UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION
September 10, 2012
SEMI-MATERIALS CO., LTD., A REPUBLIC OF KOREA CORPORATION, PLAINTIFF,
SUNPODS, INC., E-SOLAR EXHANGE LTD., SOLARSEAL TECHNOLOGIES, INC., AND SOLARPOWER RESTORATION SYSTEMS, INC., CALIFORNIA CORPORATIONS; MICAHEL GUMM AND DAN JAEGER, INDIVIDUALS; AND DOES 1-20,
The opinion of the court was delivered by: Lucy H. Koh United States District Judge
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS; ORDER DENYING AS MOOT MOTION TO STRIKE AND MOTION FOR A MORE DEFINITE STATEMENT
Before the Court is Defendants'*fn1 motion to dismiss Plaintiff's Complaint. ECF No. 4.
Also before the Court is Defendants' motion to strike portions of the Complaint, and Defendants' 21 motion for a more definite statement. ECF No. 16. Pursuant to Civil Local Rule 7-1(b), the Court 22 deemed Defendants' motions suitable for decision without oral argument. The hearing set for September 6, 2012, was vacated. For the reasons set forth below, the Court GRANTS Defendants' 24 motion to dismiss with leave to amend and DENIES as moot Defendants' motion to strike and Defendants' motion for a more definite statement. corporation, purchased 564,971 shares of Series B Preferred stock, or about ten percent of the total 4 shares, in Defendant SunPods for $999,998.67. Compl. ¶¶ 14, 15, 68, ECF No. 1. The substance 5 of Plaintiff's complaint concerns mismanagement of Defendant Sunpods. 6
¶¶ 5, 36, 70. Defendant Gumm is also the controlling shareholder of Defendant E-Solar, a 9 Solarpower, a suspended California corporation. Compl. ¶¶ 6-9. Plaintiff alleges that the "corporation defendants"*fn2 are undercapitalized and operate without the requisite corporate formalities, Compl. ¶ 13, and that these defendants are the alter ego of Defendants Gumm and 13
On or about March 15, 2010, Plaintiff Semi-Materials Co., Ltd., a Republic of Korea Defendant SunPods is a California corporation. Compl. ¶¶ 4. Defendants Gumm and Jaeger are the controlling shareholders, officers, and sole directors of Defendant SunPods. Compl. 8 California corporation; Defendant Solarseal, a suspended California corporation; and Defendant 10 Jaeger. Thus, Plaintiff alleges that Defendants Gumm and Jaeger should be personally responsible 14 for any liability incurred by Defendants SunPods, E-Solar, Solarseal, and Solarpower. Id.
Plaintiff alleges a number of acts of mismanagement. First, Plaintiff
alleges that Defendant
SunPods never delivered its share certificates, never had the required
number of directors, and did 17 not hold shareholders' meetings.
Compl. ¶¶ 16, 18, 19. 18
Plaintiff further alleges that Defendants Gumm and Jaeger had a range
of conflicts of
interest, and that they failed to disclose these conflicts or
obtain independent ratification of 20 corporate decisions in which
they had a personal interest. Compl. ¶¶ 17, 20. Plaintiff alleges that
Defendants Gumm and Jaeger improperly used Plaintiff's investment to
repay themselves back 22 salary and loans they had made to the
company, Compl. ¶ 26, and that they used company funds to 23 pay for
their own attorneys. Compl. ¶ 27. Plaintiff also alleges that
Defendants Gumm and Jaeger 24 failed to dedicate their time and energy
exclusively to SunPods and instead have engaged in the 25 management
or operation of competitive businesses. Compl. ¶ 38.
ORDER GRANTING MOTION TO DISMISS
See Compl. ¶ 13. The Court will assume that "corporate defendants"
refers to all four of the Defendants who are, in fact, corporations:
Defendants SunPods, E-Solar, Solarseal, and 28
held a board meeting on December 10, 2011, at which they discussed
the possibility of selling most 3 of Defendant SunPods' assets,
seeking new bridge funding, and filing for bankruptcy under 4
Chapter 7. Compl. ¶ 21. Also at this meeting, Defendants Gumm and
Jaeger allegedly stated that 5 in lieu of back pay and before filing
for bankruptcy, "'the SunPods patents and other trade secrets 6
In addition to these general allegations, Plaintiff alleges that Defendants Gumm and Jaeger [would] be reassigned to the corporation founder and investors and majority shareholder for the 7 unpaid compensation allowed by law.'" Compl. ¶ 22. Plaintiff alleges that these activities are 8 intended to direct Defendant SunPods' assets to Defendants Gumm and Jaeger personally, and to 9 avoid shareholders' liquidation preferences. Compl. ¶¶ 25, 55. 10 repudiated written contracts, presumably with Defendant SunPods, deferring their salaries until the company had greater cash flow and setting out terms of confidentiality and assignment of 13 inventions. Compl. ¶¶ 32, 23. 14 on December 30, 2011, alleging causes of action for: (1) breach of contract against Defendants 16 (3) interference with prospective business advantage against all Defendants; (4) interference with 18 contract against all Defendants; (5) fraud against Defendants Gumm and Jaeger; (6) unfair 19 competition against all Defendants; and (7) dissolution of the corporation against Defendants 20 Fed. R. Civ. P. Rule 12(b)(6) ("Mot.") on February 27, 2012. See ECF No. 4. Plaintiff's Response 22 to Defendants' Motion to Dismiss was filed on March 12, 2012. ("Response"), ECF No. 9. After 23 the case was reassigned to the undersigned judge on March 19, 2012, Defendants refiled their 24 motion to dismiss on March 20, 2012, and Plaintiff refiled its opposition on April 3, 2012. ECF 25 Nos. 14, 15, 19. Defendants filed their reply on April 10, 2012. ECF No. 21. 26 A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal 28 sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In considering Finally, Plaintiff alleges that Defendants Gumm and Jaeger breached or anticipatorily District Court Plaintiff filed suit in the United States District Court for the Northern District of California SunPods, Gumm, and Jaeger; (2) breach of fiduciary duties against Defendants Gumm and Jaeger; 17 SunPods, Gumm, and Jaeger. See Compl. Defendants filed their motion to dismiss pursuant to whether the complaint is sufficient to state a claim, the court must accept as true all of the factual 2 allegations contained in the complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). However, the 3 court need not accept as true "allegations that contradict matters properly subject to judicial notice 4 or by exhibit" or "allegations that are merely conclusory, unwarranted deductions of fact, or 5 unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). 6
II. LEGAL STANDARD
While a complaint need not provide detailed factual allegations, it "must contain sufficient factual 7 matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially 9 plausible when it "allows the court to draw the reasonable inference that the defendant is liable for 10 the misconduct alleged." Id.
A complaint alleging fraud must "state with particularity the circumstances constituting fraud." Fed. R. Civ. P. 9(b). Allegations of fraud must be stated with "specificity including an 13 account of the 'time, place, and specific content of the false representations as well as the identities 14 of the parties to the misrepresentations.'" Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007)
(quoting Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)). To survive a motion 16 to dismiss, "allegations of fraud must be specific enough to give defendants notice of the particular 17 misconduct which is alleged to constitute the fraud charged so that they can defend against the 18 charge and not just deny that they have done anything wrong." Id. (quoting Bly-Magee v. 19 California, 236 F.3d 1014, 1019 (9th Cir. 2001)) (internal quotations omitted).
Court take Judicial Notice of two "Business Entity Detail" reports from the California Secretary of Under Federal Rule of Evidence 201, "[t]he court may judicially notice a fact that is not subject to 27 reasonable dispute because it can be accurately and readily determined from sources whose 28 accuracy cannot reasonably be questioned." The "Business Entity Detail" reports are public
Plaintiff notes in its Response to Defendants' Motion to Dismiss, ECF No. 19, that Defendants Solarpower and Solarseal are suspended corporations. Plaintiff has requested that the 24 State, one identifying Solarseal's suspended status, and the other, Solarpower's suspended status. 26 records filed with the Secretary of State. "A trial court may presume that public records are 2 authentic and trustworthy," Gilbrook v. City of Westminster, 177 F.3d 839, 858 (9th Cir. 1999), 3 and, thus, fall within the purview of Federal Rule of Evidence 201. Accordingly, the Court takes participation in Defendants' Motion to Dismiss. California law provides for the suspension of "the 7 corporate powers, rights, and privileges" of a corporation that does not pay its taxes. Cal. Rev. & Judicial Notice of these documents.*fn3
Plaintiff has further asked that the Court strike Defendants Solarpower and Solarseal from Tax Code § 23301. Suspended California corporations may not "prosecute or defend an action, 9 appeal from an adverse judgment, seek a writ of mandate, or renew a judgment obtained prior to 10 suspension." Grell v. Laci Le Beau Corp., 73 Cal. App. 4th 1300, 1306 (citations omitted). Even a Solarpower and Solarseal lack capacity to file a Motion to Dismiss. Plaintiff's request to strike 14 demurrer filed while a corporation is suspended is "an unauthorized act by a suspended corporation
District Court For the Northern District of California in violation of Revenue and Taxation Code section 23301." Id. Accordingly, Defendants 13 Defendants Solarpower and Solarseal from participation in the joint Motion to Dismiss is United States GRANTED. The remainder of this Order applies only to Defendants SunPods, E-Solar, Gumm, 16 and Jaeger. 17 19 establishing the following elements: "(1) existence of the contract; (2) plaintiff's performance or 20 excuse for nonperformance; (3) defendant's breach; and (4) damages to plaintiff as a result of the 21 breach." CDF Firefighters v. Maldonado, 158 Cal. App. 4th 1226, 1239, 70 Cal. Rptr. 3d 667 22 (2008). Under California law, "a contract requires parties capable of consent, the consent of those 23 parties, a lawful object, and sufficient consideration." ASP Props. Grp. v. Fard, Inc., 133 Cal. 24
ORDER GRANTING MOTION TO DISMISS
B.Breach of Contract
To state a claim for breach of contract under California law, Plaintiff must plead facts App. 4th 1257, 1268-69 (2005) (citing Cal. Civ. Code § 1550). In addition, for a contract "'to be 2 enforceable, a promise must be definite enough that a court can determine the scope of the duty[,] 3 and the limits of performance must be sufficiently defined to provide a rational basis for the 4 assessment of damages.'" Bustamante v. Intuit, Inc., 141 Cal. App. 4th 199, 209 (2006) (quoting 5
Plaintiff alleges that Defendants SunPods, Gumm, and Jaeger breached written contracts by 7 failing to disclose conflicts of interest and by failing to disclose that they were operating Defendant 8 Ladas v. Cal. State Auto. Ass'n, 19 Cal. App. 4th 761, 770 (1993)). 6
SunPods with an inadequate number of directors, and that Defendants Gumm and Jaeger breached 9 agreements providing for confidentiality, assignment of inventions, and deferral of salaries. 10 state a claim for breach of contract. The only particular agreement mentioned in Plaintiff's complaint is that "Gumm and Jaeger previously signed written agreements deferring their salaries 13 However, the mere allegation that some conduct violated written contracts, without more, does not 'until the company has grown sales and cash flow to be able to repay.'" Compl. ¶ 23. Plaintiff 14 does not specify with whom this written agreement was made, nor what obligations each party incurred. Even assuming that this allegation sufficiently pleads the existence of a contract 16 concerning deferred salaries, nowhere has Plaintiff pleaded the existence of any contract 17 concerning conflicts of interest or number of directors, confidentiality, or assignment of inventions. 18
Nor has Plaintiff alleged its own performance under any alleged contract(s). Finally, Plaintiff has 19 entirely failed to plead if and how it was damaged by any breach.
claim is GRANTED.
24 its shareholders and must act "in good faith, in a manner such director believes to be in the best 25 interests of the corporation and its shareholders." Cal. Corp. Code § 309(a). A shareholder's 26 action is derivative, rather than individual, when "the gravamen of the complaint is injury to the 27 corporation, or to the whole body of its stock or property without any severance or distribution 28 among individual holders." Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998) (citing Jones v. For the foregoing reasons, Defendants' motion to dismiss Plaintiff's breach of contract C.Breach of Fiduciary Duty
By statute, directors of a California corporation owe a fiduciary duty to the corporation and H.F. Ahmanson & Co., 1 Cal. 3d 93, 106 (1969)). Where directors' acts are alleged to cause 2 business failure or devaluation of stock, the complaint is that the directors violated fiduciary duties 3 to the corporation, and it is for the corporation to bring a claim. Pareto, 139 F.3d at 699; Nelson v. 4
Here, Plaintiff has not specified the exact nature of its alleged injury, but appears to be 6 asserting a loss in value of its Sunpods shares. See Compl. ¶¶ 37, 38, 39. Accordingly, any claim 7 arising from the alleged misconduct would have to be asserted as a derivative action. The 8 Anderson, 72 Cal. App. 4th 111, 125-26 (1999). 5
Complaint states only Plaintiff Semi-Materials' individual shareholder claim, not a claim on behalf 9 of SunPods, and thus does not state a viable claim. 10 11 shareholders, and thus may owe a duty to minority shareholders.
12 breach a fiduciary duty to minority shareholders with the result that the majority benefits 13 disproportionately, a minority shareholder may bring an individual action if the shareholder can 14 allege an injury distinct from the injury to the corporation. Pareto, 139 F.3d at 699-700; see also
In addition to being directors, however, Defendants Gumm and Jaeger are also majority Nelson, 72 Cal. App. 4th at 127 ("Whether there is one minority shareholder or many, an action is 16 individual only if the stock of the individual plaintiff or plaintiffs is the only stock affected 17 adversely."). 18 19 their personal interests in intellectual property, failed to devote sufficient time to managing 20
Defendant SunPods, and operated competing businesses. But Plaintiff fails to identify any unique 21 harm suffered by Plaintiff or other minority shareholders, as distinct from harm suffered by the 22 corporation. Plaintiff has thus not stated a claim for breach of fiduciary duty owed by majority 23 shareholders to minority shareholders.*fn4
25 and Defendants' motion to dismiss Plaintiff's second claim is GRANTED.
California Corporations Code § 1800 authorizes Plaintiff's individual claim for breach of fiduciary duty. However, in the Complaint, Plaintiff asserts this as a separate cause of action. Accordingly, 28 it is addressed separately below. 7
Plaintiff alleges that Defendants Gumm and Jaeger had conflicts of interest, maintained For the foregoing reasons, Plaintiff has failed to state a claim for breach of fiduciary duty,
3 economic relationship between the plaintiff and some third party, with the probability of future 4 economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional 5 acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the 6 relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the 7 defendant." Pardi v. Kaiser Found. Hospitals, 389 F.3d 840, 852 (9th Cir. 2004) (citing Korea 8
D.Interference with Prospective Business Advantage
The tort of interference with prospective business advantage includes five elements: "(1) an
Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1153 (2003)). The plaintiff must assert an 9 existing relationship whose disruption is threatened. "[P]otential relationships-which are at most 10 a hope for an economic relationship and a desire for a future benefit"-are not sufficient. Bio-
Medical Research Ltd. v. Thane Int'l, Inc., 249 Fed. Appx. 539, 542 (9th Cir. 2007) (citing Westside Ctr. Assocs. v. Safeway Stores 23, Inc., 42 Cal. App. 4th 507, 527 (1996)). 13
Nowhere in the Complaint does Plaintiff identify the economic relationship between itself
14 and some third party with which it alleges interference. Plaintiff does suggest that Defendant SunPods had certain business opportunities, but SunPods is not the Plaintiff in this action. To state 16 a claim on which relief can be granted, Plaintiff would need to identify its own economic 17 relationship with a third party. Further, Plaintiff has not pleaded any facts whatsoever establishing 18 the third, fourth, and fifth elements of interference with prospective business advantage. The only 19 element Plaintiff addresses is the second element, where Plaintiff pleads only that "Defendants are 20 aware of Sunpod's opportunities" in several regards. Compl. ¶ 43. But even here, the Complaint 21 makes no allegations about Plaintiff's own existing relationships. 22
Because Plaintiff has failed to allege any facts establishing the five elements of the claim, Defendants' motion to dismiss Plaintiff's cause of action for interference with prospective business 24 advantage is GRANTED. 25 27 with contractual relations are: "(1) a valid contract between plaintiff and a third party; (2) 28 defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach
E.Interference With Contract The elements which a plaintiff must prove to establish a claim for intentional interference or disruption of the contractual relationship; (4) actual breach or disruption of the contractual 2 relationship; and (5) resulting damage." Pacific Gas & Electric Co. v. Bear Stearns & Co., 50 Cal. 3
Plaintiff asserts this cause of action against all Defendants, but
identifies the relevant
contract as the contract to purchase shares of SunPods stock and an
"Investor Rights Agreement." 6
3d 1118, 1127 (1990).
Compl. ¶ 48. However, Plaintiff cannot bring a claim against Defendant SunPods for interference 7 with a contract to which Defendant SunPods is the other party, because there is no third party to 8 interfere with this contract. Defendants cannot interfere with themselves. Thus, no claim has been 9 stated as to Defendant SunPods. 10
Plaintiff intends to allege interference with contracts between Plaintiff and SunPods, Plaintiff has failed to allege the three remaining elements of the cause of action. Specifically, Plaintiff has not 13 identified any of Defendants' intentional acts designed to induce a breach, actual disruption of the 14 contractual relationship, or damages. Therefore, Defendants' motion to dismiss Plaintiff's cause of As to Defendants Gumm, Jaeger, E-Solar, Solarseal, and Solarpower, to the extent that action for interference with contract is GRANTED. 16
To state a cause of action for fraud, a plaintiff must allege: "(a) misrepresentation (false 18 representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); (c) intent to 19 defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage." Engalla v. 20 9(b)'s heightened pleading requirements. Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 22 2009). Rule 9(b) demands that "[a]verments of fraud must be accompanied by 'the who, what, 23 when, where, and how' of the misconduct charged. A plaintiff must set forth more than the neutral 24 facts necessary to identify the transaction. The plaintiff must set forth what is false or misleading 25 about a statement, and why it is false." Vess v. Ciba--Geigy Corp. USA, 317 F.3d 1097, 1106 (9th 26
Cir. 2003) (internal quotation marks and citation omitted). Moreover, a fraud claim based on 27 nondisclosure "(as any other fraud claim) must be pleaded with particularity under Rule 9(b)." 28
Case No.: 11-CV-06719-LHK
ORDER GRANTING MOTION TO DISMISS
Permanente Med. Group, Inc., 15 Cal. 4th 951, 974 (1997). This cause of action must meet Rule 21 Kearns, 567 F.3d at 1127. Where the underlying facts are within the opposing party's knowledge, the plaintiff may state a claim based on information and belief only if the "allegations are 2 accompanied by a statement of facts on which the belief is founded." Moore v. Kayport Package 3 622 F.3d 1035, 1042 (9th Cir. 2010). 5 6 concealed material information in (1) voting as SunPods directors on matters in which they had 7 conflicts of interest, (2) operating competing businesses, and (3) planning an improper bankruptcy 8 filing in which company assets would be diverted to Defendants Gumm and Jaeger personally. 9
Gumm and Jaeger "concealed material information they were required to disclose." Compl. ¶ 53.
It does not allege any specific facts that Defendants had a duty to disclose. Nor does it allege that Defendants Gumm and Jaeger knew of the allegedly concealed facts or that in concealing them, 13 they intended to defraud Plaintiff. Further, as regards the bankruptcy filing, Plaintiff has pleaded 14 based on information and belief, but has not indicated any facts on which the beliefs are founded.
Exp., Inc., 885 F.2d 531, 540 (9th Cir. 1989); accord Shroyer v. New Cingular Wireless Serv., Inc., 4 Plaintiff asserts a claim of fraud against Defendants Gumm and Jaeger, alleging they Compl. ¶¶ 54, 55. However, the Complaint merely states in conclusory fashion that Defendants 10
Pleading based on information and belief is insufficient in a complaint. See Shroyer v. New 16 Cingular Wireless, 622 F.3d at 1042 ("Claims made on information and belief are not usually 17 sufficiently particular, unless they accompany a statement of facts on which the belief is 18 founded.").
20 misleading and incomplete statements," and that Plaintiff's reliance on these statements damaged 21 Yet there is no allegation of any facts tending to show that Plaintiff did, in fact, rely on any of 23 Defendants Gumm and Jaeger's statements or omissions, that any such reliance was reasonable, or 24 that reliance on these misrepresentations damaged Plaintiff (as opposed to damaging Defendant
SunPods). The facts alleged here are insufficient to state a claim under the heightened Rule 9(b) 26 standard, or even under the more permissive Rule 8 standard. Therefore, Defendants' motion to 27 dismiss Plaintiff's cause of action for fraud is GRANTED. 28
Case No.: 11-CV-06719-LHK
ORDER GRANTING MOTION TO DISMISS
Plaintiff does assert that Plaintiff "reasonably relied on Gumm and Jaeger's false, "the company's future prospects as well as the Plaintiff's value in the company." Compl. ¶ 57. 22 3 business act or practice and unfair, deceptive, untrue or misleading advertising." Cal. Bus. & Prof. 4 UCL-unlawful, unfair, or fraudulent." Berryman v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th 6 Defendants violated. The Court will thus examine all three prongs. 8
10 unlawful practices that are independently actionable under the UCL. Cel-Tech Commc'ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). Because Plaintiff's other causes of action are dismissed for failure to state a claim, and Plaintiff has failed to specify any other law 13 violated by Defendants' conduct, Plaintiff has not stated a claim under the unlawful conduct prong 14 of the UCL. See Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1153 (9th Cir. 2008)
(finding a failure to state a claim under the unlawful prong of the UCL where Plaintiff's allegations 16 fail to state a claim under any other laws identified by Plaintiff). 17 19 a substantial injury to the consumer, (2) that is not outweighed by countervailing benefits to 20 consumers or competition, and (3) that consumers themselves could not reasonably have avoided. 21 Camacho v. Auto. Club of Southern California, 142 Cal. App. 4th 1394, 1403 (2006). Plaintiff 22 alleges that Defendants' conduct benefits Defendants at the expense of Plaintiff and diverts 23 business opportunities to the Defendants (though from whom and to which Defendants, Plaintiff 24 does not say). Plaintiff asserts in conclusory fashion these actions "represent unfair competition." 25 Compl. ¶ 64. But Plaintiff has not alleged any specific facts giving rise to these alleged violations, 26 nor has Plaintiff alleged any specific injury resulting from Defendants' conduct. Accordingly, 27
Plaintiff has not stated a claim under the unfair prong of the UCL. 28
ORDER GRANTING MOTION TO DISMISS
California's Unfair Competition Law ("UCL") prohibits "any unlawful, unfair or fraudulent Code § 17200. Accordingly, "[a]n act can be alleged to violate any or all of the three prongs of the 5 1544, 1554 (2007). Plaintiff has not specified which prong(s) of the UCL Plaintiff believes 7 1. Unlawful
In proscribing unlawful business practices, the UCL considers violations of other laws as
A business practice or act is unfair for UCL purposes when three requirements are met: (1)
3 conduct that is "likely to deceive" and plead both the existence of a duty to disclose and reliance. 4 Insofar as a plaintiff's UCL claim is grounded in allegations of fraud, whether or not the word 6 Procedure 9(b). Kearns, 567 F.3d at 1124-25. 8
9 claim of fraud fails. As discussed above, Plaintiff has failed to plead with particularity the 10 circumstances of any misrepresentations or omissions, as well as intent to defraud, reliance and subsequent harm. Thus, Plaintiff has not stated a claim under the fraud prong. Finally, Plaintiff seeks exemplary and punitive damages with respect to its UCL claim. However, the Court notes that damages are not available as a remedy under the UCL; recovery is 14 limited to injunctive relief and restitution. See Cal. Bus. & Prof. Code §17203; Cel-Tech Commc'ns, 20 Cal. 4th at 179. 16 competition is GRANTED. 18
For a UCL claim based on allegedly fraudulent business practices, the Plaintiff must allege In re Tobacco II Cases, 46 Cal. 4th 298, 328 (2009); Berryman, 152 Cal. App. 4th at 1556-57. 5 "fraud" is used, such allegations must be pled with particularity pursuant to Federal Rule of Civil 7 Here, Plaintiff's fraud claim under the UCL fails for the same reasons the independent For the foregoing reasons, Defendants' motion to dismiss Plaintiff's claim for unfair
H.Dissolution of Corporation
Section 1800 of the California Corporations Code allows certain shareholders to bring an 20 action for involuntary dissolution on one of six enumerated grounds, including, as relevant here, 21 that "[t]hose in control of the corporation have been guilty of or have knowingly countenanced 22 persistent and pervasive fraud, mismanagement or abuse of authority or persistent unfairness 23 toward any shareholders or its property is being misapplied or wasted by its directors or officers." 24
Cal. Corp. Code § 1800(b)(4). In order to bring such a claim, however, one of two criteria must be 25 met: a plaintiff shareholder must own at least one third of the company, or the corporation must be 26 a close corporation. Id. at § 1800(a)(2). Plaintiff has not pleaded either of these prerequisites, and 27 thus has not stated a claim for relief under this statute. Accordingly, Defendants' motion to dismiss 28 the claim for involuntary dissolution is GRANTED.
I.Leave to Amend
Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend "shall be freely
3 given when justice so requires," bearing in mind "the underlying purpose of Rule 15 to facilitate 4 decision on the merits, rather than on the pleadings or technicalities." Lopez v. Smith, 203 F.3d 5
1122, 1127 (9th Cir. 2000) (en banc) (internal quotation marks and alterations omitted). When 6 dismissing a complaint for failure to state a claim, "'a district court should grant leave to amend 7 even if no request to amend the pleading was made, unless it determines that the pleading could not 8 possibly be cured by the allegation of other facts.'" Id. at 1127 (quoting Doe v. United States, 58 9 F.3d 494, 497 (9th Cir. 1995)). If amendment would be futile, however, a dismissal may be 10 ordered with prejudice. Dumas v. Kipp, 90 F.3d 386, 393 (9th Cir. 1996). Similarly, leave to 11 amend may be denied if allowing amendment would unduly prejudice the opposing party, cause undue delay, or if the moving party has acted in bad faith. Leadsinger, Inc. v. BMG Music Publ'g., 13 512 F.3d 522, 532 (9th Cir. 2008). 14
Plaintiff's claims for breach of contract, breach of fiduciary duties, interference with United States prospective business advantage, interference with contract, fraud, unfair competition, and 16 dissolution of the corporation all fail based on deficiencies in pleading, not deficiencies of legal 17 theory. Further, amendment would not cause undue prejudice or undue delay. Accordingly, the 18
Court GRANTS leave to amend. 19
For the foregoing reasons, the Court GRANTS Defendants' motion to dismiss with leave to 21 amend and DENIES as moot Defendants' motion to strike and motion for a more definite 22 statement. Plaintiff shall file an amended complaint, if any, within 21 days of this Order. Plaintiff 23 may not add new claims or parties absent a stipulation of the parties or a Court Order pursuant to 24 Fed. R. Civ. P. 15(a)(2). If Plaintiff fails to timely file an amended complaint or fails to cure the 25 deficiencies identified in this Order, Plaintiff's claims will be dismissed with prejudice. 26
IT IS SO ORDERED. 27