Cabo Brands Inc v. MAS Beverage Inc et al, No. 8:2011cv01911 - Document 81 (C.D. Cal. 2012)

Court Description: ORDER GRANTING CROSS DEFENDANTS MOTION TO DISMISS 72 by Judge Otis D Wright, II: The Court hereby DISMISSES the Crossdefendants Worldwide Spirits, Inc., Worldwide Beverage Imports, LLC, Universal Brands and Imports, LLC, Drinks Americas, Inc., and Drinks Americas Holdings, Ltd.from this case. Further, Fabrica De Tequilas Finos S.A. De, Federico G. Cabo, and Richard F.Cabo are DISMISSED from this case. Finally, MASs fifth cause of action for unjust enrichment is hereby DISMISSED in its entirety, including with respect to Cabo. (lc) .Modified on 11/14/2012 (lc).

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Cabo Brands Inc v. MAS Beverage Inc et al Doc. 81 O 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 CENTRAL DISTRICT OF CALIFORNIA 9 10 CABO BRANDS, INC., 11 12 13 v. MAS BEVERAGES, INC., MAS BEVERAGES, INC., 16 17 18 ORDER GRANTING CROSSDEFENDANTS’ MOTION TO DISMISS [72] Defendant. 14 15 Plaintiff, Case No. 8:11-cv-1911-ODW(ANx) v. Counterclaimant, CABO BRANDS, INC.; Counterdefendants. 19 20 21 22 23 24 25 26 27 28 MAS BEVERAGES, INC., v. Crossclaimant, FABRICA DE TEQUILAS FINOS S.A. DE C.V.; WORLDWIDE BEVERAGE IMPORTS, LLC; WORLDWIDE SPIRITS, INC.; UNIVERSAL BRANDS AND IMPORTS, LLC; DRINKS AMERICAS, INC.; DRINKS AMERICAS HOLDINGS, LTD; FEDERICO G. CABO; RICHARD F. CABO; and DOES 1 through 10, inclusive, Crossdefendants. Dockets.Justia.com Crossdefendants—Worldwide Spirits, Inc., Worldwide Beverage Imports, LLC, 1 2 Universal Brands and Imports, LLC, Drinks Americas, Inc., and Drinks Americas 3 Holdings, Ltd.—ask the Court to dismiss MAS’s claims for failure to state a claim 4 under Federal Rule of Civil Procedure 12(b)(6).1 (ECF No. 72.) For the reasons 5 discussed below, the Court GRANTS Crossdefendants’ Motion to Dismiss. I. 6 BACKGROUND On November 16, 2010, MAS entered into an agreement with Cabo to promote 7 8 Ed Hardy, Agave 99, and KAH brand tequilas. (Countercl. ¶¶ 20, 22.) Cabo agreed 9 to sell the tequila products to MAS at the prices specified in the agreement, and MAS 10 would sell the products to its clients. (Countercl. ¶ 25.) But allegedly, Cabo never 11 intended to follow the terms of the agreement and conspired with Crossdefendants— 12 through the control of Federico Cabo—to breach the agreement by granting Drinks the 13 right to distribute the same tequila products throughout the United States. (Countercl. 14 ¶¶ 27, 35, 36.) MAS claims it has the exclusive rights to distribute in numerous 15 territories, including the United States. (Countercl. ¶ 27.) Further, Cabo and 16 Crossdefendants failed to notify MAS of this arrangement, and purportedly allowed 17 MAS to continue performing under the agreement. (Countercl. ¶ 28.) As a result, 18 MAS claims that it “expended funds and effort to set up a sales force, created 19 marketing plan,” and solicited clients, following the terms of the agreement. 20 (Countercl. ¶ 30.) MAS further alleges that it performed in good faith, but Cabo and 21 Crossdefendants ignored MAS’s efforts. (Countercl. ¶ 37.) MAS also tried to resolve 22 the problems it had with Cabo; such as Cabo’s unilateral price increase and failure to 23 fill MAS’s orders; but to no avail. (Countercl. ¶¶ 34, 39.) 24 On December 12, 2011, Cabo brought a complaint, seeking a declaratory 25 judgment against MAS. (ECF No. 1.) In response, MAS filed counterclaims against 26 Cabo for breaching the terms of the agreement and also brought claims against 27 1 28 Having considered the papers filed in support of and in opposition to this Motion, the Court deems the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; L.R. 7-15. 2 1 Crossdefendants on March 16, 2012. (ECF No. 19.) Crossdefendants now bring this 2 motion to dismiss MAS’s claims. (ECF No. 72.) 3 4 II. LEGAL STANDARD Dismissal under Rule 12(b)(6) can be based on “the lack of a cognizable legal 5 theory” or “the absence of sufficient facts alleged under a cognizable legal theory.” 6 Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). A complaint 7 need only satisfy the minimal notice pleading requirements of Rule 8(a)(2)—a short 8 and plain statement—to survive a motion to dismiss for failure to state a claim under 9 Rule 12(b)(6). Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003); Fed. R. Civ. P. 10 8(a)(2). For a complaint to sufficiently state a claim, its “[f]actual allegations must be 11 enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. 12 Twombly, 550 U.S. 544, 555 (2007). While specific facts are not necessary so long as 13 the complaint gives the defendant fair notice of the claim and the grounds upon which 14 the claim rests, a complaint must nevertheless “contain sufficient factual matter, 15 accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. 16 Iqbal, 556 U.S. 662, 678 (2009). 17 Iqbal’s plausibility standard “asks for more than a sheer possibility that a 18 defendant has acted unlawfully,” but does not go so far as to impose a “probability 19 requirement.” Id. Rule 8 demands more than a complaint that is merely consistent 20 with a defendant’s liability—labels and conclusions, or formulaic recitals of the 21 elements of a cause of action do not suffice. Id. Instead, the complaint must allege 22 sufficient underlying facts to provide fair notice and enable the defendant to defend 23 itself effectively. Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). The 24 determination whether a complaint satisfies the plausibility standard is a “context- 25 specific task that requires the reviewing court to draw on its judicial experience and 26 common sense.” Iqbal, 566 U.S. at 679. 27 28 When considering a Rule 12(b)(6) motion, a court is generally limited to the pleadings and must construe “[a]ll factual allegations set forth in the complaint . . . as 3 1 true and . . . in the light most favorable to [the plaintiff].” Lee v. City of L.A., 250 F.3d 2 668, 688 (9th Cir. 2001). Conclusory allegations, unwarranted deductions of fact, and 3 unreasonable inferences need not be blindly accepted as true by the court. Sprewell v. 4 Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Yet, a complaint should be 5 dismissed only if “it appears beyond doubt that the plaintiff can prove no set of facts” 6 supporting plaintiff’s claim for relief. Morley v. Walker, 175 F.3d 756, 759 (9th Cir. 7 1999). As a general rule, leave to amend a complaint that has been dismissed should be 8 9 freely granted. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when 10 “the court determines that the allegation of other facts consistent with the challenged 11 pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well 12 Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see Lopez v. Smith, 203 F.3d 13 1122, 1127 (9th Cir. 2000). III. 14 DISCUSSION Crossdefendants move to dismiss the following five causes of action asserted 15 16 against them: (1) fraud-intentional misrepresentation; (2) fraud-negligent 17 misrepresentation; (3) negligent interference with prospective economic advantage; 18 (4) accounting; and (5) unfair business practices. (Mot. 2.) The Court considers each 19 cause of action in turn. 20 A. 21 Fraud-Intentional and Negligent Misrepresentation In California, the elements for a claim of fraud are: (1) misrepresentation; 22 (2) knowledge of falsity; (3) intent to defraud, i.e., to induce reliance; (4) justifiable 23 reliance; and (5) resulting damage. City Solutions, Inc. v. Clear Channel Commc’ns, 24 Inc., 365 F.3d 835, 839 (9th Cir. 2004) (citing Lazar v. Superior Ct., 12 Cal. 4th 631, 25 638 (1996)). 26 Pleadings of fraud are subject to a heightened standard, requiring a party to 27 “state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. 28 P. 9(b). Particularity means that averments of fraud must be accompanied by “the 4 1 who, what, when, where, and how” of the misconduct charged. Vess v. Ciba-Geigy 2 Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). And the allegations must be 3 specific, indicating the time, place, and content of the false representations as well as 4 the identities of the parties to the misrepresentations. Swartz v. KPMG LLP, 476 F.3d 5 756, 764 (9th Cir. 2007). In this case, MAS does not allege sufficient details against Crossdefendants for 6 7 its intentional and negligent fraud-misrepresentation claims. For example, MAS 8 asserts that Crossdefendants made false representations to MAS, “knew such 9 representations were false,” and made no effort to provide support, services, or 10 products to MAS. (Countercl. ¶¶ 55, 56.) The problem here is that MAS attributes 11 Cabo’s alleged acts to the Crossdefendants. And MAS provides no specific 12 allegations concerning anything that Crossdefendants did to MAS, other than enter 13 into business arrangements with Cabo. (E.g., Countercl. ¶ 27.) MAS also pleads 14 nothing concerning any contact between MAS and the Crossdefendants; and it appears 15 there was none. Crossdefendants cannot—negligently nor intentionally— 16 misrepresent information to MAS because Crossdefendants had no contact with MAS 17 nor conducted any business with MAS. Accordingly, MAS’s two fraud- 18 misrepresentation claims are DISMISSED WITH PREJUDICE as to the 19 Crossdefendants. 20 B. Negligent Interference with Prospective Economic Advantage MAS claims that Drinks negligently interfered with MAS’s prospective 21 22 economic advantage—that Drinks “knew or should have known of the existence of the 23 contractual relationship” between MAS and Cabo, but Drinks did not act with due 24 care and interfered with MAS and Cabo’s economic relationship. (Countercl. ¶¶ 71, 25 72.) 26 The elements of negligent interference with prospective economic advantage 27 are: “(1) the extent to which the transaction was intended to affect the plaintiff, (2) the 28 foreseeability of harm to the plaintiff, (3) the degree of certainty that the plaintiff 5 1 suffered injury, (4) the closeness of the connection between the defendant’s conduct 2 and the injury suffered, (5) the moral blame attached to the defendant’s conduct, and 3 (6) the policy of preventing future harm.” Hsu v. OZ Optics Ltd., 211 F.R.D. 615, 621 4 (N.D. Cal. 2002). But a defendant’s conduct is blameworthy only if it was 5 independently wrongful apart from the interference itself. Della Penna v. Toyota 6 Motor Sales, U.S.A., Inc., 11 Cal. 4th 376, 393 (1995). 7 MAS claims that it had an economic relationship with Cabo. (Countercl. ¶ 20.) 8 But MAS pleads no facts showing how Drinks’ conduct was independently wrongful. 9 According to MAS, Drinks entered a contractual relationship with Worldwide to 10 promote the tequila products in the United States. (Countercl. ¶ 27.) And even 11 though MAS alleges a grand conspiracy between Cabo and Drinks, there is nothing in 12 MAS’s pleading that suggests that Drinks even knew about the existence of MAS. 13 MAS provides nothing to demonstrate that Drinks’s conduct was independently 14 wrongful, apart from the alleged negligent interference. Lange v. TIG Ins. Co., 68 15 Cal. App. 4th 1179, 1187–88 (1998) (defendant did not negligently interfere with 16 plaintiff’s prospective economic advantage when defendant merely exercised its 17 contractual right to termination, which is not an independent wrongful act). Thus, 18 MAS’s negligent interference claim is DISMISSED WITH PREJUDICE as to 19 Drinks. 20 C. Accounting 21 To state a cause of action for accounting, a plaintiff must allege that: (1) a 22 relationship exists between the plaintiff and the defendant that requires an accounting; 23 and (2) some balance is due to the plaintiff that can only be ascertained by an 24 accounting. Teselle v. McLoughlin, 173 Cal. App. 4th 156, 179 (2009). An 25 accounting requires a relationship, but not necessarily a fiduciary relationship. Id. 26 In this case, MAS and Cabo have a contractual relationship, but MAS does not 27 allege any relationship with any of the Crossdefendants, except that of a competitor. 28 So MAS’s accounting claim is facially defective because it cannot plead the 6 1 relationship element. And thus, MAS’s accounting cause of action is DISMISSED 2 WITH PREJUDICE as to the Crossdefendants. 3 D. Unjust Enrichment Counterdefendants do not move to dismiss this cause of action, but the Court 4 5 finds it is appropriate to address this now. A court may dismiss a complaint under 6 Federal Rule of Civil Procedure 12(b)(6) on its own motion. Omar v. Sea-Land Serv., 7 Inc., 813 F.2d 986, 991 (9th Cir. 1987) (“A trial court may dismiss a claim sua sponte 8 under [Rule] 12(b)(6). . . . Such a dismissal may be made without notice where the 9 claimant cannot possibly win relief.”). 10 There is a split of authority in California whether unjust enrichment is a cause 11 of action. One line of cases identifies the elements of an unjust enrichment claim as 12 one where there is (1) the receipt of a benefit, and (2) the unjust retention of the 13 benefit at the expense of another. Cont’l Cas. Co. v. Enodis Corp., 417 Fed. App’x 14 668, 670 (9th Cir. 2011). The other line of cases identifies unjust enrichment as a 15 “general principle” and not a cause of action. Manantan v. Nat’l City Mortg., No. C- 16 11-00216 CW, 2011 U.S. Dist. LEXIS 82668, at *14–16 (N.D. Cal. July 28, 2011). This court follows the latter; unjust enrichment is not a separate cause of action. 17 18 Thongnoppakun v. Am. Express Bank, No. CV11-08063-ODW(MANx), 2012 U.S. 19 Dist. LEXIS 25581, at *5 (C.D. Cal. Feb. 27, 2012). Therefore, the Court 20 DISMISSES WITH PREJUDICE MAS’s fifth cause of action in its entirety. 21 E. Unfair Business Practices 22 California’s unfair competition law codified under Business and Professions 23 Code Section 17200 (“UCL”) encompasses “anything that can properly be called a 24 business practice and that at the same time is forbidden by law.” Chabner v. United of 25 Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir. 2000). An action under UCL 26 borrows violations from other laws and treats these violations, when committed under 27 business activity, as unlawful practices independently actionable under UCL. Id.; 28 Farmers Ins. Exch. v. Superior Court, 2 Cal. 4th 377, 383 (1992). 7 In this case, because the Court has dismissed all of MAS’s other claims against 1 2 Crossdefendants, there now remains no predicate to support a UCL claim against 3 them. Love v. The Mail on Sunday, 473 F. Supp. 2d 1052, 1059 (C.D. Cal. Feb. 8, 4 2007); see Briosos v. Wells Fargo Bank, 737 F. Supp. 2d 1018, 1020 (N.D. Cal. Aug. 5 25, 2010) (dismissing the UCL claim because there is no predicate violation necessary 6 to sustain a UCL claim); see also Falcocchia v. Saxon Mortg., Inc., 709 F. Supp. 2d 7 873, 887 (E.D. Cal. May 27, 2010) (the UCL claim survives when there is requisite 8 predicate unlawful conduct). MAS’s catch-all UCL claim must be dismissed when 9 the other claims have been dismissed. Therefore, MAS’s sixth cause of action for 10 unfair business practices is DISMISSED WITH PREJUDICE as to the 11 Crossdefendants. 12 F. 13 Alter-Ego Analysis As a last-ditch attempt, MAS attempts to divert liability to Crossdefendants by 14 pleading that they are all alter-egos of Cabo, and are all owned and controlled by 15 Federico Cabo. (Countercl. ¶¶ 1–10.) But MAS’s alter-ego theory makes no sense. 16 To show that a parent and subsidiary are not separate entities, a plaintiff must plead: 17 “(1) that there is such unity of interest and ownership that the separate personalities 18 [of the two entities] no longer exist and (2) that failure to disregard [their separate 19 identities] would result in fraud or injustice.” Doe v. Unocal Corp., 248 F.3d 915, 926 20 (9th Cir. 2001). MAS only provides conclusory allegations in its counterclaims that 21 Federico Cabo is the owner, majority shareholder, controlling officer, managing 22 partner, or managing member of each of the Crossdefendants. (E.g., Countercl. ¶ 9.) 23 But beyond that, MAS does not allege facts showing the two Unocal alter-ego factors. 24 And even if MAS can show that the Crossdefendants are alter-egos of Cabo, 25 that theory would confer the Crossdefendants’ liability to the controlling party— 26 Federico Cabo and perhaps Cabo. But this theory is worthless because, as discussed 27 above, MAS cannot demonstrate that Crossdefendants have done anything; there is no 28 liability to transfer. And to the extent MAS argues that Cabo is the alter-ego of 8 1 Crossdefendants (that Crossdefendants control Cabo), MAS provides nothing to 2 support this theory other than a simple conclusion that they are related and intertwined 3 in their business dealings. Based on MAS’s supplied facts, the Court does not find 4 that any party is an alter-ego of another. 5 G. 6 Dismissal of Non-served Parties Finally, the Court notes that several parties have yet to be served process: 7 Fabrica De Tequilas Finos S.A. De; Federico G. Cabo; and Richard F. Cabo. The 8 Court notified the parties of this defect in its September 26, 2012 Order. (ECF 9 No. 73.) To date, MAS has yet to file proofs of service for these three 10 crossdefendants. Further, the Court finds no good cause in MAS’s papers why service 11 was not timely effectuated. (ECF No. 77.) Accordingly, Fabrica De Tequilas Finos 12 S.A. De, Federico G. Cabo, and Richard F. Cabo are hereby DISMISSED from this 13 case under Federal Rule of Civil Procedure 4(m) for failure to serve process within 14 120 days. IV. 15 16 CONCLUSION For the reasons discussed above, no causes of action remain against any of the 17 served Crossdefendants. Thus, the Court hereby DISMISSES the Crossdefendants— 18 Worldwide Spirits, Inc., Worldwide Beverage Imports, LLC, Universal Brands and 19 Imports, LLC, Drinks Americas, Inc., and Drinks Americas Holdings, Ltd.—from this 20 case. Further, Fabrica De Tequilas Finos S.A. De, Federico G. Cabo, and Richard F. 21 Cabo are DISMISSED from this case. Finally, MAS’s fifth cause of action for unjust 22 enrichment is hereby DISMISSED in its entirety, including with respect to Cabo. 23 IT IS SO ORDERED. 24 November 14, 2012 25 26 27 ___________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 28 9

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