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Sterling Cross Defense Systems, Inc. v. Dolarian Capital, Inc.

United States District Court, E.D. California

June 18, 2014



ANTHONY W. ISHII, Senior District Judge.

I. Introduction

Sterling Cross Defense Systems, Inc. ("Plaintiff") brought this action for breach of contract and fraud against Defendants, Dolarian Capital, Inc. and Ara G. Dolarian ("Defendants"). Defendants have filed a motion to dismiss Plaintiff's fraud cause of action for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons discussed below, Defendants' motion to dismiss will be granted with leave to amend.

II. Background

A. Facts

Plaintiff contracted with Dyncorp International LLC to deliver various military assets for use by the United States Department of Defense. Doc. 1, Complaint ("Compl.") at ¶ 8. Plaintiff alleges that Defendants assured Plaintiff that they were in a position to acquire the assets for Plaintiff and deliver them on time. Compl. at ¶ 9. Plaintiff and Defendants entered into a contract under which Defendants would deliver the military assets on time to a destination specified by Plaintiff. Compl. at ¶ 10. Plaintiff alleges to have provided Defendants with a $300, 000.00 deposit on the contract on May 13, 2013. Compl. at ¶ 10. On or about July 4, 2013, it became apparent that Defendants were unable or unwilling to deliver the assets. Compl. at ¶ 11.

B. Procedural History

On November 1, 2013, Plaintiff filed a complaint for damages against Defendants for breach of contract and fraud. Compl. at ¶¶ 12-24. Defendants filed a motion to dismiss on November 11, 2013. Doc. 6-7. Plaintiff filed an opposition to the motion on January 3, 2014. Doc. 8.

III. Legal Standard

A. 12(b)(6) - Failure to State a Claim

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. Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011); Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008). 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. Faulkner v. ADT Sec. Servs., 706 F.3d 1017, 1019 (9th Cir. 2013); Johnson, 534 F.3d at 1121. However, the court is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994) (Nor is the Court required to accept "legal conclusions cast in the form of factual allegations if those conclusions cannot reasonably be drawn from the facts alleged.").

In order 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, 556 U.S. 662 (2009); see Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 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." Iqbal, 556 U.S. at 678. "The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully...." Iqbal, 556 U.S. at 678.

In assessing a motion to dismiss, courts may consider documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice. Dichter-Mad v. United States, 709 F.3d 749, 762 (9th Cir. 2013). If a motion to dismiss is granted, "[the] district court should grant leave to amend even if no request to amend the pleading was made...." Henry A. v. Willden, 678 F.3d 991, 1005 (9th Cir. 2012). However, leave to amend need not be granted if amendment would be futile or if the plaintiff has failed to cure deficiencies despite repeated opportunities. See Mueller v. Aulker, 700 F.3d 1180, 1191 (9th Cir. 2012); Telesaurus VPC. LLC v. Power, 623 F.3d 998, 1003 (9th Cir. 2010).

Federal Rule of Civil Procedure 9(b) requires that "a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed.R.Civ.P. 9(b). To comply with Rule 9(b), allegations of fraud must "be specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong." Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009); Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). "[A] plaintiff must set forth more than the neutral facts necessary to identify the transaction. The plaintiff must set forth what is false or misleading about a statement, and why it is false." Vess, 317 F.3d at 1106; In re Glenfed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994). Thus, allegations of fraud should specifically include "an account of ...

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