Cogenra Solar, Inc. et al v. SolarCity Corporation et al
Filing
126
Order by Hon. Vince Chhabria granting in part and denying in part 114 Motion to Dismiss. Amended Pleadings due by 8/30/2017. (vclc2S, COURT STAFF) (Filed on 8/16/2017)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
COGENRA SOLAR, INC., et al.,
Case No. 16-cv-05481-VC
Plaintiffs,
v.
SOLARCITY CORPORATION, et al.,
Defendants.
ORDER GRANTING IN PART AND
DENYING IN PART MOTION TO
DISMISS
Re: Dkt. No. 114
The motion to dismiss is granted as to Khosla Ventures and as to the claim against
SolarCity and Silevo based on the fraudulent prong of the Unfair Competition Law. It is
otherwise denied.
Khosla Ventures is again dismissed as a plaintiff because it is seeking damages for harms
resulting solely from alleged wrongs to Cogenra. See Lapidas v. Hecht, 232 F.3d 679, 683 (9th
Cir. 2000). It is sometimes enough that only one plaintiff in a multi-plaintiff case has standing to
bring a claim. See, e.g., Leonard v. Clark, 12 F.3d 885, 888 (9th Cir. 1993) as amended (Mar. 8,
1994). But in a suit brought by a corporation and an investor in the corporation, "it is not
sufficient for the plaintiff to assert a personal economic injury resulting from a wrong to the
corporation." Soranno's Gasco, Inc. v. Morgan, 874 F.2d 1310, 1318 (9th Cir. 1989) (citing
Shell Petroleum, N.V. v. Graves, 709 F.2d 593, 595 (9th Cir. 1983)) (declining to dismiss the
individual plaintiffs' claims because "there are direct and independent injuries to the individual
plaintiffs"); see also RK Ventures, Inc. v. City of Seattle, 307 F.3d 1045, 1057 (9th Cir. 2002).
And to the extent this type of standing inquiry is prudential rather than jurisdictional, prudence
weighs heavily against allowing a party to participate in (and thereby potentially multiply)
litigation merely because that party invested in the corporation that was allegedly harmed. See
Elizabeth Retail Properties LLC v. KeyBank Nat. Ass'n, 83 F. Supp. 3d 972, 986-88 (D. Or.
2015) (examining cases on shareholder standing as a prudential standing doctrine). Dismissal is
with leave to amend. If Khosla Ventures believes in good faith that it can articulate separate
harms to support standing, it may make one last attempt to do so. See Gomez v. Alexian Bros.
Hosp., 698 F.2d 1019, 1021 (9th Cir.1983) (per curiam).
The amended state law tort claims are not superseded by the California Uniform Trade
Secrets Act for the same reason that they were not superseded in the First Amended Complaint –
they are "based on facts distinct from the facts that support the [trade secret] misappropriation
claim[s]." Angelica Textile Services, Inc. v. Park, 220 Cal. App. 4th 495, 506 (2013).
Cogenra has sufficiently pleaded an intentional interference claim. It has alleged a lost
economic benefit from the three offers that it declined. Westside Ctr. Assocs. v. Safeway Stores
23, Inc., 42 Cal. App. 4th 507, 520-21 (1996). Cogenra does not need to identify the source of
the offers or prove their probability at the pleadings stage. See Qwest Communications Corp. v.
Herakles, LLC, No. 2:07-cv-00393-MCE-KJM, 2008 WL 783347, at *11 (E.D. Cal. Mar. 20,
2008). It has sufficiently alleged an independently wrongful, intentional act by SolarCity. See
Visto Corp. v. Sproqit Techs., Inc., 360 F. Supp. 2d 1064, 1067 (N.D. Cal. 2005); Second Am.
Compl. ¶¶ 133-34. And it has sufficiently alleged harm. See Second Am. Compl. ¶ 135.
While parts of the promissory estoppel claim still refer to alleged promises by SolarCity
to complete its purchase of Cogenra that Cogenra could not have reasonably relied upon, other
parts of the claim refer to the alleged promise by SolarCity to conduct the due diligence in good
faith with the goal of completing the transaction if the due diligence didn't uncover disqualifying
information. It is plausible, at least on the facts alleged, that Cogenra could reasonably have
relied on that promise. See Aventa Learning, Inc. v. K12 Inc., No. 10-cv-01022-JLR, 2011 WL
13100748, at *9 (W.D. Wash. Mar. 28, 2011) (denying motion to dismiss claim based on bad
faith conduct in a due diligence process); All. Mortg. Co. v. Rothwell, 10 Cal. 4th 1226, 1239
(1995) ("Except in the rare case where the undisputed facts leave no room for a reasonable
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difference of opinion, the question of whether a plaintiff's reliance is reasonable is a question of
fact." (quoting Blankenheim v. E.F. Hutton & Co., 217 Cal. App. 3d 1463 (1990))); cf. Green
Hills Software, Inc. v. Safeguard Sciences & SPC Private Equity Partners, 33 F. App'x 893, 895
(9th Cir. 2002) (affirming summary judgment in part because the evidence did not support
reasonable reliance on alleged misrepresentations in the negotiations process between companies
about purchase). And even though this alleged promise resembles the bargained-for agreement
in the terms sheet that couldn't be the subject of promissory estoppel, Tanguy Serra's alleged
promises about the acquisition process went beyond the terms sheet. Cf. Treefrog Devs., Inc. v.
Seido, Inc., 2013 WL 4028096, at *8 (S.D. Cal. Aug. 6, 2013) (allowing both a breach of
contract claim and promissory estoppel claim to proceed where there was a dispute about
whether the promise was encompassed in a bargained-for exchange).
The motion to dismiss the Unfair Competition Law claim is denied as to the unlawful and
unfair prongs. Cogenra has successfully pleaded violations of other laws that are actionable
under the unlawful prong. See Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir.
2012). And Cogenra has sufficiently alleged that the defendants' conduct, in allegedly using the
due diligence process to disrupt other purchase offers and steal trade secrets, "significantly
threatens or harms competition." Cel-Tech Communications, Inc. v. Los Angeles Cellular Tel.
Co., 20 Cal. 4th 163, 187 (1999). But the claim is dismissed as to the fraudulent prong. Cogenra
does not address this prong in its opposition, and the complaint does not support it. See Shroyer
v. New Cingular Wireless Services, Inc., 622 F.3d 1035, 1044 (9th Cir. 2010). It seems unlikely
that Cogenra can state a claim under the fraudulent prong, but it has leave to amend if it has a
good faith basis to do so.
Any amended complaint is due within 14 days of this order.
IT IS SO ORDERED.
Dated: August 16, 2017
______________________________________
VINCE CHHABRIA
United States District Judge
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