Mililani Group, Inc. v. O'Reilly Automotive, Inc.
Filing
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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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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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MILILANI GROUP, INC.,
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2:12-cv-00891 JAM-CKD
Plaintiff,
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No.
v.
O’REILLY AUTOMOTIVE, INC.,
and CSK AUTO, INC.
ORDER GRANTING DEFENDANTS’
MOTION TO DISMISS
Defendants.
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This matter is before the Court on Defendants O’Reilly
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Automotive, Inc. (“O’Reilly”), and CSK Auto, Inc.’s (“CSK”)
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(collectively “Defendants”) Motion to Dismiss Plaintiff’s Second
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Amended Complaint (“SAC”) (Doc. #20).
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Inc. (“Plaintiff”) opposes the motion (Doc. #26) and Defendants
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replied (Doc. #28).1
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motion is GRANTED.
Plaintiff Mililani Group,
For the following reasons, Defendants’
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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.
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I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND
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Defendants previously moved to dismiss all claims against
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O’Reilly and the waste claim; that motion was granted with leave
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to amend (Doc. #16).
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SAC (Doc. #17).
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action against Defendants, the first for breach of contract and
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the second for waste.
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to dismiss all claims against O’Reilly and the waste claim (Doc.
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#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
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leave to file a late opposition and gave Defendants a week to
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reply (Doc. #27).
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On or about August 29, 1988, CSK entered into a written
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lease agreement for warehouse and office space in Dixon,
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California (the “Property”).
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on April 30, 2011.
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breached the lease by failing to maintain insurance, maintain the
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Property, and return the Property to the condition required by
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the lease and its failure resulted in permanent diminution in
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value of the Property.
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Id. ¶ 16.
SAC ¶ 13.
CSK vacated the Property
Plaintiff alleges that CSK
Id. ¶ 25.
In addition, Plaintiff alleges that CSK merged with O’Reilly
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on July 11, 2008, and that since the merger, the day-to-day
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decisions regarding the Property were made by O’Reilly.
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Plaintiff further alleges that O’Reilly imposed unrealistic
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budgeting and financial goals on CSK that prevented CSK from
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carrying out the terms of the contracts to which it was
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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.
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obligated.
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allegedly informed that CSK managers had no control over spending
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decisions and budgets and that such decisions must be made by
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O’Reilly.
Id. ¶¶ 6-8.
Moreover, Plaintiff’s management was
Id.
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II. OPINION
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A.
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A party may move to dismiss an action for failure to state
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Legal Standard
a claim upon which relief can be granted pursuant to Federal
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Rule of Civil Procedure 12(b)(6).
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dismiss, the court must accept the allegations in the complaint
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as true and draw all reasonable inferences in favor of the
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plaintiff.
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overruled on other grounds by Davis v. Scherer, 468 U.S. 183
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(1984); Cruz v. Beto, 405 U.S. 319, 322 (1972).
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are mere “legal conclusions,” however, are not entitled to the
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assumption of truth.
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(2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
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(2007)).
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plead “enough facts to state a claim to relief that is plausible
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on its face.”
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appropriate where the plaintiff fails to state a claim
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supportable by a cognizable legal theory.
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Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990).
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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
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claim, the court has discretion to allow leave to amend the
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complaint pursuant to Federal Rule of Civil Procedure 15(a).
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“Dismissal with prejudice and without leave to amend is not
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appropriate unless it is clear . . . that the complaint could
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not be saved by amendment.”
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Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).
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B.
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Eminence Capital, L.L.C. v. Aspeon,
Discussion
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Alter Ego Liability
Defendants move to dismiss all claims against O’Reilly,
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contending that Plaintiff has failed to allege sufficient facts
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to establish alter ego liability.
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that it is not required to allege its claims in detail under the
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Federal Rules of Civil Procedure.
Plaintiff once again argues
Opp. at 2.
Federal courts apply the law of the forum state in
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determining whether to pierce the corporate veil.
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322 F.3d 1123, 1128 (9th Cir. 2003) (citations omitted).
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California law, the corporate veil may be pierced when the
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corporation is the alter ego of a controlling shareholder.
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Sonora Diamond Corp. v. Superior Court, 83 Cal.App.4th 523, 537-
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38 (2000).
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and ownership between the corporation and its equitable owner
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that the separate personalities of the corporation and the
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shareholder do not in reality exist” and (2) “an inequitable
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result if the acts in question are treated as those of the
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corporation alone.”
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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
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theory of liability, a plaintiff must allege the elements of the
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doctrine and conclusory allegations are insufficient.
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E.F. Hutton & Co., Inc., 566 F. Supp. 636, 647 (C.D. Cal. 1983).
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As to the first prong, Plaintiff provides general allegations
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that O’Reilly makes decisions for CSK through budgeting and
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Hokama v.
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management.
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do not include facts to show a unity of interest and ownership.
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See Wehlage v. EmpRes Healthcare, Inc., 791 F. Supp. 2d 774, 782-
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83 (N.D. Cal. 2011) (holding that broad allegations are not
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sufficient to show a unity of interest and ownership).
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second prong, Plaintiff alleges, “Defendant O’Reilly acted in bad
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faith in that its refusal to permit CSK to perform the lease
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obligations constituted bad faith.”
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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
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conduct amounting to bad faith, but also circular in logic
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because it assumes what Plaintiff is trying to prove.
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Plaintiff has not satisfied the second prong.
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Therefore,
Accordingly, the Court finds that Plaintiff has not alleged
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either element of alter ego liability and therefore, all claims
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against O’Reilly must be dismissed.
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failed to state alter ego liability against O’Reilly, the Court
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does not grant leave to amend.
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2.
Because Plaintiff has twice
Waste Claim
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Defendants also contend that the waste claim should be
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dismissed because Plaintiff has failed to plead facts to show a
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permanent depreciation in the Property’s market value.
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Plaintiff rejoins that deliberately allowing the landscaping to
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die and the support columns to deteriorate is permanent damage
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to the building.
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Opp. at 3.
Waste is defined as an unlawful act or omission of duty on
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the part of a tenant, resulting in permanent injury to the
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property.
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Cal.App.4th 128, 149 (1998) disapproved on other grounds by
Old Republic Ins. Co. v. Superior Court, 66
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Vandenberg v. Superior Court, 21 Cal.4th 815, 982 P.2d 229 (1999)
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(citation omitted).
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real property has to be permanently diminished.
Smith v. Cap
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Concrete, Inc., 133 Cal.App.3d 769, 775 (1982).
Proof of
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“conduct which has resulted in substantial depreciation of the
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market value of the land” establishes waste.
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Avalon Pac.-Santa Ana, L.P. v. HD Supply Repair & Remodel, LLC,
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192 Cal.App.4th 1183, 1215 (2011)(holding that “waste occurs when
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damage is sufficiently substantial and permanent to cause an
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To constitute waste, the market value of
Id.; see also
injury to the reversion interest”).
The Court previously held that Plaintiff could maintain this
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cause of action only if Plaintiff properly alleged permanent
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damage.
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the landscaping to die and the support columns to deteriorate
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placing the building in danger of falling, but those allegations
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are not found in the SAC and Plaintiff provides no facts that
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would allow Defendants or the Court to determine whether the
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Property’s diminution in market value was permanent.
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only alleges that Defendants failure to maintain or repair the
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Property “resulted in the permanent diminution in value of the
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Premises beyond ordinary wear and tear.”
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this bare assertion of a legal conclusion is insufficient to
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establish that the Property value was permanently diminished.
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Moreover, Plaintiff fails to allege that Defendants’ conduct
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resulted in substantial damage.
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192 Cal.App.4th at 1215 (requiring permanent and substantial
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damage for a waste claim).
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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
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sufficient facts for a waste claim, the Court dismisses
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Plaintiff’s second cause of action.
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indication of what more it could plead to state a claim,
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signaling that indeed there are no additional facts Plaintiff
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could include in the complaint were it granted leave to amend.
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Therefore, the Court dismisses this claim without leave to
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amend.
Plaintiff gives no
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III. ORDER
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For the reasons set forth above, Defendants’ Motion to
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Dismiss is GRANTED WITH PREJUDICE.
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Second Amended Complaint on only the breach of contract claim
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against CSK. Further, Defendants’ Motion to Strike Plaintiff’s
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Second Amended Complaint (Doc. #18) is denied as moot.
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The case will proceed on the
IT IS SO ORDERED.
Dated: April 3, 2013
____________________________
JOHN A. MENDEZ,
UNITED STATES DISTRICT JUDGE
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