Factory Connection Racing, Inc. v. Radiate Group, Inc. et al
Filing
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ORDER Granting 6 Motion to Dismiss for Failure to State a Claim. Based on the information stated herein, it is hereby Ordered that Defendant's Motion to Dismiss is granted and Plaintiff's Claim under the Act is Dismissed without prejudice, and with Leave to Amend. Plaintiff may file an Amended Complaint that cures the deficiencies by 4/22/2013. Signed by Judge John A. Houston on 3/21/2013. (leh)
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UNITED STATES DISTRICT COURT
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SOUTHERN DISTRICT OF CALIFORNIA
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FACTORY CONNECTION RACING,
INC., A New Hampshire Corporation,
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Plaintiff,
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v.
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RADIATE GROUP, INC., A Delaware
Corporation; and DOES 1 through 20,
inclusive,
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Defendant.
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Civil No. 3:12-cv-1586-JAH (BLM)
ORDER GRANTING
DEFENDANT’S MOTION TO
DISMISS
[Doc. No. 6]
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INTRODUCTION
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Currently pending before this Court is the motion to dismiss Factory Connection
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Racing, Inc.’s (“Plaintiff” or “FCR”) complaint filed by Radiate Group, Inc. (“Defendant”).
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The motion has been fully briefed by the parties. After careful review of the parties’
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submissions, and for the following reasons, this Court GRANTS Defendant’s motion to
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dismiss.
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3:12-cv-1586-JAH(BLM)
BACKGROUND
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I.
Procedural Background
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On June 6, 2012, Plaintiff filed a complaint against Defendant alleging the
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following causes of action: (1) breach of contract; (2) breach of the covenant of good faith
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and fair dealing; (3) violation of the Miller-Ayala Athlete Agents Act (“Act”); (4) Unjust
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Enrichment; and (5) Declaratory Relief. See Doc. No. 1. On August 1, 2012, Defendant
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filed the instant motion to dismiss Plaintiff’s third cause of action for violation of the Act
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pursuant to the Federal Rule of Civil Procedure 12(b)(6) [Doc. No.6].1 On September
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3, 2012, Plaintiff filed a response in opposition to the motion, including a request for
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leave to amend. See Doc. No. 11. On September 10, 2012, Defendant filed a reply. See
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Doc. No. 14.
After a careful review of the parties’ submissions, and for the following reasons, this
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Court GRANTS Defendant’s motion to dismiss.
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In connection with the motion to dismiss, Defendant filed a request for judicial
notice of the following five Exhibits: (A) California Secretary of State Athlete Agent
Disclosure Form; (B) Assembly Bill No. 1987, as originally introduced on January 3, 1996;
(C) Assembly Bill No. 1987, as amended on March 20, 1996; (D) California Senate
Judiciary Committee’s analysis of the Uniform Athlete Agents Act, Senate Bill No. 1098,
as amended on April 5, 2010, in the 2009-10 Regular Session; and (E) Minute Order
issued by the Superior Court of California, County of San Diego, North County in Case
No. 37-2010-00058757-CU-MC-NC. See Doc. No. 7. This Court may take judicial
notice of an adjudicative fact “not subject to reasonable dispute because it can be . . .
accurately and readily determined from sources whose accuracy cannot be reasonably
questioned.” See Fed. R. Evid. 201; Grason Elec. Co. v. Sacramento Mun. Util. Dist., 571
F. Supp. 1504, 1521 (E.D. Cal. 1983). In a preclusion context, a federal court may
“[take] judicial notice of a state court decision and the briefs filed in that court to
determine if an issue was raised and decided by the state court for res judicata purposes.”
Manufactured Home Cmtys. Inc. v. City of San Jose, 420 F.3d 1022, 1037 (9th
Cir.2005); see also Holder v. Holder, 305 F.3d 854, 866 (9th Cir.2002) (taking judicial
notice of a California Court of Appeal opinion “and the briefs filed in that proceeding and
in the trial court” for the purposes of ruling on issue preclusion). This Court declines to
take judicial notice of Exhibits A-D because they are not the proper subject of judicial
notice, i.e. of adjudicative facts. This Court also declines to take judicial notice of Exhibit
E, the Superior Court Minute Order, because Defendant’s motion to dismiss is not based
on issue and/or claim preclusion. Therefore, Defendant’s request for judicial notice is
DENIED.
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3:12-cv-1586-JAH(BLM)
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II.
Factual Background2
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FCR, a manufacturer of performance motorcycle parts and operator of a
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professional motorcycle racing team, alleges in its complaint that, on July 26, 2006, the
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parties entered into a one-year written Representation Agreement (“Agreement”). Under
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the Agreement, Defendant, a marketing agency, agreed to negotiate and solicit sponsorship
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opportunities on behalf of FCR. See Doc. No. 1 at 2. FCR appointed Defendant as its
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“exclusive sales agency for the purpose of acquiring all non-endemic (outside the
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motorcycle industry) sponsorships” for FCR’s teams in an “exclusive, worldwide basis for
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the term hereof.” See Doc. No. 1-2 at 2. Plaintiff is required to pay commission fees,
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during and after the expiration of the term of the Agreement, from any sponsorship that
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Defendant secures for Plaintiff.
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Defendant and FCR agreed in writing to extend the Agreement until July 26, 2008. See
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Doc. No. 1 at 3. In 2009, Defendant became the agent for one of FCR’s motocross racers,
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Trey Canrad (“Canrad”). See Doc. No. 1 at 5. FCR advised Defendant that because of
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its representation of Canrad, Defendant created a conflict of interest, and as such, no
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further commissions or obligations are owed to Defendant. Id. at 6. Plaintiff maintains
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that the Agreement is void and unenforceable because Defendant did not comply with the
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Act by failing to file a disclosure statement with the California Secretary of State and post
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a surety bond in connection with its relationship with FCR. Id. at 4-6. It is undisputed
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that Defendant did not at any relevant time satisfy the requirements of the Act. See Doc.
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No. 6-1 at 8.
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Id. at 3.
Plaintiff alleges that on July 17, 2007,
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These background facts are taken from Plaintiff’s complaint, the operative
pleading here, and are assumed true for purposes of the instant motion. See Thompson
v. Davis, 295 F.3d 890, 895 (9th Cir. 2002).
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3:12-cv-1586-JAH(BLM)
DISCUSSION
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Defendant moves to dismiss Plaintiff’s complaint pursuant to Rule 12(b)(6) of the
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Federal Rules of Civil Procedure. [Doc. No. 6].
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I.
Legal Standard
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A motion to dismiss under Rule 12(b)(6) tests the sufficiency of the complaint.
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Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is warranted under
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Rule 12(b)(6) where the complaint lacks a cognizable legal theory. Robertson v. Dean
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Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984); see Neitzke v. Williams, 490
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U.S. 319, 326 (1989) (“Rule 12(b)(6) authorizes a court to dismiss a claim on the basis
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of a dispositive issue of law.”). Alternatively, a complaint may be dismissed where it
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presents a cognizable legal theory yet fails to plead essential facts under that theory.
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Robertson, 749 F.2d at 534. While a plaintiff need not give “detailed factual allegations,”
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he must plead sufficient facts that, if true, “raise a right to relief above the speculative
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level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007).
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“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
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accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,
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129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 547). A claim is facially
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plausible when the factual allegations permit “the court to draw the reasonable inference
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that the defendant is liable for the misconduct alleged.” Id. In other words, “the non-
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conclusory ‘factual content,’ and reasonable inferences from that content, must be
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plausibly suggestive of a claim entitling the plaintiff to relief. Moss v. U.S. Secret Service,
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572 F.3d 962, 969 (9th Cir. 2009). “Determining whether a complaint states a plausible
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claim for relief will ... be a context-specific task that requires the reviewing court to draw
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on its judicial experience and common sense.” Iqbal, 129 S.Ct. at 1950.
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In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the
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truth of all factual allegations and must construe all inferences from them in the light most
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favorable to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir.
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2002); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). However,
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legal conclusions need not be taken as true merely because they are cast in the form of
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factual allegations. Ileto v. Glock, Inc., 349 F.3d 1191, 1200 (9th Cir. 2003); Western
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Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). When ruling on a motion
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to dismiss, the Court may consider the facts alleged in the complaint, documents attached
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to the complaint, documents relied upon but not attached to the complaint when
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authenticity is not contested, and matters of which the Court takes judicial notice. Lee
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v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). If a court determines that
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a complaint fails to state a claim, the court should grant leave to amend unless it
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determines that the pleading could not possibly be cured by the allegation of other facts.
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See Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995).
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II.
Analysis
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Defendant argues that Plaintiff lacks standing to pursue a claim under the Act.3,4
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See Doc. No. 6-1. Specifically, Defendant argues that Plaintiff lacks standing because it
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has not alleged sufficient facts to establish FCR has been adversely affected as a result of
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Defendant’s violation of the Act. See Doc. No. 6-1 at 15, 18-20. Defendant notes that
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while the complaint alleges that Defendant violated the Act by failing to comply with its
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disclosure obligations and by failing to obtain a surety bond, FCR has not alleged how it
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or any individual athlete has been adversely affected by Defendant’s violation of the Act.
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Because this Court ultimately finds that Plaintiff does not have the requisite
standing to bring the instant claim under the Act, this Court will not address Defendant’s
arguments regarding Plaintiff’s failure to state a claim.
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Defendant maintains it could not find any binding authority on the issues
presented in its motion to dismiss. See Doc. No. 6-1 at 17. Defendant, however, presents
both an unpublished San Diego Superior Court Minute Order and a Texas Arbitration
Award as persuasive authorities. See Doc. Nos. 7-5 and 6-2. In opposition, Plaintiff
argues Defendant improperly cited to unpublished decisions because they have no
precedential value. See Doc. No. 11 at 21-22 (citing Ninth Circuit Rule 363)(“Unpublished dispositions and orders of this Court are not precedent.”). Defendant,
in reply, argues that to the extent that Rule 36-3 is applicable, Defendant complied
because the Rule expressly permits courts to cite “[u]npublished dispositions and orders
of this Court issued on or after January 1, 2007.” See Doc. No. 14 at 8-9 (citing Ninth
Circuit Rule 36-3(b). Although the authority Defendant cites is not binding precedent,
this Court finds they have persuasive value. Therefore, this Court may rely upon these
unpublished decisions as persuasive authority. See Nuh Nhuoc Loi v. Scribner, 671 F.
Supp. 2d 1189, 1201, n. 10 (S.D. Cal 2007); Ortiz v. Accredited Home Lenders, Inc., 639
F. Supp. 2d 1159, 1167, n .1 (S.D. Cal. 2009).
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3:12-cv-1586-JAH(BLM)
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See Doc. No. 6-1 at 15, 18-20 (citing Cal. Bus. & Prof. Code § 18897.8(a)). Defendant
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points out that the complaint alleges FCR suffered damages due to Defendant’s
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representation of Canrad. See Doc. No. 6-1 at 19. Defendant argues, however, that its
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representation of Canrad does not constitute a violation of the Act. Id. Defendant,
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therefore, claims that based on the allegations in the complaint, FCR does not have
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standing to bring this action because it has not suffered any injury as a result of the
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alleged violation. See Doc. No. 6-1 at 19-10.
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In opposition, Plaintiff argues that Defendant’s failure to comply with the Act
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adversely affected FCR because it was unable to determine whether Defendant was
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simultaneously representing competitors seeking the same motosport sponsorships. See
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Doc. No. 11 at 20. Plaintiff contends that based on Defendant’s failure to comply with
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the Act, Plaintiff paid Defendant $808,683.56 in commissions that it was not entitled to
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receive. Id. Plaintiff also contends that the Act is a strict liability statute, and that under
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section 18897.8(b), even if there are no actual damages, a plaintiff may recover $50,000,
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as well as punitive damages, fees and costs. See Doc. No. 11 at 20.
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In reply, Defendant argues that the alleged “adverse effect” –that FCR was unable
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to determine whether Defendant was simultaneously representing competitors seeking the
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same sponsorships– show that FCR does not have a viable claim under the Act because
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FCR’s assertion is a hypothetical about Defendant possibly representing a competitor. See
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Doc. No. 14 at 4.
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theoretical breach of contract claim. Id. In addition, Defendant notes that FCR does not
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allege how it suffered because Defendant did not secure a surety bond pursuant to the Act.
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Id.
Defendant argues that FCR’s assertion at most gives rise to a
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Section 18897.8(a) states: Any professional athlete ... or any other person may
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bring a civil action for recovery of damages from an athlete agent, if that professional
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athlete ... or that other person is adversely affected by the acts of the athlete agent or of
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the athlete agent’s representative or employee in violation of this chapter. In regards to
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damages, section 18897.8(b) states: A plaintiff that prevails in a civil action brought
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under this section may recover actual damages, or fifty thousand dollars ($50,000),
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whichever is higher; punitive damages; court costs; and reasonable attorneys’ fees.
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Under section 18897.8(a), Plaintiff must allege it was adversely affected by
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Defendant’s violations of the Act in order to bring an action pursuant to the Act. As such,
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the Act is not a strict liability statute. Furthermore, this Court finds Plaintiff’s argument
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that FCR was damaged because it paid Defendant $808,683.56 in commissions that it was
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not entitled to receive does not establish actual damage resulting from Defendant failing
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to file a disclosure statement and to secure a surety bond pursuant to the Act. While
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Plaintiff alleges that because Defendant failed to file a disclosure statement, it could not
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determine if Defendant was representing competitors, Plaintiff does not allege that
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Defendant was representing competitors or that it was damaged by Defendant’s
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representation of a competitor.
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commission that Defendant was not entitled to receive, however, Plaintiff does not state
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that such a payment would not have been made but for Defendant’s violation of the Act.
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Therefore, Plaintiff has not alleged facts sufficient to establish it has been adversely
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affected by Defendant’s failure to comply with the Act. Thus, this Court finds that
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Plaintiff lacks standing to pursue a claim under the Act, and accordingly, GRANTS
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Defendant’s motion to dismiss. Because it is possible for Plaintiff to allege sufficient facts
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to establish it has been adversely affected as a result of Defendant’s violation of the Act,
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Plaintiff’s claim is DISMISSED WITHOUT PREJUDICE and WITH LEAVE TO
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AMEND.5
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Plaintiff also alleges that FCR paid Defendant a
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Defendant also requests that this Court award Defendant fees pursuant to the
Agreement should it prevail on its motion to dismiss. See Doc. No. 6-1 at 20. Because
Plaintiff’s claim under the Act is dismissed without prejudice, Defendant’s request for fees
is premature, and thus, DENIED.
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3:12-cv-1586-JAH(BLM)
CONCLUSION AND ORDER
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Based on the foregoing, IT IS HEREBY ORDERED that:
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1.
Defendant’s motion to dismiss [Doc. No. 6] is GRANTED and Plaintiff’s
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claim under the Act is DISMISSED WITHOUT PREJUDICE and WITH
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LEAVE TO AMEND; and
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Plaintiff may file an amended complaint that cures the deficiencies outlined
herein no later than April 22, 2013.
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Dated:
March 21, 2013
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JOHN A. HOUSTON
United States District Judge
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