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Ponomarenko v. Shapiro

United States District Court, D. Nevada, San Jose Division

February 5, 2018

NATHAN SHAPIRO, et al., Defendants.



         Plaintiff Paul Ponomarenko (“Ponomarenko”) brings this action against Defendants Nathan Shapiro (“Shapiro”) and Project Vegas Mansion (“PVM”) (collectively, “Defendants”) for alleged breach of contract and fraud arising out of a contract for personal coaching services with PVM-services that Ponomarenko alleges were never provided to him. See generally First Amended Complaint (“FAC”), ECF 43. Shapiro, proceeding pro se, filed seven counterclaims against Ponomarenko as well as a Third Party Complaint against Ponomarenko's company, Summit Estate, Inc. (“Summit Estate”).[1] See Answer, Counterclaim and Third Party Complaint (“Answer & Counterclaim”), ECF 56.

         Ponomarenko and Summit Estate filed a joint motion to dismiss the Counterclaim and Third Party Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). See Motion to Dismiss (“MTD”), ECF 59. In addition to opposing the motion to dismiss, Shapiro filed a motion to change venue to the United States District Court for the District of Nevada, unofficial southern division seated in Las Vegas, Clark County, pursuant to 28 U.S.C. § 1404(a) and the forum selection clause in the written agreement between the parties. See Motion to Change Venue (“Transfer Mot.”), ECF 74.

         The Court heard oral argument on both motions on December 7, 2017. At the hearing, the Court explained to the parties that it would rule on Ponomarenko and Summit Estate's motion to dismiss the counterclaim and third party complaint regardless of whether it ultimately transferred the case to Nevada pursuant to the forum selection clause. For the reasons that follow as well as those stated on the record at the hearing, Ponomarenko and Summit Estate's motion to dismiss the Counterclaim and Third Party Complaint is GRANTED IN PART WITH LEAVE TO AMEND and DENIED IN PART.

         Moreover, upon consideration of the briefing, oral argument, and relevant law, Shapiro's motion to change venue is GRANTED. This action shall be transferred to the United States District Court for the District of Nevada, unofficial southern division seated in Las Vegas, Clark County, Nevada. Any amendments to Shapiro's Counterclaim and Third Party Complaint are due on or before March 7, 2018.

         I. BACKGROUND

         A. Allegations in the FAC [2]

         Ponomarenko alleges that Shapiro is a life coach who markets his coaching services to potential clients in California such as Ponomarenko. See FAC ¶ 11. Shapiro regularly collaborated with other life coaches to promote his services in major cities in the United States including New York, Las Vegas, Miami, San Francisco, Chicago, and others. Id. ¶¶ 11-12. Shapiro is the sole owner and operator of Project Vegas Mansion (“PVM”), which offered these personal coaching sessions through PVM agents. Id. ¶¶ 3, 8. Ponomarenko met Shapiro at a PVM personal coaching seminar in San Francisco in February 2013. Id. ¶¶ 14-16. Ponomarenko paid $349 to attend the event. Id. ¶ 15.

         Ponomarenko later attended an “in-field” coaching session, where Defendants took him and several other individuals on “training sessions.” Id. ¶ 16. Following the seminar and training sessions, Defendants invited Ponomarenko to join them at a third event for further demonstration of their personal coaching methods. Id. ¶ 17. After these interactions, Shapiro allegedly induced Ponomarenko to consider a long-term business relationship with Defendants for personal coaching services which would include “substantial, regular, and organized feedback.” Id. ¶¶ 18-19. Shapiro informed Ponomarenko that the personal coaching services would be provided in both California and Nevada, and would require Ponomarenko to “periodically travel” to Nevada to receive coaching. Id. ¶ 19. The coaching sessions would be provided under the PVM “umbrella” through PVM's agents including Shapiro and another individual who identified himself to be working on behalf of PVM as Shapiro's business partner. Id. Thereafter, Ponomarenko flew to Las Vegas, Nevada, where he visited PVM's “coaching center” and finalized a written agreement with PVM for long term personal coaching. Id. ¶¶ 20-21.

         While in Las Vegas, Ponomarenko and Defendants executed a written agreement whereby PVM would provide a specific number of hours and sessions of personal coaching to Ponomarenko in exchange for payment. Id. ¶ 21; see also Project Vegas Mansion's Agreement, ECF 74-1 (“First Agreement”). The First Agreement was executed in writing on March 3, 2013, and obligated Ponomarenko to make an initial down payment of $25, 000. FAC ¶ 21; First Agreement at 16. Ponomarenko paid Shapiro $5, 000 while he was in Las Vegas, and paid an additional $15, 000 a few days later. FAC ¶ 21. Upon execution of the First Agreement, Ponomarenko also paid $5, 000 to another individual named Luke Krogh (“Krogh”).[3] The remainder of the payments owed under the First Agreement were to be made in regular intervals during the course of the training period. Id.

         The First Agreement expressly stated that Ponomarenko would receive his training from Krogh. See FAC ¶ 22; First Agreement at 16. Krogh became Ponomarenko's “personal mentor and instructor, ” and Ponomarenko alleges that he was told to make his remaining payments due under the First Agreement to Krogh. FAC ¶ 22. In the time period from March 2013 to January 2014, Ponomarenko repeatedly and regularly traveled between California and Nevada to attend the contracted coaching sessions. FAC ¶ 23. Ponomarenko alleges that it became evident that the personal coaching sessions lacked the “clearly defined structure” he was promised, and many sessions were conducted “in a party like setting, ” at Ponomarenko's expense. Id. ¶ 24. Ponomarenko grew frustrated with the lack of organized training, which he communicated to Krogh. Id. ¶ 25.

         In January 2014, Krogh proposed a second agreement to Ponomarenko whereby Krogh would move to San Francisco to provide the coaching sessions so that Ponomarenko did not have to regularly fly to Las Vegas. Id. ¶ 26 (hereafter, “Second Agreement”). Ponomarenko was given the impression that PVM authorized the Second Agreement, although Ponomarenko did not communicate with Shapiro during this time period. Id.[4] Pursuant to the Second Agreement, which was in oral form only, Ponomarenko agreed to pay $99, 000 to enroll in an advanced personal coaching program. Id. In addition to the fees, Ponomarenko agreed to cover all of Krogh's travel expenses for the duration of the Second Agreement. Id.

         In February 2014, Krogh traveled to San Francisco and stayed in a short-term rental apartment-paid for by Ponomarenko-for a purported coaching session that lasted approximately 7 days. Id. ¶ 27. On February 20, 2014, Krogh required Ponomarenko to pay $40, 000, consisting of a $23, 500 payment on the First Agreement and a $16, 500 down payment for the Second Agreement. Id. ¶ 28. Ponomarenko made these payments to Krogh, and alleges that he was shocked when Shapiro contacted Ponomarenko in January 2016 to inform him that a $23, 500 payment was still owed to PVM. Id. Krogh never delivered on the promise to provide advanced coaching services to Ponomarenko. Id. ¶ 29. Much like the First Agreement, it appeared that Ponomarenko's payments were instead used to fund “a lavish San Francisco/Vegas lifestyle” for PVM's agents, and to solicit other clients and business with no benefit to Ponomarenko. Id.

         Ponomarenko terminated the Second Agreement in November 2014, yet Krogh demanded the full amount of the coaching fee as well as additional expenses. Id. ¶ 30. When Krogh finally left the apartment, Ponomarenko had to pay additional expenses to terminate the lease. Id. Ponomarenko alleges that he paid thousands of dollars to PVM and its agents, including Shapiro, for coaching services that were never provided to him as promised. Id. ¶¶ 31-43.

         Ponomarenko filed this suit against Shapiro and PVM on May 23, 2016. See generally Complaint, ECF 1. Shapiro moved to quash service of process for failure to serve in accordance with the Federal Rules of Civil Procedure, and moved to dismiss the complaint for lack of personal jurisdiction over him. See ECF 27. On May 3, 2017, the Court denied Shapiro's motion to quash service of process, and granted the motion to dismiss for lack of personal jurisdiction with leave to amend in order to allege Shapiro's contacts with California, an agency relationship between Shapiro and PVM or “PVM's agent, ” (Krogh), and/or that PVM has no corporate identity separate from Shapiro. See ECF 42 at 11.[5]

         On May 30, 2017, Ponomarenko filed the FAC asserting six claims against Shapiro and PVM for (1) breach of contract; (2) intentional misrepresentation; (3) negligent misrepresentation; (4) false promise; (5) breach of the covenant of good faith and fair dealing; and (6) violation of California's Unfair Competition Law, California Business and Professions Code § 17200 (“UCL”). See generally FAC.

         B. Allegations in Shapiro's Counterclaim and Third Party Complaint [6]

         Shapiro answered the FAC on June 30, 2017, asserting venue in the United States District Court of Nevada seated in Clark County, Las Vegas, Nevada. See Answer & Counterclaim ¶ 5 at 19, 31. Shapiro brought a Counterclaim against Ponomarenko, asserting seven causes of action. Id. at 24-30. In addition, Shapiro brought a Third Party Complaint against Summit Estate, that does not include any causes of action but asserts that Ponomarenko and Summit Estate acted for each other in connection with the challenged conduct “as agents of each other” and therefore each is fully liable for the acts of the other. Id. at 32-33. Among other relief, Shapiro seeks general damages in the amount of $2, 423, 000 against Ponomarenko and Summit Estate. Id. at 33.

         Shapiro alleges that through PVM, he invested considerable resources to develop his personal coaching business in the Las Vegas metropolitan area. Id. at 19-20. This included identifying clients and techniques, maintaining relationships with those clients, developing innovative solutions to meet client needs, and developing highly qualified personal coaches to benefit the clients. Id. at 20. Shapiro alleges that this information is “valuable, confidential, and proprietary” and has “significant economic value.” Id.

         The First Agreement between Ponomarenko and PVM, executed in March 2013, contains covenants not to compete and not to divulge confidential information. Id. at 21. For example, the First Agreement's non-compete clause provides in part that “[d]uring coaching and after leaving the PVM program PARTICIPANT will not compete with PVM for a period of two years within Clark County, Nevada.” First Agreement at 10. The First Agreement also contains a nondisclosure provision, which governs the use of confidential information. Id. at 10-11.

         Shapiro alleges that Ponomarenko and Summit Estate violated these provisions in the First Agreement by forming a business entity known as “Elevated Pickup” for the purposes of competing with PVM. Id. at 22. Elevated Pickup offers social relationship coaching in Las Vegas as well as Los Angeles and San Francisco. Id. at 22-23. In essence, Shapiro's allegation is that while Ponomarenko was still working with PVM, he contacted PVM's clients, disclosed PVM's proprietary and confidential information, contacted PVM's key independent contractor for his own benefit, and solicited business and clients for Elevated Pickup, all in contravention of the First Agreement. Id. at 23. For example, Shapiro alleges that Ponomarenko communicated with at least 100 PVM potential or current clients using electronic networking systems such as, Craigslist, and Twitter, in an attempt to secure business for Elevated Pickup. Id.

         In his Counterclaim, Shapiro asserts seven causes of action against Ponomarenko for: (1) breach of contract; (2) breach of non-disclosure and confidentiality provisions; (3) breach of non-compete provision; (4) tortious interference with prospective economic advantage; (5) breach of Nevada Uniform Deceptive Trade Practices Act; (6) civil conspiracy; and (7) breach of implied covenant of good faith and fair dealing. Id. at 18-30. Although Shapiro asserts a “Third Party Complaint” against Summit Estate, it contains no causes of action. Id. at 30-31. Ponomarenko and Summit Estate filed a joint motion to dismiss the Counterclaim and Third Party Complaint. See generally MTD. The Court first addresses the motion to dismiss, and then turns to Shapiro's motion to change venue pursuant to the forum selection clause in the First Agreement.


         A. Rule 12(b)(6)

         “A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted ‘tests the legal sufficiency of a claim.'” Conservation Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts as true all well-pled factual allegations and construes them in the light most favorable to the plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the Court need not “accept as true allegations that contradict matters properly subject to judicial notice” or “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (internal quotation marks and citations omitted). While a complaint need not contain detailed factual allegations, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         On a motion to dismiss, the Court's review is limited to the face of the complaint and matters judicially noticeable. MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986). However, under the “incorporation by reference” doctrine, the Court also may consider documents which are referenced extensively in the complaint and which are accepted by all parties as authentic. In re Silicon Graphics, Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999), abrogated on other grounds by S. Ferry LP, No. 2 v. Killinger, 542 F.3d 776, 784 (9th Cir. 2008).

         If the Court concludes that the complaint should be dismissed, it must then decide whether to grant leave to amend. Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend “shall be freely given when justice so requires, ” bearing in mind “the underlying purpose of Rule15... [is] to facilitate decision on the merits, rather than on the pleadings or technicalities.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.2000) (en banc) (internal quotation marks and citation omitted). Nonetheless, a district court may deny leave to amend a complaint due to “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, [and] futility of amendment.See Leadsinger, Inc. v. BMG Music Publ'g, 512 F.3d 522, 532 (9th Cir. 2008).

         B. Discussion

         Shapiro asserts seven causes of action in his Counterclaim against Ponomarenko, and zero causes of action in his Third Party Complaint against Summit Estate. See generally Answer & Counterclaim. The Court finds that six of the causes of action against Ponomarenko, and the entire Third Party Complaint against Summit Estate, are insufficiently pled. Shapiro's pleading also contains general deficiencies, such as failure to state a demand for relief sought in the Counterclaim as required by Rule 8(a)(3), and failure to plead any causes of action against Summit Estate. In his opposition, Shapiro concedes that he “inadvertently omitted a prayer for relief at the conclusion of the Counterclaim, ” and then provides a prayer for relief in the text of his brief. See Opp'n to MTD at 15-16 (“Accordingly, the following [prayer for relief] should have been included.”) This is improper, as the Court's review on a motion to dismiss is limited to the four corners of the complaint. MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986). However, Shapiro is given leave to amend to address these deficiencies and may add his inadvertently omitted prayer for relief.

         Shapiro uses his opposition to add allegations to the point where it looks like an entirely new claim. For example, Shapiro argues that he has a viable Third Party claim against Summit Estate for Statutory Unfair Competition pursuant to California Business and Professional Code § 17200. See Opp'n to MTD at 14. Shapiro does not allege a § 17200 claim anywhere in his pleading, and he cannot amend his Counterclaim and Third Party Complaint through his opposition brief. Accordingly, Ponomarenko and Summit Estate's motion to dismiss any § 17200 claim is GRANTED WITH LEAVE TO AMEND.

         To the extent that Shapiro wishes to rely on his “Statement of Relevant Facts” in his opposition, which are also absent from his Counterclaim, he must allege those facts in an amended pleading. The Court will not evaluate their sufficiency, but will consider them as Shapiro's offer of amendment. Any amendment must also distinguish between the causes of action and factual allegations brought against Ponomarenko, and those brought against Summit Estate.

         1.Claims against Summit Estate

         The Third Party Complaint against Summit Estate also fails for lack of factual specificity. The Supreme Court has made clear that “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Shapiro's allegations regarding Summit Estate are sparse. Shapiro alleges that Summit Estate and Ponomarenko “are alter egos of one another, ” based on the sole contention that Ponomarenko paid Shapiro for coaching services with a “corporate business check” from Summit Estate. See Answer & Counterclaim ¶¶ 21, 34.

         Shapiro attempts to bolster his allegations through his opposition, and argues that the Third Party Complaint sufficiently alleges that Ponomarenko used Summit Estate as a “virtual ATM” for his own personal use in accomplishing his objectives and funding “Elevated Pickup.” See Opp'n to MTD at 14-15, ECF 62. To the extent that this is Shapiro's theory, he does not allege it in the Third Party Complaint. The issue is compounded by the fact that the only factual allegations are contained in the Counterclaim, which is brought against Ponomarenko only. See Answer & Counterclaim at 19-24. The Court cannot make out a coherent theory of alter ego liability from Shapiro's pleading, and Summit Estate is not on notice of the claims against it or the factual basis for those claims. See Twombly, 550 U.S. at 556 n.3 (“Without some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirement of providing not only ‘fair notice' of the nature of the claim, but also ‘grounds' on which the claim rests.”)

         As pled, Shapiro has not adequately alleged any cognizable claims against Summit Estate. Moreover, a standalone allegation of a payment made from Summit Estate on Ponomarenko's behalf is insufficient to support an alter ego theory. Ponomarenko and Summit Estate's joint motion to dismiss the Third Party Complaint against Summit Estate is GRANTED WITH LEAVE TO AMEND.

         2. Breach of Contract Claim ...

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