Hale Bros. Investment Company, LLC v. StudentsFirst Institute et al

Filing 23

ORDER signed by District Judge John A. Mendez on 2/13/17 ORDERING that Defendant 50CAN's MOTION to DISMISS 9 is DENIED; Defendants' MOTION to DISMISS the fraudulent transfer claim are DENIED; Defendants StudentsFirstS' MOTION to D ISMISS the fraud claim 10 is GRANTED WITH PREJUDICE; Defendants' MOTIONS to DISMISS the civil conspiracy claim are GRANTED WITH PREJUDICE. Defendants' MOTIONS to DISMISS the common counts claim are GRANTED WITH PREJUDICE; Defendants' MOTIONS to DISMISS the claim for declaratory relief are GRANTED WITH PREJUDICE; and Defendants' MOTIONS to DISMISS the UCL claim are GRANTED WITH PREJUDICE.(Mena-Sanchez, L)

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1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 EASTERN DISTRICT OF CALIFORNIA 8 9 HALE BROS. INVESTMENT COMPANY, LLC, No. 2:16-cv-02284-JAM-EFB 10 Plaintiff, 11 ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTIONS TO DISMISS v. 12 13 STUDENTSFIRST INSTITUTE; STUDENTSFIRST; and 50CAN, INC., 14 Defendants. 15 16 This action is centered around a landlord-tenant dispute 17 that is described in a Complaint which reads like an illicit love 18 affair: 19 Defendant StudentsFirst foolproof allegedly discovers 20 StudentsFirst in bed with another. 21 initiated this litigation, and in response StudentsFirst and 22 50CAN ask this Court to dismiss the Complaint and end this broken 23 association once and for all. 24 the Captain’s from Cool Hand Luke: 25 failure to communicate.” Id. (Warner Bros. 1967). 1 26 1 27 28 Plaintiff Hale Bros. believing its relationship with Feeling betrayed, Hale Bros. No other line is more apropos than “What we’ve got here is This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled for December 13, 2016. In deciding this motion, the Court takes as true all well-pleaded facts in the complaint. 1 1 I. 2 FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND StudentsFirst and StudentsFirst Institute (“StudentsFirst”) 3 leased office space from Hale Bros. Investment Company, LLC 4 (“Plaintiff” or “Hale Bros.”). 5 8, ¶ 8. 6 rent to use the second floor of the Hale Building for sixty-seven 7 months. 8 Exh. A (the “Lease”). 9 spots connected to that building. First Am. Compl. (“FAC”), ECF No. In October 2011, StudentsFirst agreed to pay monthly See id. See also Office Lease, attached to the FAC as StudentsFirst also leased twelve parking See FAC ¶ 9. See also Parking 10 Agreement, attached to the FAC as Exh. B. 11 StudentsFirst moved in and began paying rent seven months later. 12 See FAC ¶ 10. 13 2017. 14 In March 2012, The Lease was to remain in effect through October FAC ¶ 28. In the event StudentsFirst failed to perform its contractual 15 obligations, Plaintiff acquired a security interest. 16 secured Plaintiff’s interest in various furniture, fixtures, and 17 equipment from the office (the “Collateral”). 18 Letter of Credit also secured Plaintiff’s interest for 19 $1,000,000.00, which reduced to $500,000.00 in March 2016. 20 id. 21 The Lease See id. ¶ 15. A See Three-and-a-half years passed before Plaintiff and 22 StudentsFirst’s relationship soured. 23 in April 2016 (the “Meeting”). 24 Plaintiff that, by September 2016, it would cease business 25 operations, transfer all assets to a third party, vacate the 26 office, and dissolve. 27 told Plaintiff that it would breach the Lease. 28 also gave Plaintiff a balance sheet that showed rent payments See id. It started with a meeting See id. ¶ 11. StudentsFirst told In other words, StudentsFirst 2 StudentsFirst 1 stopping in July 2016 and capital contributions—valued at 2 $1,200,000.00—to 50CAN, Inc. (“50CAN”) in April and June 2016. 3 See id. ¶¶ 12-13. 4 as Exh. C. 5 intent to transfer their assets to 50CAN and merge their company 6 with 50CAN. 7 2016 at which time 50CAN assumed all obligations and liabilities 8 of StudentsFirst under the Lease. 9 months, Plaintiff asked StudentsFirst to clarify its position, See also Cash Projections, attached to the FAC StudentsFirst also concealed from Plaintiff their ¶ 16. This merger took place in or around March ¶ 23. For the next two 10 but to no avail. 11 time in June 2016, see id., StudentsFirst vacated and abandoned 12 this leased office space removing several assets prior to 13 departure. 14 See FAC ¶ 14. After paying rent for the last See id. ¶ 15. Plaintiff has sued StudentsFirst and 50CAN (collectively, 15 “Defendants”) for breach of contract, fraudulent transfer, fraud, 16 civil conspiracy, common counts, and for violating California 17 Business & Professions Code § 17200. 18 requests declaratory relief. 19 dismiss these claims. 20 (“SF’s MTD”). 21 ECF No. 14 (“Opp’n to 50CAN’s MTD”); ECF No. 15 (“Opp’n to SF’s 22 MTD”). Id. Id. at 1. Plaintiff also Defendants move separately to ECF No. 9-1 (“50CAN’s MTD”); ECF No. 10-1 Plaintiff opposes both motions to dismiss. 23 II. First Claim: See OPINION 24 A. Breach of Contract 25 To state a claim for breach of contract under California 26 law, a plaintiff must allege (1) the existence of a contract; 27 (2) plaintiff’s performance of its obligations under the 28 contract or an excuse for nonperformance; (3) defendant’s 3 1 breach; and (4) resulting damage to plaintiff. 2 Co. v. Sierra Equip. Rental, Inc., No. 2:12-cv-00617, 2016 WL 3 4000932, at *3 (E.D. Cal. July 25, 2016) (internal citation 4 omitted). 5 6 1. See Arch Ins. StudentsFirst StudentsFirst concedes that Plaintiff has properly pled a 7 breach of contract claim against it, so Plaintiff’s claim 8 survives. 9 straightforward breach of contract dispute between Plaintiff and 10 StudentsFirst.”). 11 12 See SF’s MTD at 2 (“What will remain is a 2. 50CAN Plaintiff premises its breach of contract claim on the 13 Lease, the Parking Agreement, and the implied covenant of good 14 faith and fair dealing. 15 argues that StudentsFirst’s failure to pay rent from July 2016 16 through the remaining lease term, failure to execute an Estoppel 17 Certificate, abandonment, and merger with 50CAN makes 50CAN 18 liable for breaching the Lease. 19 asserts that StudentsFirst’s failure to pay rent from July 2016 20 through the remaining lease term makes 50CAN liable for 21 breaching the Parking Agreement. 22 Plaintiff claims that 50CAN breached the implied covenant of 23 good faith and fair dealing for several reasons, including when 24 StudentsFirst ceased business operations, merged with 50CAN, 25 concealed its intent to breach the Lease until after the Letter 26 of Credit decreased in value, vacated the premises, removed 27 Collateral, and stopped paying rent. 28 added). FAC ¶¶ 32-40. Specifically, Plaintiff Id. ¶¶ 32-34. Id. ¶ 35. 4 Plaintiff also And, finally, See id. ¶ 40 (emphasis 1 Whether Plaintiff can bring this claim against 50CAN turns 2 on whether Plaintiff and 50CAN formed a contract. 3 contends that they did not because, under the Lease, an 4 assignment occurs only if Plaintiff approves it. 5 MTD at 5; Reply, ECF No. 16, at 1-2 (“50CAN’s Reply”). 6 Plaintiff maintains that they formed a contract because 50CAN 7 assumed StudentsFirst’s obligations and liabilities under the 8 Lease via the merger. 9 50CAN See 50CAN’s But See Opp’n to 50CAN’s MTD at 5. The Court agrees with Plaintiff. 50CAN’s argument 10 contradicts the Lease’s plain language. 11 an unapproved assignment constitutes a default—it says nothing 12 about termination. 13 consent of [Plaintiff]...[StudentsFirst] may not...assign...or 14 otherwise transfer...this Lease by operation of law or otherwise 15 or permit the use of...the Premises...by anyone other than 16 [StudentsFirst]”). 17 liability rule: 18 19 20 21 22 23 24 The Lease states that Exh. A § 10.1(a) (“Without the prior written The Lease also includes a successor- Even if [StudentsFirst] is in Default and/or has abandoned the Premises, this Lease shall continue in effect for so long as [Plaintiff] does not terminate [StudentFirst’s] right to possession...and [Plaintiff] may enforce all its rights and remedies under this Lease, including the right to recover Rent as it becomes due under this Lease. In such event, [Plaintiff] shall have all of the rights and remedies of a landlord under California Civil Code Section 1951.4 (lessor may continue Lease in effect after Tenant’s Default and abandonment and recover Rent as it becomes due, if Tenant has the right to sublet or assign, subject only to reasonable limitations) or any successor statute. 25 26 Id. § 11.2(c). 27 terminate the Lease. 28 In other words, a breach does not automatically Since StudentsFirst’s alleged breach does not terminate the 5 1 Lease, 50CAN assumed StudentsFirst’s obligations and liabilities 2 via the merger. 3 corporation inherits the absorbed corporation’s liabilities. 4 See CAL. CORP. CODE § 1107(a)(West 2016). 5 Decision Sci. Corp., 137 Cal. App. 4th 1001, 1016 (2006). 6 including “California Civil Code Section 1951.4...or any 7 successor statute” in the Lease, Plaintiff and StudentsFirst 8 agreed that similar successor-liability rules applied. 9 § 11.2(c)(emphasis added). California law provides that the surviving See also Maudlin v. Pac. By Exh. A, So, the Court “give[s] effect to the 10 mutual intention of the parties.” 11 2016). 12 CAL. CIV. CODE § 1636 (West In sum, Plaintiff has stated a claim against 50CAN under an 13 assumption theory. Plaintiff alleges that the merger breached 14 the Lease and breached the implied covenant of good faith and 15 fair dealing. 16 that 50CAN “absorbed [StudentsFirst’s] companies and assumed all 17 obligations and liabilities thereof, including, but not limited 18 to, [StudentsFirst’s] obligations under the Lease.” 19 Because a default does not automatically terminate the Lease and 20 because the Lease mandates a successor-liability rule, Plaintiff 21 has sufficiently pled a breach of contract claim against 50CAN. 22 The Court denies 50CAN’s motion to dismiss this claim. See FAC ¶¶ 26-34, 36-43. Second Claim: And Plaintiff maintains Id. ¶ 29. 23 B. Fraudulent Transfer 24 A fraudulent conveyance involves a debtor transferring 25 property to a third party with the intent to prevent a creditor 26 from reaching that interest to satisfy the creditor’s claim. 27 See Filip v. Bucurenciu, 129 Cal. App. 4th 825, 829 (2005) 28 (internal citation and quotation marks omitted). 6 California’s 1 Uniform Fraudulent Transfer Act (“UFTA”) allows a defrauded 2 creditor to retrieve property the creditor would otherwise be 3 able to use to pay the debt. 4 2016). See also Mehrtash v. Mehrtash, 93 Cal. App. 4th 75, 80 5 (2001). Under the UFTA, a fraudulent transfer may be “actual” 6 or “constructive.” 7 alleges an actual fraudulent transfer claim. 8 state a claim under that theory, a plaintiff must plead that the 9 defendant made a transfer with “actual intent to hinder, delay, See CAL. CIV. CODE § 3439.04 (West See CAL. CIV. CODE § 3439.04(a). 10 or defraud any creditor of the debtor.” 11 Hales Bros. FAC ¶ 50. To § 3439.01(i). 12 CAL. CIV. CODE When pleading these elements, the plaintiff must meet the 13 heightened standards mandated by Fed. R. Civ. P. 9(b). 14 v. Path, Inc., 87 F. Supp. 3d 1018, 1066 (N.D. Cal. 2014). 15 rule states that “[i]n alleging fraud or mistake, a party must 16 state with particularity the circumstances constituting the 17 fraud or mistake.” 18 plaintiff must state the “who, what, where, when, and how” and 19 must explain why the statement or omission was false or 20 misleading. 21 Cir. 1997)(internal citations omitted). 22 pleading requirements apply only to allegations made against the 23 transferor—not the transferee. 24 (B.A.P. 9th Cir. 2007) (noting that the focus is on the 25 transferor’s intent). 26 FED. R. CIV. P. 9(b). Opperman This In other words, the See Cooper v. Pickett, 137 F.3d 616, 625, 627 (9th But these heightened In re Beverly, 374 B.R. 221, 235 The allegations supporting this claim apply to both 27 Defendants. Plaintiff states that “[StudentsFirst] transferred 28 [its] assets to 50CAN with actual intent to hinder, delay, 7 1 and/or defraud Plaintiff in its collection of the monies 2 owed....” 3 and willingly received [StudentsFirst’s] funds and assets with 4 knowledge that [StudentsFirst] actually intended to hinder, 5 delay and/or defraud Plaintiff by unlawfully preventing 6 Plaintiff from recovering such funds and/or assets,” reasoning 7 that 50CAN had to know this, especially given the due diligence 8 preceding the merger. 9 10 FAC ¶ 50. 1. Then Plaintiff notes that “50CAN knowingly Id. ¶ 51. StudentsFirst StudentsFirst makes two arguments explaining why Plaintiff 11 has not stated a fraudulent transfer claim against it, but one 12 is not well taken. 13 constructive sham theory fails because Plaintiff did not allege 14 that StudentsFirst did not get a reasonably equivalent value. 15 SF’s MTD at 9. 16 theory. 17 whether Plaintiff has stated a claim under an “actual intent” 18 theory. 19 StudentsFirst contends that Plaintiff’s But Plaintiff has not raised a constructive sham See FAC ¶¶ 50-51. So, the Court focuses only on Because StudentsFirst is the transferor, Plaintiff must 20 plead its fraudulent transfer claim under Rule 9(b). 21 Opperman, 87 F. Supp. 3d at 1066. 22 StudentsFirst transferred its assets to 50CAN with “actual 23 intent to hinder, delay, and/or defraud Plaintiff in its 24 collection of the monies owed due to [StudentsFirst’s] 25 abandonment of the Premises, failure to pay Rents, and various 26 breaches of the Lease.” 27 StudentsFirst “unlawfully endeavored to place available funds 28 and assets outside Plaintiff’s reach....” FAC ¶ 50. 8 See Plaintiff alleges that Plaintiff adds that Id. ¶ 52. 1 Plaintiff explains that “StudentsFirst” (the “who”) 2 transferred its “assets”—including the $1,200,000.00 in capital 3 contributions to 50CAN in April and June 2016 (the “what” and 4 “when”)—and “purposefully concealed [its] intent to abandon the 5 Premises and cease adhering to [its] obligations under the 6 Lease...until after the Letter of Credit was reduced...in an 7 effort to defraud Plaintiff, its creditor, and prevent Plaintiff 8 from adequately mitigating the damages caused by Defendants” 9 (the “how” and “why”). 10 Id. ¶¶ 50-52. Plaintiff has specified the requisite “who, what, where, 11 when, and how,” stating enough facts for StudentsFirst to 12 prepare an adequate answer. 13 (holding that complaint satisfied Rule 9(b)’s particularity 14 requirement because, given that it “points to specific quarters, 15 specific customers and provided dollar figures for each 16 quarter,” defendants could prepare an adequate answer). 17 Plaintiff also states that StudentsFirst put its “funds and 18 assets” beyond Plaintiff’s reach, a crucial allegation. 19 Opperman, 87 F. Supp. 3d at 1066 (dismissing UFTA claim because 20 complaint did not mention that the transfer at issue put 21 property beyond plaintiffs’ reach). 22 See Cooper, 137 F.3d at 627 See In sum, Plaintiff has satisfied Rule 9(b)’s particularity 23 requirement. To require more would “make Rule 9(b) carry more 24 weight than it was meant to bear.” 25 (internal citation omitted). 26 sufficient evidence, then it “will not prevail [on this claim] 27 at summary judgment or trial,” but courts “do not test the 28 evidence at this stage.” See Cooper, 137 F.3d at 627 If Plaintiff cannot later offer Id. (internal citation and quotation 9 1 marks omitted). 2 dismiss Plaintiff’s fraudulent transfer claim. The Court denies StudentsFirst’s request to 3 4 5 2. 50CAN 50CAN makes the same arguments as StudentsFirst. See 6 50CAN’s MTD at 6; 50CAN’s Reply at 2. Because 50CAN is the 7 transferee, Plaintiff need not plead under Rule 9(b). See 8 Beverly, 374 B.R. at 235. 9 because Plaintiff has already stated a claim against Given that procedural distinction, 10 StudentsFirst under Rule 9(b), it necessarily follows that 11 Plaintiff has also stated a claim under the more relaxed Rule 8 12 plausibility standard. 13 conclude that Plaintiff stated a fraudulent transfer claim 14 against StudentsFirst, see supra Part II.B.1, the Court finds 15 that Plaintiff has stated one against 50CAN, and denies 50CAN’s 16 request to dismiss it. Third Claim: Applying the same reasoning used to 17 C. Fraud 18 To state a claim for fraud, a plaintiff must allege the 19 following under Rule 9(b)’s heightened pleading standard: (1) a 20 misrepresentation (i.e., false representation, concealment, or 21 nondisclosure), (2) knowledge of falsity, (3) intent to defraud, 22 (4) justifiable reliance, and (5) resulting damage. 23 Angeles Mem’l Coliseum Comm’n v. Insomniac, Inc., 233 Cal. App. 24 4th 803, 831 (2015)(internal citations and quotation marks 25 omitted). 26 misrepresentation theory or a concealment theory. 27 Bros. brings its fraud claim under a concealment theory, see FAC 28 ¶¶ 54-61, the Court focuses only on whether Plaintiff has stated See Los A plaintiff may bring this claim under an affirmative 10 Because Hale 1 a claim under that theory. 2 To successfully state a fraud claim under a concealment 3 theory, the plaintiff must show that the defendant had a legal 4 duty to disclose facts. 5 Cal. App. 4th 1178, 1193 (2014). 6 by claiming either: 7 relationship with the plaintiff; (2) the defendant exclusively 8 knew material facts not known to the plaintiff; (3) the 9 defendant concealed a material fact from plaintiff; or (4) the 10 defendant made partial representations, while also suppressing 11 some material facts. 12 (internal citations and quotation marks omitted). 13 affirmative duty to disclose concealed facts arises only from a 14 fiduciary or fiduciary-like relationship. 15 See Hoffman v. 162 N. Wolfe LLC, 228 A plaintiff makes that showing (1) the defendant had a fiduciary See Insomniac, 233 Cal. App. 4th at 831 In short, an Id. at 832. But, even if the plaintiff establishes an affirmative duty 16 to disclose, plaintiff must still overcome the economic loss 17 rule. 18 breach of duties that merely restate contractual obligations. 19 See BNSF Ry. Co. v. San Joaquin Valley R.R. Co., No. 1:08-cv- 20 01086, 2011 WL 3328398, at *5 (E.D. Cal. Aug. 2, 2011)(internal 21 citations and quotation marks omitted). 22 plaintiff links its fraud claim to a party’s alleged failure to 23 comply with a contractual duty, the proper claim is breach of 24 contract—not fraud. 25 marks omitted). 26 “dissolving” into each other, maintaining the crucial 27 “distinction between commercial transactions in which economic 28 expectations are protected by commercial and contract law, and In California, a plaintiff cannot recover in tort for In other words, when a See id. (internal citation and quotation This rule prevents contract and tort law from 11 1 transactions with individual consumers who are injured in a 2 manner traditionally addressed through tort law.” 3 (internal citation omitted). 4 See id. at *6 But, as with most rules, there is one exception. 5 California courts allow tort damages in contract cases where 6 tort liability is either (1) completely independent of the 7 contract; (2) arises from intentional conduct intended to harm— 8 i.e., a breach of duty causing physical injury; (3) insurance 9 contract suits involving a breach of the covenant of good faith 10 and fair dealing; (4) wrongful discharge in violation of 11 fundamental public policy; or (5) fraudulent inducement. 12 id. 13 *9 (internal citation omitted). 14 15 This exception, though, is “narrow in scope.” 1. See See id. at 50CAN Plaintiff does not bring a fraud claim against 50CAN. 16 FAC at 12 (“Fraud against Defendants, StudentsFirst and 17 See StudentsFirst Institute.”). 18 19 2. StudentsFirst Plaintiff incorporates all preceding allegations into its 20 fraud claim, including breach of contract. 21 Plaintiff specifies that “[StudentsFirst] intended to deceive 22 Plaintiff by failing to disclose and/or concealing from 23 Plaintiff [its] intention to merge [its] business with 50CAN, 24 transfer [its] assets to 50CAN, abandon the Premises, cease 25 payment of Rent and remove secured Collateral from the Premises 26 so as to induce Plaintiff not to draw upon the Letter of Credit 27 until after it was reduced....” 28 “had no way of knowing that [StudentsFirst]” had these Id. ¶ 56. 12 See FAC ¶ 54. Emphasizing that it 1 intentions, id. ¶ 57, Plaintiff maintains that it “reasonably 2 and justifiably relied on [StudentsFirst’s] deceptions and/or 3 concealment because, at the time, [StudentsFirst was], and had 4 been, in compliance with the Lease.” 5 Id. ¶¶ 57, 59. StudentsFirst argues that Plaintiff has not stated a fraud 6 claim against it because (1) Plaintiff failed to meet Rule 7 9(b)’s particularity standard, (2) StudentsFirst had no 8 affirmative duty to disclose facts to Plaintiff, and (3) even if 9 StudentsFirst did have that duty, Plaintiff still has not stated 10 a claim because Plaintiff cannot convert a contract-based 11 grievance into a tort. 12 disagrees, contending that it has satisfied Rule 9(b) and that 13 StudentsFirst had a duty to disclose those facts because they 14 were material to Plaintiff. 15 Plaintiff notes that whether StudentsFirst’s omissions “also 16 constitute a breach of the Lease is incidental” to that duty. 17 Id. 18 See SF’s MTD at 5-8. Plaintiff Opp’n to SF’s MTD at 4. And The Court agrees with StudentsFirst, but only as to its 19 last contention. 20 argument, because Plaintiff incorporated all preceding 21 allegations into this claim (including fraudulent transfer), the 22 Court concludes that Plaintiff has met Rule 9(b)’s particularity 23 requirement, applying the same reasoning used to conclude that 24 Plaintiff satisfied Rule 9(b) for its fraudulent transfer claim. 25 See supra Part II.B.1. 26 Beginning with StudentsFirst’s pleading As for whether StudentsFirst had an affirmative duty to 27 disclose facts, the Court concludes that it did. 28 made partial representations to Plaintiff at the April Meeting, 13 StudentsFirst 1 but also made critical omissions. 2 intent to cease business operations, to transfer all assets to a 3 third party, to vacate the Premises, and to dissolve. 4 ¶ 11. 5 remove secured Collateral and to accomplish these things after 6 the Letter of Credit reduced in half. 7 (emphasis added). 8 did not have a fiduciary relationship, a duty to disclose still 9 arose because StudentsFirst revealed some facts at the April 10 Meeting, but omitted others, which produced misleading half- 11 truths. 12 to disclose. 13 Cal. 3d 285, at 294-94 (1970)(holding that affirmative duty 14 arose because “defendant [made] representations but [did] not 15 disclose facts which materially qualify the facts disclosed”). 16 StudentsFirst admitted its See FAC But StudentsFirst said nothing about its intent to also See id. ¶¶ 11, 56-57 So, even though StudentsFirst and Plaintiff That partial disclosure triggered an affirmative duty See Warner Constr. Corp. v. City of Los Angeles, 2 The problem for Plaintiff, though, involves the economic 17 loss rule. 18 not allege physical injury, wrongful discharge, or fraudulent 19 inducement. 20 alleges a duty arising under tort law independent of a breach of 21 contract. 22 This is not an insurance suit, and Plaintiff does So, Plaintiff’s fraud claim proceeds only if it See BNSF, 2011 WL 3328398 at *6. Two California cases are particularly relevant here. In 23 Robinson Helicopter Co., Inc. v. Dana Corp., the court held that 24 the economic loss rule did not bar plaintiff’s fraud claims 25 because a duty arose under tort law independent of the contract 26 breach. 27 defendant breached the contract by providing nonconforming 28 clutches, but committed an independent tort by issuing false 34 Cal. 4th 979, 991 (2004). 14 Specifically, the 1 certificates of conformance. 2 certificates of conformance, [the defendant] unquestionably made 3 affirmative representations that Robinson justifiably relied on 4 to its detriment. 5 would not have...used the nonconforming 6 clutches....[a]ccordingly, [the defendant’s] tortious conduct 7 was separate from the breach itself, which involved [the 8 defendant’s] provision of the nonconforming clutches.”). 9 Conversely, in BNSF, the court held that the economic loss rule Id. at 990-91 (“By issuing false But for [these] misrepresentations...Robinson 10 barred Plaintiff’s fraud claim because the fraudulent 11 misrepresentations were an “inseparable component” of the breach 12 of contract to pay. 13 Id. at *9. Plaintiff contends that “StudentsFirst had a duty to 14 disclose [the] information because it was material to Plaintiff; 15 whether such information may also constitute a breach of the 16 Lease is incidental to said duty.” 17 This argument lacks teeth. Opp’n to SF’s MTD at 4. Forgetting that the exception 18 to the economic loss rule is “narrow in scope,” Plaintiff cites 19 no case law to support its argument that a breach of contract 20 that is “incidental to said duty” falls within this narrow 21 exception. 22 For instance, Plaintiff cites StudentsFirst’s omissions to 23 support this claim and its breach of contract claim. 24 ¶¶ 40, 55-58 (emphasis added). 25 these claims even clearer, Plaintiff incorporates into its fraud 26 claim the allegations constituting contract breach. 27 And, finally, all additional facts implicate the Lease. 28 ¶¶ 55, 59 (StudentsFirst “had no intention of continuing to And Plaintiff’s FAC pokes holes in its own argument. See id. To make the overlap between 15 Id. ¶ 54. See id. 1 perform its obligations under the Lease”; Plaintiff “justifiably 2 relied on” StudentsFirst’s concealment because “at the time, 3 [StudentsFirst was], and had been, in compliance of the Lease”) 4 (emphasis added). 5 anything but “incidental” to StudentsFirst’s duty to disclose 6 information. 7 omissions were separate from the breach itself, making this case 8 more comparable to BNSF than Robinson Helicopter. 9 cannot recast its breach of contract claim as a tort claim. Simply put, StudentsFirst’s omissions are Plaintiff has not shown that StudentsFirst’s Plaintiff 10 Dismissal under Fed. R. Civ. P. 12(b)(6) with prejudice is 11 appropriate “only if it appears beyond doubt that the plaintiff 12 can prove no set of facts in support of his claim which would 13 entitle him to relief.” 14 (9th Cir. 2001) (citations and internal quotation marks 15 omitted). 16 falling within the narrow exception required to state a fraud 17 claim under a concealment theory. 18 Plaintiff’s fraud claim with prejudice. Navarro v. Block, 250 F.3d 729, 732 As discussed above, Plaintiff cannot plead facts Fourth Claim: The Court therefore dismisses 19 D. Civil Conspiracy 20 A civil conspiracy arises when two or more people agree to 21 a common plan or design to commit a tortious act. See Kidron v. 22 Movie Acquisition Corp., 40 Cal. App. 4th 1571, 1582 (1995). 23 state a claim, the plaintiff must allege “(1) the formation and 24 operation of a conspiracy, (2) wrongful conduct in furtherance 25 of the conspiracy, and (3) damages arising from the wrongful 26 conduct.” Id. at 1581. To 27 Although “California recognizes a cause of action against 28 noncontracting parties who interfere with the performance of a 16 1 contract,” a party cannot be held liable in tort for conspiracy 2 to interfere with its own contract. 3 v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 507-08, 513 (1994) 4 (original emphasis). 5 tort duty to another not to interfere with the performance of 6 the contract; its duty is simply to perform the contract 7 according to its terms.” 8 9 See Applied Equip. corps. “One contracting party owes no general Id. at 514. The allegations supporting this claim apply to both Defendants. Plaintiff states that Defendants “knowingly and 10 willfully conspired and agreed amongst themselves to 11 intentionally” (1) allow the Letter of Credit to reduce in half 12 before telling Plaintiff about their intent to merge; (2) 13 conceal this intent; (3) cause Plaintiff to believe its secured 14 Collateral was intact; (4) remove that secured Collateral to 15 deprive Plaintiff of its secured interest; and (5) hinder, 16 delay, and/or defraud Plaintiff in collecting its claim against 17 Defendants for breaching the Lease. 18 19 1. See FAC ¶ 64. StudentsFirst StudentsFirst argues that Plaintiff cannot bring this claim 20 because a tort claim for interference with a contract does not 21 lie against a party to that contract. 22 Plaintiff maintains that it has stated a claim because it 23 alleged a conspiracy to commit a tortious act—not a conspiracy 24 to breach a contract. 25 argument is contradicted by the FAC and is without merit. See SF’s MTD at 9. See Opp’n to SF’s MTD at 9. Yet Plaintiff’s 26 Plaintiff incorporates all previous allegations of its FAC 27 into this civil conspiracy claim, including breach of contract. 28 See FAC ¶ 62. But, even if Plaintiff had not incorporated that 17 1 claim, Plaintiff’s additional allegations derive from the same 2 facts that support contract breach. 3 that Defendants conspired with each other to conceal a breach of 4 contract, to conceal their intent to breach the contract, and to 5 conceal their intent to draw from the Letter of Credit, also in 6 breach of contract. 7 merger, transfer of assets, abandonment, removal of Collateral, 8 and refusal to pay rent). 9 supporting Plaintiff’s civil conspiracy claim are an inseparable Indeed, Plaintiff states See id. ¶¶ 63-66 (citing Letter of Credit, Simply put, because the facts 10 component of its breach of contract claim, Plaintiff’s argument 11 fails. 12 cannot state a civil conspiracy claim against StudentsFirst and 13 grants StudentsFirst’s request to dismiss this claim with 14 prejudice. 15 16 See supra Part II.C.2. 2. The Court finds that Plaintiff 50CAN Plaintiff does not dispute that conspiracy to breach a 17 contract is not a legally cognizable claim and it has conceded 18 that it has not alleged such a conspiracy. 19 contends it has adequately alleged the existence of conspiracy 20 to commit a civil tort by 50CAN. 21 Rather, Plaintiff Opp’n to 50CAN MTD at 7-8. No matter how much Plaintiff wants this Court to believe 22 that it has alleged a conspiracy claim to commit a tort, 23 stripped to its core, the conspiracy claim derives from 24 Plaintiff’s breach of contract claim. 25 None of the allegations supporting this claim give rise to a 26 claim of civil conspiracy. 27 Plaintiff’s fraud claim against StudentsFirst there is no basis 28 for this claim against 50CAN. See supra Part II.C.2. Given that the Court has dismissed The Court grants 50CAN’s request 18 1 to dismiss this claim with prejudice. 2 E. Fifth Claim: Common Counts 3 The common count is a general pleading seeking recovery of 4 money without specifying the nature of the claim. See Title 5 Ins. Co. of Minnesota v. State Bd. of Equalization, 4 Cal. 4th 6 715, 731 (1992)(internal citations and quotation marks omitted). 7 It is not a specific cause of action, but rather “a simplified 8 form of pleading normally used to aver the existence of various 9 forms of monetary indebtedness.” McBride v. Boughton, 123 Cal. 10 App. 4th 379, 394 (2004)(internal citations omitted). 11 a claim, a plaintiff must allege “(1) a statement of 12 indebtedness in certain sum, (2) consideration, i.e., goods 13 sold, work done, etc., and (3) nonpayment. 14 v. Zerin, 53 Cal. App. 4th 445, 460 (1997)(internal citation 15 omitted). 16 To state Farmers Ins. Exch. The allegations supporting this claim apply to both 17 Defendants. Once again, Plaintiff incorporates all previous 18 allegations into its common counts claim, including breach of 19 contract. 20 year, [StudentsFirst], and by way of merger and assumption of 21 all liabilities and obligations, 50CAN, became indebted to 22 Plaintiff in an amount subject to identification, but in an 23 amount no less than $877,090.88, as a result of [its] lease of 24 the Premises and the services provided by Plaintiff in 25 accordance therewith.” 26 damages, interest, costs of suit, and any other relief the Court 27 deems proper. 28 /// See FAC ¶ 69. Plaintiff adds that “[w]ithin the last Id. ¶ 70. See id. ¶ 72. 19 Plaintiff seeks compensatory 1 2 1. StudentsFirst StudentsFirst argues that Plaintiff has not stated a common 3 counts claim because Plaintiff improperly restyles it as a 4 breach of contract claim. 5 that Plaintiff has neither alleged a debt of a sum certain nor 6 identified what consideration Plaintiff gave to StudentsFirst 7 besides the Lease. 8 arguments, maintaining that it has alleged indebtedness in a 9 certain sum. SF’s MTD at 9. Id. at 10. StudentsFirst adds But Plaintiff challenges these Opp’n to SF’s MTD at 12 (“no less than 10 $877,090.88”). 11 required under the Lease, satisfy the indebtedness element. 12 at 12-13. 13 never sought to dismiss the breach of contract claim, so the 14 common count claim “must survive.” 15 Plaintiff also states that its services, as Id. And, finally, Plaintiff notes that StudentsFirst Id. at 13. The Court agrees with StudentsFirst that this claim cannot 16 survive but for slightly different reasons. “[W]hen the common 17 count is based on an express contract, the element of 18 indebtedness is not satisfied where the plaintiff seeks damages 19 for breach....” 20 2005 WL 2179310, at *4-5 (E.D. Cal. Sept. 8, 2005). 21 Plaintiff centers its common counts claim on express contracts— 22 the Lease and the Parking Agreement—and Plaintiff seeks 23 compensatory damages. 24 breach of contract allegations and the common count allegations 25 together, the common count allegations in fact seek damages for 26 breach. 27 again, Plaintiff incorporates into its common counts claim the 28 allegations supporting contract breach. Mike Nelson Co. v. Hathaway, No. F 05-0208, See FAC ¶¶ 69-72. Also, reading the See Hathaway, 2005 WL 2179310 at *5. 20 Here, Indeed, once See FAC ¶ 69. 1 And, finally, that StudentsFirst did not move to dismiss 2 the breach of contract does not help Plaintiff’s argument. 3 Because Plaintiff’s common counts claim is duplicative of its 4 surviving breach of contract claim, the common counts claim 5 fails as a matter of law. 6 5. 7 Plaintiff’s common counts claim with prejudice. The Court grants StudentsFirst’s request to dismiss 8 9 See Hathaway, 2005 WL 2179310 at *4- 2. 50CAN Having previously held that Plaintiff has stated a breach 10 of contract claim against 50CAN, see supra Part II.A.2, the 11 Court concludes that the same reasons barring Plaintiff’s common 12 counts claim against StudentsFirst apply here. 13 II.E.1. 14 50CAN, so the Court dismisses it with prejudice. See supra Part Plaintiff cannot state a common counts claim against 15 F. Sixth Claim: Declaratory Relief 16 The Declaratory Judgment Act allows a district court to 17 “declare the rights and other legal relations of any party 18 seeking such declaration, whether or not further relief is or 19 could be sought,” but only “[i]n a case of actual controversy.” 20 28 U.S.C. § 2201(a). 21 independent claim. 22 713 F. Supp. 2d 1092, 1104 (E.D. Cal. 2010). 23 resolve uncertainties or disputes that could result in future 24 litigation, declaratory relief operates prospectively and should 25 not redress past wrongs. 26 F.2d 1353, 1356-57 (9th Cir. 1985) (en banc). 27 28 This remedy is a form of relief—not an See Lane v. Vitek Real Estate Indus. Grp., Designed to See United States v. Washington, 759 Specifically, declaratory relief is appropriate when the judgment will (1) “serve a useful purpose in clarifying and 21 1 settling the legal relations in issue”; and (2) “when it will 2 terminate and afford relief from the uncertainty, insecurity, 3 and controversy giving rise to the proceeding.” 4 Co. v. Preformed Line Prods. Co., 362 F.2d 339, 342 (9th Cir. 5 1966). 6 their conduct to avoid a breach. 7 Ibis LLC, No. CV 05-04239, 2006 WL 5720345, at *3 (C.D. Cal. May 8 2, 2006). 9 rights rather than to execute them. 10 11 McGraw-Edison Stated differently, this remedy enables parties to shape StreamCast Networks Inc. v. Courts should grant declaratory relief to declare See id. (internal citations and quotation marks omitted). The allegations supporting this claim apply to both 12 Defendants. 13 into its request for declaratory relief. 14 Plaintiff explains that “[a] dispute has arisen and now exists 15 between the parties to this action as to their rights, 16 responsibilities, and obligations under the Lease.” 17 Plaintiff states that “it has performed all obligations required 18 of it under the Lease,” but that Defendants argue that “they are 19 excused from any further performance of the Lease.” 20 Plaintiff “seeks a judicial determination” as to the parties’ 21 rights and obligations. 22 1. 23 Plaintiff incorporates all previous allegations See FAC ¶ 73. Id. ¶ 74. Id. So, Id. StudentsFirst StudentsFirst contends that declaratory relief is 24 inappropriate because Plaintiff centers its FAC on 25 StudentsFirst’s alleged breach of contract—a past act. 26 MTD at 11 (emphasis added). 27 is ripe for judicial determination because Plaintiff “reasonably 28 expects” that StudentsFirst will raise an affirmative defense See SF’s Yet Plaintiff argues that the case 22 1 that it is excused from performing under the Lease. 2 SF’s MTD at 14. 3 StudentsFirst has the stronger argument. Opp’n to An adequate 4 remedy already exists under Plaintiff’s breach of contract 5 claim, making declaratory relief duplicative and unnecessary 6 here. 7 3200614, at *3 (N.D. Cal. June 24, 2013) (concluding declaratory 8 relief claim duplicative of breach of contract claim because 9 deciding legality of Policy’s language already at issue in See Ellena v. Standard Ins. Co., No. 12-5401 SC, 2013 WL 10 breach of contract claim); Valle v. JP Morgan Chase Bank, N.A., 11 No. 11-cv-2453, 2012 WL 1205635, at *10 (S.D. Cal. Apr. 11, 12 2012)(holding that claim for declaratory relief fails because 13 based on same allegations supporting another cause of action). 14 The Court grants StudentsFirst’s request to dismiss with 15 prejudice Plaintiff’s claim for declaratory relief. 16 17 2. 50CAN Having previously held that Plaintiff has stated a breach 18 of contract claim against 50CAN, see supra Part II.A.2, the 19 Court also grants 50CAN’s request to dismiss with prejudice 20 Plaintiff’s claim for declaratory relief for the same reasons 21 the claim fails against StudentsFirst. 22 G. 23 24 Seventh Claim: See supra Part II.F.1. California Business & Professions Code Section 17200 California law prohibits “unfair competition,” which 25 includes “any unlawful, unfair or fraudulent business act or 26 practice.” 27 statute’s scope is broad, and it governs anti-competitive 28 business practices as well as injuries to consumers. CAL. BUS. & PROF. CODE § 17200 (West 2016) (“UCL”). 23 See Cel- The 1 Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 2 163, 180 (1999)(internal citations and quotation marks omitted). 3 A court may deem a practice unfair even if it is not illegal. 4 See id. 5 Enacted to protect both consumers and competitors by 6 promoting fair competition in commercial markets for goods and 7 services, the UCL is a meaningful consumer protection tool. 8 Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1152 9 (2003). See It “provides an equitable means through which both 10 public prosecutors and private individuals can bring suit to 11 unfair business practices and restore money or property to 12 victims of these practices.” 13 plaintiff “need only show that members of the public are likely 14 to be deceived.” 15 152 Cal. App. 4th 115, 133 (2007)(internal citations and 16 quotation marks omitted). 17 Id. at 1150. To state a claim, a Linear Tech. Corp. v. Applied Materials, Inc., But corporate plaintiffs face an uphill battle. When a UCL 18 claim is based on a contract that does not involve the public or 19 individual consumers, a corporate plaintiff cannot use the 20 statute for the relief it seeks. 21 See id. at 135. The allegations supporting this claim apply to both 22 Defendants. After incorporating all previous allegations in this 23 claim (including those constituting contract breach), Plaintiff 24 states that “Defendants have engaged in ‘unlawful,’ ‘unfair,’ 25 and/or ‘fraudulent’ business acts or practices in an effort to 26 defraud their creditors, including, without limitation, 27 Plaintiff.” 28 “deceived Plaintiff, removed property and transferred substantial FAC ¶ 78. Plaintiff specifies that Defendants have 24 1 assets in an effort to avoid and evade payments to Plaintiff, 2 and/or hinder or delay Plaintiff’s ability to collect those sums 3 due and owing to it.” 4 1. 5 Id. StudentsFirst Characterizing the Lease as a breach of a commercial 6 contract with no adverse effects on consumer welfare, 7 StudentsFirst argues the UCL does not apply here. 8 at 9. 9 based on its fraud, fraudulent transfer, and civil conspiracy See SF’s MTD Plaintiff disagrees, contending that its UCL claim is 10 claims—not its breach of contract claim. 11 12. 12 Plaintiff’s tort claims survive, Plaintiff still has not alleged 13 that this private dispute among corporate actors raises issues 14 that fall within the UCL’s reach. 15 Reply”). 16 Opp’n to SF’s MTD at In response, StudentsFirst reiterates that, even if Reply, ECF No. 17, at 4 (“SF’s The Court agrees with StudentsFirst. Notwithstanding 17 Plaintiff’s argument that its UCL claim is not based on the 18 Lease, at its core, this case involves a dispute about the 19 economic relationship between commercial parties. 20 incorporating here allegations supporting its breach of contract 21 claim augments this conclusion. 22 Tree Stores Inc. v. Toyama Partners LLC, 875 F. Supp. 2d 1058, 23 1083 (N.D. Cal. 2012) (holding that plaintiff failed to state a 24 UCL claim because plaintiff alleged that that claim was based on 25 its breach of contract claim). 26 only Plaintiff and StudentsFirst’s relationship—it did not 27 implicate potential other creditors or the general public. 28 generally Exh. A. See FAC ¶ 77. Plaintiff’s See also Dollar Additionally, the Lease defined See This too shows that Plaintiff cannot state a 25 1 UCL claim. 2 1399783, at *3 (N.D. Cal. Apr. 13, 2011)(holding plaintiff cannot 3 assert UCL claim because parties’ relationship defined by their 4 contractual arrangement and did not involve the general public or 5 individual consumers who were also parties to the contract). 6 See In re ConocoPhillips, No. 09-cv-02040, 2011 WL In sum, the Court finds that Plaintiff cannot state a UCL 7 claim against StudentsFirst because § 17200 does not protect 8 commercial disputes between contracting parties that do not 9 involve the general public or individual consumers. The Court 10 grants StudentsFirst’s request to dismiss this claim with 11 prejudice. 12 2. 50CAN 13 The Court also finds that Plaintiff fails to state a UCL 14 claim against 50CAN for the same reasons Plaintiff fails to state 15 this claim against StudentsFirst. 16 Court grants 50CAN’s request to dismiss the UCL claim with 17 prejudice. See supra Part II.G.1. The 18 19 20 21 22 23 24 25 26 27 28 III. ORDER For the reasons set forth above, the Court GRANTS in part and DENIES in part Defendants’ Motions to Dismiss as follows: 1. Defendant 50CAN’s motion to dismiss the breach of contract claim is DENIED; 2. Defendants’ motions to dismiss the fraudulent transfer claim are DENIED; 3. Defendants StudentsFirsts’ motion to dismiss the fraud claim is GRANTED WITH PREJUDICE; 4. Defendants’ motions to dismiss the civil conspiracy 26 1 2 3 4 5 6 7 8 9 claim are GRANTED WITH PREJUDICE; 5. Defendants’ motions to dismiss the common counts claim are GRANTED WITH PREJUDICE; 6. Defendants’ motions to dismiss the claim for declaratory relief are GRANTED WITH PREJUDICE; and 7. Defendants’ motions to dismiss the UCL claim are GRANTED WITH PREJUDICE. IT IS SO ORDERED. Dated: February 13, 2017 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 27

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