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5 UNITED STATES DISTRICT COURT 6 WESTERN DISTRICT OF WASHINGTON AT TACOMA 7 FUEL MEDICAL LLC, CASE NO. C22-5934 BHS 8 Plaintiff, ORDER 9 v. 10 SONOVA USA INC., 11 Defendant. 12
13 This matter is before the Court on Defendant Sonova USA Inc.’s motion to 14 dismiss. Dkt. 12. This motion seeks dismissal with prejudice of all of Plaintiff Fuel 15 Medical LLC’s claims. The Court agrees that Fuel Medical fails to state a claim upon 16 which relief can be granted. However, the Court grants Fuel Medical leave to amend its 17 claims of fraud (Count III), breach of the of the supply agreement’s confidentiality 18 provision (Count IV), breach of the nondisclosure agreement (Count V), and 19 misappropriation of trade secrets (Count VI). Those claims are therefore dismissed 20 without prejudice and with leave to amend. The remaining claims (Counts I, II, and VII) 21 are dismissed with prejudice and without leave to amend. Accordingly, Sonova’s motion 22 to dismiss is granted in part and denied in part. 1 I. BACKGROUND 2 Fuel Medical is an advisory company to hundreds of audiology and ear, nose, and
3 throat medical providers. Dkt. 1 ¶ 1. As part of its advisory services, Fuel Medical assists 4 its members by brokering the distribution of hearing aids. Id. Sonova manufactures 5 hearing instruments that it sells to medical providers and other businesses. Id. ¶ 2. 6 On March 1, 2017, Fuel Medical and two of Sonova’s predecessors-in-interest 7 (Phonak LLC and Unitron Hearing, Inc.) entered into a supply agreement under which 8 Phonak and Unitron Hearing “could sell products to Fuel Medical’s members in
9 exchange for paying ‘Revenue Sharing Payments’ to Fuel Medical.” Dkt. 1 ¶ 17. Fuel 10 Medical also agreed to market and promote Sonova’s products to its members and 11 organize Sonova product trainings with its members. Id. 12 The supply agreement also contained a confidentiality provision under which both 13 parties agreed to not use or disclose certain information except to fulfill their obligations
14 under the supply agreement. Dkt. 1 at 36. In January 2018, the parties entered into a 15 similar nondisclosure agreement to aid discussions concerning “Sonova’s product 16 development cycle concerning the Phonak brand.” Id. at 67. 17 The supply agreement provided that “the agreement would continue for a period of 18 three years, defined as the ‘Initial Term,’ and then would be automatically renewed for
19 two successive renewal terms of one year each, defined as a ‘Renewal Term,’ unless 20 earlier terminated.” Dkt. 1 ¶ 18. The supply agreement also provided: “Each party may 21 terminate this Agreement upon one hundred eighty (180) days’ prior written notice to the 22 other party without cause and for any or no reason whatsoever.” Id. at 29. 1 Under the original terms of the supply agreement, the second renewal term was set 2 to expire on February 28, 2022. Dkt. 1 at 49. However, the parties amended the supply
3 agreement eight times, extending the agreement’s expiration date. Id. at 46–66. The 4 eighth and final amendment provides: “The Parties agree to further extend the Term 5 (including the initial Term and each Renewal Term) of the Existing Agreement through 6 September 15, 2022.” Id. at 65. 7 On September 15, 2022, at 5:00 p.m., Sonva’s vice president of commercial sales, 8 Jason Mayer, informed Fuel Medical’s founder, Brendan Ford, “that Sonova was
9 terminating the contract with Fuel Medical effective immediately.” Dkt. 1 ¶ 50. Ford then 10 asked Mayer “how the transition would take place, and if Sonova’s intent was [to] stop 11 performing under the contract the following day and to sell directly to Fuel Medical’s 12 members using Fuel’s contracted pricing without compensating Fuel Medical.” Id. ¶ 50. 13 Mayer responded, “Effectively, yes.” Id.
14 That same day, Mayer sent to Fuel Medical a letter, which stated, “‘Sonova USA 15 Inc. will not be renewing the Supply Agreement . . . [which] terminated by its terms and 16 extensions September 15, 2022.’” Dkt. 1 ¶ 51. At 5:31 p.m. of that day, Sonova sent to 17 Fuel Medical’s members an “announcement,” which stated: “‘[O]ver the last few months, 18 we have been working alongside Fuel Medical to agree on terms for a new contract. . . .
19 Unfortunately, we have been unable to find a path forward. Therefore, we have made the 20 decision not to renew our agreement with Fuel Medical, effective immediately.’” Id. ¶ 53. 21 Sonova subsequently solicited direct sales from Fuel Medical’s members without 22 the aid of Fuel Medical. Dkt. 1 ¶ 57. In so doing, Sonova applied the same discounts to 1 certain products that were previously applied to those products under the supply 2 agreement. Id. Sonova also used similar “pricing tiers,” “simply changing the word ‘Fuel’
3 to ‘Propel’ in the names of the tiers (for example, ‘Fuel Max Plus’ became ‘Propel Max 4 Plus,’ and so forth).” Id. 5 Fuel Medical sued, alleging that Sonova:1 (1) breached the supply agreement by 6 prematurely terminating it without providing notice of its intent to do so 180 days 7 beforehand; (2) breached the implied covenant of good faith and fair dealing by 8 prematurely terminating the supply agreement; (3) engaged in fraud by assuring Fuel
9 Medical that it intended to enter into a new supply agreement; (4) breached the supply 10 agreement’s confidentiality provision by using Fuel Medical’s confidential “pricing 11 information”; (5) breached the nondisclosure agreement by using this same pricing 12 information; (6) misappropriated Fuel Medical’s trade secrets by using this same pricing 13 information; and (6) is liable under the doctrine of promissory estoppel for failing to
14 fulfill its promise to enter into a new supply agreement. Dkt. 1 ¶¶ 58–112. 15 Sonova moves to dismiss all of these claims with prejudice under Federal Rule of 16 Civil Procedure 12(b)(6). Dkt. 12 at 23. Sonova’s arguments and Fuel Medical’s 17 responses to them are addressed below. 18
19 20
21 1 Fuel Medical sued both Sonova USA, Inc., and Sonova Holding AG. Dkt. 1 at 1. Fuel Medical has since voluntarily dismissed its claims against Sonova Holding AG. Dkt. 20. 22 Accordingly, the only remaining defendant is Sonova USA, Inc. 1 II. DISCUSSION 2 A. Rule 12(b)(6) Standard.
3 Dismissal under Fed. R. Civ. P. 12(b)(6) may be based on either the lack of a 4 cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal 5 theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). A 6 plaintiff’s complaint must allege facts to state a claim for relief that is plausible on its 7 face. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim has “facial plausibility” 8 when the party seeking relief “pleads factual content that allows the court to draw the
9 reasonable inference that the defendant is liable for the misconduct alleged.” Id. Although 10 the court must accept as true the complaint’s well-pleaded facts, conclusory allegations of 11 law and unwarranted inferences will not defeat an otherwise proper 12(b)(6) motion to 12 dismiss. Vasquez v. Los Angeles Cnty., 487 F.3d 1246, 1249 (9th Cir. 2007); Sprewell v. 13 Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). “[A] plaintiff’s obligation to
14 provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and 15 conclusions, and a formulaic recitation of the elements of a cause of action will not do.” 16 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citing Papasan v. Allain, 478 U.S. 17 265, 286 (1986)). Courts “are not bound to accept as true a legal conclusion couched as a 18 factual allegation,” Papasan, 478 U.S. at 265, and the “[f]actual allegations must be
19 enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. 20 This requires a plaintiff to plead “more than an unadorned, the-defendant-unlawfully- 21 harmed-me accusation.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). 22 1 On a 12(b)(6) motion, “a district court should grant leave to amend even if no 2 request to amend the pleading was made, unless it determines that the pleading could not
3 possibly be cured by the allegation of other facts.” Cook, Perkiss & Liehe v. N. Cal. 4 Collection Serv., 911 F.2d 242, 247 (9th Cir. 1990). However, where the facts are not in 5 dispute and the sole issue is whether there is liability as a matter of substantive law, the 6 court may deny leave to amend. Albrecht v. Lund, 845 F.2d 193, 195–96 (9th Cir. 1988). 7 B. Fuel Medical Fails to State a Plausible Claim of Breach of Contract (Count I). 8 Fuel Medical claims that Sonova breached the supply agreement by terminating
9 the agreement on September 15, 2022, without providing notice of its intent to do so 180 10 days beforehand. Dkt. 1 ¶¶ 59–62; Dkt. 19 at 7. 11 Sonova moves to dismiss this claim, asserting that it did not terminate the supply 12 agreement and that the agreement instead expired under its own terms on September 15, 13 2022. Dkt. 12 at 8–9. Sonova alternatively asserts that, even if it did prematurely
14 terminate the supply agreement, Fuel Medical does not allege that it suffered any 15 damages between the time it terminated the agreement (5:00 p.m. on September 15, 16 2022) and the time the agreement expired under the eighth amendment (12:00 a.m. on 17 September 16, 2022). Id. at 9 18 Fuel Medical responds that “Sonova’s reading of the Supply Agreement is wrong:
19 the agreement did not expire on September 15, 2022; rather, it was to end 180 days later, 20 in March 2023, because the agreement required Sonova (not Fuel Medical) to give that 21 much notice prior to terminating the contract.” Dkt. 19 at 7. 22 1 “Under Delaware law,[2] the elements of a breach of contract claim are: 1) a 2 contractual obligation; 2) a breach of that obligation by the defendant; and 3) a resulting
3 damage to the plaintiff.” H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 140 (Del. Ch. 4 2003). “Delaware adheres to an objective theory of contracts, meaning that a ‘contract’s 5 construction should be that which would be understood by an objective, reasonable third 6 party.’” Cox Commc’ns, Inc. v. T-Mobile US, Inc., 273 A.3d 752, 760 (Del. 2022) 7 (quoting Exelon Generation Acq., LLC v. Deere & Co., 176 A.3d 1262, 1267 (Del. 8 2017)). “This approach places great weight on the plain terms of a disputed contractual
9 provision” and courts “interpret clear and unambiguous terms according to their ordinary 10 meaning.” Cox Commc’ns, Inc., 273 A.3d at 760 (internal quotation marks omitted) 11 (quoting Leaf Invenergy Co. v. Invenergy Renewables LLC, 210 A.3d 688, 696 (Del. 12 2019)). 13 Fuel Medical fails to plausibly allege that Sonova improperly terminated the
14 supply agreement. To the contrary, the factual allegations in the complaint indicate that 15 Sonova allowed the supply agreement to expire under its own terms. 16 To reiterate, the eighth and final amendment to the supply agreement provides: 17 “The Parties agree to further extend the Term (including the initial Term and each 18 Renewal Term) of the Existing Agreement through September 15, 2022.” Dkt. 1 at 65.
19 Plainly, then, the agreement was set to expire on September 16, 2022. 20 21 2 The parties agree that Delaware law applies to this claim. See Dkt. 12 at 7, Dkt. 19 at 7 22 n.3. 1 The complaint alleges that, on September 15, 2022, at 5:00 p.m., Mayer informed 2 Ford “that Sonova was terminating the contract with Fuel Medical effective
3 immediately.” Id. ¶ 50. Notably, Ford asked Mayer “how the transition would take place, 4 and if Sonova’s intent was [to] stop performing under the contract the following day and 5 to sell directly to Fuel Medical’s members using Fuel’s contracted pricing without 6 compensating Fuel Medical.” Id. ¶ 50 (emphasis added). Mayer responded, “Effectively, 7 yes.” Id. Therefore, Mayer clarified that Sonova intended to stop performing under the 8 supply agreement on September 16, 2022—the day that it was set to expire under its own
9 terms. 10 The complaint next alleges that Mayer also sent to Fuel Medical a letter “dated 11 September 15, 2022, stating that ‘Sonova USA Inc. will not be renewing the Supply 12 Agreement . . . [which] terminated by its terms and extensions September 15, 2022.’” Id. 13 ¶ 51 (emphasis added). Although this letter incorrectly states that the supply agreement
14 expired on September 15, 2022, instead of on September 16, 2022, the letter also plainly 15 communicates Sonova’s intention for the agreement to expire under its own terms. 16 The complaint further alleges that, on September 15, 2022, at 5:31 p.m., Sonova 17 sent to Fuel Medical’s members an announcement, which stated: “[O]ver the last few 18 months, we have been working alongside Fuel Medical to agree on terms for a new
19 contract. . . . Unfortunately, we have been unable to find a path forward. Therefore, we 20 have made the decision not to renew our agreement with Fuel Medical, effective 21 immediately.” Id. ¶ 53 (emphasis added). By stating that Sonova “made the decision not 22 to renew [the] agreement with Fuel Medical, effective immediately,” id. ¶ 53 Sonova 1 clarified that it did not terminate the supply agreement, but rather allowed it to expire 2 under its own terms.
3 For these reasons alone, Fuel Medical fails to plausibly allege that Sonova 4 prematurely terminated the supply agreement. 5 But even if Fuel Medical could plausibly allege that Sonova prematurely 6 terminated the supply agreement, the complaint does not allege any facts indicating that 7 such a premature termination of agreement caused Fuel Medical damages. See H-M 8 Wexford LLC, 832 A.2d at 140 (stating that, under Delaware law, damages are an element
9 to a breach of contract claim). As Sonova asserts, “[a]ssuming, arguendo, that Sonova 10 did prematurely terminate the Supply Agreement at 5:00 p.m. on September 15, 2022, the 11 only window of time during which Fuel Medical could have suffered any damages was 12 between 5:00 p.m. and 11:59 p.m. that same day.” Dkt. 12 at 9. Yet the complaint does 13 not allege that Fuel Medical suffered any damages during that time. See generally Dkt. 1.
14 Fuel Medical responds that, under such circumstances, “the damages period 15 should cover the full six-month period during which the Supply Agreement should still 16 have been in effect (i.e., until mid-March 2023).” Dkt. 19 at 8. The Court disagrees. 17 Because the supply agreement was set to expire under its own terms on September 16, 18 2022, any premature termination of the agreement would not extend the agreement
19 beyond that date. 20 Fuel Medical’s argument is also meritless considering that the parties amended the 21 supply agreement’s expiration date eight times between February 2022 and September 22 2022 while they negotiated a potential new agreement. See Dkt. 1 at 49–6. In fact, the 1 eighth and final amendment extended the agreement’s expiration date by only 8 days— 2 from September 8, 2022, to September 16, 2022. Id. at 63, 65. These short-term
3 extensions demonstrate that the parties did not intend for the existing agreement to be 4 potentially extended up to nearly 180 days beyond the express expiration date provided 5 by each amendment. 6 In sum, Sonova did not terminate the supply agreement. It allowed the agreement 7 to expire under its own terms. Sonova was therefore not required to provide to Fuel 8 Medical 180 days’ notice of an intent to terminate the agreement. Accordingly, Fuel
9 Medical fails to plausibly allege that Sonova breached the agreement by not providing 10 such notice. Because the facts are not in dispute and the sole issue is whether there is 11 liability as a matter of substantive law, this breach of contract claim (Count I) is 12 DISMISSED with prejudice. 13 C. Fuel Medical Fails to State a Plausible Claim of Breach of the Implied Warranty of Good Faith and Fair Dealing (Count II). 14 Fuel Medical also claims that Sonova breached the implied covenant of good faith 15 a fair dealing by “not providing Fuel Medical with any notice prior to purportedly 16 terminating the 2017 Supply Agreement and its amendments without cause, by 17 surreptitiously planning to circumvent Fuel Medical while assuring Fuel Medical it 18 would not do so, and by encouraging Fuel Medical’s network members to leave Fuel 19 Medical and to purchase hearing aids directly from Sonova.” Dkt. 1 ¶ 70. 20 Sonova contends that this claim fails because the supply agreement expressly 21 addresses when it would expire or when a party could terminate it. Dkt. 12 at 10. Sonova 22 1 also contends that none of the alleged conduct that is not expressly addressed by the 2 agreement falls within the ambit of the implied covenant of good faith and fair dealing.
3 Id. at 10–11. 4 Fuel Medical responds that, because “the agreement has both a ‘term’ and a ‘180- 5 day’ notice provision,” “the parties’ reasonable expectations were that neither side would 6 terminate the contract without cause before first providing the other 180 days[’] notice.” 7 Dkt. 19 at 9. 8 Under Delaware law,3 the implied covenant of good faith and fair dealing “is best
9 understood as a way of implying terms in the agreement, whether employed to analyze 10 unanticipated developments or to fill gaps in the contract’s provisions.” Oxbow Carbon 11 & Mins. Holdings, Inc. v. Crestview-Oxbow Acquisition, LLC, 202 A.3d 482, 507 (Del. 12 2019) (internal quotation marks omitted) (quoting Dunlap v. State Farm Fire and Cas. 13 Co., 878 A.2d 434, 441 (Del. 2005)). “[T]he covenant is a limited and extraordinary legal
14 remedy” that “does not apply when the contract addresses the conduct at issue, but only 15 when the contract is truly silent concerning the matter at hand.” Oxbow Carbon & Mins. 16 Holdings, Inc., 202 A.3d at 507 (internal quotation marks omitted) (quoting Nemec v. 17 Shrader, 991 A.2d 1120, (Del. 2010); Nationwide Emerging Managers, LLC v. 18 Northpointe Holdings, LLC, 112 A.3d 878, 896 (Del. 2015); Allied Capital Corp. v. GC-
19 Sun Holdings, L.P., 910 A.2d 1020, 1033 (Del. Ch. 2006)). Furthermore, “[o]nly when it 20 is clear from the writing that the contracting parties ‘would have agreed to proscribe the 21 3 The parties agree that Delaware law also applies to this claim. See Dkt. 12 at 7, 10–11; 22 Dkt. 19 at 9 n.4. 1 act later complained of . . . had they thought to negotiate with respect to that matter’ may 2 a party invoke the covenant’s protections.” Dunlap, 878 A.2d at 442 (quoting Katz v. Oak
3 Indus. Inc., 508 A.2d 873, 880 (Del. Ch. 1986)). 4 Fuel Medical’s claim first fails insofar as it alleges that Sonova breached the 5 implied covenant of good faith and fair dealing by “not providing Fuel Medical with any 6 notice prior to purportedly terminating the 2017 Supply Agreement and its amendments 7 without cause.” Dkt. 1 ¶ 70. Again, Sonova did not terminate the supply agreement, but 8 rather allowed it to expire under its own terms. Fuel Medical’s allegation otherwise is
9 meritless. In any event, the supply agreement expressly addresses when it would expire 10 or when the parties could otherwise terminate it. Dkt. 1 at 29, 65. Therefore, even if 11 Sonova prematurely terminated the supply agreement, the implied covenant of good faith 12 and fair dealing would not apply to such conduct. See Oxbow Carbon & Mins. Holdings, 13 Inc., 202 A.3d at 507.
14 Fuel Medical’s claim also fails insofar as it alleges that Sonova breached the 15 covenant by “surreptitiously planning to circumvent Fuel Medical while assuring Fuel 16 Medical it would not do so” and “by encouraging Fuel Medical’s network members to 17 leave Fuel Medical and to purchase hearing aids directly from Sonova.” Dkt. 1 ¶ 70. Fuel 18 Medical’s response does not contain any argument explaining how this alleged conduct
19 breached the implied covenant of good faith and fair dealing. See Dkt. 19 at 9–10. Nor 20 did it. The supply agreement does not clearly show that the parties would have agreed to 21 prohibit Sonova from selling directly to Fuel Medical’s members after the agreement 22 1 expired had they thought to negotiate with respect to this matter when they entered into 2 the agreement. See Dunlap, 878 A.2d at 442.
3 Accordingly, Fuel Medical fails to allege a plausible claim of breach of the 4 implied covenant of good faith and fair dealing. Because the facts are not in dispute and 5 the sole issue is whether there is liability as a matter of substantive law, this claim (Count 6 II) is DISMISSED with prejudice. 7 D. Fuel Medical Fails to State a Plausible Fraud Claim (Count III). 8 Fuel Medical next alleges that Sonova defrauded it by “repeatedly assur[ing] Fuel
9 Medical that it intended to renegotiate a new supply agreement with Fuel Medical, and 10 represented that it was actively working with its legal department to do so.” Dkt. 1 ¶ 76. 11 Sonova asserts that this claim fails for two reasons. First, Sonova contends that the 12 fraud claim lacks the particularity required under Fed. R. Civ. P. 9(b). Dkt. 12 at 11–12. 13 Second, Sonova argues that this claim is improperly based exclusively on alleged
14 representations of future intention. Id. at 12. 15 Fuel Medical responds that the complaint alleges the basis for its fraud claim with 16 sufficient particularity. Dkt. 19 at 11. It also asserts that its fraud claim is not, in fact, 17 based on representations of future intention. Id. at 11. In so doing, Fuel Medical 18 confusingly states: “Fuel Medical’s allegation is not merely that the parties agreed they
19 would continue to renegotiate a supply agreement . . . , but also that Sonova intentionally 20 misled Fuel Medical into believing that the parties would continue their relationship, and 21 that ‘Sonova “would never drop” Fuel Medical without notice.’” Id. at 12 (emphasis 22 added) (quoting Dkt. 1 ¶ 12). 1 In Washington,4 a plaintiff claiming fraud must show, among other things, “a 2 representation of an existing fact.” Elcon Const., Inc. v. E. Washington Univ., 174 Wn.2d
3 157, 166 (2012) (emphasis added). Notably, a statement as to future performance is not a 4 representation of an existing fact and, therefore, does not support a fraud claim. Shook v. 5 Scott, 56 Wn.2d 351, 355 (1960). The test to apply in determining whether a 6 representation is a mere statement as to future performance is: “Where the fulfillment or 7 satisfaction of the thing represented depends upon a promised performance of a future 8 act, or upon the occurrence of a future event, or upon particular future use, or future
9 requirements of the representee, then the representation is not of an existing fact.” Id. at 10 356 (internal quotation marks omitted) (quoting Nyquist v. Foster, 44 Wn.2d 465, 471 11 (1954)). 12 Fuel Medical’s fraud claim is based primarily on alleged statements as to future 13 performance. Sonova’s statement that it “would never drop Fuel Medical without notice,”
14 Dkt. 1 ¶ 37, is not a representation of an existing fact. It is a representation that Sonova 15 would refrain from doing something (namely, terminate the supply agreement without 16 notice) in the future. Sonova’s statement that “a new contract was imminent,” id. ¶ 38, is 17 also not a representation of an existing fact. It is rather a representation that Sonova 18 would do something (namely, enter into a new supply agreement) in the future.
4 Sonova contends that Washington law applies to the fraud claim. Dkt. 12 at 8; Dkt. 21 20 at 5. Fuel Medical disputes whether Washington law applies to this claim, but clarifies that, “[w]hile [a conflicts-of-laws] analysis may matter later for determining Sonova’s exposure for 21 punitive or exemplary damages, it is not critical for resolving the general elements of a typical fraud claim.” Dkt. 19 at 10–11. Therefore, the Court applies Washington law to determine 22 whether the complaint satisfies the general elements of a fraud claim. 1 Fuel Medical also fails to show how the remaining statements that serve as a basis 2 to its fraud claim are false. See Elcon Const., Inc., 174 Wn.2d at 166 (stating that
3 “falsity” is an element of fraud). Fuel Medical alleges that, on June 1, 2022, Mayer 4 informed Ford that “the Parties were on track to enter a new agreement.” Dkt. 1 ¶ 34. 5 Fuel Medical does not allege that, on that date, the parties were not, in fact, on track to 6 enter into a new agreement. Fuel Medical also alleges that another Sonova representative, 7 Greg Guggisberg, told Ford that “Fuel Medical’s team ‘is awesome. I am looking 8 forward to collaborating much more with them and you when we finally get this done.’”
9 Id. ¶ 36. Fuel Medical does not allege that Guggisberg was not actually looking forward 10 to collaborating with Fuel Medical. 11 To the extent that either Ford’s statement or Guggisberg’s statement suggests that 12 Sonova would enter into a new supply agreement with Fuel Medical at some time in the 13 future, these statements do not support a fraud claim. See Shook, 56 Wn.2d at 355.
14 Accordingly, Fuel Medical fails to allege a plausible claim of fraud. However, in 15 an abundance of caution, the Court declines to rule that this claim could not possibly be 16 cured by the allegation of other facts. See Cook, Perkiss & Liehe, 911 F.2d at 247. This 17 claim (Count III) is therefore DISMISSED without prejudice and with leave to amend. 18 E. Fuel Medical Fails to State a Plausible Claim that Sonova Breached the Supply Agreement’s Confidentiality Provision (Count IV). 19 Fuel Medical next claims that Sonova breached the confidentiality provision of the 20 supply agreement. It asserts that, under the supply agreement, “Sonova agreed that Fuel 21 Medical’s pricing and pricing model was confidential.” Dkt. 1 ¶ 84. It further claims that 22 1 Sonova breached the confidentiality provision by using its “pricing information and 2 pricing model” when it sold directly to Fuel Medical’s members after the supply
3 agreement expired. Id. 1 ¶ 87. 4 Sonova contends that Fuel Medical’s allegations are too vague to state a plausible 5 claim because they do not provide sufficient detail concerning the nature of the allegedly 6 confidential information or the manner in which Sonova improperly disclosed it. Dkt. 12 7 at 13. Sonova also asserts that, under the supply agreement, Sonova—not Fuel Medical— 8 set the prices for its own products. Id.
9 Fuel Medical asserts that its allegations are not too vague to state a plausible claim 10 and clarifies that the allegedly confidential information concerns discounts applied to 11 certain products and “pricing tiers.” Dkt. 19 at 13 (citing Dkt. 1 ¶ 57). In so doing, Fuel 12 Medical does not explain what, exactly, “pricing tiers” are. See generally id. 13 The confidentiality provision of the supply agreement provides, in relevant part:
14 “So long as this Agreement is in effect and for a period of three (3) years following its 15 termination or expiration, each of the parties agrees: . . . not to use or disclose the 16 Confidential Information except to fulfill its obligations under this Agreement.” Dkt. 1 at 17 36. The agreement defines confidential information as “[a]ll information, data, 18 communication and other materials, whether of tangible or intangible form, regarding the
19 party disclosing the same . . . or any subsidiary, Affiliate, customer or supplier thereof, or 20 otherwise identified by the Disclosing Party as sensitive or confidential to the party 21 receiving the same.” Id. The agreement exempts from the requirements of the 22 1 confidentiality provision information “which has become generally available to the public 2 (without a violation of this Agreement by the Receiving Party).” Id.
3 Fuel Medical fails to plausibly allege that the disputed information is subject to the 4 supply agreement’s confidentiality provision. Fuel Medical alleges that, after September 5 15, 2022, Sonova breached the confidentiality provision when it sent “‘new pricing’ to 6 Fuel Medical’s members for the purpose of soliciting direct sales.” Dkt. 1 ¶ 57. 7 Specifically, Fuel Medical alleges that, when Sonova sent the new pricing to the 8 members, Sonova used the following information that belonged to Fuel Medical:
9 Sonova not only duplicated Fuel Medical’s exact pricing, applying either a $75 or $50 discount depending on the product, Sonova also ripped off Fuel 10 Medical’s specific terminology and pricing tiers, simply changing the word “Fuel” to “Propel” in the names of the tiers (for example, “Fuel Max Plus” 11 became “Propel Max Plus,” and so forth).
12 Id. 13 The complaint then states in a conclusory manner that the disputed information is 14 “confidential and proprietary.” Dkt. 1 ¶ 57. But this is insufficient to defeat a motion to 15 dismiss. See Vasquez, 487 F.3d at 1249 (“‘[C]onclusory allegations of law and 16 unwarranted inferences’ will not defeat an otherwise proper motion to dismiss.” (quoting 17 Schmier v. U.S. Court of Appeals for the Ninth Circuit, 279 F.3d 817, 820 (9th Cir. 18 2002))). 19 In any event, the supply agreement indicates that the disputed information belongs 20 to both Fuel Medical and Sonova. The agreement provides that, “[d]uring the Term of 21 this Agreement, [Sonova] and Fuel Medical shall establish and maintain strategic pricing 22 templates for the Network Members.” Dkt. 1 at 31 (emphasis added). The agreement 1 further states that “[Sonova] shall invoice the Network Members directly for purchases 2 under this Agreement” and that “[n]othing contained in this Agreement shall be construed
3 as limiting [Sonova’s] right to change its published list prices at any time, in its sole and 4 absolute discretion.” Id. (emphasis added). Moreover, the agreement provides that 5 “Network Member pricing templates shall be provided by [Sonova] to Fuel Medical 6 electronically.” Id. at 32 (emphasis added). In exchange for being able to sell its products 7 to Fuel Medical’s members, Sonova agreed to make monthly “Revenue Sharing 8 Payments” to Fuel Medical. Id. Fuel Medical agreed to market and promote Sonova’s
9 products to its members. Id. ¶ 17. 10 Under this agreement, Fuel Medical does not appear to have sold to its members 11 any of the products supplied by Sonova. Rather, Sonova appears to have sold its products 12 directly to Fuel Medical’s members, applying “pricing templates” agreed to by both 13 parties. Notably, the complaint contains no specific, non-conclusory factual allegations
14 indicating that the discounts or “pricing tiers” in question are distinct from the “pricing 15 templates” established by both parties pursuant to the supply agreement. Therefore, the 16 supply agreement indicates that the disputed information belongs to both Fuel Medical 17 and Sonova. 18 Accordingly, Fuel Medical fails to establish a plausible claim that Sonova
19 breached the confidentiality provision of the supply agreement. Nevertheless, because the 20 deficiencies with this claim could possibly be cured by the allegation of other facts, the 21 Court grants Fuel Medical leave to amend this claim. See Cook, Perkiss & Liehe, 911 22 F.2d at 247. To plead a plausible claim, Fuel Medical must allege specific, non- 1 conclusory facts explaining (1) what, exactly, “pricing tiers” are, (2) how both the 2 discounts and “pricing tiers” in question are distinct from the “pricing templates”
3 contemplated by the supply agreement, and (3) why both the discounts and “pricing tiers” 4 in question were, in fact, confidential under the supply agreement.5 This claim (Count 5 IV) is therefore DISMISSED without prejudice and with leave to amend. 6 F. Fuel Medical Fails to State a Plausible Claim that Sonova Breached the Nondisclosure Agreement (Count V). 7 Fuel Medical further claims that Sonova breached a nondisclosure agreement— 8 which is separate from the supply agreement—by using Fuel Medical’s “[i]nformation to 9 develop and promote its own knock off version of Fuel Medical’s network services and 10 pricing information, amongst other things.” Dkt. 1 ¶ 94. The information underlying this 11 claim (Count V) is the same as the information underlying the claim that Sonova 12 breached the supply agreement’s confidentiality provision (Count IV). Therefore, this 13 claim fails for the same reasons that claim fails. 14 However, as with the previous claim, the Court grants Fuel Medical leave to 15 amend this claim. See Cook, Perkiss & Liehe, 911 F.2d at 247. To plead a plausible 16 claim, Fuel Medical must again allege specific, non-conclusory facts explaining what 17 “pricing tiers” are and how both the “pricing tiers” and discounts in question are distinct 18 from the “pricing templates” contemplated by the supply agreement. Fuel Medical must 19 also allege facts sufficiently explaining why the discounts and “pricing tiers” in question 20 5 In so doing, Fuel Medical must plead specific, non-conclusory facts indicating why the 21 discounts and “pricing tiers” in question were not generally available to the public before Sonova allegedly used this information and, in turn, exempt from the agreement’s confidentiality 22 provision. See Dkt. 1 at 36. 1 were, in fact, subject to the requirements of the nondisclosure agreement.6 This claim 2 (Count V) is accordingly DISMISSED without prejudice and with leave to amend.
3 G. Fuel Medical Fails to State a Plausible Claim of Misappropriation of Trade Secrets (Count VI). 4 Fuel Medical additionally claims that Sonova misappropriated its trade secrets by 5 using its “pricing information and pricing model” when it sold directly to Fuel Medical’s 6 members after the supply agreement expired. Dkt. 1 ¶ 104. The information underlying 7 this claim (Count VI) is also the same information underlying the previous two claims 8 (Counts IV and V). Therefore, this claim fails for the same reasons that those claims fail. 9 As with the previous two claims, the Court grants Fuel Medical leave to amend 10 this claim. See Cook, Perkiss & Liehe, 911 F.2d at 247. To reiterate, any amended 11 complaint must allege specific, non-conclusory facts explaining what “pricing tiers” are 12 and how both the “pricing tiers” and discounts in question are distinct from the “pricing 13 templates” contemplated by the supply agreement. Fuel Medical must also allege 14 sufficiently explaining why the discounts and “pricing tiers” in question were, in fact, 15 trade secrets. This claim (Count VI) is accordingly DISMISSED without prejudice and 16 with leave to amend. 17 18 19
20 6 Like the supply agreement, the nondisclosure agreement excludes from its ambit “Information that . . . becomes generally available to the public through no breach of the 21 [nondisclosure agreement] by the Receiving Party or its Representatives.” Dkt. 1 at 67. Fuel Medical must plead sufficient facts explaining why the disputed information is not subject to this 22 exclusion. 1 H. Fuel Medical Fails to State a Plausible Claim of Promissory Estoppel (Count VII). 2 Fuel Medical finally claims that Sonova is liable under the doctrine of promissory 3 estoppel. Dkt. 1 ¶¶ 108–13. Fuel Medical alleges that “Sonova promised that the supply 4 agreement would be extended for at least five years” and that this promise “is binding on 5 Sonova because injustice can only be avoided by enforcement of the promise.” Dkt. 1 ¶¶ 6 109, 112. 7 Sonova contends that this claim fails because it is improperly based on statements 8 of future intent. Dkt. 12 at 20. It also asserts that this claim is barred by the statute of 9 frauds because any oral agreement to extend the supply agreement was not to be 10 performed in one year. Id. at 21. 11 Fuel Medical responds that Sonova’s promise that “the supply agreement would 12 be extended for at least five years” is not a statement of future intent. Dkt. 19 at 21 13 (quoting Dkt. 1 ¶ 109). It further asserts that Sonova’s statement that it “would never 14 drop Fuel Medical without notice” also supports its promissory estoppel claim and is 15 similarly not a statement of future intent. Dkt. 19 at 21 (quoting Dkt. 1 ¶¶ 32, 37). 16 Finally, Fuel Medical contends that its promissory estoppel claim is not barred by the 17 statute of frauds because “Sonova cannot use the formalities of a statute designed to 18 prevent fraud to perpetrate its own fraud.” Dkt. 19 at 21. 19 In Washington,7 the elements of promissory estoppel are: 20 21 7 Both parties analyze this claim under Washington law. See Dkt. 12 at 19–21; Dkt. 19 at 22 20. 1 (1) [a] promise which (2) the promisor should reasonably expect to cause the promisee to change his position and (3) which does cause the promisee 2 to change his position (4) justifiably relying upon the promise, in such a manner that (5) injustice can be avoided only by enforcement of the 3 promise.
4 Havens v. C & D Plastics, Inc., 124 Wn.2d 158, 171 (1994) (internal quotation marks 5 omitted) (quoting Klinke v. Famous Recipe Fried Chicken, Inc., 94 Wn.2d 255, 259 n.2 6 (1980)). 7 For at least two reasons, Fuel Medical’s promissory estoppel claim fails. First, the 8 alleged statements that serve as a basis for this claim are plainly statements of future 9 intent. “A statement of future intent is not sufficient to constitute a promise for the 10 purpose of promissory estoppel” because “[a]n intention to do a thing is not a promise to 11 do it.” Elliott Bay Seafoods, Inc. v. Port of Seattle, 124 Wn. App. 5, 13 (2004). Put 12 differently, an enforceable promise requires “an express undertaking or agreement” that 13 “‘something shall happen . . . in the future.’” Meissner v. Simpson Timber Co., 69 Wn.2d 14 949, 957 (1966) (emphasis added) (quoting Restatement of Contracts § 2(1) (1932)). 15 Sonova’s alleged statements that “the supply agreement would be extended for at least 16 five years,” Dkt. 1 ¶ 109 (emphasis added), and that it “would never drop Fuel Medical 17 without notice,” id. ¶¶ 37 (emphasis added), express Sonova’s mere intention, not a 18 promise to perform. This is insufficient to support a claim of promissory estoppel.
19 Second, Fuel Medical’s promissory estoppel claim fails because the supply 20 agreement expressly addresses when it would both automatically renew and ultimately 21 22 1 expire.8 See Spectrum Glass Co. v. Pub. Util. Dist. No. 1 of Snohomish Cnty., 129 Wn. 2 App. 303, 317 (2005) (“[T]he doctrine of promissory estoppel does not apply where a
3 contract governs.”). Therefore, Fuel Medical cannot advance a promissory estoppel claim 4 to circumvent the express terms of the supply agreement. 5 For these reasons, Fuel Medical fails to allege a plausible claim of promissory 6 estoppel.9 Because the facts are not in dispute and the sole issue is whether there is 7 liability as a matter of substantive law, this claim (Count VII) is DISMISSED with 8 prejudice.
9 III. ORDER 10 Therefore, it is hereby ORDERED that Sonova’s motion to dismiss, Dkt. 12, is 11 GRANTED in part and DENIED in part. The motion is GRANTED insofar as it seeks 12 dismissal with prejudice of Counts I, II, and VII. Those claims are DISMISSED with 13 prejudice and without leave to amend. The motion is GRANTED in part and
14 DENIED in part insofar as it seeks dismissal with prejudice of Counts III, IV, V, and 15 VI. Those claims are DISMISSED without prejudice and with leave to amend. Fuel 16 Medical may file an amended complaint no later than 21 days from the date of this order, 17 which is no later than Friday, June 30th, 2023. 18 //
19 // 20 8 See Dkt. 1 ¶¶ 18, 49, 65. 21 9 Because Fuel Medical does not allege a plausible claim of promissory estoppel for each reason discussed above, the Court need not address whether this claim is also barred by 22 Washington’s statute of frauds. 1 Dated this 9th day of June, 2023. A 2 3 BENJAMIN H. SETTLE 4 United States District Judge
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