1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 EASTERN DISTRICT OF CALIFORNIA 8 9 HELLENIC PETROLEUM, LLC, a CASE NO. 1:19-CV-0491 AWI SAB Florida limited liability company, 10 Plaintiff ORDER ON DEFENDANTS’ MOTION 11 TO DISMISS v. 12 SACRAMENTO ENERGY RESOURCES, (Doc. No. 13) 13 LLC, a Texas limited liability company, BETH JOHNSON, CLIFFORD KAST, 14 and DOES 1-20,
15 Defendants
16 17 18 This is a business dispute between Plaintiff Hellenic Petroleum, LLC (“Hellenic”) and 19 Defendants Sacramento Energy Resources, LLC (“SER”), Beth Johnson (“Johnson”), and Clifford 20 Kast (“Kast”). Hellenic brings claims under California law for declaratory relief, trade libel, 21 negligent interference with prospective economic advantage (“NIPEA”), misrepresentation, and 22 unfair competition in violation of Cal. Bus. & Prof. Code § 17200 et seq. (“UCL”). The active 23 complaint is the First Amended Complaint (“FAC”). Currently before the Court is Defendants’ 24 Rule 12(b)(6) motion to dismiss. For the reasons that follow, the motion will be granted in part 25 and denied in part. 26 27 RULE 12(b)(6) FRAMEWORK 28 Under Federal Rule of Civil Procedure 12(b)(6), a claim may be dismissed because of the 1 plaintiff’s “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). A 2 dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the 3 absence of sufficient facts alleged under a cognizable legal theory. See Mollett v. Netflix, Inc., 4 795 F.3d 1062, 1065 (9th Cir. 2015). In reviewing a complaint under Rule 12(b)(6), all well- 5 pleaded allegations of material fact are taken as true and construed in the light most favorable to 6 the non-moving party. Kwan v. SanMedica, Int’l, 854 F.3d 1088, 1096 (9th Cir. 2017). However, 7 complaints that offer no more than “labels and conclusions” or “a formulaic recitation of the 8 elements of a cause of action will not do.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Johnson 9 v. Federal Home Loan Mortg. Corp., 793 F.3d 1005, 1008 (9th Cir. 2015). The Court is “not 10 required to accept as true allegations that contradict exhibits attached to the Complaint or matters 11 properly subject to judicial notice, or allegations that are merely conclusory, unwarranted 12 deductions of fact, or unreasonable inferences.” Seven Arts Filmed Entm’t, Ltd. v. Content Media 13 Corp. PLC, 733 F.3d 1251, 1254 (9th Cir. 2013). To avoid a Rule 12(b)(6) dismissal, “a 14 complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is 15 plausible on its face.” Iqbal, 556 U.S. at 678; Mollett, 795 F.3d at 1065. “A claim has facial 16 plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable 17 inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678; Somers 18 v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013). “Plausibility” means “more than a sheer 19 possibility,” but less than a probability, and facts that are “merely consistent” with liability fall 20 short of “plausibility.” Iqbal, 556 U.S. at 678; Somers, 729 F.3d at 960. The Ninth Circuit has 21 distilled the following principles for Rule 12(b)(6) motions: (1) to be entitled to the presumption 22 of truth, allegations in a complaint or counterclaim may not simply recite the elements of a cause 23 of action, but must contain sufficient allegations of underlying facts to give fair notice and to 24 enable the opposing party to defend itself effectively; (2) the factual allegations that are taken as 25 true must plausibly suggest entitlement to relief, such that it is not unfair to require the opposing 26 party to be subjected to the expense of discovery and continued litigation. Levitt v. Yelp! Inc., 27 765 F.3d 1123, 1135 (9th Cir. 2014). In assessing a motion to dismiss, courts may consider 28 documents attached to the complaint, documents incorporated by reference in the complaint, or 1 matters subject to judicial notice. In re NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1051 (9th Cir. 2 2014). If a motion to dismiss is granted, “[the] district court should grant leave to amend even if 3 no request to amend the pleading was made . . . .” Ebner v. Fresh, Inc., 838 F.3d 958, 962 (9th 4 Cir. 2016). However, leave to amend need not be granted if amendment would be futile or the 5 plaintiff has failed to cure deficiencies despite repeated opportunities. Garmon v. County of L.A., 6 828 F.3d 837, 842 (9th Cir. 2016). 7 8 BACKGROUND 9 From the FAC, it appears that Hellenic and SER entered into an agreement for the sale and 10 delivery of propane. Part of the deal for the propane was a delivery limit from SER to Hellenic of 11 $200,000 of propane. This limit was agreed to by Johnson. Despite that limit, SER at Kast’s 12 direction has sent $1.2 million of propane to Hellenic since December 2018. The delivery of this 13 amount of propane was without Hellenic’s consent, and Hellenic refuses to pay SER $1.2 million 14 for the propane. The over-supply of propane created financial pressure on Hellenic. 15 In February 2019, “Defendants” removed at Kast’s direction nine railway cars of propane 16 from Hellenic’s facility without Hellenic’s prior knowledge or permission. The bills of lading for 17 the nine railroad cars identified Hellenic as a “cosignee,” which meant that Hellenic was required 18 to “sign off” on any removal of the nine railroad cars. In order to remove the nine railroad cars, 19 Defendants made fraudulent misrepresentations regarding their authority or permission to remove 20 the cars. 21 Additionally, “Defendants” have made statements in the marketplace to disparage 22 Hellenic. “Defendants” have made statements about Hellenic being untrustworthy and refusing to 23 honor a contract to pay for propane, even though Hellenic never agreed to receive $1.2 million of 24 propane. These statements have caused Hellenic financial loss. 25 From these allegations, Hellenic seeks declaratory relief and damages through trade libel, 26 NIPEA, misrepresentation, and the UCL. 27 28 1 DEFENDANTS’ MOTION 2 1. First Cause of Action – Declaratory relief 3 Parties’ Arguments 4 Defendants argue that the claim for declaratory relief fails because there are no allegations 5 of a written or oral agreement between the parties. In fact, the FAC specifically alleges that there 6 was no agreement between the parties. Thus, there is no plausible claim stated. 7 Hellenic argues the FAC does allege a dispute regarding the delivery of propane which is 8 alleged to be in violation of an agreement. That is sufficient to support a claim for declaratory 9 relief. 10 Legal Standard 11 In California, “declaratory relief is designed in large part as a practical means of resolving 12 controversies, so that parties can conform their conduct to the law and prevent future litigation.” 13 Meyer v. Sprint Spectrum LP, 45 Cal.4th 634, 648 (2009). In relevant part, Cal. Code. Civ. P. § 14 1060 provides: “Any person interested under a . . . contract . . . may, in cases of actual controversy 15 relating to the legal rights and duties of the respective parties, bring an original action . . . in the 16 superior court . . . for a declaration of his or her rights and duties . . ., including a determination of 17 any question of construction or validity arising under the . . . contract.” A complaint for 18 declaratory relief must demonstrate a proper subject for declaratory relief (as set forth in § 1060 19 and other statutes) and an actual controversy involving justiciable questions relating to the rights 20 or obligations of a party. Sweetwater Union High Sch. Dist. v. Julian Union Elementary Sch. 21 Dist., 36 Cal. App. 5th 970, 984 (2019); Brownfield v. Daniel Freeman Marina Hosp., 208 22 Cal.App.3d 405, 411 (1989). “The ‘actual controversy’ requirement concerns the existence of a 23 present controversy relating to the legal rights and duties of the respective parties pursuant to 24 contract [§ 1060], statute, or order.” Sweetwater Union, 36 Cal.App.4th at 984; Brownfield, 208 25 Cal.App.3d at 410. 26 Discussion 27 Here, the FAC provides little detail. However, it can be reasonably inferred, see Kwan, 28 854 F.3d at 1096; TrachtGut, LLC v. L.A. Cnty. Treasurer & Tax Collector, 836 F.3d 1146, 1150 1 (9th Cir. 2016), that Hellenic entered into a contract/agreement with SER for the purchase of not 2 more than $200,000 worth of propane.1 Despite this limit, $1.2 million of propane was sent to 3 Hellenic and there is a dispute about how much, if anything, Hellenic owes to SER for the 4 delivered propane. Additional terms of the agreement are unknown, as is the very form of the 5 agreement (oral or written).2 Nevertheless, the minimal allegations in the FAC are sufficient to 6 indicate that there exists an on-going dispute regarding the obligations of the parties to a 7 contract/agreement for the provision of propane. That is sufficient to allege a plausible claim with 8 respect to SER. See Cal. Code Civ. P. § 1060; Sweetwater Union, 36 Cal.App.4th at 984. 9 Therefore, dismissal of the claim for declaratory relief regarding $1.2 million of propane is 10 inappropriate. 11 However, the allegations under the declaratory relief cause of action are not limited to the 12 delivery of $1.2 million of propane. Hellenic also alleges that Defendants fraudulently removed 13 nine railway cars of propane from Hellenic’s railyard. The significance of this allegation under 14 this cause of action is unclear. Hellenic does not allege that the removal of the nine railway cars 15 was done pursuant to the contract/agreement with SER for the provision of propane. The 16 allegation indicates that Defendants have committed a tort, not that there is a dispute as to rights or 17 obligations under a contract. Without an allegation that ties the removal of the nine railway cars to 18 obligations under a contract, removal of the railway cars does not support a viable claim for 19 declaratory relief. See Sweetwater Union, 36 Cal.App.4th at 984; Brownfield, 208 Cal.App.3d at 20 1 The Court recognizes that the FAC contains a common boilerplate allegation that all defendants were each other’s 21 agents. However, when entities are involved in a transaction, the negotiations are conducted by the entities’ respective agents. Generally, any resulting agreement is legally between the entities, not between the agents. Cf. 22 Filippo Inustries, Inc. v. Sun Ins. Co., 74 Cal.App.4th 1429, 1442-43 (1999) (holding that agent is not liable on a contract when he acts for a disclosed principal and does not exceed his authority). As such, it is reasonable and 23 plausible to infer that the agreement described in the first cause of action is between Hellenic and SER. However, in the absence of an express allegation that identifies the actual relationship between the individuals and SER, and that 24 explains how Kast and Johnson can enforce the agreement in an individual/non-representative capacity, it cannot be reasonably inferred that Kast and Johnson are parties to the agreement in an individual capacity. Without allegations 25 that plausibly show that Kast and Johnson can individually enforce the agreement, there is no basis to include them under the claim for declaratory relief. 26 2 The Court notes that declaratory relief is available for both written and oral contracts. See Columbia Pictures Corp. 27 v. De Toth, 26 Cal.2d 753, 760 (1945) (oral contract); Shaw v. Regents of U. of Cal., 58 Cal.App.4th 44, 52 (1997) (written contract); Zimmer v. Gorelink, 42 Cal.App.2d 440, 445 (1941) (holding that § 1060 applies to oral and 28 written contracts). 1 410. To the extent that the allegation regarding the removal of the nine railway cars is meant to 2 support a claim for declaratory relief, dismissal is appropriate. See id. 3 2. Second Cause of Action – Trade Libel 4 Parties’ Arguments 5 Defendants argue that the allegations for trade libel are conclusory and merely track the 6 elements of the tort. Further, the disparaging comment did not involve a reference to Hellenic’s 7 products or services, rather, it was a mere reference to its business and payment practices. 8 Hellenic argues that the FAC alleges that Defendants made disparaging statements with 9 respect to Hellenic’s business and payment practices and said that Hellenic is untrustworthy and 10 refuses to honor a contract to pay for propane. Hellenic argues that Defendants’ statements affect 11 the market’s perception of the services that Hellenic provides, as it is in the business of supplying 12 fuel to customers. Alternatively, if the claim is not considered trade libel, it should be considered 13 defamation. 14 Legal Standard 15 “Trade libel” has been defined as the “intentional disparagement of the quality of services 16 or product of a business that results in pecuniary damage to the plaintiff.”3 J-M Mfg. Co, Inc. v. 17 Phillips & Cohen LLP, 247 Cal.App.4th 87, 97 (2016). “Disparagement” consists of “injurious 18 falsehoods that interfere with business,” and unlike the tort of defamation, is “not directed at the 19 plaintiff’s personal reputation, but rather at the goods a plaintiff sells or the character of his other 20 business.” Aetna Cas. & Sur. Co. v. Centennial Ins. Co., 838 F.2d 346, 351 (9th Cir. 1988); 21 Guess, Inc. v. Superior Ct., 176 Cal.App.3d 473, 479 (1986); see Hartford Cas. Ins. Co. v. Swift 22 Distribution, Inc., 59 Cal.4th 277, 289 (2014). “Trade libel” may consist of a publication of matter 23 that is derogatory to the plaintiff’s title to his property, or its quality, or to his business in general.” 24 Atlantic Mutual Ins. Co. v. J. Lamb, Inc., 100 Cal.App.4th 1017, 1035 (2002); Nichols v. Great 25 Am. Ins. Cos., 169 Cal.App.3d 766, 773 (1985); Erlich v. Etner, 224 Cal.App.2d 69, 73 (1964); 26 see also Hartford, 59 Cal.4th at 289-91. “[C]ourts have required that the defendant’s false or 27 3 “‘[C]ommercial disparagement,’ ‘injurious falsehood,’ ‘product disparagement,’ ‘trade libel,’ ‘disparagement of 28 property,’ and ‘slander of goods,’” are names that have been given to the same tort by various courts over the years. 1 misleading statement have a degree of specificity that distinguishes direct criticism of a 2 competitor’s product or business from other statements extolling the virtues or superiority of the 3 defendant’s product or business.” Hartford, 59 Cal.4th at 291. Statements that consist of merely 4 loose, figurative, or hyperbolic language, as well as statements that are mere puffery or the 5 expression of opinion, will not constitute “disparagement.” See Aerosonic Corp. v. Trodyne 6 Corp., 402 F.2d 223, 231 (5th Cir. 1968); Hanford, 59 Cal.4th at 299; ComputerXpress, Inc. v. 7 Jackson, 93 Cal.App.4th 993, 1010-11, 1014 (2001). Additionally, the plaintiff must show it 8 actually suffered some pecuniary loss. See J-M Mfg., 247 Cal.App.4th at 97; Mann v. Quality Old 9 Time Service, Inc., 120 Cal.App.4th 90, 109 (2004);4 Erlich, 224 Cal.App.2d at 73. Generally, a 10 plaintiff must identify the particular customers and transactions lost in order to show the specific 11 pecuniary injury suffered from the defendant’s disparaging statements. See Mann, 120 12 Cal.App.4th at 109; Erlich, 224 Cal.App.2d at 73-74. 13 Discussion 14 Hellenic’s trade libel claim fails for at least two reasons. 15 First, the pecuniary loss required to support a claim of trade libel is considered to be 16 “special damages.” Leonardini v. Shell Oil Co., 216 Cal.App.3d 547, 572 (1990). As such, the 17 heightened pleading standard of Rule 9(g) applies to the damages suffered from a trade libel. See 18 Fed. R. Civ. P. 9(g) (“If an item of special damages is claim, it must be specifically stated.”); 19 Youngevity Int’l Corp. v. Smith, 2017 U.S. Dist. LEXIS 205980, *31 (S.D. Cal. Dec. 13, 2017); 20 Piping Rock Partners, Inc. v. David Lerner Assocs., 946 F.Supp.2d 957, 981 (N.D. Cal. 2013). To 21 meet this standard, the FAC was required to identify the particular customers and transactions lost 22 as a result of Defendants’ disparaging statements. See Youngevity, 2017 U.S. Dist. LEXIS 23 205980 at *31; Piping Rock, 946 F.Supp.2d at 981; Mann, 120 Cal.App.4th at 109. However, the 24 FAC merely alleges, on information and belief, that it “suffered direct financial harm.” FAC ¶ 21. 25 That does not meet Rule 9(g)’s requirements. See id. 26 Second, the disparaging statement identified in the FAC is about “[Hellenic’s] alleged 27 untrustworthiness and refusal to honor a contract to pay for propane.” FAC ¶¶ 17, 18. The Court 28 1 takes the allegation to mean that Defendants have said that Hellenic is untrustworthy because it 2 did not honor a contract to buy propane from SER. Hellenic does not argue that the statement 3 reflects necessarily on the goods it sells, rather, Hellenic argues that the statement reflects on its 4 services. See Doc. No. 15 at 7:19-22. However, there is nothing about any service provided by 5 Hellenic that is reflected in the statement. The statement focuses on a specific transaction with 6 Defendants for Hellenic to purchase propane. In that scenario, Defendants are providing a good 7 (propane) and a service (delivery of propane) to Hellenic. That is, Hellenic is a purchaser, not a 8 purveyor of any good or service. Contrary to its argument, Hellenic has not demonstrated that the 9 alleged statements disparage its services. Because Hellenic’s theory of trade libel as the 10 disparagement of its services is not supported by the allegations, no plausible claim is stated and 11 dismissal is appropriate. 12 3. Third Cause of Action – NIPEA 13 Parties’ Arguments 14 Defendants argue that the FAC alleges intentional conduct, not negligence, and fails to 15 identify any duty of care owed by Defendants to Hellenic. Further, the FAC alleges that two acts 16 by Defendants caused harm, over-supplying Hellenic with propane and removing propane from 17 Hellenic’s railyard. However, these allegations are irrational; either Hellenic wanted propane or it 18 did not. Hellenic cannot be offended both by the delivery of propane it did not want and its 19 removal. 20 Hellenic argues that there are no inconsistencies regarding negligent interference. 21 Defendants sought to unlawfully overwhelm its finances and facilities, then sought to unlawfully 22 interfere with its operations, and then spread libelous information regarding the same. 23 Alternatively, if the allegations support a claim for intentional interference with prospective 24 economic advantage, then the claim can be viewed as such. 25 Legal Standard 26 Torts of interference with prospective economic advantage impose “impose liability for 27 improper methods of disrupting or diverting the business relationship of another which fall 28 outside the boundaries of fair competition.” Golden Eagle Land Investment, LP v. Rancho Santa 1 Fe Assn., 19 Cal.App.5th 399, 429 (2018). The elements of a claim for NIPEA are: “(1) the 2 existence of an economic relationship between the plaintiff and a third party containing the 3 probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the 4 relationship; (3) the defendant’s knowledge (actual or construed) that the relationship would be 5 disrupted if the defendant failed to act with reasonable care; (4) the defendant’s failure to act with 6 reasonable care; (5) the defendant engaged in wrongful conduct; (6) actual disruption of the 7 relationship; (7) and economic harm proximately caused by the defendant's negligence. See 8 Redfearn v. Trader Joe's Co., 20 Cal. App. 5th 989, 1005-06 (2018); Verhaus v. Shultz, 155 9 Cal.App.4th 1072, 1077-78 (2007). With respect to the third and fourth elements regarding 10 reasonable care, NIPEA “arises only when the defendant owes the plaintiff a duty of care.” 11 Limandri v. Judkins, 52 Cal.App.4th 326, 348 (1997); see Golden Eagle, 19 Cal.App.5th at 430. 12 With respect to the fifth element, the wrongful conduct must be “independently wrongful,” that is, 13 “proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal 14 standard.” Edwards v. Arthur Andersen LLP, 44 Cal.4th 937, 944 (2008); Redfearn, 20 15 Cal.App.5th at 1006. 16 Discussion 17 Hellenic argues that Defendants were under a duty of care that had been created by the 18 agreement to buy and deliver propane. As discussed above, it reasonably can be inferred from the 19 FAC that Hellenic and SER entered into a contract for the sale and delivery of propane. In 20 California, “a contract to perform services gives rise to a duty of care which requires that such 21 services be performed in a competent and reasonable manner. A negligent failure to do so may be 22 both a breach of contract and a tort.” North Am. Chemical Co. v. Superior Ct., 59 Cal.App.4th 23 764, 774 (1997); see also Holguin v. Dish Network LLC, 229 Cal.App.4t h 1310, 1324 (2014). 24 Propane is a good, but delivering the propane is a service. Therefore, under North Am. and 25 Holguin, SER was under an obligation to competently deliver the propane. 26 Accepting this duty, there are problems with this cause of action. The unreasonable 27 conduct that the FAC identifies is the disruption of Hellenic’s propane supplies through the 28 delivery of excess propane and the removal of nine railway cars of propane. Assuming that 1 delivering $1.2 million of propane (which exceeds the $200,000 limit) is not a competent delivery, 2 the removal of the railway cars is separate from the delivery of propane. Although the allegations 3 are sparse, the FAC suggests that removal occurred after the delivery obligation had been met. 4 That is, at the time of removal, all performance under the agreement had already occurred, even if 5 performance was unreasonable. Hellenic does not explain how the removal of the railway cars 6 implicates any existing duty that was owed by Defendants. Hellenic also does not separate the 7 harms caused by oversupply from the harms caused by removal of the nine railway cars. 8 Therefore, the act of “disruption of supply” by Defendants does not implicate a duty owed to 9 Hellenic because only one of the two acts that form the disruption is covered by a duty created by 10 the agreement at issue. Without a duty that is owed to Hellenic by Defendants that covers the 11 conduct alleged to be unreasonable, no plausible claim is stated. 12 Additionally, the Court agrees with Defendants that there is tension in the allegations 13 regarding supply and removal. The Court accepts that Hellenic did not authorize the delivery of 14 $1.2 million of propane. However, if Hellenic did not authorize the delivery of that quantity of 15 propane, it is unclear why the removal of the nine railway cars was problematic. It would seem 16 that SER is simply taking back the excess propane that it had delivered to Hellenic. It is possible 17 that propane from sources other than Defendants was removed as part of the nine railway cars, or 18 it is possible that some portion of the nine railway cars contained a quantity of propane that was 19 within the $200,000 limit that had been set by the parties. If that is the case, both harm and 20 unreasonableness would be clear. However, there are no such allegations. The bottom line is that 21 without further factual allegations, there is simply a contention of oversupply and removal. If 22 Hellenic did not authorize the delivery of $1.2 million of propane, then Defendants taking the 23 propane back is not necessarily wrongful or unreasonable or even harmful. Further allegations are 24 necessary to show how or why the removal was improper, unreasonable, and harmful. 25 In sum, the allegations do not plausibly demonstrate a duty owed by the Defendants to 26 Hellenic that would encompass the conduct at issue. Further, the unreasonableness and 27 harmfulness of the removal of the railway cars is unclear. Therefore, no plausible claim is stated 28 and dismissal is appropriate. 1 4. Fourth Cause of Action – Misrepresentation 2 Parties’ Arguments 3 Defendants argue that the claim for misrepresentation fails because the FAC does not 4 identify what the misrepresentation was or to whom it was made. The California pleading 5 standard for fraud requires particularity, and the FAC does not provide the necessary specifics. 6 Hellenic argues that the FAC satisfies the California particularity requirements. The how, 7 what, when, where, and to who the misrepresentations were made. 8 Legal Standard 9 The elements of fraud or intentional misrepresentation are: (1) a misrepresentation, (2) 10 with knowledge of its falsity, (3) with the intent to induce another’s reliance on the 11 misrepresentation, (4) justifiable reliance, and (5) resulting damage. See Conroy v. Regents of U. 12 of Cal., 45 Cal.4th 1244, 1256 (2009); Cohen v. Kabbalah Centre Int’l, Inc., 35 Cal.App.5t h 13, 13 20 (2019); Daniels v. Select Portfolio Servicing, Inc., 246 Cal.App.4th 1150, 1166 (2016). Claims 14 of fraud must be pled with particularity and meet Rule 9(b)’s heightened pleading standard, 15 meaning that the “who, what, when, where, and how” of the fraud, as well as what is false or 16 misleading about the fraudulent statement and why it is false, must all be alleged.5 Davidson v. 17 Kimberly-Clark Corp., 889 F.3d 956, 964 (9th Cir. 2018). “Rule 9(b) does not allow a complaint 18 to merely lump multiple defendants together but requires plaintiffs to differentiate their allegations 19 when suing more than one defendant and inform each defendant separately of the allegations 20 surrounding his alleged participation in the fraud.” United States v. United Healthcare Ins. Co., 21 848 F.3d 1161, 1184 (9th Cir. 2016). Additionally, when the defendant is an entity, a complaint 22 generally must also identify the person who made the false representations on behalf of the entity. 23 See United States ex. Lee v. SmithKline Beecham, 245 F.3d 1048, 1051 (9th Cir. 2001); White v. 24 J.P. Morgan Chase, Inc., 167 F.Supp.3d 1108, 1115 (E.D. Cal. 2018); Griffin v. Lending Tree 25 Servicing, LLC, 166 F.Supp.3d 1030, 1057-58 (C.D. Cal. 2015). 26 5 The Court notes that the parties cite to and rely on pleading requirements of California state law. Such reliance, 27 although not uncommon, is improper. The Federal Rules of Civil Procedure, not the California Code of Civil Procedure, govern all actions in federal court, irrespective of the source of subject matter jurisdiction. See Fed. R. 28 Civ. P. 1; Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009); United States use of Acme Granite & Tile 1 Discussion 2 The FAC contains allegations that adequately identify several necessary specifics of the 3 Defendants’ fraud. The “what” of the misrepresentation is that “Defendants” misrepresented that 4 they had authority to remove nine railroad cars of propane from Hellenic’s facility. The 5 representation was false because in order to have had the authority to remove the nine railway 6 cars, Defendants would have had to have had Hellenic’s permission and they did not. The 7 “where” is reasonably inferred to be Hellenic’s railyard. Although the FAC does not expressly 8 allege where the misrepresentations occurred, the FAC does allege that Hellenic’s agents and 9 railway agents relied on the misrepresentations. It is reasonable to infer that the railway agents 10 were actually at the railyard and thus, that the misrepresentations actually occurred at the railyard. 11 However, not all of the necessary specifics are identified by the FAC. The “how” is not 12 alleged. Given the other allegations, the misrepresentations could have been oral, written, or both. 13 The complaint loosely identifies the “when” as February 2019, but given the nature of the 14 misrepresentation, a more specific timeframe should be known to Hellenic. The “who” is not 15 adequately identified for several reasons. First, the FAC improperly lumps SER and Kast together 16 by making allegations against “Defendants.” Lumping all “Defendants” together is improper. See 17 United Healthcare, 848 F.3d at 1184. Second, SER is a business entity. As such, Hellenic must 18 either name the agents/employees of SER who made the misrepresentations or at least attempt to 19 describe or identify those agents/employees as best it can. See SmithKline Beecham, 245 F.3d at 20 1051; White, 167 F.Supp.3d at 1115; Griffin, 166 F.Supp.3d at 1057-58. Third, although Kast is 21 alleged to have directed the removal of the railway cars, there are no allegations that actually tie 22 Kast to the misrepresentations. Hellenic needs to make allegations that show how Kast is either 23 directly or vicariously liable for the misrepresentations, not simply that he directed the 24 repossession of the nine railway cars. Finally, although not argued with respect to this cause of 25 action, as discussed above, it is not clear why the removal of the nine railway cars was harmful. 26 The removal appears to be related to the oversupply of unwanted propane. It is unclear why 27 removing/taking back the unwanted and unauthorized shipment of propane would cause harm. 28 In sum, because Rule 9(b)’s standards have not been met, dismissal is appropriate. 1 5. Fifth Cause of Action – Unfair Competition 2 Parties’ Arguments 3 Defendants argue that the UCL claim fails because the FAC does not identify any section 4 of the statutory scheme that has been violated. 5 Hellenic argues that Defendants’ view of the UCL is too narrow. Hellenic clarifies that its 6 UCL claims is derivative of each of the other claims alleged in the FAC. Insofar as any other 7 claims are allowed to proceed, the UCL should also proceed. 8 Legal Standard 9 The UCL broadly proscribes the use of any “unlawful, unfair or fraudulent business act or 10 practice.” Cal. Bus. & Prof. Code. § 17200; Beaver v. Tarsadia Hotels, 816 F.3d 1170, 1177 (9th 11 Cir. 2016). “The UCL operates as a three-pronged statute: ‘Each of these three adjectives 12 [unlawful, unfair, or fraudulent] captures a ‘separate and distinct theory of liability.’” Beaver, 816 13 F.3d at 1177 (quoting Rubio v. Capital One Bank, 613 F.3d 1195, 1203 (9th Cir. 2010)). 14 “A business practice is ‘fraudulent’ under the UCL if members of the public are likely to 15 be deceived.” Davis v. HSBC Bank, 691 F.3d 1152, 1169 (9th Cir. 2012); Puentes v. Wells Fargo 16 Home Morg., Inc., 160 Cal.App.4th 638, 645 (2008). Unless a particular disadvantaged or 17 vulnerable group is targeted, whether conduct is “fraudulent” is judged the effect the conduct 18 would have on a reasonable consumer. Puentes, 160 Cal.App.4th at 646. 19 The UCL’s “unlawful” prong “borrows violations of other laws . . . and makes those 20 unlawful practices actionable under the UCL,” and that “virtually any law or regulation – federal 21 or state, statutory or common law – can serve as a predicate . . . .” Candelore v. Tinder, Inc., 19 22 Cal.App.5th 1138, 1155 (2018). When the underlying legal claim that supports a UCL claim fails, 23 “so too will the [the] derivative UCL claim.” AMN Healthcare, Inc. v. Aya Healthcare Services, 24 Inc., 28 Cal.App.5th 923, 950 (2018); see also Krantz v. BT Visual Images, LLC, 89 Cal.App.4th 25 164, 178 (2001). 26 California law with respect to “unfair” conduct is currently “in flux.” Hodsdon v. Mars, 27 Inc., 891 F.3d 857, 866 (9th Cir. 2018). Conduct is “unfair” either when it “threatens an incipient 28 violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects 1 are comparable to or the same as a violation of the law, or otherwise significantly threatens or 2 harms competition,” or when it “'offends an established public policy or when the practice is 3 immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” Id. 4 Discussion 5 Hellenic’s opposition clarifies that its UCL claims is dependent upon his other causes of 6 action. Based on the definitions of “unfair,” “fraudulent,” and “unlawful” for purposes of the 7 UCL, Hellenic appears to be pursuing only an “unlawful” UCL claim. The Court has found that 8 dismissal of the substantive causes of action is proper. Because these causes of action fail, so too 9 fails the UCL claim.6 See AMN Healthcare, 28 Cal.App.5t h at 950; Krantz, 89 Cal.App.4th at 10 178. 11 6. Punitive Damages 12 Parties’ Arguments 13 Defendants argue that the request for punitive damages is insufficient because there is only 14 an insufficient bare allegation that Defendants acted with malice, fraud, or oppression. 15 Hellenic argues that the FAC alleges that Defendants actions were performed with malice, 16 fraud, or oppression and with the intent to cause injury to Hellenic. Thus, the allegations are 17 sufficient to support punitive damages. 18 Discussion 19 Punitive damages are “merely an additional remedy that [are] dependent on a viable cause 20 of action for an underlying tort.” 569 E. County Blvd. LLC v. Backcountry Against the Dump, 21 Inc., 6 Cal.App.5th 426, 430 n.3 (2016). Because there are no viable tort claims alleged, dismissal 22 of the punitive damages request is appropriate.7 23
24 6 The Court is unaware of any authority holding that a claim for declaratory relief under Cal. Code Civ. P. § 1060 may form the basis of a UCL “unlawful” claim. 25
26 7 The Court notes that “malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). While there is no heightened pleading standard under Rule 9(b) for punitive damages, the 27 allegations that request and support punitive damages must still meet the requirements of Rule 8 and Iqbal, i.e. the factual allegations must indicate a plausible basis for punitive damages. See Mayfield v. NASCAR, 674 F.3d 369, 28 377 (4th Cir. 2012); Coppola v. Smith, 982 F.Supp.2d 1133, 1144-45 (E.D. Cal. 2013). 1 7. Allegations Involving Individual Defendants Kast and Johnson 2 Parties’ Arguments 3 Defendants argue that the FAC is almost completely devoid of any facts relating to 4 Johnson and Kast that could support any liability. Johnson is only mentioned as having authorized 5 a $200,000 delivery limit, and there are no facts that elaborate or give context to the delivery limit. 6 Similarly, Kast is alleged to have directed the delivery of propane to Hellenic and to have directed 7 the removal of nine railway cars of propane without Hellenic’s consent. These facts do not state 8 plausible claims. 9 Hellenic argues that there are specific allegations against Johnson and Kast. Johnson 10 agreed to the $200,000 limit on propane deliveries and Kast authorized additional deliveries of 11 propane to Hellenic and the removal of the nine railway cars. Additionally, the references to 12 “Defendants” in the FAC are a reference to SER, Johnson, and Kast. 13 Discussion 14 Hellenic admits that it has lumped SER, Kast, and Johnson together and alleged acts of 15 misconduct against “Defendants” without necessarily differentiating any individual’s conduct. 16 Through Footnote 1, the Court has explained that it does not view any plausible claim against Kast 17 and Johnson with respect to declaratory relief because there are no allegations that explain how 18 they can individually enforce the agreement. Further, the Court has also explained that additional 19 facts are needed to tie Kast to the misrepresentations identified under the cause of action for 20 misrepresentation. 21 With respect to the trade libel claim, it is a reasonable reading of the FAC that Hellenic is 22 alleging that each Defendant made statements that Hellenic was untrustworthy because it did not 23 honor its agreement with SER for the purchase and delivery of propane. If Hellenic does not 24 believe that each Defendant made such a statement, then the trade libel claim should not be 25 alleged against each defendant (or Hellenic should explain that a specific defendant’s liability is 26 somehow vicarious). Similarly, if Hellenic is aware of specific statements made by specific 27 Defendants, then those specific statements should be alleged and attributed to the appropriate 28 speaker. Otherwise, the Court is satisfied that Kast and Johnson have adequate notice of their 1 individual conduct for purposes of trade libel.8 2 With respect to the NIPEA claim, as discussed above, the conduct at issue was the 3 disruption of Hellenic’s distribution of propane to its customers through acts of oversupply and 4 removal of railway cars. Lumping all defendants together in this cause of action is problematic. 5 The removal of the nine railway cars is addressed in some depth under the Court’s analysis of the 6 misrepresentation claim. That claim is alleged only against Kast and SER, not Johnson. Given 7 this limitation, and the absence of any specific allegations regarding Johnson’s relationship to 8 either Kast or SER or to her specific involvement with the nine railway cars, the FAC does not 9 plausibly tie Johnson to the removal of the railway cars. Also, while Johnson is alleged to have 10 agreed to the $200,000 limit of propane, there are no allegations that actually tie her to any 11 responsibility for the oversupply. Negotiating a contract on behalf of a principal is different from 12 the principal’s actual performance of the contract. Thus, the FAC does not plausibly tie Johnson 13 to any acts of oversupply. The situation is different with respect to Kast. The allegations indicate 14 that Kast authorized the delivery of $1.2 million of propane and ordered the removal of the 15 propane. That is sufficient to tie Kast to the oversupply and removal.9 16 With respect to the UCL claim, as a derivative claim, the above analyses apply to 17 Hellenic’s UCL claim against Kast and Johnson. 18 8. Leave To Amend 19 Permitting a party leave to amend in connection with a first Rule 12(b)(6) motion is the 20 default. See Ebner, 838 F.3d at 962. Contrary to Defendants’ arguments, the Court cannot 21 conclude at this time that amendment would be futile. Thus, the Court will follow the default rule 22 and dismiss Hellenic’s claims with leave to amend. 23 As part of the opposition, Hellenic states that its NIPEA claim may be construed as an 24 intentional interference claim and that its trade libel claim may be construed as a defamation 25
26 8 The Court reiterates that it has not found a plausible trade libel claim. Because the plausibility of the claim as a whole is a separate issue from whether each defendant has adequate notice of the claims against them and the conduct 27 attributed to them, the Court addresses the allegations with respect to Kast and Johnson.
28 9 Again, that the allegations may tie Kast to the NIPEA claim does not change the fact that no plausible NIPEA has 1 claim. However, the claims at issue are those that are actually pled in the FAC. The FAC’s 2 causes of action are clearly entitled, generally follow the applicable CACI jury instructions, and 3 were alleged by an attorney. There is simply no basis to view the FAC as alleging anything other 4 than the claims that are expressly identified, trade libel and NIPEA. Nevertheless, Hellenic’s 5 arguments are not necessarily unreasonable in that the circumstances described in the FAC seem 6 more consistent with claims of defamation and intentional interference.10 Therefore, if Hellenic 7 chooses to amend its complaint, it may replace its trade libel and NIPEA claims with those of 8 defamation and intentional interference, or it may add defamation and intentional interference 9 claims. 10 Additionally, Defendants are correct to argue that there are many conclusory allegations 11 that track the elements of a claim and relatively few factual allegations. The key to stating 12 plausible claims is to include factual allegations, conclusory allegations that merely track elements 13 are insufficient. See Iqbal, 556 U.S. at 678; Levitt, 765 F.3d at 1135; Somers, 729 F.3d at 959. 14 To make the claims and contentions of Hellenic clearer, any amended complaint should include 15 additional factual allegations that identify the nature of the dispute and the relationship between 16 the parties, and that support the claims asserted. 17 18 19 ORDER 20 Accordingly, IT IS HEREBY ORDERED that: 21 1. Defendants’ motion to dismiss (Doc. No. 13) is DENIED with respect to the first cause of 22 action based on the alleged oversupply of propane; 23 2. Defendants’ motion to dismiss (Doc. No. 13) is otherwise GRANTED and all other claims 24 are DISMISSED with leave to amend; 25 3. Within twenty-one days (21) of service of this order, Plaintiff shall file an amended 26 complaint consistent with this order; 27
28 10 This statement is a general observation and is not to be construed as the Court prohibiting Hellenic from attempting If Plaintiff does not file a timely amended complaint, then leave to amend will be 2 automatically withdrawn without further order and Defendants shall file an answer within 3 twenty-eight (28) days of service of this order. 4 5 IT IS SO ORDERED. □□ 6 | Dated: _ September 30, 2019 Z : Cb ut _-SENIOR DISTRICT JUDGE 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28