Case 2:19-cv-04770-SPL Document 36 Filed 04/06/20 Page 1 of 7

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6 IN THE UNITED STATES DISTRICT COURT
7 FOR THE DISTRICT OF ARIZONA
8 ) No. CV-19-04770-PHX-SPL
Ryan Gordon,
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Plaintiff, ) ORDER
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vs.
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13 Red Media Ltd. et al., )
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13 Defendants. )
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Before the Court is Defendants 13 Red Media, Ltd. (“13 Red”), Keith Miller
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(“Miller”), and Chad Anderson’s (“Anderson” and collectively with 13 Red and Miller, the
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“Defendants”) Motion to Dismiss for Lack of Subject Matter Jurisdiction and Failure to
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State a Claim (Doc. 18) (the “Motion”). The Motion was fully briefed on October 15, 2019.
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(Docs. 26, 27) The Court’s ruling is as follows.1
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I. Background
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Defendant 13 Red is engaged in producing and marketing homosexual adult
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entertainment online in the form of premium paid membership websites and sales of DVDs.
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(Doc. 18 at 6, ¶ 6) On November 7, 2018, Plaintiff sent a detailed email to Miller thanking
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him for the opportunity to meet with the 13 Red team and laying out his plans and vision
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for a potential collaboration. (Doc. 26 at 19–23) It is undisputed that the parties were
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Because it would not assist in resolution of the instant issues, the Court finds the
28 pending motion is suitable for decision without oral argument. See L.R. Civ. 7.2(f); Fed. R.
Civ. P. 78(b); Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998).
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1 negotiating for Plaintiff to work for 13 Red and that the parties wrote a memorandum of
2 understanding (the “MOU”) summarizing the terms of a potential contract which would
3 come at a later date and set forth all the terms of the relationship. (Docs. 1 at 8, ¶ 45; 18-1)
4 The MOU, dated November 13, 2018, stated that Plaintiff would work as an independent
5 contractor of 13 Red or its designee. (Doc. 18-1) Plaintiff was to be responsible for
6 “recruiting, hiring, and scheduling models, securing shooting locations of his choosing,
7 setting up shoots, filming, and initial editing of content. [He] shall be responsible for
8 production of content from start to finish.” (Doc. 18-1) It set forth Plaintiff’s compensation
9 as “6,000 USD for services rendered during the month of November. Thereafter, [Plaintiff]
10 shall be compensated at the rate of $10,000 USD per month, or $120,000 per year.” (Doc.
11 18-1) The MOU finally states that “[a] detailed agreement will be prepared and supersede
12 this MOU at a later date.” (Doc. 18-1) The MOU contained no provision on how or when it
13 might be terminated and no provision regarding sharing of revenues or promises of an
14 employment contract. Plaintiff and 13 Red both signed the MOU. (Doc. 18-1) The parties
15 terminated their collaboration on December 31, 2018. (Doc. 1 at 14, ¶ 74)
16 The Plaintiff initiated this case on July 19, 2019 and filed a complaint alleging twelve
17 different causes of action arising out of those business dealings. (Doc. 1) The Defendants
18 filed the Motion seeking to dismiss with prejudice all counts for lack of subject-matter
19 jurisdiction and for failure to state a claim. (Doc. 18 at 4) The Defendants also seek sanctions
20 for the filing of the complaint and leave to be allowed to present evidence for recovery of
21 their attorneys’ fees and costs. (Doc. 18 at 28–29)
22 II. Legal Standard
23 Federal Rule of Civil Procedure 12(b)(1) “allows litigants to seek the dismissal of an
24 action from federal court for lack of subject matter jurisdiction.” Kinlichee v. United States,
25 929 F. Supp. 2d 951, 954 (D. Ariz. 2013) (citing Tosco Corp. v. Comtys. for a Better Env’t,
26 236 F.3d 495, 499 (9th Cir. 2001)). Allegations raised under FRCP 12(b)(1) should be
27 addressed before other reasons for dismissal because if the complaint is dismissed for lack
28 of subject matter jurisdiction, other defenses raised become moot. Kinlichee, 929 F. Supp.

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1 2d at 954. A motion to dismiss for lack of subject matter jurisdiction under FRCP 12(b)(1)
2 may attack either the allegations of the complaint as insufficient to confer upon the court
3 subject matter jurisdiction or the existence of subject matter jurisdiction in fact. Renteria v.
4 United States, 452 F. Supp. 2d 910, 919 (D. Ariz. 2006) (citing Thornhill Publ’g Co., Inc.
5 v. General Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th Cir.1979)); Edison v. United States,
6 822 F.3d 510, 517 (9th Cir. 2016). When the motion to dismiss attacks the allegations of
7 the complaint as insufficient to confer subject matter jurisdiction, all allegations of material
8 fact are taken as true and construed in the light most favorable to the nonmoving party.
9 Renteria, 452 F. Supp. 2d at 919 (citing Federation of African Amer. Contractors v. City of
10 Oakland, 96 F.3d 1204, 1207 (9th Cir. 1996)). When the motion to dismiss is a factual
11 attack on subject matter jurisdiction, however, no presumptive truthfulness attaches to the
12 plaintiff’s allegations, and the existence of disputed material facts will not preclude the trial
13 court from evaluating for itself the existence of subject matter jurisdiction in fact. Renteria,
14 452 F. Supp. 2d at 919 (citing Thornhill, 594 F.2d at 733). A plaintiff has the burden of
15 proving that jurisdiction does in fact exist. Renteria, 452 F. Supp. 2d at 919 (citing
16 Thornhill, 594 F.2d at 733). Conclusory allegations of law and unwarranted inferences are
17 insufficient to defeat a motion to dismiss. Rosenbaum v. Syntex Corp., 95 F.3d 922, 926
18 (9th Cir. 1996).
19 III. Analysis
20 The Defendant seeks dismissal of all counts in the complaint under Rule 12(b)(1)
21 and 12(b)(6).2
22 A. Lack of Diversity
23 Defendants argue in the Motion that Anderson was, and still is, a resident of Arizona
24 which destroys the alleged diversity jurisdiction of the Court over this case. (Doc. 18 at 10–
25 11) In support of this argument, Defendants submitted an affidavit from Chad Anderson
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Because the Court finds that it lacks subject matter jurisdiction and it is dispositive
27 of the Motion to Dismiss, the Court does not address the other arguments raised in
Defendants’ Motion to Dismiss. See Giddings v. Vision House Prod., Inc., 584 F.Supp.2d
28 1222, 1225 (D. Ariz. 2008).

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1 detailing his citizenship and domicile. (Doc. 18, Ex. A) Accordingly, Defendants have
2 brought a factual challenge to subject matter jurisdiction and no presumption of truth
3 attaches to Plaintiff’s allegations. See Renteria, 452 F. Supp. 2d at 919 (citing Thornhill,
4 594 F.2d at 733). Plaintiff bears the burden to establish jurisdiction. Plaintiff has alleged
5 that Anderson was a citizen of Nevada at all times relevant to his allegations, solely based
6 on alleged representations Anderson made on unknow dates. (Doc. 26 at 15–16) Complete
7 diversity must exist and the citizenship of each plaintiff must be different from the
8 citizenship of each defendant. Caterpillar, Inc. v. Lewis, 519 U.S. 61, 68 (1996). Plaintiff
9 overlooks one crucial rule: for purposes of diversity of citizenship, “[i] has long been the
10 case that ‘the jurisdiction of the court depends upon the state of things at the time [a case is
11 filed].’” Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 570 (2004) (quoting
12 Mollan v. Torrance, 9 Wheat. 537, 539 (1824)) (internal quotations omitted). “This time-
13 of-filing rule is hornbook law (quite literally) . . . . It measures all challenges to subject-
14 matter jurisdiction premised upon diversity of citizenship against the state of facts that
15 existed at the time of filing—whether the challenge be brought shortly after filing, after the
16 trial, or even for the first time on appeal.” Id. at 571. Accordingly, the Court must determine
17 diversity of citizenship of the parties at the time this action was filed.
18 Furthermore, “the question always is, or should be, when objection is taken to the
19 jurisdiction of the court by reason of the citizenship of some of the parties, whether . . . they
20 are indispensable parties, for if their interests are severable and a decree without prejudice
21 to their rights may be made, the jurisdiction of the court should be retained and the suit
22 dismissed as to them.” Dataflux, 541 U.S. at 572 (quoting Horn v. Lockhart, 17 Wall. 570,
23 579 (1873)) (internal quotations omitted). Federal Rule of Civil Procedure 21 provides that
24 [o]n motion or on its own, the court may at any time, on just terms, add or drop a party. The
25 court may also sever any claim against a party.” Fed. R. Civ. P. 21. “It is well settled that
26 Rule 21 invests district courts with authority to allow a dispensable nondiverse party to be
27 dropped at any time, even after judgment has been rendered.” Dataflux. at 572–73 (citing
28 Newman–Green, Inc. v. Alfonzo–Larrain, 490 U.S. 826, 832 893 (1989)).

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1 Here, the Court finds that Anderson was clearly a resident of Arizona at the time this
2 action was filed. Although he did live in a condominium in Las Vegas, Nevada for
3 approximately a year, every other fact points to his domicile being Arizona. He has owned
4 a condominium in Tempe, Arizona since 2014 and considers it his home and “fortress of
5 solitude.” (Doc. 18, Ex. A at 8) He has had an Arizona driver’s license since 2014. (Doc.
6 18, Ex. A at 6–7) He has paid taxes in Arizona since 2014 and his Iowa, Arizona, and
7 Nevada bar profiles all show the same address in Arizona. (Doc. 18, Ex. A at 7) Besides the
8 fact that he worked and lived an apartment in Las Vegas for a short period of time, and not
9 even full time, there is no other factual indication he was not domiciled in Arizona.
10 Plaintiff’s bare allegations regarding some statements Anderson made are not enough to
11 confer subject matter jurisdiction to the Court.
12 However, the Court will not dismiss the entire case on this basis alone. As permitted
13 by Rule 21, the Court will grant the Motion to Dismiss under Rule 12(b)(1) as to all counts
14 only against Chad Anderson based on lack of diversity of citizenship. It will now look at
15 the amount in controversy, the other requirement for subject matter jurisdiction under 28
16 U.S.C. § 1332, as it applies to the rest of the case.
17 B. Pleading of Amount in Controversy
18 Subject matter jurisdiction based on diversity of citizenship requires an amount in
19 controversy in excess of $75,000. 28 U.S.C. 1332(a). Where it is not evident from the face
20 of the complaint, Plaintiff bears the burden “to prove, by preponderance of the evidence,
21 that the amount in controversy meets the jurisdictional threshold . . . . Conclusory allegations
22 as to [such amount] are insufficient.” Matheson v. Progressive Specialty Ins. Co., 319 F.3d
23 1089, 1090 (9th Cir. 2003); see also Sanchez v. Monumental Life Ins. Co., 102 F.3d 398,
24 403–04 (9th Cir. 1996). The complaint is devoid of any attempt at providing actual evidence
25 of the amount in controversy. The Court became aware of the exact language of the MOU
26 because Defendants provided it in their Motion. Plaintiff’s bare allegations related to the
27 amount of controversy in the complaint are:
28 - the MOU stated he would receive a salary of $120,000 for the first year and 50% of

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1 the profits made from the new products thereafter. In consideration of Defendants’
2 upfront investment, the first-year profits would be given to Defendants and split
3 evenly between Plaintiff and Defendants in subsequent years. (Doc. 1 at 8, ¶ 46);
4 - it was estimated that Plaintiff’s product would yield as much as $10,000,000 per year
5 of gross revenue per year. (Doc. 1 at 8, ¶ 47);
6 - a request for relief in an amount to be proven at trial, disgorgement of all income and
7 profits realized, and punitive damages. (Doc. 1 at 24)
8 The Court finds that the complaint fails to meet the pleading standard for the amount
9 in controversy. Plaintiff’s allegations are completely unsupported and at times plainly
10 contradictory to the evidence in the records. Indeed, the MOU’s plain language makes no
11 mention of the sharing of profits and although it mentions a yearly salary of $120,000, there
12 is no term for employment or any other guarantee that the salary was for the first year only.
13 The Court can look at the MOU because Defendants have made a factual challenge to the
14 presence of subject matter jurisdiction. Furthermore, because this is a factual challenge to
15 subject matter jurisdiction, no presumption of truth attaches to Plaintiff’s allegations
16 regarding the amount in controversy and the Court finds that it must dismiss the complaint
17 for lack of subject matter jurisdiction.3 Plaintiff has also failed to produce more support on
18 the amount of controversy issue in his response to the Motion, simply stating that an
19 agreement existed and that it supports the finding of the jurisdictional minimum because
20 Defendants owe him at least a full year of salary. (Doc. 26 at 10)
21 Although resolving the Motion on grounds of subject matter jurisdiction renders the
22 12(b)(6) defenses moot, the Court still wants to briefly address the failure to state a claim
23 issue if only for purposes of judicial economy. The Court strongly advises Plaintiff to
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The Court will not grant Defendants’ request to present evidence related to
attorneys’ fees and costs nor will it entertain sanctions under Rule 11 at this time. Given
26 that the Court will allow Plaintiff to amend his complaint, the Court reserves the right to
consider those two issues again if presented to the Court and if it finds that they have merits.
27 Defendants also mentioned filing an ethics complaint against Plaintiff’s counsel who drafted
and filed the complaint; the Court notes that this is an independent action Defendants can
28 take if they choose to do so which is outside the jurisdiction of the Court.

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1 carefully review his complaint and the pleading requirements for each of the 12 counts to
2 avoid presenting the exact same complaint to the Court with the exception of removing
3 Chad Anderson as a named Defendant. Defendants laid out the proper standard as to each
4 count.
5 Accordingly,
6 IT IS ORDERED that the Defendant’s Motion to Dismiss for Lack of Subject
7 Matter Jurisdiction and Failure to State a Claim (Doc. 18) is:
8 1) granted in full and with prejudice as to Defendant Chad Anderson;
9 2) granted in full and without prejudice to the filing of an amended complaint as to
10 all causes of action against the remaining Defendants.
11 IT IS FURTHER ORDERED that the Clerk of the Court shall enter judgment and
12 terminate this action as to Defendant Chad Anderson only.
13 Dated this 3rd day of April, 2020.
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Honorable Steven P. Logan
16 United States District Judge
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