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

Filing 29

ORDER signed by Judge John A. Mendez on 4/3/13 ORDERING that Defendants' Motion to Dismiss is GRANTED WITH PREJUDICE. The case will proceed on the Second Amended Complaint on only the breach of contract claim against CSK. Further, Defendants' Motion to Strike Plaintiff's Second Amended Complaint (Doc. #18) is denied as moot. (Becknal, R)

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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 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 Plaintiff’s Second 20 Amended Complaint (“SAC”) (Doc. #20). 21 Inc. (“Plaintiff”) opposes the motion (Doc. #26) and Defendants 22 replied (Doc. #28).1 23 motion is GRANTED. Plaintiff Mililani Group, For the following reasons, Defendants’ 24 25 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 March 6, 2012. 1 1 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND 2 Defendants previously moved to dismiss all claims against 3 O’Reilly and the waste claim; that motion was granted with leave 4 to amend (Doc. #16). 5 SAC (Doc. #17). 6 action against Defendants, the first for breach of contract and 7 the second for waste. 8 to dismiss all claims against O’Reilly and the waste claim (Doc. 9 #20).2 On December 18, 2012, Plaintiff filed its In the SAC, Plaintiff alleges two causes of SAC ¶¶ 12-27. Defendants once more moved Good cause having been shown, the Court granted Plaintiff 10 leave to file a late opposition and gave Defendants a week to 11 reply (Doc. #27). 12 On or about August 29, 1988, CSK entered into a written 13 lease agreement for warehouse and office space in Dixon, 14 California (the “Property”). 15 on April 30, 2011. 16 breached the lease by failing to maintain insurance, maintain the 17 Property, and return the Property to the condition required by 18 the lease and its failure resulted in permanent diminution in 19 value of the Property. 20 Id. ¶ 16. SAC ¶ 13. CSK vacated the Property Plaintiff alleges that CSK Id. ¶ 25. In addition, Plaintiff alleges that CSK merged with O’Reilly 21 on July 11, 2008, and that since the merger, the day-to-day 22 decisions regarding the Property were made by O’Reilly. 23 Plaintiff further alleges that O’Reilly imposed unrealistic 24 budgeting and financial goals on CSK that prevented CSK from 25 carrying out the terms of the contracts to which it was 26 2 27 28 Defendants also request judicial notice of several documents. Doc. #20. However, the Court finds these documents unnecessary for the determination of this motion and therefore, Defendants’ request for judicial notice is denied. 2 1 obligated. 2 allegedly informed that CSK managers had no control over spending 3 decisions and budgets and that such decisions must be made by 4 O’Reilly. Id. ¶¶ 6-8. Moreover, Plaintiff’s management was Id. 5 6 II. OPINION 7 A. 8 A party may move to dismiss an action for failure to state 9 Legal Standard a claim upon which relief can be granted pursuant to Federal 10 Rule of Civil Procedure 12(b)(6). 11 dismiss, the court must accept the allegations in the complaint 12 as true and draw all reasonable inferences in favor of the 13 plaintiff. 14 overruled on other grounds by Davis v. Scherer, 468 U.S. 183 15 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). 16 are mere “legal conclusions,” however, are not entitled to the 17 assumption of truth. 18 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 19 (2007)). 20 plead “enough facts to state a claim to relief that is plausible 21 on its face.” 22 appropriate where the plaintiff fails to state a claim 23 supportable by a cognizable legal theory. 24 Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990). 25 In considering a motion to Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), Assertions that 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 26 claim, the court has discretion to allow leave to amend the 27 complaint pursuant to Federal Rule of Civil Procedure 15(a). 28 “Dismissal with prejudice and without leave to amend is not 3 1 appropriate unless it is clear . . . that the complaint could 2 not be saved by amendment.” 3 Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). 4 B. 5 6 Eminence Capital, L.L.C. v. Aspeon, Discussion 1. Alter Ego Liability Defendants move to dismiss all claims against O’Reilly, 7 contending that Plaintiff has failed to allege sufficient facts 8 to establish alter ego liability. 9 that it is not required to allege its claims in detail under the 10 11 Federal Rules of Civil Procedure. Plaintiff once again argues Opp. at 2. Federal courts apply the law of the forum state in 12 determining whether to pierce the corporate veil. 13 322 F.3d 1123, 1128 (9th Cir. 2003) (citations omitted). 14 California law, the corporate veil may be pierced when the 15 corporation is the alter ego of a controlling shareholder. 16 Sonora Diamond Corp. v. Superior Court, 83 Cal.App.4th 523, 537- 17 38 (2000). 18 and ownership between the corporation and its equitable owner 19 that the separate personalities of the corporation and the 20 shareholder do not in reality exist” and (2) “an inequitable 21 result if the acts in question are treated as those of the 22 corporation alone.” 23 SEC v. Hickey, Under Alter ego liability requires (1) “a unity of interest Id. at 538. As discussed in the Court’s previous Order, to pursue this 24 theory of liability, a plaintiff must allege the elements of the 25 doctrine and conclusory allegations are insufficient. 26 E.F. Hutton & Co., Inc., 566 F. Supp. 636, 647 (C.D. Cal. 1983). 27 As to the first prong, Plaintiff provides general allegations 28 that O’Reilly makes decisions for CSK through budgeting and 4 Hokama v. 1 management. 2 do not include facts to show a unity of interest and ownership. 3 See Wehlage v. EmpRes Healthcare, Inc., 791 F. Supp. 2d 774, 782- 4 83 (N.D. Cal. 2011) (holding that broad allegations are not 5 sufficient to show a unity of interest and ownership). 6 second prong, Plaintiff alleges, “Defendant O’Reilly acted in bad 7 faith in that its refusal to permit CSK to perform the lease 8 obligations constituted bad faith.” 9 not only conclusory because Plaintiff provides no facts to show However, these allegations are still too vague and SAC ¶ 9. As to the This allegation is 10 conduct amounting to bad faith, but also circular in logic 11 because it assumes what Plaintiff is trying to prove. 12 Plaintiff has not satisfied the second prong. 13 Therefore, Accordingly, the Court finds that Plaintiff has not alleged 14 either element of alter ego liability and therefore, all claims 15 against O’Reilly must be dismissed. 16 failed to state alter ego liability against O’Reilly, the Court 17 does not grant leave to amend. 18 2. Because Plaintiff has twice Waste Claim 19 Defendants also contend that the waste claim should be 20 dismissed because Plaintiff has failed to plead facts to show a 21 permanent depreciation in the Property’s market value. 22 Plaintiff rejoins that deliberately allowing the landscaping to 23 die and the support columns to deteriorate is permanent damage 24 to the building. 25 Opp. at 3. Waste is defined as an unlawful act or omission of duty on 26 the part of a tenant, resulting in permanent injury to the 27 property. 28 Cal.App.4th 128, 149 (1998) disapproved on other grounds by Old Republic Ins. Co. v. Superior Court, 66 5 1 Vandenberg v. Superior Court, 21 Cal.4th 815, 982 P.2d 229 (1999) 2 (citation omitted). 3 real property has to be permanently diminished. Smith v. Cap 4 Concrete, Inc., 133 Cal.App.3d 769, 775 (1982). Proof of 5 “conduct which has resulted in substantial depreciation of the 6 market value of the land” establishes waste. 7 Avalon Pac.-Santa Ana, L.P. v. HD Supply Repair & Remodel, LLC, 8 192 Cal.App.4th 1183, 1215 (2011)(holding that “waste occurs when 9 damage is sufficiently substantial and permanent to cause an 10 11 To constitute waste, the market value of Id.; see also injury to the reversion interest”). The Court previously held that Plaintiff could maintain this 12 cause of action only if Plaintiff properly alleged permanent 13 damage. 14 the landscaping to die and the support columns to deteriorate 15 placing the building in danger of falling, but those allegations 16 are not found in the SAC and Plaintiff provides no facts that 17 would allow Defendants or the Court to determine whether the 18 Property’s diminution in market value was permanent. 19 only alleges that Defendants failure to maintain or repair the 20 Property “resulted in the permanent diminution in value of the 21 Premises beyond ordinary wear and tear.” 22 this bare assertion of a legal conclusion is insufficient to 23 establish that the Property value was permanently diminished. 24 Moreover, Plaintiff fails to allege that Defendants’ conduct 25 resulted in substantial damage. 26 192 Cal.App.4th at 1215 (requiring permanent and substantial 27 damage for a waste claim). 28 Order at 7. Plaintiff argues that Defendants allowed SAC ¶ 25. Plaintiff However, See Avalon Pac.-Santa Ana, L.P., Accordingly, because Plaintiff has failed to allege 6 1 sufficient facts for a waste claim, the Court dismisses 2 Plaintiff’s second cause of action. 3 indication of what more it could plead to state a claim, 4 signaling that indeed there are no additional facts Plaintiff 5 could include in the complaint were it granted leave to amend. 6 Therefore, the Court dismisses this claim without leave to 7 amend. Plaintiff gives no 8 9 III. ORDER 10 For the reasons set forth above, Defendants’ Motion to 11 Dismiss is GRANTED WITH PREJUDICE. 12 Second Amended Complaint on only the breach of contract claim 13 against CSK. Further, Defendants’ Motion to Strike Plaintiff’s 14 Second Amended Complaint (Doc. #18) is denied as moot. 15 16 The case will proceed on the IT IS SO ORDERED. Dated: April 3, 2013 ____________________________ JOHN A. MENDEZ, UNITED STATES DISTRICT JUDGE 17 18 19 20 21 22 23 24 25 26 27 28 7

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