Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_04-cv-05333/USCOURTS-caed-1_04-cv-05333-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1442 Petition for Removal- Breach of Contract

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

BOMANITE CORPORATION, a

California Corporation, and QC

CONSTRUCTION PRODUCTS, LLC, a

Delaware Limited Liability

Company,

Plaintiffs,

v.

CATHAY PIGMENTS (USA), INC., a

Nevada Corporation, MARTIN

EDISON and DOES 1 through 20,

inclusive,

Defendants.

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1:04-cv-05333 OWW SMS

MEMORANDUM DECISION AND

ORDER ON DEFENDANTS’ MOTION

TO DISMISS [Fed. R. Civ. P.

12(b)(6)] PLAINTIFFS’ FIRST

AMENDED COMPLAINT. 

I. INTRODUCTION

Defendants Cathay Pigments, Inc. (“Cathay”) and

Martin Edison (“Edison”) move to partially dismiss the First

Amended Complaint of Plaintiffs Bomanite Corporation (“Bomanite”)

and QC Construction Products, LLC (“QC”). Defendants move to

dismiss Plaintiffs’ claims for consequential damages for breach

of contract, fraud, interference with an economic relationship,

and interference with prospective economic advantage, pursuant to

Fed. R. Civ. P. 12(b)(6). Defendants also move for more specific

pleading of Plaintiffs’ fraud claim pursuant to Fed R. Civ. P.

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9(b). (Doc. 15, Defendants’ Motion, filed May 24, 2004). 

Plaintiffs oppose. (Doc. 21, Plaintiffs’ Opposition, filed Aug.

2, 2004). 

II. PROCEDURAL HISTORY

Plaintiffs Bomanite and QC (collectively, “Plaintiffs”)

filed their original complaint against Defendants Cathay and

Edison (collectively, “Defendants”) in the Superior Court of

California, County of Madera, for (1) breach of contract; (2)

fraud; and (3) intentional interference with prospective economic

advantage. (Doc. 1, Plaintiffs’ Compl., filed January 21, 2004;

see also Doc. 11, Order Granting Defendants’ Motion to Dismiss,

17). The original complaint was removed to the United States

District Court for the Eastern District of California based on

diversity jurisdiction pursuant to 28 U.S.C. § 1441(a), in

accordance with the removal procedure outlined in 28 U.S.C.

§ 1446(a). (See Doc. 1, filed February 20, 2004; see also 28

U.S.C. § 1332(a)(1) (“The district courts shall have original

jurisdiction of all civil actions where the matter in controversy

exceeds the sum or value of $75,000, exclusive of interest and

costs, and is between...[c]itizens of different [s]tates.”)).

Defendants moved to dismiss Plaintiffs’ original complaint

pursuant to Fed. R. Civ. P. 12(b)(6). (See Docs. 6 and 7, filed

Feb. 27, 2004). Plaintiffs opposed. (See Doc. 8, filed Mar. 22,

2004). Defendants replied. (Doc. 9, filed Mar. 29, 2004). Oral

arguments were heard April 5, 2004. In a memorandum decision and

order, Defendants’ motions to dismiss were granted with respect

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1 In Plaintiffs’ First Amended Complaint, Plaintiffs state

their third claim as “Interference with Business Relationships.” 

However, most case law refers to this claim as “Interference with

Economic Relationships.” This Memorandum Decision will refer to

Plaintiffs’ third claim as “Interference with Economic

Relationship(s),” or “Interference with existing Economic

Relationship(s).” 

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to Plaintiffs’ claims for consequential damages for breach of

contract, fraud, and intentional interference with prospective

economic advantage. (Doc. 11 at 19, filed Apr. 12, 2004). 

Plaintiffs were given twenty (20) days following service of the

order to amend their complaint, and Defendants were given twenty

(20) days after Plaintiffs’ filing to respond to their amended

complaint. (Id.)

Plaintiffs filed an amended complaint. (Doc. 14, First Am.

Compl., filed May 3, 2004). In addition to pleading three claims

present in their original complaint, Plaintiffs also add a

fourth, new claim: interference with an existing economic

relationship.1 (Id.). Plaintiffs now allege: (1) breach of

contract; (2) fraud; (3) interference with an existing economic

relationship; and (4) interference with prospective economic

advantage. (Id.). Defendants moved to partially dismiss

Plaintiffs’ First Amended Complaint. (Doc. 17, Defendants’ Memo,

filed May 24, 2004). Plaintiffs opposed. (Doc. 21, Plaintiffs’

Opp., filed Aug. 2, 2004). Defendants replied to Plaintiffs’

Opposition. (Doc. 22, Defendants’ Reply, filed Aug. 9, 2004).

Oral argument was heard on August 16, 2004. Russell K.

Ryan, Esq., appeared on behalf of Plaintiffs. Matthew G.

Backowski, Esq., appeared on behalf of Defendants.

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III. STATEMENT OF ALLEGATIONS

A. Summary of Alleged Negotiations and Contract

Provisions.

This case arises out of an agreement pursuant to which

Defendant Cathay was to supply Plaintiff QC with color pigments

used in architectural concrete. Defendant Cathay is a

manufacturer and supplier of color pigments used in the concrete

industry. (Doc. 14, First Am. Compl. at ¶ 3). Cathay is a

Nevada corporation with its principal place of business in El

Mirage, Arizona. (Id.). Defendant Edison, a resident of

Arizona, is the president of Cathay. (Id. at ¶ 4). Plaintiff QC

is a limited liability company that sells concrete specialty

products. (Doc. 14, First Am. Compl. at ¶ 2). QC is

incorporated in Delaware and does business throughout California,

with its principal place of business in Madera County, California

(Doc. 14, First Am. Compl. at ¶ 2). QC is an affiliate of

Bomanite. (See id.; see also Doc. 14, First Am. Compl. at ¶ 1). 

Plaintiff Bomanite is a franchisor of concrete businesses

throughout the United States and Canada. (See Doc. 21,

Plaintiffs’ Opp. at 2:3-5). Bomanite is a California corporation

with its principal place of business in Madera County,

California. (Doc. 14, First Am. Compl. at ¶ 1). 

On August 9, 2002, Defendant Cathay, by and through

Defendant Edison, and Plaintiff QC entered into an agreement for

the sale of both “Raw Pigments” and “Blended Products.” (Doc.

14, First Am. Compl. at Ex. A, Supply Agreement). “Raw Pigments”

are defined by the Agreement as “Cathay Synthetic Iron Oxide

Pigments,” and “Blended Products” are defined as “custom made

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iron oxide blends.” (Id.). On March 12, 2003, Plaintiff

Bomanite was added to the Supply Agreement as an additional and

optional buyer. (Id. at Ex. B). 

Plaintiffs allege that, before they entered into the Supply

Agreement, Defendant Cathay (through Edison) represented to

Plaintiffs that Cathay had the ability to manufacture “Blended

Products” for Plaintiffs. (Id. at ¶ 8). Plaintiffs further

allege that they “explained” to Defendants that any agreement

between them would provide that (a) Cathay manufacture Blended

Products that would be shipped directly to QC warehouses

nationwide, and (b) Cathay would sell both the Raw Pigments and

Blended Products to Plaintiffs on consignment, much like Bayer

Corporation (“Bayer”), QC’s prior supplier, had done. (Id. at ¶

9). Furthermore, Plaintiffs allege there was an understanding

between the parties that Defendants could and would perform the

following: supply six months of consignment inventory; engage in

color matching to manufacture Blended Products within 90 days;

and satisfy the manufacturing requirements for Raw Pigments and

Blended Products that Plaintiffs’ former supplier had previously

met. (Id. at ¶¶ 9-10). 

At the time of their negotiations with Defendants,

Plaintiffs were also negotiating with other pigments suppliers,

including Kingland Chemical Companies, Ltd. (“Kingland”). (Id.

at ¶ 11). Kingland was allegedly “able to provide better pricing

on pigments [than Cathay] but did not have the ability to provide

consignment inventory to replenish QC’s warehouses.” (Id.). 

Plaintiffs claim that Cathay’s representations about its ability

to manufacture Blended Products and provide consignment inventory

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induced QC to enter into the Agreement with Cathay instead of

Kingland. (Id.).

The Supply Agreement provides that Cathay will sell to QC,

and QC will purchase from Cathay, Raw Pigments or Blended

Products that are “formulated to [QC’s] specifications and

packaged in proprietary QC Construction Products Bags.” (Id. at

Ex. A). The Agreement does not specify quantities to be

purchased, although it states an estimated amount of “between 3

million pounds and 5 million pounds of Raw Pigments and finished

Blended Products” per year. (Id.). The Agreement also contains

pricing and packaging provisions. (See id.). Finally, the

Agreement specifies terms for “purchase orders” and “consignment

orders”:

For all purchase orders, terms are net 60 days from the

date of delivery to buyer’s designated delivery point.

For all consignment orders, terms will be net 30 days

from the reporting of consignment inventory usage. Usage

reports from all consignment locations shall be

summarized by Buyer and submitted to Seller within 7

working days from the end of the prior month. In any

event, any consignment inventory not consumed, sold or

otherwise used by Buyer within 6 months of delivery to

Buyer will either be returned to Seller’s warehouse

facility in El Mirage, AZ at Buyer’s expense or deemed

purchased. For any such inventory so purchased, Seller

shall immediately present an invoice to Buyer and payment

for such inventory will be due to Seller within 15 days

of the receipt of the invoice.

(Id.).

The Supply Agreement provides that Cathay’s liability for

damages shall not exceed the purchase price of the pigments

delivery at issue. (Id. at Ex. A (“Seller’s liability for

damages shall in no event exceed the purchase price of the

particular delivery with respect to which such damages are

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claimed.”)). The Supply Agreement also contains an integration

clause: “This document shall constitute the complete Agreement

and understanding between the parties, and its terms may be

modified only by the written agreement of both parties.” (Id.).

Plaintiffs’ Amended Complaint goes on to allege that “[i]t

is now evident that Cathay did not have the financial or

manufacturing capability to provide consignment inventory or

Blended Products....” (Id. at ¶ 15). Plaintiffs claim that from

August 2002 to December 2003, Cathay did not supply to QC or

Bomanite “even a single bag of product for consignment inventory

or fulfill[] any order for Blended Products.” (Id. at ¶ 16). 

Plaintiffs allege that as a result of Cathay’s non-performance of

the terms of the Supply Agreement, Plaintiffs’ production costs

have risen; Plaintiffs have had to manufacture more than $500,000

in inventory that they would otherwise have purchased from

Cathay; and they have had to purchase products in the open market

at significantly higher prices than the price agreed upon in the

Supply Agreement. (Id. at ¶ 16).

On December 2, 2003, some sixteen months after the Supply

Agreement was signed, Cathay sent a letter to Plaintiffs

terminating the Supply Agreement. (Id. at ¶ 18). Plaintiffs

claim that Cathay terminated the Agreement because of an alleged

“fabricated” assertion that Plaintiffs were in breach of the

Supply Agreement. (Id.). Plaintiffs allege that they “performed

on all promises, covenants, and conditions required of it...

under the terms of [the] Supply Agreement and its amendment.” 

(Id. at ¶ 21). Plaintiffs claim that since terminating the

Supply Agreement, Cathay has refused to release a shipment of

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ordered products, even after Plaintiffs paid them an additional

$100,000 for the delivery of that product. (Id. at ¶ 18).

B. Summary of Causes of Action and Damages Claimed.

Plaintiffs allege four causes of action against Defendants:

(1) breach of contract; (2) fraud; (3) interference with an

existing economic relationship; and (4) interference with

prospective economic advantage. (Id. at ¶¶ 19-47).

1. Breach of Contract.

First, Plaintiffs claim breach of the Supply Agreement. 

They allege that Cathay breached the Supply Agreement by:

(a) failing to provide consignment orders;

(b) failing to deliver the quantities of raw and blended

products ordered by Plaintiffs;

(c) failing to meet the performance criteria set forth in

Attachment 3 to the Supply Agreement; 

(d) failing to provide blended products as contemplated by

Attachment 1 of the Supply Agreement; 

(e) refusing to provide further product until Plaintiffs

pay for orders in which payments are not yet due; and

(f) approaching and/or soliciting QC’s customers including,

but not limited to, Cohill’s Building Specialities

inasmuch as Cathay was providing Cohill’s Blended

Products or other architectural concrete products.

(Id. at ¶ 22). 

Plaintiffs allege that their damages total in excess of

$750,000, resulting in part from:

(a) having to purchase replacement products at higher costs

from other suppliers, 

(b) increased manufacturing and labor costs, overhead

expenses, substantial freight costs, etc., from having

to manufacture its own blended products instead of

purchasing them from Cathay, 

(c) having to maintain their inventory themselves instead

of having the six months’ consignment inventory

promised by Cathay, and 

(d) QC’s inability to fill orders for certain products,

thereby jeopardizing QC’s relationships with some of

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its customers. 

(Id. at ¶ 23). Plaintiffs claim they are entitled to

compensatory damages as well as consequential damages for their

breach of contract claim. (Id. at ¶ 24). Plaintiffs argue that

the provision that damages would not exceed the purchase price

was included in the contract because “[Defendant] Edison...

wished to protect Cathay from situations where, for example, a

wrong color was used which then resulting [sic] in a dispute over

a construction project that might claim excessive damages.” 

(Id.). Furthermore, Plaintiffs allege that “[t]his language was

not meant to apply to the Supply Agreement in situations such as

the present where no product delivery was made or Cathay was

wholly unable to provide Blended Products or Consignment

Inventory.” (Id.).

2. Fraud.

Second, Plaintiffs claim that Defendants defrauded them. 

Plaintiffs’ fraud claim is based on Defendants’ alleged series of

“representations about its ability to provide consignment

inventory and [to] produc[e]...Blended Products[, which] induced

QC to do business with Cathay.” (Id. at ¶ 28). Plaintiffs

allege that it was “Defendants’ secret intention not to perform

in accordance with their promises....” (Id. at ¶ 34). 

Plaintiffs allege that if QC “had known the truth, it would not

have contracted with Cathay but would have continued to do

business with Bayer[, its former supplier,] and/or entered into a

business relationship” with another supplier. (Id.). Plaintiffs

allege that “as a proximate result of Defendants’ fraud and

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deceit, Plaintiffs have been damaged in an amount of at least

$750,000.00, plus costs and attorneys’ fees....” (Id. at ¶ 35). 

Plaintiffs also claim that Defendants’ “despicable,” intentional

misrepresentations subjected Plaintiffs to “cruel and unjust

hardship,” and justifies “an award of exemplary and punitive

damages.” (Id. at ¶ 41) 

3. Interference with Existing Economic Relationships.

Third, Plaintiffs claim that Defendants tortiously

interfered with Plaintiffs’ economic relationship with Bayer. 

(Id. at ¶ 39). Specifically, Plaintiffs allege that “Defendants’

actions...interfere[d] with Plaintiffs’ contractual relationship

with Bayer such that QC and Bomanite were no longer able to

obtain consignment inventory from Bayer and/or satisfactory

credit terms that would have permitted QC and Bomanite to

maintain its [sic] nationwide presence in a financially

satisfactory manner.” (Id. at ¶ 40). Plaintiffs allege that

they have been financially harmed “in an amount which [h]as not

yet been ascertained, but is believed to be in excess of

$750,000.00.” (Id.). Plaintiffs also claim that Defendants’

“despicable,” intentional misrepresentations caused injury to

Plaintiffs’ economic relationship with Bayer, and justifies “an

award of exemplary and punitive damages.” (Id. at ¶ 41).

4. Interference with Prospective Economic Advantage.

Fourth, Plaintiffs claim that Defendants interfered with

Plaintiffs’ prospective economic advantage with a potential

supplier and one of its customers. Plaintiffs allege that

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Defendants’ actions interfered with Plaintiffs’ prospective

economic advantage with Kingland, a potential supplier, because

Plaintiffs opted not to contract with Kingland to purchase Raw

Pigments and Blended Products at lower prices and better credit

terms than were available from Cathay due to Defendants’

fraudulent misrepresentations. (Id. at ¶ 46). Plaintiffs

further allege that Defendants approached and solicited business

from Cohill’s Building Specialties, one of Plaintiffs’ customers,

and is currently, or was in the very recent past, selling

architectural concrete products directly to them. (Id. at ¶ 45). 

Plaintiffs allege that they “have been damaged in an amount which

[h]as not yet been ascertained, but is believed to be in excess

of $750,000.00.” (Id. at ¶ 46). Plaintiffs also claim that

Defendants’ “despicable,” intentional misrepresentations deprived

Plaintiffs of prospective economic advantage, and justifies “an

award of exemplary and punitive damages.” (Id. at ¶ 47). 

5. Damages.

Plaintiffs seek (1) damages “in excess of $750,000.00,”

arising from breach of contract, fraud, interference with an

existing economic relationship, and interference with prospective

economic advantage (Id. at ¶ 23; id. at Prayer for Relief, ¶ 1). 

Plaintiffs also seek: (2) punitive damages for fraud,

interference with an existing economic relationship, and

interference with prospective economic advantage; (3) attorney’s

fees; (4) the costs of the suit; and (5) any other relief the

court may deem “just and proper.” (Id. at Prayer for Relief, ¶¶

2-5). 

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IV. STANDARDS OF REVIEW

A. Motion to Dismiss for Failure to State A Claim upon

which Relief Can Be Granted - Fed. R. Civ. P. 12(b)(6).

Fed. R. Civ. P. 12(b)(6) allows a defendant to move to

dismiss a complaint for failure to state a claim upon which

relief can be granted. However, a motion to dismiss under Fed.

R. Civ. P. 12(b)(6) is disfavored and rarely granted. “A

complaint should not be dismissed unless it appears beyond doubt

that plaintiff can prove no set of facts in support of his claim

which would entitle him to relief.” Van Buskirk v. CNN, Inc.,

284 F.3d 977, 980 (9th Cir. 2002) (citations omitted). In

deciding whether to grant a motion to dismiss, the court

“accept[s] all factual allegations of the complaint as true and

draw[s] all reasonable inferences” in the light most favorable to

the nonmoving party. TwoRivers v. Lewis, 174 F.3d 987, 991 (9th

Cir. 1999); see also Rodriguez v. Panayiotou, 314 F.3d 979, 983

(9th Cir. 2002). Dismissal of the complaint is proper if,

assuming the allegations to be true, it “fail[s] to state a claim

on its face.” Lucas v. Bechtel Corp., 633 F.2d 757, 759 (9th

Cir. 1980).

“The court need not, however, accept as true allegations

that contradict matters properly subject to judicial notice or by

exhibit. Nor is the court required to accept as true allegations

that are merely conclusory, unwarranted deductions of fact, or

unreasonable inferences.” Sprewell v. Golden State Warriors, 266

F.3d 979, 988 (9th Cir. 2001) (citations omitted). For example,

matters of public record may be considered, including pleadings,

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orders, and other papers filed with the court. See Lee v. City

of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001). Conclusions

of law, conclusory allegations, unreasonable inferences, or

unwarranted deductions of fact need not be accepted. See Western

Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981).

B. Stating Circumstances of Fraud with Specificity - Fed.

R. Civ. P. 9(b).

Rule 9(b) of the Federal Rules of Civil Procedure provides

that “in all averments of fraud..., the circumstances

constituting fraud...shall be stated with particularity.” See

also Berry v. Valence Tech., Inc., 175 F.3d 699, 706 (9th Cir.

1999).

V. LEGAL ANALYSIS

A. Defendants’ Motions to Dismiss.

Defendants move to dismiss Plaintiffs’ claims for: (1)

consequential damages for breach of contract; (2) fraud; (3)

interference with an economic relationship; and (4) interference

with prospective economic advantage.

1. Defendants’ Motion to Dismiss Plaintiffs’

Consequential Damages Claim for Breach of

Contract.

Defendants move to “dismiss Plaintiffs’ breach of contract

claim to the extent Plaintiffs seek damages beyond those

permitted under the integrated contract between the parties.” 

(Doc 17, Defendants’ Memo, 1:27-28; 14:11-15:12). Defendants

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argue that Plaintiffs’ claim for consequential damages should be

barred because the damages clause in the Agreement limits the

amount of damages to the purchase price of the particular

delivery of product over which the dispute arises. (Id. at

14:11-12). Plaintiffs, however, argue that the damages clause in

the Agreement is being taken out of context and was not intended

to apply to the circumstances giving rise to this suit. (Doc 14,

First Am. Compl. at ¶ 24; Doc 21, Plaintiffs’ Opp. at 12:9-25). 

Plaintiffs argue that extrinsic evidence will prove that the

damages clause was included in the Agreement simply to protect

Defendants “from situations where, for example, a wrong color was

used which then” results in a dispute in which excessive damages

are claimed. (Id.).

Under the California Civil Code, extrinsic evidence is

generally inadmissible when the language of the contract is clear

and unambiguous. “The language of a contract is to govern its

interpretation, if the language is clear and explicit, and does

not involve an absurdity.” (Cal. Civ. Code § 1638; see also

McAbee Constr., Inc. v. U.S., 97 F.3d 1431, 1435 (Fed. Cir. 1996)

(holding that if contractual provisions are “clear and

unambiguous, they must be given their plain and ordinary meaning,

and the court may not resort to extrinsic evidence to interpret

them”) (internal quotations and citations omitted)). However, an

exception to this general rule applies when the language of the

contract is not clear and unambiguous: “if a term is ambiguous,

its interpretation depends on the parties’ intent at the time of

the contract’s execution, in light of earlier negotiations,...

[and] related agreements....” Pierce County Hotel Employees v.

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2 The majority of Plaintiffs’ Opposition brief replicates

the arguments made in their original defense against Defendants’

motion to dismiss Plaintiffs’ consequential damages claim. (See

Doc. 21, Plaintiffs’ Opp. at 12:9-22; see also Doc. 8,

Plaintiffs’ Memo at 5:11-25). Plaintiffs have not attempted to

15

Elks Lodge, 827 F.2d 1324, 1327 (9th Cir. 1996).

Defendants argue that the damages clause in the Agreement

prevents Plaintiffs from seeking consequential damages because

the clause is clear and limits the amount of damages that can be

claimed. The clause states: “Seller’s liability for damages

shall in no event exceed the purchase price of the particular

delivery with respect to which such damages are claimed.” (Doc.

14, First Am. Compl. at Ex. A, Conditions, ¶ 3). Plaintiffs’

claim for consequential damages for breach of contract in their

original Complaint was dismissed on Defendants’ earlier motion. 

The court found that the damages clause is clear and limits the

amount of damages Plaintiffs can claim to the total cost of the

delivery order in dispute. (Doc. 11, Memo Decision at 12:12-23).

In their First Amended Complaint, Plaintiffs claim they are

entitled to consequential damages because of the mutual intention

of the parties at the time of contracting. (Doc. 21, Plaintiffs’

Opp. at 12:14-15.) They claim that Defendants have “take[n] out

of context an isolated sentence in the conditions attached to the

supply agreement....” (Id. at 12:10-11). Plaintiffs also argue

that “[t]his language is clearly not intended to deal with

overall contract performance by Cathay, since the language

surrounding the sentence in question provides layers of context

for the intent and interpretation of that sentence.” (Id. at

12:20-22).2

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mend the defects that were present in their previous pleading.

3 Plaintiffs’ additional claim that Defendants’ motion “is

not ripe for consideration” is unsupported. (Id. at 12:26-27). 

Plaintiffs do not explain why Defendants’ motion to dismiss

consequential damages is “not ripe.” The reasons given for

Defendants’ previously granted motion to dismiss consequential

damages for Plaintiffs’ breach of contract claim are still valid

and remain unaddressed in the Amended Complaint or Opposition.

16

The damages clause in the Supply Agreement is unambiguous

and part of a fully integrated agreement. (See Doc. 14, First

Am. Compl. at Ex. A, Conditions, ¶ 3; see also id. at Ex. A,

Conditions, ¶ 5 (“This document shall constitute the complete

Agreement and understanding between the parties, and its terms

may be modified only by the written agreement of both

parties.”)). There is no claim that the contract is adhesive or

unconscionable. It is not appropriate to look outside the

written contract to “the parties’ intent” because the clause

clearly limits the amount of damages that can be claimed. (Doc

21, Plaintiffs’ Opp. at 12:23-25).3 

This is not to say that Plaintiffs’ consequential damages

are not recoverable under their fraud or other tort causes of

action. Consequential damages are still recoverable under these

alternate causes of action, just not under Plaintiffs’ breach of

contract cause of action. Defendants’ motion to dismiss

Plaintiffs’ consequential damages claim for breach of contract is

GRANTED WITH PREJUDICE. To the extent Defendants move to dismiss

Plaintiffs’ consequential damages claims for alternate causes of

action, Defendants’ motion is DENIED. 

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2. Defendants’ Motion to Dismiss Plaintiffs’ Fraud

Claim.

Defendants move to dismiss Plaintiffs’ fraud claim. 

Plaintiffs seek to introduce parol evidence to prove that

Defendants intentionally misrepresented their contracting and

performance intentions in order to induce Plaintiffs to sign the

Agreement. Defendants seek to ban Plaintiffs’ admission of parol

evidence, and move to dismiss Plaintiffs’ fraud claim for failure

to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). (Doc. 17,

Defendants’ Memo at 7:21-25). Defendants argue that Plaintiffs

cannot prove all the elements required for a fraud claim without

introduction of parol evidence, and therefore fail to state a

claim. (Id. at 7:24-25). Alternatively, Defendants move for

more specific pleading of Plaintiffs’ fraud claim for lack of

particularity as required by Fed. R. Civ. P. 9(b). (Id. at 8:24-

25).

a. Failure to State a Claim - Fed. R. Civ. P.

12(b)(6).

To state a claim for fraud, a plaintiff must allege the

following five elements: (1) misrepresentation of a material fact

(false representation, concealment, or non-disclosure); (2)

knowledge of falsity; (3) intent to defraud, i.e. to induce

reliance; (4) justifiable reliance; and (5) resulting damage. 

Small v. Fritz Cos., 30 Cal. 4th 167, 173 (2003) (internal

quotations and citation omitted). 

The parol evidence rule, as applicable to written contracts,

generally prohibits introduction of extrinsic evidence, whether

oral or written, to vary the terms of an integrated written

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agreement. Pacific State Bank v. Greene, 110 Cal. App. 4th 375,

383-384 (2003); see also Cal. Civ. Proc. Code § 1856. Parol

evidence refers to matters spoken or agreed upon orally, but not

included in a written instrument. See Pacific State Bank, 110

Cal. App. 4th at 378. 

An integrated agreement is one that contains a clause

stating that the contract is to be considered the complete and

exclusive agreement between the parties. See id. at 384. 

Inclusion of an integration clause typically prohibits the

introduction of parol evidence. Trident Ctr. v. Connecticut Gen.

Life Ins. Co., 847 F.2d 564, 568 (9th Cir. 1988). The parol

evidence rule is subject to an exception for fraud. The parol

evidence rule “does not exclude...evidence of the circumstances

under which [an] agreement was made...to establish illegality or

fraud.” (Cal. Civ. Proc. Code § 1856(g)). 

California law provides two instances in which parol

evidence may be introduced under the fraud exception. First,

parol evidence is admissible in cases where one party

misrepresents the contents of the contract at the time of

signing. Pacific State Bank, 110 Cal. App. 4th at 378-79. 

Second, parol evidence is admissible when one party

misrepresents, or makes false promises of, its intentions to

perform:

[Courts] have held that if, to induce one to enter into

an agreement, a party makes an independent promise

without intention of performing it, this separate false

promise constitutes fraud....

Bank of America v. Lamb Finance Co., 179 Cal. App. 2d 498, 502

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(1960); see also Bell v. Exxon Co., 575 F.2d 714, 716 (9th Cir.

1978) (finding that parol evidence is admissible to show

fraudulent inducement to enter into a contract “even though the

contract recites that all conditions and representations are

embodied therein”). Based on their pleadings and on

representations made during oral argument, Plaintiffs do not

appear to allege that Defendants’ misrepresentations were ones of

fact mischaracterizing the content of the written Agreement at

the time of signing. Instead, Plaintiffs appear to allege that

Defendants’ misrepresentations were promissory.

When promissory misrepresentations are alleged, as they are

here, the Pendergrass rule applies. Under the Pendergrass rule,

introduction of parol evidence is admissible to prove promissory

fraud only if it does not contradict the terms of the written

contract. Bank of America Nat. Trust & Savings Assoc. v.

Pendergrass, 4 Cal. 2d at 263 (1935). While allegations of fraud

will ordinarily allow the admission of parol evidence, the

“Pendergrass rule...precludes the admission of evidence of a

false promise inconsistent with the terms of a written agreement

to prove fraud.” Continental Airlines, 216 Cal. App. 3d at 420

(citing Pendergrass, 4 Cal. 2d at 263). “For parol evidence of

fraud or misrepresentation to be admissible under California law,

‘it must tend to establish some independent fact or

representation..., and not a promise directly at variance with

the promise of the writing.’” Brinderson-Newberg Joint Venture

v. Pacific Erectors, Inc., 971 F.2d 272, 281 (9th Cir. 1992)

(emphasis omitted) (quoting Pendergrass, 4 Cal. 2d. at 263). As

the California Supreme Court recently stated, “despite some

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criticism, our courts have consistently rejected promissory fraud

claims premised on prior or contemporaneous statements at

variance with the terms of a written integrated agreement.” Casa

Herrera, Inc. v. Beydoun, 32 Cal. 4th 336, 347 (2004) (emphasis

added). 

Plaintiffs seek to introduce parol evidence of Defendants’

alleged promises to provide goods on consignment and to provide

Blended Products that were made to entice Plaintiffs to sign the

Supply Agreement. (Doc. 14, First Am. Compl. at ¶¶ 15, 31). 

Plaintiffs claim that one of “the two major components of [the]

agreement” was its consignment provision and that QC verbally

informed Defendants that “six months of consignment inventory was

particularly critical for QC....” (Id. at ¶¶ 9, 26). Plaintiffs

allege that “Cathay represented on several occasions that [it]

had the ability to both manufacture Blended Products and provide

the consignment inventory QC needed....” (Id. at ¶ 10). This

allegation satisfies the first element of fraud,

misrepresentation of material facts. Plaintiffs claim that it

was “[i]n reliance upon these representations and

promises...[that QC] executed the Supply Agreement.” (Id. at ¶

29). This allegation satisfies the fourth element, justifiable

reliance. Plaintiffs allege that “Cathay did not have the

ability (financial or otherwise) to comply with [the] Supply

Agreement...,” and had “secret intentions not to perform in

accordance with their promises....” (Id. at ¶¶ 17, 33, 34). 

Plaintiffs also allege, therefore, that “Defendants’ conduct

consisted of intentional misrepresentations, deceit and/or

concealment of material facts known to Defendants with the

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intention of” injuring Plaintiffs. (Id. at ¶ 36). These

allegations satisfy the second and third elements, knowledge of

falsity and intent to defraud, respectively. Plaintiffs further

allege that “as a proximate result of Defendants’ fraud and

deceit, Plaintiffs have been damaged in an amount of at least

$750,000.00, plus costs and attorneys’ fees....” (Id. at ¶ 35). 

This satisfies the fifth element of fraud, resulting damage.

Defendants argue that, despite Plaintiffs’ attempt to

introduce parol evidence of alleged fraudulent inducements and

promises concerning the consignment agreement, the parol evidence

rule prohibits the introduction of parol evidence because the

Supply Agreement contains an integration clause. (Doc. 17,

Defendants’ Memo at 5:19-25). The Agreement states that it

“shall constitute the complete Agreement and understanding

between the parties, and its terms may be modified only by the

written agreement of both parties.” (Doc 14, First Am. Compl. at

Ex. A, Conditions, ¶ 5). Inclusion of an integration clause,

such as this, typically prohibits the introduction of parol

evidence for purposes of interpretation and clarification. 

Trident Ctr. v. Connecticut Gen. Life Ins. Co., 847 F.2d 564, 568

(9th Cir. 1988) (“Under traditional contract principles,

extrinsic [or parol] evidence is inadmissible to interpret, vary

or add to the terms of an unambiguous integrated written

instrument.” (citations omitted)). In this case, however,

Plaintiffs are seeking to introduce parol evidence not to clarify

the meaning of a contract term, but instead to establish fraud. 

The fraud exception to the parol evidence rule applies. 

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Defendants also argue that, even if the fraud exception

applies, the Pendergrass rule precludes admission of Plaintiffs’

parol evidence because the parol evidence contradicts the express

terms of the Supply Agreement. (Doc. 17, Defendants’ Memo at

6:7-9). Defendants fail to provide any valid examples of

contradiction. Although the Supply Agreement lacks specificity

regarding the amount of product Plaintiffs expected to receive on

consignment, Plaintiffs’ parol evidence does not contradict the

terms of the Supply Agreement. According to the terms of the

Agreement, between August 5, 2002 and August 4, 2005, Plaintiffs’

“[a]nnual purchases [we]re anticipated to be between 3 million

and 5 million pounds of Raw Pigments and finished Blended

Products.” (Doc. 14, First Am. Compl. at Ex. A, Supply

Agreement, Period & Quantity). The Supply Agreement was to cover

both “purchase orders” and “consignment orders”:

For all purchase orders, terms are net 60 days from the

date of delivery to buyer’s designated delivery point.

For all consignment orders, terms will be net 30 days

from the reporting of consignment inventory usage.

Usage reports from all consignment locations shall be

summarized by Buyer and submitted to Seller within 7

working days from the end of the prior month. In any

event, any consignment inventory not consumed, sold or

otherwise used by Buyer within 6 months of delivery to

Buyer will either be returned to Seller’s warehouse

facility in El Mirage, AZ at Buyer’s expense or deemed

purchased. For any such inventory so purchased, Seller

shall immediately present an invoice to Buyer and

payment for such inventory will be due to Seller within

15 days of the receipt of the invoice.

(Id. at Ex. A, Supply Agreement, Terms). Plaintiffs’ parol

evidence of Defendants’ promises to provide goods on consignment

and to manufacture Blended Products does not contradict these

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terms. The Agreement is silent on these issues, so there can be

no contradiction. The parol evidence Plaintiffs seek to

introduce does not contradict the express terms of the Supply

Agreement. Rather, it is explanatory of the alleged intent of

the parties. Parol evidence is not barred under Pendergrass. 

For the reasons stated above, Plaintiffs’ parol evidence of

fraud is not barred. Because Plaintiffs’ parol evidence of the

Parties’ contracting intent is admissible, there is a set of

facts supporting Plaintiffs’ claim which could entitle them to

relief. See Van Buskirk, 284 F.3d at 980. Defendants’ motion

to dismiss Plaintiffs’ fraud claim for failure to state a claim

upon which relief can be granted is DENIED.

b. Failure to Plead with Particularity - Fed. R.

Civ. P. 9(b).

Defendants also move to dismiss Plaintiffs’ fraud claim for

failure to plead with sufficient particularity. However,

Plaintiffs’ claim speaks of the subject matter, the persons

involved, the dates of the contract, and the occasions of the

alleged fraud. Fed. R. Civ. P. 9(b) does not require more. 

Defendants’ motion to require Plaintiffs to plead their fraud

claim with greater particularity is DENIED.

3. Defendants’ Motion to Dismiss Plaintiffs’ Claim for

Interference with an Existing Economic

Relationship.

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Defendants move to dismiss Plaintiffs’ claim for tortious

interference with an existing economic relationship. Plaintiffs

allege that Defendants interfered with their economic

relationship with Bayer, one of its former suppliers. 

The elements a plaintiff must allege to state a claim for

interference with an existing economic relationship are: (1) a

valid contract between the plaintiff and a third party; (2)

defendant’s knowledge of this contract; (3) defendant’s

intentional acts designed to induce breach or disruption of the

contractual relationship; (4) actual breach or disruption of the

contractual relationship; and (5) damages to the plaintiff

proximately caused by the acts of the defendant. Pacific Gas &

Elec. Co. v. Bear Stearns & Co., 50 Cal. 3d 1118, 1126 (1990).

Plaintiffs allege that “[b]y virtue of [] Cathay’s

fraudulent representations of its ability to provide consignment

inventory and Blended Products, QC (and later, Bomanite) stopped

doing business with Bayer Corporation....” (Doc. 14, First Am.

Compl. at ¶ 39). However, Plaintiffs do not claim that they had

a valid contract with Bayer. Plaintiffs therefore fail to meet

the first element, and do not state a claim for interference with

an existing economic relationship as to Bayer. During oral

argument, Plaintiffs’ counsel indicated that in their pleading,

they had mistakenly alleged that Defendants interfered with their

economic relationship with its supplier, Bayer, instead of with

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their existing client, Cohill’s Building Specialties. 

Plaintiffs allege in a different section of their complaint

that Defendants interfered with Plaintiffs’ existing economic

relationships with its customers. Plaintiffs allege that “Cathay

[] approach[ed] and solicit[ed] business from Cohill’s Building

Specialties and is currently (or in the very recent past[] has

been[)] selling architectural concrete products directly to

Cohill’s Building Specialties.” (Id. at ¶ 45). Cohill’s

Building Specialties was previously one of Plaintiffs’ customers. 

(Id.). During oral argument, Plaintiffs claimed that they had a

ten-year supply agreement with Cohill’s Building Specialties. 

(Doc. 25, Transcript at 16:7-13). Plaintiffs allege that

Defendants knew of their relationships with its customers,

including their relationship with Cohill’s Building Specialties. 

(Id. at 17:9-14). Plaintiffs claim that Cohill’s Building

Specialties is no longer buying product from them, in large part

because “Cathay now has a direct deal with them.” (Id. at 16:14-

18). Plaintiffs additionally allege damages resulting from

Defendants’ interference; however, the exact amount has not yet

been ascertained. 

As presently pleaded, Plaintiffs’ third cause of action does

not state a claim for interference with an existing economic

relationship because there is no reference to Cohill’s Building

Specialties. Defendants’ motion to dismiss Plaintiffs’ claim for

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4 Although Plaintiffs cite to the elements of a prima facie

case in their opposition, they do not demonstrate how their

claims satisfy each of the five requirements, but rather, leave

it to the court to infer how their complaint establishes each

element. (Doc. 21, Plaintiffs’ Opp. at 10:23-12:7). Plaintiffs

cite two cases, without providing specific reference to language

of these cases, which purportedly support their argument that

“[i]t is universally recognized that an action will lie for

interference with economic relationships by the occurrence of

acts which are in themselves unlawful such as defamation, libel,

slander, or fraud.” (Id. at 11:1-4 (emphasis in original)). 

Plaintiffs do not explain the relationship between their

allegations and these cases or how their conclusory assertion

substitutes for establishing all the elements of the prima facie

case.

26

interference with an existing economic relationship is GRANTED

WITH LEAVE TO AMEND.

 

4. Defendants’ Motion to Dismiss Plaintiffs’ Claim for

Interference with Prospective Economic Advantage.

Defendants move to dismiss Plaintiffs’ claim for tortious

interference with prospective economic advantage. Plaintiffs’

First Amended Complaint alleges that Defendants interfered with

Plaintiffs’ prospective economic advantage with (1) Kingland and

(2) Cohill’s Building Specialties.4 Defendants argue that

Plaintiffs fail to state a claim for interference with

prospective economic advantage as to both Kingland and Cohill’s

Building Specialties, and that parol evidence is inadmissable to

support Plaintiffs’ claims of wrongful conduct pursuant to the

parol evidence rule. (Defendant’s Reply at 7:25-8:2). 

Defendants argue that their Fed. R. Civ. P. 12(b)(6) motion to

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dismiss should be granted because Plaintiffs fail to plead a

prima facie case as to both Kingland and Cohill’s Building

Specialties. (Doc. 22, Defendants’ Reply at 7:22-23). 

The elements a plaintiff must allege to state a claim for

interference with prospective economic advantage are: (1) an

economic relationship between the plaintiff and some third person

with the probability of future economic benefit to the plaintiff;

(2) the defendant’s knowledge of the relationship; (3)

intentional acts on the part of the defendant designed to disrupt

the relationship; (4) actual disruption of the relationship; and

(5) economic harm to the plaintiff proximately caused by the acts

of the defendant. Arntz Contracting Co. v. St. Paul Fire &

Marine Ins. Co., 47 Cal. App. 4th 464, 475 (1996). 

In addition to pleading the five elements, Plaintiffs must

also plead that Defendants engaged in “wrongful conduct.” Della

Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal. Rptr. 4th 376,

377 (1995). “The California Supreme Court has recently clarified

that a defendant’s culpable conduct is not established by simply

showing intentional acts that disrupted the plaintiff’s

prospective economic relations.” Id. at 381-393. A plaintiff

prosecuting an interference with prospective economic [advantage]

claim “must prove that the defendant engaged in wrongful

conduct.” Arntz Contracting Co., 47 Cal. App. 4th at 476. 

A plaintiff seeking to recover for an alleged

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interference with prospective...economic [advantage] must

plead and prove as part of its case [] that the defendant

not only knowingly interfered with the plaintiff’s

expectancy, but engaged in conduct that was wrongful by

some legal measure other than the fact of interference

itself.

Della Penna, 11 Cal. Rptr. 4th at 393.

Without this requirement of wrongfulness, beyond the fact of

interference alone, “actors in perfectly legitimate economic

transactions would be put to justifying the conduct of their

business at the whim of a rival.” Della Penna, 11 Cal. Rptr. 4th

at 390 (citations omitted). However, the precise scope of

“wrongfulness” has not been specified. Arntz Contracting Co., 47

Cal. App. 4th at 476. Rather, the focus has been on “the

defendant’s objective conduct....[E]vidence of motive or other

subjective states of mind is relevant only to illuminating the

nature of that conduct.” Id. at 477.

Plaintiffs allege that Kingland was a prospective supplier

and that Defendants’ fraudulent misrepresentations led Plaintiffs

to cease negotiating with Kingland. Plaintiffs allege that

Kingland was “willing and able to provide raw materials and

Blended Products and much lower prices than those offered by

Cathay....” (Doc. 14, First Am. Compl. at ¶ 44). This

allegation satisfies both the first and fifth elements of

interference with prospective economic advantage: an economic

relationship with the probability of future economic benefit to

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the Plaintiff, and economic harm proximately caused by

Defendants, respectively. Plaintiffs allege that “part of

Cathay’s plan” in fraudulently inducing Plaintiffs with false

promises was “for [Plaintiffs] to stop doing business with any

other pigment suppliers and rely exclusively on Cathay.” (Id.). 

This satisfies the third element, intentional acts designed to

disrupt the relationship. Plaintiffs allege that Defendants’

actions were disruptive in that “QC and [Bomanite] did not

contract with Kingland to purchase raw materials and Blended

Products.” (Doc 14, First Am. Compl. at ¶ 46). This satisfies

the fourth element, actual disruption of the relationship. Also,

Plaintiffs’ allegations of Defendants’ fraudulent

misrepresentations to deter Plaintiff from an advantageous

product supply relationship with a third party satisfies the

“wrongfulness” requirement. These allegations are not barred by

the parol evidence rule. 

As to the second element, however, Plaintiffs fail to allege

that Defendants had knowledge of the alleged negotiations with

Kingland. (Doc. 17, Defendants’ Memo at 11:20-21). Plaintiffs

do not plead facts to show the second element, Defendants’

knowledge of the relationship with Kingland. Plaintiffs fail to

state a claim for interference with prospective economic

advantage as to Kingland.

Defendants also move to dismiss Plaintiffs’ claim for

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interference with prospective economic advantage with regard to

Cohill’s Building Specialties. Plaintiffs allege that Defendants

“us[ed] specialized knowledge it gained during the process of

reformulating products to meet the needs of QC and Bomanite” to

interfere with their prospective economic advantage with Cohill’s

Building Specialties. However, Plaintiffs acknowledged during

their oral argument that they mistakenly placed the claim

regarding Cohill’s Building Specialties in the wrong section of

their complaint. (Doc. 25, Transcript at 18:2-11; see also id.

at 22:14-15). Plaintiffs had an existing economic relationship

with Cohill’s Building Specialties, not a prospective economic

advantage. As such, Plaintiffs mispled this claim (see above).

 Plaintiffs do imply in their First Amended Complaint that

Defendants were aware of their relationship with Bayer, their

previous supplier. (See Doc. 14, First Am. Compl. at ¶¶ 10, 39). 

As discussed above, Plaintiffs failed to state a claim for

interference with an existing economic relationship as to Bayer

because they do not identify a contract or other continuing

business relationship. To the extent Plaintiffs intended to

state a claim for interference with prospective economic

advantage as to Bayer, they are granted LEAVE TO AMEND to do so.

Plaintiffs have not sufficiently pled intentional

interference with a prospective economic advantage with regard to

Kingland. Defendants’ motion to dismiss Plaintiffs’ claim for

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interference with prospective economic advantage with regard to

Kingland is GRANTED WITH LEAVE TO AMEND. Plaintiffs’ claim for

interference with a prospective economic advantage with regard to

Cohill’s Building Specialties is pled under the wrong cause of

action, and should be pled under the tort of interference with an

existing economic relationship. Defendants’ motion to dismiss

Plaintiffs’ claim for interference with prospective economic

advantage with regard to Cohill’s Building Specialties is GRANTED

WITH LEAVE TO AMEND.

B. Defendants’ Motion to Bar Plaintiffs’ Damages Claims

Under the Economic Loss Rule.

Defendants argue that Plaintiffs make four implicit claims

for damages under a theory of economic loss, all of which are

barred by the economic loss rule. (Doc. 17, Defendants’ Memo at

13:24-27; see also Doc. 14, First Am. Compl. at ¶ 23). 

Plaintiffs state that they believe total damages “to be in excess

of $750,000.00” arising from their claims of breach of contract,

fraud, interference with an existing economic relationship, and

interference with prospective economic advantage. (See Doc. 14,

First Am. Compl. at ¶¶ 23, 35, 40, & 46; id. at Prayer for

Relief, ¶ 1). 

The economic loss rule prohibits a plaintiff from recovering

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economic loss suffered as a result of a defendant’s breach of

contract unless the defendant’s conduct violates a legal duty

independent of the terms of the contract. “Negligent performance

of a construction contract, without more,” does not justify an

award of economic loss. Aas v. Superior Court, 24 Cal. 4th 627,

643 (2000). If a plaintiff alleges a tort cause of action, the

plaintiff may recover economic losses. “[C]onduct amounting to a

breach of contract becomes tortious when it also violates a duty

independent of the contract arising from principles of tort law.” 

Aas v. Superior Court, 24 Cal. 4th at 643. Economic loss may

include “damages for inadequate value, costs of repair and

replacement of the defective product or consequent loss of

profits....” Jimenez v. Superior Court, 29 Cal. 4th 473, 482

(2002). 

In Plaintiffs’ breach of contract cause of action,

Plaintiffs set forth four sources from which the $750,000.00 was

“measured in part by”: 

(a) having to purchase replacement products at higher costs

from other suppliers, 

(b) increased manufacturing and labor costs, overhead

expenses, substantial freight costs, etc., from having

to manufacture its own blended products instead of

purchasing them from Cathay, 

(c) having to maintain their inventory themselves instead

of having the six months’ consignment inventory

promised by Cathay, and 

(d) QC’s inability to fill orders for certain products,

thereby jeopardizing QC’s relationships with some of

its customers. 

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(Id. at ¶ 23). Although Plaintiffs list this amount of alleged

damages throughout the First Amended Complaint, these four

sources of partial measurement are not set forth within any

subsequent cause of action alleged. (See id. at ¶¶ 35, 40, & 46;

see also id. at Prayer for Relief, ¶ 1). Defendants assume that

Plaintiffs restate these “harms” in each subsequent cause of

action, and assume they are all economic loss claims under the

same breach of contract cause of action. Defendants argue that

these subsequent implicit allegations of these four sources of

economic harm are barred under the economic loss rule because

tort claims cannot arise from a “garden-variety breach of

contract.” (Id. at 14:1-3). Defendants rely upon the following

passage from Aas v. Superior Court, from which they argue that

this rule arises:

A person may not ordinarily recover in tort for the

breach of duties that merely restate contractual

obligations. Instead, “courts will generally enforce

the breach of a contractual promise through contract

law, except when the actions that constitute the breach

violate a social policy that merits the imposition of

tort remedies.” This court recently rejected the

argument that the negligent performance of a

construction contract, without more, justifies an award

of tort damages.

24 Cal. 4th 627, 643 (2000) (internal quotations and citations

omitted). However, Defendants failed to explain what the

California Supreme Court went on to reiterate: “conduct amounting

to a breach of contract becomes tortious when it also violates a

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duty independent of the contract arising from principles of tort

law.” Id. Defendants argue that Plaintiffs are attempting to

parlay their breach of contract claim “into various tort claims

to expand their recovery.” (Id.). However, as stated above,

Plaintiffs have asserted tort claims independent of their breach

of contract claim that warrant the claim of damages for economic

loss.

Under California law, recovery for economic loss is not

barred for tort causes of action. Rather, there is a bar to

recovery for economic loss for alleged tort claims that are no

more than breach of contract claims. In this case, however,

Plaintiffs have valid tort claims independent of their breach of

contract claim. Plaintiffs are permitted to submit parol

evidence of fraud, interference with an existing economic

relationship, and interference with prospective economic

advantage--all independent tort causes of action. With this

evidence, Plaintiffs have valid tort claims. For these reasons,

Defendants’ motion to bar what they argue are claims for recovery

of economic loss under Plaintiffs’ breach of contract claim is

DENIED. 

//

//

//

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//

VI. Conclusion

For the reasons stated above, the following orders are

issued: 

1. Defendants’ motion to dismiss Plaintiffs’ consequential

damages claim for their breach of contract claim is

GRANTED WITH PREJUDICE; To the extent Defendants move

to dismiss Plaintiffs’ consequential damages claims for

alternate causes of action, Defendants’ motion is

DENIED; 

2. Defendants’ 12(b)(6) motion to dismiss Plaintiffs’

fraud claim for failure to state a claim upon which

relief can be granted is DENIED;

Defendants’ 9(b) motion to require Plaintiffs to plead

their fraud claim with greater particularity is DENIED;

3. Defendants’ motion to dismiss Plaintiffs’ claim for

interference with an existing economic relationship is

GRANTED WITH LEAVE TO AMEND;

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4. Defendants’ motion to dismiss Plaintiffs’ claim for

interference with prospective economic advantage with

regard to Kingland is GRANTED WITH LEAVE TO AMEND;

Defendants’ motion to dismiss Plaintiffs’ claim for

interference with prospective economic advantage with

regard to Cohill’s Building Specialties is GRANTED WITH

LEAVE TO AMEND;

5. Defendants’ motion to bar Plaintiffs’ damages claims

under the economic loss rule is DENIED; 

Any amended complaint shall be filed within fifteen (15)

days following date of electronic service of this order. 

SO ORDERED. 

Dated: July 14, 2005 /s/ OLIVER W. WANGER

______________________________

 Oliver W. Wanger

UNITED STATES DISTRICT JUDGE

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