ORDER RE: DEFENDANTS ROBIN HONSEY S AND COMMUNITY BOUND, LLC S MOTION TO DISMISS

Transcription

1 DISTRICT COURT, ARAPAHOE COUNTY, COLORADO 7325 South Potomac Street Centennial, Colorado DATE FILED: November 27, :44 PM CASE NUMBER: 2013CV31148 Plaintiffs: SHARON TRILK, individually, and SCIENCE SENSE, LLC, a Colorado limited liability company v. Defendants: ROBIN HONSEY, individually, and COMMUNITY BOUND, LLC, a Colorado limited liability company COURT USE ONLY Case Number: 2013CV Div. 202 ORDER RE: DEFENDANTS ROBIN HONSEY S AND COMMUNITY BOUND, LLC S MOTION TO DISMISS THIS MATTER comes before the Court on the motion ( Motion ) of defendants Robin Honsey ( Honsey ) and Community Bound, LLC ( CB ) (collectively, Defendants ) to dismiss the complaint of plaintiffs Sharon Trilk ( Trilk ) and Science Sense, LLC ( Science Sense ) (collectively, Plaintiffs ). I. FACTUAL BACKGROUND This action arises from a contract ( Agreement ) between Plaintiffs and CB. According to the allegations of Plaintiffs complaint, CB is owned and operated by Honsey, who is its sole member. Complaint 6. Plaintiffs allege that Honsey is the alter ego of CB and that the corporate veil should be pierced because corporate formalities are not observed. Id. at 38. Under the terms of the Agreement, Plaintiffs paid CB in exchange for the exclusive right to create, operate, and manage certain URLs also known as internet web addresses or websites. Id. at 7. The Agreement also contemplates Plaintiffs purchasing related support and services 1

2 from CB. Exhibit A. Plaintiffs allege that CB specifically agreed to provide website hosting services for one of the websites, the 285 Site. Complaint 17. Plaintiffs allege that Defendants started breaching the Agreement in Id. at 18. Plaintiffs assert that Honsey, acting on her own or on behalf of CB, improperly began making posts on the 285 Site as a moderator. Id. at 20. Plaintiffs also allege that Honsey, while improperly managing the 285 Site, made inaccurate representations about the status of the Agreement and the parties dispute, and contacted advertisers with whom Plaintiffs have contracts and made misrepresentations to [them] by providing inaccurate information. Id. at 28, 34. These contacts were allegedly intended to solicit the advertisers business for the 285 Site in violation of the exclusivity provided by the Agreement. Id. at 34. Plaintiffs further allege that because they rely on community goodwill, website membership, and advertising revenue, Honsey has damaged Plaintiffs by making false representations and intentionally misleading statements about the status of the Agreement... to advertisers, members and members of the press. Id. at 35. According to Plaintiffs, advertisers are confused over whether to continue advertising with Plaintiffs because of the alleged misrepresentations, the 285 Site has been negatively affected by inadequate hosting services, and the alleged unfair and deceptive trade practices of Defendants [confuse] the members, advertisers and other members of the community upon which Plaintiffs business depends. Id. at 61, 72. Based on these allegations, Plaintiffs assert ten claims for relief, including claims of breach of contract and common law invasion of privacy. Defendants move to dismiss Plaintiffs : (i) fifth claim for relief, of fraud; (ii) sixth claim for relief, of unfair trade practices; (iii) eighth 2

3 claim for relief, for an accounting; (iv) tenth claim for relief, for an injunction; and (v) request for exemplary damages. II. LEGAL AUTHORITY C.R.C.P. 12(b)(5) authorizes a party to move to dismiss a complaint against him for failure to state a claim upon which relief can be granted. This rule is designed to allow defendants to test the formal sufficiency of the complaint. Dorman v. Petrol Aspen, Inc., 914 P.2d 909, 911 (Colo. 1996). Such motions are viewed with disfavor, and a complaint is not to be dismissed unless it appears beyond doubt that the plaintiff cannot prove facts in support of the claim that would entitle the plaintiff to relief. Id. In evaluating a Rule 12(b)(5) motion, trial courts may consider only those matters stated in the complaint and must accept all allegations of material fact as true and view the allegations in the light most favorable to the plaintiff. Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256, 1259 (Colo. 2000). If the court looks to information outside the complaint, then a motion to dismiss for failure to state a claim must be treated as a motion for summary judgment. Pub. Serv. Co. of Colo. v. Van Wyk, 27 P.3d 377 (Colo. 2001). III. ANALYSIS Defendants request the dismissal of Plaintiffs : (i) fifth claim for relief, of fraud; (ii) sixth claim for relief, of unfair trade practices; (iii) eighth claim for relief, for an accounting; (iv) tenth claim for relief, for an injunction; and (v) request for exemplary damages. The Court addresses each of Defendants arguments in turn. A. Fifth Claim for Relief Fraud Defendants argue that Plaintiffs claim of fraud should be dismissed because it has not been pled with sufficient particularity as required under C.R.C.P. 9(b). Motion

4 C.R.C.P. 9(b) requires that [i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. C.R.C.P. 9(b). The particularity required by C.R.C.P. 9(b) includes all of the material elements of an action in fraud. Kinsey v. Preeson, 746 P.2d 542, 550 (Colo. 1987). A party seeking to prevail on a claim of fraud must establish: (1) that the defendant made a false representation of material fact; (2) that the one making the representation knew that it was false; (3) that the person to whom the representation was made was ignorant of the falsity; (4) that the representation was made with the intention that it be acted upon; and (5) that the reliance resulted in damage to the plaintiff. Coors v. Sec. Life of Denver Ins. Co., 112 P.3d 59, 66 (Colo. 2005); Kinsey, 746 P.2d at 550; see also CJI-Civ. 4 th. 19:1 (2013). Importantly, a plaintiff need not plead all of the evidence that may be presented to prove the fraud claim, though the complaint must at least state the main facts or incidents which constitute the fraud. State Farm Mut. Auto. Ins. Co. v. Parrish, 899 P.2d 285, 289 (Colo. App. 1994). In support of the claim of fraud, Plaintiffs allege that defendant Honsey has made false representations and intentionally misleading statements about the status of the Agreement, and about the parties dispute, to advertisers, [website] members, and members of the press. Complaint 35. Plaintiffs also allege that Defendants intentionally and willfully misrepresent[ed] ownership of the [website] to the local and regional advertisers upon whose revenue Plaintiffs are dependent, and that Honsey s and CB s misrepresentations... were intentional. Id. at 59 60, These allegations, if proven, would satisfy the first, second, and fourth elements of a fraud claim. As to the materiality of these representations, Plaintiffs allege that [s]uch misrepresentations cause damage to Plaintiffs, where Plaintiffs business is dependent upon 4

5 community goodwill, membership and advertising revenue. Id. at 36. Viewing the allegations in the light most favorable to Plaintiffs, the alleged damage to goodwill, website membership, and advertising revenue is sufficient to show the materiality of allegedly misrepresented facts. With regard to whether the audience for alleged false representations was ignorant of the falsity, Plaintiffs further allege that [a]s a result of Defendants misrepresentations, advertisers are confused and that Defendants conduct confuses the members, advertisers and other members of the community. Id. at 61, 72. This, along with the nature of the parties relationship, where Defendants apparently have significant access to control of the website, supports at least an inference that those people to whom alleged misrepresentations were made were ignorant of the falsity. Finally, Plaintiffs allege that they have been damaged by the alleged fraud, satisfying the fifth and final element of fraud. Id. at 66. Thus, viewing the facts and allegations in the light most favorable to Plaintiffs, the Court finds Plaintiffs have pled all the elements of a claim of fraud with sufficient particularity under C.R.C.P. 9(b). Accordingly, Defendants Motion is DENIED with respect to dismissal of Plaintiffs fifth claim for relief, of fraud. B. Sixth Claim for Relief Unfair Trade Practices Defendants argue that Plaintiffs claim of unfair trade practices should be dismissed because Plaintiffs have not alleged a significant public impact as required by the Colorado Consumer Protection Act ( CCPA ), , et seq., C.R.S. (2013). Motion 3 4. The CCPA is a remedial statute intended to deter and punish deceptive trade practices committed by businesses in dealing with the public. Showpiece Homes Corp. v. Assurance Co., 5

6 38 P.3d 47, (Colo. 2001). To prove a private cause of action under the CCPA, a plaintiff must show that: (1) the defendant engaged in an unfair or deceptive trade practice; (2) the challenged practice occurred in the course of the defendant s business, vocation, or occupation; (3) the challenged practice significantly impacts the public as actual or potential consumers of the defendant s goods, services, or property; (4) the plaintiff suffered injury in fact to a legally protected interest; and (5) the challenged practice caused the plaintiff s injury. Coors v. Sec. Life of Denver Ins. Co., 91 P.3d 393, 398 (Colo. App. 2003), aff d in part, rev d on other grounds, 112 P.3d 59 (Colo. 2005). Considering the broad purpose and scope of the CCPA, the terms of the CCPA must be construed liberally. Id. Consequently, when addressing whether conduct falls within the purview of the CCPA, courts presume that the conduct does. Id. The third element of the CCPA analysis requires that the challenged practice significantly impact the public as actual or potential consumers of the defendant s goods, services, or property. If the plaintiff complains of a purely private wrong, the required third element is not satisfied and the claim fails. See Martinez v. Lewis, 969 P.2d 213, 222 (Colo. 1998). Relevant considerations in determining whether a challenged practice significantly impacts the public within the context of a CCPA claim include: (1) the number of consumers directly affected by the challenged practice; (2) the relative sophistication and bargaining power of the consumers affected by the challenged practice; and (3) evidence that the challenged practice has previously affected other consumers or has significant potential to do so in the future. Coors, 91 P.3d at 399 (citing Rhino Linings USA, Inc. v. Rocky Mountain Rhino Lining, Inc., 62 P.3d 142 (Colo. 2003)). 6

7 Whether there is a significant public impact under the CCPA is a question of fact to be resolved by the trier of fact, rather than a question of law to be resolved by the Court. One Creative Place, LLC v. Jet Ctr. Partners, LLC, 259 P.3d 1287, 1289 (Colo. App. 2011). In support of the claim of unfair trade practices, Plaintiffs allege the conduct underlying the claim of fraud, discussed above in Section III.A, and also point to an allegedly inaccurate post made by Honsey that reflects an intentional attempt to mislead the members of the 285 Site into believing [plaintiff] Trilk was posting the information. Complaint 35, 59 60, 64 65, 69. Further, Plaintiffs state that the CCPA prohibits unfair and deceptive trade practices and that such unfair and deceptive trade practice confuses the members, advertisers and other members of the community upon which Plaintiffs business depends. Complaint Applying the first consideration, the number of consumers directly affected by the challenged practice, the Court finds that Plaintiffs allegations that Defendants posted information on an internet website indicate that Defendants actions could potentially impact a large number of consumers. Plaintiffs do not make any allegations related to the second consideration, the relative sophistication and bargaining power of the consumers affected by the challenged practice. Applying the third consideration, evidence that the challenged practice has previously affected consumers or has significant potential to do so in the future, the Court finds that Plaintiffs allegations that Defendants actions confuse members of the website, advertisers, and other members of the community indicate that consumers were affected and may be affected in the future. In their response ( Response ) to the Motion, Plaintiffs elaborate on how the public was impacted by explaining that the 285 Site is a public community website utilized by thousands of members of the community living along Highway 285. Response 4. 7

8 Under C.R.C.P. 8(a), pleadings only need to serve notice of the claim asserted and do not need to express a complete recitation of all the facts that support a cause of action. Blake v. Samuelson, 524 P.2d 624, 625 (1974). Considering only those matters stated in the complaint, accepting all allegations of material fact as true, and viewing the allegations in the light most favorable to Plaintiffs, the Court finds that Defendants have failed to demonstrate that Plaintiffs claim must be dismissed because Plaintiffs have failed to sufficiently plead the existence of a public impact in support of their claim under the CCPA. See Town of Alma, 10 P.3d at Accordingly, Defendants Motion is DENIED with respect to dismissal of Plaintiffs sixth claim for relief, of unfair trade practices. C. Eighth Claim for Relief Accounting Defendants argue that Plaintiffs eighth claim for relief, for an accounting, should be dismissed because Plaintiffs claim of fraud fails. Motion 4. In light of the Court s finding that Plaintiffs claim of fraud does not fail, this portion of Defendants Motion is DENIED with respect to dismissal of this claim. D. Tenth Claim for Relief Injunction Defendants argue that the alternative request for relief in the third paragraph of Plaintiffs tenth claim for relief, for an injunction, should be dismissed because it is merely a request for money and is entirely improper. Motion 5. Plaintiffs Response suggests that they misunderstood this portion of Defendants Motion to cover Plaintiffs entire tenth claim for relief, as Plaintiffs Response addresses broadly the issue of whether an injunction is proper, rather than whether the request for a refund of amounts paid to Defendants is properly pled under the claim seeking injunctive relief. Response

9 As a threshold matter, in their reply ( Reply ), Defendants reiterate the request to dismiss only the third paragraph of the tenth claim for relief, and then make an additional request that the Court dismiss the entire tenth claim for relief. Reply 7. That additional request is not properly before the Court because it was not included in the Motion, and the Court therefore need not decide whether the entire claim for an injunction should be dismissed. See Holley v. Huang, 284 P.3d 81, 87 (Colo. App. 2011); Meadow Homes Dev. Corp. v. Bowens, 211 P.3d 743, 748 (Colo. App. 2009). That leaves only the original request to dismiss the third paragraph of Plaintiffs tenth claim for relief, for an injunction. Motion 5. Plaintiffs tenth claim for relief, for an injunction, includes an alternative request in the third paragraph asking for a refund of all monies paid by [Plaintiffs] to [defendant] CB if the Court finds that the underlying contract has been breached and terminated. Plaintiffs request that, if the Court does not grant injunctive relief, they be awarded damages. This is a permissible request because a party may ask for alternative forms of relief. C.R.C.P. 8(e)(2). Here, Plaintiffs have sufficiently pled a claim for injunctive relief or, in the alternative, for damages. Accordingly, the Court will not dismiss the third paragraph of Plaintiffs tenth claim for relief, for an injunction. The portion of Defendants Motion seeking dismissal of this third paragraph is DENIED. E. Request of Exemplary Damages Defendants argue that Plaintiffs request of exemplary damages should be dismissed because Colorado law does not permit a claim for exemplary damages in the initial pleadings. Motion 5 6. Section (1.5)(a), C.R.S. (2013), reads, in pertinent part, [a] claim for 9

10 exemplary damages in an action governed by this section may not be included in any initial claim for relief. Plaintiffs complaint is an initial claim for relief, and Defendants have correctly cited (1.5)(a), C.R.S. (2013). Thus, to the extent that Plaintiffs complaint includes a claim for exemplary damages, that claim is premature at this time. Accordingly, Plaintiffs request for exemplary damages is dismissed without prejudice. The portion of Defendants Motion seeking dismissal of this prayer for relief is GRANTED. IV. CONCLUSION AND ORDER For the reasons stated above, Defendants Motion is GRANTED in part and DENIED in part. Defendants Motion to dismiss Plaintiffs request for exemplary damages is GRANTED, and Plaintiffs request for exemplary damages is dismissed without prejudice. The remaining requests for dismissal are DENIED. The Court will not dismiss Plaintiffs fifth claim for relief (fraud), sixth claim for relief (unfair trade practices), eighth claim for relief (accounting), or tenth claim for relief (injunction). IT IS SO ORDERED. Dated and signed this 27th day of November, BY THE COURT: J. Mark Hannen District Court Judge 10