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Bunnett & Co., Inc. v. Gearheart

United States District Court, N.D. California

May 25, 2018

BUNNETT & COMPANY, INC., et al., Plaintiffs,
v.
TODD GEARHEART, et al., Defendants.

          ORDER DENYING MOTION TO STRIKE AND GRANTING MOTION TO DISMISS

          RICHARD SEEBORG UNITED STATES DISTRICT JUDGE.

         INTRODUCTION

         Plaintiffs Bunnett & Company, Inc. (“Bunnett & Co.”) and Energy Feeds International, LLC (“Energy Feeds”) are sister companies and distributors of nutritional supplements for dairy cows. They aver that an enterprise consisting of J.D. Heiskell Holdings, LLC (“JDH”), historically one of Plaintiffs' largest customers; Todd Gearheart, JDH's Vice President; and certain other defendants and co-conspirators devised a scheme to establish and exert control over a new distribution channel for the supply and sale of dairy cow nutritional supplements in the United States, effectively driving Plaintiffs out of business through wrongful conduct. JDH now moves to strike or dismiss certain counts in Plaintiffs' Third Amended Complaint (“TAC”) on the grounds that Plaintiffs were not granted express leave to amend, nor can Plaintiffs plead vicarious liability on behalf of JDH as a matter of law. For the reasons stated below, JDH's motion to strike is denied, but the motion to dismiss is granted.

         BACKGROUND[1]

         Previous orders have set forth the relevant facts and only those pertaining to the present motion are recounted here. Plaintiffs are two affiliated, family-owned businesses that distribute nutritional supplements for dairy cows across the United States and have historically operated under exclusive distribution agreements with their suppliers. JDH is a large animal feed distributor and agricultural trading company where Todd Gearheart is a Vice President. JDH, Todd Gearheart, and other defendants created a scheme to establish and exert control over a new distribution channel and edge Plaintiffs out of business in the Fall of 2015.

         Plaintiffs filed suit on March 17, 2017, alleging, among other claims for relief, that defendants engaged in a conspiracy in violation of the Racketeer Influenced and Corrupt Organization Act (“RICO”) Sections 1962(c) and 1962(d). Plaintiffs averred that Todd Gearheart conducted this scheme through activities including perjury, money laundering, mail and wire fraud, and bankruptcy fraud, and further asserted that JDH was vicariously liable for his actions.

         In an Order dated February 27, 2018, certain defendants' Motion to Dismiss[2] the Second Amended Complaint was granted in part and denied in part. See Dkt. No. 104. In relevant part, that Order dismissed Plaintiffs' RICO claims for relief against JDH on the grounds that Plaintiffs had not pled facts showing Todd Gearheart's conduct was of a kind he was hired to perform, and therefore Plaintiffs could not plead vicarious liability of JDH. The Order did not expressly grant Plaintiffs leave to amend those claims for relief. On April 2, 2018, Plaintiffs filed their TAC. The TAC contained new averments regarding JDH's role in the alleged RICO claims for relief, discussed below.

         LEGAL STANDARD

         I. Rule 12(f) Motion to Strike

         Under Federal Rule of Civil Procedure 12(f) courts may strike from a pleading any “insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). The function of a Rule 12(f) motion is to avoid spending time and money litigating spurious issues. See Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). A matter is immaterial if it has no essential or important relationship to the claim for relief pleaded. Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993), rev'd on other grounds, 510 U.S. 517 (1994). A matter is impertinent if it does not pertain, and is not necessary, to the issues in question in the case. Id. Motions under Rule 12(f) are generally disfavored. See Barnes v. AT&T Pension Ben. Plan-Nonbargained Program, 718 F.Supp.2d 1167, 1170 (N.D. Cal. 2010) (citing Stanbury Law Firm v. I.R.S., 221 F.3d 1059, 1063 (8th Cir. 2000)).

         II. Rule 12(b)(6) Motion to Dismiss

         Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must 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 is facially plausible when the plaintiff pleads facts that “allow[] 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) (citation omitted). There must be “more than a sheer possibility that a defendant has acted unlawfully.” Id. While courts do not require “heightened fact pleading of specifics, ” a plaintiff must allege facts sufficient to “raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555, 570.

         In deciding whether the plaintiff has stated a claim upon which relief can be granted, the court accepts the plaintiff's allegations as true and draws all reasonable inferences in favor of the plaintiff. See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). However, the court is not required to accept as true “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008).

         If the court dismisses a complaint, it “should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). In making this determination, the court should consider factors such as “the presence or absence of undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies by previous amendments, undue prejudice to the ...


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