Talece Inc. v. Zhang et al, No. 5:2020cv03579 - Document 35 (N.D. Cal. 2020)
Court Description: ORDER GRANTING 9 DEFENDANT'S MOTION TO DISMISS WITH LEAVE TO AMEND. Signed by Judge Beth Labson Freeman on 10/22/2020.(blflc2S, COURT STAFF) (Filed on 10/22/2020)
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1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 TALECE INC., Plaintiff, 8 9 v. 10 ZHENG ZHANG, Defendant. 11 United States District Court Northern District of California Case No. 20-cv-03579-BLF ORDER GRANTING DEFENDANT'S MOTION TO DISMISS WITH LEAVE TO AMEND [Re: ECF 9] 12 13 Defendant Zheng Zhang (“Defendant”) brings a Motion to Dismiss Plaintiff Talece Inc.’s 14 (“Plaintiff”) Complaint. Mot., ECF 9. Plaintiff brought suit alleging four causes of action: breach 15 of fiduciary duties, unjust enrichment, conversion, and accounting. See Ex. A, Compl. ¶¶ 21–41, 16 ECF 1-1. Defendant moves to dismiss the Complaint for failure to state a claim upon which relief 17 can be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6). Mot. 1, 5. Particularly, 18 Defendant claims Plaintiff failed to meet the heightened pleading requirements for allegations 19 based on fraud under Rule 9(b). Id. at 2; Reply 2, ECF 16. In addition, Defendant requests this 20 Court strike portions of evidence Plaintiff filed in support of its Opposition to Defendant’s Motion 21 to Dismiss, asserting lack of foundation, lack of personal knowledge, unsworn statements, and 22 hearsay. See Reply 7–11. Having considered the briefing of the parties, the Court GRANTS Defendant’s Motion to 23 24 Dismiss, with leave to amend. 25 26 27 28 I. BACKGROUND a. Procedural History Plaintiff filed its initial complaint in the above-captioned action in Santa Clara County 1 Superior Court on May 18, 2020. See Compl. Ten days later, on May 28, 2020, Defendant 2 removed the case to this Court. See Notice of Removal, ECF 1. Plaintiff filed a motion to remand 3 the case on July 13, 2020. See Mot. to Remand, ECF 17. Plaintiff’s motion to remand was denied 4 on September 8, 2020. See Order Den. Mot. to Remand, ECF 23. 5 6 Opposition to Defendant’s Motion to Dismiss on June 24, 2020. See Opp’n, ECF 11. Defendant 7 filed his corrected Reply to Plaintiff’s Opposition on July 2, 2020. See Reply. Pursuant to Civil 8 Local Rule 7-1(b), the Court finds that Defendant’s is appropriate for determination without oral 9 argument. 10 11 United States District Court Northern District of California On June 10, 2020, Defendant filed his motion to dismiss. See Mot. Plaintiff filed its b. Factual History Plaintiff is a Delaware corporation with its principal place of business in Santa Clara, 12 California. Compl. ¶ 2. Defendant is the former Chief Executive Officer (CEO) and former Chief 13 Financial Officer (CFO) of Plaintiff. Id. ¶ 3. 14 Plaintiff describes itself as an “e-commerce website platform for [the] construction 15 industry.” Id. ¶ 2. Plaintiff’s software system “enable[s] a user to design a single-family house on 16 their laptop and have a builder company come in and build [a] customized home after the user 17 furnishe[s] payment to [Plaintiff].” Mot. 3. In this way, “a user could personalize their home 18 design, without being required to possess [] building construction expertise.” Id. Plaintiff also 19 “empower[s] potential owners of commercial buildings in similar ways.” Id. at 4. 20 Plaintiff brings four causes of action against Defendant: breach of fiduciary duty, unjust 21 enrichment, conversion, and accounting. Compl. ¶¶ 21–41. Plaintiff alleges that from February 4, 22 2019, to February 14, 2020, Defendant “concealed Plaintiff Talece’s business information from 23 Plaintiff Talece’s corporate secretary and the majority shareholders.” Id. ¶ 11. Plaintiff also alleges 24 that Defendant “misappropriate[ed] Plaintiff’s funds, properties, and trade secrets, and utiliz[ed] 25 Plaintiff’s assets in wanton instances of self-dealing.” Id. ¶ 12. On information and belief, Plaintiff 26 alleges Defendant “embezzled the corporation’s capital funds” and “transferred Plaintiff’s funds to 27 at least one bank account [and additional unknown bank accounts]” managed by Defendant. Id. 28 ¶¶ 14–16. Plaintiff also alleges on information and belief that Defendant “stole Plaintiff Talece’s 2 1 software, codes for website e-commerce platform and other technical information, as well as 2 accounting books, check books, and other assets” and caused Plaintiff to engage in transactions in 3 a way that violated the Immigration and Nationality Act and other employment regulations. Id. 4 ¶¶ 17–18. Defendant moves to dismiss Plaintiff’s complaint for failing to state a claim, pursuant to United States District Court Northern District of California 5 6 Rule 12(b)(6). Mot. 1, 5. Defendant argues that Plaintiff failed to meet the heightened pleading 7 standard for fraud-related allegations under Rule 9(b). Id. at 2, 5–6. Defendant also requests to 8 strike portions of evidence Plaintiff filed in support of its Opposition to Defendant’s Motion to 9 Dismiss. Reply 7–11. Plaintiff opposes the Motion on the grounds that its Complaint neither 10 alleges fraud nor relies on the elements of fraud and thus Rule 9(b) does not apply. Opp’n 2–4. 11 Plaintiff also maintains that if the heightened pleading standard under Rule 9(b) does apply, 12 Plaintiff’s complaint would still be considered well-plead. Id. at 4–6. 13 14 15 16 II. LEGAL STANDARD a. Rule 12(b)(6) Motion to Dismiss: General Requirements A motion to dismiss under Rule 12(b)(6) concerns what facts a plaintiff must plead on the 17 face of his complaint. Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, a complaint 18 must include “a short and plain statement of the claim showing that the pleader is entitled to 19 relief.” Id. Any complaint that does not meet this requirement can be dismissed pursuant to Rule 20 12(b)(6). In interpreting Rule 8(a)’s “short and plain statement” requirement, the Supreme Court 21 has held that a plaintiff must plead “enough facts to state a claim to relief that is plausible on its 22 face,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007), which requires that “the plaintiff 23 plead[] factual content that allows the court to draw the reasonable inference that the defendant is 24 liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). This standard does 25 not ask the Plaintiff to plead facts that suggest he will probably prevail, but rather “it asks for more 26 than a sheer possibility that a defendant has acted unlawfully.” Id. (internal quotation marks 27 omitted). The Court must “accept factual allegations in the complaint as true and construe the 28 pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & 3 1 Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). The Court is not, however, forced to 2 “assume the truth of legal conclusions merely because they are cast in the form of factual 3 allegations.” Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (internal citation omitted). 4 United States District Court Northern District of California 5 b. Fraud Pleadings Under Rule 9(b) When a party pleads a cause of action for fraud or mistake, it is subject to the heightened 6 pleading requirements of Rule 9(b). “In alleging fraud or mistake, a party must state with 7 particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b) (emphasis 8 added). “Malice, intent, knowledge, and other conditions of a person’s mind may be alleged 9 generally.” Id. Rule 9(b) demands that the circumstances constituting any alleged fraud be plead 10 “specific[ally] enough to give defendants notice of the particular misconduct . . . so that they can 11 defend against the charge and not just deny that they have done anything wrong.” Kearns v. Ford 12 Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (internal citation omitted). Claims of fraud must 13 be accompanied by the “who, what, when, where, and how” of the misconduct alleged. Cooper v. 14 Pickett, 137 F.3d 616, 627 (9th Cir. 1997), superseded by statute on other grounds (internal 15 citation omitted). 16 If a “claim is said to be ‘grounded in fraud’ or to ‘sound to fraud,’ [then] the pleading of 17 that claim as a whole must satisfy that particularity requirement of Rule 9(b).” Vess v. Ciba-Geigy 18 Corp. USA, 317 F.3d 1097, 1103–04 (9th Cir. 2003). For example, a claim may be “grounded in 19 fraud” if the “plaintiff [] allege[s] a unified course of fraudulent conduct and rel[ies] entirely on 20 that course of conduct as the basis of a claim.” Id. at 1103. 21 The applicability of Rule 9(b) hinges not on the elements of the claim but rather on the 22 nature of the allegations themselves: “Rule 9(b) applies to ‘averments of fraud’ in all civil cases in 23 federal district court . . . in cases in which fraud is not an essential element of the claim, Rule 9(b) 24 applies, but only to particular averments of fraud.” Id.; see also Kearns, 567 F.3d at 1124 (“Where 25 fraud is not an essential element of a claim, only those allegations of a complaint which aver fraud 26 are subject to Rule 9(b)'s heightened pleading standard.”). Fraud can thus be averred “by 27 specifically alleging fraud, or by alleging facts that necessarily constitute fraud (even if the word 28 ‘fraud’ is not used).” Vess, 317 F.3d at 1105 (citations omitted). 4 1 2 DISCUSSION 3 Although Plaintiff’s claims may arise under state law, Plaintiff’s allegations are subject to 4 the Federal Rules of Civil Procedure. Kearns, 567 F.3d at 1125 (quoting Vess, 317 F.3d at 1102) 5 (“[T]he Federal Rules of Civil Procedure apply in federal court, ‘irrespective of the source of the 6 subject matter jurisdiction, and irrespective of whether the substantive law at issue is state or 7 federal.’”). 8 9 United States District Court Northern District of California III. In his Motion, Defendant argues that Plaintiff’s entire complaint is grounded in fraud because Plaintiff accuses Defendant of “stealing money,” embezzlement, and misappropriation of 10 funds and trade secrets. Mot. 2, 6–9. Defendant maintains that Plaintiff fails to allege the what, 11 when, where, and how required by Rule 9(b). Id. at 6–9; see Cooper, 137 F.3d at 627. Plaintiff has 12 responded to Defendant’s Motion by stating none of its claims “involve or require fraud elements 13 explicitly or implicitly.” Opp’n 2. However, as mentioned above, “in cases in which fraud is not 14 an essential element of the claim, Rule 9(b) [still] applies [] to particular averments of fraud.” 15 Vess, 317 F.3d at 1103 (emphasis added). Plaintiff’s reliance on the elements of the causes of 16 action rather than the particular allegations against Defendant is therefore unpersuasive. See Opp’n 17 2–4. Plaintiff also implies that the language in the Complaint referencing fraud refers to the 18 condition of Defendant’s mind, which “may be alleged generally” under Rule 9(b). Id. at 2. After 19 evaluating each cause of action, as discussed below, the Court is not persuaded by this argument. 20 Alternatively, Plaintiff argues that it has pled all counts with sufficient specificity to satisfy Rule 21 9(b)’s standards and that a relaxed pleading standard applies to instances where fraudulent conduct 22 has occurred over long periods of time and when the information is peculiarly within Defendant’s 23 control. Id. at 4–5. As discussed below, the Court also finds these arguments unpersuasive. 24 25 a. Documents Attached to Defendant’s Motion and Reply As a preliminary matter, Defendant’s Motion to Dismiss and Reply include references to 26 various attachments and declarations. See Mot.; Reply. District courts generally may not consider 27 material outside the pleadings when assessing the sufficiency of a complaint under Rule 12(b)(6). 28 Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). When “matters outside the pleading 5 1 are presented to and not excluded by the court,” the motion to dismiss converts into a motion for 2 summary judgment under Rule 56, where both parties must have the opportunity “to present all 3 the material that is pertinent to the motion.” Fed. R. Civ. P. 12(d). There are two exceptions to this 4 rule: the incorporation-by-reference doctrine, and judicial notice under Federal Rule of Evidence 5 201. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 998 (9th Cir. 2018). Neither applies 6 here. Plaintiff has not extensively referred to any attachment or document in its Complaint that 7 Defendant references in his Motion or Reply to be considered incorporated-by-reference. See id. at 8 1002; see also Compl. Nor has Defendant asked this Court to take judicial notice of these 9 documents. Therefore, this Court will not consider these attachments and documents when 10 United States District Court Northern District of California 11 evaluating the Motion to Dismiss. b. Breach of Fiduciary Duty 12 “Sounding in fraud, [California's breach of fiduciary duty claim] is subject to the 13 heightened pleading standards.” United Energy Trading, LLC v. Pacific Gas & Electric Co., 146 14 F. Supp. 3d 1122, 1142 (N.D. Cal. 2015). Under the breach of fiduciary duty claim, Plaintiff 15 pleads and alleges both breaches of duty of loyalty and duty of care. Opp’n 2; see also Compl. 16 ¶ 22–24. To demonstrate that this cause of action is not subject to the heightened pleading 17 standard, Plaintiff turns to the elements of these alleged breaches, citing to California Corporations 18 Code § 309(a) to discuss the fiduciary duty of care directors owe to a corporation and its 19 shareholders and Sequoia Vacuum Systems v. Stransky, 229 Cal. App. 2d 281 (1964), to discuss 20 the duty of loyalty an agent owes his principal. Opp’n 2–3. As stated above, merely reciting the 21 definitions and elements of what constitutes a breach is not a substitute for pleading with the 22 requisite particularity when fraud has been averred. See Vess, 317 F.3d at 1103. 23 In addition to the blanket requirement that breach of fiduciary claims must be pled under 24 Rule 9(b), the entire claim expressly relies an alleged fraudulent conduct. Plaintiff avers that 25 Defendant acted with “malice, oppression, and fraud.” Compl. ¶ 28. Plaintiff supports these 26 allegations by stating that Defendant “intentionally breached his fiduciary duties owed to 27 [Plaintiff]” by acting “directly contrary to the interests of and to the detriment of the corporation, 28 taking the corporation’s funds, properties and trade secrets, with the purpose of advancing his own 6 1 interests [and engaging] in substantial self-dealings.” Id. ¶ 25. Plaintiff also states that “neither 2 Plaintiff[‘s] Board of Directors nor the shareholders of the majority outstanding shares gave 3 Defendant [] informed consent that authorized the beaches of his fiduciary duties alleged herein.” 4 Id. ¶ 26. These allegations are further supported by the general allegations of the Complaint, 5 discussed in greater detail below. See id. ¶¶ 11, 12, 14, 17. The breach of fiduciary duty claim is 6 therefore founded in fraud, as Plaintiff is alleging Defendant intentionally misrepresented his 7 duties and acted to the detriment of Plaintiff for his own benefit. By specifically alleging fraud and 8 alleging facts that rely on fraudulent behavior, Plaintiff has averred fraud under the breach of 9 fiduciary duty claim, and thus, this cause of action is subject to the heightened pleading standards United States District Court Northern District of California 10 of Rule 9(b). See Vess, 317 F.3d at 1105. 11 However, Plaintiff fails to explain the when, where, how, and other details of the 12 allegations. See Mot. 6–8. Plaintiff broadly states that Defendant engaged in the alleged 13 wrongdoings during the time he was CEO, from February 4, 2019 to February 14, 2020. Compl. 14 ¶ 11. Plaintiff does not provide greater detail about when exactly or approximately Defendant 15 “misappropriate[ed] [Plaintiff’s] funds, properties and trade secrets,” “utiliz[ed] Plaintiff’s assets 16 in wanton instances of self-dealing,” and into which accounts Plaintiff believes Defendant 17 embezzled Plaintiff’s capital funds. See Compl. ¶¶ 12–14, 16. Plaintiff also does not provide any 18 specific details of when and how Defendant “stole” Plaintiff’s software, codes, accounting books, 19 and other assets. Compl. ¶ 17. Therefore, Plaintiff has not met the heightened pleading standard of 20 Rule 9(b). See Cooper, 137 F.3d at 627. Accordingly, the Court GRANTS Defendant’s motion to 21 dismiss the breach of fiduciary duty claim WITH leave to amend. 22 23 c. Unjust Enrichment In regard to its second claim—unjust enrichment—Plaintiff again turns to the elements of 24 unjust enrichment by citing to Peterson v. Cellco Partnership, 164 Cal. App. 4th 1583 (2008). 25 Opp’n 3. Plaintiff argues that this claim is not subject to Rule 9(b) because it shares no elements 26 with fraud. Id. As stated above, merely reciting the elements of what constitutes unjust enrichment 27 is not a substitute for pleading with particularity when fraud has been averred. See Vess, 317 F.3d 28 at 1103. In its Complaint, Plaintiff’s unjust enrichment claim explicitly relies on the same course 7 United States District Court Northern District of California 1 of Defendant’s conduct as the breach of fiduciary duty claim. Plaintiff avers that Defendant 2 “misappropriated Plaintiff[‘s] funds, properties and trade secrets for his own benefits by fraud or 3 other wrongful conduct.” Compl. ¶ 31. Plaintiff goes on to say that “as a result of Defendant[‘s] 4 wrongdoings, Plaintiff [] has been deprived of its rightful possessions and Defendant [] has been 5 conferred a substantial and unjust benefit.” Id. ¶ 33. This claim stems from a unified course of 6 fraudulent conduct averred under the breach of fiduciary duty claim and is therefore subject to the 7 heightened pleading standard of Rule 9(b). See Vess, 317 F.3d at 1103 (stating that a claim may be 8 “grounded in fraud” if the “plaintiff [] allege[s] a unified course of fraudulent conduct and rel[ies] 9 entirely on that course of conduct as the basis of a claim”). Accordingly, the Court GRANTS 10 Defendant’s motion to dismiss the unjust enrichment claim WITH leave to amend. Plaintiff should 11 allege this claim with more detailed information regarding which funds, properties, and trade 12 secrets were misappropriated. Plaintiff should also allege approximately when and how the 13 unlawful behavior occurred. 14 d. Conversion 15 In an attempt to demonstrate that its third claim is not subject to Rule 9(b), Plaintiff 16 discusses the elements of conversion by citing to Lee v. Hanley, 61 Cal. 4th 1225 (2015). Opp’n 3. 17 Plaintiff argues that since conversion is a general intent tort and does not require the intent to 18 defraud, it cannot be grounded in fraud. Id. As stated above, merely reciting the elements of what 19 constitutes conversion is not a substitute for pleading with particularity when fraud has been 20 averred. See Vess, 317 F.3d at 1103. Plaintiff goes on to state that it is not alleging “fraudulent 21 conversion” because “fraudulent conversion is a criminal action prosecutable only by the state.” 22 Opp’n 3. However, this Court must review what Plaintiff has specifically averred in its Complaint 23 to determine whether this claim is subject to Rule 9(b). See Vess, 317 F.3d at 1103. Even if the 24 term “fraud” is not specifically used, fraud can still be averred by “alleging facts that necessarily 25 constitute fraud.” Id. at 1105 (citations omitted). 26 Here, Plaintiff’s conversion claim explicitly relies on the same course of Defendant’s 27 conduct as the breach of fiduciary duty claim. Plaintiff brings the conversion claim by averring 28 “Defendant [] intentionally interfered with Plaintiff[‘s] ownership over its assets and properties, 8 United States District Court Northern District of California 1 which were transferred into various accounts controlled by him or for his own benefit.” Compl. 2 ¶ 37. Plaintiff also alleges that Defendant “intentional[ly] obscure[ed] the transfer of assets” and as 3 a result of his “intentional and malicious conduct, Plaintiff [] suffered significant monetary 4 damages.” Id. ¶¶ 37–38. This claim stems from a unified course of fraudulent conduct alleged 5 under the breach of fiduciary duty claim and is therefore subject to the heightened pleading 6 standard of Rule 9(b). See Vess, 317 F.3d at 1103 (stating that a claim may be “grounded in fraud” 7 if the “plaintiff [] allege[s] a unified course of fraudulent conduct and rel[ies] entirely on that 8 course of conduct as the basis of a claim”). Accordingly, the Court GRANTS Defendant’s motion 9 to dismiss the conversion claim WITH leave to amend. Plaintiff should allege this claim with 10 more detailed information regarding which assets and properties were transferred, into which 11 expected accounts they were transferred, and when and how such actions occurred. 12 e. Accounting 13 For its fourth claim—accounting—Plaintiff argues that it is “merely alleg[ing] that 14 Defendant has not provided Plaintiff and its shareholders with an accounting of Plaintiff’s 15 transactions and financial managements that occurred under Defendant’s direction.” Opp’n 3–4. 16 “Because Defendant has not returned the business records and account information, Plaintiff does 17 not have access to crucial corporation financial and transfer records[] and [is] thus unable to 18 ascertain and demand damages in a fixed amount.” Id. at 4. While the term “fraud” is not 19 specifically mentioned, this Court must still evaluate the Complaint itself as fraud can be averred 20 by “alleging facts that necessarily constitute fraud.” Vess, 317 F.3d at 1105 (citations omitted). 21 Here, Plaintiff’s accounting claim explicitly relies on the same course of Defendant’s 22 conduct as the breach of fiduciary duty claim. Plaintiff asserts the accounting cause of action by 23 relying on allegations that Defendant “has a legal and fiduciary duty to Plaintiff [] and its 24 shareholders to account for the financial management and transactions of Plaintiff” and has failed 25 to “return[] the business records and account information [for such management].” Compl. ¶¶ 40– 26 41. Therefore, these claims stem from a unified course of fraudulent conduct as the breach of 27 fiduciary duty claim and are subject to the heightened pleading standard of Rule 9(b). See Vess, 28 317 F.3d at 1103 (stating that a claim may be “grounded in fraud” if the “plaintiff [] allege[s] a 9 1 unified course of fraudulent conduct and rel[ies] entirely on that course of conduct as the basis of a 2 claim”). Accordingly, the Court GRANTS Defendant’s motion to dismiss the accounting claim 3 WITH leave to amend. Plaintiff should allege this cause of action with more detailed information 4 regarding when and how of the allegedly unlawful behavior occurred. The Court anticipates that 5 amendment to the factual allegations that precede the specific claims will suffice. 6 The Court thus finds that Plaintiff has not pled its Complaint with enough specificity. United States District Court Northern District of California 7 8 Plaintiff’s additional arguments in its Opposition are unpersuasive. Plaintiff maintains that it is not 9 required to specifically cite to each instance of allegedly fraudulent conduct where the allegedly 10 unlawful conduct occurred frequently over a lengthy period of time. Opp’n 4. Plaintiff cites to 11 United States ex rel. Franklin v. Parke-Davis, Division of Warner- Lambert Co., 147 F. Supp. 2d 12 39, 49 (D. Mass 2001), and In re Cardiac Devices Qui Tam Litigation, 221 F.R.D. 318, 333 (D. 13 Conn. 2004), to support this proposition. However, United States ex rel. Franklin involved a 14 complex scheme of fraud, where the plaintiff alleged the defendant engaged in an extensive and 15 far-reaching fraudulent scheme to promote the sale of a drug for off-label use during his period of 16 employment for five months. See 147 F. Supp. 2d at 45, 49. The Court rejected the idea that Rule 17 9(b) required “identification of every ineligible prescription submitted to the government for 18 payment.” Id. at 49.1 This is not the case here, as this case does not involve a complex and far- 19 reaching fraudulent prescription sale scheme. Nor is this Court asking for each and every instance 20 of the alleged breach of fiduciary duty, embezzlement, or misappropriation of funds. But Plaintiff 21 must provide more “specific information” on the when, where, and how the alleged breach, 22 conversion, and other allegations occurred. See id. Similarly, In re Cardiac was a Multidistrict Litigation (“MDL”) where the Government 23 24 alleged the defendants were reimbursed by Medicare and Medicaid for procedures not approved 25 by the FDA over a nine-year period. See 221 F.R.D. at 329–30. In re Cardiac also relied on cases 26 27 28 United States ex rel. Franklin also “applie[d] a more forgiving pleading standard than [more] recent cases.” See U.S. ex rel. Nowak v. Medtronic, 806 F. Supp. 2d 310, 355 n.30 (D. Mass. 2011). 10 1 1 that were much more complex that this one, including an MDL case where the plaintiffs alleged 2 that forty-two pharmaceutical companies fraudulently overstated the published wholesale prices of 3 their prescription drugs and two other cases that covered six- and twelve-year periods of 4 allegations. See id. at 333–334. This is not the situation in this case, where the allegations cover a 5 one-year period for one corporation and one defendant. Plaintiff also maintains that the heightened pleading standard for fraud claims is relaxed United States District Court Northern District of California 6 7 where factual information is within Defendant’s exclusive knowledge or control. Opp’n 4–5. 8 However, Plaintiff cites to complex corporate fraud cases with multiple defendants, such as E & E 9 Co. v. Kam Hing Enterprises, 429 F. App’x 632, 633 (9th Cir. 2011), or complex securities fraud 10 cases, such as Moore v. Kayport Package Express, 885 F.2d 531, 540 (9th Cir. 1989). In this case, 11 there is only one Defendant, and it is contested whether the factual information is solely and 12 exclusively within Defendant’s control. See Opp’n 4–5; Reply 6. Plaintiff must provide at least 13 some further details explaining how it knows or suspects Defendant was acting unlawfully, 14 especially regarding the time periods of the allegedly unlawful behavior and how the alleged 15 embezzlements, misappropriations, stealing of software and code, and other harmful transactions 16 were approximately occurring. As it stands, Plaintiff’s complaint is too general to pass the heightened pleading standard 17 18 required by Rule 9(b). The Motion to Dismiss is hereby GRANTED, with leave to amend. 19 Defendant’s Objection to Evidence in Plaintiff’s Opposition is DENIED as Plaintiff did not submit 20 any evidence in its Opposition. See Opp’n; see also Reply 7–11. Defendant merely objects to 21 Plaintiff’s recitation of the allegations in its Complaint. See Reply 7–11. 22 23 24 IV. ORDER For the foregoing reasons, the Court GRANTS Defendant’s Motion to Dismiss, with leave 25 to amend. Plaintiff, should it elect to file an Amended Complaint, shall do so no fewer than 26 twenty-one (21) days from the issue of this Order. 27 28 IT IS SO ORDERED 11 1 2 3 4 Dated: October 22, 2020 ______________________________________ BETH LABSON FREEMAN United States District Judge 5 6 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12
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