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National Outsourcing Services Inc. v. TS Dynamic Corp.

United States District Court, D. Nevada

July 15, 2019

NATIONAL OUTSOURCING SERVICES INC., et al., Plaintiffs,
v.
TS DYNAMIC CORP., et al., Defendants.

          ORDER

          JAMES C. MAHAN, UNITED STATES DISTRICT JUDGE

         Presently before the court is third-party defendant Christopher Rangel's (“Rangel”) motion to dismiss TS Dynamic Corp.'s (“TS Dynamic”) third-party complaint. (ECF No. 16). TS Dynamic filed a response (ECF No. 19), to which Rangel replied (ECF No. 23).

         Also before the court is plaintiff/counter-defendants National Outsourcing Services (“NOS”) and Nationwide Outside Services Corp.'s motion to strike TS Dynamic's claim for punitive damages. (ECF No. 17). TS Dynamic filed a non-opposition response (ECF No. 20), to which the counter-defendants replied (ECF No. 24).

         I. Facts

         This case arises out of a series of contract disputes. (ECF No. 1). Rangel owns NOS, which engages in the business of outsourcing employee management tasks for various companies, including employee benefits, workers' compensation, unemployment insurance withholding, and Medicare. (ECF No. 16 at 2). After TS Dynamic expressed interest in buying NOS, the companies agreed to a transfer twenty-five of NOS's accounts to TS Dynamic. Id. at 2-3. As part of the agreement, TS Dynamic agreed to pay NOS's tax and workers' compensation liabilities, as well as a percentage of revenues derived from current and future accounts. Id. at 3. Under a second agreement, NOS maintains that TS Dynamic agreed to indemnify and defend NOS from lawsuits associated with workers' compensation insurance. Id. at 4.

         On January 23, 2019, NOS filed a complaint against TS Dynamic, alleging that TS Dynamic breached the agreements by failing to make its contractually obligated payments and failing to defend NOS from liabilities stemming from lawsuits against it. (ECF No. 1). NOS also alleges that TS Dynamic, or related defendants, have stolen NOS's identity and infringed on its trademarked name to conduct fraudulent business. (ECF Nos. 1, 16 at 5). NOS alleges that TS Dynamic has conducted itself as NOS in Alabama and has failed to pay tax liabilities under NOS's name in that state. Id.

         On March 11, 2019, TS Dynamic filed a third-party complaint against Rangel, alleging that Rangel violated a non-compete clause contained in the agreement. (ECF No. 12 at 13-15). In response, Rangel and NOS filed the instant motions to dismiss the third-party complaint and to strike TS Dynamic's claim for punitive damages. (ECF Nos. 16, 17).

         II. Legal Standard

         A court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A properly pled complaint must provide “[a] short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 does not require detailed factual allegations, it demands “more than labels and conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted).

         “Factual allegations must be enough to rise above the speculative level.” Twombly, 550 U.S. at 555. Thus, to survive a motion to dismiss, a complaint must contain sufficient factual matter to “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (citation omitted).

         In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply when considering motions to dismiss. First, the court must accept as true all well-pled factual allegations in the complaint; however, legal conclusions are not entitled to the assumption of truth. Id. at 678-79. Mere recitals of the elements of a cause of action, supported only by conclusory statements, do not suffice. Id. at 678.

         Second, the court must consider whether the factual allegations in the complaint allege a plausible claim for relief. Id. at 679. A claim is facially plausible when the plaintiff's complaint alleges facts that allow the court to draw a reasonable inference that the defendant is liable for the alleged misconduct. Id. at 678.

         Where the complaint does not permit the court to infer more than the mere possibility of misconduct, the complaint has “alleged-but not shown-that the pleader is entitled to relief.” Id. (internal quotation marks omitted). When the allegations in a complaint have not crossed the line from conceivable to plausible, plaintiff's claim must be dismissed. Twombly, 550 U.S. at 570.

         The Ninth Circuit addressed post-Iqbal pleading standards in Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. ...


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