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Anthony Encarnacao, An Individual v. Phase Forward Inc.

February 7, 2012


The opinion of the court was delivered by: Hon. Otis D. Wright, II United States District Judge

Order GRANTING Defendants' Motion to Dismiss [24]


Pending before the Court is Defendants Phase Forward, Inc.; D. Ari Buchler ("Buchler"); Russell J. Campanello ("Campanello"); Chistopher Menard ("Menard"); Steven Powell ("Powell"); Steven Rosenberg ("Rosenberg"); and Robert K. Weiler's ("Weiler") (collectively "Defendants"*fn1 ) September 12, 2011 Motion to Dismiss. (Dkt. No. 24.) Plaintiff Anthony Encarnacao ("Plaintiff") filed his Opposition on December 21, 2011 (Dkt. No. 40), to which Defendants filed a Reply on January 30, 2011 (Dkt. No. 3). After careful consideration of the papers filed in support of and in opposition to the instant Motion, the Court deems the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7--15. For the reasons discussed below, Defendants' Motion is GRANTED.


Plaintiff was employed by Phase Forward, Inc. ("Phase Forward") from June 2003 until September 2010. (First Amended Complaint ("FAC") ¶¶14, 24.) Beginning in 2007, Plaintiff entered into yearly compensation arrangements with Phase Forward (the "Compensation Arrangements"), whereby he received, inter alia, a base salary and commissions based upon the orders he generated from Phase Forward customers. (FAC ¶¶ 15, 16, 19.) Under the Compensation Arrangements, the commissions "accrued" at the time the transactions became fixed. (FAC ¶ 17.) A portion of each commission was to be paid to Plaintiff at the time the transaction was completed, and the remainder was to be deferred and paid over a period of years according to a "revenue recognition schedule." (FAC ¶ 17; Mot. at 2.) The initial commission was to be 50 percent, and the deferred portion was to be the remaining 50 percent. (FAC ¶ 26.)

In April 2010, Oracle America, Inc. ("Oracle") acquired Phase Forward and succeeded to all of Phase Forward's rights and liabilities. (FAC ¶ 23.) Plaintiff alleges that in September 2010, Phase Forward discontinued operations and terminated all of its employees, including Plaintiff. (FAC ¶ 24.)

Plaintiff contends that Phase Forward refuses to pay him the deferred commissions that accrued pursuant to the "revenue recognition schedule." (FAC ¶ 24.) He further contends that Defendants never intended to honor the Compensation Arrangements. (FAC ¶ 27.) Plaintiff claims that Defendants induced him to execute each of the Compensation Arrangements, which falsely represented to him that he would be fully compensated, as a ploy to grow Phase Forward's business and sell it for a high return. (FAC ¶¶ 27--28.) He asserts that he relied upon Defendants' representations in executing the Compensation Arrangements and suffered damages as a result. (FAC ¶¶ 29--30.)

Pursuant to the foregoing events and contentions, Plaintiff filed a Complaint on June 16, 2011. (Dkt. No. 1.) Plaintiff subsequently filed a FAC on August 29, 2011. (Dkt. No. 22.) Therein, Plaintiff alleges that Defendants violated the Racketeer Influenced and Corrupt Organization Act ("RICO") by engaging in a pattern of racketeering activity, in violation of 18 U.S.C. § 1962(c)--(d)*fn2 . (FAC ¶¶ 37--40.) Plaintiff predicates his RICO claim on Defendants' multiple alleged acts of wire fraud, 18 U.S.C. §§ 1341, 1343, asserting that Defendants falsely represented to him via four annual email communications, sent in 2007, 2008, 2009, and 2010, that he would be compensated according to the Compensation Arrangements. (FAC ¶¶ 37--41.)

Plaintiff also alleges in his FAC that Individual Defendants tortiously interfered with the contract between Plaintiff and Phase Forward. (FAC ¶¶ 51--55.) Plaintiff claims that Individual Defendants induced Phase Forward to breach the Compensation Arrangements, intending to reap financial benefits as a result. (FAC ¶¶ 53--54.)

On December 8, 2011, the Court ruled on a Motion to Dismiss, pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(2), holding that the Court has personal jurisdiction over the Individual Defendants. (Dkt. No. 35.) The Court now considers Defendants' September 12, 2011 Motion to Dismiss under Rule 12(b)(6).


"To survive a motion to dismiss for failure to state a claim under Rule 12(b)(6), a complaint generally must satisfy only the minimal pleading requirements of Rule 8(a)(2)." Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). Rule 8(a)(2) requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). For a complaint to sufficiently state a claim, its "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Dismissal under a 12(b)(6) motion can be based on "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). To overcome a 12(b)(6) motion, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotation marks omitted). The plausibility standard "asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement of relief." Id.

When considering a 12(b)(6) motion, a court is generally limited to considering material within the pleadings and must construe "[a]ll factual allegations set forth in the complaint . . . as true and . . . in the light most favorable to [the plaintiff]." See Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir. 2001) (citing Epstein v. Wash. Energy Co., 83 F.3d 1136, 11 (9th Cir. 1996)). A court is not, however, "required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

As a general rule, leave to amend a complaint which has been dismissed should be freely granted. Fed.R.Civ.P. 15(a). However, leave to amend may be denied when "the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency." Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 ...

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