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Axon Solutions, Inc. v. San Diego Data Processing Doc. No. 5 Corp.

February 12, 2010

AXON SOLUTIONS, INC., A DELAWARE CORPORATION, PLAINTIFF,
v.
SAN DIEGO DATA PROCESSING DOC. NO. 5 CORPORATION, A CALIFORNIA PUBLICLY-OWNED CORPORATION; AND THE CITY OF SAN DIEGO, A CHARTERED POLITICAL SUBDIVISION OF THE STATE OF CALIFORNIA, DEFENDANTS.



The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge

ORDER GRANTING IN PART DIEGO'S MOTION IN DISMISS AND DENYING IN PART DEFENDANT CITY OF SAN

Plaintiff Axon Solutions, Inc. ("Axon") initiated this litigation on a contract it held with Defendant San Diego Data Processing Corporation ("SDDPC"), a publicly-owned, non-profit corporation which provides information technology services to Defendant City of San Diego (the "City"). Axon makes seven claims: (1) breach of contract, (2) misappropriation of trade secrets, (3) copyright infringement, (4) declaratory relief, (5) quantum meruit, (6) goods and services sold and delivered, and (7) account stated. (Doc. No. 1, hereinafter "Compl.," at 1). The City filed a motion to dismiss all claims. (Doc. No. 5). Axon filed an opposition and the City filed a reply. (Doc. Nos. 10, 13).

The court finds this matter appropriate for disposition without oral argument. See CivLR 7.1(d)(1). The court hereby GRANT IN PART and DENIES IN PART the City's motion to dismiss, and dismisses claims one, five, six, and seven.

I. BACKGROUND

Axon is a Delaware corporation which provides "business and computer consulting services, software product development, implementation, and application management services." (Compl. ¶ 2). On September 28, 2007, Axon and SDDPC entered a "Master Services Agreement" ("MSA") by which Axon agreed to provide SDDPC with information technology products and services for use by the City. (Compl. ¶ 8). In exchange, SDDPC agreed to pay Axon $16,951,786. (Compl. ¶ 9).

Axon fulfilled its contractual obligations until SDDPC terminated the agreement for convenience pursuant to section 2.2 of the MSA. (Compl. ¶ 11). Upon termination, Axon became entitled to certain payments related to "holdback"amounts, partially completed deliverables, and wind-down costs. (Compl. ¶ 13). Nonetheless, after termination, SDDPC and the City continued to use products provided by Axon, which include Axon's trade secret and copyright-protected material.

As neither SDDPC nor the City paid the money due Axon, Axon instituted the claims procedures provided for in article 21 of the MSA. (Compl. ¶ 33). The parties conducted an unsuccessful mediation on August 26, 2009. (Compl. ¶ 34). Axon subsequently filed suit on November 12, 2009. (See Doc. No. 1).

II. LEGAL STANDARD

A court should dismiss an action where a complaint fails to "state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Therefore, a motion to dismiss should be granted where the complaint lacks either a "cognizable legal theory" or facts sufficient to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). In evaluating the claim a court must "accept as true all of the allegations contained in [the] complaint." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). However, the complaint's "factual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007).

In testing the complaint's legal adequacy, the court may consider material properly submitted as part of the complaint or subject to judicial notice. Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007).

III. DISCUSSION

A. Contract Claim

The City argues that it cannot be liable under the MSA because, not only was the City not an explicit party to the MSA, the City cannot be a party to the MSA because the City did not comply with the contracting requirements imposed by the City's charter and municipal code.

If a city contracts in a fashion forbidden by its charter or municipal code, that contract is unenforceable against the City. G.L. Mezzetta, Inc. v. City of Am. Canyon, 78 Cal. App. 4th 1087, 1094 (Cal. Ct. App. 2000) ("A contract entered into by a local government without legal authority is 'wholly void,' ultra vires, and unenforceable.") (citations omitted). The City's municipal code provides that "[w]hen a contract provides for an expenditure greater than $1,000,000, the Purchasing Agent shall advertise for sealed proposals for a minimum of one day in the ...


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