Kaabooworks Services, LLC v. Pilsl

          RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

          Kristen L. Mix, United States Magistrate Judge.

         This matter is before the Court on Plaintiff's Motion to Strike, or in the Alternative Dismiss, Counter-Complaint [#110]^[1] (the “Motion”). Defendant filed a Response [#112] in opposition to the Motion [#110], and Plaintiff filed a Reply [#117]. The Motion has been referred to the undersigned for recommendation pursuant to 28 U.S.C. § 636(b) and D.C.COLO.LCivR 72.1(c). See [#111]. The Court has reviewed the Motion, Response, Reply, the entire case file, and the applicable law, and is sufficiently advised in the premises. For the reasons set forth below, to the extent Plaintiff seeks dismissal of Defendant's counterclaims, the Court RECOMMENDS that the Motion [#110] be DENIED in part and GRANTED in part. The Court is concurrently issuing a separate Order regarding the portion of the Motion [#110] seeking to strike the counterclaims pursuant to Fed.R.Civ.P. 12(f), 15(a), and 16(b).

         I. Background

         Plaintiff is a Delaware limited liability company with its principal place of business in Colorado. See [#109] ¶ 3. Plaintiff is a live-music and entertainment company that organizes high-end music and adult cultural festivals in California with plans to expand geographically. Am. Compl. [#88] ¶ 15. Defendant served as Plaintiff's Senior Vice President of Business Development from October 1, 2015, until October 10, 2017. Id. ¶ 2. Plaintiff has asserted three claims against Defendant. Id. ¶¶ 37-65. First, Plaintiff asserts a claim for violation of the Colorado Trade Secrets Act. Id. ¶¶ 37-51. Second, Plaintiff asserts a claim for violation of the Defend Trade Secrets Act. Id. ¶¶ 52-61. Finally, Plaintiff asserts that Defendant converted its property. Id. ¶¶ 62-65. On January 8, 2019, Defendant filed an Answer, Counterclaim[s], and Demand for Jury on Counterclaim[s] [#109] asserting four counterclaims: (1) breach of contract, (2) quantum meruit, (3) fraud in the inducement, and (4) bad faith pursuant to Colo. Rev. Stat. § 7-74-105. See [#109] at 13-18, ¶¶ 9-43. The precise allegations underlying the claims are generally immaterial to resolution of the present Motion [#110], which, in relevant part, seeks dismissal of all counterclaims on the basis of subject matter jurisdiction and of the bad faith counterclaim for failure to state a claim.

         II. Standards of Review

         A. Federal Rule of Civil Procedure 12(b)(1)

         The purpose of a motion to dismiss pursuant to Rule 12(b)(1) is to test whether the Court has jurisdiction to properly hear the case before it. Because “federal courts are courts of limited jurisdiction, ” the Court must have a statutory basis to exercise its jurisdiction. Montoya v. Chao, 296 F.3d 952, 955 (10th Cir. 2002); Fed.R.Civ.P. 12(b)(1). Statutes conferring subject-matter jurisdiction on federal courts are to be strictly construed. F & S Const. Co. v. Jensen, 337 F.2d 160, 161 (10th Cir. 1964). “The burden of establishing subject-matter jurisdiction is on the party asserting jurisdiction.” Id. (citing Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)).

         A motion to dismiss pursuant to Rule 12(b)(1) may take two forms: facial attack or factual attack. Holt v. United States, 46 F.3d 1000, 1002 (10th Cir. 1995). When reviewing a facial attack on a complaint, the Court accepts the allegations of the complaint as true. Id. By contrast, when reviewing a factual attack on a complaint, the Court “may not presume the truthfulness of the complaint's factual allegations.” Id. at 1003. With a factual attack, the moving party challenges the facts upon which subject-matter jurisdiction depends. Id. The Court therefore must make its own findings of fact. Id. In order to make its findings regarding disputed jurisdictional facts, the Court “has wide ranging discretion to allow affidavits, other documents, and a limited evidentiary hearing.” Id. (citing Ohio Nat'l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990); Wheeler v. Hurdman, 825 F.2d 257, 259 n.5 (10th Cir. 1987)). The Court's reliance on “evidence outside the pleadings” to make findings concerning purely jurisdictional facts does not convert a motion to dismiss pursuant to Rule 12(b)(1) into a motion for summary judgment pursuant to Rule 56. Id.

         B. Federal Rule of Civil Procedure 12(b)(6)

         The 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 Atlantic Co. 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)). “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.” 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).

         To 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 Fed.R.Civ.P. 8(a). Iqbal, 552 U.S. at 679 (second brackets added; citation and internal quotation marks omitted).

         III. Analysis

         A. Fed.R.Civ.P. 12(b)(1)

         Plaintiff briefly raises the issue of jurisdiction, albeit with minimal analysis and no legal citation, which the Court construes pursuant to Fed.R.Civ.P. ...