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Tervon, LLC v. Jani-King of California, Inc.

United States District Court, S.D. California

July 6, 2015

TERVON, LLC, a California limited liability company, SUNYATA K. LITTLE and ELEANOR E. LITTLE, individuals; and MARIO GUTIERREZ, an individual, Plaintiff,
v.
JANI-KING OF CALIFORNIA, INC., a Texas corporation, JANI-KING INTERNATIONAL, INC., a Texas corporation; and DOES 1-100, inclusive, Defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS [ECF 8]

CYNTHIA BASHANT, District Judge.

On January 15, 2014, Plaintiffs Tervon, LLC, Sunyata K. Little, Eleanor E. Little (together "Little"), and Mario Gutierrez commenced this action arising from Plaintiffs' franchisee-franchisor relationship with defendant Jani-King of California, Inc. ("Jani-King") and its parent company Jani-King International, Inc. (collectively "Defendants") in the San Diego Superior Court. Thereafter, Defendants removed this action to federal court. ECF 1. Defendants now move to dismiss the complaint under Federal Rules of Civil Procedure 9(b) and 12(b)(6). ECF 8. Plaintiffs opposed and Defendants replied. ECFs 9, 10.

The Court finds this motion suitable for determination on the papers submitted and without oral argument. See Civ. L.R. 7.1(d.1). For the following reasons, the Court GRANTS IN PART and DENIES IN PART Defendants' motion to dismiss. ECF 8.

I. BACKGROUND[1]

Little, Gutierrez, and Tervon, LLC entered into franchisee contracts with Jani-King in October 2008, November 2008, and October 2010 respectively. Compl. ¶ 15. In March 2011, Jani-King submitted a bid to the City of San Diego for janitorial/cleaning services of Qualcomm Stadium. Compl. ¶ 16. The City's Request for Proposal stated "the typical number of eight (8) hour work shifts following a major event is approximately two and one half (2 ½) to three (3) days but may vary depending on type of event and event scheduling." Compl. ¶ 17. Jani-King's bid quoted $0 for a third day of cleaning as well as $0 for cleaning the parking lot, outside concrete areas, stairs, escalators, elevators, and end zones. Compl. ¶¶ 18-19. A City of San Diego representative contacted Jani-King to inform them that they had failed to include estimates for those costs and as a result, their bid was significantly lower than the other bids. Compl. ¶ 20. Randall Frazine, President of the San Diego Jani-King office, confirmed this was Jani-King's accurate bid. Compl. ¶ 21. Jani-King was awarded the Qualcomm contract in March or April 2011. Compl. ¶ 25.

On June 22, 2012, Jani-King's representative Paul Johnson met with Sotero Enriquez, principal of Tervon, LLC, Salvador Gutierrez on behalf of Gutierrez, and either Sunyata or Eleanor Little to discuss Plaintiffs taking the Qualcomm account. Compl. ¶¶ 26-27. At this meeting Mr. Johnson presented two spreadsheets showing that each franchise owner should expect $3, 261.49 profit for each Charger game and $1, 178.02 profit for each Aztec game. Compl. ¶ 28. Mr. Johnson also verbally confirmed these numbers were accurate. Id. He presented Plaintiffs with a "Labor Hour Summary" listing expected hours for each task. Compl. ¶ 29. The Summary included hours for a third day of cleaning and tasks for which Jani-King bid $0. Compl. ¶¶ 29.

Plaintiffs claim they relied on Mr. Johnson's presentation and statements when they agreed to the Qualcomm contracts, and after the first four events had all incurred significant financial losses. Compl. ¶¶ 30, 34. In August 2012, Plaintiffs spoke to Mr. Johnson regarding their losses, and Mr. Johnson again confirmed the numbers to be correct. Compl. ¶ 35.

On September 4, 2012, Plaintiffs met with Mr. Frazine, representing Jani-King, and Sean Ayres, Executive Director of Jani-King International, Inc., to discuss solutions to Plaintiffs' losses. Compl. ¶ 37. When asked about the numbers on the spreadsheets Mr. Johnson provided, Mr. Frazine told the Plaintiffs that "the numbers... were all wrong and the Plaintiffs should just throw the [spreadsheets] away." Compl. ¶ 38.

Plaintiffs incurred significant losses from the Qualcomm contract, which made it difficult to pay their employees and harmed their work relations. Compl. ¶ 42. They had to take out advances from Jani-King to keep paying employees, which caused stress. Compl. ¶ 43.

Gutierrez and Tervon, LLC released their portions of the contract on September 24, 2012 and November 15, 2012 respectively, leaving Little as the sole franchisee until the end of the season on February 2013. Compl. ¶¶ 41, 44.

On January 15, 2014, Plaintiffs commenced this action against Defendants in the San Diego Superior Court. Thereafter, Defendants removed this action to this Court claiming: (1) fraud by intentional misrepresentation in violation of Civil Code §§ 1709, 1710; (2) fraud by concealment in violation of Civil Code §§ 1709, 1710; (3) negligent misrepresentation in violation of Civil Code §§ 1709, 1710; (4) breach of contract (franchisee agreement); (5) breach of contract (lease agreement); (6) breach of the implied covenant of good faith and fair dealing; (7) violation the California Unfair Competition Law ("UCL", Cal. Bus. & Prof. Code §§ 17200, et seq. ); (8) intentional infliction of emotional distress; and (9) declaratory relief. Defendants now move to dismiss Plaintiffs' Complaint in its entirety under Rules 9(b) and 12(b)(6). Plaintiffs opposed and Defendants replied.

II. LEGAL STANDARD

A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed.R.Civ.P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court must accept all factual allegations pleaded in the complaint as true and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations, rather, it must plead "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). 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." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). "Where a complaint pleads facts that are merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557).

"[A] plaintiff's obligation to provide the grounds' of his entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)) (alteration in original). A court need not accept "legal conclusions" as true. Iqbal, 556 U.S. at 678. Despite the deference the court must pay to the plaintiff's allegations, it is not proper for the court to assume that "the [plaintiff] can prove facts that [he or she] has not alleged or that defendants have violated the... laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).

Generally, courts may not consider material outside the complaint when ruling on a motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). However, documents specifically identified in the complaint whose authenticity is not questioned by parties may also be considered. Fecht v. Price Co., 70 F.3d 1078, 1080 n.1 (9th Cir. 1995) (superseded by statutes on other grounds). Moreover, the court may consider the full text of those documents, even when the complaint quotes only selected portions. Id. It may also consider material properly subject to judicial notice without converting the motion into one for summary judgment. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994).

As a general rule, a court freely grants leave to amend a complaint which has been dismissed. Fed.R.Civ.P. 15(a). However, leave to amend may be denied when "the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency." Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986).

III. DISCUSSION

A. Breach of Contract

Under California law, there are four elements to a breach of contract: "(1) the existence of a contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff." Oasis West Realty, LLC v. Goldman, 51 Cal.4th 811, 821 (2011).

Defendants argue that Plaintiffs fail to plead how Jani-King's alleged conduct breached the franchisee contracts. Defs.' Mot. 5:24-25. In their Complaint, Plaintiffs allege Jani-King ...


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