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Mossimo Holdings LLC v. Haralambus

United States District Court, C.D. California

February 3, 2015

MOSSIMO HOLDINGS LLC, Plaintiff,
v.
HARRY HARALAMBUS, an individual; ONWARD PACIFIC LIMITED, a Hong Kong corporation; BEYOND BLUE, INC., a California corporation; THE LAMBUS CORPORATION; a California corporation, Defendants.

ORDER RE HARRY HARALAMBUS AND THE LAMBUS CORPORATION'S MOTIONS TO DISMISS PLAINTIFF'S FIRST-AMENDED COMPLAINT [Dkt. Nos. 38, 40.]

DEAN D. PREGERSON, District Judge.

Before the Court are motions to dismiss the Plaintiff's First-Amended Complaint, filed separately by Defendants Haralambus and The Lambus Corporation ("TLC"). Having considered the parties' submissions and heard oral arguments, the Court adopts the following order.

I. BACKGROUND

Mossimo, Inc. entered into a licensing agreement with Defendant Beyond Blue in 2001, granting Beyond Blue the right to sublicense the "Mossimo" trademark in the Philippines in exchange for a percentage of the royalties resulting from any such sublicensing. (FAC ¶ 3.) Plaintiff alleges, and provides an exhibit to show, that the terms of the licensing agreement gave it the right to 70% of royalties as well as the right to quarterly sales reports, the right to conduct audits; sublicenses also required Plaintiff's prior written consent. (Id. at ¶ 21; FAC, Ex. 1.) Mossimo, Inc. then transferred ownership of the mark to Plaintiff in 2006. (Id. at ¶ 20.) Plaintiff and Beyond Blue amended the license agreement in 2007. (Id. at ¶ 22.) Plaintiff alleges, and provides an exhibit to show, that the amendment left all terms of the original agreement intact unless expressly amended. (Id. at ¶ 22; FAC, Ex. 2.) Plaintiff alleges that the 2007 amendment required Defendant Beyond Blue to pay guaranteed minimum royalties totaling $1, 000, 000 less a $200, 000 credit. (Id. at ¶ 25.) The amendment also allowed Beyond Blue to assign its interest in the license agreement to Onward Pacific ("Onward"), provided Onward agreed to be bound by the terms of the contract. (FAC, Ex. 2, ¶ 7.)

Plaintiff alleges that since 2007, Defendants Beyond Blue and Onward have not provided quarterly reports, paid the guaranteed royalties, or paid the required percentage of actual royalties. (Id. at ¶ 30.) Plaintiff also alleges that Defendants entered into an unauthorized sublicense agreement with nonparty Promark Industries ("Promark") and that they concealed their breaches of the agreement until after the end of the agreement. (Id. at ¶ 32.)

Further, Plaintiff alleges Defendant Haralambus formed TLC in 2008 for the purpose of receiving royalties from Promark in an effort to conceal and avoid having to account for those royalties to Plaintiff. (Id. at ¶¶ 6, 35-36.) Plaintiff alleges it sent a letter to Haralambus in 2011 informing him that Onward was in default under the Amended License Agreement for failure to pay the guaranteed minimum royalties. Plaintiff alleges that in 2013, Haralambus caused $100, 000 to be transferred from TLC's account to pay Onward's default. (Id. at ¶ 45.) Plaintiff alleges this method of payment proves that Onward is unable to pay its obligations under the Amended License Agreement and that its income has been commingled with Lambus Corp. (Id. at ¶¶ 45-46.)

To the extent that Plaintiff was aware of breaches of the agreement, it alleges that it has made "repeated demands for performance." (Id. at ¶ 31.) Plaintiff now brings this action for breach of contract, conversion, money had received, and fraud, demanding damages, accounting and injunctive relief.

II. LEGAL STANDARD

In order to survive a motion to dismiss for failure to state a claim, a complaint need only include "a short and plaint statement of the claim showing that the pleader is entitled to relief." Bell Atl. Corp. V. Twombly, 550 U.S. 544, 55 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint must include "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).

III. DISCUSSION

A. Breach of Contract Claims

1. Alter Ego Theory

The Court previously dismissed Plaintiff's breach of contract claim, apparently rooted in an "alter ego" theory of liability that would allow piercing of the corporate veil, because although Plaintiff had alleged some facts establishing the basic elements of alter ego theory, [1] it had neither explicitly pleaded the theory nor explained which breaches of contract, specifically, could be fairly attributed to Defendants TLC and Haralambus. (Dkt. No. 34.) In its FAC, Plaintiff realleges the breach of contract claims, but with additional factual allegations and a more direct allegation of "alter ego" liability. (FAC, ¶¶ 35-55.) However, Plaintiff still does not ascribe particular breaches to TLC and Haralambus; rather, Plaintiff asserts that Haralambus, TLC, and Onward are "each... alter egos of each other" and holds them all equally liable for each breach. (Id. at 52-54.)

Defendants argue that because its FAC still does not specify which breaches justify piercing the corporate veil, Plaintiff has not corrected the deficiency the Court identified in its previous order. (E.g., Reply of Haralambus at 4-5.) Plaintiff counters that under the particular species of alter ego theory it alleges, a theory called "single enterprise" theory, it is "not ...


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