The opinion of the court was delivered by: The Honorable David O. Carter, Judge
PRESENT: THE HONORABLE DAVID O. CARTER, JUDGE
Julie Barrera N/A Courtroom Clerk Court Reporter
ATTORNEYS PRESENT FOR PLAINTIFF: ATTORNEYS PRESENT FOR DEFENDANT:
None Present None Present
PROCEEDINGS: (IN CHAMBERS): ORDER DENYING DEFENDANT DDI, INC.'S MOTION TO DISMISS COMPLAINT PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6)
Before the Court is a Motion to Dismiss ("Motion") (Dkt. 60) filed by Defendant DDI, Inc. ("Defendant DDI"). The Court has considered the moving, opposing, and replying papers and hereby DENIES the Motion.
The facts alleged by Verso Paper LLC ("Verso" or "Plaintiff") are as follows:
Plaintiff is a Delaware limited liability company with its personal place of business in Tennessee. Second Am. Compl. ("SAC") ¶ 1 (Dkt. 57). In September 2006, Plaintiff entered into a written agreement with Co-Defendant HireRight, Inc. ("HireRight"), a company based in California. In the contract, HireRight agreed to perform background screenings of prospective employees. Id. at ¶ 10.
b.Defendant DDI's Subcontract to Screen Plaintiff's Prospective Employees
On April 5, 2007, Plaintiff ordered a background screening for Thom Williams ("Williams") for a prospective position in its accounting department. Id. at ¶ 12. Unbeknownst to Plaintiff, Williams had entered a guilty plea for embezzlement in the circuit court of Lee County, Mississippi on November 28, 2001, for stealing $215,663.49 from his previous employer. Id. at ¶ 20. Williams' guilty plea for embezzlement and criminal history are on public record in Lee County, easily and readily accessible by searching for defendants with the last name "Williams." Id. at ¶ 22.
HireRight subcontracted the search for criminal records to DDI, Inc, a Kentucky corporation. Id. at ¶ 33. The subcontract ("Subcontract") stated that Defendant DDI "understands and agrees that the results provided to HireRight for completed searches must be accurate, complete, neat, well structured and use proper grammar and correct spelling. Such reports are provided directly to HireRight's Customers and reflect on the quality of the work performed." Id. at ¶ 35; SAC Ex. 3. The Subcontract also stated, "Because HireRight guarantees its customers that the most current and accurate information is being provided . . . [DDI] shall be required to physically visit the relevant county courthouses and personally examine the physical records pertaining to each Search." SAC ¶ 35. In the Subcontract, Defendant DDI further agreed that its reported results would be "TRUE, COMPLETE AND ACCURATE BASED ON THE MOST UPTO-DATE PUBLIC RECORDS AVAILABLE." SAC. Ex. 3 (emphasis in original).
c.Defendant DDI's Performance of the Subcontract
Defendant DDI allegedly failed to perform its duty according to the Subcontract by not physically searching Lee County records. SAC ¶ 43. Defendant DDI falsely asserted that Williams did not have a criminal record in Lee County. Id. at ¶ 42. On April 10, 2007, based on Defendant DDI's information, HireRight sent a "Complete Request" to Plaintiff, which stated that Williams had no criminal record specifically in Lee County. SAC ¶ 14-16; SAC Ex. 2. In the right-hand column corresponding with the Lee County records search, the report stated that the search was "complete." SAC Ex. 2. However, in the "comments" section corresponding with the Lee County records search, the record indicated that "further research [is] required." SAC Ex. 3.
Plaintiff hired Williams based on the information provided by Defendant DDI through HireRight. SAC ¶ 28, 29. Subsequently, Williams embezzled and pled guilty to embezzling at least $10,247,386 from Plaintiff. Id. at ¶ 23. Had Plaintiff known Williams' true criminal history, Plaintiff would not have hired Williams and, subsequently, would not have lost $10,247,386. Id. at ¶ 44.
Plaintiff filed the SAC on January 10, 2012, against Defendant DDI and asserted several causes of action. The causes of action at issue on this motion are for the Fourth cause of action for negligence and gross negligence and the Fifth cause of action for negligent misrepresentation. Plaintiff requests recovery of damages and "interest in all monies awarded." Id. at 13.
Plaintiff filed the original complaint against HireRight as the sole defendant. HireRight moved for a motion to dismiss, and the Court denied the motion. HireRight sought to join National Union Fire Insurance Company of Pittsburgh, PA ("National Union") as a plaintiff, and the Court granted the joinder. Plaintiffs filed the First Amended Complaint ("FAC") including National Union as Plaintiff. Plaintiffs then filed a stipulation for leave to File SAC, and the Court granted the leave. Plaintiffs filed the SAC to add DDI and John Doe 1 and 2 as Defendants.
Under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed when a plaintiff's allegations fail to set forth a set of facts which, if true, would entitle the complainant to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (holding that a claim must be facially plausible in order to survive a motion to dismiss). The pleadings must raise the right to relief beyond the speculative level; a plaintiff must provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555(citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). On a motion to dismiss, this court accepts as true a plaintiff's well-pled factual allegations and construes all factual inferences in the light most favorable to the plaintiff. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). The court is not required to accept as true legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678.
In evaluating a Rule 12(b)(6) motion, review is ordinarily limited to the contents of the complaint and material properly submitted with the complaint. Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th Cir. 1994); Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc.,896 F.2d 1542, 1555 n.19 (9th Cir. 1990). Under the incorporation by reference doctrine, the court may also consider documents "whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading." Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994), overruled on other grounds by 307 F.3d 1119, 1121 (9th Cir. 2002).
A motion to dismiss under Rule 12(b)(6) can not be granted based upon an affirmative defense unless that "defense raises no disputed issues of fact." Scott v. Kuhlmann, 746 F.2d 1377, 1378 (9th Cir. 1984). For example, a motion to dismiss may be granted based on an affirmative defense where the allegations in a complaint are contradicted by matters properly subject to judicial notice. Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). In addition, a motion to dismiss may be granted based upon an affirmative defense where the complaint's allegations, with all inferences drawn in Plaintiff's favor, nonetheless show ...