Case 1:12-cv-00456-RWR Document 15 Filed 05/29/12 Page 1 of 24

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

JOHN N. XEREAS Plaintiff, v. MARJORIE A. HEISS, GEOFFREY O.S. DAWSON, RIOT ACT DC, LLC, and SQUIID, INC., Defendants. Civil Action No. 1:12-cv-00456-RWR

DEFENDANTS HEISS, DAWSON, AND RIOT ACT DC, LLCS MOTION TO DISMISS Defendants Marjorie A. Heiss, Geoffrey O.S. Dawson, and Riot Act, DC, LLC, respectfully move for an Order pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and Local Rule 7 dismissing Counts IV through XI of Plaintiff John N. Xereas Amended Complaint, Dkt. Entry No. 3. As explained in the accompanying memorandum of law in support of this motion and in the motion to dismiss contemporaneously filed by co-Defendant Squiid, Inc., Plaintiffs Amended Complaint fails to state a claim upon which relief can be granted for these counts. A proposed Order is attached hereto.

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Respectfully submitted, /s/ Joshua Fowkes______________________ Joshua Fowkes (D.C. Bar No. 494700) [email protected] Arent Fox LLP 1050 Connecticut Avenue, NW Washington, DC 20036-5339 Tel: (202) 857-6000 Fax: (202) 857-6395 Alec P. Rosenberg (D.C. Bar No. 479381) [email protected] ARENT FOX LLP 1050 Connecticut Avenue, NW Washington, DC 20036-5339 Tel: (202) 857-6000 Fax: (202) 857-6395 Attorneys for Defendants Marjorie A. Heiss, Geoffrey O.S. Dawson, and Riot Act DC, LLC

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

JOHN N. XEREAS Plaintiff, v. MARJORIE A. HEISS, GEOFFREY O.S. DAWSON, RIOT ACT DC, LLC, and SQUIID, INC., Defendants. Civil Action No. 1:12-cv-00456-RWR

DEFENDANTS HEISS, DAWSONS, AND RIOT ACT DC, LLCS MEMORANDUM OF LAW IN SUPPORT OF THEIR MOTION TO DISMISS This is a business divorce case involving a comedy club venture that failed in less than a year, largely as a result of fundamental disagreements between two of the three managing members Defendants Heiss and Dawson and the third, Plaintiff Xereas. Heiss and Dawson repeatedly afforded Xereas opportunities to change what they viewed to be his ineffective and improper management practices, but he refused to do so. The disagreements boiled over when Heiss and Dawson terminated the employment of several persons whom Xereas had hired and, in response, Xereas stormed out of comedy club, stopped participating in the business, and took actions designed to undermine and injure the venture. As a result, and consistent with the LLC operating agreement that governed their business relationship, Heiss and Dawson voted to remove Xereas as a manager of the venture. This lawsuit followed. The complaint includes several groundless claims involving Xereas allegations that, despite (i) forming with Heiss and Dawson a company named Riot Act DC, LLC, (ii) soliciting and accepting third party investment in that company, and then (iii) collaborating in the

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creation and operation of a comedy club (and a related online presence) under the mark RIOT ACT, the business may not lawfully operate under that mark without his continued involvement as a manager. Those claims will essentially be moot soon because, as part of its plan to rebrand and repurpose the venue it operates in downtown Washington, D.C., the company has decided quickly to cease using, and to relinquish to Xereas, that mark and any Internet domain names incorporating it. As for Xereas remaining claims, each is deficient as a matter of law. Accordingly, Heiss, Dawson, and Riot Act DC, LLC are moving to dismiss them under Federal Rule of Civil Procedure 12(b)(6) and Local Rule 7. This memorandum of law focuses on six of Xereas nontrademark claims. Co-defendant Squiid, Inc. (Squiid) is contemporaneously filing a motion to dismiss the other two claims Xereas conversion claim (Count IV) and cybersquatting claim (Count X). As explained below, Heiss, Dawson, and Riot Act DC, LLC incorporate all arguments set forth in Squiids motion to dismiss that are applicable to them. FACTUAL BACKGROUND Defendant Dawson has successfully built and operated over 20 bars, restaurants, and billiards halls in and around Washington, D.C. (and elsewhere) over the past 20 years. Among the well-known ventures he has spearheaded are the Buffalo Billiards venues (now located in Washington, D.C., Philadelphia, and Austin) and Rocket Bar in downtown, D.C. Defendant Heiss is an attorney who has collaborated with Dawson in many of his most successful ventures, regularly handling many of the legal issues and services for such projects. In March 2010, a real estate agent named Alan Zich suggested that Dawson meet Xereas at 801 E Street, N.W., in downtown Washington, D.C., to discuss possible uses of the space, including use as a comedy club. (See Am. Compl. 27.) That property is an attractive location

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for an entertainment venue for multiple reasons but, due to a zoning restriction, it must be used as a performing arts space. (Id.) Xereas has experience in the world of comedy clubs, having managed The D.C. Improv comedy club and having worked in and around that industry for some time. (See id. 12.) Dawson introduced Xereas to Heiss, and the three discussed a potential collaboration. (See id. 29.) A few months later, Heiss, Dawson, and Xereas agreed to build and operate a new comedy club at the 801 E. Street location (the Riot Act Club). (See id. 30.) To that end, they formed a limited liability corporation, Riot Act DC, LLC, which is a co-defendant here. (See id. 32-34.) On May 6, 2010, Dawson, Heiss, and Xereas executed an Operating Agreement and Articles of Organization for their LLC and registered that entity with the District of Columbia. (See id.) In November 2010, they executed an Amended and Restated Operating Agreement to govern the venture. (See Am. Compl., Ex. 13.) Each party agreed to contribute money and intangibles to Riot Act, DC, LLC, which would be managed by the three Managing Members Dawson, Heiss, and Xereas based on a majority vote (without regard to their respective equity stakes). (See id.) To capitalize the project, Dawson and Heiss also obtained approximately $2 million from multiple passive investors, some of whom have invested in certain of their prior ventures (the so-called Class B Members). (Id. at 7-8.) After designing and building the interior of the venue, signing up comedy talent to perform, and beginning to establish an online, social media presence, the Riot Act Club opened its doors to the public in August 2011. (See Am. Compl. 44 & 47.) The venture did not go as planned, and it quickly became apparent to Dawson and Heiss that Xereas was neither an effective manager nor a reliable partner. In particular, and among other problematic practices, Xereas insisted upon (i) signing contracts on behalf of Riot Act, DC,

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LLC without submitting them for review by Riot Acts in-house legal counsel, Ms. Heiss; (ii) hiring comedians without written contracts; and (iii) paying performers in cash without issuing evidence of receipt or otherwise issuing proper documentation for tax purposes. In addition, Xereas hired as employees friends and family, including his brother, Ted Xereas, and close friend, Mike Farfel, who did not perform effectively in their roles. Riot Act DC, LLC was quickly losing money and, in Dawsons and Heiss view, Xereas was not running the day-to-day operations of the comedy club in a manner that was consistent with sound business practices or likely to lead to success. By January 2012, after repeated, unsuccessful attempts to work with Xereas to solve the problems that they had identified, Dawson and Heiss decided that significant changes in personnel and practices were necessary. Those changes included, on January 17, 2012, the termination of several employees whom Xereas had hired, including Ted Xereas and Mike Farfel. Upon learning of that decision, Xereas stormed out of the Riot Act Club and, to Dawsons and Heiss knowledge, has never returned to work. Thereafter, Xereas stopped communicating with Dawson and Heiss and took actions designed to undermine the company (in which he was still, at the time, a managing member). Among the most damaging of those actions was Xereas participation in a scheme to sabotage the social media marketing tools that the company had created (at significant expense) to help the Riot Act Club develop and engage with its fan base. The situation deteriorated from that point, and the differences became intractable. Xereas began claiming that the trademark RIOT ACT and Internet domain names incorporating that mark belonged to him, not to Riot Act DC, LLC, and he demanded that the company cease using that intellectual property. Indeed, Dawson and Heiss discovered that Xereas had filed an

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application with the U.S. Patent and Trademark Office to register the mark RIOT ACT in his own name. Having investigated the circumstances surrounding the social media sabotage that had occurred after they fired Xereas brother and friend, Dawson and Heiss realized that Xereas was conspiring with members of his family and others in a course conduct designed to completely undermine and injure the business.1 Then, in February 2012, Xereas initiated a lawsuit in the Superior Court of the District of Columbia against Dawson, Heiss, and Riot Act DC, LLC. (Xereas later dismissed that action voluntarily.) Faced now with a partner who would neither come to work nor communicate with them (and who was in fact suing them), Dawson and Heiss determined that Xereas conduct required and under the LLCs operating agreement fully warranted his removal as a managing member. On March 22, 2012, after affording Xereas and his counsel an opportunity to try to justify his misconduct and explain why he should not be removed as a managing member (which Xereas declined to try to do), Dawson and Heiss effected that action under the relevant terms of the operating agreement. Xereas filed this action the next day and, on March 27, 2012, he filed the Amended Complaint that is the subject of this motion. THE MOTIONS TO DISMISS Xereas Amended Complaint asserts eleven counts against various combinations of Heiss, Dawson, Riot Act, DC, LLC, and co-defendant Squiid, Inc. (Squiid), which is a tiny web services company that Riot Act DC, LLC engaged to design and manage a website and related social media outlets related to the Riot Act Club. Squiid is implicated in two counts Count IV for conversion and Count X for cybersquatting and, contemporaneously with this motion, is filing its own motion to dismiss those counts for failure to state a claim. Because
1

Despite being removed as a managing member, Xereas still retains a roughly twenty-five percent equity stake in Riot Act, DC, LLC. 5

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Counts IV and X are untenable as against any defendant, Defendants Dawson, Heiss, and Riot Act DC, LLC are incorporating here the arguments set forth in Squiids motion to dismiss that apply to them. In Counts I through III of the Amended Complaint, Xereas alleges that Heiss, Dawson, and Riot Act, DC, LLC have committed trademark infringement and unfair competition by using the mark RIOT ACT in connection with the comedy club business. His theory contrary to the facts, the law, and common sense is that he merely licensed to the company the alleged rights in the mark RIOT ACT that he previously had developed, and that the company may not use that mark absent his ongoing managerial involvement in its business. As noted above, there is no need to resolve those issues because the company has decided to stop using that mark, to quickly transition to a new mark, and to relinquish to Xereas all rights to RIOT ACT and the related domain names at issue.2 That leaves Counts V through IX and Count XI of the Amended Complaint, which allege various business torts and defamation. As explained below, each of those claims is fatally deficient. ARGUMENT AND AUTHORITIES When ruling on a defendants motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a judge must accept as true all of the factual allegations contained in the complaint. Atherton v. D.C. Office of the Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009). However, the pleader must provide more than labels and conclusions, and a formulaic recitation of the elements of the cause of action will not do. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). To survive

In addition to the bases for dismissal set forth in Squiids motion to dismiss, Defendants relinquishment of all rights to the domain names related to RIOT ACT will also essentially moot Plaintiffs cybersquatting claim (Count X). 6

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a motion to dismiss, a complaint must . . . state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation and internal quotation marks omitted). Counts IV through XI of Xereas Amended Complaint do not state claims that are plausible on their face and, therefore, the Court should dismiss them. I. Xereas Breach of Contract Claim (Count V) Fails as a Matter of Law Because Xereas Amended Complaint Does Not Allege How Heiss and Dawson Breached a Contract The title of Count V indicates that Xereas intends to claim that Dawson and Heiss breached a contract into which they entered with him. However, the Amended Complaint does not identify the contract at issue, let alone describe the specific contractual term that Dawson and Heiss allegedly breached or how they allegedly did so. As such, Count V fails to state a claim for a breach of contract. To prevail on a claim of breach of contract, a party must establish (1) a valid contract between the parties; (2) an obligation or duty arising out of that contract; (3) a breach of that duty; and (4) damages caused by the breach. Tsintolas Realty Co. v. Mendez, 984 A.2d 181, 187 (D.C. 2009). To state such a claim, therefore, a plaintiff must allege sufficient facts to establish the existence of a contract and how the defendant breached it. See Mesumbe v. Howard Univ., 706 F. Supp. 2d 86, 95-96 (D.D.C. 2010). Xereas sets forth his allegations of wrongdoing for Count V in Paragraph 94 of the Amended Complaint. Specifically, he alleges that: Defendants breached their duty of good faith and fair dealing by fraudulently inducing Plaintiff to enter a business relationship with them, to sign the Operating Agreement, to contribute $100,000, and to contribute his time and industry expertise, contacts, and business plans, as well as the right to use Plaintiffs RIOT ACT Trademarks and Domain Names, to the Venture, and then terminating Plaintiff Xereas participation, involvement, and ownership in the Venture shortly after the clubs opening. 7

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These allegations refer to the original Operating Agreement that governed Riot Act DC, LLC, but they do not affirmatively state that, let alone describe how, Dawson and Heiss supposedly breached that agreement (or any other). In Twombly, the Supreme Court held that: To survive a motion to dismiss, a complaint must . . . state a claim to relief that is plausible on its face. 550 U.S. at 555. Here, Xereas claim does not even rise to the level of labels and conclusions or a formulaic recitation of the elements of the cause of action. Instead, he has done nothing more than mention a cause of action in the heading of Count V. That does not suffice under even the most liberal view of federal pleading standards. II. Xereas Claim for Breach of the Implied Covenant of Good Faith and Fair Dealing (Count V) Fails as a Matter of Law Because He Improperly Alleges It as a Stand-Alone Cause of Action and Because It is Duplicative of Xereas Fraudulent Inducement Claim Because Count V does not state a claim for breach of contract, the most that it fairly can be said to allege is a stand-alone claim for breach of the implied covenant of good faith and fair dealing. However, that claim likewise fails as a matter of law because it violates the following principles: (1) a party cannot bring a cause of action for breach of the duty of good faith and fair dealing without alleging breach of an express term of the underlying contract; and (2) a claim for breach of the implied covenant of good faith and fair dealing cannot simply mirror another, established claim alleged in a complaint. a. Xereas' Breach of Implied Covenant of Good Faith and Fair Dealing Claim Fails Because He Fails to Allege a Breach of an Express Contractual Provision The majority of jurisdictions that have ruled on the issue have held that a party cannot assert an action for breach of the implied covenant of good faith and fair dealing without also alleging breach of an express term of the underlying contract. See, e.g., Hospital Corp. of Am. v. Fla. Med. Ctr., Inc., 710 So.2d 573, 575 (Fla. Dist. Ct. App. 1998); Adolph Coors Co. v. Rodriguez, 780 S.W.2d 477, 482 (Tex. Ct. App. 1989); Super Glue Corp. v. Avis Rent-a-Car 8

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Sys., Inc., 517 N.Y.S. 2d 764, 766 (N.Y. App. Div. 1987); see also 23 WILLISTON ON CONTRACTS 63.22 ([P]erhaps the majority of courts decline[] to find a breach of the implied covenant of good faith and fair dealing absent breach of an express term of the contract.). In other words, breach of the implied covenant of good faith and fair dealing is not a stand-alone claim. Although it appears that the District of Columbia Court of Appeals has not yet expressly considered the issue,3 this Court has held on at least one occasion that no such stand-alone claim is cognizable. Crystal Productions, Inc. v. Doc Severinsen Orchestras, No. Civ. A 90-932, 1994 WL 507546, at *4 (D.D.C. Sept. 10, 1992). In reaching that conclusion, the Crystal Productions court reasoned that the implied covenant of good faith modifies the meaning of all explicit terms in a contract, preventing a breach of those explicit terms de facto when performance is maintained de jure. . . . The implied covenant is not, however, an undertaking that can be breached apart from those [explicit] terms. Id. (quoting Alans of Atlanta, Inc. v. Minolta Corp., 903 F.2d 1414, 1429 (11th Cir. 1990)); see also Bernstein v. True, 636 So.2d 1364 (Fla. Dist. Ct. App. 1994) (With respect to [a] breach of an implied duty of good faith, a duty of good faith must relate to the performance of an express term of the contract and is not an abstract and independent term of a contract which may be asserted as a source of breach when all other terms have been performed pursuant to the contract requirements.). The decisions of appellate courts in neighboring jurisdictions (including the Maryland Court of Special Appeals and the Virginia Supreme Court) are in accord. See Mt. Vernon Prop., LLC v. Branch Banking & Trust Co., 170 Md. App. 457, 471, 907 A.2d 373, 381 (Md. Ct. Spec. App. 2006) ([W]e affirm the circuit courts holding that there is no independent cause of action at law in Maryland for breach of the
3

See C&E Servs., Inc. v. Ashland, 601 F. Supp. 2d 262, 274-75 (D.D.C. 2009) (stating that District of Columbia law on this issue is not settled). 9

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implied covenant of good faith and fair dealing.); Charles E. Brauer Co. v. NationsBank of Virginia, N.A., 251 Va. 28, 33, 466 S.E.2d 382, 385 (Va. 1996) (holding that, in Virginia, there is no independent cause of action in tort for a partys breach of the obligation of good faith). This Court should adopt the well-reasoned view of the Crystal Productions court and the majority of other courts that have considered this issue and, accordingly, hold that Xereas cannot bring a stand-alone claim for breach of the implied covenant of good faith and fair dealing. b. Alternatively, Xereas Claim for Breach of the Implied Covenant of Good Faith and Fair Dealing Fails Because It is Identical To His Fraudulent Inducement Claim That claim fails for another independent reason as well: it is duplicative of Xereas fraudulent inducement claim in Count VI. [A] party is not entitled to maintain an implied duty of good faith claim where the allegations of bad faith are identical to a claim for relief under an established cause of action. Jacobsen v. Oliver, 201 F. Supp. 2d 93, 98 n.2 (D.D.C. 1996) (internal quotation marks and citations omitted); see also Wash. Metro. Area Transit Auth. v. Quik Serve Foods, Inc., No. 04-838, 2006 WL 1147933, at *5 (D.D.C. Apr. 28, 2006) ([B]reach of the implied covenant is not an independent cause of action when the allegations are identical to other claims for relief under [an] established cause of action.); Capital Justice, LLC v. Wachovia Corp., 605 F. Supp. 2d 187, 193 (D.D.C. 2009) (Lamberth, J.). Xereas claim for breach of the implied covenant of good faith and fair dealing involves allegations identical to those associated with his claim of fraudulent inducement. Each of those alternate theories of recovery concerns the same supposed fraudulent inducement that Heiss and Dawson allegedly carried out. Indeed, the paragraphs setting forth the allegations for each cause of action are virtually identical. (Compare Am. Compl. 94 with Am. Compl. 97.) Because the good faith claim is identical to Xereas fraudulent inducement claim, it fails as a matter of law.

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III.

Xereas Fraudulent Inducement and Conspiracy to Defraud Claims (Counts VI and VII) Fail as a Matter of Law Because He Has Failed to Plead Them with Particularity, as Required by Rule 9(b)

The Court should dismiss Xereas next two claims because he has not pled them with particularity, as required under Fed. R. Civ. P. 9. More specifically, Count VI alleges that Dawson and Heiss fraudulently induced Xereas to enter into a business relationship with them. (Am. Compl. 96-98.) Count VII alleges that Dawson and Heiss conspired to defraud Xereas by agreeing between themselves and taking action intended to fraudulently induce him to enter into a business relationship with them. (Am. Compl. 99-102.) Both claims are subject to the heightened pleading standards of Rule 9, but the Amended Complaint includes only vague and conclusory allegations that do not even approach the requisite degree of particularity. Federal Rule of Civil Procedure 9(b) provides that, [i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud. Because a fraudulent inducement claim is a claim of fraud, a plaintiff pleading fraudulent inducement must satisfy the pleading requirement of Rule 9(b). Buy Back District of Columbia, LLC v. Home Depot USA, Inc., No. Civ. A 04-1429-PLF, 2004 WL 4012265 (D.D.C. Dec. 14, 2004); see also Poblete v. Indymac Bank, 657 F. Supp. 2d 86, 93 (D.D.C. 2009) (dismissing plaintiffs claim under Rule 9(b) because it consists of diffuse and conclusory allegations that the defendants deliberately misrepresented material facts to induce the plaintiff to enter into the transaction at issue); Ellipso, Inc. v. Mann, 460 F. Supp. 2d 99, 105-07 (D.D.C. 2006) (analyzing fraudulent inducement claim under particularity requirements of Rule 9). The same is true of a plaintiff pleading conspiracy to defraud. See Sturdza v. United Arab Emirates, 281 F.3d 1287, 1306 (D.C. Cir. 2002) ([I]n actions alleging conspiracy to defraud or conceal, the particularity requirements of Rule 9(b) must be met.) (quoting Hayduk

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v. Lanna, 775 F.2d 441, 443 (1st Cir. 1985)); Kissi v. Panzer, 664 F. Supp. 2d 120, 126-27 (D.D.C. 2008) (dismissing plaintiffs conspiracy to defraud claim under Rule 9(b) because plaintiffs allegations are, at best, conclusory). To satisfy Rule 9, a plaintiff must, at a minimum, state the time, place and content of the false representations, the fact misrepresented and what was retained or given up as a consequence of the fraud. Kowal v. MCI Communications Corp., 16 F.3d 1271, 1278 (D.C. Cir. 1994). Thus, allegations in form of conclusions on the part of the pleader as to the existence of fraud are insufficient. Ellipso, 460 F. Supp. 2d at 106 (quoting Hercules & Co. v. Shama Rest. Corp., 613 A.2d 916, 923 (D.C. 1992)). Xereas sets forth his fraudulent inducement claim in Paragraph 97 of his Amended Complaint: Defendants Dawson and Heiss fraudulently induced Plaintiff to enter into a business relationship with them, to sign the Operating Agreement, to contribute $100,000, and to contribute his time and industry expertise, contacts and business plans, and to allow use of the RIOT ACT Trademarks and Domain Names by the Venture, all the while intending to terminate without cause Plaintiff Xereas participation, involvement, and ownership shortly after the clubs opening. His conspiracy to defraud claims is alleged in Paragraphs 100-101: Defendants Dawson and Heiss fraudulently conspired to defraud Plaintiff Xereas by agreeing between themselves and taking actions intended to fraudulently induce Plaintiff to enter into a business relationship with them, to sign the Operating Agreement, to contribute $100,000, and to contribute his time and industry expertise, contacts and business plans, and to allow use of the RIOT ACT Trademarks and Domain Names by the Venture, all the while intending to terminate, without cause, Plaintiffs participation, involvement, and ownership shortly after the clubs opening. Defendants Dawson and Heiss actively concealed their fraud from Plaintiff intending to obtain and take improper advantage of Plaintiff Xereas comedy club management expertise, talent 12

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booking skills, industry contacts, email customer lists, and long established and favorable reputation in the industry, solely for the purpose of launching a comedy club using the RIOT ACT Trademarks and RIOT ACT Domain Names, with the intention of terminating Plaintiffs participation, involvement, and ownership in the Venture. Aside from the paragraphs quoted above, the only other paragraphs in the Amended Complaint that reasonably can be construed to relate to Xereas fraudulent inducement and conspiracy to defraud claims are paragraphs 30, 32, 33, and 34, which describe the formation of the parties business relationship. The gist of his allegations on this subject is set forth in paragraph 33: During th[e] period [of April or May 2010], Defendant Heiss, a licensed DC attorney, prepared the necessary documents to pursue the parties Venture including an Operating Agreement and the Articles of Organization for a DC limited liability corporation, identified as Riot Act DC, LLC (the LLC). Heiss registered the LLC with the District of Columbia on May 6, 2010. Also on May 6, 2010, Plaintiff Xereas, without benefit of counsel, and Defendants Dawson and Heiss executed the Operating Agreement. Among other things, the Operating Agreement provided for each of the three Managing Members (i.e., Plaintiff Xereas, Defendant Dawson, and Defendant Heiss) to contribute the sum of $100,000 to the Venture as operating capital. None of these allegations state[s] the time, place and content of the false representations, the fact misrepresented and what was retained or given up as a consequence of the fraud as required by Rule 9 The Court should dismiss them accordingly.4

Further, conspiracy to defraud is nothing more than a means for establishing vicarious liability for the underlying tort; it is not an independent tort. Exec. Sandwich Shoppe, Inc. v. Carr Realty Corp., 749 A.2d 724, 738 (D.C. 2000). That means that, if the Court concludes that Xereas fraudulent inducement claim fails as a matter of law, Xereas conspiracy to defraud claim automatically fails as well.

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IV.

Xereas Tortious Interference with Contractual Relations Claim (Count VIII) Fails as a Matter of Law Because Xereas Amended Complaint Does Not Allege That a Contract Existed Between Him and the Individuals and Entities with Whom Defendants Allegedly Interfered Count VIII of the Amended Complaint alleges that Dawson and Heiss tortiously

interfered with Xereas business relationships with numerous talent managers, agents, comics, and other contacts in the comedy and entertainment industry. (Am. Compl. 103-05.) That claim requires the existence of a contract between the plaintiff and the third party with whom the defendant allegedly interfered. Because Xereas does not allege that he and the numerous talent managers, agents, comics, and other contacts in the comedy and entertainment industry were in contractual privity, his tortious interference claim fails as a matter of law. Tortious interference with contractual relations arises when a defendant interferes with a contract between the plaintiff and some third party. Weaver v. Gross, 605 F. Supp. 210, 216 (D.D.C. 1985)) (emphasis added). To establish a claim of tortious interference with contractual relations, a plaintiff must prove (1) the existence of a contract, (2) defendants knowledge of the contract, (3) defendants intentional procurement of the contracts breach, and (4) damages resulting from the breach. Cooke v. Griffiths-Garcia Corp., 612 A.2d 1251, 1256 (D.C. 1992) (emphasis added). Paragraph 104 of Xereas Amended Complaint articulates his tortious interference claim as follows: Defendants Dawson and Heiss were well aware of the business relationship that Plaintiff Xereas had with numerous talent managers, agents, comics and other contacts in the comedy and entertainment industry and acted intentionally to deprive Plaintiff of his ownership of the RIOT ACT Domain Names, his access to longstanding email address at [email protected], and thereby his ability to maintain contact and relationships, and continue doing business with, these individuals. (Emphasis added). These allegations do not pass muster under the applicable standards because Xereas has 14

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not alleged that contracts existed between himself and the referenced contacts, let alone that Dawson and Heiss interfered with those contractual relations. The Court should dismiss Count VIII for that reason. V. Xereas Unjust Enrichment Claim (Count IX) Fails as a Matter of Law Because Xereas Complaint Alleges the Existence of a Contract Between Xereas and Dawson, Heiss, and Riot Act DC, LLC Xereas has alleged, however, the existence of a contract between himself and Defendants Dawson, Heiss, and Riot Act DC, LLC. That allegation is fatal to the unjust enrichment claim he seeks to assert in Count IX, which claims that those defendants activities . . . have provided an immediate market and commercial recognition for their services which they otherwise would not have, and have resulted in unjust enrichment at Plaintiffs expense. (Am. Comp. 107.) The unjust enrichment claim also fails against the individual defendants, Dawson and Heiss, because Xereas fails to set forth any allegations that would establish that they should be held responsible for Riot Act, DC, LLCs liabilities under the District of Columbias Uniform Limited Liability Company Act of 2010. a. Xereas Unjust Enrichment Claim Fails Because His Amended Complaint Alleges the Existence of a Contract Between the Parties Under District of Columbia law, there can be no claim for unjust enrichment when an express contract exists between the parties. Albrecht v. Comm. on Emp. Benefits of Fed. Reserve Emp. Benefits Sys., 357 F.3d 62, 69 (D.C. Cir. 2004) (quoting Schiff v. Am. Assn of Retired Persons, 697 A.2d 1193, 1194 (D.C. 1997)); see also United States ex rel. Modern Elec., Inc. v. Ideal Elec. Sec. Co., 81 F.3d 240, 247 (D.C. Cir. 1996) (Unjust enrichment . . . rests on a contract implied in law, that is, on the principle of quasi-contract. This . . . form of recovery is possible in the absence of any contract, actual or implied in fact.). Xereas unjust enrichment claim cannot survive in light of that rule.

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Specifically, paragraphs 32-38 of the Amended Complaint describe the contract that governed the relationship between Dawson, Heiss, Xereas, and the company they formed, Riot Act DC, LLC. (See Am. Compl. 37 (The RIOT ACT Business Plan as prepared by Plaintiff Xereas and Defendants Dawson and Heiss, reflected Plaintiffs understanding of the terms of the contractual relationship entered into by himself, Mr. Dawson, and Ms. Heiss in pursuing their business venture (emphasis added)). Because Xereas alleges the existence of a contract between the parties, his unjust enrichment claim fails as a matter of law. b. Xereas Unjust Enrichment Claim Fails Against Individual Defendants Dawson and Heiss Because Xereas Does Not Allege How They are Liable For Riot Act, DC, LLCs Activities Under the District of Columbias Uniform Limited Liability Company Act of 2010 The unjust enrichment claim separately fails as a matter of law against Dawson and Heiss because Xereas has not alleged how or why those defendants should be held personally liable for the conduct of Riot Act, DC, LLC. Under District of Columbia law, a member of a limited liability company is generally not liable for the debts, obligations, or other liabilities of a limited liability company, whether arising in contract, tort, or otherwise. D.C. Code 29-803.04; see also Ruffin v. New Destination, LLC, 773 F. Supp. 2d 34, 40 (D.D.C. 2011) (The general rule is that a corporation is regarded as an entity separate and distinct from its shareholders . . ., and this rule applies to LLCs. (internal quotations marks and citations omitted)). A party seeking to disregard the corporate or LLC entity must pierce the veil by putting forward affirmative evidence that there is unity of ownership and interest and use of the corporate form to perpetuate fraud or wrong. Ruffin, 773 F. Supp. 2d at 40 (citing Lawlor v. District of Columbia, 758 A.2d 964, 975 (D.C. 2000)). Xereas Amended Complaint is devoid of any allegations as to how there was a unity of ownership and interest, or how Dawson or

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Heiss may have used Riot Act, DC, LLC to perpetuate the alleged wrong. Therefore, the unjust enrichment claim cannot survive against the individual defendants in any event. VI. Xereas Defamation Claim (Count XI) Fails as a Matter of Law Because the Statements Xereas Claims Heiss and Dawson Allegedly Made are Not Actionable as Defamatory Statements Count XI alleges that Heiss and Dawson defamed Xereas by repeatedly ma[king] oral and written statements directly stating or implying that Plaintiff Xereas was dismissed from the Venture due to incompetence and/or dishonest business practices. (Am. Compl. 114.) To plead a claim of defamation under District of Columbia law, a plaintiff must allege (among other things) that the defendant made a statement of fact or a statement of opinion that implies a provably false fact. By contrast, Xereas alleges that Heiss and Dawson defamed him by calling him incompetent and dishonest, neither of which are statements of fact or statements of opinion that imply a provably false fact. The defamation claim fails as a result. To pursue a claim of defamation in the District of Columbia, a plaintiff must allege four elements: (1) that the defendant made a false and defamatory statement concerning the plaintiff; (2) that the defendant published the statement without privilege to a third party; (3) that the defendants fault in publishing the statement amounted to at least negligence; and (4) either that the statement was actionable as a matter of law irrespective of special harm or that its publication caused the plaintiff special harm. Oparaugo v. Watts, 884 A.2d 63, 76 (D.C. 2005). As a general rule, statements of fact are capable of being defamatory, whereas pure opinions cannot be defamatory and are therefore not actionable. Rosen v. Am. Israel Public Affairs Comm., Inc., --- A.3d ---, No. 11-CV-368, 2012 WL 1427797, at *4 (D.C. Apr. 26, 2012). Statements of opinion, however, can be actionable if they imply a provably false fact, or rely upon stated facts that are provably false. Id. (quoting Guilford Transp. Indus. v. Wilner, 760 A.2d 580, 597 (D.C. 2000)). 17

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For a statement to imply a provably false fact, it must contain an explicit or implicit factual foundation that would allow someone hearing or reading the statement to discern[] particular behaviors that [are] concrete enough to reveal objectively verifiable falsehoods. Id. (quoting Guilford, 760 A.2d at 597); see also Moldea v. New York Times Co., 22 F.3d 310, 31617 (D.C. Cir. 1994) ([W]e must determine as a threshold matter whether a challenged statement is capable of a defamatory meaning; and whether it is verifiable-that is, whether a plaintiff can prove that it is false.). In other words, the statement must communicate [a] specific message about a discernible fact to an uninformed hearer. Id. Remarks on a subject lending itself to multiple interpretations cannot be the basis of a successful defamation action because as a matter of law no threshold showing of falsity is possible in such circumstances. Id. (quoting McClure v. Am. Family Mut. Ins. Co., 223 F.3d 845, 856 (8th Cir. 2000)). Consistent with these principles, in Rosen the Court of Appeals for the District of Columbia recently explained that generalized statements critical of employees behavior e.g., that they were terminated because they were disloyal, disruptive, unacceptable, and unfit do not form the basis of a defamation claim unless such statements reference specific incidents that can be found to be provably false. Id. Xereas sets forth his defamation claim in paragraphs 63-64 of his Amended Complaint: Since the date of his effective termination on January 26, 2012, Defendants Dawson and Heiss have actively engaged in both written and oral communications with members of the entertainment industry and the general public, including Riot Act fan club members, agents, event planners, and others falsely representing that Plaintiff Xereas employment was terminated due to incompetence, dishonest business practices, deceptive sales practices, and other like false and defamatory claims. (Emphasis added.) Defendant Dawson and Heiss have made such claims despite full knowledge of their falsity, and with the intention of causing 18

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damage to Plaintiffs Xereas personal and business reputation and to his ability to continue to operate in his field of expertise. Xereas claim that Dawson and Heiss defamed him by stating that he was terminated due to incompetence, dishonest business practices, and deceptive sales practices are not actionable as defamatory statements because they are not provably false and do not reference or imply provably false facts. Indeed, courts routinely hold that these exact terms and others like them cannot support a defamation claim. See, e.g., Cutaia v. Radius Engg Intl, Inc., No. 5:11cv0077, 2012 WL 525471, at *7 (W.D. Va. Feb. 16, 2012) (defendants statement about plaintiffs competence and assertion that plaintiff did not properly perform its contractual duties are not subject to objective verification and therefore not actionable as defamatory statements); Newman v. Hansen & Hempel Co., No. 01-C-9871, 2002 WL 31455990, at *8 (N.D. Ill. Nov. 1, 2002) (plaintiffs statements that defendant was incompetent at her job and stupid are opinions, not statements of fact and therefore not actionable); Shor Intl Corp. v. Eisinger Enterprises, Inc., No. 90-Civ-2353, 2000 WL 1793389, at *3 (S.D.N.Y. Dec. 5, 2000) (defendants conduct in referring to all of defendants practices as dishonest, as opposed to stating that defendants engaged in dishonest practices on a particular occasion, converts the statement into a hyperbole that cannot be taken as a serious assertion of fact). Because Xereas does not allege that Dawson and Heiss defamed him by making a statement of fact or a statement of opinion that implies a provably false fact, Xereas defamation claim fails as a matter of law.

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VII.

Xereas Claims for Conversion and Cybersquatting (Counts IV and X) Fail as a Matter of Law Against Dawson, Heiss, and Riot Act, DC, LLC for the Reasons Set Forth in Squiids Motion to Dismiss

As explained in Squiids Motion to Dismiss, a plaintiff cannot assert a conversion claim for improperly exercising dominion or control over intangible property, such as an Internet domain name. (See Squiids Mot. to Dismiss at 5.) Because Xereas is basing his conversion claim on his allegation that Dawson, Heiss, and Riot Act, DC, LLC converted Internet domain names, his claim fails as a matter of law. Count X is also deficient against Dawson, Heiss, and Riot Act, DC, LLC for reasons set forth in Squiids Motion to Dismiss. Specifically, the statute upon which Count X is predicated, the Anticybersquatting Consumer Protection Act, 15 U.S.C. 1125(d) (ACPA), does not apply to a domain name that is registered before the plaintiff has developed rights in the trademark that such domain name supposedly violates that is, before the mark at issue has been used in commerce. (Squiids Mot. to Dismiss at 7.) Because Xereas registered each of the domain names at issue here before he first used the mark RIOT ACT in commerce, his cybersquatting claim against Dawson, Heiss, and Riot Act, DC, LLC fails as a matter of law. (Id.)

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CONCLUSION Xereas displeasure with the circumstances surrounding his removal as a managing member of Riot Act DC, LLC does not entitle or enable him to state cognizable claims under D.C. law. Instead, for the reasons set forth above, each of Counts IV, V, VI, VII, VIII, IX, X, and XI of Xereas Amended Complaint fails as a matter of law. Accordingly, the Court should dismiss these claims.

Respectfully submitted,

/s/ Joshua Fowkes______________________ Joshua Fowkes (D.C. Bar No. 494700) [email protected] Arent Fox LLP 1050 Connecticut Avenue, NW Washington, DC 20036-5339 Tel: (202) 857-6000 Fax: (202) 857-6395 Alec P. Rosenberg (D.C. Bar No. 479381) [email protected] ARENT FOX LLP 1050 Connecticut Avenue, NW Washington, DC 20036-5339 Tel: (202) 857-6000 Fax: (202) 857-6395 Attorneys for Defendants Marjorie A. Heiss, Geoffrey O.S. Dawson, and Riot Act DC, LLC

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CERTIFICATE OF SERVICE The undersigned hereby certifies that on this 29th day of May, 2012, I have caused the foregoing Motion to Dismiss Plaintiff John N. Xereas Amended Complaint to be served by operation of the Courts CM/ECF system upon the following: Julia Anne Matheson, Esq. Laurence R. Hefter, Esq. Stephanie H. Bald, Esq. FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER, LLP 901 New York Ave., N.W. Washington, D.C. 20001 Tel: (202) 408-4000 Fax: (202) 408-4400 Irwin H. Liptz, Esq. KIVITZ & LIPTZ, LLC 7979 Old Georgetown Road Bethesda, MD 20814 Tel: (301) 951-3400 Fax: (301) 951-3646 Tim Clinton CLINTON & PEED 1455 Pennsylvania, Ave., N.W. Suite 400 Washington, D.C. 20004 Tel: (202) 621-1828 Fax: (202) 204-6320

/s/ Joshua Fowkes_______________ Joshua Fowkes