Corsini v. Canyon Equity, LLC et al

Filing 53

ORDER by Judge LARSON granting 44 Motion to Dismiss (jllc1, COURT STAFF) (Filed on 5/23/2011)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

NORTHERN DISTRICT OF CALIFORNIA

11
For the Northern District of California

United States District Court

10
Frank Corsini,

12
13

Plaintiff,

No. C 10-2061 JL
DISMISSAL
(Granting Docket # 44)

v.

14

Canyon Equity, LLC, et al.,

15

Defendants.
________________________________/

16
Defendants’ motion to dismiss Plaintiff’s First Amended Complaint (“FAC”) came on
17
for hearing. Attorney for Plaintiff was Matthew M. Clarke, CHRISTMAN, KELLEY, &
18
CLARKE, Santa Barbara. Attorney for Moving Defendants was Gregory S. Cavallo,
19
SHOPOFF & CAVALLO LLP. The Court carefully reviewed the moving and opposing
20
pleadings, the arguments of counsel, and the record in this case and hereby grants the
21
motion. Plaintiff has no cause of action against these Defendants; he fails to state facts in
22
support of at least one element of each cause of action against the Moving Defendants.
23
I.

Background

24
This Court, in its ruling, e-filed February 14, 2011 at Docket # 36, dismissed
25
Plaintiff’s fraud claims as to all Defendants, with leave to amend, because Plaintiff failed to
26
state a claim with the required particularity under Fed. R. Civ. Pro. 9. Plaintiff was pro se
27
when he originally filed and this Court ruled that he could cure his Complaint by articulating
28

C-10-2061 DISMISSAL

Page 1 of 10

1

with specificity the “who, what, when, where and how” of his fraud claim as discussed in

2

more detail below.

3

This Court also dismissed with leave to amend Plaintiff’s quantum meruit claim

4

against Kjell Spangberg, Homi Vazifdar, Christoph Henkel, and Canyon Equity, LLC, since

5

he failed to plead that he had an understanding regarding compensation with any other

6

Defendants other than Harmon and Auberge Resorts. Again, Plaintiff was pro se when he

7

originally filed and the Court found that he could cure his Complaint by articulating more

8

specifically a quantum meruit claim against these Defendants.

9

The Court ruled that Plaintiff had stated a cognizable claim for breach of contract
and quantum meruit claim against Defendants Harmon and Auberge Resorts and thus the

11
For the Northern District of California

United States District Court

10

motion to dismiss as to those parties and claims was denied.

12

This Court ordered Plaintiff in his Amended Complaint to plead all elements of fraud

13

for each Defendant. Rule 9(b) requires Plaintiff to differentiate his allegation when suing

14

more than one Defendant. Destfino v. Reiswig, 630 F.3d 952, 958-959 (9th Cir. 2001) citing

15

Cisneros v. Instant Capital Funding Grp., Inc., 263 F.R.D. 595, 606-607 (E.D. Cal. 2009).

16

To state a cognizable fraud claim, Plaintiff must explain with specificity which Defendants

17

were responsible for which fraudulent statements and conduct. For the quantum meruit

18

claim, the Court ordered Plaintiff to establish not only that he rendered services to the

19

Defendants, but also that the parties had an understanding that he would be compensated.

20

Huskin & Brown LLP v. Wolf 32 Cal.4th 453, 458 (2004) (citations omitted). See 1 Wikin,

21

Summary 10th (2005) Contracts, § 1036, p. 1127. Finally, given that there is a statute of

22

limitations on oral contract and quantum meruit claims in California, the Court ordered

23

Plaintiff to plead with more specificity the timing of the transactions that gave rise to his

24

complaint, as well as to the timing of when he first learned of Defendants’ breach.

25

Plaintiff filed a timely First Amended Complaint (“FAC”) at Docket # 37, but this

26

Court, after reviewing the FAC, concludes that Plaintiff fails to state the fraud claims with

27

particularity and also fails to present facts that support an understanding with anyone other

28

than Mark Harmon that he would be paid for introducing potential investors. Thus his

C-10-2061 DISMISSAL

Page 2 of 10

1

quantum meruit claims against the moving Defendants must also be dismissed without

2

leave to amend.

3

Plaintiff in his opposition brief beings a new allegation that the Moving Defendants

sufficient understanding to state an actionable claim for and quantum meruit. This Court

6

finds that even if the new allegation can be interpreted as an understanding that

7

compensation was to be made, Plaintiff’s First Amended Complaint (“FAC”) refutes that

8

there was an understanding that compensation was to be paid by the Moving Defendants,

9

rather than someone else. The First Amended Complaint unequivocally alleges only that

10

Mark Harmon (not a party to the motion to dismiss) agreed to compensate Plaintiff for the

11
For the Northern District of California

knew that Plaintiff “was not providing his services for free,” which Plaintiff contends is a

5

United States District Court

4

introductions to Spangberg that resulted in investment in Canyon Equity. FAC, ¶ 44. That

12

agreement was not merely for Harmon’s own introduction to Spangberg: but rather, the

13

“agreement included introductions that could be considered ‘derivative’, such as those

14

introductions to Homi Vazifdar, whom Harmon promised to introduce.” FAC, ¶ 21. Thus, it

15

is only Harmon, if anyone, that could be liable to Plaintiff for his “services.” Plaintiff’s

16

opposition brief completely ignores the impact of the “valid oral contract” (see FAC, ¶ 44)

17

he allegedly entered into with Mark Harmon. Quantum meruit is not a viable claim when

18

there is an actual contract regarding compensation. What Plaintiff is attempting to do is

19

hold the Moving Defendants liable in quantum meruit for the contractual obligations of Mark

20

Harmon, which is legally impermissible.

21

Plaintiff’s First Amended Complaint is also faulty because Plaintiff fails to allege at

22

least one necessary element for each claim with respect to the Moving Defendants. With

23

respect to quantum meruit, Plaintiff does not and cannot allege that there was an

24

understanding that the Moving Defendants would pay Plaintiff. With respect to fraud, each

25

of Plaintiff’s allegations relates to their alleged after-the-fact concealment of Plaintiff’s right

26

to compensation, and thus cannot support a finding that he relied on any fraudulent act or

27

omission when performing his services. With respect to Plaintiff’s claim for an accounting,

28

he lacks the required fiduciary relationship, and moreover no accounting is required

C-10-2061 DISMISSAL

Page 3 of 10

1

because the investment figures are readily available through discovery. Finally, with

2

respect to Plaintiff’s § 17200 claim, he has not and cannot allege an “unlawful” business

3

practice, a predicate to any viable claim under the statute. Despite this Court’s clear ruling

4

on the requirements for an amended pleading, Plaintiff was unable to state any viable

5

claims against the Moving Defendants, and therefore the First Amended Complaint should

6

be dismissed without leave to amend.

7

II.

Analysis

8

A.

The quantum meruit claims must be dismissed without leave to amend

9

With regard to his claims for quantum meruit, Plaintiff relies on the notion that the
moving Defendants impute a “contractual agreement” into the elements for quantum

11
For the Northern District of California

United States District Court

10

meruit. That is simply not true. It is undisputed that Plaintiff need not allege a “contractual

12

agreement” with the Moving Defendants to state a claim for quantum meruit recovery, but

13

rather, as the Court stated in its prior order:

14
15
16
17

For the quantum meruit claim, Plaintiff must establish not only that he rendered
services to the Defendants, but also that the parties had an understanding that he
would be compensated.
2/14/11 Order, 11:7-8.
Said another way, to recover in quantum meruit, Plaintiff “must show the

18

circumstances were such that ‘the services were rendered under some understanding or

19

expectation of both parties that compensation therefor was to be made.’” Huskinson &

20

Brown v. Wolf, 32 Cal.4th 453, 458 (2004), citing Estate of Mumford, 173 Cal. 511, 523

21

(1916) (emphasis added). Plaintiff argues that an understanding that he was “not providing

22

his services for free” is a sufficient understanding regarding compensation. It is not. That is

23

not an understanding that Plaintiff was to be paid by the Moving Defendants for his

24

services. Plaintiff cannot allege an “understanding” that he expected to be paid by the

25

Moving Defendants because he allegedly had a “valid oral contract” (i.e., an understanding)

26

with Mark Harmon for those very same services (his introductions related to the investment

27

in Canyon Equity). In other words, Plaintiff understood and expected to be paid by Mark

28

Harmon, not the Moving Defendants, and thus quantum meruit is not a viable claim against

C-10-2061 DISMISSAL

Page 4 of 10

1

the Moving Defendants. Plaintiff simply cannot plead alternative factual, rather than legal,

2

claims. It is unmistakable that there was no understanding or expectation by Plaintiff that

3

the Moving Defendants would pay for Plaintiff’s services. The First Amended Complaint

4

alleges that Mark Harmon – not the moving Defendants – agreed to pay Plaintiff for

5

introductions to Spangberg relating to resort investment projects. FAC, ¶¶ 20, 21. Those

6

services included not only an introduction to Harmon, but to all other “derivative”

7

introductions, expressly including the introduction to defendant Homi Vazifdar. Id. The First

8

Amended Complaint also specifically alleges that Plaintiff and Mark Harmon entered into a

9

“valid oral contract” for Plaintiff to provide “the introduction of Defendant Spangberg to
Defendant Harmon and Defendant Auberge Resorts, LLC, and then to Defendant Vazifdar,

11
For the Northern District of California

United States District Court

10

which resulted in Defendant Spangberg’s participation in Defendant Canyon Equity.” FAC,

12

¶ 44.

13

Plaintiff has alleged only that the Moving Defendants knew Plaintiff was not

14

performing his services for free (FAC ¶¶ 17, 18), that they voluntarily accepted Plaintiff’s

15

services (FAC, ¶¶ 78, 85), and therefore that Plaintiff should be compensated. That is

16

legally insufficient. The law is not, as Plaintiff argues, simply that quantum meruit is viable

17

against the beneficiary whenever services were provided “under circumstances disclosing

18

that they were not gratuitously rendered.” Opposition, p. 8; citing Long v. Rumsey, 12

19

Cal.2d 334, 432 (1938) (quantum meruit recovery proper where contract unenforceable

20

under statute of frauds). Plaintiff must allege that there was an understanding that

21

compensation was to be made for Plaintiff’s services by the Moving Defendants, not

22

someone else. That is not the case here: It was only alleged that Mark Harmon agreed to

23

pay Plaintiff for his and all other “derivative” introductions. FAC, ¶ 21. Merely pleading that

24

the Moving Defendants understood Plaintiff was “not providing his services for free” does

25

not constitute any understanding by the Moving Defendants that payment would come from

26

them. Plaintiff is impermissibly seeking to obligate the Moving Defendants for Mark

27

Harmon’s alleged contractual obligation. However, it is well settled that there is no

28

equitable basis for an implied-in-law promise to pay reasonable value when the parties

C-10-2061 DISMISSAL

Page 5 of 10

1

have an actual agreement covering compensation. Willman v. Gustafson, 63 Cal.App.2d

2

830, 831-32 (1944); Hedging Concepts, Inc. v. First Alliance Mortgage Co., 41 Cal.App.4th

3

1410, 1419-1420 (1996) (quantum meruit recovery cannot conflict with terms of actual

4

contract between parties, lest the court in effect impose its own ideas of a fair deal on the

5

parties). Moreover, well settled California law dictates that, where a party has agreed to

6

accept payment from a third-party, there can be no quantum meruit recovery from the party

7

who actually accepted services (but did not agree to pay for those services). For example,

8

an attorney who has agreed to accept as compensation for his or her services such amount

9

as the court may order the opposing party to pay (e.g., in a civil rights suit or a marital
dissolution proceeding) cannot thereafter shift positions and bring a separate fee action

11
For the Northern District of California

United States District Court

10

against the client. Even if the amount awarded is not fully collectible (e.g., party ordered to

12

pay becomes insolvent), or is less than the attorney would have expected as “reasonable”

13

compensation, the client who has not otherwise agreed to pay fees has no personal

14

liability. Thiesen v. Keough 115 Cal.App. 353, 361-362 (1931); and see Coons v. Kary, 263

15

Cal.App.2d 650, 654–655 (1968). In the absence of a mutual understanding or expectation

16

that compensation was owed from the Moving Defendants, quantum meruit claims cannot

17

proceed.

18

B.

19

The First Amended Complaint does not allege the elements of a claim for fraud. The

20

elements that must be pled for fraud are: (a) a false representation, (b) knowledge of falsity

21

(or “scienter”); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e)

22

resulting damage. Philipson & Simon v. Gulsvig, 154 Cal.App.4th 347, 363 (2007). Here,

23

Plaintiff has completely failed to allege a viable claim, and instead mixes two theories

24

together in an attempt to state one actionable cause.

25

The fraud claims must be dismissed without leave to amend

Plaintiff’s opposition brief states that his fraud claim arises out of the allegation that

26

“Spangberg withheld information from Plaintiff regarding the size and scope of his

27

investment, thereby making it impossible for Corsini to make a valid claim to his

28

C-10-2061 DISMISSAL

Page 6 of 10

1

compensation.” That is not credible, particularly given that Plaintiff has filed the instant

2

action, naming defendants Mark Harmon and Auberge Resorts, LLC, while still maintaining

3

that he lacks information about the size and scope of Spangberg’s investment. Plaintiff also

4

states that “Defendant Spangberg withheld this information while leading Corsini to believe

5

that it would ‘all work out’ between Corsini and Vazifdar and Harmon.” That is simply not

6

an actionable fraud claim, as the alleged misrepresentation and reliance do not correspond

7

to Plaintiff’s claim for damages. As Plaintiff recognizes in his opposition, his alleged

8

damages are that he has “not received just compensation for his services.” Opposition, p.

9

13:2-3. However, the alleged misrepresentation (withholding investment information and
telling Plaintiff it would “all work out”) and alleged reliance (if anything, not bringing a claim

11
For the Northern District of California

United States District Court

10

earlier for his referral fee) do not support his claim for damages (non-payment of the

12

referral fee). In fact, the alleged misrepresentations and reliance occurred, if at all, well

13

after Plaintiff performed his services, and thus Plaintiff could not have relied on the alleged

14

misrepresentation when performing his services. If the alleged misrepresentation and

15

reliance related to Plaintiff’s inducement to perform services, then the damage claim would

16

match. But as it is stated in the First Amended Complaint, Plaintiff’s allegations at best

17

support a theory of equitable tolling of the statute of limitations under the fraudulent

18

concealment doctrine.

19

C.

20

Plaintiff does not and cannot state a factual or legal basis for an accounting. Plaintiff

The accounting claim must be dismissed without leave to amend

21

must allege (1) a fiduciary or other relationship appropriate to the remedy; and (2) a

22

balance due from the defendant to the plaintiff that can only be ascertained by an

23

accounting. 5 Witkin, California Procedure, Pleading, Section 820, p. 236 (2008). A

24

complaint does not state a cause of action for an accounting where it shows on its face that

25

none is necessary; i.e., where the plaintiff alleges a right to recover a sum certain or a sum

26

that can be made certain by calculation. Id., citing St. James Church of Christ Holiness v.

27

Superior Court, 135 Cal.App.2d 352, 359 (1955). Plaintiff does not dispute that no fiduciary

28

relationship exists. Moreover, Plaintiff has absolutely no response to why he cannot
ascertain the amount of his alleged referral fee through discovery. Plaintiff argues that he
C-10-2061 DISMISSAL

Page 7 of 10

1

has asked for the information multiple times but was denied access, and that is why he had

2

to resort to legal action. That is not true. Plaintiff “had to” resort to legal action because of

3

the dispute over whether he was owed a fee at all, not because he did not know how much

4

he was owed. Plaintiff can obtain the necessary records during discovery and conduct his

5

own analysis of the fee he is allegedly owed. The amount can be made certain by

6

calculation, and thus an accounting is improper. St. James Church of Christ Holiness v.

7

Superior Court, supra, 135 Cal.App.2d at 359.

8
9

D.

If Plaintiff’s fraud claim is dismissed, Plaintiff’s Unfair Business
Practices Claim must also be dismissed

11
For the Northern District of California

United States District Court

10
Plaintiff recognizes that his fraud and § 17200 claims allege the same conduct, but

12

argues that the § 17200 claim can stand alone and does not require him to meet the

13

“heightened standard of pleading” for fraud. That is completely wrong. In what is referred

14

to as “killing two birds with one stone,” the most common defense to a § 17200 “unlawful”

15

practices claim is to establish a defense to the “borrowed” law. Numerous courts hold that

16

this is also a defense to the § 17200 “unlawful” claim. Smith v. State Farm Mut. Auto. Ins.

17

Co., 93 Cal.App.4th 700, 718 (2001); Lazar v. Hertz Corp., 69 CalApp.4th 1494, 1505

18

(1999); People v. Duz–Mor Diagnostic Lab., Inc., 68 Cal.App.4th 654, 673 (1998). A

19

number of cases have held that, if the complaint fails to state a violation of an underlying

20

law, the § 17200 claim on which it is premised fails too. Whiteside v. Tenet Healthcare

21

Corp., 101 Cal.App.4th 693, 706 (2002); Krantz v. BT Visual Images, LLC, 89 Cal.App.4th

22

164, 178 (2001) (§ 17200 claim that is dependent on other claims, such as breach of the

23

covenant of good faith and fair dealing, is dismissed where summary judgment is entered

24

as to the other claims); Van Ness v. Blue Cross of California, 87 Cal.App.4th 364, 376–377

25

(2001) (dismissal of contract and bad faith claims results in dismissal of § 17200 claim);

26

Khoury v. Maly’s of Calif., Inc., 14 Cal.App.4th 612, 619 (1993) (dismissal of other claims

27

results in dismissal of dependent § 17200 claim); Renick v. Dun & Bradstreet Receivable

28

Mgmt. Services, 290 F.3d 1055, 1057–1058 (9th Cir. 2002) (dunning notice to debtor that
does not violate Fair Debt Collection Practices Act does not constitute § 17200 violation);
C-10-2061 DISMISSAL

Page 8 of 10

of Lanham Act claim results in dismissal of § 17200 claim). Moreover, if the law being

3

“borrowed” to state the § 17200 claim contains special elements that must be shown, or

4

has its own definition of the kinds of practices that are covered, the courts will frequently

5

“import” the underlying definitions along with the law’s substantive prohibition. People v.

6

Duz–Mor Diagnostic Laboratory, Inc., 68 Cal.App.4th 654, 674 (1998) (if the underlying law

7

requires “intent,” then so too does the § 17200 claim even though § 17200 is a “strict

8

liability” statute); Truta v. Avis Rent–A–Car System, Inc., 193 Cal.App.3d 802, 812–814

9

(1987) (in deciding whether a car rental company’s sale of collision damage waivers

10

violated the Insurance Code, the court “borrowed” the Insurance Code’s definition of

11
For the Northern District of California

Denbicare U.S.A., Inc. v. Toys “R” Us, Inc., 84 F.3d 1143, 1152 (9th Cir. 1996) (dismissal

2

United States District Court

1

“business of insurance” and concluded that the company was not engaged in the business

12

of insurance in selling collision damage waivers to consumers). Thus, because fraud is the

13

“borrowed” law, the elements and pleading standard are identical, not lessened as Plaintiff

14

suggests. Plaintiff’s opposition brief recognizes that § 17200 requires “unlawful” business

15

practice to state a viable claim. What Plaintiff ignores is that his § 17200 claim is duplicative

16

of his fraud claim and states no other “unlawful” business practice. If there is no valid fraud

17

claim, what other state or federal law did the Moving Defendants allegedly violate? Plaintiff

18

cannot answer that question.

19

III.

20

Plaintiff has failed to amend his causes of action for fraud and quantum meruit to

21

state valid claims, despite this Court’s clear holding on pleading requirements. Plaintiff’s

22

new causes of action for an accounting and unfair business practices also fail to state valid

23

claims. Therefore, the Court grants the motion by Moving Defendants Spangberg, Vazifdar,

24

and Canyon Equity, LLC and dismisses Plaintiff’s First Amended Complaint as to the

25

moving Defendants without leave to amend.

26

CONCLUSION

The undersigned will be retiring from the court on May 31. Accordingly, the parties

27

shall appear for a case management conference before the magistrate judge to whom their

28

case is reassigned on June 29, 2011 at 10:30 a.m. The parties shall submit a joint
statement one week prior to the conference.
C-10-2061 DISMISSAL

Page 9 of 10

1
2

IT IS SO ORDERED.
DATED: May 23, 2011

3
__________________________________
James Larson
United States Magistrate Judge

4
5
6
7
8
9

11
For the Northern District of California

United States District Court

10

12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

C-10-2061 DISMISSAL

Page 10 of 10