Circle Click Media LLC v. Regus Management Group LLC et al

Filing 117

Order by Hon. Samuel Conti granting in part and denying in part #107 Motion to Dismiss.(sclc1, COURT STAFF) (Filed on 12/10/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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For the Northern District of California

United States District Court

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CIRCLE CLICK MEDIA LLC, and CTNY
INSURANCE GROUP LLC, on behalf of
themselves and all others
similarly situated,

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Plaintiffs,
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v.
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REGUS MANAGEMENT GROUP LLC, REGUS )
BUSINESS CENTRE LLC, REGUS PLC, HQ )
GLOBAL WORKPLACES LLC, and DOES 1 )
through 50,
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Defendants.
)

Case No. 12-04000 SC
ORDER GRANTING IN PART AND
DENYING IN PART MOTION TO
DISMISS SECOND AMENDED
COUNTERCLAIM

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I.

INTRODUCTION
Plaintiffs Circle Click Media LLC ("Circle Click") and CTNY

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Insurance Group LLC ("CTNY") (collectively, "Plaintiffs") bring

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this putative class action against Regus Management Group LLC

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("RMG"), Regus Business Centre LLC, Regus plc, and HQ Global

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Workplaces LLC (collectively "Defendants").

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counterclaim for breach of contract against CTNY, as well as other

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counterclaims against both Plaintiffs.

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RMG's counterclaims with leave to amend on August 13, 2013, RMG

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filed a Second Amended Counterclaim.

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Order"), 101 ("SACC").

RMG has asserted a

After the Court dismissed

ECF Nos. 90 ("Aug. 13

Plaintiffs now move to dismiss the SACC

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pursuant to Federal Rule of Civil Procedure 12(b)(6).

ECF No. 107

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("Mot.").

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("Reply"), and appropriate for determination without oral argument

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per Civil Local Rule 7-1(b).

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Motion is GRANTED in part and DENIED in part.

The Motion is fully briefed, ECF Nos. 110 ("Opp'n"), 114

For the reasons set forth below, the

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II.

RMG is in the business of leasing commercial office space

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BACKGROUND

throughout California and New York.

Through its advertisements,

United States District Court

For the Northern District of California

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RMG represents that it provides customers with fully equipped

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offices for one low monthly price.

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its services are "simple, easy, and flexible," and that its one-

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page contract -- the Office Service Agreement -- "takes just 10

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minutes to complete."

RMG has also represented that

Circle Click and CTNY executed an Office Service Agreement

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with RMG.

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merely identifies the location of the office space, the monthly

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office fee, the term of the agreement, and the parties to it.

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Office Service Agreement incorporates by reference another document

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called the "Terms and Conditions."

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also only one page, but it is printed in five-point font, which is

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almost illegible.

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document, the "House Rules," which discloses a number of other

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fees.

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Price Guide, which lists the prices for a variety of services.

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The Office Service Agreement is in fact one page, and it

The

The Terms and Conditions is

The Terms and Conditions reference another

The House Rules reference yet another document, the Service

In July 2012, Plaintiffs filed this action against Defendants

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in California state court.

ECF No. 1.

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removed, and several rounds of pleading followed.

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The action was subsequently
The gravamen of

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Plaintiffs' Second Amended Complaint ("2AC"), Plaintiffs' operative

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pleading, is that RMG and the other Defendants routinely assessed

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Plaintiffs for charges that were not disclosed in the Office

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Service Agreement.

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Plaintiffs' complaint, the monthly fee listed in Circle Click's

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Office Service Agreement is $2,461, but Circle Click received

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monthly invoices ranging from $2,559.67 to $6,653.79.

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Plaintiffs allege that Circle Click was assessed charges for

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kitchen amenities (regardless of whether these amenities were

ECF No. 65 ("2AC").

For example, according to

Id. ¶ 49.

United States District Court

For the Northern District of California

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used), telephone lines, telecom handsets, office restoration, and

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business continuity services, among other things.

Id. ¶ 52.

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In their 2AC, Plaintiffs seek to represent a class of all

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persons who paid for Defendants' office space in California and New

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York and were assessed charges by Defendants over the monthly

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payments indicated in the Office Service Agreement or any similar

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agreement.

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violation of California's Unfair Competition Law ("UCL"), Cal. Bus.

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& Prof. Code § 17200, et seq.; violation of California's False

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Advertising Law ("FAL"), id. § 17509; and unjust enrichment.

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Plaintiffs assert the following causes of action:

Defendants subsequently filed an Answer, in which RMG asserted

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breach of contract counterclaims against Circle Click and CTNY, as

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well as a number of other counterclaims against both the Plaintiffs

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and the absent class members.

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the counterclaims, which was granted in part and denied in part on

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August 13, 2013.

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breach of contract counterclaim against Circle Click and CTNY with

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leave to amend.

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provisions of the agreements verbatim, specify how Plaintiffs

Plaintiffs filed a motion to dismiss

Among other things, the Court dismissed RMG's

The Court directed RMG to "set forth the relevant

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breached those provisions, and allege whether the House Rule and

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Service Price Guide were made available to Plaintiffs."

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Order at 19-20.
RMG filed the SACC on October 3, 2013.

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Aug. 13

RMG has abandoned its

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breach of contract counterclaim against Circle Click, but continues

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to press a breach of contract counterclaim against CTNY.

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alleges that CTNY breached the Office Service Agreement by: (1)

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failing to make its full monthly office payments, plus applicable

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taxes, in an amount of $12,209.01; (2) failing to pay the kitchen

RMG

United States District Court

For the Northern District of California

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amenities fee, plus applicable taxes, in an amount of $391.92; (3)

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failing to pay the office set-up fee, plus applicable taxes, in an

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amount of $81.66; (4) failing to pay the business continuity

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service fee in an amount of $987; (5) failing to pay the office

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restoration fee, plus applicable taxes, in an amount of $239.45;

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and (6) failing to pay late payment fees.

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exception of the basic monthly office fee, none of these fees are

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described in the Office Service Agreement. 1

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relief, RMG seeks, among other things, damages and attorney's fees.

With the

In its prayer for

Plaintiffs move to dismiss RMG's breach of contract

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SACC ¶¶ 33-38.

counterclaim against CTNY, as well as its prayer for attorney fees.

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III. LEGAL STANDARD
A Rule 12(b)(6) motion to dismiss "tests the legal sufficiency

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of a claim."

Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001).

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The kitchen amenities fee is allegedly set out in the Service
Price Guide, the office set-up fee in House Rule 36, the business
continuity service fee in paragraph 1.7 of the Terms and Conditions
and House Rule 38, the office restoration fee in paragraph 1.7 of
the Terms and Conditions and House Rule 37, and the late payment
fees in paragraph 8.5 of the Terms and Conditions and House Rule
39.

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"Dismissal can be based on the lack of a cognizable legal theory or

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the absence of sufficient facts alleged under a cognizable legal

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theory."

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(9th Cir. 1988).

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a court should assume their veracity and then determine whether

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they plausibly give rise to an entitlement to relief."

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Iqbal, 556 U.S. 662, 664 (2009).

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must accept as true all of the allegations contained in a complaint

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is inapplicable to legal conclusions.

Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699
"When there are well-pleaded factual allegations,

Ashcroft v.

However, "the tenet that a court

Threadbare recitals of the

United States District Court

For the Northern District of California

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elements of a cause of action, supported by mere conclusory

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statements, do not suffice."

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Twombly, 550 U.S. 544, 555 (2007)).

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complaint must be both "sufficiently detailed to give fair notice

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to the opposing party of the nature of the claim so that the party

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may effectively defend against it" and "sufficiently plausible"

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such that "it is not unfair to require the opposing party to be

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subjected to the expense of discovery."

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1191, 1204 (9th Cir. 2011).

Id. at 663 (citing Bell Atl. Corp. v.
The allegations made in a

Starr v. Baca, 633 F.3d

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IV.

DISCUSSION

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A.

Attorney's Fees

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Plaintiffs argue that RMG's prayer for attorney's fees must be

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dismissed because RMG cannot point to any statute or contractual

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provision allowing for the recovery of such fees.

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concedes that attorney's fees are not recoverable.

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Accordingly, RMG's demand for attorney's fees is DISMISSED.

Mot. at 5.

RMG

Opp'n at 1 n.1.

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B.

Breach of Contract

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Next Plaintiffs argue that RMG has failed to plead sufficient

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facts to state a claim for breach of contract against CTNY.

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Specifically, Plaintiffs attack RMG's claim as it relates to (1)

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the kitchen amenities fee, (2) the business continuity service fee,

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and (3) the late payment fee.

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RMG has failed to put CTNY on notice of its damages, and that RMG's

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counterclaim is implausible due to numerous inconsistencies.

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i.

Plaintiffs also generally argue that

The Kitchen Amenities Fee

The kitchen amenities fee is set out in House Rule 13, which
provides: "Kitchen Amenities/Beverage Fee allows clients and

United States District Court

For the Northern District of California

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visitors access to self-service coffee and tea.

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mandatory and will be charged per office occupant."

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The Service Price Guide also refers to the fee: "Kitchen Amenities

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(required) $30 per person per month."

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Conditions nor the Office Service Agreement contain any reference

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to a kitchen amenities fee.

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and Conditions indicates that other fees may be assessed: "The

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monthly office fee and any recurring services requested by the

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Client are payable monthly in advance."

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Id.

This fee is
SACC ¶ 20.

Neither the Terms and

However, paragraph 8.9 of the Terms

Id. ¶ 21.

Based on paragraph 8.9 of the Terms and Conditions, Plaintiffs

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argue that RMG has failed to plead that CTNY requested kitchen

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amenities, and absent such a request, the kitchen amenities fee

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should not have been assessed.

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a request was unnecessary because both the House Rules and Service

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Price Guide, which were allegedly incorporated into the Terms and

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Conditions and the Office Service Agreement, indicate that the

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kitchen amenities fee was mandatory.

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Mot. at 6.

Defendants respond that

Opp'n at 4.

There is some tension between the Terms and Conditions, which
suggests that additional fees will be assessed only for services

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requested by the client, and the House Rules and Service Price

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Guide, which indicate that the kitchen amenities fee is mandatory,

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regardless of whether kitchen amenities are used or requested by

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the client.

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part of the contract, and interprets each part with reference to

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the entire agreement.

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100 N.Y.2d 352, 358 (NY Ct. App. 2003).

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of the agreement would force the Court to ignore provisions that

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expressly provide that the kitchen amenities fee is mandatory, the

As it must, the Court attempts to give effect to every

See Westmoreland Coal Co. v. Entech, Inc.,
Since Plaintiff's reading

United States District Court

For the Northern District of California

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Court declines to adopt it.

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regarding the kitchen amenities fee remain undisturbed. 2
ii.

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Business Continuity Fee

The business continuity services fee is set out in paragraph

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Accordingly, RMG's allegations

1.7 of the Terms and Conditions:

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When a client vacates its accommodation(s)[,]
invariably
Regus
continues
to
receive
the
Client's
mail,
faxes,
telephone
calls
and
visitors.
In order to professionally manage the
redirection of the Client's calls, mail, faxes[,]
and visitors[,] Regus charges a one-time Business
Continuity Service. This service lasts for three
months after the end of the date of this
agreement. If in the event [sic] that there are
no calls, mail, faxes or visitors[,] this service
will not be applied. This fee is located in the
house rules.

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SACC ¶ 23.

RMG alleges that the fee was $329 per month and that

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CTNY was obligated to pay a total business continuity fee of $987.
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Id.
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Plaintiffs argue that the SACC does not establish that RMG was
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Nothing in this Order precludes Plaintiffs from asserting that
Defendants' practice of assessing a kitchen amenities fee violates
the UCL. Indeed, the dispute over Defendants' counterclaims
further demonstrates how a reasonable consumer might be deceived by
the fees set out in RMG's agreements.

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entitled to the business continuity fee, because it does not allege

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that CTNY received any calls, mail, faxes, or visitors at the

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offices it leased from RMG after the lease expired.

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RMG does not meaningfully respond to this argument except to assert

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that it has alleged sufficient facts by setting out the breached

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contractual provisions verbatim.

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plainly wrong.

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entitled to assess a business continuity fee.

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regarding breach, without more, are not enough.

United States District Court

This argument is

RMG must also allege facts showing that it was
Legal conclusions

Accordingly, RMG's breach of contract claim is DISMISSED to

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For the Northern District of California

Opp'n at 4.

MOT. at 6.

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the extent it is predicated on the business continuity fee.

Since

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the Court's August 13 Order placed RMG on notice that it was

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required to plead how CTNY breached the agreements, dismissal is

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WITH PREJUDICE.
iii. Late Payment Fees

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The Terms and Conditions provide that a late payment fee will

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be charged on all overdue balance, and the House Rules explain how

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that fee is calculated.

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provide:

SACC ¶ 25.

Specifically, the House Rules

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Late Payment Fee: If you do not pay fees when
due, a service fee of $25 plus 5% penalty will be
charged on all overdue balances under $1,000.
For balances equal to or greater than $1,000[,] a
fee of $50 plus 5% will apply. . . . . We also
reserve the right to withhold services . . .
while there are any outstanding fees and interest
or you are in breach of your agreement.

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Id.

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only paid a fraction of the fees it owes.

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RMG alleges that it is entitled to late fees because CTNY has
Id. ¶ 26.

Plaintiffs argue that the late payment fee constitutes

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unenforceable liquidated damages under New York law.

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"Liquidated damages clauses will generally be upheld where, at the

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time of contracting, it appears that actual damages will be

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difficult to estimate and the liquidated damages amount is not

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plainly disproportionate to the possible loss."

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Grp./Commercial Servs., Inc. v. Holladay-Tyler Printing Corp., 94

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CIV. 6642 (HB), 1995 WL 702343, at *1 (S.D.N.Y. Nov. 29, 1995).

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Further, a "liquidated damages clause[] must specify an amount

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either in absolute dollars or in some manner that obviates

CIT

United States District Court

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For the Northern District of California

Id.

Mot. at 8.

foreseeable court involvement."

For example, the New York

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Supreme Court rejected a liquidated damage clause that allowed a

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plaintiff to recover liquidated damages in the amount of 25 percent

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of the total contract price, but also gave the plaintiff the right

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to sue for "such actual damages as it may establish."

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Indus. Corp. v. Schwartz, 281 N.Y.S.2d 420, 421 (N.Y. App. Term

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1967).

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"the option to disregard the liquidated damages specified if the

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actual damages exceed the amount stipulated."

Jarro Bldg.

The court reasoned that the clause afforded the plaintiff

Id. at 426.

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Plaintiffs reason that the late fee provision here is

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unenforceable because it entitles RMG to a minimum late payment

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amount plus a percentage penalty, and RMG is also asserting actual

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damages in the SACC.

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Plaintiffs do not point to any provision in the relevant agreements

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that would entitle RMG to actual damages for late payments.

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fact that RMG is also seeking damages in the amount of other

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allegedly unpaid fees does not render the late penalty fee

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unenforceable.

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Opp'n at 8 (citing SACC ¶¶ 25, 40).

However,

The

Plaintiffs also argue that RMG's claim for late payment fees

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is "hopelessly vague and fails to provide fair notice to CTNY."

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Id. at 6.

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payments became late or the amount of any late payment penalty

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balance that CTNY purportedly owes.

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unconvincing.

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only $1,773.32, and that CTNY's lease expired on or around July

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2013.

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and to establish a plausible claim for a late penalty fee.

United States District Court

For the Northern District of California

Id.

This argument is also

RMG has pled that CTNY owes $13,909.04, has paid

SACC ¶¶ 17, 26.

This is sufficient to put CTNY on notice

Accordingly, RMG's breach of contract claim remains

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Plaintiffs contend that RMG does not allege when

undisturbed as it relates to the late penalty fee.
iv.

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Other Plausibility Issues

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Plaintiffs also raise a number of other plausibility issues.

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First, Plaintiffs take issue with paragraph 40 of the SACC, which

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states:

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the remaining monthly payments plus all applicable taxes and fees

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for services due under the [Office Service Agreement], in an amount

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no less than $12,135.72., plus all applicable late payment fees."

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Specifically, Plaintiffs take issue with the phrase "include, but

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not limited to," since it implies that RMG will seek fees not

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described in the SACC.

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may not pursue claims that are not set out in the SACC without

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further amendment.

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that RMG intends to do so. 3

"Damages incurred by RMG include, but are not limited to,

Opp'n at 6-7.

The Court agrees that RMG

However, at this point, there is no indication

Plaintiffs also claim that the SACC asserts inconsistent

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damage figures.

Id. at 7-8.

Having carefully reviewed the

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pleadings, the Court is not convinced that the SACC contains any

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It is not clear from the motion or reply papers, but Plaintiff
also appears to be arguing that RMG is required to plead its exact
damages. This is an unreasonably high pleading standard.

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internal inconsistencies.

RMG has merely alleged different sums in

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connection with the CTNY's total obligation under the Office

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Service Agreement, and the total amount that is currently due and

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owing.

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extent that there are inconsistencies, they amount to only a few

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hundred dollars and, thus, are not fatal for the purposes of a Rule

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12(b)(6) motion to dismiss.

Compare SACC ¶ 33 with id. ¶ 40.

In any event, to the

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V.

For the reasons set forth above, Plaintiffs' motion to dismiss

United States District Court

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For the Northern District of California

CONCLUSION

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RMG's counterclaim is GRANTED in part and DENIED in part.

The

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Court DISMISSES WITH PREJUDICE RMG's request for attorney's fees,

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as well as RMG's breach of contract counterclaim to the extent that

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it is predicated on CTNY's failure to pay a business continuity

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fee.

The rest of RMG's counterclaims remain undisturbed.

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IT IS SO ORDERED.

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December 10, 2013
UNITED STATES DISTRICT JUDGE

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