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Mendes v. Fedex Ground Package System, Inc.

United States District Court, N.D. California

January 15, 2015

HIRAM MENDES, et al., Plaintiffs,


SUSAN ILLSTON, District Judge.

Defendant Fedex Ground Package System, Inc. ("FedEx") moves to dismiss the first amended complaint ("FAC") filed by plaintiffs Costaneira Transport, Inc ("CTI"), KR Express, Inc. ("KR Express"), Hiram Mendes, and Kim Raney (collectively "plaintiffs"[1]). The motion, which seeks dismissal for failure to state a claim, is set for hearing on January 16, 2015. Pursuant to Civil Local Rule 7-1(b), the Court determines that this matter is appropriate for resolution without oral argument and VACATES the hearing. For the reasons set forth below, the Court GRANTS defendant FedEx's motion to dismiss, with leave to amend.


KR Express and CTI entered into contracts with FedEx (the "Operating Agreements") to provide package delivery services under the moniker "FedEx Ground" in 2009 and 1999, respectively. FAC ¶ 9. Under the Operating Agreements, plaintiffs were required to pay for FedEx uniforms, communications and data equipment, equipment washing, Department of Transportation inspections, and drug testing. FAC ¶ 21. Plaintiffs were also required to purchase or lease vehicles in accordance with FedEx specifications. Id. Both Operating Agreements provided for automatic renewal for a term of one year, subject to termination upon notice by either party. Id. ¶ 10. Corporate plaintiffs and FedEx allowed the Operating Agreements to automatically renew every year until 2012. Id. ¶¶ 11-12. Paragraph 11.2 of the Operating Agreements governs the terms of renewal and provides as follows:

11.2 Renewal Terms. This agreement shall automatically renew for successive terms of one year each after expiration of the initial term unless [corporate plaintiffs] or [FedEx] provides the other party notice of non-renewal in writing at least 30 days prior to the expiration of the initial term or any successive renewal term.

Docket No. 13-2, Brenner Decl. Exh. A Part 1; Docket No. 13-7, Brenner Decl. Exh. B Part 1.

Paragraph 13 prohibits oral modification. It states that the Operating Agreements "constitute the entire agreement and understanding between the parties...[and] shall not be modified, altered, changed or amended in any respect unless in writing and signed by both parties." Id.

Plaintiffs allege that on multiple occasions, they were assured by FedEx that the Operating Agreements would not be canceled absent good cause.[2] FAC ¶¶ 13-14. Relying on these assurances, plaintiffs "purchased new equipment, bought routes from other contractors, made investments in their companies, and otherwise worked to grow FedEx's business." Id. at ¶ 15. In November of 2012, FedEx sent CTI a letter indicating that it was considering not renewing the CTI contract; KR Express received a similar letter in January of 2013. Id. ¶¶ 16, 19. Both corporate plaintiffs were subsequently notified in writing of FedEx's intent not to renew their respective Operating Agreements pursuant to paragraph 11.2. Id. ¶¶ 18, 20.

On August 22, 2014, plaintiffs filed a complaint against FedEx, premised on diversity jurisdiction, alleging causes of action for (1) breach of implied contract, (2) wrongful termination, and (3) promissory estoppel. Docket No. 1. On October 17, 2014, FedEx filed a motion to dismiss the complaint. Docket No. 13. On November 18, 2014, the Court approved the parties' stipulation whereby plaintiffs were permitted to amend their complaint, and defendant agreed to withdraw its motion to dismiss. Docket No. 21. On November 19, 2014, plaintiffs filed the FAC. Docket No. 22. Now before the Court is FedEx's motion to dismiss the FAC for failure to state a claim. Docket No. 23.


Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it fails to state a claim upon which relief can be granted. Fed. R. Civ. Pro. 12(b)(6). To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must allege "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). This "facial plausibility" standard requires the plaintiff to allege facts that add up to "more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The Court must assume that the plaintiff's allegations are true and must draw all reasonable inferences in the plaintiff's favor. Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987).

Although factual allegations are generally accepted as true for purposes of the motion, the Court is not required to accept as true "allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). The Court, for example, need not accept as true "allegations that contradict matters properly subject to judicial notice or by exhibit." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); see also Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295-96 (9th Cir. 1998) ("[W]e are not required to accept as true conclusory allegations which are contradicted by documents referred to in the complaint."); Van Hook v. Curry, No. C 06-3148 PJH (PR), 2009 WL 773361, at *3 (N.D. Cal. Mar. 23, 2009) ("When an attached exhibit contradicts the allegations in the pleadings, the contents of the exhibits trump the pleadings.").

As a general rule, the Court may not consider materials beyond the pleadings when ruling on a Rule 12(b)(6) motion. Lee v. City of L.A., 250 F.3d 668, 689 (9th Cir. 2001). However, pursuant to Federal Rule of Evidence 201, the Court may take judicial notice of "matters of public record, " such as prior court proceedings. Id. at 688-89. The Court may also consider "documents attached to the complaint [and] documents incorporated by reference in the complaint... without ...

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