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Mat-Van, Inc. v. Sheldon Good & Company Auctions

February 6, 2008

MAT-VAN, INC.; LUMAN N. NEVELS, JR.; 1DB CORPORATE RETREAT, LTD., PLAINTIFFS,
V. SHELDON GOOD & COMPANY AUCTIONS, LLC; SHELDON GOOD & COMPANY AUCTIONS; AND DOES 1 TO 30, DEFENDANTS.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER: 1) GRANTING IN PART AND REQUEST FOR JUDICIAL DENYING IN PART DEFENDANTS' MOTION TO DISMISS [Doc. No. 26]; 2) DISMISSING DEFENDANT SHELDON GOOD & COMPANY AUCTIONS; 3) DENYING DEFENDANTS' MOTION TO STRIKE REQUEST FOR PUNITIVE DAMAGES [Doc. No. 26]; and 4) DENYING DEFENDANTS' NOTICE [Doc. No. 28.].

Presently before the court are defendants Sheldon Good & Company Auctions, LLC, and Sheldon Good & Company Auctions' (collectively "defendants") (1) motion to dismiss plaintiffs' Second Amended Complaint (Doc. No. 26), (2) motion to strike plaintiffs' claim for punitive damages (id.), and (3) request for judicial notice in support of the motion to dismiss (Doc. No. 28). For the following reasons, the Court grants in part and denies in part defendants' motion to dismiss, dismisses defendant Sheldon Good & Company Auctions, denies defendants' motion to strike, and denies defendants' request for judicial notice.

BACKGROUND

Factual Background

Defendants are auction companies incorporated in Delaware with their principal places of business in Illinois. Mat-Van, Inc. ("Mat-Van"), Luman N. Nevels Jr. ("Nevels"), and 1DB Corporate Retreat, Ltd. ("1DB") (collectively "plaintiffs") each own island properties, which they wished to sell. This action arises out of contracts between Sheldon Good & Company Auctions, LLC ("SGC") and each plaintiff in which SGC agreed to auction plaintiffs' three resort islands. (SAC ¶¶ 6, 8, 11.)

According to the complaint, SGC's Senior Vice Presidents, David Latvaaho and Douglas Johnson, approached plaintiffs with a plan to set up a worldwide auction where plaintiffs could sell their three islands along with other sellers. (Id. ¶ 9.) Plaintiffs allege SGC made numerous representations to plaintiffs: (1) each island owner would contribute $100,000 per island to form a marketing fund of at least $500,000; (2) public interest existed in buying at this kind of auction; (3) a large number of island owners were interested in selling at the auction; (4) SGC would limit the number of islands sold at the auction to under ten, but at least five; (5) SGC had rejected some islands as unsuitable for the auction; (6) each island would be given equal marketing and advertising exposure in exchange for the owner's $100,000 contribution; (7) the auction would be held at the Four Seasons hotel in New York City; (8) SGC would aggressively market the islands on television; and (9) SGC would promote the auction through free public interest articles. (Id. ¶ 9.)

After signing written contracts, plaintiffs each gave SGC $100,000 for marketing and auction purposes. (Id. ¶¶ 11-13.) The auction did not turn out to be the success plaintiffs hoped for, as none of the island properties were purchased. (Id. ¶ 15.) Plaintiffs discovered that, contrary to SGC's alleged representations, another seller, George Story, did not contribute $100,000 per island to the marketing funds, but only contributed $100,000 to list his two islands. (Id. ¶ 9.) Thus, there was only $400,000 in total available advertising funds and not the $500,000 assured by SGC.

Procedural Background

On April 5, 2007, plaintiffs filed a complaint in the Superior Court of California for the County of San Diego, alleging fraud and breach of contract. (Doc. No. 1, Notice of Removal, Exhibit A, 3-4.) On May 21, 2007, defendants removed the case to this Court. On July 27, 2007, the Court granted defendants' motion to dismiss plaintiffs' fraud cause of action and motion to strike plaintiffs' claim for punitive damages. (Doc. No. 15.) The Court granted plaintiffs leave to amend, and plaintiffs filed a first amended complaint on August 10, 2007. (Doc. No. 16.) The Court granted defendants' motion to dismiss the first amended complaint in its entirety on October 16, 2007, again granting plaintiffs leave to amend. (Doc. No. 24.)

On October 30, 2007, plaintiffs filed a second amended complaint (hereinafter "SAC"). (Doc. No. 25.) On November 9, 2007, defendants moved to dismiss the SAC and to strike the request for punitive damages. (Doc. No. 26.) Defendants also filed a request for judicial notice in support of the motion to dismiss. (Doc. No. 28.) On January 7, 2008, plaintiffs filed an opposition to the motion and the request for judicial notice. (Doc. No. 29.) Defendants filed a reply in support of the motion to dismiss (Doc. No. 30) and a reply in support of the request for judicial notice (Doc. No. 31) on January 15, 2008. The Court finds that the matter is now fully briefed and amenable for disposition without oral argument pursuant to Local Civil Rule 7.1(d)(1).

DISCUSSION

1. Defendants' Motion to Dismiss the Second Amended Complaint

Legal Standard

A motion to dismiss pursuant to Rule12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. Civ. Proc. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court may dismiss a complaint for failure to state a claim when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Navarro, 250 F.3d at 732 (citing Conley). In other words, a Rule 12(b)(6) dismissal is proper only where there is either a "lack of a cognizable ...


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