Edwards v. Vemma Nutrition

          ORDER

          Dominic W. Lanza United Slates District Judge

         Pending before the Court are three motions to dismiss: (1) the Motion of Tom and Bethany Alkazin to Dismiss for Lack of Personal Jurisdiction Or, in the Alternative, to Compel Arbitration (Doc. 112), (2) Defendant Vemma International Holdings, Inc.'s Motion to Dismiss Second Amended Complaint (Doc. 114), and (3) Former Defendant Haresh Mehta's Motion to Clarify Dismissal and Alternative Renewal of Motion to Dismiss (Doc. 131). As discussed below, all three motions will be granted.

         BACKGROUND

         A. The First Amended Complaint

         On July 3, 2017, Plaintiff John Edwards brought this copyright infringement action. (Doc. 1.)

         On August 25, 2019, Edwards filed his First Amended Complaint (“FAC”), naming as defendants (1) Vemma Nutrition, Inc., (2) Vemma International Holdings, Inc., (3) Vemma Vitamins Pty. Ltd., (4) Tom and Bethany Alkazin, (5) Haresh Mehta, (6) Tarak Mehta, and (7) Roes I through X. (Doc. 13.)

         B. The Dismissal As To Vemma Nutrition

         On September 15, 2017, Vemma Nutrition Company (“Vemma Nutrition”)^[1]-the only Defendant served at that time-filed a Motion to Compel Arbitration and Dismiss Action (Doc. 18), arguing that “the parties' contract included a broad arbitration clause requiring arbitration of any dispute relating to the parties' ‘relationship.'” (Doc. 18 at 1-2.)

         On January 31, 2018, the Court issued a 16-page opinion granting the motion, holding that Edwards's claims against Vemma Nutrition were subject to arbitration and thus dismissing those claims without prejudice. (Doc. 61.)

         C. The Dismissal As To The Alkazins, Mehta, And Vemma Holdings

         On November 29, 2017, Tom and Bethany Alkazin (“the Alkazins”) and Vemma International Holdings, Inc. (“Vemma Holdings”) waived service. (Doc. 37.) Service was executed on Haresh Mehta (“Mehta”)^[2] on December 11, 2017. (Doc. 39.)

         On January 17, 2018, Mehta filed a motion to dismiss the FAC for lack of personal jurisdiction. (Doc. 57.)

         On February 21, 2018, the Alkazins filed a motion to dismiss the FAC for lack of personal jurisdiction. (Doc. 74).

         On February 21, 2018, Vemma Holdings filed a motion to dismiss the FAC for failure to state a claim. (Doc. 70).

         On July 20, 2018, the Court issued an opinion granting all three motions. (Doc. 99.) As for the two motions to dismiss for lack of personal jurisdiction, the Court noted that Edwards asserted specific jurisdiction, as opposed to general jurisdiction, and determined that the “purposeful direction” test applied, as opposed to the “purposeful availment” test. Id. at 4. Under the purposeful direction test, jurisdiction exists when the defendant has “(1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state.” Id. at 5 (quoting Morrill v. Scott Fin. Corp., 873 F.3d 1136, 1142 (9th Cir. 2017)).

         The Court noted that the FAC “broadly alleges that Mr. Alkazin has ‘transacted business in this district and throughout the United States,' but it does not allege . . . any potential harm in Arizona that would be anything more than random, fortuitous, or attenuated.” Id. at 6. The Court therefore determined that the FAC did not allege facts demonstrating the Alkazins had caused any harm suffered in Arizona and therefore dismissed the FAC as to the Alkazins, with leave to amend within 30 days “[i]f Dr. Edwards has such facts.” Id. at 6-7.

         The Court similarly determined the FAC did not allege facts demonstrating that Mehta-a resident of South Carolina who allegedly hid one of Edwards' book scripts in South Carolina and used Edwards' copyrighted materials to expand Vemma Nutrition's presence into India-had caused any harm suffered in Arizona. Id. at 7. The Court dismissed the FAC as to Mehta without leave to amend. Id.

         Finally, in granting Vemma Holdings's motion to dismiss, the Court concluded that “the FAC impermissibly refers to the Vemma corporate defendants without differentiation, ” noting that the FAC “specifically defines ‘Vemma' to include both Vemma Nutrition and [Vemma Holdings].” Id. at 9. The Court found that the lack of differentiation “results in confusion as to which claims and theories remain against [Vemma Holdings], ” considering that Vemma Nutrition had been dismissed due to the binding arbitration agreement, and “the FAC neither alleges that [Vemma Nutrition and Vemma Holdings] are alter egos, nor does it allege separate facts against Vemma Holdings that would give rise to independent liability.” Id. The Court granted Edwards leave to amend as to Vemma Holdings within 30 days, adding that “[t]he Second Amended Complaint should clearly set out which allegations apply to [Vemma Holdings].” Id. at 10.

         The Court concluded the opinion with the summation, “The Court grants the motions to dismiss and allows Plaintiff to amend the complaint to plead facts showing whether he suffered harm in Arizona based on the Alkazins' conduct and to clarify which allegations apply to Defendant [Vemma Holdings].” Id. at 10-11. The Court then issued the following orders:

1. Defendant Haresh Mehta's Motion to Dismiss, (Doc. 57), is GRANTED.

2. Defendants Tom and Bethany Alkazin's Motion to Dismiss, (doc. 74), is GRANTED with leave to amend within 30 days.

3. Defendant Vemma International Holdings Inc.'s Motion to Dismiss, (doc. 70), is GRANTED with leave to amend within 30 days.

4. Plaintiff John Edwards may amend the complaint to clarify which allegations and claims apply to Vemma International Holdings and to state facts, if any, which suggest that Plaintiff was harmed in Arizona by the conduct of the Alkazins.

(Doc. 99 at 11.)

         D. The Second Amended Complaint

         On August 19-20, 2018, Edwards filed his Second Amended Complaint (“SAC”). (Doc. 106-1.)^[3] The SAC names all the non-fictitious Defendants named in the FAC. Relevant amendments include (1) the allegation that “[o]n information and belief, . . . Vemma Nutrition . . . was formed as a wholly-owned subsidiary of Vemma Holdings[;] . . . Vemma Holdings has always been owned by the Boreyko family, including B.K. Boreyko, who is also the Chief Executive Officer of Vemma Nutrition” (Doc. 106-1 ¶ 8), (2) the allegation that “[o]n information and belief, Vemma Holdings is the alter-ego of Vemma Nutrition” (id. ¶ 9), ^[4] (3) the allegation that the Alkazins have connections to Arizona (id. ¶ 15), (4) the legal conclusion that “personal jurisdiction . . . exists over the Alkazins in Arizona under principles of general and/or specific jurisdiction” (id. ¶ 16), (5) the allegation that Mehta “is a foreign national, domiciled in India and presently living in South Carolina, ” and (6) the legal conclusion that “[o]n information and belief, and pursuant to [28] U.S.C. § 1391(c)(3), personal jurisdiction is proper against Haresh Mehta . . . in the District of Arizona” (id. ¶ 18).

         The SAC also alleges that Vemma Nutrition and Vemma Holdings “have operated as a common enterprise” and collectively refers to the two companies as “Vemma.” (Id. ¶ 21). Furthermore, the SAC adds three new claims for relief: “civil conspiracy” between Vemma Holdings and Vemma Nutrition (id. ¶¶ 103-105), “preliminary and permanent injunction” against all Defendants (id. ¶¶ 107-110), and “punitive damages” against “Vemma” (id. ¶¶ 112-114).

         E. The Further ...