United States District Court, N.D. California, San Jose Division
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANT'S MOTION TO DISMISS SECOND AMENDED COMPLAINT
RE: DKT. NO. 99
J. DAVILA United States District Judge
before the Court is NetApp, Inc.'s ("Defendant"
or "NetApp") Motion to Dismiss Integrated Storage
Consulting Services, Inc.'s ("Plaintiff" or
"ISCSI") Second Amended Complaint. The Court found
this matter suitable for decision without oral argument
pursuant to Civil Local Rule 7-1(b) and vacated the hearing.
The Court has subject matter jurisdiction pursuant to 28
U.S.C. § 1332. Having fully reviewed the parties'
briefing, and for the following reasons, the Court GRANTS IN
PART AND DENIES IN PART Defendant's Motion.
Court's orders on two previous motions to dismiss have
discussed the background of this case in some detail.
See Dkt. Nos. 29, 81. The Court therefore provides
only a summary of the relevant facts here.
NetApp, a Delaware corporation with its principal place of
business in California, manufactures and sells a range of
storage and data management equipment. Dkt. No. 94, Second
Amended Complaint ("SAC"), ¶¶s 4, 9-10.
Although Defendant does work directly with end users to
promote sales of NetApp products, Defendant typically sells
its products through resellers. Id., ¶ 11.
Plaintiff ISCSI, a Colorado corporation with its principal
place of business in Colorado, became one of these resellers
in 2004. Id., ¶¶s 3-4, 12-13. Plaintiff
and Defendant signed a series of Reseller Authorization
Agreements ("the Agreements") to capture the terms
of their arrangement. Id., ¶ 13.
the Agreements, a reseller could register new sales
opportunities through NetApp deal registration programs if
the reseller satisfied certain requirements, including
demonstrating that it would make the use of a NetApp product
central to the proposed deal. Id., ¶¶s
27-28. According to Plaintiff, once a reseller registered an
opportunity, NetApp promised to work exclusively with that
reseller in connection with that customer, including
providing special pricing. Id., ¶¶s 30-33.
Resellers often had to invest significant time and energy
into acquiring customers, and the registration system
protected them from price competition from other resellers.
Id., ¶ 36. In addition, from time to time
NetApp and a reseller would enter into an Account Teaming
Agreement that would further describe NetApp's and the
reseller's obligations for a registered opportunity.
Id., ¶ 37.
2008 to 2011, Plaintiff put substantial work into selling
NetApp products to four customers: CaridianBCT, ST Micro,
Tri-State, and Xilinx. Id., ¶ 40. Defendant
granted Plaintiff deal registrations for all four of these
customers. Id., ¶ 34. In late 2009, Plaintiff
and Defendant entered into a Teaming Agreement to provide
services to CaridianBCT (the "CaridianBCT Teaming
Agreement"), in which Defendant promised not to
jeopardize Plaintiff's "Trusted Advisor" status
for the CaridianBCT account. Id., ¶¶s
37-38. Plaintiff and Defendant entered into a similar Teaming
Agreement for Xilinx (the "Xilinx Teaming
Agreement"). Id., ¶ 39.
also alleges that Defendant's representatives repeatedly
encouraged Plaintiff to continue to sign up new customers.
Id., ¶ 54. Defendant allegedly made a number of
assurances to Plaintiff about Defendant's commitment to
Plaintiff, and these caused Plaintiff to continue its efforts
to sell NetApp products to its customers. Id.,
Defendant later granted other resellers deal registrations
for CaridianBCT and ST Micro and encouraged Tri-State and
Xilinx to work with other partners. Id.,
¶¶s 46-51, 85. For example, Defendant promised
CaridianBCT, a customer that Plaintiff had procured, that it
would get the same pricing if it chose a different reseller,
leading it to opt for Plaintiff's competitor Trace3.
Id., ¶¶s 59-60. Plaintiff alleges that
Defendant's behavior effectively terminated
Plaintiff's relationships with its customers and
destroyed Plaintiff's resale business, causing over $10
million in damages. Id., ¶¶s 51, 85. On
February 1, 2013, Defendant notified Plaintiff that it did
not plan to renew Plaintiff's Reseller Authorization
Agreement. Id., ¶ 86.
December 7, 2012, Plaintiff filed the original Complaint in
this action, alleging 11 claims for relief. Dkt. No. 1. On
July 31, 2013, the Court granted in part and denied in part
Defendant's motion to dismiss. Dkt. No. 39. Specifically,
the Court denied the motion with respect to a claim for
breach of the CaridianBCT Teaming Agreement and a claim for a
violation of California's Unfair Competition Law
("UCL"), Cal. Bus. & Prof. Code §§ 17200
et seq. Id. at 11-13, 21. The Court dismissed the
remaining nine claims, but with leave to amend. Id.
at 7-10, 13-22.
August 15, 2013, Plaintiff filed its First Amended Complaint,
which alleged 21 claims for relief. Dkt. No. 42. On July 9,
2014, the Court issued an Order Granting in Part and Denying
in Part NetApp's Motion to Dismiss ("Order on
FAC"). Dkt. No. 81. In the Order, the Court dismissed
Plaintiff's new claims, including a claim for a breach of
the Xilinx Teaming Agreement, without prejudice but without
leave to amend because Plaintiff had not first sought leave
to amend to add these claims. Id. at 9-10. The Court
dismissed without prejudice and with leave to amend four of
Plaintiff's claims: (1) fraud, (2) interference with
contractual relations regarding Xilinx, (3) intentional
interference with prospective economic relations as to all
four customers; and (4) negligent interference with
prospective economic relations as to all four customers.
Id. at 23. However, the Court denied the motion with
respect to three claims: (1) a claim for breach of the
CaridianBCT Teaming Agreement; (2) a claim for a violation of
the UCL, and (3) a claim for intentional interference with
contractual relations related to a contract between Plaintiff
and Tri-State. Id. The Order did not include a
deadline for filing an amended complaint. Id.
October 10, 2014, Plaintiff moved for leave to file a Second
Amended Complaint including all three surviving claims,
amended versions of all four claims for which the Court had
granted leave to amend, and the claim for breach of the
Xilinx Teaming Agreement. Dkt. No. 86. On December 3, 2014,
the Court issued an Order Denying Plaintiff's Motion for
Leave to Amend ("Order Denying Leave to Amend")
because Plaintiff had not shown diligence in bringing the
claim about the Xilinx Teaming Agreement sooner. Dkt. No. 92.
December 22, 2014, Plaintiff filed a Second Amended Complaint
("SAC") containing seven causes of action: (1) a
breach of the CaridianBCT Teaming Agreement; (2) fraud; (3)
intentional interference with a contract between Plaintiff
and Tri-State; (4) intentional interference with a contract
between Plaintiff and Xilinx; (5) intentional interference
with prospective economic relations as to all four customers;
(6) negligent interference with prospective economic
relations as to all four customers; and (7) violation of the
UCL. Dkt. No. 94. On January 22, 2015, Defendant filed the
instant motion to dismiss the SAC in its entirety because the
Court had denied Plaintiff's motion for leave to amend
or, in the alternative, to dismiss the second, fourth, fifth,
and sixth causes of action for failure to state a claim. Dkt.
No. 99. The Court found this matter suitable for decision
without oral argument pursuant to Civil Local Rule 7-1(b) and
vacated the hearing.
Rule of Civil Procedure 8(a) requires a plaintiff to plead
each claim with sufficient specificity to "give the
defendant fair notice of what the . . . claim is and the
grounds upon which it rests." Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (internal quotation
marks omitted). Although particular detail is not generally
necessary, the factual allegations "must be enough to
raise a right to relief above the speculative level"
such that the claim "is plausible on its face."
Id. at 556-57. A complaint which falls short of the
Rule 8(a) standard may be dismissed if it fails to state a
claim upon which relief can be granted. Fed.R.Civ.P.
12(b)(6). Dismissal of a claim under Rule 12(b)(6) may be
based on a "lack of a cognizable legal theory or the
absence of sufficient facts alleged under a cognizable legal
theory." Balistreri v. Pacifica Police
Dep't, 901 F.2d 696, 699 (9th Cir. 1990); see
Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097,
1104 (9th Cir. 2008).
motion to dismiss stage, the court must read and construe the
complaint in the light most favorable to the non-moving
party. Autotel v. Nev. Bell Tel. Co., 697 F.3d 846,
850 (9th Cir. 2012) (citation omitted). When deciding whether
to grant a motion to dismiss, the court generally "may
not consider any material beyond the pleadings." Hal
Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d
1542, 1555 n.19 (9th Cir. 1990). However, the court may
consider material submitted as part of the complaint or
relied upon in the complaint, and may also consider material
subject to judicial notice. See Lee v. City of Los
Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001).
court must accept as true all "well-pleaded factual
allegations" in the complaint. Ashcroft v.
Iqbal, 556 U.S. 662, 664 (2009). However, "courts
are not bound to accept as true a legal conclusion couched as
a factual allegation." Twombly, 550 U.S. at
555. Nor is a complaint sufficient if it merely "tenders
naked assertions devoid of further factual enhancement."
Iqbal, 556 U.S. at 678 (internal quotation marks
omitted). In other words, "to be entitled to the
presumption of truth, allegations in a complaint or
counterclaim may not simply recite the elements of a cause of
action, but must contain sufficient allegations of underlying
facts to give fair notice and to enable the opposing party to
defend itself effectively." Eclectic Props. E., LLC
v. Marcus & Millichap Co., 751 F.3d 990, 996 (9th Cir.
2014) (quoting Starr v. Baca, 652 F.3d 1202, 1216
(9th Cir. 2011)). "In all cases, evaluating a
complaint's plausibility is a
‘context-specific' endeavor that requires courts to
‘draw on . . . judicial experience and common
sense.'" Levitt v. Yelp! Inc., 765 F.3d
1123, 1135 (9th Cir. 2014) (alteration in original) (quoting
Eclectic Props. E., 751 F.3d at 996).