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California Expanded M Products Co. v. Clarkwestern Dietrich Building Systems LLC

United States District Court, C.D. California

October 29, 2014

CALIFORNIA EXPANDED M PRODUCTS CO., a California company, Plaintiff,
v.
CLARKWESTERN DIETRICH BUILDING SYSTEMS LLC doing business as CLARKDIETRICH BUILDING SYSTEMS, et al. Defendants.

ORDER RE: MOTIONS TO DISMISS [Dkt. Nos. 113, 117]

DEAN D. PREGERSON, District Judge.

Presently before the court is Defendant and Counterclaimant ClarkWestern Dietrich Building Systems LLC ("ClarkWestern)'s Motion to Dismiss Plaintiff's Third Claim for Negligent Interference with Prospective Economic Advantage (Dkt. 113). Also before the court is Plaintiff California Expanded M Products Company ("CEMCO")'s Motion to Dismiss ClarkWestern's Counterclaim (Dkt. 117). Having considered the submissions of the parties and heard oral argument, the court grants both motions and adopts the following order.

I. Background

Plaintiff California Expanded M Products Co. ("CEMCO") is a California corporation. (Third Amended Complaint ("TAC") ¶ 1.) Defendant James A. Klein ("Klein") was, at one time, a CEMCO employee. (TAC ¶ 8.) CEMCO alleges it entered into a contract ("the Agreement") with Klein, under which he promised CEMCO exclusive negotiation rights for an exclusive license to any construction-related technology that Klein might invent. (TAC ¶ 9.) Under the Agreement, in the event CEMCO and Klein were unable to agree on license terms, CEMCO would enjoy a right of first refusal on any licensing agreement that Klein reached with a third party. (Id.)

Klein later patented a new construction technology, but did not grant an exclusive license to CEMCO. (TAC ¶ 10.) Instead, Klein licensed his new "Blazeframe" technology to CEMCO's biggest competitor, Defendant ClarkWestern. (Id.)

On October 31, 2012, Klein filed a patent infringement action against CEMCO in the Western District of Washington. See CV 13-04669 DDP-MRW. CEMCO then initiated this action against Klein and ClarkWestern on December 18, 2012, alleging four causes of action against ClarkWestern for (1) tortious interference with contractual relations, (2) tortious interference with prospective economic advantage, (3) negligent interference with prospective economic advantage, and (4) inducing breach of contract, and two causes of action against Klein for (5) breach of contract, and (6) breach of the covenant of good faith and fair dealing. ClarkWestern filed a counterclaim against CEMCO for tortious interference with prospective economic advantage.

After conferring with the parties, this court directed CEMCO to file a Third Amended Complaint. The TAC alleges the same six causes of action originally alleged, as well as nine additional causes of action for declaratory relief regarding the validity and enforceability of the various BlazeFrame patents. Clarkwestern again filed a counterclaim against CEMCO, alleging a single claim for Tortious Interference with Prospective Economic Advantage. (Dkt. 115.)

ClarkWestern now moves to dismiss CEMCO's third cause of action for negligent interference with prospective economic advantage. CEMCO moves to dismiss ClarkWestern's counterclaim.

II. Legal Standard

A complaint will survive a motion to dismiss when it contains "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) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007)). When considering a Rule 12(b)(6) motion, a court must "accept as true all allegations of material fact and must construe those facts in the light most favorable to the plaintiff." Resnick v. Hayes , 213 F.3d 443, 447 (9th Cir. 2000). Although a complaint need not include "detailed factual allegations, " it must offer "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal , 556 U.S. at 678. Conclusory allegations or allegations that are no more than a statement of a legal conclusion "are not entitled to the assumption of truth." Id. at 679. In other words, a pleading that merely offers "labels and conclusions, " a "formulaic recitation of the elements, " or "naked assertions" will not be sufficient to state a claim upon which relief can be granted. Id. at 678 (citations and internal quotation marks omitted). "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement of relief." Id. at 679. Plaintiffs must allege "plausible grounds to infer" that their claims rise "above the speculative level." Twombly , 550 U.S. at 555. "Determining whether a complaint states a plausible claim for relief" 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.

III. Discussion

A. CEMCO's Cause of Action for Negligent Interference with Prospective Economic Advantage

CEMCO's Third Cause of Action for Negligent Interference with Prospective Economic Advantage alleges that ClarkWestern knew or should have known about the relationship between Klein and CEMCO, and failed to act with reasonable care by "unfairly using its multibillion dollar market power to dictate the terms of the license that was offered by Klein to CEMCO, by interfering with CEMCO's ability to obtain a fair license in an arms [sic] length negotiation with only Klein on an exclusive basis, and by requiring that Klein sue CEMCO for patent infringement...." (TAC ¶¶ 30-31.) ClarkWestern argues that it, as a competitor, owed no duty of care to CEMCO. (ClarkWestern Motion at 5-6.)

"The threshold element of a cause of action for negligence is the existence of a duty to use due care toward an interest of another that enjoys legal protection against unintentional invasion." Lake Alamnor Assoc. L.P. v. Huffman-Broadway Group, Inc. , 178 Cal.APp.4th 1194, 1205 (2009) (internal quotation and citations omitted). "Recognition of a duty to manage business affairs so as to prevent purely economic loss to third parties in their financial ...


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