Global Private Funding Inc v. Empyrean West LLC et al, No. 2:2013cv04622 - Document 91 (C.D. Cal. 2014)
Court Description: ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS MOTIONS TO DISMISS PLAINTIFFS FIRST AMENDED COMPLAINT 53 , 61 . All dismissed claims are dismissed WITHOUT PREJUDICE. Any amended complaint correcting the deficiencies identified in this order must be filed on or before September 25, 2014 by Judge Dean D. Pregerson. (lc) .Modified on 9/11/2014 (lc).
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Global Private Funding Inc v. Empyrean West LLC et al Doc. 91 1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 GLOBAL PRIVATE FUNDING, INC., a California corporation, 13 Plaintiff, 14 15 16 17 18 19 20 21 22 23 24 v. EMPYREAN WEST, LLC, an Arizona corporation; JAY L. CARTER, individually and as managing partner of EMPYREAN WEST LLC; DAVID C. KELLER, individually and as CEO of EMPYREAN WEST LLC; U.S. FUEL CORPORATION, a Nevada corporation; HARRY BAGOT, individually and as President/CEO of US FUEL CORPORATION; STANLEY N. DRINKWATER, III, individually and as Chairman of the Board; US FUEL CORPORATION; WILLIAM CHADY, individually and as Chief Operating Officer of US FUEL CORPORATION; ROBERT SCHWARTZ, individually, 25 Defendants. 26 ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 13-04622 DDP (MANx) ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTIONS TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT [DKT. NOS. 53, 61] 27 28 /// Dockets.Justia.com 1 Presently before the Court are two motions to dismiss 2 Plaintiff’s First Amended Complaint, filed by two different groups 3 of defendants (the “Motions”). (Docket Nos. 53, 61.) For the 4 reasons stated in this order, U.S. Fuel’s motion is GRANTED and 5 Empyrean, Carter, and Keller’s motion is GRANTED IN PART and DENIED 6 IN PART. 7 I. Background 8 9 10 Plaintiff’s First Amended Complaint (“FAC”) is difficult to decipher. As best the Court can understand, Plaintiff’s allegations are as follows. 11 Plaintiff Global Private Equity, Inc. (“Plaintiff” or 12 “Global”) is a private, equity-based lender to established 13 companies, as well as startups, offering business, financial, and 14 technical services to its clients. (FAC ¶ 2.) Defendant Empyrean 15 West, LLC (“Empyrean”) is engaged in the business of funding United 16 States businesses which support local economic development through 17 foreign investments. (Id.) Defendants Jay Carter (“Carter”) and 18 David Keller (“Keller”) are, respectively, the managing partner and 19 CEO of Empyrean. (Id. ¶¶ 7, 8.) 20 On July 30, 2012, Plaintiff executed a confidentiality and 21 non-disclosure agreement with Empyrean which formed the initial 22 basis of the business relationship between the two companies. (Id. 23 ¶ 20.) On August 31, 2012, Plaintiff and Empyrean entered into a 24 Master Service Agreement (“MSA”), to which the confidentiality 25 agreement was attached. (Id.) Under the MSA, Plaintiff agreed to 26 perform various business-related services for Empyrean, including 27 “business incubation, business sales, merges [sic] and 28 acquisitions, company formation, restructing [sic], project 2 1 funding, financial packaging, real estate sales, financing, 2 marketing, advertising, online development, technology 3 applications, infrastructure and telecom services.” (Id.) The MSA 4 also included a Business Incubation Addendum, executed on September 5 29, 2012. (Id.) Empyrean agreed to furnish foreign investors for 6 Plaintiff’s clients under the EB-5 visa program. (Id.) Empyrean 7 also agreed to pay Plaintiff 10% of the gross revenue, plus a 8 deferred percentage of other revenues generated. (Id. ¶ 22.) 9 On July 19, 2012, U.S. Fuel executed a confidentiality and 10 non-disclosure agreement with Plaintiff defining the business 11 relationship between the two companies. (Id. ¶ 23.) On August 13, 12 2012, Plaintiff and U.S. Fuel entered into a Master Service 13 Agreement (“MSA”), to which the confidentiality agreement was 14 attached. (Id.) 15 Plaintiff alleges that it provided Empyrean “confidential 16 information concerning their clients with the intention of 17 obtaining financing for various projects through the resources of 18 particular foreign investors through the foreign investment program 19 management by [Empyrean].” 20 although it “provided the projects for [Empyrean] to fund,” 21 Empyrean “was unable to produce a single investor from any 22 location, whether in the United States or in any foreign country.” 23 (Id. ¶ 27.) Essentially, Plaintiff alleges that it provided 24 Empyrean with multiple investment opportunities, each of which 25 Empyrean found some fault with. (Id. ¶ 37.) Then, after rejecting 26 the project, Empyrean would work directly with the underlying 27 company on the project on the very same terms proposed by 28 Plaintiff, leaving Plaintiff out and thus avoiding payment of any (Id. ¶ 28.) Plaintiff alleges that 3 1 percentages owed to Plaintiff as a result of Plaintiff’s services 2 in finding investment opportunities for Empyrean. (Id. ¶ 36.) 3 Empyrean commenced one such project with U.S. Fuel, apparently a 4 client of Plaintiff. (Id. ¶ 35.) Empyrean and U.S. Fuel each told 5 Plaintiff that they intended to terminate their MSAs with Plaintiff 6 because of purported breaches by Plaintiff. (Id. ¶¶ 35, 39.) 7 The Court previously dismissed Plaintiff’s Complaint without 8 prejudice. (Docket No. 47.) Plaintiff then filed the FAC, bringing 9 eighteen causes of action against various defendants. (Docket No. 10 51.) Defendants have now moved to dismiss the FAC. (Docket Nos. 53, 11 61.) After the Motions were filed, Plaintiff stipulated to dismiss 12 certain defendants and withdrew some causes of action. (See Docket 13 Nos. 38, 83, 84, 85, 86, 87, 88.) 14 II. Legal Standard 15 A complaint will survive a motion to dismiss when it contains 16 “sufficient factual matter, accepted as true, to state a claim to 17 relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 18 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 19 570 (2007)). When considering a Rule 12(b)(6) motion, a court must 20 “accept as true all allegations of material fact and must construe 21 those facts in the light most favorable to the plaintiff.” Resnick 22 v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). Although a complaint 23 need not include “detailed factual allegations,” it must offer 24 “more than an unadorned, the-defendant-unlawfully-harmed-me 25 accusation.” Iqbal, 556 U.S. at 678. Conclusory allegations or 26 allegations that are no more than a statement of a legal conclusion 27 “are not entitled to the assumption of truth.” Id. at 679. In other 28 words, a pleading that merely offers “labels and conclusions,” a 4 1 “formulaic recitation of the elements,” or “naked assertions” will 2 not be sufficient to state a claim upon which relief can be 3 granted. Id. at 678 (citations and internal quotation marks 4 omitted). 5 “When there are well-pleaded factual allegations, a court 6 should assume their veracity and then determine whether they 7 plausibly give rise to an entitlement of relief.” Id. at 679. 8 Plaintiffs must allege “plausible grounds to infer” that their 9 claims rise “above the speculative level.” Twombly, 550 U.S. at 10 555. “Determining whether a complaint states a plausible claim for 11 relief” is a “context-specific task that requires the reviewing 12 court to draw on its judicial experience and common sense.” Iqbal, 13 556 U.S. at 679. 14 III. Discussion 15 A. Dismissed Defendants and Claims 16 Since Plaintiff’s filing of the FAC, Plaintiff has agreed to 17 dismiss certain defendants entirely and has dismissed some causes 18 of action as to the remaining defendants. Plaintiff has dismissed 19 Defendants Harry Bagot, Stanley N. Drinkwater III, William Chady, 20 Robert Schwartz, and Paul Adams. (See Docket Nos. 38, 83, 84, 85, 21 86.) Therefore, the Court does not analyze the sufficiency of 22 Plaintiff’s FAC as to causes of action asserted against these 23 defendants and deems all such causes of action dismissed. The 24 defendants who remain in this action are U.S. Fuel, Empyrean, 25 Carter, and Keller (collectively, “Remaining Defendants”).1 26 1 27 28 It is unclear from Plaintiff’s FAC whether Plaintiff intended to name John Fairweather and Steven Luck as additional defendants in this action. Fairweather and Luck have yet to appear in this (continued...) 5 1 Plaintiff also concedes dismissal of certain causes of action 2 against the Remaining Defendants in its oppositions to the Motions. 3 (See Docket Nos. 87, 88.) Plaintiff “withdraws” its third, fourth, 4 fifth, sixth, ninth, tenth, twelfth, sixteenth, seventeenth, and 5 eighteenth causes of action in their entirety. Additionally, 6 Plaintiff withdraws his eighth and fourteenth causes of action as 7 to Defendant U.S. Fuel. The remainder of this order, therefore, 8 addresses the sufficiency of the remaining claims only. The Motions 9 are GRANTED as to all withdrawn claims and as to the dismissed 10 defendants. 11 B. First Cause of Action: Breach of Contract 12 Plaintiff brings the first cause of action, for breach of 13 contract, against all Remaining Defendants. Defendants argue that 14 this cause of action is insufficiently pled because Plaintiff did 15 not attach the written contract allegedly breached to the FAC, nor 16 pled its contents verbatim. Plaintiff contends that it is 17 sufficient that the contract was included as an attachment to its 18 original complaint. U.S. Fuel further argues that the allegations 19 in the FAC do not establish a breach of contract claim as to U.S. 20 Fuel, since the contract focused on in the FAC is a contract 21 between Plaintiff and Empyrean. 22 The Court finds that Plaintiff’s complaint is deficient 23 because Plaintiff failed to attach a copy of each contract 24 allegedly breached to the FAC. See Gilmore v. Lycoming Fire Ins. 25 Co., 55 Cal. 123, 124 (1880). The original complaint was dismissed 26 1 27 28 (...continued) action, and it appears that they have not been served. They have not filed anything in this action or joined in either of the Motions. 6 1 by the Court, and the attachment of the contracts at issue to the 2 original complaint is irrelevant for purposes of determining 3 whether Plaintiff’s FAC is sufficient. 4 Further, as to Defendant U.S. Fuel, though Plaintiff alleges 5 the existence of a contract with U.S. Fuel and includes some detail 6 regarding the terms of the contract, nowhere does Plaintiff allege 7 how U.S. Fuel purportedly breached its contract with Plaintiff. 8 Rule 8 requires more, such that U.S. Fuel is on notice as to the 9 alleged breach to which it will need to prepare a defense. Both 10 this deficiency and the failure to attach the contracts at issue 11 are potentially remediable through amendment. Therefore, the Court 12 GRANTS the Motions as to this cause of action and DISMISSES 13 Plaintiff’s contract claim WITHOUT PREJUDICE.2 14 C. Second Cause of Action: Intentional Interference with Prospective Economic Advantage 15 16 Plaintiff brings the second cause of action against Defendant 17 Empyrean only. Intentional interference with prospective economic 18 advantage protects against intentional acts designed to harm an 19 economic relationship which is likely to produce economic benefit. 20 See Shamblin v. Berge, 166 Cal.App.3d 118, 123 (1985). However, 21 mere interference is not enough: “The tort of intentional 22 interference with prospective economic advantage is not intended to 23 24 25 26 27 28 2 Plaintiff’s FAC purports to bring this cause of action against all defendants, which would include Remaining Defendants Carter and Keller. However, whether Plaintiff actually entered into any contract with Carter or Keller individually, as opposed to with Empyrean as an entity, is unclear. Though Carter and Keller do not argue the sufficiency of the allegations as to them specifically, Plaintiff should clarify upon amendment whether its contract claim is asserted against these individuals and, if so, the contract Plaintiff relies on for that assertion. 7 1 punish individuals or commercial entities for their choice of 2 commercial relationships or their pursuit of commercial objectives, 3 unless their interference amounts to independently actionable 4 conduct.” Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 5 1134, 1158-59 (2003). “[A]n act is independently wrongful if it is 6 unlawful,” meaning that the act is prohibited “by some 7 constitutional, statutory, regulatory, common law, or other 8 determinable legal standard.” Id. at 1159. 9 Here, Plaintiff has not alleged sufficient facts to establish 10 that Empyrean’s conduct in pursuing its “projects” with U.S. Fuel 11 and other entities and bypassing Empyrean’s involvement in the 12 projects is independently unlawful. Although Plaintiff’s FAC 13 suggests a purpose behind Empyrean’s actions that might be 14 considered improper, Plaintiff does not allege how Empyrean 15 violated another specific law. Therefore, the Court GRANTS the 16 Motions as to this cause of action and DISMISSES Plaintiff’s 17 intentional interference with prospective economic advantage claim 18 WITHOUT PREJUDICE. 19 D. Seventh Cause of Action: Commercial Defamation 20 Plaintiff brings the seventh cause of action against Defendant 21 Empyrean only. The parties agree that this cause of action appears 22 to be on the grounds of slander. “Slander is a false and 23 unprivileged publication, orally uttered ... which: (1) Charges any 24 person with crime, or with having been indicted, convicted, or 25 punished for crime; ... (3) Tends directly to injure him in respect 26 to his office, profession, trade or business, either by imputing to 27 him general disqualification in those respects which the office or 28 other occupation peculiarly requires, or by imputing something with 8 1 reference to his office, profession, trade, or business that has a 2 natural tendency to lessen its profits ... (5) Which, by natural 3 consequence, causes actual damage.” Cal. Civ. Code § 46. 4 Plaintiff’s allegations in regard to this cause of action are 5 insufficient. Plaintiff merely alleges that “Defendant Empyrean’s 6 statements through its officers and employees to the clients of 7 [specified entities] were slanderous per se in that such statements 8 imputed to Plaintiff a crime and a lack of professional competence 9 and integrity.” (FAC ¶ 79.) However, Plaintiff includes no 10 allegations as to the content of the allegedly slanderous 11 statements, nor how those statement bore on Plaintiff’s commission 12 of a crime or lack of professional competence. Indeed, Plaintiff’s 13 only response in opposition to the Motions is to say that “Global 14 did not attempt to state each and every slanderous statement 15 attributed to Empyrean, its officers and employees.” (Opp., Docket 16 No. 88, p.4.) Therefore, the Court would GRANT the Motions as to 17 this cause of action and DISMISS Plaintiff’s commercial defamation 18 claim WITHOUT PREJUDICE. 19 E. Eighth, Eleventh, Thirteenth, and Fourteenth Causes of Action: Plaintiff’s Fraud and Fraud-Related Claims 20 21 Several of Plaintiff’s remaining claims sound in fraud. Under 22 California law, “[t]he elements of intentional misrepresentation, 23 or actual fraud, are: (1) misrepresentation (false representation, 24 concealment, or nondisclosure); (2) knowledge of falsity 25 (scienter); (3) intent to defraud (i.e., to induce reliance); (4) 26 justifiable reliance; and (5) resulting damage.” Anderson v. 27 Deloitte & Touche, 56 Cal.App.4th 1468, 1474 (1997) (internal 28 quotation marks and citations omitted). A claim for negligent 9 1 misrepresentation contains the same elements as a fraud claim, 2 except that instead of knowledge of falsity, the statement must be 3 made “without reasonable ground for believing it to be true.” See, 4 e.g., Hasso v. Hapke, 227 Cal.App.4th 107, 127 (2014). Claims 5 sounding in fraud are subject to the heightened pleading standard 6 of Rule 9(b), requiring a plaintiff to state “‘the who, what, when, 7 where, and how’ of the misconduct charged.” Vess v. Ciba-Gelgy 8 Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting Cooper v. 9 Pickett, 137 F.3d 616, 627 (9th Cir. 1997)). 10 It appears from Plaintiff’s FAC that the conduct at the heart 11 of Plaintiff’s fraud claims is Empyrean’s representation, in the 12 course of doing business with Plaintiff, that Empyrean falsely 13 assured Plaintiff that it could obtain investors under the EB-5 14 visa program and other investment sources and made false statements 15 as to the nature and quality of those investors. (FAC ¶¶ 102-104.) 16 Plaintiff identifies a particular instance in which Keller “stated 17 that Empyrean had several investors who were willing and able to 18 act with financial efforts and invest in several projects,” a 19 statement made in January or February 2013 to Sam Senev, 20 Plaintiff’s CEO. (Id. ¶ 33.) Ultimately, Plaintiff alleges that 21 “Defendants did not produce a single investor or any project for 22 Plaintiff’s clients.” (Id. ¶ 104.) Plaintiffs essentially alleges 23 that the affirmative assurances of Empyrean that investors were 24 forthcoming and the concealment of the fact that such investors 25 would not be produced support Plaintiff’s fraud-based claims. 26 The Court finds that Plaintiff has alleged sufficient facts to 27 support his fraud-based claims against Defendants Keller and 28 Empyrean. Plaintiff provides sufficient details, including who, 10 1 what, when, and how Keller, speaking on behalf of Empyrean, made an 2 allegedly fraudulent representation. Further, Plaintiff alleges 3 that “the foregoing misrepresentations were made with the intention 4 that Plaintiff rely thereon” and that “Defendants never intended 5 that the funding to Global’s clients would ever go through.” (Id. 6 ¶¶ 105, 109.) Therefore, as to the representation made by Keller 7 regarding Empyrean’s ability and willingness to supply investors to 8 Plaintiff, the Court finds that the FAC is sufficient and DENIES 9 the Motions as to Defendants Keller and Empyrean. 10 However, as to Defendants Carter and U.S. Fuel, the 11 allegations are insufficient. Nowhere does the FAC specify any 12 specific misrepresentations that may be attributed to either of 13 these defendants. As a result, the Court GRANTS the Motions as to 14 Carter and U.S. Fuel and DISMISSES this cause of action as to them 15 WITHOUT PREJUDICE. Further, to the extent that any 16 misrepresentations other than the one identified above form the 17 basis for Plaintiff’s fraud-based claims, Plaintiff must amend to 18 clarify that it bases these claims on those additional 19 misrepresentations. 20 F. Fifteenth Cause of Action: Breach of Non-Competition Covenant 21 22 Plaintiff brings the fifteenth cause of action against all 23 Remaining Defendants. Plaintiff alleges that “[a]n MSA and Addenda 24 executed by Defendants U.S. Fuel and Empyrean both contain 25 provisions for non-circumvention, non-solicitation, and no 26 disparaging remarks.” (FAC ¶ 145.) Plaintiff then alleges that 27 “Empyrean and U.S. Fuel have systematically breached the MSA and 28 Addenda.” (Id. ¶ 146.) However, as with Plaintiff’s contract claim, 11 1 without the benefit of the language of the covenant Plaintiff 2 alleges to have been breached, Plaintiff’s allegations are 3 insufficient to establish a plausible claim. Further, as Defendants 4 point out, California law disfavors covenants not to compete and 5 only allows them in specific situations. See, e.g., Edwards v. 6 Arthur Andersen LLP, 44 Cal.4th 937, 945-46 (2008). Plaintiff must 7 allege more facts regarding the alleged breach and how the 8 agreement itself is enforceable under California law. The Court 9 therefore GRANTS the Motions as to this claim and DISMISSES it 10 WITHOUT PREJUDICE. 11 IV. Conclusion 12 For the foregoing reasons, the Court GRANTS U.S. Fuel’s motion 13 to dismiss (Docket No. 61). The Court GRANTS IN PART and DENIES IN 14 PART Empyrean, Keller, and Carter’s motion to dismiss (Docket No. 15 53). All dismissed claims are dismissed WITHOUT PREJUDICE. Any 16 amended complaint correcting the deficiencies identified in this 17 order must be filed on or before September 25, 2014. 18 19 IT IS SO ORDERED. 20 21 22 Dated: September 11, 2014 DEAN D. PREGERSON United States District Judge 23 24 25 26 27 28 12
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