Tat Tohumculuk A.S. v. H. J. Heinz Company, et al

Filing 32

ORDER signed by Senior Judge William B. Shubb on 11/14/2013 re 24 Defendants' Motion to Dismiss: Defendants' motion to dismiss is hereby DENIED with respect to plaintiff's breach of contract and breach of implied covenant claims, and GRANTED in all other respects. Plaintiff has twenty days from the date of this Order to file an amended complaint, if it can cure the defects in its claims consistent with this Order. (Kirksey Smith, K)

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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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TAT TOHUMCULUK, A.S., a Turkish
company,

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NO. CIV 13-0773 WBS KJN

Plaintiff,
MEMORANDUM AND ORDER RE:
MOTION TO DISMISS

v.
H.J. HEINZ COMPANY, a
Pennsylvania corporation
registered to do business in
California, and HEINZSEED, a
division of H.J. HEINZ COMPANY,

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Defendants.

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----oo0oo----

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Plaintiff Tat Tohumculuk, A.S., a Turkish company,

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brings this suit against H.J. Heinz Company L.P. (“Heinz”), a

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Pennsylvania corporation registered to do business in California,

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and Heinzseed, a division of Heinz, arising out of an alleged

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agreement to distribute tomato seed in Turkey.1

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Presently before

Defendant Heinz is erroneously named in the complaint
as only “H.J. Heinz Company.”
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the court is defendants’ motion to dismiss the complaint for

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failure to state a claim upon which relief can be granted

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pursuant to Federal Rule of Civil Procedure 12(b)(6).

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I.

Factual and Procedural Background

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Plaintiff is a Turkish company involved in the business

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of purchasing and selling produce seed, as well as tomato paste

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and other food products.

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global commercial food conglomerate, whose subsidiary, defendant

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Heinzseed, is located in Stockton, California.

(Compl. ¶ 3.)

Defendant Heinz is a

(Id. ¶¶ 4-5.)

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Heinzseed breeds proprietary tomato seed varieties for global

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sale.

(Id.)

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Plaintiff alleges that in 2000, defendants “orally

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engaged” plaintiff “to exclusively test, register, introduce, and

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then market and sell” defendants’ tomato seed varieties in

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Turkey.

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the Turkish Department of Agriculture, a process that plaintiff

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claims generally takes over two years.

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that over the course of eleven years, plaintiff registered

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nineteen of defendants’ tomato seed varieties, at the cost of

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$300,000.

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(Id. ¶ 7.)

New seed varieties must be registered with

(Id.)

Plaintiff alleges

(Id. ¶¶ 7-10.)
Plaintiff alleges defendants repeatedly represented to

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third parties that plaintiff was defendants’ “exclusive supplier”

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in Turkey, (id. ¶ 11), and that the parties “had an oral

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understanding” that the distribution relationship “would only be

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terminated for cause,” (id. ¶ 17).

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contends that Claudio Leggieri, allegedly Heinzseed’s Paris-based

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international sales manager, made repeated representations

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between 2009 and 2011 that the sole cause for terminating would
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In particular, plaintiff

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be plaintiff’s “fail[ure] to promptly pay” for purchased tomato

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seed.

(Id.)

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However, plaintiff alleges that on at least four

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specific instances between 2009 and 2011, Leggieri made comments

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revealing discriminatory views toward Muslims and people of

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Turkish descent.

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defendants’ abrupt termination of the distribution arrangement on

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August 4, 2011.

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never provided a justification for the termination, but rather

(Id. ¶ 23.)

Plaintiff claims this bias led to

(Id. ¶¶ 18, 23.)

Plaintiff maintains defendants

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diverted business to a new supplier run by a Christian of

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European descent.

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(Id. ¶ 20.)

On April 19, 2013, plaintiff filed a Complaint, (Docket

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No. 2), which defendants moved to dismiss on May 30, 2013.

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(Docket No. 12.)

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stipulation to allow plaintiff to file a first amended complaint

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(“FAC”).

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2013.

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On July 12, 2013, the court approved a

(Docket No. 22.)

Plaintiff filed the FAC on July 29,

(Docket No. 23.)
The FAC brings claims for: (1) declaratory relief; (2)

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breach of contract; (3) breach of implied covenant; (4) unjust

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enrichment; (5) intentional interference with prospective

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economic advantage; (6) trade libel; and (7) violation of

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California’s Unfair Competition Law (“UCL”), Cal. Bus. & Profs.

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Code § 17200 et seq.

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dismiss the Complaint for failure to state a claim upon which

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relief can be granted pursuant to Rule 12(b)(6).

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24.)

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II.

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(Docket No. 23.)

Defendants move to

(Docket No.

Legal Standard
On a motion to dismiss, 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.

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

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plausible on its face.”

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544, 570 (2007).

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for more than a sheer possibility that a defendant has acted

Scheuer v. Rhodes, 416

To survive a motion to dismiss, a plaintiff needs to

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

This “plausibility standard,” however, “asks

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unlawfully,” and where a complaint pleads facts that are “merely

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consistent with” a defendant’s liability, it “stops short of the

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line between possibility and plausibility.”

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556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 556–57).

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III. Discussion

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A.

Ashcroft v. Iqbal,

Declaratory Judgment
“A claim for declaratory relief is unnecessary where an

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adequate remedy exists under some other cause of action.”

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Mangindin v. Wash. Mut. Bank, 637 F. Supp. 2d 700, 707 (N.D. Cal.

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2009); see also StreamCast Networks, Inc. v. IBIS LLC, No. CV 05-

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04239 MMM (EX), 2006 WL 5720345, at *4 (C.D. Cal. May 2, 2006)

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(listing numerous cases dismissing duplicative declaratory relief

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claim because determination of breach of contract claim resolved

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questions regarding contract interpretation).

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Plaintiff’s first cause of action seeks a declaration

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that defendants “had no right to unilaterally terminate the

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distribution relationship without due notice, justification or

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cause”; that plaintiff’s “distributorship would only be

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terminated for cause if [plaintiff] failed to pay for the HEINZ
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tomato seed in accordance with the invoice terms”; that plaintiff

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“was entitled to at least 3 years advance notice prior to

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termination of the distributorship without cause”; and that

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plaintiff “is entitled to compensation and damages for the

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wrongful termination.”

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contractual claims adequately address these issues.

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because declaratory relief is duplicative of the breach of

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contract claims, the court will dismiss plaintiff’s claim for

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declaratory judgment.

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B.

(Compl. ¶ 28.)

Plaintiff’s remaining
Accordingly,

Statute of Frauds
Before addressing plaintiff’s breach of contract claim,

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the court must first decide whether the statute of frauds bars

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enforcement of the alleged agreement.

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frauds mandates that a contract “that by its terms is not to be

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performed within a year from the making thereof” is unenforceable

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“unless [the contract], or some note or memorandum thereof, [is]

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in writing and subscribed by the party to be charged or by the

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party’s agent.”

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contracts which expressly preclude performance within one year

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are unenforceable.”

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Risk Managers, Inc., 578 F. Supp. 2d 1242, 1248 (E.D. Cal. 2008)

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(Damrell, J.).

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California’s statute of

Cal. Civ. Code § 1624(a)(1).

“Only those

Multifamily Captive Grp., LLC v. Assurance

Defendants contend that the agreement falls within the

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statute of frauds because the complaint alleges that the seed

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registration process in Turkey “generally takes over 2 years,”

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(Compl. ¶ 7), and that it ultimately took an eleven-year period

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for plaintiff to test, register, and market the Heinz seed in

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Turkey, (id. ¶ 10).

The allegation that seed registration
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“generally” takes over two years, however, does not make

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performance within one year impossible.

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performance within one year is not probable under the terms of

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the agreement does not bring it within the statute of frauds.”

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Lacy v. Bennett, 207 Cal. App. 2d 796, 800-01 (2d Dist. 1962).

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Further, “that performance may have extended over a greater

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period than one year does not bring the agreement within the

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statute.”

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620, 634 (2d Dist. 1948).

“The fact that

Columbia Pictures Corp. v. De Toth, 87 Cal. App. 2d
Thus, while it was unlikely that the

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alleged agreement could be performed within one year--and it was

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in fact not performed within one year--the statute of frauds does

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not apply because the agreement did not “expressly preclude

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performance within one year.”

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Supp. 2d at 1248.

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C.

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Multifamily Captive Grp., 578 F.

Breach of Contract
Defendants next contend that, even if the statute of

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frauds does not apply, plaintiff does not sufficiently allege an

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enforceable contract.

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under California law, a plaintiff must allege: “(1) existence of

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the contract; (2) plaintiff’s performance or excuse for

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nonperformance; (3) defendant’s breach; and (4) damages to

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plaintiff as a result of the breach.”

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Mortg., FSB, 745 F. Supp. 2d 961, 974 (N.D. Cal 2010) (quoting

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CDF Firefighters v. Maldonado, 158 Cal. App. 4th 1226, 1239 (5th

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Dist. 2008)).

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elements.

To plead a claim for breach of contract

Appling v. Wachovia

Defendants do not challenge the second and fourth

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1.

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A plaintiff may plead the existence of a contract by

Existence of Contract

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its legal effect, in which case the “plaintiff must allege the

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substance of its relevant terms.”

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Allen Eng’g Contractor, Inc., No. CV F 11–1590 LJO DLB, 2012 WL

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1601659, at *4 (E.D. Cal. May 7, 2012) (quoting McKell v. Wash.

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

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also Khoury v. Maly’s of Cal., Inc., 14 Cal. App. 4th

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(2d Dist. 1994) (“An oral contract may be pleaded generally as to

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its effect, because it is rarely possible to allege the exact

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words.”).

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Frontier Contracting, Inc. v.

612, 616

Plaintiff alleges that the parties agreed in 2000 for

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plaintiff “to exclusively test, register, introduce, and then

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market and sell, HEINZ Tomato Seed varieties in Turkey.”

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¶ 7.)

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that plaintiff was defendants’ exclusive supplier of tomato seed

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varieties in Turkey, as well as defendants’ representative and

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liaison with customers in the Turkish market.

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E.)

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test, register, market, and sell defendants’ seed in Turkey in

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return for an exclusive supply of defendants’ seed--sufficiently

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show the “substance of [the agreement’s] relevant terms,”

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Frontier Contracting, 2012 WL 1601659, at *4

(Compl.

According to plaintiff, defendants repeatedly represented

(Id. ¶ 11, Exs. D-

These allegations--that the parties agreed for plaintiff to

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Further, plaintiff alleges that over eleven years, it

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purchased over four million dollars of defendants’ seed and sold

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the seed in the Turkish market, a market that plaintiff had spent

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$300,000 and eleven years to develop.

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alleged facts of the parties’ course of conduct also allow the

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court to infer the existence of an ongoing distribution

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agreement.

(Id. ¶¶ 15, 17.)

These

See Varni Bros. v. Wine World, Inc., 35 Cal. App. 4th
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880, 889 (5th Dist. 1995) (”Here appellants had been distributing

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wine for Wine World for many years.

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implies they had a distribution agreement.”).

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Their course of conduct

Defendants contend, however, that plaintiff’s

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allegations are insufficiently definite because plaintiff does

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not allege any term for duration, and because the parties

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disagree over whether the arrangement could be terminated at will

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or only for cause.

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duration of the agreement, the law implies a reasonable term and,

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even assuming the contract to be terminable at will, requires the

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giving of reasonable notice prior to termination.”

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Cal. App. 4th at 616; see also Zee Med. Distrib. Ass’n v. Zee

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Med., Inc., 80 Cal. App. 4th 1, 10 (1st Dist. 2000) (“When there

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is no express term, and the surrounding circumstances and the

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nature of the contract do not permit the construction of the

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contract to have an ascertainable term of duration, the contract

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is usually construed as terminable at will after a reasonable

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time of duration has elapsed.”).

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term for duration and dispute over the ability of defendant to

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terminate the agreement do not mean plaintiff fails to allege the

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existence of an enforceable contract.

Although plaintiff “alleged no specific

Khoury, 14

Thus, the absence of a stated

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2.

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Plaintiff alleges that defendants breached the

Defendants’ Breach

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contract “by refusing to sell [plaintiff] any more seed after

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August 5, 2011, and by asking [plaintiff] to return any inventory

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of [defendants’] tomato seed varieties that it had in stock as of

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August 5, 2011.”

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defendants terminated the agreement “without previous notice,

(Compl. ¶ 33.)

Plaintiff also alleges that

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warning, or discussion.”

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disagree over whether the agreement provided for termination at

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will or only for cause, as discussed above, even if termination

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was only for cause defendants still had to provide reasonable

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notice.

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the contract to be terminable at will, [the law] requires the

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giving of reasonable notice prior to termination.”).

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defendants did not provide any notice prior to terminating the

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agreement and immediately requested that plaintiff return

(Id. ¶ 18.)

Although the parties

See Khoury, 14 Cal. App. 4th at 616 (“[E]ven assuming

Here,

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defendants’ seed.

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that defendants terminated the agreement without notice,

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plaintiff has adequately pleaded breach.2

(Id. Ex. R.)

Thus, because plaintiff alleges

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Accordingly, because plaintiff has pleaded every

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element of a breach of contract claim, the court will deny

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defendants’ motion to dismiss that claim.

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D.

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Breach of Implied Covenant
“Every contract imposes upon each party a duty of good

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faith and fair dealing in its performance and its enforcement.”

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Marsu, B.V. v. Walt Disney Co., 185 F.3d 932, 937 (9th Cir. 1999)

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(quoting Carma Developers, Inc. v. Marathon Dev. Cal., Inc., 2

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Cal. 4th 342, 371 (1992)) (internal quotation marks omitted).

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Because the court finds that plaintiff sufficiently
alleges defendants breached the agreement by terminating without
notice, the court does not need to reach plaintiff’s contention
that, “under Turkish law, a minimum of 3 years notice is required
in order to revoke the distribution rights.” (Compl. ¶ 8.)
Plaintiff admits that California law governs this underlying
dispute. (Pl.’s Opp’n at 7:17-18 (Docket No. 26) (“TAT seeks to
apply Turkish laws, customs, and practices only to establish
certain implied contract terms; not to establish the governing
law to be applied to this dispute.”).)
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That duty, known as the covenant of good faith and fair dealing,

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requires “that neither party will do anything which will injure

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the right of the other to receive the benefits of the agreement.”

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Andrews v. Mobile Aire Estates, 125 Cal. App. 4th 578, 589 (2d

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Dist. 2005) (quoting Careau Co. v. Sec. Pac. Bus. Credit, Inc.,

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222 Cal. App. 3d 1371, 1393 (2d Dist. 1990)) (internal quotation

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marks omitted).

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compliance with the express terms of the contract, and cannot be

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extended to create obligations not contemplated in the contract.”

“[T]he implied covenant is limited to assuring

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Racine & Laramie, Ltd. v. Dep’t of Parks & Recreation, 11 Cal.

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App. 4th 1026, 1032 (4th Dist. 1992).

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Defendants challenge this claim only on the grounds

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that plaintiff’s underlying breach of contract claim fails.

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discussed above, plaintiff has adequately plead a breach of

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contract claim.

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contend that plaintiff’s breach of implied covenant claim is

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inadequately pleaded, the court will deny their motion to dismiss

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plaintiff’s that claim.

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E.

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As

Accordingly, because defendants do not otherwise

Unjust Enrichment
Plaintiff’s fourth cause of action asserts a claim for

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unjust enrichment.

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unjust enrichment is a freestanding cause of action or simply a

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general principle that underlies various legal doctrines and

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remedies.

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App. 4th 779, 793 (2d Dist. 2003) (holding there is no cause of

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action in California for unjust enrichment), with Lectrodryer v.

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SeoulBank, 77 Cal. App. 4th 723, 726 (2000) (permitting unjust

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enrichment claim to stand).

California courts are divided over whether

Compare Melchior v. New Line Prods., Inc., 106 Cal.

The Ninth Circuit, however, has
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endorsed the former approach, see Bosinger v. Belden CDT, Inc.,

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358 F. App’x 812, 815 (9th Cir. 2009) (citing Melchior, 106 Cal.

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App. 4th at 793), as has this court, Randhawa v. Skylux Inc., No.

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2:09-CV-02304 WBS DAD, 2012 WL 5349403, at *2 (E.D. Cal. Oct. 26,

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2012), and numerous other district courts, see Foster Poultry

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Farms v. Alkar-Rapidpak-MP Equip., Inc., No. 1:11-CV-00030 AWI

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SMS, 2011 WL 2414567, at *6 (E.D. Cal. June 8, 2011) (listing

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cases).

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unjust enrichment is not freestanding cause of action.

Following the weight of this precedent, the court finds

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Accordingly, the court will grant defendants’ motion to dismiss

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plaintiff’s claim for unjust enrichment.

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F.

Intentional Interference with Prospective Economic

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Advantage

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Under California law, the elements of the tort of

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intentional interference with prospective economic advantage are:

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(1) an economic relationship between the plaintiff and
some third person containing the probability of future
economic benefit to the plaintiff; (2) knowledge by
the defendant of the existence of the relationship;
(3) intentional acts on the part of the defendant
designed to disrupt the relationship; (4) actual
disruption of the relationship; and (5) damages to the
plaintiff proximately caused by the acts of the
defendant.

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Conkle v. Jeong, 73 F.3d 909, 918 (9th Cir. 1995) (quoting

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v. Kirwan, 39 Cal. 3d 311, 330 (1985)).

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Blank

The interference must be independently wrongful beyond

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its interfering character, meaning “it is proscribed by some

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constitutional, statutory, regulatory, common law, or other

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determinable legal standard.”

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44 Cal. 4th 937, 944 (2008) (citations and internal quotation

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marks omitted).

Edwards v. Arthur Andersen LLP,

“An act is not independently wrongful merely
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because defendant acted with an improper motive.”

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Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1158 (2003).

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Plaintiff alleges that defendants began contacting

Korea Supply

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plaintiff’s customers in Turkey to transfer orders to a new

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distributor, knowing “these communications would destabilize

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[plaintiff’s] commercial relationships” and “damage [plaintiff’s]

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commercial reputation and pride.”

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plaintiff claims defendants cut off plaintiff’s orders and sought

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to recover plaintiff’s inventory of defendants’ seed “in order to

(Compl. ¶ 50.)

Further,

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make it impossible for [plaintiff] to timely perform its

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obligations under purchase orders, or anticipated future purchase

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orders.”

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was “based on discriminatory reasons” including a bias against

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Turkish Muslims, in favor of a new distributor run by European

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Christians.

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(Id. ¶ 51.)

According to plaintiff, the termination

(Id. ¶ 23.)

Taken as true, these allegations demonstrate only that

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defendants “acted with an improper motive.”

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Cal. 4th at 1158.

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engaged in independently wrongful acts in violation of the

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Foreign Corrupt Practices Act, the FAC here does not allege

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defendants violated “constitutional, statutory, regulatory,

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common law, or other determinable legal standard.”

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at 1159.

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its UCL claim, these statutes do not apply to the facts alleged

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here, as will be set forth below.

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grant defendants’ motion to dismiss the intentional interference

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with prospective economic advantage claim.

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G.

Korea Supply Co., 29

Unlike Korea Supply Co., where the defendants

29 Cal. 4th

To the extent plaintiff relies on the statutes named in

Trade Libel
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Accordingly, the court will

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Plaintiff does not oppose defendants’ motion to dismiss

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its trade libel claim.

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defendants’ motion to dismiss plaintiff’s trade libel claim.

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H.

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Accordingly, the court will grant

UCL
The UCL prohibits “any unlawful, unfair, or fraudulent

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business act or practice.”

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Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999).

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‘any unlawful’ business practice, section 17200 borrows

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violations of other laws and treats them as unlawful practices

Cel–Tech Commc’ns, Inc. v. L.A.
“By proscribing

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that the unfair competition law makes independently actionable.”

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Id. (internal quotation marks omitted).

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with reasonable particularity the facts supporting the statutory

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elements of the violation.”

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Plaintiff brings claims under the unlawful and unfair prongs of

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the UCL.

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“A plaintiff must state

Khoury, 14 Cal. App. 4th at 619.

Plaintiff asserts two statutory predicates for its

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claim under the UCL’s unlawful prong: 42 U.S.C. § 1981 and

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California’s Unruh Civil Rights Act, Cal Civ. Code § 51.

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1981 provides that “[a]ll persons within the jurisdiction of the

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United States shall have the same right in every State and

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Territory to make and enforce contracts . . . as is enjoyed by

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white citizens.”

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as a predicate for plaintiff’s UCL claim, however, because it

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only covers acts of discrimination against persons within the

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jurisdiction of the United States.

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Int’l Grp., Inc., 460 F.3d 296, 303-06 (2d Cir. 2006).

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Tenkorang, the court dismissed § 1981 claims brought by workers

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in South Africa even though “the relevant employment contract was

42 U.S.C. § 1981(a).

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Section

The statute cannot serve

See Ofori-Tenkorang v. Am.
In Ofori-

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initially formed in the United States” and “the relevant

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discrimination was directed by persons who were themselves in the

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United States.”

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limitation,” the court held, “is defined by the location of the

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subject of the discrimination, not by the location of the

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decisionmaker.”

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conducting its operations in Turkey, § 1981 does not apply.

Id. at 304.

Id.

The statute’s “territorial

Because plaintiff is a Turkish company

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The Unruh Civil Rights Act guarantees “full and equal

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accommodations, advantages, facilities, privileges, or services

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in all business establishments of every kind whatsoever” to

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“[a]ll persons within the jurisdiction of this state.”

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Code § 51.

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See Keum v. Virgin Am. Inc., 781 F. Supp. 2d 944, 955 (N.D. Cal.

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2011) (dismissing section 51 claim alleging discriminatory

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actions on flight bound for California when discrimination took

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place outside state).

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alleged discrimination was approved by defendants’ officers in

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California, section 51 applies.

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language of the statute, however, regards access by “persons

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within the jurisdiction of” California.

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Plaintiff has not presented any case law, nor is the court aware

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of any, applying section 51 to alleged discrimination suffered by

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parties outside California.

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apply.

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extraterritorially, plaintiff’s claim under the unlawful prong of

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the UCL fails for lack of statutory predicate.

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7-Eleven, Inc., 205 Cal. App. 4th 1176, 1185 (4th Dist. 2012)

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(“When a statutory claim fails, a derivative UCL claim also

Cal. Civ.

The Unruh Act, too, has limited geographic scope.

Plaintiff contends that, because the

(Compl. ¶ 62.)

The plain

Cal. Civ. Code § 51.

The Unruh Act, therefore, does not

Because neither § 1981 nor section 51 apply

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Cf. Aleksick v.

1

fails.”).

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Plaintiff also brings a claim under the UCL’s “unfair”

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prong.

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an established public policy’ or is ‘immoral, unethical,

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oppressive, unscrupulous or substantially injurious to

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consumers.’”

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Cir. 2008) (quoting People v. Convalescent Homes, Inc., 159 Cal.

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App. 3d 509, 530 (4th Dist. 2008)).

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has criticized these standards as “too amorphous and provid[ing]

“An unfair business practice is one that either ‘offends

McDonald v. Coldwell Banker, 543 F.3d 498, 506 (9th

The California Supreme Court

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too little guidance to courts,” Cel-Tech, 20 Cal. 4th at 185, and

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subsequent courts have required claims under this prong to “be

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‘tethered’ to specific constitutional, statutory or regulatory

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provisions.”

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845, 854 (1st Dist. 2002).

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Gregory v. Albertson’s, Inc., 104 Cal. App. 4th

To the extent plaintiff tethers its unfairness claim to

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§ 1981 and section 51, the claim fails for the same reasons set

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forth above.

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successfully allege a violation of any underlying statutory

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provision, the court will grant defendants’ motion to dismiss

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plaintiff’s UCL claim.

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Accordingly, because plaintiff does not

IT IS THEREFORE ORDERED that defendants’ motion to

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dismiss be, and the same hereby is, DENIED with respect to

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plaintiff’s breach of contract and breach of implied covenant

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claims, and GRANTED in all other respects.

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Plaintiff has twenty days from the date of this Order

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to file an amended complaint, if it can cure the defects in its

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claims consistent with this Order.

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Dated:

November 14, 2013

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