Ronald Cohn, Inc. v. Sprouts Farmers Market, Inc., No. 3:2019cv00848 - Document 49 (S.D. Cal. 2021)
Court Description: ORDER granting in part and denying in part 41 Defendant's Motion to Dismiss. Signed by Judge John A. Houston on 1/13/2021. (jpp)
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Ronald Cohn, Inc. v. Sprouts Farmers Market, Inc. Doc. 49 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 RONALD COHN, INC. d/b/a SPROUTS FARMERS MARKET, a California corporation, 13 14 15 16 17 18 Case No.: 19cv848-JAH (RBB) ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS [Doc. No. 41] Plaintiff, v. SPROUTS FARMERS MARKET, INC., a Delaware corporation; f/k/a and d/b/a SPROUTS FARMERS MARKETS, LLC, a Delaware limited liability company, Defendant. 19 20 INTRODUCTION 21 Pending before the Court is Defendant Sprouts Farmers Market, Inc. (“Sprouts” or 22 “Defendant”) motion to dismiss five of the six causes of action brought by Plaintiff 23 Ronald Cohn, Inc.’s (“Plaintiff”) in the First Amended Complaint (“FAC”). See generally 24 Doc. No. 41. Plaintiff filed an opposition to Defendants’ motion and Defendant filed a 25 reply. See Doc. Nos. 45, 46. Having carefully considered the pleadings in this action, and 26 for the reasons set forth below, the Court hereby GRANTS IN PART AND DENIES IN 27 PART Defendant’s motion to dismiss. 28 1 19cv848-JAH (RBB) Dockets.Justia.com 1 BACKGROUND 2 In October 1990, Sprouts’ predecessor, Boney’s Services, Inc. (Boney’s), entered 3 into a Trademark License Agreement with Plaintiff for the operation of a grocery store in 4 Chula Vista, California. Doc. No. 40 at 2. Boney’s Services, Inc. and Plaintiff entered 5 into a second Trademark License Agreement in September 1995 (collectively “TLAs”) 6 allowing Plaintiff to open and operate a second grocery store in Chula Vista, California. 7 Id. The TLA allows Plaintiff exclusive rights to use Sprouts’ tradename within the 8 designated “Protected Areas” in exchange for royalties that are paid to Sprouts. Id. at 7. 9 In 2011, Sprouts Farmers Market acquired Boney’s and amended the TLAs. Id. at 10 3. Plaintiff alleges that Sprouts violated the covenant of good faith and fair dealing as 11 implied in the TLA by preventing Plaintiff from accessing discounted and promotional 12 pricing for products, denying Plaintiff proper advance notice of advertisements sent out 13 through the San Diego Union-Tribune, diverting customers to corporate-owned stores by 14 not placing Plaintiff’s store on the Sprouts Farmers Market website, and selling within 15 Plaintiff’s Protected Areas through online sales. Id. 16 On April 23, 2020, the Court granted Sprouts’ motion to dismiss five of Plaintiff’s 17 six claims. On June 4, 2020, Plaintiff filed a First Amended Complaint (“FAC”). See 18 Doc. No. 40. Sprouts now moves to dismiss Counts two through six of Plaintiff’s FAC 19 for failure to state a claim. See generally Doc. No. 41 at 8. Plaintiff filed a response to 20 Defendant’s motion and Defendant filed a reply. See Doc. Nos. 45, 46. This matter was 21 taken under submission without oral argument. Doc. No. 47. 22 LEGAL STANDARD 23 Sprouts seeks dismissal pursuant to Rule 12(b)(6). Rule 12(b)(6) tests the 24 sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). 25 Dismissal is warranted under Rule 12(b)(6) where the complaint lacks a cognizable legal 26 theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984); see 27 Neitzke v. Williams, 490 U.S. 319, 326 (1989) (“Rule 12(b)(6) authorizes a court to 28 dismiss a claim on the basis of a dispositive issue of law”). Further, a pleading must 2 19cv848-JAH (RBB) 1 contain “a short and plain statement of the claim showing that the pleader is entitled to 2 relief. . . .” Fed. R. Civ. P. 8(a)(2). A complaint may be dismissed, however, where it 3 presents a cognizable legal theory yet fails to plead essential facts under that theory. 4 Robertson, 749 F.2d at 534. While a plaintiff need not give “detailed factual allegations,” 5 he must plead sufficient facts that, if true, “raise a right to relief above the speculative 6 level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007); see also Pierce v. 7 Wagner, 134 F.2d 958, 959 (9th Cir. 1943); Patten v. Dennis, 134 F.2d 137 (9th Cir. 8 1943). 9 To survive a motion to dismiss, “a complaint must contain sufficient factual 10 matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft 11 v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 547). A claim is 12 facially plausible when the factual allegations permit “the court to draw the reasonable 13 inference that the defendant is liable for the misconduct alleged.” Id. In other words, “the 14 non-conclusory ‘factual content’ and reasonable inferences from that content, must be 15 plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S. Secret 16 Service, 572 F.3d 962, 969 (9th Cir. 2009) (quoting Iqbal, 556 U.S. at 678). 17 “Determining whether a complaint states a plausible claim for relief will be a context- 18 specific task that requires the reviewing court to draw on its judicial experience and 19 common sense.” Iqbal, 556 U.S. at 679. 20 In reviewing a motion to dismiss under Rule 12(b)(6), the Court must assume the 21 truth of all factual allegations and must construe all inferences from them in the light 22 most favorable to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir. 23 2002); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). However, 24 legal conclusions need not be taken as true merely because they are cast in the form of 25 factual allegations. Ileto v. Glock, Inc., 349 F.3d 1191, 1200 (9th Cir. 2003); Western 26 Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). When ruling on a motion to 27 dismiss, the Court may consider the facts alleged in the complaint, documents attached to 28 the complaint, documents relied upon but not attached to the complaint when authenticity 3 19cv848-JAH (RBB) 1 is not contested and matters of which the Court takes judicial notice. Lee v. City of Los 2 Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). If a court determines that a complaint fails 3 to state a claim, the Court should grant leave to amend unless it determines that the 4 pleading could not possibly be cured by the allegation of other facts. See Doe v. United 5 States, 58 F.3d 494, 497 (9th Cir. 1995); Knappenberger v. City of Phoenix, 566 F.3d 6 936, 942 (9th Cir. 2009). 7 DISCUSSION 8 Sprouts moves to dismiss Plaintiff’s claims for violation of California’s Unfair 9 Competition Law, intentional and negligent tortious interference, breach of good faith 10 and fair dealing, and declaratory relief. 11 A. 12 Defendant contends Plaintiff’s claim for relief under the California Unfair 13 Competition Law (“UCL”) fails as a matter of law. California's UCL prohibits any 14 “unlawful, unfair or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. 15 “Each prong of the UCL is a separate and distinct theory of liability” and “an 16 independent basis for relief.” Lozano v. AT&T Wireless Servs., Inc., 504 F.3d 718, 731 17 (9th Cir. 2007) (citation omitted). Plaintiff argues Defendant violated the UCL under all 18 three prongs. See Doc. No. 45 at 6-17. The Court will discuss each in turn. 19 20 California’s Unfair Competition Law (“UCL”) i. Unlawful Prong Under the “unlawful prong,” Plaintiff alleges Defendant’s violation of the 21 California Franchise Investment Law (“CFIL”) serves as a predicate to Plaintiff’s UCL 22 claim. See Doc. No. 45 at 8. To establish a UCL claim under the “unlawful” prong, the 23 plaintiff must show the challenged business practice must be one prohibited by civil, 24 criminal, federal, state, municipal, statutory, regulatory, or court-made laws. People v. 25 McKale, 25 Cal. 3d 626, 626 (1979).The CFIL provides “each prospective franchisee 26 with the information necessary to make an intelligent decision regarding franchises being 27 offered,…to prohibit the sale of franchises where the sale would lead to fraud or a 28 likelihood that the franchisor’s promises would not be fulfilled, and to protect the 4 19cv848-JAH (RBB) 1 franchisor and franchisee by providing a better understanding of their business 2 relationship.” Cal. Corp. Code § 31001. 3 Here, Defendant argues Plaintiff’s CFIL claim cannot be used as a predicate for 4 Plaintiff’s UCL claim as it is barred by the CFIL’s four-year statute of limitation (SOL). 5 See Doc. No. 41 at 21; see also Cal. Corp. Code § 31330. However, as the Court 6 determined during the hearing on the previous motion to dismiss, whether Plaintiff’s 7 CFIL claim is barred by the SOL is not dispositive. Rep. Tr. 8:23-9:6, April 23, 2020. A 8 private Plaintiff may bring a UCL action even when the alleged violation has no private 9 right of action. See Kasky v. Nike, Inc., 27 Cal. 4th 939, 950 (2002). 10 Sprouts next alleges that Plaintiff’s CFIL claim is barred by the UCL’s four-year 11 SOL. See Doc. No. 41 at 15. The UCL provides that “[a]ny action to enforce any cause of 12 action pursuant to [the UCL] shall be commenced within four years after the cause of 13 action accrued.” Cal. Bus. & Prof. Code § 17208. On a motion to dismiss based on the 14 SOL, the Court must assess whether “the running of the statute is apparent on the face of 15 the complaint.” Huynh v. Chase Manhattan Bank, 465 F.3d 992, 997 (9th Cir. 2006) 16 (quoting Jablon v. Dean Witter & Co., 614 F.2d 677, 682 (9th Cir. 1980) (“When a 17 motion to dismiss is based on the running of the SOL, it can be granted only if the 18 assertions of the complaint, read with the required liberality, would not permit the 19 plaintiff to prove that the SOL was tolled.”)). 20 Here, Plaintiff alleges Defendant violated the CFIL by failing to register the 21 franchise with California’s Department of Business Oversight and failing to disclose 22 certain information. See Doc. No. 45 at 14. Plaintiff further contends that since 2017, 23 Defendant has materially changed its relationships with Plaintiff by making material 24 modifications to the franchisee-franchisor relationship. Id. at 14. In considering whether 25 the complaint is sufficient to state a claim, the Court will take all material allegations as 26 true and construe all reasonable inferences from them in the light most favorable to the 27 Plaintiff. See Thompson v. Davis, 295 F.3d, at 895; NL Indus., Inc. v. Kaplan, 792 F.2d 28 896, 898 (9th Cir. 1986). Based on Plaintiff’s allegations, the Court concludes that 5 19cv848-JAH (RBB) 1 Plaintiff has enumerated sufficient facts and theories that permit a reasonable inference of 2 liability relating to an “unlawful” prong, UCL claim. As such, Plaintiff has stated a 3 plausible CFIL claim under the “unlawful” prong. 4 5 6 Accordingly, Defendant’s motion to dismiss Plaintiff’s UCL unlawful prong claim is DENIED. ii. Unfair Prong 7 The unfair prong of the UCL prohibits a business practice that “violates established 8 public policy or if it is immoral, unethical, oppressive or unscrupulous and causes injury 9 to consumers which outweighs its benefits.” McKell v. Washington Mut., Inc., 142 Cal. 10 App. 4th 1457, 1473 (2006). California law is currently unsettled regarding the standard 11 applied to consumer claims under the unfair prong of the UCL. See Davis v. HSBC Bank 12 of Nevada, N.A., 691 F.3d 1152, 1169 (9th Cir. 2012) (citing Lozano v. AT&T Wireless 13 Servs., Inc., 504 F.3d 718, 735-36). Under the traditional balancing test, “an act or 14 practice is unfair if the consumer injury is substantial, is not outweighed by any 15 countervailing benefits to the consumers or to competition, and is not an injury the 16 consumers themselves could reasonably have avoided.” Berryman v. Merit Property 17 Management, Inc., 152 Cal.App.4th 1544, 1555 (2007). Under the Cel-Tech test, a 18 business practice is unfair if the plaintiff alleges that a defendant violated a “legislatively 19 declared policy or proof of some actual or threatened impact on competition.” Cel-Tech 20 Commc’ns. Inc. v. L.A. Cellular Tel. Co., 20 Cal.4th 163, 186 (1999). The Court need not 21 go through the analytical exercise of deciding whether the Cel-Tech or balancing test 22 should apply. Although the balancing test was criticized by the court in Cel-Tech, the 23 Ninth Circuit in Lozano ultimately concluded that either test can be utilized to satisfy the 24 "unfair" prong. 25 Here, Plaintiff alleges the “unfair” prong is satisfied under the Cel-Tech test as 26 Defendant’s alleged violations of the CFIL is tethered to legislatively declared policies. 27 See Doc. No. 45 at 16. Plaintiff alleges Defendant’s failure to register or otherwise 28 disclose material modifications are directly tethered to California’s policies of protecting 6 19cv848-JAH (RBB) 1 “the franchisor and franchisee by providing a better understanding of the relationship 2 between the franchisor and franchisee” and preventing “fraud or a likelihood that the 3 franchisor’s promises would not be fulfilled. See Doc. No. 45 at 16; see also Cal. Corp. 4 Code § 31001. Defendant contends violations of the CFIL are time barred. See Doc. No. 5 41 at 23. However, as stated above, Plaintiff’s CFIL claim is not considered time bared 6 by the UCL’s four-year statute of limitation on the face of the complaint. At this stage of 7 the proceedings, Plaintiff’s allegations are sufficient to state a claim under the “unfair” 8 prong of the UCL. Plaintiff’s unfair prong claim is tethered to California’s policy of 9 protecting franchisor-franchisee relationship. Plaintiff’s allegations therefore adequately 10 11 12 13 14 plead a UCL claim under the “unfair” prong. Accordingly, Defendant’s motion to dismiss Plaintiff’s UCL unfair prong claim is DENIED. iii. Fraudulent Plaintiff claims Sprouts engaged in fraudulent conduct in violation of the UCL by 15 misleading consumers into believing Sprouts’ advertised products were available at 16 Plaintiff’s stores. See Doc. No. 45 at 20-23. The “fraudulent” prong of the UCL is 17 “governed by the reasonable consumer test”: a plaintiff may demonstrate a violation by 18 “show[ing] that [reasonable] members of the public are likely to be deceived.” Williams 19 v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008) (citations and quotation marks 20 omitted). This deception need not be intentional. See In re Tobacco II Cases, 46 Cal. 4th 21 298, 311 (2009). 22 Before the Court proceeds with deciding the merits of the UCL claim under the 23 fraudulent prong, the Court must first determine whether Plaintiff has standing. See 24 O’Connor v. Uber Tech., 58 F. Supp. 3d 989, 1002 (N.D. Cal. 2014). Under the UCL, 25 standing is limited to plaintiffs who have “suffered injury in fact and ha[ve] lost money 26 or property as a result of the unfair competition.” Cal. Bus. & Prof. Code § 17204. To 27 satisfy this standard, a plaintiff must demonstrate that he actually relied upon the alleged 28 deceptive or misleading statements. See In re Tobacco II Cases, 46 Cal. 4th at 306, 326. 7 19cv848-JAH (RBB) 1 Moreover, “courts have recognized that UCL fraud plaintiffs must allege their own 2 reliance – not the reliance of others – to have standing under the UCL.” O’Connor, 58 F. 3 Supp. 3d at 1002. 4 Here, the alleged fraudulent conduct consists of Sprouts misleading consumers by 5 advertising products that were unavailable at Plaintiff’s stores. However, Plaintiff is not a 6 member of the consumer class that has standing to assert the theories of deceit. Rather, 7 Plaintiff alleges that potential consumers relied on Sprouts’ advertising to assume 8 products were available at Plaintiff’s stores. Since Plaintiff does not allege its own 9 reliance, Plaintiff does not have standing to challenge these advertisements under the 10 fraudulent prong of the UCL. See O’ Connor, 58 F. Supp. 3d at 1003 (dismissing a UCL 11 fraudulent prong claim brought by Uber drivers because the drivers “have not alleged 12 their own reliance on Uber’s misrepresentations” but only the reliance of “Uber’s 13 customers”); see also U.S. Legal Support, Inc. v. Hofioni, 2013 WL 6844756, at *15 14 (E.D. Cal. Dec. 2013) (holding that Plaintiff’s fraudulent claim fails for lack of reliance 15 where “Plaintiff is not a consumers of Defendants’ services”). 16 17 Accordingly, Defendant’s motion to dismiss Plaintiff’s UCL fraudulent prong claim is GRANTED. 18 B. 19 Defendant moves to dismiss Plaintiff’s claims for negligent and intentional Intentional and Negligent Interference with Economic Relations 20 interference with prospective economic relations on the basis that Plaintiff failed to allege 21 an independent wrongful act and that the claim is barred by the stranger doctrine. See 22 Doc. No. 41 at 6. To state a claim for tortious interference with an economic advantage, 23 sufficient facts must be plead which indicate: “(1) an economic relationship between the 24 plaintiff and some third party, with the probability of future economic benefit to the 25 plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional acts on the 26 part of the defendant designed to disrupt the relationship; (4) actual disruption of the 27 relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the 28 defendant.” CRST Van Expedited, Inc. v. Werner Enterprises, Inc., 479 F.3d 1099, 1107– 8 19cv848-JAH (RBB) 1 08 (9th Cir. 2007). The difference between intentional interference and negligent 2 interference with prospective business advantage relates to the defendant’s intent. 3 Redfearn v. Trader Joe’s Co. 2o Cal. App. 5th 989, 1006 (2018). 4 i. Independent Wrongful Act 5 Unlike tortious interference with a contract claim, a plaintiff alleging a tortious 6 interference with an economic advantage or business interference claim “must also show 7 that the defendant's action ‘was wrongful “by some measure beyond the fact of the 8 interference itself.’” Popsescu v Apple, Inc., 1 Cal. App. 5th 39, 44 (2016); citing Della 9 Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal.4th 376, 392 (1995). “‘[A]n act is 10 independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, 11 statutory, regulatory, common law, or other determinable legal standard[,]’” Edwards v. 12 Arthur Anderson LLP, 44 Cal. 4th 937, 944 (2008), and not merely the product of an 13 improper, but lawful, purpose or motive. Korea Supply Co., 29 Cal. 4th 1134, 1159 fn. 11 14 (2003). Such conduct must also be independently actionable, meaning the legal standards 15 must “provide for, or give rise to, a sanction or means of enforcement for a violation of 16 the particular rule or standard that allegedly makes the defendant's conduct wrongful.” 17 Stevenson Real Estate Servs., Inc. v. CB Richard Ellis Real Estate Servs., Inc., 138 Cal. 18 App. 4th 1215, 1223 (2006). 19 Here, Plaintiff identifies the purported UCL claim as the independently wrongful 20 conduct of Sprouts. See Doc. No. 45 at 18. Plaintiff alleges that Defendant’s “deceptive 21 newsprint advertising to its customers” and Sprouts’ collusion with third-party online 22 delivery service providers illustrates independent wrongful conduct to satisfy a tort claim. 23 Id. However, as stated above, Plaintiff UCL claim is directly associated with the TLA 24 and is not a stand-alone tort cause of action. There are no independently wrongful acts 25 alleged to be independent of the interference itself. Plaintiff FAC fails to show how the 26 alleged wrongful interfering act is independently tortious towards a third party. Korea 27 Supply Co., supra, 29 Cal. 4th at 1163. As such, there are insufficient allegations 28 supporting the required elements of an interference claim. 9 19cv848-JAH (RBB) 1 ii. Stranger Doctrine 2 Nevertheless, Plaintiff’s next hurdle is to sufficiently allege that Sprouts is a 3 “stranger” to the relationship between Plaintiff’s stores and the customers. Plaintiff 4 argues that Sprouts is a “stranger” to this relationship because: (1) Plaintiff operates 5 solely within the “protected area;” (2) services the customers within that area and 3) 6 Sprouts’ only interest is to collect royalties, and as such the relationship is minimal and 7 indirect at best. See Doc. No. 45 at 19-20. Sprouts contends the interference claims are 8 barred by the stranger doctrine because Sprouts has a legitimate interest in the customers 9 of the Sprouts brand and has a financial interest from each sale as the sales are a basis for 10 calculations of royalties paid to Sprouts. See Doc. No. 41 at 17. 11 In Applied Equipment Corp. v. Litton Saudi Arabia Ltd., the California Supreme 12 Court addressed the issue of whether a party to a contract could be liable in tort for 13 conspiracy to interfere with its own contract. 7 Cal. 4th 503, 508-509 (1994). The court 14 held that a contracting party cannot be held liable in tort for conspiracy to interfere with 15 its own contract as “[t]he tort duty not to interfere with the contract falls only on 16 strangers-interlopers who have no legitimate interest in the scope or course of the 17 contract's performance.” Id. at 514. Although Applied Equipment was not specifically 18 cited in Marin Tug, the Ninth Circuit in Marin Tug also invoked and applied the stranger 19 doctrine in deciding whether the wrongfulness element of the claim for tortious 20 interference with prospective economic advantage was satisfied. In reaching its decision, 21 the Ninth Circuit emphasized that “California law has long recognized that the core of 22 intentional interference business torts is interference with an economic relationship by a 23 third-party stranger to that relationship, so that an entity with a direct interest or 24 involvement in that relationship is not usually liable for harm caused by the pursuit of its 25 interests.” Marin Tug & Barge, Inc. v. Westport Petroleum, Inc., 271 F.3d 825, 832 (9th 26 Cir. 2001). 27 As in Marin Tug and Brage, Sprouts asserts here that it has a direct interest in 28 Plaintiff’s business, both Sprouts and Plaintiff have an economic benefit from the sales 10 19cv848-JAH (RBB) 1 acquired from Plaintiff’s stores, and even though the means in which Sprouts used to 2 advertise by allegedly operating within the “protected area” of the TLA may be in 3 dispute, Sprouts still holds an interest monetarily, and in the operation of the Sprouts 4 brand name. As the Court stated in granting Sprouts’ prior motion to dismiss, Sprouts has 5 a direct interest in Plaintiff’s business and is not a stranger to the relationship between 6 Plaintiff and its customers. First, without the TLA, Plaintiff would not be operating the 7 Sprouts brand stores. Second, both Sprouts and Plaintiff have an economic benefit from 8 the sales acquired from Plaintiff’s stores. See Marin Tug & Barge, 271 F.3d at 834 9 (holding that “Shell and Marin Tug had a mutual economic interest in delivering the oil 10 safely and cleanly and were dependent upon each other to do so. In this situation, there is 11 nothing wrongful under California law about the means Shell chose to advance its 12 interests, a simple refusal to deal with Marin Tug or to load its oil on Marin Tug's 13 barges.”). Although the means in which Sprouts use to advertise was potentially 14 operating within the “protected area” of the TLA and the alleged collusion with vendors 15 to disassociate from Plaintiff may be in dispute, Sprouts still holds an interest monetarily, 16 and in the operation of the Sprouts brand name. Plaintiff has once again failed to plead 17 with legal sufficiency that Sprouts is a “stranger” to Plaintiff’s business operation. 18 19 Accordingly, Defendant’s motion to dismiss Plaintiff’s claims for negligent and intentional interference with prospective economic relations is GRANTED. 20 C. 21 Defendant argues that Plaintiff’s claim for breach of the implied covenant of good Breach of the Covenant of Good Faith and Fair Dealing 22 faith and fair dealing should be dismissed because it is not a separate form of relief from 23 Plaintiff’s express breach of contract claim. See Doc. No. 41 at 28. Defendant further 24 alleges the only two theories of liability that are not included in the express breach of 25 contract claim are: 1) removing Plaintiff’s stores from the Sprouts Farmers Market 26 website and online store locator, and 2) deterring online delivery vendors from doing 27 business with Plaintiff. Id. at 30. Plaintiff argues in response that the breach of the 28 implied covenant of good faith and fair dealing seeks to adjudicate different rights under 11 19cv848-JAH (RBB) 1 the contract; including, Defendant’s unannounced operational audits and refusal to 2 provide Plaintiff with safety standards. See Doc. No. 45 at 29. 3 Under California law, every contract contains an implied-in-law covenant of good 4 faith and fair dealing. Foley v. Interactive Data Corp., 47 Cal.3d 654, 683-84 (1988). The 5 covenant exists to ensure that “each party [does] not [] do anything which will deprive 6 the other parties thereto of the benefits of the contract.” Harm v. Frasher, 181 Cal. App. 7 2d 405, 417 (Ct. App. 1960). The implied covenant does not alter a party’s existing rights 8 or duties under a contract. See Guz v. Bechtel Nat. Inc., 24 Cal. 4th 317, 327 (2000) 9 ([W]hile the implied covenant requires mutual fairness in applying a contract’s actual 10 terms, it cannot substantively alter those terms.”). Rather, the implied covenant 11 supplements “the express contractual covenants, to prevent a contracting party from 12 engaging in conduct which (while not technically transgressing the express covenants) 13 frustrates the other party’s rights to the benefits of the contract.” Avidity Partners, LLC v. 14 State, 221 Cal. App. 4th 1180, 1204 (2013). 15 Here, in accordance with the facts alleged in the FAC, Plaintiff has stated a 16 plausible claim for breach of the implied covenant of good faith and fair dealing. Plaintiff 17 has alleged that an express contract existed with Sprouts. Therefore, Defendant had a 18 duty to execute the contract’s purposes in good faith. The exact nature and scope of this 19 duty is a factual inquiry and is based on the purposes of the TLA, the express terms of the 20 TLA, and the reasonable expectations of both parties. Plaintiff’s FAC contains sufficient 21 facts to sustain the alleged violation of the implied covenant of good faith and fair 22 dealing claim at this stage of the litigation. 23 24 Accordingly, Defendant’s motion to dismiss Plaintiff’s claim for breach of good faith and fair dealing is DENIED. 25 D. 26 Defendant seeks to dismiss Plaintiff’s declaratory relief claim because it is Declaratory Relief 27 duplicative of Plaintiff breach of contract claim. See Doc. No. 41 at 31. “The Ninth 28 Circuit has directed district courts faced with whether to entertain claims for declaratory 12 19cv848-JAH (RBB) 1 relief to consider, among other factors, whether the claim will…serve some [] useful 2 purpose.” Top Agent Network, Inc. v. Zillow, Inc., 2015 WL 7709655, at *9 (N.D. Cal. 3 Apr. 2015) (citing Gov’t Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998). 4 For that reason, courts often “dismiss[] companion claims for declaratory relief where the 5 breach of contract claims resolved the dispute completely and rendered additional relief 6 inappropriate.” Davis v. Capitol Records, LLC, 2013 WL 1701746, at *3 (N.D. Cal. Apr. 7 2013). 8 Here, Plaintiff alleges that although there are several issues sought to be 9 adjudicated that overlap with the express contract claim, some of the issues; such as 10 Sprouts’ duty to re-list Plaintiff on its website, that are not included and are separate from 11 the contract claim. See Doc. No. 45 at 31. Claims for declaratory relief are not 12 independent causes of action, but rather the ultimate prayer for relief. Lane v. Vitek Real 13 Estate Indus. Grp., 713 F. Supp. 2d 1092, 1103 (E.D. Cal. 2010). A plaintiff is not 14 entitled to such relief without a viable underlying claim. As such, when the underlying 15 claim is dismissed, the declaratory relief cause of action must be dismissed as well. 16 Shaterian v. Wells Fargo Bank, N.A., 829 F. Supp. 2d 873, 888 (N.D. Cal. 2011). 17 Plaintiff’s UCL unlawful prong, UCL unfair prong, and good faith and fair dealing 18 claims survive this motion to dismiss. As such, Plaintiff’s declaratory relief claim can be 19 substantiated by the alleged tort claims and, at this stage of the proceedings, Plaintiff may 20 plead alternative relief. 21 Accordingly, Defendant’s motion to dismiss Plaintiff’s declaratory relief claim is 22 DENIED. 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 13 19cv848-JAH (RBB) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 CONCLUSION For the reasons set forth above, IT IS HEREBY ORDERED: 1. Defendant’s motion to dismiss is GRANTED IN PART AND DENIED IN PART. 2. Defendant’s motion to dismiss Plaintiff’s UCL unlawful and unfair prong claims are DENIED. 3. Plaintiff’s UCL fraudulent prong claim is DISMISSED with leave to amend. 4. Plaintiff’s claims for intentional and negligent tortious interference are DISMISSED with leave to amend. 5. Defendant’s motion to dismiss Plaintiff’s breach of good faith and fair dealing claim is DENIED. 6. Defendant’s motion to dismiss Plaintiff’s declaratory relief claim is DENIED 7. Plaintiff may file an amended Complaint on or before February 15, 2021. IT IS SO ORDERED. 17 18 19 20 21 22 DATED: January 13, 2021 ____________________________________ Hon. John A. Houston United States District Judge 23 24 25 26 27 28 14 19cv848-JAH (RBB)
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