United States District Court, D. Colorado
HOMEWATCH INTERNATIONAL, INC., a Colorado corporation, Plaintiff,
SUZANNE NAVIN, an individual, Defendant.
Kristen L. Mix, United States Magistrate Judge
matter is before the Court on Defendant's Rule
12(b)(6) Motion to Dismiss for Failure to State a
Claim [#10] (the “Motion”). Plaintiff
filed a Response [#13] in opposition to the Motion, and
Defendant filed a Reply [#19]. The Court has reviewed the
briefing on the Motion, the case file, and the applicable
law, and is sufficiently advised in the premises. For the
reasons set forth below, the Motion [#10] is
action arises from a franchise agreement (“Franchise
Agreement”) and nondisclosure/noncompetition agreement
(“NDA”) entered into on June 8, 2006, between
Plaintiff Homewatch International, Inc.
(“Plaintiff”) and Prominent Home Care, Inc.
(“Prominent”). Compl. [#3] at 1. Defendant
Suzanne Navin (“Defendant”), who is the sole
shareholder and officer of Prominent, signed the Franchise
Agreement and NDA (collectively, the
“Agreements”). Id. Plaintiff alleges
that Defendant breached the Agreements by wrongfully
operating a business in direct competition with Plaintiff.
alleges that the Franchise Agreement granted Prominent the
rights to use Plaintiff's “licensed operation
methods and exclusive trademarks, service marks, logotypes,
commercial symbols, and trade names.” Id. at
2. In exchange, Prominent agreed to be bound by the
restrictive covenants contained in the Agreements, including
the “Post-Termination Covenant Not to Compete”
contained in the Franchise Agreement. Id. The
Franchise Agreement expired on June 30, 2016. Id. at
3. On July 1, 2016, Defendant started a company that directly
competes with Plaintiff, which Plaintiff contends is a breach
of the Agreements. Id.
filed the Complaint in state court, and Defendant removed the
action to this Court on August 24, 2016. Notice of
Removal [#1]. The Complaint raises three claims for
relief: (1) Breach of Contract, (2) Unjust Enrichment, in the
alternative, and (3) Injunctive Relief. See Compl.
[#3] at 3-4. Defendant now moves to dismiss all claims.
See Motion [#10]. Defendant argues that the
Agreements are not binding on her as an individual because
she signed them in her official capacity only, and that the
noncompetition covenants in the Agreements are void pursuant
to Colo. Rev. Stat. § 8-2-113(2). Id. at 6, 15.
Defendant also argues that the unjust enrichment claim must
fail because it is based on the same unenforceable
noncompetition provisions. Id. at 23.
purpose of a motion to dismiss pursuant to Rule 12(b)(6) is
to test “the sufficiency of the allegations within the
four corners of the complaint after taking those allegations
as true.” Mobley v. McCormick, 40 F.3d 337,
340 (10th Cir. 1994); Fed.R.Civ.P. 12(b)(6) (stating that a
complaint may be dismissed for “failure to state a
claim upon which relief can be granted”). “The
court's function on a Rule 12(b)(6) motion is not to
weigh potential evidence that the parties might present at
trial, but to assess whether the plaintiff's complaint
alone is legally sufficient to state a claim for which relief
may be granted.” Sutton v. Utah State Sch. for the
Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir. 1999)
(citation omitted). To withstand a motion to dismiss pursuant
to Rule 12(b)(6), “a complaint must contain enough
allegations of fact ‘to state a claim to relief that is
plausible on its face.'” Robbins v.
Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)); see also Shero v. City of Grove, Okla., 510
F.3d 1196, 1200 (10th Cir. 2007) (“The complaint must
plead sufficient facts, taken as true, to provide
‘plausible grounds' that discovery will reveal
evidence to support the plaintiff's allegations.”
(quoting Twombly, 550 U.S. at 570)).
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.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). “A pleading that offers labels and conclusions
or a formulaic recitation of the elements of a cause of
action will not do. Nor does a complaint suffice if it
tenders naked assertion[s] devoid of further factual
enhancement.” Id. (brackets in original;
internal quotation marks omitted).
survive a motion to dismiss pursuant to Rule 12(b)(6), the
factual allegations in the complaint “must be enough to
raise a right to relief above the speculative level.”
Christy Sports, LLC v. Deer Valley Resort Co., 555
F.3d 1188, 1191 (10th Cir. 2009). “[W]here the
well-pleaded facts do not permit the court to infer more than
the mere possibility of misconduct, ” a factual
allegation has been stated, “but it has not show[n]
that the pleader is entitled to relief, ” as required
by Rule 8(a). Iqbal, 552 U.S. at 679 (second
brackets added; citation and internal quotation marks
of a contract is a matter of state law. DIRECTV, Inc. v.
Imburgia, 136 U.S. 463 (2015). The Franchise Agreement
also provides that the “Agreement will be interpreted
under the laws of the State of Colorado, and any dispute
between the parties will be governed by and determined in
accordance with the substantive internal laws of the State of
Colorado . . . .” [#3] at 34. Additionally, when a
federal court sits in diversity, it is required to apply the
most recent applicable substantive state law pronounced by
the state's highest court. Mincin v. Vail Holdings,
Inc., 308 F.3d 1105, 1108 (10th Cir. 2002). For these
reasons, the Court applies Colorado law here.
primary goal of contract interpretation is to give effect to
the written expression of the parties' intent. Ad
Two, Inc. v. City & Cty. of Denver, 9 P.3d 373, 376
(Colo. 2000). Where the words of a written contract are clear
and unambiguous, its meaning is to be ascertained in
accordance with its plainly expressed intent. M & G
Polymers USA, LLC v. Tackett, 135 S.Ct. 926, 933 (2015).
Interpretation of a contract is a question of law where the
contract's construction does not depend on extrinsic
evidence and where the language is susceptible to only one
reasonable interpretation. Zink v. Merrill Lynch Pierce
Fenner & Smith, Inc., 13 F.3d 330, 332 (10th Cir.
1993); see also Stegall v. Little Johnson Assoc.,
Ltd., 996 F.2d 1043, 1048 (10th Cir. 1993) (applying
Colorado law); Evensen v. Pubco Petroleum Corp., 274
F.2d 866, 872 (10th Cir. 1960). Interpretation of a contract
is a question of fact only when a contract term is found to
be ambiguous. Dorman v. Petrol Aspen, Inc., 914 P.2d
909 (Colo. 1996). The provisions of a contract are ambiguous
when they are subject to more than one reasonable
interpretation. Union Ins. Co. v. Houtz, 883 P.2d
1057 (Colo. 1994).
Whether the Noncompetition Covenants Are Binding on
the Court will address Defendant's argument that she is
not personally bound by the noncompetition covenants because
she signed the Agreements in her official capacity only.
Motion [#10] at 1. The Franchise Agreement provides
the following in ...