Carr v. AutoNation, Inc. et al

Filing 46

ORDER signed by District Judge John A. Mendez on 8/14/2018 GRANTING 39 AutoNation, Inc.'s Motion for Judgment on the pleadings and DISMISSES Plaintiff's sole remaining claim of breach of contract implied in fact with LEAVE TO AMEND. (Reader, L)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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JAMES CARR,

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No.

2:17-cv-01539-JAM-AC

Plaintiff,
v.
AUTONATION, INC., et al.

ORDER GRANTING DEFENDANT
AUTONATION’S MOTION FOR JUDGMENT
ON THE PLEADINGS

Defendants.

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More than twenty years ago, Plaintiff James Carr

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(“Plaintiff” or “Carr”) claims that he came up with a business

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plan (the “Business Plan”) to transform the automobile-wrecking

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industry into a profitable system.

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Business Plan to Defendant AutoNation, Inc. (“AutoNation”) during

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face-to-face meetings and AutoNation subsequently told him that

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it was not interested in partnering with him.

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that AutoNation, co-defendant LKQ Corporation (“LKQ”), and others

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then stole his ideas from the Business Plan to open a new, highly

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profitable company.

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company in 2015, Plaintiff initiated this lawsuit, alleging

Plaintiff presented the

Plaintiff alleges

After finding out about AutoNation’s new

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Misappropriation of Trade Secrets and Breach of Contract Implied

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in Fact.

Compl., ECF No. 1-2.1

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In January 2018, this Court granted LKQ’s motion to dismiss

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Plaintiff’s sole claim for trade secret misappropriation against

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it.

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AutoNation’s motion to dismiss Plaintiff’s trade secret

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misappropriation claim and denied AutoNation’s motion to dismiss

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Plaintiff’s implied contract claim on statute of limitations

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grounds because questions of fact existed over whether Plaintiff

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Order (the “MTD Order”), ECF No. 35.

should have discovered the claim earlier.

The Court also granted

See MTD Order.

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AutoNation moves for judgment on the pleadings on

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Plaintiff’s remaining claim for breach of implied contract.

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Mem., ECF No. 39.

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reasons explained below, the Court grants AutoNation’s motion for

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judgment on the pleadings and dismisses Plaintiff’s implied

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contract claim without prejudice.

Plaintiff opposes.

Opp., ECF No. 41.

For the

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I.

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FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff owned and operated an automobile-wrecking business

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in Placerville, California between 1985 and 1995.

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Based on his experience and background as a college-educated

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certified public accountant, Plaintiff created the Business Plan

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to transform the automobile-wrecking industry into an efficient,

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interconnected, and highly profitable national system capable of

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synchronizing the supply of wrecked cars with the demand of

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Compl. ¶ 2.

This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was
scheduled for July 10, 2018. In deciding this motion, the Court
takes as true all well-pleaded facts in the operative complaint.
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recycled auto parts.

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Plaintiff sent letters to approximately 10 companies and

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individuals to gauge their interest in being a business partner

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and capital source.

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Compl. ¶¶ 2-3.

Around November 1995,

Compl. ¶ 4.

One of two respondents asked for the Business Plan and then,

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upon Plaintiff’s request, returned the Business Plan after

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indicating they were not interested.

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owned by well-known businessman Wayne Huizenga (“Huizenga”), was

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the other company that responded.

Compl. ¶ 5.

Compl. ¶ 4.

AutoNation,

Specifically,

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between November 1995 and January 1996, Jeff Davis (“Davis”) of

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AutoNation called Plaintiff to ask some follow-up questions and

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asked for the Business Plan.

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Davis the Business Plan, but without any confidentiality

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agreement or non-disclosure agreement.

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then traveled to California to meet with Plaintiff in person and

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tour approximately five automobile wrecking yards throughout

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Northern California.

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spoke to Davis about general next steps, including what the

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nature of his future involvement would be if they decided to move

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forward.

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that he “contemplated being compensated or otherwise involved

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should Huizenga, AutoNation, or any affiliates choose to move

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forward with the idea.”

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Id.

Compl. ¶¶ 6, 8.

Compl. ¶ 9.

Plaintiff sent

Compl. ¶¶ 8, 42.

Davis

During the visit, Plaintiff

Plaintiff claims that he also made clear to Davis

Id.

After their visit, Davis called Plaintiff and told him that

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Huizenga and AutoNation were not interested in pursuing the

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Business Plan.

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Business Plan and he did.

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automobile-wrecking industry and moved on to other ventures.

Compl. ¶ 10.
Id.

Plaintiff asked Davis to return the
Then Plaintiff left the

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Id.

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He did not follow developments in the automobile-wrecking

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industry and did not keep in touch with people in the industry.

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Id.

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At a barbeque almost ten years later, Plaintiff told a new

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acquaintance who owned a Northern California auto parts recycler

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that Plaintiff once had a billion dollar business idea involving

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the automobile-wrecking industry.

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pitched it to Huizenga and AutoNation.

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expressed shock and told Plaintiff that a company called LKQ had

Compl. ¶ 11.
Id.

He added that he

The new acquaintance

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been formed with Huizenga’s involvement and that it was

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tremendously successful.

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Id.

Plaintiff did further research on the internet to learn that

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Huizenga’s business associate founded LKQ and that Huizenga and

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AutoNation were founding backers.

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discovered that AutoNation owned significant shares of LKQ until

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2003.

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Compl. ¶ 12.

And Plaintiff

Compl. ¶ 17.

After completing his initial research, Plaintiff filed suit

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against Defendants AutoNation, Huizenga, Davis, and LKQ in El

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Dorado County Superior Court, alleging misappropriation of trade

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secrets against all Defendants and breach of contract implied in

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fact against AutoNation and Huizenga, seeking damages in excess

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of $87,000,000.

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the case to this Court under 28 U.S.C. § 1441.

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ECF No. 1.

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parties’ stipulation to dismiss Defendants Huizenga and Davis

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without prejudice.

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///

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///

Compl. ¶ 53.

Defendants collectively removed
Not. of Removal,

On September 19, 2017, the Court approved the

ECF No. 22.

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II.

OPINION

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A.

Legal Standard

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Under Federal Rule of Civil Procedure 12(c), after the

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pleadings are closed, but early enough not to delay trial, a

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party may move for judgment on the pleadings.

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Proc. 12(c).

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when, accepting all factual allegations in the complaint as

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true, there is no issue of material fact in dispute, and the

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moving party is entitled to judgment as a matter of law.

Fed. R. Civ.

Judgment on the pleadings is properly granted

Chavez

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v. U.S., 683 F.3d 1102, 1108 (9th Cir. 2012) (internal citation

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and quotation marks omitted).

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The analysis under Rule 12(c) is substantially similar to

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the analysis under Rule 12(b)(6) because, under both rules, a

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court must determine whether the facts alleged in the complaint,

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taken as true, entitle the plaintiff to a legal remedy.

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683 F.3d at 1108 (internal citation and quotation marks

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omitted).

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court must decide if a complaint contains sufficient factual

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matter, accepted as true, to state a claim to relief that is

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plausible on its face.

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marks omitted).

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formulaic recitations of the elements of a cause of action are

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not sufficient.

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570 (2007).

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are not entitled to the presumption of truth, before determining

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whether a claim is plausible.

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678, 682 (2009).

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Chavez,

As on a motion to dismiss under Rule 12(b)(6), a

Id. (internal citation and quotation

Mere conclusory statements in a complaint and

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555,

The Court discounts conclusory statements, which

Ashcroft v. Iqbal, 556 U.S. 662,

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B.

Pleading Of Breach Of Contract Implied In Fact

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In its moving papers, AutoNation first argues that

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Plaintiff’s breach of contract implied in fact claim should be

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dismissed because it is preempted by the California Uniform

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Trade Secrets Act (“CUTSA”).

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argues that Plaintiff’s implied in fact contract claim is really

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a preempted equitable claim for breach of contract implied in

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law because he fails to allege an actual agreement between

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himself and Davis.

Mem. at 1-2.

Mem. at 10-11.

AutoNation also

Plaintiff counters by

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applying the pleading standard under Rule 12(b)(6) and argues

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that CUTSA does not preempt his adequately pleaded breach of

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contract implied in fact.

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Wahl Prods. Inc. v. Mattel, Inc., 104 Cal. App. 4th 27, 29

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(2002) in support of his contention that his allegations suffice

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to adequately plead an implied in fact contract claim.

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Opp. at 8.

Plaintiff cites Gunther-

In Gunther-Wahl, plaintiff Mr. Wahl gave a presentation to

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Mattel about his ideas for a television show and accompanying

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toy line that Mattel could license for compensation.

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App. 4th at 29-30.

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presentation materials with Mattel for further circulation and

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review.

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or other limitations in place before making his presentation and

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leaving his materials with Mattel.

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not have an express understanding about whether and to what

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extent he would be compensated if Mattel used his idea.

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After Mattel told Mr. Wahl that it was not interested in

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pursuing his idea, Mattel nonetheless developed toys that Mr.

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Wahl thought were based on his concepts.

104 Cal.

Mr. Wahl, at Mattel’s request, left his

Id. at 30-31.

Mr. Wahl had no non-disclosure agreement

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Id.

Mattel and Mr. Wahl did

Id. at 32-33.

Id.

At

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trial, the jury was instructed that Mr. Wahl needed to have

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expressly conditioned the disclosure of his ideas on

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compensation for them.

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Appeal reversed and found this instruction to be a misstatement

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of the law on implied in fact contract.

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Id. at 34.

The California Court of

Id. at 42-43.

Plaintiff claims that, like Mr. Wahl, he gave clear

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expressions to AutoNation that he was offering to share his work

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product and expertise with AutoNation on the condition that he

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would be compensated “if AutoNation chose to develop a business

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based on Plaintiff’s inputs.”

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that in his initial communication to Huizenga, he “contemplated

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he would be the one building the company he envisioned.”

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(emphasis bolded and italicized in original).

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visited Plaintiff after receiving Plaintiff’s business plan,

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Plaintiff “discussed his further involvement in the project with

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Mr. Davis.”

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conduct in requesting the Business Plan and soliciting

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substantial further assistance from Mr. Carr and the surrounding

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context implied a contractual obligation to compensate Mr. Carr

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for any use AutoNation made of his assistance” that it breached

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by forming LKQ without Plaintiff.

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Id.

Opp. at 10.

Plaintiff contends

Id.

When Davis

Plaintiff further explains that “AutoNation’s

Opp. at 11.

In its reply, AutoNation contends that Plaintiff’s breach

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of contract claim fails because an unconsummated business

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relationship does not form a contract to pay for an idea.

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Reply, ECF No. 44, at 2.

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Dakin & Co., 831 F.2d 898, 902 (9th Cir. 1987) to support its

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argument that an unconsummated business relationship does not

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form an implied-in-fact contract for the sale of an idea upon

AutoNation relies on Aliotti v. R

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which that relationship would have been premised.

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plaintiff Ms. Aliotti showed the defendant many of her toy

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designs at a meeting to discuss defendant’s acquisition of Ms.

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Aliotti’s employer.

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discuss the defendant purchasing any specific designs.

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After the defendant decided not to pursue a relationship with

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Ms. Aliotti’s employer, it designed toys that resembled those

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Ms. Aliotti designed.

831 F.2d at 899.

In Aliotti,

The parties did not
Id.

Id. at 899-900.

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The Ninth Circuit rejected Ms. Aliotti’s argument that she

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had a viable claim for breach of implied in fact contract based

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on the defendant designing toys similar to hers after she

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disclosed her ideas to pursue a future relationship with the

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defendant that did not come to fruition.

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902-03.

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grant of summary judgment for the defendant, explained that “no

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contract may be implied where an idea has been disclosed not to

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gain compensation for that idea but for the sole purpose of

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inducing the defendant to enter a future business relationship.”

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Id. at 903.

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Aliotti, 831 F.2d at

The Ninth Circuit, in affirming the district court’s

The Gunther-Wahl court distinguished Aliotti by emphasizing

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that Ms. Aliotti, unlike Mr. Wahl, made her presentation to the

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defendant not to sell her idea but to help persuade the

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defendant to buy her employer before it became bankrupt.

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Gunther-Wahl, 104 Cal. App. 4th at 42.

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explained, Ms. Aliotti had expectation of payment for her

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business and not just for her designs.

The Gunther-Wahl court

See id.

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Here, similar to Ms. Aliotti and unlike Mr. Wahl, Plaintiff

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solicited AutoNation’s financial support and presented his ideas
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to pursue a future business relationship in which he would

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remain intimately involved rather than to simply have AutoNation

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purchase his ideas.

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Plaintiff’s own allegations and arguments.

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Specifically, Plaintiff has made the following statements

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(either in argument or in his Complaint) indicating that he

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wanted a business relationship with AutoNation rather than a

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buyer for his ideas:

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I believe I can build a company from scratch [.] (Opp. at
3 (citing Compl. Exh. B));

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Plaintiff set out in search of a partner to provide the
capital needed to bring his plan to fruition. (Compl.
¶ 4);

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Mr. Carr’s letter summarized his business qualifications
and expressly contemplated Mr. Carr’s direct involvement
in a company arising out of his concept. (Opp. at 3
(citing Compl. Exh. B)); and

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Mr. Carr spoke to Mr. Davis in general terms about next
steps, including what the nature of his future
involvement would be should AutoNation decide to move
forward. (Opp. at 3 (citing Compl., ¶ 9)).

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Reply at 2.

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As Defendant points out, this is clear from

Aliotti mandates this Court dismiss claims for breach of

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implied contract where the alleged breach arises from an

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unconsummated business relationship rather than the failure to

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pay for a product or idea.

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the Court must reject Plaintiff’s claim for breach of implied

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contract because it is based on the disclosures of Plaintiff’s

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plans in pursuit of a business relationship with AutoNation.

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Since the Court finds Plaintiff has failed to state a plausible

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implied in fact contract claim, it need not, and does not

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address AutoNation’s other argument that Plaintiff’s claim is an

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implied in law contract cause of action that is preempted by

831 F.2d at 902-03.

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Accordingly,

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CUTSA (an argument which Plaintiff labels as “immaterial” Opp.

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at 2).

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C.

Leave to Amend

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Courts have discretion to grant Rule 12(c) motions with

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leave to amend.

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1343, 1346 (C. D. Cal. 2014).

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Plaintiff cannot cure the deficiencies of his implied contract

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claim that are mentioned above, the Court will grant AutoNation’s

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motion with leave to amend.

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Crosby v. Wells Fargo Bank, N.A., 42 F. Supp. 3d
Because the Court is not convinced

See Holshouser v. County of Modoc,

No. 2:14-cv-2552, 2015 WL 10381707 *3 (E.D. Cal. Oct. 1, 2015).

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III.

ORDER

For the reasons set forth above, the Court GRANTS

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AutoNation’s motion for judgment on the pleadings and dismisses

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Plaintiff’s sole remaining claim of breach of contract implied in

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fact WITH LEAVE TO AMEND.

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claim, his First Amended Complaint shall be due within twenty

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days of this Order.

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twenty days thereafter. If Plaintiff elects not to file an

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Amended Complaint, the Complaint will be dismissed and the Clerk

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shall close this case

If Plaintiff elects to amend this

AutoNation’s responsive pleading is due

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IT IS SO ORDERED.

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Dated: August 14, 2018

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