Randhawa v. Skylux, Inc., et al.

Filing 161

MEMORANDUM and ORDER signed by Senior Judge William B. Shubb on 1/15/13: Defendants' motion to dismiss for failure to state a claim be, and the same hereby is, GRANTED as to plaintiffs' first, second, third, and fifth claims. AND IT IS FURTHER ORDERED that the first, second, third, and fifth claims of plaintiffs Sixth Amended Complaint be, and the same hereby are, DISMISSED WITH PREJUDICE. (Kaminski, H)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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----oo0oo----

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MOHIT RANDHAWA aka HARPAL
SINGH, and SHANNON CALLNET PVT
LTD,

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Plaintiffs,

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NO. CIV. 2:09-02304 WBS DAD

MEMORANDUM AND ORDER RE:
MOTION TO DISMISS

v.
SKYLUX INC.; INTERACTIVE
INTELLIGENCE, INC.; MUJEEB
PUZHAKKARAILLATH; SKYLUX
TELELINK PVT LTD; and DOES 1
through 20, inclusive,

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Defendants.

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----oo0oo----

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This matter is again before the court on Skylux, STPL,

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and Puzhakkaraillath’s (together, “defendants”) motion to dismiss

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plaintiffs’ claims against them in the Sixth Amended Complaint

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(“Sixth AC”) pursuant to Federal Rule of Civil Procedure

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12(b)(6).

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In the court’s October 26, 2012 Order (“Order”), the
court dismissed all of plaintiffs’ claims except Shannon
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Callnet’s fourth claim for breach of implied warranty.

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2012 Order (“Order”) (Docket No. 148).)

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plaintiffs filed their Sixth AC1 alleging: 1) breach of contract;

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2) breach of duty of good faith and fair dealing; 3) breach of

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express warranty; 4) breach of implied warranty; and 5) unfair

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business practices under California Business and Professions Code

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section 17200 et seq.

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plaintiffs’ first, second, third, and fifth claims for failure to

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state a claim under Rule 12(b)(6).

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II.

(Id.)

(Oct. 26,

After the Order,

Defendants now move to dismiss

Discussion

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To survive a motion to dismiss, a plaintiff must plead

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“only enough facts to state a claim to relief that is plausible

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on its face.”

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(2007).

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than a sheer possibility that a defendant has acted unlawfully,”

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Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and “[w]here a

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complaint pleads facts that are ‘merely consistent with’ a

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defendant’s liability, it ‘stops short of the line between

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possibility and plausibility of entitlement to relief.’”

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(quoting Twombly, 550 U.S. at 557).

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plaintiff has stated a claim, the court must accept the

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allegations in the complaint as true and draw all reasonable

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inferences in favor of the plaintiff.

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U.S. 232, 236 (1974), overruled on other grounds by Davis v.

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570

This “plausibility standard,” however, “asks for more

Id.

In deciding whether a

Scheuer v. Rhodes, 416

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Plaintiffs first filed their Fifth Amended Complaint,
but included claims against another defendant, Interactive, which
had already been dismissed as subject to arbitration. (Docket
No. 150.) The parties stipulated to the filing of an amended
complaint, and the court granted permission to file the Sixth AC.
(Docket No. 151.)
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Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322

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(1972).

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A.

Breach of Contract, Breach of Implied Covenant of

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Good Faith and Fair Dealing, and Breach of Express

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Warranty

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In its Fourth Amended Complaint, Shannon Callnet

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previously attempted to the bring claims for breach of contract,

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breach of implied covenant of good faith and fair dealing, and

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breach of express warranty against defendants.

The court

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dismissed the claims for lack of standing because plaintiffs

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conceded that “plaintiff Randhawa is indeed the correct party to

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bring contractual causes of action against STPL, since it was

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Randhawa who executed the MOU.”

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to Mot. to Dismiss Fourth AC at 4 (Docket No. 145)).)

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noted that, because Randhawa signed the MOU, “only Randhawa has

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standing to bring the claim unless Shannon Callnet alleges facts

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sufficient to support another theory that would allow it to sue

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under the MOU.”

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Baan Co., 74 Cal. App. 4th 401, 405 (1st Dist. 1999) (breach of

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contract claims “generally require[] the party to be a signatory

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to the contract, or to be an intended third party

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beneficiary”)).)

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(Order at 2 (quoting Pl.’s Opp.
The court

(Order at 2 (citing Berclain v. Am. Latina v.

In the Sixth AC, Randhawa brings the contractual claims

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against defendants.

Defendants now argue that Randhawa lacks

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prudential standing in federal court because the harms alleged in

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the Sixth AC are harms suffered principally by Shannon Callnet.

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See Franchise Tax Bd. of Cal. v. Alcan Aluminium Ltd., 493 U.S.

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331, 336 (1990) (noting that shareholders are generally
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prohibited from “initiating actions to enforce the rights of the

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corporation unless the corporation’s management has refused to

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pursue the same action for reasons other than good-faith business

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judgment”).

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In response, plaintiffs assert, for the first time,

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that Randhawa’s contract claims are not based on the MOU, but on

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some subsequent agreement between the parties.

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defendants’ reliance on the terms of the MOU in arguing that

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Shannon Callnet, and not Randhawa, suffered injury “is both in

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one sense inappropriate and in any event incomplete,” because

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“the text of the MOU was not presented to plaintiff Randhawa

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until later, and hence there is no assurance that all of its

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express terms actually memorialized the agreement.”

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at 9 (Docket No. 158).)

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MOU is “merely” a memorandum of understanding, it “is not the

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agreement but a precursor to the agreement” that was actually

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entered into by the parties, and that “the MOU is deficient in

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conveying a full or accurate memorialization of what plaintiff

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Randhawa and STPL agreed to.”

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plaintiffs, “it will apparently have to be up to the parties at

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the time of trial hereon to convince the trier of fact as to what

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were and what were not the actual terms of the agreement on which

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the parties reached a meeting of the minds.”

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argument, plaintiffs again reiterated that the MOU was just a

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“precursor” to the actual agreement entered into by the parties.

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They argue that

(Pls.’ Opp’n

Plaintiffs now assert that, because the

(Id. at 10.)

According to

(Id.)

At oral

Nowhere in the Sixth AC do plaintiffs allege facts

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indicating that any “agreement” outside the MOU was entered into

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at all, let alone the terms of such an agreement.
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See Kaui Scuba

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Ctr., Inc. v. PADI Ams., Inc., Civ. No. 10-1579 DOC MANx, 2011 WL

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2711177, at *5 (C.D. Cal. July 13, 2011) (rejecting contract

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alleged to be “partly oral and partly written” when the complaint

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failed to allege the substance of the contract’s relevant terms);

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N. Cnty. Comms. Corp. v. Verizon Global Networks, Inc., 685 F.

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Supp. 2d 1112, 1122 (S.D. Cal. 2010) (noting that a plaintiff

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alleging a breach of contract “must plead . . . the contract

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either ‘by its terms, set out verbatim in the complaint or a copy

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of the contract attached to the complaint and incorporated

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therein by reference, or by its legal effect,’” and that “in

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order to plead a contract by its legal effect, [a plaintiff] must

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allege the substance of its relevant terms” (quoting McKell v.

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Wash. Mut., Inc., 142 Cal. App. 4th 1457, 1489 (2d Dist. 2006))).

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At oral argument, when asked to point to an allegation in the

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complaint that provided the relevant terms of the contract,

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plaintiffs could not do so.

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Thus, even if Randhawa has prudential standing to

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assert contract claims under the MOU, because plaintiffs fail to

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allege the substance of the agreement that forms the basis for

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their first, second, and third claims, the court will dismiss

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those claims.

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B.

Unfair Competition Claims

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California Business and Professions Code § 17200 et

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seq. prohibits unfair competition, which is defined to include

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“any unlawful, unfair, or fraudulent business act or practice.”

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Cal. Bus. & Prof. Code § 17200.

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separate and distinct theory of liability . . . .”

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Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir. 2009) (citing S.

“Each prong of the UCL is a

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Kearns v.

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Bay Chevrolet v. Gen. Motors Acceptance Corp., 72 Cal. App. 4th

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861, 886 (4th Dist. 1999)).

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In the October 26, 2012 Order, the court noted that

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“plaintiffs do not clearly state which prong of the UCL they are

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relying upon,” and that the court “had further difficulty

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discerning what prong to proceed under because neither party

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cites, nor can this court find, any UCL cause of action that

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resembles the facts before the court.”

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Sixth AC, plaintiffs now allege that defendants engaged in

(Order at 4.)

In the

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“deceptive” business practices, (Sixth AC ¶¶ 46, 48-49), and

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argue in their opposition brief that their UCL claims fall under

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the fraudulent prong of the UCL, (Pls.’ Opp’n at 3).

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“To state a cause of action for violation of the UCL

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under the ‘fraudulent’ prong, the plaintiff must show that

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members of the public are likely to be deceived.”

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Installment Fee Cases, --- Cal. Rptr. 3d ----, 2012 WL 6214302,

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at *10 (Cal. Ct. App. 4th Dist. Dec. 13, 2012); see Williams v.

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Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008) (noting that

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under the UCL and CLRA, “Appellants must show that members of the

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public are likely to be deceived” (internal quotation marks

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omitted)).

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In re Ins.

In federal court, Rule 9(b)’s heightened pleading

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standard applies to UCL claims based on fraud.

Kearns, 567 F.3d

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at 1125 (citing Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097,

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1102-05 (9th Cir. 2003)).

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with particularity the circumstances constituting fraud or

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mistake.”

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“who, what, when, where, and how” of the alleged

Under Rule 9(b), “a party must state

Fed. R. Civ. P. 9(b).

The claimant must show the

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misrepresentation and “must set forth what is false or misleading

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about a statement, and why it is false.”

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Vess, 317 F.3d at 1106.

In support of their claim, Shannon Callnet and Randhawa

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point to general allegations that Puzzhakarailth and STPL

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unilaterally inserted a forum selection clause into the MOU and

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did not provide Randhawa with a copy of the MOU after its terms

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were negotiated, (Sixth AC ¶¶ 10, 12), that Shannon Callent

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employed an agent of STPL who willfully damaged software in order

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for STPL to gain repair and consultation fees, (id. ¶ 16,), and

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that STPL failed to disclose the existence of a licensing

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agreement for the Interactive software, (id. ¶ 20).

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The court fails to see how plaintiffs’ allegations–-

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which consist of failure to disclose terms during contract

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negotiations and commercial sabotage--satisfy the requirement

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that members of the public are likely to be deceived.

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Labs., Inc. v. Rhone-Poulenc Rorer, Inc., 178 F. Supp. 2d 1099,

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1121 (N.D. Cal. 2001) (noting that it should “be necessary under

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the ‘fraudulent’ prong to show deception to some members of the

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public, or harm to the public interest, and not merely to the

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direct competitor or other non-consumer party to a contract”);

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Cabo Brands, Inc. v. MAS Beverages, Inc., Civ. No. 8:11-1911 ODW

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ANx, 2012 WL 2054923, at *5 (C.D. Cal. June 5, 2012) (“In this

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private contract dispute, the Court cannot fathom how [the

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defendant] will deceive members of the public.”).

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See Watson

Even assuming, however, that Randhawa is a member of

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the public, plaintiffs’ allegations fail to state with

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particularity the alleged misrepresentations, why those

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misrepresentations were fraudulent, or the circumstances
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surrounding the misrepresentations.

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1125-27 (dismissing UCL claim based on false advertising and

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nondisclosure where the allegations did not “specify what the

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television advertisement or other sales material specifically

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stated,” and allegations of nondisclosure were “couched in

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general pleadings”); Vess, 317 F.3d at 1106 (rejecting a UCL

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claim where plaintiff did not adequately specify which testing

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data, publications, and other information were fraudulent).

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See Kearns, 567 F.3d at

Plaintiffs therefore fail to state a cognizable claim

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under the “fraudulent” prong of the UCL and the court will grand

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defendants’ motion to dismiss that claim.

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In the October 26, 2012 Order, the court warned

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plaintiffs that if their next complaint was “still deficient, the

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court will have to assume plaintiffs can do no better, and any

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order dismissing that complaint or any of the claims in it will

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be without leave to amend.”

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will dismiss plaintiffs’ first, second, third, and fifth claims

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with prejudice and without leave to amend because further

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amendment would be futile.

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Inc., 957 F.2d 655, 658 (9th Cir. 1992); Reddy v. Litton Indus.,

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Inc., 912 F.2d 291, 296-97 (9th Cir. 1990); Rutman Wine Co. v. E.

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& J. Gallo Winery, 829 F.2d 729, 738 (9th Cir. 1987); Klamath-

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Lake Pharm. Ass’n v. Klamath Med. Serv. Bureau, 701 F.2d 1276,

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1293 (9th Cir. 1983).

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(Order at 6.)

The court, therefore,

See DeSoto v. Yellow Freight Sys.,

IT IS THEREFORE ORDERED that defendants’ motion to

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dismiss for failure to state a claim be, and the same hereby is,

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GRANTED as to plaintiffs’ first, second, third, and fifth claims;

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AND IT IS FURTHER ORDERED that the first, second,
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third, and fifth claims of plaintiffs’ Sixth Amended Complaint

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be, and the same hereby are, DISMISSED WITH PREJUDICE.

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DATED:

January 15, 2013

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