Mililani Group, Inc. v. O'Reilly Automotive, Inc.

Filing 16

ORDER signed by Judge John A. Mendez on 11/26/2012 ORDERING that Defendants' 12 Motion to Dismiss is GRANTED WITH LEAVE TO AMEND. Plaintiff's Amended Complaint must be filed within twenty (20) days from the date of this Order. If Plaint iff elects not to file an Amended Complaint, the case will proceed on the First Amended Complaint on only the breach of contract claim against CSK. Defendants must file their response to Plaintiff's Amended Complaint within twenty (20) days from the date any Amended Complaint is filed. (Zignago, K.)

Download PDF
1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 MILILANI GROUP, INC., 12 15 2:12-cv-00891 JAM-CKD Plaintiff, 13 14 No. v. O’REILLY AUTOMOTIVE, INC., and CSK AUTO, INC. ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS WITH LEAVE TO AMEND Defendants. 16 17 This matter is before the Court on Defendants O’Reilly 18 Automotive, Inc. (“O’Reilly”), and CSK Auto, Inc.’s (“CSK”) 19 (collectively “Defendants”) Motion to Dismiss (Doc. #12). 20 Plaintiff Mililani Group, Inc. (“Plaintiff”) opposes the motion 21 (Doc. #13).1 22 granted. 23 /// 24 /// 25 /// For the following reasons, Defendants’ motion is 26 27 28 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled for November 7, 2012. 1 1 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND 2 Plaintiff filed its First Amended Complaint (“FAC”), the 3 operative complaint in this case, on May 21, 2012 (Doc. #7). 4 Plaintiff alleges two causes of action against Defendants, the 5 first for breach of contract and the second for waste. 6 On or about August 29, 1988, CSK entered into a written 7 lease agreement for warehouse and office space in Dixon, 8 California (the “Property”). 9 30, 2011. CSK vacated the Property on April Plaintiff alleges that CSK breached the lease by 10 failing to maintain insurance, maintain the Property, and return 11 the Property to the condition required by the lease. 12 further alleges that CSK’s failure to maintain and repair the 13 Property constitutes waste. 14 Plaintiff Moreover, Plaintiff alleges that CSK merged with O’Reilly 15 on July 11, 2008, and that since the merger the day-to-day 16 decisions regarding the Property were made by O’Reilly. 17 18 II. OPINION 19 A. Legal Standard 20 A party may move to dismiss an action for failure to state 21 a claim upon which relief can be granted pursuant to Federal 22 Rule of Civil Procedure 12(b)(6). 23 dismiss, the court must accept the allegations in the complaint 24 as true and draw all reasonable inferences in favor of the 25 plaintiff. 26 overruled on other grounds by Davis v. Scherer, 468 U.S. 183 27 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). 28 are mere “legal conclusions,” however, are not entitled to the In considering a motion to Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), 2 Assertions that 1 assumption of truth. 2 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 3 (2007)). 4 plead “enough facts to state a claim to relief that is plausible 5 on its face.” 6 appropriate where the plaintiff fails to state a claim 7 supportable by a cognizable legal theory. 8 Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990). 9 Ashcroft v. Iqbal, 556 U.S. 662, 678 To survive a motion to dismiss, a plaintiff needs to Twombly, 550 U.S. at 570. Dismissal is Balistreri v. Upon granting a motion to dismiss for failure to state a 10 claim, the court has discretion to allow leave to amend the 11 complaint pursuant to Federal Rule of Civil Procedure 15(a). 12 “Dismissal with prejudice and without leave to amend is not 13 appropriate unless it is clear . . . that the complaint could 14 not be saved by amendment.” 15 Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). Eminence Capital, L.L.C. v. Aspeon, 16 B. Judicial Notice 17 Defendants request judicial notice of three documents: 18 (1) a printout from the Arizona Corporation Commission website 19 stating that CSK is an Arizona Corporation in good standing; 20 (2) a printout from the Missouri Secretary of State website 21 stating that O’Reilly is a Missouri Corporation in good 22 standing; and (3) portions of the Securities and Exchange 23 Commission, Form 10-K, filed by O’Reilly in 2011. 24 Judicial Notice attached to Defendants’ Motion to Dismiss, Doc. 25 #12, at 1-2. 26 downloaded from a public agency’s official website, are subject 27 to judicial notice. 28 Emergency Mgmt. Agency, 812 F. Supp. 2d 1089, 1093 (E.D. Cal. Request for Public records, including public records Coal. for a Sustainable Delta v. Fed. 3 1 2011). 2 only “to prove their existence and content, but not for the 3 truth of the matters asserted therein.” 4 for a Sustainable Delta v. McCamman, 725 F. Supp. 2d 1162, 1183– 5 84 (E.D. Cal. 2010)). 6 notice of the three documents limited to their existence and 7 content. 8 9 10 C. However, public records are subject to judicial notice Id. (quoting Coalition Therefore, the Court grants judicial Discussion 1. Alter Ego Liability Defendants move to dismiss all claims against O’Reilly, 11 contending that Plaintiff has failed to allege sufficient facts 12 to establish alter ego liability. 13 not required to allege its claims in detail under the Federal 14 Rules of Civil Procedure. 15 Plaintiff argues that it is The parties agree that because O’Reilly did not sign the 16 lease or occupy the property, Plaintiff can only sustain a claim 17 against O’Reilly through alter ego liability. 18 apply the law of the forum state in determining whether to pierce 19 the corporate veil. 20 2003) (citations omitted). 21 veil may be pierced when the corporation is the alter ego of a 22 controlling shareholder. 23 83 Cal.App.4th 523 (2000). 24 unity of interest and ownership between the corporation and its 25 equitable owner that the separate personalities of the 26 corporation and the shareholder do not in reality exist” and 27 (2) “an inequitable result if the acts in question are treated as 28 those of the corporation alone.” Federal courts SEC v. Hickey, 322 F.3d 1123, 1128 (9th Cir. Under California law, the corporate Sonora Diamond Corp. v. Superior Court, Alter ego liability requires (1) “a Id. at 538. 4 To pursue this 1 theory of liability, a plaintiff must allege the elements of the 2 doctrine and conclusory allegations are insufficient. 3 E.F. Hutton & Co., Inc., 566 F.Supp.636, 647 (C.D. Cal. 1983). 4 a. Unity of Interest 5 6 Hokama v. For the unity of interest element, courts consider several factors, including 7 inadequate capitalization, commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, use of one as a mere conduit for the affairs of the other, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers. 8 9 10 11 12 Virtualmagic Asia, Inc. v. Fil-Cartoons, Inc., 99 Cal.App.4th 13 228, 245 (2002). 14 factors, but it fails to provide sufficient facts to support its 15 allegations. 16 CSK and O’Reilly merged, “CSK has operated at the will and whim 17 of O’Reilly, it has no separate corporate office, it has no 18 management employees, day to day decisions regarding the 19 Premises, described below were made by O’Reilly employees.” 20 ¶ 7. 21 in CSK’s name to such an extent that any individuality or 22 separateness of CSK and O’Reilly no longer exists. 23 These general allegations are too broad and insufficient to show 24 a unity of interest and ownership. See Wehlage v. EmpRes 25 Healthcare, Inc., 791 F.Supp.2d 774, 782-83 (N.D. Cal. 2011) 26 (dismissing claims based on alter ego liability because the broad 27 allegations were “not sufficient to show a unity of interest and 28 ownership”). Here, Plaintiff has alleged several of these For example, Plaintiff generally alleges that since FAC Plaintiff also alleges that O’Reilly carried out business 5 Id. ¶ 8. 1 Defendants argue that the claims against O’Reilly fail 2 substantively because O’Reilly is “three steps removed” from CSK 3 in the corporate structure and O’Reilly is not CSK’s parent 4 company according to the judicially noticed documents. 5 Defendants’ argument does not eliminate all potential alter ego 6 liability. 7 company, in California, the alter ego doctrine may apply between 8 a parent and a subsidiary or, under the single enterprise rule, 9 between sister and affiliated companies. However, Even though O’Reilly may not be CSK’s parent Id. at 783. Here, the 10 companies are affiliated and therefore, alter ego liability 11 under these circumstances is still possible if properly alleged. 12 13 b. Inequitable result With respect to the inequitable result element of 14 Plaintiff’s alter ego theory, Plaintiff must allege bad faith 15 conduct by Defendants. 16 Cal.App.4th 1205, 1213 (1992). 17 to merely show that a creditor will remain unsatisfied if the 18 corporate veil is not pierced.” 19 Oakland Meat Co., 210 Cal.App.2d 825, 842 (1962). 20 Plaintiff has not alleged any wrongdoing by either O’Reilly or 21 CSK that may amount to bad faith. 22 faith, the alter ego doctrine cannot be invoked. 23 Mid-Century Ins. Co. v. Gardner, 9 Moreover, “it is not sufficient Associated Vendors, Inc. v. Here, Without allegations of bad Accordingly, the Court finds that Plaintiff has not alleged 24 either element of alter ego liability and therefore, all claims 25 against O’Reilly must be dismissed. 26 amend, however, because Plaintiff may be able to allege the unity 27 of interest element in greater detail and allege sufficient facts 28 to establish bad faith conduct by the Defendants. 6 The Court grants leave to 1 2 3 2. 4 Waste Claim Defendants also contend that the waste claim should be 5 dismissed independently because Plaintiff has failed to plead 6 facts to establish a permanent or substantial depreciation in 7 the Property’s market value. 8 have to allege permanent damage to the Property because in 9 federal court, only a plain and simple statement of the claim is 10 Plaintiff argues that it does not required. 11 Waste is defined as an unlawful act or omission of duty on 12 the part of a tenant, resulting in permanent injury to the 13 property. 14 Cal.App.4th 128, 149 (1998) disapproved on other grounds by 15 Vandenberg v. Superior Court, 21 Cal.4th 815, 982 P.2d 229 16 (1999) (citation omitted). 17 value of real property has to be permanently diminished. 18 v. Cap Concrete, Inc., 133 Cal.App.3d 769, 775 (1982). 19 “waste does not embrace a breach of covenant to repair, whether 20 the damage is caused by ordinary wear and tear or an act of 21 God.” 22 Old Republic Ins. Co. v. Superior Court, 66 To constitute waste, the market Smith However, Krone v. Goff, 53 Cal.App.3d 191, 195 (1975). Here, Plaintiff has alleged that Defendants failed to 23 maintain and repair the Property and that it has expended, at 24 least, one million dollars to repair and return the Property to 25 its original condition. 26 that the Property has been permanently damaged or that the 27 market value of the Property has been permanently diminished, 28 which is required to establish a claim even in federal court. Plaintiff, however, does not allege 7 1 See In re Am. Principals Holdings, Inc. Sec. Litig., No. 653, 2 1987 WL 39746, at *15 (S.D. Cal. July 9, 1987) (dismissing 3 plaintiff’s waste claim because the plaintiff failed to allege 4 permanent damage to the property). 5 Because this claim may be saved by further amendment, the 6 Court grants Defendants’ motion to dismiss but with leave to 7 amend. 8 9 III. ORDER 10 For the reasons set forth above, Defendants’ Motion to 11 Dismiss is GRANTED WITH LEAVE TO AMEND. 12 Complaint must be filed within twenty (20) days from the date of 13 this Order. 14 Complaint, the case will proceed on the First Amended Complaint 15 on only the breach of contract claim against CSK. Defendants 16 must file their response to Plaintiff’s Amended Complaint within 17 twenty (20) days from the date any Amended Complaint is filed. 18 19 20 Plaintiff’s Amended If Plaintiff elects not to file an Amended IT IS SO ORDERED. Dated: November 26, 2012 ____________________________ JOHN A. MENDEZ, UNITED STATES DISTRICT JUDGE 21 22 23 24 25 26 27 28 8

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?