Convergent Mobile, Inc. v. JTH Tax, Inc. ( 2020 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 CONVERGENT MOBILE, INC., Case No. 4:19-cv-06484-YGR 8 Plaintiff, ORDER: (1) GRANTING IN PART AND v. DENYING IN PART MOTION TO DISMISS; 9 (2) DENYING MOTION TO STRIKE; AND 10 JTH TAX, INC. DBA LIBERTY TAX SERVICE, ( C3 O) NS FE ET RT EIN NG C EC ASE MANAGEMENT Defendant. 11 Dkt. Nos. 6, 7 12 The Court is in receipt of defendant JTH Tax, Inc. dba Liberty Tax Service’s (“JTH”) 13 motion to dismiss and motion to strike. (Dkt. Nos. 6 and 7.) For the reasons set forth below: the 14 15 motion to dismiss is DENIED as to claims for breach of contract and for breach of the covenant of 16 good faith and fair dealing, and GRANTED as to the claim for promissory estoppel; and the motion 17 to strike is DENIED. The standards with respect to these motions are well-known and are not in dispute. 18 I. MOTION TO DISMISS 19 The complaint alleges three causes of action: Breach of Contract (First Cause of Action), 20 Promissory Estoppel (Second Cause of Action), and Breach of the Covenant of Good Faith and 21 Fair Dealing (Third Cause of Action). The core of this Order is based on a fundamentally 22 different view of the complaint by the Court as opposed to JTH’s reading. Under the Federal 23 Rules of Civil Procedure, a plaintiff need only provide allegations to satisfy the notice pleading 24 standard under Rule 8. This is fundamentally a business dispute arising out of commercial 25 interactions. There is no surprise, and plaintiff Convergent Mobile, Inc. (“Convergent”) need not 26 provide the level of detail JTH seeks. JTH is undeniably on notice of the basic dispute described 27 1 With respect to the first cause of action, a breach of contact claim, while the statements of 2 law referenced in JTH’s briefing are accurate with respect to one method of proving a breach of 3 contract claim, other manners of proving a breach of contract also exist. Fundamentally: to 4 “prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) 5 the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s 6 breach, and (4) the resulting damage to the plaintiff.” Richman v. Hartley, 224 Cal.App.4th 1182, 7 1186 (2014). The Court finds the complaint sufficiently alleges each of these elements. The 8 motion as to this claim is therefore DENIED. 9 With respect to the second cause of action, a claim for promissory estoppel, the Court 10 agrees that “[u]nder California law, the same allegations that give rise to a breach of contract 11 claim cannot also ‘give rise to a claim for promissory estoppel, as the former [is] predicated on a 12 promise involving bargained-for consideration, while the latter is predicated on a promise 13 predicated on reliance in lieu of such consideration.’” JMP Securities LLP v. Altair 14 Nanotechnologies Inc. 880 F.Supp.2d 1029, 1040-41 (N.D. Cal. 2012) (quoting Co-Investor, AG 15 v. FonJax, Inc., C 08-01812 SBA, 2008 WL 4344581, at *3 (N.D. Cal. Sept. 22, 2008) (collecting 16 California cases)). While the Court agrees that in general a party may plead in the alternative, 17 Convergent suggests no facts which would suffice to frame a separate and independent claim. The 18 motion is therefore GRANTED as to this claim. 19 The claim for the breach of the covenant of good faith and fair dealing, the third cause of 20 action, is frequently pled in conjunction with a breach of contract claim. Usually at the pleading 21 stage, a court has an incomplete record to determine whether it should be dismissed as a matter of 22 law: where allegations indicate that the defendant “violated the [agreement’s] implied covenant of 23 good faith and fair dealing by [acting] in a in a way not reasonably contemplated by the contract or 24 the parties,” a plausible claim exists. See Co-Investor, AG, supra, (citing Egan v. Mut. of Omaha 25 Ins. Co. 24 Cal.3d 809, 818 (1979); Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal.App.3d 26 1371, 1394-95 (1990)). Here, while indeed bare bone, the allegations are sufficient to allege that 27 JTH acted in a manner knowing that its conduct would materially cause Convergent to enter into 1 The motion as to this claim is therefore DENIED. 2 Accordingly, for the foregoing reasons, the motion to dismiss is GRANTED IN PART and 3 DENIED IN PART. 4 II. MOTION TO STRIKE 5 A court “may strike from a pleading an insufficient defense or any redundant, immaterial, 6 impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). “The function of a [Rule] 12(f) motion 7 to strike is to avoid the expenditure of time and money that must arise from litigating spurious 8 issues by dispensing with those issues prior to trial . . . .” Whittlestone, Inc. v. Handi–Craft Co., 9 618 F.3d 970, 973 (9th Cir. 2010) (quoting Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 10 1993) rev’d on other grounds, 510 U.S. 517 (1994)). “Motions to strike ‘are generally disfavored 11 because they are often used as delaying tactics and because of the limited importance of pleadings 12 in federal practice.’” Shaterian v. Wells Fargo Bank, N.A., 829 F. Supp. 2d 873, 879 (N.D. Cal. 13 2011) (quoting Rosales v. Citibank, Fed. Sav. Bank, 133 F. Supp. 2d 1177, 1180 (N.D. Cal. 14 2001)). 15 Further, because Rule 12(f) motions are disfavored, “courts often require a showing of 16 prejudice by the moving party before granting the requested relief.” Sanchez v. City of Fresno, 17 914 F. Supp. 2d 1079, 1122 (E.D. Cal. 2012) (quoting Cal. Dep't of Toxic Substances Control v. 18 Alco Pac., Inc., 217 F. Supp. 2d 1028, 1033 (C.D. Cal. 2002)). “If there is any doubt whether the 19 portion to be stricken might bear on an issue in the litigation, the court should deny the 20 motion.” Holmes v. Elec. Document Processing, Inc., 966 F. Supp. 2d 925, 930 (N.D. Cal. 2013) 21 (quoting Platte Anchor Bolt, Inc. v. IHI, Inc., 352 F. Supp. 2d 1048, 1057 (N.D. Cal. 2004)). It is 22 within the sound discretion of the district court whether to grant a motion to strike. See 23 Whittlestone, 618 F.3d at 973 (citing Nurse v. United States, 226 F.3d 996, 1000 (9th Cir. 2000)). 24 Here, JTH was advised against filing a motion to strike. JTH nevertheless did, and yet 25 failed to articulate any prejudice necessitating such a motion. While the Court understands the 26 desire to eliminate the prospect of attorney fees from litigation, this alone is an insufficient reason 27 to bring a Rule 12(f) motion to busy courts, especially where the contract itself creates an issue. 1 provides a good overview as to attorney fees under California state law. Thus: 2 [In general, under California law, a] party may not recover attorney fees unless expressly authorized by statute or contract. Code Civ. 3 Proc., § 1021; Sessions Payroll Management, Inc. v. Noble Construction Co., 84 Cal.App.4th 671, 677 (2000). In the absence of 4 a statute authorizing the recovery of attorney fees, the parties may [nevertheless] agree on whether and how to allocate attorney fees. 5 Xuereb v. Marcus & Millichap, Inc., 3 Cal.App.4th 1338, 1341 (1992). They may agree the prevailing party will be awarded all the 6 attorney fees incurred in any litigation between them, limit the recovery of fees only to claims arising from certain transactions or 7 events, or award them only on certain types of claims. The parties may agree to award attorney fees on claims sounding in both contract 8 and tort. Id. at pp. 1341–42. To ensure mutuality of remedy, however, section 1717 makes an attorney fee provision reciprocal 9 even if it would otherwise be unilateral either by its terms or in its effect. Santisas v. Goodin, 17 Cal.4th 599, 610 (1998); Reynolds 10 Metals Co. v. Alperson, 25 Cal.3d 124, 128 (1979). 11 Brown Bark III, 219 Cal. App. 4th at 818-19 (internal citations altered). 12 Here the contract appears to contemplate unilateral attorney fees solely for JTH in 13 paragraph 10(b) of the parties’ agreement. The Court need not decide at this juncture whether 14 section 1717 would render reciprocal the unilateral attorney fees provision. Suffice it to say, the 15 allegations in the complaint should not be stricken at this juncture. To the extent that the motion 16 sought to strike more that the attorney fees allegation, such a motion would be wholly without 17 merit. Accordingly, the motion to strike is DENIED. 18 III. CONCLUSION 19 For the reasons set forth above: (1) the motion to dismiss is GRANTED IN PART as to the 20 claim for promissory estoppel and DENIED IN PART as to claims for breach of contract and for 21 breach of the covenant of good faith and fair dealing; and (2) the motion to strike is DENIED. 22 Convergent additionally requested leave to amend in response to the motion to dismiss 23 with respect to all three claims. Given (i) the delay in the progress of this case, (ii) that the motion 24 was denied as to two of the claims, and (iii) the likely futility of any amendment as to the claim for 25 promissory estoppel, the request to amend is DENIED. JTH shall file an answer to the complaint 26 by May 8, 2020. Should Convergent maintain that sufficient independent facts exist to establish a 27 claim for promissory estoppel, it may file a motion to amend by no later than May 6, 2020. If so 1 amend on a normal briefing schedule as permitted under the local rules. 2 A case management conference is hereby scheduled for June 1, 2020 at 2:00 p.m. In light 3 of the uncertainties with the ongoing coronavirus disease (COVID-19) pandemic, the parties are 4 || instructed to check the Court’s scheduling notes to determine whether the conference will be held 5 || in person or by some alternate platform. 6 This Order terminates Docket Numbers 6 and 7 7 IT Is SO ORDERED. 8 || Dated: April 22, 2020 9 YVONNE GONZALEZ ROGERS 10 UNITED STATES DISTRICT JUDGE 11 g 12 © 15 16 & 17 Z 18 19 20 21 22 23 24 25 26 27 28