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James v. Equilon Enterprises

September 15, 2008


The opinion of the court was delivered by: Hon. Thomas J. Whelan United States District Judge


This is a state law contract action between Plaintiff Samuel St. James ("Plaintiff") and Defendants Equilon Enterprises, L.L.C. dba Shell Oil Products US ("Equilon") and Citibank (South Dakota), NA ("Citibank"). On May 30, 2008, Equilon removed the action pursuant to 28 U.S.C. § 1441. Equilon now moves to dismiss several causes of action from Plaintiff's First Amended Complaint ("FAC") pursuant to Federal Rules of Civil Procedure 12(b)(6) for failure to state a claim and 9(b) for failure to plead with particularity.

The Court decides the matter on the papers submitted and without oral argument. See S.D. Cal Civ. R. 7.1(d.1). For the reasons stated below, the Court GRANTS Defendants' Motion to Dismiss the FAC. (Doc. Nos. 12, 13.)


Equilon is a limited liability corporation, which formed from the merger of Shell Oil and Texaco in 1999. (Pl.'s Opp'n Mem. 1.) Plaintiff is a salesman who began working for Shell Oil in June 1996, and remained with the company after the Texaco merger. (Pl.'s Opp'n Mem. 1.) During his tenure with the company, Plaintiff sold Shell's corporate Fleet Credit Card Services to corporate clients throughout Southern California and Arizona. (Pl.'s Opp'n Mem. 2.) Between June 1996 and July 2001 Plaintiff was compensated on a salary and expenses basis. He made approximately $160,000 in his final year. (Pl.'s Opp'n Mem. 2.)

In 2001 Plaintiff was presented with and accepted a new $.04 per gallon commission payment plan. (Pl.'s Opp'n Mem. 2.) In late February 2005, Equilon again changed its payment structure. (Pl.'s Opp'n Mem. 2.) Thereafter Plaintiff signed a new fully-integrated "independent contractor agreement" and remained with the company. (Def.'s Supp. Mem. 1.)

The independent contractor agreement became effective March 1, 2005, and is the subject of this dispute. (Def.'s Supp. Mem. 1.) The Agreement stipulated that Plaintiff, as he had in the past, would provide Fleet Credit Card Solicitation Services to various California markets. (Pl.'s Opp'n Mem. 2.) The Agreement set forth a commission-based compensation plan in which Plaintiff would receive $.03 per gallon (with no base salary or expenses) based upon a sales code from the credit cards as administered by Citibank. (Pl.'s Opp'n Mem. 2; Def.'s Supp. Mem. 2.)

The Agreement was for a one-year term, to be renewed automatically for successive one-year terms, unless terminated in accordance with its provisions. (Def.'s Supp. Mem. 2.) Specifically, paragraph 2 of the Agreement stated that, "[e]ither [Equilon] or [Plaintiff] may terminate this Agreement either in its entirety or for a particular market, at any time and for any reason or no reason at all, by giving the other at least two (2) days advance written notice." (Am. Compl. Ex. A ¶2.) The Agreement further provided that should Equilon terminate the Agreement in one or more markets without cause, it would pay Plaintiff "three months worth of commissions . . . for the terminated market(s) based on the previous month's sales." (Am. Compl. Ex. A ¶3(b).)

On May 31, 2007, Equilon terminated the Agreement and subsequently paid Plaintiff for three months of commissions. (Pl.'s Opp'n Mem. 3.) Plaintiff then brought suit in California Superior Court against both Equilon and Citibank. On May 30, 2008, Equilon removed the case to this Court. On July 15, 2008, Plaintiff filed his First Amended Complaint alleging breach of contract, bad faith breach of contract, unjust enrichment, fraud, negligence, interference with prospective business advantage, unfair business practices and unlawful termination of franchise. On August 1, 2008, Equilon filed this Motion to Dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). On August 19, 2008, Plaintiff opposed the motion. On August 25, 2008, Equilon filed its reply brief with the Court.


The Court must dismiss a cause of action for failure to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). "The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of the complaint." North Star Int'l. v. Arizona Corp. Comm'n., 720 F.2d 578, 581 (9th Cir. 1983). The Court must treat as true all factual allegations in the Complaint and must "construe them in the light most favorable to the nonmoving party." Gompper v. VISX, Inc., 298 F.3d 893, 895 (9th Cir. 2002); see also Walleri v. Fed. Home Loan Bank of Seattle, 83 F.3d 1575, 1580 (9th Cir. 1996). A motion under 12(b)(6) may be granted where the plaintiff cannot allege facts sufficient to state a claim to relief that is plausible on its face. Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007).

As the Supreme Court recently explained, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 1964. Instead, the allegations in the complaint "must be enough to raise a right to relief above the speculative level." Id. at 1964--65. Conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss. Legal conclusions need not be taken as true merely because they are cast in the form of factual allegations. Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981); Ileto v. Glock Inc., 349 F.3d 1191, 1200 (C.D. Cal. 2003).

Generally, the court may not consider material outside the complaint when ruling on a motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). However, the court may consider any documents specifically identified in the complaint whose authenticity is not questioned by the parties. Fecht v. Price Co., 70 F.3d 1078, 1080 n.1 (9th Cir. 1995). Moreover, the court may consider the full text of those documents, even when the complaint quotes only selected portions. Id.


A. Texas Law Governs this Dispute

Equilon contends that, under the Agreement, Texas law governs this dispute. (Def.'s Supp. Mem. 3--4.) Paragraph 19 of the Agreement states: "This Agreement and the performance hereunder shall be governed by the laws of the state of Texas, without regard to the conflicts of laws principles therein." (Am. Compl. Ex. A ¶19.) Plaintiff contends that, despite this language, California law should govern each of his claims. (Pl.'s Opp'n Mem. 6.)

In determining the enforceability of arm's-length contractual choice-of-law provisions, California courts apply the principles set forth in Restatement (Second) Conflict of Laws Section 187, which reflects a strong policy favoring enforcement of such provisions. Nedlloyd Lines B.V. v. Superior Court, 11 Cal. Rptr. 2d 330, 331--333 (Cal. 1992). A choice of law clause "encompasses all causes of action arising from or related to [an] agreement, regardless of how they are characterized." Id. at 336--337.

The proper approach under Restatement Section 187, subdivision (2) is for the court first to determine either: (1) whether the chosen state has a substantial relationship to the parties or their transaction, or (2) whether there is any other reasonable basis for the parties' choice of law. Nedlloyd, 11 Cal. Rptr. 2d at 334--335. If neither of these tests is met, that is the end of the inquiry, and the court need not enforce the parties' choice of law. Id. If, however, either test is met, the court must next determine whether the chosen state's law ...

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