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Rondberg v. McCoy

December 21, 2009

TERRY RONDBERG, D.C. AND THE CHIROPRACTIC JOURNAL AND JOURNAL OF VERTEBRAL SUBLUXATION, PLAINTIFFS,
v.
MATHEW MCCOY A.K.A. MATT MCCOY A.K.A. DR. MATT MCCOY AND DOES 1 TO 100, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Marilyn L. Huff, District Judge United States District Court

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT MCCOY'S MOTION TO DISMISS FAC

On October 21, 2009, Plaintiffs Terry Rondberg, D.C. and the Chiropractic Journal and Journal of Vertebral Subluxation filed their First Amended Complaint ("FAC") against Defendants Matthew McCoy and Does 1 through 100. (Doc. No. 8.) On November 2, 2009, Defendant Matthew McCoy filed his motion to dismiss the FAC. (Doc. No. 10.) The Court submitted the motion on parties' papers on December 3, 2009. (Doc. No. 11.) On December 7, 2009, Plaintiffs filed their response in opposition to the motion to dismiss. (Doc. No. 12.) On December 14, 2009, Defendant Matthew McCoy filed his reply. (Doc. No. 13.) For the reasons below, the Court GRANTS in part and DENIES in part Defendant Matthew McCoy's motion.

Background

On March 4, 2009, Plaintiffs Terry Rondberg, D.C. and the Chiropractic Journal and Journal of Vertebral Subluxation ("Plaintiffs") filed their First Amended Complaint ("FAC") against Defendants Matthew McCoy ("McCoy" or "Defendant") and Does 1 through 100 in the San Diego Superior Court. (Doc. No. 1.) On August 3, 2009, Defendant McCoy removed the action to this Court pursuant to 28 U.S.C. § 1441(b), because this Court has original jurisdiction over the RICO violation claim.*fn1 (Id.) On August 10, 2009, Defendant filed a motion to dismiss the FAC pursuant to the Federal Rule of Civil Procedure 12(b)(6) or, in the alternative, for a more definite statement of the claims pursuant to the Federal Rule of Civil Procedure 12(e). (Doc. No. 3.) On September 21, 2009, the Court granted Defendant's motion to dismiss Plaintiffs' FAC. (Doc. No. 7.) On October 21, 2009, Plaintiffs filed their amended complaint, entitled "First Amended Complaint."*fn2 (Doc. No. 8.) On November 2, 2009, Defendant Matthew McCoy filed his motion to dismiss the FAC. (Doc. No. 10.) The Court submitted the motion on parties' papers on December 3, 2009. (Doc. No. 11.) On December 7, 2009, Plaintiffs filed their response in opposition to the motion to dismiss. (Doc. No. 12.) On December 14, 2009, Defendant McCoy filed his reply. (Doc. No. 13.)

In the FAC, Plaintiffs re-allege that Plaintiff Terry Rondberg, D.C. ("Rondberg") and Cynthia Rondberg are owners and sole shareholders of The Chiropractic Journal, Inc. (FAC ¶ 12.) Plaintiffs allege that Rondberg founded the Journal of Vertebral Subluxation Research ("JVSR"), a peer-reviewed scientific journal, as a division of The Chiropractic Journal. (FAC ¶ 14.) Plaintiffs allege that JVSR operated a website, www.jvsr.com, and received revenue from advertising on the internet and through its publications. (Id. ¶¶ 16, 20.) Plaintiffs allege that on or about April 1, 2000, JVSR, through Rondberg, hired Defendant, Mathew [sic] McCoy, D.C. to act as the JVSR editor, as an independent contractor. The employment agreement was an oral agreement that Mr. McCoy perform editorial services for the JVSR and to allow for Dr. Rondberg, Mr. McCoy, Terry Pochert, and Marty Marsh to collaborate on the JVSR and equally share the profit. (FAC ¶ 18.) Plaintiffs allege that in return for the editorial services Defendant McCoy was to perform, he was to be compensated "in equal proportions of profits to Dr. Rondberg, Dr. Marsh, and Dr. Pochart." (Id. ¶ 36.) Plaintiffs allege that McCoy breached the agreement by "failing to provide editorial services." (Id. ¶ 38.)

Plaintiffs further allege that JVSR's revenue from credit card merchant accounts was processed through the Chiropractic Journal until on or about until April 24, 2006, when Defendant McCoy ("McCoy") reorganized the merchant account to direct charges to JVSR, as part of a scheme to divert JVSR property and money for McCoy's personal benefit. (Id. ¶¶ 22-23.) Plaintiffs allege that since mid-2008, McCoy assumed control of the JVSR's operations and engaged in a "series of unauthorized, un-consented and illegal actions," including: changing the registration of the JVSR's domain name to himself, "absconding and diverting funds of JVSR" for his personal benefit, excluding the Chiropractic Journal and Rondberg from JVSR operations, falsely disseminating statements that McCoy is the owner of JVSR, undermining the operation of JVSR, promoting and operating own projects and business entities on JVSR's website, blocking the Chiropractic Journal and Rondberg from accessing JVSR's books, records, and bank accounts, holding oneself out as the owner/sole director/officer of JVSR, contacting JVSR customers to divert them to bank accounts established by McCoy, abetting unnamed co-conspirators to carry out a common plan to defraud Plaintiffs, engaging in a campaign to disparage and destroy Rondberg and diminish his reputation in the chiropractic community, establishing an enterprise calculated to engage in illegal conduct, including mail fraud and embezzlement, to the detriment of the Plaintiffs, intentionally publishing false statements, private facts and disparaging comments concerning Plaintiffs. (FAC ¶ 25.) Plaintiffs allege that McCoy engaged in malicious and illegal conduct to undermine Plaintiffs' operations and affiliations within the chiropractic community, misappropriated JVSR's trade secrets and customer lists for his own use, and engaged in competitive conduct against JVSR and Plaintiffs. (Id.) Plaintiffs allege that McCoy hijacked JVSR's website, internet operations, merchant accounts, and internet-related operations. (Id.) Plaintiffs allege that McCoy used JVSR's resources to operate a personal business known as "Glass Houses." (Id.) Plaintiffs allege that McCoy intentionally disseminated false, offensive, private and confidential information and statements in order to cast Plaintiffs in a false light. (Id.)

Plaintiffs also allege that since approximately December 2008, McCoy and Does 1 through 50 engaged in a pattern and scheme to embezzle and convert the funds and property of JVSR and the Chiropractic Journal. (FAC ¶ 26.) Finally, Plaintiffs allege that they have suffered damages in an amount to be determined, but believed to be in excess of $1 million, as a result of McCoy's and Does' 1 through 50, common plan, scheme, defamation, and illegal conduct. (Id. ¶ 32.)

Discussion

I. Motion to Dismiss Pursuant to 12(b)(6)

A motion to dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims asserted in the complaint. Navarro v. Black, 250 F.3d 729, 731 (9th Cir. 2001). A complaint generally must satisfy only the minimal notice pleading requirements of Federal Rule of Civil Procedure 8(a)(2) to evade dismissal under a Rule 12(b)(6) motion. Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). Rule 8(a)(2) requires that a pleading stating a claim for relief contain "a short and plain statement of the claim showing that the pleader is entitled to relief." The function of this pleading requirement is to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A complaint does not "suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting id. at 556). To avoid dismissal under Federal Rule of Civil Procedure 12(b)(6), Plaintiff's complaint must allege "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009) (quotations omitted). "Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555 (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235--36 (3d ed. 2004)). "All allegations of material fact are taken as true and construed in the light most favorable to plaintiff. However, conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim." Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir.1996); see also Twombly, 550 U.S. at 555-56.

"Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir.1990). The court may, however, consider the contents of documents specifically referred to and incorporated into the complaint. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994).

A. Breach of Contract and Accounting

Plaintiffs' first cause of action is for breach of contract. (FAC ¶¶ 35-41.) In California, "[a] cause of action for breach of contract requires proof of the following elements: (1) existence of the contract; (2) plaintiff's performance or excuse for nonperformance; (3) defendant's breach; and (4) damages to plaintiff as a result of the breach." CDF Firefighters v. Maldonado, 158 Cal. App.4th 1226, 1239 (2008). The FAC alleges that: On or about April 1, 2000, Defendant McCoy entered into an oral agreement with Plaintiffs to provide editorial services for the JVSR and be compensated in return in equal proportions of profits to Dr. Rondberg, Dr. Marsh, and Dr. Pochart.

(FAC ¶ 36.) In another paragraph, the FAC alleges that:

On or about April 1, 2000, JVSR, through Rondberg, hired Defendant, Mathew [sic] McCoy, D.C. to act as the JVSR editor, as an independent contractor. The employment agreement was an oral agreement that Mr. McCoy perform editorial services for the JVSR and to allow for Dr. Rondberg, Mr. McCoy, Terry Pochert, and Marty Marsh to collaborate on the JVSR and equally share the profit. (FAC ¶ 18.) The FAC also alleges that McCoy was responsible for "collecting and accounting for subscriber and advertising revenue." (FAC ¶ 21.) The FAC alleges that Plaintiffs performed their obligations "under all transactions and agreements ... incorporated herein by reference," and that Defendant "materially breached the aforementioned agreements, as detailed above, and by failing to provide editorial services in breach of this agreement." (FAC ¶¶ 36-38.) The FAC alleges that as a result of the breaches by Defendants, "Plaintiff has suffered damage in an amount to be proven at trial." (FAC ¶ 41.) The Court concludes that the FAC states a claim for breach of contract. Accordingly, the Court DENIES Defendant's motion to dismiss Plaintiffs' breach of contract claim.

Plaintiffs' eighth cause of action is for accounting. (FAC ¶¶ 89-92.) A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting. Teselle v. McLoughlin, 173 Cal. App.4th 156, 179 (Ct. App. 2009); 5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 819, p. 236. While a fiduciary relationship between the parties is not required to state a cause of action for accounting, plaintiff must allege some relationship that requires an accounting. (Id.) Here, the FAC alleges that Defendant entered into an oral contract and was responsible for "collecting and accounting for subscriber and advertising revenue." (FAC ¶¶ 18, 21.) The FAC also alleges that, as a result of the "conversion and/or unlawful acts," Defendants received all or a portion of the money due to Plaintiffs. (Id. ¶ 91.) Specifically, the FAC alleges that Defendants engaged in a scheme to divert JVSR money for their own personal benefit. (Id. ¶ 24.) The FAC alleges that Defendants continue "to the present time to collect fees rightfully due to Plaintiff." (Id. ¶ 92.) Plaintiffs allege that the exact ...


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