Multi-Flex Circuits Pty Limited v. Emerson

• Court: District Court, N.D. California
• Decided: July 16, 2025
• Docket: 5:25-cv-00303
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 8 MULTI-FLEX CIRCUITS PTY LIMITED, Case No. 5:25-cv-00303-BLF et al., 9 Plaintiffs, ORDER GRANTING MOTION TO 10 DISMISS WITH LEAVE TO AMEND v. 11 [Re: Dkt. No. 22] DANIEL T. EMERSON, et al., 12 Defendants. 13 14 Before the Court is Defendants Daniel Emerson and Light & Motion Industries, Inc.’s 15 (collectively, “Defendants”) Motion to Dismiss the Complaint. Dkt. No. 22 (“Mot.”). Plaintiffs 16 Multi-Flex Circuits Pty. Limited and Elecsys Manufacturing Corporation (collectively, 17 “Plaintiffs”) filed a brief in opposition to the motion. Dkt. No. 23 (“Opp.”). Defendants filed a 18 Reply in support of their motion. Dkt. No. 26 (“Reply”). The Court previously determined that 19 this motion was suitable for resolution without oral argument and vacated the hearing date. Dkt. 20 No. 30; see Civ. L.R. 7-1(b). 21 For the following reasons, the Court hereby GRANTS Defendants’ Motion to Dismiss the 22 Complaint WITH LEAVE TO AMEND. 23 I. BACKGROUND 24 For purposes of this motion, the following facts alleged in the Complaint are taken as true. 25 Multi-Flex Circuits Pty. Limited (“Multi-Flex”) is a company based in Australia that designs and 26 manufactures printed circuit boards. Dkt. No. 4 (“Compl.”) ¶ 1. Elecsys Manufacturing 27 Corporation (“Elecsys”) is a company based in the Philippines that provides electronics 1 parts. Id. ¶ 2. Defendant Light & Motion Industries, Inc. (“LMI”) is a California corporation that 2 sells lights and related equipment marketed for use with bicycles, underwater diving, and 3 photography. Id. ¶ 3. Defendant Daniel Emerson (“Emerson”) is the Chief Executive Officer of 4 LMI and is also a member of the Board of Directors and a shareholder of the corporation. Id. ¶ 4. 5 LMI has ordered printed circuit boards from Multi-Flex for over a decade. Id. ¶ 9. During 6 that time, LMI frequently requested that Elecsys source many of the parts for the circuit boards. 7 Id. Within the last four years, LMI “began to fall significantly behind in paying Multi-Flex and 8 Elecsys for its orders.” Id. ¶ 11. LMI’s sales had declined prior to the COVID-19 pandemic, and 9 the company continued to experience financial difficulties during the pandemic. Id. ¶ 10. As a 10 result, LMI “stopped employing personnel at its warehouse, sought to sub-let its entire warehouse 11 facilities in Marina . . . , and took out [] Small Business Administration ‘Payroll Protection Act’ 12 (‘PPA’) loans in 2020 and 2021 . . . to keep its business afloat.” Id. As of the time of filing, LMI 13 owed Multi-Flex $681,393 (plus interest) “for electronic and lighting parts that Multi-Flex 14 manufactured and shipped to LMI,” and LMI owed Elecsys $583,229 “for parts that Elecsys 15 purchased at LMI’s request.” Id. ¶ 11. Plaintiffs further assert that LMI has been inadequately 16 capitalized at all relevant times, and that LMI “used PPA loan proceeds . . . at least in part to pay 17 debts to vendors (contrary to the SBA loan program terms) to hide its insolvency.” Id. ¶ 12. 18 Multi-Flex and Elecsys filed suit in the United States District Court for the Northern 19 District of California on January 9, 2025. Dkt. No. 4. Multi-Flex brings two claims for relief 20 against LMI and Emerson, the latter on an “alter ego” theory: (1) a claim for breach of a written 21 contract, id. ¶¶ 13–19, and (2) a claim for “common counts,” id. ¶¶ 20–24. Elecsys brings its own 22 common count claim against LMI and Emerson, the latter again on an “alter ego” theory. Id. 23 ¶¶ 20–24. 24 II. LEGAL STANDARD 25 Under Federal Rule of Civil Procedure 12(b)(6), a court must dismiss a complaint if it fails 26 to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion, the plaintiff 27 must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. 1 that allow the court to “draw the reasonable inference that the defendant is liable for the 2 misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). There must 3 be “more than a sheer possibility that a defendant has acted unlawfully.” Id. While courts 4 generally do not require “heightened fact pleading of specifics,” a plaintiff must allege facts 5 sufficient to “raise a right to relief above the speculative level.” See Twombly, 550 U.S. at 555, 6 570. 7 When determining whether a claim has been stated, the Court accepts as true all well-pled 8 factual allegations and construes them in the light most favorable to the plaintiff. Reese v. BP 9 Expl. (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the Court need not “accept as 10 true allegations that contradict matters properly subject to judicial notice” or “allegations that are 11 merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead 12 Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (internal quotation marks and citations 13 omitted). On a motion to dismiss, the Court’s review is limited to the face of the complaint and 14 matters judicially noticeable. See MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 15 1986); N. Star Int’l v. Ariz. Corp. Comm’n, 720 F.2d 578, 581 (9th Cir. 1983). 16 In deciding whether to grant leave to amend, the Court must consider the factors set forth 17 by the Supreme Court in Foman v. Davis, 371 U.S. 178 (1962), and discussed at length by the 18 Ninth Circuit in Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2003). A district 19 court ordinarily must grant leave to amend unless one or more of the Foman factors is present: 20 (1) undue delay, (2) bad faith or dilatory motive, (3) repeated failure to cure deficiencies by 21 amendment, (4) undue prejudice to the opposing party, or (5) futility of amendment. Eminence 22 Capital, 316 F.3d at 1051–52. “[I]t is the consideration of prejudice to the opposing party that 23 carries the greatest weight.” Id. at 1052. However, a strong showing with respect to one of the 24 other factors may warrant denial of leave to amend. Id. 25 III. DISCUSSION 26 A. Breach of Contract 27 Only Plaintiff Multi-Flex asserts a breach of contract claim against Defendants LMI and 1 fail to state a claim because “[t]he Complaint fails to identify the contractual obligations allegedly 2 breached with any specificity.” Mot. at 9. Instead, “it recites the elements of a contract claim with 3 virtually no adornment,” id. at 10, noting only that Multi-Flex entered into multiple “written 4 purchase order[s]” with LMI in which LMI promised to remit “payment in full within thirty days 5 of receipt of the shipment” and then failed to make the payments, id. (citing Compl. ¶¶ 14–17). 6 Accordingly, Defendants argue that they have not received “fair notice” of Plaintiff’s claim and 7 that it is unclear what “material obligations were allegedly breached,” because Multi-Flex has not 8 identified which contracts (and how many) are at issue nor identified the specific contract 9 language at issue. Id. at 11. 10 In opposition, Multi-Flex states that Defendants’ argument “ignores the allegations in the 11 Complaint.” Opp. at 3. After reciting paragraphs 14 through 19 of the Complaint, Multi-Flex 12 argues that those allegations “track the elements of a claim for breach of contract” and that it is 13 “not require[d] . . . to attach the contract or recite the contract’s terms verbatim.” Id. at 4 (quoting 14 Misha Consulting Grp., Inc. v. Core Educ. and Consulting Sols. Inc., No. 13-cv-04262, 2013 WL 15 6073362, at *1 (N.D. Cal. Nov. 15, 2013)). Multi-Flex states that it is enough to have 16 “specifically allege[d] the provision in the parties’ contract that was breached—failure to pay for 17 products shipped within 30 days—the amount that is owed ($681,839), and the time frame for the 18 unpaid orders (within the last four years).” Id. at 5. 19 “[T]he elements of a cause of action for breach of contract are (1) the existence of the 20 contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and 21 (4) the resulting damages to the plaintiff.” Oasis W. Realty, LLC v. Goldman, 51 Cal. 4th 811, 821 22 (2011) (citing Reichert v. General Ins. Co., 68 Cal. 2d 822, 830 (1968)); accord 7EDU Impact 23 Acad. Inc. v. You, 760 F. Supp. 3d 981, 999 (N.D. Cal. 2024). “[A] plaintiff must, in actions 24 involving breach of a written contract, ‘allege the specific provisions in the contract creating the 25 obligation the defendant is said to have breached.’” In re Anthem, Inc. Data Breach Litig., 162 F. 26 Supp. 3d 953, 978 (N.D. Cal. 2016) (quoting Young v. Facebook, Inc., 790 F. Supp. 2d 1110, 1117 27 (N.D. Cal. 2011)). 1 on Defendants that Defendants are alleged to have breached. It is true that Plaintiff need not 2 “attach the contract or recite the contract’s terms verbatim” in order to proceed on a breach of 3 contract claim under the more forgiving federal pleading standard. Misha Consulting, 2013 WL 4 6073362, at *1. However, the Court concludes that Plaintiff’s current allegations are too vague 5 and conclusory. Multi-Flex’s allegations related to this first claim for relief consist only in stating 6 that (1) “[a]t various times during the past four years, LMI has ordered, and Multi-Flex has 7 manufactured and shipped, printed circuit boards and other electrical parts for use in LMI’s 8 lighting products,” Compl. ¶ 14; (2) “[e]ach order from LMI was made via a written purchase 9 order and promised Multi-Flex payment in full within thirty days of receipt of the shipment,” id. 10 ¶ 15; (3) “Multi-Flex performed all material obligations . . . ,” id. ¶ 16; and (4) “LMI ha[s] 11 breached its obligations . . . by failing to pay the full amount due for goods it ordered from Multi- 12 Flex,” id. ¶ 17. 13 In other words, Plaintiff states simply that LMI promised to pay within thirty days of each 14 shipment, but Multi-Flex does not identify any specific contracts allegedly breached—pointing 15 only generally to “various” “purchase order[s],” id. ¶¶ 14–15—nor the specific provision(s) of the 16 Parties’ contract(s) that establish the promise to pay at issue. Thus, Multi-Flex has failed to 17 provide sufficient detail to adequately put Defendants (or the Court) on notice of the factual 18 underpinnings of its breach of contract claim. See Langan v. United Servs. Auto. Ass’n, 69 F. 19 Supp. 3d 965, 980 (N.D. Cal. 2014) (“[T]here is no way for the Court know . . . even how many 20 agreements are at issue.”); Iglesia Cristiana Luz Y Verdad v. Church Mut. Ins. Co., No. 15-cv- 21 05621, 2016 WL 692839, at *4 (N.D. Cal. Feb. 19, 2016) (“It is not clear from the allegations in 22 the complaint how many policies are at issue. . . . The complaint does not disclose such terms as 23 the amount of coverage or the premiums charged. Plaintiffs’ allegations are not sufficiently 24 specific to put Allstate on notice of the contract at issue.”). 25 Accordingly, Multi-Flex’s first cause of action for Breach of Written Contract is 26 DISMISSED. However, the Court determines that none of the Foman factors weighs against 27 permitting amendment, so the dismissal is WITH LEAVE TO AMEND. 1 B. Common Count 2 Plaintiffs each assert a common count claim. Compl. ¶ 21 (“LMI has become indebted to 3 Multi-Flex in the amount of $681,393 for goods sold and delivered . . . , and has become indebted 4 to Elecsys in the amount of $583,229 for goods that Elecsys purchased. . . .”). Defendants argue 5 that Multi-Flex’s common count claim is “entirely duplicative of its breach of contract claim” and 6 therefore may be dismissed in light of the fact that the breach of contract claim has been 7 dismissed. Mot. at 12 (citing Perdue v. Rodney Corp., No. 13-cv-2712, 2014 WL 3726700, at *8 8 (S.D. Cal. July 25, 2014)). Regarding Elecsys, Defendants argue that the common count claim 9 fails “for an even more fundamental reason: it does not allege that it delivered anything to LMI.” 10 Id. at 14. “The Complaint alleges that Elecsys sourced parts for LMI, but nowhere does it say that 11 any of the parts Elecsys predicates LMI’s indebtedness on were delivered to LMI,” and 12 Defendants argue that the Complaint in this action is so sparse as to render it unreasonable to infer 13 that the goods were delivered. Id. at 15. 14 In response, Plaintiffs argue that Multi-Flex’s common count claim survives because the 15 breach of contract claim is adequately pleaded. Opp. at 6. Moreover, Plaintiffs argue that “the 16 Complaint alleges that Multi-Flex performed ‘all material obligation[s]’ and that LMI has failed to 17 pay for the[] products,” which Plaintiffs assert is sufficient. Id. As for Elecsys’s common count 18 claim, Plaintiffs argue that the Complaint need not specifically allege that any parts were delivered 19 to LMI; rather, it is enough to allege that LMI induced Elecsys to provide services or materials. 20 Id. at 7 (citing Earhart v. William Low Co., 25 Cal. 3d 503, 505–16 (1979)). 21 “A common count . . . is a simplified form of pleading normally used to aver the existence 22 of various forms of monetary indebtedness, including that arising from an alleged duty to make 23 restitution under an assumpsit theory.” Korchemny v. Piterman, 68 Cal. App. 5th 1032, 1047 24 (2021) (citing Zumbrun v. Univ. of S. Cal., 25 Cal. App. 3d 1, 14–15 (1972)). It “broadly applies 25 ‘wherever one person has received money which belongs to another, and which in equity and good 26 conscience . . . should be returned.’” Rubinstein v. Fakheri, 49 Cal. App. 5th 797, 809 (2020) 27 (citation omitted). The elements of a common count claim are: “(1) the statement of indebtedness 1 Balboa Cap. Corp. v. Shaya Med. P.C. Inc., 623 F. Supp. 3d 1059, 1070–71 (C.D. Cal. 2022) 2 (quoting Farmers Ins. Exch. v. Zerin, 53 Cal. App. 4th 445, 460 (1997)). 3 Regarding Multi-Flex’s common count claim, “California courts [have] held that when a 4 common count is used as an alternative claim seeking the same recovery demanded in a specific 5 cause of action based on the same facts, the common count may be dismissed if the cause of action 6 is dismissed.” In re Apple In-App Purchase Litig., 855 F. Supp. 2d 1030, 1042 (N.D. Cal. 2012) 7 (citing McBride v. Boughton, 123 Cal. App. 4th 379, 394–95 (2004)). In this case, the few 8 allegations indicate that Multi-Flex’s common count claim is an alternative for its breach of 9 contract claim, since both claims are based upon LMI’s alleged failure to pay for goods sold and 10 delivered. Compare Compl. ¶¶ 16, 18, with id. ¶¶ 21–22. And, as Defendants point out, the 11 common count claim sets forth a specific amount owed that is the same as the amount 12 incorporated into Multi-Flex’s breach of contract claim. See Compl. ¶¶ 11, 13, 21. Accordingly, 13 Multi-Flex’s common count claim is DISMISSED WITH LEAVE TO AMEND. See Perdue, 14 2014 WL 3726700, at *9 (“Because the Court dismisses Plaintiff’s breach of contract claim, it also 15 dismisses Plaintiff’s common counts claims.”). 16 As to Elecsys’s common count claim, Elecsys is correct that it need not specifically allege 17 that any goods were delivered to LMI. A complaint also sets out a common count claim where it 18 “allege[s] ‘the payment of a sum of money by plaintiff at the special instance and request of 19 defendant, for which money so paid defendant is indebted to him, and that he (defendant) has 20 failed and refused to pay this money.’” Rubinstein, 49 Cal. App. 5th at 810 (quoting Kraner v. 21 Halsey, 82 Cal. 209, 210 (1889)). Yet even in the absence of a requirement to allege delivery 22 specifically, Elecsys’s assertions fall short of stating a claim for common count. 23 The Complaint alleges solely that (1) LMI often “requested that Elecsys . . . source many 24 of the parts to be used in the lights,” Compl. ¶ 9, and (2) “LMI . . . has become indebted to Elecsys 25 in the amount of $583,229 for goods that Elecsys purchased at LMI’s request,” id. ¶ 21. This 26 assertion of indebtedness lacks adequate facts to make Elecsys’s claim for relief plausible. While 27 Plaintiffs’ brief states that LMI expressly requested Elecsys to purchase various source materials 1 mentions of a “request” involving Elecsys by LMI in the Complaint, the Court is unable to discern 2 to whom such requests were directed and whether they were, in fact, “express.” (Indeed, given 3 Multi-Flex’s role in “combin[ing] its printed circuit boards with the[] parts [sourced by Elecsys], 4 and ship[ping] the finished products to LMI[],” Compl. ¶ 9, the implication seems to be that the 5 request was directed to Multi-Flex, which might mean that the cost of the parts sourced by Elecsys 6 was intended to be encapsulated in the contract price due to Multi-Flex.) More factual allegations 7 are necessary to raise Elecsys’s right to relief above the speculative level by illustrating the 8 specific request(s) made; the specific goods, services, or outlay of money underpinning this claim; 9 and the specific point(s) at which LMI can be considered to have become “indebted” to Elecsys. 10 Accordingly, Elecsys’s common count claim is DISMISSED. However, the Court 11 determines that none of the Foman factors weighs against permitting amendment, so the dismissal 12 is WITH LEAVE TO AMEND. 13 C. Alter Ego Liability 14 Each claim in the Complaint is alleged against Defendant Emerson as the “alter ego” of 15 Defendant LMI. Compl. ¶¶ 19, 24. Defendants argue that Plaintiffs have “utterly fail[ed] to 16 adequately plead either of” the two elements required to establish alter ego liability. Mot. at 3–9. 17 Specifically, Plaintiffs include only a brief paragraph alleging based on information and belief that 18 LMI “at all relevant times, has been inadequately capitalized” and that Defendant Emerson 19 “dominates and controls LMI’s operations and decisions.” Compl. ¶ 12. Moreover, Defendants 20 argue that the Complaint states that LMI attempted to take various “measures to bolster its 21 finances in response to its [financial] difficulties,” an allegation that seems at odds with an 22 accusation of wrongdoing sufficient to establish alter ego liability. Mot. at 8. 23 Plaintiffs respond that courts have found the alter ego doctrine “applicable where a 24 shareholder was the president and sole shareholder of the corporation and the corporation was 25 inadequately capitalized,” asserting that this is such a case because Plaintiffs have alleged “that 26 Emerson and his wife are the sole directors and shareholders of LMI, that Emerson, as CEO, 27 dominated and controlled its operations and decisions, and that he continued its operations . . . 1 Administration Payroll Protection Act ‘loans.’” Opp. at 9–10. Plaintiffs say that they “based 2 these allegations on LMI’s corporate filings.” Id. at 10. 3 “The alter ego doctrine applies where (1) such a unity of interest and ownership exists that 4 the personalities of the corporation and individual are no longer separate, and (2) an inequitable 5 result will follow if the acts are treated as those of the corporation alone.” RRX Indus., Inc. v. Lab- 6 Con, Inc., 772 F.2d 543, 545 (9th Cir. 1985) (citing Automotriz Del Golfo De California S.A. De 7 C.V. v. Resnick, 47 Cal. 2d 792, 796 (1957); U.S. Fire Ins. Co. v. Nat’l Union Fire Ins. Co., 107 8 Cal. App. 3d 456, 470 (1980)). “In assessing alter ego, courts consider the commingling of funds 9 and other assets of the entities, the holding out by one entity that it is liable for the debts of the 10 other, identical equitable ownership of the entities, use of the same offices and employees, use of 11 one as a mere shell or conduit for the affairs of the other, inadequate capitalization, disregard of 12 corporate formalities, lack of segregation of corporate records, and identical directors and 13 officers.” Sandoval v. Ali, 34 F. Supp. 3d 1031, 1040 (N.D. Cal. 2014) (citing Sonora Diamond 14 Corp. v. Superior Court, 83 Cal. App. 4th 523, 538–39 (2000)). “The corporate form will be 15 disregarded only in narrowly defined circumstances and only when the ends of justice so require.” 16 Eleanor Licensing LLC v. Classic Recreations LLC, 21 Cal. App. 5th 599, 615 (2018) (internal 17 alterations omitted). 18 “Conclusory allegations of ‘alter ego’ status are insufficient to state a claim. Rather, a 19 plaintiff must allege specifically both of the elements of alter ego liability, as well as facts 20 supporting each.” Sandoval, 34 F. Supp. 3d at 1040 (quoting Neilson v. Union Bank of Cal., N.A., 21 290 F. Supp. 2d 1101, 1116 (C.D. Cal. 2003)). In this case, Plaintiffs’ allegations related to the 22 alter ego doctrine are insufficient. The only considerations addressed in the Complaint are the 23 alleged inadequate capitalization and the fact that Emerson and his wife are “the sole officers and 24 directors of LMI,” an entity that Emerson “dominates and controls” in his capacity as Chief 25 Executive Officer. Compl. ¶ 12. However, despite suggesting that the undercapitalization 26 allegation is based on LMI’s “corporate filings,” see Opp. at 10, Plaintiffs fail to put forward any 27 facts showing that LMI actually was undercapitalized or the timeframe during which the 1 4221652, at *6 (N.D. Cal. Sept. 4, 2019) (“The failure to present facts regarding the amount of 2 capital necessary to continue business operations is fatal to an alter ego claim.”). And—as 3 Defendants point out—the Complaint suggests that LMI was not always in dire financial straits, 4 and that it attempted to correct for declines in sales by terminating warehouse personnel and 5 subletting facilities. See Compl. ¶ 10. In any event, a “mere allegation that [an entity] is 6 undercapitalized is not enough to imply an unjust result,” since to conclude otherwise would 7 render the corporate veil pierceable whenever an entity becomes insolvent. See Orosa v. 8 Therakos, Inc., No. 11-cv-2143, 2011 WL 3667485, at *7 (N.D. Cal. Aug. 22, 2011). Here, there 9 are no other allegations in support of the alter ego theory, i.e., that Emerson commingled funds, 10 disregarded corporate formalities or records, attempted to use the company as a conduit for his 11 personal affairs, or otherwise misused the corporate entity. Without more, the Court concludes 12 that Plaintiffs have not done enough to show the applicability of the doctrine to Emerson. 13 In sum, the allegations in the Complaint are too brief and conclusory to establish that this 14 is one of those rare situations in which the corporate veil should be pierced. All claims alleged 15 against Defendant Emerson based on an alter ego theory are DISMISSED. However, the Court 16 determines that none of the Foman factors weighs against permitting amendment, so the dismissal 17 is WITH LEAVE TO AMEND. 18 IV. ORDER 19 For the foregoing reasons, IT IS HEREBY ORDERED that: 20 1. Multi-Flex’s Breach of Written Contract claim is DISMISSED WITH LEAVE TO 21 AMEND; 22 2. Plaintiffs’ respective Common Count claims are DISMISSED WITH LEAVE TO 23 AMEND. 24 3. All claims against Defendant Daniel Emerson based on an alter ego theory are 25 DISMISSED WITH LEAVE TO AMEND. 26 4. Plaintiffs may file an amended complaint on or before August 18, 2025. Failure to 27 meet the deadline to file an amended complaint or failure to cure the deficiencies 1 Plaintiffs may not add parties or claims without the express approval of the Court or 2 stipulation of all Parties. 3 4 IT IS SO ORDERED. 5 6 || Dated: July 16, 2025 ’ A LABSON FREEMAN 8 United States District Judge 9 10 11 12

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