Opinion
No. C-03-3922 MMC.
December 13, 2005
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS COUNTERCLAIMS; VACATING HEARING
Before the Court is the motion, filed November 9, 2005 by plaintiff/counter-defendant Matthew Kaufman ("Kaufman") pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the Second and Third Counterclaims alleged in the answer and counterclaims ("Answer"), filed October 20, 2005, by defendants. Defendant/counterclaimant Sanctuary Records Group Limited ("SRGL") has filed opposition, to which Kaufman has replied. Having read and considered the papers filed in support of and in opposition to the motion, the Court deems the matter appropriate for decision on the papers, VACATES the hearing scheduled for December 16, 2005, and rules as follows.
No other defendant is a party to the counterclaims that are the subject of the instant motion.
Kaufman argues that SRGL's opposition should not be considered because it was filed on Tuesday, November 29, 2005, rather than Monday, November 28, 2005. See Fed.R.Civ.P. 6(a) (holding where deadline to file falls on court holiday, deadline is extended to following court date). A review of the docket indicates, however, that the opposition, as well as declarations filed in support thereof, were electronically filed and emailed to counsel for Kaufman on November 28, 2005. Accordingly, the opposition is timely.
A. Second Counterclaim
In the Second Counterclaim, SRGL alleges a claim of tortious interference with contract. Specifically, SRGL alleges that in 1993, Beserkley Audio and Video, Inc. ("Beserkley") and SRGL, through a predecessor Castle Communications, Plc., entered into an agreement titled Assignment of Catalogue of Master Recordings ("Assignment"), under which Beserkley assigned to SRGL "the benefit of all advances against royalties in respect of [certain recordings] . . . to the extent that same remain unrecouped after all royalties arising on the exploitation of [certain recordings] prior to the Assignment Date have been accounted for in full by [Beserkley]." (See Answer ¶ 78.) SRGL further alleges that on April 18, 1994, Kaufman provided an accounting to SRGL, advising SRGL of the amount of "unrecouped balances remaining for advances . . . which [SRGL] would be entitled to recoup from royalties earned by [certain] artists from the exploitation of their master recordings under the terms of their respective recording agreements." (See id. ¶ 79.) SRGL alleges that it thereafter "applied royalties" earned by the subject artists "to repayment of their respective advantages as reflected in the April 18, 1994 letter." (See id. ¶ 80.) SRGL further alleges that Kaufman, in 2002, "falsely stated" to certain of the artists that the artists had not owed any sums to Beserkley at the time of the assignment and that the balances he had provided to SRGL in 1994 were "false and made up by [Kaufman]." (See id. ¶¶ 81-82.) As a result, according to SRGL, the artists "made demands on [SRGL] for payments and refused to cooperate in the exploitation of the master recordings of their music which were the subject of the Assignment," (see id. ¶ 83), and that such actions by the artists caused SRGL to be "deprived of income from the exploitation of the master recordings," (see id. ¶ 84).
The Court hereafter will substitute "SRGL" in place of SRGL's predecessor, Castle Communications, Plc.
Kaufman argues the Second Counterclaim, for various reasons, is subject to dismissal.
First, Kaufman argues that SRGL has failed to allege that Kaufman caused SRGL to be injured, i.e., that Kaufman caused a disruption of a contract to which SRGL is a party. See Quelimane Co. v. Stewart Title Guaranty Co., 19 Cal. 4th 26, 55 (1998) (holding, to state claim for intentional interference with contractual relations, plaintiff must allege defendant's act resulted in "actual breach or disruption" of plaintiff's contractual relationship with third party and that plaintiff was damaged). SRGL, however, alleges that Beserkley assigned to SRGL certain of Beserkley's contractual rights to receive advances Beserkley made to specified artists, that Kaufman "falsely" advised certain of those artists that they do not owe SRGL any sums under the agreements assigned, and that such artists have refused to allow SRGL to continue to "exploit" the recordings that were the subject of the Assignment, thereby depriving SRGL of income it expected to obtain under the agreements it had been assigned by Beserkley. The Court cannot say, in light of such allegations, that it is "clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." See Falkowski v. Imation Corp., 309 F. 3d 1123, 1132 (9th Cir. 2002), as amended, 320 F. 3d 905 (2003) (internal quotation and citation omitted).
Second, Kaufman argues that the claim is barred by the two-year statute of limitations applicable under California law to claims for interference with contractual relations. See Trembath v. Digardi, 43 Cal. App. 3d 834, 836 (1974) (holding two-year statute of limitations applicable to claims for interference with contractual relations). Such claim accrues no later "than the actual breach of the contract by the party who was wrongfully induced to breach." See id. at 836. Dismissal on statute of limitations grounds, however, is appropriate only where the running of the limitations period is "apparent on the face of the complaint." See Jablon v. Dean Witter Co., 614 F. 2d 677 (9th Cir. 1980). Here, because SRGL does not allege when the artists allegedly refused to comply with any contractual obligations they owe to SRGL, dismissal on grounds of the statute of limitations is not appropriate. See id.
SRGL argues that because the Assignment contains a choice-of-law provision stating that English law governs the "performance and construction" of the Assignment, the six-year English statute of limitations applicable to a claim for interference with contract governs. Because Kaufman has not shown that dismissal is appropriate even if the shorter two-year statute under California law applies, the Court need not at this time determine which law governs. Further, the Court observes that SRGL fails to cite any authority for the proposition that a choice-of-law provision in an agreement would govern a tort claim alleged against an individual who is not a party to the agreement, and, in any event, the alleged induced breach is not of the Assignment itself, but rather of one or more contracts between Beserkley and certain artists.
Finally, Kaufman argues that the claim is barred by the defense of laches. "The defense of laches, however, is not available at law, only in equity." County of Los Angeles v. City of Alhambra, 27 Cal. 3d 184, 195 (1980); see, e.g., Wells Fargo Bank v. Bank of America, 32 Cal. App. 4th 438, 440 (1995) (holding defense of laches "unavailable in an action at law for damages"; finding defense inapplicable to claim for breach of contract). SRGL's claim for interference with contractual relations is not a claim in equity, and SRGL seeks only damages, not an equitable remedy.
Accordingly, Kaufman has not shown that the Second Counterclaim is subject to dismissal.
B. Third Counterclaim
In the Third Counterclaim, SRGL alleges a claim of fraud, pleaded in the alternative to the Second Counterclaim. Specifically, SRGL alleges that if Kaufman's 2002 statement to the artists that they did not owe any sums to SRGL was true, then statements Kaufman made in 1992 to SRGL to the effect that "there were balances due from the Beserkley recording artists" were false, and were made to induce SRGL into entering into the Assignment with Beserkley and into an agreement to pay certain royalties to Kaufman. (See Answer ¶¶ 90-92.)
Kaufman argues the Third Counterclaim is not pleaded with the specificity required by Rule 9(b). The Court agrees.
Although SRGL sufficiently identifies the statement made by Kaufman, albeit paraphrased, SRGL fails to allege any facts to support a finding that Kaufman's statement was false when made in 1992. See In re Glenfed, 42 F. 3d 1541, 1548-49 (9th Cir. 1994) (holding plaintiff must set forth "an explanation as to why the statement was untrue or misleading when made") (emphasis in original). Although SRGL pleads that Kaufman admitted to certain artists in 2002 that he had "made up" the figures included in a 1994 accounting he prepared for SRGL, (see Answer ¶¶ 79, 82, 88), such allegation is insufficient to allege that the statements as to earlier figures he provided to SRGL in 1992 likewise were false when made.
SRGL alleges the date of the statement as "April 9, 2002." (See Answer ¶ 89.) In its opposition, SRGL asserts such date is a typographical error, and that the correct date is April 9, 1992.
Accordingly, the Third Counterclaim is subject to dismissal for failure to comply with Rule 9(b). The Court, however, will afford SRGL an opportunity to cure the deficiency.
Contrary to Kaufman's arguments, amendment will not necessarily be futile on grounds of the statute of limitations, because the Court cannot find from the face of the pleading that the fraud claim is barred by the applicable three-year statute of limitations under California law, which limitations period begins to run at the time the fraud is discovered, see Cal. Code Civ. Proc. § 338(d); the amendment will not be futile on grounds of laches because such defense, as stated above, is inapplicable to legal claims.
CONCLUSION
For the reasons set forth above, Kaufman's motion to dismiss is hereby GRANTED in part and DENIED in part, as follows:1. The Third Counterclaim is hereby DISMISSED, with leave to amend. A First Amended Answer to the Third Amended Complaint and Counterclaims, if any, shall be filed no later than December 23, 2005.
2. In all other respects, the motion is hereby DENIED.
IT IS SO ORDERED.