Snopes Media Grp. v. Mikkelson

SNOPES MEDIA GROUP, INC., Plaintiff, v. BARBARA MIKKELSON, Defendant.

No. 21-cv-1730-BAS-DEB

United States District Court, S.D. California

May 2, 2022

ORDER DENYING DEFENDANT'S MOTION TO DISMISS (ECF NO. 4)

Hon Cynthia Bashant, United States District Judge.

Plaintiff Snopes Media Group (“Snopes Media”) filed a First Amended Complaint (“FAC”) against Barbara Mikkelson, alleging two causes of action for: (1) violation of California Penal Code § 496 (receipt of stolen funds), and (2) unjust enrichment. (ECF No. 3.) Plaintiff alleges that Ms. Mikkelson received stolen funds embezzled by Proper Media, and that Ms. Mikkelson extorted funds from Proper Media that rightfully belonged to Snopes Media. Plaintiff also alleges that Ms. Mikkelson is unjustly enriched by retention of those funds. Before the Court is Ms Mikkelson's motion to dismiss Plaintiff's action for failure to state a claim. (ECF No. 4.) Plaintiff responded (ECF No. 5) and Defendant replied (ECF No. 6).

The Court finds this motion suitable for determination on the papers submitted and without oral argument. See Fed.R.Civ.P. 78(b); Civ. L.R. 7.1(d)(1). For the reasons stated below, the Court DENIES Defendant Barbara Mikkelson's motion to dismiss.^[1]

I. BACKGROUND

Plaintiff Snopes Media is the owner of the Snopes.com website, founded in 2003 by then husband and wife, David Mikkelson and Barbara Mikkelson. (FAC ¶ 9.) Proper Media is an internet media company founded in 2015 by Drew Schoentrup, Christopher Richmond, Tyler Dunn, Vincent Green, and Ryan Miller. (Id. ¶ 10.) On August 11, 2015, Snopes Media entered into a written one-year contract with Proper Media entitled the General Service Agreement (“GSA”). (Id. ¶ 11.) Under this agreement, Proper Media agreed to procure, place, and manage advertising on Snopes.com and to compensate Snopes Media based on advertising invoicing on a monthly basis. (Id. 13-14.) In April 2016, Mr. Mikkelson told Proper Media to pause the disbursement of funds into Snopes Media's bank account because there were alleged unauthorized withdrawals by Ms. Mikkelson. (Id. ¶ 22.)

Around the same time, after the divorce of Ms. Mikkelson and her husband resulted in a 50/50 split of Snopes Media shares, the principals of Proper Media offered to buy Ms. Mikkelson's 50% interest in Snopes Media. (Id. ¶¶ 16-17.) Those parties entered into a written Stock Purchase Agreement (“SPA”) giving the principals of Proper Media shares in Snopes Media in their individual capacities. (Id. ¶¶ 18-21.) A portion of the purchase price was due at closing, and the rest was due in monthly installments pursuant to a promissory note attached to the SPA. (Id. ¶ 21.) After Ms. Mikkelson sold her 50% interest, Schoentrup took over as the bookkeeper for Snopes Media in July 2016. (Id. ¶ 24.) Once Schoentrup became bookkeeper, Proper Media did not return the advertising revenues withheld from Snopes Media since April 2016. (Id. ¶¶ 25-29.) Instead, Proper Media used the advertising revenues due to Snopes Media to pay interest to Ms. Mikkelson while the principals tried to get a loan for the down payment to purchase her ownership interest. (Id. ¶ 27.) Schoentrup, Richmond, and Dunn used Snopes Media's advertising revenues to pay Ms. Mikkelson under the Promissory Note through 2017. (Id. ¶ 30.) Proper Media withheld Snopes Media's advertising revenues for months at a time and concealed from Snopes Media the use of the advertising revenues to pay Ms. Mikkelson. (Id. 31-32.)

In September 2016, Ms. Mikkelson approached Schoentrup and demanded additional sums that she claimed were outstanding to her. (Id. ¶ 35.) She demanded these funds via written threats to disseminate false and defamatory information about her exhusband Mr. Mikkelson. (Id. ¶ 36.) She claimed this information would affect the Snopes Media brand and website - and therefore the stock price. (Id. ¶¶ 35-36.) To resolve these threats, Ms. Mikkelson and Schoentrup entered into the “Settlement Agreement.” (Id. ¶ 37.) When Snopes Media attempted to end the GSA with Proper Media in March 2017, Proper Media wrongly held itself out to be a 50% owner of Snopes Media. (Id. ¶¶ 38-42.)

On October 4, 2017, Proper Media, Schoentrup, Richmond, Dunn and Ms. Mikkelson entered into three secret agreements for the early settlement of the Promissory Note and Settlement Agreement. (Id. ¶ 46.) The Promissory Note was to be purchased and assigned to Schoentrup and Richmond at a discount. (Id. ¶ 47.) The third agreement included an undisclosed release, releasing the parties from their payment obligations under the Settlement Agreement in exchange for an early payment to Ms. Mikkelson of $159, 008.60. (Id. ¶ 49.) Plaintiff alleges that not only were these transactions concealed from Snopes Media, but also the money paid to Ms. Mikkelson was sourced from Snopes Media's advertising revenues that had been withheld from Snopes since April 2016. (Id. ¶¶ 52-53.)

Defendant knew the funds she received were misappropriated or embezzled, due to the related litigation between Snopes Media and Proper Media that had been extensively reported in the press. (Id. ¶ 56.) In addition, Defendant continues to withhold advertising revenues despite Snopes Media informing her that the revenues were stolen by Proper Media. (Id. ¶ 57.)

II. LEGAL STANDARD

A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed.R.Civ.P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court must accept all factual allegations pleaded in the complaint as true and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations, rather, it must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. 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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). “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 to relief.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557).

“[A] plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986) (alteration in original)). A court need not accept “legal conclusions” as true. Iqbal, 556 U.S. at 678. Despite the deference the court must pay to the plaintiff's allegations, it is not proper for the court to assume that “the [plaintiff] can prove facts that [he or she] has not alleged or that defendant[] ha[s] violated the . . . laws in ways that have not been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).

III. ANALYSIS

A. Count One - Receipt of Stolen Property

California Penal Code § 496(c) authorizes persons injured by the receipt of stolen property to bring a civil action for three times the amount of actual damages, as well as attorneys' fees and costs. “A criminal conviction is not a prerequisite to recovery of treble damages.” Switzer v. Wood, 35 Cal.App. 5th 116, 126 (2019). Rather, “[a] violation may be found to have occurred if the person engaged in the conduct described in the statute.” Id. To state a violation of the statute, a plaintiff must plead three elements: “(a) the property was stolen, and (b) the defendant was in possession of it, (c) knowing it was stolen.” Verdugo-Gonzalez v. Holder, 581 F.3d 1059, 1061 (9th Cir. 2009) (citing People v. Anderson, 210 Cal.App.3d 414, 420 (1989)). In addition, “assuming a defendant's knowledge that the property at issue is stolen, section 496, subdivision (a) may be violated in either of two ways: (1) by buying or receiving any property that has been stolen or (2) by conceal[ing], sell[ing], [or] withhold[ing] . . . any property from the owner.” People v. Brown, 32 Cal.App. 5th 726, 732 (2019) (alterations in original). Defendant challenges whether Plaintiff has sufficiently stated that the property received was “stolen.”

In Hueso v. Select Portfolio Servicing, Inc., 527 F.Supp.3d 1210 (S.D. Cal. 2021), this Court held that for property to be “stolen” under § 496(a), the property must already have been stolen when it comes into a defendant's possession. See Grouse River Outfitters Ltd. v. NetSuite, Inc., No. 16-CV-02954-LB, 2016 WL 5930273, at *14 (N.D. Cal. Oct. 12, 2016) (finding plaintiff's money “was not ‘stolen' when [defendant] allegedly defrauded [plaintiff] of it”); cf. Lacagnina v. Comprehend Sys., Inc., 25 Cal.App. 5th 955, 971 (2018) (holding that plaintiff's labor was not “stolen” at the time [defendant] allegedly defrauded him out of the . . . compensation). The Northern District in Grouse found that the tense of the statutory language supported this view. 2016 WL 5930273, at *14 (noting that the first sentence of § 496(a) refers to “property that has been stolen or that has been obtained in any manner constituting theft”).

Here Defendant relies almost exclusively on Siry Investments LP v. Farkhondepour to argue that Plaintiff did not plead receipt of stolen property. 45 Cal.App. 5th 1098, 1133-37 (2020), review granted, 468 P.3d 701 (2020).^[2] In Siry, the California Court...