ADT Security Services, Inc. v. Security One International, Inc. et al

Filing 196

ORDER by Judge Yvonne Gonzalez Rogers granting 158 Motion to Dismiss without Leave to Amend. The Court VACATES the hearing set for February 19, 2013. (fs, COURT STAFF) (Filed on 2/14/2013)

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1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 6 7 8 ADT SECURIITY SERVICES, INC., 9 10 United States District Court Northern District of California 11 12 Plaintiff, vs. Case No.: 11-CV-05149 YGR ORDER GRANTING MOTION OF DEFENDANT SAFE HOMES TO DISMISS WITHOUT LEAVE TO AMEND SECURITY ONE INTERNATIONAL, INC. et al., Defendant(s). 13 14 Plaintiff ADT Security Services, Inc. (“ADT”) alleges that Defendant Safe Home Security, 15 Inc. (“Safe Home”) has benefitted from the allegedly fraudulent and deceitful acts perpetrated by 16 the other defendants in this action: Defendants Security One International, Inc. (“Security One”); 17 its sole officer, director, and shareholder, Claudio Hand; Scellusaleads; and Pure Clar, the owner 18 and operator of Sceullusaleads. Counts I through XI of ADT’s Third Amended Complaint 19 (“TAC”) allege unfair competition against the other four defendants. ADT does not allege that 20 Safe Home engaged in any wrongful conduct or that Safe Home was aware of the allegedly 21 wrongful conduct of the other defendants, but based upon the alleged wrongful conduct of those 22 other defendants, ADT seeks restitution from Safe Home, entry of a permanent injunction against 23 Safe Home, and also requests that a constructive trust be imposed on Safe Home based on a theory 24 of unjust enrichment (Count XII). 25 26 27 28 Safe Home has filed a motion to dismiss the claim against it for failure to state a claim upon which relief can be granted, and a motion to strike. Having carefully considered the papers submitted and the pleadings in this action, for the reasons set forth below, the Court hereby GRANTS the Motion to Dismiss and DISMISSES 1 WIT THOUT PREJ JUDICE Coun XII of the Third Amen nt e nded Compl laint, but WI ITHOUT LEA AVE TO 2 AME .1 END 3 A. LEGAL STANDARD A motion to dismiss under Rule 12(b)(6) tes the legal s n sts sufficiency o the claims alleged in of s 4 5 the complaint. Ileto v. Gloc Inc., 349 F.3d 1191, 1 c I ck. 1199-1200 ( (9th Cir. 200 03). Dismiss for failure sal e 6 to st a claim can be based on the lack of a cogniz tate c d k zable legal th heory or the failure to all lege 7 suff ficient facts under a cogn u nizable legal theory. Bal l listreri v. Pa acifica Polic Dep’t, 901 F.2d 696, ce 1 8 699 (9th Cir. 19 990). To surv a motio to dismiss “a compla must con vive on s, aint ntain sufficie factual ent 9 ter, d ‘ m hat ble oft matt accepted as true, to ‘state a claim to relief th is plausib on its face.’” Ashcrof v. Iqbal, 556 U.S. 662, 678 (2009) (q quoting Bell Atl. Corp. v Twombly, 5 U.S. 544 557 (2007 v. 550 4, 7)). 11 United States District Court Northern District of California 10 hough “detai factual allegations” are not requ iled a uired, a plain ntiff’s obligat tion to provi the ide Alth 12 grou unds for its entitlement to relief “req e t quires more t than labels a conclusio and a fo and ons, ormulaic 13 recit tation of the elements of a cause of action will n do.” Two f a not ombly, supra 550 U.S. a 555 a, at 14 (cita ations and qu uotations om mitted). “[W W]here the we ell-pleaded f facts do not p permit the co to infer ourt 15 mor than the mere possibility of misconduct, the co re m omplaint has alleged – b it has not ‘show[n]’– s but t – 16 ‘tha the pleader is entitled to relief.’” See Iqbal, sup 556 U.S. at 679. (“ at r t S upra, “While legal conclusions l 17 can provide the framework of a complai they mus be suppor by factu allegation (citing o int, rted ual ns”) st 18 Fed. R. Civ. P. 8(a)(2)). 8 19 B. ANALYS SIS Unjust enrichment is a theory of recovery in quasi-contr e s f n ract, in which a plaintiff contends the h e 20 21 defe endant receiv a benefit to which it was not ent ved t titled. Parac Fin. v. G cor General Elec. Capital 22 Corp 96 F.3d 1151, 1167 (9th Cir. 199 2 “‘[U]nj enrichm rp., 1 ( 96). just ment’ is a term of art. Th m he 23 1 24 25 Pur rsuant to Fede Rule of Civil Procedu 78(b) and Civil Local R 7-1(b), th Court finds this motion eral C ure Rule he appr ropriate for de ecision withou oral argum ut ment. Accordi ingly, the Cou VACATES the hearing s for urt S set Febr ruary 19, 2013. 2 26 27 28 eneral princip underlying various lega doctrines a remedies, that one pers ple, g al and son “It is a ge should no be permitte unjustly to enrich himse at the expe ot ed elf ense of anothe but should be er, d required to make restit t tution of or fo property or benefits rece or r eived, retaine or appropr ed, riated, where it is just and equ i uitable that su restitution be made, an where such action invol uch n nd h lves no violati or frustrat ion tion of law or opposition to public polic either dire r o cy, ectly or indire ectly. As expressed by some authorities, the obligation to do justice rests upon a persons, na e t n e all atural 2 1 substantive part of the law of restitution is concerned with identifying those forms of enrichment 2 that the law treats as ‘unjust’ for purposes of imposing liability.” Restatement (Third) of 3 Restitution & Unjust Enrichment § 1 (2011). A claim for unjust enrichment requires a plaintiff to 4 plead two elements: “receipt of a benefit and unjust retention of the benefit at the expense of 5 another.” Lectrodryer v. SeoulBank, 77 Cal. App. 4th 723, 726 (Cal. Ct. App. 2000). Fundamental 6 to a claim for unjust enrichment is the basic notion that a “person is not permitted to profit by his 7 own wrong.” Restatement (Third) of Restitution & Unjust Enrichment § 3 (emphasis supplied). ADT argues that the law recognizes a cause of action for unjust enrichment and that it has 9 alleged the elements for that cause of action. However, “[t]hreadbare recitals of the elements of a 10 cause of action, supported by mere conclusory statements” does not suffice to state a claim. Iqbal, 11 United States District Court Northern District of California 8 supra, 556 U.S. at 678. ADT alleges that Safe Home has received a benefit from the allegedly 12 fraudulent conduct of Security One and Scellusaleads—after Security One converts ADT customer 13 accounts, it sells these customer accounts to Safe Home, who provides the security monitoring 14 services to the former ADT customers in exchange for a monthly monitoring fee.3 And ADT 15 characterizes Safe Home’s retention of the revenue it receives from customers converted by 16 Security One and Scellusaleads as unjust—this is a legal conclusion. 17 Even where a defendant receives a benefit from another, the defendant is liable only if the 18 circumstances are such that, as between the two parties, it is unjust for the defendant to retain the 19 and artificial; if one obtains the money or property of others without authority, the law, independently of express contract, will compel restitution or compensation.” Lucky Auto Supply v. Turner, 244 Cal. App. 2d 872, 885 (Cal. Ct. App. 1966) (quoting 46 Am. Jur. Restitution and Unjust Enrichment, p. 99). 20 21 22 23 24 25 26 27 28 3 ADT’s allegations regarding unjust enrichment are as follows: 253. SCELLUSA and/or SECURITY ONE are switching ADT Customer accounts to SECURITY ONE through fraud. 254. SECURITY ONE, in turn, sells these former ADT Customer accounts to SAFE HOME. 255. SAFE HOME provides security system monitoring services to the former ADT Customers in exchange for a monthly monitoring fee paid to SAFE HOME. * * * 257. SAFE HOME receives a benefit from the fraudulent activity of SCELLUSA and/or SECURITY ONE in the form of revenue derived from former ADT Customer accounts. * * * 263. SAFE HOME’s retention of revenue from ADT Customers converted by SCELLUSA and/or SECURITY ONE through fraud would be unjust. 3 1 bene efit. First Nationwide Sav. v. Perry, 11 Cal. App 4th 1657, 1663 (Cal. Ct. App. 199 (“The N S , p. 92) 2 pers receiving the benefit is required to make rest son g t titution only if the circum y mstances are such that, e 3 as between the two individu t uals, it is unju for the p erson to reta it.”). Wh ADT ha alleged the ust ain hile as e 4 lega conclusion that Safe Home’s reten al n H ntion of reven would b unjust, AD has failed to allege nue be DT d 5 facts to show that Safe Hom own con me’s nduct would itself render the retentio of the ben r on nefit unjust. 6 In it opposition ADT argues that it is Safe Home’s burden to e ts n, S s establish, as an affirmati defense, ive 7 that its retention of the bene would no be unjust. Although s n efit ot some of the s same equitab ble 8 cons siderations ju ustifying res stitution may constitute a defense to a claim of r y restitution, th lack of he 9 alleg gations of wrongdoing by Safe Hom or its kno w b me, owledge of w wrongdoing b others, is an by s 10 important consid deration in determining the validity of ADT’s cl d laim for unju enrichme ust ent. See id. United States District Court Northern District of California 11 ADT has failed to al s llege evident tiary facts (e e.g., Safe Ho was awa that Secu ome are urity One 12 was engaging in the alleged fraudulen conduct w n dly nt when it retain this alleg benefit),4 which if ned ged 13 true, would esta ablish that Sa Home’s retention of the benefit i unjust. Th afe r is herefore, AD has not DT 14 satis sfied its burd to allege facts showi “‘that the pleader is entitled to re den e ing e elief.’” Iqba supra, al, 15 556 U.S. at 679 (quoting Fe R. Civ. P. 8(a)(2)) (al ed. lteration in o original). Ac ccordingly, A ADT has 16 ed w f nted. faile to state a claim upon which relief can be gran Based on the foregoi analysis, the Court G RANTS the Motion to D n ing , Dismiss. 17 18 C. NO LEA TO AME AVE END Although ADT was on notice of the deficien h f ncies in its T TAC that wer identified by Safe re d 19 20 Hom ADT cho to file an opposition to the motio to dismiss rather than seek leave t amend the me, ose n on s n to e 21 TAC The Cour notes that the deadline to amend th pleadings was Decem C. rt e he s mber 31, 2012 and non- 22 23 24 25 26 27 28 4 In its opposition ADT argues that: n, ADT beli ieves discove will establ that Safe Home has be “on notice of the ery lish een e” fraudulen conduct by Security One and Scellusa nt e aleads at least since the co t ommencement of t this action on October 20, 2011. Sa Home has indisputably been on noti of ADT’s r afe s y ice allegation of fraud an violations of the Lanham Act against Security On and ns nd o m t ne Scellusaleads since Ap 12, 2012, when ADT s pril served Safe H Home with a s subpoena ng nd ct Defendant. requestin documents related to this litigation an the conduc of its Co-D An inadequately pled claim ca i p annot proceed based upon t bare asser d the rtion, in an op pposition brie that ef, disco overy will un ncover evidence of wrongd doing that wou allow AD to allege fa sufficient to state a uld DT acts t claim Instead, ADT must alle in its com m. A ege, mplaint (this b being its third amended co d omplaint), evidentiary facts s to st a cause of action for un tate f njust enrichm ment. 4 1 expe discovery must be co ert y ompleted by March 28, 2 2013. As AD has not r DT requested lea to amend ave d 2 the pleadings, th time to am p he mend the ple eadings has p passed, non-expert disco overy must b completed be d 3 with six week and ADT has not mov for an ex hin ks, ved xtension of th deadline to amend th pleadings, the he 4 the Court will not act on its own to gran leave to am C nt mend the com mplaint. Th herefore, Cou XII of unt 5 the Third Amen T nded Compla is DISMI aint ISSED WITH OUT LEAVE TO AMEND. E 6 D. CONCLU USION 7 For the reasons set forth above, the Motion t Dismiss is GRANTED. r fo t to s 8 Count XII of the Thi Amended Complaint is DISMISSE WITHOU LEAVE TO AMEND. X ird d t ED UT O 9 This dismissal is WITHOUT PREJUDICE. s E This Ord Terminat Docket Number 115. der tes N . 11 United States District Court Northern District of California 10 IT IS SO ORDERED. 12 13 14 Date: February 14, 2013 y __ __________ ___________ __________ _________ YVON GONZAL ROGERS NNE LEZ UNITED ST TATES DISTR RICT COURT JUDGE T 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5

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