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Johnston v. International Mixed Martial Arts Federation

United States District Court, District of Nevada

January 22, 2015

Robert Johnston, et al., Plaintiffs,
v.
International Mixed Martial Arts Federation, et al., Defendants.

ORDER PERMITTING LIMITED AMENDMENT [DOC. 28]

Jennifer A. Dorsey, United States District Judge

This business dispute concerns the International Mixed Martial Arts Federation (IMMAF’s) 2014 Word Championships of Amateur Mixed Martial Arts event. In October 2014, I dismissed Robert Johnston and the Las Vegas MMA, LLC’s (LVMMA) contract, fraud, and defamation claims for failure to plead a plausible claim for relief. Doc. 25. Plaintiffs now move to amend their complaint to replead their contract-based claims and a defamation claim and drop all claims by Robert Johnston. I find plaintiff’s defamation allegations are barely sufficient to survive a futility analysis, but plaintiff again fails to adequately allege the material terms of a contract between itself and defendants. Thus, I grant the motion for leave to amend in part, and I instruct plaintiff to file an amended complaint that includes only the unjust enrichment and defamation claims as pled in the proposed amended complaint. Doc. 28-1. As the newly proposed amended complaint deletes any claim by Robert Johnson, I also order that the caption be amended to reflect that this action is being pursued on behalf of LVMMA only and that Johnston is no longer a party to this case.

Background

LVMMA initially sued in Nevada state court, alleging claims for (1) breach of the implied covenant of good faith and fair dealing against IMMAF, (2) breach of contract against IMMAF, (3) fraud and misrepresentation against IMMAF and its agent Nyra Phillips, (4) unjust enrichment against IMMAF, and (5) defamation against Phillips. Doc. 1-1. After removing the case to federal court, defendants moved to dismiss all of these claims under Rule 12(b)(6) for failure to state a claim. I granted the motion on all but the unjust enrichment claim; I dismissed the contract claims because the basic terms of the contract and facts to suggest contract formation were not pled, and I dismissed the defamation claim because there was no allegation that a false statement had been published to a third party. Doc. 25. I gave plaintiffs 30 days to file a properly supported motion for leave to amend. Id.

LVMMA timely moved for leave to amend its complaint. In the proposed amended complaint, all claims by Johnston are dropped, the unjust enrichment claim reappears, and LVMMA takes another shot at pleading its claims for breach of contract, breach of the implied covenant of good faith and fair dealing (Counts 1-2), and defamation (Count 4). Doc. 28.[1] LVMMA’s one-page memorandum of points and authorities merely reiterates my October 23, 2014, ruling, argues that leave to amend is liberally granted, and claims that LVMMA’s proposed amended complaint “provides greater clarification of Plaintiff’s claims and greater factual detail.” Doc. 28 at 2. Defendants respond that the amended complaint fails to cure the defects detailed in my prior ruling and that this suit should proceed on plaintiff’s unjust enrichment theory only. Doc. 29 at 1. LVMMA filed no reply.

Discussion

Rule 15 of the Federal Rules of Civil Procedure requires district courts to “freely give leave [to amend] when justice so requires.”[2] The Ninth Circuit has long recognized that this policy is “to be applied with extreme liberality.”[3] In the seminal leave-to-amend case of Forman v. Davis, [4] the United States Supreme Court explained, “[i]f the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, [the Plaintiff] ought to be afforded an opportunity to test his claim on the merits.”

Still, amendment is not automatic. If reasons justify denying opportunity to amend, the court has discretion to foreclose amendment.[5] In the Ninth Circuit, courts consider five factors when determining whether to grant leave: (1) bad faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of amendment, and (5) whether the plaintiff has previously amended the complaint.[6] Any of the first four factors can serve as a basis for denying leave to amend, [7] but the analysis focuses on the bad faith of the party seeking to amend the complaint, as well as the prejudice to the other party.[8]

An amendment is futile when “the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.”[9] Although Rule 15(a) “encourages leave to amend, district courts need not accommodate futile amendments.”[10] Rejection of a proposed amended complaint is warranted if the amendment “would merely enlarge on the legal theory rejected” by the court.[11] A court enjoys broad discretion to deny a motion for leave to amend when “a plaintiff has previously been granted leave to amend” but fails to address the previous defects.[12]

A. Discovery is not complete, and the court does not consider evidence outside the pleadings to analyze the motion.

Defendants contend that all three of the newly pled causes of action are futile because “evidence produced to date” belies LVMMA’s allegations. Doc. 29. Discovery has not yet been completed, and I decline to consider evidence outside the pleadings to determine whether the new allegations state viable claims. Defendants cite to Gabrielson v. Montgomery Ward & Co., for the proposition that “[a]n amendment may be denied as futile when the claim could be defeated on a motion for summary judgment.” But in Gabrielson, the trial court had already considered, and disposed of, a motion for summary judgment and the plaintiff had already thrice amended her complaint.[13] Because the procedural posture of this case is not as advanced as Gabrielson’s was, I decline to apply Gabrielson’s principles here.

B. Plaintiff has pled a plausible claim for defamation (count 4).

LVMMA’s proposed defamation claim alleges that defendant Nyra Phillips, “while acting in the course and scope of her employment for Defendant IMMAF, knowingly, intentionally and recklessly communicated false and defamatory statements to third parties which falsely accused Plaintiff of being subject of an investigation by the Nevada State Athletic Commission. . . .” Doc. 28-1 at 7 (emphasis added). Defendants argue that the addition of the bald allegation that Phillips communicated a false statement to a third party is too threadbare because it fails to identify the third parties or the date or time of the statement and that Phillips’s alleged statement that plaintiff was “under investigation by the Nevada State Athletic Commission for activities related to the qualifier event” is not defamatory. Docs. 28-1 at 3; 29 at 7, 9.

To state a defamation claim, a plaintiff must allege “(1) a false and defamatory statement . . .; (2) an unprivileged publication to a third person; (3) fault, amounting to at least negligence; and (4) actual or presumed damages.”[14] At the October 23, 2014, hearing, I pointed out that what was missing from LVMMA’s defamation claim was a publication to a third party. Plaintiff’s amended complaint adequately cures this deficiency, now alleging that Phillips communicated this alleged Nevada Gaming Commission investigation of plaintiff to both plaintiff, Doc. 28-1 at 3, and unidentified third parties, id. at 7, causing IMMAF to terminate plaintiff in its purported capacity as promoter for the event. ...


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