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DS-Concept Trade Invest, LLC v. Morgan-Todt, Inc.

United States District Court, N.D. California

May 18, 2017

DS-Concept Trade Invest, LLC, a Delaware Limited Liability Company, Plaintiff,
Morgan-Todt, Inc., d/b/a United Cold Storage, a California corporation, Defendant.



         Plaintiff DS-Concept Trade Invest, LLC (“DSC”) brings this action against defendant Morgan-TODT, Inc., d/b/a United Cold Storage (“United”) alleging that it negligently stored 573, 350.93 pounds of pecorino cheese (“the Cheese”) improperly in the freezer, rather than the refrigerator.

         DSC filed its third amended complaint (“TAC”) on March 1, 2017, alleging one count for negligence. (Dkt. No. 42, TAC.)[1] Now before the Court is United's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). (Dkt. No. 43.) DSC filed its opposition on April 5, 2017. (Dkt. No. 33.) United filed its reply on April 12, 2017. (Dkt. No. 45.) Defendant also moves to strike, pursuant to Rule 12(f), several allegations in the TAC regarding United's alleged interference with DSC's relations with third parties Gourmet Foods Imports, LTD., G&K Sales, and others.

         Having carefully considered the pleadings and the papers submitted on this motion, and for the reasons set forth below, defendant's motion to dismiss and motion to strike are Denied.[2]

         I. Relevant Background

         Plaintiff DSC is a purchaser of accounts receivable (also known as “trade debt”) from third-party trade companies that exports food products, including Gourmet Foods Imports, LTD, and its agent/affiliate through common ownership, Gormet Food Imports, LTD (collectively “Gourmet”). (TAC ¶¶ 3-6, 8 9.) DSC purchases trade debt from Gourmet pursuant to a “Factoring Agreement.” (Id. ¶¶ 8-10.) Under the Factoring Agreement, Gourmet obtains and prepares to fill purchase orders for food products from a buyer, typically third-party Atalanta Corporation (“Atalanta”). Gourmet then designates DSC as the payee on these orders. (Id. ¶ 12.) DSC confirms the purchase orders with the buyer and advances funds to Gourmet. (Id.) Gourmet uses these funds to acquire and ship the order to the buyer. (Id. ¶ 13.) After the buyer receives the goods, DSC is paid “via direct collection of payment” from the buyer. (Id.) DSC alleges that this “course of business” is “often employed in international financing in the food and beverage industry.” (Id. ¶ 13.) According to DSC, factoring agreements are “common to trade finance allowing vendors, like Gourmet, access to capital in exchange for absolute divestment by the vendor” in favor of the lender of the “goods in-transit and, ultimately, the anticipated forward payment for those goods from the vendor's buyer.” (Id. ¶ 20.)

         Defendant United is a cold storage facility located in San Francisco, California. (Id. ¶ 18.) Between June and August 2015, DSC advanced funds to Gourmet in connection with Gourmet's purchase of the Cheese. As a result, Gourmet generated $2, 063, 883.33 in invoices payable to DSC. (Id. ¶ 14, Exh. D.) DSC contends that the Cheese arrived at United's cold storage facility in San Francisco (id. ¶ 18, Exh. E) but none of the involves have been paid. (Id. ¶ 15.) According to DSC, United improperly stored the Cheese in the freezer, rather than the refrigerator, which diminished the value of the Cheese by rendering it unfit for human consumption. (Id. ¶¶ 36-40.) To secure repayment of the advances and other monetary damages, DSC brought three federal suits, namely against (1) United and (2) Gourmet in this Court, and (3) Gourmet and Atalanata in the U.S. District Court for the District of New Jersey. See DS-Concept Trade LLC v. Gourmet Food Imports, LLC, et al. Case No. 3:16-cv-00466 YGR; DS-Concept Trade LLC v. Atalanta Corporation, et al., Case No. 2:16-cv-00429-SRCCLW.

         According to DSC, under the Factoring Agreement the Cheese is “property in which DSC holds a beneficial interest (or, alternatively, collateral in which DSC has a security interest).” (Id. ¶ 22, Exh. A §§ 11, 14.) DSC alleges that United owed it a duty of care to store the Cheese reasonably because of this beneficial and/or security interest in the Cheese. (Id. ¶¶ 20, 57.) Plaintiff alleges that, “based on industry customs and practices, ” United understood or should have understood that the Cheese and proceeds from any sale were subject to DSC's beneficial and/or security interest. (Id. ¶ 53.) Further, DSC claims that “[b]ased on industry customs and practices . . . as well as the food cold storage facility's general standard of care, ” United agreed, pursuant to its agreement with Gourmet, to “ensure that the [C]heese was stored properly to maintain its condition and value for G[ourmet] and third parties with any beneficial and/or security interest, i.e. DSC.” (Id. ¶ 55.) (Emphasis supplied.)

         II. Legal Framework

         A. Motion to Dismiss

         Pursuant to Rule 12(b)(6), a complaint may be dismissed for failure to state a claim upon which relief may be granted. Dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) is proper 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) (citing Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988)). The complaint must plead “enough facts to state a claim [for] relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face “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). If the facts alleged do not support a reasonable inference of liability, stronger than a mere possibility, the claim must be dismissed. Id. at 678-79; see also In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (stating that a court is not required to accept as true “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences”). “Federal Rule of Civil Procedure 8(a)(2) requires only a ‘short and plain statement of the claim showing that the pleader is entitled to relief, ' in order to ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'” Twombly, 550 U.S. at 554-55 (quoting Fed.R.Civ.P. 8(a)(2)) (alteration in original). Even under the liberal pleading standard of Rule 8(a)(2), “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.” Id. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986) (internal brackets and quotation marks omitted)). The Court will not assume facts not alleged, nor will it draw unwarranted inferences. Iqbal, 556 U.S. at 679 (“Determining whether a complaint states a plausible claim for relief [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.”).

         B. Motion to Strike

         Motions to strike are not favored and “should not be granted unless it is clear that the matter to be stricken could have no possible bearing on the subject matter of the litigation.” Colaprico v. Sun Microsystem, Inc., 758 F.Supp. 1335, 1339 (N.D.Cal. 1991). When a court considers a motion to strike, it “must view the pleading in a light most favorable to the pleading party.” In re, Inc. Sec Lit., 114 F Supp.2d 955, 965 (C.D.Cal. 2000). A court may only strike portions of a complaint in four limited circumstances, namely where it finds the pleading to contain “redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). A matter is “immaterial” where it is “has no bearing on the controversy before the Court.” In re, 114 F.Supp.2d at 965. Allegations have been found “impertinent” where they are “not responsive or irrelevant to the issues that arise in the action and which are inadmissible as evidence.” Id. A court must deny the motion to strike if there is any doubt whether the allegations in the pleadings might be relevant in the action. Id. Where the moving party cannot demonstrate the material will prejudice a party, “courts frequently deny motions to strike even though the offending matter literally was within one or more of the categories set forth in Rule 12(f).” New York City Employees' Retirement System v. Barry, 667 F.Supp.2d 1121, 1128 (N.D. Cal. 2009) (internal quotations omitted).

         III. ...

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