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Central Coast Pipe Lining, Inc v. Pipe Shield Usa

April 19, 2013

CENTRAL COAST PIPE LINING, INC., PLAINTIFF,
v.
PIPE SHIELD USA, INC.; PIPE SHIELD SERVICES, LTD.; B.G. ARNOLD SERVICES T/A BRADLEY MECHANICAL SERVICES; ELASTOCHEM COMPANY SPECIALTY, INC.; DOES 1--100, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Otis D. Wright, II United States District Judge

O

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS [17]

I.INTRODUCTION

Plaintiff Central Coast Pipe Lining, Inc., BG Arnold Services T/A Bradley Mechanical Services ("BMS"), Pipe Shield USA, Inc., and Pipe Shield Services, Ltd. entered into a Settlement Agreement on January 18, 2012, severing their business relationship. Central Coast then attempted to purchase epoxy necessary for its business from Elastochem, the manufacturer of the epoxy formerly sold to Central Coast by Pipe Shield USA. Since Elastochem does not sell directly to consumers, it declined to sell epoxy to Central Coast except for Plaintiff's personal use. Armed with this refusal, Central Coast alleges that Defendants breached the Settlement Agreement and conspired with each other to cut off Plaintiff's epoxy access. After considering Central Coast's seven claims, the Court GRANTS IN PART and DENIES IN PART Defendants' Motion to Dismiss.*fn1

II.FACTUAL BACKGROUND

Central Coast is a California corporation with its principal place of business in San Luis Obispo County, California. (First Amended Complaint ("FAC") ¶ 2.) Central Coast engages in the "blow through epoxy lining" business and sells supply agreements for implementation of epoxy-lining products. (Id. ¶ 5.)

Pipe Shield USA is incorporated and has its principal place of business in Connecticut. (Id. ¶ 3.) Pipe Shield Services and BMS are Canadian companies. (Id.)

Between January 1, 2010, and January 18, 2012, Pipe Shield USA, Pipe Shield Services, and BMS (collectively, the "Pipe Shield Defendants"*fn2 ) were Central Coast's sole suppliers of AN 500, a specialized type of epoxy. (Id. ¶ 6.) But on January 18, 2012, Central Coast and the Pipe Shield Defendants entered into a Settlement Agreement. (Id. ¶ 8, Ex. 1.) Under this agreement, Pipe Shield USA and Central Coast agreed to terminate Plaintiff's licensing agreement, which had previously given Central Coast certain rights to Pipe Shield's products in California. (Id. Ex. 1.) Pipe Shield USA agreed in exchange to refund $70,000 of the $100,000 licensing fee Central Coast had previously paid. (Id.)

Under paragraph 4 of the Settlement Agreement, all parties also agreed "that each [would] for itself and/or directly or indirectly through any other party, refrain from interfering with, hindering or by any means impeding the business operations and/or expansion of any other Party." (Id.) But the parties were allowed to compete with each other in a "commercially reasonable manner." (Id.)

Elastochem manufactures the AN 500 epoxy and the allegedly identical AG 310 epoxy, which Central Coast attempted to purchase directly from Elastochem instead of through Pipe Shield USA. (Id. ¶ 11(a).*fn3 ) Central Coast's President Stan Rutiz emailed Elastochem three times, inquiring whether he could purchase the AG 310 epoxy directly from Elastochem. On February 29, 2012, Elastochem ultimately declined, informing Rutiz that he had to purchase the epoxy through BMS. (Id. Ex. 3.) But Elastochem did offer to sell the epoxy to Central Coast for its personal, rather than commercial, use. (Id. ¶ 11(a)(i), (b).)

Despite Elastochem's response, Central Coast alleges that Elastochem offered AG 310 for sale on the Internet to the general public for $135 a gallon and that Central Coast was the only prospective purchaser denied the ability to purchase AG 310. (Id. ¶ 11(a)(ii)--(iv).) Central Coast argues that it was unable to obtain the epoxy because Defendants conspired to obstruct its access to AG 310. (Id. ¶ 11(a).) Plaintiff contends that it lost some $250,000 per year in anticipated profits due to this alleged conspiracy. (Id. ¶ 11-2.) Central Coast maintains that it could have sold at least 1,500 gallons of AG 310 per year at over $300 per gallon. (Id.)

On December 17, 2012, Central Coast filed a Complaint against Defendants in California state court. BMS and Elastochem then removed the action to this Court. On February 5, 2013, Defendants filed their first motion to dismiss. (ECF No. 11.) Central Coast failed to oppose the motion, so the Court granted it. (ECF No. 12.) After Central Coast filed its seven-claim First Amended Complaint, Defendants again moved for dismissal on March 22, 2013. (ECF No. 17.) Plaintiff timely opposed. (ECF No. 18.) That Motion is now before the Court for decision.

III.LEGAL STANDARD

Dismissal under Rule 12(b)(6) can be based on "the lack of a cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). A complaint need only satisfy the minimal notice pleading requirements of Rule 8(a)(2)-a short and plain statement-to survive a motion to dismiss for failure to state a claim under Rule 12(b)(6). Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003); Fed. R. Civ. P. 8(a)(2). For a complaint to sufficiently state a claim, its "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). While specific facts are not necessary so long as the complaint gives the defendant fair notice of the claim and the grounds upon which the claim rests, a complaint must nevertheless "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

Iqbal's plausibility standard "asks for more than a sheer possibility that a defendant has acted unlawfully," but does not go so far as to impose a "probability requirement." Id. Rule 8 demands more than a complaint that is merely consistent with a defendant's liability-labels and conclusions, or formulaic recitals of the elements of a cause of action do not suffice. Id. Instead, the complaint must allege sufficient underlying facts to provide fair notice and enable the defendant to defend itself effectively. Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). The determination whether a complaint satisfies the plausibility standard is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679.

When considering a Rule 12(b)(6) motion, a court is generally limited to the pleadings and must construe "[a]ll factual allegations set forth in the complaint . . . as true and . . . in the light most favorable to [the plaintiff]." Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir. 2001). Conclusory allegations, unwarranted deductions of fact, and unreasonable inferences need not be blindly accepted as true by the court. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Yet a complaint should be dismissed only if "it appears beyond ...


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