Honma Golf U.S., LTD. v. Saddle Creek Corporation

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 HONMA GOLF U.S., LTD, Case No.: 21cv1131-CAB-WVG

12 Plaintiff, ORDER DENYING MOTION TO 13 v. DISMISS COUNT III FROM THE COMPLAINT [Doc. No. 7] 14 SADDLE CREEK CORPORATION, 15 Defendant. 16 17 On June 24, 2021, Defendant Saddle Creek Corporation (“Saddle Creek”) filed a 18 motion to dismiss Count III of the complaint. [Doc. No. 7.] On July 15, 2021, Plaintiff 19 Honma Golf U.S., Ltd. (“HONMA”) filed an opposition. [Doc. No. 10.] On July 22, 20 2021, Defendant filed a reply. [Doc. No. 13.] For the reasons set forth below, the motion 21 to dismiss Count III is DENIED. 22 ALLEGATIONS OF COMPLAINT 23 HONMA contracts with third-party logistics companies to deliver its top of the line 24 golf clubs, which range from $175 for individual clubs to $50,000 for a particular set, to 25 customers across the United States. [Doc. No. 7-2, Ex. A, at ¶ 5.] On January 24, 2019, 26 HONMA and Saddle Creek entered into a warehouse services agreement (the 27 “Agreement”), under which Saddle Creek agreed to receive, store, and prepare for 28 shipment HONMA’s products at its warehouse facility located at 7345 Mission George 1 Road, San Diego, CA 92120 (the “Facility”). [Id. at ¶¶ 6-7.] In exchange, HONMA 2 agreed to pay Saddle Creek $10,000 a month for the storage of its products, plus 3 additional fees required under the Agreement. [Id. at ¶ 7.] The Agreement is scheduled to 4 terminate January 31, 2022. [Id. at ¶ 6.] 5 Beginning around April 2020, HONMA expressed concerns to Saddle Creek about 6 irregularities in the count of its inventory that was delivered to the Facility. Because of 7 HONMA’s concerns, it arranged to have Saddle Creek perform a full inventory audit of 8 HONMA’s products at the Facility. HONMA hired its accounting firm, Ernst & Young, 9 to oversee Saddle Creek’s audit and to confirm the accuracy of Saddle Creek’s count. 10 [Doc. No. 7-2, Ex. A, at ¶ 10.] Once Saddle Creek conducted the audit in May 2020, 11 Ernst & Young confirmed HONMA’s suspicions: that there were discrepancies in 12 inventory and other transactions in excess of $400,000. That is, Saddle Creek had 13 misplaced, lost, or stolen over $400,000 of HONMA’s inventory from April 2019 to May 14 2020. [Id. at ¶ 11.] 15 In or around October 2020, at the conclusion of a second audit, Saddle Creek 16 determined that $490,852 of HONMA’s equipment that was stored and managed at the 17 Facility had been lost. [Doc. No. 7-2, Ex. A, at ¶ 16.] Shortly after Saddle Creek 18 completed its October 2020 audit, HONMA began transferring its remaining inventory at 19 the Facility to other locations. [Id. at ¶ 17.] In or around March 15, 2021, after HONMA 20 transitioned a large portion of its inventory away from the Facility, HONMA conducted 21 its own review of its inventory that was held by Saddle Creek at the Facility over the 22 years and determined that there was additional missing equipment, which may be worth 23 as much as $562,077. [Id. at ¶ 18.] In total, HONMA believes that due to Saddle Creek’s 24 negligence or intentionally wrongful conduct, over $1 million worth of HONMA’s 25 inventory has been misplaced or stolen since the parties entered into the Agreement. [Id. 26 at ¶ 19.] Based on the foregoing, HONMA filed suit against Saddle Creek on or about 27 April 23, 2021. In its Complaint, HONMA has asserted claims for breach of contract, 28 conversion, and declaratory relief. [Doc. No. 7-2, Ex. A, at ¶¶ 21-36.] 1 LEGAL STANDARD 2 A complaint will survive a motion to dismiss when it contains “sufficient factual 3 matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. 4 Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. 5 Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). When 6 considering a Rule 12(b)(6) motion, a court must “accept as true all allegations of 7 material fact and must construe those facts in the light most favorable to the plaintiff.” 8 Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir.2000). 9 Although a complaint need not include “detailed factual allegations,” it must offer 10 “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Iqbal, 556 11 U.S. at 678. Conclusory allegations or allegations that are no more than a statement of a 12 legal conclusion “are not entitled to the assumption of truth.” Id. at 679. In other words, a 13 pleading that merely offers “labels and conclusions,” a “formulaic recitation of the 14 elements,” or “naked assertions” will not be sufficient to state a claim upon which relief 15 can be granted. Id. at 678 (citations and internal quotation marks omitted). 16 “When there are well-pleaded factual allegations, a court should assume their 17 veracity and then determine whether they plausibly give rise to an entitlement of relief.” 18 Id. at 679. Plaintiffs [cross-complainants] must allege “plausible grounds to infer” that 19 their claims rise “above the speculative level.” Twombly, 550 U.S. at 555. “Determining 20 whether a [cross] complaint states a plausible claim for relief” is a “context-specific task 21 that requires the reviewing court to draw on its judicial experience and common sense.” 22 Iqbal, 556 U.S. at 679. 23 DISCUSSION 24 Defendant argues the declaratory relief claim should be dismissed because 25 HONMA “has an adequate remedy at law” under the breach of contract and conversion 26 claims. [Doc. No. 7-1 at 2.] Plaintiff argues the declaratory relief claim is cognizable 27 because it seeks a separate remedy from those sought by the other claims. [Doc. No. 10 28 at 2.] 1 Under 28 U.S.C. § 2201, “any court of the United States, upon the filing of an 2 || appropriate pleading, may declare the rights and other legal relations of any interested 3 || party seeking such declaration, whether or not further relief 1s or could be sought.” “The 4 ||existence of another adequate remedy does not preclude a judgment for declaratory relief 5 ||in cases where it is appropriate.” FED.R.CIV.PROC. 57. Declaratory relief may also be 6 || granted in addition to other remedies (e.g., damages for installments past due under a 7 contract plus a declaration as to liability to make future payments).” Phillips & 8 Stevenson, RUTTER GROUP PRAC GUIDE: FEDERAL CIV.PRO. BEFORE TRIAL 9 ||(The Rutter Group 2021), §10:6.3. Finally, declaratory relief 1s appropriate where a 10 || breach of contract claim will not settle all contractual issues for which plaintiff seeks 11 declaratory relief. See, e.g., StreamCast Networks, Inc. v. IBIS LLC, 2006 WL 5720345, 12 || at *4 (C.D. Cal. May 2, 2006)(declaratory relief claim not redundant of breach of contract 13 claim where declaratory relief claim sought determination, inter alia, of whether contract 14 || could be terminated, while contract claim sought actual or liquidated damages for 15 || defendant’s past alleged breaches). 16 Here, Plaintiff's declaratory relief claim is not redundant of its other claims. The 17 declaratory relief claim seeks to have the court determine that HONMA is entitled to 18 || terminate the Agreement (which is not set to terminate until January 31, 2022) due to 19 || Saddle Creeks’ alleged material breaches, while the breach of contract and conversion 20 || claims seek damages for Saddle Creeks’ past alleged breaches. Because the claims seek 21 || different forms of relief, the claims are not redundant. 22 CONCLUSION 23 For the reasons set forth above, the motion to dismiss Count III is DENIED. 24 ||Dated: August 18, 2021 € Z 25 Hon. Cathy Ann Bencivengo 26 United States District Judge 27 28