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Dream Team Holdings LLC v. Alarcon

United States District Court, D. Arizona

August 11, 2017

Dream Team Holdings LLC, an Arizona limited liability company; and Green Light District Holdings LLC, a California limited liability company, Plaintiffs,
v.
Rudy Alarcon; Kristen Abelon; Philip Baca; Organic Patient Group Inc., an Arizona non-profit entity; and Energy Clinics LLC, an Arizona limited liability company, Defendants.

          ORDER

          DOUGLAS L. RAYES UNITED STATES DISTRICT JUDGE.

         This action arises out of a failed partnership to legally cultivate and distribute medical marijuana in Arizona. Plaintiffs Dream Team Holdings (Dream Team) and Green Light District Holdings (Green Light) seek damages from Defendants on a number of contract, tort, and equitable claims. Before the Court are Green Light's motion for partial summary judgment or an order treating certain facts as established (Doc. 74), Defendants' motion to dismiss the claims brought on behalf of Dream Team (Doc. 87), and Dream Team's motion to strike portions of Defendants' reply memorandum or, alternatively, to file a surreply (Doc. 91). The motions are fully briefed. For the reasons stated below, the motion to dismiss is granted and the motions to strike and for partial summary judgment are denied.[1]

         I. Background

         Green Light and Defendants legally cultivate and distribute marijuana in California and Arizona, respectively. The parties contemplated a partnership, which they planned to call Dream Team. During negotiations, the parties executed a Term Sheet and Memorandum of Understanding (Term Sheet), which appears to be an agreement regarding the principle terms of a forthcoming Operating Agreement should the parties later form Dream Team. Dream Team, however, was never properly incorporated and an Operating Agreement consequently never took effect.

         Each party blames the other for the venture's failure. Green Light alleges that it invested money and in-kind services toward the creation of Dream Team, but that the venture failed because Defendants were unresponsive, failed to provide an accounting, and failed to return revenue or profits. In contrast, Defendants claim that Green Light's agent in Arizona had a problematic management style, was ignorant of Arizona law, acted unlawfully, and engaged in unprofessional behavior. Defendants admit that Green Light invested some money in the venture, but dispute the amounts invested or that they approved those sums. Defendants also allege that the work of Green Light's agents damaged their operation, property, and valuable strains of marijuana crop. Defendants claim that they have lost clients, employees, and potential investment opportunities. Lastly, Defendants allege that they made good faith efforts to negotiate a generous settlement with Green Light which proved unsuccessful.

         Green Light and Dream Team filed this action in Maricopa County Superior Court on April 29, 2016, and the matter thereafter was removed to this Court. After removal, Green Light unilaterally organized Dream Team and named Defendant Alarcon as a member. Alarcon later filed a separate action in Maricopa County Superior Court seeking dissolution of Dream Team and, on May 22, 2017, the superior court entered judgment ordering the dissolution. (Doc. 87-2.) Defendants now seek to dismiss the claims brought by Dream Team because it did not exist when this case was filed and, though it later had a short-lived existence, it has since been dissolved. Green Light seeks partial summary judgment on its equitable claim for “money had and received.”

         II. Dream Team's Motion to Strike or File Surreply

         Dream Team asks the Court to strike what it characterizes as new arguments within Defendants' reply brief or, alternatively, to allow it to file a surreply. (Doc. 91.) “Motions to strike are disfavored and are rarely granted.” XY Skin Care & Cosmetics, LLC v. Hugo Boss USA, Inc., No. CV-08-1467-PHX-ROS, 2009 WL 2382998, at *1 n.1 (D. Ariz. Aug. 4, 2009) (citation omitted). Under Local Rule 7.2(m):

a motion to strike may be filed only if it is authorized by statute or rule, such as Federal Rule of Civil Procedure 12(f), 26(g)(2), or 37(b)(2)(A)(iii), 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.

         Dream Team relies on Federal Rule of Civil Procedure 12(f), which permits the Court, on its own or by motion, to “strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” A reply memorandum in support of a motion to dismiss, however, is not a “pleading” for purposes of Rule 12(f). Indeed, Rule 7(a) defines “pleading” as only:

(1) a complaint; (2) an answer to a complaint; (3) an answer to a counterclaim designated as a counterclaim; (4) an answer to a crossclaim; (5) a third-party complaint; (6) an answer to a third-party complaint; and (7) if the court orders on, a reply to an answer.

         Moreover, Rules 7 and 12 distinguish pleadings from motions. See Fed. R. Civ. P. 7(a)-(b); Fed.R.Civ.P. 12(b). Accordingly, Dream Team's motion to strike is denied because it is not authorized under Local Rule 7.2(m). See Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983) (“Under the express language of the rule, only pleadings are subject to motions to strike.”); Ordahl v. U.S., 646 F.Supp. 4, 6 (D. Mont. 1985) (concluding that it would be inappropriate to strike a motion for reconsideration because motions are not pleadings).

         Moreover, on the merits the Court finds that Defendants did not raise new arguments in their reply memorandum. Instead, Dream Team appears to have misinterpreted the arguments that Defendants made in their initial motion. The Court finds that Defendants' arguments are well within the permissible scope of a reply. See Beckhum v. Hirsch, No. CV 07-8129-PCT-DGC (BPV), 2010 WL 582095, at *8 (D. Ariz. Feb. 17, 2010). Dream Team's alternative request to file a surreply therefore is denied.

         III. Defendants' Motion ...


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