United States District Court, D. Arizona
IOW, LLC, an Arizona limited liability company; and When Enterprises Corp., a Delaware corporation, Plaintiffs/Counterdefendants,
Michael Breus and Lauren Breus, husband and wife, Defendants/Counterclaimants.
G. Campbell Senior United States District Judge
IOW, LLC (“IOW”) and When Enterprises Corp.
(“WEC”) brought this action against Dr. Michael
Breus and Lauren Breus, asserting claims for breach of
contract and the implied covenant of good faith and fair
dealing, misappropriation of trade secrets, unjust
enrichment, unfair competition, and trademark infringement
under 15 U.S.C. § 1114. Doc. 1-1 at 1-19. Defendants
counterclaimed, seeking to cancel several of Plaintiffs'
move for summary judgment on all claims (Docs. 76, 79) and
Plaintiffs cross-move on Defendants' counterclaim (Doc.
81). The motions are fully briefed, and oral argument will
not aid in the Court's decision. See Fed R. Civ.
P. 78(b). For the following reasons, the Court will grant in
part Defendants' motion as to Plaintiffs' claims and
deny the parties' cross-motions on Defendants'
Breus is a clinical psychologist, board certified in clinical
psychology and sleep disorders, who studies how his
patients' chronobiologies effect their treatment. Docs.
77 at 1-2; 84 at 2. Chronobiology is the science of the human
body's natural circadian rhythms, and a chronotype is an
individual's internal circadian rhythm that influences
her sleep cycle and activity. Doc. 77 at 2. Dr. Breus has
authored three books and more than eighty blogs discussing
chronobiology and circadian rhythms. Id. at 2-3;
Doc. 84 at 2.
December 2013, Dr. Breus met Randy Miller, the sole member of
IOW and the majority shareholder of WEC. Docs. 77 at 7; 83 at
3. Miller told Dr. Breus about his business, WHEN, and shared
his ideas for an online counseling platform branded around
the name, “If or When” or “If not Now When,
” where coaches would help customers achieve their
goals based on the concept of: “If I don't do it
now, when will I do it?” Doc. 77 at 7. Dr. Breus and
IOW entered into a Confidentiality Agreement regarding their
discussions in January 2014, but had no other agreements.
Id. Dr. Breus provided no services to Plaintiffs and
was never identified as an associate by their promotional
materials. Id. In February 2015, IOW assigned the
Agreement to WEC, which now owns all intellectual property
related to the WHEN business. Id. at
present dispute concerns Dr. Breus's third book, The
Power of When. Dr. Breus and his ghostwriter, Valerie
Frankel, began collaborating on the book in November 2014.
Id. at 3. Originally titled The Overnight Solution,
the book posits that an individual can be healthier and more
productive by adjusting when she accomplishes certain tasks.
Id. at 3-4. Based on extensive research, the book
identifies four general chronotypes that inform when a person
should do certain activities, and includes a “Bio-Time
Quiz” that helps readers identify their chronotype.
Id. In August 2015, Dr. Breus acquired the domain
name thepowerofwhen.com to use as a promotional website for
the book, which went live in August 2016. Id. at 5.
He also registered thepowerofwhenquiz.com to publish his
Bio-Time Quiz, which went live in July 2016. Id.
parties agree that Dr. Breus never disclosed information
about Plaintiffs or Miller to his ghostwriter or publisher,
Little, Brown, and Company (“LB”). Id.
at 7. But Plaintiffs assert that Dr. Breus, in developing the
concept for his third book, used and incorporated information
that he discussed with Miller and that was subject to the
Confidentiality Agreement and trade secret protections.
Id.; Doc. 84 at 3.
Summary Judgment Standard.
seeking summary judgment “bears the initial
responsibility of informing the district court of the basis
for its motion, and identifying those portions of [the
record] which it believes demonstrate the absence of a
genuine issue of material fact.” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). Summary judgment is
appropriate if the evidence, viewed in the light most
favorable to the nonmoving party, shows “that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). Summary judgment is also appropriate against a party
who “fails to make a showing sufficient to establish
the existence of an element essential to that party's
case, and on which that party will bear the burden of proof
at trial.” Celotex, 477 U.S. at 322. Only
disputes over facts that might affect the outcome of the suit
will preclude summary judgment, and the disputed evidence
must be “such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Breach of Contract.
plaintiff must establish that it has standing to bring suit.
Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61
(1992). Three elements are required for Article III standing:
(1) an injury-in-fact, (2) causation between the injury and
the allegedly wrongful conduct, and (3) that the injury is
likely to be redressed by a favorable decision from the
Court. Lujan, 504 U.S. at 560.
allege that Defendants breached the January 2014 Agreement by
using confidential business strategies and concepts in
developing and marketing The Power of When. Doc. 1-1 at 8.
Defendants argue that IOW lacks standing because it assigned
the Agreement to WEC in February 2015, before Dr. Breus
titled or published his book, and that IOW has no injury
because WEC now owns all alleged intellectual property of the
business. Doc. 76 at 17. IOW responds that it was under
common control with WEC during the relevant time and
therefore constitutes an “affiliate” under the
Agreement and can enforce the confidentiality obligations.
Docs. 83 at 5; see 84-9 at 2-3.
Agreement deems confidential certain information disclosed by
the “Owner” to the “Recipient. See
Doc. 84-9 at 2-3. The terms Owner and Recipient are defined
to include “affiliates of the parties, ” meaning
“any person or entity controlling, controlled by[, ] or
under common control with a party.” Id.
Defendants do not dispute that IOW is an
“affiliate” under the Agreement and was under
common control with WEC at the time of the alleged breach.
They assert instead that IOW must be a primary party in
interest to enforce the Agreement's terms, citing
Stratton v. Inspiration Consolidated Copper Co., 683
P.2d 327 (Ariz.Ct.App. 1984), which states that to
“recover under the third party beneficiary doctrine,
the contract relied upon by the third party must reflect that
the parties thereto intended to recognize [it] as a primary
party in interest.” Doc. 91 at 2.
does not argue that it is a third-party beneficiary or that
it qualifies to sue for breach of the Agreement as a
third-party beneficiary. Nor does it address specifically how
it otherwise satisfies the elements required for Article III
standing. IOW states that “the rights and obligations
under the [Agreement] extend to affiliates of the parties
under common control, ” that it “continued to be
covered under the terms of the [Agreement], ” and that
it owned the proprietary information when Defendants first
began breaching. Doc. 83 at 5-6. The broad definitions of
Owner and Recipient to include “affiliates”
appear to expand the scope of information deemed
confidential. But saying that an affiliate's information
is to be treated as confidential under the Agreement is not
the same as saying that the affiliate is a party to the
Agreement with rights to sue for breach. And other than the
Agreement language, IOW cites no evidence in the record
showing when it was injured, what cognizable injury it
suffered as a non-party “affiliate, ” or any
legal authority supporting its standing argument. IOW has
failed to establish standing to assert the breach of contract
claim, and the Court will grant Defendants summary judgment
against IOW on this claim. See Celotex, 477 U.S. at
322; Lujan, 504 U.S. at 560-61.
prevail on a breach of contract claim, a plaintiff must show
the existence of a contract, its breach, and resulting
damages. See Thomas v. Montelucia Villas, LLC, 302
P.3d 617, 621 (Ariz. 2013); Snow v. W. Sav. & Loan
Ass'n, 730 P.2d 204, 210 (Ariz. 1986).
“[I]nterpretation of a contract is generally a matter
of law, ” Powell v. Washburn, 125 P.3d 373,
375 (Ariz. 2006), but whether a party has breached the
contract is a question for the trier of fact, see Walter
v. F.J. Simmons, 818 P.2d 214, 218-19 (Ariz.Ct.App.
1991); Shiloh Custom Homes, Inc. v. Drywall, No. 1
CA-CV 07-0677, 2009 WL 690600, at *7 (Ariz.Ct.App. Mar. 17,
2009). A party breaches a contract when it “fail[s],
without legal excuse, to perform any promise which forms the
whole or part of a contract.” Snow, 730 P.2d
alleges that Defendants breached the Agreement by using
confidential business strategies and concepts to their
advantage (Doc. 1-1 at 8), including WEC's trademarks,
branding, and business models (Doc. 83 at 6-8). Defendants
argue that WEC has no evidence that Dr. Breus shared
WEC's confidential information with others to show
breach. Doc. 76 at 8-10.
asserts that Dr. Breus “utilize[d] the confidential
materials received from [WEC], which included the
confidential proposed trademarks and branding of WHEN
selected by Mr. Miller.” Doc. 83 at 6. But WEC's
unexplained record citations do not support this assertion.
They reference Defendants' statement of facts regarding
Dr. Breus's collaboration with Frankel, Defendants'
characterization of The Power of When book, and
Defendants' disputed contention that Dr. Breus acquired
the domain names at LB's instruction. Id.
(citing Doc. 77 at 3, 5). WEC also cites its statement of
facts, which identifies the date on which Dr. Breus released
the book, quotes the book's synopsis and selected
content, and quotes part of the book's forward, written
by Dr. Mehmet Oz. Id. (citing Doc. 84 at 7-8). WEC
then discusses how, before Miller met Dr. Breus, Miller
requested his attorney perform a trademark search on Power of
When, and that he and his attorney “considered that
phrase to be highly confidential” until it was publicly
disclosed in an August 2016 trademark application.
Id. But this evidence does not show that Defendants
disclosed confidential information in violation of the
contends that The Power of When and the book's marketing
materials and programs mimic the WHEN programs, ideas, and
brand models. Doc. 83 at 6-7. But WEC's cited evidence
again fails to support these assertions. WEC cites its
statement of facts, which reasserts that the Agreement
covered financial and business-related information related to
the WHEN business, including the phrase, “the power of
when, ” again discusses when Dr. Breus released his
book, and quotes parts of the book's content, synopsis,
and forward. Id. (citing Doc. 84 at 6-8). Defendants
do not dispute that Miller shared with Dr. Breus many of the
things WEC alleges (see Doc. 91 at 3 n.1), but
WEC's citations do not show that Dr. Breus ever disclosed
that information to others in violation of the Agreement. The
evidence simply describes information purportedly covered by
the Agreement, and quotes portions of The Power of When.
argues next that the origin of Dr. Breus's book title is
disputed and creates an issue of fact regarding breach. Doc.
83 at 7. Defendants cite evidence that Dr. Breus's
publisher, LB, conceived the title in a meeting where Dr.
Breus was not present and later suggested the title to him
via email. Doc. 76 at 9-10 (citing Doc. 77-2 at 8-13). WEC
responds with the following evidence. Doc. 83 at 7. In a
series of emails between Dr. Breus, Frankel, Dr. Breus's
agent, Alex Glass, and Tracy Behar of LB, Behar stated that
Glass and she had discussed Perfect Timing, When to Do
Everything, and Time of Your Life as title options, and that
Frankel liked The Science of When. See Doc. 84-14 at
2-3. Glass responded that he liked The Science of When and
that Dr. Breus liked Perfect Timing and Time of Your Life.
Behar suggested The Power of When several days later.
Id. Based solely on these communications, WEC
contends that “serious question[s] of
credibility” preclude summary judgment because Glass
and Dr. Breus discussed title options before Behar suggested
The Power of When and Frankel had also previously suggested a
similar title. Doc. 83 at 7.
emails are the sole basis for WEC controverting Behar's
sworn testimony that she and LB conceived the title without
input from Dr. Breus. See Docs. 77 at 5; 84 at 3.
The email discussion involves no communication by Dr. Breus,
and Glass stated specifically that Dr. Breus's title
suggestions were Perfect Timing and Time of Your Life.
See Doc. 84-6 at 2. Behar testified about how the
title was suggested. She testified that she immediately
disliked the book's working title, The Overnight
Solution, and described the common title-change process that
the publisher engaged in of emailing and meeting to
brainstorm alternatives. Doc. 77-2 at 8-13. She testified
that The Power of When title was developed in a meeting
involving only the publisher, marketing director, managing
editor, and paperback publisher. Id. at 15. She
explained that Frankel came up with The Science of When, but
the publisher found the word “science” too
technical-sounding so she suggested “power, ”
which Behar then suggested via email to Dr. Breus, Frankel,
evidence clearly contradicts WEC's assertion that the
book title came from Dr. Breus's violation of the
Agreement, and WEC presents no contrary evidence. WEC's
argument that credibility issues preclude summary judgment is
likewise not supported by any evidence undercutting the
truthfulness of the email exchange or the participants'
testimony about it. “[M]ere allegation and speculation
do not create a factual dispute for purposes of summary
judgment.” Sudre v. The Port of Seattle, NO.
C15-0928JLR, 2016 WL 7035062, at *7 (W.D. Wash. Dec. 2, 2016)
(quoting Nelson v. Pima Cmty. Coll., 83 F.3d 1075,
1081-82 (9th Cir. 1996)); see also Tropigas de Puerto
Rico, Inc. v. Certain Underwriters at Lloyd's of
London, 637 F.3d 53, 59 (1st Cir. 2011)
(“theoretical possibilities alone are inadequate to
block the swing of the summary judgment ax”). And the
Court has no obligation to search the record for evidence
creating a dispute of fact that WEC fails to identify.
Carmen v. S.F. Unified Sch. Dist., 237 F.3d 1026,
1031 (9th Cir. 2001); Keenan v. Allan, 91 F.3d 1275,
1279 (9th Cir. 1996); see also Independent Towers of
Wash. v. Washington, 350 F.3d 925, 929 (9th Cir. 2003).
argues that even if Dr. Breus did not suggest The Power of
When as a book title, he had a duty under the Agreement not
to use it. Alternatively, WEC argues that a dispute of fact
exists regarding whether the Agreement created such a duty.
Doc. 83 at 8. WEC cites two paragraphs of its statement of
facts in support of this assertion, but the citations refer
to 41 pages of the record and cite no specific pages. Such a
general reference fails to identify evidence “so that
it could conveniently be found.” Carmen, 237
F.3d at 1031. In any event, Dr. Breus's duties under the
Agreement are questions of law, not fact. WEC fails clearly
to explain why, in the absence of evidence that Dr. Breus
disclosed confidential information, summary judgment is
inappropriate. WEC has failed to present evidence showing
breach, an essential element on which it would bear the
burden of proof at trial. See Celotex, 477 U.S. at
322. The Court will grant Defendants summary judgment on the
breach of contract claim.
Breach of the Implied Covenant of Good Faith and Fair
Arizona law, every contract “implies a covenant of good
faith and fair dealing.” Rawlings v. Apodaca,
726 P.2d 565, 569 (Ariz. 1986). The implied covenant
“prohibits a party from doing anything to prevent other
parties to the contract from receiving the benefits and
entitlements of the agreement. The duty arises by operation
of law but exists by virtue of a contractual
relationship.” Wells Fargo Bank v. Ariz.
Laborers, 38 P.3d 12, 29 (Ariz. 2002). “A party
may breach the implied covenant even in the absence of a
breach of an express provision of the contract by denying the
other party the reasonably expected benefits of the
agreement.” Nolan v. Starlight Pines Homeowners
Ass'n, 216 Ariz. 482, 489 (Ariz.Ct.App. 2007).
allege that Dr. Breus breached the Agreement's implied
covenant of good faith and fair dealing by developing,
marketing, and selling confidential material covered by the
Agreement, and engaging in self-dealing in bad faith to
advance his interests to Plaintiffs' detriment. Doc. 1-1
argue that IOW lacks standing because it assigned the
Agreement to WEC before the titling and publication of Dr.
Breus's book, meaning that IOW had no contractual
relationship with Dr. Breus at the time of the alleged
injury. Doc. 76 at 17. IOW does not meaningfully respond.
See Doc. 83 at 5-6. As with its breach of contract
claim, IOW fails to explain why it has standing to raise a
breach of implied covenant claim without a contractual
relationship with Dr. Breus. Id. Nor does IOW cite
any evidence of an injury it suffered while still a party to
the Agreement. See Id. IOW asserts that Dr. Breus
interfered with its rights under the Agreement, but cites
only a sentence of its statement of facts which refers to 67
pages of the record and includes no specific page citation.
See Id. (citing Doc. 84 at 6). IOW's general and
unsupported assertions are insufficient to establish
standing, as well as elements of its claim - namely that Dr.
Breus prevented IOW, as a party to the contract, from
receiving the Agreement's benefits. See Celotex,
477 U.S. at 322; Carmen, 237 F.3d at 1031; Wells
Fargo, 38 P.3d at 29.
argue that WEC's claim fails for lack of evidence that
Dr. Breus breached the Agreement or used any material that he
learned from Miller. Doc. 76 at 10. WEC asserts that even if
Dr. Breus did not breach the Agreement, his actions
interfered with its rights under the Agreement and he
competed directly with WEC while “supposedly
collaborating with Plaintiffs under the [Agreement].”
Doc. 83 at 9. Other than a general citation to two exhibits
totaling 67 pages, WEC cites no supporting evidence in the
record for these assertions. WEC states that Miller
repeatedly told Dr. Breus to “hold all business
activities close to the vest, ” but fails entirely to
cite evidence showing that Dr. Breus breached or interfered
with the Agreement. Again, the Court will not search the
record for evidence to support WEC's arguments. See
Carmen, 237 F.3d at 1031; Keenan, 91 F.3d at
1279; Independent Towers, 350 F.3d at 929.
Defendants' cited evidence shows that Miller repeatedly
testified that numerous aspects of Dr. Breus's book
appeared nowhere in WHEN programs or materials, including
chronobiology, chronotypes, and instructing people on when to
perform certain tasks. See Doc. 77-3 at 8, 12, 17,
19-20, 22-23, 26, 28-33, 40-42. Miller also testified that
numerous aspects of the WHEN business did not appear in the
book, including online counseling services, membership and
service levels, and WHEN's gratitude tool. Id.
at 35-36, 38-39. When asked specifically what confidential
information was disclosed in The Power of When, Miller
answered: “I think we've covered that it's not
confidential information. It's more of a misappropriation
of use of ‘WHEN,' ‘Power of WHEN,' and
other uses of ‘WHEN' throughout the book.”
Id. at 43. Miller admitted that his business's
use of the word “when” was not confidential.
Id. at 47-46. And the Agreement excludes from
confidentiality any information that is or becomes publicly
available through no wrongful act of the Recipient or which
is disclosed to the Recipient by a third party. See
Doc. 84-9 at 2. The Court will grant summary judgment for
Defendants on Plaintiffs' breach of the implied covenant
of good faith and fair dealing claim.
Misappropriation of Trade Secrets.
establish a claim for misappropriation of a trade secret, the
claimant must first prove a legally protectable trade secret
exists. Arizona has adopted the Uniform Trade Secrets Act
(‘UTSA'), which codifies the basic principles of
common law trade secret ...