VeriFone, Inc. v. A Cab, LLC

Filing 47

ORDER Granting in part and Denying in part 35 Motion to Dismiss. A Cab's counterclaims based on the Services Agreement are dismissed without prejudice. IT IS FURTHER ORDERED that A Cab shall file its third amended counterclaim within fourteen (14) days of the date of this Order. Signed by Chief Judge Gloria M. Navarro on 8/24/16. (Copies have been distributed pursuant to the NEF - JM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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VERIFONE, INC., a Delaware corporation,
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Plaintiff,
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vs.
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A CAB, LLC, a Nevada limited liability
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company,
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Defendant.
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A CAB, LLC, a Nevada limited liability
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company,
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Counterclaim Plaintiff,
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vs.
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VERIFONE, INC., a Delaware corporation,
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Counterclaim Defendant. )

Case No.: 2:15-cv-00157-GMN-GWF
ORDER

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Pending before the Court is a Motion to Dismiss Defendant A Cab, LLC’s (“A Cab”)

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Second Amended Counterclaim (ECF No. 35) filed by Plaintiff VeriFone, Inc. (“VeriFone”).

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A Cab filed a Response (ECF No. 37), and VeriFone filed a Reply (ECF No. 38).

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I.

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BACKGROUND
A Cab alleges in its Second Amended Counterclaim (“SAC”) that it entered into the

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Verifone Transportation Services Agreement (the “Services Agreement”) with VeriFone and

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Taxipass on December 18, 2007, wherein Taxipass agreed to install POS Terminals in A Cab’s

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participating taxis, such participating taxis had access to the VeriFone Hosted Software through

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Taxipass’ equipment, and A Cab granted Taxipass the exclusive right to process all electronic

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payment transactions for its participating taxis. (SAC ¶¶ 5–8, ECF No. 30; Services Agreement,

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Ex. A to Mot. to Dismiss SAC §§ 1–2, ECF No. 35-1). A Cab further alleges that Taxipass

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defaulted on its obligations to A Cab under the Services Agreement, VeriFone notified A Cab

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of Taxipass’ default, and VeriFone assumed the operations and obligation of Taxipass. (SAC ¶¶

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12–14). Upon assuming Taxipass’ operations and obligation under the Services Agreement, A

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Cab alleges that VeriFone “failed to cure the swipe revenue which was owed to A Cab,” which

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was approximately $117,000. (Id. ¶ 15).

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A Cab further alleges that it entered into a Dispatch Service Lease Agreement (the
“Dispatch Agreement”) with VeriFone on November 11, 2011, wherein VeriFone agreed to

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provide A Cab with a dispatch system. (Id. ¶¶ 11, 31). A Cab claims that “[p]ursuant to section

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6 of the Dispatch Agreement, following the expiration of the Service Agreement, the parties

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agreed to negotiate in good faith to enter into an agreement pertaining to payment processing

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service.” (Id. ¶ 16). Moreover, A Cab alleges that “Verifone breached this clause by instead

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merely continuing the swipe revenue from the Service Agreement at $1 per swipe, rather than

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the industry standard of $2 per swipe.” (Id. ¶ 17).
On October 23, 2015, the Court granted VeriFone’s Motion to Dismiss A Cab’s

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Amended Counterclaim, dismissing A Cab’s Amended Counterclaim with prejudice. (Order

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6:11–14, ECF No. 29). The Court held that the Dispatch Agreement barred A Cab from

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seeking consequential damages from VeriFone. (Id. 5:15–17). Because A Cab did not seek any

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other relief for its claims, the Court dismissed its claims against VeriFone with leave to amend.

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(Id. 5:17–21).

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II.

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LEGAL STANDARD
Dismissal is appropriate under Rule 12(b)(6) where a pleader fails to state a claim upon

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which relief can be granted. Fed. R. Civ. P. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544,

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555 (2007). A pleading must give fair notice of a legally cognizable claim and the grounds on
which it rests, and although a court must take all factual allegations as true, legal conclusions
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couched as a factual allegations are insufficient. Twombly, 550 U.S. at 555. Accordingly, Rule

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12(b)(6) requires “more than labels and conclusions, and a formulaic recitation of the elements

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of a cause of action will not do.” Id. “To survive a motion to dismiss, a complaint must contain

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sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its

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face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “A

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claim has facial plausibility when the plaintiff pleads factual content that allows the court to

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draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. This

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standard “asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.
If the court grants a motion to dismiss for failure to state a claim, leave to amend should

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be granted unless it is clear that the deficiencies of the complaint cannot be cured by

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amendment. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992). Pursuant

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to Rule 15(a), the court should “freely” give leave to amend “when justice so requires,” and in

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the absence of a reason such as “undue delay, bad faith or dilatory motive on the part of the

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movant, repeated failure to cure deficiencies by amendments previously allowed, undue

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prejudice to the opposing party by virtue of allowance of the amendment, futility of the

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amendment, etc.” Foman v. Davis, 371 U.S. 178, 182 (1962).

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III.

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DISCUSSION
A. Motion to Dismiss
1. Services Agreement
A Cab alleges that VeriFone breached the Services Agreement by failing to pay monies

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owed to A Cab as a result of VeriFone’s assumption of Taxipass’ obligation under the Services

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Agreement. (SAC ¶ 24). However, the Services Agreement contains the following forum

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selection clause:

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Any legal suit, action or proceeding arising out of or relating to this
Agreement shall be commenced in a federal court in the Northern
District of California or in state court in Santa Clara County,
California, and each party hereto irrevocably submits to the
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jurisdiction and venue of any such court in any such suit, action or
proceeding.
(Services Agreement § 14).
VeriFone moves to dismiss A Cab’s claims related to the Services Agreement because

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they “are improper in this Court . . . [and] can be litigated in only California.” (Mot. Dismiss

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7:9–14). Rather than rely upon 28 U.S.C. § 1404(a) or Rule 12(b)(3) of the Federal Rules of

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Civil Procedure, VeriFone bases its motion on Rule 12(b)(6). (Id. 1:22–23). The Supreme

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Court has not foreclosed this avenue. Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of

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Texas, 134 S. Ct. 568, 580 (2013). It appears no controlling precedent precludes 12(b)(6)

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dismissal based on a contrary forum selection clause. See JPMorgan Chase Bank, N.A. v. Trade

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Show Fabrications W., Inc., No. 2:12–CV–00554–GMN, 2014 WL 347476, at *2–3 (D. Nev.

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Jan. 29, 2014) (finding no controlling precedent and declining to resolve the question). District

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courts after Atlantic Marine have split as to whether Rule 12(b)(6) is an appropriate vehicle.

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See, e.g., Hudson Fin. Corp. v. Autoliv ASP, Inc., No. 1:12CV2808, 2014 WL 132437, at *2 n.1

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(N.D. Ohio Jan. 14, 2014) (noting a split in authority but holding that § 1404(a) is the only

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appropriate vehicle for enforcement of a forum selection clause); Carter’s of New Bedford, Inc.

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v. Nike, Inc., No. CIV.A. 13–11513–DPW, 2014 WL 1311750, at *2 n.5 (D. Mass. Mar. 31,

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2014) (citing First Circuit precedent allowing dismissal under Rule 12(b)(6) based on a

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contrary forum selection clause and considering such a motion). The Court accepts VeriFone’s

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characterization of its motion as brought under Rule 12(b)(6).

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Opposing the validity of the Services Agreement’s forum selection clause, A Cab argues

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that the Services Agreement was modified in 2009. (Response 2:25–27). A Cab asserts that the

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2009 modification of the Services Agreement does not have a forum selection clause limiting

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any action based upon the Services Agreement in California. (Id. 2:27–28). A Cab attaches the

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2009 modification to its Response. (See Ex. A to Response, ECF No. 37-2). However, nowhere

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in A Cab’s SAC does A Cab plead facts on which the Court could infer that the Services

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Agreement was modified in 2009. Rather, the allegations in the SAC merely relate to the

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Services Agreement that was entered into by the parties on December 18, 2007. (SAC ¶ 5).

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“Generally, a district court may not consider any material beyond the pleadings in ruling on a

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Rule 12(b)(6) motion.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555

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n.19 (9th Cir. 1990). Thus, the Court will not consider the 2009 modification as it goes beyond

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the pleadings and is inappropriate in a response to a Rule 12(b)(6) motion. Accordingly, the

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Court dismisses A Cab’s counterclaims based upon the Services Agreement and will give A

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Cab leave to amend its SAC to include facts related to the 2009 modification of the Services

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Agreement.
2. Dispatch Agreement
A Cab alleges that VeriFone breached Section 6 of the Dispatch Agreement. (SAC ¶¶

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24–28). A claim for breach of contract must allege (1) the existence of a valid contract; (2) that

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the plaintiff performed or was excused from performance; (3) that the defendant breached the

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terms of the contract; and (4) that the plaintiff was damaged as a result of the breach. See

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Restatement (Second) of Contracts § 203 (2007); Calloway v. City of Reno, 993 P.2d 1259,

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1263 (Nev. 2000) (“A breach of contract may be said to be a material failure of performance of

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a duty arising under or imposed by agreement”).

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Section 6 of the Dispatch Agreement provides that “VeriFone and [A Cab] shall

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negotiate in good faith to enter into an agreement covering the subject matter thereof. So long

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as it is allowed under applicable law, such agreement will incorporate a payment voucher

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model pursuant to which VeriFone will pay to [A Cab] at least $1 per transaction fee as long as

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voucher fee is at least $3.” (ECF No. 17). Specifically, A Cab alleges that “VeriFone failed to

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comply with Section 6 requiring negotiation of an agreement upon the expiration of the Service

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Agreement, and instead has to date paid A Cab $1 per swipe rather than the $2 per swipe

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industry standard,” which has resulted in “the loss of swipe revenue which continues to be

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incurred.” (SAC ¶¶ 26–27). Accordingly, the Court finds that A Cab has sufficiently pled a

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breach of contract counterclaim based on the Dispatch Agreement.

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Furthermore, A Cab alleges that VeriFone breached the implied covenant of good faith

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and fair dealing. (SAC ¶¶ 33–34). Under Nevada law, “[e]very contract imposes upon each

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party a duty of good faith and fair dealing in its performance and execution.” A.C. Shaw

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Constr. v. Washoe County, 784 P.2d 9, 9 (Nev. 1989) (quoting Restatement (Second) of

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Contracts § 205). To establish a claim for breach of the implied covenant of good faith and fair

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dealing, a plaintiff must show that: (1) the plaintiff and defendant were parties to a contract; (2)

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the defendant owed a duty of good faith and fair dealing to the plaintiff; (3) the defendant

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breached his duty by performing in a manner unfaithful to the purpose of the contract; and (4)

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the plaintiff's justified expectations were denied. Crow v. Home Loan Ctr., No. 3:11–cv–

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00259–LRH–VPC, 2011 WL 2214118, at * 2 (D. Nev. 2011).

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Specifically, A Cab alleges that “VeriFone breached its implied duty by failing to install

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a dispatch system that performed as promised,” which “A Cab has been damaged in an amount

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of at least $117,000, the monies owed pursuant to VeriFone’s assumption of Taxipass’

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obligations” and “A Cab has been damaged by the loss of swipe revenue which continues to be

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incurred.” (SAC ¶¶ 33–34). Accordingly, the Court finds that A Cab sufficiently pleads a

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breach of the implied covenant of good faith and fair dealing counterclaim based on the

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Dispatch Agreement.

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B. Leave to Amend

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Rule 15(a)(2) of the Federal Rules of Civil Procedure permits courts to “freely give

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leave [to amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2). The Ninth Circuit “ha[s]

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held that in dismissing for failure to state a claim under Rule 12(b)(6), ‘a district court should

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grant leave to amend even if no request to amend the pleading was made, unless it determines

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that the pleading could not possibly be cured by the allegation of other facts.’” Lopez v. Smith,

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203 F.3d 1122, 1127 (9th Cir. 2000) (quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir.

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1995)).

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The Court finds that A Cab may be able to plead additional facts to support its

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counterclaims against VeriFone based on the Services Agreement. Accordingly, because the

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Court finds that A Cab may be able to plead additional facts to support its dismissed

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counterclaims, the Court will grant A Cab leave to file a third amended counterclaim solely for

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this purpose. Plaintiffs shall file a third amended counterclaim within fourteen (14) days of

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the date of this Order if it can allege sufficient facts that plausibly establishes its dismissed

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counterclaims based on the Services Agreement.

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IV.

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CONCLUSION
IT IS HEREBY ORDERED that VeriFone’s Motion to Dismiss (ECF No. 35) is

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GRANTED in part and DENIED in part. Accordingly, A Cab’s counterclaims based on the

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Services Agreement are dismissed without prejudice.

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IT IS FURTHER ORDERED that A Cab shall file its third amended counterclaim

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within fourteen (14) days of the date of this Order. Failure to file a third amended

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counterclaim by this date shall result in the Court dismissing A Cab’s counterclaims based on

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the Services Agreement with prejudice.

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DATED this _____ day of August, 2016.

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___________________________________
Gloria M. Navarro, Chief Judge
United States District Judge

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