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Senah, Inc. v. XI'an Forstar S&T Co, Ltd.

United States District Court, N.D. California, San Jose Division

March 2, 2015

SENAH, INC., Plaintiff,
v.
XI'AN FORSTAR S&T CO, LTD., Defendant.

ORDER (1) GRANTING DEFENDANT'S THIRD PARTIAL MOTION TO DISMISS, WITH PREJUDICE; (2) GRANTING DEFENDANT'S MOTION TO STRIKE EXEMPLARY DAMAGES [Re: ECF 70]

BETH LABSON FREEMAN, District Judge.

This is the third attempt by Plaintiff Senah, Inc. to plead a cause of action for fraud against Defendant Forstar. The previous two pleadings were dismissed by this Court with leave to amend. See ECF 46, 63. Plaintiff's Second Amended Complaint ("SAC") attempts to plead a cause of action for fraudulent concealment arising out of alleged misrepresentations made over email by an employee of Defendant. Defendant once again moves to dismiss, and also moves to strike Plaintiff's prayer for punitive damages. Because Plaintiff fails to plead a cause of action for fraud with the particularity required under Federal Rule of Civil Procedure 9(b), and because Plaintiff has now been given three chances to plead a fraud cause of action, the Court GRANTS Defendant's motion to dismiss, with prejudice.

I. BACKGROUND

All facts pled in the SAC are taken as true for purposes of adjudicating the motion to dismiss. See Marzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1015, 1031 (9th Cir. 2008).

In 2004, Defendant hired Plaintiff to sell products in "North, Central, and South America." The contract between the parties provided that Plaintiff would be owed commissions on certain sales, the amount of which varied during the life of the contract. SAC ¶ 8a-8d. Plaintiff argues that Defendant breached the contract in December 2012 by selling products within Plaintiff's territory for which Plaintiff was entitled to commission, and failing to report those sales to Plaintiff or pay said commissions owed. SAC ¶ 12. Plaintiff contends that Defendant had a contractual obligation to disclose these sales to Plaintiff. SAC ¶ 29.

Plaintiff's fraudulent concealment claim is based on communication between Plaintiff and a Forstar employee, Lily Cai, who represented herself to be the Manager of Forstar's International Sales Department, SAC ¶ 30.1. On December 11, 2012, Ms. Cai sent a spreadsheet to Plaintiff via email which Plaintiff contends "misrepresented commissionable orders" to several companies, including Konnect RF, Tektronix, and Radio Frequency Systems, SAC ¶¶ 30.2-30.5. Plaintiff contends that Ms. Cai "knew of and intentionally concealed" information regarding the sales Defendant made to Konnect RF, SAC ¶ 30.2, Tektronix, SAC ¶¶ 30.3-30.4, and Radio Frequency Systems. SAC ¶ 30.5. Further, Plaintiff contends that Defendant had made sales to additional companies, including Fluke Electronics, Volex Interconnect, and CommScope, which were not reported in this December 11 spreadsheet. SAC ¶¶ 30.6-30.8. Finally, Defendant contends that "Forstar intended to defraud and deceive Senah by intentionally concealing said facts." SAC ¶ 32.

II. LEGAL STANDARD

A complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a). A plaintiff must therefore "plead enough facts to state a claim for relief that is plausible on its face, " Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007), which requires a plaintiff to plead "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). Any complaint that fails to meet these requirements may be dismissed pursuant to Rule 12(b)(6).

A cause of action for fraud is subject to the heightened pleading requirements of Rule 9(b). A party alleging fraud "must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). Fraud claims must be "accompanied by the who, what, when, where, and how of the misconduct alleged." Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997).

III. DISCUSSION

Under California law, a cause of action for fraudulent concealment has five elements:

(1) [T]he defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.

Bank of Am. Corp. v. Superior Court, 198 Cal.App.4th 862, 870 (2011).

Defendant argues that Plaintiff has failed to adequately plead (1) that Ms. Cai had the authority to speak on behalf of Forstar; (2) that Ms. Cai intentionally concealed any unreported sales; and (3) that any concealment by Ms. Cai was done with the specific intent to defraud Plaintiff. See Def.'s Mot. at 7-11. Defendant contends that Plaintiff is attempting to turn a straight-forward breach of contract claim into a fraud claim in order to seek exemplary damages, see id. at 10, 11-12, and ...


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