United States District Court, D. Arizona
HONORABLE DIANE J. HUMETEWA UNITED STATES DISTRICT JUDGE
matter is before the Court on seven Motions filed by the
parties. Defendants Electronic Payment Systems, LLC
(“EPS”) and Electronic Payment Transfer, LLC
(“EPT”) filed a Motion to Transfer Venue to the
District of Colorado (Doc. 20). Defendants John Dorsey
(“Dorsey”), Thomas McCann (“McCann”),
and Michael Peterson (“Peterson”) (collectively,
“Individual Defendants”) filed a Joinder to that
Motion (Doc. 21). Plaintiff, the Federal Trade Commission
(“FTC”), filed a Response in opposition to the
Motion (Doc. 32) and all the Defendants filed a Reply. (Doc.
34). The FTC filed a Motion to Strike Affirmative Defenses of
Defendants Dynasty Merchants LLC (“Dynasty”) and
Nikolas Mihilli (“Mihilli”) (Doc. 59). No
response was filed to that Motion. Defendant Electronic
Payment Solutions of America Incorporated
(“EPSA”) filed a Motion to Dismiss the
cross-claims filed against it by Defendants EPS and EPT (Doc.
69). EPS and EPT filed a Response (Doc. 71). No reply to that
Motion was filed. The FTC filed a Motion to Strike the Answer
to the Amended Complaint filed by the Individual Defendants,
related to the jury demands in the Amended Answer (Doc. 97).
The Individual Defendants filed a Response. (Doc. 103). The
FTC filed a Second Motion to Strike Affirmative Defenses
(Doc. 98) of Defendants Dynasty Merchants and Milhilli.
Dynasty and Milhilli did not respond to the Motion. Finally,
there are two Motions for extensions of time to effectuate
service and to respond to cross-claims. (Docs. 115 and 116).
While not all of the parties are involved in each of the
respective pending Motions, the Court will consider all of
the Motions in this Order.
brought this action under Section 13(b) of the Federal Trade
Commission Act and the Telemarketing and Consumer Fraud and
Abuse Prevention Act (the “Telemarketing Act”),
seeking to obtain permanent injunctive relief, restitution,
and other relief on behalf of consumers who were allegedly
defrauded by all of the defendants involved here (hereafter,
collectively, “Defendants”). (Doc. 85 at 3). The
Complaint alleges that these Defendants perpetrated a
deceptive telemarketing scheme (the “scheme”) by
inducing consumers to give their credit card information in
exchange for promised interest income payments on amounts
given. Defendants allegedly laundered the credit card
transactions resulting in a total injury to consumers in an
amount in excess of $7, 300, 000. (Id. at 4).
Defendants allegedly created several fictitious companies and
accounts in order to hide these transactions. (Id.)
credit card industry, merchant accounts are established in
order to settle payment of credit card transactions.
Independent sales organizations (“ISO”) are
involved in the payment processing of credit card
transactions. Defendant EPS is an ISO that markets payment
processing services to merchants. EPS is a Colorado company.
(Id.) EPS allegedly sells payment processing
services to merchants, served as the ISO to numerous entities
involved in the present scheme, and set up and approved the
merchant accounts for the fictitious companies.
(Id.) EPS allegedly processed nearly $5.9 Million in
fraudulent transactions over the course of the scheme. The
FAC alleges that EPS used three sales agents to market its
services, Defendants Jay Wigdore (“Wigdore”),
Michael Abdelmesseh (“Abdelmesseh”), and Mihilli.
The FAC further alleges that these Defendants were
participants in the scheme. (Id. at 6). EPS
allegedly processed the consumer transactions through the
fictitious accounts and then transferred the money to
companies controlled by these Defendants. (Id.)
EPT is a Colorado company who is closely affiliated with EPS.
EPS and EPT are allegedly controlled by the same principals.
The FAC refers to EPS and EPT collectively as EPS.
(Id. at 10). Defendant Dorsey is the CEO and
co-owner of EPS. Defendant McCann is the managing member and
co-owner of EPS. (Id. at 11). Defendant Peterson is
the risk-manager of EPS. The FAC alleges that all three
individuals were principal actors in the scheme.
Electronic Payment Services, Inc. (“EP Services”)
is an Arizona corporation. Defendant EPSA is also an Arizona
Corporation. EP Services and EPSA both allegedly acted as ISO
sales agents for EPS and referred merchants to EPS in
furtherance of the scheme. (Id. at 7-8). Defendant
Wigdore, who resides in Arizona, is President of EP Services
and a director of EPSA and allegedly acted as an ISO sales
agent on behalf of EPS and participated in the scheme.
(Id. at 9). The FAC alleges that Defendant Michael
Abdelmesseh, who resides in Arizona, is a director of EPSA
and acted as an ISO sales agent for EPS and participated in
the scheme. (Id.)
Dynasty is an Arizona limited liability company. The FAC
alleges that Dynasty processed merchant transactions using
EPS's ISO services in furtherance of the scheme.
(Id.) The FAC alleges that Defendant Mihilli, who
resides in Arizona, is an officer of Dynasty and worked as a
sub-agent of Wigdore and Abdelmesseh.
brings six causes of action against the various Defendants
related to alleged violations of the FTC Act and the
Telemarketing Act. The FTC seeks permanent injunctive relief,
refund of monies paid, and restitution to consumers. (Doc. 84
at 56-57). On September 29, 2017, EPS filed their Answer to
the FTC's Complaint and additionally filed cross-claims
against Defendants EPSA Wigdore, Abdelmesseh, Mihilli,
Dynasty, and KMA Merchant Services, LLC. (Doc. 22). The
FTC filed their FAC on March 9, 2018. (Doc. 85). Since that
time, all remaining Defendants have answered the FAC. (Docs.
89, 90, 91, 94, and 95).
Motion to Dismiss Cross-Claims
EPSA and Wigdore move to dismiss the cross-claims asserted
against them by EPS based on the duplicative nature of the
cross-claims to a complaint filed in the District of Colorado
and pursuant to Fed.R.Civ. 12(b)(6).
Motion to Dismiss Legal Standards
motion to dismiss pursuant to Rule 12(b)(6) challenges the
legal sufficiency of a complaint. Ileto v. Glock,
Inc., 349 F.3d 1191, 1199-1200 (9th Cir. 2003). A
complaint must contain a “short and plain statement
showing that the pleader is entitled to relief.”
Fed.R.Civ.P. 8(a). “All that is required are sufficient
allegations to put defendants fairly on notice of the claims
against them.” McKeever v. Block, 932 F.2d
795, 798 (9th Cir. 1991). Rule 8, however, requires
“more than an unadorned,
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
complaint need not contain detailed factual allegations to
avoid a Rule 12(b)(6) dismissal; it simply must plead
“enough facts to state a claim to relief that is
plausible on its face.” Twombly, 550 U.S. at
570. “A complaint 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.” Iqbal, 129 S.Ct.
at 1949 (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 defendant has acted
unlawfully.” Iqbal, 129 S.Ct. at 1949
(citation omitted). “Where a complaint pleads facts
that are ‘merely consistent with' a defendant's
liability, it ‘stops short of the line between
possibility and plausibility of entitlement to
relief.'” Id. (citation omitted).
addition, the Court must interpret the facts alleged in the
complaint in the light most favorable to the plaintiff, while
also accepting all well-pleaded factual allegations as true.
Shwarz v. United States, 234 F.3d 428, 435 (9th Cir.
2000). That rule does not apply, however, to legal
conclusions. Iqbal, 129 S.Ct. at 1949. A complaint
that provides “labels and conclusions” or
“a formulaic recitation of the elements of a cause of
action will not do.” Twombly, 550 U.S. at 555.
Nor will a complaint suffice if it presents nothing more than
“naked assertions” without “further factual
enhancement.” Id. at 557.
courts “retain broad powers to prevent duplicative or
unnecessary litigation.” Slack v. McDaniel,
529 U.S. 473, 478 (2000). “There is a generally
recognized doctrine of federal comity which permits a
district court to decline jurisdiction over an action when a
complaint involving the same parties and issues has already
been filed in another district.” Pacesetter
Systems, Inc. v. Medtronic, Inc., 678 F.2d 93, 94-95
(9th Cir. 1982). “A suit is duplicative if the claims,
parties, and available relief do not significantly differ
between the two actions.” iStar RC Paradise Valley
LLC v. Five Star Dev., No. CV-10-2191-PHX-GMS, 2011 WL
4852293, at *8 (D. Ariz. Oct. 13, 2011) (quoting Barapind
v. Reno, 72 F.Supp.2d 1132, 1145 (E.D. Cal. 1999)
(internal citation omitted)). Dismissal of the second action
is proper “when a complaint involving the same parties
and issues has already been filed in another district.”
Pacesetter Systems, 678 F.2d at 95.
Defendants Wigdore and EPSA argue that the cross-claims filed
against them in this case are identical to the complaint
filed against them in the District of Colorado, and thus that
the duplicative claims filed in this District should be
explained above, EPS brought suit against these Defendants in
the District of Colorado (the “Colorado case”) in
September of 2014. The FTC subsequently filed suit against
the Defendants, including EPS, in July of 2017. With their
Answer to the FTC Complaint, EPS filed cross-claims against
Wigdore, Abdelmesseh, and EPSA that largely mirrors the
complaint in the Colorado case. (Doc. 22).
Court notes that the relevant portions of the complaint filed
by EPS and EPT in the District of Colorado and the
cross-claims filed in this case are nearly identical. Both
list the same or very similar causes of action against
Defendants EPSA and Wigdore. These cases of action relate to
alleged breaches of the contractual obligations of the
parties, including: failing to sell EPS's processing
services; failure to offer a right of first refusal pursuant
to the contract; encouraging merchants to obtain services