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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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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ADT SECURIITY SERVICES, INC.,

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United States District Court
Northern District of California

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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).

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Plaintiff ADT Security Services, Inc. (“ADT”) alleges that Defendant Safe Home Security,

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Inc. (“Safe Home”) has benefitted from the allegedly fraudulent and deceitful acts perpetrated by

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the other defendants in this action: Defendants Security One International, Inc. (“Security One”);

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its sole officer, director, and shareholder, Claudio Hand; Scellusaleads; and Pure Clar, the owner

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and operator of Sceullusaleads. Counts I through XI of ADT’s Third Amended Complaint

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(“TAC”) allege unfair competition against the other four defendants. ADT does not allege that

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Safe Home engaged in any wrongful conduct or that Safe Home was aware of the allegedly

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wrongful conduct of the other defendants, but based upon the alleged wrongful conduct of those

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other defendants, ADT seeks restitution from Safe Home, entry of a permanent injunction against

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Safe Home, and also requests that a constructive trust be imposed on Safe Home based on a theory

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of unjust enrichment (Count XII).

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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

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WIT
THOUT PREJ
JUDICE Coun XII of the Third Amen
nt
e
nded Compl
laint, but WI
ITHOUT LEA
AVE TO

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AME .1
END

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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

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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

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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

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suff
ficient facts under a cogn
u
nizable legal theory. Bal
l
listreri v. Pa
acifica Polic Dep’t, 901 F.2d 696,
ce
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699 (9th Cir. 19
990). To surv a motio to dismiss “a compla must con
vive
on
s,
aint
ntain sufficie factual
ent

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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)).

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United States District Court
Northern District of California

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hough “detai factual allegations” are not requ
iled
a
uired, a plain
ntiff’s obligat
tion to provi the
ide
Alth

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grou
unds for its entitlement to relief “req
e
t
quires more t
than labels a conclusio and a fo
and
ons,
ormulaic

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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

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(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

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mor than the mere possibility of misconduct, the co
re
m
omplaint has alleged – b it has not ‘show[n]’–
s
but
t
–

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‘tha the pleader is entitled to relief.’” See Iqbal, sup 556 U.S. at 679. (“
at
r
t
S
upra,
“While legal conclusions
l

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can provide the framework of a complai they mus be suppor by factu allegation (citing
o
int,
rted
ual
ns”)
st

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Fed. R. Civ. P. 8(a)(2)).
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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

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defe
endant receiv a benefit to which it was not ent
ved
t
titled. Parac Fin. v. G
cor
General Elec. Capital

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Corp 96 F.3d 1151, 1167 (9th Cir. 199 2 “‘[U]nj enrichm
rp.,
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(
96).
just
ment’ is a term of art. Th
m
he

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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.
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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
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substantive part of the law of restitution is concerned with identifying those forms of enrichment

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that the law treats as ‘unjust’ for purposes of imposing liability.” Restatement (Third) of

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Restitution & Unjust Enrichment § 1 (2011). A claim for unjust enrichment requires a plaintiff to

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plead two elements: “receipt of a benefit and unjust retention of the benefit at the expense of

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another.” Lectrodryer v. SeoulBank, 77 Cal. App. 4th 723, 726 (Cal. Ct. App. 2000). Fundamental

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to a claim for unjust enrichment is the basic notion that a “person is not permitted to profit by his

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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

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alleged the elements for that cause of action. However, “[t]hreadbare recitals of the elements of a

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cause of action, supported by mere conclusory statements” does not suffice to state a claim. Iqbal,

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United States District Court
Northern District of California

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supra, 556 U.S. at 678. ADT alleges that Safe Home has received a benefit from the allegedly

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fraudulent conduct of Security One and Scellusaleads—after Security One converts ADT customer

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accounts, it sells these customer accounts to Safe Home, who provides the security monitoring

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services to the former ADT customers in exchange for a monthly monitoring fee.3 And ADT

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characterizes Safe Home’s retention of the revenue it receives from customers converted by

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Security One and Scellusaleads as unjust—this is a legal conclusion.

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Even where a defendant receives a benefit from another, the defendant is liable only if the

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circumstances are such that, as between the two parties, it is unjust for the defendant to retain the

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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).

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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.
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bene
efit. First Nationwide Sav. v. Perry, 11 Cal. App 4th 1657, 1663 (Cal. Ct. App. 199 (“The
N
S
,
p.
92)

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pers receiving the benefit is required to make rest
son
g
t
titution only if the circum
y
mstances are such that,
e

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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

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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

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facts to show that Safe Hom own con
me’s
nduct would itself render the retentio of the ben
r
on
nefit unjust.

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In it opposition ADT argues that it is Safe Home’s burden to e
ts
n,
S
s
establish, as an affirmati defense,
ive

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that its retention of the bene would no be unjust. Although s
n
efit
ot
some of the s
same equitab
ble

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cons
siderations ju
ustifying res
stitution may constitute a defense to a claim of r
y
restitution, th lack of
he

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alleg
gations of wrongdoing by Safe Hom or its kno
w
b
me,
owledge of w
wrongdoing b others, is an
by
s

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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

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ADT has failed to al
s
llege evident
tiary facts (e
e.g., Safe Ho was awa that Secu
ome
are
urity One

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was engaging in the alleged fraudulen conduct w
n
dly
nt
when it retain this alleg benefit),4 which if
ned
ged

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true, would esta
ablish that Sa Home’s retention of the benefit i unjust. Th
afe
r
is
herefore, AD has not
DT

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satis
sfied its burd to allege facts showi “‘that the pleader is entitled to re
den
e
ing
e
elief.’” Iqba supra,
al,

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556 U.S. at 679 (quoting Fe R. Civ. P. 8(a)(2)) (al
ed.
lteration in o
original). Ac
ccordingly, A
ADT has

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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.

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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

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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

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TAC The Cour notes that the deadline to amend th pleadings was Decem
C.
rt
e
he
s
mber 31, 2012 and non-

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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.

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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

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the pleadings, th time to am
p
he
mend the ple
eadings has p
passed, non-expert disco
overy must b completed
be
d

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with six week and ADT has not mov for an ex
hin
ks,
ved
xtension of th deadline to amend th pleadings,
the
he

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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

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the Third Amen
T
nded Compla is DISMI
aint
ISSED WITH OUT LEAVE TO AMEND.
E

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D.

CONCLU
USION

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For the reasons set forth above, the Motion t Dismiss is GRANTED.
r
fo
t
to
s

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Count XII of the Thi Amended Complaint is DISMISSE WITHOU LEAVE TO AMEND.
X
ird
d
t
ED
UT
O

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This dismissal is WITHOUT PREJUDICE.
s
E
This Ord Terminat Docket Number 115.
der
tes
N
.

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United States District Court
Northern District of California

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IT IS SO ORDERED.

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Date: February 14, 2013
y

__
__________
___________
__________
_________
YVON GONZAL ROGERS
NNE
LEZ
UNITED ST
TATES DISTR
RICT COURT JUDGE
T

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