United States District Court, N.D. California
AMENDED ORDER GRANTING MOTIONS TO DISMISS; ORDER
DENYING MOTION FOR BOND 
PHYLLIS J. HAMILTON United States District Judge.
motions of defendants Carol Realini (“Realini”),
Rodney Robinson (“Robinson”), Christopher Martin
(“Martin”), and Ultralight FS, Inc. f/k/a Obopay,
Inc. (“Obopay/Ultralight”), and defendants Omney,
Inc. (“Omney”) and Accelerated Commerce
Solutions, Inc. (“ACS”) to dismiss the complaint
for failure to state a claim, pursuant to Federal Rule of
Civil Procedure 12(b)(6), came on for hearing on January 25,
2017. Also before the court was the motion of defendants
Realini, Robinson, and Martin for an order pursuant to Civil
L.R. 65.1-1 and California Code of Civil Procedure §
1030, requiring plaintiffs to post a bond to secure any award
of costs and attorney's fees.
appeared by their counsel Peter Fredman. Defendants Realini,
Robinson, Martin, and Obopay/Ultralight appeared by their
counsel Lee Marshall, Alexandra Whitworth, and Mary Buchanan;
and defendants Omney and ACS appeared by their counsel
Christopher Karagheuzoff, and Patricia Welch. Having read the
parties' papers and carefully considered their arguments
and the relevant legal authority, the court hereby GRANTS the
motions to dismiss and DENIES the motion for bond, as follows
and for the reasons stated at the hearing.
complaint in this action was filed on March 25, 2015.
Plaintiffs are MH Pillars Ltd., d/b/a Payza, a United Kingdom
corporation, and MH Pillars Inc., a New York corporation.
Cplt ¶ 6. Plaintiffs allegedly operate "Payza,
" which is "an internet payment business similar to
Paypal." Cplt ¶ 18. Defendants are three individuals
- Realini, Robinson, and Martin, all of whom allegedly reside
in California; two Delaware corporations - Obopay/Ultralight
and Omney; and one California corporation - ACS. Cplt
which was based in Silicon Valley, also operated a business
similar to PayPal, which was focused on mobile payments and
banking, with a substantial business and presence in India.
Cplt ¶ 19. Plaintiffs assert that by 2012, most of
Obopay/Ultralight's customers were overseas, and its U.S.
business operations "consisted solely of
'renting' its purported U.S. state money transmitter
license rights to non-licensed payment processing businesses
through agency agreements. Cplt ¶ 3. Payza was allegedly
one of Obopay/Ultralight's customers. Cplt ¶ 3.
April 1, 2012, MH Pillars Inc. entered into an "Agent
Agreement" with Obopay/ Ultralight, and at that point
began operating in the United States. See Cplt ¶¶
19-20 & Exh. A. Martin - Obopay's "EVP" and
“Compliance Officer” - allegedly negotiated and
executed the Agent Agreement on behalf of Obopay/Ultralight.
Cplt ¶ 22; Exh. A at 11.
the Agent Agreement, Obopay/Ultralight agreed to provide
money transmission services to plaintiffs in the states where
Obopay/Ultralight maintained money transmitter licenses (or
"MTLs"). Cplt ¶ 21. MH Pillars Inc. agreed to
pay Obopay/Ultralight a $100, 000 fee and $6, 500/mo. (with
increased fees after the first year) for the rights to
conduct electronic money transfers as its agent pursuant to
Obopay/ Ultralight's MTLs for a three-year term. Cplt
allege that shortly after MH Pillars Inc. entered into the
Agent Agreement, they learned that Obopay/Ultralight was in
financial distress (which Obopay/Ultralight had previously
failed to disclose). Cplt ¶ 23. They assert that
Obopay/Ultralight was in the process of "selling itself
or its assets, " that its U.S. operations would be
"abandoned" during any resulting restructuring, and
that its MTL business was facing serious compliance problems.
Cplt ¶ 23. They claim that Obopay/Ultralight personnel
including Martin "knew or should have known these to be
the true facts at the inception of the Agent Agreement"
in April 2012 - i.e., that Obopay/Ultralight was
having financial problems and "was seeking to sell
itself." Cplt ¶ 23.
plaintiffs assert, it was not until May 2012 that they first
became aware that Obopay/Ultralight was for sale, when Martin
approached them as potential buyers of the company. Cplt
¶ 24. They contend that they were "an obvious
target" as they now relied on the Agent Agreement to
operate their U.S. business. Cplt ¶ 24. Shortly
thereafter, they assert, Obopay/Ultralight "and/or its
shareholders" began a transaction to sell
Obopay/Ultralight or its assets to an overseas buyer that
intended to abandon the U.S. operations and MTLs. Cplt ¶
25. The sale was allegedly completed effective November 11,
2012. Cplt ¶ 27.
claim that Robinson subsequently approached them with an
offer to sell them the MTLs and to continue the U.S.
operations. Cplt ¶ 28. Robinson allegedly stated that
the new foreign owner of Obopay/Ultralight would transfer the
MTLs to them, in exchange for an assumption of up to $500K
worth of U.S. liabilities, and allegedly represented that
"he could deliver the deal to plaintiffs in exchange for
a brokerage fee to his new ACS entity." Cplt ¶ 28.
After allegedly obtaining plaintiffs' agreement in
principle, Robinson arranged for his attorney to put the deal
together. Cplt ¶ 29. Plaintiffs claim that
Robinson's proposal was that defendant ACS would purchase
Obopay/Ultralight - stripped of its technology and
intellectual property - and would resell it to plaintiffs,
who would thereby acquire the MTLs by merger with what
remained of the Obopay/Ultralight entity. Cplt ¶ 31.
series of events followed, which appear to have been caused
by or related to the fact that existing Obopay/Ultralight
MTLs were out of compliance with state regulators, or were
"in serious jeopardy" - notably events involving
negotiations concerning the attempt to bring the MTLs into
compliance with the various state regulators. Cplt
January 31, 2013, the parties executed agreements that
Realini and her attorney had allegedly prepared - (a) a
"Stock Purchase Agreement" ("Stock
Agreement") whereby MH Pillars Ltd. purchased 9% of the
stock in Obopay/Ultralight for $1.25 million, and pursuant to
which Realini and Obopay/Ultralight allegedly warranted that
Obopay/Ultralight had good MTLs and the power to transfer
them, see Cplt Exh. B; and (b) an "Option
Agreement, " between MH Pillars Ltd., Obopay, and
Realini, whereby MH Pillars Ltd. paid $400, 000 for the
option to purchase the remaining 91% of Obopay/ Ultralight
for a nominal sum; and pursuant to which Realini and
Obopay/Ultralight allegedly warranted that Obopay/Ultralight
had good MTLs and the power to transfer them, see
Cplt Exh. C.
assert that the Stock Agreement was executed by Realini on
behalf of Obopay/Ultralight, and that the Option Agreement
was executed by Realini on behalf of herself and
Obopay/Ultralight. See Cplt ¶ 39(a), (b) & Exhs. B
and C. Plaintiffs assert that "other transactional
documents" included an employment agreement between
Realini and Obopay/Ultralight, executed by Robinson as CFO
for Obopay/Ultralight; an indemnity agreement between
Obopay/Ultralight and Realini executed by Robinson as CFO for
Obopay/Ultralight; and an indemnity agreement between
Obopay/Ultralight and Robinson executed by Realini as CEO for
Obopay/Ultralight. Cplt ¶ 39(c).
January 31, 2013, as part of this transaction,
“plaintiffs” paid $1.65 million to
Obopay/Ultralight and $276, 088 to ACS (which money allegedly
went to Robinson and Realini). Cplt ¶¶ 40-41. In
addition, in March 2013, Obopay/Ultralight allegedly
requested that "plaintiffs" transfer some $4.1
million to its control for "MTL compliance purposes,
" which plaintiffs claim they did in April 2013. Cplt
assert that approximately two months later, in June 2013,
Obopay/ Ultralight and Realini sent plaintiffs a letter
purporting to rescind the Option Agreement and terminate the
Agent Agreement. Cplt ¶ 47 & Exh. D. As a result,
plaintiffs allege, they could no longer maintain their U.S.
operations. Cplt ¶ 48. Plaintiffs allege that defendants
never tendered nor offered to tender the $400K consideration
paid for the Option Agreement, or the $4.1 million that
plaintiffs paid in early 2013. Cplt ¶¶ 49-50.
Plaintiffs now claim that defendants owe them $4.5 million
directly, and that defendants owe plaintiffs' customers
some additional amount. See, e.g., Cplt
allege six causes of action in the complaint - (1) breach of
fiduciary duty (against Realini, Robinson, Martin, and ACS);
(2) negligence (against all defendants); (3) breach of
contract (against Realini, and Obopay/Ultralight; (4) fraud
and deceit (against all defendants); (5) rescission and
restitution (against all defendants); (6) infair competition
under Business & Professions Code § 17200 (against
Motions to Dismiss
motion to dismiss is proper under Federal Rule of Civil
Procedure 12(b)(6) where the pleadings fail to state a claim
upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The
court must “accept factual allegations in the complaint
as true and construe the pleadings in the light most
favorable to the nonmoving party, ” Manzarek v. St.
Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031
(9th Cir. 2008), drawing all “reasonable
inferences” from those facts in the nonmoving
party's favor, Knievel v. ESPN, 393 F.3d 1068,
1080 (9th Cir. 2005).
complaint may be dismissed if it does not allege
“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 pleaded factual content 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). However, “a
complaint [does not] suffice if it tenders naked assertions
devoid of further factual enhancement.” Id.
(quotation marks and brackets omitted). The court need not
“assume the truth of legal conclusions merely because
they are cast in the form of factual allegations.”
W. Mining Council v. Watt, 643 F.2d 618, 624 (9th
Motion by defendants Realini, Robinson, Martin, and
Realini, Robinson, Martin, and Obopay/Ultralight seek an
order dismissing all six causes of action alleged in the
complaint. Defendants Omney and ACS filed a joinder in the
motion, but provided no separate argument.
initial matter, as explained at the hearing, the court finds
the complaint largely incomprehensible, in part because
plaintiffs fail to specify which defendant is alleged to have
engaged in which behavior with regard to which plaintiff. It
is not the court's job or defendants' job to match up
the facts with each cause of action and each plaintiff and
each defendant. In addition, the court finds that each of the
six causes of action fails to state a claim.
Breach of fiduciary duty
elements of a cause of action for breach of fiduciary duty
are (1) existence of a fiduciary duty; (2) breach of the
fiduciary duty; and (3) damage proximately caused by the
breach. Stanley v. Richmond, 35 Cal.App.4th 1070,
1086 (1995). There must be an adequate showing of each of
these elements in order to plead a cause of action for breach
of fiduciary duty. See Yamauchi v. Cotterman, 84
F.Supp.3d 993, 1016 (N.D. Cal. 2015); City of Atascadero
v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 68
Cal.App.4th 445 (1998)). Plaintiffs bring this claim against
Realini, Robinson, Martin, and ACS.
allege that Realini, Robinson, Martin, and ACS "owed
fiduciary duties with respect to these matters to act with
the highest degree of honesty and loyalty toward [plaintiffs]
and in their best interests, ” on the basis that
officers and controlling shareholders owe fiduciary duties to
other stockholders, that joint venture partners owe fiduciary
duties to each other, and that agents generally owe fiduciary
duties to their principals. See Cplt ¶ 54.
Plaintiffs allege that "[d]efendants breached these
fiduciary duties" and that plaintiffs were injured and
suffered damages as a result. Cplt ¶¶ 55, 56.
motion to dismiss the claim of breach of fiduciary duty is
GRANTED. The complaint is impermissibly vague in its generic
allegations against all “defendants, ” and does
not plead facts showing that any particular defendant was a
fiduciary to either plaintiff or showing a specific basis for
such fiduciary relationship. More importantly, the complaint
does not identify a fiduciary duty that was owed by any
particular defendant to any particular plaintiff, or plead
facts showing the breach of any such fiduciary duty.
dismissal is WITH LEAVE TO AMEND to allege facts sufficient
to state a plausible claim as to each of the defendants named
in this cause of action - Realini, Robinson, Martin, and ACS.
Plaintiffs must also plead particular facts showing which
defendant owed a fiduciary duty to which plaintiff, and under
which theory, and must also allege facts showing breach by a
particular defendant and facts showing resulting damage.
elements of a cause of action for negligence under California
law are (1) duty; (2) breach; (3) causation; and (4) damages.
Wells Fargo Bank, N.A. v. Renz, 795 F.Supp.2d 898,
924-25 (N.D. Cal. 2011). Plaintiffs bring this claim against
allege that "[d]efendants owed duties of care to
plaintiffs and the public at large to competently maintain
Obopay's MTL rights and not unlawfully rent or sell MTL
rights or compliance services that they had no legal
authority or practical capability to deliver or
provide." Cplt ¶ 59. They allege that this
"tort duty" is imposed by law on "all
California MTL licensees (or would-be licensees) in order to
implement the fundamental public policies embodied in the
state regulatory scheme pertaining to MTL licensing, and is
independent of the parallel duties imposed on defendants
under the contracts alleged herein." Cplt ¶ 59.
Additionally, plaintiffs assert, "defendants owed
plaintiffs duties of care under conventional
Biankanja analysis. Cplt ¶ 59 (citing
Biankanja v. Irving, 49 Cal. 2d 647, 650 (1958)).
Plaintiffs allege further that "[d]efendants breached
these duties of care" and that "[p]laintiffs were
harmed as a result of the breach . . . ." Cplt
assert further that "[e]ach corporate defendant is
liable for punitive damages for the acts of its agents
because each (a) had advance knowledge of their unfitness,
(b) authorized their wrongful conduct beforehand, and/or (c)
ratified their wrongful conduct afterwards, as shall be
proven at trial. Cplt ¶ 62.
motion to dismiss the cause of action for negligence is
GRANTED. Plaintiffs have not identified the existence of a
legal duty - an essential element of a cause of action for
negligence. Whether this prerequisite has been satisfied in a
particular case is a question of law to be resolved by the
court. Avila v. Citrus Cmty. Coll. Dist., 38 Cal.4th
148, 161 (2006). As a general rule, persons have a duty to
use due care to avoid injury to others, and may be held
liable if their careless conduct injures another person.
See Rowland v. Christian¸69 Cal. 2d 108, 113
(1968); Cal. Civ. Code § 1714. A duty of care may arise
through statute, contract, the general character of the
activity, or the relationship between the parties. The
Ratcliff Architects v. Vanir Constr. Mgmt., Inc., 88
Cal.App.4th 595, 604-05 (2001) (citing J'Aire Corp.
v. Gregory, 24 Cal.3d 799, 803 (1979)).
plaintiffs have alleged no facts showing that any defendant
owed a legal duty of care to any plaintiff, or that any
defendant breached any legal duty of care owed to any
plaintiff. Moreover, the assertion that the duty allegedly
owed to "the public at large" is "independent
of the parallel duties imposed on ...