Sonoran Resources LLC et al v. Oroco Resource Corporation et al

Filing 39

ORDER granting in part and denying in part 36 Motion to Dismiss for Failure to State a Claim. Plaintiffs shall file an amended complaint no later than 6/27/2014. Signed by Judge David G Campbell on 6/11/2014.(DGC, nvo)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Sonoran Resources LLC, et al.,

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Plaintiffs,

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ORDER

v.

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No. CV-13-01266-PHX-DGC

Oroco Resource Corporation, et al.,

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Defendants.

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Defendant Goldgroup Mining, Inc. (“Goldgroup”) has filed a motion to dismiss

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pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Doc. 36. The motion

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is fully briefed. For the reasons that follow, the Court will grant the motion in part and

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deny it in part.1

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I.

Background.

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This case arises out of contracts entered in 2010 and 2011 between Plaintiffs

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Sonoran Resources, LLC (“Sonoran”) and SR Servicios Mineros, S.A. de C.V.

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(“SRSM”), and Defendants Oroco Resource Corporation (“Oroco”) and Minas de Oroco

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Resources, S.A. (“MOR”). Doc. 36. at 2. The contracts relate to land “located in Cerro

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Prieto near Magdalena, Sonora, Mexico,” on which the Oroco Defendants owned surface

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and mining rights. Id. The first contract was a Professional and Consulting Services

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The request for oral argument is denied because the issues have been fully
briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b);
Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998).

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Agreement (the “PCS Agreement”) between Sonoran, Oroco, and MOR. Id. The second

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was a Service Agreement between MOR and SRSM. Id. The third was an Engineering

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Procurement and Construction Management Agreement (the “EPCM Agreement”)

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between ORC, MOR, Sonoran, and SRSM. Id. The EPCM Agreement incorporated the

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Service Agreement. Id. Defendant Goldgroup is not a party to any of the Agreements.

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Id. at 2.

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Plaintiffs contend that, in accordance with the Service and EPCM Agreements,

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they obtained a mining license, known as a “Manifesto de Impacto Ambiental” or

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“MIA,” from Mexico’s environmental regulatory agency. Doc. 32, ¶ 25, Doc. 37 at 3.

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Plaintiffs later pursued a suspension of the MIA at Oroco’s request. Doc. 32, ¶ 37. The

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terms of the suspension allegedly required that “all flora and fauna” on the Cerro Prieto

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land were to “remain undisturbed, preserved, and protected.” Id., ¶ 37. Plaintiffs allege

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that Oroco and MOR subsequently breached the MIA and the Agreements, and Plaintiffs

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filed this action against Oroco and MOR on June 25, 2013. See Doc. 1. In September

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2013, Goldgroup acquired MOR from Oroco along with Oroco’s surface and mining

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rights in the Cerro Prieto land. Id., ¶ 62. It is unclear from the pleadings whether MOR

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remains a separate legal entity, but Plaintiffs allege that Goldgroup “assumed all

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liabilities of MOR, including all obligations under the Agreements.” Id.

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Plaintiffs allege that Goldgroup violated the terms of the MIA suspension by

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“making unauthorized modifications to the Cerro Prieto property[.]” Id., ¶ 54. Plaintiffs

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further allege that they are owed 250,000 shares of Oroco common stock and

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$177,066.43 under the Agreements, and that Goldgroup has “improperly induced” Oroco

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and MOR to cease performance of the Agreements.

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complaint in January 2014 asserting claims against Goldgroup for breach of contract,

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breach of the duty of good faith and fair dealing, and intentional interference with

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business expectancy. Doc. 32. Goldgroup seeks dismissal of these claims.

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II.

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Plaintiffs filed an amended

Legal Standard.
When analyzing a complaint for failure to state a claim to relief under

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Rule 12(b)(6), the well-pled factual allegations are taken as true and construed in the light

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most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th

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Cir. 2009). Legal conclusions couched as factual allegations are not entitled to the

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assumption of truth, Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are

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insufficient to defeat a motion to dismiss for failure to state a claim, In re Cutera Sec.

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Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). To avoid a Rule 12(b)(6) dismissal, the

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complaint must plead enough facts to state a claim to relief that is plausible on its face.

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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This plausibility standard “is not

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akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a

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defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at

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556). “[W]here the well-pleaded facts do not permit the court to infer more than the mere

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possibility of misconduct, the complaint has alleged B but it has not ‘show[n]’ B ‘that the

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pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).

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III.

Analysis.

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A.

Breach of Contract.

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Goldgroup seeks dismissal of Plaintiffs’ breach of contract claim on the ground

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that it is not a party to any contract with Plaintiffs. Doc. 36 at 4. Under Arizona law, a

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breach of contract claim requires a plaintiff to show (1) a contract, (2) a breach, and

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(3) damages. Thunderbird Metallurgical, Inc. v. Ariz. Testing Lab., 423 P.2d 124, 126

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(Ariz. 1967). Goldgroup argues that it did “not become a party to the [Agreements] by

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acquiring MOR, nor did it acquire or become liable for any obligations of MOR as a

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result,” and further argues that “the corporate form must not be disregarded.” Doc. 36 at

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4.

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“subsumed the obligations for the Agreements” when it acquired MOR (Doc. 32, ¶ 8) and

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“accepted all assets and assumed all liabilities of MOR, including all obligations under

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the Agreements” (id., ¶ 62).

Goldgroup does not respond, however, to Plaintiffs’ allegations that Goldgroup

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It is unclear from the pleadings whether MOR still exists as a separate legal entity.

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Goldgroup does not dispute that MOR is a party to the Agreements, nor does it argue that

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Plaintiffs’ have failed to state a breach of contract claim against MOR. Although it is

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true that Plaintiffs’ do not allege that Goldgroup is a party to the Agreements, they do

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allege that Goldgroup assumed MOR’s obligations and liabilities under the Agreements.

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Accepting this allegation as true, as the Court must at this stage, Plaintiffs have stated a

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claim for breach of contract. The Court will deny the motion to dismiss this claim.

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B.

Breach of the Duty of Good Faith and Fair Dealing.

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The covenant of good faith and fair dealing is implied in every contract. Rawlings

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v. Apodaca, 726 P.2d 565, 569 (Ariz. 1986). “The duty arises by virtue of a contractual

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relationship.” Id. As discussed above, Plaintiffs have alleged that MOR violated the

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covenant of good faith and fair dealing with respect to the Agreements and that

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Goldgroup assumed MOR’s liabilities and obligations under the Agreements.

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Doc. 32, ¶¶ 8, 62. The Court will deny Goldgroup’s motion to dismiss this claim for the

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reasons stated above.

See

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C.

Intentional Interference with Business Expectancy.

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To state a claim for tortious interference with a business expectancy, a plaintiff

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must allege (1) the existence of a valid contractual relationship or business expectancy;

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(2) the interferer’s knowledge of the relationship or expectancy; (3) intentional

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interference inducing or causing a breach or termination of the relationship or

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expectancy; and (4) resultant damage to the party whose relationship or expectancy has

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been disrupted. Dube v. Lukins, 167 P.3d 93, 98 (Ariz. Ct. App. 2007). Arizona law

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requires actionable interference to be “both intentional and improper.” Neonatology

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Assocs., Ltd. v. Phoenix Perinatal Assoc., Inc., 164 P.3d 185, 187 (Ariz. Ct. App. 2007)

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(quoting Safeway Ins. Co. v. Guerrero, 106 P.3d 1020, 1026 (Ariz. 2005)). “If the

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interferer is to be held liable for committing a wrong, his liability must be more than the

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act of interference alone.” Id. “[T]here is ordinarily no liability absent a showing that the

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defendant’s actions were improper as to motive or means.” Id. at 187-88.

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Goldgroup argues that the Agreements were terminable at will and it therefore is

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not liable even if it did induce Oroco and MOR to breach the Agreements. Goldgroup

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argues that Plaintiffs had “no guarantee that Oroco and MOR would continue to perform

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under the contracts.”

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Incorporated, 558 P.2d 741, 745 (Ariz. Ct. App. 1976), where the court stated that “it is

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evident that a distinction exists between inducements involving contracts of a definite

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period of duration and at-will business relationships.” Doc. 38 at 4. The Ulan court went

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on to note that “[i]f disturbance or injury to one’s business relationship comes as the

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result of competition and without improper means, there is no cause of action, unless

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some superior right by contract is interfered with.” Ulan, 558 P.2d at 745. Goldgroup

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also cites to Miller v. Hehlen, 104 P.3d 193, 203 (Ariz. Ct. App. 2005), and Bar J Bar

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Cattle Company v. Pace, 763 P.2d 545 (Ariz. Ct. App. 1988), where the Arizona Court of

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Appeals restated the “need for caution” when considering the issue of improper

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interference “in the context of competitive business activities.” Doc. 36 at 6.

Doc. 36 at 6.

Goldgroup cites Ulan v. Vend-A-Coin,

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Plaintiffs counter that although the Agreements were terminable at will, Oroco and

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MOR were required to pay “all outstanding monies owed to Plaintiffs” before they were

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able to validly terminate the Agreements. Doc. 37 at 7. Plaintiffs claim that Goldgroup

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“intentionally interfered with Plaintiffs’ ability to collect the 250,000 Oroco common

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shares and $177,066.43 owed under the Agreements,” and that the Agreements are not

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terminable absent satisfaction of those obligations. Id. at 8.

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Goldgroup misapplies its cited authority. This is not a case like Ulan, Miller, or

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Bar J Bar Cattle Co. where the parties were engaged in competitive business. In Ulan,

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for example, the plaintiff and defendant were both in the business of leasing coin-

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operated laundry equipment and the defendant offered a better deal to one of plaintiff’s

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customers. 558 P.2d at 742-43. In Bar J Bar, the plaintiff and defendant were both

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ranchers who wished to graze their cattle on the same land. The defendant purchased the

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land, leading to termination of the plaintiff’s lease. 763 P.2d at 546-47. In Miller, the

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defendant, a former employee of the plaintiff’s tax preparation business, called the

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plaintiff’s clients to solicit their business. 104 P.3d at 196. Each of these cases thus

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involved commercial competition – efforts by a commercial entity to win business away

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from a competitor.
This case is different.

Goldgroup did not lure MOR’s business away from

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Plaintiffs or offer MOR a better deal on something it was buying from Plaintiffs.

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Goldgroup purchased MOR, and Plaintiffs allege that Goldgroup then induced MOR to

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cease performance under the Agreements. Goldgroup’s competition-based cases are not

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helpful in this situation.

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Although Goldgroup argues that Oroco was free to sell its surface and mining

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rights to Goldgroup, Plaintiffs have made several allegations that Oroco has breached the

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Agreements. Plaintiffs allege that Oroco withheld money and stock shares that were

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already owed to Plaintiffs and appear to allege that Goldgroup induced that conduct.

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Thus, Plaintiffs’ claims are concerned with more than just the loss of future business

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under the Agreements, and the Court is not persuaded that such alleged conduct would

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fall “within the purview of the privilege of competition.” Ulan, 558 P.2d at 746. The

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Court will not dismiss Plaintiffs claim on this basis.

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Goldgroup also argues that “Plaintiffs offer absolutely no factual allegations as to

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Goldgroup’s actions or how Goldgroup intentionally induced [Oroco and MOR],

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improperly or otherwise, to breach the contracts at issue.” Doc. 36 at 5. The Court

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agrees.

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interference with Plaintiffs’ business expectancy was both intentional and improper. See

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Neonatology Assocs., 164 P.3d at 187. It is not sufficient to simply state that Goldgroup

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“had actual and constructive knowledge of Plaintiffs’ valid business expectancy” and

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“improperly induced Defendants Oroco and MOR to prematurely cease performance

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under the Agreements[.]” Doc. 32, ¶¶ 104, 105. These conclusory allegations are not

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entitled to the presumption of truth and are not sufficient to defeat a 12(b)(6) motion. See

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Iqbal, 556 U.S. at 680.

Plaintiffs have failed to plead facts showing that Goldgroup’s alleged

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Plaintiffs also argue that Goldgroup improperly interfered with the Agreements by

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“engaging in earthworks in violation of the suspended MIA in order to illegally conduct

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due diligence to acquire MOR.” Id. But Plaintiffs do not allege in their complaint that

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Goldgroup’s actions in violation of the MIA interfered with any business expectancy.

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Rather, they allege that Goldgroup’s actions were “unauthorized” and “in contravention”

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of the Agreements. Doc. 32, ¶ 54. This allegation does not support Plaintiffs’ claim for

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intentional interference with a business expectancy. The Court will grant Goldgroup’s

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motion to dismiss this claim.

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D.

Leave to Amend.

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Rule 15 makes clear that the Court “should freely give leave [to amend] when

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justice so requires.” Fed. R. Civ. P. 15(a)(2). The policy in favor of leave to amend must

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not only be heeded, see Foman v. Davis, 371 U.S. 178, 182 (1962), it must be applied

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with extreme liberality, see Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 880

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(9th Cir. 2001). This liberality “is not dependent on whether the amendment will add

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causes of action or parties.” DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th

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Cir. 1987). The Court will grant Plaintiffs’ request for leave to amend.

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IT IS ORDERED that Goldgroup’s motion to dismiss (Doc. 36) is granted in

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part and denied in part as set forth above. Plaintiffs shall file an amended complaint no

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later than June 27, 2014.

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Dated this 11th day of June, 2014.

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