Neb. Data Ctrs., LLC v. Khayet

NEBRASKA DATA CENTERS, LLC, Plaintiff, v. LEO KHAYET, Defendant.

8:17CV369

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEBRASKA

May 10, 2018

MEMORANDUM AND ORDER

This matter is before the Court on the Motion to Dismiss, ECF No. 78, filed by Defendant Leo Khayet. Also before the Court are the Motion for Sanctions, ECF No. 94, filed by Plaintiff Nebraska Data Centers, LLC (NDC), the Motion to Strike Order, ECF No. 143, filed by Khayet, and the Objection to Order, ECF No. 147, filed by Khayet. For the reasons stated below, the Motion to Dismiss will be granted, in part.; the Motion for Sanctions will be denied, without prejudice and subject reassertion; and the Motion to Strike Order and the Objection to Order will be denied.

BACKGROUND

I. Factual Background

The following facts are those alleged in the Amended Complaint, ECF No. 11, and assumed true for purposes of the pending Motion to Dismiss.

On August 8, 2017, Khayet and NDC entered into a Consulting Agreement, ECF No. 2, which provided:

NDC has asked [Khayet] to introduce or re-introduce the Company to targeted family offices, high net worth individuals, strategic real estate investors and other capital groups and/or individuals identified in Appendix A that have the financial ability to purchase the assets of NDC [ ]: including all tangible and intangible assets.

Am. Comp. ¶ 6, ECF No. 11, Page ID 23 (citing Consulting Agreement, ECF No. 2). The terms of the Consulting Agreement also provided that "[i]f NDC or any affiliate[ ] completes any transaction with any party listed in Appendix A within thirty-six [ ] months after the date of this Agreement" Khayet shall be paid two percent "of the purchase and/or sale of NDC assets in whole or in part . . . ." Consulting Agreement § 2.a., ECF No. 2, Page ID 6. Neither NDC nor any of its assets were sold.

On October 4, 2017, NDC sent Khayet a letter that stated NDC "hereby terminates the Consulting Agreement with immediate effect as of the date of this letter." Termination Letter, ECF No. 2, Page ID 11. The next day, Khayet disputed NDC's asserted termination and, despite NDC's repeated requests to stop, he has since continued to contact individuals and business entities interested in NDC's assets under his perceived authority to perform the Consulting Agreement. NDC alleges that Khayet's purpose is to "embarrass, harass and interfere with [its] business and . . . relationships . . . ." Am. Comp. ¶ 22, ECF No. 11, Page ID 25. NDC also alleges that Khayet has been making efforts to buy NDC's assets himself or with a group of other buyers.

On December 1, 2016, prior to executing the Consulting Agreement, NDC and Timber Ventures, LLC, of which Khayet is the President, also entered into a Mutual Confidentiality and Nondisclosure Agreement (Confidentiality Agreement), ECF No. 12. The parties entered into the Confidentiality Agreement "for the purpose of determining whether [NDC] would engage [Khayet]." Am. Comp. ¶ 50, ECF No. 11, Page ID 27.NDC alleges Khayet was a party to the Confidentiality Agreement and that he breached it by disclosing NDC's confidential information without its prior authorization.

II. Procedural Background

On October 5, 2017, NDC filed a Complaint for Declaratory Judgment, ECF No. 1, against Khayet, seeking a declaration that the Consulting Agreement was terminated and that Khayet was owed no compensation. On November 2, 2017, NDC filed the Amended Complaint, ECF No. 11, which sought a similar declaratory judgment and asserted the following claims: (1) tortious interference with a business relationship or expectancy; (2) fraudulent misrepresentation; (3) negligent misrepresentation; (4) breach of contract; (5) a violation of the Junkin Act, Neb. Rev. Stat. § 59-805; (6) unfair competition; (7) a violation of the Nebraska Uniform Deceptive Trade Practices Act (UDTPA), Neb. Rev. Stat. § 87-302; (8) common-law trademark infringement; and (9) injunctive relief. NDC also sought a preliminary injunction through the Amended Complaint, and on November 17, 2017, it moved for a preliminary injunction, ECF No. 21.

On December 7, 2017, a hearing on the Motion for Preliminary Injunction was held and an attorney, Benjamin Maxell, appeared on Khayet's behalf to oppose the Motion. The Court allowed Khayet until December 29, 2017, to submit a response brief and any supporting evidence. On December 19, 2017, Maxell moved to withdraw as counsel for Khayet and the Court held a hearing on that motion as well as on NDC's Motion for Contempt of Court Order, ECF No. 40. Khayet personally appeared at the December 19, 2017, hearing and the Court permitted Maxell to withdraw his representation. Khayet has proceeded pro se since Maxell's withdrawal.

After denying his first two motions to dismiss, ECF Nos. 61 and 68, for failing to comply with the Court's local rule NECivR. 7.1(a)(1)(A), the Court permitted Khayet to submit a responsive pleading to the Amended Complaint on or before February 2, 2018. See Text Order, ECF No. 63; see also Order on Mot. Prelim. Inj., ECF No. 76, Page ID 519 (granting NDC's request for a preliminary injunction, in part). Khayet then submitted the pending Motion to Dismiss, ECF No. 78, in compliance with the Court's local rules. Prior to submitting the pending Motion to Dismiss, Khayet submitted several motions and other filings seeking various forms of relief. ECF Nos. 19, 49, 51, 55-9, 62, 67, 72. Since filing the pending Motion to Dismiss, Khayet has continued to submit motions and other filings also requesting various forms of relief. ECF Nos. 81-2, 87, 93, 98, 119, 133, 135, 140, 143, 147.

In his Motion to Dismiss, Khayet asserts the Court lacks personal jurisdiction over him, that the District of Nebraska is an improper venue, and that NDC's Amended Complaint should be dismissed in its entirety because it fails to state a claim upon which relief can be granted. He also asserts the Court lacks subject-matter jurisdiction because NDC failed to demonstrate that the amount in controversy exceeds $75,000.

STANDARD OF REVIEW¹

A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). To satisfy this requirement, a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Corrado v. Life Inv'rs Ins. Co. of Am., 804 F.3d 915, 917 (8th Cir. 2015) (quoting BellAtlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Barton v. Taber, 820 F.3d 958, 964 (8th Cir. 2016) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Zink v. Lombardi, 783 F.3d 1089, 1098 (8th Cir. 2015) (quoting Iqbal, 556 U.S. at 678), cert. denied, 135 S. Ct. 2941 (2015). The complaint's factual allegations must be "sufficient to 'raise a right to relief above the speculative level.'" McDonough v. Anoka Cty., 799 F.3d 931, 946 (8th Cir. 2015) (quoting Twombly, 550 U.S. at 555). The Court must accept factual allegations as true, but it is not required to accept any "legal conclusion couched as a factual allegation." Brown v. Green Tree Servicing LLC, 820 F.3d 371, 373 (8th Cir. 2016) (quoting Iqbal, 556 U.S. at 678). Thus, "[a] pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.'" Ash v. Anderson Merchandisers, LLC, 799 F.3d 957, 960 (8th Cir. 2015) (quoting Iqbal, 556 U.S. at 678), cert. denied, 136 S. Ct. 804 (2016).

On a motion to dismiss, courts must rule "on the assumption that all the allegations in the complaint are true," and "a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and 'that a recovery is very remote and unlikely.'" Twombly, 550 U.S. at 555 & 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). "Determining whether a complaint states a plausible claim for relief . . . [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Mickelson v.Cty. of Ramsey, 823 F.3d 918, 923 (8th Cir. 2016) (alternation in original) (quoting Iqbal, 556 U.S. at 679).

DISCUSSION

By his conduct and appearances, Khayet waived his defenses under Fed. R. Civ. P. 12(b)(2) and 12(b)(3) for lack of personal jurisdiction and improper venue, and NDC sufficiently pled that the amount in controversy exceeds $75,000. Thus, the Court will not dismiss this case under Fed. R. Civ. P. 12(b)(1), (2), or (3). The Court will, however, dismiss the following claims under Fed. R. Civ. P. 12(b)(6) for failure to state claims upon which relief can be granted: (1) fraudulent misrepresentation, (2) negligent misrepresentation, (3) breach of the Confidentiality Agreement against Khayet, (4) violation of § 59-805 of the Junkin Act, (5) unfair competition under Nebraska law, and (6) common-law trademark infringement under Nebraska law. NDC's Motion for Sanctions, Khayet's Motion to Strike Order, and Khayet's Objection to Order will be denied.

I. Personal Jurisdiction and Venue

Rule 12 "sets only the outer limits of waiver; it does not preclude waiver by implication." Yeldell v. Tutt, 913 F.2d 533, 539 (8th Cir. 1990) (quoting Marquest Med. Prods. v. EMDE Corp., 496 F. Supp. 1242, 1245 n.1 (D. Colo. 1980)). Defenses under 12(b)(2) and 12(b)(3) "may be lost by failure to assert [them] seasonably, by formal submission in a cause, or by submission through conduct." First Bank Bus. Capital, Inc. v. Agriprocessors, Inc., 602 F. Supp. 2d 1076, 1090 (N.D. Iowa 2009) (quoting Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 168 (1939)); see also Yeldell, 913 F.2d at 539; TLC Vision (USA) Corp. v. Freeman, No. 4:12CV01855 ERW, 2013 WL2181267, at *6 (...