United States District Court, E.D. California
MEMORANDUM DECISION AND ORDER RE DEFENDANTS'
MOTION TO DISMISS (Doc. 8)
LAWRENCE J. O'NEILL UNITED STATES CHIEF DISTRICT JUDGE.
PRELIMINARY STATEMENT TO PARTIES AND COUNSEL
in the Eastern District of California carry the heaviest
caseloads in the nation, and this Court is unable to devote
inordinate time and resources to individual cases and
matters. Given the shortage of district judges and staff,
this Court addresses only the arguments, evidence, and
matters necessary to reach the decision in this order. The
parties and counsel are encouraged to contact the offices of
United States Senators Feinstein and Harris to address this
Court's inability to accommodate the parties and this
action. The parties are required to reconsider consent to
conduct all further proceedings before a Magistrate Judge,
whose schedules are far more realistic and accommodating to
parties than that of U.S. Chief District Judge Lawrence J.
O'Neill, who must prioritize criminal and older civil
trials set before Chief Judge O'Neill trail until he
becomes available and are subject to suspension mid-trial to
accommodate criminal matters. Civil trials are no longer
reset to a later date if Chief Judge O'Neill is
unavailable on the original date set for trial. Moreover,
this Court's Fresno Division randomly and without advance
notice reassigns civil actions to U.S. District Judges
throughout the nation to serve as visiting judges. In the
absence of Magistrate Judge consent, this action is subject
to reassignment to a U.S. District Judge from inside or
outside the Eastern District of California.
Gulamnabi Vahora (“Dr. Vahora”), brings this
action against Defendants Shiekh M. Masood (“Dr.
Masood”), Naeem Mujtaba Qarni (“Naeem”),
Najam Ul Mujtaba Qarni (“Najam”), and Valley
Diagnostics Laboratory, Inc. (“VDL”), for their
alleged “breach of oral contract, breach of the implied
covenant of good faith and fair dealing, unjust enrichment,
promissory estoppel, violation of California's Unfair
Competition Law (“UCL”), civil conspiracy to
commit fraudulent deceit, intentional misrepresentation,
[and] conversion.” Complaint (“Compl.”),
Doc. 1 at 1. These causes of action arise from an alleged
oral agreement between Dr. Vahora and Naeem to partner for
the purposes of purchasing and operating a medical diagnostic
testing company, VDL.
Dr. Masood, Naeem, and VDL (collectively,
“Defendants”) move to dismiss Dr. Vahora's
Complaint under Federal Rule of Civil Procedure
12(b)(6). The Court took the matter under submission
on the papers pursuant to Local Rule 230(g). Doc. 3-1. For
the following reasons, the Court DENIES and GRANTS IN PART
Defendants' motion to dismiss.
FACTUAL AND PROCEDURAL BACKGROUND 
Vahora is an individual residing in Wayne, Pennsylvania.
See Compl. ¶ 1. He has owned and operated
multiple businesses engaged in medical diagnostic testing and
claims to be the majority-owner of VDL. Id.
¶¶ 21, 60.
a corporation organized under the laws of the state of
California with its principal place of business in Madera,
California. Id. ¶ 2. VDL also operates from a
second office located in Fresno, California. Id.
¶ 3. VDL is engaged in medical diagnostic testing.
Id. ¶ 31.
is an individual residing in Clovis, California. Id.
¶ 4-5. He is the agent for service of process for VDL,
and is VDL's President and part-owner. Id.
is an individual residing in Ontario, Canada. Id.
¶ 8-9. He is Naeem's brother and Dr. Vahora's
former employee. Id. ¶¶ 22-24.
Masood is an individual residing in Madera, California.
Id. ¶ 10-11. Dr. Masood and Naeem are related
by marriage: Dr. Masood's son is married to Naeem's
daughter. Id. ¶ 29.
Vahora brings this case under the Court's diversity
jurisdiction. Id. ¶ 12 (citing 28 U.S.C. §
to March 2012, Naeem resided in Pakistan. Id. ¶
25. He wanted to move to the United States under the E-2
Investor visa program, which required him “to invest a
substantial amount of capital in the purchase and ownership
of a United States business.” Id. ¶
facilitate Naeem's visa, Dr. Masood and Najam decided
that Naeem should purchase a medical business because
“that is the field of Dr. Masood's
expertise.” Id. ¶ 29. Dr. Masood
identified VDL as a potential investment. Id. ¶
31. VDL's then-owner and non-party Dr. Muhammad Saeed
(“Dr. Saeed”) sought a sale price of $400, 000
for the business. Id. ¶¶ 32-33.
March 2012, Najam contacted Dr. Vahora and informed him of
Naeem's situation. Id. ¶¶ 22, 25, 26.
Najam, Dr. Masood, and Naeem sought Dr. Vahora's
assistance in the analysis and purchase of VDL “because
of Dr. Vahora's extensive experience in the operation and
valuation of such medical laboratory businesses.”
Id. ¶¶ 30, 34.
Vahora agreed to help and “engaged in a systematic
analysis of VDL's value, and modeled the number of
laboratory samples required to achieve profitability.”
Id. ¶ 35. As part of his analysis, Dr. Vahora
visited the Madera location of VDL several times at his own
expense. Id. ¶ 36. He met with Dr. Saeed and
Dr. Masood, and reviewed “copious information about
VDL.” Id. ¶¶ 36, 39. “Upon
completion of his analysis . . . Dr. Vahora determined that
VDL was worth no more than $200, 000.” Id.
the valuation process, Najam and Dr. Masood suggested to Dr.
Vahora that he should partner with Naeem in the purchase of
VDL. Id. ¶¶ 37-38. Once Dr. Vahora's
valuation of VDL was complete, the men “both increased
their campaign to convince Dr. Vahora to invest in VDL in
partnership with Naeem.” Id. ¶ 42. Najam
represented that Naeem “would serve as a competent lab
manager and a worthy partner in ownership of the lab, ”
id. ¶ 43, and Dr. Masood represented that
“partnering with Naeem to purchase the lab was an
excellent investment.” Id. ¶ 44. However,
at that time, “Naeem worked in the finance industry . .
. in his native Pakistan, and had no relevant experience
operating a medical diagnostic laboratory.”
Id. ¶ 45.
“Naeem formally asked Dr. Vahora to be his partner in
VDL.” Id. ¶ 46.
Masood, on behalf of Naeem, negotiated the terms of the
partnership with Dr. Vahora. Id. ¶ 47. The
terms of the agreement were as follows:
• Dr. Vahora and Naeem would j ointly purchase VDL for
• Dr. Vahora and Naeem would each contribute $100, 000
to the purchase of VDL;
• Dr. Vahora and Naeem would be equal partners in VDL,
with the potential of Dr. Saeed and Dr. Masood having small
ownership interests therein by subsequent mutual agreement;
• Naeem would apply for legal immigrant status in the
United States pursuant to the E-2 Treaty Investor program;
• Dr. Vahora would teach Naeem how
Id. ¶ 48.
April 17, 2012, Naeem e-mailed Dr. Vahora to confirm the
terms of the partnership agreement reached by Dr. Vahora and
Dr. Masood on behalf of Naeem. Id. ¶ 49.
2012, Dr. Vahora and Naeem purchased VDL for $200, 000.
Id. ¶ 55. Although the sales agreement for VDL
identified Naeem as the sole purchaser, Dr. Vahora claims VDL
was acquired pursuant to Dr. Vahora's and Naeem's
oral agreement to “form an equal partnership for the
purchase, ownership and management of VDL.”
Id. ¶ 54. Further, Naeem contributed only $80,
000 towards the purchase price, whereas Dr. Vahora
contributed $120, 000. Id. ¶¶ 58-59.
result of the changed contribution amounts, Dr. Vahora
contends the partnership became “a de facto 60/40
partnership, with Dr. Vahora owning a 60 percent interest in
VDL and Naeem owning a 40 percent interest in VDL.”
Id. ¶ 60. Dr. Vahora believes that Naeem
subsequently “diluted his 40 percent ownership in VDL
by selling and/or sharing a portion of his interest in VDL
with Dr. Saeed and/or Dr. Mahmood and/or Najam and/or third
parties without the consent of Dr. Vahora.”
Id. ¶ 70.
around October 2012, “Dr. Vahora began to teach Naeem
how to operate a medical diagnostic laboratory.”
Id. ¶ 72. Dr. Saeed stayed on at VDL as a
technical advisor because “Naeem was unable to run the
laboratory on a daily basis as he had promised.”
Id. ¶¶ 74-75.
could not pay its own expenses. Id. ¶ 73.
“Naeem represented to Dr. Vahora that he was without
sufficient assets to contribute to VDL's operating and
overhead expenses.” Id. ¶ 75. As a
result, Dr. Vahora was left responsible for funding VDL's
operations. Id. ¶¶ 73, 75. He
“provided large amounts of supplies to VDL, and infused
VDL with enormous amount[s] of operating capital, ”
Id. ¶ 73, and paid Dr. Saaed's salary.
Id. ¶ 75. “In total, Dr. Vahora spent in
excess of $380, 000 on VDL's operating expenses, payroll,
rent and other daily expenses.” Id. ¶
same time, Naeem wanted a salary and a loan from VDL.
Id. ¶ 77. In October 2012, Dr. Vahora and Naeem
reached an agreement over the telephone for Naeem's
salary and loan. Id. ¶ 78. The terms of the
agreement were as follows:
• Naeem would take responsibility for ordering VDL
marketing supplies from Pakistan, so that Dr. Vahora no
longer was compelled to provide them;
• VDL would hire a new laboratory technician, whom Dr.
Saeed would supervise;
• VDL would offer and advertise and [sic] increased
array of services, including in-home and nursing home blood
• Naeem's loan from VDL would be “paid off
through my profit income over a period of time”; and
• Naeem's monthly salary would initially be $3, 000,
with a raise to $5, 000 based on his attainment of certain
Id. ¶ 79. Naeem subsequently sent Dr. Vahora an
email confirming the terms of the agreement. Id.
even after several months on the job and with Dr. Saeed and
the existing staff on the premises, Naeem exhibited great
difficulty running VDL.” Id. ¶ 80. Under
Naeem's management, VDL was processing only twenty
specimens per day. Id. ¶ 84. Naeem was unable
to grow the business and “depended entirely upon Dr.
Vahora's continual infusion of funds beyond the initial
$120, 000 investments in order to keep VDL afloat.”
Id. ¶¶ 85-86. Naeem “improperly
raised his own salary from $3, 000 to $5, 000, ”
id. ¶ 87, even though VDL “could not
afford to pay Naeem the sum of $5, 000 per month, in light of
its unprofitable status.” Id. ¶ 88. In
addition, Naeem he used VDL funds for his own personal
expenses. Id. ¶ 89.
end of 2012, “VDL was in a state of managerial disarray
and fiscal crisis.” Id. ¶ 90. It became
“evident to Dr. Vahora that Naeem's value to VDL
was significantly lower than Najam and Dr. Masood had
represented to Dr. Vahora prior to his entering the
partnership with Naeem.” Id. ¶ 83.
Therefore, in December 2012, Dr. Vahora took on a more
proactive role in VDL's daily management and Naeem's
role was limited to maintaining VDL's finances and
executing Dr. Vahora's instructions. Id.
Vahora hired Alfonso Flores (“Flores”) as
VDL's full-time Vice President of Sales. Id.
¶ 94. Under Dr. Vahora's and Flores's direct
management, VDL's productivity “immediately and
dramatically” increased. Id. ¶ 103.
“[I]n the first eight days of January 2013, VDL made
290 requisitions, as compared with 20 requisitions per month
when the lab was under Naeem's sole daily control.”
Id. ¶ 104.
December 2012 through early 2013, Naeem regularly sought
funds from Dr. Vahora, “purportedly to support
VDL's operations, ” despite VDL's increases in
productivity. Id. ¶¶ 112-32. As a result,
by January 30, 2013, Dr. Vahora required Naeem to submit
detailed expense reports because his confidence in
Naeem's ability to manage VDL and its finances was
“completely eroded.” Id. ¶ 119.
June 2013, VDL's financial situation under Naeem's
daily mismanagement was dire.” Id. ¶ 131.
Dr. Vahora realized Naeem was not fit for his position and
began seeking a replacement, while “continu[ing] to
function as VDL's at-large manager and decision-maker
regarding laboratory operations.” Id.
acting on behalf of VDL and without Dr. Vahora's consent
or knowledge, violated Flores's employment contract by
“terminat[ing] Flores's employment at VDL,
effective July 1, 2013.” Id. ¶¶ 139,
141, 143. On July 3, 2013, Naeem informed Flores via email
“that Dr. Vahora was no longer involved with
VDL.” Id. ¶ 138. Flores subsequently
forwarded the email to Dr. Vahora. Id. ¶ 140.
point prior to July 10, 2013, “Naeem informed Dr.
Vahora that he no longer wished to partner with Dr. Vahora in
the ownership or management of VDL.” Id.
¶ 142. On July 10, 2013, Dr. Vahora sent Naeem an email
expressing his disagreement with Naeem's decision to
terminate Flores's employment. Id. ¶ 143.
In the email, Dr. Vahora stated that they should honor
Flores's employment contract. Id., Ex. 37 at 1.
Naeem did not respond to Dr. Vahora's email. Id.
¶ 145. Dr. Vahora sent Naeem four additional emails
regarding Flores on July 12, 16, 18, and 21, 2013, all of
which Naeem ignored. Compl. ¶¶ 144-45. “In
desperation, Dr. Vahora reached out to Defendant Najam in
search of a way to reach Naeem, to wind down the partnership,
and to address management and ownership of VDL, to no
Vahora wrote Naeem a sixth email on July 27, 2013.
Id. ¶ 147. In the email, Dr. Vahora stated that
he had “not received any proposal in writing for
resolving any issue in partnership.” Id.
¶ 147. He explained that “[i]f by the first of
August 2013 . . . [he] did not receive any written document
from [Naeem], then . . . [he] w[ould] come to Madera and
legally take over the lab.” Id. Dr. Vahora
also noted that Naeem, “[a]fter seeing this future,
” was “trying to conspire against [him] and throw
[him] out, ” because he “want[ed] to get all the
benefits and share it with [his] co-conspirator.”
Id., Ex. 39 at 3.
a subsequent telephone conversation, Naeem agreed to submit a
written proposal to Dr. Vahora to liquidate their
partnership, but he never did so [despite] numerous ...