Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-02787/USCOURTS-azd-2_06-cv-02787-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1346 Tort Claim

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

The request for oral argument is denied because the parties have thoroughly discussed

the law and evidence and oral argument will not aid the Court’s decisional process. See

Mahon v. Credit Bur. of Placer County, Inc., 171 F.3d 1197, 1200 (9th Cir. 1999).

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

AdVnt Biotechnologies, LLC, an

Arizona limited liability company, 

Plaintiff, 

vs.

Martin Schroeder, Ann Schroeder,

husband and wife; The Emmes Group,

Inc., a corporation, 

Defendants. 

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

CV-06-904-PHX-DGC (Lead)

CV-06-2787-PHX-DGC

CV-06-2788-PHX-DGC

ORDER

Defendants Martin and Ann Schroeder and The Emmes Group (collectively

“Schroeder”) have filed a motion to dismiss the complaint of Plaintiff AdVnt

Biotechnologies, LLC (“Advnt”) under Federal Rules of Civil Procedure 9(b) and 12(b)(6)

and, alternatively, a motion for a more definite statement. CV-06-2787-PHX-DGC Dkt. #7.

The Court has reviewed the memoranda filed by the parties. Dkt. ##7, 12, 15. For the

reasons stated below, the Court will grant the motion in part.1

Case 2:06-cv-02787-DGC Document 24 Filed 06/28/07 Page 1 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 -

I. Background.

Lawrence J. Warfield, trustee in bankruptcy for Osborn Scientific Group, Inc.

(“OSG”), filed a twenty-count complaint against Advnt stemming from Advnt’s purchase of

many of OSG’s assets on October 22, 2003, including tests for various types of biowarfare

agents. See 06-ap-00087-GBN, Dkt. #1. The Trustee contends OSG received other offers

for more than the sale price of $50,000, but sold the assets to Advnt for a lesser amount to

satisfy a $266,000 debt OSG owed to Advnt’s owner, Tim Scherkenback. Id. ¶¶ 104-07.

Advnt filed a separate action for intentional misrepresentation and tortious interference with

contract against Schroeder, a former investment banker for OSG, for allegedly stating falsely

to the Trustee in 2004 and 2005 that other companies had offered more than Advnt for a

stake in OSG. Dkt. #1. Advnt filed a motion to consolidate its case against Schroeder with

the main action brought by Trustee Warfield, which the Court granted on May 16, 2007.

Dkt. #23. 

II. Discussion.

1. Intentional Misrepresentation.

Arizona law treats claims for intentional misrepresentation as claims for fraud. Knoell

v. Cerkvenik-Anderson Travel, Inc., 891 P.2d 861, 869 (Ariz. Ct. App. 1994), vacated and

remanded on other grounds, 917 P.2d 689 (Ariz. 1996); Formento v. Encanto Bus. Park, 744

P.2d 22, 28 (Ariz. Ct. App. 1987); Bank of the West v. Estate of Leo, 231 F.R.D. 386, 390 (D.

Ariz. 2005); see also Restatement (2d) of Torts, §§ 526-530 (1977). Schroeder argues that

Advnt failed to plead its intentional misrepresentation claim with the particularity required

by Rule 9(b). 

“To meet the Rule 9(b) particularity requirement, a plaintiff must set forth more than

the neutral facts necessary to identify the transaction. The plaintiff must set forth what is

false or misleading about a statement, and why it is false.” Orthologic Corp. v.

Columbia/HCA Healthcare Corp., No. CIV 01-0006-PHX-SRB, 2002 WL 1331735 at *2

(D. Ariz. Jan. 7, 2002) (citing Yourish v. California Amplifier, 191 F.3d 983, 993 (9th Cir.

1999)). A plaintiff must also “state the time, place, and specific content of the false

Case 2:06-cv-02787-DGC Document 24 Filed 06/28/07 Page 2 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 -

representations as well as the identities of the parties to the misrepresentation.” Schreiber

Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see also Vess

v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (“Averments of fraud must

be accompanied by the who, what, when, where, and how of the misconduct charged.”);

Lancaster Cmty. Hosp. v. Antelope Valley Dist., 940 F.2d 397, 405 (9th Cir. 1991) (Rule 9(b)

“requires a pleader of fraud to detail with particularity the time, place, and manner of each

act of fraud, plus the role of each defendant in each scheme.”). Courts have dismissed fraud

claims when, for example, the plaintiff did not specify the identity of the individual speakers,

the dates or times when the alleged misrepresentations were made, or the contents of the

statements and what was false about them. See, e.g., Arnold & Assocs., Inc. v. Misys

Healthcare Sys., 275 F.Supp.2d 1013, 1028 (D. Ariz. 2003); Williamson v. Allstate Insurance

Co. 204 F.R.D. 641, 645 (D. Ariz. 2001).

Advnt’s complaint does not allege intentional misrepresentation with the particularity

required by Rule 9(b). See CIV-06-2787, Dkt. #1. It alleges that the misrepresentations

occurred “beginning sometime in 2004 and ending in 2005” (id. ¶ 13), but this date range

does not adequately identify when the statements were made. Nor does the complaint allege

to whom the statements were made, instead stating that they were directed to “third parties.”

Id. ¶ 14. While the complaint describes generally that Schroeder told third parties that OSG

had received lucrative offers for the sale of its assets or shares of ownership, it does not

allege the specific contents of a single statement. Because Advnt has failed to allege the

time, place, content, or recipients of any misstatement, the Court will dismiss the claim for

failure to comply with Rule 9(b). 

2. Tortious Interference with Contract.

Schroeder argues that, pursuant to Section 365 of the Bankruptcy Code, OSG

breached its contract with Advnt immediately prior to filing for bankruptcy on December 11,

2003. Dkt. #7 at 8. Schroeder then contends that because the contract was already breached,

he could not possibly have interfered with OSG’s contract with Advnt through statements

he allegedly made in 2004 and 2005. Id. at 9-10. 

Case 2:06-cv-02787-DGC Document 24 Filed 06/28/07 Page 3 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

Advnt cites cases for the proposition that a contract is not executory when the only

remaining performance obligation is the payment of money. Dkt. #12 (citing In re Bryan

Universal Roofing, Inc., 218 B.R. 948 (Bankr. D. Ariz. 1998); In re THC Fin. Corp., 686

F.2d 799, 804 (9th Cir. 1982); Benevides v. Alexander, 670 F.2d 885, 887 (9th Cir. 1982)).

As Advnt later states, however, these cases simply mean that “contracts that only required

payment by the debtor [in bankruptcy] are not executory.” In re THC, 686 F.2d at 804. This

is not the case here, where Advnt owed OSG $25,000 and OSG still had an obligation, as

Advnt alleges in its counterclaim against OSG, to provide usable biowarfare testing formulas.

- 4 -

Section 365 of the Bankruptcy Code provides that if a contract between a debtor and

a third party is executory and the bankruptcy trustee does not assume or reject the contract,

the contract is deemed rejected and the debtor is considered to have breached the contract

immediately before the bankruptcy petition was filed. 11 U.S.C. § 365(d)(1), (g). “A

contract is executory if the obligations of both the bankrupt and the other party to the contract

are so far unperformed at the time of filing that the failure of either to complete performance

would constitute a material breach excusing performance of the other.” Collingwood Grain,

Inc. v. Coast Trading Co., Inc., 744 F.2d 686, 692 (9th Cir. 1984) (quotations omitted). 

Schroeder claims that the contract was executory because performance of both parties

remained due on December 11, 2003. Id. at 9. Advnt does not dispute that it owed $25,000

to OSG at that time. Id. And in its counterclaim against OSG, Advnt alleged that OSG

breached the contract with Advnt in 2003 by failing to provide certain assets to Advnt. See

CIV-06-2788, Dkt. #7-3, Counterclaim ¶¶ 2-9. Thus, Advnt clearly has alleged that OSG

had performance obligations remaining. 

Advnt now argues that the contract was not executory and, therefore, that no breach

occurred by operation of § 365. Dkt. #12 at 5. Advnt instead alleges that “OSG has

breached the October 22, 2003 Agreement on the 18th day of January, 2006, upon the filing

of the Complaint against Advnt.” Dkt. #1 ¶ 17. In its response to Schroeder’s motion, Advnt

contends that “the agreement [between OSG and Advnt] was breached as a result of

Defendant Schroeder’s contract interference, and not in accordance with § 365 Bankruptcy

Code law.” Dkt. #13 at 6.2

 

Case 2:06-cv-02787-DGC Document 24 Filed 06/28/07 Page 4 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 5 -

Clearly, the allegations in Advnt’s counterclaim against OSG are inconsistent with

Advnt’s arguments that the contract was not executory. Citing no authority, Schroeder

contends that Advnt is judicially estopped from arguing that OSG owed no remaining

performance obligations to Advnt. Dkt. #7 at 9.

“Judicial estoppel is an equitable doctrine that precludes a party from gaining an

advantage by asserting one position, and then later seeking an advantage by taking a clearly

inconsistent position.” Hamilton v. State Farm Fire. & Cas. Co., 270 F.3d 778, 782 (9th Cir.

2001) (emphasis added; citation omitted); see also Poweragent Inc. v. Electronic Data

Systems Corp., 358 F.3d 1187, 1192 (9th Cir. 2004) (“[A] litigant may not benefit by making

directly contradictory arguments regarding the same dispute in different tribunals.”)

(emphasis added). Schroeder identifies no advantage or benefit Advnt has yet received from

its inconsistent counterclaim against OSG. Nor has Schroeder identified any prejudice

Schroeder has suffered from Advnt’s inconsistent positions. See Zedner v. United States, 126

S.Ct. 1976, 1987 (2006) (judicial estoppel is especially appropriate when a party’s

inconsistent positions are “to the prejudice of the party who has acquiesced in the position

formerly taken by him.”) (citation omitted). 

Although Advnt’s positions appear to be plainly inconsistent, parties are permitted to

plead inconsistently. See Fed. R. Civ. P. 8(e)(2); 5 Wright & Miller, Federal Practice and

Procedure: Civil 3rd §1283. In ruling on Schroeder’s motion to dismiss, the Court must

accept Advnt’s pleadings as true. Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996).

Accepting the allegations as true, the Court finds no basis for dismissing the tortious

interference claim. 

The Court will deny Schroeder’s motion for a more definite statement on the tortious

interference claim. Motions for a more definite statement are disfavored in light of the notice

pleading requirements of federal courts. See Castillo v. Norton, 219 F.R.D. 155, 163 (D.

Ariz. 2003). The claim for tortious interference is adequately pled and fairly notifies

Schroeder of the nature of the claim. 

Case 2:06-cv-02787-DGC Document 24 Filed 06/28/07 Page 5 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 6 -

IT IS ORDERED:

1. Defendant’s motion to dismiss (CV-06-2787-PHX-DGC, Dkt. #7) is granted

in part and denied in part as set forth above.

2. Defendant’s alternative motion for a more definite statement (CV-06-2787-

PHX-DGC, Dkt. #7) is denied.

DATED this 28th day of June, 2007.

 

Case 2:06-cv-02787-DGC Document 24 Filed 06/28/07 Page 6 of 6