United States District Court, D. Arizona
Honorable Rosemary Marquez United States District Judge
before the Court are Cross-Motions for Summary Judgment, both
of which are fully briefed. (Docs. 56, 75, 80, 82.) The Court
heard oral argument on October 15, 2019, and took the matter
under advisement. (Doc. 104.) For the reasons that follow,
both Motions will be granted in part and denied in part.
Factual and Procedural History
January 19, 2018, Plaintiff William Martin filed this action
against Defendant Weed, Incorporated (“WEED”).
(Doc. 1.) Plaintiff alleged that he entered into a contract
with WEED, which WEED breached by failing to issue Plaintiff
700, 000 shares of WEED stock. (Id. at
2-3.) Based on the foregoing allegations,
Plaintiff brought four claims: two for breach of contract,
one for breach of the covenant of good faith and fair
dealing, and one for conversion. (Id. at 3-5.)
March 27, 2018, Plaintiff filed the operative First Amended
Complaint, alleging the same four claims against WEED. (Doc.
29 at 4-7.) In addition, Plaintiff added several defendants:
Glenn Martin, President and CEO of WEED; Nicole Breen,
Secretary and Treasurer of WEED; Ryan Breen, Vice President
and Social Media Officer of WEED; and GEM Management Group,
LLC. (Id. at 2.) Plaintiff brings a fifth claim
against all Defendants for violation of Ariz. Rev. Stat.
§ 44-1004, alleging that WEED transferred stock shares
to the other Defendants for the purpose of defrauding
Plaintiff as a creditor. (Id. at 7-8.)
31, 2018, WEED filed its operative Second Amended
Counterclaim. (Doc. 50.) WEED alleges two counterclaims
against Plaintiff: one for fraudulent misrepresentation and
concealment, and one for breach of contract. (Id. at
6-9.) The counterclaim for breach of contract rests on the
allegation that Plaintiff did not perform any services under
the parties' contract. (Id. at 8-9.) The fraud
counterclaim arises from WEED's decision to hire Michael
Ryan, a longtime friend of Plaintiff. (See Id. at
6-7.) WEED alleges that it hired Ryan based on the
recommendation of Plaintiff, and that Plaintiff made such
recommendation without disclosing that he was indebted to
Ryan and intended for WEED to satisfy that debt by issuing
stock shares to Ryan. (Id. at 7-8.) WEED further
alleges that Plaintiff told Ryan that contractual performance
would not be required, and that Ryan indeed did not perform.
(Id. at 8.)
Plaintiff and WEED filed Motions to Dismiss. (Docs. 13, 20.)
The Court granted WEED's Motion to Dismiss, finding
Plaintiff's claims for conversion and breach of the
covenant of good faith and fair dealing barred by the statute
of limitations. (Doc. 49 at 13-14.) The Court partially
granted Plaintiff's Motion to Dismiss, finding that WEED
had stated a counterclaim for fraud based on
misrepresentation and/or concealment, but not fraudulent
nondisclosure. (Id. at 14.)
Plaintiff has three claims pending: two for breach of
contract, and one for fraudulent transfer in violation of
Ariz. Rev. Stat. § 44-1004. WEED has two counterclaims
pending: one for fraud based on misrepresentation and/or
concealment, and one for breach of contract. All claims are
challenged on summary judgment.
judgment is proper “if the movant 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). A fact is material if it “might affect the
outcome of the suit under the governing law.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A factual dispute is genuine if the evidence is such
that a reasonable trier of fact could resolve the dispute in
favor of the nonmoving party. Id. In evaluating a
motion for summary judgment, the court must “draw all
reasonable inferences from the evidence” in favor of
the non-movant. O'Connor v. Boeing N. Am., Inc.,
311 F.3d 1139, 1150 (9th Cir. 2002). A reasonable inference
is one which is supported by “significant probative
evidence” rather than “threadbare conclusory
statements.” Barnes v. Arden Mayfair, Inc.,
759 F.2d 676, 680-81 (9th Cir. 1985) (internal quotation
marks omitted). If “the evidence yields conflicting
inferences [regarding material facts], summary judgment is
improper, and the action must proceed to trial.”
O'Connor, 311 F.3d at 1150.
party moving for summary judgment bears the initial burden of
identifying those portions of the record, together with
affidavits, if any, that it believes demonstrate the absence
of a genuine issue of material fact. Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). If the movant meets
this burden, the burden shifts to the nonmovant to
“come forward with specific facts showing that there is
a genuine issue for trial.” Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)
(internal quotation marks and emphasis omitted); see
also Fed. R. Civ. P. 56(c)(1).
October 2014, Plaintiff and WEED entered into a Consulting
Agreement for Plaintiff to provide consulting services to
WEED. (DSOF ¶ 5.) The Consulting Agreement provides that
Plaintiff would be compensated with 1.2 million shares of
WEED stock, to be issued in two installments. (DSOF ¶ 6;
Doc. 76-1 at 2, 9.) WEED issued the first installment of 500,
000 shares to Plaintiff. (DSOF ¶ 6; Doc. 81-4 at 8.) Per
the Consulting Agreement, the second installment of 700, 000
shares would “become, due and payable . .. within 30
days on April 1st. 2015 . . . .” (Doc. 76-1 at 9.)
April 1, 2015, Plaintiff exchanged emails with Glenn Martin,
who signed the Consulting Agreement on behalf of WEED. (Doc.
57-2 at 74-77.) In the first email, Plaintiff sets forth a
proposed “50/50 joint venture” and concludes:
“I'm happy to work with you, but not for
you.” (Id. at 77.) The response email from
Glenn Martin states, among other things:
So far now we will go our separate ways in business. We will
always stay friends I PRAY !! You said we were even with the
500k shares and thats good. If I had to put out another 700k
for only getting 1/2 of $27, 500 would of been upsetting.
(Id. at 74.) WEED never issued Plaintiff the second
installment of 700, 000 shares. (See DSOF ¶ 8.)
brings two claims for breach of contract based on WEED's
refusal to issue the remaining 700, 000 shares. WEED denies
these claims, contending that the Consulting Agreement was
terminated before the shares became payable. WEED brings a
counterclaim for breach of contract, asserting that Plaintiff
breached by never performing any consulting services.
Plaintiff denies this claim, arguing that the evidence shows
both that he performed and that WEED is the breaching party.
The Consulting Agreement
Consulting Agreement is governed by Arizona law. (Doc. 76-1
at 6.) Under Arizona law, contracts are interpreted so as to
“ascertain and enforce the parties' intent.”
ELM Ret. Ctr., LP v. Callaway, 246 P.3d 938, 941
(Ariz. App. 2010). To determine what the parties intended,
the Court must “first consider the plain meaning of the
words in the context of the contract as a whole.”
Grosvenor Holdings, L.C. v. Figueroa, 218 P.3d 1045,
1050 (Ariz. App. 2009). If the contract is unambiguous,
“its interpretation is a question of law for the
court.” Callaway, 246 P.3d at 942.
Compensation Provision provides in relevant part:
The balance of 700, 000 (seven hundred thousand) shares due
on contract shall become, due and payable as described above,
within 30 days on April 1st. 2015 and shall be issued within
30 days of its due date.
(Doc. 76-1 at 9.) The parties agree on the meaning of this
provision: On April 1, 2015, the 700, 000 shares would become
due to Plaintiff as compensation, and WEED would be required
to issue the shares to Plaintiff no later than May 1, 2015
(thirty days after ...