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Joyce M. Rankine v. Roller Bearing Company of America

May 9, 2013


The opinion of the court was delivered by: Irma E.GONZALEZ United States District Judge


Presently before the Court is the motion of Plaintiffs Joyce Rankine ("Rankine") and Lawrence Stanton ("Stanton") (collectively "Plaintiffs") to dismiss the first amended counterclaim of Defendant Roller Bearing Company of America ("Defendant") for failure to state a claim. [Doc. No. 43, Pl.'s Mot.] For the following reasons, the Court DENIES Plaintiffs' motion to dismiss.


On July 20, 2012, Plaintiffs filed a complaint in state court against Defendant and unnamed defendants. [Doc. No. 1-1, Compl.] Defendant removed the action to this Court on August 22, 2012. [Doc. No. 1, Notice of Removal.] The complaint alleges two causes of action: (1) breach of contract of the Rankine Note and (2) breach of contract of the Stanton Note. [Doc. No. 1-1, Compl.] On September 4, 2012, Defendant filed its answer to the complaint, which asserts forty-five affirmative defenses. [Doc. No. 4, Answer.] It also filed counterclaims against Plaintiffs. [Doc. No. 5, Counterclaims.] This Court previously dismissed the counterclaims on January 2, 2013. [Doc. No. 39.]

Defendant subsequently filed its first amended counterclaim ("FACC"). In its FACC, Defendant alleges the following facts. Plaintiffs Rankine and Stanton, in addition to Baxter Rankine (now deceased), entered into a stock purchase agreement ("Agreement" or "Stock Purchase Agreement") with Defendant to sell their outstanding shares of capital stock in All Power Manufacturing, Inc. ("All Power") in September 2006. [Doc. No. 5, FACC ¶ 10; Ex. A, Agreement.] The parties executed two Non-Negotiable Promissory Notes in connection with the Agreement-one Note in favor of Rankine ("Rankine Note")*fn1 and one in favor or Stanton ("Stanton Note") (collectively "Notes"). [Id. ¶¶ 19, 24; Ex. B, Rankine Note; Ex. D, Stanton Note.] The principal amount of the Rankine Note is $600,000, plus interest. [Id. ¶ 19.] The principal amount of the Stanton Note is $150,000, plus interest. [Id. ¶ 24.] Both Notes were originally payable in full on September 12, 2007. [Id. ¶¶ 19, 24.]

Defendant alleges that Paragraphs 1.3 of both the Rankine and Stanton Notes give Defendant the right to set off amounts coming due under the Notes against damages Defendant sustained as a result of any breach of representation or warranty by Plaintiffs in the Stock Purchase Agreement. [Id. ¶¶ 18, 20, 25; Ex. B, Rankine Note; Ex. D, Stanton Note.]

On or about August 11, 2009, Plaintiffs each executed an Amendment to Non-Negotiable Promissory Note ("Rankine Amendment" and "Stanton Amendment") to their respective Notes with Defendant. Each amendment made two changes to their respective Notes: (1) it amended Paragraph 1.1 to read "The principal amount of this Note, and all accrued and unpaid interest thereon, shall be due and payable on June 30, 2012;" and (2) it limited the right of set-off unless, prior to June 30, 2012, Defendant received a communication from the Mexican taxing authority stating that a tax was due. [Id. ¶¶ 22, 27; Ex. C, Amendment to Rankine Note; Ex. E, Amendment to Stanton Note.] Defendant alleges that the amendments were made to eliminate a dispute between the parties regarding potential Mexico income taxes, and that the amendments "provide[] a limitation on the Mexico tax set-off." [Id. ¶¶ 22, 27.]

Defendant further alleges that contrary to the Stock Purchase Agreement, Plaintiffs did not provide Defendant with all of the intellectual property assets that are necessary for the operation of All Power. [Id. ¶ 16.] Defendant also alleges that before the Stock Purchase Agreement closed on September 12, 2006, Mary Alvarado and some "Key Employees," defined in the Stock Purchase Agreement to include Baxter Rankine, Charles Sharp, Tom Blanch, David McCulloch, David Rankine, and Jeffrey Rindskopf, misappropriated, used, disclosed, and obtained by improper means All Power's trade secret information, including its intellectual property assets. [Id. ¶¶ 38-39.] Defendant also alleges that these individuals divulged All Power's confidential and proprietary business information to third parties without All Power's consent. [Id.] Defendant imputes knowledge of this alleged wrongdoing to Plaintiffs Rankine and Stanton and alleges that Plaintiffs did not disclose this information to Defendant. [Id. ¶¶ 40-41.]

Defendant's FACC alleges the following causes of action: (1) breach of written contract; (2) intentional misrepresentation; (3) negligent misrepresentation; (4) common law fraud in connection with the sale and purchase of securities; (5) breach of the implied covenant of good faith and fair dealing; (6) contractual indemnity; (7) equitable indemnity; (8) rescission of contract; and (9) declaratory relief. [Doc. No. 42, FACC.] Plaintiffs subsequently filed the present motion to dismiss. [Doc. No. 43.]


I. Motion to Dismiss

A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. Civ. P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court must accept all factual allegations pleaded in the complaint as true, and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations, rather, it must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). 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." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). "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.'" Iqbal, 556 U.S. at 1949 (quoting Twombly, 550 U.S. at 678).

"[A] plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires 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 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)) (alteration in original). A court need not accept "legal conclusions" as true. Iqbal, 556 U.S. at 678. Despite the deference the court must pay to the plaintiff's allegations, it is not proper for the court to assume that "the [plaintiff] can prove facts that [he or she] has not alleged or that defendants have violated the . . . laws in ways that have not been alleged." Associated Gen. Contractors of Calif., Inc. v. Calif. State Council of Carpenters, 459 U.S. 519, 526 (1983).

Further, a court generally may not consider materials beyond the pleadings when ruling on a Rule 12(b)(6) motion. United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003). However, a court "may take judicial notice of matters of public record . . . as long as the facts noticed are not subject to reasonable ...

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