United States District Court, D. Arizona
CWT Canada II Limited Partnership, an Ontario, Canada Limited Partnership, et al., Plaintiffs,
Elizabeth J. Danzik, an Individual, et al., Defendants.
G. Campbell United States District Judge.
three consolidated cases in this matter concern business
disputes among the various parties - disputes which have been
the subject of many lawsuits. Before the Court are five fully
briefed motions. The Court addresses each
Danzik (“Dennis”) is the chief executive officer
of RDX Technologies, Corp. (“RDX”), a now-defunct
corporation. Dennis also owns Danzik Applied Sciences, LLC
(“DAS”). Dennis and his spouse, Elizabeth Danzik
(“Elizabeth”), own Deja II, LLC
(“Deja”). CWT Canada II Limited Partnership
(“CWT Canada”) and Resource Recovery Corporation
(“RRC”) entered into a transaction to sell their
company, Changing World Technologies, L.P. (“CWT
LP”), to RDX. CWT Canada and RRC also entered into a
transaction to purchase RDX stock. Kevin Bridges was the
chief financial officer of RDX. Tony Ker was the chairman of
the RDX board, and Richard Carrigan was a board member. Jean
Noelting, Bruce MacFarlane, and Brian Appel were senior
officers of CWT LP.
March 4, 2016, CWT Canada and RRC sued Elizabeth and Deja,
alleging that Elizabeth received $730, 000 that Dennis stole
from them, and that she defrauded them in the separate RDX
stock transaction. CWT Canada II, LP v. Elizabeth J.
Danzik, No. 16-cv-00607-DGC (the “Elizabeth
Action”). Next, CWT Canada and RRC sued DAS, Bridges,
Carrigan, and Ker, alleging that they knew of and aided in
Dennis's fraudulent theft scheme. CWT Canada II, LP
v. Kevin Bridges, No. 16-cv-02577-DGC (the
“Bridges Action”). Finally, Dennis and RDX sued
CWT Canada, RRC, Noelting, MacFarlane, and Appel, alleging
that they defrauded him into the purchase of CWT LP.
Dennis M. Danzik v. CWT Canada II, LP, No.
17-cv-00969-DGC (the “Dennis Action”). On
September 27, 2017, the Court granted the parties' motion
to consolidate these actions and directed the parties to make
subsequent filings in the Elizabeth Action.
cases come after CWT Canada, RRC, and Noelting already
obtained a judgment against Dennis and RDX in New York state
court. GEM Holdco, LLC, et al. v. Changing World
Technologies, L.P., et al., Index No. 650841/2013 (Sup.
Ct. N.Y. Cty.) (the “New York Action”). Another
action - by Dennis and RDX against CWT Canada, RRC, Appel,
Noelting, and MacFarlane - remains pending in a Canadian
court. RDX Technologies Corp. v. Appel, File No.
1401-09394 (Ct. of Queens Bench, Alberta, Canada) (the
the motions seek dismissal under Rule 12(b)(6). 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 if 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.
(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).
The Bridges Action.
Canada and RRC sued DAS and various other defendants in the
Bridges Action, and Defendant Ker has filed a counterclaim
against them. Bridges Doc. 81. CWT Canada and RRC moved to
dismiss the counterclaim. Bridges Doc. 86. Ker filed an
amended counterclaim ten days later (Bridges Doc. 88), and
then a second amended counterclaim (“SAC”) (Doc.
99). CWT Canada and RRC have filed a motion to dismiss the
SAC. Doc. 107.
First Motion to Dismiss the Counterclaim (Bridges Doc.
argues that the first motion should be dismissed as moot in
light of his amended counterclaim. Bridges Doc. 89. The Court
agrees. See Ramirez v. Cty. of San Bernardino, 806
F.3d 1002, 1008 (9th Cir. 2015) (An “amended complaint
supersedes the original, the latter being treated thereafter
as non-existent.”) (quoting Forsyth v. Humana,
Inc., 114 F.3d 1467, 1474 (9th Cir. 1997), overruled
on other grounds by Lacey v. Maricopa Cty., 693 F.3d 896
(9th Cir. 2012)). The Court will deny as moot CWT Canada and
RRC's motion to dismiss the original counterclaim
(Bridges Doc. 86).
Motion to Dismiss the SAC (Doc. 107).
asserts claims for abuse of process and defamation. Doc. 99
at 25-26. The following facts are relevant to determining
what law applies to the claims. Ker resides in British
Columbia, Canada, and served on the board of RDX during and
after its acquisition of CWT LP. Doc. 99 at 16, 18-19. CWT
Canada is organized in Delaware; has its principal place of
business in Ontario, Canada; and its general partner is
incorporated and has its principal place of business in
Canada. Id. RRC is incorporated in Delaware and has
its principal place of business in New York. Id. at
Choice of Law Standard.
diversity cases such as these, “the district court must
apply the choice-of-law rules of the state in which it
sits.” Abogados v. AT & T, Inc., 223 F.3d
932, 934 (9th Cir. 2000). Arizona follows the
Restatement's “most significant relationship”
test. See Bates v. Super. Ct., 749 P.2d 1367, 1369
(Ariz. 1988); Magellan Real Estate Inv. Tr. v.
Losch, 109 F.Supp.2d 1144, 1155 (D. Ariz. 2000);
Restatement (Second) of Conflict of Laws. Under this test,
the law of the state that has the most significant
relationship to an issue governs that issue. In a tort claim,
factors to consider include: “(a) the place where the
injury occurred, (b) the place where the conduct causing the
injury occurred, (c) the domicile, residence, nationality,
place of incorporation and place of business of the parties,
and (d) the place where the relationship, if any, between the
parties is centered.” Magellan, 109 F.Supp.2d
at 1156 (quoting Restatement (Second) of Conflict of Laws
§ 145). “These contacts are to be evaluated
according to their relative importance with respect to the
particular issue.” Id.
Abuse of Process.
alleges that CWT Canada and RRC (collectively,
threatened[, ] and attempted to coerce” him to provide
testimony against Dennis and RDX in the New York Action. Doc.
99 at 22. He asserts that the New York Action is fraudulent
and baseless. Id. at 18-21. He claims that
Counterdefendants used tactics such as contacting him without
notifying RDX's counsel, lying to him about Dennis, and
threatening to sue. Id. at 22-23. When Ker
consistently refused to change his testimony,
Counterdefendants sued him, first in New York and then in
this Court. Id. at 23. Ker asserts that these suits
are frivolous and were “initiated and pursued”
solely for the improper purpose of coercing him to
“flip sides and testify against Dennis Danzik and
RDX.” Id. Ker alleges that Counterdefendants
have employed this strategy against other key witnesses as
well. Id. at 21-22.
Choice of Law.
Arizona, an abuse of process claim is generally governed by
“the local law of the state where the proceeding
complained of occurred, unless, with respect to the
particular issue, some other state has a more significant
relationship . . . to the occurrence and the
parties[.]” Restatement (Second) of Conflict of Laws
§ 155; see also Xcentric Ventures LLC v.
Borodkin, No. CV-11-1426-PHX-GMS, 2012 WL 692976, at *5
(D. Ariz. Mar. 1, 2012). Counterdefendants argue that New
York law should apply to Ker's claim based on the New
York suit, and that Arizona law should apply to his claim
based on the Bridges Action. Doc. 107 at 6-7 (citing
Xcentric, 2012 WL 692976, at *5). Ker's response
does not address this issue, but it repeatedly cites Arizona
law in discussing the abuse of process claim. See
Doc. 113 at 10-11. The Court agrees with Counterdefendants.
parties do not argue, and the Court does not find, that any
state has a more significant interest in these claims than
New York and Arizona, respectively. Aside from being the
states where the alleged abuses occurred, New York and
Arizona have clear connections to the parties and the
underlying occurrences giving rise to these claims. More
importantly, the choice between New York and Arizona law does
not concern a true conflict of laws - the abuse of process
claim fails under the law of both states.
Failure to State a Claim.
state an abuse of process claim under New York law, Ker must
allege (1) “regularly issued process, ” (2)
“intent to do harm without excuse or justification,
” and (3) “use of the process in a perverted
manner to obtain a collateral objective.” Casa de
Meadows Inc. (Cayman Islands) v. Zaman, 908 N.Y.S.2d
628, 632 (App. Div. 2010) (quoting Curiano v.
Suozzi, 469 N.E.2d 1324, 1326 (N.Y.App.Div. 1984)).
Importantly, “‘the institution of a civil action
by summons and complaint is not legally considered process
capable of being abused.'” Id.
state an Arizona abuse of process claim, Ker must allege
“(1) a willful act in the use of judicial process; (2)
for an ulterior purpose not proper in the regular conduct of
the proceedings.” Fappani v. Bratton, 407 P.3d
78, 81 (Ariz.Ct.App. 2017) (quoting Nienstedt v.
Wetzel, 651 P.2d 876, 881 (Ariz.Ct.App. 1982)). Unlike
the tort of malicious prosecution, which covers the
initiation of civil proceedings with malice and without
probable cause, abuse of process addresses misuse of process
after proceedings have been initiated. See Joseph v.
Markowitz, 551 P.2d 571, 573-74 (Ariz.Ct.App. 1976). As
in New York, “abuse of process requires some act beyond
the initiation of a lawsuit[.]” Id. at 575.
Courts have “explicitly rejected the contention that
the initiation of a lawsuit can constitute the necessary
act” for abuse of process under Arizona law. Blue
Goose Growers, Inc. v. Yuma Groves, Inc., 641 F.2d 695,
697 (9th Cir. 1981) (citation omitted). Courts also have held
that an abuse of process claim will not lie where a lawsuit
initiated in bad faith is “continued without
justification.” Morn v. City of Phx., 730 P.2d
873, 876 (Ariz.Ct.App. 1986). Counterdefendants'
“mere persistence in [this] litigation, even if based
on an improper motive, does not sustain the tort.”
Crackel v. Allstate Ins. Co., 92 P.3d 882, 888
abuse of process counterclaim, based entirely on
Counterdefendants' initiation and pursuit of the New York
and Arizona lawsuits, fails to state a claim under New York
and Arizona law and will be dismissed.
alleges that “around May-December 2015, Jean Noelting
and/or Bruce MacFarlane, on behalf of Counterdefendants,
spoke with Ryan Johnson and/or Brock Aynsley, accusing Ker of
fraud and being in a conspiracy with Dennis Danzik.”
Doc. 99 at 23. Ryan Johnson was an RDX investor who worked
for the company in investor relations and had relationships
with many RDX shareholders, brokerage firms, and money
managers. Id. at 23-24. Brock Aynsley was a broker
for a large Canadian firm. Id. at 24. The SAC also
alleges that around “May-December 2015, Jean Noelting,
on behalf of Counterdefendants, spoke with Glenn Davies,
” an RDX director, telling him “that Ker was a
liar and would be sued for fraud if he did not turn on
asserts that he “has been in the public company
business since 1996, ” “has derived the majority
of his income based on a solid reputation, ” and has
suffered “immense harm” as a result of
Counterdefendants' statements and RDX's bankruptcy,
which he alleges was caused by Counterdefendants' fraud.
Id. at 18-19, 24. As a result of RDX's
bankruptcy, the Alberta Securities Commission notified Ker
that he is ineligible to serve as an officer or director of a
public company. Id. at 24. Counterdefendants'
actions have allegedly destroyed Ker's reputation,
“severely hinder[ing] his ability to raise money and
work in his established profession.” Id.
Choice of Law.
Arizona, a defamation claim is generally governed by the law
of “the state where the publication occurs . . .
unless, with respect to the particular issue, some other
state has a more significant relationship . . . to the
occurrence and the parties[.]” Restatement (Second) of
Conflict of Laws § 149; see also Vazirani v. Annexus
Distributors AZ, LLC, No. 1 CA-CV 14-0815, 2017 WL
443529, at *6 (Ariz.Ct.App. Feb. 2, 2017).
asserts that the Court “should rely on the law of
Canada, where the defamation occurred.” Doc. 99 at 25
(citing Vazirani, 2017 WL 443529, at *6).
Alternatively, the SAC asserts a defamation claim
“pursuant to U.S. law.” Id. at 26. The