United States District Court, D. Nevada
M. Navarro, Chief Judge United States District Judge
before the Court is the Motion to Dismiss, (ECF No. 33),
filed by Defendants Eleven23 Marketing, LLC
(“Eleven23”) and Armen Gharabegian
“Defendants”). Plaintiff CORT Business Services
Corporation (“CORT”) filed a Response, (ECF No.
36), and Defendants filed a Reply, (ECF No. 38). For the
reasons discussed below, the Court GRANTS Defendants'
Motions to Dismiss.
case arises out of Defendants' alleged breach of a Master
Supply Agreement (“MSA”) with CORT. Gharabegian
owns and operates Eleven23 and Lounge22, LLC (“Lounge
22”), both furniture design and manufacturing
companies. (Compl. ¶ 5, ECF No. 1). Gharabegian resides
in Los Angeles County, California, and Eleven23 has its
principle place of business in Los Angeles County,
California. (Id. ¶¶ 2, 5). CORT asserts
that it is a Delaware corporation in the business of
furniture and accessory rentals, a large part of which is in
the trade show and events industry in Las Vegas, Nevada.
(Id. ¶¶ 1, 11).
September 2009, Lounge22 filed for Chapter 11 bankruptcy.
(See Ex. A to Mot. to Dismiss (“MTD”) at
12, ECF No. 33-1). Following this bankruptcy, CORT and
Gharabegian, on behalf of Lounge22, entered into an Asset
Purchase Agreement (“APA”) under which CORT would
purchase certain products and furnishings from Lounge22.
(Id.). The APA contained a choice of law clause
which stated the APA would be governed by laws of California.
(Id. at 39). Shortly thereafter, Gharabegian created
Eleven23 as Lounge22's successor entity. (Compl.
August 2010, CORT and Eleven23 entered into the MSA, under
which Eleven23 would design and manufacture furniture for
CORT, and CORT would license the Lounge22 trademark.
(See Ex. 1 to Compl. (“MSA”), ECF No.
1-1). The MSA contains a forum selection clause, requiring
the MSA to be governed by laws of Nevada and adjudicated by a
state or federal court located in Nevada. (Id.
§ 25). CORT alleges that pursuant to the MSA, it placed
“several purchase orders in October 2014 for thousands
of pieces in the Naples furniture collection.” (Compl.
¶ 59). CORT alleges that it received the furniture late,
“did not receive all of the ordered pieces, ” and
the pieces it did receive “were defective because the
quality of the vinyl was of a much lower standard than the
parties had agreed upon.” (Id. ¶¶
65-67). In particular, “[t]he quality was so poor that
the fabric would not withstand multiple rentals by CORT's
customers, i.e., could not fulfill their intended
purpose.” (Id. ¶ 67).
discussions failed to resolve this and other disagreements
related to the MSA, both parties initiated separate lawsuits.
First, Eleven23 and Gharabegian filed an action in Los
Angeles County Superior Court, asserting breach of the MSA as
well as trademark infringement claims for CORT's use of
the Lounge22 trademark. See Compl., Eleven23
Mktg., LLC v. CORT Bus. Servs. Corp., No.
2:16-cv-01308 (D. Nev. Jan. 8, 2016). That case was removed
to the Central District of California. (Id.).
Shortly thereafter, CORT filed the instant case in this Court
asserting various claims under the MSA. (See
Compl.). In the instant Motion, Defendants seek to dismiss
CORT's Complaint for failure to state a claim, or in the
alternative, to transfer the case to the Central District of
California. (See MTD, ECF No. 33). After the Motion
was fully briefed, the Central District of California
transferred the first case to this district to be
consolidated with this case. See Order, Eleven23
Mktg., LLC v. CORT Bus. Servs. Corp., No. 2:16-cv-01308
(D. Nev. June 10, 2016).
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.
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 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).
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
Complaint asserts the following claims: (1) alter
ego/piercing the corporate veil; (2) specific enforcement of
the MSA; (3) breach of the MSA; and (4) breach of warranty.
(Compl. ¶¶ 92-128). In the instant Motion,
Defendants seek to dismiss CORT's Complaint for failure
to state a claim, or in the alternative, to transfer the case