utah and any action relating to

this Agreement or the breach or enforcement

hereof shall be brought and maintained in the

Courts of the State of Utah, each of the

parties consenting [sic] the exclusive personal

jurisdiction of such courts as if they were

personally present in Utah.

Id. at 47 ¶ 19.

Kilgore carried out his duties as Vice President in Arizona,

traveling to that state with a Firstline sales team recruited from

other states. Kilgore Aff. ¶ 11.

At the end of the 2005 summer sales season, after informing

Firstline executives that he intended to terminate his employment

with the company, Kilgore met with Wright Thurston and Defendant

Trevor Keyes of Firstline in Utah on August 12, 2005. At this

meeting, Kilgore was asked to return to Utah on August 24, 2005 to

discuss employment options with Thurston. Id. ¶¶ 16-18. 

At the August 24 meeting, Kilgore agreed orally ("Consulting

Agreement") to a temporary two-month trial period as an acting

Division President for Firstline. Id. ¶¶ 19-22. Kilgore never

signed a written agreement or formally accepted a position as a

full Division President.

On November 12, 2005, Kilgore formally terminated his

employment with Firstline. Id. ¶ 28.

Kilgore subsequently established Siren, Inc. ("Siren") as an

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Arizona corporation as of March 10, 2006. Like Firstline, Siren is

in the business of selling home security systems. Kilgore is

Siren's sole owner. Id. ¶¶ 2-3. Siren has recruited sales

representatives by email communications to college students in

Arizona. Id. ¶ 40. Siren plans to sell security systems in the

summer 2006 sales season in three markets: Cleveland and Columbus,

Ohio and Indianapolis, Indiana. Id.

On April 4, 2006, Firstline filed a complaint in state court

in Utah against Kilgore alleging (1) breach of contract, (2)

intentional interference with contractual relations, (3)

misappropriation of corporate opportunity, (4) misappropriation of

trade secrets, (5) breach of fiduciary duty, (6) unjust enrichment,

and (7) conversion, and (8) seeking preliminary and permanent

injunctive relief based on those claims. See Compl. (doc. # 4, pt.

2) at 24-41.

After the filing of that lawsuit, Plaintiffs aver that

Firstline officials have contacted current and prospective Siren

employees to induce them to not join Siren, breach their employment

contracts and join Firstline, or to otherwise stop working for

Siren. Am. Compl. (doc. # 16) ¶ 43. For example, Plaintiffs claim

that Keyes and other Firstline officials have (1) mentioned the

Utah lawsuit and made other references to their plans of putting

Siren out of business, see id. ¶ 46, (2) threatened that Firstline

will have people follow Siren's salesmen around during the summer

to make sure they cannot make any sales, id. ¶ 49, (3) said that

Keyes would personally set aside $250,000 per Siren office to make

sure that Siren employees in those cities do not show up to work,

id. ¶ 50, (4) indicated that Keyes would "hire four Mexicans to put

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1

 The only paragraph in the original complaint concerning Erin

Keyes reads as follows:

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up flyers on the doors before and after the employees of Siren have

knocked them to kill Siren's business," id. ¶ 51, and (5) stated

that Defendants have a "mole" or "inside man" at Siren, id. ¶ 48. 

Defendants deny these allegations, Keyes Aff. ¶¶ 21-22, Redd Aff.

¶¶ 16-18, but concede that Keyes may have made some statements he

later regretted "out of concern for the damage being inflicted on

Firstline" at the time. Keyes Aff. ¶ 19.

On April 21, 2006, Siren and Kilgore filed the present action

in the Superior Court of Arizona in Maricopa County alleging (1)

intentional interference with contractual relations, (2) defamation

and trade libel, (3) breach of contract, (4) restraint of trade,

(5) abuse of process, and (6) seeking preliminary and permanent

injunctive relief based on those claims. See Compl. (doc. # 1, pt.

2). Defendants removed the action to this Court that same day.

Plaintiffs subsequently filed an amended complaint (doc. #

16), naming Jane Doe Keyes in place of Defendant Erin Keyes, and

dropping the breach of contract claim. See Am. Compl. (doc. # 16).

II. DEFENDANT ERIN KEYES'S RULE 12(b)(2) MOTION TO DISMISS

Defendant Erin Keyes has moved to dismiss Plaintiffs'

Complaint pursuant to Rule 12(b)(2) of the Federal Rules of Civil

Procedure. The original complaint contains no allegations against

Erin Keyes; her joinder as a party defendant is based solely on her

capacity as a potential interest holder in a marital community

benefitted by the allegedly tortious conduct of her husband, Trevor

Keyes.1 See Compl. (doc. # 1, pt. 2) ¶ 4. Because Utah, their

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Keyes and his wife, Erin, are residents of the

State of Utah and, on information and belief,

were at all relevant times herein husband and

wife. Accordingly, this action is brought

against them and their marital community, as the

actions taken by Keyes were done for the benefit

of and in furtherance of his marital community.

Compl. (doc. # 1, pt. 2) ¶ 4.

2

 In an apparent effort to evade dismissal on the bases set

forth in Defendants' motion to dismiss (doc. # 5), Plaintiffs have

filed an amended complaint (doc. # 16). In their response to

Defendants' motion to dismiss, Plaintiffs claim that the amended

complaint does not name Erin Keyes as a party, thereby mooting her

motion. See Resp. (doc. # 15) at 1-2. As Defendants point out,

however, the amended complaint (doc. # 16) names "Jane Doe Keyes"

instead. Reply (doc. # 19) at 2 n.1. Accordingly, Defendants seek

clarification that Erin Keyes will be dropped as a party, and the

Court rules on her motion on that basis.

As the claims in the complaint and amended complaint against the

remaining defendants are essentially the same, the analysis would be

the same whether directed to the complaint or amended complaint.

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state of marriage and domicile, is not a community property state,

she maintains that there is no such marital community in which she

could be a current interest holder. Mot. (doc. # 5) at 6-7. Thus,

she contends that the Court cannot exercise personal jurisdiction

over her. Id. The Court construes this motion as a request for an

order dropping Defendant Erin Keyes for reason of misjoinder.2

Rule 21 of the Federal Rules of Civil Procedure, titled

"Misjoinder and Non-Joinder of Parties," provides that "[p]arties

may be dropped or added by order of the court on motion of any

party or of its own initiative at any stage of the action and on

such terms as are just." Id. The power to drop or add parties is

vested to the sound discretion of the court. See Sams v. Beech

Aircraft Corp., 625 F.2d 273, 277 (9th Cir. 1980); see also Fair

Hous. Dev. Fund Corp. v. Burke, 55 F.R.D. 414, 419 (E.D.N.Y. 1972)

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(citing 3A Moore's Federal Practice § 21.05 (1970)) (Rule 21

affords broad discretion to court in adding or dropping parties).

While Rule 21 does not define "misjoinder," Rule 20 sheds

light on the matter by setting forth the standard for permissive

joinder of parties defendant.

All persons . . . may be joined in one action

as defendants if there is asserted against them

jointly, severally, or in the alternative, any

right to relief in respect of or arising out of

the same transaction, occurrence, or series of

transactions or occurrences and if any question

of law or fact common to all defendants will

arise in the action.

Fed. R. Civ. P. 20(a). Rule 17(b) further instructs that "the

capacity of an individual . . . to sue or be sued shall be

determined by the law of the individual's domicile." Fed. R. Civ.

P. 17(b). Finally, the defense of lack of capacity to be sued may

only be raised by "specific negative averment, which shall include

such supporting particulars as are peculiarly within the pleader's

knowledge." Fed. R. Civ. P. 9(a); see, e.g., Comstock v. Pfizer

Ret. Annuity Plan, 524 F. Supp 999, 1002 (D. Mass. 1981) (granting

motion to dismiss because named defendant was an unincorporated

association, not subject to suit under state law).

It is apparent from the face of Plaintiffs' Complaint that

Defendant Erin Keyes is a domiciliary of Utah. Compl. (doc. # 1,

pt. 2) ¶ 4. Her capacity to be sued must therefore be determined

by Utah law. See Fed. R. Civ. P. 17(b). Unlike Arizona, which

specifically permits judgment creditors to levy upon community

property by joinder of a tortfeasor's spouse as a party defendant,

Utah does not operate under principles of community property or

provide a similar provision for joinder. Compare Ariz. Rev. Stat.

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§§ 25-211, -215(D) (West 2006), and Vikse v. Johnson, 137 Ariz.

528, 672 P.2d 193, 196 (Ct. App. 1983), with Utah Code Ann. §§ 30-

2-1 to -11 (West 2006). Therefore, in Utah, there does not exist

any marital community to which a tort victim may look for

satisfaction of a judgment. Moreover, under Utah law, "[n]either

spouse is personally liable for the separate debts, obligations, or

liabilities of the other . . . incurred during marriage . . . ." 

Utah Code Ann. § 30-2-5(1)(b) (West 2006).

In light of the foregoing considerations, it is clear that

Plaintiffs have no right to relief against Erin Keyes and that she

may not be sued for her husband's torts based solely on her marital

capacity. These particulars have been amply expounded in

Defendant's motion as required by Rule 9(a). See Mot. (doc. # 5)

at 6-7. Defendant's motion, construed as a Rule 21 motion for an

order dropping her as a party to this action, will be granted.

III. DEFENDANTS' RULE 12(b)(3) MOTION TO DISMISS

All Defendants have moved to dismiss Plaintiffs' Complaint on

the basis of a forum selection clause in the VP Agreement rendering

venue improper in this Court. Mot. (doc. # 5) at 7-10. That

provision states that "any action relating to this Agreement or the

breach or enforcement hereof shall be brought and maintained in the

Courts of the State of Utah, each of the parties hereof consenting

[sic] the exclusive personal jurisdiction of such courts as if they

were personally present in the State of Utah." VP Agreement (doc.

# 4, pt. 2) at 47 ¶ 19.

A. Standard of Review

In resolving a Rule 12(b)(3) motion to dismiss, the pleadings

need not be accepted as true and the district court may consider

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3

 Although The Bremen involved an international forum selection

clause in a commercial contract, the Ninth Circuit has approved The

Bremen framework for domestic forum selection clauses and employment

contracts. See Spradlin v. Lear Siegler Mgmt. Servs. Co., 926 F.2d

865, 867-68 (9th Cir. 1991) (employment contract); Pelleport

Investors, Inc. v. Budco Quality Theatres, Inc., 741 F.2d 273, 279

(9th Cir. 1984) (domestic forum selection clause).

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facts outside the pleadings. See Murphy v. Schneider Nat'l, Inc.,

362 F.3d 1133, 1137 (9th Cir. 2003) (citations omitted). When

faced with a Rule 12(b)(3) motion based on a forum selection

clause, "the trial court must draw all reasonable inferences in

favor of the non-moving party and resolve all factual conflicts in

favor of the non-moving party." Id. at 1138.

B. Choice of Law

Because this is a diversity case arising from alleged

negligence occurring in Arizona, the Court applies federal

procedural law and state substantive law. Erie R.R. v. Tompkins,

304 U.S. 64, 78-79 (1938). Although the VP Agreement contains a

choice of law provision selecting Utah law, see VP Agreement (doc.

# 4, pt. 2) at 47 ¶ 19, the Ninth Circuit has held that, in the

context of determining venue, Erie principles require that federal

law apply to both the enforcement and interpretation of forum

selection clauses. Manetti-Farrow, Inc. v. Gucci Am., Inc., 858

F.2d 509, 512-13 (9th Cir. 1988).

C. Discussion

1. Enforceability of the Forum Selection Clause

The enforceability of a forum selection clause is controlled

by the Supreme Court's decision in The Bremen v. Zapata Off-Shore

Co., 407 U.S. 1 (1972), in which it was held that forum selection

clauses are presumptively valid.3 See The Bremen, 407 U.S. at 10;

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4

 The Court acknowledges that Plaintiffs' briefs occasionally

refer to the "overbroad and otherwise unlawful non-compete clauses."

See, e.g., Reply (doc. # 21) at 12. These unelaborated

characterizations made in passing are insufficient to overcome the

presumption of validity established by The Bremen.

5

 Although Mediterranean Enterprises dealt with the

interpretation of an arbitration clause, the Ninth Circuit has

explained that the guidance of such cases is equally applicable to

the interpretation of a forum selection clause, because an

arbitration clause is simply a specific type of forum selection

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Murphy, 362 F.3d at 1140. The party opposing enforcement of the

forum selection clause must "clearly show that enforcement would be

unreasonable and unjust, or that the clause was invalid for such

reasons as fraud or over-reaching." The Bremen, 407 U.S. at 15;

cf. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n.14 (1985)

(holding that enforcement of freely negotiated forum selection

clause that is not "unreasonable and unjust" would not offend due

process). Defendants argue that Plaintiffs cannot meet this heavy

burden to escape the enforcement of a provision that was freely

negotiated. See Mot. (doc. # 5) at 7-8. Because Plaintiffs have

not challenged its enforceability, the Court will proceed on the

basis that the forum selection clause is enforceable.4

 See Resp.

(doc. # 15); Reply (doc. # 21).

2. Scope of the Forum Selection Clause

A forum selection clause is not axiomatically limited in scope

to contract claims, particularly in this case where the "relating

to" language generally lends to a broader range of covered

disputes. Cf. Mediterranean Enters., Inc. v. Ssangyong Corp., 708

F.2d 1458, 1463-64 (9th Cir. 1983) (discussing how omission of

"relating to" language in an arbitration clause results in a

narrower scope of covered disputes).5 Forum selection clauses have

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clause. Manetti-Farrow, Inc., 858 F.2d at 514 n.4 (citing Scherk v.

Alberto-Culver Co., 417 U.S. 506, 417 (1974)).

6

 At oral argument, Plaintiffs' counsel argued that Siren cannot

be bound by the forum selection clause because it was never a party

to the VP Agreement. Counsel also suggested that Manetti-Farrow is

distinguishable in that it extended the reach of the forum selection

clause only to defendants who had not signed the contract. The Court

disagrees. There is nothing in the Ninth Circuit's Manetti-Farrow

decision to believe that the court intended such a narrow and

imbalanced rule.

Defendants assertion that Kilgore has breached his obligations

under the non-compete and non-solicitation covenants of the VP

Agreement is plainly traceable to Siren's conduct in hiring former

Firstline employees, recruiting in Tempe and Mesa, and entering the

Cleveland, Columbus, and Indiana markets. Kilgore is Siren's sole

owner. Kilgore Aff. ¶¶ 2-3. It is inescapable to conclude that

Siren's conduct is so closely intertwined with Kilgore's contractual

relationship with Firstline that the forum selection clause must

apply as equally to Siren as it would to Kilgore. See MannetiFarrow, Inc., 858 F.2d at 514 n.5.

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frequently been held to apply to pure tort claims where the

"resolution of the claims relates to interpretation of the

contract." See, e.g., Manetti-Farrow, Inc., 858 F.2d at 511, 514

(claims of tortious interference and tortious interference with

contractual relations). A forum selection clause can also apply to

litigants who were not parties to the contract provided that the

alleged conduct of those parties is "closely related to the

contractual relationship." Id. at 514 n.5.6

In the instant case, Plaintiffs assert claims for defamation

and trade libel (Count III), abuse of process (Count V),

intentional interference with contractual relations (Count II), and

restraint of trade in violation of state antitrust laws (Count IV);

based on these claims, Plaintiffs also seek injunctive relief

(Count I). Am. Compl. (doc. # 16). The Court discusses each claim

in turn in considering whether they are within the purview of the

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forum selection clause.

i. Defamation and Trade Libel

Plaintiffs' claim in Count III alleging defamation and trade

libel falls within the scope of the forum selection clause, because

it relates in material part to the VP Agreement and whether it was

breached by Kilgore. See Am. Compl. (doc. # 16) ¶ 74 (alleging

that Defendants have told third parties that Plaintiffs are guilty

of improper acts including breach of contract and breach of

fiduciary duty); cf. Tracer Research Corp. v. Nat'l Envtl. Servs.

Co., 42 F.3d 1292, 1295 (9th Cir. 1994) (discussing approvingly a

case from the Southern District of New York finding plaintiff's

defamation claims to be within scope of arbitration clause, because

they "necessarily turned on whether he was terminated with or

without cause, an issue which involved an interpretation of the

contractual relationship between the parties") (quoting McMahon v.

RMS Elec., Inc., 618 F. Supp. 189 (S.D.N.Y. 1985)). Like the

claims in McMahon, Plaintiffs' defamation claims cannot be resolved

without an interpretation of the parties' contractual relationship

-- specifically, the nature of Kilgore's obligations under the VP

Agreement. Therefore, Count III will be dismissed without

prejudice.

ii. Abuse of Process

Plaintiffs' claim in Count V for abuse of process is likewise

within the ambit of the forum selection clause. Because Plaintiffs

allege that Defendants filed the Utah lawsuit for improper

purposes, the resolution of this claim will depend on whether

Defendants had a legitimate reason to pursue that action. See Am.

Compl. (doc. # 16) ¶¶ 86-93. In light of the dispute concerning

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7

 Plaintiffs maintain that the standard of liability for abuse

of process is much less stringent than the manner in which it is

presented by Defendants. Compare Pls.' Resp. (doc. # 15) (plaintiff

must show that defendant used process primarily for purpose other

than that for which it was intended) (citation omitted) with Defs.'

Resp. (doc. # 14) (plaintiff must additionally show that action

"could not logically be explained without reference to the

defendants' improper motives") (citation omitted). The disagreement

over the appropriate standard is of no consequence to the resolution

of the pending Rule 12(b)(3) motion. Dismissal must follow even

under Plaintiffs' formulation, because resolution of the abuse of

process claim will inevitably require some inquiry into Kilgore's

alleged breach of the VP Agreement to determine whether Defendants

were pursuing the Utah action primarily for an improper purpose.

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Kilgore's obligations under the non-solicitation and non-compete

provisions of the VP Agreement, the determination of this claim

necessarily "relat[es] to [the VP Agreement] or the breach or

enforcement [t]hereof." See VP Agreement (doc. # 4, pt. 2) at 47 ¶

19. Count V for abuse of process will therefore be dismissed

without prejudice.7

iii. Intentional Interference with Contractual Relations

Defendants argue that the resolution of Plaintiffs' claim of

intentional interference with contractual relations will also turn

upon the enforceability and interpretation of the non-compete and

non-solicitation provisions of the VP Agreement, thereby bringing

that claim within the scope of the forum selection clause. Mot.

(doc. # 5) at 9-10. The Court agrees.

To establish a prima facie case of intentional interference

with contractual relations under Arizona law, one element a

plaintiff must prove is that the defendant's conduct was improper. 

See Wagenseller v. Scottsdale Mem'l Hosp., 147 Ariz. 370, 710 P.2d

1025, 1042-43 (1985), superseded in part by Ariz. Rev. Stat. §

23-1501 (West 2003). In determining whether the defendant's

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actions were improper, courts consider the following seven factors:

(a) the nature of the actor's conduct,

(b) the actor's motive,

(c) the interests of the other with which the

actor's conduct interferes,

(d) the interests sought to be advanced by the

actor,

(e) the social interests in protecting the

freedom of action of the actor and the

contractual interests of the other,

(f) the proximity or remoteness of the actor's

conduct to the interference and

(g) the relations between the parties.

See id. at 1042-43 (quoting Restatement (Second) of Torts § 767)

(1979). In addition, it is recognized that among competitors

certain conduct is privileged and therefore not improper.

One is privileged purposely to cause a third

person not to enter into or continue a business

relation with a competitor of the actor if

(a) the relation concerns a matter involved in

the competition between the actor and the

competitor, and

(b) the actor does not employ improper means,

and

(c) the actor does not intend thereby to create

or continue an illegal restraint of

competition, and

(d) the actor's purpose is at least in part to

advance his interest in his competition with

the other.

Restatement (Second) of Torts § 768(1) (1979); accord Edwards v.

Anaconda Co., 115 Ariz. 313, 565 P.2d 190, 193 (Ct. App. 1977).

Plaintiffs Kilgore and Siren allege, inter alia, that they

have attempted to recruit sales representatives from colleges in

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8

 Plaintiffs ask rhetorically "when, in Defendants' view, would

their tortious and illegal conduct be sufficient to subject them to

sanctions from a court in Arizona? Would Defendants have to be tried

criminally in Utah if they chose to burn down Siren's offices in

Arizona or committed battery on Kilgore to keep him from doing

business in security systems' sales." Resp. (doc. # 15) at 5. This

was asked again at oral argument. 

Instead of asking questions to define the outer limits of

acceptable conduct under the privilege of competition, greater

attention could be paid to answering the question of whether

Defendants' actual conduct was privileged. Arguments based on

egregious factual scenarios tend not to illuminate arguments based on

facts in issue.

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Arizona, and that "Defendants have acted unlawfully by "caus[ing]

prospective employees, who Defendants knew were being recruited by

Siren, to refuse to come to work for Siren." Am. Compl. (doc. #

16) ¶¶ 38, 68. However, the non-compete and non-solicitation

provisions of the VP Agreement would ostensibly prohibit

Plaintiffs' recruiting practices. See VP Agreement (doc. # 4, pt.

2) at 45-46 ¶ 6. Thus, Defendants contend that their actions

cannot be found improper in light of their interests under the

agreement. See Mot. (doc. # 5) at 10 ("Plaintiffs [sic] and the

company he formed certainly would have no right to complain that

Firstline interfered with contracts Plaintiffs executed unlawfully

in the first instance.").8

It is apparent that the resolution of Plaintiff's claim will

turn upon the enforceability and interpretation of the VP Agreement

as it bears upon the questions of Defendants' motive, the interests

sought to be advanced by Defendants, and the relations among the

parties. See Restatement (Second) of Torts § 767(a), (d), and (g)

(1979). As such, this claim is within the scope of the forum

selection clause as a dispute relating to the breach or enforcement

of the agreement. See VP Agreement (doc. # 4, pt. 2) at 47 ¶ 19. 

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9

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Ariz. Rev. Stat. § 44-1402 as the state counterpart to section 1 of

the Sherman Act, 15 U.S.C. § 1, making its holding in the context of

the federal statute equally applicable to the resolution of claims

brought under the state statute. See Three Phoenix Co., 659 P.2d at

1260.

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Count II for intentional interference with contractual relations

will be dismissed without prejudice.

iv. Restraint of Trade

Under section 44-1402, "[a] contract, combination or

conspiracy between two or more persons in restraint of, or to

monopolize, trade or commerce, any part of which is within this

state, is unlawful." Ariz. Rev. Stat. § 44-1402 (West 2003). 

Plaintiffs allege that Defendants, in "seeking to destroy Siren as

a business and to prevent Kilgore from doing business as a

potential future competitor of Firstline," have acted unlawfully

under Ariz. Rev. Stat. § 44-1402. Am. Compl. (doc. # 1) ¶¶ 80-85. 

In particular, Plaintiffs challenge the non-compete clause in the

VP Agreement as imposing an unreasonable restraint on competition. 

See Am. Compl. (doc. # 16) ¶¶ 80-85; Reply (doc. # 21) at 12:19-26. 

Adjudication of this claim will therefore require a determination

of that clause's enforceability by considering "the facts peculiar

to the business in which the restraint is applied, the nature of

the restraint and the reasons for its adoption." See Three Phoenix

Co. v. Pace Indus., 135 Ariz. 113, 659 P.2d 1258, 1260 (1983)

(applying "rule of reason" to determine whether covenant not to

compete violated federal antitrust law) (internal quotations

omitted)9

; cf. Valley Med. Specialists v. Farber, 194 Ariz. 363,

982 P.2d 1277, 1283-86 (1999) (en banc) (discussing test for

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determining enforceability of covenant not to compete). Because

the inevitable questions of enforceability and interpretation bring

this claim within the scope of the forum selection clause, Count IV

for restraint of trade will be dismissed without prejudice.

Should Plaintiffs later take the position that their reply

(doc. # 21) had errantly characterized Count IV as a challenge to

the non-compete clause, or decide to extricate that theory from a

subsequent filing, the Court adds that Plaintiffs' antitrust claim

would be dismissed pursuant to Rule 12(b)(6) for failure to state a

claim upon which relief can be granted. A district court may

dismiss a claim sua sponte under Rule 12(b)(6) where, as here, the

briefing of a related motion raises the issue upon which the

dismissal was based so as to give ample notice and opportunity for

the plaintiff to oppose dismissal. See Omar v. Sea-Land Serv.,

Inc., 813 F.2d 986, 991 (9th Cir. 1987) (citing Wong v. Bell, 642

F.2d 359, 361-62 (9th Cir. 1981); accord 5 Charles Alan Wright &

Arthur R. Miller, Federal Practice & Procedure § 1357 (1969). Sua

sponte dismissal is also appropriate "where the claimant cannot

possibly win relief." Omar, 813 F.2d at 991.

In this case, the Court finds that the briefing of Plaintiffs'

motion for temporary restraining order (doc. # 4, pt. 7) provided

ample notice and opportunity to argue case dispositive issues. In

response to Plaintiffs' motion, Defendants asserted that, "on the

face of their Complaint, Plaintiffs have failed to state a claim

under Arizona's antitrust statute," Resp. (doc. # 14) at 14, and

Plaintiffs, in turn, responded directly to that argument, Reply

(doc. # 21) at 12-14.

After reviewing all of the arguments raised in Plaintiffs'

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10 Federal court interpretations of the Sherman Act, 15

U.S.C. § 1, et seq., may be used as a guide in construing Arizona's

Uniform State Antitrust Act, Ariz. Rev. Stat. § 44-1401, et seq.

Ariz. Rev. Stat. § 44-1412 (West 2003) (". . . [C]ourts may use as a

guide interpretations given by the federal courts to comparable

federal antitrust statutes."); see also Johnson v. Pac. Lighting Land

Co., 817 F.2d 601, 604 (9th Cir. 1987) (construing Ariz. Rev. Stat.

§ 44-1402 in light of federal court decisions). Copperweld and

Freeman are particularly appropriate guides in this case because the

Supreme Court of Arizona has specifically recognized Ariz. Rev. Stat.

§ 44-1402 as the Arizona counterpart to 15 U.S.C. § 1, the federal

statute upon which those cases were based. See Three Phoenix Co.,

659 P.2d at 1260.

Plaintiffs cite to the decision of the Court of Appeals of

Arizona in Bunker's Glass Co. v. Pilkington PLC, 202 Ariz. 481, 47

P.3d 1119 (Ct. App. 2002), for the proposition that state public

policy concerns may override persuasive federal court authority in

antitrust matters. Reply (doc. # 21) at 12. In Bunker's Glass the

court merely observed that public policy favors recognition of an

indirect purchaser's standing to sue under state antitrust laws,

notwithstanding the contrary position taken by the Supreme Court with

respect to claims brought under the Sherman Act. See Bunker's Glass

Co., 47 P.3d at 1123-30. However, Plaintiff does not cite any

Arizona authority that would support deviation from the "single

entity" rule of Copperweld. Moreover, Plaintiffs' vague and belated

references to Defendants' arrangements with third parties, Reply

(doc. # 21) at 13, are without support from the amended complaint,

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motion and reply, and reading the allegations of the Complaint in

the light most favorable to Plaintiffs, the Court concludes that

Plaintiffs could not possibly obtain relief on their antitrust

claim. The weight of authority from the Supreme Court and the

Ninth Circuit supports Defendants' position. The named Defendants

-- an employee, an officer, and the corporation for which they work

-- are incapable of conspiracy within the meaning of Ariz. Rev.

Stat. § 44-1402. See Copperweld Corp. v. Independence Tube Corp.,

467 U.S. 752, 769 (1984) (officers or employees of the same firm

are incapable of conspiracy to harm or restrain competition);

Freeman v. San Diego Ass'n of Realtors, 322 F.3d 1133, 1147-48 (9th

Cir. 2003) (same).10 Therefore, even if Plaintiffs later decide

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that they have no quarrel with the non-compete clause, Count IV for

restraint of trade would still be dismissed for failure to state a

claim upon which relief could be granted.

v. Injunctive Relief

Finally, Plaintiffs seek injunctive relief based on the

aforementioned claims of intentional interference with contractual

relations, defamation and trade libel, restraint of trade, and

abuse of process. See Am. Compl. (doc. # 16) ¶¶ 56-64. The VP

Agreement's forum selection clause requires dismissal of those

underlying claims, leaving no basis for equitable relief in the

future. Accordingly, Count I for permanent injunction will also be

dismissed without prejudice.

Because Defendants' motion to dismiss (doc. # 5) will be

granted in its entirety, Defendants' motion to stay (doc. # 5) and

Plaintiffs' motion for temporary restraining order (doc. # 4, pt.

7) will be denied and dismissed as moot.

IV. CONCLUSION

In light of the foregoing analysis,

IT IS ORDERED that Defendant Erin Keyes' Rule 12(b)(2) motion

to dismiss (doc. # 5), construed as a Rule 21 request for an order

dropping her as a party for reason of misjoinder, is GRANTED.

IT IS FURTHER ORDERED that Defendants' Rule 12(b)(3) motion to

dismiss (doc. # 5) is GRANTED. Counts I, II, III, IV, and V of

Plaintiffs' First Amended Complaint (doc. # 16) are dismissed

without prejudice.

IT IS FURTHER ORDERED that Plaintiffs' motion for temporary

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restraining order (doc. # 4, pt. 7) is DENIED and dismissed as

moot.

IT IS FURTHER ORDERED that Defendants' motion to stay (doc. #

5) is DENIED and dismissed as moot.

IT IS FINALLY ORDERED directing the Clerk of the Court to

enter judgment in favor of Defendants and terminate this case.

DATED this 17th day of May, 2006.

Copies to counsel of record

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