California State Employees Association v. Bogart

Filing 19

ORDER signed by Judge John A. Mendez on 2/2/15 ORDERING the Court DISMISSES WITHOUT LEAVE TO AMEND Bogart's claim for conversion in its entirety. The Court DISMISSES WITH LEAVE TO AMEND the "fraudulent-prong" and "unfair-prong& quot; of Bogart's UCL claim. Finally, the Court DISMISSES WITHOUT LEAVE TO AMEND the "unlawful-prong" of Bogart's UCL claim, to the extent it is based on conversion. Bogarts Second Amended Counter-Claim must be filed within twenty (20) days from the date of this Order. CSEA's responsive pleading is due within twenty (20) days thereafter. If Bogart elects not to file a Second Amended Counter-Claim, the matter will proceed consistent with this Order. (Becknal, R)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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CALIFORNIA STATE EMPLOYEES
ASSOCIATION,

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Plaintiff,
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v.
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RICHARD BOGART; and DOES 1
through 25, inclusive,

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Defendants.
RICHARD BOGART,

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Counter-Plaintiff,
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v.
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CALIFORNIA STATE EMPLOYEES
ASSOCIATION,

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Counter-Defendant.

Case No. 2:14-CV-02494 JAM-KJN
ORDER GRANTING PLAINTIFF’S
MOTION TO DISMISS

Plaintiff California State Employees Association (“CSEA”)

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moves to dismiss (Doc. #9) the second and third causes of action in

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Defendant Richard Bogart’s (“Bogart”) First Amended Cross-Complaint

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(“FACC”) (Doc. #8).

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filed a reply (Doc. #14).

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is GRANTED. 1

Bogart opposes the motion (Doc. #12) and CSEA
For the following reasons, CSEA’s motion

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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 January 14, 2015.
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I.

FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

According to Bogart’s FACC, “for a number of years,” Richard

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Bogart “worked as an insurance broker for Anthem Life Insurance

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Company.”

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“developed a long-standing mutually beneficial relationship with

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CSEA,” which is a federation of four affiliated organizations of

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California state employees.

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leadership “asked Mr. Bogart if he could research, identify and

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analyze two possible vendors who would be able to assist CSEA in

FACC ¶ 3.

During his time with Anthem, Bogart

FACC ¶ 3.

In 2007, a member of CSEA’s

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offering CSEA members a discount electronics purchasing program . .

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. as a non-insurance benefit of membership.”

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brokered an agreement between CSEA and Purchasing Power, a company

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specializing in establishing and managing purchasing programs for

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employees through which payments for certain, offered products are

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automatically deducted from employee paychecks through payroll.

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FACC ¶ 4.

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Agreement with Purchasing Power under which Mr. Bogart was to

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receive a four percent commission on all CSEA member purchases from

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Purchasing Power.”

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FACC ¶ 4.

Bogart

On December 8, 2007, Bogart “entered a Marketing

FACC ¶ 5.

From 2007 through early 2014, Bogart received commissions

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pursuant to the Marketing Agreement.

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leadership change at CSEA, the new director of member benefits

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wrote a letter to Purchasing Power, informing it that CSEA “does

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not have or utilize[] an independent contractor or broker for its

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business” and that “CSEA did not sign an independent contract or

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broker agreement with Mr. Bogart.”

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this letter, “Purchasing Power terminated its contract with Mr.

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Bogart and stopped paying him commissions in April 2014.”
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FACC ¶ 6.

FACC ¶¶ 7-8.

However, after a

As a result of

FACC

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¶ 9.

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four percent commission directly to CSEA.

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Beginning in April 2014, Purchasing Power began paying the
FACC ¶ 9.

On August 21, 2014, CSEA filed a complaint in Sacramento

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County Superior Court, alleging against Bogart seven causes of

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action, including conversion, deceit/fraudulent concealment, and

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constructive fraud.

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counterclaim (mistakenly labeled as a cross-claim) against CSEA.

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Shortly thereafter, Bogart removed the case to this Court, on the

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basis of diversity jurisdiction.

On October 22, 2014, Bogart filed a

On November 25, 2014, Bogart

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filed his FACC against CSEA.

The FACC includes the following

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causes of action: (1) intentional interference with contractual

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relations; (2) conversion; and (3) violation of Business and

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Professions Code § 17200, commonly known as the Unfair Competition

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Law (“UCL”).

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II.

OPINION

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A.

Conversion

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CSEA argues that Bogart has failed to state a claim for

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conversion because “California courts do not recognize a claim for

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conversion arising from a contractual right of payment.”

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6.

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right to the payment of commissions did not entitle him to “the

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immediate possession necessary to establish a cause of action for

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the tort of conversion.”

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997, 1000 (9th Cir.1999)).

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claim does not rely on a “contractual right to payment,” but rather

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alleges an ownership interest in a “specific, identifiable, and

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traceable” sum of money.

Mot. at

Specifically, CSEA argues that Bogart’s alleged contractual

Mot. at 6 (citing In re Bailey, 197 F.3d
Bogart responds that his conversion

Opp. at 3-4.
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Under California law, the elements of a conversion claim are

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as follows: “(1) the plaintiff’s ownership or right to possession

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of the property at the time of the conversion; (2) the defendant’s

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conversion by a wrongful act or disposition of property rights; and

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(3) damages.”

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(9th Cir. 2010).

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a plaintiff “must show that she was entitled to immediate

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possession at the time of conversion.”

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1000 (9th Cir. 1999).

Mindys Cosmetics, Inc. v. Dakar, 611 F.3d 590, 601
With respect to the first element of conversion,

In re Bailey, 197 F.3d 997,

Importantly, the Ninth Circuit has noted

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that, under California law, “a mere contractual right of payment,

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without more, does not entitle the obligee to the immediate

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possession necessary to establish a cause of action for the tort of

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conversion.”

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Milling Co., 187 Cal. 352 (1921).

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Id. (citing Imperial Val. Co. v. Globe Grain &

The sole “wrongful act” alleged by Bogart is CSEA’s March 27,

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2014 letter to Purchasing Power, which resulted in Purchasing

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Power’s “refus[al] to pay Mr. Bogart commissions on sales beginning

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in April 2014[.]”

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establish that Bogart was “entitled to immediate possession [of the

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commission payments] at the time of conversion.”

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at 1000 (emphasis added).

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was deprived of his commission payments for any months up to, and

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including, March 2014.

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receive commissions “each month, from April 2014 to November 2014.”

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FACC ¶ 17.

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– Bogart claims he was contractually entitled to continue receiving

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future commission payments from Purchasing Power.

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however, “a mere contractual right of payment, without more, does

FACC ¶¶ 8, 13.

This allegation fails to

Bailey, 197 F.3d

Notably, Bogart does not allege that he

Rather, Bogart alleges that he failed to

At the time of the alleged conversion – March 27, 2014

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As noted above,

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not entitle the obligee to the immediate possession necessary” to

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state a claim for conversion.

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Globe Grain & Milling Co., 187 Cal. 352 (1921); see also Gerawan

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Farming, Inc. v. Rehrig Pac. Co., 2012 WL 691758, at *6 (E.D. Cal.

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Mar. 2, 2012) (dismissing claim for conversion because “there is

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nothing to suggest that the royalty payments due to [plaintiff]

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amounted to anything more than a contractual right to payment”).

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Bogart has not sufficiently alleged the first element of his

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conversion claim.

Id. (citing Imperial Val. Co. v.

This failure is fatal to his claim.

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To the extent that Bogart contends that the unpaid commissions

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are “specific, identifiable, and traceable” funds, this argument is

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misplaced.

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the subject of an action for conversion if a specific sum capable

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of identification is involved.”

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Cal.App.4th 445, 452 (1997).

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does not replace – the three essential elements of a conversion

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claim listed above.

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2010).

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requirement is necessary, but not sufficient, to state a claim for

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conversion.

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he was entitled to immediate possession of the funds at the time of

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CSEA’s alleged conversion.

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sum sought by Bogart is specific and identifiable.

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Opp. at 3.

As Bogart accurately notes, “[m]oney can be

Farmers Ins. Exch. v. Zerin, 53

However, this rule supplements – but

Mindys Cosmetics, 611 F.3d at 601 (9th Cir.

In other words, the “specific, identifiable sum”

As discussed above, Bogart has failed to allege that

Therefore, it matters not whether the

Similarly, Bogart’s reliance on Mathews is unavailing.

Opp.

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at 3 (citing Mathews v. Orion Healthcorp Inc, 2014 WL 4245986 (N.D.

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Cal. Aug. 27, 2014).

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employer for conversion, alleging that the employer had improperly

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withheld his commission payments.

In Mathews, the name-plaintiff sued his

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Mathews, 2014 WL 4245986, at *1.

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Under Mathews’ employment contract, he was entitled to receive

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commissions on a monthly basis.

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commissions up to, and including, June 2013.

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on July 12, 2013, his employer sent out an email notifying

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employees that the commission payments would be delayed

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indefinitely.

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motion for summary judgment with regard to his July 2013

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commissions, which “had already been accrued in June.”

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However, the district court did not find in favor of the plaintiff

Id. at *3.

Id. at *1-2.

He received those
Id. at *3.

However,

The district court granted Mathews’

Id. at *7.

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with regard to the August 2013 commissions, or any commissions

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thereafter: i.e. those commissions which had not yet accrued at the

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time of the employer’s July 12, 2013 email.

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district court’s findings in Mathews support this Court’s

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conclusion that Bogart has failed to allege a conversion claim

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against CSEA.

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is unable to show that he was entitled to immediate possession of

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the April 2014 commissions at the time of CSEA’s March 27, 2014

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letter.

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August 2013 commissions in Mathews, which accrued after the

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Mathews’ employer’s July 12, 2013 email.

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Id. at *7-8.

The

Unlike the July 2013 commissions in Mathews, Bogart

Rather, Bogart’s future commissions are analogous to the

For all of these reasons, CSEA’s motion to dismiss Bogart’s

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second cause of action for conversion is granted.

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not proposed any additional allegations that would be both

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consistent with the FACC and sufficient to state a claim for

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conversion this claim is dismissed with prejudice.

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Capital, L.L.C. v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir.

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2003) (holding that dismissal without leave to amend is appropriate

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“where it is “clear . . . that the complaint could not be saved by
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Since Bogart has

See Eminence

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amendment”).

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B.

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CSEA argues that Bogart’s UCL claim should be dismissed in

Violation of the UCL

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part, to the extent that it alleges fraudulent business practices,

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unfair business practices, or unlawful business practices through

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conversion.

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argument with regard to his claim of fraudulent or unfair business

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practices, but argues generally that CSEA’s motion to dismiss the

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third cause of action in part is improper, and that the proper

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vehicle for such a challenge is a Rule 12(f) motion to strike.

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Opp. at 5.

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practices survives as it is derivative of his conversion claim.

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Opp. at 5.

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Mot. at 8.

Bogart does not directly address CSEA’s

Bogart also argues that his claim for unlawful business

As an initial matter, CSEA’s motion to dismiss Bogart’s UCL

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claim in part is properly before the Court.

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dismiss specific “prongs” of a UCL claim, without moving to dismiss

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the claim in its entirety.

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2011 WL 2909313, at *7-8 (C.D. Cal. May 25, 2011) (ruling on a

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motion to dismiss individual “prongs” of the plaintiff’s UCL claim,

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such as the “unlawful-prong UCL claim” and the “unfair-prong UCL

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claim”).

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1113, 1130 (D. Ariz. 2019) is unpersuasive.

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Court to strike individual allegations within the UCL claim, but

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rather to dismiss the claim in part, to the extent that it relies

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on specific theories.

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proper.

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A party may move to

See, e.g., Goldsmith v. Allergan, Inc.,

Bogart’s reliance on Thompson v. Paul, 657 F. Supp. 2d

Opp. at 5.

CSEA is not asking the

Such a request is procedurally

CSEA first argues that Bogart’s UCL claim should be dismissed,
to the extent that it alleges “fraudulent” business practices by
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CSEA.

Mot. at 8.

Bogart does not appear to oppose this argument.

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To state a claim for “fraudulent” business practices under the UCL,

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a plaintiff must “allege that consumers are likely to be deceived

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by the defendant’s conduct.”

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2011 WL 587587, at *4 (E.D. Cal. Feb. 9, 2011).

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to allege that CSEA’s conduct would have been likely to deceive

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“consumers.”

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UCL claim is dismissed with leave to amend.

Jackson v. Ocwen Loan Servicing, LLC,
Bogart has failed

For this reason, the “fraudulent-prong” of Bogart’s

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CSEA next argues that Bogart’s UCL claim should be dismissed,

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to the extent that it alleges “unfair” business practices by CSEA.

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Mot. at 8.

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business practice is “unfair” under the UCL “if either (1) it is

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tethered to [a] specific constitutional, statutory, or regulatory

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provision, or (2) its harm to consumers outweighs its utility.”

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MacDonald v. Ford Motor Co., 2014 WL 1340339, at *9 (N.D. Cal. Mar.

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31, 2014).

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his UCL claim is “tethered to [a] specific constitutional,

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statutory, or regulatory provision,” nor has he alleged any facts

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that would allow the Court to conclude that CSEA’s business

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practices harmed consumers.

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Bogart’s UCL claim is dismissed with leave to amend.

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Bogart also does not appear to oppose this argument.

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Bogart’s opposition does not include any argument that

For this reason, the “unfair-prong” of

Finally, CSEA argues that Bogart’s UCL claim should be

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dismissed, to the extent that the allegation of “unlawful” business

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practices is based on a theory of conversion.

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Bogart has failed to state a claim for conversion.

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the “unlawful-prong” of Bogart’s UCL claim is dismissed with

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prejudice, to the extent that it is based on conversion.

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supra, at 7 (discussing futility of amendment of Bogart’s
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As discussed above,
Accordingly,

See

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conversion claim).

However, as the “unlawful-prong” is also based

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on a theory of intentional interference with contractual relations

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– which has not been challenged by CSEA – the prong itself survives

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CSEA’s motion to dismiss.

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Enterprises, Inc., 479 F.3d 1099, 1107 (9th Cir. 2007) (holding

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that intentional interference with a contract constitutes an

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“unlawful” practice for purposes of the UCL).

See CRST Van Expedited, Inc. v. Werner

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III.

ORDER

For the reasons set forth above, the Court DISMISSES WITHOUT

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LEAVE TO AMEND Bogart’s claim for conversion in its entirety.

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Court DISMISSES WITH LEAVE TO AMEND the “fraudulent-prong” and

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“unfair-prong” of Bogart’s UCL claim.

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WITHOUT LEAVE TO AMEND the “unlawful-prong” of Bogart’s UCL claim,

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to the extent it is based on conversion.

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Counter-Claim must be filed within twenty (20) days from the date

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of this Order.

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(20) days thereafter.

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Amended Counter-Claim, the matter will proceed consistent with this

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Order.

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The

Finally, the Court DISMISSES

Bogart’s Second Amended

CSEA’s responsive pleading is due within twenty
If Bogart elects not to file a Second

IT IS SO ORDERED.
Dated: February 2, 2015

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