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Interserve, Inc., et al v. Fusion Garage Pte. Ltd

February 9, 2011

INTERSERVE, INC., ET AL., PLAINTIFFS,
v.
FUSION GARAGE PTE. LTD, DEFENDANT.



The opinion of the court was delivered by: Richard Seeborg United States District Judge

**E-filed 2/9/11**

For the Northern District of California

ORDER DENYING MOTION TO DISMISS AMENDED COMPLAINT

I. INTRODUCTION

This action arises from an alleged cooperative effort between plaintiffs and defendant to develop and bring to market a tablet computer that was to be known as the "Crunchpad." Shortly before the planned product launch, defendant announced that it would no longer work with plaintiffs, and instead would release a tablet computer under the name "joojoo." Plaintiffs' claims for fraud and unfair competition as pleaded in the original complaint herein were dismissed, with leave to amend. Defendant now moves to dismiss those claims as repleaded in the Amended Complaint. Pursuant to Civil Local Rule 7-1(b), the motion has been submitted without oral argument. For the reasons explained below, it will be denied.

II. BACKGROUND

The general background of this suit has been described in prior orders and will not be repeated here. As noted, the fraud and unfair competition counts of the original complaint were 4 dismissed with leave to amend. That complaint included, among other things, a count under the Lanham Act, which was also dismissed with leave to amend, but which plaintiffs have not attempted 6 to replead. The Lanham Act claim was predicated on a variety of allegedly false statements made 7 by defendant. Additionally, the allegations of the original complaint encompassed a plethora of 8 purported other misrepresentations, false promises, and failures to disclose on defendant's part. As 9 the order dismissing the fraud claim observed, the result was a "hodgepodge that renders it difficult 10 to differentiate between mere conclusions of falsity and any factual representations that might be court sufficient to establish that material misrepresentations were presented, that promises were made without intent to perform, or that there was a duty to disclose matters omitted." Order entered For the Northern District of California

August 24, 2010 at 14:12-15.

Furthermore, by the time the prior motion to dismiss was being briefed and decided, plaintiffs had already conducted substantial discovery, which they contended had uncovered additional instances and evidence of misrepresentations. While such material could not properly be considered in support of plaintiffs' argument that the then-existing complaint adequately pleaded fraud, it did serve as an additional reason to require plaintiffs to amend before proceeding with their claim. See id. at 14:17-15:2.

Although the Amended Complaint has incorporated additional material from the discovery proceedings, it is fundamentally narrower than the original, in that entire counts have been 22 eliminated (including some as to which leave to amend was granted), and the fraud claim is more 23 focused. For example, the original complaint included an assertion that defendant misrepresented 24 its existing software when the parties first discussed working together in 2008, and alleged that 25 plaintiffs were induced to enter the relationship with defendant through promissory fraud. By 26 contrast, the fraud claim of the Amended Complaint is based on alleged misrepresentations by defendant concealing its purported plan to abandon plaintiffs and market the joojoo on its own, 2 beginning in the latter half of 2009.*fn1

7 a misrepresentation, such as a false representation or a concealment of fact; (2) knowledge of falsity 8 or concealment; (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) 9 resulting damage." Milne Employees Ass'n v. Sun Carriers, 960 F.2d 1401, 1408 (9th Cir. 1991)

does not challenge the adequacy of the pleading of misrepresentations, knowledge, and intent. The issue is whether plaintiffs have alleged sufficient facts showing they relied on any of the purported misrepresentations.*fn2

The parties are in agreement that under Rule 9(b) of the Federal Rules of Civil Procedure, "a 15 party must state with particularity the circumstances constituting fraud or mistake." Plaintiffs and defendant part company, however, over whether the particularity required by Rule 9(b) applies to pleading the reliance and damages elements of a fraud claim. Defendant cites cases such as Roque 18 v. Suntrust Mortg., Inc., 2010 WL 546896, *5 (N.D. Cal. 2010) and Applied Elastomerics, Inc. v. Z-19 Man Fishing Prods., Inc., 2007 WL 703606, *3 (N.D. Cal. March 5, 2007), which generally assert that all of the elements of a fraud claim must be pleaded with specificity, but which do not consider Statements Before and During the Project." (Emphasis added). This heading appears to be an inadvertent carry-over from the original complaint. The allegations under the heading do not include any ...


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