3 UNITED STATES DISTRICT COURT
4 DISTRICT OF NEVADA
5 * * *
6 LUXX INTERNATIONAL, LLC, et al., Case No. 2:23-cv-00512-MMD-DJA
7 Plaintiffs, ORDER v. 8 PURE WATER TECHNOLOGIES, et al., 9 Defendants. 10 11 I. SUMMARY 12 Plaintiffs Luxx International, LLC and Wayde King sued Defendants Pure Water 13 Technologies (“PWT”), Tasty One, LLC, Michael Kaplan, and Adam Kaplan for trademark 14 infringement and other related claims. (ECF No. 1 (“Complaint”).) The Kaplans then filed 15 counterclaims, alleging fraudulent misrepresentation against each Plaintiff. (ECF No. 16 16 (“Counterclaim”).) Before the Court is Plaintiffs’ motion to dismiss the Counterclaim (ECF 17 No. 20 (“Motion”)).1 As further explained below, the Court grants in part and denies in part 18 the Motion—granting it as to the counterclaim against Luxx International and denying it 19 as to the counterclaim against King. The Court also grants the Kaplans leave to amend 20 their counterclaim against Luxx International. 21 II. BACKGROUND 22 The following allegations are adapted from the Complaint and Counterclaim. In 23 July 2017, Luxx International, King, and the Kaplans entered into an operating agreement 24 (“Agreement”) to create and operate PWT, a business “providing goods and services in 25 commerce pertaining to water, especially water filtration systems.” (ECF No. 1 at 3, 5.) 26 27 28 1The Kaplans filed a response (ECF No. 22), and Plaintiffs filed a reply (ECF No. 2 Luxx worked as a salesperson for the Kaplans. (ECF No. 16 at 17.) For reasons unknown 3 at the time, Luxx refused to accept payments in his name and informed the Kaplans to 4 pay any money owed to Luxx to his mother, Allyson Martin, or to pay Luxx’s bills directly. 5 (Id.) Ultimately, Luxx formed Luxx International with his mother as principal to accept any 6 payments on his behalf. (Id.) The Kaplans eventually offered Luxx an ownership interest 7 in PWT, which he took in the name of Luxx International, LLC. (Id.) The Kaplans later 8 learned that Luxx’s real name was Derek Martin Hunt and that he was a “fugitive from the 9 law” who had been “indicted and convicted in the state of Georgia for aggravated child 10 molestation [and] statutory rape” in 2013. (Id. at 17-18.) The Kaplans allege that had they 11 known of Luxx’s criminal background, they would not have sent him into customer’s 12 homes to perform sales presentations and would not have offered him an ownership 13 interest in PWT. (Id. at 18.) 14 In late 2016 or early 2017, Luxx introduced King to the Kaplans. (Id. at 19.) At the 15 time, King was part of the Animal Planet show “Tanked,” where King would install “exotic 16 and high[-]end custom aquariums in celebrity homes and businesses.” (Id.) In early 2017, 17 in a meeting at King’s office, King allegedly represented to the Kaplans that he had “an 18 extensive customer list including A-list celebrities and businesses,” that he would share 19 the “Tanked” customer list with PWT, that he would “extensively feature” PWT products 20 on “Tanked,” and that he could get celebrity endorsements for PWT products. (Id.) The 21 Kaplans eventually gave King an ownership interest in PWT in July 2017. (Id.) The 22 Kaplans allege that none of King’s representations at the early 2017 meeting were true 23 and that had they known that King “would not provide his contact list for marketing, was 24 not capable of providing celebrity endorsements, and would not prominently feature 25 [PWT] products on his ‘Tanked’ show,” they would not have offered King an ownership 26 interest in PWT. (Id. at 21.) 27 28 2 Luxx International; and (2) fraudulent misrepresentation against Wayde King. (Id. at 21- 3 22.) 4 III. DISCUSSION 5 Plaintiffs argue that the Kaplans’ counterclaims fail as a matter of law. The Court 6 addresses each counterclaim in turn and whether it will grant the Kaplans leave to amend 7 any dismissed counterclaims. 8 To state a claim for fraudulent misrepresentation, a plaintiff must allege five 9 elements: (1) the defendant made a false representation; (2) the defendant knew or 10 believed the representation was false; (3) the defendant intended to induce the plaintiff to 11 act or to refrain from acting in reliance on the misrepresentation; (4) the plaintiff justifiably 12 relied on the misrepresentation; and (5) the plaintiff suffered damages from the reliance. 13 Bulbman, Inc. v. Nev. Bell, 825 P.2d 588, 592 (Nev. 1992). 14 Rule 9(b) of the Federal Rules of Civil Procedure requires that “[i]n alleging fraud 15 or mistake, a party must state with particularity the circumstances constituting fraud or 16 mistake.” Fed. R. Civ. P. 9(b). To satisfy this standard, a plaintiff must plead “an account 17 of the ‘time, place, and specific content of the false representations as well as the 18 identities of the parties to the misrepresentations.’” Swartz v. KPMG LLP, 476 F.3d 756, 19 764 (9th Cir. 2007) (quoting Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 20 2004)). Rather than only identifying the transaction, the complaint must also “set forth 21 what is false or misleading about a statement, and why it is false.” Vess v. Ciba-Geigy 22 Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (citation and internal quotation marks 23 omitted). 24 A. Counterclaim Against Luxx International 25 Plaintiffs argue that the Kaplans’ counterclaim against Luxx International fails 26 because they fail to allege any false misrepresentation made by Luxx International and 27 rather only allege that nonparty Charlie Luxx failed to disclose his real identity. (ECF No. 28 20 at 6.) The Kaplans counter that the doctrine of alter ego “binds” Luxx International to 2 ego doctrine cannot apply because the Kaplans did not plead any elements of the 3 doctrine.2 (ECF No. 24 at 4.) 4 The Court agrees with Plaintiffs that the Kaplans have based their fraudulent 5 misrepresentation claim against Luxx International solely on alleged conduct by Charlie 6 Luxx. (ECF No. 16 at 21-22.) And even assuming the alter ego doctrine could apply here 7 and impute Charlie Luxx’s conduct to Luxx International, the Kaplans have not plead any 8 elements of the alter ego doctrine in their Counterclaim and only raised that doctrine for 9 the first time in their response to the Motion. The Kaplans “must specifically allege all 10 three elements of alter ego liability and facts that support each element.” Trina Solar US, 11 Inc. v. Carson-Selman, Case No. 2:20-cv-1308-JCM-BNW, 2020 WL 7338552, at *3 (D. 12 Nev. Dec. 14, 2020) (citation omitted). Because they have not done so, the Court finds 13 that they have not sufficiently connected Luxx International to Charlie Luxx’s alleged 14 fraudulent conduct, let alone pleaded this counterclaim with the requisite particularity 15 under Rule 9(b),3 and fail to state a counterclaim against Luxx International. The Court 16 accordingly grants the Motion as to this counterclaim. 17 However, the Court will grant the Kaplans leave to amend their counterclaim 18 against Luxx International. The Court has discretion to grant leave to amend and should 19 freely do so “when justice so requires.” Fed. R. Civ. P. 15(a); see also Allen v. City of 20 Beverly Hills, 911 F.2d 367, 373 (9th Cir.
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3 UNITED STATES DISTRICT COURT
4 DISTRICT OF NEVADA
5 * * *
6 LUXX INTERNATIONAL, LLC, et al., Case No. 2:23-cv-00512-MMD-DJA
7 Plaintiffs, ORDER v. 8 PURE WATER TECHNOLOGIES, et al., 9 Defendants. 10 11 I. SUMMARY 12 Plaintiffs Luxx International, LLC and Wayde King sued Defendants Pure Water 13 Technologies (“PWT”), Tasty One, LLC, Michael Kaplan, and Adam Kaplan for trademark 14 infringement and other related claims. (ECF No. 1 (“Complaint”).) The Kaplans then filed 15 counterclaims, alleging fraudulent misrepresentation against each Plaintiff. (ECF No. 16 16 (“Counterclaim”).) Before the Court is Plaintiffs’ motion to dismiss the Counterclaim (ECF 17 No. 20 (“Motion”)).1 As further explained below, the Court grants in part and denies in part 18 the Motion—granting it as to the counterclaim against Luxx International and denying it 19 as to the counterclaim against King. The Court also grants the Kaplans leave to amend 20 their counterclaim against Luxx International. 21 II. BACKGROUND 22 The following allegations are adapted from the Complaint and Counterclaim. In 23 July 2017, Luxx International, King, and the Kaplans entered into an operating agreement 24 (“Agreement”) to create and operate PWT, a business “providing goods and services in 25 commerce pertaining to water, especially water filtration systems.” (ECF No. 1 at 3, 5.) 26 27 28 1The Kaplans filed a response (ECF No. 22), and Plaintiffs filed a reply (ECF No. 2 Luxx worked as a salesperson for the Kaplans. (ECF No. 16 at 17.) For reasons unknown 3 at the time, Luxx refused to accept payments in his name and informed the Kaplans to 4 pay any money owed to Luxx to his mother, Allyson Martin, or to pay Luxx’s bills directly. 5 (Id.) Ultimately, Luxx formed Luxx International with his mother as principal to accept any 6 payments on his behalf. (Id.) The Kaplans eventually offered Luxx an ownership interest 7 in PWT, which he took in the name of Luxx International, LLC. (Id.) The Kaplans later 8 learned that Luxx’s real name was Derek Martin Hunt and that he was a “fugitive from the 9 law” who had been “indicted and convicted in the state of Georgia for aggravated child 10 molestation [and] statutory rape” in 2013. (Id. at 17-18.) The Kaplans allege that had they 11 known of Luxx’s criminal background, they would not have sent him into customer’s 12 homes to perform sales presentations and would not have offered him an ownership 13 interest in PWT. (Id. at 18.) 14 In late 2016 or early 2017, Luxx introduced King to the Kaplans. (Id. at 19.) At the 15 time, King was part of the Animal Planet show “Tanked,” where King would install “exotic 16 and high[-]end custom aquariums in celebrity homes and businesses.” (Id.) In early 2017, 17 in a meeting at King’s office, King allegedly represented to the Kaplans that he had “an 18 extensive customer list including A-list celebrities and businesses,” that he would share 19 the “Tanked” customer list with PWT, that he would “extensively feature” PWT products 20 on “Tanked,” and that he could get celebrity endorsements for PWT products. (Id.) The 21 Kaplans eventually gave King an ownership interest in PWT in July 2017. (Id.) The 22 Kaplans allege that none of King’s representations at the early 2017 meeting were true 23 and that had they known that King “would not provide his contact list for marketing, was 24 not capable of providing celebrity endorsements, and would not prominently feature 25 [PWT] products on his ‘Tanked’ show,” they would not have offered King an ownership 26 interest in PWT. (Id. at 21.) 27 28 2 Luxx International; and (2) fraudulent misrepresentation against Wayde King. (Id. at 21- 3 22.) 4 III. DISCUSSION 5 Plaintiffs argue that the Kaplans’ counterclaims fail as a matter of law. The Court 6 addresses each counterclaim in turn and whether it will grant the Kaplans leave to amend 7 any dismissed counterclaims. 8 To state a claim for fraudulent misrepresentation, a plaintiff must allege five 9 elements: (1) the defendant made a false representation; (2) the defendant knew or 10 believed the representation was false; (3) the defendant intended to induce the plaintiff to 11 act or to refrain from acting in reliance on the misrepresentation; (4) the plaintiff justifiably 12 relied on the misrepresentation; and (5) the plaintiff suffered damages from the reliance. 13 Bulbman, Inc. v. Nev. Bell, 825 P.2d 588, 592 (Nev. 1992). 14 Rule 9(b) of the Federal Rules of Civil Procedure requires that “[i]n alleging fraud 15 or mistake, a party must state with particularity the circumstances constituting fraud or 16 mistake.” Fed. R. Civ. P. 9(b). To satisfy this standard, a plaintiff must plead “an account 17 of the ‘time, place, and specific content of the false representations as well as the 18 identities of the parties to the misrepresentations.’” Swartz v. KPMG LLP, 476 F.3d 756, 19 764 (9th Cir. 2007) (quoting Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 20 2004)). Rather than only identifying the transaction, the complaint must also “set forth 21 what is false or misleading about a statement, and why it is false.” Vess v. Ciba-Geigy 22 Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (citation and internal quotation marks 23 omitted). 24 A. Counterclaim Against Luxx International 25 Plaintiffs argue that the Kaplans’ counterclaim against Luxx International fails 26 because they fail to allege any false misrepresentation made by Luxx International and 27 rather only allege that nonparty Charlie Luxx failed to disclose his real identity. (ECF No. 28 20 at 6.) The Kaplans counter that the doctrine of alter ego “binds” Luxx International to 2 ego doctrine cannot apply because the Kaplans did not plead any elements of the 3 doctrine.2 (ECF No. 24 at 4.) 4 The Court agrees with Plaintiffs that the Kaplans have based their fraudulent 5 misrepresentation claim against Luxx International solely on alleged conduct by Charlie 6 Luxx. (ECF No. 16 at 21-22.) And even assuming the alter ego doctrine could apply here 7 and impute Charlie Luxx’s conduct to Luxx International, the Kaplans have not plead any 8 elements of the alter ego doctrine in their Counterclaim and only raised that doctrine for 9 the first time in their response to the Motion. The Kaplans “must specifically allege all 10 three elements of alter ego liability and facts that support each element.” Trina Solar US, 11 Inc. v. Carson-Selman, Case No. 2:20-cv-1308-JCM-BNW, 2020 WL 7338552, at *3 (D. 12 Nev. Dec. 14, 2020) (citation omitted). Because they have not done so, the Court finds 13 that they have not sufficiently connected Luxx International to Charlie Luxx’s alleged 14 fraudulent conduct, let alone pleaded this counterclaim with the requisite particularity 15 under Rule 9(b),3 and fail to state a counterclaim against Luxx International. The Court 16 accordingly grants the Motion as to this counterclaim. 17 However, the Court will grant the Kaplans leave to amend their counterclaim 18 against Luxx International. The Court has discretion to grant leave to amend and should 19 freely do so “when justice so requires.” Fed. R. Civ. P. 15(a); see also Allen v. City of 20 Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990). The Court may deny leave to amend if: 21 (1) it will cause undue delay; (2) it will cause undue prejudice to the opposing party; (3) 22 2Plaintiffs also argue that the alter ego doctrine cannot apply because Charlie Luxx 23 is not a party to this action, implicating due process concerns. (ECF No. 24 at 5-6.) However, the Court is not persuaded by this due process argument because Plaintiffs 24 rely solely on Callie v. Bowling, 160 P.3d 878 (Nev. 2007), which involved the reversal of a granting of a motion to amend the judgment which added a nonparty to the final 25 judgment under the alter ego doctrine. The instant action is currently at a very different and much earlier stage of litigation—at the motion to dismiss stage—and therefore does 26 not involve the same due process concerns.
27 3The Court need not—and does not—fully address Plaintiffs’ arguments that the Kaplans do not adequately allege damages incurred because of the alleged 28 misrepresentation (ECF No. 24 at 3), but the Court notes that their conclusory allegation 2 or (5) the amendment would be futile. See Leadsinger, Inc. v. BMG Music Publ’g, 512 3 F.3d 522, 532 (9th Cir. 2008). The Court finds that amendment would not necessarily be 4 futile. While the Court questions the applicability of the alter ego doctrine in the situation 5 here, particularly given that Charlie Luxx is not alleged to be an official agent, officer, or 6 LLC member of Luxx International, the Court finds that the Kaplans have made some 7 argument as to the viability of this doctrine (ECF No. 22 at 10-11) and it is therefore 8 possible for them to cure the identified deficiencies in this counterclaim. 9 B. Counterclaim Against King 10 As an initial matter, Plaintiffs proffer the Agreement (ECF No. 20-1) in support of 11 their argument that the parol evidence rule bars the Kaplans’ fraud claim against King 12 because the terms of the Agreement contradict their allegations, specifically that the 13 Agreement states that King’s contribution will be simply his “Business Expertise.” (ECF 14 No. 20 at 8.) “When ruling on a Rule 12(b)(6) motion to dismiss, if a district court considers 15 evidence outside the pleadings, it must normally convert the 12(b)(6) motion into a Rule 16 56 motion for summary judgment, and it must give the nonmoving party an opportunity to 17 respond.” United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003) (citations omitted). 18 “A court may, however, consider certain materials—documents attached to the complaint, 19 documents incorporated by reference in the complaint, or matters of judicial notice— 20 without converting the motion to dismiss into a motion for summary judgment.” Id. at 908. 21 Here, neither side addresses whether the Court may properly consider the 22 Agreement at this motion to dismiss stage. While Plaintiffs attached the Agreement to 23 their Complaint, the Kaplans did not attach the Agreement to their Counterclaim nor did 24 they mention and incorporate by reference the Agreement in the Counterclaim.4 25 Accordingly, because the Counterclaim—not the Complaint—is at issue here, the Court 26
27 4The Kaplans do mention the Agreement in their answer in response to Plaintiffs’ Complaint (ECF No. 16 at 3-6, 11), but the answer is treated separately from the 28 Counterclaim. 2 stage.6 3 Next, Plaintiffs argue that “[a]t best, Defendants’ allegation is that King broke an 4 oral promise that was not committed to writing[,] [b]ut broken promises are not 5 actionable.” (ECF No. 24 at 8; ECF No. 20 at 9.) As support, Plaintiffs rely on Sattari v. 6 Washington Mut., Case No. 2:09-CV-00768-KJD, 2010 WL 3896146, at *4 (D. Nev. Sept. 7 29, 2010), aff’d, 475 F. App’x 648 (9th Cir. 2011), citing Murphy v. T. Rowe Price Reserve 8 Fund, Inc., 8 F.3d 1420, 1423 (9th Cir. 1993) for the proposition that “gratuitous promises 9 are not enforced in equity.” But Sattari and Murphy concerned breach of oral agreement 10 claims that failed for lack of consideration. See id. The Kaplans’ counterclaim for 11 fraudulent misrepresentation against King has different elements and does not require 12 consideration. See Bulbman, 825 P.2d at 592. The Court therefore finds Plaintiffs’ broken 13 promise argument unpersuasive.7 Accordingly, the Court denies the Motion as to the 14 counterclaim against King. 15 IV. CONCLUSION 16 The Court notes that the parties made several arguments and cited to several 17 cases not discussed above. The Court has reviewed these arguments and cases and 18 determines that they do not warrant discussion as they do not affect the outcome of the 19 motion before the Court. 20 21 5The Court also declines to consider the declarations proffered by the parties (ECF 22 Nos. 20-2, 22-1) because they were not attached to the Counterclaim, were not incorporated by reference in the Counterclaim, and are not matters of judicial notice. See 23 Ritchie, 342 F.3d at 907.
24 6In any event, even if the Court did consider Plaintiffs’ parol evidence rule argument and the Agreement, it would find the argument unpersuasive because King’s alleged 25 misrepresentations do not appear to directly contradict the term in the Agreement indicating that King’s initial capital contribution would be his business expertise. 26 7Plaintiffs also raised for the first time in their reply that the Kaplans did not 27 sufficiently allege damages as to their counterclaim against King. (ECF No. 24 at 10.) The Court need not—and does not—consider this argument. See Zamani v. Carnes, 491 F.3d 28 990, 997 (9th Cir. 2007) (“The district court need not consider arguments raised for the 1 It is therefore ordered that Plaintiffs’ motion to dismiss (ECF No. 20) is granted in 2 || part and denied in part, as specified herein. The Court dismisses the counterclaim against 3 || Plaintiff Luxx International, LLC but grants Defendants Michael Kaplan and Adam Kaplan 4 || leave to amend that counterclaim, as specified herein. 5 It is further ordered that the Kaplans must file their first amended counter-complaint 6 || containing amended allegations to cure the deficiencies identified herein within 15 days 7 || of the date of this order. Failure to do so will result in dismissal of their counterclaim 8 || against Luxx International without prejudice. 9 DATED THIS 17'" Day of August 2023.
11 MIRANDA M. DU 12 CHIEF UNITED STATES DISTRICT JUDGE 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28