Blueline Software Services, Inc. v. Systems America, Inc. et al

Filing 46

ORDER by Judge Edward M. Chen granting 31 Motion to Dismiss Plaintiff's Unfair Competition Claim and Request for Punitive Damages from Defendant Systems America. (emclc1, COURT STAFF) (Filed on 10/13/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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BLUELINE SOFTWARE SERVICES, INC.,
Plaintiff,

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v.

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Case No. 17-cv-01960-EMC

SYSTEMS AMERICA, INC., et al.,
Defendants.

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ORDER GRANTING DEFENDANT
SYSTEM AMERICA'S MOTION TO
DISMISS UNFAIR COMPETITION
CLAIM AND REQUEST TO STRIKE
DEMAND FOR PUNITIVE DAMAGES

For the Northern District of California

United States District Court

Docket No. 31
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Defendant Systems America, Inc. (“Systems America”) moved to dismiss Plaintiff
Blueline Software Services, Inc.’s (“Blueline”) third cause of action for unfair competition under
Rule 12(b)(6) and to strike Blueline’s request for punitive damages under Rule 12(f). For the

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reasons stated at the hearing and as supplemented herein, the Court GRANTS the motion.
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A.

Motion to Dismiss Unfair Competition Claim

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Under Rule 12(b)(6), the Court assumes all allegations of material fact as true, construes
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them in favor of Plaintiff, and may dismiss a claim when the complaint fails to plead “enough
facts to state a claim to relief that is plausible on its face.” Cousins v. Lockyer, 568 F.3d 1063,

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1067 (9th Cir. 2009) (citation and quotation omitted).
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At the hearing, Plaintiff confirmed it brings only a California common law claim for unfair
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competition. It disavowed any such theory based on misappropriation of confidential information
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and confirmed it will proceed only on an intentional interference with prospective economic
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advantage theory. See Balboa Ins. Co. v. Trans Global Equities, 218 Cal.App.3d 1327, 1341-42
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(1990) (interference with prospective economic advantage and misappropriation are two types of
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claims that may be brought under umbrella of unfair competition). To the extent Plaintiff’s theory

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was premised on Systems America’s interference with an economic relationship represented by a

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contract between Plaintiff and Systems America, that theory is foreclosed. See Woods v. Fox

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Broadcasting Sub., Inc., 129 Cal.App.4th 344, 350 (2005) (holding that “a party to the plaintiff’s

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contract cannot be liable” for various business torts, including interference with prospective

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economic advantage); Applied Equipment Corp. v. Litton Saudi Arabia, Ltd., 7 Cal.4th 503, 514-

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18 (1994).
Plaintiff later asserted that Systems America interfered with its economic relationship with

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Defendant Mukunda. That theory, however, was not plead. Moreover, Plaintiff did not

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adequately plead causation. See Young v. Long., 43 Cal.3d 64, 71 n.6 (1987) (elements of

designed to disrupt the relationship,” “actual disruption of the relationship,” and “economic harm

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For the Northern District of California

prospective economic advantage claim include “intentional acts on the part of the defendant

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United States District Court

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to the plaintiff proximately caused by the acts of the defendant”). Plaintiff’s verified complaint

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alleges that Systems America “solicit[ed], encourag[ed], and/or induc[ed] Mukunda to continue

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his assignment at Infosys after [not before] his resignation from Blueline.” Compl. ¶ 43 (emphasis

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added). There are no allegations that Systems America acted to “disrupt” Plaintiff’s relationship

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with Mukunda before he resigned, and thus none that would support proximate causation of the

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purported harm.
At the hearing, Plaintiff was unable to identify any facts presently known or on which

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Plaintiff could on a good faith basis allege that Systems America committed any allegedly

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disruptive acts prior to Mukunda’s resignation. In light of the verified allegation that Systems

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America’s actions occurred after the resignation and Plaintiff’s apparent concession it could not

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allege otherwise at this time, Plaintiff must seek leave of Court to assert this new theory of

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interference with prospective economic advantage.

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B.

Motion to Strike

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Rule 12(f) permits a court to “strike from a pleading an insufficient defense or any

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redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). Systems

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America argues that punitive damages are precluded by law and therefore “impertinent” and

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“immaterial.” The Ninth Circuit rejects that notion, and has held that Rule 12(f) is not an
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appropriate vehicle for removing requests for punitive damages where precluded by law. See

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Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 974-75 (9th Cir. 2010). However, the Court

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will review the request under Rule 12(b)(6). See Powell v. Wells Fargo Home Mortgage, 2017

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WL 2720182, at *6-7 (N.D. Cal. Jun. 23, 2017).
Punitive damages are not available on Plaintiff’s contract causes of action against Systems

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America, counts one and two. See Cal. Civ. Code § 3294(a) (punitive damages only available in

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actions “not arising from contract”); Purcell v. Schweitzer, 224 Cal.App.4th 969, 976 (2014)

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(same). Although they would be available under a common law unfair competition claim, see

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Duncan v. Stuetzle, 76 F.3d 1480, 1490 (9th Cir. 1996), that claim has been dismissed. Moreover,

Code § 3294(a), or that Systems America “ratified the wrongful conduct . . . on the part of an

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For the Northern District of California

Plaintiff fails to allege that Systems America acted with “oppression, fraud, or malice,” Cal. Civ.

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United States District Court

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officer, director, or managing agent of the corporation.” Id. § 3294(b). Accordingly, Plaintiff’s

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prayer for punitive damages against Systems America is dismissed.

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C.

Conclusion

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Plaintiff’s third cause of action for unfair competition against Systems America is

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DISMISSED. Plaintiff’s prayer for punitive damages against Systems America is DISMISSED.

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Plaintiff must seek leave of the Court to amend the complaint to reassert either claim. Plaintiff’s

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contract causes of action against Systems America (counts one and two), tort cause of action

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against Defendant Mukunda (count four), and prayer for relief for punitive damages from

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Defendant Mukunda remain in the case (he has not moved to dismiss the claim for punitive

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damages).

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This order disposes of Docket No. 31.

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IT IS SO ORDERED.

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Dated: October 13, 2017
______________________________________
EDWARD M. CHEN
United States District Judge

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