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`Case 2:23-cv-01116-DWL Document 43 Filed 04/30/24 Page 1 of 9
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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE DISTRICT OF ARIZONA
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`Todd Svec,
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`Plaintiff,
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`v.
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`Brett Davis, et al.,
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`No. CV-23-01116-PHX-DWL
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`ORDER
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`Defendants.
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`Pending before the Court is a motion for judgment on the pleadings filed by
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`Plaintiff/Counter-Defendant Todd Svec (“Svec”). (Doc. 35.) For the reasons that follow,
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`the motion is denied.
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`BACKGROUND
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`On March 22, 2023, Svec initiated this action against Brett Davis (“Davis”) and
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`certain other individuals and entities (together, “Defendants”). (Doc. 1.)1 Svec alleges that
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`“[o]n or about August 13, 2020, [he] paid [Davis] the agreed-upon $30,000 in exchange
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`for ownership of half of” a company called 21 Electronics, LLC. (Id. ¶ 18.) Svec further
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`alleges that “Davis eventually effectively ousted [him] from the partnership in 2022 by
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`removing [his] access to” various company accounts, information, and inventory. (Id.
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`¶ 43.) Svec further alleges that he and Defendants “agreed that the business relationship
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`was frayed and that the partnership should be dissolved . . . [i]n August 2022.” (Id. ¶ 45.)
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`1
`This action was filed in the Western District of Missouri but was later transferred to
`the District of Arizona. (Doc. 11.)
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`Case 2:23-cv-01116-DWL Document 43 Filed 04/30/24 Page 2 of 9
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`Based on these allegations, the complaint asserts claims for breach of contract, breach of
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`fiduciary duty, conversion, unjust enrichment, and an accounting. (Id. ¶¶ 48-107.)
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`On August 17, 2023, Defendants filed an amended answer. (Doc. 25.) Defendants
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`“admit the Parties signed a letter of intent” but otherwise “deny all remaining allegations
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`set forth in ¶ 18 of the Complaint.” (Id. at 2 ¶ 9.) Defendants also deny the allegations in
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`¶ 43 of the complaint. (Id. at 4 ¶ 26.)
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`In the same pleading, Davis asserts counterclaims for declaratory relief, promissory
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`estoppel, breach of the covenant of good faith and fair dealing, unjust enrichment/quantum
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`meruit, and conversion. (Id. at 8-17.) Davis alleges as part of his counterclaim that “the
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`letter of intent . . . and any further business venture was expressly conditioned on and would
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`not constitute a binding agreement on the parties until the Parties executed a final
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`partnership agreement or membership purchase agreement memorializing the final terms
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`of any business venture.” (Id. at 10 ¶¶ 15-16.) Davis further alleges that “[d]espite
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`executing the letter of intent . . . , Svec took no steps at any point in time to finalize or
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`formalize any partnership document or any other documents memorializing a[n]
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`acquisition of any interest in 21 Electronics.” (Id at 10 ¶ 17.) According to Davis, the
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`parties then agreed that “rather than” Svec “acquiring the interest in 21 Electronics,” he
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`“would serve as a distributor,” and “[t]he $30,000 . . . was treated as a payment to acquire
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`the non-exclusive right to distribute.” (Id. at 11 ¶¶ 27-28.) Based in part on these
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`allegations, Davis seeks a declaratory judgment that “Svec never acquired a legal or
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`ownership interest in 21 Electronics, LLC.” (Id. at 14 ¶ 53.)
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`On October 27, 2023, Svec filed the pending motion for judgment on the pleadings.
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`(Doc. 35.) That motion is now fully briefed. (Doc. 37, 38.)2
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`…
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`…
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`…
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`2
`Defendants’ request for oral argument is denied because the issues are fully briefed
`and argument would not aid the decisional process. See LRCiv 7.2(f).
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`- 2 -
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`Case 2:23-cv-01116-DWL Document 43 Filed 04/30/24 Page 3 of 9
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`I.
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`Legal Standard
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`DISCUSSION
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`“[T]o survive a motion to dismiss, a party must allege ‘sufficient factual matter,
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`accepted as true, to state a claim to relief that is plausible on its face.’” In re Fitness
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`Holdings Int’l, Inc., 714 F.3d 1141, 1144 (9th Cir. 2013) (quoting Ashcroft v. Iqbal, 556
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`U.S. 662, 678 (2009)). “A claim has facial plausibility when the plaintiff pleads factual
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`content that allows the court to draw the reasonable inference that the defendant is liable
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`for the misconduct alleged.” Id. (quoting Iqbal, 556 U.S. at 678). “[A]ll well-pleaded
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`allegations of material fact in the complaint are accepted as true and are construed in the
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`light most favorable to the non-moving party.” Id. at 1444-45 (citation omitted). However,
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`the court need not accept legal conclusions couched as factual allegations. Iqbal, 556 U.S.
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`at 678-80. Moreover, “[t]hreadbare recitals of the elements of a cause of action, supported
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`by mere conclusory statements, do not suffice.” Id. at 678. The court also may dismiss
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`due to “a lack of a cognizable legal theory.” Mollett v. Netflix, Inc., 795 F.3d 1062, 1065
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`(9th Cir. 2015) (citation omitted).
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`A Rule 12(c) motion for judgment on the pleadings by a defendant or counter-
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`defendant is “functionally identical” to a Rule 12(b)(6) motion to dismiss. Cafasso, U.S.
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`ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 n.4 (9th Cir. 2011) (citations
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`omitted); see also Harris v. Cnty. of Orange, 682 F.3d 1126, 1131 (9th Cir. 2012) (“Iqbal
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`applies to Rule 12(c) motions.”) (citation omitted). Therefore, a motion for judgment on
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`the pleadings “is properly granted when, taking all the allegations in the non-moving
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`party’s pleadings as true, the moving party is entitled to judgment as a matter of law.”
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`Fajardo v. Cnty. of Los Angeles, 179 F.3d 698, 699 (9th Cir. 1999); see also Elvig v. Calvin
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`Presbyterian Church, 375 F.3d 951, 955 (9th Cir. 2004) (when ruling on a Rule 12(c)
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`motion, the court must “accept as true all allegations in [the plaintiff’s] complaint and treat
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`as false those allegations in the answer that contradict [the plaintiff’s] allegations”).
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`Similarly, when a plaintiff or counterclaimant seeks judgment on the pleadings, “the
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`allegations of the non-moving party must be accepted as true, while the allegations of the
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`Case 2:23-cv-01116-DWL Document 43 Filed 04/30/24 Page 4 of 9
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`
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`moving party which have been denied are assumed to be false.” Hal Roach Studios, Inc.
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`v. Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1989). “Judgment on the pleadings
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`is proper when the moving party clearly establishes on the face of the pleadings that no
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`material issue of fact remains to be resolved and that it is entitled to judgment as a matter
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`of law.” Id. See generally 1 Steven S. Gensler, Federal Rules of Civil Procedure, Rules
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`and Commentary, Rule 12 (2024) (“For the court to grant judgment on the pleadings for
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`the plaintiff, the pleadings must show, even when construed in the light most favorable to
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`the defendant, that the plaintiff must prevail as a matter of law. This is often a difficult
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`burden since the plaintiff typically will hold the burden of proof for the claims it is
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`asserting. For the plaintiff to prevail on a Rule 12(c) motion, the pleadings must
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`conclusively establish all elements for which the plaintiff holds the burden and that no
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`defense is possible.”).
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`II.
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`The Parties’ Arguments
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`Svec contends that Defendants admit that (1) “[Svec] and . . . Davis agreed that
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`[Svec] would pay . . . Davis $30,000 in exchange for ownership of half of the partnership
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`and/or company”; (2) “[Svec] and [Davis] signed the contract/partnership agreement, even
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`if they do not agree that it was a contract or partnership agreement and instead allege that
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`it was a ‘letter of intent’”; and (3) “[Svec] paid . . . Davis $30,000.” (Doc. 35 at 5-6.) Svec
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`therefore contends that Defendants have admitted that he “was entitled to his rights under
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`the contract, i.e., one-half of the business.” (Id. at 6.) It follows, according to Svec, that
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`Davis is not entitled to a declaration “that there was no formal business relationship
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`between [Svec] and . . . Davis and that [Svec] never acquired a legal interest in 21
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`Electronics, LLC” because (1) “there is no express condition in the August 11, 2020
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`document that prevented or delayed [Svec’s] acquisition of a 50% interest”; (2) “the sale
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`and acquisition were consummated upon payment of $30,000, and [Svec] made that
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`payment”; and (3) “Davis’s after-the-fact claim that the sale was conditioned on the
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`creation and execution of other partnership agreements is clearly belied by the express
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`terms of the August 11, 2020 document.” (Id. at 10-11.) Finally, Svec also argues that, as
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`Case 2:23-cv-01116-DWL Document 43 Filed 04/30/24 Page 5 of 9
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`a matter of law, he is “entitled to an accounting for the business from . . . Davis” under
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`either A.R.S. § 29-1035 or § 29-3410. (Id. at 11-12.)
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`Defendants respond that there is “a factual dispute as to whether . . . Svec acquired
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`an interest in 21 Electronics” because “whether the parties intend[ed] to be bound” by “a
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`letter of intent” or “only after the execution of a formal written agreement is a question of
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`fact.” (Doc. 37 at 5-6, 11, cleaned up.) More specifically, Defendants assert that “a letter
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`of intent is generally not a binding agreement unless the content of the letters, conduct of
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`the parties, and its surrounding circumstances clearly point to a mutual intent to be bound,”
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`and here “the content of the letter of intent dated August 11, 2020 reflects an intent not to
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`be bound because its purpose is clearly outlined, essential terms of the alleged contract are
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`missing, and the letter of intent even references further ‘partnership agreements’ . . . that
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`must be executed to complete the transaction.” (Id. at 8-9.) Finally, Defendants contend
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`that “the conduct of the parties following the letter of intent reflects an intent not to be
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`bound by the terms of the letter of intent” because the parties “never executed the
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`subsequent partnership agreements to complete the transaction” and “the parties agreed to
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`repurpose the $30,000 . . . Svec paid to . . . Davis as an acquisition of the right to distribute
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`XPin products through” Svec’s own company. (Id. at 3, 10-11.)
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`In reply, Svec argues that “being labeled a notice of intent does not preclude an
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`agreement from being a binding contract.” (Doc. 38 at 2.) Svec emphasizes that “[t]here
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`is no express or even implied nonbinding clause in the agreement,” and rather “[t]he
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`content of the agreement . . . shows that the parties clearly intended to be bound by it.” (Id.
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`at 4.) Further, Svec argues that “when the terms of a contract are clear, the intent of the
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`parties must be ascertained from the contract itself,” but in any case “the parties’ conduct
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`and the surrounding circumstances further demonstrate the parties’ intent to treat the
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`agreement as a sale of an interest in the business.” (Id. at 5-6.) Svec also contends that it
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`“is not legally accurate” to suggest that “the lack of other agreements somehow prevents
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`the consummation of the sale.” (Id. at 7.)
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`…
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`Case 2:23-cv-01116-DWL Document 43 Filed 04/30/24 Page 6 of 9
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`III. Analysis
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`A.
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`Svec’s Claim For An Accounting
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`Svec seeks judgment on the pleadings on Count Seven of his complaint, which is an
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`affirmative claim for an accounting. (Doc. 1 ¶¶ 103-07.) At the outset, the Court notes
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`that Svec has been inconsistent regarding whether Arizona or Missouri law governs this
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`claim. (Doc. 1 ¶ 105 [seeking accounting under Missouri statute]; Doc. 35 at 11 [seeking
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`accounting under Arizona statutes]; Doc. 38 at 8 [citing both Arizona and Missouri
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`statutes].) As explained below, Svec is not entitled to judgment on the pleadings regardless
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`of which state’s law applies.
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`A.R.S. § 29-3410(B) allows “a member or manager” of an LLC to “inspect and
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`copy” certain “records.” Similarly, A.R.S. §§ 29-1035(B) and 29-1033(B) allow “[a]
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`partner” to “maintain an action against the partnership or another partner” including for
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`“access to [the partnership’s] books and records.” Meanwhile, Mo. Rev. Stat. § 358.220
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`provides that “[a]ny partner shall have the right to a formal account as to partnership
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`affairs” under specified circumstances. Thus, to prevail here, Svec would need to establish
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`“on the face of the pleadings” that he entered into a partnership with Davis or otherwise
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`became a member or manager of 21 Electronics, LLC. Hal Roach Studios, 896 F.2d at
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`1550. For purposes of this assessment, “the allegations of the non-moving party must be
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`accepted as true, while the allegations of the moving party which have been denied are
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`assumed to be false.” Id.
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`Svec has not established an entitlement to relief under those standards. Svec places
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`heavy emphasis on the fact that, under Arizona law, a document denominated as a letter of
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`intent can potentially qualify as an enforceable contract. Johnson Int’l, Inc. v. City of
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`Phoenix, 967 P.2d 607, 614 (Ariz. Ct. App. 1998) (noting that although “generally the
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`purpose [of a letter of intent] is not to bind parties to the ultimate contractual obligations,”
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`“[t]o determine whether the agreement binds anything, the court must look to the content
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`of the letter and to the circumstances”) (citing Rennick v. O.P.T.I.O.N. Care, Inc., 77 F.3d
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`309, 315 (9th Cir. 1996)). Svec contends that, because Defendants admit in their answer
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`Case 2:23-cv-01116-DWL Document 43 Filed 04/30/24 Page 7 of 9
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`that Davis signed the August 11, 2020 letter and then received the $30,000 payment
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`contemplated in it, and because the August 11, 2020 letter did not contain an express non-
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`binding clause, it follows that Defendants have admitted the August 11, 2020 letter was a
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`binding contract. (Doc. 35 at 7-9.)
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`This argument lacks merit. “For an enforceable contract to exist” under Arizona
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`law, “[t]he parties must intend to be bound.” Tabler v. Indus. Comm’n of Arizona, 47 P.3d
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`1156, 1158-59 (Ariz. Ct. App. 2002). Critically, “[t]he determination of intent [to contract]
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`is a factual question.” Id. at 1159. Further, “[w]hen interpreting a contract . . . , it is
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`fundamental that a court attempt to ascertain and give effect to the intention of the parties
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`at the time the contract was made if at all possible. If, for example, parties use language
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`that is mutually intended to have a special meaning, and that meaning is proved by credible
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`evidence, a court is obligated to enforce the agreement according to the parties’ intent, even
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`if the language ordinarily might mean something different. The judge, therefore, must
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`avoid the often irresistible temptation to automatically interpret contract language as he or
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`she would understand the words. . . . On occasion, exposition of the evidence regarding
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`the intention of the parties will illuminate plausible interpretations other than the one that
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`is facially obvious to the judge.” Taylor v. State Farm Mut. Auto. Ins. Co., 854 P.2d 1134,
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`1139-40 (Ariz. 1993) (cleaned up). Here, although Defendants admit in their answer that
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`Davis signed the August 11, 2020 letter and then received a $30,000 payment from Svec,
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`Defendants specifically deny Svec’s allegation that, by doing so, Davis intended to and
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`agreed to sell a 50% ownership interest in 21 Electronics, LLC to Svec. (Doc. 25 at 2
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`¶¶ 7-9.) Davis also includes more detailed allegations on these topics in his counterclaim,
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`asserting that (1) the parties did not intend the August 11, 2020 letter to be a binding
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`contract, but rather only intended to be bound by the execution of a subsequent formal
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`contract that never came to fruition; and (2) the $30,000 payment was ultimately treated as
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`a payment for distribution rights, not as a payment for a partial interest in 21 Electronics,
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`LLC. (Id. at 10-11 ¶¶ 15-17, 28.) If these allegations were directly contradicted by the
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`August 11, 2020 letter, the Rule 12(c) analysis might be different, but they are not—among
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`Case 2:23-cv-01116-DWL Document 43 Filed 04/30/24 Page 8 of 9
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`other things, the August 11, 2020 letter refers to itself as a “notice . . . to serve as a letter
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`of intent,” merely states that Svec will have a 50% interest in 21 Electronics, LLC “[a]t the
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`conclusion of this sale/transaction,” and states that “additional partnership agreements will
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`be constructed and put into place” in the future. (Doc. 1-3 at 1.) For purposes of Svec’s
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`motion, the Court must take Defendants’ factual intent-to-contract allegations as true and
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`reject Svec’s contrary allegations. Hal Roach Studios, 896 F.2d at 1550. Because this
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`analysis results in the conclusion that Defendants did not intend to treat the August 11,
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`2020 letter as a binding contract to sell a partnership interest to Svec, it follows that Svec
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`is not entitled to judgment on the pleadings on his claim for an accounting under Arizona
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`law—as noted, a prerequisite to such a claim is that Svec became a partner, member, or
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`manager of 21 Electronics, LLC.
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`The conclusion would be the same if Count Seven were governed by Missouri law.
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`In Missouri, “[w]here a contract is ambiguous, then a question of fact arises as to the intent
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`of the parties as to its meaning.” Tuttle v. Muenks, 21 S.W.3d 6, 9 (Mo. Ct. App. 2000).
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`Whether the parties intended to be bound by a contract can also present a fact question. Cf.
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`Baier v. Darden Restaurants, 420 S.W.3d 733, 739 (Mo. Ct. App. 2014) (“[T]he absence
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`of the offeror’s signature on the proposal presents a question of fact, requiring the trial
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`court to determine the offeror’s intent, i.e., whether an ‘offer’ to enter into a bilateral
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`contract was made, and thus whether the offeror intends to be bound if the unsigned
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`proposal is accepted by the offeree.”); Benson Optical Co. v. Floerchinger, 810 S.W.2d
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`531, 535 (Mo. Ct. App. 1991) (“[W]here two defendants signed a contract as individuals,
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`not as agents, and where their names were included within the identification of one of the
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`parties to the contract, the question of their intent to be personally bound was for the trier
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`of fact.”). Here, viewing the pleadings in the light most favorable to the non-movant, it is
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`ambiguous whether the parties intended the August 11, 2020 letter to be a binding contract
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`making Svec a partner upon receipt of the $30,000 payment or merely intended to signal
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`their intent to execute such a contract in the future—plans that never came to fruition. Cf.
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`Shapleigh Inv. Co. v. Miller, 193 S.W.2d 931, 937 (Mo. Ct. App. 1946) (“[I]t becomes a
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`question of fact as to whether the parties intended the formal writing to be merely a
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`memorial of their agreement arrived at through their correspondence, or whether they
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`intended that there should be no contract until the execution of the formal extension
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`agreement.”).
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`B.
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`Davis’s Counterclaim For Declaratory Judgment
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`Under the Declaratory Judgment Act, “[i]n a case of actual controversy within its
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`jurisdiction . . . , any court of the United States, upon the filing of an appropriate pleading,
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`may declare the rights and other legal relations of any interested party seeking such
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`declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a).
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`Here, Davis seeks a declaratory judgment “that there was no formal business
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`relationship between the Parties, and that . . . Svec never acquired a legal or ownership
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`interest in 21 Electronics, LLC.” (Doc. 25 at 14 ¶ 53.) Svec argues essentially this
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`counterclaim should be dismissed because Svec will prevail on the merits of the contract-
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`formation issue. (Doc. 35 at 10-11 [“[Svec] clearly did . . . acquire[] an interest in 21
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`Electronics. . . . Davis’s after-the-fact claim that the sale was conditioned on the creation
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`and execution of other partnership agreements is clearly belied by the express terms of the
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`August 11, 2020 document.”].) But as explained above, this cannot be a basis for judgment
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`on the pleadings because, taking all of Davis’s counter-allegations as true, Svec does not
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`prevail on the merits.
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`Accordingly,
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`IT IS ORDERED that Svec’s motion for judgment on the pleadings (Doc. 35) is
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`denied.
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`Dated this 30th day of April, 2024.
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`- 9 -
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