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Edwards v. Nutrition

United States District Court, D. Arizona

November 1, 2019

John Edwards, Plaintiff,
Vemma Nutrition, et al., Defendants.



         Pending before the Court are motions for attorneys' fees filed by Defendants Vemma Nutrition Company (“Vemma Nutrition”)[1] (Doc. 166), Vemma International Holdings Incorporated (“Vemma Holdings”) (Doc. 167), Bethany and Tom Alkazin (“the Alkazins”) (Doc. 168), and Haresh Mehta (“Mehta”)[2] (Doc. 169). For the following reasons, Vemma Nutrition's motion will be denied, Vemma Holdings' and the Alkazins' motion will be granted in part and denied in part, and Mehta's motion will be granted. The Court will award $47, 833.18 to Vemma Holdings, $21, 228 to the Alkazins, and $11, 536 to Mehta, to be assessed against Edwards and his counsel in this action, Florin Ivan (“Ivan”) and Justin Clark (“Clark”), with Edwards responsible for 60% of the overall award and Ivan and Clark each responsible for 20%.


         On July 3, 2017, Plaintiff initiated this action by filing a pro se Complaint. (Doc. 1.) On August 25, 2017, Plaintiff-now represented by Clark-filed a First Amended Complaint (“FAC”). (Doc. 13.)

         I. Dismissal of Vemma Nutrition

         On September 15, 2017, Vemma Nutrition-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.) The motion specified that if the motion were granted, Vemma Nutrition would “file an application for recovery of its attorneys' fees pursuant to [LRCiv] 54.2 and A.R.S. § 12-341.01.” (Id. at 2.)

         In his response, Edwards argued that the contract containing the arbitration clause was a “clickwrap” agreement in which a user becomes an “Affiliate” of Vemma Nutrition by filling out an online application and clicking an “OK” button to assent to Vemma Nutrition's terms-but someone else enrolled him without his knowledge or consent, such that he neither clicked the button nor saw the terms. (Doc. 24 at 2-6.) He further argued that the adhesion contract was unenforceable due to unconscionability, in part because Vemma retained the right to modify the contract at any time, without the other party's assent. (Id. at 6-10.) Finally, he argued that his claims-namely, copyright infringement and breach of other contracts (not the one containing the arbitration clause)-fell outside the scope of the agreement containing the arbitration clause. (Id. at 10-15.)

         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.) The Court held that even if Edwards had been enrolled as an Affiliate by another person “without his knowledge or permission, ” Edwards subsequently ratified the contract by (1) participating as an Affiliate between 2007 and 2015, which required annual membership renewal, and (2) cashing at least 45 commission checks from Vemma Nutrition, which included endorsement language stating, “I have read, agreed with and am in compliance with current Vemma policies and procedures.” (Id. at 4.) The Court added, “The fact that Plaintiff did not see Vemma's policies and procedures, which include the Arbitration Provision, does not mean that he did not agree to the Arbitration Provision” because he “could easily have accessed” it. (Id. at 6.)

         However, the Court agreed with Edwards that the agreement was an adhesion contract and that “the unilateral modification clause is substantively unconscionable.” (Id. at 7.) The Court found the unilateral modification provision to be “particularly salient in this case because Vemma [Nutrition] modified its Arbitration Provision with Plaintiff.” (Id. at 8.) Specifically, when Edwards was enrolled as an Affiliate in 2007, the Arbitration Provision applied to disputes “relating to any relationship between or among Vemma, its officers, employees, distributors or vendors, ” but it was modified by 2015 to apply to disputes “relating to any relationship between or among Vemma, its Affiliates, officers, employees, distributors or vendors.” (Id. at 8-9, emphasis added.) The Court thus severed the unconscionable unilateral modification provision and held that the 2015 contractual language was not binding on Edwards, but the 2007 language was. (Id. at 10.)

         The Court then analyzed whether Edwards could be considered a “distributor, ” discussed evidence for and against construing “distributor” in a manner that would include Edwards, and determined that the 2007 Agreement was “ambiguous” as to the meaning of “distributor.” (Id. at 12-14.) In light of this ambiguity, the Court applied the “presumption of arbitrability” and construed “distributor” to include Edwards. (Id. at 14-15.)

         Finally, the Court construed the arbitration clause broadly, such that the “relationship” between Vemma Nutrition and Edwards (as a “distributor”) covered claims that did not arise out of the contract containing the arbitration clause and had nothing to do with Edwards's role as a “distributor” or Affiliate. (Id. at 15-16.)

         The Court therefore granted Vemma Nutrition's motion to compel arbitration and dismissed Edwards's claims against Vemma Nutrition without prejudice. (Id. at 16.)

         II. First Dismissal Of The Alkazins, Mehta, And Vemma Holdings

         On November 29, 2017, the Alkazins and Vemma Holdings waived service. (Doc. 37.) Mehta was served on December 11, 2017. (Doc. 39.)

         In early 2018, Mehta filed a motion to dismiss the FAC for lack of personal jurisdiction (Doc. 57), the Alkazins filed a motion to dismiss the FAC for lack of personal jurisdiction (Doc. 74), and Vemma Holdings filed a motion to dismiss the FAC for failure to state a claim. (Doc. 70).

         Also in early 2018, Ivan filed a notice of appearance, which stated that the law firm Ivan & Kilmark, PLC was appearing on behalf of Edwards as associate counsel, associating with lead counsel J. Clark Law Firm, P.L.L.C. (Doc. 68.)

         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 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's book scripts in South Carolina and used Edwards's 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 granting leave to amend. Id.

         Finally, in granting Vemma Holdings' 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].” (Doc. 99 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 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].” (Doc. 99 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.)

         III. Second Dismissal Of The Alkazins, Mehta, And Vemma Holdings

         On August 20, 2018, Edwards filed a Second Amended Complaint (“SAC”), which named all of the non-fictitious Defendants that had been named in the FAC. (Doc. 106-1.) The SAC was filed and signed by Clark of J. Clark Law Firm, PLLC. Although Ivan had previously filed a notice of appearance as associate counsel for Edwards, neither Ivan's name nor his law firm's name appears on the SAC. (Id.)

         On September 4, 2018, the Alkazins filed a motion to dismiss the SAC for lack of personal jurisdiction, or alternatively to compel arbitration (Doc. 112), and Vemma Holdings filed a motion to dismiss the SAC for failure to state a claim (Doc. 114).

         Things were a little more complicated regarding Mehta because he had already been dismissed without leave to amend. Thus, the Court sua sponte questioned the appropriateness of Edwards's effort to rename Mehta in the SAC. On August 31, 2018, the Court issued a written order stating that it had reviewed the named parties in the SAC and found that “Mehta was named as a Defendant after having been dismissed for lack of jurisdiction . . . and without leave to amend.” (Doc. 111.) The Court thus ordered Edwards to show cause, by September 13, 2018, as to why Mehta should not be dismissed from the action. Id. The Court also set a status hearing on that date to discuss the parties' request for extensions of the pending deadlines in the case. Id. Finally, the Court directed the Clerk of Court to dismiss Mehta, without further notice, on September 14, 2018 if Edwards failed to comply with the order to show cause.

         On September 13, 2018, at the status conference, attorneys Clark and Ivan were both present, but Ivan did all the talking on behalf of Edwards. (Doc. 124 at 2-13.) During the hearing, the Court provided Edwards's counsel with the following explanation concerning the July 20, 2018 order granting the Alkazins' motion to dismiss with leave to amend and granting Mehta's motion to dismiss without leave to amend:

I did dismiss [Mehta], and I didn't give you leave to amend with respect to him.
I will tell you what my thinking was because he and the Alkazins . . . the allegations as it pertains to any sort of damage that they inflicted on . . . the plaintiff in Arizona were very insufficient. Because all the allegations as it pertains to . . . Mr. Mehta had to do with his activities in India, I just didn't see that there was any possibility you were going to make any claim that there was any damage done to Dr. Edwards, who is not an Arizona resident, in Arizona.
Similarly, I felt the same way about the Alkazins . . . . However, because they are residents of Nevada, I considered that there was more possibility that you could actually do that with some specificity, which is why I gave you leave to amend.

(Doc. 124 at 2-3.)

         During the status conference, Ivan attempted to make arguments regarding why Mehta should not be dismissed, but the Court prevented Ivan from doing so, stating, “if you want to address the Mehta issue, because they're not here, you probably need to do it in writing.” Id. at 4. Ivan nevertheless stated that he “didn't see the words ‘with prejudice'” in the order dismissing Mehta, and the Court responded by reiterating that the dismissal was without leave to amend. Id. The Court added, “[i]f you feel like you want me to reconsider, or whatever else, if you feel like you still have access to such a motion, you can file it.” Id. at 5.

         The status conference ended at 10:27 a.m. (id. at 13), and Edwards did not file a written response to the order to show cause by the end of that day. Accordingly, per the Court's August 31, 2018 order (Doc. 111), the Clerk of Court dismissed Mehta the following day. (Doc. 120.)

         On September 28, 2018, Edwards filed a “motion for reconsideration, ” requesting that the Court vacate the Clerk's summary dismissal of Mehta. (Doc. 121.) The motion was signed by Ivan. (Id.)

         On October 1, 2018, the Court granted the motion for reconsideration and reinstated Mehta.[3] (Doc. 122.)

         On October 4, 2018, Edwards filed responses to the motions to dismiss that had been filed by Vemma Holdings and the Alkazins. (Docs. 125, 126.) The former response was jointly signed by Clark and Ivan but the latter response was only signed by Ivan. (Id.)

         On November 8, 2018, Mehta filed a motion which he titled “Former Defendant Haresh Mehta's Motion to Clarify Dismissal and Alternative Renewal of Motion to Dismiss.” (Doc. 131.)

         On November 19, 2018, Edwards filed a motion to strike Mehta's motion. (Doc. 136.) Both Clark and Ivan were identified as counsel of record on the first page of the motion, but it was signed by Ivan alone. (Id.)

         On December 17, 2018, the Court issued an order denying the motion to strike Mehta's motion (as well as denying a different motion to strike that Edwards had filed). (Doc. 143.) Among other things, this order noted that “[i]t is unfortunate that [Edwards] has wasted so much of the Court's and the other parties' time by filing baseless motions to strike.” (Id. at 3.)

         On December 31, 2018, Edwards filed a response to Mehta's motion to dismiss. (Doc. 144.) Both Clark and Ivan were identified as counsel of record on the first page of ...

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