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Prins v. Lightyear Network Solutions Inc.

United States District Court, D. Nevada

February 6, 2017

TODD A. PRINS, Plaintiff,
v.
LIGHTYEAR NETWORK SOLUTIONS, INC.; CHRIS T. SULLIVAN; and RICK HUGHES, Defendants.

          ORDER

          Gloria M. Navarro, Chief Judge United States District Judge.

         Pending before the Court is the Motion to Dismiss, (ECF No. 101), filed by Defendants Rick Hughes (“Hughes”), Lightyear Network Solutions, Inc. (“Lightyear”), and Chris Sullivan (“Sullivan”) (collectively “Defendants”). Plaintiff Todd A. Prins (“Plaintiff) filed a Response, (ECF No. 109), [1] and Defendants filed a Reply, (ECF No. 110). For the reasons discussed below, the Court GRANTS in part and DENIES in part Defendants' Motion to Dismiss.[2]

         I. BACKGROUND

         This case arises from Plaintiff's investment in Defendants' company Lightyear Network Solutions, Inc. (“Lightyear”). Specifically, Lightyear LLC, Lightyear's predecessor, was a provider of telecommunications services throughout the United States, including telephone long distance, internet and intranet, calling cards, and voice over internet protocol. (SAC ¶ 8). In 2010, Lightyear LLC, entered into a reverse merger transaction with Libra Alliance Corporation (“Libra”). (Id. ¶ 9). Libra fully acquired Lightyear LLC, and once the merger was completed, Libra operated Lightyear LLC's business and changed its name to “Lightyear Network Solutions, Inc.” (Id.). Defendant Chris Sullivan (“Sullivan”) was the director of Lightyear and eventually owned approximately forty percent of its stock. (Id. ¶ 10).

         In an attempt to acquire additional investors, Defendant Rick Hughes (“Hughes”) approached Plaintiff about an investment opportunity in Lightyear. (Id. ¶ 11). As a result, Plaintiff became a shareholder of Lightyear's common stock by investing $500, 000. (Id. ¶ 14). In 2013, however, Lightyear was purchased by Birch Communications (“Birch”); Lightyear's sale proceeds were paid predominantly to Sullivan and Plaintiff did not receive any reimbursement. (Id. ¶¶ 16-18). Plaintiff brought suit to recover the amount of his investment. (Id. ¶ 20).

         In the instant Motion, Defendants seek dismissal of Plaintiff's Second Amended Complaint due to Plaintiff alleging various causes of action pursuant to Texas law. (Mot. to Dismiss at 8, ECF No. 101). Defendants allege that the choice of law clause in the Agreement requires Plaintiff to assert claims pursuant to Nevada law, and therefore Plaintiff's “Texas common law and statutory claims should be dismissed.” (Id. at 8).

         II. LEGAL STANDARD

         Rule 12(b)(6) of the Federal Rules of Civil Procedure mandates that a court dismiss a cause of action that fails to state a claim upon which relief can be granted. See North Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 12(b)(6) for failure to state a claim, dismissal is appropriate only when the complaint does not give the defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is sufficient to state a claim, the Court will take all material allegations as true and construe them in the light most favorable to the plaintiff See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986).

         The Court, however, is not required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a plaintiff must plead facts showing that a violation is plausible, not just possible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555) (emphasis added). In order to survive a motion to dismiss, a complaint must allege “sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Id. “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.” Id.

         A court may also dismiss a complaint pursuant to Federal Rule of Civil Procedure 41(b) for failure to comply with Federal Rule of Civil Procedure 8(a). Hearns v. San Bernardino Police Dept., 530 F.3d 1124, 1129 (9th Cir. 2008). Rule 8(a)(2) requires that a plaintiff's complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). “Prolix, confusing complaints” should be dismissed because “they impose unfair burdens on litigants and judges.” McHenry v. Renne, 84 F.3d 1172, 1179 (9th Cir. 1996). Mindful of the fact that the Supreme Court has “instructed the federal courts to liberally construe the ‘inartful pleading' of pro se litigants, ” Eldridge v. Block, 832 F.2d 1132, 1137 (9th Cir. 1987), the Court will view Plaintiffs pleadings with the appropriate degree of leniency.

         “Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion . . . . However, material which is properly submitted as part of the complaint may be considered on a motion to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citations omitted). Similarly, “documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss” without converting the motion to dismiss into a motion for summary judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Under Federal Rule of Evidence 201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court considers materials outside of the pleadings, the motion to dismiss is converted into a motion for summary judgment. See Fed. R. Civ. P. 12(d); Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir. 2001).

         If the Court grants a motion to dismiss, it must then decide whether to grant leave to amend. Pursuant to Rule 15(a), the court should “freely” give leave to amend “when justice so requires, ” and in the absence of a reason such as “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of the amendment, etc.” Foman v. Davis, 371 U.S. 178, 182 (1962). Generally, leave to amend is only denied when it is clear that the deficiencies of the complaint cannot be cured by amendment. See DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992).

         III. DISCUSSION

         In the instant Motion, Defendants seek dismissal of Plaintiff s Second Amended Complaint (“SAC”) because it contains “only claims that are based upon Texas law” in contradiction to “the Nevada choice of law clause in the [ ] Agreement.” (Mot. to Dismiss at 2, ECF No. 101). Plaintiff responds that its first, third, fourth, fifth, sixth, ninth, tenth, and eleventh causes of action are common law causes of ...


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