Impeva Labs, Inc., v. System Planning Corporation et al

Filing 48

ORDER granting 36 Motion to Dismiss. Signed by Judge Edward J. Davila on 1/9/2013. (ejdlc4, COURT STAFF) (Filed on 1/9/2013)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

United States District Court
For the Northern District of California

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SAN JOSE DIVISION

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IMPEVA LABS, INC.,

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Plaintiff,
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v.
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SYSTEM PLANNING CORPORATION,
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SYSTEM PLANNING CORPORATION D/B/A )
GLOBALTRAK AND RICHARD C. MEYERS, )
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Defendants.
)
)

Case No.: 5:12-CV-00125-EJD
ORDER GRANTING DEFENDANTS’
MOTION TO DISMISS THIRD
CAUSE OF ACTION OF THE
SECOND AMENDED COMPLAINT

[Re: Docket No. 36]

Presently before the court is Defendants System Planning Corporation (“SPC”), System

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Planning Corporation d/b/a GlobalTrak (“GlobalTrak”) and Richard C. Meyers’ (“Myers”)

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(collectively, “Defendants”) Motion to Dismiss the Third Cause of Action of the Second Amended

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Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). The court found this

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matter suitable for decision without oral argument pursuant to Civil Local Rule 7-1(b) and

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previously vacated the hearing. The court has subject matter jurisdiction over this matter pursuant

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to 28 U.S.C. § 1331 and 1332. Having fully reviewed the parties’ briefing, the court GRANTS

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Defendants’ Motion to Dismiss.

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Case No.: 5:12-CV-00125-EJD
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS THIRD CAUSE OF ACTION
OF THE SECOND AMENDED COMPLAINT

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I. BACKGROUND
The background of this case is sufficiently set forth in this court’s Order Granting in Part

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and Denying in Part Defendants’ Motion to Dismiss First Amended Complaint. Dkt. No. 34. The

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following background is taken from that Order, and is repeated here only to the extent necessary

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for the present motion.

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a. Factual Background
The parties were competitors in the business of providing tracking systems for the
containerized shipping market. GlobalTrak is a wholly owned division of SPC, and Richard C.

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United States District Court
For the Northern District of California

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Meyers is its Chief Executive Officer. Plaintiff is currently operating its business as a debtor and

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debtor-in-possession under 11 U.S.C. §§ 1107 and 1108.

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The cause of action at issue in this motion arises out of Defendants’ alleged interference

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with Plaintiff’s bankruptcy proceedings. See Bankr. N.D. Cal. Case No. 10-53056-ASW-11 (the

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“Bankruptcy Case”). On March 31, 2010, Plaintiff filed a motion in the Bankruptcy Case to

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establish bid procedures for the sale of substantially all of its assets (the “Sale Motion”). Pursuant

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to the bid procedures, ARINC, Inc. was designated as the “stalking horse” bidder and procedures

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were established for other interested buyers to become qualified bidders at an auction (the

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“Auction”) for Plaintiff’s assets. In response to the Auction, SPC signed a non-disclosure

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agreement and purported to indicate its interest in acquiring Impeva’s assets. SPC did not make a

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bid to acquire said assets, but instead filed an Objection to the Sale Motion, alleging infringement

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of two of SPC’s patents—U.S. Patent Nos. 7,098784 (“the ’784 patent”) and 7,702,358 (“the ’358

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patent”)—by Plaintiff. SPC also filed a Proof of Claim on April 28, 2010 for an unspecified

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amount of damages resulting from Plaintiff’s alleged infringement. Plaintiff alleges that both

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GlobalTrek and Meyers participated in the decision to file the objection and proof of claims.

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At the Auction, ARINC’s initial stalking horse bid of $2,000,000 was bettered by a bid of

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$2,200,000 by Cubic Corporation (“Cubic”). ARINC, reluctant to purchase intellectual property

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tainted by SPC’s patent infringement claims, did not submit an overbid and withdrew its bids to

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acquire Plaintiff’s assets. ARINC indicated in open court during the Auction that but for SPC’s

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Case No.: 5:12-CV-00125-EJD
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS THIRD CAUSE OF ACTION
OF THE SECOND AMENDED COMPLAINT

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patent infringement claims it would have been willing to bid $1,000,000 higher over its initial

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stalking horse bid. However, because ARINC did not participate in the Auction, the bid by Cubic

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of $2,200,000 in cash (plus the assumption of certain liabilities) was determined to be the

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successful bid.

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b. Procedural Background
Plaintiff filed this action on January 6, 2012. Dkt. No. 1. Defendants moved to dismiss,
(Dkt. No. 13), and Plaintiff amended its complaint as a matter of right (Dkt. No. 18). Plaintiff filed

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its First Amended Complaint (“FAC”) on February 22, 2012, alleging ten causes of action. Dkt.

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United States District Court
For the Northern District of California

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No. 18. The first four causes of action sought declaratory relief that Plaintiff did not infringe the

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’784 and ’358 patents and asserted invalidity as to those patents. Id. The fifth through eighth

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causes of action were based primarily on facts relating to a failed RFP submission which pre-dated

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the bankruptcy proceedings. Id. The ninth and tenth causes of action were based primarily on

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Defendants’ involvement in Plaintiff’s Bankruptcy Case, including the cause of action at issue here

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for “Judicial Order to Preserve Integrity of Bankruptcy Process”). Id. Defendants filed a Motion

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to Dismiss the FAC (Dkt. No. 23), which this court granted in part and denied in part on August

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23, 2012 (Dkt. No. 34). In that Order, the court denied Defendants’ motion as to Plaintiff’s fifth,

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and part of Plaintiff’s sixth causes of action, and dismissed Plaintiff’s first, second, third, fourth,

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seventh, eighth, ninth, and tenth causes of action. Plaintiff filed its Second Amended Complaint

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(“SAC”) on September 5, 2012, which contained three causes of action: Violation of the Federal

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Lanham Act 15 U.S.C. § 1125(a), Intentional Interference with Prospective Economic Relations,

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and Judicial Order to Preserve Integrity of Bankruptcy Process 11 U.S.C. § 105. Dkt. No. 35.

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Defendant filed a Motion to Dismiss Plaintiff’s third cause of action—Judicial Order to Preserve

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Integrity of Bankruptcy Process—to which the court now turns. Dkt. No. 36.

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II. LEGAL STANDARD

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Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim in the

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complaint with sufficient specificity to “give the defendant fair notice of what the ... claim is and

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the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)

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Case No.: 5:12-CV-00125-EJD
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS THIRD CAUSE OF ACTION
OF THE SECOND AMENDED COMPLAINT

(internal quotations omitted). A complaint which falls short of the Rule 8(a) standard may be

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dismissed if it fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6).

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Dismissal under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim is “proper only

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where there is no cognizable legal theory or an absence of sufficient facts alleged to support a

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cognizable legal theory.” Shroyer v. New Cingular Wireless Servs., Inc., 606 F.3d 658, 664 (9th

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Cir. 2010) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). In considering whether

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the complaint is sufficient to state a claim, the court must accept as true all of the factual

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allegations contained in the complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While a

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United States District Court
For the Northern District of California

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complaint need not contain detailed factual allegations, it “must contain sufficient factual matter,

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accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. (quoting Twombly, 550

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U.S. at 570).

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III. DISCUSSION
In its third cause of action, Plaintiff seeks to have the court issue an order pursuant to

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Section 105 of the bankruptcy title, 11 U.S.C. § 105, “compensating plaintiff Impeva for its losses

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in order to preserve the integrity of the bankruptcy process.” Dkt. No. 35 ¶ 29. Plaintiff alleges

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that the court may act under § 105 because Defendants violated the local bankruptcy rules during

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the Bankruptcy Case. In particular, Plaintiff alleges that Defendants violated the local rules by

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filing their Objection without an accompanying declaration or affidavit to support their factual

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contentions and by filing their Proof of Claim without including any evidence to establish a prima

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facie case. Dkt. No. 35 ¶ 28.

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The court has determined that it does not have the authority to act pursuant to Section 105

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in this case. While Section 105 endows “the court” with broad powers to enforce the bankruptcy

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process, those powers rest with the court to which the bankruptcy case is assigned, whether it be a

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district court or a bankruptcy court. See Marrama v. Citizens Bank of Mass., 549 U.S. 365, 375

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(finding that “the broad authority granted to bankruptcy judges to take any action that is necessary

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or appropriate ‘to prevent an abuse of process’ described in § 105(a) of the Code” authorized the

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bankruptcy judge’s actions in question) (emphasis added); In re Feit & Drexler, Inc., 760 F.2d 406,

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Case No.: 5:12-CV-00125-EJD
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS THIRD CAUSE OF ACTION
OF THE SECOND AMENDED COMPLAINT