Jetpack Enterprises, Llc et al v. Jetlev, Llc et al

NOTICE OF MOTION AND MOTION to Dismiss Counts II through VI of Plaintiffs' First Amended Complaint or For More Definite Statement

C.D. Cal.July 10, 2017

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 CASE NO. 8:15-cv-02113-CJC-JCG DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 R. SCOTT FELDMANN (CA SBN 169230) sfeldmann@bakerlaw.com BAKER & HOSTETLER LLP 600 Anton Blvd., Suite 900 Costa Mesa, CA 92626 Telephone: (714) 966-8862 Facsimile: (714) 754-6611 KEVIN W. KIRSCH (CA SBN 166184) kkirsch@bakerlaw.com BAKER & HOSTETLER LLP 312 Walnut Street, Suite 3200 Cincinnati, OH 45202-4074 Telephone: (513) 929-3499 Facsimile: (513) 929-0303 Attorneys for Defendants JLIP, LLC, SETH GERSZBERG and MATTHEW ROSENBLATT UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION JETPACK ENTERPRISES, LLC, and JETPACK ENTERPRISES - SAN DIEGO, LLC, Plaintiffs, v. JETLEV, LLC, JETLEV TECHNOLOGIES, INC., JLIP, LLC, AQUAFLIER, LLC, JLSG, LLC, SETH GERSZBERG, and MATTHEW ROSENBLATT, Defendants. Case No. 8:15-cv-02113-CJC-JCG NOTICE OF MOTION AND PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT OF DEFENDANTS JLIP, LLC, SETH GERSZBERG, AND MATTHEW ROSENBLATT Date: Monday, August 7, 2017 Time: 1:30 p.m. Courtroom: 9B (Santa Ana) Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 1 of 34 Page ID #:4119 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 CASE NO. 8:15-cv-02113-CJC-JCG - i- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 TO THE HONORABLE COURT, ALL PARTIES AND ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on Monday, August 7, 2017 at 1:30 p.m. in Courtroom 9B of the above-titled Court, located at 411 West 4th St., Santa Ana, California 92701, Counsel for Defendants JLIP, LLC, Seth Gerszberg, and Matthew Rosenblatt (collectively, “Defendants”) will, and hereby do, move the Court pursuant to Fed. R. Civ. P. 12(b)(6) to dismiss with prejudice Counts II through VI of Plaintiffs’ First Amended Complaint (Dkt. 138.) Plaintiffs improperly allege breach of contract under the guise of various inapplicable tort claims, in violation of California’s economic loss rule and California Civil Code Section 3294. Plaintiffs also fail to allege facts that establish necessary elements of the tort claims. In the alternative, Defendants will, and hereby do, move the Court pursuant to Fed. R. Civ. P. 12(e) for an order requiring Plaintiffs to provide a more definite statement of Counts II through IV of the First Amended Complaint, which purport to set forth tortious misrepresentation claims. Those claims are not pleaded with the particularity required by Fed. R. Civ. P. 9(b). This motion is made following the conference of counsel pursuant to L.R. 7-3, which took place on or about June 26-28, 2017. See Declaration of Robert T. Razzano, attached hereto. Dated: July 10, 2017 BAKER & HOSTETLER, LLP By: /s/ Kevin W. Kirsch Kevin W. Kirsch Attorney for Defendants JLIP, LLC, SETH GERSZBERG and MATTHEW ROSENBLATT Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 2 of 34 Page ID #:4120 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 CASE NO. 8:15-cv-02113-CJC-JCG - ii- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 CONTENTS I. INTRODUCTION ............................................................................................ 1 II. PLAINTIFFS’ ALLEGATIONS ...................................................................... 3 III. STANDARD OF REVIEW ............................................................................. 6 IV. Argument .......................................................................................................... 7 A. The Economic Loss Rule and California Civil Code Section 3294 Mandate Dismissal of Plaintiffs’ Tort Claims and Prayer for Punitive Damages. ................................................................................................ 7 1. Counts II-IV Should be Dismissed With Prejudice .................. 11 2. Counts V and VI Should Be Dismissed With Prejudice .......... 14 B. Plaintiffs Have Not Pleaded the Elements of a Claim for Fraud or Misrepresentation. ................................................................................ 15 1. The Alleged “Overarching” Failure to Tell Plaintiffs that Jetlev Was Going in a New Direction is Not Actionable. ................................................................................ 17 2. The Allegedly Fraudulent Inducement to Enter Into the November 2013 Contract is Not Actionable. ........................... 18 3. The Alleged Misrepresentation Regarding Jetlev’s Financial Condition is Not Actionable. .................................... 19 C. Plaintiffs Have Not Pleaded the Elements of a Claim for Interference with Economic Advantage. .................................................................. 19 1. Plaintiffs Have Not Adequately Pleaded a Prospective Advantage. ................................................................................ 20 2. Plaintiffs Have Not Adequately Pleaded Tortious Conduct. .................................................................................... 21 D. Alternatively, To the Extent the FAC Supports a Fraud or Misrepresentation Claim, the Circumstances of the Alleged Misrepresentations are Not Pleaded With the Requisite Particularity Under Rule 9(b). .................................................................................. 24 V. CERTIFICATION OF COMPLIANCE WITH LOCAL RULE 7-3 ............. 26 VI. Conclusion ...................................................................................................... 27 Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 3 of 34 Page ID #:4121 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 CASE NO. 8:15-cv-02113-CJC-JCG - iii- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 Table of Authorities Page(s) Cases 800 Adept, Inc. v. Murex Securities, Ltd., 539 F. 3d 1354 (Fed. Cir. 2008) .......................................................................... 23 Aas v. Superior Court, 24 Cal. 4th 627 (2000) ........................................................................................... 7 Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, 70 Cal. Rptr. 3d 199, 158 Cal.App.4th 226 (Cal. App. 2007) ...................... 16, 18 In re Apple & AT&TM Antitrust Litig., 596 F. Supp. 2d 1288 (N.D. Cal. Oct. 1, 2008) ................................................... 25 Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503 (Cal. 1994) ......................................................................... 9, 21, 22 Ashcroft v. Iqbal, 556 U.S. 662 (2009) .............................................................................................. 6 Cates Construction, Inc. v. Talbot Partners, 21 Cal. 4th 28, 980 P.2d 407, 86 Cal. Rptr. 2d 855 (Cal. 1999) ........................... 8 Crogan v. Metz, 47 Cal. 2d 398 (Cal. 1956) .................................................................................... 9 Damabeh v. 7-Eleven, Inc., No. 12-CV-01739 LHK, 2013 U.S. Dist. LEXIS 66565, 2013 WL 1915867 (N.D. Cal. May 8, 2013) ....................................................................... 21 Della Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal. 4th 376 (1995) ......................................................................................... 22 Foster Poultry Farms v. Alkar-Rapidpak-MP Equipment, Inc., 868 F. Supp. 2d 983 (E.D. Cal. 2012) ..................................................... 12, 13, 15 Heliotrope General, Inc. v. Ford Motor Co., 189 F.3d 971 (9th Cir. 1999) ................................................................................. 6 Intelligraphics, Inc. v. Marvell Semiconductor, Inc., 2009 U.S. Dist. LEXIS 9875 (N.D. Cal. 2009) ......................................... 9, 10, 11 Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 4 of 34 Page ID #:4122 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 CASE NO. 8:15-cv-02113-CJC-JCG - iv- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (2003) ........................................................................................ 22 Lazar v. Superior Court, 12 Cal.4th 631 909 P. 2d 981(Cal. 1996) ............................................................ 16 Los Angeles Mem’l Coliseum Comm’n v. Insomniac, Inc., 233 Cal. App. 4th 803, 182 Cal. Rptr. 3d 888 (2015) ......................................... 16 In re Lui, 2016 WL 1212113 (9th Cir. Mar. 29, 2016) ....................................................... 26 McHenry v. Renne, 84 F.3d 1172 (9th Cir. 1996) ............................................................................... 24 Moss v. US. Secret Srvc., 572 F.3d 962 (9th Cir.2009) .................................................................................. 6 Odom v. Microsoft Corp., 486 F.3d 541 (9th Cir. 2007) ............................................................................... 26 Oestreicher v. Alienware Corp., 544 F. Supp. 2d 964 (N.D. Cal. 2008) ................................................................. 24 Oracle USA, Inc. v. XL Global Servs., Inc., 2009 U.S. Dist. LEXIS 59999 (N.D. Cal. Jul. 13, 2009) ............................. passim Panavision Int’l, L.P. v. Toeppen, 945 F. Supp. 1296 (C.D. Cal. 1996) .................................................................... 20 Pickard v. WMC Mortgage Corp., 2009 WL 3416134 (E.D. Cal. Oct. 21, 2009) ..................................................... 24 Richard P. v. Vista Del Mar Child Care Serv., 106 Cal. App. 3d 860 ..................................................................................... 15, 19 Robinson Helicopter Company v. Dana Corporation, 34 Cal. 4th 979 (2004) .................................................................................. passim In re Silicon Graphics, Inc. Sec. Litig., 183 F.3d 970 (9th Cir.1999) .................................................................................. 6 Super Chefs, Inc. v. Second Bite Foods, Inc., 2015 U.S. Dist. LEXIS 113468 (C.D. Cal. Aug. 25, 2015) ......................... passim Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 5 of 34 Page ID #:4123 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 CASE NO. 8:15-cv-02113-CJC-JCG - v- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 Tsai v. Wang, 2017 U.S. Dist. LEXIS 91797 (Jun. 14, 2017) ............................................. passim Westside Ctr. Assocs. v. Safeway Stores 23, Inc., 42 Cal. App. 4th 507, 49 Cal. Rptr. 2d 793 (1996) ....................................... 20, 21 Statutes Cal. Comm. Code § 2201(1) ..................................................................................... 17 California Civil Code Section 3294 .................................................................... 1, 7, 8 Rules Federal Rule of Civil Procedure 8 ...................................................................... 24, 25 Federal Rule of Civil Procedure 9(b) ................................................................ passim Federal Rule of Civil Procedure 12(b)(6) ......................................................... 1, 6, 26 Federal Rule of Civil Procedure 12(e) .................................................................. 1, 26 Local Rule 7-3 .......................................................................................................... 26 Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 6 of 34 Page ID #:4124 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 CASE NO. 8:15-cv-02113-CJC-JCG DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 Defendants JLIP, LLC (“JLIP”), Seth Gerszberg (“Gerszberg”), and Matthew Rosenblatt (“Rosenblatt”) (collectively, “Defendants”), hereby move pursuant to Federal Rule of Civil Procedure 12(b)(6) for an order dismissing with prejudice Counts II through VI of Plaintiffs’ First Amended Complaint, all of which improperly allege breach of contract under the guise of various inapplicable tort claims, in violation of California’s economic loss rule and California Civil Code Section 3294.1 The elements of Plaintiffs’ tort claims are not pleaded. Plaintiffs fail to state a tort claim upon which relief can be granted. In the alternative and with regard to Counts II through IV, all of which depend on proving a material misrepresentation, the circumstances of the alleged misrepresentations have not been set forth with the particularity required under Rule 9(b). In order to provide Defendants a fair opportunity to defend themselves, should Counts II through IV survive this motion at all, the Court should order Plaintiffs to provide a more definite statement pursuant to Rule 12(e). I. INTRODUCTION This entire litigation arises from an alleged breach of contract claim repeatedly valued by Plaintiffs at $105,422.80, specifically comprised of an allegedly (a) unreturned deposit totaling $85,000; (b) unpaid commission totaling $18,007.80; and (c) undelivered product totaling $2,415. (See Plaintiffs’ First Amended Complaint, Dkt. 138, hereafter referenced as “FAC”, at Exh. 3). 1 Plaintiffs are not entitled to seek or obtain punitive damages on its breach of contract claim at Count I of the FAC. Defendants had planned to include within its dispositive motion directed at the initial Complaint a motion to dismiss with prejudice any claim of Plaintiffs to the contrary. In the course of a “meet and confer,” however, Plaintiffs’ counsel represented that Plaintiffs would not seek punitive and/or other form of exemplary damage under its breach of contract claim at Count I of the Complaint. On the assumption that this representation applies with equal force to the FAC, the present Motion is solely targeted against the wrongfully pled Counts II-VI of the FAC. Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 7 of 34 Page ID #:4125 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 CASE NO. 8:15-cv-02113-CJC-JCG - 2- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 On January 18, 2017, more than one year into this case and at a time when Plaintiffs were seeking expansive discovery, the Court inquired as to the proportionality of discovery to the size of the case. After discussing the nature of the case, the Court stated “It’s a 105,000 dollar case.” Plaintiffs’ counsel responded, “I understand, Your Honor.” (Dkt. 104-1 at 57:15-18.) But five months later, faced with a Motion to Dismiss exposing the fatal deficiencies and legal barriers to their tort claims, Plaintiffs amended their pleading, removing some tort claims and a fiduciary duty claim, but attempting to bolster other tort claims with more vague allegations that add no substance and still arise from contract. (Dkt. 126; Dkt. 126-1.) Plaintiffs have done their best to wrongfully mischaracterize a run-of-the- mill breach of contract case into a tort case, through which Plaintiffs somehow now claim entitlement to upwards of $16 Million Dollars on a $105,000 debt. Plaintiffs do so through assertion of a breach of contract claim (at Count I), followed by wrongful assertion of five (5) purportedly different (but all substantively identical) tort claims (at Counts II-VI), each of which is entirely predicated on allegedly unfulfilled promises and thereby constitute thinly veiled contract claims. As set forth below, California’s economic loss rule bars plaintiffs from injecting prejudicial mudslinging into simple contract cases like this. Plaintiffs still fail to state a tort claim upon which relief can be granted. Counts II through VI of the FAC should be dismissed with prejudice. In the alternative, if any of Counts II through IV of the FAC survive this motion, Plaintiffs should be required to plead their hopelessly vague allegations of fraud with particularity so that Defendants may have a fair opportunity to prepare and present a defense. Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 8 of 34 Page ID #:4126 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 CASE NO. 8:15-cv-02113-CJC-JCG - 3- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 II. PLAINTIFFS’ ALLEGATIONS2 In its Order Denying Defendants’ Motion to Dismiss for Lack of Personal Jurisdiction (Dkt. 21), this Court accurately summarized Plaintiffs’ initial Complaint as follows: Jetpack filed its complaint against Defendants on December 18, 2015. The Complaint asserts nine causes of action against the Defendants: for (1) breach of contract, (2) fraud, (3) promissory fraud, (4) negligent misrepresentation, (5) intentional interference with prospective economic advantage, (6) conversion, (7) negligence, (8) fraudulent conveyance, and (9) breach of fiduciary duty. (See generally Compl.) Essentially, Jetpack alleges that Jetlev failed to perform on its obligations in the Contract and then misled Jetpack to believe first that it could still meet those obligations, and second that it was in bankruptcy, all in an effort to persuade Jetpack to drop its claim for the roughly $105,000. (See id.). (Dkt. 32 at pp. 5-6 (emphasis added).) The FAC is substantively no different except that the sixth through ninth counts have been voluntarily deleted-Plaintiffs added, however, a “negligent interference” claim that differs from the intentional interference claim only in terms of culpability. (Compare Dkt. 1 with FAC.) This Court’s very own summary of the allegations in Plaintiffs’ pleading effectively provides all the factual backdrop needed for favorable disposition of this motion. Indeed, as discussed below, the entirety of this case is predicated on Plaintiffs’ allegations of economic harm arising from vague and allegedly unfulfilled promises and expectations with no allegation of an independent tort. The majority of the FAC is an exercise in mudslinging in a transparent attempt to cast Defendants as corporate raiders who allegedly forced a non-party 2 All of Plaintiffs’ factual allegations in the FAC are assumed as true for purposes of this motion. Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 9 of 34 Page ID #:4127 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 CASE NO. 8:15-cv-02113-CJC-JCG - 4- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 inventor out of his company. But when it boils down to the Plaintiffs, each and every one of Plaintiffs’ causes of action arise from an alleged relationship between the parties that was first consummated in an actual contract in February 2013, which was amended in November 2013 to address the alleged breach of the February contract.3 (FAC, ¶¶ 82-89, Ex. 3.) Plaintiffs specifically allege that, in February 2013, Plaintiff Jetpack Enterprises, LLC (“Jetpack Enterprises”) and Jetlev, LLC (“Jetlev”) executed an agreement (the “February 2013 Contract”) providing that Plaintiff Jetpack Enterprises would pay Jetlev a fully refundable $85,000 deposit toward the possible future purchase of four jetpacks for use at a new San Diego facility. (Id., ¶ 82.) Plaintiffs further allege that, around this same time, it became apparent to Plaintiff Jetpack Enterprises that Jetlev was not delivering promised equipment or meeting other financial obligations, including without limitation failing to pay Jetpack Enterprises a contractual commission totaling $18,000 and deliver a contractually owed order of helmets valued at $2,415. (Id., ¶ 85.) Accordingly, Plaintiffs further allege that, in or about August 2013, Jetpack Enterprises demanded that Jetlev make it whole for the deposit, the commission, and the helmets. (Id., ¶ 87.) Plaintiffs further allege that one or more Defendants convinced Plaintiffs of their opinion that the best course of action was simply to credit the money that was allegedly owed to Jetpack Enterprises toward the purchase of new jetpack equipment. (Id., ¶ 88.) Plaintiffs allege that this resulted in a contract entered in November 2013 (the “November 2013 Contract”), under which Jetlev allegedly acknowledged $105,422.80 owed under the February 2013 Contract and agreed that 3 Tellingly, Plaintiffs themselves divide the “fact section” of the FAC into a “Part I” (FAC, ¶¶ 13-75) dedicated to the alleged ‘background,’ in contrast to a “Part II” (FAC, ¶¶ 76-95) dedicated to allegations that actually involve Defendants’ alleged conduct toward Plaintiffs. Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 10 of 34 Page ID #:4128 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 CASE NO. 8:15-cv-02113-CJC-JCG - 5- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 such debt would be “zeroed out” in exchange for delivery of fourteen new jetpack units (called “AquaFlyer” or “AquaBoard” units). (Id., ¶ 89, Ex. 3). Plaintiffs then allege that Jetlev breached the November 2013 Contract by having failed to deliver new jetpack units and/or otherwise return any of the money that was owed (Id., at ¶ 90.) Plaintiffs claim that their baseline damages arising from such breaches of contract total $105,422.80 (plus interest). (Id., ¶¶ 96-105 (Count I); see also Dkt. 104-1 at 21:15-18 (Plaintiffs’ counsel: “In this case [$105,000] is the base level.”).)4 Otherwise, Plaintiffs’ 47-page FAC merely chronicles Plaintiffs’ allegedly positive relationship-but no contract-with Jetlev Technologies, Inc. (“JTI”) a company once owned by Raymond Li, followed by a publicized change of control of the company and an alleged change in its direction. (FAC, ¶¶ 14-75.) As for Plaintiffs’ tort claims, Plaintiffs essentially allege that, because they believed that their relationship with JTI would proceed as it had under Mr. Li, Plaintiffs allegedly invested heavily in their own operations. (Id., ¶ 77.) And because Plaintiffs, for whatever reason, believed Jetlev to be bankrupt, they allegedly delayed filing what is essentially Count I of the FAC. (Id., ¶ 93.) Without legal justification, Plaintiffs have asked the Court to require Defendants to compensate Plaintiffs “several million dollars” for their failed investments and to punish Defendants, essentially for investing in a company and allegedly changing its direction in a way that did not benefit Plaintiffs. (See, e.g., id, ¶¶ 95(i), 116.) 4 Plaintiffs’ claims against the individual Defendants (Seth Gerszberg and Matthew Rosenblatt) are all premised on Plaintiffs’ allegations that such individuals are liable as alter egos of the corporate defendants and/or otherwise liable for breaches of the February 2013 Contract, as amended and/or otherwise modified by the November 2013 Contract. Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 11 of 34 Page ID #:4129 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 CASE NO. 8:15-cv-02113-CJC-JCG - 6- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 The only allegations in this action that, if true, provide any legal basis for relief are contractual in nature. The law requires that this Court dismiss with prejudice Counts II through VI of the FAC, all of which improperly seek to transform contractual allegations into tort claims. III. STANDARD OF REVIEW When a plaintiff fails to state in its pleading a claim upon relief can be granted, Rule 12(b)(6) authorizes a court to dismiss those claims before parties are required to engage in costly, but ultimately pointless, litigation. In order to survive a motion under this rule, a plaintiff must provide more than “unadorned, the-defendant-unlawfully-harmed-me accusation[s],” and cannot offer “labels and conclusions” or “a formulaic recitation of the elements of a cause of action,” in place of actual facts that allow the “court to draw the plausible and reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim is facially plausible only “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for 'the misconduct alleged.” Id. The plausibility standard seeks more than “a sheer possibility that a defendant has acted unlawfully.” Id. “In sum, for a complaint to survive a motion to dismiss, 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. US. Secret Srvc., 572 F.3d 962, 989 (9th Cir.2009) (citing Iqbal, 556 U.S. at 677-78). In evaluating the motion, the Court may consider the parties’ pleadings, the “facts that are contained in materials of which the court may take judicial notice,” and documents attached to or referred to in the complaint if the authenticity of the documents is not in question. Heliotrope General, Inc. v. Ford Motor Co., 189 F.3d 971, 981 (9th Cir. 1999); In re Silicon Graphics, Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir.1999). Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 12 of 34 Page ID #:4130 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 CASE NO. 8:15-cv-02113-CJC-JCG - 7- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 Plaintiffs attach only three documents to the FAC. The first is a Joint Venture Agreement to which Plaintiffs are neither a party nor a third-party beneficiary. (See Dkt. 138-1.) The second purports to be a press release written by a non-party in this case. (Dkt. 138-2.) And the third is the November 2013 Contract between Defendant Jetlev, Inc., and Plaintiff Jetpack Enterprises, LLC, which forms the basis of Plaintiffs’ breach of contract claim at Count I of the FAC. (FAC, ¶¶ 96-105; Dkt. 138-3.)5 Plaintiffs’ pleading does not support a tort claim under California law. Counts II through VI should be dismissed with prejudice. IV. ARGUMENT A. The Economic Loss Rule and California Civil Code Section 3294 Mandate Dismissal of Plaintiffs’ Tort Claims and Prayer for Punitive Damages. California law makes clear that “A person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations.” Aas v. Superior Court, 24 Cal. 4th 627, 643 (2000), superseded by statute on other grounds as recognized in Rosen v. State Farm Gen. Ins. Co., 30 Cal. 4th 1070 (2003) (internal quotations omitted) (emphasis added). This doctrine - well known as the “economic loss rule” - prohibits a party from converting a breach of contract action into a tort action. As such, the economic loss rule prevents plaintiffs from seeking punitive and/or other forms of tort damages, when the gravamen of their Complaint is based on conduct that constituted a breach of the parties’ contractual obligations. See, 5 Only Jetpack Enterprises, LLC is identified as a party to the November 2013 Contract that is in suit. Somehow, Plaintiffs both seem to believe they are entitled to recover under that contract, rendering their alter ego allegations against Defendants rather ironic, if not disingenuous. Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 13 of 34 Page ID #:4131 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 CASE NO. 8:15-cv-02113-CJC-JCG - 8- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 e.g., Robinson Helicopter Company v. Dana Corporation, 34 Cal. 4th 979, 988 (2004): Simply stated, the economic loss rule provides: ““[W]here a purchaser's expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only ‘economic’ losses.” This doctrine hinges on a distinction drawn between transactions involving the sale of goods for commercial purposes where economic expectations are protected by commercial and contract law, and those involving the sale of defective products to individual consumers who are injured in a manner which has traditionally been remedied by resort to the law of torts.” The economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise. Quite simply, the economic loss rule “prevent[s] the law of contract and the law of tort from dissolving one into the other.” Id. at 988 (internal citations omitted). Entirely consistent with the economic loss rule is California Civil Code Section 3294, which likewise provides that punitive damages are not available in actions for breach of contract: “(a) In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.” Cal. Civil Code § 3294(a) (emphasis added); see also, e.g., Cates Construction, Inc. v. Talbot Partners, 21 Cal. 4th 28, 61, 980 P.2d 407, 427, 86 Cal. Rptr. 2d 855, 878 (Cal. 1999) (“The law governing this subject has been aptly summarized as follows. ‘[P]unitive or exemplary damages, which are designed to punish and deter statutorily defined types of wrongful conduct, are available only in Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 14 of 34 Page ID #:4132 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 CASE NO. 8:15-cv-02113-CJC-JCG - 9- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 actions 'for breach of an obligation not arising from contract.’”) In the absence of an independent tort, punitive damages may not be awarded for breach of contract “even where the defendant's conduct in breaching the contract was willful, fraudulent, or malicious.” Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 516 (Cal. 1994); see also Crogan v. Metz, 47 Cal. 2d 398, 405 (Cal. 1956). In one guiding example of the application of the economic loss rule, the court in Intelligraphics, Inc. v. Marvell Semiconductor, Inc., 2009 U.S. Dist. LEXIS 9875 (N.D. Cal. 2009), dismissed a fraud claim with factual allegations very similar to the case at bar. In Intelligraphics, the plaintiff alleged that its time and materials software development contract allowed it to stop its software development work if total invoices reached $250,000. At that point, the plaintiff alleged, the parties had allegedly agreed that it would either be replaced by another software developer or negotiate for a higher cap on the development work. The plaintiff brought a fraud claim based on allegedly false promises by the defendant that, if plaintiff continued its work, defendant would pay all amounts already owed, and then also pay on a time and materials basis for any additional work beyond the initial $250,000 cap that was necessary for plaintiff to complete the software project. Citing the economic loss rule, the court in Intelligraphics rejected the plaintiff’s fraud claim because it was based on nothing more than the defendant’s purported breach of its contractual obligations under the original time and materials contract, which plaintiff claimed was enforceably amended by an agreement to negate the $250,000 cap. As the court explained: An examination of the evidence cited by [plaintiff] Intelligraphics in support of these assertions reveals that none of the alleged promises is anything more than a reiteration of the obligations that exist under the contract. . . . [T]here is no evidence of misrepresentations that exposed Intelligraphics to Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 15 of 34 Page ID #:4133 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 CASE NO. 8:15-cv-02113-CJC-JCG - 10- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 liability beyond the economic loss that allegedly resulted from [defendant] Marvell's failure to abide by the terms of the contract. Nor are the representations cited by Intelligraphics, which are, at most, assurances that Marvell intended to meet its contractual obligations, sufficient to give rise to an "extra measure of blameworthiness" or that constitute a "clear . . . deviation from socially useful business practices." Robinson, 34 Cal. 4th at 988. Rather, were the Court to permit a fraud claim based merely on representations that the defendant intended to make payments required under the contract, the Court would open the door to tort claims in virtually every case in which a party promised to make payments under a contract but failed to do so. Such a result would be inconsistent with the reasoning offered by the California Supreme Court in Robinson. Intelligraphics, Inc., 2009 U.S. Dist. LEXIS 9875, at *50-51. In Oracle USA, Inc. v. XL Global Servs., Inc., 2009 U.S. Dist. LEXIS 59999 (N.D. Cal. Jul. 13, 2009), the U.S District Court for the Northern District of California was confronted with a similar fact pattern involving purported tort claims which were, in essence, premised on a party’s failure to keep alleged promises. In Oracle, the parties entered into a series of agreements through which plaintiff Oracle licensed software to the defendant and provided related consulting services. Oracle alleged that the defendant requested plaintiff continue providing services beyond the end date of the contract, and promised to pay all outstanding invoices for consulting services. Id. at * 2. Oracle sued for breach of contract and fraud when the defendant refused to pay over $540,000 in service costs. Id. Oracle alleged the defendant made the false promise to pay the outstanding invoices with the intention of inducing Oracle to provide free additional consulting services. Id. Citing the economic loss rule, the district court barred Oracle's fraud claim even though Oracle had alleged the statements regarding additional services constituted a separate contract or agreement. See 2009 U.S. Dist. LEXIS 59999, at *14. The Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 16 of 34 Page ID #:4134 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 CASE NO. 8:15-cv-02113-CJC-JCG - 11- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 district court did so on the ground that “[t]here is no conduct at issue which is independent from the various promises made by the parties in the course of their contractual relationship.” Id. The tort claims made by Plaintiffs in the instant case are materially identical to the tort claims rejected by the Courts in Intelligraphics and Oracle, where the courts held that an alleged “I-will-pay-what-I-am-already-responsible-for-paying- pursuant-to-contract” type of promise, however characterized, must be asserted as a breach of contract claim and cannot support independent tort claims. 1. Counts II-IV Should be Dismissed With Prejudice Each of Counts II (Fraud), III (Promissory Fraud) and IV (Negligent Misrepresentation) are predicated on Plaintiffs’ allegations that one or more Defendants fraudulently and/or negligently misled Plaintiffs in three ways: First, Plaintiffs allege an “overarching deception . . . that Jetlev was going to stand by the original promises of an ongoing relationship” that allegedly originated when Jetlev was owned and managed by Raymond Li. (FAC, ¶ 109.) (emphasis added). Second, Plaintiffs allege that Defendants led Plaintiffs to believe they would honor the November 2013 Contract knowing they would not do so, which led to a breach of the November 2013 Contract-under which Plaintiffs now bring suit. (See, e.g., FAC, Count II at ¶¶ 111-112.) And third, Plaintiffs allege that Defendants led them to believe Jetlev was going bankrupt, which allegedly caused Plaintiffs to forgo their pursuit of the very contractual claim that is embodied in Count I of the FAC. (Id., ¶¶ 113-115.) Counts II through IV of the FAC are therefore related to nothing more than vague expectations of a future relationship based on undocumented promises and alleged breaches of the February 2013 Contract, as it was amended and/or otherwise modified by the November 2013 Contract. Plaintiffs’ allegations that one or more Defendants never in fact intended to fulfill these alleged promises amount to nothing beyond improperly framed backdoor breach of contract claims. Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 17 of 34 Page ID #:4135 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 CASE NO. 8:15-cv-02113-CJC-JCG - 12- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 The Oracle court rejected similar claims under similar facts: “The parties’ intentions and expectations are precisely what are at issue in the dispute about Oracle's provision of Campbell and Poon's services in exchange for further assurances about payment. There is no conduct at issue which is independent from the various promises made by the parties in the course of their contractual relationship.” Oracle USA, Inc. v. XL Global Servs., Inc., 2009 U.S. Dist. LEXIS 59999, at *14 (N.D.Cal. Jul. 13, 2009). See also Foster Poultry Farms v. Alkar-Rapidpak-MP Equipment, Inc., 868 F. Supp. 2d 983 (E.D. Cal. 2012) (In Foster, the plaintiff argued that the defendant committed fraud when it submitted letters stating it would indemnify the plaintiff for defense costs associated with a patent infringement suit knowing that it would not in fact indemnify the plaintiff. The court rejected this argument, noting that “[i]f the letter is a separate contract or agreement, the alleged misrepresentations contained therein cannot form the basis for a fraudulent inducement claim.” Id. at 994; Super Chefs, Inc. v. Second Bite Foods, Inc., 2015 U.S. Dist. LEXIS 113468, *10 (C.D. Cal. Aug. 25, 2015) (Relying on the above holdings in Oracle and Foster Poultry Farms for the same proposition.) To be clear, Plaintiffs’ assertions that Jetlev and/or any other Defendant misrepresented their true intent with respect to Jetlev’s business are of no import where, as here, they never legally bound themselves to carry out that intent. Nothing in the FAC in any way alleges or suggests that any of the Defendant’s vaguely alleged misconduct resulted in any binding obligation until February 2013 Contract, as amended and/or otherwise modified by the November 2013 Contract, under which Plaintiffs seek $105,422.80 in damages, plus interest. (FAC, ¶ 101.) Tellingly, in the initial Complaint, the damages sought by Plaintiffs under each of the so-called ‘tort claims’ set forth in Counts II-IV directly equate to the quantum of damages sought by Plaintiffs as a measure for Plaintiffs’ breach of contract claim. (Compare Dkt. 1 at ¶ 101 (alleging that breach of contract damages Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 18 of 34 Page ID #:4136 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 CASE NO. 8:15-cv-02113-CJC-JCG - 13- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 total $105,422.80) with id. at ¶ 111 (alleging fraud damages of $105,422.80), ¶ 125 (alleging promissory fraud damages of $105,422.80), ¶ 134 (alleging negligent misrepresentation damages of $105,422.80).) The pleadings are not the only place where this $105,422.80 figure became a focal point. On January 18, 2017, before the Magistrate on a discovery dispute where Plaintiffs had every reason to argue massive damages to support their grandiose discovery requests, the following exchanges occurred: The Court: “I think I want you to answer one question for me. Are the damages $105,000?” [Plaintiffs’ Counsel]: “In this case that is the base level plus punitives.” * * * The Court: “I don’t need to underscore again, the [$105,000] is resonating, and the punitive damages are not. Is that fair?” [Plaintiffs’ Counsel]: “I understand, your honor.” * * * The Court: “If you want a separate custodian depo, I guess you could have that. But I don’t know if that’s going to - It’s a 105,000 dollar case.” Plaintiffs’ counsel: “I understand, Your Honor.” (Dkt. 104-1 at 21:15-18, 29:24-30:2, 57:15-18.) “Courts have applied the Economic Loss Rule to bar fraud claims where the damages plaintiffs seek are the same economic losses arising from the alleged breach of contract.” Foster Poultry Farms, 868 F. Supp. 2d at 991. The harm described and damages sought point to the inescapable conclusion that what is at issue here is nothing more than Jetpack Enterprises, LLC’s loss suffered as a result of Jetlev, LLC’s purported breach of its contractual obligations. Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 19 of 34 Page ID #:4137 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 CASE NO. 8:15-cv-02113-CJC-JCG - 14- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 This is not a tort case. Just so, Counts II through IV of the FAC should be dismissed. 2. Counts V and VI Should Be Dismissed With Prejudice Counts V (Intentional Interference With Prospective Economic Advantage) and VI (Negligent Interference With Prospective Economic Advantage) are also premised on Defendants’ purported failures to fulfill vaguely alleged promises and contracts to which Plaintiffs are strangers, and as such are subject to dismissal with prejudice under the economic loss rule. More particularly, Counts V and VI are predicated on allegations that Plaintiffs failed to receive the benefit of a relationship it allegedly had with Defendants under its former ownership due to some form of amorphous tortious interference. As with Plaintiffs’ other claims, all doubt about the true nature of this claim (a breach of contract claim in disguise) is removed by reference to Plaintiffs’ allegation in its initial Complaint that it sustained damages totaling $105,422.80 due to such tortious interference, such damages having arisen from those very same alleged breaches of contract. (Compare Dkt. 1 at ¶101 (alleging breach of contract damages of $105,422.80) with Id. at ¶144 (alleging intentional interference damages of $105,422.80).) The findings of the Court and Plaintiffs’ acknowledgement thereof at the January discovery hearing are likewise revealing. (Dkt. 104-1 at 21:15-18, 29:24-30:2, 57:15-18.) California’s economic loss rule bars Plaintiffs’ interference claims for the same reasons it bars their fraud and misrepresentation claims. As the California Supreme Court made clear in Robinson Helicopter, supra, the economic loss “doctrine hinges on a distinction drawn between transactions involving the sale of goods for commercial purposes where economic expectations are protected by commercial and contract law, and those involving the sale of defective products to individual consumers who are injured in a manner which has traditionally been remedied by resort to the law of torts.” Id. at 988. Here, Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 20 of 34 Page ID #:4138 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 CASE NO. 8:15-cv-02113-CJC-JCG - 15- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 Plaintiffs’ expectations for additional profits, additional customers and additional equipment were all contractual expectations, protected by commercial and contract law as alleged in Count I of the FAC. The economic loss rule mandates dismissal of all Plaintiffs’ tort claims, leaving only a contractual claim under which punitive damages are not available. (See Dkt. 104-1 at 29:24-30:2 (The Court: “[T]he [$105,000] is resonating, and the punitive damages are not.”).) B. Plaintiffs Have Not Pleaded the Elements of a Claim for Fraud or Misrepresentation. Plaintiffs, facing millions of dollars of liability for patent infringement in another court, are now transparently attempting to turn this $105,000 contract case into a multi-million dollar fraud investigation. Even assuming, arguendo, that California had no economic loss rule, Plaintiffs still have not pleaded the elements of an actionable tort for any sort of misrepresentation. Counts II through IV of the FAC should be dismissed. The elements of a claim for fraud in California are: “(1) a misrepresentation . . . ; (2) knowledge of falsity (or scienter); (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage.” Robinson, 34 Cal. 4th at 990. “Fraudulent representations, to constitute ground for relief, must be as to existing and material facts; predictions of future events are ordinarily considered nonactionable expressions of opinion.” Richard P. v. Vista Del Mar Child Care Serv., 106 Cal. App. 3d 860, 865. A promise of future performance cannot constitute fraud. See Oracle, 2009 U.S. Dist. LEXIS 59999, * 7; Foster Poultry, 868 F. Supp. 2d at 994. Nor can a promise to honor a previously-entered agreement. See Super Chefs, 2015 U.S. Dist. LEXIS 113468, * 11. “[I]n order to state a claim for fraudulent concealment, ‘there must be allegations demonstrating that the defendant was under a legal duty to disclose.’” Tsai v. Wang, 2017 U.S. Dist. LEXIS 91797, * 8 (Jun. 14, 2017) (quoting Los Angeles Mem'l Coliseum Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 21 of 34 Page ID #:4139 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 CASE NO. 8:15-cv-02113-CJC-JCG - 16- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 Comm'n v. Insomniac, Inc., 233 Cal. App. 4th 803, 831, 182 Cal. Rptr. 3d 888 (2015)).6 The elements of a claim for negligent misrepresentation are: “(1) a misrepresentation of a past or existing material fact, (2) without reasonable grounds for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) ignorance of the truth and justifiable reliance thereon by the party to whom the misrepresentation was directed, and (5) damages.” Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, 70 Cal. Rptr. 3d 199, 213, 158 Cal.App.4th 226 (Cal. App. 2007). “[A] positive assertion is required; an omission or an implied assertion or representation is not sufficient.” Id. Plaintiffs allege in the FAC that “Defendants’ fraudulent conduct can be generally divided into three categories.” (FAC, ¶ 108.) The first is the alleged “overarching” failure to inform Plaintiffs that whatever relationship they once had would not continue. (Id., ¶¶ 109-110.) The second is the alleged inducement into the written contract that is the subject of Count I of the FAC. (Id., ¶¶ 111-112.) And the third is the alleged statement regarding Jetlev’s plan to institute insolvency proceedings, which purportedly caused Plaintiffs to delay suing for $105,422.80. (Id., ¶¶ 113-115.) The FAC adds no meaningful substance or particularity to Plaintiffs’ claims, and does not remedy the fatal defects in Counts II-IV of the initial Complaint under the economic loss rule, as set forth above. Further, even without the application of the economic loss rule, Plaintiffs have not pleaded the elements of a fraud or negligent misrepresentation claim. 6 “Promissory fraud” is merely a “subspecies” of fraud wherein the plaintiff relied by entering into a contract. Tsai, 2017 U.S. Dist. LEXIS 91797, * 13 (citing Lazar v. Superior Court, 12 Cal.4th 631, 638, 909 P. 2d 981(Cal. 1996)). Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 22 of 34 Page ID #:4140 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 CASE NO. 8:15-cv-02113-CJC-JCG - 17- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 1. The Alleged “Overarching” Failure to Tell Plaintiffs that Jetlev Was Going in a New Direction is Not Actionable. The first vaguely alleged “overarching deception” is essentially an alleged failure to inform Plaintiffs that Jetlev would not continue to support Plaintiffs’ businesses with new jetpacks as it once had. (FAC, ¶¶ 109-110, 122, 132.) Plaintiffs even characterize this first purported fraud as leading them to believe “that Jetlev was going to stand by the original promises.” (Id., ¶¶ 109, 132.) Plaintiffs, in attempting to defend the dearth of particularity of their pleading in this regard, have couched this claim as “fraud by omission.” (Dkt. 130-1 at 7.) Plaintiffs have not alleged a statement of fact capable of being true or false at the time it was allegedly made. See Super Chefs, 2015 U.S. Dist. LEXIS 113468, * 11. At best, Plaintiffs allege vague promises of future performance that could only be enforced, if at all, under contract law.7 To the extent Plaintiffs allege that Defendants defrauded them by failing to keep them informed of their business plans, this is not an actionable fraud absent a duty to disclose. Tsai v. Wang, 2017 U.S. Dist. LEXIS 91797, * 8. Plaintiffs have alleged no such duty; they even deleted the fiduciary duty claim from their initial Complaint. (See generally FAC (only paragraphs 132 and 153 contain the word “duty,” and then only in the context of the duty of care associated with ordinary negligence)). Plaintiffs cannot maintain a negligent misrepresentation claim based on this allegedly “overarching” fraud by omission, as a negligent misrepresentation claim requires an affirmative misrepresentation of past or existing fact, not an omission 7 The alleged relationship involving sales of expensive goods, such a contract claim would have to be supported by a signed writing under the statute of frauds. See Cal. Comm. Code § 2201(1). Not surprisingly, then, Plaintiffs’ contract claim only seeks relief under the written November 2013 Contract. Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 23 of 34 Page ID #:4141 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 CASE NO. 8:15-cv-02113-CJC-JCG - 18- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 regarding plans for the future. Apollo Capital Fund, LLC, 70 Cal. Rptr. 3d at 213. Having failed to establish the elements of any form of misrepresentation claim under California law, Counts II through IV of the FAC should be dismissed as to the allegations of “overarching” fraud. 2. The Allegedly Fraudulent Inducement to Enter Into the November 2013 Contract is Not Actionable. Plaintiffs allege-still without particularity as to when, how, or by whom- that they were fraudulently or negligently induced to enter into the November 2013 Contract, or that the November 2013 Contract itself was an act of promissory fraud. (FAC, ¶¶ 111-112, 122-123, 134.) Plaintiffs do not allege what statements were made to induce their signing of the November 2013 Contract, nor have they alleged facts showing knowledge of the falsity of any such statement. That alone is reason enough to dismiss the claim, or at least to require it to be pleaded with the requisite particularity. See Tsai, 2017 U.S. Dist. LEXIS 91797, ** 12-16. Even if a false statement and scienter could be alleged, however, Plaintiffs are suing Defendants under the November 2013 Contract, the remedy for which is payment of the amount ($105,422.80) Plaintiffs believed owed under the February 2013 Contract. (Id., ¶¶ 82-90, 123.) Thus, contrary to Plaintiffs’ assertion in a previous brief, the Grouse River case does not support Plaintiffs’ position. (See Dkt. 130-1 at 5-6.) The plaintiff in Grouse River did not sue under the induced contract-it sought to avoid the induced contract. See 2016 U.S. Dist. LEXIS 141478 at * 1 (no breach of contract claim); id. at * 18 (the “exception permits fraud claims challenging a contract’s validity.”) (emphasis added). Plaintiffs have asserted no actual reliance and no damages. The economic loss rule has not been traversed under Plaintiffs’ “fraudulent inducement” theory, nor have the elements of fraud been satisfied, nor are Plaintiffs even seeking the remedy that follows from a fraudulent inducement claim. Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 24 of 34 Page ID #:4142 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 CASE NO. 8:15-cv-02113-CJC-JCG - 19- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 Plaintiffs’ vague “fraudulent inducement” theory does not transform this contract case into a tort case. 3. The Alleged Misrepresentation Regarding Jetlev’s Financial Condition is Not Actionable. The third alleged misrepresentation, raised only in Count II of the FAC, is the vaguely described “fiction . . . that [Jetlev] was going into bankruptcy and that all of its obligations to Plaintiffs . . . were discharged.” (FAC, ¶¶ 113-115.) (emphasis added). The very language quoted above from the FAC shows this is a prediction regarding something that may happen in the future-not an existing fact. The first element of a misrepresentation claim has not been alleged. See Richard P., 106 Cal. App. 3d at 865. Further, even if such a prediction could be construed by this Court as a statement of fact, Plaintiffs could not justifiably rely on this alone in forbearing collection efforts. A simple search of court records would reveal whether Jetlev had filed for bankruptcy and received a discharge. The fourth element of a misrepresentation claim has not been alleged. Further still, the FAC makes abundantly clear that any representations regarding Jetlev’s solvency caused Plaintiffs no harm, as they are, in fact, pursuing the $105,422.80 they claim to have been owed, plus interest. (FAC, Count I.) Damages flowing from this alleged misrepresentation have not been alleged. The elements of fraud and negligent misrepresentation are not supported by the allegations in the FAC. Counts II-IV of the FAC should be dismissed with prejudice. C. Plaintiffs Have Not Pleaded the Elements of a Claim for Interference with Economic Advantage. Plaintiffs admitted that the amendments to their interference claims added nothing of consequence other than “more detail” to what was already in the Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 25 of 34 Page ID #:4143 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 CASE NO. 8:15-cv-02113-CJC-JCG - 20- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 Complaint, along with an alternative claim (Count VI) that the alleged conduct was negligent rather than intentional. (Dkt. 128 at 21.) But the basic premise of the interference claims remains unchanged from Count V of the Initial Complaint: Plaintiffs got along with Jetlev with Mr. Li was in charge, but not when Mr. Gerszberg and Mr. Rosenblatt allegedly took over. Under the economic loss rule, such a claim cannot stand. And even the purported additional “detail” in the FAC does not set forth the elements of a cognizable interference claim. “To plead a claim for intentional interference with prospective business advantage, a plaintiff must allege ‘(1) a specific economic relationship between the plaintiff and some third person containing the probability of future economic benefit to the plaintiff; (2) knowledge by defendant of the existence of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) damages proximately caused by the defendant's acts.’” Super Chefs, 2015 U.S. Dist. LEXIS 113468, * 13-14 (citing Panavision Int'l, L.P. v. Toeppen, 945 F. Supp. 1296, 1305 (C.D. Cal. 1996). For a negligent interference claim, the plaintiff must allege a duty of care flowing from the defendant. Tsai, 2017 U.S. Dist. LEXIS 91797, * 31 (citing Lange v. TIG Ins. Co., 68 Cal.App.4th 1179, 1187, 81 Cal. Rptr. 2d 39 (1998)). Plaintiffs have failed to allege facts supporting several of these elements. 1. Plaintiffs Have Not Adequately Pleaded a Prospective Advantage. Regarding the “relationship” alleged to have been disrupted, it “must be one that ‘eventually will yield the desired benefit, not necessarily the more speculative expectation that a potentially beneficial relationship will eventually arise.’” Tsai, 2017 U.S. Dist. LEXIS 91797 at * 28 (quoting Westside Ctr. Assocs. v. Safeway Stores 23, Inc., 42 Cal. App. 4th 507, 524, 49 Cal. Rptr. 2d 793 (1996)). “[I]t is essential that the Plaintiff allege facts showing that Defendant interfered with Plaintiff's relationship with a particular individual. . . . Allegations that a defendant Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 26 of 34 Page ID #:4144 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 CASE NO. 8:15-cv-02113-CJC-JCG - 21- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 interfered with the plaintiff's relationship with an 'as yet unidentified' customer will not suffice.” Tsai, 2017 U.S. Dist. LEXIS 91797 at * 28 (citing Damabeh v. 7- Eleven, Inc., No. 12-CV-01739 LHK, 2013 U.S. Dist. LEXIS 66565, 2013 WL 1915867, at *10 (N.D. Cal. May 8, 2013); Westside Ctr. Assocs., 42 Cal. App. 4th at 527). It only stands to reason, as California’s highest court has held, that one cannot be held liable in tort for interfering with one’s own contract. See Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 514 (1994); see also Oracle, 2009 U.S. Dist. LEXIS 59999, *11-12. In both Counts V and VI of the FAC, Plaintiffs allege nothing more than the Defendants’ interference with a “prospective economic advantage with Mr. Li and JTI.” (FAC, ¶¶ 141, 151.) They lament the partnership they enjoyed with “Mr. Li’s Jetlev” is no more. (Id.) Plaintiffs have thus identified no specific relationship with which Defendants interfered, other than perhaps Defendants’ own relationship with Plaintiffs. That cannot form the basis of an interference claim. See Applied Equipment Corp., 7 Cal.4th at 514. Any other potential advantage that Plaintiffs could possibly be said to have pleaded is vague and speculative, and was not mentioned in prior briefing on this issue. (See FAC, ¶¶ 139-157; see also Dkt. 130-1 at 1 (claiming that the first element is satisfied because “Plaintiffs had an economic relationship with [JTI] and Raymond Li that they were later made to believe was carried over to [Jetlev] itself.”)) Such allegations do not satisfy California’s standards for pleading an interference claim as set forth in Tsai, Damabeh, and Westside. Plaintiffs have not pleaded the first or second elements of an interference claim. 2. Plaintiffs Have Not Adequately Pleaded Tortious Conduct. Regarding the conduct alleged to give rise to the claim, a plaintiff must plead “wrongful” conduct “‘proscribed by some constitutional, statutory, regulatory, Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 27 of 34 Page ID #:4145 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 CASE NO. 8:15-cv-02113-CJC-JCG - 22- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 common law, or other determinable legal standard.’” Super Chefs, 2015 U.S. Dist. LEXIS 113468, * 14 (citing Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1159 (2003)). “[A]n omission to perform a contract obligation is never a tort, unless that omission is also an omission to perform a legal duty.” Tsai, 2017 U.S. Dist. LEXIS 91797 at * 26 (quoting Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 515, 28 Cal. Rptr. 2d 475, 869 P.2d 454 (1994)). California law “does not distinguish between good and bad motives for breaching a contract.” Oracle, 2009 U.S. Dist. LEXIS 59999, * 12. The court in Korea Supply Co., set forth the categories of conduct that can form the basis for a tortious interference claim. The allegedly “wrongful” conduct must be “proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” Id. The conduct must be “wrongful by some legal measure other than the fact of interference itself.” Id. at 1153 (quoting Della Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal. 4th 376, 393 (1995)) (emphasis added). Interference law “is not intended to punish individuals or commercial entities for their choice of commercial relationships or their pursuit of commercial objectives, unless their interference amounts to independently actionable conduct.” Id. at 1158-59 (emphasis added). The means must be “independently tortious.” Id. at 1159 (quoting Della Penna, 11 Cal. 4th at 408 (Mosk, J., concurring)) (emphasis in original). Plaintiffs cannot claim that Defendants are liable in tort for merely investing in a company, obtaining managerial control over it, and steering it in a different direction. Nor can Plaintiffs hold Defendants liable in tort for directing their own company to cut ties with Plaintiffs. If some binding obligation between Plaintiffs and “Mr. Li’s Jetlev” went unfulfilled, that is a contract case, not a tort case.8 See 8 Plaintiffs’ allegations regarding JLIP’s decision to defend its intellectual property from Plaintiffs’ infringing acts in court have no place here. (See, e.g., FAC, ¶¶ 143- Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 28 of 34 Page ID #:4146 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 CASE NO. 8:15-cv-02113-CJC-JCG - 23- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 Tsai, 2017 U.S. Dist. LEXIS 91797 at * 26. In previous briefing, Plaintiffs offered no rebuttal to these arguments. (Dkt. 130-1 at 1-3.) Instead, Plaintiffs committed themselves to the theory that Defendants’ “wrongful” conduct was to allegedly breach the Joint Venture Agreement. (Dkt. 130-1 at 2; Dkt. 138-1.) But Plaintiffs were not party to the Joint Venture Agreement-nor do Plaintiffs even allege they were third-party beneficiaries of it. (Id.) And again, absent some independent legal duty, a breach of a contract cannot support a tort claim. Tsai, 2017 U.S. Dist. LEXIS 91797 at * 26. Plaintiffs have not pleaded the third element of an interference claim, nor have they alleged facts giving rise to a legal duty that would support a negligent interference claim. If the law operated as Plaintiffs want this Court to hold, then every single one of the thousands of partnership disputes that occur each year would be accompanied by an exponential explosion of litigation by third-parties claiming to have been somehow affected. Every single breach of contract would open the breaching party up to liability from myriad people who claim to have been affected as a result. It would become impossible for people to conduct business with any degree of predictability. In short, Plaintiffs seek to invent new law which makes no policy or logical sense, even if their allegations were eventually proven true. Plaintiffs’ interference claims (Counts V and VI) should be dismissed with prejudice. 144, 153-154.) State law claims for tortious interference are preempted by federal patent law. See 800 Adept, Inc. v. Murex Securities, Ltd., 539 F. 3d 1354, 1369 (Fed. Cir. 2008). If Plaintiffs believe they were somehow damaged by JLIP’s filing of patent infringement litigation (they have identified no business relationship with which it interfered), then that is a matter for the court handling the patent infringement litigation to decide. Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 29 of 34 Page ID #:4147 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 CASE NO. 8:15-cv-02113-CJC-JCG - 24- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 D. Alternatively, To the Extent the FAC Supports a Fraud or Misrepresentation Claim, the Circumstances of the Alleged Misrepresentations are Not Pleaded With the Requisite Particularity Under Rule 9(b). Even if the general fact pattern set forth by Plaintiffs in the FAC could support a claim for fraud or negligent misrepresentation, Plaintiffs do not set forth those claims with the requisite particularity under Rule 9(b) or the requisite plainness under Rule 8. See Grouse River, 2016 U.S. Dist. LEXIS 141478, ** 24- 28 (citing Pickard v. WMC Mortgage Corp., 2009 WL 3416134, *3 (E.D. Cal. Oct. 21, 2009) (quoting McHenry v. Renne, 84 F.3d 1172, 1179-80 (9th Cir. 1996)) ("Something labeled a complaint but written more as a press release, prolix in evidentiary detail, yet without simplicity, conciseness and clarity as to whom plaintiffs are suing for what wrongs, fails to perform the essential functions of a complaint.")); see also Tsai, 2017 U.S. Dist. LEXIS 91797, * 32 (noting that Rule 9(b) also applies to negligent misrepresentation claims). In order to plead a misrepresentation with particularity, one must “specify the ‘who, what, when, where, and how’ of the alleged misrepresentations and . . . how those representations proved to be false.” Grouse River, 2016 U.S. Dist. LEXIS 141478, * 24. “Conclusory allegations [that] fail to convey the ‘time, place, and specific content’ of the misrepresentations” are inadequate. Tsai, 2017 U.S. Dist. LEXIS 91797, * 6. The pleading likewise cannot be conclusory regarding the defendant’s scienter. Id. at * 7 (quoting Oestreicher v. Alienware Corp., 544 F. Supp. 2d 964, 968 (N.D. Cal. 2008) (“[N]othing in the Federal Rules of Civil Procedure relieves a plaintiff of the obligation to 'set forth facts from which an inference of scienter could be drawn.”) In Grouse River, the court ruled that the plaintiff’s 41-page complaint did not plead fraud with particularity because it neither “la[id] out the specific representations on which it is based, [nor cited] these by paragraph number back to Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 30 of 34 Page ID #:4148 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 CASE NO. 8:15-cv-02113-CJC-JCG - 25- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 the preceding segments of the complaint.” Id. at * 26. The court also ruled that by filing such a voluminous complaint the plaintiff ran afoul of Rule 8, which requires a “short and plain statement” of the parties’ dispute. Id. at * 27. Plaintiffs’ FAC is no different from the complaint in Grouse River, it says too much without saying what is needed to allow Defendants to defend themselves. In Apple, the only case Plaintiffs relied upon in prior briefing to support their claim for fraud by omission (Dkt. 130-1 at 7), the plaintiff class alleged specific and existing facts about Apple’s products and the terms of its standard agreements that it did not disclose to its consumers. See In re Apple & AT&TM Antitrust Litig., 596 F. Supp. 2d 1288, 1310 (N.D. Cal. Oct. 1, 2008) (holding only that, by alleging the specific facts that were undisclosed, Rule 9(b) was satisfied). By contrast, Plaintiffs’ allegations in this case are incredibly vague. Plaintiffs in this case readily admit their misrepresentation claim is based on an alleged “overarching fraud” that has taken place “since 2011.” (Dkt. 128 at 13- 14.) Indeed, the FAC runs twenty-three pages and 75 paragraphs before it even reaches any substantive discussion of how any of the Defendants interacted with Plaintiffs. (See FAC at 24, Heading “Factual Allegations Part II: Allegations as to Plaintiffs”.) And even then, Plaintiffs still only vaguely describe some sort of assurance that Plaintiffs and Jetlev would continue to do business together on some uncertain terms. (See generally FAC.) The court in Grouse River found that the plaintiff essentially only pled a “global representation” regarding the performance of the product being sold, and held that such allegations are not sufficiently particular. 2016 U.S. Dist. LEXIS 141478, ** 26-27. Just so, the global allegations by Plaintiffs in Counts II-IV of the FAC are too vague to satisfy Rule 9(b) and too verbose to satisfy Rule 8.9 9 This vagueness is particularly troubling considering that Plaintiffs seek to attribute “overarching fraud . . . since 2011” to Defendants Gerszberg, Rosenblatt, and JLIP, Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 31 of 34 Page ID #:4149 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 CASE NO. 8:15-cv-02113-CJC-JCG - 26- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 Rule 9(b) is not a mere formality; it is a matter of fairness. “[A] driving concern of Rule 9(b) is that defendants be given fair notice of the charges against them.” Grouse River, 2016 U.S. Dist. LEXIS 141478, ** 8-9 (citing In re Lui, 2016 WL 1212113, *1 (9th Cir. Mar. 29, 2016); Odom v. Microsoft Corp., 486 F.3d 541, 553 (9th Cir. 2007)) (quotations omitted). Plaintiffs have yet to provide notice adequate to allow Defendants to fairly answer the charges against them. If the Court somehow finds that any sort of actionable misrepresentation could be supported under the general fact pattern alleged by Plaintiffs, Plaintiffs have yet to allege it with enough particularity to allow the Defendants to fairly defend themselves from such a claim. Rule 9(b) has not been satisfied, and the Court should mandate a more definite statement under Rule 12(e). V. CERTIFICATION OF COMPLIANCE WITH LOCAL RULE 7-3 More than seven days prior to the filing of this motion, Defendants exhausted their opportunity to seek an extrajudicial resolution or narrowing of this motion. On June 26, 2017, counsel for Defendants sent Plaintiffs’ counsel a letter setting forth the contemplated nature of this motion and its legal and factual bases, which for the most part tracked those stated in the briefs filed in conjunction with the Motion for Judgment on the Pleadings. On June 27, 2017, the parties’ counsel spoke to discuss their respective positions and potential solutions to narrow the motion. (See Razzano Decl., ¶¶ 5-6.) even though Plaintiffs contend the following in their FAC: (1) Raymond Li, not Seth Gerszberg or Matthew Rosenblatt, was the “patriarch” of Jetlev and controlled it through 2011 (FAC, ¶ 15); (2) Gerszberg did not even take an interest in jetpack technology until toward the end of 2011 (id., ¶¶ 19, 21); (3) JLIP was not even formed until December 1, 2011 (id, ¶ 23); (4) the Joint Venture Agreement under which Gerszberg was able to exert any control over Jetlev did not exist until January 1, 2012 (id., ¶ 26, Ex. 1); and (5) Rosenblatt is not alleged to have any involvement (other than briefly making a loan in 2012) in Jetlev’s affairs until July 2013. (id., ¶¶ 44, 53.) Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 32 of 34 Page ID #:4150 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 CASE NO. 8:15-cv-02113-CJC-JCG - 27- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 The parties were at an impasse regarding the Rule 12(b)(6) aspects of the motion. Defendants, however, still provided Plaintiffs an opportunity to obviate the Rule 9(b) deficiencies in the FAC. On June 28, 2017, Defendants’ counsel wrote to Plaintiffs’ counsel offering Plaintiffs a reasonable amount of time to decide whether and how to further amend their pleading to add particularity to their allegations of fraud. (See Razzano Decl., ¶¶ 6-7.) Later that day, Plaintiffs-acknowledging that Defendants had satisfied their obligation to meet and confer before filing this motion-declined in writing to further amend their pleading. (See Razzano Decl., ¶ 8.) VI. CONCLUSION As set forth above, the true nature of each and every one of Plaintiffs’ causes of action in the First Amended Complaint is a contractual dispute. The economic loss rule does not permit Plaintiffs to mischaracterize their breach of contract claims as tort claims. Even without the economic loss rule, Plaintiffs have not pleaded the elements of any of the tort claims they assert. The Court should grant Defendants’ motion and dismiss with prejudice Counts II through VI of the First Amended Complaint. In the alternative, should any of Counts II through IV of the First Amended Complaint survive this motion, the Court should order that the circumstances of the alleged misrepresentations be set forth with the requisite particularity. A proposed Order is attached hereto. / / / Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 33 of 34 Page ID #:4151 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 CASE NO. 8:15-cv-02113-CJC-JCG - 28- DEFENDANTS’ PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT 610986907.1 Dated: July 10, 2017 BAKER & HOSTETLER, LLP By: /s/ Kevin W. Kirsch Kevin W. Kirsch Attorney for Defendants JLIP, LLC, Seth Gerszberg and Matthew Rosenblatt Case 8:15-cv-02113-CJC-JCG Document 144 Filed 07/10/17 Page 34 of 34 Page ID #:4152 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 CASE NO. 8:15-cv-02113-CJC-JCG DECL. OF ROBERT T. RAZZANO ISO MOTION TO DISMISS FIRST AM. COMPL. 611019601.1 R. SCOTT FELDMANN (CA SBN 169230) sfeldmann@bakerlaw.com BAKER & HOSTETLER LLP 600 Anton Blvd., Suite 900 Costa Mesa, CA 92626 Telephone: (714) 966-8862 Facsimile: (714) 754-6611 KEVIN W. KIRSCH (CA SBN 166184) kkirsch@bakerlaw.com BAKER & HOSTETLER LLP 312 Walnut Street, Suite 3200 Cincinnati, OH 45202-4074 Telephone: (513) 929-3499 Facsimile: (513) 929-0303 Attorneys for Defendants JLIP, LLC, SETH GERSZBERG and MATTHEW ROSENBLATT UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION JETPACK ENTERPRISES, LLC, and JETPACK ENTERPRISES - SAN DIEGO, LLC, Plaintiffs, v. JETLEV, LLC, JETLEV TECHNOLOGIES, INC., JLIP, LLC, AQUAFLIER, LLC, JLSG, LLC, SETH GERSZBERG, and MATTHEW ROSENBLATT, Defendants. Case No. 8:15-cv-02113-CJC-JCG DECLARATION OF ROBERT T. RAZZANO IN SUPPORT OF PARTIAL MOTION TO DISMISS OR FOR MORE DEFINITE STATEMENT OF DEFENDANTS JLIP, LLC, SETH GERSZBERG, AND MATTHEW ROSENBLATT Date: Monday, August 7, 2017 Time: 1:30 p.m. Courtroom: 9B (Santa Ana) Case 8:15-cv-02113-CJC-JCG Document 144-1 Filed 07/10/17 Page 1 of 3 Page ID #:4153 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 CASE NO. 8:15-cv-02113-CJC-JCG DECL. OF ROBERT T. RAZZANO ISO MOTION TO DISMISS FIRST AM. COMPL. 611019601.1 I, Robert T. Razzano declare as follows: 1. I am an attorney at the law firm of Baker & Hostetler LLP, and counsel for Defendants Seth Gerszberg, Matthew Rosenblatt, and JLIP, LLC (“Defendants”) in the above-captioned matter. I have personal knowledge of the facts stated herein and, if called as a witness, would competently testify thereto. 2. On or about June 5, 2017, Plaintiffs lodged a proposed First Amended Complaint (see Dkt. 126-1; Dkt. 128-1 (unredacted version)) in conjunction with their opposition to Defendants’ Motion for Judgment on the Pleadings (Dkt. 123) directed at the initial Complaint in this action. 3. Defendants subsequently filed two briefs advocating that the tort claims in the Complaint should be dismissed, that Plaintiffs’ proposed amendments were futile, and both the initial Complaint and the proposed First Amended Complaint failed to plead fraud with particularity. (See Dkt. 129; Dkt. 134-1.) 4. On or about June 21, 2017, the Court granted Plaintiffs leave to file their proposed First Amended Complaint and ruled that Defendants’ Motion for Judgment on the Pleadings was moot. (Dkt. 136.) Plaintiffs filed the First Amended Complaint, which is substantially identical to the proposed First Amended Complaint, on or about June 24, 2017. (Dkt. 138.) 5. On June 26, 2017, counsel for Defendants sent Plaintiffs’ counsel a letter setting forth the contemplated nature of this motion and its legal and factual bases, which for the most part track those stated in the briefs filed in conjunction with the Motion for Judgment on the Pleadings and include recent additional law. 6. On June 27, 2017, I spoke with Plaintiffs’ counsel on the telephone to discuss further the basis for Defendants’ contemplated motion, Plaintiffs’ basis for opposing same, and potential solutions to narrow the motion. The parties were at an impasse regarding the Rule 12(b)(6) aspects of the motion. Case 8:15-cv-02113-CJC-JCG Document 144-1 Filed 07/10/17 Page 2 of 3 Page ID #:4154 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 CASE NO. 8:15-cv-02113-CJC-JCG - 2- DECL. OF ROBERT T. RAZZANO ISO MOTION TO DISMISS FIRST AM. COMPL. 7. Defendants, however, still provided Plaintiffs an opportunity to obviate the Rule 9(b) deficiencies they perceived in the First Amended Complaint. On June 28, 2017, Defendants’ counsel wrote to Plaintiffs’ counsel offering Plaintiffs a reasonable amount of time to decide whether and how to further amend their pleading to add particularity to their allegations of fraud. 8. Later that day, Plaintiffs-acknowledging that Defendants had satisfied their obligation to meet and confer before filing this motion-declined in writing to further amend their pleading. 9. More than seven days have passed since the parties satisfied their obligations to meet and confer regarding this motion. Executed this 10th day of July, 2017, in Cincinnati, Ohio. Dated: July 10, 2017 By: /s/ Robert T. Razzano Robert T. Razzano Case 8:15-cv-02113-CJC-JCG Document 144-1 Filed 07/10/17 Page 3 of 3 Page ID #:4155 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 CASE NO. 8:15-cv-02113-CJC-JCG ORDER GRANTING DEFENDANTS’ PARTIAL MOTION TO DISMISS FIRST AMENDED COMPLAINT 611021905.1 R. SCOTT FELDMANN (CA SBN 169230) sfeldmann@bakerlaw.com BAKER & HOSTETLER LLP 600 Anton Blvd., Suite 900 Costa Mesa, CA 92626 Telephone: (714) 966-8862 Facsimile: (714) 754-6611 KEVIN W. KIRSCH (CA SBN 166184) kkirsch@bakerlaw.com BAKER & HOSTETLER LLP 312 Walnut Street, Suite 3200 Cincinnati, OH 45202-4074 Telephone: (513) 929-3499 Facsimile: (513) 929-0303 Attorneys for Defendants JLIP, LLC, SETH GERSZBERG and MATTHEW ROSENBLATT UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION JETPACK ENTERPRISES, LLC, and JETPACK ENTERPRISES - SAN DIEGO, LLC, Plaintiffs, v. JETLEV, LLC, JETLEV TECHNOLOGIES, INC., JLIP, LLC, AQUAFLIER, LLC, JLSG, LLC, SETH GERSZBERG, and MATTHEW ROSENBLATT, Defendants. Case No. 8:15-cv-02113-CJC-JCG [PROPOSED] ORDER GRANTING DEFENDANTS’ PARTIAL MOTION TO DISMISS FIRST AMENDED COMPLAINT Case 8:15-cv-02113-CJC-JCG Document 144-2 Filed 07/10/17 Page 1 of 2 Page ID #:4156 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 CASE NO. 8:15-cv-02113-CJC-JCG ORDER GRANTING DEFENDANTS’ PARTIAL MOTION TO DISMISS FIRST AMENDED COMPLAINT 611021905.1 Before the Court is Defendants Seth Gerszberg, Matthew Rosenblatt, and JLIP, LLC’s (collectively, “Defendants”) Partial Motion to Dismiss First Amended Complaint or For More Definite Statement. Having considered the Motion and the arguments of counsel, and being duly advised in the premises, the Court finds Defendants’ motion well taken. Therefore, the Court hereby ORDERS that Defendants’ motion is GRANTED. Counts II through VI of Plaintiffs’ First Amended Complaint (Dkt. 138) are hereby DISMISSED WITH PREJUDICE. Plaintiffs’ prayer for exemplary and/or punitive damages is hereby STRICKEN. IT IS SO ORDERED. Dated: ______________________ CORMAC J. CARNEY UNITED STATES DISTRICT JUDGE Case 8:15-cv-02113-CJC-JCG Document 144-2 Filed 07/10/17 Page 2 of 2 Page ID #:4157