Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-00964/USCOURTS-cand-3_07-cv-00964-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1446 Breach of Contract- Insurance

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

CAL-AGREX, Inc., a California

Corporation,

Plaintiff,

v.

DEE VAN TASSELL, JERRY GOODWIN, and

DOES 1 through 20, inclusive, 

Defendants. 

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No. C-07-0964 SC

ORDER GRANTING

DEFENDANT JERRY

GOODWIN'S MOTION TO

DISMISS CLAIM TWO OF

PLAINTIFF'S SECOND

AMENDED COMPLAINT;

GRANTING GOODWIN'S

MOTION FOR JUDGMENT

ON DEE VAN TASSELL'S

CROSS-CLAIM

I. INTRODUCTION

The Court previously struck two claims in Plaintiff CalAgrex, Inc.'s ("Plaintiff" or "Cal-Agrex") First Amended

Complaint, and dismissed a third without prejudice. See Docket

No. 43 ("First MTD Order"). The Court granted Cal-Agrex leave to

amend its complaint. Cal-Agrex subsequently filed the Second

Amended Complaint. See Docket No. 45.

Defendant Jerry Goodwin ("Goodwin") now moves the Court to

dismiss the second claim of the Second Amended Complaint, in which

Cal-Agrex alleges a fraudulent promise. See Mot. to Dismiss Claim

Two of Pl.'s 2d Am. Compl. ("Motion to Dismiss"), Docket No. 46. 

Goodwin asserts that the claim as pled fails to meet the

requirements of Federal Rules of Civil Procedure 12(b)(6) and

9(b). Cal-Agrex opposed the Motion to Dismiss, and Goodwin

replied. See Docket Nos. 50, 51. Having reviewed the parties'

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submissions and considered the issue thoroughly, the Court hereby

GRANTS Goodwin's Motion to Dismiss and dismisses Cal-Agrex's claim

for fraudulent promise with prejudice.

Goodwin also moves the Court for judgment against Defendant

Dee Van Tassell ("Van Tassell") on Van Tassell's cross-claim. 

See Docket No. 49 ("Cross-claim Motion"). The Court previously

dismissed the cross-claim, but granted Van Tassell leave to amend. 

See Docket No. 44 ("Cross-claim Order"). Van Tassell never filed

an amended cross-claim, and never opposed Goodwin's Cross-claim

Motion. The Court therefore GRANTS Goodwin's Cross-claim Motion

and dismisses the cross-claim with prejudice.

II. FACTUAL BACKGROUND

According to the Second Amended Complaint, on December 23,

2004, Cal-Agrex entered into a written agreement to purchase

10,000 metric tons of non-fat dry milk powder ("NFDM") from

Goodwin and Dee Van Tassell (together with Goodwin referred to as

"Defendants"). See 2d Am. Compl. ¶ 8; Ex. A ("Agreement"). The

Agreement required Defendants to ship the first 3,000 metric tons

of NFDM in January, 2005. Id. ¶ 9. The Agreement required CalAgrex to wire a deposit of $2,000,000 to the account of Van

Tassell for the benefit of Van Tassell and Goodwin. Id. ¶ 10.

Between December 24, 2004 and January 13, 2005, Plaintiff

initiated a series of wire transfers, depositing a total of

$1,000,000 in Van Tassell's account. Id. ¶ 12. Another party

deposited an additional $500,000 into Van Tassell's account,

apparently for partial-performance of Cal-Agrex's obligations

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under the Agreement. Id. Plaintiff alleges that when it asked

Defendants why it had not received a shipment of NFDM, Defendants

acknowledged that they had not sent a shipment yet. Id. ¶ 13. 

Cal-Agrex further alleges that in a telephone conversation with

Van Tassell on January 21, 2005, Van Tassell waived the remaining

deposit required by the written agreement until the shipments

began. Id. Goodwin allegedly confirmed this waiver of the

remaining deposit requirement in a telephone call conversation

with Cal-Agrex on January 31, 2005. Id.

Finally, Plaintiff alleges that Defendants have refused to

deliver any NFDM. Id. ¶ 14.

Plaintiff's Second Claim alleges Defendants promised to

deliver NFDM to Plaintiff and personally guaranteed the return of

Plaintiff's deposited funds if they failed to deliver, but that

Defendants never intended to perform such promises. See id. ¶¶

22-29. 

III. DISCUSSION

A. Motion To Dismiss

Goodwin asserts two deficiencies in Cal-Agrex's claim for

fraud: first, Goodwin argues that Cal-Agrex failed to plead a

false promise; second, he argues that Cal-Agrex did not plead the

factual allegations of fraud with sufficient particularity.

1. Rule 12(b)(6)

Pursuant to Federal Rule of Civil Procedure 12(b)(6), the

court will grant a motion to dismiss if the plaintiff fails "to

state a claim upon which relief can be granted." Fed. R. Civ. P.

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1

Goodwin suggests a different set of elements in a claim for

false promise fraud. Compare Mot. to Dismiss at 7, citing

California Civil Jury Instruction (CACI) 1902, with Vega, 17 Cal.

Rptr. 2d at 32. The CACI is not binding authority. Although the

instructions are intended to be an accurate statement of the law,

they do not absolve the courts of their responsibility for

interpreting California law. See Cal. Rules of Court, Rule

2.1050(a), (b). Other courts addressing claims for false promise

fraud, including those cited by Goodwin and those cited in the

notes to CACI 1902, have used the elements recited here. See, e.g., Molko v. Holy Spirit Ass'n, 46 Cal. 3d 1092, 1108 (1988),

superseded on unrelated grounds, Aguilar v. Atl. Richfield Co., 25

Cal. 4th 826, 853 n.19 (2001); Lazar v. Super. Ct., 12 Cal. 4th

631, 638 (1996); Engalla v. Permanente Med. Group, 15 Cal. 4th 951,

974 (1997); Conrad v. Bank of Am., 45 Cal. App. 4th 133, 156 (Ct.

App. 1996); Lovejoy v. AT&T Corp., 92 Cal. App. 4th 85, 93 (Ct.

App. 2001).

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12(b)(6). When evaluating a motion to dismiss, the court accepts

the facts as stated by the nonmoving party and draws all

inferences in its favor. See Everest & Jennings, Inc. v. Am.

Motorists Ins. Co., 23 F.3d 226, 228 (9th Cir. 1994). 

Furthermore, the court must assume that all general allegations

"embrace whatever specific facts might be necessary to support

them." Peloza v. Capistrano Unified Sch. Dist., 37 F.3d 517, 521

(9th Cir. 1994). At the pleading stage, the plaintiff "need only

show that the facts alleged, if proved, would confer standing upon

him." Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1140

(9th Cir. 2003).

The elements of a claim for fraud are "(1) representation;

(2) falsity; (3) knowledge of falsity; (4) intent to deceive; and

(5) reliance and resulting damage (causation)." Vega v. Jones,

Day, Reavis & Pogue, 17 Cal. Rptr. 3d 26, 32 (Ct. App. 2004).1 

The only significant changes Cal-Agrex made to the fraudulent

promise claim in the Second Amended Complaint were to add the

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details of phone calls between Cal-Agrex and Defendants on January

21 and January 31, 2005. Goodwin contends that by adding these

dates, Cal-Agrex undermined its fraud claim. Essentially, Goodwin

argues that Cal-Agrex has pled a Catch 22: absent the alleged

modification of the contract, Cal-Agrex never fulfilled its

contractual obligation of a $2,000,000 deposit, so Defendants had

no obligation to deliver NFDM, and Cal-Agrex has alleged no basis

for concluding that their promise was false. Alternatively, if

the contract was modified as alleged, the modifications took place

on January 21 and January 31, 2005, weeks after Cal-Agrex

transferred a portion of the deposit to Van Tassell, so Cal-Agrex

did not do anything in reliance on the modified promise. 

Cal-Agrex claims that the Court's First MTD Order forecloses

consideration of this issue. The Court disagrees. The Second

Amended Complaint is a new pleading, and Goodwin is entitled to

challenge it. Cal-Agrex relies on the following portion of the

First MTD Order:

Goodwin asserts that because Cal-Agrex did not

deliver the originally agreed-upon deposit of

$2,000,000, he has not broken a promise,

intentionally or otherwise. . . . This

argument has no merit. Cal-Agrex alleges that

it performed its contractual obligations in

full, as the contract was purportedly modified

to reduce the amount of the deposit. None of

the factual allegations necessary for CalAgrex's claim depends on its performance. If,

as Cal-Agrex alleges, Defendants did not

intend to deliver NFDM or return any monies

deposited at the time the parties entered into

the Agreement, Defendants' promises to do so

could have been fraudulent regardless of CalAgrex's conduct. 

First MTD Order at 5-6 (emphasis added). Addressing the

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heightened pleading requirements of Rule 9(b), the Court again

noted the relevance of the alleged waiver:

The promise to deliver NFDM or return the

money, however, was conditioned on Cal-Agrex

depositing $2,000,000 with Defendants. CalAgrex alleges that after it made a partial

deposit, Defendants waived the remainder of

the deposit requirement. . . . Plaintiff only

says that this waiver occurred in January of

2005. Plaintiff does not specify the date,

which of the two Defendants communicated the

waiver to Plaintiff, or how they communicated

the waiver (i.e., by telephone, e-mail, etc.). 

To the extent that Cal-Agrex's claim for fraud

relies on its allegation that Defendants

waived the deposit requirement, the

allegations of that waiver in the First

Amended Complaint lack the necessary

specificity to satisfy Rule 9(b). 

Id. at 7 (emphasis added). Cal-Agrex responded to the Court's

concern by adding the dates of two telephone calls. 2d Am. Compl.

¶ 13.

The fraud claim survived the First MTD Order because, if all

the allegations were true, it was sufficient. Now, Cal-Agrex has

painted itself into a corner. There are two possible promises at

issue. The first promise is the original Agreement, pursuant to

which Cal-Agrex would deposit $2,000,000 with Van Tassell, and Van

Tassell and Goodwin would ship NFDM to Cal-Agrex. The second

promise is the modified Agreement, pursuant to which Defendants

would ship NFDM to Cal-Agrex without waiting for the full deposit. 

The allegations in the Second Amended Complaint are

insufficient to support a claim that either promise was

fraudulent. With regard to the unmodified promise to deliver NFDM

in exchange for $2,000,000, Cal-Agrex fails to allege facts

supporting the falsity element of the claim. Because Cal-Agrex

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admits that it did not deposit the full $2,000,000, there is no

factual basis in the Second Amended Complaint for concluding that

Defendants failed to keep their promise to deliver NFDM upon

receipt of the deposit, or to return the deposit in the event of

non-delivery, and therefore no basis for concluding that

Defendants' promise was false. With regard to the modified

promise, which requires the purported waiver, Cal-Agrex fails to

plead reliance. Taking all of the allegations in the Second

Amended Complaint as true, Cal-Agrex transferred the first

$1,000,000 before Defendants waived the remainder, so Cal-Agrex

cannot possibly have relied on that waiver in making the deposit. 

Either Defendants' promise was not false, or Cal-Agrex did not

rely on it. Either way, the claim fails.

Cal-Agrex claims that it relied on the waiver by

"refrain[ing] from immediate demand for return of the deposited

funds. . . ." 2d Am. Compl. at ¶ 26; Opp'n at 5-6. The Court

fails to see how this constitutes reliance. "Reliance exists when

the misrepresentation or nondisclosure was an immediate cause of

the plaintiff's conduct which altered his or her legal relations.

. . ." Alliance Mortgage Co. v. Rothwell, 10 Cal. 4th 1226, 1239

(1995). Cal-Agrex does not allege that it did anything which

changed the legal relationship between it and Defendants after the 

waiver. It did not bind itself to new contractual obligations or

release Goodwin or Van Tassell from existing obligations. Nor did

Cal-Agrex do anything which affected its right to pursue legal

action, as it appears to have brought this suit in a timely

manner. Even if refraining from an immediate demand for

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2Cal-Agrex also argues that "Goodwin's suggestion that CalAgrex is also required to allege that it relied on the waiver by

depositing additional funds is nonsensical. . . ." Opp'n at 7. 

If, at the time of the waiver, Cal-Agrex thought it was being

defrauded, it could have sought to rescind the Agreement and

recover the deposited funds. Rather, it chose to seek damages for

fraud, which required it to affirm the Agreement. See, e.g., City

Bank of San Diego v. Ramage, 266 Cal. App. 2d 570, 586-87 (Ct. App.

1968). 

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compliance did amount to reliance, Cal-Agrex did not plead any

resulting harm from it in the Second Amended Complaint. In its

Opposition, Cal-Agrex asserts, without support, that this "was

clearly to Cal-Agrex's detriment, as those funds have never been

returned." Opp'n at 7. Cal-Agrex deposited its money with Van

Tassell before the waiver.2

 None of the facts Cal-Agrex alleges

in the Second Amended Complaint suggests reliance on the waiver or

additional harm resulting from that reliance. As such, the waiver

cannot be the basis for Cal-Agrex's claim for fraud.

2. Leave to Amend

The Second Amended Complaint is Cal-Agrex's third

unsuccessful attempt to repackage its contract claim as a false

promise claim. The Court sees no benefit in further delaying this

matter while Cal-Agrex attempts to plead fraud for a fourth time. 

No additional facts consistent with those alleged in the Second

Amended Complaint could rectify the problems described above. As

such, the Court dismisses the false promise claim with prejudice

and without leave to amend. See Lopez v. Smith, 203 F. 3d. 1122,

1127 (9th Cir. 2000).

3. Rule 9(b)

Because the Court has dismissed Cal-Agrex's false promise

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claim with prejudice, the Court need not reach the question of

whether the claim as pled satisfied the heightened pleading

requirements of Rule 9(b).

B. Cross-claim Motion

The Court granted Goodwin's prior motion to dismiss Van

Tassell's cross-claim, but allowed Van Tassell leave to amend. 

Van Tassell has not done so. Goodwin now moves the Court to enter

judgment on the cross-claim, or in the alternative, to dismiss the

cross-claim with prejudice. Van Tassell did not oppose this

motion. The Court is mindful of the need to allow pro se

litigants some latitude. However, in filing his original Answer

and Counterclaim, Van Tassell has demonstrated his ability to

comply with the Court's deadlines and to follow the established

procedures. Despite this, Van Tassell has forgone two

opportunities to address the deficiencies in the cross-claim. The

Court will not extend a third opportunity. The Court therefore

grants Goodwin's motion and dismisses the cross-claim with

prejudice and without leave to amend. As other claims still

remain for resolution either through summary judgment or trial,

the Court refrains from entering judgment at this time.

IV. CONCLUSION

For the reasons set forth above, the Court GRANTS Goodwin's

Motion to Dismiss and Goodwin's Cross-claim Motion and ORDERS as

follows:

1. Cal-Agrex's claim for false promise is dismissed with

prejudice and without leave to amend.

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2. Van Tassell's cross-claim against Goodwin is dismissed

with prejudice and without leave to amend.

3. The parties shall appear for a status conference on

February 22, 2008 at 10:00 a.m. in Courtroom 1. 

4. No later than seven days prior to the status conference,

the parties shall submit to the Court a Joint Status

Statement.

IT IS SO ORDERED.

Dated: January 22, 2008 

 UNITED STATES DISTRICT JUDGE

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