Cirrus Education Inc. et al v. Christopher M. Adams et al

NOTICE OF MOTION AND MOTION to Dismiss Case DEFENDANTS NOTICE OF MOTION AND MOTION:

C.D. Cal.January 9, 2017

1126-5473-0001 - 1 - NOTICE OF MOTION AND MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ROBERT C. BAKER, BAR ID #49255 rbaker@bknlawyers.com LAURENCE C. OSBORN, BAR ID #155209 losborn@bknlawyers.com BAKER, KEENER & NAHRA, LLP 633 West 5th Street Suite 4900 Los Angeles, California 90071 Telephone: (213) 241-0900 Facsimile: (213) 241-0990 Attorneys for Defendants CHRISTOPHER M. ADAMS, an individual; DAVID V. ADAMS, trustee of the Christopher Adams Trust; DVA, INC.; and MORGAN ADAMS, INC. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA - WESTERN DIVISION CIRRUS EDUCATION INC., a corporation; CIRRUS (BEIJING) CORP., a corporation; CIRRUS LTD; a corporation; and IQ-HUB PTE LTED., a corporation, Plaintiffs, vs. CHRISTOPHER M. ADAMS, an individual; DAVID V. ADAMS, a trustee of the Christopher Adams Trust; DVA, INC., a corporation; and MORGAN ADAMS, INC., a corporation, Defendants. Case No.: 2:16-CV-9194-TJH-GJS Complaint Filed: 12-12-2016 DEFENDANTS’ NOTICE OF MOTION AND MOTION: (1) TO DISMISS PLAINTIFF CIRRUS BEIJING’S FIRST CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) (2) TO DISMISS PLAINTIFF CIRRUS BEIJING’S SECOND CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) (3) TO DISMISS PLAINTIFF CIRRUS BEIJING’S THIRD CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) (4) TO DISMISS PLAINTIFF CIRRUS BEIJING’S FOURTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (5) TO DISMISS PLAINTIFFS’ FIFTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(1); AND (6) TO DISMISS PLAINTIFFS’ SIXTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) Case 2:16-cv-09194-TJH-GJS Document 21 Filed 01/09/17 Page 1 of 4 Page ID #:240 1126-5473-0001 - 2 - NOTICE OF MOTION AND MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 [Filed Concurrently with Supporting Memorandum Of Points And Authorities; Request for Judicial Notice; Proposed Order] [Filed concurrently with Special Motion to Strike under California Code of Civil Procedure 425.16] Date: February 6, 2017_____ Hearing: Time: UNDER SUBMISSION Courtroom: #9B TO ALL PARTIES AND THEIR COUNSEL OF RECORD: NOTICE IS HEREBY GIVEN that on February 6, 2017, under submission, or as soon thereafter as the matter may be heard in Courtroom #9B of the United States District Court, Central District of California, 312 North Spring Street Los Angeles, CA 90012-4701, Defendants CHRISTOPHER M. ADAMS; DAVID V. ADAMS, a trustee of the Christopher Adams Trust; DVA, INC.; and MORGAN ADAMS, INC. will, and hereby do move to dismiss the First, Second, Third, Fourth , Fifth, and Sixth Causes of Action in the Complaint filed by Plaintiffs Cirrus Education, Inc. (“CEI”), Cirrus (Beijing) Corp. (“Cirrus Beijing”), Cirrus LTD, and IQ HUB PTE, LTD (“IQ HUB”), (collectively, “Plaintiffs”). The grounds for this motion are that Plaintiff Cirrus Beijing has failed to meet the essential elements to bring its First, Second, and Third Causes of Action. Further, relief cannot be granted for Plaintiff Cirrus Beijing’s Fourth Cause of Action under California Business and Professions Code § 17200 for failing to state what business act or practice Plaintiff Christopher Adams engaged in, for lack of standing, and for failing to properly allege how Plaintiff Christopher Adams’ alleged actions were unlawful, unfair, or fraudulent. Fed. R. Civ. P. 12(b)(6). Moreover, Plaintiffs are not entitled to declaratory relief under their Fifth Cause of Action because this case lacks an actual case-and-controversy as required under Article III of the United States Constitution and the Declaratory Judgment Act. 28 U.S. Case 2:16-cv-09194-TJH-GJS Document 21 Filed 01/09/17 Page 2 of 4 Page ID #:241 1126-5473-0001 - 3 - NOTICE OF MOTION AND MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Code § 2201(a). Without such, the Court lacks subject-matter jurisdiction, and must dismiss the action. Fed. R. Civ. P. 12(b)(1). Because Cirrus Beijing is unable to bring claims for any of its causes of action, no basis exists to grant injunctive relief, and the Sixth Cause of Action must be dismissed. Fed. R. Civ. P. 12(b)(6). LOCAL RULE 7-3 MEET/CONFER COMPLIANCE – On Tuesday, January 3, 2017, and January 4, 2017, counsel for Defendants contacted Plaintiffs’ counsel by phone informing him that, in accordance with Local Rule 7-3, Defendants were initiating a meet and confer before filing their motion to dismiss and motion to specially strike Plaintiffs’ complaint. Each of Defendants communications specified the grounds for Defendants’ two motions. The parties discussed the Defendants’ motions. However, no informal resolution could be reached that would avoid Defendants’ motions. This motion is based on this Notice, the attached Memorandum of Points and Authorities, the concurrently filed Request for Judicial Notice, the Complaint on file herein, all pleadings and papers on file, and all other oral and written evidence that the Court may wish to consider at the hearing or prior to ruling on the motion. DATED: January 9, 2017 BAKER, KEENER & NAHRA, LLP By ROBERT C. BAKER /S/ LAURENCE C. OSBORN LAURENCE C. OSBORN Attorneys for Defendants CHRISTOPHER M. ADAMS, an individual; DAVID V. ADAMS, trustee of the Christopher Adams Trust; DVA, INC.; and MORGAN ADAMS, INC. Case 2:16-cv-09194-TJH-GJS Document 21 Filed 01/09/17 Page 3 of 4 Page ID #:242 1126-5473-0001 - 4 - NOTICE OF MOTION AND MOTION TO DISMISS UNDER FRCP 12(b)1 and 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CERTIFICATE OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES USDC Case No.: 2:16-CV-9194 TJH (GJS) CIRRUS EDUCATION, INC., et al. v. CHRISTOPHER M. ADAMS, et al. I am over the age of 18 and not a party to the within action; I am employed by BAKER, KEENER & NAHRA, LLP in the County of Los Angeles at 633 West Fifth Street, Suite 4900, Los Angeles, California, 90071. On January 9, 2017, I served the foregoing document(s) described by DEFENDANTS’ NOTICE OF MOTION AND MOTION: (1) TO DISMISS PLAINTIFF CIRRUS BEIJING’S FIRST CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (2) TO DISMISS PLAINTIFF CIRRUS BEIJING’S SECOND CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (3) TO DISMISS PLAINTIFF CIRRUS BEIJING’S THIRD CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (4) TO DISMISS PLAINTIFF CIRRUS BEIJING’S FOURTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (5) TO DISMISS PLAINTIFFS’ FIFTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(1); AND (6) TO DISMISS PLAINTIFFS’ SIXTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) as follows: Michael C. Tu, Esq. Counsel for Plaintiffs Kevin M. Askew, Esq. Elliott S. Henry, Esq. ORRICK, HERRINGTON & SUTCLIFFE LLP 777 S. Figueroa Street, Suite 3200 Los Angeles, CA 90017 (213) 629-2020; (213) 612-2499-FAX mtu@orrick.com kaskew@orrick.com  (BY ECF) I caused the above-referenced document(s) to be filed the Electronic Case Filing (ECF) system in the United States District Court for the Central District of California, on all parties registered for e- filing. Counsel of record are required by the Court to be registered e-filers, and as such, are automatically e-served with a copy of the documents upon confirmation of e-filing.  (FEDERAL) I declare that I am employed in the office of a member of the Bar of this Court at whose direction the service was made. I declare under penalty of perjury under the laws of the United States of America that the above is true and correct. Executed on January 9, 2017, at Los Angeles, California. LAURENCE C. OSBORN /s/ LAURENCE C. OSBORN Case 2:16-cv-09194-TJH-GJS Document 21 Filed 01/09/17 Page 4 of 4 Page ID #:243 1126-5473-0001 - 1 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ROBERT C. BAKER, BAR ID #49255 rbaker@bknlawyers.com LAURENCE C. OSBORN, BAR ID #155209 losborn@bknlawyers.com BAKER, KEENER & NAHRA, LLP 633 West 5th Street Suite 4900 Los Angeles, California 90071 Telephone: (213) 241-0900 Facsimile: (213) 241-0990 Attorneys for Defendants CHRISTOPHER M. ADAMS, an individual; DAVID V. ADAMS, trustee of the Christopher Adams Trust; DVA, INC.; and MORGAN ADAMS, INC. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA - WESTERN DIVISION CIRRUS EDUCATION INC., a corporation; CIRRUS (BEIJING) CORP., a corporation; CIRRUS LTD; a corporation; and IQ-HUB PTE LTED., a corporation, Plaintiffs, vs. CHRISTOPHER M. ADAMS, an individual; DAVID V. ADAMS, a trustee of the Christopher Adams Trust; DVA, INC., a corporation; and MORGAN ADAMS, INC., a corporation, Defendants. Case No.: 2:16-CV-9194-TJH-GJS Complaint Filed: 12-12-2016 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION: (1) TO DISMISS PLAINTIFF CIRRUS BEIJING’S FIRST CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) (2) TO DISMISS PLAINTIFF CIRRUS BEIJING’S SECOND CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) (3) TO DISMISS PLAINTIFF CIRRUS BEIJING’S THIRD CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) (4) TO DISMISS PLAINTIFF CIRRUS BEIJING’S FOURTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (5) TO DISMISS PLAINTIFFS’ FIFTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(1); AND (6) TO DISMISS PLAINTIFFS’ SIXTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 1 of 32 Page ID #:244 1126-5473-0001 - 2 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 [Filed Concurrently with Notice of Motion and Motion to Dismiss; Request for Judicial Notice; Proposed Order] [Filed concurrently with Special Motion to Strike under California Code of Civil Procedure 425.16] Hearing: Date: February 6, 2017_____ Time: UNDER SUBMISSION Courtroom: #9B /// /// /// Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 2 of 32 Page ID #:245 1126-5473-0001 - i - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS Page MEMORANDUM OF POINTS AND AUTHORITIES ................................................ 1 1. INTRODUCTION ................................................................................................ 1 2. ARGUMENT ........................................................................................................ 3 A. Standard of Review .................................................................................... 3 B. Plaintiff Cirrus Beijing’s First Cause of Action Fails for Failure to State A Claim for Which Relief Can Be Granted ...................................... 3 (i) The Purported Statements Are Privileged Under Cal. Civ. Code § 47(b) ..................................................................................... 4 (ii) The Alleged Statements Are Not Defamatory ................................. 5 (iii) Cirrus Beijing Has Failed to Allege Damages ................................. 5 C. Plaintiff Cirrus Beijing’s Second and Third Causes of Action Fail for Failure to State A Claim for Which Relief Can Be Granted ...................... 6 (i) The Purported Statements Are Privileged Under Cal. Civ. Code §47(b) ...................................................................................... 7 (ii) Plaintiff Has Failed to Allege a Wrongful Act ................................ 7 (iii) Plaintiff Has Failed to Establish a Special Relationship Between Itself and Defendants ........................................................ 8 (iv) Plaintiff Cannot Demonstrate an Existing Economic Relationship ..................................................................................... 8 (v) The Alleged Statements Cannot Constitute Actionable Interference .................................................................................... 10 (vi) Cirrus Beijing Has Failed to Allege Damages ............................... 11 D. Plaintiff Cirrus Beijing’s Fourth Cause of Action Fails for Failure to State A Claim for Which Relief Can Be Granted .................................... 11 (i) Adams’ Communication to the NEEQ Is Not a Business Act or Practice Under the UCL ................................................................. 12 (ii) Plaintiff Cirrus Beijing Lacks Standing Under the UCL ............... 12 (iii) Plaintiff Cirrus Beijing Fails to State How Defendants Engaged in Any Unlawful, Unfair, or Fraudulent Conduct That Deceived the Public ....................................................................... 13 Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 3 of 32 Page ID #:246 1126-5473-0001 - ii - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 E. The Court Lacks Subject-Matter Jurisdiction for Plaintiffs’ Fifth Cause of Action for Declaratory Relief ................................................... 14 (i) The Fifth Cause of Action for Declaratory Relief Is Not Ripe for Adjudication ............................................................................. 15 (a) A Case and Controversy Does Not Exist ............................ 15 (b) The Court Should Not Exercise Its Discretion in Granting Declaratory Relief ................................................................ 17 i) Declaratory Relief Would Neither Serve a Useful Purpose Nor Afford Relief from Uncertainty ............... 19 ii) Application of the Brillhart Factors Also Favors Dismissal. ...................................................................... 20 F. No Basis Exists to Grant Plaintiffs’ Sixth Cause of Action for Injunctive Relief ....................................................................................... 22 3. CONCLUSION ................................................................................................... 22 Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 4 of 32 Page ID #:247 1126-5473-0001 - iii - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Page(s) Cases Abbott Labs. v. Gardner, 387 U.S. 136 (1967) ..................................................................................................... 15 Allen v. Wright, 468 U.S. 737 (1984) ..................................................................................................... 14 Amid v. Hawthorne Cmty. Med. Grp., Inc., 212 Cal. App. 3d 1383 (Ct. App. 1989) ....................................................................... 10 Baldwin v. Marina City Props., Inc., 79 Cal. App. 3d 393 (Ct. App. 1978) ............................................................................. 6 Bank of the West v. Superior Court, 2 Cal. 4th 1257 (Cal. 1992) .......................................................................................... 13 Barnes-Hind, Inc., v. Superior Court, 181 Cal. App. 3d 377(Ct. App. 1986) ........................................................................ 5, 8 Barquis v. Merchants Collection Assn., 7 Cal.3d 94 (Cal. 1972) ................................................................................................ 12 Bernhardt v. County of Los Angeles, 279 F.3d 862 (9th Cir. 2002) ........................................................................................ 14 Blanchard Training & Dev., 2016 WL 773227, at *5 ................................................................................................ 20 Blank v. Kirwan, 39 Cal. 3d 331 (Cal. 1985) ............................................................................................. 9 Bowen v. Zaisun Technologies, Inc., 116 Cal. App. 4th 777 (Ct. App. 2004) ........................................................................ 11 Brillhart v. Excess Ins. Co., 316 U.S. 491 (1942) ............................................................................................... 18, 20 Califano v Sanders, 430 U.S. 99 (1977) ....................................................................................................... 15 Celador Int'l, Ltd. v. Walt Disney Co., 347 F. Supp. 2d 846 (C.D. Cal. 2004) .................................................................... 18, 19 Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115 (9th Cir. 2010) ...................................................................................... 16 Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 5 of 32 Page ID #:248 1126-5473-0001 - iv - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Clinton v. Acequia, Inc., 94 F.3d 568 (9th Cir. 1996) .......................................................................................... 15 ComputerXpress, Inc. v. Jackson, 93 Cal. App. 4th 993 (Ct. App. 2001) ........................................................................ 4, 7 Della Penna v. Toyota Motor Sales, U.S.A., 11 Cal. 4th 376 (Cal. 1995) ............................................................................................ 7 Exxon Shipping Co. v. Airport Depot Diner, 120 F.3d 166 (9th Cir. 1997) .................................................................................. 18, 21 Fiberlight, LLC v. Amtrak, 81 F. Supp. 3d 93 (D.D.C. 2015) ................................................................................. 21 First Nationwide Mortg. Corp. v. FISI Madison, LLC, 219 F. Supp. 2d 669 (D. Md. 2002) ............................................................................. 20 Fontani v. Wells Fargo Investments, LLC, 129 Cal. App. 4th 719 (Ct. App. 2005) .......................................................................... 4 Gribin v. Hammer Galleries, Div. of Hammer Holdings, Inc., 793 F. Supp. 233 (C.D. Cal. 1992) ............................................................................... 19 Griffith Co. v. San Diego Col. For Women, 172 Cal.App.2d 756 (Ct. App. 1955) ....................................................................... 6, 11 Hall v. Time Inc., 158 Cal. App. 4th 847 (Ct. App. 2008) ........................................................................ 13 Hewlett v. Squaw Valley Ski Corp., 54 Cal. App. 4th 499 (Ct. App. 1997) .......................................................................... 12 J'Aire Corp. v. Gregory, 24 Cal. 3d 799 (Cal. 1979) ......................................................................................... 6, 8 Khoury v. Maly’s of Calif., Inc., 14 Cal. App. 4th 612 (Cal. 1993) ................................................................................. 13 Klein v. Earth Elements, Inc., 59 Cal. App. 4th 965 (Ct. App. 1997) .......................................................................... 12 Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375 (1994) ..................................................................................................... 14 Korea Supply Corp. v. Lockheed Martin Corp., 29 Cal. 4th. 1134 (Cal. 2003) ....................................................................................... 13 Kwikset v. Superior Court, 51 Cal. 4th 310 (Cal. 2011) .......................................................................................... 12 Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 6 of 32 Page ID #:249 1126-5473-0001 - v - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Kyocera Commc'ns, Inc., 2012 WL 2501119, at *3 .............................................................................................. 20 Leadsinger, Inc. v. BMG Music Pub., 512 F.3d 522 (9th Cir. 2008) ........................................................................................ 18 Livid Holdings v. Saloman Smith Barney, Inc., 416 F. 2d 940 (9th Cir. 2005) ......................................................................................... 3 Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) ..................................................................................................... 16 Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270 (1941) ..................................................................................................... 15 McGraw-Edison Co. v. Preformed Line Prods. Co., 362 F.2d 339 (9th Cir. 1966) .................................................................................. 18, 20 Medimmune, Inc. v. Genetech, Inc., 549 U.S. 1186 (2007) ................................................................................................... 14 Moss v. U.S. Secret Serv., 572 F.3d 962 (9th Cir. 2009) .......................................................................................... 3 National Med. Trans. Network v. Deloitte & Touche, 62 Cal. App.4th 412 (Ct. App. 1998) ............................................................................. 7 No Doubt v. Activision Publishing, Inc., 192 Cal. App. 4th 1018 (Ct. App. 2011) ...................................................................... 13 People v. Casa Blanca Convalescent Homes, Inc., 159 Cal. App. 3d 509 (Ct. App. 1984) ......................................................................... 12 Podobedov v. Living Essentials, LLC, No. CV 11-6408 PSG PLAX, 2012 WL 2513458, at *5 (C.D. Cal. Mar. 22, 2012) .. 20 Principal Life Ins. Co. v. Robinson, 394 F.3d 665 (9th Cir. 2005) .................................................................................. 15, 20 Pub. Affairs Assoc. v. Rickover, 369 U.S. 111 (1962) ..................................................................................................... 17 Relentless Air Racing, LLC v. Airborne Turbine Ltd. Partnership 222, Cal. App. 4th 811(Ct. App. 2013) ................................................................................ 20 Richardson v. City and County of Honolulu, 124 F.3d 1150 (9th Cir. 1997) ...................................................................................... 16 Rickards v. Canini Eye Reg. Foundation, 704 F.2d 1449 (9th Cir. 1983) .................................................................................. 9, 10 Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 7 of 32 Page ID #:250 1126-5473-0001 - vi - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Roth v. Rhodes, 25 Cal. App. 4th 530 (Ct. App. 1994) .......................................................................... 10 Slaughter v. Friedman, 32 Cal. 3d 149 (Cal. 1982) ............................................................................................. 4 Spinner Corp. v. Princeville Develop. Corp., 849 F. 2d 388 (9th Cir. 1988) ....................................................................................... 11 Stolz v. Wong Comm. Ltd. Partnership, 25 Cal. App. 4th 1816 (Ct. App. 1994) .......................................................................... 8 Stop Loss Ins. Brokers v. Brown & Taland Med. Grp. 143 Cal. App. 4th 1036 (2006) ....................................................................................... 8 Thomas v. Anchorage Equal Rights Comm'n, 220 F.3d 1134 (9th Cir.2000) ....................................................................................... 16 Venhaus v. Shultz, 155 Cal. App. 4th 1072 (Ct. App. 2007) ........................................................................ 9 Wells Fargo Bank, National Association v. Weinberg, 227 Cal. App. 4th 1 (Ct. App. 2014) ...................................................................... 17, 19 Western Mining Council v. Watt, 634 F.2d 618, 624 (9th Cir. 1981) cert. denied. 454 U.S. 1031 (1981) ......................... 3 Westside Ctr. Assoc. v. Safeway Store 23, Inc., 42 Cal. App. 4th 507 (Ct. App. 1996) .......................................................................... 10 Youst v. Longo, 43 Cal. 3d 64 (Cal. 1987) ............................................................................................... 8 Statutes Cal. Bus. & Prof. Code § 17200 .......................................................................... 11, 12, 13 Cal. Bus. & Prof. Code § 17204 ...................................................................................... 12 Cal. Civ. Code § 45 ............................................................................................................ 5 Cal. Civ. Code § 47 ............................................................................................................ 4 Cal. Civ. Code § 47(b) ........................................................................................... 3, 4, 6, 7 Cal. Civ. Proc. Code § 187 ........................................................................................ 17, 19 The Declaratory Judgment Act (28 U.S. Code § 2201) ................................................... 17 Other Authorities Fed. R. Civ. P. 12(b)(1) ................................................................................................ 3, 14 Fed. R. Civ. P. 12(b)(6) ................................................................................................ 3, 11 Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 8 of 32 Page ID #:251 1126-5473-0001 - vii - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 U.S. Const. art. III ............................................................................................................ 14 Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 9 of 32 Page ID #:252 1126-5473-0001 - 1 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM OF POINTS AND AUTHORITIES 1. INTRODUCTION Plaintiffs’ lawsuit arises from a judgment ordered in the Underlying Matter called Christopher Adams v. David Topolewski, Los Angeles Sup. Ct. No. BC382058 (filed Dec. 11, 2007). On August 16, 2016, and after nine (9) years of litigation, the Superior Court of the County of Los Angeles, State of California entered Judgment in favor of Defendants CHRISTOPHER ADAMS (“Adams”), DAVID V. ADAMS, DVA, INC., and MORGAN ADAMS, INC. (then plaintiffs)(collectively “Defendants”) against Plaintiffs CIRRUS (BEIJING) CO., LTD, (“Cirrus Beijing” or “Plaintiff”), IQ-HUB PTE LTD (“IQ-HUB”), CIRRUS EDUCATION, INC. (“CEI”), and CIRRUS LTD. (collectively “Plaintiffs”) for $62,800,000. [See, Exh. “A” to Defendants’ Request for Judicial Notice.] The Court in the California State Court Action, made specific findings that Cirrus Beijing, and the other Plaintiffs in this action were liable as the successor entities, and the successor embodiments of English Xchange Pte. Ltd. (“EXPL”). [Complaint ¶ 46; see, page 4 of the Corrected and Final Statement of Decision as Exh. “B” to Defendants’ Request for Judicial Notice.] Adams had argued during briefing for closing arguments in the Underlying Matter that Plaintiffs were judgement debtors as related to EXPL, but only on theories of successor liability. [See, Plaintiff Christopher Adams’ Closing Argument Brief, p. 14, as Exh. “C” to Defendants’ Request for Judicial Notice.] Plaintiffs are currently appealing the trial court’s finding in the California Court of Appeal. [Complaint ¶ 3; see also Exh. “D” attached to Defendants’ Request for Judicial Notice]. Plaintiff Cirrus Beijing had been in the process of an application to list its stock for public sale on the Chinese National Equities Exchange and Quotations (“NEEQ”) which reviews and qualifies stocks in China for listing on the public stock exchange for sale. The NEEQ is regulated by the China Securities Regulatory Commission. [Complaint ¶ 51] Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 10 of 32 Page ID #:253 1126-5473-0001 - 2 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Three months after Entry of Judgment against Cirrus Beijing, and on or about November 9, 2016, Defendant Christopher Adams presented, through his Chinese legal counsel, a letter to the Surveillance Department of Exchange for the NEEQ, identifying the Judgment, providing a copy of said Judgment. [See Exh. “A” to Plaintiffs’ Complaint] Defendant Christopher Adams letter requested an investigation and review of the Cirrus Beijing’s application, and provided the NEEQ with a copy of the Judgment entered against Cirrus Beijing in excess of $60,000,000. [Exh. “A” to Plaintiffs’ Complaint], and informed the NEEQ’s Surveillance Division that the Judgment was not in the Cirrus Beijing disclosures in direct violation of Chinese securities laws and the concealment of this information could seriously damage the company and its shareholders. Plaintiff Cirrus Beijing claims the letter contained two defamatory statements against it including that “Cirrus Beijing is owned 100% by English Exchange HK” and that the parent company of Cirrus Beijing is EXPL. [Complaint ¶ 62] Plaintiffs contend that this action is part of an effort by Defendant Adams to “smear,” “defame,” and “interfere with the business prospects” of Cirrus Beijing. [Complaint ¶50] This is a baseless contention that has no merit. Plaintiffs’ Complaint asserts claims including: 1) Defamation; 2) Intentional Interference with Prospective Economic Advantage; 3) Negligent Interference with Prospective Economic Advantage; 4) Violation of California Business & Professions Code § 17200; 5) Declaratory Relief; and 6) Injunctive Relief. Despite being based entirely in California law, it appears Plaintiffs have strategically pursued these claims in federal district court to hinder Defendants efforts to collect on their Judgment and expend resources to defend this action. Defendants bring this motion to dismiss the First, Second, Third, Fourth, Fifth, and Sixth Causes of Actions in Plaintiffs’ Complaint pursuant to Federal Rule of Civil Procedure 12(b). Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 11 of 32 Page ID #:254 1126-5473-0001 - 3 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2. ARGUMENT A. Standard of Review “[F]or a complaint to survive a motion to dismiss” under Fed. R. Civ. P. 12(b)(6) and Fed. R. Civ. P. 12(b)(1), “the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (citations and quotations omitted). “The court does not, however, necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations in plaintiff’s complaint.” Western Mining Council v. Watt, 634 F.2d 618, 624 (9th Cir. 1981) cert. denied. 454 U.S. 1031 (1981). “A court need not permit an attempt to amend if it is clear that the Complaint could not be saved by amendment.” Livid Holdings v. Saloman Smith Barney, Inc. 416 F. 2d 940, 946 (9th Cir. 2005). B. Plaintiff Cirrus Beijing’s First Cause of Action Fails for Failure to State A Claim for Which Relief Can Be Granted Cirrus Beijing’s First Cause of Action for defamation must fail because: (1) it involves privileged communications in an “official proceeding” as set forth in Cal. Civ. Code §47(b); (2) Plaintiff cannot establish the existence of any defamatory statements; (3) Plaintiff has no evidence the alleged statements identified in Paragraph 62 of Plaintiff’s Complaint caused any harm to Cirrus Beijing; and (4) Plaintiff has no evidence of any damages caused by the alleged statements. Cirrus Beijing’s two statements claimed to be defamatory are: 1) that a diagram identified Cirrus Beijing as being 100% owned by a company named English Xchange HK; and 2) the parent company of Cirrus Beijing is EXPL. [Complaint ¶ 62] However, these statements are unable to give rise to a viable claim. /// /// /// /// Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 12 of 32 Page ID #:255 1126-5473-0001 - 4 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (i) The Purported Statements Are Privileged Under Cal. Civ. Code § 47(b) Plaintiff cannot prevail because the alleged statements identified by Cirrus Beijing are privileged communications arising in the context of an “official proceeding” as establish by law. Cal. Civ. Code §47(b) states that a publication is “privileged” if: (b) In any (1) legislative proceeding, (2) judicial proceeding, (3) in any other official proceeding authorized by law, or (4) in the initiation or course of any other proceeding authorized by law and reviewable pursuant to Chapter 2 (commencing with Section 1084) of Title 1 of Part 3 of the Code of Civil Procedure Cal. Civ. Code § 47(b). California courts have ruled that the term “official proceeding” “has been interpreted broadly to protect communications to or from governmental officials which may precede the initiation of formal proceedings.” Slaughter v. Friedman, 32 Cal. 3d 149, 156 (Cal. 1982). The case on point is ComputerXpress, Inc. v. Jackson, 93 Cal. App. 4th 993, 1006 (Ct. App. 2001). In ComputerXpress, a plaintiff brought trade libel and interference of contract claims, among others, based on a letter defendants sent to the Securities and Exchange Commission, notifying the agency that the plaintiff was falsely representing that its business was profitable. Id. at 998. The court stated that the letter was an official proceeding under Cal. Civ. Code §47(b) because “the purpose of the complaint was to solicit an SEC investigation. Id. at 1009. Courts have extended this to quasi-regulatory agencies, as well. Fontani v. Wells Fargo Investments, LLC, 129 Cal. App. 4th 719, 728–732 (Ct. App. 2005). Plaintiffs admit that the NEEQ is government regulated by the China Securities Regulatory Commission. [Complaint ¶ 51] Based on this authority, Christopher Adams’ November 9, 2016 letter is within the privilege under Cal. Civ. Code §47(b) as a privileged publication in an “official proceeding.” Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 13 of 32 Page ID #:256 1126-5473-0001 - 5 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (ii) The Alleged Statements Are Not Defamatory Plaintiff Cirrus Beijing cannot prevail because it has not identified any defamatory statements actionable as libel against Defendant Christopher Adams in connection with the November 9, 2016 letter. “If no reasonable reader of a publication could impute to a statement therein a meaning which tended to harm the reputation of the plaintiff in any of the respects enumerated in Civil Code section 45 then there is no libel at all.” Barnes-Hind, Inc., v. Superior Court, 181 Cal. App. 3d 377, 386 (Ct. App. 1986) The statements relied on by Cirrus Beijing have no meaning directed to harming the reputation of Cirrus Beijing. First, whether Cirrus Beijing is owned 100% by English Xchange HK is entirely benign. There is no explanation given in the Complaint as to why that would be defamatory, or otherwise harm the reputation of Cirrus Beijing – because it does not. Second, the statement about EXPL being a parent of Cirrus Beijing is also benign and provides no tendency to harm the reputation of Plaintiff, but it is also essentially true. The Statement of Decision in the State Court Action reflects that Cirrus Beijing is the “successor embodiment of EXPL,” or essentially the same company as EXPL in a successor form. [See,page 4 of the Corrected and Final Statement of Decision as Exh. “B” to Defendants’ Request for Judicial Notice.] (iii) Cirrus Beijing Has Failed to Allege Damages Cirrus Beijing fails to identify or properly identify any damages caused by the two alleged “defamatory” statements. Cirrus Beijing has not properly pled a damage theory or claim, let alone being able to present evidence of any damages. Paragraph 66 of Plaintiff’s Complaint states the basis for damages is “[it] will force the company to significantly scale back its growth plans.” [Complaint ¶ 66] First, this is entirely speculative as “[d]amages are not recoverable in the fact of damage is too remote, speculative, or uncertain.” Griffith Co. v. San Diego Col. For Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 14 of 32 Page ID #:257 1126-5473-0001 - 6 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Women, 172 Cal.App.2d 756, 768 (Ct. App. 1955). Cirrus Beijing’s claim is the epitome of remote, uncertain and speculative damage claims. Second, the allegation of damages is an insufficient pleading of damages because it fails to identify economic loss at all. It only alleges that the disclosure of the two purported statements caused “a scale back of growth plans.” Plaintiff cannot make any evidentiary showing of damages, and has not pled a proper showing of damages revealing that, but for the making of either one of the two purported statements, Cirrus Beijing suffered any damages due to “a scale back of growth plans.” C. Plaintiff Cirrus Beijing’s Second and Third Causes of Action Fail for Failure to State A Claim for Which Relief Can Be Granted Plaintiff Cirrus Beijing has failed to plead necessary allegations to state a claim for intentional interference with prospective economic advantage. Baldwin v. Marina City Props., Inc., 79 Cal. App. 3d 393, 407 (Ct. App. 1978). While a plaintiff for a claim of negligent interference with prospective economic advantage does not have to prove intentionality, the plaintiff must demonstrate that the defendant’s action could foreseeably disrupt a business advantage of another with whom the defendant has a special relationship. J'Aire Corp. v. Gregory, 24 Cal. 3d 799, 804 (Cal. 1979). Cirrus Beijing cannot meet these requirements. The Second and Third Causes of Action fail for the following six reasons: 1) Christopher Adams’ November 9, 2016 letter is privileged as being made in an “official proceeding” (Cal. Civ. Code §47(b)); 2) There is no wrongful conduct by Christopher Adams; 3) There is no special relationship giving rise to any duty owed to Cirrus Beijing; 4) Plaintiff cannot show any reasonable probability of contract or profit would have been obtained but for the making of the two statements identified; 5) Plaintiff has no evidence that, but for the two alleged statements, there was any interference; and 6) Plaintiff has no evidence, and has not properly pled any resulting damages. /// /// Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 15 of 32 Page ID #:258 1126-5473-0001 - 7 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (i) The Purported Statements Are Privileged Under Cal. Civ. Code §47(b) As set forth above, Plaintiff cannot prevail because the alleged statements identified by Cirrus Beijing are privileged communications as they arise in the context of an “official proceeding” established by law. ComputerXpress, Inc. v. Jackson, 93 Cal. App. 4th at 1006. (ii) Plaintiff Has Failed to Allege a Wrongful Act The alleged disruptive must be wrongful act to state a claim for intentional or negligent interference of prospective economic advantage. To be actionable, however, the alleged interference must be wrongful “by some measure beyond the fact of the interference itself.” Della Penna v. Toyota Motor Sales, U.S.A., 11 Cal. 4th 376, 394 (Cal. 1995) (intentional); National Med. Trans. Network v. Deloitte & Touche, 62 Cal. App.4th 412, 438 (Ct. App. 1998) (negligent). In its Complaint, Cirrus Beijing does not deny that it concealed the $60,000,000 Judgment during its application process for a listing of stock to sell to the public, or that it did so in violation of Chinese securities disclosure laws. Plaintiff cannot claim, nor can it prove, that the actions taken by the NEEQ, or any other entity to cease the application process under the circumstances was wrongful. Plaintiff bases its claims on a duplicitous theory. Cirrus Beijing claims that Christopher Adams’ privileged communication prompting an investigation by the Surveillance Department of the NEEQ, that uncovered Cirrus Beijing’s unlawful conduct in concealing a $60,000,000 Judgment during its listing application, is somehow a wrongful act. This theory is unconvincing. Plaintiff cannot make any showing of any wrongful conduct by Christopher Adams that caused the circumstances complained of by Cirrus Beijing. As stated above, the Christopher Adams’ communication was a privileged. Second, no defamatory statements were made, and the statements made are proven to be true relating to the $60,000,000 judgment intentionally concealed by Cirrus Beijing, and the EXPL Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 16 of 32 Page ID #:259 1126-5473-0001 - 8 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 relationship to Cirrus Beijing. See, Barnes-Hind, Inc., v. Superior Court, 181 Cal. App. 3d at 386 [See argument, supra (2(b)(ii)]. (iii) Plaintiff Has Failed to Establish a Special Relationship Between Itself and Defendants To state a negligent interference claim, a plaintiff must alleged facts sufficient to establish a legally-recognized “special relationship” between himself and defendants that gives rise to a duty on defendant’s part not to negligently interfere with a plaintiff’s third-party economic relationships. See, J’Aire Corp. v. Gregory, 24 Cal. 3d at 804; Stolz v. Wong Comm. Ltd. Partnership, 25 Cal. App. 4th 1816, 1825 (Ct. App. 1994) (dismissing negligent interference claim where plaintiff failed to plead existence of a duty of care); Stop Loss Ins. Brokers v. Brown & Taland Med. Grp.,143 Cal. App. 4th 1036, 1042 (2006)(holding that J’Aire Corp. and its progeny “do not support extending a tort duty to business parties’ arms-length dealings”). Cirrus Beijing has not pled, and cannot prove, a special relationship between Christopher Adams and Cirrus Beijing to support its Third Cause of Action for negligent interference. [Complaint ¶¶ 75-80] In fact, the gravamen of Plaintiff’s entire Complaint, and position in the State Court Action is based on claims that Cirrus Beijing had no relationship with Christopher Adams. (iv) Plaintiff Cannot Demonstrate an Existing Economic Relationship Cirrus Beijing must allege and prove an existing economic relationship. There can be no recovery unless the Plaintiff shows that, except for the tortious interference, there was a reasonable probability that the contract or profit would have been obtained. Youst v. Longo, 43 Cal. 3d 64 (Cal. 1987). What Cirrus Beijing claims is that their ability to sell stock to the public through a public listing for sale on the NEEQ has been interfered with. First, it is nonsensical that Cirrus Beijing’s intentional concealment of the $60,000,000 Judgment against it during the NEEQ application process, when disclosure of same is legally mandated under Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 17 of 32 Page ID #:260 1126-5473-0001 - 9 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Chinese law, would ever result in a probability of benefit or profit in the sale of its stock. In fact, it likely would have the opposite result once revealed to the buying public. That aside, the law does not recognize Cirrus Beijing’s claim for interference with the potential buying public of its stock as a “reasonable probability of benefit.”1 For instance, the tort of interference is aimed at protecting established business relationships that have the probability of ripening into financially advantageous contractual relationships. Blank v. Kirwan, 39 Cal. 3d 331 (Cal. 1985)(plaintiff had no protectable expectancy of a relationship with class of potential poker club patrons, “but at most a hope for an economic relationship”), See also Venhaus v. Shultz, 155 Cal. App. 4th 1072, 1078 (Ct. App. 2007) (same foundation predicated for negligent interference claim; must be “economic relationship between plaintiff and third party” which contained “reasonably probably future economic benefit or advantage to plaintiff”). Thus, it is not enough to simply allege that Defendant Christopher Adams interfered with potentially profitable hypothetical future stock buyers. The Ninth Circuit interpreting California law has also recognized these requirements. For example, in Rickards v. Canini Eye Reg. Foundation, 704 F.2d 1449 (9th Cir. 1983), plaintiffs were veterinarians who were unable to get their canine eye exams listed on a certain registry because the registry would only list examinations performed by veterinarians certified by ACVO and plaintiffs had failed to pass the examinations required to obtain ACVO certification. Plaintiffs asserted antitrust claims, and a claim for intentional interference with prospective economic advantage, alleging that defendants had conspired to monopolize the market in canine eye examinations, 1 Plaintiff alleges that the contractual relationship upon which it bases its claim is with the NEEQ. [Complaint ¶¶ 69, 73, 76 & 80] However, the NEEQ is simply a stock exchange and vehicle to list the Cirrus Beijing stock to the public for sale to the public. If the claim by Cirrus Beijing is an interference with the arrangement with the NEEQ would have a probability of benefit or profit alone, that claim fails outright not only because that is not a contract for profit in and of itself, and Cirrus Beijing’s prospective relationship with the NEEQ was conditioned on compliance with Chinese securities laws and the candid disclosure of the Judgment against Cirrus Beijing for $60,000,000, which Plaintiff does not dispute was concealed from the NEEQ in violation of Chinese securities laws. Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 18 of 32 Page ID #:261 1126-5473-0001 - 10 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 thereby interfering with plaintiffs’ prospective relationships with dog owners who otherwise would have used their services. Despite testimony by dog owners supporting this allegation, the Ninth Circuit upheld a directed verdict in favor of the defendants on the ground that the evidence failed to establish “the existence of a specific economic relationship between [plaintiffs] and third parties.” Id., See also, Westside Ctr. Assoc. v. Safeway Store 23, Inc., 42 Cal. App. 4th 507 (Ct. App. 1996) (rejecting notion that plaintiff could establish claim based on interference with his relationship with “the market” or with mere opportunity for sales). Moreover, at least two California courts have specifically applied this principle in dismissing interference claims brought by doctors alleging interference with unidentified or future patients. Amid v. Hawthorne Cmty. Med. Grp., Inc., 212 Cal. App. 3d 1383, 1392 (Ct. App. 1989); Roth v. Rhodes, 25 Cal. App. 4th 530, 546 (Ct. App. 1994). Therefore, Cirrus Beijing’s claim for interference with prospective buyers of its stock cannot provide a basis for its Second or Third Cause of Actions. (v) The Alleged Statements Cannot Constitute Actionable Interference Plaintiff cannot prove that any actionable interference occurred at all, let alone based on the two statements alleged by Cirrus Beijing. Again, it is an absurd notion by Cirrus Beijing that anyone would give any attention to these two innocuous statements about EXPL as a parent company (which is true), and Cirrus Beijing’s 100% ownership by Exglish Xchange HK (which if not accurate has no demonstrable bearing on any issue with Cirrus Beijing’s application to publically list its stock for sale on the NEEQ stock exchange), and completely ignore Cirrus Beijing’s intentional concealment of the $60,000,000 Judgment as a basis to evaluate Cirrus Beijing’s application process for listing Cirrus Beijing stock on the NEEQ. /// /// Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 19 of 32 Page ID #:262 1126-5473-0001 - 11 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (vi) Cirrus Beijing Has Failed to Allege Damages Plaintiff again alleges that the alleged result of the Christopher Adams November 9, 2016 letter is the “listing prospects are now uncertain and its growth plans forced to be scaled back.” [Complaint ¶ 80] As set forth above, this is admittedly uncertain, speculative and remote and not sufficient for proof of damages. Griffith Co. v. San Diego Col. For Women, 172 Cal. App. 2d 756, 768 (Ct. App. 1955). Further, an allegation of potentially “scaled back” growth plans does not sufficiently constitute an economic loss or damage required under these causes of action. D. Plaintiff Cirrus Beijing’s Fourth Cause of Action Fails for Failure to State A Claim for Which Relief Can Be Granted Plaintiff Cirrus Beijing’s Fourth Cause of Action brought under California Business and Professions Code § 17200, otherwise known as California’s Unfair Competition Law (“UCL”), fails to state a claim against Defendants upon which relief may be granted pursuant to §12(b)(6) of the Federal Rules of Civil Procedure. First, Plaintiff Cirrus Beijing is not entitled to relief under Business & Prof. Code § 17200 because the statute does not reach matters of securities transactions. Bowen v. Zaisun Technologies, Inc., 116 Cal. App. 4th 777, 787–88 (Ct. App. 2004); see also, Spinner Corp. v. Princeville Develop. Corp., 849 F. 2d 388, 391–93 (9th Cir. 1988). Mainly though, Cirrus Beijing bases its entire Fourth Cause of Action on the allegation that “Adams has engaged in unfair competition by virtue of making false and defamatory statements in a letter sent to NEEQ with the intent of interfering with Cirrus Beijing’s listing application.” [Complaint ¶ 82] However, this allegation fails to state how this conduct was a business act under the UCL. Furthermore, Cirrus Beijing fails to demonstrate that it has standing to bring a claim under the UCL, and fails to bring forth allegations that Adams intended to engage in unlawful, unfair, or fraudulent business practices. Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 20 of 32 Page ID #:263 1126-5473-0001 - 12 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (i) Adams’ Communication to the NEEQ Is Not a Business Act or Practice Under the UCL Unfair competition under the UCL is defined to include “unlawful, unfair or fraudulent business practice and unfair, deceptive, untrue or misleading advertising.” Cal. Bus. & Prof. Code § 17200. The law does not define what a business practice is, but courts have interpreted it to be an “act or practice, committed pursuant to business activity, that is at the same time forbidden by law.” Klein v. Earth Elements, Inc., 59 Cal. App. 4th 965, 969 (Ct. App. 1997); see also Barquis v. Merchants Collection Assn., 7 Cal.3d 94, 113 (Cal. 1972). Usually, a “business practice” under the UCL indicates that the statute is directed at ongoing wrongful conduct. Hewlett v. Squaw Valley Ski Corp., 54 Cal. App. 4th 499, 519 (Ct. App. 1997); see also People v. Casa Blanca Convalescent Homes, Inc., 159 Cal. App. 3d 509, 526 (Ct. App. 1984). Plaintiff Cirrus Beijing has failed to identify a “business practice” that would be covered under the UCL or how Defendant Adams sending his correspondence to the NEEQ was “committed pursuant to business activity.” Furthermore, Cirrus Beijing has failed to demonstrate how the single act of sending the letter to the NEEQ is ongoing, demonstrative of a pattern, or forbidden by law. In general, Plaintiffs contend that Defendant Adams “embarked on an effort to smear and defame Cirrus Beijing,” but otherwise make no other contention that this was made pursuant to a business activity. [Complaint ¶ 50] The relationship between Cirrus Beijing and Defendants is that of judgment-debtor and judgment-creditor. They are not business competitors nor do they exchange in goods and services. Defendant Adams’ act of sending the letter to the NEEQ is one that is not covered by the UCL, for which relief cannot be granted. (ii) Plaintiff Cirrus Beijing Lacks Standing Under the UCL To maintain standing to sue under the UCL, a plaintiff must plead and prove that they have suffered an “injury in fact and [have] lost money or property” as a result of a defendant’s unlawful, unfair, or fraudulent business practice. Kwikset v. Superior Court 51 Cal. 4th 310, 317 (Cal. 2011); Cal. Bus. & Prof. Code § 17204. There must be a Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 21 of 32 Page ID #:264 1126-5473-0001 - 13 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 causal link between the alleged unfair competition and plaintiff's injury. i.e., plaintiff must have lost money or property because of the challenged act. Hall v. Time Inc., 158 Cal. App. 4th 847, 855 (Ct. App. 2008). Furthermore, a plaintiff must show that they have a vested, quantifiable ownership interest in the money or property. Korea Supply Corp. v. Lockheed Martin Corp., 29 Cal. 4th. 1134, 1149–151 (Cal. 2003). Here, Cirrus Beijing lacks standing because it has failed to allege a loss of money or property as a consequence of Defendants’ allegedly unlawful, unfair, or fraudulent business practices. Cirrus Beijing’s only claims regarding the alleged harm is that it has “uncertain listing prospects” and “growth plans,” or that its attempt “to raise capital as a publicly-traded in China” or “take advantage of highly favorable market conditions” will be hindered. [Complaint ¶¶ 6, 59, 83]. Nowhere does Cirrus Beijing state how it lost money or property, let alone provide a “quantifiable” determination of any amount which was lost. Therefore, Cirrus Beijing has no standing to bring a UCL claim. (iii) Plaintiff Cirrus Beijing Fails to State How Defendants Engaged in Any Unlawful, Unfair, or Fraudulent Conduct That Deceived the Public Plaintiff fails to plead with requisite specificity the conduct it believes constitutes Defendants’ “unlawful, unfair and fraudulent business practices.” Cal. Bus. & Prof. Code § 17200. “A plaintiff alleging unfair business practices under these statutes must state with reasonable particularity the facts supporting the statutory elements of the violation.” Khoury v. Maly’s of Calif., Inc., 14 Cal. App. 4th 612, 619 (Cal. 1993). A motion to dismiss is properly sustained under the “unlawful” prong if the complaint “identifies no particular section of the statutory scheme which was violated and fails to describe with any reasonable particularity the facts supporting violation.” Id. Under the “unfair” and “fraudulent” prongs, plaintiffs must plead that “members of the public are likely to be deceived.” Bank of the West v. Superior Court, 2 Cal. 4th 1257, 1267 (Cal. 1992); No Doubt v. Activision Publishing, Inc., 192 Cal. App. 4th 1018, 1036 (Ct. App. 2011). Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 22 of 32 Page ID #:265 1126-5473-0001 - 14 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiff cannot bring a UCL claim because it fails to set forth allegations indicating how any of the three prongs have been violated. Furthermore, Plaintiff fails to specifically identify any law or business act needed to predicate a UCL claim, and has failed to state facts that Defendants’ practices were likely to deceive the public. As discussed in the Defendants’ Introduction to this motion, Adams’ statements helped the public by informing the NEEQ of information that would enable it to protect investors from harm. For the foregoing reasons, Plaintiffs fail to meet the elements necessary to bring a UCL claim. E. The Court Lacks Subject-Matter Jurisdiction for Plaintiffs’ Fifth Cause of Action for Declaratory Relief The threshold requirement for any request for relief, including for declaratory relief, is that it “meet Article III’s case-or-controversy requirement” of the United States Constitution. Medimmune, Inc. v. Genetech, Inc., 549 U.S. 118, 126 (2007). If this requirement is not met, dismissal is warranted under Fed. R. Civ. P. 12(b)(1). On a motion to dismiss for lack of standing, a district court must accept as true all material allegations in the complaint, and must construe the complaint in the nonmovant’s favor. Bernhardt v. County of Los Angeles, 279 F.3d 862, 867 (9th Cir. 2002). The Court may not speculate as to the plausibility of the plaintiff’s allegations. See id. As noted above, Defendants move to dismiss Plaintiffs’ Fifth Cause of Action under Rule 12(b)(1) of the Federal Rules of Civil Procedure on the ground that their claims are unripe. The Article III case or controversy requirement limits federal courts’ subject matter jurisdiction by requiring that plaintiffs have standing and that claims be “ripe” for adjudication. Allen v. Wright, 468 U.S. 737, 750 (1984). The party asserting federal subject matter jurisdiction bears the burden of proving its existence. See Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994). /// /// Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 23 of 32 Page ID #:266 1126-5473-0001 - 15 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (i) The Fifth Cause of Action for Declaratory Relief Is Not Ripe for Adjudication The rationale of the ripeness doctrine “is to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements.” Clinton v. Acequia, Inc., 94 F.3d 568, 572 (9th Cir. 1996) (citing Abbott Labs. v. Gardner, 387 U.S. 136, 148 (1967), overruled on other grounds Califano v Sanders, 430 U.S. 99 (1977). “Accordingly, ripeness is peculiarly a question of timing, and a federal court normally ought not resolve issues involving contingent future events that may not occur as anticipated, or indeed may not occur at all.” Id. If a case is not ripe for review, there is no case or controversy, and thus, the court lacks subject-matter jurisdiction. To determine whether declaratory judgment is appropriate, a district court must decide (1) whether an actual case or controversy exists, and (2) whether the court should exercise its discretion to award declaratory relief. Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 669 (9th Cir. 2005). (a) A Case and Controversy Does Not Exist In the Ninth Circuit, the traditional standard for review for ripeness between private parties is whether “there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Principal Life Ins. Co., 394 F.3d at 671, quoting Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941). Plaintiffs here have not stated any facts to suggest that there is an existing controversy or “sufficient immediacy” that Defendants’ future actions will create one. Plaintiffs claim that “there exists a real and reasonable apprehension that defendants will seek to impose liability on the plaintiffs by claiming they are alter egos of the Superior Court Defendants.” [Complaint ¶ 60]. A claim of “real and reasonable apprehension” does not constitute “sufficient immediacy” to warrant a declaratory judgment. In the instant matter, “[t]he ‘central concern [of the ripeness inquiry] is whether the case involves uncertain or contingent future events that may not occur as Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 24 of 32 Page ID #:267 1126-5473-0001 - 16 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 anticipated, or indeed may not occur at all.’ ” Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122–1123 (9th Cir. 2010) (citing Richardson v. City and County of Honolulu 124 F.3d 1150, 1160 (9th Cir. 1997)). Furthermore, a court may evaluate the “sufficient immediacy” requirement in light of the “injury in fact” analysis a court must conduct when evaluating whether a party has standing to bring a case. Thomas v. Anchorage Equal Rights Comm'n, 220 F.3d 1134, 1138 (9th Cir.2000) (en banc) (“The constitutional component of the ripeness inquiry is often treated under the rubric of standing.... Indeed, because the focus of our ripeness inquiry is primarily temporal in scope, ripeness can be characterized as standing on a timeline.”) Therefore, under an “injury in fact” analysis, Plaintiffs must prove that potential harm is “actual or imminent, not conjectural or hypothetical.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992). “Imminence” is an even higher showing for Plaintiffs here. Plaintiffs’ sole evidence for demonstrating “sufficient immediacy” is a court room exchange between Judge Rosenblatt and counsel for Defendants Robert Baker over three (3) months before the trial in the Underlying Matter, where Mr. Baker indicated that he may attempt to “put evidence of alter ego” against Cirrus Ltd. [Complaint ¶ 42] Plaintiffs believe that the exchange in court “demonstrates that defendants intended from the beginning to seek a judgment against the plaintiffs...” presumably under alter ego theories [Complaint ¶ 42.] Plaintiffs decided to highlight this exchange because no other credible support exists to base their claim on for declaratory relief. The reality is that Defendants never argued alter ego theories during or after the trial in the Underlying Matter. All arguments were based on successor liability theories. [See, Plaintiff Christopher Adams’ Closing Argument Brief, p. 14, as Exh. “C” to Defendants’ Request for Judicial Notice.] There is no indication in the Statement of Decision or the Judgment that alter ego theories were ever debated or considered. [See, Exh. “A” to Defendants’ Request for Judicial Notice; see, page 4 of the Corrected and Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 25 of 32 Page ID #:268 1126-5473-0001 - 17 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Final Statement of Decision as Exh. “B” to Defendants’ Request for Judicial Notice.] Plaintiffs have resorted to stressing the courtroom exchange because they are unable to locate any other discussion of alter ego arguments in the proceedings related to the Underlying Matter that would serve their purpose. If Defendants decide to enforce the judgement against them based on alter ego theories, California law requires them to do so pursuant to a noticed motion. Wells Fargo Bank, National Association v. Weinberg, 227 Cal. App. 4th 1, 9. (Ct. App. 2014); see also Cal. Code Civ. Proc. § 187. In that situation, Plaintiffs will have ample opportunity in front of a California Court to argue the merits of adding them as judgment debtors. Therefore, Plaintiffs claim that “there exists a real and reasonable apprehension that defendants will seek to impose liability on the plaintiffs by claiming they are alter egos of the Superior Court Defendants” is nothing but speculation. [Complaint ¶ 60]. Plaintiffs’ claim is entirely contingent on a judgment action being enforced against them in the future for which there has been no showing of “sufficient immediacy” or “imminence.” Moreover, issues relating to the Underlying Action are still being adjudicated in California courts, including Plaintiffs’ challenge to the trial’s court finding that they are liable under theories of successor liability. [Complaint ¶ 3; see also, Exh. “D” attached to Defendants’ Request for Judicial Notice]. Alter ego theories were never advanced or discussed by any party in proceedings related to the Underlying Matter. Plaintiffs’ request for declaratory relief is based on purely hypothetical and speculative facts, and their reliance on the February 9, 2016 courtroom exchange fails to constitute proof that “sufficient immediacy” or any “imminence” exists to warrant declaratory relief. (b) The Court Should Not Exercise Its Discretion in Granting Declaratory Relief The Declaratory Judgment Act (28 U.S. Code § 2201) grants “federal courts competence to make a declaration of rights,” but it does “not impose a duty to do so.” Pub. Affairs Assoc. v. Rickover, 369 U.S. 111, 112 (1962). Thus, it “is well established Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 26 of 32 Page ID #:269 1126-5473-0001 - 18 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 that even though jurisdiction may exist under the Declaratory Judgment Act the granting of declaratory judgments is at the discretion of the district court.” McGraw-Edison Co. v. Preformed Line Prods. Co., 362 F.2d 339, 342 (9th Cir. 1966) (citation omitted). Likewise, the district court holds the discretion to dismiss any declaratory judgment action without leave to amend. See Leadsinger, Inc. v. BMG Music Pub., 512 F.3d 522, 533 (9th Cir. 2008). In determining whether to entertain a request for a declaratory relief, courts in the Ninth Circuit consider two primary criteria: (1) if the judgment “will serve a useful purpose in clarifying and settling the legal relations in issue;” and (2) if “it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.” Celador Int'l, Ltd. v. Walt Disney Co., 347 F. Supp. 2d 846, 857 (C.D. Cal. 2004) (quoting McGraw-Edison Co., 362 F.2d at 342). If the requested “relief serves no purpose, or an illegitimate one, then the district court should not grant it.” Exxon Shipping Co. v. Airport Depot Diner, 120 F.3d 166, 167–68 (9th Cir. 1997) (district court abused its discretion when it “granted a declaratory judgment summarily adjudicating certain issues relating to claims against Exxon in a parallel federal proceeding and in hypothetical state court litigation”). In addition to the foregoing threshold requirements, courts consider what are known as the “Brillhart factors”: (1) the district court should avoid needless determination of state law issues; (2) it should discourage litigants from filing declaratory actions as a means of forum shopping; and (3) it should avoid duplicative litigation. Robinson, 394 F.3d at 672 (citing Brillhart v. Excess Ins. Co., 316 U.S. 491 (1942). Here, neither of the threshold requirements for declaratory relief is met, and all of the Brillhart factors weigh in favor of dismissal. /// /// Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 27 of 32 Page ID #:270 1126-5473-0001 - 19 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i) Declaratory Relief Would Neither Serve a Useful Purpose Nor Afford Relief from Uncertainty A declaratory judgment “serve[s] no useful purpose ” when “the issues raised by the prayer for declaratory relief will be completely disposed of in other litigation[.]” Celador Int'l, Ltd., 347 F. Supp. 2d at 857. Thus, district courts consistently deny declaratory relief where, as here, it seeks a determination concerning defenses to claims in another pending or anticipated action. See Gribin v. Hammer Galleries, Div. of Hammer Holdings, Inc., 793 F. Supp. 233, 235 (C.D. Cal. 1992) (“Numerous courts have refused to grant declaratory relief to a party who has come to the court only to assert an anticipatory defense[.]”). The Fifth Cause of Action is for a declaration “establishing that the plaintiffs, on the one hand, and the Superior Court Defendants, on the other hand, are not alter egos with respect to any potential claims by the defendants.” [Complaint ¶ 86] Furthermore, Plaintiffs seek a declaration that they “are separate and distinct from EXPL, and are not alter egos of that entity or any of the Superior Court Defendants.” [Complaint ¶ 87] However, Plaintiffs’ claim is entirely contingent on a judgment enforcement action being brought against them that has yet to occur and for which Defendants have not signaled will ever occur. Moreover, whether Defendants decide to enforce the judgment in the future will ultimately take place in state court under relevant California statutes and case authority than enable Defendants to add debtors to their Judgment. Cal. Code Civ. Proc. § 187; Wells Fargo Bank, National Association v. Weinberg, 227 Cal. App. 4th 1, 9 (Ct. App. 2014). In that proceeding, the judgment creditor will need to show that (1) the parties to be added as judgment debtors had control of the underlying litigation and were virtually represented in that proceeding; (2) there is such a unity of interest and ownership that the separate personalities of the entity and the owners no longer exist; and (3) an inequitable result will follow if the acts are treated as those of the entity alone. Relentless Air Racing, LLC v. Airborne Turbine Ltd. Partnership 222, Cal. App. 4th Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 28 of 32 Page ID #:271 1126-5473-0001 - 20 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 811, 815–16 (Ct. App. 2013). Therefore, a proceeding in federal court to determine this would be entirely duplicative of what must occur in California state court. See, e.g., Kyocera Commc'ns, Inc., 2012 WL 2501119, at *3 (“Permitting multiple lawsuits to adjudicate the same issues would serve no purpose[.]”). The Fifth Cause of Action should also be dismissed because it will not “terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding[.]” McGraw-Edison Co., 362 F.2d at 342. For example, “were this Court to entertain the instant action, yet not award [Plaintiffs] the declaratory judgment [they] desire,” the decision by defendants whether to add plaintiffs as judgment debtors would still require adjudication in a California court. First Nationwide Mortg. Corp. v. FISI Madison, LLC, 219 F. Supp. 2d 669, 674 (D. Md. 2002); see also Blanchard Training & Dev., 2016 WL 773227, at *5. Thus, because the Fifth Cause of Action does not meet the threshold requirements for declaratory relief, it should be dismissed with prejudice. See Exxon Shipping Co., 120 F.3d at 168–70; see also Podobedov v. Living Essentials, LLC, No. CV 11-6408 PSG PLAX, 2012 WL 2513458, at *5 (C.D. Cal. Mar. 22, 2012) (dismissing declaratory judgment action without leave to amend). ii) Application of the Brillhart Factors Also Favors Dismissal. Dismissal of the Fifth Cause of Action is also warranted based on the Brillhart factors. The first and third Brillhart factors are, respectively, the avoidance of “needless determination of state law issues,” and “duplicative litigation.” See Principal Life Ins. Co., 394 F.3d at 672. As discussed above, the determination as to whether Plaintiffs are judgement debtors is a matter of state law that can be decided in underlying post- judgement proceedings. This Court need not address that issue. The remaining Brillhart factor is “discourag[ing] litigants from filing declaratory actions as a means of forum shopping[.]” Principal Life Ins. Co., 394 F.3d at 672. A related consideration is “whether the declaratory action is being sought [] for the purposes of procedural fencing or to obtain a ‘res judicata’ advantage.” Id. “Procedural Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 29 of 32 Page ID #:272 1126-5473-0001 - 21 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 fencing” occurs when a party attempts to “us[e] the declaratory judgment device to preempt another lawsuit and to engage in forum-shopping[.]” Fiberlight, LLC v. Amtrak, 81 F. Supp. 3d 93, 115 (D.D.C. 2015). “The wholesome purposes of declaratory acts would be aborted by its use as an instrument of procedural fencing [] to choose a forum.” Exxon Shipping Co., 120 F.3d at 170 (citation omitted). Since Defendants have never pursued Plaintiffs as judgment debtors on alter ego theories, Plaintiffs clearly have filed the Complaint for procedural advantage and forum shopping, and to make Defendants waste resources to defend actions both in state and federal court. The determination of alter ego liability is ultimately a question of California state law, if and when it arises, which means that a California court is a proper venue. Plaintiffs have brought this action in federal court to vex Defendants and to avoid the general jurisdiction of the California Court of Appeal which is currently reviewing Plaintiffs’ challenge of the trial court’s ruling. [Complaint ¶ 3; see also, Exh. “D” attached to Defendants’ Request for Judicial Notice]. The current federal court action has already led Defendants to spend unnecessary resources to litigate claims that could easily be addressed in state court upon resolution of the matter before the California Court of Appeal. The litigation was undoubtedly brought to harass Defendants, and has significantly entangled federal and state court systems. This has and will lead to extreme inconvenience for Plaintiffs without settling any matters that has been raised in the course of litigation. /// /// /// /// /// /// /// Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 30 of 32 Page ID #:273 1126-5473-0001 - 22 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 F. No Basis Exists to Grant Plaintiffs’ Sixth Cause of Action for Injunctive Relief Plaintiffs have failed to make a showing that they have valid claims to bring any of their Causes of Action against Defendants. Without such viable claims, there is no basis for injunctive relief, and Plaintiffs’ Sixth Cause of Action must be denied. 3. CONCLUSION For the foregoing reasons set forth above, Plaintiffs’ First, Second, Third, Fourth, Fifth, and Sixth Causes of Action must be dismissed with prejudice. DATED: January 9, 2017 BAKER, KEENER & NAHRA, LLP By /S/ LAURENCE C. OSBORN ROBERT C. BAKER LAURENCE C. OSBORN Attorneys for Defendants CHRISTOPHER M. ADAMS, an individual; DAVID V. ADAMS, trustee of the Christopher Adams Trust; DVA, INC.; and MORGAN ADAMS, INC. Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 31 of 32 Page ID #:274 1126-5473-0001 - 23 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS UNDER FRCP 12(b)1 AND 12(b)(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CERTIFICATE OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES CIRRUS EDUCATION, INC., et al. v. CHRISTOPHER M. ADAMS, et al. USDC Case No.: 2:16-CV-9194 TJH (GJS) I am over the age of 18 and not a party to the within action; I am employed by BAKER, KEENER & NAHRA, LLP in the County of Los Angeles at 633 West Fifth Street, Suite 4900, Los Angeles, California, 90071. On January 9, 2017, I served the foregoing document(s) described by MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION: (1) TO DISMISS PLAINTIFF CIRRUS BEIJING’S FIRST CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (2) TO DISMISS PLAINTIFF CIRRUS BEIJING’S SECOND CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (3) TO DISMISS PLAINTIFF CIRRUS BEIJING’S THIRD CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (4) TO DISMISS PLAINTIFF CIRRUS BEIJING’S FOURTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (5) TO DISMISS PLAINTIFFS’ FIFTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(1); AND (6) TO DISMISS PLAINTIFFS’ SIXTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) as follows: Michael C. Tu, Esq. Counsel for Plaintiffs Kevin M. Askew, Esq. Elliott S. Henry, Esq. ORRICK, HERRINGTON & SUTCLIFFE LLP 777 S. Figueroa Street, Suite 3200 Los Angeles, CA 90017 (213) 629-2020; (213) 612-2499-FAX mtu@orrick.com kaskew@orrick.com  (BY ECF) I caused the above-referenced document(s) to be filed the Electronic Case Filing (ECF) system in the United States District Court for the Central District of California, on all parties registered for e- filing. Counsel of record are required by the Court to be registered e-filers, and as such, are automatically e-served with a copy of the documents upon confirmation of e-filing.  (FEDERAL) I declare that I am employed in the office of a member of the Bar of this Court at whose direction the service was made. I declare under penalty of perjury under the laws of the United States of America that the above is true and correct. Executed on January 9, 2017, at Los Angeles, California. /s/ LAURENCE C. OSBORN LAURENCE C. OSBORN Case 2:16-cv-09194-TJH-GJS Document 21-1 Filed 01/09/17 Page 32 of 32 Page ID #:275 1126-5473-0001 - 1 - [PROPOSED] ORDER ON DEFENDANTS’ MOTION TO DISMISS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA - WESTERN DIVISION CIRRUS EDUCATION INC., a corporation; CIRRUS (BEIGING) CORP., a corporation; CIRRUS LTD; a corporation; and IQ-HUB PTE LTED., a corporation, Plaintiffs, vs. CHRISTOPHER M. ADAMS, an individual; DAVID V. ADAMS, a trustee of the Christopher Adams Trust; DVA, INC., a corporation; and MORGAN ADAMS, INC., a corporation, Defendants. Case No.: 2:16-CV-9194-TJH-GJS Complaint Filed: 12-12-2016 [PROPOSED] ORDER ON DEFENDANTS’ MOTION TO DISMISS: (1) TO DISMISS PLAINTIFF CIRRUS BEIJING’S FIRST CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) (2) TO DISMISS PLAINTIFF CIRRUS BEIJING’S SECOND CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) (3) TO DISMISS PLAINTIFF CIRRUS BEIJING’S THIRD CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) (4) TO DISMISS PLAINTIFF CIRRUS BEIJING’S FOURTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (5) TO DISMISS PLAINTIFFS’ FIFTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(1); AND (6) TO DISMISS PLAINTIFFS’ SIXTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) Hearing: DATE: February 6, 2017 TIME: UNDER SUBMISSION DEPT: Courtroom 9B Case 2:16-cv-09194-TJH-GJS Document 21-2 Filed 01/09/17 Page 1 of 3 Page ID #:276 1126-5473-0001 - 2 - [PROPOSED] ORDER ON DEFENDANTS’ MOTION TO DISMISS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendants CHRISTOPHER M. ADAMS; DAVID V. ADAMS, a trustee of the Christopher Adams Trust; DVA, INC.; and MORGAN ADAMS, INC.’s Motion to Dismiss the Complaint of Plaintiffs CIRRUS EDUCATION, INC., CIRRUS (BEIJING) CORP., Cirrus LTD, and IQ HUB PTE, LTD under Federal Rule of Civil Procedure 12(b) came on for hearing on February 6, 2017 before the Hon. Judge Terry J. Hatter, Jr., presiding. Defendants were represented by Laurence C. Osborn of Baker, Keener & Nahra LLP. Plaintiffs were represented by Michael Tu of Orrick, Herrington & Sutcliffe LLP. The Court has read, heard and considered all oral and written arguments and evidence submitted by the parties and finds that, upon consideration of all evidence and arguments presented makes the following orders: IT IS HEREBY ORDERED, ADJUDGED AND DECREED that Defendants CHRISTOPHER M. ADAMS; DAVID V. ADAMS, a trustee of the Christopher Adams Trust; DVA, INC.; and MORGAN ADAMS, INC.’s Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b), as to the First, Second, Third, Fourth, Fifth and Sixth Causes of Action contained therein is hereby GRANTED as against Plaintiffs CIRRUS EDUCATION, INC., CIRRUS (BEIJING) CORP., Cirrus LTD, and IQ HUB PTE, LTD. DATED: ___________________ ____________________________________ THE HONORABLE TERRY J. HATTER, JR. Judge of the United States District Court Case 2:16-cv-09194-TJH-GJS Document 21-2 Filed 01/09/17 Page 2 of 3 Page ID #:277 1126-5473-0001 - 3 - [PROPOSED] ORDER ON DEFENDANTS’ MOTION TO DISMISS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CERTIFICATE OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES USDC Case No.: 2:16-CV-9194 TJH (GJS) CIRRUS EDUCATION, INC., et al. v. CHRISTOPHER M. ADAMS, et al. I am over the age of 18 and not a party to the within action; I am employed by BAKER, KEENER & NAHRA, LLP in the County of Los Angeles at 633 West Fifth Street, Suite 4900, Los Angeles, California, 90071. On January 9, 2017, I served the foregoing document(s) described by [PROPOSED] ORDER ON DEFENDANTS’ MOTION TO DISMISS: (1) TO DISMISS PLAINTIFF CIRRUS BEIJING’S FIRST CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (2) TO DISMISS PLAINTIFF CIRRUS BEIJING’S SECOND CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (3) TO DISMISS PLAINTIFF CIRRUS BEIJING’S THIRD CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (4) TO DISMISS PLAINTIFF CIRRUS BEIJING’S FOURTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6); (5) TO DISMISS PLAINTIFFS’ FIFTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(1); AND (6) TO DISMISS PLAINTIFFS’ SIXTH CAUSE OF ACTION UNDER FED. R. CIV. P. 12(b)(6) as follows: Michael C. Tu, Esq. Counsel for Plaintiffs Kevin M. Askew, Esq. Elliott S. Henry, Esq. ORRICK, HERRINGTON & SUTCLIFFE LLP 777 S. Figueroa Street, Suite 3200 Los Angeles, CA 90017 (213) 629-2020; (213) 612-2499-FAX mtu@orrick.com kaskew@orrick.com  (BY ECF) I caused the above-referenced document(s) to be filed the Electronic Case Filing (ECF) system in the United States District Court for the Central District of California, on all parties registered for e- filing. Counsel of record are required by the Court to be registered e-filers, and as such, are automatically e-served with a copy of the documents upon confirmation of e-filing.  (FEDERAL) I declare that I am employed in the office of a member of the Bar of this Court at whose direction the service was made. I declare under penalty of perjury under the laws of the United States of America that the above is true and correct. Executed on January 9, 2017, at Los Angeles, California. LAURENCE C. OSBORN /s/ LAURENCE C. OSBORN Case 2:16-cv-09194-TJH-GJS Document 21-2 Filed 01/09/17 Page 3 of 3 Page ID #:278