Richard Sutherland v. Thomas Francis

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAR 30 2016
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
RICHARD SUTHERLAND, as Assignee of No. 14-15438
Nigel Allen; as Assignee of Fred Pilster; as
Assignee of Sal Ruiz; as Assignee of Judith D.C. No. 5:12-cv-05110-LHK
Lavendar; ANTHONY MALFATTI,
Individually,
MEMORANDUM*
Plaintiffs - Appellants,
v.
THOMAS E. FRANCIS,
Defendant - Appellee.
Appeal from the United States District Court
for the Northern District of California
Lucy H. Koh, District Judge, Presiding
Argued and Submitted March 16, 2016
San Francisco, California
Before: FERNANDEZ, GOULD, and FRIEDLAND, Circuit Judges.
Plaintiffs appeal from the district court’s judgment dismissing for failure to
state a claim their diversity action alleging contract claims under California law.
We have jurisdiction under 28 U.S.C. § 1291. We affirm in part, reverse in part,
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
and remand.
The district court properly dismissed Plaintiffs’ action because Plaintiffs
failed to allege facts sufficient to show the breach of an oral sales contract. See
Walsh v. W. Valley Mission Cmty. Coll. Dist., 78 Cal. Rptr. 2d 725, 733 (Cal. Ct.
App. 1998) (setting forth elements of a breach of contract claim); see also Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009). Plaintiffs allege that they purchased only
fractional interests in certain heavy machinery. Although the California
Commercial Code specifically provides for “sale of a part interest in existing
identified goods,” Cal. Com. Code § 2105(3), Plaintiffs have not adequately
alleged facts showing that the alleged oral contracts involved the sale of goods
because such a sale requires the passing of title from the seller to the buyer for a
price.1 See id.; see also Cal. Com. Code § 2106 (defining “sale”); Cal. Com. Code
§ 2401(3) (providing for how title passes). While factual allegations must be
accepted as true, legal conclusions—such as Plaintiffs’ bare assertion that each
1
A transaction in the form of a sale that really is “intended to operate only as a
security transaction” is not covered by the California Commercial Code’s sales
division. Cal. Com. Code § 2102. Thus, as the district court correctly
recognized, Plaintiffs cannot state a claim for breach of a contract for the sale of
goods by alleging a failure to abide by promises to pay interest or return principal.
2
contract with Defendant was a “sale of goods pursuant to the provisions of the
Uniform Commercial Code”—are not entitled to an assumption of truth. Iqbal,
556 U.S. at 679. The district court thus properly dismissed Plaintiffs’ claims
because, among other things, Plaintiffs had not alleged that they had taken or were
supposed to take title to the machinery pursuant to the oral contracts, or how
Defendant breached the agreements by not transferring title to Plaintiffs.
The district court erred, however, in denying leave to amend on the ground
that amendment would be futile. “Dismissal without leave to amend is improper
unless it is clear, upon de novo review, that the complaint could not be saved by
any amendment.” Krainski v. Nev. ex rel. Bd. of Regents of Nev. Sys. of Higher
Educ., 616 F.3d 963, 972 (9th Cir. 2010) (quoting Thinket Ink Info. Res., Inc. v.
Sun Microsystems, Inc., 368 F.3d 1053, 1061 (9th Cir. 2004)).
At this point in the proceedings, although Plaintiffs’ ability to save their
claims by amendment is far from certain, it is not clear that they lack that ability. 2
2
The district court appears to have believed that Plaintiffs had had two
opportunities to remedy their pleading defects, which might have supported a
conclusion that Plaintiffs could not allege new facts. See Allen v. City of Beverly
Hills, 911 F.2d 367, 374 (9th Cir. 1990) (failure to supply new facts within an
amended complaint supports a denial of further leave to amend). At the time of
dismissal, however, the district court had given Plaintiffs only one chance to
amend to cure defects. Plaintiffs amended their original complaint within twenty-
3
Defendant does not dispute that types of machinery Plaintiffs discuss in their
complaint may be considered “goods.” Plaintiffs identified, by specific vehicle
identification numbers, the machinery to which they allegedly contracted. The
only issue is whether Plaintiffs can allege that they contracted with Defendant to
purchase partial interests in these goods.3 Plaintiffs’ counsel represented on
appeal that Plaintiffs could allege that they were to receive an assignment of title
for their interests in the machinery, and that written bills of sale reflecting
fractional ownership interests could be attached to an amended pleading.
To survive dismissal on remand, Plaintiffs must allege and have factual
support for their contention that Defendant was supposed to transfer title to partial
interests in the machinery to Plaintiffs before Defendant was to resell the pieces of
equipment but Defendant did not do so.
one days of serving it merely to add a party, prior to Defendant’s motion to dismiss
or any ruling by the court. See Fed. R. Civ. P. 15(a)(1) (“A party may amend its
pleading once as a matter of course within: (A) 21 days after serving it[.]”).
3
There is no statutory requirement under California’s Commercial Code that full
title to goods must pass from the buyer to the seller. Cal. Com. Code § 2105(3);
see also Leal v. Holtvogt, 702 N.E.2d 1246, 1255 (Ohio Ct. App. 1998)
(concluding that the sale of a half-interest in a horse is a sale of goods under the
Uniform Commercial Code).
4
The parties shall bear their own costs on appeal.
AFFIRMED in part, REVERSED in part, and REMANDED.
5