Pro 49 Development, LLC v. Ness Express 1, LLC

Opinion

PRO 49 DEVELOPMENT, LLC, a No. 2:24-cv-01850-JAM-JDP California limited liability company, Plaintiff, ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ v. MOTION TO DISMISS NESS EXPRESS 1, LLC, a Delaware limited liability company; ADAM DECKER, an individual; JOSEPH DECKER, an individual; TOMMY’S EXPRESS LCC, a Michigan limited liability company; RYAN ESSENBURG, an individual; and DOES 1 through 100, inclusive, Defendants. Before the Court is Defendants Tommy’s Express LLC and Ryan Essenburg’s (collectively, the “Tommy’s Defendants”) motion to dismiss. See Mot., ECF No. 32-1. Pro 49 Development (“Plaintiff”) opposes. See Opp’n, ECF No. 35. The Tommy’s Defendants reply. See Reply, ECF No. 38. For the following reasons, the motion is GRANTED IN PART and DENIED IN PART.1

1This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled for February 11, 2025. Plaintiff originally filed suit in the Superior Court of California, County of Placer. See Notice of Removal, ECF No. 1. Defendants then properly removed the case to federal court under diversity jurisdiction. See id.; see also Order Denying Motion to Remand, ECF No. 25. This controversy arises out of a lease between Plaintiff and Defendant Ness Express 1 (“Ness”) for the establishment of a car wash under the franchise of Defendant Tommy’s Express. See Comp. ¶ 1, ECF No. 1. Plaintiff alleges that Ness violated the lease and that named defendants (including Ryan Essenburg) interfered with the lease. See id. Plaintiff brings thirteen causes of action, including breach of contract. See id. at 1. Of those thirteen causes of action, Plaintiff only brings four against the Tommy’s Defendants: (1) inducing breach of contract; (2) intentional interference with contractual relations; (3) intentional interference with prospective economic relations; and (4) negligent interference with prospective economic relations. See id. at 23-26. In its Prayer for Relief, Plaintiff seeks punitive damages for these claims. See id. at 32. The Tommy’s Defendants now move to dismiss these four causes of action for failure to state a claim upon which relief can be granted. Mot. at 1-2. They also ask the Court to dismiss Plaintiff’s request for punitive damages. See id. at 2. Plaintiff responds that it has sufficiently pled these claims and its request for punitive damages. See Opp’n at 15. /// A. Legal Standard A Rule 12(b)(6) motion challenges the sufficiency of a complaint for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “To survive a motion to dismiss [under 12(b)(6)], a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citation omitted). Plausibility requires “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. While “detailed factual allegations” are unnecessary, the complaint must allege more than “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Id. Conclusory allegations are not to be considered in the plausibility analysis. Id. at 679 (“While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”). When a plaintiff fails to “state a claim upon which relief can be granted,” the Court must dismiss the claim. Fed. R. Civ. P. 12(b)(6). B. Request for Judicial Notice Under Federal Rule of Evidence 201, a district court may take judicial notice of a fact that is “not subject to reasonable dispute because it can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b)(2). It is proper for a court to consider evidence subject to judicial notice when deciding a motion to dismiss. Weston Fam. P’ship LLLP v. Twitter, Inc., 29 F.4th 611, 617 (9th Cir. 2022). The Tommy’s Defendants request that the Court take judicial notice of the lease between Plaintiff and Ness, as well as an email involving Adam Decker. See Request for Judicial Notice, ECF No. 32-2. The Tommy’s Defendants state that the email forms the basis of Plaintiff’s allegation that they told Ness to abandon the lease. Id. at 2. Plaintiff does not oppose the request. Because the Tommy’s Defendants seek judicial notice of documents that are referenced in the complaint, the Court GRANTS this request. C. Analysis 1. Inducing Breach of Contract To state a claim for inducing breach of contract, a plaintiff must show: (1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant’s knowledge of that contract; (3) the defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach; and (5) resulting damage. Jenni Rivera Enterprises, LLC v. Latin World Ent. Holdings, Inc., 36 Cal. App. 5th 766, 782 (2019) (internal quotation marks and citations omitted). The Tommy’s Defendants assert that Plaintiff must show that they “acted in an unjustified manner.” See Mot. at 6-8. The Court disagrees. “The defendant’s conduct need not be wrongful apart from the interference with the contract. Furthermore, a plaintiff need not establish that the primary purpose of the defendant’s actions was to disrupt the contract. The tort is shown even where the actor does not act for the purpose of interfering with the contract or desire it but knows that the interference is certain or substantially certain to occur as a result of his [or her] action.” Jenni Rivera Enterprises, 36 Cal. App. 5th at 782 (cleaned up). The Tommy’s Defendants do not contest that that there was a valid contract between Plaintiff and Ness, that they knew about the contract, or that there was resulting damage. As such, the Court addresses the remaining elements, in part by discussing the arguments presented by the Tommy’s Defendants: (a) whether there was an actual breach; (b) whether the contract was at-will and therefore Plaintiff must show an independently wrongful act; and (c) whether Ness and Tommy’s had a privileged relationship that precludes liability for this tort. a. Actual Breach The Tommy’s Defendants argue that Plaintiff cannot show actual breach because Ness did not breach the contract. See Mot. at 6. Instead, the Tommy’s Defendants contend that Ness believed it was acting lawfully “within the termination period under the Lease.” Id. In the Complaint, Plaintiff states that Ness terminated the Lease by citing to a section of the contract that allowed for termination “only in the event the Lessee, in its commercially reasonable discretion, is unsatisfied with its inspections.” Compl. ¶ 48. Plaintiff further alleges that the inspections are specified elsewhere, and that Ness never performed any of the qualifying inspections. Id. ¶¶ 48-49. As such, Plaintiff plausibly states that Ness breached the contract, thus satisfying this element for pleading inducing breach. b. At-Will Contract The Tommy’s Defendants argue that the contract was at-will and therefore Plaintiff must plead an independently wrongful act. See Mot. at 7; see also Ixchel Pharma, LLC v. Biogen, Inc., 9 Cal. 5th 1130, 1148 (2020) (holding that to state a claim for interference with an at-will contract, a plaintiff must allege that the defendant engaged in an independently wrongful act). The Tommy’s Defendants summarily argue that the lease was akin to an at-will contract because “Ness was still in it [sic] termination period.” See Mot. at 7. Plaintiff argues that the contract was not at-will. See Opp’n at 7. An at-will contract “may be terminated, by its terms, at the prerogative of a single party, perhaps because that party found a better offer from a competitor. In that event, the other party has no legal claim to the continuation of the relationship.” Coast Hematology-Oncology Assocs. Med. Grp., Inc. v. Long Beach Mem’l Med. Ctr., 58 Cal. App. 5th 748, 767 (2020). Here, the lease did not provide that either party could terminate it without justification. Indeed, both parties agree that the lease could be terminated only under specific conditions, which is why the Tommy’s Defendants argue that Ness terminated the contract pursuant to a lawful justification. See Mot. at 6. The Tommy’s Defendants do not argue that Ness could terminate the contract at its prerogative. Moreover, in the Complaint, Plaintiff alleges that the lease could only be terminated subject to outlined circumstances, which is why Ness stated it was terminating the lease pursuant to a particular subsection. See Compl. ¶¶ 47-57. Accepting Plaintiff’s factual allegations as true, the Court finds that the contract was not at-will, and therefore Plaintiff does not need to plead an independently wrongful act. c. Privileged Relationship The Tommy’s Defendants’ final argument is that they had a privileged relationship with Ness that shields them from liability. They cite a California appellate case where the court held that an international union was not liable for inducing breach of contract that concerned one of its local unions because the international union and local union were “in a confidential relationship” that was “close and interwoven” with the unions “having common objectives and existing under the same system of internal laws and management.” Lawless v. Bhd. of Painters, Decorators & Paperhangers of Am., 143 Cal. App. 2d 474, 478 (1956). “Multiple courts have cabined Lawless’s finding to analogous situations in which the parties have a close or interdependent relationship.” whiteCryption Corp. v. Arxan Techs., Inc., No. 15-CV-00754-WHO, 2016 WL 3275944, at *4–5 (N.D. Cal. June 15, 2016) (collecting cases). The Tommy’s Defendants argue that they have a privileged relationship with Ness because they “have a legitimate business interest in the performance and success of Ness’s franchise.” Mot. at 8. But as the California Supreme Court held, the assertion of a financial business interest “is a matter of defense, to be decided by a resolution of the factual issues presumptively involved.” Collins v. Vickter Manor, Inc., 47 Cal. 2d 875, 883 (1957). Because the Tommy’s Defendants’ right to this privilege “does not affirmatively appear on the face of the complaint,” it would be improper for the Court to find that any such privilege exists at this stage of litigation. See id. Accordingly, because Plaintiff has stated a claim for inducing breach of contract, the Court denies the Tommy’s Defendants’ motion as to this claim. 2. Intentional Interference with Contractual Relations The elements for this tort are substantially similar to those for inducing breach of contract. See Jenni Rivera Enterprises, LLC, 36 Cal. App. 5th at 782. As such, the Tommy’s Defendants simply incorporate their arguments made for inducing breach. See Mot. at 9. Because Plaintiff has sufficiently pled the requisite elements and the Tommy’s Defendants have no additional arguments, the Court finds that Plaintiff has stated a claim for intentional interference. Tommy’s Defendants’ motion to dismiss as to this claim is denied. 3. Intentional Interference with Prospective Economic Relations To state a claim for intentional interference with prospective economic advantage, a plaintiff must show: “(1) the existence, between the plaintiff and some third party, of an economic relationship that contains the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentionally wrongful acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm proximately caused by the defendant’s action.” Roy Allan Slurry Seal, Inc. v. Am. Asphalt S., Inc., 2 Cal. 5th 505, 512 (2017). Regarding the third element, “an act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1159 (2003). The Tommy’s Defendants argue that Plaintiff has not pled an independently unlawful act. See Mot. at 10. Plaintiff counters that the Tommy’s Defendants approved the premises for Ness to lease and then later instructed Ness to “cut bait.” See Opp’n at 11. Plaintiff states that the Tommy’s Defendants’ conduct constitutes “intentional misrepresentation, concealment, false promise, and negligent misrepresentation.” See id. But none of these allegations are in the Complaint. In fact, this cause of action contains no mention of unlawful conduct on the part of the Tommy’s Defendants. See Compl. at 25. Because Plaintiff has failed to plead that the Tommy’s Defendants engaged in an independently unlawful act, it has failed to state a claim for this tort. Accordingly, the Court grants the Tommy’s Defendants’ motion as to this claim. 4. Negligent Interference with Prospective Economic Relations “A plaintiff alleging a claim for intentional or negligent interference with prospective economic advantage has the burden to plead and prove as an element not only that the defendant interfered with an economic relationship, but also that the defendant’s interference was wrongful by some measure beyond the fact of the interference itself.” Id. at 1006 (internal quotation marks and citations omitted). As mentioned above, “an act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” Korea Supply Co., 29 Cal. 4th at 1159. Like its claim for intentional interference with prospective economic relations, Plaintiff fails to plead that the Tommy’s Defendants engaged in independently unlawful conduct for this cause of action. See Compl. at 26. As the Tommy’s Defendants argue, this reason alone warrants dismissal. See Mot. at 12. The Court agrees and grants the Tommy’s Defendants’ motion as to this claim. 5. Punitive Damages The Tommy’s Defendants ask the Court to dismiss Plaintiff’s request for punitive damages because they have not met the pleading requirement under California law. See Mot. at 13-14. But, as Plaintiff points out, the federal pleading standard is more lenient. See Opp’n at 14. “Although Section 3294 provides the governing substantive law for punitive damages, California’s heightened pleading standard irreconcilably conflicts with Rules 8 and 9 of the Federal Rules of Civil Procedure—the provisions governing the adequacy of pleadings in federal court.” Clark v. Allstate Ins. Co., 106 F. Supp. 2d 1016, 1018 (S.D. Cal. 2000). Under the Federal Rule, “malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9. Indeed, the Ninth Circuit has held that a plaintiff need not plead “any particularity in connection with an averment of intent, knowledge or condition of the mind.” In re GlenFed Sec. Litig., 42 F.3d 1541, 1545 (9th Cir. 1994) (en banc), superseded by statute on other grounds as stated in SEC v. Todd, 642 F.3d 1207, 1216 (9th Cir. 2011). Accordingly, “in federal court, a plaintiff may include a ‘short and plain’ prayer for punitive damages that relies entirely on unsupported and conclusory averments of malice or fraudulent intent.” Clark, 106 F. Supp. 2d at 1019. Plaintiff has pled several claims for which it may be entitled to punitive damages if the elements of Section 3294 are met. In the Complaint, Plaintiff alleges that the Tommy’s Defendants’ actions constituted “oppression, fraud and malice within the definition of Civil Code 3294.” See Compl. ¶¶ 122, 130, 139, 149. Even if these allegations are conclusory and unsupported, they are sufficient to survive a motion to dismiss in federal court. Accord Rees v. PNC Bank, N.A., 308 F.R.D. 266, 274 (N.D. Cal. 2015). D. Meet and Confer Before counsel files a motion, they must first contact opposing counsel to discuss thoroughly the contents of the motion. See Order, ECF No. 6-2. For a motion to dismiss, this conference must take place five (5) days before the last day of filing. The Tommy’s Defendants filed the present motion on the last day of filing, November 20, 2024. See Notice of Motion, ECF No. 32. They state they conferred with opposing counsel on November 18, 2024—two days before the filing deadline. See id. Because the meet and confer should have taken place no later than November 15, 2024, Plaintiff asks that the Court deny the present motion. See Opp’n at 14-15. Plaintiff’s request is denied. As the Tommy’s Defendants point out, there was no prejudice from the delayed meet and confer, and they satisfied the spirit of the requirement. See Reply at 5. E. Leave to Amend A court granting a motion to dismiss a claim must then decide whether to grant leave to amend. Leave to amend should be “freely given” where there is no “undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of [the] amendment . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962). Upon stipulation of the parties, the Court already ordered that Plaintiff may file a First Amended Complaint (“FAC”), and that it may amend its complaint to the extent permitted by this Order regarding the Tommy’s Defendants’ motion to dismiss. See Stipulation and Order, ECF No. 39. Because granting leave to amend the claims dismissed will not result in any delay or prejudice, and because there are facts that Plaintiff claims it could plead to support these claims, the Court grants Plaintiff leave to amend its claims for intentional and negligent interference with prospective economic relations. For the reasons set forth above, the Tommy’s Defendants’ motion to dismiss is GRANTED IN PART and DENIED IN PART. Specifically, the Court GRANTS the motion with leave to amend as to the claims for intentional and negligent interference with prospective economic relations, and DENIES the motion as to the remaining claims. As previously ordered, Plaintiff shall file IIE EI II IIE RN I I RE II III ED Oe

its FAC within twenty-one (21) days. See Stipulation and Order. Tommy’s Defendants shall file their response to the FAC within twenty-one (21) days thereafter. Dated: February 6, 2025 Aas JOHN A. MENDEZ SENIOR UNITED*STATES DISTRICT JUDGE 13