Vargas v. MLEM Properties Incorporated

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WO
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
Daniel Vargas,
Plaintiff,
v.
MLEM Properties Incorporated,
Defendant.
No. CV-25-03047-PHX-MTL
ORDER
The Court now considers Defendant’s Motion to Dismiss. (Doc. 6.) It is fully
briefed. The Motion will be granted as follows.
I.
A motion to dismiss under Federal Rule of Civil Procedure (“Rule”) 12(b)(6) for
failure to state a claim upon which relief can be granted “tests the legal sufficiency of a
claim.” Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A court may dismiss a
complaint “if there is a lack of a cognizable legal theory or the absence of sufficient facts
alleged under a cognizable legal theory.” Conservation Force v. Salazar, 646 F.3d 1240,
1242 (9th Cir. 2011) (internal quotation marks and citation omitted). A complaint must
assert sufficient factual allegations that, when taken as true, “state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted).
Plausibility is more than mere possibility; a plaintiff is required to provide “more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action will
not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). When analyzing the
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sufficiency of a complaint, the well-pled factual allegations are taken as true and construed
in the light most favorable to the plaintiff. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th
Cir. 2009).
II.
This claim arises from Defendant terminating Plaintiff’s employment. Plaintiff
alleges that he was terminated in retaliation for him (a) reporting to management an
allegation of sexual harassment suffered by a female co-worker, and (b) reporting to federal
authorities Defendant utilizing undocumented labor. Each of Plaintiff’s twelve claims for
relief fail, either for pleading deficiencies or as a matter of law.
1. Plaintiff’s Title VII retaliation claim, Count I, will be dismissed because the
complaint fails to allege exhaustion of administrative remedies. “In order to litigate a Title
VII claim in federal district court, [Plaintiff] must have exhausted [his] administrative
remedies.” Greenlaw v. Garrett, 59 F.3d 994, 997 (9th Cir. 1995). Plaintiff must have filed
a charge with the Equal Employment Opportunity Commission (“EEOC”) within 180 days
of his alleged employment discrimination. 42 U.S.C. § 2000e-5(e). The complaint does not
allege that Plaintiff filed an EEOC charge, thus one conclusion is that he did not exhaust.
His response to the Motion indicates that the EEOC issued a right-to-sue letter, but Plaintiff
does not attach the letter, nor does he describe the timing. In an episode demonstrating, in
the Court’s opinion, unprofessionalism, Plaintiff refused to provide a copy of the letter to
Defendant’s counsel when asked in preparing the reply brief. The Court will therefore
dismiss Count I without prejudice. Plaintiff must include in his amended complaint details
of the EEOC charge and EEOC’s right-to-sue letter and attach the right-to-sue letter to the
amended complaint.
2. Plaintiff brings two claims for relief under the Arizona Employment
Protection Act (“AEPA”), A.R.S. § 23-1501—Counts II and VIII. Plaintiff alleges he was
suspended and constructively discharged after reporting sexual harassment involving a
female coworker. Although the AEPA permits claims for termination in violation of an
Arizona statute, it also provides that when the underlying statute supplies a remedy, that
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remedy is exclusive. A.R.S. § 23-1501(A)(3)(b). Retaliation for reporting sex
discrimination is governed by the Arizona Civil Rights Act, which establishes its own
administrative and judicial remedies. The AEPA may not be used to repackage
discrimination or retaliation claims that fall within the Civil Rights Act’s scope. See
Peterson v. City of Surprise, 244 Ariz. 247, 252-53 (App. 2018); Cox v. Glob. Tool Supply
LLC, 629 F. Supp. 3d 963, 972 (D. Ariz. 2022). Because the alleged public policy violation
arises from sex discrimination, and amendment cannot alter the statute governing that
conduct, Counts II and VIII fail as a matter of law and are dismissed with prejudice.
Plaintiff’s AEPA claims based on reporting the employment of undocumented
workers also fail. The whistleblower provision of the AEPA protects only disclosures
concerning violations of the Arizona Constitution or Arizona statutes. A.R.S.
§ 23-1501(A)(3)(c)(ii). Plaintiff alleges he reported Defendant’s use of undocumented
labor to federal authorities, which necessarily concerns alleged violations of federal
immigration law. Because the AEPA does not extend to disclosures of federal law
violations, Plaintiff fails to state a claim under the statute. This defect cannot be cured by
amendment.
3. The next claim for relief is stated under A.R.S. § 38-532. This statute
establishes a right of action for whistleblower retaliation for public employees only.
Mullenaux v. Graham Cnty., 207 Ariz. 1, 6 (App. 2004) (Ҥ 38-532 applies only to public
employees.”). Plaintiff was employed by a private company, so his public whistleblower
claim fails as a matter of law. It will be dismissed with prejudice.
4. Plaintiff also alleges Defendant breached the implied covenant of good faith
and fair dealing through retaliatory discipline, suspension without pay, and constructive
discharge. In Arizona, “[t]he employment relationship is contractual in nature.” A.R.S.
§ 23-1501(A)(1). And the implied covenant requires that neither party act to deprive the
other of the “benefits of their agreement.” Wagenseller v. Scottsdale Mem’l Hosp., 147
Ariz. 370, 385 (1985). But the covenant does not create job tenure, impose a general good
cause requirement, or prohibit termination simply because it is alleged to be unfair. Rather,
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to state a claim, “an employee generally must point to a violation of their employment
contract when alleging a breach of the covenant of good faith in employment actions.”
Stone v. Charles Schwab & Co., No. CV-24-03047-PHX-SMB, 2025 WL 2829563, at *6-7
(D. Ariz. Oct. 6, 2025).
Here, Plaintiff does not identify any express or implied contractual term entitling
him to continued employment, progressive discipline, or termination only for cause. Nor
does he allege Defendant denied him an earned benefit, such as accrued compensation or
commissions, while continuing to accept his work. See Wagenseller, 147 Ariz. at 385.
Instead, the claim rests on conclusory allegations that Defendant acted in bad faith by
disciplining and terminating him. Such allegations are insufficient to state a contractual
implied covenant claim. Stone, 2025 WL 2829563, at *7. To the extent Plaintiff attempts
to assert a tort-based implied covenant theory, that claim is not cognizable under Arizona
law and is dismissed with prejudice. Id.
Plaintiff’s breach of contract claim fails for similar reasons. Under the AEPA,
employment is presumed at will unless both parties sign a written contract that establishes
a definite term or expressly restricts termination rights. A.R.S. § 23-1501(A)(2). “Taken in
conjunction with A.R.S. § 23-1501(3)(a), A.R.S. § 23-1501(2) dictates that to prevail on a
breach of contract claim against an employer, an employee must show that the employer
breached a contract that meets the requirements of A.R.S. § 23-1501(2).” White v. AKDHC,
LLC, 664 F. Supp. 2d 1054, 1062 (D. Ariz. 2009).
Although Plaintiff alleges an “employment agreement” and asserts he was
disciplined “without cause,” he does not identify any written agreement, handbook
provision, or other signed writing that limits Defendant’s right to terminate his employment
or converts the relationship from at will to for cause. (Doc. 1 ¶¶ 96-97.) General references
to a “fair workplace” or internal policies do not plausibly establish enforceable contractual
terms under the AEPA. Accordingly, Count XII is dismissed without prejudice. Any
amended pleading must identify a contract satisfying A.R.S. § 23-1501(A)(2) and a
specific provision Defendant allegedly breached.
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5. Plaintiff next asserts a claim for Intentional Infliction of Emotional Distress
(“IIED”) under Count V. The Arizona Supreme Court, in Ford v. Revlon, Inc., 153 Ariz.
38 (1987), set out the elements of IIED as follows:
[F]irst, the conduct by the defendant must be “extreme” and
“outrageous”; second, the defendant must either intend to
cause emotional distress or recklessly disregard the near
certainty that such distress will result from his conduct; and
third, severe emotional distress must indeed occur as a result
of defendant’s conduct.
Id. at 43.
Plaintiff fails to allege Defendant’s conduct was “so outrageous in character and so
extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as
atrocious and utterly intolerable in a civilized community.” Mintz v. Bell Atl. Sys. Leasing
Int’l, Inc., 183 Ariz. 550, 554 (App. 1995) (citation omitted). “In the employment context,
it is ‘extremely rare’ to find conduct sufficient to meet this standard.” Fraser v. State, No. 2
CA-CV 2025-0116, 2025 WL 3248333, at *7 (Ariz. App. Nov. 21, 2025) (quoting Mintz,
183 Ariz. at 554). Plaintiff’s allegations that Defendant’s “conduct in suspending Plaintiff
without notice, converting his suspension to unpaid status without justification, and
publicly posting his position, while making no legitimate attempt to address the harassment
concerns he raised,” do not amount to extreme and outrageous conduct. (Doc. 1 ¶ 59);
Mintz, 183 Ariz. at 554 (holding that failure to promote plaintiff and forcing her to return
to work while on disability leave, even if motivated by sex discrimination or retaliation,
did not amount to extreme and outrageous conduct). Even taking Plaintiff’s complaint
allegations as true, he fails to state a claim as a matter of law. Plaintiff’s IIED claim will
be dismissed with leave to amend.
6. Plaintiff pleads “Constructive Discharge” as Count VI, alleging Defendant’s
“retaliatory actions” created intolerable working conditions that coerced his resignation.
(Doc. 1 ¶¶ 63-66.) But under Arizona law, constructive discharge is not an independent
cause of action; plaintiff must still plead and prove an underlying statutory or common-law
wrongful termination theory to obtain relief. Peterson, 244 Ariz. at 250-51 (constructive
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discharge “by itself . . . does not afford an employee a remedy” and must be tied to a
wrongful termination claim); see also Smith v. Pile, No. CV-23-00815-PHX-SMB, 2024
WL 706968, at *5 (D. Ariz. Feb. 20, 2024) (dismissing constructive discharge count
without prejudice where plaintiff failed to adequately plead the predicate wrongful
termination basis). Plaintiff concedes constructive discharge is not a standalone claim and
clarifies that his underlying theories sound in retaliation, wrongful termination, and
whistleblower violations. Because Count VI, as currently pled, labels the discharge theory
as a freestanding count, the Court dismisses it without prejudice. Any amended pleading
must specify which statutory or common-law theory supplies the wrongful-termination
cause of action and allege facts plausibly satisfying that theory; constructive discharge
alone is insufficient. Peterson, 244 Ariz. at 250-51; Smith, 2024 WL 706968, at *5.
7. Under Count VII, Plaintiff alleges defamation (slander and libel). He argues
that Defendant’s management falsely accused him of sexual harassment after receiving a
demand letter and communicated those accusations to third parties inside and outside the
organization.* To state a defamation claim under Arizona law, Plaintiff must plausibly
allege (1) a “false, defamatory statement” about him, (2) publication to a third party, and
(3) fault—knowledge of falsity, reckless disregard, or negligence in failing to ascertain
truth. Farrell v. Hitchin’ Post Trailer Ranch, No. 1 CA-CV 11-0011, 2011 WL 6057930,
at *2 (Ariz. App. Dec. 6, 2011) (citing Peagler v. Phx. Newspapers, Inc., 114 Ariz. 309,
315 (1977)). In a defamation action, conclusory statements are insufficient to state a claim
upon which relief can be granted “‘because the context and language of an allegedly
defamatory statement is crucial’ to determine whether a plaintiff has established a prima
* Under this Count, Plaintiff argues that Defendant’s defamatory conduct violates “Title
VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-3(a)” and the “Fair Employment
and Housing Act, (FEHA), California Government Code § 12940(h).” (Doc. 1 ¶¶ 71-72.)
It is unclear whether Plaintiff intended to assert these statutes as independent causes of
action or merely as support for his defamation claim. “[A]lthough Plaintiff appears in this
Court pro se, the Court is not required to scour his Complaint and piece together his claims
for him.” Moore v. Maricopa Cnty. Juv. Ct., No. CV-18-01553-PHX-JJT, 2018 WL
9848169, at *1 (D. Ariz. Sept. 18, 2018), aff’d, 786 F. App’x 89 (9th Cir. 2019). The Court
therefore does not construe these allegations as separate counts. In any event, Plaintiff
alleges no facts supporting a claim under either statute, and any such claims would fail on
that basis.
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facie case.” Fuller v. City of Scottsdale, No. 1 CA-CV 24-0785, 2026 WL 113616, at *9
(Ariz. App. Jan. 15, 2026) (quoting BLK III, LLC v. Skelton, 252 Ariz. 583, 588 (App.
2022)). Here, Plaintiff does not identify the substance of any specific statement, who made
it, when it was made, or to whom it was published. (See Doc. 1 ¶¶ 68-76.) Nor does he
plead facts supporting fault beyond conclusory labels of “malice” and “reckless disregard.”
(Id. ¶¶ 69.) Because these allegations do not provide sufficient factual content to render a
defamation claim plausible, Count VII is dismissed without prejudice.
8. Plaintiff alleges Defendant retaliated against him in violation of the Fair
Labor Standards Act (“FLSA”) by suspending him and converting that suspension to
unpaid status. The FLSA “sets forth employment rules concerning minimum wages,
maximum hours, and overtime pay.” Kasten v. Saint-Gobain Performance Plastics Corp.,
563 U.S. 1, 4 (2011). To state a claim under the FLSA’s antiretaliation provision, 29 U.S.C.
§ 215(a)(3), Plaintiff must plausibly allege that “(1) he engaged in activity protected by the
FLSA; (2) the defendant took an adverse employment action; and (3) there was a causal
link between the protected activity and the adverse action.” Ader v. SimonMed Imaging
Inc., 465 F. Supp. 3d 953, 975 (D. Ariz. 2020). “An employee engages in a protected
activity when she participates in conduct that reasonably could be perceived as directed
toward the assertion of rights protected by the statute.” Davenport v. SP Jedi Inc.,
No. CV-18-02580-PHX-SMM, 2020 WL 1271380, at *6 (D. Ariz. Jan. 16, 2020).
Although Plaintiff asserts he complained of “possible wage and hour violations,”
the Complaint does not identify any unpaid wages, overtime violations, or minimum wage
issues governed by the FLSA. (Doc. 1 ¶¶ 82-85.) General complaints about workplace
misconduct, safety concerns, or harassment alone do not constitute protected activity under
§ 215(a)(3). See Lau v. Mayorkas, No. 21-CV-4756-YGR, 2022 WL 22885366, at *9 (N.D.
Cal. Apr. 27, 2022) (“A report of general workplace harassment does not qualify as a
protected activity.”). Plaintiff’s attempt to supply more specific FLSA allegations in his
response to the Motion cannot cure these pleading deficiencies, as a complaint may not be
amended through briefing. LaComba v. Eagle Home Loans & Inv., LLC,
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No. 2:23-CV-00370-KJM-DB, 2023 WL 4239070, at *2 (E.D. Cal. June 28, 2023)
(“Regardless of the merits of their new claim, plaintiffs may not amend their complaint
through briefing in opposition to a motion to dismiss.”). Nor does Plaintiff allege facts
showing Defendant would have reasonably understood his complaints as asserting rights
under the FLSA, rather than raising non-FLSA employment grievances. See Kasten, 563
U.S. at 14. Because Plaintiff fails to plead protected activity under the FLSA, Count IX is
dismissed without prejudice.
9. Plaintiff’s negligent hiring, supervision, and retention claim under Count X
fails as a matter of law. Under Arizona law, workers’ compensation is the exclusive remedy
for injuries arising out of and in the course of employment caused by an employer’s alleged
negligence. Wagner v. State, 242 Ariz. 95, 97 (App. 2017); Mosakowski v. PSS World
Med., Inc., 329 F. Supp. 2d 1112, 1131 (D. Ariz. 2003) (“Arizona law precludes an
employee from bringing a tort action based on negligent hiring and negligent retention
against their employer.”). Accordingly, Count X is dismissed with prejudice. See Foroughi
v. Wal-Mart Stores, Inc., No. CV-10-506-PHX-GMS, 2010 WL 2231931, at *3 (D. Ariz.
June 2, 2010) (dismissing a negligent supervision claim with prejudice because “Arizona’s
Workers’ Compensation Statute is the exclusive remedy for any injury suffered by an
employee due to an employer’s alleged negligence”).
10. Under Count XI, Plaintiff alleges Defendant tortiously interfered with his
employment and unspecified industry relationships through adverse actions, a job posting,
and an alleged smear campaign. Under Arizona law, the elements of tortious interference
with a business relationship are: “(1) [t]he existence of a valid contractual relationship or
business expectancy; (2) knowledge of the relationship or expectancy on the part of the
interferer; (3) intentional interference inducing or causing a breach or termination of the
relationship or expectancy; and (4) resultant damage to the party whose relationship or
expectancy has been disrupted.” AIRFX.com v. AirFX LLC, No. CV 11-01064-PHX-FJM,
2011 WL 6846428, at *1 (D. Ariz. Dec. 29, 2011) (quoting Wagenseller, 147 Ariz. at 386).
“The interference must be improper as well as intentional.” Id.
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Plaintiff’s claim fails at the threshold because an employer cannot interfere with its
own employment relationship. See Stetter v. Blackpool, LLC,
No. CV-09-1071-PHX-DGC, 2010 WL 1531082, at *2 (D. Ariz. Apr. 15, 2010). To the
extent Plaintiff alleges interference with future employment prospects, he does not identify
any specific third-party employer, contract, or concrete business expectancy, nor does he
allege facts showing Defendant’s knowledge of such a relationship. (Doc. 1 ¶¶ 91-94.)
Vague allegations of potential industry relationships or speculative future employment are
insufficient to state a plausible claim. See Stetter, 2010 WL 1531082, at *2. Because
Plaintiff fails to plead interference with an identifiable third-party relationship or
expectancy, Count XI is dismissed without prejudice.
III.
Under Rule 15(a)(2), leave to amend should be given freely “when justice so
requires.” But it is not required when amendment “would cause the opposing party undue
prejudice, is sought in bad faith, constitutes an exercise in futility, or creates undue delay.”
Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989). For the reasons
discussed above, several of Plaintiff’s claims fail as a matter of law and cannot be cured
by amendment. But the Court will grant leave to amend for claims dismissed without
prejudice.
Any amended pleading must do more than offer generalized assertions or a simple
recitation of the elements of a claim. Plaintiff must allege well-pleaded factual content
supporting each claim for relief, as required by Rule 8(a), and must present each claim in
a separate count. Plaintiff is advised that if the Court grants a future Rule 12(b)(6) motion
in whole or in part, further leave to amend may not be granted.
IT IS ORDERED granting Defendant’s Motion to Dismiss (Doc. 6).
. . . .
. . . .
. . . .
. . . .
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IT IS FURTHER ORDERED that the following claims are dismissed with
prejudice: Count II – Violation of AEPA; Count VIII – Wrongful Termination in Violation
of Arizona Public Policy; Count III – Whistleblower Retaliation under A.R.S. § 38-532;
Count IV – Implied Covenant of Good Faith and Fair Dealing (tort theory only); and Count
X – Negligent Hiring, Supervision, and Retention.
IT IS FURTHER ORDERED that the following claims are dismissed without
prejudice: Count I – Title VII Retaliation; Count IV – Implied Covenant of Good Faith
and Fair Dealing (contract theory only); Count V – Intentional Infliction of Emotional
Distress; Count VI – Constructive Discharge; Count VII – Defamation (Slander and Libel);
Count IX – FLSA Retaliation; Count XI – Tortious Interference with Business
Relationships; and Count XII – Breach of Contract.
IT IS FURTHER ORDERED that Plaintiff may file an amended complaint as to
the claims dismissed without prejudice no later than February 16, 2026.
IT IS FURTHER ORDERED that if no amended complaint is filed by
February 16, 2026, the Clerk of Court must dismiss this action and close this case without
further notice to Plaintiff or order of this Court.
Dated this 26th day of January, 2026.
Case 2:25-cv-03047-MTL Document 14 Filed 01/26/26 Page 10 of 10