Protection Capital, LLC v. IP Co., LLC

[6] UNITED STATES DISTRICT COURT [7] SOUTHERN DISTRICT OF CALIFORNIA [8] 9 PROTECTION CAPITAL, LLC, a CASE NO. 18-cv-1880-L-WVG Delaware limited liability company, [10] ORDER DENYING DEFENDANT 11 Plaintiff, GLOCOM INC.’S MOTION TO 12 v. DISMISS [DOC. 37] 13 IP CO., LLC, a Georgia limited 14 liability company , 15 Defendant. [17] Pending before the Court is Defendant Glocom, Inc.’s (“Glocom”) motion [18] to dismiss the fourth claim of Plaintiff Protection Capital, LLC’s (“PPC”) Second [19] Amended Complaint (“SAC”), Tortious Interference with Contract, pursuant to [20] Federal Rule of Civil Procedure 12(b)(6). Doc. 37. Pursuant to Civil Local Rule [21] 7.1.d.1, the Court has decided this motion without oral argument. For the [22] following reasons, the Court DENIES Glocom’s motion to dismiss. [23] Background [24] This case arises from Defendant IP Co., LLC’s (“IPCO”) failure to continue [25] payments to PPC pursuant to a Convertible Promissory Note and a Note Purchase [26] Agreement the two parties executed on April 30, 2007. Under the Note, IPCO [27] had access to unsecured loans of up to a maximum aggregate value of $500,000 1 were required to pay PPC five percent (5%) of all “products, proceeds and 2 amounts received” with respect to the intellectual property identified in the 3 Purchase Agreement. Between 2008 and 2017, IPCO remitted the five percent 4 (5%) owed to PPC under the Purchase Agreement without any form of protest or 5 reservation of rights. 6 In 2017, Glocom purchased 100% of IPCO’s membership interests with 7 knowledge of IPCO’s continuing financial obligations to PPC under the Note and 8 Purchase Agreement. PPC alleges that, after Glocom’s acquisition of 100% of 9 IPCO’s membership interest, Glocom instructed IPCO to breach its financial 10 obligations to PPC under the Purchase Agreement. Due to IPCO’s failure to pay 11 PPC since the Glocom acquisition, it is alleged that between $150,000 and 12 $500,000 is owed by IPCO to PPC at the time the original complaint was filed. 13 PPC has since provided IPCO with written notice of default and demand for 14 payment. 15 On August 8, 2018, PPC filed the original complaint against IPCO. 16 Subsequently, the Court found good cause to grant PPC leave to amend its 17 complaint twice. See Docs. 20, 26. PPC filed the operative Complaint on May 18 31, 2019, alleging Glocom is liable for Tortious Interference with Contract and 19 seeking exemplary and punitive damages for intentional conduct. On July 22, 20 2019, Glocom filed the instant motion, seeking to dismiss the tortious interference 21 claim and the SAC as to Glocom. This motion has been fully briefed and is ready 22 for disposition. 23 Legal Standard 24 A motion under Rule 12(b)(6) tests the sufficiency of the complaint. 25 Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is warranted 26 where the complaint lacks a cognizable legal theory. Shroyer v. New Cingular 27 Wireless Serv., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). Alternatively, a 1 to plead essential facts under that theory. Robertson v. Dean Witter Reynolds, Inc., [2] 749 F.2d 530, 534 (9th Cir. 1984). 3 In reviewing a Rule 12(b)(6) motion, the Court must assume the truth of all 4 factual allegations and construe them most favorably to the nonmoving party. 5 Huynh v. Chase Manhattan Bank, 465 F.3d 992, 997 , 999 n.3 (9th Cir. 2006). 6 Even if doubtful in fact, factual allegations are assumed to be true. Bell Atl. Corp. 7 v. Twombly, 550 U.S. 544, 555 (2007). “A well-pleaded complaint may proceed 8 even if it strikes a savvy judge that actual proof of those facts is improbable, and 9 that a recovery is very remote and unlikely.” Id. at 556 (internal quotation marks 10 and citation omitted). On the other hand, legal conclusions need not be taken as 11 true merely because they are couched as factual allegations. Id. at 555 ; see also 12 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 13 Generally, the Court does not “require heightened fact pleading of 14 specifics, but only enough facts to state a claim to relief that is plausible on its 15 face.” Twombly, 550 U.S. at 570 . “Nevertheless, a plaintiff’s obligation to provide 16 the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and 17 conclusions, and a formulaic recitation of the elements of a cause of action will 18 not do.” Id. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)). Thus, 19 “[t]o survive a motion to dismiss, a complaint must contain sufficient factual 20 matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” 21 Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570 ). “A claim has facial 22 plausibility when the plaintiff pleads factual content that allows the court to draw 23 the reasonable inference that the defendant is liable for the misconduct alleged.” [24] Id. at 678 . “The plausibility standard is not akin to a ‘probability requirement,’ 25 but it asks for more than a sheer possibility that a defendant has acted unlawfully.” [26] Id. (quoting Twombly, 550 U.S. at 556 ). “Determining whether a complaint states 27 a plausible claim for relief will . . . be a context-specific task that requires the 1 U.S. at 679. 2 To state a claim for intentional interference with contract, a plaintiff must 3 plead (1) the existence of a valid contract between the plaintiff and a third party; 4 (2) the defendant’s knowledge of that contract; (3) the defendant’s intentional acts 5 designed to induce a breach or disruption of the contractual relationship; (4) actual 6 breach or disruption of the contractual relationship; and (5) resulting damage. See 7 Reeves v. Hanlon, 33 Cal.4th 1140, 1148 (2004). 8 Discussion 9 Under California law, tortious interference with contract may only be 10 maintained against “stranger[s] to a contract” or “noncontracting parties.” See 11 Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 514 (1994). This 12 “protect[s] the expectations of contracting parties against frustration by outsiders 13 who have legitimate social or economic interest in the contractual relationship.” [14] Id. “[U]nder California law, the pertinent economic relationship is the one that 15 exists between the two contracting parties.” United Nat’l Maint., Inc. v. San 16 Diego Convention Ctr., Inc., 766 F.3d 1002, 1007 (9th Cir. 2014). The 17 contracting parties have the “direct interest or involvement in that relationship.” 18 Marin Tug & Westport Petroleum, Inc., 271 F.3d 825 , 832 (2001). California 19 thus recognizes a cause of action sounding in tort against noncontracting parties 20 who interfere with the performance of a contract. Woods v. Fox Broad. Sub., Inc., [21] 28 Cal.Rptr.3d 463, 469 (Cal. Ct. App. 2005). 22 Glocom contends that it cannot be considered a stranger to the Note or Note 23 Purchase Agreement after it acquired 100% membership interest in IPCO in 24 November 2017. Doc. 37 at 5. Specifically, Glocom asserts that it obtained 25 “Affiliate” status pursuant to the Purchase Agreement because it “owns or 26 controls directly or indirectly such Person [IPCO][.]” Id. Notwithstanding its 27 economic interest in the contract after acquiring its membership interest, Glocom 1 || tortious interference with contract claim. 2 Glocom also contends that PPC inappropriately relies on Asahi Kasei 3 Pharma Corp. v. Actelion Ltd., 222 Cal.App.4th 945 (Cal. Ct. App. 2013) to 4 || allege that Glocom can be held liable for tortious interference with contract. Doc. 5 ||37 at 5-6. In Asahi, defendant Actelion similarly asserted that it could not be held 6 || liable for tortious interference with contract because it acquired CoTherix, a party 7 || with whom Asahi agreed to develop their drug—Fasudil, before Actelion and 8 ||CoTherix shelved the drug’s development. See Asahi, 222 Cal.App.4th at 952 . 9 || However, the California Court of Appeal found that Actelion’s broad reading of 10 ||Applied Equipment unpersuasive because it admitted that no contract existed 11 || between it and Asahi and that Actelion did not assume the contract between Asahi 12 |}and CoTherix. Jd. at 967-68. Here, while Glocom makes no admission like 13 || Actelion, the facts readily indicate a similar contractual posture. There is no 14 || contract between Glocom and PPC. Granted Glocom acquired 100% membership 15 |/interest in the IPCO’s contract rights, it failed to represent that it assumed the 16 || contract with PPC in toto. Moreover, a plain reading of the Purchase Agreement 17 reveals that Glocom’s acquisition of IPCO’s interest does not create a contractual 18 |/relationship with PPC on its own. As such, the Court finds that Glocom is a 19 || stranger to the contract between PPC and IPCO. Therefore, Glocom can be held 20 || liable for tortious interference with contract. 21 Conclusion 22 For the foregoing reasons, Glocom’s motion to dismiss [doc. 37] is 23 || DENIED. [24] 25 || Date: January 14, 2020 UY pL 26 YY fer S lef Vp □ H6nU. James LorenzH 27 United States District Judge