Goodbreak, LLC v. Hood by Air, LLC et al

Filing 25

ORDER DENYING PLAINTIFFS MOTION TO REMAND TO STATE COURT by Judge Dean D. Pregerson: Plaintiffs motion to remand is DENIED 18 . The individual Defendants Motion to Dismiss for Lack of Personal Jurisdiction is GRANTED 11 . HBAs Motion to Dismiss Pl aintiffs fraud and negligent is representation, intentional interference, implied covenant, and UCL claims is GRANTED. Those claims, and all claims against the individual Defendants, are DISMISSED, with leave to amend. Any amended complaint shall befiled within fourteen days of the date of this Order. (lc). Modified on 1/12/2016 (lc).

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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GOODBREAK, LLC, a California
limited liability company,

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Plaintiff,
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v.
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HOOD BY AIR, LLC, a
California limited liability
company; HOOD BY AIR
LICENSING, LLC,a California
limited company; HOOD BY
AIR, an unknown entity;
SHAYNE OLIVER, an
individual; LEILAH WEINRAUB,
an individual; BEAU WOLLENS,
an individual; MELVIN LOH,
an individual,

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Defendants.
___________________________

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Case No. CV 15-03897 DDP (ASx)
ORDER DENYING PLAINTIFF’S MOTION
TO REMAND TO STATE COURT

[Dkt. 11, 18]

Presently before the court is Plaintiff Goodbreak LLC

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(“Goodbreak”)’s Motion to Remand.

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submissions, the Court DENIES the motion.

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I. Background

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After considering the parties’

Goodbreak arranges for the manufacture of clothing in China

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for its clients.

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and Hood By Air Licensing, LLC (collectively “HBA”) sell articles

(Complaint, ¶ 18.)

Defendants Hood By Air, LLC

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of clothing online and in retail locations.

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Defendant Shayne Oliver owns, directs, or controls HBA and

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Defendant Leilah Weinraub is HBA’s CEO.

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Director of Operations.

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(Complaint, ¶ 19.)

Defendant Wollens is HBA’s

(Id. ¶¶ 6-8.)

At a trade show in China, Defendants Oliver and Weinraub

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informed Goodbreak of the potential to invest in HBA.

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20.)

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with Defendants to further discuss this opportunity.

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meeting, Defendants requested that Plaintiff first manufacture

(Compl. ¶

Plaintiff traveled to New York City in November 2013 to meet
(Id.)

At the

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clothing for Defendants on a “trial run” basis, before Plaintiff

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could become an equity investor.

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lower markup rate (50%) than was customary in order to develop a

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business relationship with Defendants and preserve the opportunity

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to invest in HBA.

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(Id.)

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(Id.)

(Id.)

Plaintiff agreed to a

This agreement was not memorialized.

Pursuant to the agreement with Defendants, Plaintiff initiated

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production of various items of clothing for the Defendants.

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(Compl. ¶ 21.)

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Defendants instead agreed to pay Plaintiff within 30 days of

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receiving invoices.

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payments on several occasions.

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Plaintiff requested payment upon delivery, but

(Id.

¶ 24.)

Defendants were late with their

(Id.)

The Complaint further alleges that Defendants made

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unreasonable turn-around demands, frequently giving Plaintiff only

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two weeks, and once as little as three days, to fulfill

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manufacturing orders.

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Defendants’ designs, Plaintiff had to re-design several garments to

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make them capable of being manufactured.

(Compl. ¶ 26.)

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Due to alleged errors in

(Id.

¶ 27.)

On these

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occasions, Plaintiff had to use its own resources to fix errors and

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pay “rush” fees to the manufacturer.

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(Id. at ¶ 27.)

Plaintiff also alleges that Defendants demanded direct access

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to Plaintiff’s manufacturers in China.

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facilitate that access, Plaintiff helped Defendants obtain Chinese

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visas so that Defendants could observe production of the clothing.

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(Id.)

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Plaintiff’s manufacturer to break its agreement with Plaintiff and

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deal directly with HBA instead.

(Compl. ¶ 28.)

To

While Defendant Wollen was in China, however, he induced

(Id. at ¶ 29.)

After Plaintiff

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discovered this new arrangement, Defendants offered to continue

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paying Plaintiff the previously agreed upon markup rate, but never

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actually paid Plaintiff.

(Id.)

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Plaintiff filed suit in California state court alleging eight

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causes of action, including breach of contract, fraud, intentional

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interference with contractual relations, and unfair business

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practices.

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of diversity jurisdiction under 28 U.S.C. § 1332.

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Removal ¶ 3.)

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Defendants, for their part, move to dismiss.

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II. Legal Standard

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Defendant removed the action to this Court on the basis
(Notice of

Plaintiff seeks to remand the action to state court.

A defendant may remove a case from state court to federal

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court if the case could have originally been filed in federal

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court.

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jurisdiction of all civil actions where the matter in controversy

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exceeds the sum or value of $75,000 and is between citizens of

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different States.

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presumption” against removal and the Defendant has the burden of

28 U.S.C. § 1441(a).

The district courts have original

28 U.S.C. § 1332(a)(1).

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There is a “strong

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establishing that removal is proper.

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564, 566 (9th Cir. 1992).

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Gaus v. Miles, Inc., 980 F.2d

Federal Rule of Civil Procedure 12(b)(2) provides that a court

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may dismiss a suit for lack of personal jurisdiction.

The

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plaintiff has the burden of establishing that jurisdiction exists.

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See Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990).

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as here, the motion is based on written materials rather than an

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evidentiary hearing, “the plaintiff need only make a prima facie

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showing of jurisdictional facts.”

Where,

Caruth v. International

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Psychoanalytical Ass’n, 59 F.3d 126, 128 (9th Cir. 1977); Pebble

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Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006).

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the plaintiff cannot simply rest on the bare allegations of its

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complaint, uncontroverted allegations in the complaint must be

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taken as true.”

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797, 797 (9th Cir. 2004) (internal quotations and citation

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omitted).

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affidavits must be resolved in the plaintiff’s favor.

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“Although

Schwarzenegger v. Fred Martin Motor Co., 374 F.3d

Conflicts between parties over statements contained in
Id.

A complaint will survive a motion to dismiss when it contains

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“sufficient factual matter, accepted as true, to state a claim to

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relief that is plausible on its face.”

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662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,

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570 (2007)).

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“accept as true all allegations of material fact and must construe

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those facts in the light most favorable to the plaintiff.”

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v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000).

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need not include “detailed factual allegations,” it must offer

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“more than an unadorned, the-defendant-unlawfully-harmed-me

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accusation.”

Ashcroft v. Iqbal, 556 U.S.

When considering a Rule 12(b)(6) motion, a court must

Iqbal, 556 U.S. at 678.
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Resnick

Although a complaint

Conclusory allegations or

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allegations that are no more than a statement of a legal conclusion

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“are not entitled to the assumption of truth.” Id. at 679.

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other words, a pleading that merely offers “labels and

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conclusions,” a “formulaic recitation of the elements,” or “naked

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assertions” will not be sufficient to state a claim upon which

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relief can be granted.

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quotation marks omitted).

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In

Id. at 678 (citations and internal

“When there are well-pleaded factual allegations, a court should
assume their veracity and then determine whether they plausibly

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give rise to an entitlement of relief.” Id. at 679.

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must allege “plausible grounds to infer” that their claims rise

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“above the speculative level.” Twombly, 550 U.S. at 555.

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“Determining whether a complaint states a plausible claim for

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relief” is a “context-specific task that requires the reviewing

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court to draw on its judicial experience and common sense.”

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556 U.S. at 679.

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III. Discussion

Plaintiffs

Iqbal,

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A.

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Plaintiff argues that this case should be remanded because the

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Complaint does not state facts sufficient to establish the parties’

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citizenship and because Defendants have failed to definitively

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state their own U.S. citizenship status.

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courts . . . do not limit their inquiry to the face of the

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Plaintiff’s complaint, but rather consider the facts disclosed in

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the record of the case as a whole, in determining the propriety of

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removal.”

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Practice and Procedure § 3734 (4th ed. 2015).

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diversity is a concern of federal courts, not state courts, so many

Remand

Generally, “federal

14C Charles Alan Wright & Arthur R. Miller, Federal

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This is because

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state court complaints omit the facts necessary to determine

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diversity.

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(9th Cir. 2005).

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Harris v. Bankers Life and Cas. Co., 425 F.3d 689, 693

The Ninth Circuit has held that a defendant is permitted to

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remove an action to federal court “on the basis of its own

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information.”

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1121, 1125 (9th Cir. 2013).

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not allege the citizenship of each Defendant in its complaint, this

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“should not defeat removal if Defendant independently knows or

Roth v. CHA Hollywood Medical Center, L.P., 720 F.3d
Specifically, even if a Plaintiff does

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learns that information.”

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held in Harris that if the complaint does not set forth grounds for

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removal, and the Defendant chooses not to do its own research to

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determine if the action is removable, then the action is not

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removable at that point.

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not, however, prevent Defendants from voluntarily investigating to

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determine whether removal is proper.

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situations where the complaint does not allege facts sufficient to

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support removal, a Defendant is permitted to do research and remove

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the case to federal court, but is under no obligation to do so.

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Roth, 720 F.3d at 1125.

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Id. at 1125.

The Ninth Circuit also

Harris, 425 F.3d at 694.

Id. at 694.

Harris does

Thus, in

Here, although Plaintiff’s complaint does not contain

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citizenship allegations, Defendants discovered the case was

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removable from their own knowledge and investigation.

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Goodbreak does not dispute that it is a citizen of California.

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Defendants state in signed declarations that of the seven named

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defendants, five are citizens of New York, one is a citizen of

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Singapore, and one is an entity that does not exist.

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Removal p. 3; Weinraub Decl. ¶ 7, Dkt. No. 20-1.)
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Plaintiff

(Notice of

This court

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assumes that Defendants’ declarations are truthful, and Plaintiff

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has provided no evidence to the contrary.1

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statements, diversity jurisdiction exists among the parties and

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this case is properly in federal court.2

Based upon these

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B.

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Defendants Oliver, Weinraub, and Wollens (collectively, the

Personal Jurisdiction

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“individual Defendants”) argue that this court does not have

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personal jurisdiction over them.

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exercise personal jurisdiction to the extent authorized by the law

District courts have the power to

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of the state in which they sit.

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Panavision Int’l, L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir.

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1998).

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jurisdiction coextensive with the Due Process Clause of the United

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States Constitution, see Cal. Civ. Code § 410.10, this court may

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exercise personal jurisdiction over a nonresident defendant when

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that defendant has “at least ‘minimum contacts’ with the relevant

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forum such that the exercise of jurisdiction ‘does not offend

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traditional notions of fair play and substantial justice.’”

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Schwarzenegger, 374 F.3d at 800-01 (citing Int’l Shoe Co. v.

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Washington, 326 U.S. 310, 316 (1945)).

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such a quality and nature that the defendants could reasonably

Fed. R. Civ. P. 4(k)(1)(A);

Because California’s long-arm statute authorizes personal

The contacts must be of

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Plaintiff further alleges that Defendants Oliver, Weinraub
and Wollens’ declarations are insufficient because they do not
allege U.S. citizenship, a condition required for state
citizenship. Again, this court assumes that Defendants’ statements
of citizenship are complete and truthful representations.
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Plaintiff is requesting at least $428,372.16, which is well
above the $75,000 required for diversity jurisdiction under 28
U.S.C. § 1332(a)(1).
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expect to be “haled into court there.”

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Woodson, 444 U.S. 286, 297 (1980).

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World-Wide Volkswagen v.

1. General Jurisdiction

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Personal jurisdiction may be either general or specific.

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Gator.Com, 341 F.3d at 1076.

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there are substantial or continuous and systematic contacts with

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the forum state, even if the cause of action is unrelated to those

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contacts.”

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jurisdiction is fairly high”

Id.

“General jurisdiction exists when

“The standard for establishing general
Id. (citations omitted). “The

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contacts with the forum state must be of a sort that approximate

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physical presence.” Id. “Factors to be taken into consideration are

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whether the defendant makes sales, solicits or engages in business

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in the state, serves the state’s markets, designates an agent for

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service of process, holds a license, or is incorporated there.” Id.

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at 1076-77 (citations omitted). The court focuses on “the economic

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reality of the defendants’ activities rather than a mechanical

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checklist.” Id. “Even if substantial, or continuous and systematic,

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contacts exist, the assertion of general jurisdiction must be

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reasonable.” Id.

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Here, the only contacts Plaintiff cites are the individual

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Defendants’ relationships to HBA and the fact that Plaintiff paid

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money to Defendants’ California-based accountant.

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nowhere near systematic enough to approximate physical presence.

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See Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S.Ct.

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2846, 2853 (2011) (“For an individual, the paradigm forum for the

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exercise of general jurisdiction is the individual’s domicile . . .

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.”).

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///
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These facts are

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2.

Specific Jurisdiction

Courts in the Ninth Circuit apply a three prong test to
establish specific jurisdiction:
(1) The non-resident defendant must purposefully direct his
activities or consummate some transaction with the forum or
resident thereof; or perform some act by which he purposefully
avails himself of the privilege of conducting activities in
the forum, thereby invoking the benefits and protections of
its laws;

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(2) the claim must be one which arises out of or relates to
the defendant’s forum-related activities; and

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(3) the exercise of jurisdiction must comport with fair play
and substantial justice, i.e. it must be reasonable.

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Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th
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Cir. 2004.

The “plaintiff bears the burden of satisfying the first

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two prongs of the test.” Id. “If the plaintiff succeeds in
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satisfying both of the first two prongs, the burden then shifts to
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the defendant to ‘present a compelling case’ that the exercise of
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jurisdiction would not be reasonable.” Id.
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Plaintiff briefly argues that the first two prongs are
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satisfied because the individual Defendants “entered into contracts
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with plaintiff; registered two (2) limited liability companies in
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California; and paid plaintiff . . . using the services of an
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accountant located in Los Angeles.”

(Opposition at 5.)

However,

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“a contract alone does not automatically establish the requisite
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minimum contacts necessary for the exercise of personal
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jurisdiction.”

Gray & Co. v. Firstenberg Machinery Co., Inc., 913

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F.2d 758, 760 (9th Cir. 1990) (citing Burger King Corp. v.
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Rudzewicz, 471 U.S. 462, 475-76 (1985).

In a contractual dispute,

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the court must weigh additional factors such as course of dealings,
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choice of law provisions in the contract, and other factors not
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addressed by Plaintiff.

See Baca Gardening and Landscaping, Inc.

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v. Prizm Vinyl Corp., No. EDCV 08-1328-VAP, 2008 WL 4889030 at *4

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(C.D. Cal. Nov. 12, 2008).

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forum state alone sufficient to confer personal jurisdiction over

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the sender.

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Ltd., 828 F.2d 1439, 1443 (9th Cir. 1987).

Nor is the receipt of payment in a

See Fed. Deposit Ins. Corp. v. British-Am. Ins. Co.,

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“The mere fact that a corporation is subject to local

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jurisdiction does not necessarily mean its nonresident officers,

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directors, agents, and employees are suable locally as well.”

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Allstar Marketing Group, LLC v. Your Store Online, LLC, 666

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F.Supp.2d 1109, 1119 (C.D. Cal. 2009) (internal alteration,

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quotation, and citation omitted).

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that HBA is an alter ego of the individual Defendants.

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v. Wells Fargo Bank, N.A., 76 F.Supp.3d 929, 945 (2014) (explaining

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exceptions to fiduciary shield doctrine).

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exception, Plaintiff must make a prima facie case “(1) that there

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is such unity of interest and ownership that the separate

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personalities of the two entities no longer exist and (2) that

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failure to disregard their separate identities would result in

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fraud or injustice.”

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F.Supp.3d 938, 954 (N.D. Cal. 2015) (internal quotations,

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alterations, and citation omitted).

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Plaintiff contends, therefore,
See Mulato

To invoke the alter ego

Stewart v. Screen Gems-EMI Music, Inc., 81

When examining unity of interest, courts looks to factors such

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as the commingling of funds, use of the same offices or personnel,

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and lack of separate records.

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requirement generally requires some evidence of bad-faith.

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Pacific Maritime Freight, Inc. v. Foster, No. 10-cv-0578-BTM-BLM,

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2010 WL 3339432 at *7 (S.D. Cal. Aug. 24, 2010).

Id.

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The second prong’s injustice

Here, the

See

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Complaint does no more than allege the individual Defendants’

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relationship to HBA and conclusorily assert that the alter ego

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factors are satisfied, with no supporting factual allegations.

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(Compl. ¶ 13.)

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the exception does not apply.

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attributed to the individual Defendants.

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Absent a prima facie case for alter ego liability,
HBA’s acts and contacts cannot be

Because there is no other basis for specific jurisdiction over

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the individual Defendants, their motion to dismiss for lack of

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personal jurisdiction is granted.

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C.

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HBA moves to dismiss several of Plaintiff’s substantive

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HBA’s 12(b)(6) Motion

claims.

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1.

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Fraud and Negligent Misrepresentation

HBA argues that Plaintiff’s fraud and negligent

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misrepresentation claims are duplicative of breach of contract

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claim.

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contract breaches, thereby limiting contracting parties to contract

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damages.”

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Corp., 660 F.Supp.2d 1163, 1180 (C.D. Cal. 2009).

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amounting to a breach of conduct becomes tortious when it also

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violates a duty independent of the contract arising from principles

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of tort law.”

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979, 998 (2004) (internal quotation and citation omitted).

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Plaintiff does not identify any duty HBA owed to Goodbreak, other

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than the alleged contractual duty.

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misrepresentation claims are, therefore, dismissed.

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///

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“The economic loss rule generally bars tort claims for

United Guar. Mortg. Indem. Co. v. Countrywide Fin.
“[C]onduct

Robinson Helicopter Co. v. Dana Corp., 34 Cal. 4th

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Here,

Plaintiff’s fraud and negligent

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2.

Intentional Interference

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A claim for intentional interference with contractual

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relations requires “(1) a valid contract between plaintiff and a

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third party; (2) defendant’s knowledge of this contract; (3)

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defendant’s intentional acts designed to induce a breach or

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disruption of the contractual relationship; (4) actual breach or

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disruption . . ., and (5) resulting damage.”

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v. Stewart Title Guaranty Co., 19 Cal.4th 26, 55 (1998).

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Quelimane Co., Inc.

HBA argues that the Complaint does not plead sufficient facts

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to sustain an intentional interference claim.

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Although the Complaint makes reference to “agreements with third

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parties” and alleges that Defendants “hijacked plaintiff’s

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manufacturers,” there is neither any indication of the identities

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of those third party manufacturers nor any allegation regarding the

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contractual right or rights with which Defendants allegedly

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interfered.

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one manufacturer, that manufacturer is not named in the Complaint,

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which refers to several, rather than one, Chinese manufacturer.

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Defendants cannot be expected to defend against such vague

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allegations.

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Entm’t, Inc., – F.Supp.3d –, 2015 WL 4606077 at *15 (C.D. Cal.

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2015).

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3.

The court agrees.

Although Plaintiff’s opposition includes the name of

See, e.g. UMG Recordings, Inc. v. Global Eagle

Remaining Claims

Having dismissed Plaintiff’s intentional interference claim,

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the court also dismisses Plaintiff’s claims for the breach of the

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UCL and of the implied covenant of good faith and fair dealing.

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Plaintiff argues that its implied covenant claim is not duplicative

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of its breach of contract claim because it is based upon
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Plaintiff’s “reasonable expectation to not have HBA disrupt

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Goodbreak’s contract with the manufacturer.”

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other words, Plaintiff’s implied covenant claim is based upon its

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now-dismissed intentional interference claim.3

(Opp. at 10.)

In

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As for the UCL claim, Plaintiff’s Opposition makes reference

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to both the unlawful and unfairness prongs of California’s Unfair

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Competition Law.

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initial matter, however, the Complaint identifies only unfair, not

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any allegedly unlawful, business practice.

Cal. Business & Professions Code § 17200.

As an

(Compl. ¶¶ 74-76.)

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Second, the unlawful practice to which Plaintiff refers is the

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alleged intentional interference claim, which is deficient for the

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reasons discussed above.

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threatens an incipient violation of an antitrust law, or violates

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the policy or spirit of one of those laws . . ., or otherwise

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significantly threatens or harms competition.”

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Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163, 187 (1999).

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Plaintiff makes no attempt to demonstrate how the conduct alleged

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meets this definition.

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IV. CONCLUSION

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Lastly, an “unfair” practice is one “that

Cel-Tech Commc’ns,

For the reasons stated above, Plaintiff’s motion to remand is

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DENIED.

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Personal Jurisdiction is GRANTED.

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Plaintiff’s fraud and negligent misrepresentation, intentional

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interference, implied covenant, and UCL claims is GRANTED.

The individual Defendants’ Motion to Dismiss for Lack of
HBA’s Motion to Dismiss

Those

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Although Plaintiff’s opposition devotes two sentences to
the argument that the breach of implied covenant claim is based
upon Defendants’ complaints about the items provided by Plaintiff,
it is unclear to the court how such complaints implicate the terms
of the alleged contract.
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claims, and all claims against the individual Defendants, are

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DISMISSED, with leave to amend.

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filed within fourteen days of the date of this Order.

Any amended complaint shall be

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IT IS SO ORDERED.

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Dated: January 12, 2016
DEAN D. PREGERSON
United States District Judge

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