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General Security Services v. County of Fresno

September 1, 2011



This case arises from a contractual dispute between Plaintiff General Security Services Corp. ("GSS") and Defendant the County of Fresno ("the County"). GSS is a citizen of Minnesota, and filed suit under this Court's diversity jurisdiction. GSS alleges state law causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and conversion. The County moved to dismiss the Complaint under Federal Rule of Civil Procedure 12(b)(6), and oral argument was heard on August 1, 2011. For the reasons that follow, the County's motion will be granted in part and denied in part.


From the Complaint, in June 2004, the County and GSS entered into a contract ("the Agreement") whereby GSS was to provide electronic monitoring devices and monitoring services to the County in order for the County to monitor parolees and probationers.

On October 31, 2009, the County terminated the Agreement. GSS then began collecting, cleaning, cataloguing, and shipping all remaining monitoring equipment.

On December 10, 2009, GSS provided the County with a breakdown of equipment that was subject to charges for damage, theft, tampering, or misuse, and sent to the County a final invoice for $245,610.95.

On January 29, 2010, GSS sent a past due letter to the County, and reminded the County that the County had a 45 day payment window in which to pay the invoice, but that this window had now closed. The County acknowledged receipt of the December 2009 invoice through a letter dated February 23, 2010.

By letter dated March 26, 2010, the County denied that it owed the approximately $246,000, and raised several grounds for denying payment.

By letter dated April 28, 2010, GSS sought to remedy the County's grounds for denial of payment in the March 26 letter. GSS adjusted the invoice balance to $221,810.05.

By letter dated May 11, 2010, GSS informed the County that the County's failure to honor the contractual obligations was directly resulting in consequential damages to GSS's relationships with other manufacturers of the equipment and others in the industry.

In letters dated May 18 and May 21, 2010, the County acknowledged receipt of the previous GSS correspondences. The County again denied payment of funds to GSS pursuant to GSS's invoice. The County set forth new grounds for refusing to pay the invoice.

In a letter dated May 28, 2010, GSS replied to the County's May 21, 2010, and again reiterated that the County's failure to honor the contractual obligations was causing consequential harm to GSS.

On June 3, 2010, GSS and employees of the County had a telephonic conference call. Shortly thereafter, on June 7, 2010, the County sent GSS a letter that set out more grounds for denial of payment.

By letter dated July 15, 2010, GSS responded to the additional grounds raised by the County, and made a good faith credit. GSS adjusted the invoice balance to $156,217.50.

By letter dated July 30, 2010, the County again refused to pay GSS.

By letter dated August 5, 2010, GSS insisted that the County pay the invoice amount of $156,217.50.

By letter dated September 16, 2010, the County stated that its contractual obligations were at most $3,007.50.

By letter dated January 24, 2011, GSS's counsel sent a demand letter to the County Probation Department. See Plaintiff's Ex. R. *fn2

By letter dated February 1, 2011, Greg Reinke ("Reinke") of the County Probation department replied to the January 24, 2011, demand letter. See Complaint Ex. P. Reinke informed GSS that, before instituting a lawsuit against the County, GSS was required to file a claim with the County's governing board. See id.

On February 14, 2011, GSS presented to the County a Government Claim Act claim for damages. This claim is on a form provided by the County. See id.

By letter dated March 22, 2011, the County denied the claim for damages. The County contended that GSS's claim was untimely.


Under Federal Rule of Civil Procedure 12(b)(6) , a claim may be dismissed because of the plaintiff's "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6) . A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under a cognizable legal theory. Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In reviewing a complaint under Rule 12(b)(6), all allegations of material fact are taken as true and construed in the light most favorable to the non-moving party. Marceau v. Blackfeet Hous. Auth., 540 F.3d 916, 919 (9th Cir. 2008); Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1999). However, the Court is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1056-57 (9th Cir. 2008); Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Although they may provide the framework of a complaint, legal conclusions are not accepted as true and "[t]hreadbare recitals of elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949-50 (2009); see also Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003).

Furthermore, Courts will not assume that plaintiffs "can prove facts which [they have] not alleged, or that the defendants have violated . . . laws in ways that have not been alleged." Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). A plaintiff's allegations cannot amount to a mere "formulaic recitation of the elements of a cause of action," rather the factual allegations "must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, to "avoid a Rule 12(b)(6) dismissal, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009); see Twombly, 550 U.S. at 570; see also Weber v. Department of Veterans Affairs, 521 F.3d 1061, 1065 (9th Cir. 2008). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949.

The plausibility standard is not akin to a 'probability requirement,' but it asks more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of 'entitlement to relief.' . . .

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. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged -- but it has not shown -- that the pleader is entitled to relief.

Iqbal, 129 S.Ct. at 1949-50. "In sum, for a complaint to survive a motion to dismiss, the nonconclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. United States Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009).

In deciding whether to dismiss a claim under Rule 12(b)(6), the Court is generally limited to reviewing only the complaint, but may review inter alia materials which are properly submitted as part of the complaint. See Edwards v. Marin Park, Inc., 356 F.3d 1058, 1062 (9th Cir. 2004); Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). If a Rule 12(b)(6) motion to dismiss is granted, "[the] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc). In other words, leave to amend need not be granted when amendment would be futile. Gompper v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002).


Defendant's Argument The County argues that GSS has failed to comply with the presentation requirements of the California Government Claims Act. The Complaint shows that the breach of contract claim accrued on January 28, 2010, when the County failed to pay GSS's invoice. GSS's January 29, 2010, letter to the County acknowledges that, per the Agreement, the County was to pay the invoice by January 27, 2010. That the parties later exchanged correspondences after January 28, 2010, is of no consequence. Under the Government Claim Act, GSS had one year from the date of accrual to present their breach of contract claim to the County. However, GSS did not file a government claim with the County until February 14, 2011. Accordingly, GSS failed to timely present its breach of contract claim, and that claim should be dismissed for this failure.

With respect to the conversion claim and the covenant of fair dealing claim (which is alleged as a tort), dismissal is appropriate for several reasons. First, GSS's government claim did not contain tort allegations, rather it was limited to a breach of contract claim. Second, the claims were not presented to the County within six months of their accrual, and thus were not timely presented. Third, as argued in reply, GSS cannot recover tort ...

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