JENNIFER A. DORSEY, District Judge.
In this international, unfair competition case, the Court must determine whether the plaintiff gaming-technology company's five-page complaint sufficiently states claims for unfair competition under state, federal, and Macao law, and claims for tortious interference with existing and prospective business relationships and, if not, whether leave to amend should be allowed. Because plaintiff's factual allegations sound in fraud but do not satisfy Rule 9's heightened pleading standard, the Court finds that all claims save one must be dismissed for inadequacy. The Court will, however, allow limited amendment to cure these factual deficiencies.
LT International, Ltd. ("LT") is a Canadian corporation authorized to do business
Shuffle Master, Inc. is a direct competitor of LT. Id. LT alleges that in the year preceding the filing of its Complaint, Shuffle Master began "an international campaign of disparagement of [LT's] business and its products and services." Id. According to LT, Shuffle Master has, inter alia, wilfully misrepresented the quality of LT's products and services, including the Live Multi-Table System, to customers both in Nevada and Macao, damaging LT's business, both current and prospective. Id.
By its five-page, already once-amended complaint,
Shuffle Master moves this Court to dismiss all of LT's claims, arguing that the thin allegations in this five-page complaint alleging claims grounded in fraud are insufficient to state a cognizable claim for relief under FRCP 8, 9, and 12(b)(6). Doc. 17. Shuffle Master further urges dismissal of LT's tortious-interference claim on the grounds that any contract that may be the subject of that claim would be illegal and thus unenforceable because LT has not received the license necessary to sell or distribute gaming devices in Nevada. Id. at 12. LT opposes the motion, contending that its claims do not sound in fraud and thus require only notice pleading under Rule 8, which LT's allegations satisfy. Doc. 19. Nevertheless, should this Court find its allegations insufficient, LT should be granted leave to cure any deficiencies because this litigation remains in its infancy. Id. at 9.
In addition to its request for leave to cure deficiencies in its factual allegations, Doc. 19, LT also asks for leave to file a second amended complaint to add a new party (LT Game Canada) as a plaintiff because LT Game Canada is the true plaintiff for all claims arising before LT's formation in 2011. Doc. 37. Shuffle Master opposes this motion, contending that the proposed new version of the complaint still falls short of the specificity required by the rules, that LT acted in bad faith by sandbagging with this new party on the last day for amendment, and if LT Game Canada is the true real party in interest, the LT entities should have known that from the inception of this case. Doc. 42.
Federal Rule of Civil Procedure 8(a) provides the basic standard for federal pleadings: "A pleading that states a claim for relief must contain: (1) a short and plain statement of the grounds for the court's jurisdiction . . . .; (2) a short and plain statement of the claim showing that the pleader is entitled to relief; and (3) a demand for the relief sought." The United States Supreme Court fleshed out that standard and its relationship to FRCP 12(b)(6) in Ashcroft v. Iqbal and Bell Atlantic Corp. v. Twombly. "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face."
A complaint is subject to deeper scrutiny when it contains allegations of fraud or mistake. Rule 9 of the Federal Rules of Civil Procedure requires a party to "state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally."
LT's First Amended Complaint gestures to the "Lanham Act" and "unfair competition" without specifying the specific legal basis for this theory. See Doc. 14 at 3-4. From the sparse facts of LT's First Amended Complaint and its references in its opposition to the motion to dismiss, the Court concludes that LT relies on the Lanham Act's false advertising
Shuffle Master contends that LT's Lanham Act claim should be evaluated under Rule 9(b)'s particularity standard because the allegations that support it are fraudulent in nature. Doc. 17 at 4-8. LT's allegations fail Rule 9's more demanding particularity standard, Shuffle Master contends, requiring dismissal of this claim. Id. LT challenges the notion that its allegations must be evaluated under the heightened Rule 9 standard merely because LT characterized Shuffle Master's intentional conduct as a "misrepresentation." Doc. 19 at 2-3.
Neither fraud nor mistake is an element of a Lanham Act false advertising claim. To be actionable under this statute, the statement need only be "false" and result in "deception."
But that's not the end of the analysis. In the Ninth Circuit, there is more than one way to trigger Rule 9. The language penned in a complaint when pleading a claim for which fraud is not an essential element may garner Rule 9 scrutiny:
LT's contention that its claim cannot qualify as grounded in fraud merely by its use of the word "misrepresentation" is without merit because "[i]t is well settled in the Ninth Circuit that misrepresentation claims are a species of fraud, which must meet Rule 9(b)'s particularity requirement."
In Vess v. Ciba-Geigy Corp. USA,
The Court begins by evaluating whether LT's misrepresentation allegations that support this claim satisfy Rule 9. The claim itself consists of just three paragraphs: a repetition and reallegation of all prior paragraphs, the conclusory statement that "Defendant's aforesaid activities constitute unfair competition under the federal Lanham Act," and the assertion that those activities "have damaged and caused, and are damaging and causing, irreparable harm to the Plaintiff." Doc. 14 at 3-4. As these bare-bones in-count allegations offer nothing of substance, the Court first examines the realleged prior paragraphs, which include:
Doc. 14 at 2-3. Paragraphs 13-16 rely entirely on misrepresentations—a species of fraud—so LT was required to "identify the who, what, when, where, and how of the misconduct charged, as well as what is false or misleading about the purportedly fraudulent statement, and why it is false."
LT's factual allegations in paragraphs 13, 14, 15, and 16 do not satisfy Rule 9(b). Paragraph 13 gestures broadly towards the "who," in that "Defendant" made the misrepresentations, and satisfies the "where" and "when" criteria by claiming that these misrepresentations occurred at, inter alia, the "G2E trade show in May, 2012." Doc. 14 at 3.
Denuded of its fraud-related allegations, this claim consists of just two paragraphs:
Doc. 14 at 2-3. These allegations are little more than "a formulaic recitation of the elements of a cause of action," which the Court is not obligated to accept as true.
The Ninth Circuit has acknowledged that "the tort of unfair competition is extremely broad" in Nevada.
For its Nevada unfair competition claim, LT again "repeats each and every allegation" from its general statement of facts and then alleges summarily that "Defendant's aforesaid activities constitute unfair competition under the State of Nevada's common law" and "have damaged and have caused, and are damaging and causing, irreparable harm to the Plaintiff." Doc. 14 at 4. Since LT relies on the same set of factual allegations for its state-law unfair competition claim as it does for its Lanham Act claim, the Court's analysis first "strips away" the inadequately pled, fraud-based paragraphs, see supra, leaving only paragraphs 12 and 17, which are, again, just "a formulaic recitation of the elements of a cause of action," and the Court is not obligated to accept them as true.
Shuffle Master next argues that LT's claim for violation of Macao's unfair competition law also "sounds in fraud" and thus suffers from the same fatal defects as the previous claims. LT again directs the Court back to paragraphs 13-15 to search for the facts LT contends support this claim to Rule 9's standards. The Court returns from that search empty handed, for these allegations have not been rendered more substantial by their third reallegation.
LT also attaches to its pleading approximately 25 pages of what it purports is a section of Macao's commercial code, translated from Portugese into English. Doc. 14-1. LT includes no affidavit or other proof that this is an accurate, professionally performed translation. Even assuming the veracity and reliability of this document, LT has triggered Rule 9 by basing this claim on fraud-based allegations whether or not fraud is an essential element of an unfair competition claim under Macao law. Again, LT's allegations fall short of Rule 9's standard, warranting the dismissal of this claim.
Shuffle Master next contends that LT's claim for "tortious interference with current and prospective business and contractual relations" must be dismissed because LT has not obtained any licenses from the State of Nevada permitting it to sell gambling products in the State, and thus it
As the Nevada Supreme Court explained in Hilton Hotels Corp. v. Butch Lewis Productions, Inc.,
In addition to referencing the same set of factual allegations that underlie all of the other claims above when pleading these two claims together in a single count, LT offers four new paragraphs: 29-32. Doc. 14 at 4-5. Of these new allegations, paragraph 31 must be disregarded because it relies on Shuffle Master's "misrepresentations" but again fails to identify with particularity the nature of the misrepresentations. The remaining paragraphs are not grounded in fraud and may be considered under Rule 8. Thus, the Court must determine whether paragraphs 29, 30 & 31, combined with paragraphs 12 & 17, state either of the claims pled in this collective count:
Doc. 14 at 2-5.
Nothing within the four corners of these paragraphs suggests that LT has contracts or business outside of the United States, or that Shuffle Master's "international campaign of disparagement" impacts any contracts outside of Nevada. This appears to conflict, or at least chafe, against its argument that Shuffle Master's actions, and LT's injury, "are not limited solely to Defendant's activities within the State of Nevada, but rather worldwide, including in Macau and Australia." Doc. 19 at 9 (emphasis added). But the Hilton standard does not require the contract at issue to be forged in Nevada to state a claim for intentional interference with a contract. LT is missing one critical component of its allegations, however: it failed to allege that these contracts are "valid" and "existing." Although LT mentions two "customers" located in Las Vegas, Nevada—the "Las Vegas Sands Corporation and the Venetian"—it does not indicate that these "customers" were parties with whom LT had a "valid and existing contract." Without this critical allegation, LT's claim for interference with existing contracts must be dismissed.
This deficiency is not fatal to LT's claim for interference with prospective relationships, however. The standard for recovery on a "prospective" tortious interference theory does not require pleading the existence of a valid contract.
In its Opposition to Shuffle Master's motion to dismiss, LT argued that if its First Amended Complaint is found inadequate, it should be permitted leave to file a second amended complaint. Doc. 19 at 8. On January 24, 2013, Magistrate Judge Foley conducted a discovery hearing in this case and remarked that the allegations in LT's First Amended Complaint appeared inadequate. See Doc. 29 at 17-19. A week later, on the amendment deadline, see Doc. 20 at 4, LT moved to file a Second Amended Complaint. LT suggests that its second amended complaint (proposed as Doc. 37-1) would serve two purposes: (1) permit LT to supplement any insufficient factual allegations; and (2) add a new plaintiff. Doc. 37. The Court finds that amendment is appropriate
Rule 15 of the Federal Rules of Civil Procedure requires district courts to "freely give leave [to amend] when justice so requires."
Still, amendment is not automatic. If reasons justify denying opportunity to amend, the court has discretion to foreclose amendment.
When applying the factors, the Court finds that limited amendment is warranted. Although the analysis yields the conclusion that fairness dictates that LT be permitted an opportunity to cure the pleading deficiencies that the Court has now identified, should LT be able to do so, the Court does not find that a new plaintiff should be permitted based on LT's deadline-date request.
The Court finds no evidence that LT's request to amend to cure any factual defects in its own claims is brought in bad faith. LT timely asked for this relief in its opposition to Shuffle Master's motion to dismiss, and it offered some factual supplementation in its proposed Second Amended Complaint.
The same cannot be said about LT's request to add LT Canada as a plaintiff on the amendment-request deadline, however. Although LT claims that its proposal to add its Canadian counterpart was made in response to problems in obtaining discovery from Shuffle Master, as well as "the independent decision of the management and parent company of LT Game Canada to . . . bring action against the Defendant for damages sustained as a result of Defendant's unlawful actions," Doc. 43 at 11, the notion that the LT organization did not know which of its entities was the real party in interest with respect to this lawsuit is unconvincing. LT was obligated to investigate its claims prior to filing suit, and its threadbare initial complaint and subsequent discovery conduct reflect that any failure to name the correct—or all of the correct—plaintiffs appears to be the result of a lack of diligence not a surprise late in the discovery process. See Doc. 42 at 10-11. The facts that LT never identified LT Canada as an interested party under Rule 7.1
The Court similarly finds that LT did not unduly delay its request to amend to add new factual allegations to support its existing claims, but it did unduly delay in identifying LT Canada on the final day for seeking leave to amend pleadings. "In assessing timeliness, we do not merely ask whether a motion was filed within the period of time allotted by the district court in a Rule 16 scheduling order. Rather, in evaluating undue delay, we also inquire whether the moving party knew or should have known the facts and theories raised by the amendment in the original pleading."
It strains credulity that LT did not know LT Canada's purported role in this case before filing suit or when filing its first amended complaint in response to Shuffle Master's first motion to dismiss. Even if the request to add this new plaintiff was made by the midnight deadline, if truly meritorious, it should have been made before that. Thus, this factor weighs in favor of factual amendment but against adding a new party.
"The consideration of prejudice to the opposing party carries the greatest weight."
Shuffle Master contends that LT has repeatedly failed to cure deficiencies after having had two opportunities to file satisfactory claims, and this fact should cut against any amendment. Doc. 42 at 15. Although the district court's discretion to deny a motion for leave to amend a complaint is particularly broad when "a plaintiff has previously been granted leave to amend and fails to add the requisite particularity to [its] claims,"
Finally, the Court considers whether amendment would be futile in this case. The proposed second amended complaint suffers from a number of problems that would result in amendment being futile if the court were to accept and allow the filing of LT's pleading in that form. For example, the proposed amended pleading defines "Plaintiffs" as LT and LT Canada, collectively, but does a confusing job of explaining which plaintiff is the subject of which allegation or claim. The Court is also not convinced that the facts as alleged in the proposed second amended complaint provide the requisite "how of the misconduct charged, as well as what is false or misleading about the purportedly fraudulent statement[s], and why [they are] false"
In sum, the Rule 15(a) factors weigh in favor of permitting LT to file a second amended complaint that cures the factual deficiencies identified above, but they cut against permitting LT to add a new plaintiff in this litigation. LT's requests
Accordingly, based upon the foregoing reasons and with good cause appearing and no reason for delay,
It is
It is
Courts in this district have found that this rule "requires greater disclosure than Federal Rule 7.1, which only requires non-governmental corporate parties to disclose parent corporations or corporations owning more than 10% of the party's stock." Righthaven v. Democratic Underground, LLC, 791 F.Supp.2d 968, 978-79 (D.Nev.2011). Other district courts have found that a party's failure to submit a certification after ordered to do so by the Court warrants dismissal of the action. See, e.g., National Credit Union Administration Board v. North Star Business Services, LLC, 2012 WL 4076152, at *1-*2 (D.Nev. Aug. 21, 2012); United States v. Dilullo, 2007 WL 3124544, at *1 (D.Nev. Oct. 23, 2007). Although the Court has found no case addressing the duty to supplement its Certification, nothing in the plain language of the Local Rule suggests that a different result should be reached in this instance. Notably, in Righthaven, the Court ordered additional briefing on the topic of why disclosure had not been made, indicating why it should not be sanctioned for failing to disclose other parties' interests in the case. See id. at 978-79.
