Davis Wine Imports, LLC v. Vina Y Bodega Estampa, S.A., No. 3:2010cv00650 - Document 48 (D. Or. 2011)

Court Description: OPINION AND ORDER: Defendants motion 36 for summary judgment or, in the alternative, to dismiss DWCs claims for breach of the implied covenant of good faith and fair dealing, breach of implied contract, and unjust enrichment, is DENIED. Signed on 10/13/11 by Magistrate Judge Dennis J. Hubel. (kb)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 DISTRICT OF OREGON 10 PORTLAND DIVISION 11 12 13 DAVIS WINE COMPANY, a Partnership, and DAVIS WINE IMPORTS, LLC, a California Limited Liability Company, 14 15 16 Plaintiff, v. VINA Y BODEGA ESTAMPA, S.A., a Chilean Company, 17 Defendants. 18 19 20 21 22 23 Darian Stanford Phil Nelson Jason Hirshon SLINDE NELSON LLC 111 SW 5th Avenue, Suite 1740 Portland, Oregon 97204 Attorneys for Plaintiff 24 25 26 Alison Rhodes Judith Parker HINSHAW & CULBERTSON LLP 1000 SW Broadway, Suite 1250 Portland, OR 97205 27 Attorneys for Defendant 28 OPINION AND ORDER ) ) ) ) ) ) ) ) ) ) ) ) ) ) 03:10-cv-00650-HU OPINION AND ORDER 1 HUBEL, Magistrate Judge: Opinion and Order 2 3 Currently before the court is defendant Vina Y Bodega Estampa, 4 S.A. s ( Estampa ) motion for summary judgment pursuant to Federal 5 Rule of Civil Procedure ( Rule ) 56(c) or, alternatively, to 6 dismiss plaintiff Davis Wine Company s ( DWC ) claims for breach of 7 the implied covenant of good faith and fair dealing, breach of 8 implied contract, and unjust enrichment pursuant to Rule 12(b)(6). 9 All parties have consented to entry of final judgment by a 10 Magistrate Judge in accordance with Rule 73 and 28 U.S.C. § 636(c). 11 For the reasons set forth below, Estampa s motion [36] for summary 12 judgment or, in the alternative, to dismiss DWC s claims for breach 13 of the implied covenant of good faith and fair dealing, breach of 14 implied contract, and unjust enrichment, is DENIED. Background 15 16 Davis Wine Imports, LLC ( Davis LLC ) originally filed this 17 action in the Multnomah County Circuit Court for the State of 18 Oregon on July 20, 2009. 19 complaint, Davis LLC brought claims against Estampa for breach of 20 contract and breach of the covenant of good faith and fair dealing. 21 (Notice of Removal Ex. 1 at 5-8.) 22 LLC s summons and complaint on May 27, 2010. 23 1.) 24 2010. (Notice of Removal ¶ 1.) In its Estampa was served with Davis (Notice of Removal ¶ Estampa then removed the case to federal court on June 8, (Notice of Removal at 1.) 25 On July 28, 2010, Estampa filed its first motion for summary 26 judgment arguing that Davis LLC did not exist as an entity at the 27 time the parties entered into the contract. (Defs. Mem. Supp. 28 (doc. #12) at. 1-10.) OPINION AND ORDER Estampa also argued that the contract was 2 1 not valid under California law because the parties were not capable 2 of contracting with one another. 3 10.) Rather than responding to the motion for summary judgment, on 4 August 16, 2010, Davis LLC filed a motion for joinder, leave to 5 amend, and for an extension of time to respond to Estampa s motion 6 for summary judgment. 7 complaint to join DWC. 8 9 (Defs. Mem. Supp. (doc. #12) at (Doc. #16.) Davis LLC sought to amend the (Decl. Phil Nelson Ex. A at ¶ 2.) The court granted Davis LLC s motion for joinder and leave to amend since the record was insufficient to determine if the 10 partnership continued to exist after the formation of the LLC. 11 (Doc. #28 at 10.) 12 motion for summary judgment. 13 Davis LLC and DWC (collectively Plaintiffs ) submitted their First 14 Amended Complaint ( FAC ) against Estampa. (FAC at 1.) Thus, it was premature to address Estampa s (Doc. #28 at 10.) On April 1, 2011, 15 The following are facts as alleged in Plaintiffs FAC: DWC is 16 a domestic partnership formed in 2003 between brothers German and 17 Sebastian Bistue and their father, Cesar Bistue (collectively the 18 Bistues ). (FAC ¶ 2.) 19 (FAC ¶ 2.) Davis LLC is a domestic wine importing company formed 20 in September 2008 by the Bistues, which also conducts business in 21 Portland, Oregon. 22 with its principle place of business in Santiago, Chile. 23 4.) 24 DWC conducts business in Portland, Oregon. (FAC ¶ 3.) Estampa is a foreign corporation (FAC ¶ DWC is a federally licensed importer, marketer and distributor 25 of international wine throughout the United States. (FAC ¶ 6.) 26 December 2007, DWC entered into negotiations with Estampa for an 27 exclusive right to import, market and distribute Estampa wine 28 nationwide. (FAC ¶ 7.) OPINION AND ORDER In Prior to executing a contract, DWC 3 1 notified Estampa that they were in the process of reorganizing as 2 a limited liability company, e.g., Davis LLC. 3 requested that Davis LLC, not DWC be the party to the contract on 4 January 4, 2008. (FAC ¶ 7; Decl. Cesar Bistue ¶ 8.) 5 Estampa that it would be approximately five or six months before 6 the transition from DWC to Davis LLC would be complete. 7 On January 7, 2008, DWC executed an (FAC ¶ 7.) DWC DWC notified (FAC ¶ 7.) Importation and 8 Represtation [sic] Agreement with Estampa ( the Agreement ) in the 9 name of the to-be-formed company, Davis LLC. (FAC ¶ 8.) The 10 parties allegedly understood and agreed that DWC would perform all 11 obligations under the Agreement and would be entitled to all of the 12 benefits under the Agreement until and unless Davis LLC was 13 formed. 14 agreement correspondence between the parties were addressed to DWC, 15 and all invoices and purchases orders issued pursuant to the 16 Agreement were in DWC s name. 17 press release and a notice to all its distributors listing DWC as 18 its official importer. 19 (FAC ¶ 8.) DWC claims that all pre-agreement and post- (FAC ¶ 9.) Estampa also issued a (FAC ¶ 9.) German Bistue is DWC s director of marketing and served as 20 Estampa s main contact. 21 marketing 22 Portland office, which is the national sales headquarters. 23 11.) 24 representative of Estampa, met with German Bistue at DWC s Portland 25 office. 26 discussed logistics of DWC s exclusive distribution of Estampa 27 wines in Oregon and the United States. 28 On activity or and about (FAC ¶ 12.) (FAC ¶ 11.) negotiations February 12, The majority of DWC s were 2008, conducted Marie from its (FAC ¶ Chaisson, a During this meeting, Estampa and DWC (FAC ¶ 12.) DWC submitted three purchase orders to Estampa: PO 237, PO OPINION AND ORDER 4 1 238, and PO 242" on February 28, 2008. (FAC ¶ 13.) Estampa 2 refused to accept these purchase orders despite the Agreement. (FAC 3 ¶ 13.) 4 inventory of wine stored by Western Carriers at multiple locations 5 in the United States in a single purchase order rather than over 6 time. 7 invoices to DWC and DWC submitted three new Purchase Orders: PO 8 249, PO 250, and PO 251. 9 of Estampa s inventory of wine stored by Western Carriers in Estampa allegedly insisted on DWC purchasing their entire (FAC ¶ 13.) On or about March 18, 2008, Estampa sent two PO 249 governed the purchase 10 California. 11 inventory of wine stored by Western Carriers in New Jersey, and PO 12 251 dealt with the purchase of Estampa wine directly from Chile. 13 (FAC ¶ 14.) 14 (FAC ¶ 14.) (FAC ¶ 14.) PO 250 covered the purchase of Estampa s On March 20, 2008, DWC was scheduled to receive the Estampa 15 wine from California under PO 249, but it never arrived. (FAC ¶ 16 15.) 17 ship any inventory and would not honor the invoices. 18 Estampa s reason for this action was that a third-party insurer, 19 Coface, refused to insure DWC. 20 Agreement did not require them to use any particular insurer. (FAC 21 ¶ 16.) 22 terminate the Agreement. Soon thereafter, Estampa informed DWC that they would not (FAC ¶ 16.) (FAC ¶ 15.) DWC claims that the Nevertheless, Estampa informed DWC that they intended to (FAC ¶ 16.) 23 DWC claims that its customers had already placed substantial 24 orders for Estampa wines and, due to Estampa s breach of the 25 Agreement, they were unable to deliver on these orders. 26 17.) 27 Ortiz , a letter detailing Estampa s alleged breaches and demanding 28 that Estampa comply with the Agreement. (FAC ¶ On April 3, 2008, DWC sent Estampa s CEO, Miguel Gonzales OPINION AND ORDER 5 (FAC ¶ 18.) On April 14, 1 2008, Estampa responded by formally terminating the Agreement based 2 on what Ortiz characterized as lack of mutual trust. 3 Five months later, on September 5, 2008, Davis LLC was registered 4 under California law. 5 breach of contract, breach of the covenant of good faith and fair 6 dealing, breach of implied contract, and unjust enrichment against 7 Estampa.1 (FAC ¶ 20.) (FAC ¶ 19.) Plaintiffs bring claims for (FAC ¶¶ 21-43.) 8 Estampa brought the motion that is currently before the court. 9 (Defs. Mot. Summ. J. (doc. #36) at 1.) Estampa s memorandum raised 10 arguments pertaining to the sufficiency of the claims alleged by 11 both Davis LLC and DWC. 12 conceded the motions against Davis LLC and withdrew all claims made 13 on its behalf. (Pl. s Opp n at 11.) 14 address the only remaining claims in this case, DWC s claims. (Defs. Mem. Supp. at 5-18.) Accordingly, the court will Standard 15 16 Plaintiffs I. Motion for Summary Judgment 17 Summary judgment is appropriate if pleadings, the discovery 18 and disclosure materials on file, and any affidavits show that 19 there is no genuine issue as to any material fact and that the 20 movant is entitled to judgment as a matter of law. 21 P. 56(c). Summary judgment is not proper if factual issues exist 22 for trial. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 23 1995). 24 25 FED. R. CIV. The moving party has the burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 26 27 1 28 Plaintiffs s claims alternatively, Davis LLC. OPINION AND ORDER are brought 6 on behalf of DWC or, 1 U.S. 317, 323 (1986). 2 genuine issue of material fact, the nonmoving party must go beyond 3 the pleadings and identify facts which show a genuine issue for 4 trial. 5 judgment by relying on the allegations in the complaint, or with 6 unsupported conjecture or conclusory statements. 7 Spacelabs Medical, Inc., 343 F.3d 1107, 1112 (9th Cir. 2003). Thus, 8 summary judgment should be entered against a party who fails to 9 make a showing sufficient to establish the existence of an element 10 essential to that party s case, and on which that party will bear 11 the burden of proof at trial. Id. at 324. If the moving party shows the absence of a A nonmoving party cannot defeat summary Hernandez v. Celotex, 477 U.S. at 322. 12 The court must view the evidence in the light most favorable 13 to the nonmoving party. Bell v. Cameron Meadows Land Co., 669 F.2d 14 1278, 1284 (9th Cir. 1982). 15 existence of a genuine issue of fact should be resolved against the 16 moving party. 17 Where different ultimate inferences may be drawn, summary judgment 18 is inappropriate. 19 136, 140 (9th Cir. 1981). All reasonable doubt as to the Hector v. Wiens, 533 F.2d 429, 432 (9th Cir. 1976). Sankovick v. Life Ins. Co. of N. Am., 638 F.2d 20 However, deference to the nonmoving party has limits. 21 nonmoving party must set forth specific facts showing a genuine 22 issue for trial. 23 a scintilla of evidence in support of plaintiff s positions [is] 24 insufficient. 25 (1986). 26 lead a rational trier of fact to find for the nonmoving party, 27 there is no genuine issue for trial. Matsushita Elec. Indus. Co., 28 Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (internal FED. R. CIV. P. 56(e). The The mere existence of Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 Therefore, where the record taken as a whole could not OPINION AND ORDER 7 1 quotation marks omitted). 2 II. 3 Rule 12(b)(6) Motion to Dismiss Rule 12(b)(6) allows a court to dismiss a complaint for 4 failure to state a claim upon which relief can be granted. In 5 considering a Rule 12(b)(6) motion to dismiss, the court must 6 accept all of the claimant s material factual allegations as true 7 and view all facts in the light most favorable to the claimant. 8 Reynolds v. Giusto, No. 08-CV-6261, 2009 WL 2523727, at *1 (D. Or. 9 Aug. 18, 2009). The Supreme Court addressed the proper pleading 10 standard under Rule 12(b)(6) in Bell Atlantic Corp. v. Twombly, 550 11 U.S. 544 (2007). 12 sufficient in the pleadings to give proper notice of the claim and 13 its basis: 14 15 16 Twombly established the need to include facts While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff s obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. 17 Id. at 555 (brackets omitted). 18 Since Twombly, the Supreme Court has clarified that the 19 pleading standard announced therein is generally applicable to 20 cases governed by the Rules, not only to those cases involving 21 antitrust allegations. Ashcroft v. Iqbal,---U.S.---, 129 S. Ct. 22 1937, 1949 (2009). The Iqbal court explained that Twombly was 23 guided by two specific principles. First, although the court must 24 accept as true all facts asserted in a pleading, it need not accept 25 as true any legal conclusion set forth in a pleading. Id. Second, 26 the complaint must set forth facts supporting a plausible claim for 27 relief and not merely a possible claim for relief. 28 OPINION AND ORDER 8 Id. The court 1 instructed 2 plausible claim for relief will . . . be a context-specific task 3 that 4 experience and common sense. Iqbal, 129 S. Ct. at 1949-50 (citing 5 Iqbal v. Hasty, 490 F.3d 143, 157-58 (2nd Cir. 2007)). 6 concluded: While legal conclusions can provide the framework of a 7 complaint, they must be supported by factual allegations. 8 there are well-pleaded factual allegations, a court should assume 9 their veracity and then determine whether they plausibly give rise 10 that requires [d]etermining the reviewing to an entitlement to relief. 11 whether court to a complaint draw on its states a judicial The court When Id. at 1950. The Ninth Circuit further explained the Twombly-Iqbal standard 12 in Moss v. U.S. Secret Service, 572 F.3d 962 (9th Cir. 2009). 13 Moss court reaffirmed the Iqbal holding that a claim has facial 14 plausibility when the plaintiff pleads factual content that allows 15 the court to draw the reasonable inference that the defendant is 16 liable for the misconduct alleged. Moss, 572 F.3d at 969 (quoting 17 Iqbal, 129 S. Ct. at 1949). 18 stating: In sum, for a complaint to survive a motion to dismiss, 19 the non-conclusory factual content, and reasonable inference from 20 that content must be plausibly suggestive of a claim entitling the 21 plaintiff to relief. The court in Moss concluded by Moss, 572 F.3d at 969. Discussion 22 23 The I. DWC s Standing 24 Estampa argues that when DWC incorporated on September 5, 25 2008, they ceased to exist as a partnership and therefore lack 26 standing to bring any claims arising out of its alleged pre- 27 incorporation activities on behalf of Davis LLC. 28 DWC s subsequent OPINION AND ORDER efforts to create 9 standing, Estampa believes including its 1 registration to do business in Oregon two years after 2 incorporating, are insufficient. 3 of Davis LLC came months after Estampa s breach in April 2008 and 4 was a reorganization in form only. 5 although the paperwork for Davis LLC was filed with the California 6 Secretary of State after Estampa terminated the Agreement, Davis 7 LLC was never operational. 8 understanding with his partners was that the partnership would 9 continue at least until all federal and state permits had been DWC argues that the organization According to Cesar Bistue, Apparently, Cesar Bistue s intent and 10 transferred or obtained by the LLC. 11 This never happened, however, and the relevant federal basic 12 permits and California licenses continue to be in the name of DWC. 13 Estampa relies on Calkins v. Calkins, 63 Cal. App. 292 (1923), 14 as the seminal case setting forth the dissolution rule. In Calkins 15 it was stated that: 16 17 18 19 20 21 22 (Decl. Cesar Bistue ¶ 18.) The law never contemplated that persons engaged in business as partners may incorporate with intent to obtain the advantages and immunities of corporate form, and then, Proteus like, become at will a copartnership or a corporation, as the exigencies or purpose of their joint enterprise may from time to time require. . . . If the parties have the rights of partners, they have the duties and liabilities imposed by law and are responsible in solido to all creditors. If they adopt the corporate form, with the corporate shield extended over them to protect them against personal liability, they cease to be partners, and have only the rights, duties, and obligations of stockholders. They cannot be partners inter sese and a corporation as to the rest of the world. 23 Calkins, 63 Cal. App. at 298-99 (quoting Jackson v. Hooper, 76 N.J. 24 Eq. 592, 599(1910)). Estampa contends that the language quoted 25 above requires a finding that the partnership ceased to exist for 26 purposes of the company s interactions with third parties upon 27 incorporation. 28 OPINION AND ORDER 10 1 As Estampa points out, cases outside of California have 2 confirmed as much. For example, in Hooper v. Yoder, 737 P.2d 852 3 (Colo. 1987), the court indicated that the general rule is that 4 incorporation of a partnership business effects dissolution of the 5 partnership. 6 cited Cavasso v. Downey, 188 P. 594 (Cal. App. 1920), for the 7 proposition 8 business, and there was no evidence of an agreement that their 9 relationship as co-partners should continue, the partnership was 10 terminated and merged into the corporation. Id. [emphasis added]. 11 According to Estampa, the key California cases relating to 12 dissolution are Persson v. Smart Inventions, Inc., 125 Cal. App. 13 4th 1141 (2005) and Cavasso v. Downey, 45 Cal. App. 780 (1920). 14 Persson and Cavasso analyzed the rights and responsibilities of 15 former business partners inter sese, rather than between an entity 16 and a third party.2 17 by stating, [a] number of cases cited deal with the rights of 18 third parties under such circumstances, and have no bearing on the 19 instant case. 20 Estampa argues that, while business associates may be treated as 21 partners in relation to one another, the corporate form is to be 22 respected in dealings with third parties. Hooper, 737 P.2d at 858 n.5. that, where partners The Hooper court also incorporated a partnership In fact, Cavasso made this distinction clear Cavasso, 45 Cal. App. at 786. Nevertheless, The only authorities 23 24 25 26 27 28 2 Persson (and Cavasso, for that matter) analyzed the rights and responsibilities of former business partners against one another. It is clear from the case law that [this portion of the] analysis does not apply to disputes between an entity and third parties, and it is therefore irrelevant to this Court s decision. . . . Whether partners may agree to continue as partners in relation to one another after incorporation is not at issue here. (Def. s Reply at 5.) OPINION AND ORDER 11 1 Estampa cites in support of this argument are Itel Containers 2 Intern. Corp. v. Atlanttrafik Exp. Servs. Ltd., 909 F.2d 698 (2d 3 Cir. 1990) and Sagamore Corp. v. Diamond West Energy Corp., 806 4 F.2d 373 (2d Cir. 1986). 5 In Itel, Sea Containers Ltd. ( SCL ) was engaged in the 6 business of selling and leasing cargo containers to ocean carriers. 7 Itel, 909 F.2d at 700. 8 (the AES line) and its two ships, but SCL did not want to compete 9 openly with its container customers. SCL decided to purchase a shipping line Id. SCL decided instead to 10 incorporate separate entities to buy and operate the line. Id. SCL 11 supplied the funds and legal fees for the creation of Elliott 12 Maritime, whose sole shareholder was a business associate of SCL. 13 Id. 14 incorporated as a wholly owned subsidiary of Elliot Maritime, to be 15 the holding company of the AES liner service. 16 Express Service Inc. ( AES Inc. ), was formed as a wholly owned 17 subsidiary of AES Ltd. to operate the liner service. 18 Containers International Corporation ( Itel ), along with others, 19 had leased equipment to the AES line prior to formation of AES Ltd. 20 Id. 699-700. 21 Id. at 700. 22 deeply in debt and incurring large monthly losses. 23 refused to provide further financial assistance and AES Ltd. went 24 into liquidation. Id. With AES Ltd. in bankruptcy, Itel and others 25 commenced actions to recover payment for equipment rentals from 26 SCL. Atlanttrakif Express Service Ltd. ( AES Id. Ltd. ) was Atlanttrafik Id. Itel Itel eventually entered into a lease with AES Ltd. However, the AES operation fell apart as AES Ltd. was Id. at 701. SCL Id. 27 On appeal, Itel claimed that the district court should have 28 found SCL and AES Ltd. were joint venturers in operating the AES OPINION AND ORDER 12 1 line. Id. at 701. The Second Circuit determined that the elements 2 necessary to form a joint venture were lacking based, in part, on 3 SCL purposely using layers of corporations so that its involvement 4 with 5 indication they expected to share in the losses except as a lender 6 to AES Ltd. 7 that the district court correctly found that AES Ltd. itself was 8 not a joint venture because it was a corporation. 9 dicta, the court stated, a joint venture and a corporation are 10 mutually exclusive way of doing business. . . . Though business 11 associates may be treated as partners vis-a-vis one another even 12 when they operate through a corporation, the corporate form is to 13 be respected in dealings with third parties. 14 the In AES line would Id. at 701-02. Sagamore, the be remote, and since there was no Furthermore, the court went on to note chairman of Diamond Id. at 702. In Id. West Corporation 15 ( Diamond West ) entered into an Equity Participation Agreement 16 ( EPA ) with the president of Sagamore Corporation ( Sagamore ). 17 Sagamore, 806 F.2d at 374. 18 entity, Diamond East Energy Corporation, would be formed to carry 19 out the project. 20 whether a joint venture agreement is superseded and rendered 21 unenforceable by the formation of a corporation to implement it. 22 Id. 23 Sagamore court recognized that individuals can be partners inter 24 sese and a corporation to the rest of the world, so long as the 25 rights of third parties such as creditors are not involved. 26 379. 27 decision. at 377. Id. at 375. In The EPA provided that a separate On appeal, an issue was raised as to delineating the applicable standard, the Id. at However, this principle played no part in the court s See id. ( [I]t is not argued that enforcement of the EPA 28 OPINION AND ORDER 13 1 adversely affected the rights of any third parties. ) The Sagamore 2 court went on to determine that the terms of the EPA invoked by 3 Sagamore 4 enforceable. 5 survived the formation of Diamond East and were Id. The court finds Estampa s argument concerning the dissolution 6 of DWC unavailing based on the following reasons. First, and 7 perhaps, most notably, the parties have not cited, nor has research 8 revealed a California case, or a case from another jurisdiction, 9 where the court definitively found that a partnership ceased to 10 exist under these circumstances. In fact, several of Estampa s 11 sources are merely persuasive authorities that offered the relied 12 upon statement in dicta. 13 Moreover, Hooper made the pertinent observation that, the 14 dissolution of a partnership . . . does not automatically terminate 15 the existence of the partnership. 16 dissolution the partnership is not terminated but continues until 17 the winding up of partnership affairs is completed. Id. at 859. 18 This includes the process of settling the partnership affairs after 19 dissolution. 20 organize a corporation to continue the business of the firm, the 21 winding up of the partnership includes the transfer of partnership 22 assets to the corporation in exchange for corporate stock. 23 When no shares of stock are issued upon incorporation, thereby 24 winding up the partnership affairs, the partnership continues to 25 exist. 26 27 Id. at 859. Under Hooper, 737 P.2d at 858. Colorado law, Upon when partners Id. Id. California also has applicable provisions governing the winding up of partnerships. For example, Corporations Code § 16803 28 OPINION AND ORDER 14 1 provides in pertinent part: 2 3 (a) After dissolution, a partner who has not dissociated may participate in winding up the partnership s business[.] 4 **** 5 (c) A person winding up a partnership s business may preserve the partnership business or property as a going concern for a reasonable time, prosecute and defend actions and proceedings, whether civil, criminal, or administrative, settle and close the partnerships business, dispose of and transfer the partnership s property, discharge the partnership s liabilities, distribute the assets of the partnership . . . settle disputes by mediation or arbitration, and perform other necessary acts. 6 7 8 9 10 Cal. Corp. Code § 16803 (a)-(c) (2006) (emphasis added); see also 11 9 Witkin Summary Cal. Law (10th Ed. 2005) Partnership, § 48 (noting 12 that a partnership continues after dissolution for the purposes of 13 winding up its business, which includes prosecuting and defending 14 actions and proceedings). Similarly, a dissolved corporation 15 continues to exist for the purpose of winding up its affairs, 16 including prosecuting lawsuits to recover sums due or owing to it 17 or to recover any of its property. Favila v. Katten Muchin 18 Rosenman LLP, 188 Cal. App. 4th 189, 212 (2010). 19 In short, Estampa relies on cases that provide no clear 20 indication how a California court will resolve the precise issue 21 involved here. The authorities discussed instead suggest and the 22 court holds that the Bistues are entitled to preserve the 23 partnership for the purposes of initiating a civil proceeding such 24 as this. 25 II. Contract Interpretation Under California Law 26 DWC claims that the parties intended DWC to be a party (or to 27 use the precise Agreement parlance, the Agent ), which allows them 28 OPINION AND ORDER 15 1 to enforce the contract. It is alleged that Estampa understood and 2 agreed that Davis LLC would be identified as the Agent as well, but 3 DWC would perform all obligations until reorganization was affected 4 five or six months later, or by early June or early July 2008. 5 Estampa believes that DWC is attempting to create ambiguity by 6 inundating the court with extrinsic evidence that contradicts the 7 Agreement and is barred by the parol evidence rule. 8 A. General Principles 9 The Agreement contains a choice-of-law clause requiring 10 California s substantive law to apply. 11 objective theory of contracts, under which it is the objective 12 intent, as evidenced by the words of the contract, rather than the 13 subjective 14 interpretation. Founding Members of Newport Beach Country Club v. 15 Newport Beach Country Club, Inc., 109 Cal. App. 4th 944, 956 (2003) 16 (internal citation and quotation marks omitted). 17 undisclosed intent or understanding is irrelevant to contract 18 interpretation. 19 intent of one of the California recognizes the parties, that controls The parties Id. The basic goal, however, it to give effect to the parties 20 mutual intent at the time of contracting. Cedars-Sinai Med. Ctr. 21 v. Shewry, 137 Cal. App. 4th 964, 979 (2006) (citations omitted). 22 When a contract is reduced to writing, the parties intention is 23 determined from the writing alone, if possible. 24 Founding Members, 109 Cal. App. 4th at 955). Id. (quoting 25 B. The Parol Evidence Rule 26 California s parol evidence rule is codified in section 1856 27 28 OPINION AND ORDER 16 1 of the California Code of Civil Procedure.3 2 Beydoun, 32 Cal. 4th 336, 343 (2004). 3 introduction of any extrinsic evidence, whether oral or written, to 4 vary, 5 instrument. 6 App. 4th 1412, 1433 (1992)). The rule does not, however, prohibit 7 the introduction of extrinsic evidence to explain the meaning of 8 a written contract . . . [i]f the meaning urged is one to which the 9 written contract terms are reasonably susceptible. Casa Herrera, 10 32 Cal. 4th at 343 (quoting BMW of N. Am., Inc. v. New Motor 11 Vehicle Bd., 162 Cal. App. 3d 980, 990 n.4 (1984); see also 12 Arechiga v. Dolores Press, Inc., 192 Cal. App. 4th 567, 575 (2011) 13 (a court may admit parol evidence to interpret an ambiguous 14 contract under section 1856(g)).4 alter or add to the terms Casa Herrera, Inc. v. It generally prohibits the of an integrated written Id. (quoting Alling v. Universal Mfg. Corp., 5 Cal. 15 Application of California s parole evidence rule divides the 16 court s inquiry into two principal parts, 1) was the writing 17 intended to be an integration, i.e., a complete and final 18 19 20 21 3 Section 1856(a) states, [t]erms set forth in a writing intended by the parties the parties as a final expression of their agreement . . . may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement. CAL. CIV. P. Code § 1856(a) (West 2007). 22 4 23 24 25 26 27 28 Section 1856(g) states, [t]his section does not exclude other evidence of the circumstances under which the agreement was made or to which it relates, as defined in Section 1860, or to explain an extrinsic ambiguity or otherwise interpret the terms of the agreement[.] Id. § 1856(g). Section 1860 states, [f]or the proper construction of an instrument, the circumstances under which it was made, including the situation of the subject of the instrument, and of the parties to it, may also be shown, so that the Judge be placed in the position of those whose language he is to interpret. Id. § 1860. OPINION AND ORDER 17 1 expression of the parties agreement, precluding any evidence of 2 collateral agreements and 2) is the agreement susceptible of the 3 meaning contended for by the party offering the evidence? Gerdlund 4 v. Elec. Dispensers Int l, 190 Cal. App. 3d 263, 270 (1987) 5 (citations omitted). 6 integrated, extrinsic evidence is admissible only if it is relevant 7 to prove a meaning [to] which the language of the instrument is 8 reasonably susceptible. 9 234 Cal. App. 3d 973, 1001 (1991) (citation omitted). 1. Put another way, [i]f a writing is deemed Banco do Brasil, S.A. v. Latian, Inc., 11 Was the writing intended to be an integration, i.e. a complete and final expression of the parties agreement? 12 In regard to the question of integration, the Agreement of the 13 parties contains an expression of their intent that it supersede 14 any and all other agreements between them and that it constitutes 15 their entire agreement. 16 that such a clause, while it certainly helps to resolve the issue, 17 does not itself establish an integration; the collateral agreement 18 itself must be examined in order to determine whether the parties 19 intended it to be part of their bargain. Gerdlund, 190 Cal. App. 20 3d at 270-71 (citing Masterson v. Sine, 68 Cal. 2d 222, 65 Cal. 21 Rptr. 545, 436 P.2d 561 (1968)). 22 agreement that contradicts an express provision of the written 23 agreement, however, is not permitted under Masterson. Id. at 271. 24 It cannot reasonably be presumed that the parties intended to 25 integrate two directly contradictory terms in the same agreement.5 10 The California Supreme Court held . . . Id. Proof of a collateral 26 27 28 5 In determining whether an agreement is integrated, the California Appellate Districts seem to disagree whether courts OPINION AND ORDER 18 1 Here, the parties focused their oral arguments on the guidance 2 provided by Banco do Brasil. 3 the integration analysis to be based on the examination of four 4 questions: 5 6 7 8 9 In Banco do Brasil, the court held (1) does the written agreement appear on its face to be a complete agreement; . . (2) does the alleged oral agreement directly contradict the written instrument; (3) can it be said that the oral agreement might naturally have been made as a separate agreement or, to put it another way, if the oral agreement had been actually agreed to, would it certainly have been included in the written instrument; and (4) would evidence of the oral agreement be likely to mislead the trier of fact. 10 Banco do Brasil, 234 Cal. App. 3d at 1003. 11 presence of an integration clause favored Estampa. DWC argued that 12 the Banco 13 favorable to it s position. 14 do Brasil s second, third, DWC conceded that the and fourth The court finds DWC s arguments unavailing. factor were The crucial 15 issue is whether the parties intended the written instrument to 16 serve as the exclusive embodiment of their agreement. 17 Grain & Mining Co. v. Henson, 13 Cal. App. 3d 493, 498 (1970)). In 18 Salyer, a trucker and a farmer entered into a contract to haul 19 grain. 20 president of a large-scale farming operation and the trucker, who Id. at 496. Salyer The negotiations took place between the 21 22 23 24 25 26 27 28 should consider if the terms of the alleged oral understanding are inconsistent with the written contract. Compare Ebensen Userware Internat., Inc., 11 Cal. App. 4th at 637 n.3 (1992) (stating that, the question of conflict between the written and oral agreements is irrelevant to the question of integration ), and Founding Members, 109 Cal. App. 4th at 954 (favorably citing Ebensen for the same proposition), with Banco do Brasil, 234 Cal. App. 3d at 1003 (finding that the integration analysis is comprised of four questions, including whether the alleged oral agreement directly contradicts the written instrument). OPINION AND ORDER 19 1 had been engaged in the trucking business for eleven years and 2 operated six trucks. 3 between the parties to be integrated based, in part, on the fact 4 that the parties to the negotiations dealt at arm s length and both 5 were experienced businessmen who may be presumed to know the effect 6 of written agreements. Id. at 501. The court found the agreement Id. 7 Similarly, in this case, the negotiations were at arm s length 8 and lasted for a three-month period during which Estampa s Export 9 Manager, Marie Chaisson ( Chaisson ) visited DWC s offices, Cesar 10 Bistue 11 Estampa s CEO, Miguel Gonzalez Ortiz ( Ortiz ), visited DWC s 12 offices and warehouse. 13 been in the wine business for seven years prior to being contacted 14 by Chaisson. 15 a 16 experience in the wine business.6 17 Accordingly, 18 businessmen who are presumed to know the effect of their written 19 agreements. MBA visited from the Estampa winery in (Decl. Cesar Bistue ¶ 4.) (Decl. Cesar Bistue ¶ 2-3.) the as University in Colchagua, Salyer, of and Cesar Bistue had German Bistue also had Washington the Chile, and seven years of (Decl. German Bistue ¶ 1.) parties here are experienced 20 Most importantly, Banco do Brasil made several pertinent 21 observations regarding the presence of an integration clause that 22 appears to be supported by California precedent. 23 noted that the adoption and use of an integration clause by the First, it was 24 25 26 27 28 6 German Bistue s declaration indicates he has eleven years of experience in the wine business. However, that is presumably as of the date of his declaration on May 25, 2011, rather than when negotiations began in September 2007. (Decl. German Bistue at 2, 6.) OPINION AND ORDER 20 1 parties may well be conclusive on the issue of integration. Banco 2 do Brasil, 234 Cal. App. 3d at 1001. 3 presence of an integration clause will be very persuasive, if not 4 controlling, on this issue. 5 imagine how the parties could have more clearly expressed their 6 intent 7 expression 8 clause. to make of the their written Second, obviously, the Id. at 1003. instrument agreement than It is difficult to a full including and an complete integration Id. 9 In short, the parties have not cited, nor has the court found 10 any case holding that, despite the presence of an integration 11 clause, the contract should not be found to be integrated. 12 Banco do Brasil, 234 Cal. App. 3d at 1003-08; see also Haggard v. 13 Kimberly Quality Care, Inc., 39 Cal. App. 4th 508, 518 (1995); see 14 also Gerdlund, 190 Cal. App. 3d at 272; see also Alling, 5 Cal. 15 App. 4th at 1435. 16 the California courts find an agreement complete despite the 17 omission of an integration clause. 18 Application, Ltd. v. Price Waterhouse, 49 Cal. App. 4th 464, 470 19 (1996) (noting that, although there is no integration clause in 20 the engagement letters, they are nonetheless complete. ) Thus, the 21 court concludes that the Agreement is integrated. 2. 22 23 24 The See In fact, often times the converse is true and See, e.g., Software Design & Is the Agreement Susceptible to the Meaning Contended for by the Party Offering the Evidence? second part of the inquiry is whether the offered 25 evidence is nonetheless admissible to explain the meaning of the 26 contract language, under Gerdlund, 190 Cal. App. 3d at 272. 27 California recognizes a broad exception to the parol evidence rule. 28 OPINION AND ORDER 21 1 No contract should ever be interpreted and enforced with a meaning 2 that neither party gave it, which is why parol evidence may be 3 introduced to show the meaning of the express terms of the written 4 contract. 5 F.2d 272 (9th Cir. 1992) (citations omitted). Brinderson-Newberg Joint Venture v. Pac. Erectors, 971 6 This aspect of parole evidence rule was articulated by the 7 California Supreme Court in Pac. Gas. & Elec. v. G.W. Thomas 8 Drayage etc. Co., 69 Cal. 2d 33, 37 (1968): 9 10 11 The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible. 12 Gerdlund, 190 Cal. App. 3d at 272. The decision whether to admit 13 parol evidence involves a two-step process: 14 15 16 17 18 First, the court provisionally receives (without actually admitting) all credible evidence concerning the parties intentions to determine ambiguity, i.e., whether the language is reasonably susceptible to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is reasonably susceptible to the interpretation urged, the extrinsic evidence is then admitted to aid in the second step-interpreting the contract. 19 Arechiga, 192 Cal. App. 4th at 575 (quoting Winet v. Price, 4 Cal. 20 App. 4th 1159, 1165 (1992). 21 In support of its position, DWC has offered the following 22 extrinsic evidence demonstrating the parties intentions. The 23 earlier drafts of the Agreement identified DWC as the Agent. (Pl. s 24 Opp n at 13.) Just prior to execution on January 7, 2008, the 25 identity of the Agent in the opening paragraph of the Agreement 26 changed to Davis LLC. (Id.) Estampa, specifically Ortiz and 27 Chaisson, understood and agreed that Davis LLC was not yet formed 28 OPINION AND ORDER 22 1 at the time of the Agreement. (Id.) Estampa understood and agreed 2 that, although the Agreement identified Davis LLC as the Agent, DWC 3 would actually conduct operations and perform work under the 4 Agreement for at least the first five or six months or until early 5 June or July 2008. 6 concerning reorganization and DWC s role under the Agreement to 7 Ortiz 8 conversation with Chaisson. 9 such information to Chaisson via email on January 4, 2008. 10 during a (Id.) meeting Cesar Bistue explained information in Colchagua, (Id.) Chile and in a phone Cesar Bistue also communicated (Id.) Estampa did not hesitate to allow DWC to actually commence 11 performance once the Agreement was executed. 12 did commence performance, resulting in several beneficial contacts 13 and market entries for Estampa throughout the United States. (Id.) 14 Estampa s press releases, emails and Letter Appointment announcing 15 their new Untied States importer and representatives refer only to 16 DWC and never to Davis LLC. 17 orders, correspondence and miscellaneous information exchanged 18 between the parties reference DWC. 19 DWC to purchase all it s wine stored in the United States. 20 13.) Estampa s legally required wine labels identify their importer 21 as DWC. Estampa s termination letter is addressed to DWC. 22 Opp n at 14.) 23 Here, the Agreement s (Id. at 13-14) (Id.) All invoices, purchase (Id. at 14.) introductory DWC in fact Estampa required language states (FAC ¶ (Pl. s that, 24 [t]his AGREEMENT entered into as of the 7[th] day of January, 2008 25 is by and between . . . Estampa . . . and Davis Wine Imports, LLC, 26 represented by Cesar Gabriel Bistue, having its business address at 27 606 Pena Drive, Suite 700, Davis, California, United States of 28 OPINION AND ORDER 23 1 America ( AGENT and together with [Estampa] the Parties ). (FAC 2 Ex. A at 1.) 3 is legally authorized to import alcoholic beverages in the United 4 States under the Federal Permit CA-I-5278[.] Section 2.2 of the Agreement states, The AGENT . . . (FAC Ex. A at 1.) 5 According to DWC, the contract is ambiguous because Davis LLC 6 is defined as the Agent and the holder of Federal Permit CA-I-5278. 7 However, 8 Sebastian Bistue and German Bistue, dba Davis Wine Company, 606 9 Pena Drive, Unit #700, Davis, CA 95616. the true holders of Federal Permit CA-I-5278 are: (Pl. s Opp n at 17.) DWC 10 characterizes this as a specific and unmistakable reference to DWC 11 within the four corners of the Agreement. 12 they were also the Agent (or party) and may enforce the Agreement. 13 In this case, the court does not find that the language of the Thus, DWC argues that 14 Agreement lends itself to the proposed meaning. According to the 15 California Supreme Court, the parol evidence rule determines the 16 enforceable and incontrovertible terms of an integrated written 17 agreement. 18 agreement is the parties sole agreement, and it is impermissible 19 to allow extrinsic evidence to add to, detract from, or vary the 20 terms of such an agreement. 21 is that they were also a party or Agent under the Agreement. (See 22 Pl. s Opp n at 12.) 23 term Agent in its singular form, not plural. 24 interpretation would require the court to read Agent as Agents, 25 and to add the name of an entity that is not explicitly referenced 26 on the face of the Agreement. Such an interpretation runs afoul of 27 Casa Herrera s mandate by adding and varying the terms of the Casa Herrera, 32 Cal. 4th at 345. Id. The interpretation sought by DWC As written, however, the Agreement uses the 28 OPINION AND ORDER The written 24 Embracing DWC s 1 agreement. 2 contract, nor does it support a meaning to which the contract is 3 susceptible. 4 The evidence is not offered to explain a term of the In addition, Davis LLC was deliberately identified as the only 5 Agent under the Agreement thereby precluding alteration. The 6 original drafts of the Agreement listed DWC as the Agent. 7 Bistue then decided DWC might benefit from an organizational change 8 and instructed Estampa that Davis LLC would be identified as the 9 Agent in the final version of the Agreement, rather than DWC. Cesar 10 (Pl. s Opp n at 6.) 11 contract as Davis Wine Imports, LLC, then we will not have to 12 change the name. 13 intended for the Agreement not to reference DWC because he wanted 14 to avoid the necessity of a name change. Accordingly, the parties 15 final undertaking that was deliberately expressed in writing, 16 cannot 17 (California s parol evidence rule, make[s] sure that the parties 18 final undertaking, deliberately expressed in writing, shall not be 19 changed ). be As Cesar Bistue stated, [w]e can sign the (Pl. s Opp n at 7.) changed. See Casa Herrera, Clearly Cesar Bistue 32 Cal. 4th at 345 20 Moreover, while much is made of prior or contemporaneous 21 agreements concerning DWC s reorganization and ability to perform 22 on 23 contract . . . supersedes all the negotiations or stipulations 24 concerning its matter which preceded or accompanied the execution 25 of the instrument. 26 extrinsic evidence cannot be admitted to prove what the agreement 27 was . . . because as a matter of law the agreement is the writing Davis LLC s behalf, the of executing a Casa Herrera, 32 Cal. 4th at 344. 28 OPINION AND ORDER act 25 written Thus, 1 itself. Id. at 344 (emphasis added). Here, the Agreement fails 2 to mention reorganization, an applicable grace period, or the fact 3 that DWC would perform the obligations until any reorganization was 4 affected. 5 Agreement and cannot add an additional provision (party) to an 6 integrated writing. The court is therefore bound by the terms of the 7 Finally, DWC argues that Federal Permit CA-I-5278 is a 8 specific and unmistakable reference to and inclusion of Davis Wine 9 Company. (Pl. s Opp n at 17.) The court finds this argument 10 unavailing. On its face, this reference is neither specific, nor 11 unmistakable without the benefit of extrinsic evidence. 12 evidence also demonstrates that Cesar Bistue intended to have DWC s 13 name stricken from the Agreement and replaced by Davis LLC. In 14 essence, DWC is now arguing for their inclusion despite the fact 15 that they intended for their exclusion prior to execution of the 16 Agreement. DWC s 17 In short, the court agrees with Banco do Brasil that parties 18 to a business transaction, such as this, should be able to clearly 19 express their intent as to the nature and scope of their legal 20 relationship. 21 parties 22 agreement, they are required to live with its terms. 23 event, while the court does not find DWC to be the Agent based on 24 the contract s plain language, this result does not foreclose the 25 possibility DWC could enforce the contract as a promoter. 26 III. DWC s Status as a Promoter of the Agreement 27 agree Banco do Brasil, 234 Cal. App. 3d at 1001. to a complete and final expression Once the of Id. their In any DWC claims that in California it is black letter law that a 28 OPINION AND ORDER 26 1 counter party can enforce a contract against a promoter of an 2 entity that is never formed. 3 presents the reverse scenario. 4 have never squarely addressed the issue, but claims that many other 5 jurisdictions and commentators have. 6 universal agreement that promoters can enforce the same contracts 7 that could otherwise be enforced against them. (Pl. s Opp n at 20.) The case at bar DWC admits that California courts (Id.) DWC argues there is (Id.) 8 DWC first relies on White v. Dvorak, 78 Wash. App. 105 (1995). 9 In White, the court held that underlying every contract is a 10 presumption that the parties intended to create an enforceable 11 obligation, which extends to contracts made in the name of a 12 nonexistent corporation. 13 that purports to act as a corporation will want a binding contract 14 with the other party. 15 intends to make a present contract with an existing person. 16 An enforceable contract can only exist if the person purporting to 17 act as a corporation is a party to the contract because the 18 corporation lacks existence and cannot be bound. 19 even if the other party is unaware of the corporate nonexistence, 20 the presumption in favor of enforceability supersedes the silence 21 of the parties in the contract as to the effect of nonexistence of 22 an entity purporting to be a party. 23 enters into a contract with a person purporting to act as a 24 corporation, the third party is bound and both parties can demand 25 performance despite the tenor of the contract suggesting the unborn 26 entity will, when created, perform the promises. 27 White, 78 Wash. App. at 114. Id. The person In the same vein, the other party Id. Id. Id. In turn, Thus, when a third party Id. at 114-15. DWC goes on to proclaim that every single known case and 28 OPINION AND ORDER 27 1 commentary are in accord with White s holding. 2 cites Fish v. Tandy Corp., 948 S.W.2d 886 (Tex. App. 1997), for the 3 proposition that, [b]ecause any enforceable agreement is mutual 4 and binding on both parties, logic dictates [that] a promoter who 5 is liable under an agreement may also make a claim under such a 6 contract. 7 For example, DWC Fish, 948 S.W.2d at 898.7 Estampa argues that DWC cites a number of non-binding 8 authorities in an attempt to establish that DWC s status as a pre- 9 incorporation promoter creates standing. Notably, Estampa points 10 out that none of the cases cited by DWC involved a partnership as 11 a pre-incorporation promoter. According to Estampa, DWC focuses on 12 the rights of corporate promoters in circumstances where the 13 corporation is never formed, which is not the case here. 14 In California, absent certain inapplicable exceptions, 15 [p]romoters are personally liable on contracts they make in 16 promotion of a corporation even though the corporation after coming 17 into existence receives benefits from the contract[.] 18 Jur. 3d Corporations § 47. 19 organized, 20 contracts 21 personally liable on such contracts. 22 Guide: Corporations (The Rutter Group) ¶ 3:399 (CACORPS CH. 3-G). 23 While we are dealing with the alleged promotion of a LLC, and by whether its 15 Cal. Whether or not the corporation is even or not promoters, it the ratifies promoters pre-incorporation themselves remain Friedman, Cal. Practice 24 25 26 27 28 7 DWC also cites Island Transp.Co., Inc. v. Cavanaugh, 767 N.E. 2d 609 (Mass. App. Ct. 2002); Gardner v. Madson, 949 P.2d 785 (Utah Ct. App. 1997); T Street Dev., LLC v. Dereje & Dereje, No. CV-05-524-GK, 2005 WL 3466651 (D.D.C. Dec. 19, 2005); Cinema N. Corp. v. Plaza at Latham Assoc., 867 F.2d 135 (2d Cir. 1989). OPINION AND ORDER 28 1 rather than a corporation, 02 Dev., LLC v. 607 South Park, LLC, 159 2 Cal. App. 4th 609 (2008), noted there was no authority that would 3 support treating an LLC differently than a corporation in this 4 respect. South Park, 159 Cal. App. at 610. 5 Generally, promoters are individuals rather than a partnership 6 or other legal entity, which begs the question whether a 7 partnership can be a promoter. 8 Springs Co., 114 Cal. App. 496 (1931), promoters were defined as, 9 [t]he persons who, for themselves or others, take the preliminary 10 steps to the organization of a corporation. . . . They are the ones 11 who bring about the incorporation. 12 500 (quoting 1 Thompson on Corporations, third edition, 106, 13 section 96). 14 issue, the court can find no reason in law or logic why partners, 15 who are jointly and severally liable for partnerships debts, cannot 16 serve as a promoter for an entity yet-to-be formed. It seems 17 unlikely that partnerships are precluded from being promoters, 18 while corporations are allowed to act in such a capacity under 19 California law. See 15 Cal. Jur. 3d Corporations § 34 (recognizing 20 that a corporation can be a promoter of another corporation); 9 21 Witkin Summary Cal. Law (10th Ed. 2005) Corporations, § 52 (same). 22 The dispositive issue thus remains whether DWC is entitled to 23 enforce the contract they entered into with Estampa on behalf of 24 Davis LLC. 25 provides that, [u]nless otherwise agreed, a person who, in dealing 26 with another, purports to act as agent for a principal whom both 27 know to be nonexistent or wholly incompetent, becomes a party to In MacDonald v. Arrowhead Hot Macdonald, 114 Cal. App. at While California has no controlling cases on this The Restatement Second of Agency § 326 ( § 326 ) 28 OPINION AND ORDER 29 1 such a contract. Restatement (Second) of Agency § 326 (1958). The 2 authors of the Restatement state that promoters are a classic 3 illustration of § 326's application. 4 primarily on the Restatement Third of Agency § 6.04 ( § 6.04 ), as 5 the parallel provision to § 326, which provides in pertinent part: 6 Unless the third party agrees otherwise, a person who makes a contract with a third party purportedly as an agent on behalf of a principal becomes a party to the contract if the purported agent knows or has reason to know that the purported principal does not exist or lacks capacity to be a party to a contract. 7 8 Id. cmt. b. DWC relies 9 Restatement (Third) of Agency § 6.04 (2006). Section 6.04 applies 10 to promoters of yet-to-be formed entities as well. Id. cmt. c. 11 DWC claims that § 326 and § 6.04 s use of the term party 12 suggests they are able to enforce the Agreement under these 13 circumstances. The California courts have not explicitly adopted 14 § 326, nor have they adopted § 6.04. However, the court predicts 15 that if a California court was confronted with this issue, it would 16 adopt § 6.04, and thereby afford DWC a cause of action under these 17 circumstances. In Bonfigli v. Strachan, 192 Cal. App 4th 1302 18 (2011), the First Appellate District was faced with no California 19 authority directly on point and therefore turned to the 20 Restatement Third of Agency § 3.13, noting that they agreed with 21 the Restatement s analysis.8 Similarly, in this case, there is no 22 23 8 24 25 26 27 28 California courts have applied the Restatement Third of Agency in other contexts as well. See Tvberg v. Fillner Const., Inc., 49 Cal. 4th 518, 528 (applying Restatement Third of Agency § 3.15); see also Messenger Courier Ass n of Ams. v. Cal. Unemployment Ins. Appeals Bd., 175 Cal. App. 4th 1074, 1090 (applying Restatement Third of Agency, Introduction, Common Law and Statutes); see also Phillips v. TLC Plumbing, Inc. 172 Cal. App. 4th 1133, 1139-40 (applying Restatement Third of Agency § 7.05 and OPINION AND ORDER 30 1 precedential authority to draw upon and the Restatement Third is 2 both relevant and instructive. 3 6.04 to the case at bar. 4 The court will therefore apply § In sum, the court agrees DWC is able to bring an action to 5 enforce the Agreement under § 6.04. 6 IV. Whether the Agreement was Unlawful 7 Estampa claims that, even if DWC is able to enforce the 8 Agreement, the Agreement still had an unlawful purpose and an 9 unlawful object. Specifically, Estampa argues that the Agreement 10 called for nationwide importation of their wines, and DWC lacked 11 the requisite licenses to lawfully comply with this obligation. DWC 12 counters by arguing that the Agreement did not require them to 13 import wine into all fifty states, and the only license they were 14 required to possess was Federal Permit CA-I-5278. 15 DWC, they only needed to import wine into California, store it in 16 a warehouse, and then sell it to third-party distributors who re- 17 distribute the wine throughout the United States. DWC alleges that 18 such a practice is both legal and customary in the wine industry. 19 Estampa s arguments are unavailing. concerning the statements 21 contradicts their position. For example, on January 24, 2008, 22 Chaisson sent an email to a New Jersey distributor, explaining 23 Estampa s relationship with DWC. (Decl. German Bistue ¶ 10.) Within 24 the email, Chaisson indicated that Davis Wine Co. fit all of [our] 25 necessary criteria for representing Estampa . . . on a national 26 level. commentary). OPINION AND ORDER the Chaisson also 27 28 of First, Estampa s own 20 (Id. Ex. 15 at 1.) nature According to 31 parties arrangement stated that, starting 1 March 1st , all orders must be sent to dwc@daviswine.com and orders 2 will 3 Sacramento, California. (Id. Ex. 15 at 2) (emphasis added). be shipped out of Davis Wine Co. s warehouse in West 4 In addition, the Agreement itself supports DWC s position. 5 Estampa relies heavily on section 3.3 of the Agreement, which 6 states: For PRODUCTS shipped directly from Chile to CLIENTS, AGENT 7 will continue as the legal importer and exclusive representative of 8 the 9 conceivable that DWC would have been required to import into states 10 besides California, which would have been unlawful. The Agreement 11 defines CLIENTS as all wholesale or retail clients, with legal 12 license to buy and resell alcoholic beverages in the TERRITORY 13 [e.g., all fifty states], that have been designated by the AGENT to 14 sell the products. The language seems to suggest that the Bistues 15 had discretion in designating what clients could sell the products 16 and thereby avoid any unlawful importation. 17 Agreement also states that, it shall . . . be the responsibility 18 of the AGENT to . . . complete all the legal formalities and 19 compliance procedures for the importation and sale, both federal 20 and state. 21 providing DWC an opportunity to obtain all licenses and permits 22 necessary to their importation duties. 23 is lawful and any contrary argument by Estampa conflicts with their 24 own admissions. 25 /// PRODUCTS. (FAC Ex. A at (FAC Ex. A at 1-2.) 2.)9 Estampa argues it is Section 2.3 of the The court reads this section as Accordingly, the Agreement 26 27 28 9 PRODUCTS is defined as the products produced or sold by Estampa under the brands Estampa and Estacion. (FAC Ex. A at 1.) OPINION AND ORDER 32 1 2 V. The Timeliness of DWC s Claims Next, Estampa argues that the applicable statutes of 3 limitations for DWC s breach of the implied duty of good faith and 4 fair dealing, breach of implied contract, and unjust enrichment 5 claims have expired. 6 Estampa, under California law, the duty of good faith and fair 7 dealing, and a right based on an implied contract are subject to a 8 two year statute of limitations.10 9 alleged injury to DWC took place on or around April 14, 2008, and 10 since DWC did not bring suit until April 1, 2011, their claims are 11 barred. Estampa claims that Federal Rule of Civil Procedure 12 ( Rule ) 17(a) 13 interest, but DWC fails to qualify for this exception because it is 14 not a contract beneficiary under the Agreement. 15 (Def. s Mem. Supp. at 15.) permits a According to Estampa contends that the relation-back for a real party in Estampa s argument misses the mark. Davis LLC sued Estampa in 16 Oregon state court on July 20, 2009. 17 federal court on June 8, 2010. 18 a motion seeking to amend the complaint to join DWC. 19 motion was granted on March 11, 2011. 20 and DWC filed the FAC. 21 under the FAC relate back to the filing of the original complaint. 22 As indicated above, DWC continues to exist and is entitled to 23 Estampa removed the case to On August 16, 2010, Davis LLC filed On April Davis LLC s 1, 2011, Davis LLC The issue then is whether DWC s claims attempt enforcement of the Agreement. The court need not address 24 25 26 27 28 10 Estampa relies on Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285 (9th Cir. 1987), Smyth v. USAA Property & Casualty Ins. Co., 5 Cal. App. 4th 1470 (1992), Pac. Employers Ins. v. Hartford Acc. & Ind. Co., 228 F.2d 365 (9th Cir. 1955), for the applicable statutes of limitations. OPINION AND ORDER 33 1 whether 2 applicable rule and it provides, [a]n amendment to a pleading 3 relates back to the date of the original pleading when . . .the 4 amendment asserts a claim or defense that arose out of the conduct, 5 transaction, or occurrence set out-- or attempted to be set out-- 6 in the original pleading[.] FED. R. CIV. P. 15(c)(1). 7 Circuit has indicated that: 8 DWC is a contract beneficiary. Rule 15(c) is the The Ninth 11 An amendment adding a party plaintiff relates back to the date of the original pleading only when: 1) the original complaint gave the defendant adequate notice of the claims of the newly proposed plaintiff; 2) the relation back does not unfairly prejudice the defendant; and 3) there is an identity of interests between the original and newly proposed plaintiff. 12 In re Syntex Corp. Sec. Litig., 95 F.3d 922, 935 (9th Cir. 1996) 13 (citing Besig v. Dolphin Boating & Swimming Club, 683 F.2d 1271, 14 1278-79 (9th Cir. 1982)). 15 seldom adequate when substituting plaintiffs, unless the change 16 merely brings in the real party in interest or accomplishes some 17 similar technical result. 18 substituted and substituting plaintiffs are so closely related that 19 they in effect are but one, an amended complaint substituting 20 plaintiffs relates back only when the relief sought is sufficiently 21 similar to constitute an identity of interest. 22 omitted). 9 10 23 Notice from a previous complaint is Besig, 683 F.2d at 1278. Unless the Id. (citations Here, I find that DWC and Davis LLC are essentially the same 24 entity, or are in effect but one. 25 prejudiced because they have been provided ample notice and there 26 is an identity of interests between Davis LLC and DWC. 27 Brothers v. Am. Cyanimid Co., 695 F.2d 382, 384 (9th Cir. 1982) 28 OPINION AND ORDER 34 Further, Estampa is not See Raynor 1 (finding that the identity-of-interest requirement of Rule 15(c) 2 was met because [t]he circumstances giving rise to the claim 3 remained the same [under the amended complaint] as under the 4 original complaint. ) 5 that, [a]n amendment changing plaintiffs may relate back when the 6 relief sought 7 demanded originally. Id. However, Besig provided context to that 8 statement by stating, [i]n such a case, despite lack of notice [of 9 a new plaintiff and its claims], the defendant is not prejudiced in Estampa relies heavily on Besig s language the amended complaint is identical to that 10 because his response to the action requires no revision. 11 (emphasis added). Estampa has been provided notice in this case, 12 however. 13 this instance. 14 Id. Thus, Besig would not require an identical complaint in In sum, the relief sought under the FAC is sufficiently 15 similar to the original complaint to satisfy Besig. 16 the amendment adding DWC to this case relates to original pleading 17 and DWC s claims are timely. 18 VI. 19 As a result, The Implied Contract Claim on its Merits As an alternative to their express contract claims, DWC claims 20 a breach of implied contract. Estampa 21 contract is expressed or implied, it must entered into by parties 22 with legal capacity and it must have a lawful purpose. 23 court has already determined that the Agreement had a lawful 24 purpose and that, although Davis LLC lacked capacity, DWC was 25 entitled to enter into contracts on its behalf as a promoter. The 26 court therefore finds Estampa s argument unavailing. 27 is denied. 28 OPINION AND ORDER 35 argues that whether a Here, the This motion 1 VII. DWC s Unjust Enrichment Claim 2 Next, Estampa argues that, under California law, there is no 3 cause of action for unjust enrichment, citing Durrell v. Sharp 4 Healthcare, 183 Cal. App. 4th 1350, 1370 (2010). 5 extent DWC seeks restitution, Estampa argues that such claims must 6 rest on an implied contract claim. Estampa s position is that an 7 implied contract claim is time barred and, in any event, DWC lost 8 nothing and there is neither evidence nor truth to the notion that 9 Estampa was enriched. And, to the (Def. s Mem. Supp. at 17.) In fact, 10 Estampa claims that, between the parties, they incurred the greater 11 expense and DWC experienced the greater enrichment. 12 In California, unjust enrichment is 13 restitution. 14 be awarded in lieu of breach of contract damages when the parties 15 had an express contract, but it is unenforceable or ineffective for 16 some reason. 17 in the alternative to its breach of contract claim. 18 determined that DWC may attempt to enforce the contract as a 19 promoter. 20 contract, there is no claim for restitution. 21 stage in the proceedings, DWC is entitled to plead its restitution 22 claim in the alternative. 23 this ground. 24 /// 25 /// 26 /// 27 /// Durrell, 183 Cal. App. 4th at 1370. Id. synonymous with Restitution may In this case, DWC s unjust enrichment claim is The court has The parties concede that if there is an enforceable Estampa s motion is therefore denied on 28 OPINION AND ORDER However, at this 36 Conclusion 1 2 For the reasons stated above, Estampa s motion [36] for 3 summary judgment or, in the alternative, to dismiss DWC s claims 4 for breach of the implied covenant of good faith and fair dealing, 5 breach of implied contract, and unjust enrichment, is DENIED. 6 IT IS SO ORDERED. 7 Dated this _13th___ day of October, 2011. 8 /s/ Dennis J. Hubel _________________________________ 9 10 Dennis James Hubel Unites States Magistrate Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 OPINION AND ORDER 37

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