Britz Fertilizers, Inc. v. Bayer Corporation et al, No. 1:2006cv00287 - Document 37 (E.D. Cal. 2008)
Court Description: Memorandum Decision and ORDER CONSOLIDATING CASES signed by Judge Oliver W. Wanger on 2/5/08. Lead Case is 1:06-cv-00287-OWW-SMS, Member Case is 1:07-cv-00846-OWW-SMS. Member Case CLOSED; All pleadings shall hereafter be filed in Lead Case No. 1:06-cv-00287-OWW-SMS. (Verduzco, M)
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Britz Fertilizers, Inc. v. Bayer Corporation et al Doc. 37 1 2 3 4 5 UNITED STATES DISTRICT COURT 6 EASTERN DISTRICT OF CALIFORNIA 7 8 9 Britz Fertilizers, Inc., a California corporation, 10 1:07-cv-00846-OWW-SMS Plaintiff, 11 v. 12 Bayer Corporation, an Indiana corporation, and Bayer CropScience, a Delaware limited partnership, 13 MEMORANDUM DECISION GRANTING IN PART AND DENYING IN PART DEFENDANTS MOTION TO DISMISS PLAINTIFF S FIRST AMENDED COMPLAINT FOR DAMAGES FOR NEGLIGENCE, GROSS NEGLIGENCE, AND BREACH OF CONTRACT (Doc. 9) 14 Defendants. 15 16 17 I. Introduction. This cases concerns Bayer Corporation s ( Bayer Corp.) and 18 Bayer CropScience, LP s ( Bayer Science ) (collectively 19 Defendants ) alleged inadequate defense of Britz Fertilizers, 20 Inc. ( Britz ) in a state court lawsuit where a judgment was 21 entered against Britz for over seven million dollars. 22 court for decision is Defendants motion to dismiss ( Motion ) 23 Britz s First Amended Complaint for Damages for Negligence, Gross 24 Negligence, and Breach of Contract ( FAC ). 25 dismiss Britz s FAC on the following grounds: Britz s FAC is 26 duplicative of a previously filed complaint in this Court, the 27 allegations in the FAC are contrary to documents subject to 28 judicial notice, Britz cannot recover on its negligence and gross Before the Defendants move to negligence claims for relief because the claims are for negligent Dockets.Justia.com 1 performance of a contract and are not independent of the 2 contract, and Britz cannot recover for breach of contract because 3 the FAC does not allege a breach of the contract s terms. 4 II. Background. 5 A. Procedural Background. 6 Britz filed a Complaint for Damages for Negligence, Gross 7 Negligence, and Negligent Supervision against Defendants on June 8 8, 2007 (hereinafter Britz II ). 9 2007, Britz filed its FAC for damages for negligence, gross Ten days later, on June 18, 10 negligence, and breach of contract. 11 diversity of citizenship jurisdiction under 28 U.S.C. § 1332. 12 Britz alleges the amount in controversy exceeds $75,000, 13 exclusive of interest and costs. 14 corporation with its principal place of business located in 15 Fresno, California. 16 corporation with its principal place of business located in 17 Pittsburgh, Pennsylvania. 18 limited partnership with its principal place of business in 19 Research Triangle Park, North Carolina. 20 Science are entities that are citizens of Delaware, Indiana, and 21 Germany. 22 was responsible for its actions or inaction.1 23 Britz invokes the court s Britz is a California Defendant Bayer Corp. is an Indiana Defendant Bayer Science is a Delaware The partners of Bayer Britz alleges Bayer Corp. controlled Bayer Science and FAC ¶ 7. On July 17, 2007, Defendants filed this Motion. Britz 24 opposes Defendants Motion. On July 25, 2007, District Judge 25 Anthony W. Ishii signed an order reassigning this case (Britz II) 26 27 28 1 In the FAC, Britz jointly refers to Bayer Corp. and Bayer Science as Defendant or as Bayer. The terms are also used interchangeably in this Order. 2 1 to this court because of a currently pending lower-numbered 2 related case captioned Britz Fertilizers, Inc., v. Bayer 3 Corporation, et al., 1:06-cv-00287-OWW-SMS (hereinafter Britz 4 I ). 5 B. Factual Background. 6 7 1. Britz II. Defendants manufacture agricultural chemical products. 8 ¶ 10. 9 products in central California. FAC Britz was a distributor of Defendants agricultural FAC ¶ 11. As a distributor, 10 Britz was one of Defendants largest accounts generating between 11 $20 and $25 million in annual sales for Defendants. 12 One of the products Defendants manufactured was an agricultural 13 chemical product known as Ethrel. 14 FAC ¶ 11. FAC ¶ 12. In 2002, Britz purchased Defendants Ethrel. FAC ¶ 13. 15 Britz sold the Defendants Ethrel to an individual named Ahmad 16 Skouti ( Skouti ), who was a grape grower in Fresno and Madera 17 Counties. 18 applied Defendants Ethrel to certain vineyards he owned in 19 Fresno and Madera Counties, and to a vineyard in Fresno County 20 that he leased from Walter Johnsen ( Johnsen ). 21 Skouti s vineyards sustained damage after the application of 22 Defendants Ethrel to the vineyards; Britz alleges this damage 23 was not through its fault or negligence. FAC ¶ 13. Britz alleges that in July 2002, Skouti FAC ¶ 14. FAC ¶ 15. 24 In September 2002, after becoming aware of the damage to 25 Skouti s vineyards, Britz promptly notified Defendants of the 26 damage. 27 ( Ferguson ), Defendants vice president and assistant general 28 counsel, acting as an agent or representative of the Defendants, FAC ¶ 16. On September 10, 2002, William Ferguson 3 1 represented to Britz, in writing, that in the event a claim arose 2 out of the application of Defendants Ethrel to Skouti s 3 vineyards it would be Bayer s position that it would defend and 4 indemnify [Plaintiff against] any claim related to [Defendant s] 5 product in a situation where the [D]istributor acted as a purely 6 pass through entity. 7 managing product liability litigation for Bayer since 8 approximately 1988 and had significant experience in this area. 9 FAC ¶ 18. 10 FAC ¶¶ 17-18. Ferguson had been On December 18, 2002, Skouti and Johnsen filed a lawsuit 11 against Britz in Fresno County Superior Court for damages 12 sustained as a result of the application of Defendant s Ethrel to 13 Skouti s vineyards ( Skouti Lawsuit ). 14 insurance carrier retained Theodore Hoppe ( Hoppe ) to represent 15 Britz in the Skouti Lawsuit. 16 filed a cross-complaint against Defendants for declaratory relief 17 and indemnification in the Skouti Lawsuit. 18 FAC ¶ 20. FAC ¶ 19. Britz s On March 7, 2003, Britz FAC ¶ 22. On January 16, 2003, Britz requested that Defendants defend 19 and indemnify Britz in the Skouti Lawsuit. 20 2003, James Moore ( Moore ) of the law firm Baker & Hostetler 21 LLP, as the agent or representative and on behalf of Defendants, 22 agreed in writing that Defendants would defend Britz in 23 connection with the Skouti Lawsuit. 24 2003, correspondence is addressed to Hoppe and reads: 25 26 Re: FAC ¶ 21. FAC ¶ 23. On May 14, Moore s May 14, No. 02-CECG04540; Ahmad Skouti and Walter Johnsen v. Britz Fertilizers, Inc., et al; In the Superior Court of California, County of Fresno. 27 Dear Mr. Hoppe: 28 4 1 2 3 4 5 6 This is in response to your letter dated January 16, 2003, concerning the above-referenced matter. Bayer has asked me to respond to the letter. You have provided to Bayer CropScience ( Bayer ) a copy of a complaint that does not mention Bayer or any Bayer product. The complaint alleges, among other things, that Britz Fertilizers, Inc. ( Britz ) acted as a consultant for the plaintiff and performed negligently in this capacity. The information provided to Bayer indicates that Bayer has no duty to defend or indemnify Britz Fertilizers in this case. 7 8 9 10 11 12 13 14 15 However, because of Bayer s relationship with Britz, Bayer agrees to defend Britz Fertilizers, Inc. at this time. Bayer will not pay past attorneys fees or costs in this case. Bayer will retain Jim Rushford of Rushford & Bonotto in Sacramento, to defend this matter with you. If there is any evidence in this case of negligence or fault on the part of Britz (whether credible or not), Bayer may at its option withdraw from the defense of this case. In the event that Bayer withdraws from the case, Britz agrees to waive any conflict and allow attorneys retained by Bayer in this manner to continue to represent Bayer if Bayer is included as a party. Britz agrees that it will cooperate fully with Bayer in connection with the defense of this case. Both Bayer and Britz reserve the issue of indemnity until a later date. 16 17 Please sign below to indicate acceptance of Britz Fertilizers, Inc. to this letter agreement. 18 Please let me know if you have any questions. 19 Very truly yours, 20 [Signature of James L. Moore] 21 James L. Moore Of Baker & Hostetler 22 23 FAC, Exhibit A. Britz alleges Moore was employed and acting as 24 Defendants outside legal counsel for all litigation claims in 25 connection with Defendants agricultural chemicals. 26 Britz further alleges Moore had been Defendants outside counsel 27 since 1993 and had significant experience representing Defendants 28 in crop damage lawsuits. FAC ¶ 24. 5 Moore s primary FAC ¶ 24. 1 responsibilities included securing, employing, supervising, and 2 managing local trial counsel retained to represent and defend 3 Defendants in litigation involving Defendants products. 4 24. 5 FAC ¶ Britz believed that Defendants agreed to Defend Britz in the 6 Skouti lawsuit because Britz was one of Defendants largest 7 accounts, and Defendants did not want to lose or damage the 8 business relationship with Britz. 9 to and did pay for Hoppe s subsequent legal services in the Defendants agreed 10 Skouti Lawsuit. 11 the legal services of James Rushford ( Rushford ) of Rushford & 12 Bonotto LLP to act as co-counsel to defend Britz in the Skouti 13 Lawsuit. 14 complaint against the Defendants in reliance on Defendants 15 agreement to defend Britz in the Skouti Lawsuit. 16 June 18, 2003, Rushford became co-counsel of record for Britz. 17 FAC ¶ 26. 18 November 22, 2004, Rushford represented Britz in the Skouti 19 Lawsuit. 20 FAC ¶ 26. FAC ¶ 25. FAC ¶ 26. Defendants also retained and paid for On June 3, 2003, Britz dismissed its cross- FAC ¶ 27. On Beginning June 18, 2003, and continuing through FAC ¶ 28. Britz alleges that Rushford, while representing Britz in the 21 Skouti Lawsuit, was acting as counsel for Defendants without 22 Britz s knowledge or consent. 23 counsel to Britz, Rushford continuously reported the status of 24 the litigation and the substance of privileged attorney-client or 25 work-product information between Hoppe and himself to Moore and 26 Ferguson. 27 Rushford to Ferguson. 28 Defendants vice president and assistant general counsel, was FAC ¶ 30. FAC ¶ 29. While acting as co- Moore reported his communications with FAC ¶ 31. Ferguson, in his capacity as 6 1 responsible for the overall management of Britz s defense in the 2 Skouti lawsuit. 3 FAC ¶ 31. While Rushford was representing Britz, he concluded Hoppe 4 was not properly defending Britz in the Skouti Lawsuit and 5 repeatedly communicated this information to Moore or Ferguson, or 6 both. 7 or mitigate Hoppe s acts or omissions to ensure Britz received a 8 proper defense. 9 to Britz the propriety of Hoppe s representation of Britz. FAC ¶ 32. Rushford failed to take any measures to correct FAC ¶ 33. Rushford also failed to communicate FAC ¶ 10 33. 11 defended in the Skouti Lawsuit under the supervision of Bayer. 12 FAC ¶ 33. 13 Rushford s conclusion that Hoppe was not competently defending 14 Britz, they failed to take any measures to ensure Britz received 15 a proper defense. 16 also failed to communicate to Britz any of Rushford s conclusions 17 regarding the inadequacy of Britz s defense in the Skouti 18 Lawsuit, so Britz could have taken corrective measures. 19 34. 20 Britz believed in good faith that it was being properly Although Defendants, Moore, and Ferguson were aware of FAC ¶ 34. Defendants, Moore, and Ferguson FAC ¶ On November 22, 2004, Rushford withdrew as counsel for Britz 21 in the Skouti Lawsuit without Britz s consent. 22 alleges Rushford represented Defendants regarding Skouti s claims 23 after he withdrew as Britz s counsel and without Britz s consent. 24 FAC ¶ 35. 25 FAC ¶ 35. Britz Based on these facts, Britz asserts three claims for relief. 26 The first claim for relief is for negligence. 27 Defendants agreed to defend Britz in the Skouti Lawsuit, and 28 therefore undertook a duty to exercise reasonable care in 7 Britz asserts 1 managing Britz s defense. According to Britz, Defendants 2 breached their duty to exercise care in managing Britz s defense 3 in the Skouti Lawsuit by failing to take measures to ensure Britz 4 received a proper defense. 5 to properly manage Britz s defense and to inform it of Rushford s 6 dual agency (and conflict), which resulted in a judgment in the 7 Skouti Lawsuit against Britz in the amount of $7,596,247 plus 8 costs, which is the legal cause of Britz s injuries. 9 second claim for relief is for gross negligence. Britz also asserts Defendants failed Britz s In its claim 10 for gross negligence, Britz asserts that Defendants failed to act 11 with any modicum of diligence or care, and Defendants actions 12 constituted a wanton and reckless disregard of its obligations to 13 Britz. 14 gross negligence claim. 15 is for breach of contract. 16 agreement to defend Britz in the Skouti Lawsuit contained a 17 necessary and implied condition to adequately defend Britz. 18 According to Britz, Defendants breached their agreement to 19 adequately defend Britz by failing to take measures to ensure 20 Britz received an adequate defense, and by failing to inform 21 Britz of the facts or circumstances indicating Britz was not 22 being adequately defended as Rushford had indicated to Moore and 23 Ferguson. 24 Defendants agreement to adequately defend Britz. 25 it did not become aware of Defendants breach of its obligations 26 until after June 10, 2005, when the $7,596,247 judgment was 27 entered against Britz. Britz also seeks exemplary and punitive damages for its Britz s third and final claim for relief Britz asserts Defendants express Throughout the Skouti Lawsuit, Britz relied on 28 8 Britz alleges 1 2 2. Britz I. The following is an overview of the allegations in Britz I 3 that are not otherwise set forth in Britz II. 4 Britz and Bayer Corp. entered into a distributorship agreement 5 ( Distribution Agreement ) that entitled Britz to distribute 6 itemized formulations of Bayer Products. 7 Britz agreed to use its best efforts in selling Bayer Products. 8 Britz I Compl. ¶ 9. 9 Distribution Agreement required Britz to promptly investigate and 10 report to Bayer Corp. all customer complaints concerning the use 11 and application of Bayer Products and to cooperate with Bayer 12 Corp. in handling claims. 13 term and condition in the Distribution Agreement required Bayer 14 Corp. to indemnify Britz against all claims for property damage 15 or personal injury to third parties, whether arising in warranty, 16 negligence, or otherwise, with certain exceptions, caused by 17 goods supplied to Britz by Bayer Corp. under the Distribution 18 Agreement. 19 In January 2002, Britz I Compl. ¶ 7. One of the terms and conditions in the Britz I Compl. ¶ 10. An additional Britz I Compl. ¶ 11. Britz seeks the following relief in Britz I: damages in the 20 amount of $7,596,247, plus costs and interest, under express 21 indemnity, implied contractual indemnity, and implied equitable 22 indemnity theories; an unspecified amount in damages, including 23 punitive damages, for fraud and false promise; unspecified 24 damages for negligent misrepresentation; and declaratory relief. 25 Britz also seeks attorney s fees. 26 Britz filed the complaint that initiated Britz I on March 27 14, 2006. On August 30, 2006, a scheduling conference order was 28 entered setting the discovery cutoff date as June 29, 2007, a 9 1 settlement conference date on July 12, 2007, the non-dispositive 2 motions deadline on July 16, 2007, a dispositive motions deadline 3 on July 30, 2007, a pre-trial conference date on September 24, 4 2007, and the trial date for October 30, 2007.2 5 and upon the parties request, Magistrate Judge Snyder extended 6 the discovery cutoff date to July 30, 2007. 7 upon the parties request, the pre-trial motions schedule was 8 modified requiring non-dispositive motions to be filed by August 9 12, 2007, and all dispositive motions to be filed by August 27, On May 24, 2007, 10 2007. 11 new scheduling order.3 12 following dates were set. 13 21, 2007. 14 Dispositive motions are due January 14, 2008. 15 conference is set for March 17, 2008. 16 On June 7, 2007, and On July 10, 2007, the parties filed a joint request for a begin on May 6, 2008. 17 18 By minute order dated August 1, 2007, the The discovery cutoff date is December Non-dispositive motions are due January 4, 2008. III. The final pretrial A jury trial is set to Legal Standard. Federal Rule of Civil Procedure 12(b)(6) provides that a 19 motion to dismiss may be made if the plaintiff fails to state a 20 claim upon which relief can be granted. 21 court is not whether the plaintiff will ultimately prevail, 22 rather, it is whether the plaintiff could prove any set of facts 23 in support of his claim that would entitle him to relief. The question before the See 24 25 26 27 28 2 The parties did not anticipate filing any amendments to the pleadings as of August 30, 2006. (Doc. 12) Sched. Conf. Order at p. 3, lns. 25-26. 3 The parties filed this request prior to Defendants filing of this Motion. 10 1 Hishon v. King & Spalding, 467 U.S. 69, 73 (1984). 2 should not be dismissed unless it appears beyond doubt that 3 plaintiff can prove no set of facts in support of his claim which 4 would entitle him to relief. 5 977, 980 (9th Cir. 2002). 6 A complaint Van Buskirk v. CNN, Inc., 284 F.3d In deciding whether to grant a motion to dismiss, the court 7 accept[s] all factual allegations of the complaint as true and 8 draw[s] all reasonable inferences in the light most favorable to 9 the nonmoving party. TwoRivers v. Lewis, 174 F.3d 987, 991 (9th 10 Cir. 1999); see also Rodriguez v. Panayiotou, 314 F.3d 979, 983 11 (9th Cir. 2002). 12 allegations that are merely conclusory, unwarranted deductions of 13 fact, or unreasonable inferences. 14 Warriors, 266 F.3d 979, 988 (9th Cir. 2001). A court is not required to accept as true Sprewell v. Golden State 15 IV.Defendants Request for Judicial Notice. 16 Defendants request the court to take judicial notice of 17 several documents that were filed in Britz I under Federal Rule 18 of Evidence ( FRE ) 201. 19 declaration of Defendants counsel in support of Defendants 20 Motion and include copies of the Joint Scheduling Conference 21 Statement, Britz s Opposition to Defendants Motion to Compel 22 Answers Posed at Deposition, the Declaration of Robert Glassman 23 (Britz s chief financial officer) in Opposition to Defendants 24 Motion to Compel Answers Posed at Deposition, the Declaration of 25 Theodore W. Hoppe in Opposition to Defendants Motion to Compel 26 Answers Posed at Deposition, and the Declaration of Roger Schrimp 27 (Britz s current counsel) in Opposition to Defendants Motion to 28 Compel Answers Posed at Deposition. These documents are attached to the 11 1 Defendants also request the court to take judicial notice of 2 a letter from Mr. Hoppe to Mr. Moore dated May 27, 2003, 3 indicating Britz agrees to Defendants proposal in Moore s May 4 14, 2003, letter. 5 for judicial notice. 6 Britz does not object to Defendants request A judicially noticed fact must be one not subject to 7 reasonable dispute in that it is either (1) generally known 8 within the territorial jurisdiction of the trial court or 9 (2) capable of accurate and ready determination by resort to 10 sources whose accuracy cannot reasonably be questioned. 11 Evid. 201(b). 12 by a party and supplied with the necessary information. 13 Evid. 201(d). 14 of public record, such as prior court proceedings, see, e.g., 15 Emrich v. Touche Ross & Co., 846 F.2d 1190, 1198 (9th Cir. 1988). 16 Fed. R. A court shall take judicial notice if requested Fed. R. Judicially noticed facts often consist of matters In reviewing a Rule 12(b)(6) motion, a court must accept as 17 true all material allegations in the complaint, as well as 18 reasonable inferences to be drawn from them. 19 Deposit Ins. Corp., 139 F.3d 696, 699 (9th Cir. 1998). 20 may consider facts subject to judicial notice outside the 21 pleadings in a motion to dismiss. 22 Court for the Dist. of Nevada, 828 F.2d 1385 (9th Cir. 1987) 23 (citing Mack v. South Bay Beer Distribs., Inc., 798 F.2d 1279, 24 1282 (9th Cir. 1986)). 25 Pareto v. Federal A court Mullis v. United States Bankr. Each document that Defendants request the court to take 26 judicial notice of is a part of the court record in Britz I, 27 except for the May 27, 2003, Hoppe Letter. 28 the proper subject of judicial notice under FRE 201(b) and 12 These documents are 1 Emrich, 846 F.2d at 1198. The Hoppe Letter, which is Britz s 2 acceptance of Defendants offer to pay Britz s attorney s fees 3 and to provide Rushford as counsel in the Skouti Lawsuit, is 4 central to Britz s claims for breach of contract, negligence, and 5 gross negligence. 6 (9th Cir. 1998) (holding that a district court ruling on a 7 motion to dismiss may consider a document the authenticity of 8 which is not contested, and upon which the plaintiff s complaint 9 necessarily relies. ). See Parrino v. FHP, Inc., 146 F.3d 699, 706 The Hoppe Letter is also the proper 10 subject of judicial notice under FRE 201(b) as its existence is 11 not reasonably subject to dispute. 12 13 Defendants request for judicial notice of the documents attached to the declaration of T. Mark Smith is GRANTED. 14 15 V. A. Discussion. Whether Britz s FAC States a Claim for Relief for Negligence and Gross Negligence. 16 17 Defendants contend a party may not recover in tort for 18 breach of a contractual obligation (tortious breach of contract). 19 Defendants maintain each of the causes of action in Britz II are 20 based on the May 14, 2003, letter from Moore to Hoppe, a contract 21 between the parties. 22 Defendants have any duties independent of the May 14, 2003, 23 letter, and Britz has only pleaded negligent performance of a 24 contract. 25 Defendants argue Britz does not allege Britz contends its negligence and gross negligence claims 26 arise from Defendants duty to exercise reasonable care in 27 furnishing a defense to Britz, including a duty to inform Britz 28 of material facts or circumstances which became known to 13 1 Defendants during its defense. 2 Defendants agreement to defend Britz crated a special 3 relationship between Britz and Defendants that is analogous to 4 the relationship between an insurer and an insured. 5 Britz also contends that The distinction between tort and contract is well-grounded 6 in common law, and divergent objectives underlie the remedies 7 created in the two areas. 8 550 (1999). 9 intentions of the parties to the agreement, tort law is primarily Erlich v. Menezes, 21 Cal. 4th 543, Whereas contract actions are created to enforce the 10 designed to vindicate social policy. Id. at 550-51. While the 11 purposes behind contract and tort law are distinct, the boundary 12 line between them is not[,] and the distinction between the 13 remedies for each is not found ready made. 14 internal quotations omitted). 15 commented that the distinction arises from the nebulous and 16 troublesome margin between tort and contract law. 17 Superior Court, 24 Cal. 4th 627, 635 (2000). Id. (citations and The California Supreme Court has Aas v. 18 A trio of California Supreme Court cases address whether 19 Britz can state a claim against Defendants for negligence and 20 gross negligence arising out of the May 14, 2003, letter. 21 e.g., Aas v. Superior Court, 24 Cal. 4th 627 (2000); Erlich v. 22 Menezes, 21 Cal. 4th 543 (1999); and Freeman & Mills, Inc. v. 23 Belcher Oil Co., 11 Cal. 4th 85 (1995). 24 ordinarily recover in tort for the breach of duties that merely 25 restate contractual obligations. 26 [C]ourts will generally enforce the breach of a contractual 27 promise through contract law, except when the actions that 28 constitute the breach violate a social policy that merits the 14 See, A person may not Aas, 24 Cal. at 643. 1 imposition of tort remedies. 2 at 552 (1999)). 3 Id. (citing Menezes, 21 Cal. 4th In Menezes, the California Supreme Court was faced with the 4 issue of whether a homeowner could recover emotional distress 5 damages against a homebuilder for shoddy construction work. 6 facts of Menezes are straight forward. 7 with the homebuilder, a licensed general contractor, to build a 8 dreamhouse on their ocean-view lot. 9 548. The rains came and the nightmares began shortly after the 10 11 12 13 14 15 homeowners moved into their new home. The The homeowners contracted Menezes, 21 Cal. 4th at Id. The house leaked from every conceivable location. Walls were saturated in an upstairs bedroom, two bedrooms downstairs, and the pool room. Nearly every window in the house leaked. The living room floor filled with three inches of standing water. In several locations water poured in . . . streams from the ceilings and walls. The ceiling in the garage became so saturated . . . the plaster liquified and fell in chunks to the floor. 16 Id. (alterations in original omitted). 17 attempts to stop the leaks proved ineffectual. 18 homeowners eventually had another general contractor and 19 structural engineer inspect their home. 20 revealed substantial defects in the workmanship of the house. 21 addition to confirming defects in the roof, windows, and 22 waterproofing, the inspection revealed none of the load-bearing 23 walls were properly installed, turrets on the roof were 24 inadequately connected to the roof beams and had begun to 25 collapse, other parts of the roof framing were improperly 26 constructed, and three decks were in danger of catastrophic 27 collapse. 28 the homebuilder on several theories including breach of contract, Id. at 549. The homebuilder s Id. Id. The This inspection In The homeowners sought recovery against 15 1 fraud, negligent misrepresentation, and negligent construction. 2 Id. 3 At trial, the homeowners testified that they suffered 4 emotional distress as a result of the defective condition of the 5 house and the homebuilder s invasive and ineffectual repairs. 6 Menezes, 21 Cal. 4th at 549. 7 absolutely sick and had to be removed by an ambulance after 8 learning of the full extent of the structural problems. 9 jury found the homebuilder breached his contract with the One of the homeowners felt Id. The 10 homeowners by negligently constructing their home and awarded the 11 homeowners $406,700 as the cost of repairs. Id. 12 was awarded $50,000 for emotional distress. Id. 13 Each homeowner The court of appeal affirmed the judgment, including the 14 emotional distress awards, noting that the breach of a 15 contractual duty may support an action in tort. 16 supreme court reversed holding that emotional distress damages 17 are not available in breach of contract and negligent 18 construction cases, disagreeing with the court of appeals 19 reliance on the proposition that a contractual obligation may 20 create a legal duty and the breach of that duty may support an 21 action in tort. 22 court stated, however, conduct amounting to a breach of contract 23 only becomes tortious when it also violates a duty independent of 24 the contract arising from principles of tort law. 25 supreme court reviewed several cases and concluded that in each 26 case the duty that gives rise to tort liability is either 27 completely independent of the contract or arises from conduct 28 that is both intentional and intended to harm. Id. Id. at 550. The Recognizing this proposition is true, the 16 Id. Id. The 1 Aas is also a construction defect case. In Aas, the 2 homeowners alleged that their dwellings suffered a variety of 3 construction defects affecting virtually all components and 4 aspects of construction. 5 these defects, the plaintiffs asserted causes of action for 6 negligence, strict liability, breach of implied warranty, breach 7 of express warranty, and breach of contract. 8 sought damages for the cost of repairing the alleged defects and 9 for damages representing the diminution in value of their Id. Based on The plaintiffs 10 residences. 11 for orders in limine seeking to exclude evidence of the alleged 12 construction defects that had not caused property damage. 13 The trial court granted the defendants motions as to the 14 homeowners tort claims only. 15 sought a writ of mandate, which the court of appeal denied, and 16 the California Supreme Court granted review of that decision. 17 Id. at 634. 18 Id. Aas, 24 Cal. 4th at 633. Before the trial began, the defendants moved Id. at 633-34. Id. The homeowners The question in Aas was whether the homeowners could 19 recover in negligence from the entities that built their homes a 20 money judgment representing the cost to repair, or the diminished 21 value attributable to, construction defects that have not caused 22 property damage. 23 relied on North Am. Chem. Co. v. Superior Court, 59 Cal. App. 4th 24 764, 777 (1997) for the proposition that a contract to perform 25 services gives rise to a duty of care which requires that such 26 services be performed in a competent and reasonable manner[,] and 27 that a negligent failure to do so may be both a breach of 28 contract and a tort. Aas, 24 Cal. 4th at 635. The Aas homeowners Aas, 24 Cal. 4th at 643. 17 The homeowners 1 argued the defendant s negligent breach of contractual duties 2 owed directly to [the homeowners] to deliver homes in compliance 3 with the applicable building codes is a tort, for which [they] 4 may recover the amount which will compensate for all the 5 detriment proximately caused thereby. 6 found the homeowners argument unpersuasive in light of Menezes 7 and Belcher Oil. 8 Id. The supreme court A person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations. Instead, courts will generally enforce the breach of a contractual promise through contract law, except when the actions that constitute the breach violate a social policy that merits the imposition of tort remedies. 9 10 11 12 Id. 13 The supreme court had recently rejected the argument that the 14 negligent performance of a construction contract, without more, 15 justifies an award of tort damages in Menezes. 16 emphasized its Menezes finding where it reiterated that conduct 17 amounting to a breach of contract becomes tortious when it also 18 violates a duty independent of the contract arising from 19 principles of tort law. 20 court of appeals denial of the homeowners petition for writ of 21 mandate to require admission of evidence of construction defects 22 that did not cause damage. 23 (internal quotations and alterations in original omitted). Id. Id. The court The supreme court affirmed the Id. at 653. Britz argues that its breach of contract claim arises out of 24 Defendants breach of its promise to defend Britz in the Skouti 25 lawsuit. 26 argues, arise from a duty to exercise reasonable care in 27 providing a competent defense with competent counsel and a duty 28 to inform Britz of material facts or circumstances Defendants The negligence and gross negligence claims, Britz 18 1 2 became aware of in the course of defending Britz. Britz s arguments ignore the California Supreme Court s 3 opinions in Menezes and Aas. 4 relies on the language in the court of appeals decision in North 5 American Chemical Company, a case pre-dating Menzes and Aas, that 6 held where the contract is one for services, the contract gives 7 rise to an implied duty of care which requires that such services 8 be performed in a reasonable manner, and that a negligent failure 9 to do so may be both a breach of contract and a tort. 10 Menezes court noted that this statement was true, but 11 unequivocally qualified that, conduct amounting to a breach of 12 contract becomes tortious only when it also violates a duty 13 independent of the contract arising from principles of tort law. 14 Menezes, 21 Cal. 4th at 551 (citing Applied Equip. Corp. v. 15 Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 515 (1994). 16 contract was one for services, a competent performance of such 17 services was a contractual duty. 18 Like the homeowners in Aas, Britz The The Here, Britz does not allege that Defendants had a duty to 19 defend independent of the May 14, 2003, letter whereby Defendants 20 undertook to provide Britz a defense in the Skouti Lawsuit. 21 Britz s negligence allegations that Defendants undertook a duty 22 to exercise reasonable care in managing Britz s defense and 23 should have informed Britz of Rushford s communications with 24 Moore and Ferguson that Hoppe was inadequately representing 25 Britz, premised on the May 14, 2003, letter by which Defendants 26 undertook Britz s defense, was an integral part of and not 27 independent of Bayer s defense obligation. 28 Britz admits that Defendants agreed to defend Britz in the 19 1 Skouti Lawsuit because of their prior business relationship. 2 is this prior business relationship that resulted in the 3 Defendants offer to defend Britz in the Skouti Lawsuit, not an 4 independent duty arising under tort law. 5 inform Britz of Rushford s conclusion that Hoppe was not 6 providing Britz with an adequate defense in the Skouti Lawsuit is 7 part of defense counsel s duty to keep a client informed when 8 representing a client as part of a defense tender and does not 9 implicate any social policy that merits the imposition of tort 10 11 It Defendants failure to remedies. Britz contends that Defendants argument that a party may 12 not recover in tort for breach of a contractual obligation 13 ignores well-established case law. 14 Britz cites the venerable California Supreme Court decision in 15 Eads v. Marks, 39 Cal. 2d 807 (1952) for the proposition that 16 the same act may be both a tort and breach of contract. 17 In support of this position, In Eads, a father had entered into an agreement with a dairy 18 for the delivery of milk, cream, butter, and eggs to his 19 residence. 20 into the delivery agreement, the parents of the plaintiff, a one- 21 year old child, informed the dairy that it should not leave glass 22 containers, among other things, at the residence other than in 23 the refrigerator. 24 dairy that the child might become injured by picking up, 25 dropping, or tripping over the dairy products or glass 26 containers. 27 milk container on the back porch of the residence. 28 child picked up the glass container and fell off the porch Eads, 39 Cal. 2d at 809. Id. Id. About a year after entering The plaintiff s parents informed the About nine months later, the dairy left a glass 20 Id. The 1 causing the container to break near his face. 2 sustained severe injuries in the fall. 3 Id. The child Id. Plaintiffs sued the dairy for negligence. In the complaint, 4 the plaintiffs alleged they made an agreement with the dairy 5 regarding the place of delivered dairy products and, implicit in 6 the agreement, is the allegation that it was made expressly for 7 the benefit of their minor child, a third-party beneficiary. 8 Eads, 39 Cal. 2d at 810. 9 the complaint was uncertain because it alleged no facts showing Defendants demurred on the ground that 10 any duty was owed to the child. 11 the demurrer without leave to amend. 12 Id. The trial court sustained On appeal, the court reversed holding that the same act may 13 be both a tort and a breach of contract. 14 [e]ven where there is a contractual relationship, between the 15 parties, a cause of action in tort may sometimes arise out of the 16 negligent manner in which the contractual duty is performed, or 17 out of a failure to perform such duty. 18 the duty of care arose by reason of the contract. 19 The contract is of significance only in creating the legal duty, 20 and the negligence of the defendant should not be considered as a 21 breach of contract, but as a tort governed by the rule of torts. 22 Id. 23 Id. Id. Britz s reliance on Eads is misplaced. The court reasoned According to Eads, Id. at 811. Eads has been 24 refuted by later California case law that establishes the 25 independent duty requirement. 26 deliver dairy products, with all deliveries to be placed in the 27 refrigerator, was between the injured child s parents and the 28 dairy, the duty underlying the negligence cause of action was to In Eads, although the agreement to 21 1 the injured child, who was not a party to the contract. 2 Characterizing the independent duty of care in Eads as applying 3 to the child is consistent with Menezes and Aas. 4 contrast, Britz maintains the Defendants owed it a duty of care 5 arising out of the May 14, 2003, letter. 6 injured young child who was a not a party to the agreement for 7 the delivery of dairy products to whom a duty was owed, in 8 contrast to the case at hand where Britz, a party to the May 14, 9 2003, letter, was injured by a breach of the very duty of defense 10 Here, by In Eads, it was the the contract provides. 11 Britz contends Defendants agreement to defend it in the 12 Skouti Lawsuit created a special relationship that is analogous 13 to the relationship shared between an insurer and an insured. 14 This special relationship, according to Britz, creates a duty of 15 care independent of the contract and arising from principles of 16 tort law. 17 between the parties. 18 14, 2003, letter was simply an offer to pay Britz s attorney s 19 fees associated with its defense in the Skouti Lawsuit to keep a 20 commercial customer happy. 21 interpretation of the May 14, 2003, letter implies that 22 Defendants agreed to assume control over the litigation in the 23 Skouti Lawsuit. 24 of defense by their undertaking to provide counsel. 25 allege that Britz was an agricultural chemical dealer to whom 26 Bayer was a commercial product supplier. 27 insurance-like relationship in the providing of a defense to a 28 customer and to defend the manufacturer-seller s product. Defendants rejoin no special relationship existed Instead, Defendants suggest that the May Defendants also assert Britz s Defendants deny any insurance contract-type duty 22 The facts There is no special 1 Every contract imposes upon each party a duty of good faith 2 and fair dealing in its performance and enforcement. 3 Interactive Data Corp., 47 Cal. 3d 654, 683 (1988). 4 covenant, however, is a contract term and compensation for its 5 breach has almost always been limited to contract rather than 6 tort remedies. 7 the precise nature and extent of the duty imposed by such an 8 implied promise will depend on the contractual purposes. 9 (alterations in original omitted). Id. at 684. Foley v. The As to the scope of the covenant, Id. As a contract concept, 10 breach of the duty led to imposition of contract damages 11 determined by the nature of the breach and standard contract 12 principles. 13 Id. An exception to this general rule exists in the context of 14 insurance contracts, where, for a variety of reasons, courts 15 have held that breach of the implied covenant will provide the 16 basis for an action in tort. 17 insurance context 18 19 20 21 Foley, 47 Cal. 3d at 684. In the the duty to comport with the implied covenant of good faith and fair dealing is immanent in the contract whether the company is attending on the insured s behalf to the claims of third persons against the insured or the claims of the insured itself. Accordingly, when the insurer unreasonably and in bad faith withholds payment of the claim of its insured, it is subject to liability in tort. 22 23 24 Id. (alterations in original omitted). Tort recovery is permitted in the insurance context because 25 of circumstances that do not exist in typical commercial 26 contracts. 27 obtain a commercial advantage by purchasing the policy rather, 28 he seeks protection against the calamity. An insured in an insurance contract does not seek to 23 Id. (citing Egan v. 1 Mutual of Omaha Ins. Co., 24 Cal. 3d. 809, 819 (1979)). The 2 insurers obligations are rooted in their status as purveyors of 3 a vital service labeled quasi-public in nature. 4 3d at 684-85 (alterations in original omitted). 5 services affected with a public interest must take the public s 6 interest seriously, where necessary placing it before their 7 interests in maximizing gains and limiting disbursements. 8 at 685. 9 manufactured product, the obligations of insurers go beyond Foley, 47 Cal. Suppliers of Id. As a supplier of a public service rather than a 10 meeting reasonable expectations of coverage. 11 the relationship of insurer and insured is inherently 12 unbalanced: the adhesive nature of insurance contracts places the 13 insurer in a superior bargaining position. 14 Id. Additionally, Id. Britz and the Defendants do not share the special 15 relationship that exists between an insured and insurer. The 16 relationship between Britz and Defendants is a commercial one, 17 that of a purchaser and seller in the commercial context of 18 agricultural chemical sales. 19 in the Skouti Lawsuit arises out of their commercial 20 relationship, and the May 14, 2003, letter specifically indicates 21 Defendants would defend Britz because of Bayer s relationship 22 with Britz. 23 special relationship status to commercial dealings between 24 parties outside of the insurance context. 25 business of manufacturing and selling agricultural chemical 26 products. 27 service to the public or peace of mind to customers in the way an 28 insurance company does. Defendants offer to defend Britz Britz has not cited any cases extending the Defendants are in the Defendants do not provide a catastrophe avoidance Defendants do not hold a superior 24 1 bargaining position over Britz, and there is nothing adhesive 2 about Defendants May 14, 2003, letter voluntarily offering to 3 defend Britz in the Skouti Lawsuit. 4 good customer happy, not to become its insurer. 5 valid reason to extend the special relationship status to Britz 6 and Defendants. 7 8 9 Defendants sought to keep a There is no The motion to dismiss the negligent breach of contract claim is GRANTED WITHOUT LEAVE TO AMEND. Defendants contend Britz s gross negligence cause of action 10 fails to state a claim because it is merely an allegation of 11 punitive damages by stating Defendants 12 16 failed to act with any modicum of diligence or care, and Defendants actions constituted a wanton and reckless disregard of its obligations to Britz and as a voluntary and conscious disregard for Britz s rights and any consequences which were a foreseeable result of Defendant s action or inaction, thereby justifying an award of exemplary and punitive damages. Defendant s conduct was despicable by any standard. 17 Britz rejoins that the language above sufficiently pleads a 13 14 15 18 cause of action for gross neglience. California tort law 19 recognizes the difference between negligence and gross 20 negligence. 21 (2007). 22 want of even scant care or an extreme departure from the ordinary 23 standard of conduct. 24 of course, consist of either ordinary negligence or gross 25 negligence. 26 Whether a party acted with gross negligence is a question of 27 fact. 28 whether there has been such a lack of care as to constitute Santa Barbara v. Superior Court, 41 Cal. 4th 747 Gross negligence has long been defined as either the Id. at 754. A breach of legal duty may, Van Meter v. Bent Constr. Co., 46 Cal. 2d 588, 595. Cooper v. Kellogg, 2 Cal. 2d 504, 511 (1935) (stating 25 1 gross negligence is a question of fact for the determination of 2 the trial court or jury, even where there is no conflict in the 3 evidence if different conclusions upon the subject can rationally 4 be drawn therefrom. ). 5 Here, Britz has pleaded a cause of action for gross 6 neglience, albeit marginally, to survive a motion to dismiss. 7 Britz has alleged that Defendants did not act with any modicum of 8 diligence and disregarded its obligations while defending Britz 9 in the Skouti Lawsuit. The FAC also incorporates by reference 10 all of the facts surrounding Defendants offer to defend Britz, 11 pay Hoppe s attorney s fees, and provide Rushford as counsel. 12 Gross negligence is another species, an exacerbated form of 13 negligence. 14 independent duty not arising from contract. 15 duty of care to Britz independent of that it assumed under the 16 contract. 17 tort. 18 19 Like negligence, gross negligence still requires an Defendants owed no Britz cannot state a claim for gross negligence in The motion to dismiss the gross negligence claim is GRANTED WITHOUT LEAVE TO AMEND. 20 21 B. Whether Britz s FAC States a Claim for Relief for Breach of Contract. 22 23 Defendants contend the FAC fails to state a claim for relief 24 for breach of contract. The FAC alleges the May 14, 2003, letter 25 contains a necessary and implied condition that the Defendants 26 would adequately defend Britz in the Skouti Lawsuit. 27 also alleges Defendants failed to take adequate measures to 28 ensure Britz received an adequate defense, and Defendants failed 26 The FAC 1 to inform Britz of facts or circumstances indicating it was not 2 receiving an adequate defense. 3 Defendants, are insufficient to state a claim for breach of 4 contract. 5 These allegations, according to Britz contends that the May 14, 2003, letter constituted an 6 express agreement that Defendants would defend Britz in the 7 Skouti lawsuit. 8 agreement to Defend Britz is an implied condition to do so in a 9 reasonable Incidental and necessary to Defendants manner. Britz maintains this condition is so obvious 10 and incidental to the agreement, there was no reason to state 11 the covenant at the time the agreement was entered into. 12 California recognizes an implied covenant of good faith and 13 fair dealing in every contract . . . . Kransco v. American 14 Empire Surplus Lines Ins. Co., 23 Cal. 4th 390, 400 (2000). 15 Broadly stated, that covenant requires neither party do anything 16 which will deprive the other of the benefits of the agreement. 17 Belcher Oil Co., 11 Cal. 4th at 91. 18 on each party to do that which is necessary to accomplish the 19 purpose of the contract. 20 App. 4th 578, 589 (2005). 21 parties, implied covenants will be found if after examining the 22 contract as a whole it is so obvious that the parties had no 23 reason to state the covenant, the implication arises from the 24 language of the agreement, and there is a legal necessity. 25 Zivi v. Edmar Co., 40 Cal. App. 4th 468, 473 (1995). 26 courts have implied covenants in a contract, such covenants are 27 justified only when they are not inconsistent with some express 28 term of the contract and, in the absence of such implied terms, The covenant imposes a duty Andrews v. Mobil Aire Estates, 125 Cal. To effectuate the intent of the 27 Ben- While 1 the contract could not be effectively performed. 2 Title Ins. & Trust Co., 20 Cal. 2d 814, 824 (1942). 3 terms should never be read to vary express terms. 4 Developer v. Marathon Dev., 2 Cal. 4th 342, 374 (1992). 5 Tanner v. Implied Carma The parties do not dispute that a defense agreement exists. 6 The controlling terms of the agreement are found in the May 14, 7 2003, letter from Defendants outside counsel to Hoppe. 8 14, 2003, letter contains the following contractual terms: 9 The May (1) Bayer agrees to defend Britz Fertilizers, Inc. at this time. (2) Bayer will not pay past attorney s fees or costs in this case. (3) Bayer will retain Jim Rushford of Rushford & Bonotto in Sacramento, to defend this matter with you. (4) If there is any evidence in this case of negligence or fault on the part of Britz (whether credible or not), Bayer may at its option withdraw from the defense of this case. (5) In the event that Bayer withdraws from the case, Britz agrees to waive any conflict and allow attorneys retained by Bayer in this manner to continue to represent Bayer if Bayer is included as a party. (6) Britz agrees that it will cooperate fully with Bayer in connection with the defense of this case. (7) Both Bayer and Britz reserve the issue of indemnity until a later date. 10 11 12 13 14 15 16 17 18 19 20 21 22 (Emphasis added). 23 The agreement specifically states Bayer will defend Britz 24 at this time and will retain Rushford to do so in the Skouti 25 Lawsuit. 26 fees and that Rushford represented Britz for approximately 27 seventeen months and then withdrew from representation several 28 months before the Skouti Lawsuit went to trial. The parties do not dispute that Defendants paid Hoppe s 28 The record does 1 not show why Rushford withdrew from its representation of Britz. 2 Term four, above, expressly reserves the right to withdraw from 3 the defense of this case in the event of any negligence by Britz. 4 There is no provision that Bayer was further obligated to provide 5 a defense or counsel to Britz. 6 replacement counsel for Britz after Rushford withdrew may or may 7 not have breached terms number one and three in view of the 8 temporal limitation at this time, which introduces material 9 ambiguity into the extent and length of the defense commitment. 10 Defendants failure to provide There is no allegation of any representation by express 11 language in the May 14, 2003, letter that Defendants had an 12 obligation to adequately defend Britz. 13 three, above, simply require Defendants to defend Britz at this 14 time and to provide Rushford to do so. 15 of agricultural products. 16 defense to Britz by providing and paying counsel. 17 Hoppe s fees (term two) and providing Rushford to assist with 18 Britz s defense (term three) explained how Defendants would 19 defend Britz. 20 enough to defend Britz is colorably sufficient at the pleading 21 stage to withstand a motion to dismiss the contract claim that 22 Defendants breached their obligation to defend Britz, in view of 23 the manifest ambiguity of the defense agreement. 24 Contract terms one and Defendants are sellers Defendants could only provide a The payment of Britz s allegation that Defendants didn t do The motion to dismiss the contract claim is DENIED. 25 26 C. 27 Defendants contend Britz II should be dismissed because it 28 Whether Britz II is Duplicative of Britz I. is duplicative of Britz I. Defendants maintain that Britz has 29 1 sought to litigate claims arising from a common nucleus of 2 operative fact in two separate cases. 3 both Britz I and Britz II arise from an alleged breach of certain 4 obligations related to the Skouti Lawsuit. 5 the Defendants alleged defense and indemnity obligations 6 emanating from the Skouti Lawsuit, and by filing Britz II, Britz 7 has in effect split its claims. 8 9 According to Defendants, Both cases concern Britz contends the claims asserted in the FAC are not duplicative of the claims asserted in the Britz I complaint. 10 Britz maintains Defendants fail to understand the key 11 distinctions between the two cases, and that Britz I and Britz II 12 are based on different duties, which arise from separate 13 agreements, and are based on different factual nuclei. 14 According to Britz, Britz I is based on Defendants contractual 15 duty to indemnify Britz under an indemnification provision in the 16 Distribution Agreement. 17 Defendants undertook an express separate duty to defend Britz in 18 the Skouti Lawsuit, and this duty arose out of Moore s May 14, 19 2003, letter. 20 In Britz II, however, Britz claims In a recent opinion, the Ninth Circuit succinctly described 21 the analytical framework to determine whether a later-filed 22 complaint should be dismissed as duplicative of an earlier-filed 23 complaint. 24 684 (9th Cir. 2007). 25 maintain two separate actions involving the same subject matter 26 at the same time in the same court and against the same 27 defendant. 28 (3d Cir. 1977) (en banc)). Adams v. California Dep t of Health Servs., 487 F.3d Plaintiffs generally have no right to Id. (citing Walton v. Eaton Corp., 563 F.2d 66, 70 The test for claim preclusion is used 30 1 to determine whether a suit is duplicative. Adams, 487 F.3d at 2 688. 3 sufficiency of a plea of other suit pending in another forum [i]s 4 the legal efficacy of the first suit, when finally disposed of, 5 as the thing adjudged, regarding the matters at issue in the 6 second suit. Id. at 689 (citing United States v. The Haytian 7 Republic, 154 U.S. 118, 124 (1894)). 8 context, the appropriate inquiry is whether, assuming that the 9 first suit were already final, the second suit could be precluded The Supreme Court has stated the true test of the In the claim-splitting 10 pursuant to claim preclusion. 11 normal claim preclusion analysis applies and the court must 12 assess whether the second suit raises issues that should have 13 been brought in the first. 14 Adams, 487 F.3d at 689. The Id. In assessing whether the second action is duplicative of the 15 first, a court examine[s] whether the causes of action and 16 relief sought, as well as the parties or privies to the action, 17 are the same. 18 parties, or, at least, such as represent the same interests; 19 there must be the same rights asserted and the same relief prayed 20 for; the relief must be founded upon the same facts, and the . . 21 . essential basis, of the relief sought must be the same. 22 (citing The Haytian Republic, 154 U.S. at 124). 23 duplicative if the claims, parties, and available relief do not 24 significantly differ between the two actions. 25 at 689 (citing Serlin v. Arthur Andersen & Co., 3 F.3d 221, 223 26 (7th Cir. 1993)). 27 28 Adams, 487 F.3d at 689. There must be the same Id. A suit is Adams, 487 F.3d The Ninth Circuit uses a transaction test developed in the context of claim preclusion to ascertain whether successive 31 1 causes of action are the same. 2 two events are part of the same transaction or series depends on 3 whether they are related to the same set of facts and whether 4 they could conveniently be tried together. 5 four criteria are examined when applying the transaction test: 6 Adams, 487 F.3d at 689. Id. Whether The following (1) Whether rights or interests established in the prior judgment would be destroyed or impaired by the prosecution of the second action; (2) Whether substantially the same evidence is presented in the two actions; (3) Whether the two suits involve infringement of the same right; and (4) Whether the two suits arise out of the same transactional nucleus of facts. 7 8 9 10 11 12 13 Id. 14 (citing Costantini v. Trans World Airlines, 681 F.2d 1199, 1202 15 (9th Cir. 1982)). 16 The last of these criteria is the most important. Britz II is entirely duplicative of Britz I. Id. It simply adds 17 an additional claim for a more particularized duty to defend. 18 The parties are identical in both Britz I and Britz II. 19 relief sought in both Britz I and Britz II is almost identical. 20 Britz seeks damages in both cases to indemnify it for the 21 $7,596,247 judgment entered against Britz in the Skouti Lawsuit 22 and any defense costs. 23 judgment against it in the Skouti Lawsuit plus punitive damages 24 for its fraud and false promise claims for relief. 25 $10,000,000.00 in damages in Britz II for Defendants negligence 26 and breach of contract in failing to adequately defend Britz in 27 the Skouti Lawsuit. 28 cover the judgment in the Skouti Lawsuit. The Britz I seeks indemnification for the Britz seeks In both cases, Britz is seeking damages to 32 1 A review of the complaint in Britz I and the FAC in Britz II 2 reveals numerous allegations of identical facts. Both the 3 complaint and FAC describe Britz s sale of Defendants chemical 4 Ethrel to Skouti, the damages to Skouti s vineyards, the Skouti 5 Lawsuit where judgment was entered against Britz for $7,596,247 6 for harm to those vineyards, Ferguson s communications that it 7 was Bayer s position that it would defend and indemnify any claim 8 related to its products where Britz acted as a pass-through 9 entity. Britz s fraud cause of action in Britz I alleges 10 Ferguson s representation that Defendants would indemnify Britz 11 was false, and Britz relied on Ferguson s representation that 12 Defendants would defend and indemnify Britz. 13 action also alleges Britz would refrain from filing a cross- 14 complaint in the Skouti Lawsuit against Britz. 15 Britz dismissed a cross-complaint against Defendants after 16 Defendants agreed to defend Britz in the Skouti Lawsuit. 17 alleges Britz is continuing to incur attorney s fees following 18 judgment in the Skouti Lawsuit. 19 Britz, which is at issue in Britz II, Defendants paid Hoppe s 20 attorney s fees; attorney s fees post-judgment in the Skouti 21 Lawsuit are claimed in Britz I. 22 The fraud cause of Britz II alleges Britz I Under the agreement to defend These complaints should be consolidated for all purposes 23 including trial or Britz should be required to plead any 24 supplemental or additional claims for relief and damages in its 25 original complaint. 26 against Defendants for the defense of and any indemnity 27 obligations in the Skouti Lawsuit will serve the interests of 28 justice, promote judicial economy, preserve party and judicial One trial embracing all of Britz s claims 33 1 resources, and prevent unjustified duplication of evidence and 2 potentially inconsistent results in the second lawsuit concerning 3 the same underlying transactions. 4 consolidated with Britz I. 5 (explaining that a district court may dispense with a duplicative 6 complaint by dismissing the later-filed complaint with or without 7 prejudice, by staying or enjoining the later-filed proceeding, or 8 by consolidating the two actions). 9 original complaint to succinctly state all surviving claims and 10 To that end, Britz II is See Adams, 487 F.3d at 692 Britz shall amend the remedies sought. 11 12 13 14 15 VI. For the foregoing reasons, Defendants motion to dismiss is GRANTED in part and DENIED in part as set forth below. (1) 16 17 (2) Defendants motion to dismiss as to Britz s gross neglience claim is GRANTED WITHOUT LEAVE TO AMEND. (3) 20 21 Defendants motion to dismiss as to Britz s neglience claim is GRANTED WITHOUT LEAVE TO AMEND. 18 19 Conclusion. Defendants motion to dismiss Britz s breach of contract claim is DENIED. (4) Defendants motion to dismiss as to whether Britz II is 22 duplicative of Britz I is GRANTED. 23 1:07-cv-00846-OWW-SMS (Britz II) is consolidated for 24 all purposes with Britz I. 25 restated to allege the surviving claims within twenty 26 (20) days following service of this decision. 27 Defendants shall have fifteen (15) days to answer, if 28 any further response is required to the consolidated 34 Case number The complaint shall be 1 2 complaint. (5) Case number 1:07-cv-00846-OWW-SMS (Britz II) shall be 3 administratively closed and all pleadings shall 4 hereafter be filed in case number 1:06-cv-00287-OWW-SMS 5 (Britz I). 6 Defendants shall file an order consistent with this 7 memorandum decision within five (5) days following service by the 8 clerk of this decision. 9 IT IS SO ORDERED. 10 Dated: 474bb4 February 5, 2008 /s/ Oliver W. Wanger UNITED STATES DISTRICT JUDGE 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 35
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