Stanz v. Brown

— 1 — — 2 — — 3 — — 4 — — 5 — — 6 — — 7 — 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA — 10 — 11 AARON STANZ, individually and on Case No.: 22-cv-1164-GPC behalf of JET GENIUS HOLDINGS, — 12 — INC. as shareholder thereto, ORDER: — 13 — Plaintiff, (1) GRANTING REQUESTS FOR — 14 — v. JUDICIAL NOTICE; — 15 — JORDAN BROWN, individually and in (2) GRANTING DEFENDANTS’ 16 his capacity as CEO, Director, and MOTIONS TO DISMISS; AND Chairman of co-defendants JET GENIUS — 17 — HOLDINGS, INC. and JET GENIUS 3) GRANTING PLAINTIFF LEAVE 18 FLORIDA HOLDINGS, INC.; JET TO AMEND GENIUS HOLDINGS, INC.; JET — 19 — GENIUS FLORIDA HOLDINGS, INC.; [ECF Nos. 30, 31, 33, 34, 38] 20 C3 JETS LLC; BOWMAN AVIATION LLC; JET AGENCY GLOBAL LLC; C3 — 21 — LIMO LLC; BROWN FAMILY TRUST; 22 and DOES 1-20, 23 Defendants. — 24 — 25 On March 2, 2023, Plaintiff Aaron Stanz (“Plaintiff” or “Stanz”) filed his First 26 Amended Complaint (“FAC”) against Defendants Jordan Brown, individually and on — 27 — 1 behalf of Jet Genius Holdings, Inc. and Jet Genius Florida Holdings, Inc. as a 2 shareholder; Jet Genius Holdings, Inc.; Jet Genius Florida Holdings, Inc.; C3jets LLC; Jet 3 Agency Global LLC; C3 Limo LLC; Bowman Aviation, Inc.; Brown Family Trust; and 4 Does 1-20. ECF No. 25 (“FAC” or “Compl.”). 5 All Defendants subsequently filed Motions to Dismiss. ECF Nos. 30, 31, 33, 34, 6 38. Plaintiff filed Oppositions, (ECF Nos. 41, 46, 47, 55, 56),1 and Defendants filed 7 Replies, (ECF Nos. 48, 52, 53, 58, 59). A hearing was held on the motions on May 26, 8 2023 and the matter was taken under submission. For the reasons that follow, the Court 9 GRANTS Defendants’ Motions to Dismiss with leave to amend. 10 FACTUAL BACKGROUND 11 Plaintiff’s action stems from a years-long business relationship with Defendant 12 Jordan Brown in the private aviation industry in which Federal Excise Tax (“FET”) was 13 collected from clients but not remitted to the IRS as required by law. Compl. ⁋ 1. Plaintiff 14 is the co-founder, Chief Technology Officer, major shareholder, and former director of 15 Jet Genius Holdings and major shareholder of Jet Genius Florida Holdings. Compl. ⁋ 8. 16 Defendants Jet Genius Holdings, Inc. (“JGH”) and Jet Genius Florida Holdings, Inc. 17 (“JGFH”) are air charter brokers that match clients with available air charter operators. 18 Compl. ⁋⁋ 9, 10. Plaintiff alleges Defendant Jet Agency Global LLC (“JAG”) is the same 19 company as JGH and JGFH. Compl. ⁋ 14. Defendants JGH, JGFH, and JAG operate 20 together as “Charter Flight Group” (“CFG”). Compl., Exhibit E at 5. — 21 — — 22 — — 23 — 1 Plaintiff’s counsel is reminded of and encouraged to consult the Local Rules prior to 24 any future filings that may occur in this Court. Plaintiff’s counsel has struggled with rules non-compliance throughout the course of this litigation. Relevant to the pending Motions — 25 — and Oppositions, Plaintiff is reminded of Local Rule 5.1(a) (type no smaller than 14-point 26 font) and 7.1(h) (briefs exceeding 10 pages must have table of contents and table of authorities), among others. — 27 — 1 Defendant C3jets LLC (“C3jets”) operates private aircraft for commercial purposes 2 and is believed by Plaintiff to be engaged in various aircraft lease or lease-purchase 3 agreements. Compl. ⁋ 12. Defendant Bowman Aviation, Inc. (“Bowman Aviation”) 4 performs contract services for JGH and JGFH. Compl. ⁋ 13. Defendant C3 Limo LLC 5 (“C3 Limo”) is a company Plaintiff alleges is managed by various members of Brown’s 6 family and uses JGH’s and JGFH’s company address and official email address to 7 conduct business. Compl. ⁋ 15. Plaintiff alleges Defendant Brown Family Trust is a trust 8 listed on JGFH share certificates which were improperly assigned to the trust. Compl. ⁋ 9 16. Last, Defendant Jordan Brown (“Brown”) is the Chairman and CEO of JGH and 10 JGFH, and allegedly the sole member of C3jets, JAG, Bowman Aviation, and, along with 11 his wife, is a trustee of the Brown Family Trust. Compl. ⁋⁋ 11, 12. 12 JGH was formed between Plaintiff Stanz, Defendant Brown, and non-party 13 Alexander Wolf (“Wolf”) in California in 2016 to offer a “technical business-to-business 14 logistics platform servicing the private aviation industry.” Compl. ⁋ 22. Originally, Stanz 15 and Brown were each 49.5% shareholders. Compl. ⁋ 22. Brown was, and remains, CEO, 16 and Stanz was Chief Technology Officer and states he used his technical expertise to 17 create JGH’s “GRID” logistics platform, which “significantly decrease[d] time and costs 18 associated with buy-side and sell-side actions required to complete complex transactions 19 for brokering and provisioning a chartered aircraft, at all stages of a transaction,” 20 including lead collection, client contact, quoting aircraft options, generating and sending 21 contracts, provisioning an aircraft, and monitoring staff and resources. Compl. ⁋ 23. 22 Plaintiff essentially alleges that, beginning in 2017, Defendants misappropriated 23 Plaintiff’s intellectual property in a scheme to charge clients for FET, which Defendants 24 represented to clients would be collected and remitted to the IRS as required by law, but 25 instead Defendant Brown used this money to enrich his lifestyle and further the — 26 — — 27 — 1 enterprise’s interests. Compl. ⁋ 95.2 Plaintiff states that JGH and JGFH, operating as air 2 charter brokers, are required pursuant to 26 U.S.C. § 4281 (a) to pay a FET of 7.5% of the 3 transportation price of air travel as well as a flat fee for each “domestic segment” of 4 travel. Compl. ⁋⁋ 70-71. Plaintiff states that air charter brokers are required to collect the 5 FET from clients, hold this money in trust on their behalf, and remit the FET to the IRS 6 on a regular basis. Compl. ⁋ 71. Plaintiff states a failure to pay FET is a felony criminal 7 violation under 26 U.S.C. § 7202 . Compl. ⁋ 70. 8 Plaintiff states Wolf informed him in summer 2018 that JGH had unpaid FET, 9 despite having had adequate capital to meet the IRS demand. Compl. ⁋ 24. Plaintiff 10 alleges the unpaid FET at this time was approximately $935,000, but has since 11 “ballooned to over $6,721,350 . . . .” Compl. ⁋ 24. Plaintiff says that after discovering 12 this, he sought to have JGH’s financials audited at an August 22, 2018 shareholder 13 meeting, but that Brown “admonished Stanz and Shareholder Wolf for bringing up the 14 audit issue, and [stated] that this criminal act was his [(Brown’s)] decision alone . . . .” 15 Compl. ⁋ 25. Plaintiff states the shareholders, “at the demand of Defendant Brown,” 16 voted in favor of the audit firm favored by Brown. Compl. ⁋ 26. Plaintiff alleges the audit 17 was later abandoned. Compl. ⁋ 31. 18 The FAC alleges that after Brown was confronted about the unpaid FET, “he 19 became verbally abusive and hostile, and threatened to disrupt business to the point of 20 bankrupting the company.” Compl. ⁋ 28. Stanz became worried that if Brown bankrupted 21 the company, JGH shareholders, including himself, could become personally liable to the 22 IRS for the unpaid FET. Compl. ⁋ 28. Plaintiff alleges that throughout the audit 23 negotiations and after an attempt by shareholders to “wrest control of JGH from Brown,” — 24 — — 25 — 26 2 Plaintiffs FAC at paragraphs 88(a)-(q) identify seventeen instances in which Plaintiff alleges Defendants collects FET from clients and failed to remit. Compl. ⁋⁋ 88(a)-(q). — 27 — 1 Plaintiff began discussions with JGH to modify the corporate structure in an attempt to 2 protect shareholders and address the FET. Compl. ⁋ 29. Stanz alleges that: 3 Under duress, on November 7, 2018, [he] entered into the Shareholder Agreement . . . and its contemporaneously — 4 — executed assignment of intellectual property by Plaintiff to 5 JGH wherein Stanz would relinquish almost half his shares (lowering him from a 49.5% shareholder to a 25% — 6 — shareholder) on the condition that revenue would be used 7 to pay the taxes owed to the IRS, that valuable intellectual property including [GRID] would not be transferred — 8 — without property documentation or compensation to 9 Plaintiff, and that of the 24.5% share reduction by Plaintiff, 10% of the shares would be allocated for a — 10 — properly constructed employee equity incentive plan. As 11 part of the Shareholder Agreement, Brown required Plaintiff Stanz and Shareholder Wolf to no longer serve on — 12 — the Board of Directors, under the false promise by Brown 13 and JGH to fill the vacancies with two new independent Directors. — 14 — Compl. ⁋ 29 (collectively the “2018 Agreement”); ECF No. 29-1 (Shareholder — 15 — Agreement); ECF No. 29-2 (Intellectual Property Assignment). — 16 — Plaintiff states that after the 2018 Agreement, Brown, in violation of JGH Bylaws — 17 — and California law, remained sole Director of JGH. Compl. ⁋ 30. The FAC alleges that — 18 — Brown at this point “structured JGH to assist in his architecture of a criminal enterprise to — 19 — enrich himself and his family.” Compl. ⁋ 31. Plaintiff states Brown “began directing the — 20 — agents and attorneys of JGH to improperly establish subsidiaries and third-party — 21 — companies to further dilute JGH shareholder value by misappropriating the JGH Platform — 22 — including the GRID . . . .” Compl. ⁋ 32. Brown is alleged to have used these new — 23 — companies to ignore his FET obligations and hide assets from the IRS. Compl. ⁋ 33. On — 24 — August 27, 2019, Brown is alleged to have improperly incorporated JGFH in Florida to — 25 — serve as a shell company by which Brown could create a “new entity which would have — 26 — absolutely no oversight or accountability to the shareholders of JGH.” Compl. ⁋ 34. — 27 — 1 Plaintiff states he received a stock certficiate for 959,615 Class A shares of JGFH on 2 April 26, 2022. Compl. ⁋ 51. 3 Plaintiff alleges all of this was done in violation of the 2018 Agreement, which 4 stated Brown would work toward a settlement with the IRS. Compl. ⁋ 32. Instead, the 5 FAC alleges the business continued to generate over $125,000,000 in revenue and the 6 unpaid FET grew to nearly $7,000,000. Compl. ⁋ 33. In addition, Stanz states the 7 employee equity incentive plan, also agreed to the in 2018 Agreement, never materialized 8 and instead Brown allocated shareholdings to the Brown Family Trust. Compl. ⁋ 36. 9 Further, the FAC alleges that Plaintiff’s intellectual property, including GRID, was 10 moved in a series of “undocumented sham transactions” from JGH to JGFH in violation 11 of the 2018 Agreement and Plaintiff was never awarded compensation for such 12 transactions. Compl. ⁋ 38. Plaintiff alleges that Defendant Brown continued to create 13 additional schemes “by making millions of dollars of fraudulent undocumented ‘loans’ to 14 Defendants Brown individually, C3 Jets, JAG, C3 Limo, and Bowman Aviation . . . .” 15 Compl. ⁋ 40 (collectively known as the “undocumented loans”).3 Plaintiff alleges these 16 undocumented loans, absent terms payback terms, were unauthorized disbursements 17 without benefit to JGH or JGFH shareholders. Compl. ⁋ 53. 18 Plaintiff states that in June 2021, Defendants Brown and JGFH approached 19 Plaintiff with a new shareholder agreement that would give Plaintiff JGFH shareholdings 20 and require Plaintiff’s indemnification of Brown for actions in violation of his fiduciary 21 duties, for malfeasance, for fraud, and for failure to pay FET. Compl. ⁋ 42 (the “2021 22 Agreement”) (it does not appear to the Court that Plaintiff signed this agreement). — 23 — — 24 — 3 The FAC states Plaintiff discovered the existence of Defendant C3 Limo in May 2022, — 25 — which uses the JGFH and JGH company address as its registered office and “continues to 26 utilize the JGH Intellectual Property.” Compl. ⁋ 52. Plaintiff also believes C3 Limo received an undocumented loan from JGFH and JGH. Compl. ⁋ 53. — 27 — 1 In October 2021, the IRS contacted Plaintiff to inform him of his individual 2 responsibility for the $1,300,000 in unpaid FET. Compl. ⁋ 43. Plaintiff claims the IRS 3 was holding him personally responsible because his name was listed on a bank card he 4 states he only signed under duress. Compl. ⁋⁋ 43-44. Plaintiff alleges he confronted 5 Brown about the unpaid FET, and Brown admitted on November 4, 2021 that he was the 6 one responsible and that he could “raise the money tomorrow” to address the IRS debt. 7 Compl. ⁋ 46. 8 Plaintiff states that in March 2022, the IRS “increased [its] outreach . . . and 9 informed him that the IRS intended to individually assess [Plaintiff] for Defendant JGH’s 10 unpaid FET.” Compl. ⁋ 50. At this point, Plaintiff alleges he approached Defendants 11 Brown, JGH, and JGFH with a proposal from the IRS to make a small payment of 12 $125,000, which would allow the IRS to defer its individual assessment against Stanz. 13 Compl. ⁋ 50. Brown failed to respond to this proposal or reimburse him for his legal 14 expenses, as Stanz states is required by JGH Bylaws. Compl. ⁋ 50. 15 On May 3, 2022, the IRS notified Plaintiff that it had assessed him for $1.3 million 16 of the unpaid FET. Compl. ⁋ 54. Plaintiff states that at this point, he proposed to 17 Defendants that a possible solution was to merge Defendants JGH, JGFH, C3 Jets, and 18 JAG. Compl. ⁋ 54. Plaintiff negotiated an extension with the IRS until August 8, 2022 to 19 allow time for the proposed merger. Compl. ⁋ 56. Proposed merger drafts and balance 20 sheets were sent to Plaintiff, Shareholder Wolf, and all Defendants, and it was at this 21 point that Plaintiff noticed “more than $10,000,000 of the balance sheet items . . . were 22 not addressed in the proposed merger” and included millions of dollars in undocumented 23 loans. Compl. ⁋⁋ 55-57. 24 Plaintiff states he later learned that Brown further harmed the business when he 25 threatened the life of the CEO of Executive Charter Services (“ECS”) in late July 2022. 26 Compl. ⁋⁋ 62, 65. Plaintiff states that there had been talks of ECS acquiring JGH and — 27 — 1 satisfying the FET debt, and that as a result of Brown’s threats, the deal fell through. 2 Compl. ⁋⁋ 62-66. 3 On July 29, 2022, the IRS informed Plaintiff that it would accept a payment of 4 $100,000 from Defendants in exchange for not filing a lien against Plaintiff. Compl. ⁋ 61. 5 Plaintiff informed Defendant Brown of this, but he has yet to comply. Compl. ⁋ 62. 6 Plaintiff filed his initial Complaint in this Court on August 8, 2022. ECF No. 1. Plaintiff 7 later filed a Motion to Amend, (ECF No. 16), which this Court granted, (ECF No. 24). 8 On March 3, 2023, Plaintiff filed the First Amended Complaint. ECF No. 25. Plaintiff 9 alleges two causes of action pursuant to federal law: (1) violation of RICO, 18 U.S.C. § 10 1962; and (2) violation of the Defend Trade Secrets Act, 18 U.S.C. § 1836 (b)(1). Plaintiff 11 alleges eight state law causes of action: (1) violation of the California Uniform Trade 12 Secrets Act; (2) breach of contract; (3) breach of fiduciary duty; (4) fraud; (5) conspiracy; 13 (6) accounting; (7) unjust enrichment; and (8) equitable indemnity. Compl. ⁋⁋ 92-220. 14 Plaintiff seeks damages, attorneys’ fees, and injunctive relief. Compl. at 74-81. 15 LEGAL STANDARDS 16 Defendants’ Motions to Dismiss argue that Plaintiff’s Complaint should be 17 dismissed under Federal Rule of Civil Procedure (“Rule”) 12(b)(1) for lack of subject 18 matter jurisdiction, Rule 12(b)(6) for failure to state a claim, and Rule 12(b)(7) for failure 19 to join an indispensable party. Some Defendants also move under Rule 12(f) to strike 20 portions of Plaintiff’s FAC. 21 I. Federal Rule of Civil Procedure 12(b)(1) 22 Rule 12(b)(1) permits dismissal of a claim for lack of subject matter jurisdiction. 23 Fed. R. Civ. P. 12(b)(1). Dismissal for lack of subject matter jurisdiction should be 24 granted if the complaint, considered in its entirety, fails to allege facts sufficient to 25 establish subject matter jurisdiction. In re Dynamic Random Access Memory (DRAM) 26 Antitrust Litig., 546 F.3d 981, 984-85 (9th Cir. 2008). The Plaintiff bears the burden of — 27 — 1 proving that a federal court has subject matter jurisdiction. Spokeo, Inc. v. Robins, 578 2 U.S. 330, 338 (2016); see also McCauley v. Ford Motor Co., 264 F.3d 952, 957 (9th Cir. 3 2001) (citing McNutt General Motors Acceptance Corp., 298 U.S. 178, 189 (1936)). 4 A Rule 12(b)(1) attack may be facial or factual. Safe Air for Everyone v. Meyer, — 5 — 373 F.3d 1035, 1039 (9th Cir. 2004). In a facial attack, defendant asserts that the 6 allegations in the complaint are insufficient to prove federal subject matter jurisdiction. — 7 — Id. The court resolves a facial attack as a Rule 12(b)(6) motion to dismiss—the court 8 accepts the factual allegations in the complaint as true and determines if the allegations 9 are sufficient to properly invoke federal jurisdiction. Leite v. Crane Co., 749 F.3d 1117 , 10 1121 (9th Cir. 2014). In a factual attack, defendant disputes the very truth of the factual 11 allegations themselves that are said to invoke subject matter jurisdiction. Safe Air for 12 Everyone, 373 F.3d at 1039 . To resolve a factual attack, the court is permitted to review 13 evidence beyond the complaint. Id. 14 Defendants do not appear to dispute the truthfulness of the underlying allegations, 15 simply that they do not give rise to federal subject matter jurisdiction. Thus, this is a 16 facial attack, and the Court will determine whether the allegations in Plaintiff’s 17 Complaint, taken as true, sufficiently support a finding of subject matter jurisdiction. 18 II. Federal Rule of Civil Procedure 12(b)(6) 19 Rule 12(b)(6) permits dismissal for failure to state a claim upon which relief can be 20 granted. Fed. R. Civ. P. 12(b)(6). Rule 8(a)(2) states that a pleading must contain “a 21 short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. 22 R. Civ. P. 8(a)(2). A plaintiff is not required to provide “detailed factual allegations,” but 23 the plaintiff must plead sufficient facts that, if accepted as true, “raise a right to relief 24 above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007). A 25 complaint will survive a motion to dismiss when it contains enough facts to “state a claim 26 to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting — 27 — 1 Twombly, 550 U.S. at 570 ). A claim is plausible when the factual allegations permit “the 2 court to draw the reasonable inference that the defendant is liable for the misconduct 3 charged.” Iqbal, 556 U.S. at 678 . Further, under Rule 9(b), when the complaint includes 4 allegations of fraud, a party must “state with particularity the circumstances constituting 5 fraud or mistake.” Fed. R. Civ. P. 9(b). 6 The Court is not required to accept as true “allegations that are merely conclusory, 7 unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. 8 Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). “Threadbare recitals of the elements of a 9 cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 10 U.S. at 678. 11 III. Federal Rule of Civil Procedure 12(b)(7) 12 Under Rule 12(b)(7), a defendant may move to dismiss for a failure to join a party 13 under Rule 19. Fed. R. Civ. P. 12(b)(7). A Rule 19 motion poses three questions: (1) 14 whether the nonparty should be joined under Rule 19(a); (2) if the nonparty is necessary 15 under Rule 19(a), whether it is feasible to order the nonparty be joined; and (3) if joinder 16 is not feasible, whether the case can proceed without the nonparty, or whether the 17 nonparty is an “indispensable party” such that the action must be dismissed. Upper Deck 18 Co. v. Flores, 569 F. Supp. 3d 1050 , 1070 (S.D. Cal. 2021) (citing EEOC V. Peabody W. 19 Coal Co., 400 F.3d 774, 779 (9th Cir. 2005)). 20 IV. Federal Rule of Civil Procedure 12(f) 21 Rule 12(f) states that a court “may strike from a pleading an insufficient defense or 22 any redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). 23 “The function of a 12(f) motion to strike is to avoid the expenditure of time and money 24 that must arise from litigating spurious issues by dispensing with those issues prior to 25 trial . . . .” Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir. 2010). 26 “[M]otions to strike should not be granted unless it is clear that the matter to be stricken — 27 — 1 could have no possible bearing on the subject matter of the litigation.” Colaprico v. Sun 2 Microsys., Inc., 758 F. Supp. 1335, 1339 (N.D. Cal. 1991). 3 REQUESTS FOR JUDICIAL NOTICE 4 Defendant JGFH filed a Request for Judicial Notice in support of its Motion to 5 Dismiss. ECF No. 30-3. JGFH requests judicial notice of the following documents: 6 1. The initial Complaint, filed in this action, on August 8, 2022 by Plaintiff Aaron 7 Stanz. 8 2. The First Amended Complaint, filed in this action, on March 3, 2023 by Plaintiff 9 Aaron Stanz. 10 Defendants Jordan Brown; JGH; C3 jets; Bowman Aviation; JAG; and C3 Limo 11 request judicial notice of the following documents: 12 1. Case docket of case filed on May 21, 2018 in the Southern District of California by 13 the Securities and Exchange Commission (“SEC”) against Bud Genius, Inc. and 14 Aaron Stanz, Case No. 18-cv-1005. 15 2. Complaint filed in U.S. SEC v. Bud Genius, Inc., et al., S.D. Cal., Case No. 18-cv16 1005. 17 3. Consent of Aaron Stanz filed on May 22, 2018 in U.S. SEC v. Bud Genius, Inc., et 18 al., S.D. Cal., Case No. 18-cv-1005. 19 4. Consent of Bud Genius, Inc. filed on May 22, 2018 in U.S. SEC v. Bud Genius, 20 Inc., et al., S.D. Cal., Case No. 18-cv-1005. 21 5. Final Judgment as to Aaron Stanz filed on May 24, 2018 in U.S. SEC v. Bud 22 Genius, Inc., et al., S.D. Cal., Case No. 18-cv-1005. 23 6. Final Judgment as to Bud Genius, Inc. filed on May 24, 2018 in U.S. SEC v. Bud 24 Genius, Inc., et al., S.D. Cal., Case No. 18-cv-1005. 25 7. Certified copy of the Complaint for Injunctive and Other Relief filed by the State 26 of Illinois on February 10, 2009 against U.S. Credit Find, Inc. and Aaron Stanz in — 27 — 1 Case No. 2009-CH-0021, before the State of Illinois in the Circuit Court of the 2 Seventh Judicial Circuit, Sangamon County, Illinois. 3 8. Certified copy of the Answer filed on March 9, 2009 in People of the State of 4 Illinois v. U.S. Credit Find, Inc., et al., Case No. 2009-CH-0021. 5 9. Certified copy of the Final Judgment and consent Decree filed on May 22, 2009 in 6 People of the State of Illinois v. U.S. Credit Find, Inc., et al., Case No. 2009-CH7 0021. 8 ECF Nos. 31-2; 33-2; 34-2; 38-2. 9 Defendants JAG, C3 Limo, and Bowman Aviation request judicial notice of two 10 additional documents: 11 1. A true and correct copy of Florida Division of Corporations Entity Details for C3 12 Limo, LLC. 13 2. A true and correct copy of Florida Division of Corporations Entity Details for 14 Bowman Aviation, Inc. 15 ECF Nos. 33-2; 34-2. 16 The Court “may judicially notice a fact that is not subject to reasonable dispute 17 because it: (1) is generally known within the trial court’s territorial jurisdiction; or (2) can 18 be accurately and readily determined from sources whose accuracy cannot reasonably be 19 questioned.” Fed. R. Evid. 201(b). Public records, including judgments, complaints, and 20 other publicly filed documents, are “proper subjects of judicial notice.” Shetty v. Cwalt, 21 Inc., 2017 WL 3394161 , at *2 (N.D. Cal. Aug. 8, 2017) (citing United States v. Black, — 22 — 482 F.3d 1035, 1041 (9th Cir. 2007)). “A court may take judicial notice of ‘matters of 23 public record’ without converting a motion to dismiss into a motion for summary 24 judgment.” Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001). — 25 — — 26 — — 27 — 1 Here, the documents requested for judicial notice are publicly filed records. 2 Plaintiff does not oppose Defendants’ requests for judicial notice. Accordingly, the Court 3 GRANTS the requests for judicial notice. 4 DISCUSSION 5 Defendants advance a number of arguments for why Plaintiff’s FAC should be 6 dismissed in its entirety. For the most part, the arguments overlap. 7 I. PLAINTIFF’S DERIVATIVE CLAIMS 8 Plaintiff’s FAC appears to allege causes of action individually, as well as “on 9 behalf of Jet Genius Holdings, Inc. and Jet Genius Florida Holdings, Inc. as a shareholder 10 . . . .” Compl. at 1. To the extent that Plaintiff proceeds on behalf of JGH and JGFH, the 11 Court interprets this as a derivative suit. Defendants JGH and JGFH argue Plaintiff does 12 not have standing to bring his action on behalf of JGH and JGFH shareholders because 13 Plaintiff has failed to comply with Federal Rule of Civil Procedure 23.1, California law, 14 and Florida law, which requires Plaintiff to first make a demand to the board of directors 15 prior to commencing a derivative action in court, or to plead with particularity why such 16 demand would have been futile. ECF No. 30-1 at 13 (JGFH); 38-1 at 10-12 (JGH). 17 Further confusion is created by the fact that Plaintiff’s FAC does not specify which 18 claims are derivative or direct. 19 A derivative suit allows individual shareholders to bring “‘suit to enforce a 20 corporate cause of action against officers, directors, and third parties.’” Kamen v. 21 Kemper Financial Services, Inc., 500 U.S. 90, 95 (1991) (emphasis in original) (quoting 22 Ross v. Bernhard, 396 U.S. 531, 534 (1970)). To prevent abuse, a prerequisite to a 23 derivative suit is that the shareholder demonstrate “‘that the corporation itself had refused 24 to proceed after suitable demand, unless excused by extraordinary conditions.’” Id. at 96 25 (quoting Ross, 396 U.S. at 534 ). This prerequisite has been codified in Rule 23.1, which 26 states in relevant parts: — 27 — 1 (a) Prerequisites. The rule applies when one or more shareholders or members of a corporation . . . bring a — 2 — derivative action to enforce a right that the corporation or 3 association may properly assert but has failed to enforce. . . (b) Pleading Requirements. The complaint must be — 4 — verified and must: 5 . . . (3) state with particularity: — 6 — (A) any effort by the plaintiff to obtain the desired 7 action from the directors or comparable authority and, if necessary, from the shareholders or — 8 — members; and 9 (B) the reasons for not obtaining the action or not making the effort. — 10 — Fed. R. Civ. P. 23.1 (a), (b)(3)(A) & (B). — 11 — Rule 23.1 “contemplates both the demand requirement and the possibility that — 12 — demand may be excused,” however, “it does not create a demand requirement of any — 13 — particular dimension.” Kamen, 500 U.S. at 96 . Rather, a district court should look to state — 14 — law to determine if the futility exception to the demand requirement is met or if any — 15 — demand actually made on behalf of the shareholder is sufficient. Id. at 92 . Here, JGFH is — 16 — incorporated in Florida and Florida law controls; JGH is incorporated in California and — 17 — California law controls. Compl. ⁋⁋ 9, 10. Plaintiff makes no allegation in the FAC that he — 18 — initiated pre-suit demand to either JGH or JGFH. As such, the Court will determine if — 19 — Plaintiff has met the standard for the futility exception under JGH’s and JGFH’s — 20 — respective state laws. — 21 — A. JGFH Demand Futility — 22 — Florida law requires a derivative suit complaint to be “verified and allege with — 23 — particularity . . . [t]he reason or reasons the shareholder did not make the effort to obtain — 24 — the desired action from the board of directors or comparable authority.” Fla. Stat. § 25 607.0742(2)(c) (2020). The Court finds that Plaintiff has not adequately alleged with — 26 — particularity why pre-suit demand on JGFH would have been futile. Plaintiff states, — 27 — 1 “[n]otice to the Board for JGFH further was futile, as the JGH shareholders and Plaintiff 2 were not provided with executed copies of the governance documents or structure of 3 JGFH, it was incorporated without Plaintiff’s or the JGH’s shareholders’ knowledge, its 4 Board was comprised of parties unknown to Plaintiff which upon information and belief 5 is solely Brown, and Defendant Brown substituted new shareholders and classes of shares 6 within JGFH in conflict of the original structure of JGH and the Shareholder Agreement.” 7 Compl. ⁋ 37. Defendant further states demand was futile because “Plaintiff was never 8 informed he was a shareholder or that [] governance documents existed.” Compl. ⁋ 51. 9 The Court does not see how these allegations relate to demand futility. Plaintiff 10 alleges he was never given JGFH governance documents, including incorporation 11 documents, bylaws, or Board resolutions, however Plaintiff does not state he asked for 12 them, or why these documents are necessary in the first instance to his demand. Compl. ⁋ 13 51. The Court is further confounded by Plaintiff’s allegation that he was not aware he 14 was a shareholder of JGFH where his FAC states that he received a stock certificate 15 representing 24.5% of JGFH Class A Shares on April 26, 2022, approximately three 16 months before filing his initial Complaint. See Compl. ⁋ 51. As such, Plaintiff has not 17 sufficiently pled demand futility as it relates to JGFH. 18 B. JGH Demand Futility 19 As to JGH, California law requires a Plaintiff “[1] allege[] in the complaint with 20 particularity plaintiff’s efforts to secure from the board such action as plaintiff desires, or 21 the reasons for not making such effort, and [2] allege[] further that plaintiff has either 22 informed the corporation or the board in writing of the ultimate facts of each cause of 23 action against each defendant or delivered to the corporation or the board a true copy of 24 the complaint which plaintiff proposes to file.” Cal. Corp. Code § 800 (b)(2). Under 25 California law, “general averments that the directors were involved in a conspiracy or 26 aided and abetted the wrongful acts complained of will not suffice to show demand — 27 — 1 futility.” Bader v. Anderson, 101 Cal. Rptr. 3d 821, 833 (Cal. Ct. App. 2009). Instead, 2 “‘the court must be apprised of facts specific to each director from which it can conclude 3 that that particular director could or could not be expected to fairly evaluate the claims of 4 the shareholder plaintiff.’” Id. (quoting Shields v. Singleton, 19 Cal. Rptr. 2d 459 , 466 5 (Cal. Ct. App. 1993)). 6 The Court finds Plaintiff has not met these two requirements in § 800(b)(2). 7 Plaintiff states that “[f]ollowing the Board Coup, any effective effort which could be 8 afforded by Plaintiff or the JGH shareholders to seek recourse was futile, as Defendant 9 Brown improperly constituted the entirety of JGH’s Board . . . .” Compl. ⁋ 37. This is the 10 only explanation Plaintiff provides as to why he did not serve demand on the JGH Board 11 and is not sufficient. This statement is exactly the type of “general averment” California 12 law seeks to avoid. However, even if the Court were to find that demand would have 13 been futile, Stanz has not alleged he met the second requirement under § 800(b)(2) to 14 provide JGH, in writing, the ultimate facts of each cause of action alleged in the FAC or 15 provide the JGH Board a proposed copy of the complaint Plaintiff intended to filed. 16 Thus, the Court finds Plaintiff has not shown he met the prerequisites to bring 17 derivative claims against JGH or JGFH in this Court. Plaintiff should either initiate 18 demand on JGH and JGFH Boards or allege with further particularity why such demand 19 is futile under Florida and California law. As such, the Court DISMISSES all derivative 20 claims asserted by Plaintiff on behalf of JGH and JGFH shareholders. 21 II. PLAINTIFF’S INDIVIDUAL FEDERAL CLAIMS 22 Plaintiff also asserts his causes of action individually. Compl. at 1. Thus, the Court 23 must determine if Plaintiff has pled sufficient facts to state a claim for each cause of 24 action. Plaintiff asserts two federal causes of action: (1) violation of RICO pursuant to §§ 25 1962; and (2) violation of the Defend Trade Secrets Act pursuant to § 1836(b)(1). 26 / / / — 27 — 1 A. First Cause of Action: RICO, 18 U.S.C. § 1962 2 Pursuant to 18 U.S.C. § 1962 , Plaintiff alleges Defendants associated for a 3 common purpose to misappropriate Plaintiff’s intellectual property and to “collect more 4 than $5,000,000 in charged but unpaid FET from the CFG Enterprise’s clients.” Compl. ⁋ 5 93. Although Plaintiff’s FAC is difficult to follow, it appears Plaintiff pleads both 18 6 U.S.C. §1836 (b), misappropriation of trade secrets, and mail and wire fraud under 18 7 U.S.C. §§1341 , 1343 as predicate acts. Compl. ⁋ 93, 98. Defendants do not dispute that 8 these statutes can properly serve as predicate acts and primarily argue Plaintiff has not 9 sufficiently pled injury under civil RICO. Plaintiff appears to plead claims under 18 10 U.S.C. §§ 1962 (a)-(d). The Court discusses each in turn. 11 i. 18 U.S.C. § 1962 (a) — 12 — 18 U.S.C. § 1962 (a) states that “[i]t shall be unlawful for any person who has 13 received any income derived, directly or indirectly, from a pattern of racketeering activity 14 . . . to use or invest, directly or indirectly, any part of such income, or the proceeds of 15 such income . . . in . . . operation of . . . any enterprise.” The Ninth Circuit has reasoned 16 that “a plaintiff seeking civil damages for a violation of section 1962(a) must allege facts 17 tending to show that he or she was injured by the use or investment of racketeering 18 income.” Nugget Hydroelectric, L.P. v. Pac. Gas and Elec. Co., 981 F.2d 429, 437 (9th 19 Cir. 1992). A plaintiff “must include allegations of injury from the use and investment of 20 racketeering proceeds, not merely injury from the predicate acts of racketeering 21 themselves.” Sea-Land Serv., Inc. v. Atl. Pac. Intern., Inc., 57 F. Supp. 2d 1048, 1054 (D. 22 Haw. 1999 ). 23 Here, Plaintiff states the injuries to his reputation, intellectual property, and the 24 personal assessment by the IRS were caused by Defendants’ investment of the 25 fraudulently collected FET into the enterprise. Compl. ⁋ 112. However, the Court finds 26 these injuries are not distinct from the injuries he alleges elsewhere in the FAC and is not — 27 — 1 distinct from the injuries he claims result from the racketeering activities themselves. See 2 Compl. ⁋⁋ 103-104, 107-108, 112-113. Thus, the Court finds Plaintiff has not sufficiently 3 pled a distinct injury resulting from the Defendants’ investment of any alleged 4 racketeering proceeds, and this claim must be DISMISSED. 5 ii. 18 U.S.C. § 1962 (b) — 6 — 18 U.S.C. § 1962 (b) states that “[i]t shall be unlawful for any person through a 7 pattern of racketeering activity . . . to acquire or maintain, directly or indirectly, any 8 interest in or control of any enterprise which is engaged in, or the activities of which 9 affect, interstate or foreign commerce.” § 1962(b) requires “a specific nexus between the 10 control of the enterprise and the racketeering activity.” Sea-Land, 57 F. Supp. 2d at 1055 . 11 Plaintiff has not met this burden. Plaintiff has not pled facts showing that there is a nexus 12 between Defendants’ control of the enterprise and the alleged scheme to collect and not 13 remit clients’ FET. Thus, Plaintiff has failed to plead a cause of action under § 1962(b), 14 and the claim must be DISMISSED. 15 iii. 18 U.S.C. §§ 1962 (c) 16 Under 18 U.S.C. § 1962 (c), a plaintiff must allege the defendant participated in 17 “(1) the conduct of (2) an enterprise that affects interstate commerce (3) through a pattern 18 (4) of racketeering activity or collection of unlawful debt.” Eclectic Props. East, LLC v. 19 Marcus & Millichap Co., 751 F.3d 990, 997 (9th Cir. 2014) (citing 18 U.S.C. § 1962 (c)). 20 As to the Section 1962(c) claim, Defendants argue Plaintiff has not adequately pled 21 causation under civil RICO. See ECF No. 30-1 at 15. The Court agrees for the reasons 22 stated below. 23 iv. 18 U.S.C. § 1964 (c) 24 RICO's provision for civil actions provides that “[a]ny person injured in his 25 business or property by reason of a violation of section 1962 of this chapter may sue … — 26 — — 27 — 1 and shall recover threefold the damages he sustains and the cost of the suit, including a 2 reasonable attorney's fee.” 18 U.S.C. § 1964 (c). 3 To maintain a cause of action under RICO, a plaintiff must show not only that the 4 defendant's violation was a “but for” cause of his injury, but that it was the proximate 5 cause as well. Holmes v. Secs. Inv. Prot. Corp., 503 U.S. 258, 268 (1992)). This means 6 there must be “some direct relation between the injury asserted and the injurious conduct 7 alleged.” Id. Directness of the relationship is important for three reasons. “First, the less 8 direct an injury is, the more difficult it becomes to ascertain the amount of a plaintiff's 9 damages attributable to the violation, as distinct from other, independent, factors.” Id. at 10 269-270. Second, courts would have to adopt complicated apportionment rules to avoid 11 multiple recoveries. Id. Third, directly injured victims can generally be counted on to sue, 12 “without any of the problems attendant upon suits by plaintiffs injured more remotely.” — 13 — Id. (citing Associated Gen. Contractors of California, Inc. v. California State Council of 14 Carpenters, 459 U.S. 519 , 541–42 (1983)). These three policy concerns guide a court's 15 evaluation of the directness of the injury under RICO. Id. at 270. 16 At its core, the case involves Federal Excise Tax that was allegedly collected by 17 JGH from clients but not remitted to the IRS as required by law. Compl. ⁋ 1. From there, 18 it is difficult to follow what Plaintiff alleges is his precise RICO injury, but the Court 19 makes out the following allegations of injury and finds each defective in turn. See Compl. 20 ⁋⁋ 103-104. First, Plaintiff states he “suffered injury derivatively to his reputation and 21 business.” Compl. ⁋ 103. He states that his interests as a shareholder have been damaged 22 due to the fraudulently charged FET. Id. However, shareholders do not generally have 23 standing to assert RICO claims in an individual capacity. Ahn v. Hanil Dev. Inc., 2010 24 WL 11520673 , at *2 (C.D. Cal. Jan. 21, 2010); see also, Gaff v. Fed. Deposit Ins. Corp., — 25 — 814 F.2d 311, 315 (6th Cir.), on reh'g in part, 828 F.2d 1145, 1147-48 (6th Cir. 1987) 26 (finding that as a general precept of corporate law a shareholder of a corporation does not — 27 — 1 have a personal or individual right of action for damages based solely on an injury to the 2 corporation). A shareholder “must show either an injury distinct from that to other 3 shareholders or a special duty between [the defendants and the shareholder] if they are to 4 having standing to assert RICO claims based on injury to the corporation.” Sparling v. 5 Hoffman Const. Co., Inc., 864 F.2d 635, 640 (9th Cir. 1988). Plaintiff has shown neither. 6 Any injury to his interests as a shareholder resulting from the collected and unremitted 7 FET is not distinct from that of any other shareholder. Any “derivative[ injury to] his 8 reputation and business” is just that—derivative—and does not meet the direct, proximate 9 cause standard required under civil RICO. Further, Plaintiff has not pled that the 10 Defendants owed him a special duty. 11 Second, Plaintiff states he has suffered injury as a result of Defendants’ use of his 12 intellectual property to commit criminal acts, and that the use of his intellectual property 13 in the commission of crimes has damaged the value of his property. Compl. ⁋ 103. For 14 the reasons discussed below, the Court finds that Plaintiff has not pled with particularity 15 the substance of his intellectual property, and thus this cannot establish a legitimate injury 16 under § 1962(c). Further, to prevail on his misappropriation of IP theory, Plaintiff will be 17 required to demonstrate that his assignment of IP to JGH was obtained through fraud. 18 This additional inquiry means any injury to Plaintiff resulting from the misappropriation 19 of IP is “too remote” to form direct injury because the link between the failure to pay 20 FET and harm to Plaintiffs’ IP is “purely contingent” on whether he was fraudulently 21 induced to relinquish his rights. Holmes, 503 U.S. at 271 . As the Holmes Court observed: 22 “quite apart from problems of proving factual causation, recognizing claims of the 23 indirectly injured would force courts to adopt complicated rules apportioning damages 24 among plaintiffs removed at different levels of injury from the violative acts, to obviate 25 the risk of multiple recoveries.” Holmes, 503 U.S. at 269 . — 26 — — 27 — 1 Third, Plaintiff states he has suffered injury as a result of the $1.3 million that has 2 been personally assessed against him by the IRS. Compl. ⁋ 104. Proximate cause analysis 3 under civil RICO looks to who is the direct victim of the allegedly wrongful conduct. In 4 Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006), the Court found plaintiff had not 5 pled proximate cause because the plaintiff was not the “direct victim of th[e] conduct”; 6 the direct victim was “the State that was being defrauded” via lost tax revenue Anza v. 7 Ideal Steel Supply Corp., 547 U.S. 451, 458 (2006). Similarly, in Hemi Group, LLC v. 8 City of New York, N.Y., 559 U.S. 1 (2010), the City of New York sued a New Mexico 9 company that sold cigarettes online because they failed to file information with the State 10 of New York which would have allowed the City of New York to collect tax revenue on 11 cigarettes sold out of the state. The Court in Hemi Group held that the City of New 12 York’s purported injury by way of lost tax revenue was not direct enough to constitute 13 proximate cause under civil RICO because the more direct victim was the State of New 14 York; the State of New York was first in the chain of alleged victims. Hemi Group, LLC 15 v. City of New York, N.Y., 559 U.S. 1, 10-12 (2010). The Court further reasoned that the 16 State of New York was a better situated plaintiff and had incentive to sue defendant Hemi 17 Group because the State of New York had also lost out on tax revenue. Id. at 11-12 . 18 In the FAC, Plaintiff claims that Defendants engaged in a scheme to use the JGH 19 Intellectual Property to defraud JGH and JGFH passengers purchasing air transportation 20 of more than $5 million in FET that clients were charged for and which was placed in a 21 “trust fund” for the IRS as required by 26 U.S.C. § 4281 . FAC ¶¶ 74-75. Plaintiff further 22 contends that the CFG Enterprise used the wires to charge customers the FET falsely 23 claiming that the collected FET would be remitted to the IRS. FAC ¶ 95. These 24 allegations reveal that the direct victim of the scheme is the United States Government 25 and, possibly, any customers who paid the FET to JGH and may now be held responsible 26 for Defendants’ failure to remit the tax to the IRS. — 27 — 1 With regard to himself, Plaintiff Stanz has failed to sufficiently allege that he is a 2 direct victim of any purported RICO scheme. His alleged injury is premised on an 3 attenuated and convoluted theory that his intellectual property was used to collect the 4 unpaid FET and that the IRS is holding him personally responsible for the unpaid FET 5 because of a JGH bank card he opened allegedly under duress. FAC ¶¶ 43-44, 93. 6 However, as of this time, it does not appear that Plaintiff has paid any money to the IRS. 7 Thus, the Court also cannot say he has suffered injury in the form money actually paid to 8 the IRS. 9 RICO requires “some direct relation between the injury asserted and the injurious 10 conduct alleged.” Id. at 268 . Here, Plaintiff is seeking treble damages for amounts owed 11 by JGH customers to the IRS based on a convoluted set of facts that, at best, were 12 indirectly caused by the misappropriation of IP or alleged wire fraud. Plaintiff’s damages 13 theory requires the Court to move well beyond the first step involving the failure to pay 14 the FET and cannot satisfy RICO’s direct relationship requirement. Accordingly, the 15 Court finds Plaintiff’s asserted injuries do not meet the proximate cause requirement 16 under civil RICO 18 U.S.C. § 1962 , and the claims must be DISMISSED. 17 v. 18 U.S.C. § 1962 (d) — 18 — 18 U.S.C. § 1962 (d) makes it “unlawful for any person to conspire to violate any 19 of the provisions of subsections (a), (b), or (c) of this subsection.” A § 1962(d) claim 20 necessarily relies on a claim under one of the other three subsections. See Religious Tech. 21 Ctr. v. Wollersheim, 971 F.2d 364 , 367 n.8 (9th Cir. 1992). Because the Court finds 22 Plaintiff has failed to plead a claim under any of the RICO subsections, this cause of 23 action must also be DISMISSED. 24 B. Second Cause of Action: Defend Trade Secrets Act, 18 U.S.C. § 1836 (b)(1) — 25 — 18 U.S.C. § 1836 (b)(1), the Defendant Trade Secrets Act (“DTSA”), states that the 26 “owner of a trade secret that is misappropriated may bring a civil action . . . if the trade — 27 — 1 secret is related to a product or service used in, or intended for use in, interstate or foreign 2 commerce.” “Trade secret” is defined in 18 U.S.C. §1839 (3) and “misappropriation” is 3 defined in § 1839(5). To state a claim under the DTSA, a Plaintiff must plead sufficient 4 facts to show: (1) that he owned a trade secret; (2) the trade secret was misappropriated 5 by Defendants; and (3) Plaintiff suffered damages. Gordon Grado, M.D., Inc. v. Phoenix 6 Cancer and Blood Disorder Treatment Inst., 603 F. Supp. 3d 799 , 800 (D. Ariz. May 16, 7 2022). Courts in this Circuit routinely find that although a plaintiff does not need to 8 reveal the exact details of a trade secret, a plaintiff “must ‘describe the subject matter of 9 the trade secret with sufficient particularity to separate it from matters of general 10 knowledge in the trade or of special persons who are skilled in the trade, and to permit 11 the defendant to ascertain at least the boundaries within which the secret lies.’” AlterG, 12 Inc. v. Boost Treadmills LLC, 388 F. Supp. 3d 1133, 1144 (N.D. Cal. 2019) (quoting Alta 13 Devices, Inc. v. LG Elecs., Inc., 343 F. Supp. 3d 868, 881 (N.D. Cal. 2018)). Defendants 14 argue that Plaintiff’s DTSA claim fails because he has not pled his alleged trade secrets 15 with sufficient particularity. See e.g., ECF No. 30-1 at 16-17. The Court agrees. 16 Courts in this Circuit have found that trade secrets defined as “source code, 17 customer lists and customer related information, pricing information, vendor lists and 18 related information, marketing plans and strategic business development initiatives, 19 ‘negative knowhow’ learned through the course of research and development, and other 20 information related to the development of its price-optimization software, including ideas 21 and plans for produce enhancements” were not sufficiently particular to state a claim 22 under the DTSA. Vendavo, Inc. v. Price f(x) AG, 2018 WL 1456697 , at *3 (N.D. Cal. 23 Mar. 23 , 2018); see also AlterG, 388 F. Supp. 3d at 1145 (citing Vendavo). Trade secrets 24 defined in these “broad, categorical terms” which are “more descriptive of the types of 25 information that generally may qualify as protectable trade secrets,” are not sufficiently 26 particular. See id. at *4. — 27 — 1 Here, Plaintiff alleges the following trade secrets have been misappropriated: 2 The JGH Platform, Plaintiff’s Technical Expertise, software architecture and source codes, websites, — 3 — technology infrastructure, business models, web-servers, 4 domain names such as jetcharter.com, jetagency.com, and flycfg.com, business methods, clients lists, proprietary — 5 — designs, and trade secrets in the JGH Intellectual Property. — 6 — Compl. ⁋ 122. — 7 — Plaintiff’s trade secret allegations are indeed “broad, categorical” allegations that — 8 — are “more descriptive of the types of information” that may qualify for protection. — 9 — Vendavo, 2018 WL 1456697 , at *4. Plaintiff does not attempt to concretely describe the — 10 — trade secrets he alleges have been misappropriated or discuss the secrets with any manner — 11 — of specificity beyond the general nature of the secret at issue. The Proprietary — 12 — Information and Inventions Agreement (the Intellectual Property Assignment) does not — 13 — provide any more specification on the types of trade secrets Plaintiff claims have been — 14 — misappropriated. See Compl., Exh. B (ECF No. 29-2). The failure to provide specific — 15 — description of the intellectual property is problematic for the additional reason that the — 16 — Intellectual Property Assignment appears to memorialize an agreement between JGH and — 17 — Plaintiff that had existed since Plaintiff had commenced his employment with JGH and — 18 — thus predates any alleged fraud. The Agreement, signed by Plaintiff on November 7, — 19 — 2018 states: — 20 — “The following confirms and memorializes an agreement 21 that jet Genius Holdings, Inc., . . ., and I (Aaron Stanz) have had since the commencement of my employment — 22 — (which term, for purposes of this agreement, shall be 23 deemed to include any relationship of service to the Company that I may have had prior to actually becoming — 24 — an employee) with the Company in any capacity and that 25 is and has been a material part of the consideration for my employment by the Company.” — 26 — ECF No. 29-2 at 2. — 27 — 1 By failing to specify what intellectual property forms the basis for his § 1836 2 claim, it is not possible to determine whether Plaintiff owns any intellectual property that 3 is not covered by his 2018 Assignment. 4 Accordingly, the Court finds that Plaintiff’s DTSA claim must be DISMISSED. In 5 so doing, the Court does not purport to make any finding as to whether Plaintiff even 6 owned the trade secrets, after November 7, 2018 or at any point, or whether Plaintiff has 7 suffered any damage as a result of any misappropriated trade secrets. If Plaintiff chooses 8 to amend his FAC, he should allege with “greater specificity the types of trade secrets 9 that were misappropriated and the exact technology to which they pertain.” AlterG, 388 10 F. Supp. 3d at 1146. 11 III. SUBJECT MATTER JURISDICTION 12 Because the Court has dismissed both of Plaintiff’s federal causes of action, 13 subject matter jurisdiction cannot exist under 28 U.S.C. § 1331 . The Parties dispute 14 whether diversity of citizenship exists to establish diversity jurisdiction under 28 U.S.C. § 15 1332. 28 U.S.C. § 1332 (a) requires that (1) the amount in controversy exceed $75,000, 16 and (2) the action is between citizens of different states. The Court finds there is not 17 diversity of citizenship. 18 A. Citizenship 19 A person is a “citizen” of the state in which they are domiciled. Kantor v. 20 Wellesley Galleries, Ltd., 704 F.2d 1088, 1090 (9th Cir. 1983). “A person’s domicile is 21 [their] permanent home, where [they reside] with the intention to remain or to which 22 [they] intend[] to return.” Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 23 2001) (citing Lew v. Moss, 797 F.2d 747, 749 (9th Cir. 1986)). A person residing in a 24 state is not necessary a citizen of that state. Id. An individual can reside in a state and be 25 domiciled in another. Mississippi Band of Choctaw Indians v. Holyfield, 490 U.S. 30 , 48 26 (1989). — 27 — 1 To determine domicile, a court should analyze a number of factors, including the 2 person’s “current residence, voting registration and voting practices, location of personal 3 and real property, location of brokerage and bank accounts, location of spouse and 4 family, membership in unions and other organizations, place of employment or business, 5 driver’s license and automobile registration, and payment of taxes.” Lew, 797 F.2d at 6 750. A person’s old domicile is not relinquished until a new domicile is established. Id. 7 “A change in domicile requires the confluence of (a) physical presence at the new 8 location with (b) an intention to remain there indefinitely.” Id. Diversity of citizenship is 9 determined at the time the lawsuit is filed. Grupo Dataflux v. Alas Global Group, L.P., — 10 — 541 U.S. 567, 570-71 (2004). 11 Plaintiff’s initial Complaint filed in this Court on August 8, 2022 stated: 12 Plaintiff . . . is a competent adult citizen of the State of California for all times relevant in this action until March — 13 — 1, 2022, where he obtained a leasehold in the State of 14 Kansas, but has not yet made his primary residency in the State of Kansas. — 15 — ECF No. 1 ⁋ 5; ECF No. 30, RJN 1. — 16 — Plaintiff’s FAC, filed in this Court on March 2, 2023, states: — 17 — Plaintiff is a competent adult and was a citizen of — 18 — California until March 1, 2022, when he obtained a 19 leasehold in the State of Kansas and now is a resident of the State of Kansas. — 20 — FAC ⁋ 8. — 21 — The Court finds this is not sufficient to determine that Plaintiff was a citizen of — 22 — Kansas at the time he filed his lawsuit. As stated, “residence” is not enough to establish — 23 — citizenship. Plaintiff would retain his California citizenship until he established his — 24 — domicile in Kansas, and obtaining a leasehold and becoming a “resident” of the state does — 25 — not necessarily constitute a change in citizenship. To support his citizenship claim, — 26 — Plaintiff argues that “[a]fter commencing the underlying action, the IRS transferred [sic] — 27 — 1 Plaintiff’s case to the Kansas department of IRS, thus clarifying for Plaintiff he was free 2 to properly maintain his valid Kansas citizenship.” ECF No. 41 at 8 (citing FAC ⁋ 62). He 3 also states he received mail from Defendants at his address in Kansas. Id. 4 Plaintiff’s bears the burden of proving to this Court that subject matter jurisdiction 5 exists, and his argument does not establish he was a citizen of Kansas at the time his 6 lawsuit was filed. See Grupo Dataflux, 541 U.S. at 570-71 . Indeed, the evidence he 7 provides to support his assertion is an event that occurred after the lawsuit was filed (his 8 IRS file was transferred to Kansas “after commencing the underlying action”). Further, 9 simply receiving mail in Kansas, from Defendants or anyone else for that matter, is not 10 enough for the Court to determine that Plaintiff had established a residence and developed 11 an intent to remain in Kansas. Because Plaintiff remains a citizen of California until he 12 establishes domicile in another state, the Court finds Plaintiff has not shown he was not a 13 citizen of California when he filed the initial Complaint. Because at least one of the 14 Defendants (JGH) is a citizen of California, diversity jurisdiction does not exist, and the 15 Court lacks subject matter jurisdiction over Plaintiff’s action. Accordingly, Plaintiff’s 16 remaining state law claims must be DISMISSED. 17 IV. LEAVE TO AMEND 18 “If a complaint is dismissed for failure to state a claim, leave to amend should be 19 granted ‘unless the court determines that the allegation of other facts consistent with the 20 challenged pleading could not possible cure the deficiency.’” DeSoto v. Yellow Freight 21 Systs., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv-Well 22 Furniture Co., 806 F.2d 1393 , 1401 (9th Cir. 1986)). The Court grants Plaintiff leave to 23 amend his First Amended Complaint. Plaintiff should address the deficiencies noted 24 above but take note that Defendants raised a number of arguments in their Motions to 25 Dismiss, and the Court does not purport to have made findings as to each. — 26 — — 27 — 1 CONCLUSION 2 For the reasons above, the Court hereby GRANTS Defendants’ Motion to Dismiss 3 || with leave to amend. If he desires, Plaintiff shall file a Second Amended Complaint on 4 || or before June 30, 2023. 5 IT IS SO ORDERED. 6 || Dated: June 8, 2023 2 aplo Os 7 Hon. Gonzalo P. Curiel g United States District Judge — 9 — — 10 — — 11 — — 12 — — 13 — — 14 — — 15 — — 16 — — 17 — — 18 — — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — 27 28 28 22-cv-1164-GPC