United States District Court, C.D. California
HERRING NETWORKS, INC.
AT&T SERVICES, INC., ET AL.
Present: The Honorable CHRISTINA A. SNYDER
(IN CHAMBERS) - DEFENDANT AT&T SERVICES,
INC.’S MOTION TO DISMISS PLAINTIFF’S COMPLAINT
FOR FAILURE TO STATE A CLAIM (DKT. 14, FILED APRIL 25, 2016)
DEFENDANT AT&T INC.’S MOTION TO DISMISS
PLAINTIFF’S COMPLAINT FOR LACK OF PERSONAL JURISDICTION
(DKT. 16, FILED APRIL 25, 2016)
Honorable CHRISTINA A. SNYDER
March 9, 2016, plaintiff Herring Networks, Inc.
(“Herring”) intiated this action against
defendants AT&T Services, Inc. (“AT&T
Services”) and AT&T, Inc. (collectively,
“defendants”). Dkt. 1. Plaintiff asserts claims
against defendants for: (1) fraud by concealment; (2)
intentional misrepresentation; (3) negligent
misrepresentation; (4) breach of the implied covenant of good
faith and fair dealing; (5) promissory estoppel; (6) breach
of oral contract; and (7) breach of implied in fact contract.
April 25, 2016, defendant AT&T Services filed a motion to
dismiss for failure to state a claim upon which relief can be
granted, Dkt. 14, and defendant AT&T, Inc. filed a motion
to dismiss for lack of personal jurisdiction, Dkt.
On May 23, 2016, plaintiff filed oppositions to both of these
motions, Dkt. 32, 33, and on June 13, 2016, defendants filed
replies in support of their respective motions, Dkt. 37, 38.
Having carefully considered the parties’ arguments, the
Court finds and concludes as follows.
complaint alleges the following facts: Herring is an
independent, family-owned television programming company that
owns and operates two television networks--a lifestyle
entertainment channel called A Wealth of Entertainment
(“AWE”) and a news channel called One America
News Network (“OAN”). Compl. ¶¶ 16-19.
Herring is a California Corporation with its principal place
of business in San Diego, California. Id. ¶ 8.
Defendants AT&T, Inc. and AT&T Services are Delaware
corporations with their principal places of business in
Dallas, Texas. Id. ¶ 9. AT&T, Inc. is the
parent company of AT&T Services. Id. ¶ 10.
Collectively, defendants are the second largest provider of
mobile telephone services and the largest provider of fixed
wireline telephone services in the United States.
Id. ¶ 20. Defendants also provide broadband
internet and subscription television services. Id.
In June 2006, defendants launched AT&T U-verse
(“U-verse”), a multi-channel television
distribution service. Id. ¶ 21. From its
launch, defendants included AWE as one of the channels on the
U-verse platform. Id. ¶ 23. Several years
thereafter, defendants also began including OAN on the
U-verse platform. Id. ¶ 25.
of television networks, such as Herring, generate revenue
through carriage (i.e. distribution) agreements with
defendants. Id. Defendants’ customers, or
subscribers, would pay a fee to obtain access to a variety of
networks available on the U-verse platform. Id. In
turn, defendants would pay the network owners an agreed upon
licensing fee to distribute their content. Id. In
early 2014, Herring and defendants entered into a renewed
licensing agreement (the “U-verse Agreement”).
Id. ¶ 26. Pursuant to the U-verse Agreement,
defendants agreed to carry both AWE and OAN for a customary
five-year period with one-year renewals and to pay Herring a
monthly licensing fee of $0.18 per subscriber. Id.
to Herring, when the parties negotiated the U-verse
Agreement, defendants led Herring to believe that they were
committed to expanding their U-verse platform and increasing
its subscriber base. Id. ¶ 27. Nonetheless,
Herring contends that AT&T’s true intention was to
wind down U-verse, acquire a competitor, DirecTV, and move
subscribers from the U-verse platform to DirecTV’s
platform. Id. ¶ 29. Herring alleges that
defendants deliberately withheld this information from
Herring. Id. In particular, Herring alleges that
Ryan Smith, Vice President of Content at AT&T Services,
made the following representations to Charles Herring, the
President of Herring: (1) defendants expected U-verse to
challenge and surpass its competitor Time Warner Cable
(“TWC”)-at the time U-verse had less than half as
many subscribers as TWC (approximately 5.3 million for
U-verse compared to 11.4 million for TWC); (2) defendants
were continuing U-verse’s expansion to additional
markets and capturing a larger market share in the markets
where U-verse had already launched; and (3) defendants had
ambitious expansion plans. Id. ¶ 28. Herring
further alleges that these representations were consistent
with defendants’ public statements regarding their
intention to grow U-verse. Id. ¶ 33. For
example, in one of their Annual Reports, defendants stated:
As part of Project Velocity IP (VIP), we [AT&T] plan to
expand our IP-broadband service to approximately 57 million
customer locations, including U-verse services to a total of
33 million customer locations. We expect to be substantially
complete in the 2015 and 2016 timeframe.
Id. Finally, Herring alleges that defendants
misrepresented their plans to grow U-verse in public filings
by AT&T, Inc.’s top executives, which Herring
relied on. Id. ¶¶ 90, 97.
early draft of the U-verse agreement, there was a clause that
would have required defendants to carry Herring’s
networks on any subsequently-acquired platforms. Id.
¶ 31. However, towards the end of the parties’
negotiations, new language was inserted into the U-verse
agreement, which stated:
For the avoidance of doubt, nothing herein shall obligate
AT&T to launch and carry the Services on any System that
AT&T acquires during the Term if such System is not
already distributing or obligated to distribute the Services.
Dkt. 17, Smith Decl, Ex. A, “U-verse Agreement”
¶ 4.B. Herring contends that this language effectively
excused AT&T from any obligation to carry Herring’s
networks on newly-acquired platforms, such as the DirecTV
platform. Compl. ¶ 31.
after the U-verse Agreement was finalized, defendants
announced their plans to acquire DirectTV. Id.
¶ 46. In order for defendants to acquire DirecTV they
needed to obtain regulatory approval from the Federal
Communications Commission (“FCC”). Id.
¶ 48. According to Herring, the FCC has a Congressional
mandate to foster a diverse, robust, and competitive
marketplace for video programming, which includes ensuring
fair and equal treatment for independent programmers.
Id. ¶ 50. Thus, in order to obtain the
necessary governmental approvals, defendants needed support
and lobbying from independent programmers, such as Herring.
Id. To this end, shortly after announcing the
planned acquisition of DirecTV, executives from Herring and
defendants met at AT&T Services’ Los Angeles
offices. Id. ¶ 55. At this meeting, Aaron
Slator, the president of AT&T Services, made the
following proposal: If Herring publicly supported defendants
throughout its acquisition of DirecTV, including by lobbying
the FCC, defendants would ensure that DirecTV carried
Herring’s networks on its platform. Id. ¶
56. Slator said that the terms of carriage on DirecTV’s
platform would be similar to the U-verse Agreement and that
this new agreement would be reduced to writing after the
acquisition of DirecTV was completed. Id. ¶ 57.
He also stated that the new agreement would be for a
customary five year term, with automatic one-year
renewals-i.e., identical to the U-verse Agreement.
Id. Finally, Slator informed Herring’s
executives that while DirecTV would need to pay Herring less
than the $0.18 per subscriber set forth in the U-verse
Agreement, carriage on DirecTV’s platform would still
be very lucrative for Herring. Id. ¶ 59. Slator
told Herring’s executives that he had been authorized
to make this proposal by his superiors at AT&T, Inc.
Id. ¶¶ 55, 58. Herring agreed to this
proposal and, thereafter, began advocating on
defendants’ behalf and in favor of the DirecTV
acquisition. Id. ¶¶ 60, 66-69. On July 24,
2015, AT&T’s acquisition of DirecTV was approved by
the FCC and the AT&T/DirecTV merger was consumated.
Id. ¶ 76. Nonetheless, defendants have not made
either of Herring’s networks available on the DirecTV
platform. Id. ¶ 36.
addition, Herring contends that, since acquiring DirecTV,
defendants have aggressively solicited U-verse subscribers to
move to DirecTV. Id. ¶ 35. AT&T has also
publicly announced that it plans to make DirecTV its
television service and wind down U-verse. Id. ¶
37. Defendants’ efforts to phase out U-verse have been
successful. Since the acquisition of DirecTV, U-verse has
lost approximately 325, 000 subscribers, while DirecTV has
gained more than 200, 000 during the same time. Id.
As noted above, under the U-verse Agreement, Herring’s
licensing fee is based on the number of U-verse subscribers.
Accordingly, Herring contends that, by shifting subscribers
from U-verse to DirecTV, defendants are undermining
Herring’s bargained-for benefit under the U-verse
Agreement. Id. ¶ 36-39.
Motion to Dismiss for Lack of Personal Jurisdiction
defendant moves to dismiss for lack of personal jurisdiction
under Federal Rule of Civil Procedure 12(b)(2), the plaintiff
bears the burden of demonstrating that the court may properly
exercise personal jurisdiction over the defendant. Pebble
Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006).
Where, as here, a court decides such a motion without an
evidentiary hearing, the plaintiff need only make a prima
facie showing of jurisdictional facts to withstand the motion
to dismiss. Ballard v. Savage, 65 F.3d 1495, 1498
(9th Cir. 1995); Doe v. Unocal Corp., 27 F.Supp.2d
1174, 1181 (C.D. Cal. 1998), aff’d, 248 F.3d
915 (9th Cir. 2001). Plaintiff’s version of the facts
is taken as true for purposes of the motion if not directly
controverted, and conflicts between the parties’
affidavits must be resolved in plaintiff’s favor for
purposes of deciding whether a prima facie case for personal
jurisdiction exists. AT & T v. Compagnie Bruxelles
Lambert, 94 F.3d 586, 588 (9th Cir. 1996);
Unocal, 27 F.Supp.2d at 1181. If the defendant
submits evidence controverting the allegations, however, the
plaintiff may not rely on its pleadings, but must “come
forward with facts, by affidavit or otherwise, supporting
personal jurisdiction.” Scott v. Breeland, 792
F.2d 925, 927 (9th Cir.1986) (quoting Amba Mktg. Servs.,
Inc. v. Jobar Int’l, Inc., 551 F.2d 784, 787 (9th
personal jurisdiction exists if (1) it is permitted by the
forum state’s long-arm statute and (2) the
“exercise of that jurisdiction does not violate federal
due process.” Pebble Beach, 453 F.3d at
1154-55 (citing Fireman’s Fund Ins. Co. v.
Nat’l Bank of Coops., 103 F.3d 888, 893 (9th Cir.
1996). California’s long-arm jurisdictional statute is
coextensive with federal due process requirements, so that
the jurisdictional analysis under state and federal law are
the same. Cal. Civ. Proc. Code § 410.10; Roth v.
Garcia Marquez, 942 F.2d 617, 620 (9th Cir. 1991). The
Fourteenth Amendment’s Due Process Clause requires that
a defendant have “minimum contacts” with the
forum state so that the exercise of jurisdiction “does
not offend traditional notions of fair play and substantial
justice.” Int’l Shoe Co. v. Washington,
326 U.S. 310, 316 (1945). Depending on the nature of the
contacts between the defendant and the forum state, personal
jurisdiction is characterized as either general or specific.
has general jurisdiction over a nonresident defendant when
that defendant’s activities within the forum state are
“substantial” or “continuous and
systematic, ” even if the cause of action is
“unrelated to the defendant’s forum
activities.” Perkins v. Benguet Consol. Mining
Co., 342 U.S. 437, 446-47 (1952); Data Disc, Inc. v.
Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1287 (9th Cir.
1977). The standard for establishing general jurisdiction is
“fairly high” and requires that the
defendant’s contacts be substantial enough to
approximate physical presence. Bancroft & Masters,
Inc. v. Augusta Nat’l Inc., 223 F.3d 1082, 1086
(9th Cir. 2000). “Factors to be taken into
consideration are whether the defendant makes sales, solicits
or engages in business in the state, serves the state’s
markets, designates an agent for service of process, holds a
license, or is incorporated there.” Id.
(finding no general jurisdiction when the corporation was not
registered or licensed to do business in California, paid no
taxes, maintained no bank accounts, and targeted no
advertising toward California).
may assert specific jurisdiction over a claim for relief that
arises out of a defendant’s forum-related activities.
Rano v. Sipa Press, Inc., 987 F.2d 580, 588 (9th
Cir. 1993). The test for specific personal jurisdiction has
(1) The non-resident defendant must purposefully direct his
activities or consummate some transaction with the forum or
resident thereof; or perform some act by which he
purposefully avails himself of the privilege of conducting
activities in the forum, thereby invoking the benefits and
protections of its laws;
(2) the claim must be one which arises out of or relates to
the defendant's forum-related activities; and
(3) the exercise of jurisdiction must comport with fair play
and substantial justice, i.e., it must be reasonable.
Schwarzenegger v. Fred Martin Motor Co., 374 F.3d
797, 802 (9th Cir. 2004) (citing Lake v. Lake, 817
F.2d 1416, 1421 (9th Cir. 1987)); see also Burger King
Corp. v. Rudzewicz, 471 U.S. 462, 475-76 (1985). The
plaintiff bears the burden of satisfying the first two
prongs, and must do so to establish specific jurisdiction.
Schwarzenegger, 374 F.3d at 802.
plaintiff establishes the first two prongs, then it is the
defendant’s burden to “present a compelling
case” that the third prong, reasonableness, has not
been satisfied. Schwarzenegger, 374 F.3d at 802
(quoting Burger King, 471 U.S. at 477). The third
prong requires the Court to balance seven factors: (1) the
“extent of the defendant’s purposeful injection
into the forum”; (2) the burdens on defendant from
litigating in the forum state; (3) the “extent of
conflict with the sovereignty of the defendant’s state,
” (4) the forum state’s “interest in
adjudicating the dispute”; (5) the “most
efficient judicial resolution of the controversy”; (6)
the “importance of the forum to the plaintiff’s
interest in convenient and effective relief”; and (7)
the existence of an alternative forum. Ziegler v. Indian
River County, 64 F.3d 470, 475 (9th Cir. 1995).
Motion to Dismiss for Failure to State a Claim
motion pursuant to Federal Rule of Civil Procedure 12(b)(6)
tests the legal sufficiency of the claims asserted in a
complaint. Under this Rule, a district court properly
dismisses a claim if “there is a ‘lack of a
cognizable legal theory or the absence of sufficient facts
alleged under a cognizable legal theory.’ ”
Conservation Force v. Salazar, 646 F.3d 1240, 1242
(9th Cir. 2011) (quoting Balisteri v. Pacifica Police
Dep’t, 901 F.2d 696, 699 (9th Cir. 1988)).
“While a complaint attacked by a Rule 12(b)(6) motion
to dismiss does not need detailed factual allegations, a
plaintiff’s obligation to provide the
‘grounds’ of his ‘entitlement to
relief’ requires more than labels and conclusions, and
a formulaic recitation of the elements of a cause of action
will not do.” Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 555 (2007). “[F]actual allegations must
be enough to raise a right to relief above the speculative
considering a motion pursuant to Rule 12(b)(6), a court must
accept as true all material allegations in the complaint, as
well as all reasonable inferences to be drawn from them.
Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998).
The complaint must be read in the light most favorable to the
nonmoving party. Sprewell v. Golden State Warriors,
266 F.3d 979, 988 (9th Cir. 2001). However, “a court
considering a motion to dismiss can choose to begin by
identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth.
While legal conclusions can provide the framework of a
complaint, they must be supported by factual
allegations.” Ashcroft v. Iqbal, 556 U.S. 662,
679 (2009); see Moss v. United States Secret
Service, 572 F.3d 962, 969 (9th Cir. 2009) (“[F]or
a complaint to survive a motion to dismiss, the
non-conclusory ‘factual content, ’ and reasonable
inferences from that content, must be plausibly suggestive of
a claim entitling the plaintiff to relief.”).
Ultimately, “[d]etermining whether a complaint states a
plausible claim for relief will . . . be a context-specific
task that requires the reviewing court to draw on its
judicial experience and common sense.” Iqbal,
556 U.S. at 679.
a court converts a Rule 12(b)(6) motion into a motion for
summary judgment, a court cannot consider material outside of
the complaint (e.g., facts presented in briefs,
affidavits, or discovery materials). In re American
Cont’l Corp./Lincoln Sav. & Loan Sec. Litig.,
102 F.3d 1524, 1537 (9th Cir. 1996), rev’d on other
grounds sub nom Lexecon, Inc. v. Milberg Weiss Bershad Hynes
& Lerach, 523 U.S. 26 (1998). A court may, however,
consider exhibits submitted with or alleged in the complaint
and matters that may be judicially noticed pursuant to
Federal Rule of Evidence 201. In re Silicon Graphics Inc.
Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999); see
Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir.
general rule, leave to amend a complaint which has been
dismissed should be freely granted. 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