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Sam Kohli Enterprises, Inc., A California Corporation v. the Boc Group

August 1, 2011

SAM KOHLI ENTERPRISES, INC., A CALIFORNIA CORPORATION, PLAINTIFF,
v.
THE BOC GROUP, INC., A MEMBER OF THE
THE BOC GROUP, INC. AND LINDE GROUP; LINDE NORTH AMERICA, LINDE NORTH AMERICA, INC. INC., A DELAWARE CORPORATION; AND DOES 1 THROUGH 10, DEFENDANTS.



The opinion of the court was delivered by: Hon. Dana M. Sabraw United States District Judge

ORDER GRANTING IN PART PLAINTIFF'S FIRST AMENDED COMPLAINT BY DEFENDANTS AND DENYING IN PART MOTION TO DISMISS

Pending before the Court is a motion to dismiss Plaintiff's First Amended Complaint ("FAC") brought by Defendants the BOC Group, Inc., a member of the Linde Group ("BOC"), and Linde North America, Inc. ("Linde"). For the following reasons, Defendants' motion to dismiss is granted in part and denied in part.

I.

BACKGROUND

This action arises from an agreement between two corporations with diversity of citizenship. On December 3, 2007, Plaintiff Sam Kohli Enterprises, a corporation incorporated under the laws of the State of California, entered into a Unified Service Agreement ("the Contract") with Defendant BOC. In the Contract, Plaintiff agreed to "become the 'employer of record' for BOC's workers and to manage and assume risk for all aspects of employment taxes, including workers' compensation insurance." (FAC ¶ 7.) BOC, an industrial supply company incorporated under the laws of the State of Delaware, agreed to "pay a set rate for each worker Plaintiff supplied," where "[t]he rate for each worker varied according to the worker[']s classification [as] . . . professional, clerical, light industrial, or industrial." (Mot. to Dismiss at 6.) A Master Rate and Services Schedule fixed the rate for each of the pertinent classifications. (FAC, Ex. A at 5.)

On December 3, 2010, Plaintiff filed a Complaint with the Superior Court for the State of California. (Doc. 1, App. A.) On February 11, 2011, Defendant Linde removed the action to federal court on the basis of diversity jurisdiction. On March 21, 2011, the parties filed a joint motion for leave to allow Plaintiff to file a FAC, which the Court granted. (Docs. 6-8.)

In the FAC, Plaintiff alleges that BOC is a wholly-owned subsidiary of Linde and that Linde owned and controlled BOC during "all relevant times." (FAC ¶ 3.) Plaintiff pleads four claims for relief as to BOC alone: (1) breach of contract, (2) breach of the covenant of good faith and fair dealing, (3) promissory estoppel, and (4) unjust enrichment. Additionally, Plaintiff pleads a fifth claim of fraud against both BOC and Linde. On April 11, 2011, Defendants filed a motion to dismiss each of the claims in the FAC. (Doc. 10.) Plaintiff filed an opposition, Defendants filed a reply, and Plaintiff filed a motion for leave to file a sur-reply, which the Court granted. (Docs. 11, 12, 14, 16, 17.) The Court further granted Defendants' request to file a sur-reply in response. (Doc. 15.)

II.

LEGAL STANDARD

A party may move to dismiss a claim under Rule 12(b)(6) if the claimant fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). The Federal Rules require a pleading to include a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The Supreme Court, however, recently established a more stringent standard of review for pleadings in the context of 12(b)(6) motions to dismiss. See Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). To survive a motion to dismiss under this new standard, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). "Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950 (citing Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir. 2007)). The reviewing court must therefore "identify the allegations in the complaint that are not entitled to the assumption of truth" and evaluate "the factual allegations in [the] complaint to determine if they plausibly suggest an entitlement to relief." Id. at 1951.

III.

DISCUSSION In their motion to dismiss, Defendants argue (1) Plaintiff fails to demonstrate that BOC breached the Contract, (2) Plaintiff fails to demonstrate it suffered actual harm, (3) Plaintiff's claim of a breach of the covenant of good faith and fair dealing fails because it is dependant upon the breach of contract claim, (4) Plaintiff's claim of unjust enrichment fails because it cannot be raised as an independent claim for relief, and (5) Plaintiff's second, third, fourth, and fifth claims each fail because they lack particularized factual allegations and because they are based on the breach of contract claim. Additionally, Defendants argue that an indemnification clause in the contract insulates them from liability for each of Plaintiff's claims.

A. Indemnification Clause

As an initial matter, Defendants argue that an indemnification clause in the contract invalidates all of Plaintiff's claims. The indemnification clause states, "[Plaintiff] shall indemnify [BOC] for any damages including attorney fees, arising in connection with [BOC's] or a Worker's negligence, recklessness, or intentional misconduct." (FAC, Ex. A at 3.) In its sur-reply, Plaintiff cites California law stating, "[a]ll contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law." Cal. Civ. Code § 1668. "However, the word 'wilful' as used . . . may be said to connote an act done with malevolence, as distinguished from an act motivated by good intentions but founded in negligence." Davidson v. Welch, 75 Cal. Rptr. 676, 685 (Cal. Ct. App. 1969) (referencing Insurance Code § 533, but indicating similar considerations apply to California Civil Code § 1668). Therefore, in light of § 1668, an indemnification clause may exempt a party from liability for claims that require mere ordinary negligence, but not for claims involving fraud, willful injury, or willful or negligent violation of the law. See Werner v. ...


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