Encompass Holdings Inc. v. Daly et al

Filing 243

ORDER by Magistrate Judge Bernard Zimmerman granting in part and denying in part 228 Motion to Dismiss; granting in part and denying in part 230 Motion to Dismiss (bzsec, COURT STAFF) (Filed on 10/21/2011)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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ENCOMPASS HOLDINGS, INC.,
Plaintiff(s),

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v.

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CAREY F. DALY II, et al.,

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Defendant(s).
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No. C09-1816 BZ
ORDER DENYING MOTION TO
DISMISS COUNTERCLAIMS,
CROSSCLAIMS AND THIRD PARTY
CLAIMS AND DENYING LEAVE TO
AMEND

Before the court are the motion of Encompass, Webber and

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Cooper and the motion of Hurford, Berardi and Harmon, each

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filed pursuant to Rule 12(b)(6) to dismiss the “Third Amended

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Counter Claims, Cross-Complaint and Third Party Complaint”

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(“Third Amended Counterclaim”) filed by Daly and Lanham

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(“counterclaimants”).1

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leave to file a fourth amended counterclaim.

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of my discretion, that motion is ordered DENIED.

In opposition, counterclaimants sought
In the exercise
This case is

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The parties dispute whether a motion to dismiss for
failure to state a claim is timely. Regardless of whether the
proper vehicle is a Rule 12(b)(6) motion or a Rule 12(c)
motion, the defense of failing to state a claim is never
waived. Fed. R. Civ. Proc. 12(h)(2); Aldabe v. Aldabe, 616
F.2d 1089, 1093 (9th Cir. 1980).
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over two and a half years old and on the eve of trial.

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Counterclaimants have had ample opportunities to amend their

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pleading and it is too late to try again.

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so since counterclaimants requested a trial continuance so

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they could serve an additional party, Murray Goldenberg.

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In any event, the factual allegations in the Fourth

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Amended Counterclaim are similar to those in the Third Amended

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Counterclaim.2

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Counterclaim is to withdraw claims of constructive fraud,

This is especially

The principal thrust of the Fourth Amended

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unfair business practices, defamation and emotional distress.

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For the reasons discussed on the record, I will treat this

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proposal as withdrawing those claims and only address the

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remaining claims in the Third Amended Counterclaim.

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The motion of Encompass, Webber and Cooper to dismiss the

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first claim for fraud against them is DENIED.

That claim

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alleges that movants were aware of an encumbrance against

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Nacio that they did not disclose to counterclaimants while

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inducing counterclaimants to enter into an agreement which

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placed certain obligations on them.

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that counterclaimants justifiably relied on movants’

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representations and failures to disclose and were injured

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thereby.

It is further alleged

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Movants erroneously claim that they had no duty to

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disclose the existence of this encumbrance because they were

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not in a fiduciary relationship with counterclaimants and the

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rule of “Caveat Emptor” prevails.

However, in California

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Any unserved third party defendants named in the
Third Amended Counterclaim are ordered DISMISSED.
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active concealment or suppression of fact by a nonfiduciary is

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the equivalent of a false representation, such as where the

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party has exclusive or superior knowledge of material facts

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not known to the opposing party to the transaction and fails

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to disclose them.

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Deceit § 37; 5 Witkin Sum. Cal. Law Torts § 796 (10th ed.

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2010) (“The duty to disclose may arise without any

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confidential relationship where the defendant alone has

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knowledge of material facts that are not accessible to the

See generally 34(a) Cal. Jur. 3d Fraud and

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plaintiff.”).

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and its directors Webber and Cooper knew of a claimed security

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interest in all of Nacio’s assets which encumbered its stock,

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that counterclaimants were unaware of this encumbrance, that

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it had not been recorded in any of the Nacio records which

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Daly had audited, and that movants failed to disclose the

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existence of this encumbrance prior to Daly entering into the

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December Agreement and subsequently investing substantial time

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and resources in Nacio.

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¶ 46-50;

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World Markets Corp., 157 Cal. App 4th 835, 845-46 (2007).

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This adequately states a claim for fraud.

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Here, counterclaimants alleged that Encompass

See Third Amended Counterclaim at

See also OCM Principal Opportunities Fund v. CIBC

The motion to dismiss the third claim for interference

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with prospective business advantage against Webber and

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Encompass is GRANTED.

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is that the interference be by wrongful conduct.

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v. Toyota Motor Sales, USA, 11 Cal.4th 376, 393 (1995).

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third claim alleges two types of interference.

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potential investor, Gallant, with whom Webber allegedly

In California, an element of this tort

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Della Penna
The

One is with a

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interfered in violation of the confidentiality provisions of

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the December Agreement.

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judicial notice of Nacio’s plan of reorganization filed with

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the Bankruptcy Court on May 16, 2008 in which Gallant is

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identified as a potential investor.

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was not confidential on June 19, 2008 when Webber allegedly

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contacted them and interfered with the potential relationship.

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At movant’s request, the court takes

Accordingly, its identity

Counterclaimants further allege that Webber’s
interference harmed Nacio, with whom Webber may have had a

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fiduciary relationship.

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either for Nacio to assert or for counterclaimants to assert

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in a derivative action, which this is not.

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other alleged conduct is wrongful within the meaning of Della

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Penna.

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the third claim is GRANTED.

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However, any such harm would be

None of Webber’s

Accordingly, it is ORDERED that the motion to dismiss

The motion to dismiss the breach of contract claim

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against Encompass and Webber is DENIED.

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Agreement obligated all parties not to disparage each other

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and the complaint alleges in ¶ 31 that Webber individually and

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as an officer of Encompass disparaged Daly and Lanham in a

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variety of ways.

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GRANTED as there are no allegations that Cooper disparaged

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Daly or Lanham.

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The December

Cooper’s motion to dismiss this claim is

The motions to dismiss the claims against all

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counterdefendants and third party defendants for violating the

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RICO Act and conspiring to violate the RICO Act are GRANTED

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for the reasons set forth in the court’s prior Orders

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analyzing the RICO allegations in the Third Amended
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Counterclaim.

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It is ORDERED that the Third Amended Counterclaim is

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DISMISSED for failure to state a claim except as follows:

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The first claim against Encompass, Webber and Cooper.

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2.

The fourth claim against Encompass and Webber.

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Dated: October 21, 2011

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Bernard Zimmerman
United States Magistrate Judge

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