Osprey 1, LLC v. January, Inc., et al.,, No. 3:2017cv06620 - Document 25 (N.D. Cal. 2018)

Court Description: ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS by Judge William Alsup [granting in part and denying in part 10 Motion to Dismiss]. Plaintiff has until 3/8/2018 to seek leave to amend complaint. (whasec, COURT STAFF) (Filed on 2/15/2018)
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Osprey 1, LLC v. January, Inc., et al., Doc. 25 1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 OSPREY 1 LLC, 11 For the Northern District of California United States District Court 10 12 13 14 15 Plaintiff, No. C 17-06620 WHA v. JANUARY, INC.; NOOSHEEN HASHEMI; and DOES 1 through 10, ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS Defendants. / 16 INTRODUCTION 17 18 In this contract dispute, defendants move to dismiss or stay all claims in the complaint 19 on the grounds that plaintiff, a Nevada LLC, lacks the capacity to sue in California. For the 20 reasons stated herein this motion is DENIED. Defendants also move to dismiss plaintiff’s 21 promissory fraud claim for failure to comply with FRCP 9(b)’s pleading requirements. 22 This motion is GRANTED. 23 24 STATEMENT The following is taken from the well-pled allegations of the complaint. Osprey 1 LLC 25 is a recruiting firm that performs nationwide executive searches and has clients in multiple 26 states (Dkt. No. 1). Osprey recruits, interviews, and presents candidates for positions that its 27 clients seek to fill (id. ¶ 8). Osprey formed under the laws of Nevada and its sole member, 28 Stephen Wachter, resides in Park City, Utah (id. ¶ 1). Wachter’s declaration represents that Dockets.Justia.com 1 the nature of his business enables him to perform his recruiting services from anywhere with 2 internet and cell phone service. As a result, he performs his services from anywhere he travels 3 to, but does the majority of his work from his residence in Park City, Utah (Dkt. No. 15-1). 4 On May 1, 2017, Noosheen Hashemi, the founder and CEO of a health start-up called 5 January, Inc., contacted Wachter to recruit candidates for executive positions at January (Dkt. 6 No. 1 at ¶ 10). On May 12, 2017, Wachter met with Hashemi at her home office in Atherton, 7 California, where they discussed two executive positions she was looking to fill for January 8 (id. ¶ 12). According to the complaint, the parties entered into an oral contract that Osprey 9 would recruit candidates for two positions at January — chief technology officer and chief product officer — in exchange for a $55,000 recruiting fee per filled position. The terms of the 11 For the Northern District of California United States District Court 10 agreement provided that $25,000 of the $55,000 fee would be paid up-front as “retainer to 12 initiate work” and the remaining $30,000 would be payable when a candidate signed an 13 employment contract with January. Hashemi also agreed to give Osprey a $2500 travel budget 14 per position for interviewing candidates (id. ¶ 12). 15 Also on May 12, 2017, Osprey sent Hashemi written contracts and invoices back-dated 16 to May 10, embodying the terms and conditions they had agreed to earlier for the CTO and 17 CPO positions (id. ¶ 14). On May 17, Hashemi signed the written contract for the CTO position 18 and paid the $25,000 retainer. Hashemi did not sign a written contract or pay a retainer for the 19 CPO position. 20 Hashemi eventually asked Osprey to search for two more positions identified in the 21 complaint as “E&G” and “U&X Design.” Hashemi did not sign a written contract or pay a 22 retainer for either position. Nevertheless, the complaint alleges that Osprey searched for all 23 four positions between May and September (id. ¶ 15). Hashemi had already paid the retainer 24 for the CTO position. The complaint alleges, therefore, that Osprey was also entitled to the 25 retainers for the CPO, UX Design, and E&G positions — totaling $75,000. 26 On July 31, 2017, Jane Doe I, a candidate which Osprey presented to January, accepted 27 a job offer for the E&G position (id. ¶ 16). Osprey contacted Hashemi to collect $55,000 28 placement fee for that position. When Hashemi explained that she could not afford to pay 2 1 $55,000, Osprey agreed to a $5,000 discount for each of the four positions if Hashemi promptly 2 paid $50,000 for the E&G position (id. ¶ 17; see Dkt. No. 1-7 (updated invoice reflecting 3 discount)). 4 Thereafter, Osprey continued to search and present candidates for January’s remaining informed Osprey that, between the previously-paid $25,000 retainer for the CTO contract and 7 the new $25,000 payment, she considered the fee for the E&G position to be paid in full (id. 8 ¶ 23–24). Osprey, however, rejected this reasoning as improper intermingling of separate 9 payments on separate invoices. Osprey further argues that, because Hashemi did not satisfy 10 the condition of the $5000 discount, it now owes Osprey $30,000 (not $25,000) for the E&G 11 For the Northern District of California three positions (id. ¶ 19). On August 30, 2017, Hashemi paid $25,000 on the E&G invoice and 6 United States District Court 5 position. Additionally, the complaint alleges Osprey is entitled to $25,000 for the CPO retainer, 12 $25,000 for the UX Design retainer, and $1,512 for two trips to California to interview 13 candidates. 14 In sum, Osprey failed to deliver an acceptable candidate on three out of the four 15 positions, yet demands compensation for the three failures. Osprey has no written contract 16 on three out of four positions. The one written contract (for the unfilled CTO position) is not 17 signed by both sides. Hashemi paid for the one position on which Osprey succeeded except for 18 a dispute over $5,000 for not paying in time. 19 Osprey came to California and this district to commence this action on November 16, 20 2017, alleging (1) breach of written contract (2) breach of oral contract (3) breach of implied 21 contract (4) quantum meruit (5) open book account (6) account stated (7) false promise and 22 (8) promissory estoppel (id. ¶ 27–74). ANALYSIS 23 24 1. FALSE PROMISE CLAIM FOR RELIEF 25 In its seventh claim for relief, Osprey alleges that Hashemi falsely promised that it 26 would make payments for each position. Osprey’s promissory fraud claim is subject to FRCP 27 9(b)’s particularity requirement. Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 28 2003). FRCP 9(b) states that “[i]n alleging fraud or mistake, a party must state with 3 1 particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and 2 other conditions of a person’s mind may be alleged generally.” Our court of appeals has 3 interpreted FRCP 9(b) to require that a plaintiff state the “who, what, when, where, and how of 4 the misconduct charged” as well as “what is false or misleading about a statement, and why it is 5 false.” Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010) (internal quotation 6 marks and citation omitted). Plaintiff must state “ ‘more than the neutral facts necessary to 7 identify the transaction.’ ” Kearns v. Ford Motors Co., 567 F.3d 1120, 1124 (9th Cir. 2009) 8 (quoting In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994), superseded by 9 statute on other ground) (emphasis in original). Osprey has failed to satisfy FRCP 9(b)’s heightened pleading standard. Osprey provides 11 For the Northern District of California United States District Court 10 no evidence or support for its blanket statement that “Hashemi did not intend to perform these 12 promises when promises were made.” (Dkt. No. 1 ¶ 63). A conclusory allegation falls short of 13 the requirement under FRCP 9(b). The complaint merely offers the following limited 14 description of the alleged false promises (id. ¶ 62): 15 16 17 18 19 During the period on or about May 1, 2017 through September 2017, Defendant, Noosheen Hashemi made false promises to Plaintiff that Defendant January, Inc., would pay Plaintiff’s Payment terms for Plaintiff’s Services for each position, which promises were renewed or impliedly reaffirmed each time Defendant requested Plaintiff’ Services for a position and each time Defendant accepted a submission of a candidate from Plaintiff, and which promises constitute an express and/or implied representation and promise of payment. 20 This paragraph does not sufficiently state the “who, what, when, where, and how” of the 21 alleged false promises. The complaint fails to identify specific promises that were made, where 22 they were made, and why they were false. Osprey does not provide concrete facts regarding 23 when these alleged false promises were made, other than alleging they occurred between May 24 and September. In particular, the complaint has not pled any facts to illuminate how and when 25 the parties first discussed the E&G and UX Design positions, yet alone any facts regarding false 26 promises in connection with those two positions. 27 Moreover, Osprey’s allegations that Hashemi’s promises were false because she never 28 intended to pay are undermined by the complaint itself. For instance, the complaint states that 4 1 Hashemi paid $25,000 in connection with the CTO position, and another $25,000 in connection 2 with the E&G position. At the minimum, these two payments negate Osprey’s contention that 3 Hashemi never intended to pay with respect to at least two promises. 4 Given that the complaint merely alleges that “Hashemi made false promises” without 5 specifying the manner or frequency, the defendants are not given “fair notice of the particular 6 misconduct which is alleged to constitute the fraud” that FRCP 9(b) requires. Bly-Magee v. Cal., 7 236 F. 3d 1014, 1019 (9th Cir. 2001). 8 Because failure to comply with FRCP 9(b)’s pleading requirements is sufficient to argument that there is no legal basis for the complaint’s allegation of “implied” fraudulent 11 For the Northern District of California dismiss Osprey’s promissory fraud claim, this order does not address defendants’ further 10 United States District Court 9 misrepresentation. 12 2. 13 Defendants move to dismiss or stay all claims in Osprey’s complaint pursuant to 14 OSPREY’S CAPACITY TO MAINTAIN THIS ACTION FRCP 12(b)(6), on the grounds that Osprey does not have the capacity to maintain this action. 15 Defendants argue that Osprey, a Nevada limited liability company, is barred from 16 maintaining this action because it does not have a certificate of qualification to transact intrastate 17 business as required by California Corporation Code Section 17708.07(a). Section 17708.07(a) 18 provides that “[a] foreign limited liability company transacting intrastate business in this state 19 shall not maintain an action or proceeding in this state unless it has a certificate of registration 20 to transact intrastate business in this state.” CAL. CORP. CODE § 17708.07(a). The California 21 legislature has defined “transacting intrastate business” as “enter[ing] into repeated and 22 successive transactions of business in this state, other than in interstate and foreign commerce[.]” 23 id. § 17708.03(a); see also, § 191(a). The defendant, as the moving party, bears the burden of 24 proving (1) the action arises out of plaintiff’s transaction of intrastate business; and (2) the action 25 was commenced prior to plaintiff qualifying to transact intrastate business. United Med. Mgmt. 26 Ltd. v. Gatto, 48 Cal. App. 4th 1732, 1740 (1996)). 27 28 5 1 Given that Osprey concedes it does not have a certificate of qualification, the issue 2 presented is whether defendants have carried their burden to show Osprey’s claims arose out of 3 the transaction of intrastate business, and was therefore required to register in California. 4 There are issues of fact that need to be resolved through discovery before the issue of 5 whether or not Osprey transacted intrastate business within the meaning of Section 17708.07(a) 6 can be reached. For instance, Osprey’s contracts and invoices show a California address at 7 “6950 Almaden Expy, Ste. 122, San Jose, CA.” Defendants argue that this is the address to 8 Osprey’s office in California. Wachter’s declaration, however, denies that allegation and 9 contends that the address is a “mailbox.” On its face, this address does not look like a “mailbox” 11 For the Northern District of California United States District Court 10 and it appears that Osprey may be misrepresenting its activities within California. Moreover, neither side has supplied facts to show where the purported contracts required 12 acceptance to become binding. Such facts are of paramount importance given the significance 13 that both statutory authority and court decisions place on where a contract requires acceptance in 14 determining whether a foreign company transacted intrastate business. Taking the signed written 15 contract as an example, it is unclear whether that document conferred power of acceptance on 16 Hashemi upon her signature in California, or whether final acceptance remained with Osprey 17 in Utah. Importantly, the signed contract attached to the complaint is only signed by Hashemi 18 (see Dkt. No. 1-1). Yet, Wachter’s declaration alleges that he “executed” and “signed” the 19 contract in question outside of California (Dkt No. 15-1 at 2). It is not clear, therefore, where the 20 alleged contracts required acceptance to become binding. 21 In light of the mentioned inconsistencies in the record, this order reserves decision on 22 this issue at summary judgment (or potentially at trial) where the truth of Osprey’s activities in 23 California will be illuminated. For the foregoing reasons defendants’ motion to dismiss or stay 24 all claims is DENIED. 25 3. DEFENDANTS’ FAILURE TO ATTACH A PROPOSED ORDER 26 In its opposition, Osprey argues that defendants’ motion to dismiss should be denied 27 for failure to attach a proposed order as required under Civil Local Rule 7.2(c). Defendants, 28 however, corrected their mistake by including their proposed order in their reply brief. 6 1 Accordingly, the undersigned judge excuses defendants’ mistake and allows the motion to 2 proceed. 3 4 CONCLUSION For the foregoing reasons, defendants’ motion to dismiss or stay all claims asserted in 5 the complaint on the ground that plaintiff lacks the capacity to maintain this suit is DENIED. 6 Defendants’ motion to dismiss plaintiff’s promissory fraud claim is GRANTED. 7 Plaintiff may seek leave to amend the complaint and will have TWENTY–ONE CALENDER 8 DAYS from 9 to file an amended complaint. A proposed amended complaint must be appended to the motion. the date of this order to file a motion, noticed on the normal 35–day track, for leave The motion should clearly explain how the amendments to the complaint cure the deficiencies 11 For the Northern District of California United States District Court 10 identified herein. 12 13 IT IS SO ORDERED. 14 15 Dated: February 15, 2018. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 16 17 18 19 20 21 22 23 24 25 26 27 28 7