Dalrada Financial Corporation v. Deprey Company

• Court: District Court, S.D. California
• Decided: May 29, 2025
• Docket: 3:24-cv-01185
• Status: Unknown

Opinion

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 SOUTHERN DISTRICT OF CALIFORNIA 8 9 DALRADA FINANCIAL Case No.: 3:24-cv-01185-RBM-DEB CORPORATION, a Wyoming 10 corporation; DALRADA PRECISION ORDER GRANTING IN PART AND 11 PARTS, INC., a California Corporation DENYING IN PART DEPREY and wholly owned subsidiary of Dalrada DEFENDANTS’ MOTION TO 12 Financial Corp., DISMISS 13 [Doc. 3] 14 Plaintiffs, 15 v. 16 DEPREY COMPANY, et al.,

17 Defendants. 18 19 20 Pending before the Court is Defendants DePrey Company and Steven A. DePrey’s 21 (collectively, the “DePrey Defendants”) Motion to Dismiss (“Motion to Dismiss”). (Doc. 22 3.) On October 1, 2024, Plaintiffs Dalrada Financial Corporation and Dalrada Precision 23 Parts, Inc. (“Plaintiffs”) filed an Opposition to Defendants’ Motion to Dismiss 24 (“Opposition”). (Doc. 5.) On October 11, 2024, the DePrey Defendants filed a Reply in 25 support of the Motion (“Reply). (Doc. 6-1).1 26

27 1 The DePrey Defendants filed their Reply concurrently with a Motion for Leave to file their Reply beyond the deadline due to excusable neglect. (Doc. 6 at 2.) The Court granted 28 1 The Court finds this matter suitable for determination without oral argument 2 pursuant to Civil Local Rule 7.1(d)(1). For the reasons discussed below, the DePrey 3 Defendants’ Motion to Dismiss is GRANTED IN PART and DENIED IN PART. 4 I. BACKGROUND2 5 This case concerns a contractual dispute between Plaintiffs and the DePrey 6 Defendants. On July 10, 2024, Plaintiffs filed the instant Complaint asserting claims for: 7 (1) breach of a written contract (based on two different contracts); (2) breach of the implied 8 covenant of good faith and fair dealing; (3) intentional interference with prospective 9 economic advantage; (4) tortious interference with business relations; (5) unjust 10 enrichment; (6) civil conspiracy; (7) federal RICO violations; and (8) intentional 11 misrepresentation (fraud). (Compl. [Doc. 1] at 1, 8–15.)3 12 A. The Sales Representative Agreement 13 On or about May 3, 2021, Defendant DePrey Company, LLC (“Defendant Deprey 14 Co.”) and Plaintiffs entered into a Sales Representative Agreement where Defendant 15 Deprey Co. was to “bring in” a large contract with a third-party company, Fastenal 16 Company (“Fastenal”), for the custom manufacturing of steel parts (the “Written 17 Contract”). (Compl. ¶ 14; see Compl., Ex. C [Doc. 1-2] at 7–12.) Under the terms and 18 conditions of the Written Contract, Plaintiffs paid Defendant DePrey Co. a commission “in 19 the amount of 10% on gross sales for accounts it brought in for Plaintiff.” (Id.) 20 Pursuant to its terms, either party was allowed to “terminate the [Written Contract] 21 with or without cause by providing a written notice to the other party at least 60 (sixty) 22 days prior to the effective date of termination.” (Id. ¶ 18.) 23 24

25 2 The factual summary in this section reflects Plaintiffs’ allegations, not conclusions of fact or law by this Court. Well-pleaded factual allegations are accepted as true for purposes of 26 this Motion. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 27 3 The Court cites the paragraph numbers of the Complaint and the CM/ECF electronic 28 1 B. Fastenal Account 2 On or around September 2021, Defendant Deprey Co. brought the Fastenal account 3 to Plaintiffs. (Id. ¶ 15.) Defendant Simon Gray (“Defendant Gray”) was the Chief 4 Operations Officer for Plaintiffs responsible for receiving and processing purchase orders 5 from Plaintiffs’ customers.4 (Id. ¶¶ 12, 15.) As part of the process, Defendant Gray sent 6 the processed purchase orders to Plaintiffs for fulfillment. (Id.) “Plaintiffs would then 7 send the [p]urchase [o]rders to their manufacturer, which in this case was Mide Global 8 Corporation located in Guangdong Province, China who would then ship the orders directly 9 to customers.” (Id. ¶ 15.) “The contractual relationship between Plaintiffs and Fastenal 10 continued from September 2021 until approximately December 2023.” (Id. ¶ 17.) 11 C. The Breach 12 On or around December 19, 2023, Defendant Pay Muench (“Defendant Muench”), 13 an employee of Defendant DePrey Co., sent an email to the “General Manager for Fastenal 14 providing instructions to cancel any existing open purchase orders with Plaintiffs and 15 switch said purchase orders to Mide Global Corporation.” (Id. ¶¶ 7, 17.) Defendant 16 Muench stated that “effective immediately” Defendant DePrey Co. would no longer 17 represent Plaintiffs and would instead be “working directly with Mide.” (Id. ¶ 17.) On 18 that same day, a sales specialist for Fastenal sent an email to Defendant Gray, who was still 19 working as an employee of Plaintiffs, “instructing [Defendant] Gray to cancel [Plaintiffs’] 20 Purchase orders.” (Id. ¶ 19 (citation omitted).) 21 Plaintiffs allege that the DePrey Defendants “circumvented the process and changed 22 the purchase orders from Plaintiffs to Mide” (id. ¶ 27) and thereby breached Sections 3.2, 23 3.5, and 10 of the Written Contract. (Id. ¶¶ 33–35.) “Defendants have breached their duties 24

25 4 Defendants Simon Gray and Pay Muench have not joined this Motion to Dismiss or otherwise appeared in this action. Accordingly, this Order only addresses the claims and 26 allegations against the DePrey Defendants. The Court further notes that Plaintiffs filed the 27 Complaint on July 16, 2024, but have not yet filed a proof of service demonstrating that Defendants Simon Gray or Pay Muench were properly or timely served. See Fed. R. Civ. 28 1 and obligations under Section 3.2 of the subject [Written Contract] wherein they were to 2 provide complete cooperation to Plaintiffs in order to assist Plaintiffs in maximizing 3 success within the territory in which Defendants acted as sales representatives.” (Id.) The 4 DePrey Defendants also allegedly breached “Section 3.5 (Prohibited Acts) . . . by willfully, 5 intentionally[,] and maliciously (1) directly making representations on behalf of Plaintiffs 6 and/or its products without Plaintiffs’ consent; (2) engaging in unfair, anti-competitive, 7 misleading and deceptive practices with respect to Plaintiffs and its products including 8 disparagement and trade libel of Plaintiffs; (3) selling, promoting or soliciting the sale of 9 or offer to sell any goods that compete with the products being sold by Plaintiffs.” (Id. 10 ¶ 34.) The DePrey Defendants further breached “Section 10 of the [Written Contract] by 11 failing and/or refusing to submit written notice to Plaintiffs informing them of the intent to 12 terminate the agreement 60 days prior to the effective termination date.” (Id. ¶ 35.) 13 Defendant DePrey Co. “did not provide any notice to Plaintiffs that they intended to 14 terminate their contractual agreement until January 10, 2024.” (Id. ¶ 18.) “As such, 15 Plaintiffs allege that the [Written Contract] was still in full force and effect at the time” of 16 the alleged breach. (Id.) “On or about January 9, 2024[,] Plaintiffs paid the sum of 17 $6,957.15 to Defendant DePrey Co. as their commission for December accounts.” (Id. 18 ¶ 23.) “On or about January 10, 2024[,] after receiving its commission payment, Defendant 19 Steven DePrey sent an email to Dalrada Precision Parts President David Pickett stating that 20 DePrey no longer wanted to represent Plaintiffs.” (Id. ¶ 24.) After the Deprey Defendants 21 allegedly “breached their duties and contractual obligations to Plaintiffs,” and “sought to 22 terminate their relationship with Plaintiffs[,] [Defendant] Gray continued to use 23 Plaintiffs[’] FedEx account to ship products to customers who had [a] relationship with 24 Plaintiffs which amounted to approximately $5,617.85.” (Id. ¶ 21.) 25 “On or about January 22[,] 2024, Plaintiffs’ legal counsel sent a letter to [the DePrey 26 Defendants] advising them that they were in breach of the [Written Contract].” (Id. ¶ 25.) 27 “On or about March 15, 2024, Plaintiffs received an email from Shining Ocean, a company 28 that Plaintiffs used for shipping the orders from Mide to Plaintiffs’ customers, with an 1 invoice for $2,000” for shipments received on December 15, 2023. (Id. ¶ 27.) As a result 2 of Fastenal’s cancelled purchase orders, Plaintiff experienced financial losses over 3 $800,000. (Id. ¶ 21.) 4 D. The DePrey Defendants’ Motion to Dismiss 5 On September 4, 2024, the Deprey Defendants filed the instant Motion to Dismiss. 6 (See Doc. 3 at 2.) The DePrey Defendants argue that all eight causes of action “depend[] 7 on the existence of a valid and enforceable [c]ontract” and should be dismissed because 8 “Plaintiffs failed to allege that the [Written] Contract was valid at the time of the alleged 9 breach(es) in 2023 and 2024.” (Doc. 3-1 at 2.) 10 In their Opposition, Plaintiffs argue that the Parties’ conduct extended or renewed 11 the Written Contract by implication. (Doc. 5 at 5.) Plaintiffs assert that they continued to 12 perform under the Written Contract and “[the DePrey] Defendants continued to act as sales 13 representatives for Plaintiff[s] long after the [Written] Contract’s expiration date.” (Id.) 14 II. LEGAL STANDARD 15 “A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to 16 state a claim upon which relief can be granted ‘tests the legal sufficiency of a claim.’” 17 Conservation Force v. Salazar, 646 F.3d 1240, 1241–42 (9th Cir. 2011) (quoting Navarro 18 v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). An action may be dismissed for failure to 19 allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. 20 v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff 21 pleads factual content that allows the court to draw the reasonable inference that the 22 defendant is liable for the misconduct alleged. The plausibility standard is not akin to a 23 ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant 24 acted unlawfully.” Iqbal, 556 U.S. at 678 (internal citations omitted). For purposes of 25 ruling on a Rule 12(b)(6) motion, the Court “accept[s] factual allegations in the complaint 26 as true and construe[s] the pleadings in the light most favorable to the nonmoving party.” 27 Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). 28 1 III. DISCUSSION 2 The DePrey Defendants seek to dismiss all eight causes of action against them based 3 solely on their contention that Plaintiffs failed to allege the existence of a valid contract. 4 (Doc. 3-1 at 5.) In their Opposition, Plaintiffs contend that “Defendant’s arguments are 5 premature and concern factual disputes, which cannot be resolved on a motion to dismiss.” 6 (Doc. 5 at 5 (citing Iqbal, 556 U.S. at 678).) Plaintiffs further argue that the Written 7 Contract is enforceable because “[t]he facts, as alleged in the Complaint, establish that 8 Defendants, by their conduct, extended the terms of the [Written Contract] even absent a 9 formal written agreement to do so.” (Doc. 5 at 4.) 10 As a preliminary matter, the DePrey Defendants do not raise any additional 11 arguments challenging the legal sufficiency of Plaintiffs’ Complaint. (See Doc. 3-1 at 4– 12 5.) As such, the Court limits the scope of its ruling to the arguments raised by the DePrey 13 Defendants and declines to address whether the allegations are otherwise sufficient to state 14 a claim. See Khademi v. South Orange County Cmty. College Dist., 194 F. Supp. 2d 1011, 15 1027 (C.D. Cal. 2002) (“A judge is . . . neither required to hunt down arguments [the 16 parties] keep camouflaged, nor required to address perfunctory and undeveloped arguments 17 . . . [T]o the extent that [Defendant] failed to develop any additional argument[s] or provide 18 any legal support for them, [it] has waived them.”) (citing Williams v. Eastside Lumberyard 19 & Supply Co., 190 F. Supp. 2d 1104, 1114 (S.D. Ill. 2001)); see, e.g., Est. of Johnson v. 20 Cnty. of Sacramento, No. 2:23-cv-01304-KJM-JDP, 2024 WL 279137, at *6 (E.D. Cal. 21 Jan. 25, 2024) (declining to review the sufficiency of plaintiffs’ allegations on its own 22 initiative where defendant failed to develop such arguments in its motion to dismiss); cf. 23 Sparling v. Hoffman Const. Co., 864 F.2d 635, 638 (9th Cir. 1988) (noting that courts may 24 review inadequacy of a complaint on its own initiative and dismiss a complaint after giving 25 plaintiff notice and opportunity to respond). 26 27 28 1 A. Contract Claims (First, Second, and Fifth Causes of Action) 2 1. Breach of Written Contract (First Cause of Action) 3 “[T]he elements of a cause of action for breach of contract are (1) the existence of 4 the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s 5 breach, and (4) the resulting damages to the plaintiff.” Oasis W. Realty, LLC v. Goldman, 6 51 Cal. 4th 811, 821 (2011) (citation omitted). Under California law, “[a] written contract 7 may be pleaded either by its terms—set out verbatim in the complaint or a copy of the 8 contract attached to the complaint and incorporated therein by reference—or by its legal 9 effect.” Quick Dispense, Inc. v. Vitality Foodservice, Inc., No. 8:23-CV-02322-FWS- 10 ADS, 2024 WL 2925589, at *9 (C.D. Cal. June 4, 2024) (citing McKell v. Wash. Mut., Inc., 11 142 Cal. App. 4th 1457, 1489 (2006)). On a motion to dismiss, “[r]esolution of contractual 12 claims . . . is proper if the terms of the contract are unambiguous.” Monaco v. Bear Stearns 13 Residential Mortg. Corp., 554 F. Supp. 2d 1034, 1040 (C.D. Cal. 2008) (quoting Bedrosian 14 v. Tenet Healthcare Corp., 208 F.3d 220 (9th Cir. 2000)). “A contract provision is 15 ambiguous where it is capable of two or more reasonable interpretations.” Velazquez v. 16 GMAC Mortg. Corp., 605 F. Supp. 2d 1049, 1069 (C.D. Cal. 2008) (citing Bay Cities 17 Paving & Grading, Inc. v. Lawyers’ Mut. Ins. Co., 5 Cal. 4th 854, 867 (1993)). 18 Plaintiffs argue that the validity of the Written Contract “concern[s] factual disputes, 19 which cannot be resolved on a motion to dismiss.” (Doc. 5 at 5 (citing Iqbal, 556 U.S. at 20 678).) However, the Court finds that the DePrey Defendants challenge the sufficiency of 21 the Complaint based on contradictions between Plaintiffs’ allegations and the Written 22 Contract, attached as Exhibit C to the Complaint (see Doc. 1-2, Ex. C at 7–12). See 23 Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001) (“The [C]ourt need 24 not . . . accept as true allegations that contradict matters properly subject to judicial notice 25 or by exhibit.”). 26 In this case, Plaintiffs allege that “the [Written Contract] was still in full force and 27 effect at the time of the breach by [Defendant] DePrey” on December 19, 2023. (Compl. 28 ¶¶ 18–20.) However, the Written Contract provides that it would continue “for an initial 1 term of one year unless sooner terminated pursuant to Section 10. After the end of the 2 initial term, this [Written Contract] may be automatically renewed for successive one-year 3 periods upon written agreement by parties.” (Doc. 1-2 at 10 (emphasis added).) Based on 4 its review of the Written Contract, the Court finds that its express terms are unambiguous 5 and demonstrate that the Parties intended for its duration to last one year and for its renewal 6 to be contemplated in writing. See Bank of the W. v. Superior Ct., 2 Cal. 4th 1254, 1264 7 (1992) (“If contractual language is clear and explicit, it governs.”) (citing Cal Civ. Code 8 § 1638); MacKinnon v. Truck Ins. Exch., 31 Cal. 4th 635, 647 (2003) (“[The parties’ 9 mutual] intent is to be inferred, if possible, solely from the written provisions of the 10 contract.”) (citation omitted). As Plaintiffs do not allege that the Parties agreed to its 11 renewal in writing, the Written Contract effectively terminated on May 3, 2022. See 12 Citizens for Amending Proposition L v. City of Pomona, 28 Cal. App. 5th 1159, 1189 13 (2018) (“It is the general rule that when a contract specifies its duration, it terminates on 14 the expiration of such period.”) (quoting Beatty Safway Scaffold, Inc. v. Skrable, 180 Cal. 15 App. 2d 650, 654 (1960)). 16 While Plaintiffs contend that the Parties’ conduct impliedly renewed the Written 17 Contract, the Complaint does not contain sufficient facts to plausibly allege the existence 18 of an implied-in-fact contract. See Schneider v. Cal. Dep’t of Corr., 151 F.3d 1194, 1197 19 n.1 (9th Cir. 1998) (“In determining the propriety of a Rule 12(b)(6) dismissal, a court may 20 not look beyond the complaint to a plaintiff’s moving papers such as a memorandum in 21 opposition to a defendant’s motion to dismiss.”); Candor v. United States, 1 F. Supp. 3d 22 1076, 1082 (S.D. Cal. 2014) (“[A complaint] may not be amended by briefs in opposition 23 to a motion to dismiss.”) (citation omitted). “[A] contract implied in fact consists of 24 obligations arising from a mutual agreement and intent to promise where the agreement 25 and promise have not been expressed in words.” Retired Employees Ass’n of Orange 26 County, Inc. v. County of Orange, 52 Cal. 4th 1171, 1178 (2011) (cleaned up). 27 Here, Plaintiffs do not provide the effective date of the implied renewal, its duration, 28 or any other specific terms. (See generally Compl. ¶¶ 14–24.) Plaintiffs also do not allege 1 that the DePrey Defendants’ conduct as sales representatives, which they claim formed the 2 implied renewal, continued after the Written Contract formally terminated.5 See Allen v. 3 Nextera Energy Operating Servs., LLC, No. C 12-01610 LB, 2012 WL 1918930, at *2 4 (N.D. Cal. May 25, 2012) (finding a “breach claim is wholly conclusory and falls short of 5 the pleading standards mandated by Iqbal and Twombly” where it does not include details 6 such as “when the implied contract took effect, how it was formed, or its specific terms.”). 7 Instead, Plaintiffs specifically allege that the DePrey Defendants engaged in conduct 8 contrary to the terms of the Written Contract after its termination. (See Compl. ¶¶ 27–28.) 9 For these reasons, Plaintiffs fail to state a plausible claim for breach of the Written 10 Contract. The Motion to Dismiss is therefore GRANTED as to the First Cause of Action. 11 Nonetheless, the Court grants Plaintiffs leave to amend based on their contentions 12 concerning an implied-in-fact contract. See Fed. R. Civ. P. 15(a); Cook v. Northern Cal. 13 Serv., Inc., 911 F.2d 242, 247 (9th Cir. 1990) (“[A] district court should grant leave to 14 amend even if no request to amend the pleading was made, unless it determines that the 15 pleading could not possibly be cured by the allegation of other facts.”). 16 2. Breach of Implied Covenant of Good Faith and Fair Dealing (Second 17 Cause of Action) 18 California law implies a covenant of good faith and fair dealing in every contract. 19 Yi v. Circle K Stores, Inc., 258 F. Supp. 3d 1075, 1085–86 (C.D. Cal. 2017), aff’d, 747 F. 20 App’x 643 (9th Cir. 2019) (citing Keshish v. Allstate Ins. Co., 959 F. Supp. 2d 1226, 1232 21 (C.D. Cal. 2013)). “Although breach of the implied covenant often is pleaded as a separate 22 count, a breach of the implied covenant is necessarily a breach of contract.” Digerati 23 Holdings, LLC v. Young Money Ent., LLC, 194 Cal. App. 4th 873, 885 (2011). 24 25

26 5 Plaintiffs also allege that Defendant Gray “continued to use Plaintiffs’ FedEx account” 27 and was still employed when the alleged breach of the Written Contract occurred. (Compl. ¶¶ 13, 21.) However, as the Court previously noted, this Order only addresses the claims 28 1 Because Plaintiffs fail to allege the existence of a valid contract at the time of the 2 alleged breach (see Sec. III.A.1), the Court finds that Plaintiffs also fail to a state a claim 3 for breach of the implied covenant of good faith and fair dealing. Accordingly, the Motion 4 to Dismiss is GRANTED as to the Second Cause of Action with leave to amend. 5 3. Unjust Enrichment (Fifth Cause of Action) 6 “When a plaintiff alleges unjust enrichment, a court may ‘construe the cause of 7 action as a quasi-contract claim seeking restitution.’” Astiana v. Hain Celestial Grp., Inc., 8 783 F.3d 753, 762 (9th Cir. 2015) (quoting Rutherford Holdings, LLC v. Plaza Del Rey, 9 223 Cal. App. 4th 221, 231 (2014)). An unjust enrichment claim fails as a matter of law 10 where an express contract between the parties exists which governs the subject matter of 11 the claim. Yang v. Dar Al–Handash Consultants, 250 Fed. Appx. 771, 773 (9th Cir. 2007). 12 However, “where there is an existing express contract, a party may only bring a claim for 13 restitution if the contract is unenforceable, procured by fraud, or otherwise inapplicable.” 14 Echo & Rig Sacramento, LLC v. AmGuard Ins. Co., 698 F. Supp. 3d 1210, 1219 (E.D. Cal. 15 2023) (citing Rutherford Holdings, 223 Cal. App. 4th at 231). 16 Although Plaintiffs may not be able to recover on this claim if there is a valid 17 enforceable contract governing the claims, “[i]t would be improper to exclude the quasi 18 contract claim on the basis that it cannot co-exist alongside a contract remedy because the 19 Court has yet to determine whether a contract remedy is available to Plaintiff[s].” 20 Professor Brainstorm, LLC 2009 WL 10675891, at *3. In this case, the Court granted 21 Plaintiffs leave to amend their contractual claims based on their contention that an implied 22 contract existed at the time of the alleged breach. Because the Court has not yet determined 23 whether remedies are available based on an implied contract, it will allow the unjust 24 enrichment claim to proceed at this stage. See Echo & Rig Sacramento, LLC, 698 F. Supp. 25 3d at 1219. The Motion to Dismiss is therefore DENIED as to the Fifth Cause of Action. 26 B. Intentional Interference with Prospective Advantage (Third Cause of Action) 27 To state a claim for intentional interference with a prospective economic advantage, 28 Plaintiff “must plead that the defendant engaged in an independently wrongful act’ outside 1 of merely interfering with a contract.” Vascular Imaging Pros., Inc. v. Digirad Corp., 401 2 F. Supp. 3d 1005, 1012 (S.D. Cal. 2019) (cleaned up). An act is “independently wrongful” 3 if it is “proscribed by some constitutional, statutory, regulatory, common law, or other 4 determinable legal standard.” Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 5 1134, 1139, 131 (2003). This requirement is the “defining and limiting . . . aspect of the 6 tort of intentional interference with a prospective economic advantage.” Drink Tank 7 Ventures LLC v. Real Soda in Real Bottles, Ltd., 71 Cal. App. 5th 528, 539 (2021). 8 While the existence of a valid contract is an element of this claim, Plaintiffs’ claim 9 fails because it is premised on the DePrey Defendants’ alleged breach of the Written 10 Contract. In the Complaint, Plaintiffs allege that the DePrey Defendants interfered with 11 Plaintiffs’ third-party contracts “when they intentionally directed open purchase orders 12 meant for Plaintiffs to [a third party.]” (Compl. ¶ 58.) This is the same conduct which 13 Plaintiffs allege constituted the DePrey Defendants’ breach of the Written Contract. (See 14 Compl. ¶¶ 33–34.) As Plaintiffs fail to state a breach of contract claim, they cannot plead 15 a wrongful act based on the same alleged breach. Moreover, “[u]nder California law, a 16 breach of contract cannot constitute the ‘wrongful’ conduct required for the tort of 17 interference with prospective economic advantage.” Deerpoint Grp., Inc. v. Agrigenix, 18 LLC, 345 F. Supp. 3d 1207, 1235 (E.D. Cal. 2018). 19 Accordingly, Plaintiffs do not allege a “wrongful act” separate and apart from the 20 alleged breach of contract and therefore fail to state a claim for intentional interference 21 with a prospective economic advantage. The Motion to Dismiss is therefore GRANTED 22 as to the Third Cause of Action with leave to amend. 23 C. Remaining Causes of Action 24 Plaintiffs assert additional claims for: (1) tortious interference with business 25 relations (Fourth Cause of Action); (2) civil conspiracy (Sixth Cause of Action); (3) federal 26 Racketeer Influenced and Corrupt Organizations Act (“RICO”) violations (Seventh Cause 27 of Action); and (4) intentional misrepresentation (Eighth Cause of Action). 28 1 For the reasons previously stated (see Sec. III), the scope of this Order is limited and 2 only addresses the DePrey Defendants’ contention that all causes of action rely on the 3 enforceability of the Written Contract. Thus, the Court does not reach the question of 4 whether Plaintiffs’ pleadings otherwise plead adequate allegations and sufficient facts to 5 state any of the remaining claims under Rule 12(b)(6). 6 1. Tortious Interference with Business Relations (Fourth Cause of Action) 7 To state a claim for intentional interference with business relations, a plaintiff must 8 allege: “(1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge 9 of the contract; (3) defendant’s intentional acts designed to induce breach or disruption of 10 the contract; (4) actual breach or disruption; and (5) resulting damage.” Name.Space, Inc. 11 v. Internet Corp. for Assigned Names and Numbers, 795 F.3d 1124, 1133 (9th Cir. 2015) 12 (quoting Family Home & Fin. Ctr., Inc. v. Fed. Home Loan Mortg. Corp., 525 F.3d 822, 13 825 (9th Cir. 2008)). 14 Unlike Plaintiffs’ claim for intentional interference with prospective economic 15 advantage, this claim does not rely on the existence of a valid contract because it does not 16 “require[] that the defendant’s conduct be wrongful by some legal measure other than the 17 fact of interference itself.” Id. (quoting Korea Supply Co. v. Lockheed Martin Corp., 29 18 Cal. 4th 1134 (2003)). Because the Court does not reach the question of whether Plaintiffs 19 otherwise plead adequate allegations and sufficient facts to state a claim for tortious 20 interference with business relations, the Motion to Dismiss is DENIED as to the Fourth 21 Cause of Action. 22 2. Civil Conspiracy (Sixth Cause of Action) 23 The elements of a claim for civil conspiracy are: “(1) the formation and operation of 24 the conspiracy, (2) wrongful conduct in furtherance of the conspiracy, and (3) damages 25 arising from the wrongful conduct.” Kidron v. Movie Acquisition Corp., 40 Cal. App. 4th 26 1571, 1581 (1995). Here, Plaintiffs premise their civil conspiracy claim on the DePrey 27 Defendants’ alleged breach of contract, interference with business relations, and 28 interference with prospective economic advantage. (Compl. ¶¶ 74–75.) 1 Because Plaintiffs have not stated a plausible claim for intentional interference with 2 prospective economic advantage (see Sec. III.B), it cannot supply the “wrongful conduct” 3 tort required to state a claim for civil conspiracy. Moreover, even if Plaintiffs had 4 sufficiently alleged a breach of contract claim, their civil conspiracy claim cannot be based 5 on the DePrey Defendants’ alleged breach. See Applied Equip. Corp. v. Litton Saudi 6 Arabia Ltd., 7 Cal. 4th 503, 508 (1994) (holding that a contracting party cannot be liable 7 for civil conspiracy to interfere with its own contract). To the extent Plaintiffs’ civil 8 conspiracy claim is premised on Defendants’ alleged breach of contract and interference 9 with prospective economic relations, Plaintiffs’ Sixth Cause of Action therefore fails. 10 However, Plaintiffs claim for tortious interference with business relations has not 11 been dismissed and may provide an independent substantive basis for conspiracy liability. 12 Accordingly, to the extent Plaintiffs’ civil conspiracy claim is premised on the DePrey 13 Defendants’ alleged interference with business relations, the Motion to Dismiss is 14 DENIED as to the Sixth Cause of Action. The Court again notes that it does not reach the 15 question of whether Plaintiffs otherwise plead adequate allegations and sufficient facts to 16 state a claim for civil conspiracy. 17 3. Federal RICO Violations (Seventh Cause of Action) 18 RICO provides a private right of action for “[a]ny person injured in his business or 19 property” by a RICO violation. 18 U.S.C. § 1964(c). To state a RICO claim, a plaintiff 20 must allege: (1) the conduct; (2) of an enterprise affecting interstate commerce; (3) through 21 of pattern; (4) of racketeering activity; and (5) the conduct must be the proximate cause of 22 harm to the victim. Eclectic Props. E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 997 23 (9th Cir. 2014) (first citing 18 U.S.C. § 1962(c); and then citing Sedima, S.P.R.L. v. Imrex 24 Co., Inc., 473 U.S. 479, 496–97 (1985)). Racketeering activity “encompass[es] dozens of 25 state and federal offenses, known in RICO parlance as predicates.” RJR Nabisco v. Eur. 26 Cmty., 579 U.S. 325, 330 (2016). Plaintiffs allege that Defendants violated § 1962(d) of 27 the civil RICO Act (Compl. ¶ 85), which requires “either an agreement that is a substantive 28 violation of RICO or that the defendants agreed to commit, or participated in, a violation 1 of two predicate offenses.” Howard v. America Online, Inc., 208 F.3d 741, 751 (9th Cir. 2 2000). “Rule 9(b)’s [particularity] requirement . . . applies to civil RICO fraud claims.” 3 Edwards v. Marin Park, Inc., 356 F.3d 1058, 1065–66 (9th Cir. 2004) (cleaned up). 4 Here, Plaintiffs allege the DePrey Defendants engaged in a “scheme to interfere with 5 [Plaintiffs’] business relations and income.” (Compl. ¶ 86.)6 While Plaintiffs do not 6 specify any predicate acts, they allege the DePrey Defendants committed several wrongful 7 acts in violation of RICO including “common law fraud, unjust enrichment, intentional 8 interference with contract and business relations, and civil conspiracy.” (Id. ¶ 84.) 9 Plaintiffs’ failure to allege the existence of a valid contract between the Parties does 10 not in and of itself defeat the RICO claim. The Motion to Dismiss is therefore DENIED 11 as to the Seventh Cause of Action. While the Court has concerns as to the sufficiency of 12 Plaintiffs’ allegations, it does not reach the question of whether Plaintiffs plead adequate 13 allegations and sufficient facts to state a claim for RICO violations. See Iqbal, 556 U.S. at 14 678–79 (holding plaintiff failed to sufficiently state RICO claim, where complaint lacked 15 “sufficient factual matter” to support “legal conclusions”). 16 4. Intentional Misrepresentation (Eighth Cause of Action) 17 “To state a claim for fraudulent misrepresentation, a plaintiff must allege: (1) a 18 misrepresentation; (2) knowledge that the representation was false; (3) intent to induce 19 reliance on the misrepresentation; (4) justifiable reliance on the misrepresentation; and (5) 20 resulting damage.” Hougue v. City of Holtville, No. 07cv2229 WQH (WMc), 2008 WL 21 1925249, at *8 (S.D. Cal. Apr. 30, 2008) (citation omitted). 22 In support of this claim, Plaintiffs allege the DePrey Defendants “continu[ed] to 23 communicate to Plaintiffs that the transaction structures of the agreements by and between 24 Plaintiffs [and Defendants] were being implemented, leading Plaintiffs to believe that all 25 orders being placed from Fastenal were being billed by and through Plaintiffs.” (Compl. ¶ 26 27 6 The Court notes that Plaintiffs allege only one interference concerning the third party 28 1 ||90.) Plaintiffs also allege the DePrey Defendants made such “false and misleading” 2 || representations “with the intent to deceive and mislead Plaintiffs” to rely on them and “not 3 ||interfere with their concerted effort to defraud Plaintiffs.” (qd. 93-95.) As a result, 4 || Plaintiffs were allegedly “denied the benefits of the agreements” and “suffered damages in 5 approximate amount of $800,000.00.” Ud. J§ 91, 97.) 6 Although the alleged representations relate to the Parties’ contractual obligations, 7 || Plaintiffs’ intentional misrepresentation claim does not rely on the validity of the Written 8 ||Contract. The Motion to Dismiss is therefore DENIED as to the Eighth Cause of Action. 9 || The Court nonetheless notes that it does not address whether Plaintiffs’ allegations satisfy 10 |/the requisite particularity standard under Rule 9 because the Parties do not raise this 11 ||argument in their briefing. See Fed. R. Civ. P. 9(b). 12 IV. CONCLUSION 13 For the foregoing reasons, the DePrey Defendants’ Motion to Dismiss (Doc. 6) is 14 || GRANTED IN PART and DENIED IN PART. Specifically: 15 1. The DePrey Defendants’ Motion to Dismiss is GRANTED as to the First, 16 Second, and Third Causes of Action with leave to amend. 17 2. The DePrey Defendants’ Motion to Dismiss is DENIED as to the Fourth, 18 Fifth, Sixth, Seventh, and Eighth Causes of Action. 19 Should Plaintiffs choose to amend their Complaint, they must file a first amended 20 ||complaint on or before June 13, 2025. The Deprey Defendants must respond to the 21 |}amended complaint on or before June 27, 2025. Should Plaintiffs choose not to amend 22 proceed on their Complaint without the dismissed claims, the DePrey Defendants shall 23 || file an Answer to the Complaint on or before June 20, 2025. 24 IT IS SO ORDERED. 25 || DATE: May 29, 2025

7 HON. RUTH BERMUDEZ MONTENEGRO UNITED STATES DISTRICT JUDGE 28 15