United States District Court, N.D. California
ORDER GRANTING MOTION TO DISMISS AND DENYING WITHOUT
PREJUDICE REQUEST FOR LEAVE TO FILE A MOTION FOR SANCTIONS
RE: DKT. NOS. 52, 38
HAYWOOD S. GILLIAM, JR, UNITED STATES DISTRICT JUDGE.
before the Court are Defendant's motions to dismiss the
second amended complaints in these related actions, briefing
for which is complete. See Srinvasan v. Kenna, Dkt.
Nos. 51 (“Srinvasan SAC”), 52 (“Srinvasan
Mot.”), 54 (“Srinvasan Opp.”), 55
(“Srinvasan Reply”); Haas v. Kenna, Dkt.
Nos. 37 (“Haas Mot.”), 38 (“Haas
Mot.”), 40 (“Haas Opp.”), 41 (“Haas
Reply”). Defendant also requests leave to file separate
motions for sanctions. See Srinvasan Mot. at 12;
Haas Mot. at 15. After carefully considering the parties'
arguments, the Court GRANTS Defendant's
motions to dismiss, but DENIES WITHOUT
PREJUDICE Defendant's request for leave to file
a motion for sanctions.
Rule of Civil Procedure (“Rule”) 8(a) requires
that a complaint contain “a short and plain statement
of the claim showing that the pleader is entitled to
relief.” Fed.R.Civ.P. 8(a)(2). A defendant may move to
dismiss a complaint for failing to state a claim upon which
relief can be granted under Rule 12(b)(6). “Dismissal
under Rule 12(b)(6) is appropriate only where the complaint
lacks a cognizable legal theory or sufficient facts to
support a cognizable legal theory.” Mendiondo v.
Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir.
2008). To survive a Rule 12(b)(6) motion, a plaintiff must
plead “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 a 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).
reviewing the plausibility of a complaint, courts
“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).
Nonetheless, courts do not “accept as true allegations
that are merely conclusory, unwarranted deductions of fact,
or unreasonable inferences.” In re Gilead Scis.
Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008)
(quoting Sprewell v. Golden State Warriors, 266 F.3d
979, 988 (9th Cir. 2001)). The Court also need not accept as
true allegations that contradict matter properly subject to
judicial notice or allegations contradicting the exhibits
attached to the complaint. Sprewell, 266 F.3d at
court concludes that a 12(b)(6) motion should be granted, the
“court 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) (en banc) (internal citations and
quotation marks omitted). But “where the Plaintiff has
previously been granted leave to amend and has subsequently
failed to add the requisite particularity to its claims, the
district court's discretion to deny leave to amend is
particularly broad.” See Zucco Partners, LLC v.
Digimarc Corp., 552 F.3d 981, 1007 (9th Cir. 2009)
(quotation marks and alterations omitted).
previously brought five state law causes of action against
Defendant. See Srinvasan, Dkt. No. 21
(“Srinvasan FAC”) ¶¶ 22-51;
Haas, Dkt. No. 20 (“Haas FAC”)
¶¶ 29-65. All of Plaintiffs' claims sought to
hold Defendant Kenna liable for alleged acts or omissions of
a company for which he served as CEO: Tradehill, Inc
(“Tradehill”). See, e.g., Srinvasan FAC
¶¶ 3 (alleging that Kenna “was co-founder and
CEO of Tradehill, Inc.”), 6 (alleging that
“Tradehill was the alter ego of Kenna such that there
is a unity of ownership and control in that Kenna dominated
and controlled Tradehill; that Tradehill did not operate as a
bona fide corporation; and that Tradehill was inadequately
capitalized, and that unfair and inequitable results will
follow if the corporate separateness of Tradehill from Kenna
is recognized”), 7 (alleging that “Kenna was in
possession and control of the assets that Tradehill had
custody of, including plaintiff's bitcoin”).
Defendant moved to dismiss each of Plaintiffs' claims
for, in part, failure to plead alter ego liability,
Plaintiffs freely conceded that their pleadings were
inadequate on this front, but sought leave to amend to plead
“the specificity requirement for alter ego.”
See, e.g., Srinvasan, Dkt. No. 22 at 6-7
(moving to dismiss the FAC for failure to plead sufficient
facts to invoke the alter ego doctrine); Srinvasan,
Dkt. No. 34 at 3 (“Plaintiff had initially pleaded the
alter ego doctrine generally because the Complaint had been
filed in state court, and because California applies a
general pleading standard to alter ego. Counsel was unaware
of the specificity requirement for alter ego, and requests
leave to amend to so plead.”). And the Court granted
Defendant's motions to dismiss the first amended
complaints, in part, due to Plaintiffs' failures to plead
alter ego. See, e.g., Srinvasan, Dkt. No.
49 at 5. The Court explained that pleading alter ego
liability was a “threshold issue for all claims in
these actions, ” given the nature of the allegations.
Id. The Court further warned that failure to cure
this threshold defect “may result in dismissal without
leave to amend.” Id. at 4-5.
the Court's dismissal order, Plaintiffs filed second
amended complaints in both actions. Plaintiffs narrowed their
state law causes of action to two: (1) conversion, as to all
Plaintiffs; and (2) misrepresentation, as to Plaintiff
Johnson alone. See Srinvasan SAC ¶¶ 20-26;
Haas SAC ¶¶ 28-40. But Plaintiffs failed to add any
allegations whatsoever to the operative complaints that would
in any way merit the Court reconsidering its prior conclusion
concerning alter ego liability. In fact, the operative
complaints recite verbatim the same allegations this Court
previously found lacking. Compare, e.g., Srinvasan
SAC ¶¶ 3, 6-7, with Srinvasan FAC
¶¶ 3, 6- 7. In other words, nothing has changed.
confronted with their failure to amend the complaint in any
way on this matter, see, e.g., Srinvasan Mot. at
6-7, Plaintiffs' only response was the following:
A clarification is in order. Plaintiff[s] [is/are] not suing
Tradehill, nor [is/are] plaintiff[s] stating any causes of
action against Tradehill. Furthermore, plaintiff[s] [is/are]
not pleading against Kenna based on alter ego liability.
Plaintiff[s] [is/are] not alleging that Kenna is liable
because of his actions on behalf of Tradehill as its CEO.
Plaintiff[s] [is/are] alleging that Kenna
converted [their] bitcoin. The cause of action for conversion
is pleaded as against Kenna and the Doe defendants as
individuals only, in their capacity as individuals only, not
based on alter ego liability. Paragraph 6 therefore needs to
be stricken to avoid this ambiguity. Plaintiff[s]
stipulate[s] that it be stricken.
See Srinvasan Opp. at 1; Haas Opp. at 1. Plaintiffs
miss the point entirely. It is beside the point that
Plaintiffs did not name Tradehill as a defendant. Indeed,
Plaintiffs must plead alter ego because they brought
suit against Tradehill's CEO, rather than Tradehill
itself. And they cannot handwave the alter ego
requirements-which this Court plainly stated were necessary
in its dismissal order-by stating that they are pleading
conversion against Kenna himself, without having pled any
facts attributable to Kenna other than acts purportedly
performed by him as CEO of Tradehill. Further, even if the
Court were to strike paragraph six of the respective
complaints, each otherwise notes that Plaintiffs bring suit
against Kenna as “co-founder and CEO of Tradehill,
Inc.” See, e.g., Srinvasan SAC ¶ 3. And
each alleges that Kenna absconded with bitcoin “that
Tradehill had custody of.” See, e.g.,
id. ¶ 7. Neither operative complaint ...