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Carpenter v. All American Games

United States District Court, D. Arizona

January 30, 2017

Chad Carpenter, an individual, Plaintiff/Defendant,
All American Games, a limited liability company, Douglas Berman, an individual, and Does 1-30, inclusive, Defendants/Counterclaimants


          David G. Campbell, United States District Judge.

         On September 27, 2016, Defendants All American Games (“AAG”) and Douglas Berman filed an amended counterclaim against Plaintiff Chad Carpenter. Doc. 20. Plaintiff filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Doc. 25. Defendants filed a response (Doc. 26), and Plaintiff did not reply. Neither party has requested oral argument. For the reasons set forth below, the Court will deny the motion.

         I. Background.

         The Court takes the allegations of Defendants' counterclaim as true for purposes of a motion to dismiss. Defendants, through a wholly owned subsidiary, Football University, LLC (“FBU”), operate a national football tournament for youth football players (“FBU tournament”). Doc. 20, ¶ 4. Defendants also operate football camps throughout the United States, including in Phoenix, Seattle, and various cities in California. Id. Plaintiff is a former employee of Defendants. Id. He worked as a “regional player representative in the western region” and was “responsible for assisting in recruiting athletes to attend [the camps] and recruiting teams to participate in the [FBU tournament].” Id., ¶ 5. Plaintiff began his affiliation with Defendants as a coach at the camps in 2010. Id., ¶ 6. Plaintiff became a full time employee in September 2012, making a base salary of $65, 000 and receiving commissions based on camp revenues and payments from FBU tournament participation. Id., ¶ 6. Prior to June 2015, Defendant paid Plaintiff two commissions: $7, 500 as payment for his work on the 2014 FBU tournament, and $3, 110 as payment for his promotional activities for the 2015 FBU camps in his region. Id. There is a factual dispute between the parties about whether additional commissions are due. Doc. 25, at 4; Doc. 26 at 5-6.

         In May 2015, Defendants discovered a “troubling and improper relationship between Plaintiff and another former employee.” Doc. 20, ¶ 7. According to Defendants, this former employee was manipulating “[Defendants'] financial systems to inflate the revenue numbers for the FBU regional camps being held in Phoenix, Seattle and California.” Id., ¶ 8. Following the former employee's termination on June 2, 2015, Defendants discovered “considerable evidence that Plaintiff was fully knowledgeable of the fraudulent actions of the dismissed former employee.” Id., ¶¶ 9-10. Defendants' investigation revealed that “Plaintiff extended reduced pricing to customers that were unauthorized by AAG in order to inflate the revenue numbers for those camps, ” and that Plaintiff had acted with “gross insubordination with respect to his supervisor.” Id., ¶¶ 11-12. Within days of the first employee's termination, Defendants terminated Plaintiff. Id., ¶ 13; Doc. 1, ¶ 13.

         Plaintiff contends that, after his termination, Defendants sent an e-mail regarding his termination to over 200 employees and outside affiliates, calling into question his character, jeopardizing his future employment, and potentially making him “untouchable” as a coach. Doc. 1, ¶ 13. Plaintiff sued Defendants for defamation, unpaid wages, unjust enrichment, and breach of contract. Doc. 1. Defendants' amended counterclaim followed, alleging breach of contract, unjust enrichment, breach of implied covenant, breach of fiduciary duty of good faith and loyalty to AAG, and conversion. Doc. 20 at 10-14.

         II. Legal Standard.

         A successful motion to dismiss under Rule 12(b)(6) must show either that the complaint lacks a cognizable legal theory or fails to allege facts sufficient to support its theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). A complaint that sets forth a cognizable legal theory will survive a motion to dismiss as long as it contains “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 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.” Id., 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (citing Twombly, 550 U.S. at 556). Arizona law governs Defendants' state law claims. United Mine Workers of America v. Gibbs, 383 U.S. 715, 726 (1996).

         III. Defendants' Motion to Dismiss.

         A. Breach of Contract.

         Plaintiff argues that Defendants' amended counterclaim recites only legal conclusions and fails to plead sufficient factual allegations that, if true, would state a cause of action for breach of contract. Doc. 25 at 2. The elements of a breach of contract claim are the existence of a contract, breach, and resulting damages. Thomas v. Montelucia Villas, LLC, 302 P.3d 617, 621 (Ariz. 2013). Defendants' counterclaim alleges that Plaintiff became a full-time employee in September 2012, and that his salary and commissions were contingent upon his responsibilities as a player representative and recruiter. Doc. 20, ¶¶ 5-6. Defendants contend that Plaintiff breached his employment contract by “[s]pecifically and without limitation fail[ing] to follow FBU procedures with regard to billing and pricing for camps, which were Plaintiff's job responsibilities pursuant to his Agreement with AAG.” Id., ¶ 20. Specifically, Defendants allege that Plaintiff failed to follow FBU procedures regarding billing and pricing by extending unauthorized discounts to certain AAG customers to inflate the revenue figures for his camps, causing Defendants both financial and reputational damage. Id., ¶¶ 11, 20, 22. Defendants also assert that Plaintiff's alleged insubordination was in violation of FBU policies and procedures. Id., ¶ 20. These allegations provide a sufficient factual basis to support the claim for breach of contract.

         Plaintiff also argues that Defendants' amended counterclaim only cites “conduct by a third party employee and fails to establish any facts related to the duties of an agreement or the breach of those duties by Plaintiff.” Doc. 25 at 3. To the contrary, Defendants have pled when the employment relationship began with Plaintiff, when and how they discovered his failure to comply with billing and pricing policies and procedures, and the injury Plaintiff's conduct has caused them. Although Defendants do allege that Plaintiff was aware of the former employee's fraudulent actions (Doc. 20, ¶¶ 7-10), the Court need not decide if that factual allegation alone is sufficient because it is not the sole allegation upon which Defendants' breach of contract claim depends. Defendants have pled sufficient facts to state a claim that is plausible on its face. See Iqbal, 556 U.S. at 678.

         B. Unjust Enrichment.

         A party is unjustly enriched when it “has and retains money or benefits which in justice and equity belong to another.” City of Sierra Vista v. Cochise Enters., Inc., 697 P.2d 1125, 1131 (Ariz.Ct.App. 1984). The five elements of unjust enrichment are “(1) an enrichment; (2) an impoverishment; (3) a connection between the enrichment and the impoverishment; (4) absence of justification for the enrichment and the impoverishment, and (5) an absence of a remedy provided by ...

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