Damabeh v. 7-Eleven, Inc.
Filing
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Order by Hon. Lucy H. Koh granting 7 Motion to Dismiss. (lhklc1, COURT STAFF) (Filed on 9/12/2012)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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SAN JOSE DIVISION
United States District Court
For the Northern District of California
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GHOLAM R. DAMABEH, an individual
Plaintiffs,
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v.
7-ELEVEN, INC., a Texas corporation, and
DOES 1-100
Defendants.
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Case No.: 5:12-CV-1739-LHK
ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS
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On July 19, 2011, Plaintiff Gholam R. Damabeh (“Plaintiff”) filed a Complaint in
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California Superior Court for the County of Santa Clara alleging three causes of action arising out
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of a dispute over the termination of his Franchise Agreement with Defendant 7-Eleven, Inc. (“7-
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Eleven”). See ECF No. 1, Ex. A (“Compl.”). On April 6, 2012, Defendant removed this action to
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the United States District Court for the Northern District of California based on diversity
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jurisdiction. See ECF No. 1. Defendant filed the instant motion to dismiss the Complaint on May
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29, 2012, arguing that the Plaintiff failed to state a cause of action upon which relief can be
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granted. ECF No. 7. Plaintiff filed his Opposition on April 27, 2012. ECF No. 16, 17. Defendant
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filed its Reply on May 4, 2012. ECF No. 17. For the reasons stated below, the Court GRANTS
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Defendant’s Motion to Dismiss with leave to amend.
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Case No.: 5:12-CV-1739-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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I.
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BACKGROUND
Plaintiff entered into a franchise agreement with Defendant pursuant to which Defendant
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was responsible for supplying Plaintiff with a store, to be located in Cupertino, California, as well
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as the equipment necessary to operate the store (“Franchise Agreement”). Compl. at 4. Plaintiff
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alleges that he operated the Cupertino store from 1978, until Defendant terminated the Franchise
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Agreement in July 2008. Id.
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Plaintiff’s claims relate primarily to two purported breaches of the Franchise Agreement.
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First, the Franchise Agreement provides that Defendant is responsible for repairing any damage to
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the store, equipment, or property so long as the repairs can be completed within thirty days.
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For the Northern District of California
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Compl. at 4. However, if Defendant “determine[s] [that the damage] cannot reasonably be repaired
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or replaced within thirty (30) days,” then the “agreement… terminate[s].” Compl., Ex. 1, ¶
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26(e)(1)(c). The Franchise Agreement further provides that if the Franchise Agreement is
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terminated pursuant to the 30 day repair provision, the Franchise Agreement provides that Plaintiff
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has the right to elect to “transfer”1 to another 7-Eleven Store that is available as a franchise or to
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receive a refund of the portion of the franchise fee Plaintiff paid. Id., ¶ 26(e)(1); Compl. at 4.
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Plaintiff alleges that Defendant breached these provisions of the Franchise Agreement by falsely
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stating that Plaintiff’s store, property, or equipment had sustained “extensive damage and/or…
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causualty [sic] damage[,] which could not reasonably be repaired” within 30 days. Compl. at 4, 5.
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The Franchise Agreement also requires Plaintiff to maintain a minimum amount of equity
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in the store. Compl. at 4. If Plaintiff fails to maintain the minimum amount of equity, the
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Franchise Agreement provides that Defendant has the right to transfer equity from another 7-
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Eleven store owned by Plaintiff to cover the deficit. Id. Plaintiff alleges that, on two occasions, in
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approximately January 2007 and September 2007, Defendant transferred equity from Plaintiff’s
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Cupertino store to another store owned by Plaintiff. Compl. at 4, 7-8. Plaintiff alleges that the
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September 2007 equity transfer breached the Franchise Agreement because the equity transfer was
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used to pay for “non-equity matters” related to the other store. Id. at 4. (internal quotations
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The Franchise Agreement is unclear as to what is being transferred.
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Case No.: 5:12-CV-1739-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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omitted). Plaintiff further alleges that both the January and September 2007 equity transfers
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caused his equity in the Cupertino store to fall below the minimum requirement. Id. at 7-8.
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Plaintiff alleges that these breaches caused Plaintiff to be “dispossessed of [his] store…
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equipment, and… property.” Compl. at 4, 6. Plaintiff also alleges that he “sustained pain…
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suffering, anxiety and trauma” as a result of Defendant’s fraudulent behavior. Id. at 6.
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Plaintiff’s Complaint also includes a number of other allegations that Plaintiff contends
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show “unlawful, unfair[,] and fraudulent” conduct by Defendant. Specifically, Plaintiff alleges
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that, in July 2008, Defendant called Plaintiff and told him that it was “imperative” that he attend a
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meeting. Compl. at 7. Plaintiff alleges that, during that meeting, Defendant sent a truck to
United States District Court
For the Northern District of California
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Plaintiff’s store to collect his inventory without Plaintiff’s knowledge or consent. Id. Plaintiff also
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alleges that Defendant: (1) “devised a scheme to force” Plaintiff out of his store, (2) misled
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Plaintiff to believe that $10,000 in equity was sufficient to meet the minimum equity requirements
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for his store, (3) took Plaintiff’s store “under false pretenses,” and (4) interfered with the sale of
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Plaintiff’s store. Id. 9-10. Plaintiff further alleges that, in addition to constituting breaches of the
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Franchise Agreement, Defendant’s false statements regarding whether his store could be repaired
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in 30 days and Defendant’s improper transfer of equity between his stores constituted unlawful,
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unfair, and fraudulent conduct. Id. at 7-9.
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Based on these allegations, Plaintiff alleges causes of action for: (1) breach of contract; (2)
fraud; and (3) violation of California Business and Professions Code Sections 17200 and 17500.
II.
LEGAL STANDARD
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A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal
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sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In considering
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whether 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). However, the
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court need not accept as true “allegations that contradict matters properly subject to judicial notice
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or by exhibit” or “allegations that are merely conclusory, unwarranted deductions of fact, or
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unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008).
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While a complaint need not allege detailed factual allegations, it “must contain sufficient factual
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Case No.: 5:12-CV-1739-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at
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678 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially
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plausible when it “allows the court to draw the reasonable inference that the defendant is liable for
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the misconduct alleged.” Iqbal, 556 U.S. at 678.
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III.
DISCUSSION
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A. Admissibility of Contract Attached to Defendant’s Motion to Dismiss
As a threshold matter, the Court must address whether it may properly consider a copy of
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the Franchise Agreement that Defendant has attached as Exhibit 1 to its Motion. Plaintiff did not
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attach a copy of the Franchise Agreement to his Complaint. Plaintiff argues that the copy attached
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United States District Court
For the Northern District of California
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to Defendant’s motion should not be considered because the document has not been properly
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authenticated. Opposition at 7. Plaintiff argues that, pursuant to Local Rule 7-5(a), in order to be
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properly considered, the Franchise Agreement must be supported by an affidavit attesting to its
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authenticity. Id. Significantly, Plaintiff does not contend that the copy of the Franchise Agreement
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attached to Defendant’s Motion is not, in fact, the Franchise Agreement Plaintiff signed.
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In order to address Plaintiff’s concerns, the Court ordered Defendant to produce a
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declaration attesting to the authenticity of the Franchise Agreement. See ECF No. 19. Defendant
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has done so. See ECF No. 22. Accordingly, Plaintiff’s argument on this point is moot.
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Plaintiff also contends that the terms set forth in the Franchise Agreement should not be
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considered at this stage because to do so would “improperly convert the Motion to Dismiss into
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a… [m]otion for [s]ummary [j]udgment.” Opposition at 7. This argument fails. A court may
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“consider certain materials—documents attached to the complaint, documents incorporated by
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reference in the complaint, or matters of judicial notice” when considering a motion to dismiss.
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United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003). A document is incorporated by
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reference “if the plaintiff refers extensively to the document or the document forms the basis of the
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plaintiff’s claim.” Id.
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Here, the central allegations in Plaintiff’s Complaint are that Defendant breached the
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Franchise Agreement, specifically the provision requiring it to repair certain damages within 30
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days and the provision governing equity transfers between stores. Compl. at 4, 5. Accordingly, the
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Case No.: 5:12-CV-1739-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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Franchise Agreement “forms the basis of Plaintiff’s claim” and is properly considered in resolving
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Defendant’s Motion to Dismiss. Ritchie, 342 F.3d at 907-08.
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B. Plaintiff’s Breach of Contract Claim
Plaintiff alleges that Defendant breached the Franchise Agreement by: (1) falsely claiming
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that the store had suffered damages that could not be repaired in 30 days when, in fact, it could, (2)
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transferring equity from Plaintiff’s Cupertino store to another one of Plaintiff’s stores to cover
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“‘non equity’ matters.” Compl. at 4, 5. In order to state a claim for breach of contract, Plaintiff
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must allege facts showing: (1) the existence of a contract; (2) Plaintiff’s performance or excuse for
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nonperformance; (3) Defendant’s breach, and (4) damages to Plaintiff resulting from Defendant’s
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United States District Court
For the Northern District of California
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breach. Transcription Commc’ns Corp. v. John Muir Health, No. C 08-4418 TEH, 2009 WL
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666943, at *5 (N.D. Cal. Mar. 13, 2009). Defendant argues Plaintiff’s allegations fail to state a
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claim for breach of contract. Motion at 3-4.
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a. Plaintiff’s Allegations Regarding the 30 Day Repair Provision
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Defendant argues that Plaintiff’s allegation that Defendant breached the Franchise
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Agreement by falsely claiming that the store had suffered damages that could not be repaired in 30
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days fails to state a claim for two reasons. First, Defendant contends Plaintiff fails to allege
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sufficient facts concerning the nature of the damage or its extent. Second, Defendant contends
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Plaintiff’s allegations fail to show that the damage to Plaintiff’s store, equipment, and property
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could have actually been repaired within 30 days. Motion at 3.
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The Court agrees. Plaintiff’s allegations regarding the damage to his store, equipment and
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property are not sufficient. Plaintiff fails to identify what the damage was or when it occurred.
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Moreover, Plaintiff does not provide any facts from which the Court could infer that the damage
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could have been repaired within 30 days. Id. at 4. These allegations do not suffice under Rule 8.
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Iqbal, 556 U.S. at 678 (holding that a complaint must allege facts sufficient to “allow[] the court to
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draw the reasonable inference that the defendant is liable for the misconduct alleged.”).
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Defendant further contends that Plaintiff’s breach of contract claim fails because the
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Franchise Agreement empowers Defendant to make the determination of how long repairs will
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take. See Motion at 3. The Court agrees. The Franchise Agreement provides that: “[T]his
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Case No.: 5:12-CV-1739-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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agreement will terminate before the Expiration Date… if there is casualty damage to the Store or 7-
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Eleven Equipment which we determine cannot reasonably be repaired or replaced within thirty (30)
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days or less.” Compl., Ex. 1, ¶ 26(e)(1)(c) (emphasis added). Accordingly, in order to show
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Defendant breached the contract, Plaintiff must allege that Defendant stated that the damage could
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not be repaired within 30 days and that Defendant had not actually made such determination. An
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allegation that Defendant’s statement was wrong because the damage could be repaired within 30
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days will not suffice. To conclude otherwise, would read the phrase “we determine” out of the
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Franchise Agreement. See Advanced Network, Inc. v. Peerless Ins. Co., 190 Cal. App. 4th 1054,
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1063-64, 119 Cal. Rptr. 3d 17 (2010) (“We must give significance to every word of a contract,
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For the Northern District of California
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when possible, and avoid an interpretation that renders a word surplusage.”).
b. Plaintiff’s Allegations Regarding the Equity Transfer
Defendant also argues that Plaintiff fails to state a claim for breach of contract based on his
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allegations that Defendant transferred equity from Plaintiff’s Cupertino store to another one of
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Plaintiff’s stores to cover “non equity” matters. Motion at 3. Defendant contends that these
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allegations fail to show a breach because Plaintiff has not alleged facts “showing that 7-Eleven was
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not contractually entitled to transfer the referenced funds.” Id. at 4. The Court agrees.
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The Franchise Agreement provided that, if Plaintiff failed to maintain the minimum amount
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of equity in his stores, Defendant had the right to transfer equity from another 7-Eleven store
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owned by Plaintiff to cover the deficit. Compl. at 4. Plaintiff has not alleged that the store where
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his funds were transferred had sufficient equity to meet the minimum equity requirement set forth
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in the Franchise Agreement. Accordingly, Plaintiff has not alleged facts showing Defendant’s
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transfer was improper. Plaintiff’s allegation that the funds were used for “non equity” matters is
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irrelevant. Plaintiff’s allegations, therefore, fail to show Defendant’s equity transfer breached the
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Franchise Agreement.
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For the reasons set forth above, Defendant’s Motion to Dismiss Plaintiff’s first cause of
action for breach of contract is GRANTED.
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Case No.: 5:12-CV-1739-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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C. Plaintiff’s Fraud Claim
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Plaintiff’s second cause of action alleges that Defendant is liable for fraudulently stating
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that Plaintiff’s store, equipment, or property could not be repaired within 30 days. Compl. at 5.
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Defendant argues that this claim should be dismissed because Plaintiff (1) failed to meet the
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heightened pleading standard for causes of action involving fraud under Rule 9(b), and (2) failed to
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plead facts showing detrimental reliance. Motion at 4.
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As correctly stated by Defendant, pursuant to Federal Rule of Civil Procedure 9(b), a claim
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for fraud must be pled with particularity. Motion at 4 (citing Fed. R. Civ. P. 9(b)). Under the
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heightened standard, a plaintiff alleging fraud must set forth the “who, what, when, where, and how
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For the Northern District of California
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of the misconduct charged.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003)
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(internal quotation marks omitted); Saldate v. Wilshire Credit Corp., 686 F. Supp. 2d 1051, 1065
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(E.D. Cal. 2010) (holding that, when asserting a fraud claim against a corporation, the plaintiff
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‘must allege the names of the persons who made the allegedly fraudulent representations, their
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authority to speak, to whom they spoke, what they said or wrote, and when it was said or written”).
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Plaintiff’s allegations fail to meet the standard set forth in Rule 9(b). For example, Plaintiff
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does not identify who at 7-Eleven told Plaintiff the damage to Plaintiff’s store, property, or
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equipment could not be repaired within 30 days, when this statement was made, or whether the
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speaker had authority to make the statement. Plaintiff also does not state what the damage was or
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when it occurred. Moreover, as set forth supra in connection with Plaintiff’s breach of contract
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claim, Plaintiff has not alleged any facts, much less particularized facts, showing why Defendant’s
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statement that the damage could not be repaired within 30 days was false (i.e. facts showing the
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damage could have been repaired within the set amount of time). See Vess, 317 F.3d at 1106 (“The
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plaintiff must set forth what is false or misleading about a statement, and why it is false.”).
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Furthermore, Plaintiff has not alleged any facts supporting his allegations that Defendant “had no
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reasonable ground for believ[ing]” its statements were true or that Defendant sought to “conceal[]”
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its ability to repair the damages within 30 days from Plaintiff. Compl. at 5. Accordingly,
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Plaintiff’s allegations fail to state a claim for fraud.
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Case No.: 5:12-CV-1739-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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Plaintiff’s fraud claim also fails because Plaintiff fails to adequately allege detrimental
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reliance, an essential element in pleading a fraud claim. See Carter v. Prime Healthcare Paradise
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Valley, LLC, 198 Cal. App. 4th 396, 409 (2011) (“[W]ithout detrimental reliance, there is no
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fraud.”). Reliance occurs “when a misrepresentation is the immediate cause of a plaintiff’s
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conduct, which alters his legal relations, and when absent such representation, he would not, in all
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reasonable probability, have entered into the contract or other transaction.” Engalla v. Permanente
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Medical Grp., Inc., 15 Cal. 4th 951, 976 (1997).
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Here, Plaintiff does not allege that he took, or did not take, any action in reliance on
Defendants’ alleged misstatements regarding its inability to repair the damage to Plaintiff’s store
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For the Northern District of California
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within 30 days. For Plaintiff’s reliance allegations, Plaintiff’s Complaint states: “In justifiable
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reliance upon [D]efendant[‘s] conduct, [P]laintiff was induced to act… as follows: the store,
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equipment and property provided to [P]laintiff was taken from [P]laintiff and [D]efendants and
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each of them dispossessed [P]laintiff of the store and took possession of the store, equipment and
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property [D]efendant was to provide.” Compl. at 6. This allegation does not show any action or
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non-action by Plaintiff (i.e. that Plaintiff altered his position) in response to the alleged
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misrepresentation. Accordingly, the Court concludes that Plaintiff has failed to allege reliance.
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Plaintiff argues that, notwithstanding his failure to allege facts showing he altered his
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position as a result of Defendant’s alleged misstatement, the Court should simply presume reliance.
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Opposition at 11. However, the cases upon which Plaintiff relies are inapposite. See id. (citing
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Vasquez v. Superior Court, 4 Cal. 3d 800, 814 (1971); Engalla, 15 Cal. 4th at 977). These cases
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hold that reliance may be presumed where a material misrepresentation has been made to induce a
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party to enter into a contract. Vasquez, 4 Cal. 3d at 814; Engalla, 15 Cal. 4th at 977. Here,
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however, Plaintiff fails to allege any facts showing he entered into any agreement, or otherwise
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acted or declined to act, in reliance on Defendants’ alleged misstatement. See Vasquez, 4 Cal. 3d at
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814 (noting that a presumption of reliance exists "[w]here representations have been made in
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regard to a material matter and action has been taken”) (emphasis added).
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For the reasons set forth above, Defendant’s Motion to Dismiss Plaintiff’s second cause of
action for fraud is GRANTED.
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Case No.: 5:12-CV-1739-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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D. Violation of California Business and Professions Code § 17200, 17500
Plaintiff’s third cause of action alleges violations of California Business and Professions
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Code § 17200 (“Unfair Competition Law” or “UCL”) and California Business and Professions
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Code § 17500 (“False Advertising Law” or “FAL”). Compl. at 7-10. Defendant argues Plaintiff’s
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claims fail under Rule 8 because Plaintiff fails to allege facts sufficient to permit the Court to draw
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the reasonable inference that 7-Eleven violated either statute. Motion at 5 (citing Iqbal, 556 U.S. at
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678). Defendant also alleges that these claims fail because Plaintiff’s allegations fail to meet the
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heightened pleading requirements of Rule 9(b). Id. The Court agrees. The Court first addresses
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the sufficiency of Plaintiff’s allegations under Rule 9(b).
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For the Northern District of California
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1. Sufficiency of Plaintiff’s Allegations under Federal Rule of Civil Procedure 9(b)
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Rule 9(b) is applicable to claims for fraud or mistake, including claims based on the UCL
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and FAL. See Fed. R. Civ. P. 9(b); Vess, 317 F.3d at 1102-05 (holding that Rule 9(b) applied to
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state law claims under the UCL and the FAL to the extent those claims were based on fraudulent
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conduct). Here, much of the conduct Plaintiff alleges in support of his UCL and FAL claims
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sounds in fraud. For example, Plaintiff alleges that Defendant “wrongfully… advised [P]laintiff
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that [his] store, equipment, and property… was damaged… [and] could not be” repaired within 30
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days, and that this statement “was not true.” Compl. at 9. Plaintiff is alleging, in essence, a false
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statement. Id.; see also id. at 5 (alleging fraud claim based on Defendant’s statement that the
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damage could not be repaired within 30 days). Similarly, the following allegations in the
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Complaint allege fraudulent conduct: (1) Defendant “devised a scheme to force” Plaintiff out of his
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store, (2) Defendant misled Plaintiff to believe that $10,000 was sufficient to meet the minimum
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equity requirements for his store, and (3) Defendant “took [Plaintiff’s] store… under false
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pretenses.” Id. at 9-10. Plaintiff’s claim that Defendant told Plaintiff that it was “imperative” that
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Plaintiff meet with Defendant and then Defendant sent a truck to Plaintiff’s store to take Plaintiff’s
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inventory also appears to allege fraudulent conduct to the extent Plaintiff is alleging that the
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meeting was a mere pretext to allow Defendant to access Plaintiff’s store while Plaintiff was out.
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Id. at 7. Because these claims allege fraud, they must be supported by particularized facts as
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required by Rule 9(b). See Fed. R. Civ. P. 9(b); Vess, 317 F.3d at 1102-04.
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Case No.: 5:12-CV-1739-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
Plaintiff’s allegations fail to meet this requirement. As set forth supra, Plaintiff does not
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allege which of Defendant’s employees told him the damage could not be repaired in 30 days, or
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why this statement was false. Plaintiff’s allegations that Defendant “devised a scheme to force”
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Plaintiff to sell his store and took Plaintiff’s store under “false pretenses” are similarly unsupported
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by particularized facts. Compl. at 9. Indeed, the Court is unable to discern whether these
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allegations are premised on Defendant’s alleged misconduct in connection with its repair
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obligations, or whether some other misconduct is being alleged. Plaintiff’s allegation that
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Defendant misled him regarding the amount necessary to meet the minimum equity requirement
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also fails because Plaintiff does not allege which of Defendant’s employees misled him, what was
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United States District Court
For the Northern District of California
1
said, or when it was said. Vess, 317 F.3d at 1106 (holding that plaintiff must allege the “who, what
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when, where, and how of the misconduct charged”). Plaintiff’s allegation that Defendant misled
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him as to the need for a meeting so that Defendant could take Plaintiff’s inventory while Plaintiff
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was gone similarly fails because Plaintiff has not alleged which of Defendant’s employees called
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the meeting, where it took place, or facts showing Defendant did not actually need to meet with
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Plaintiff. See id. For these reasons, Plaintiff’s allegations of fraudulent conduct fail under 9(b).
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Accordingly, these allegations will not support Plaintiff’s claims under the UCL or the FAL. See
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id. at 1105 (holding that allegations of fraud that do not satisfy Rule 9(b) should be “stripped from
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the claim”).
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2. Sufficiency of Plaintiff’s Allegations under Federal Rule of Civil Procedure 8(a)
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In light of the Court’s ruling above, only two allegations remain that may support Plaintiff’s
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UCL and FAL claims: (1) that Defendant improperly transferred equity from one of Plaintiff’s
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store to another (thereby causing Plaintiff’s equity in the first store to fall below the minimum), and
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(2) that Defendant interfered with the sale of Plaintiff’s store. Compl. at 6-7, 9. These allegations
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do not allege fraud and are, therefore, not required to meet the particularity requirements of Rule
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9(b). See Vess, 317 F.3d at 1104 (holding that Rule 9(b) “does not require that allegations
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supporting a claim be stated with particularity when those allegations describe non-fraudulent
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conduct.”). However, they must still satisfy the pleading requirements set forth in Rule 8. The
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Court concludes that neither allegation is sufficient under Rule 8.
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Case No.: 5:12-CV-1739-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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Plaintiff’s allegation that Defendant interfered with Plaintiff’s sale of his store lacks any
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support (e.g. facts regarding what Defendant did to interfere with the sale of Plaintiff’s store). This
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bare allegation does not provide the Court with enough information “to draw the reasonable
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inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.
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Accordingly, these allegations fail under Rule 8(a).
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Plaintiff’s allegation that Defendant improperly transferred equity from Plaintiff’s store,
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causing the Plaintiff’s equity in the store to fall below the minimum, similarly fails. Plaintiff
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alleges that, on two occasions, in July 2007 and January 2007, Defendant advised Plaintiff that
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Defendant was going to take equity from Plaintiff’s store because Plaintiff owed Defendant money.
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For the Northern District of California
10
Compl. at 6-7. However, Plaintiff’s allegations are unclear as to what the purported debt related.
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See id. (alleging that Defendant informed Plaintiff he owed money in connection with “the sale of
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this [sic] other 7-Eleven store to [P]laintiff or some other unspecified reason”). Indeed, Plaintiff
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does not even allege whether Defendant’s statement that Plaintiff owed Defendant money was true
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or not. See id. Furthermore, with respect to the January transfer, it is unclear whether Plaintiff is
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alleging that the equity taken from Plaintiff’s store was transferred to his other store (an action that
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could be consistent with Defendant’s rights under the contract), or whether Plaintiff is alleging that
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Defendant kept the money. Thus, even under Rule 8(a), Plaintiff’s allegations fail to provide the
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Court with sufficient information to evaluate whether Defendant might reasonably be held liable
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under the UCL or FAL.
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3. Other Deficiencies in Plaintiff’s UCL Claim
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While not raised in the Motion, the Court notes that there are several other deficiencies with
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respect to Plaintiff’s UCL and FAL claims. For example, Plaintiff’s UCL claim fails under the
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unlawful prong because Plaintiff does not allege that any specific laws were violated. Saldate, 686
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F. Supp. 2d at 1066 (“To state a claim for ‘unlawful’ business practice under the UCL, a plaintiff
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must assert the violation of any other law”) (quoting Rubio v. Capital One Bank (USA), N.A., 572
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F. Supp. 2d 1157, 1168 (C.D. Cal. 2008)). Plaintiff’s UCL claim would also fail under the
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fraudulent prong because Plaintiff has not alleged that any deceptive statements were made to the
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public or that Defendant’s actions harmed the public interest. Saldate, 686 F. Supp. 2d at 1066
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Case No.: 5:12-CV-1739-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
1
(“The ‘fraudulent’ prong under the UCL requires a plaintiff to ‘show deception to some members
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of the public, or harm to the public interest….’ ”) (quoting Watson Laboratories, Inc. v. Rhone-
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Poulenc Rorer, Inc., 178 F. Supp. 2d 1099, 1121 (C.D. Cal. 2001)). Plaintiff’s claim under the
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FAL fails for the same reason. California Business and Professions Code § 17500 (“It is unlawful
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for any… corporation… with intent directly or indirectly to dispose of real or personal property…
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to make or disseminate… before the public… [a] statement… which is untrue or misleading….”)
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(emphasis added).
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United States District Court
For the Northern District of California
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For the reasons set forth above, Defendant’s Motion to Dismiss Plaintiff’s third cause of
action for violations of the UCL and FAL is GRANTED.
E. Leave to Amend
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Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend “shall be freely
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given when justice so requires,” bearing in mind “the underlying purpose of Rule 15 to facilitate
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decision on the merits, rather than on the pleadings or technicalities.” Lopez v. Smith, 203 F.3d
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1122, 1127 (9th Cir. 2000) (en banc) (internal quotation marks and alterations omitted). When
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dismissing a complaint for failure to state a claim, “‘a district court should grant leave to amend
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even if no request to amend the pleading was made, unless it determines that the pleading could not
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possibly be cured by the allegation of other facts.’” Id. at 1127 (quoting Doe v. United States, 58
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F.3d 494, 497 (9th Cir. 1995)). If amendment would be futile, however, a dismissal may be
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ordered with prejudice. Dumas v. Kipp, 90 F.3d 386, 393 (9th Cir. 1996). Similarly, leave to
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amend may be denied if allowing amendment would unduly prejudice the opposing party, cause
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undue delay, or if the moving party has acted in bad faith. Leadsinger, Inc. v. BMG Music Publ’g.,
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512 F.3d 522, 532 (9th Cir. 2008).
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In the present case, the Court believes the pleading deficiencies identified above could be
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cured with additional factual allegations. Lopez, 203 F.3d at 1130. Moreover, amendment would
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not cause undue prejudice or undue delay. Accordingly, the Court GRANTS leave to amend.
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IV.
CONCLUSION
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For the reasons set forth above, Defendant’s motion to dismiss the Complaint is
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GRANTED with leave to amend. If Plaintiff wishes to pursue this action, he must file a First
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Case No.: 5:12-CV-1739-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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Amended Complaint, addressing the deficiencies identified herein, within 21 days of this Order.
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Plaintiff may not add new claims or parties without seeking Defendant’s consent or leave of the
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Court pursuant to Federal Rule of Civil Procedure 15. If Plaintiff fails to file an amended
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complaint within 21 days of this Order or to cure the deficiencies addressed in this Order, the
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action will be dismissed with prejudice.
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IT IS SO ORDERED.
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Dated: September 12, 2012
___________________________________
LUCY H. KOH
United States District Judge
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United States District Court
For the Northern District of California
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Case No.: 5:12-CV-1739-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS
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