Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_06-cv-04191/USCOURTS-cand-5_06-cv-04191-7/pdf.json

Nature of Suit Code: 365
Nature of Suit: Personal Injury - Product Liability
Cause of Action: 28:1332 Diversity-Product Liability

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 This disposition is not designated for publication and may not be cited.

Case No. C 06-04191 JF 

ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

(JFEX1)

** E-filed 4/24/07 **

NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

MICHAEL ARBSLAND,

 Plaintiff,

 v.

SOUTHWEST SIGNS, THE HOME DEPOT,

INC., et al,

 Defendants.

Case Number C 06-04191 JF

ORDER1

 GRANTING MOTION TO

DISMISS WITH LEAVE TO AMEND 

[re: docket no. 32]

SOUTHWEST SIGNS, LLC,

Cross-Complainant,

 v. 

THE HOME DEPOT, INC., SIGNS HAWAII,

SIGN ART, L. MORIGUCHI, INC., et al, 

Cross-Defendants. 

Cross-Defendant L. Moriguchi, Inc., doing business as Sign Art, moves to dismiss the

cross-complaint of Southwest Signs LLC (“Southwest Signs”) for failure to state a claim upon

which relief can be granted. Southwest Signs opposes the motion. The Court heard oral

Case 5:06-cv-04191-JF Document 48 Filed 04/24/07 Page 1 of 6
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2

 Southwest Signs is a Texas business entity doing business in the state of California.

3

 Home Depot is a corporation organized under the laws of Delaware with its principal

place of business in Georgia. 

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Case No. C 06-04191 JF 

ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

(JFEX1)

argument on April 20, 2007. For the reasons set forth below, the motion will be granted with

leave to amend.

I. BACKGROUND

On July 7, 2006, Plaintiff Michael Arbsland (“Arbsland”) filed a complaint against

Southwest Signs2

 and the Home Depot, Inc.3 (“Home Depot”) for strict liability and negligence. 

Complaint 1. Arbsland alleges the following: at the time of the events at issue, he was an

employee of Sign Art and was hired to install and repair a Home Depot store sign in Kauai,

Hawaii. Id. at 2. While he was working on the sign on October 3, 2003, an electrical

malfunction, allegedly from defective wiring in the sign, caused him to fall off a ladder. The fall

rendered him “mentally incompetent and incapacitated by reason of a traumatic brain injury.” 

Complaint 3. He did not recover for a period of at least ten months. Id. Southwest Signs

manufactured the Home Depot sign. Southwest Signs had hired Cross-Defendant Signs Hawaii

to install the sign; Signs Hawaii in turn hired Sign Art. 

Sign Art alleges that there was neither a contract nor any communications between Sign

Art and Southwest Signs. Southwest Signs alleges that its contract with Signs Hawaii included

an indemnity clause as follows:

Contractor shall make all statutory contributions for their 

employees and hereby agrees to save Southwest Signs harmless 

from any loss by reason of damage to property or injury (including 

death) to person caused by performance of work hereunder, and 

to defend any action brought against Southwest Signs, and to pay 

any judgment rendered in any such action. 

Opp’n 2. The indemnity clause is not referenced in the cross-complaint, nor is the contract

attached as an exhibit to the opposition. 

Southwest Signs filed its cross-complaint on August 31, 2006. The cross-complaint

asserts claims for comparative negligence, equitable indemnity, contribution, and declaratory

relief against Sign Art, Signs Hawaii, and Home Depot . Cross-Comp. 1. 

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Case No. C 06-04191 JF 

ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

(JFEX1)

II. LEGAL STANDARD

A complaint may be dismissed for failure to state a claim upon which relief can be

granted for one of two reasons: (1) lack of a cognizable legal theory or (2) insufficient facts

under a cognizable legal theory. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Robertson v.

Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir. 1984). For purposes of a motion to

dismiss, the plaintiff’s allegations are taken as true, and the Court must construe the complaint in

the light most favorable to the plaintiff. Jenkins v. McKeithen, 395 U.S. 411, 421 (1969). Leave

to amend must be granted unless it is clear that the complaint’s deficiencies cannot be cured by

amendment. Lucas v. Department of Corrections, 66 F.3d 245, 248 (9th Cir. 1995). When

amendment would be futile, however, dismissal may be ordered with prejudice. Dumas v. Kipp,

90 F.3d 386, 393 (9th Cir. 1996). 

On a motion to dismiss, the Court’s review is limited to the face of the complaint and

matters judicially noticeable. North Star International v. Arizona Corporation Commission, 720

F.2d 578, 581 (9th Cir. 1983); MGIC Indemnity Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir.

1986); Beliveau v. Caras, 873 F.Supp. 1393, 1395 (C.D. Cal. 1995). However, under the

“incorporation by reference” doctrine, the Court also may consider documents which are

referenced extensively in the complaint and which are accepted by all parties as authentic, which

are not physically attached to the complaint. In re Silicon Graphics, Inc. Securities Litigation,

183 F.3d 970 (9th Cir. 1999).

III. DISCUSSION

Sign Art asserts that all of Southwest Sign’s claims should be dismissed because there is

no written indemnity agreement between the two parties, as required under California Labor

Code § 3864. Motion 2. Southwest Signs responds that a written indemnity agreement between

itself and Sign Art is not required under § 3864 because Southwest Signs is a third-party

beneficiary of the alleged contract between Signs Hawaii and Sign Art. Opp’n 4. Southwest

Signs bases its third-party beneficiary argument on the alleged indemnity agreement between

itself and Signs Hawaii. Id. However, as noted previously, the cross-complaint does not

describe the alleged contractual agreement between Signs Hawaii and Sign Art, the alleged

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Case No. C 06-04191 JF 

ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

(JFEX1)

indemnity agreement between Southwest Signs and Signs Hawaii, or the alleged third-party

beneficiary relationship in general. 

California Labor Code § 3864 states:

If an action as provided in this chapter prosecuted by the 

employee, the employer, or both jointly against the third 

person results in judgment against such third person, or 

settlement by such third person, the employer shall have no 

liability to reimburse or hold such third person harmless on 

such judgment or settlement in absence of a written agreement 

so to do executed prior to the injury.

Cal. Lab. Code § 3864 (2007). The California Legislature enacted section 3864 because implied

indemnity imposed a larger burden on the employer than was envisioned under the workers’

compensation program. Up-Right, Inc. v. Van Erickson, 5 Cal.App.4th 679 (1992). In Up-Right,

even the employer’s violation of child labor laws did not circumvent section 3864's requirement

of a written indemnity agreement. 

The absence of a written indemnity agreement does not necessarily bar the instant crossclaim. In Kaiser Engineers, Inc. v. Grinnell Fire Protection Systems Co., 219 Cal.Rptr. 626

(Cal. Ct. App. 1985), an engineering firm cross-complained against an employer for indemnity

based on a provision in the employer's contract with a federal agency providing for the

indemnity of the federal agency and its agents for liabilities from injuries arising from the

employer's operations. There was no written indemnity agreement between the employer and the

engineering firm, but the court held that section 3864 nonetheless was satisfied because the

agreement provided indemnity for the “agents” of the federal agency, and the engineering firm

was considered an agent. Id. at 1054. Because the instant cross-complaint lacks any relevant

detail, this Court cannot determine whether Southwest Signs is a third-party beneficiary of the

contract between Signs Hawaii and Sign Art and whether such status brings Southwest Signs

within the reasoning of Kaiser Engineers. 

To the extent that it argues that it is an agent or third-party beneficiary of the alleged

contractual relationship and indemnity agreement between Signs Hawaii or Sign Art, Southwest

Signs must allege facts supporting such theories in an amended cross-complaint. Based on its

counsel’s representations that additional time may be required to gather the relevant information,

Case 5:06-cv-04191-JF Document 48 Filed 04/24/07 Page 4 of 6
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4

 The Court does not reach Sign Art’s alternative argument that Southwest Signs would

fail to state a claim for indemnity even if the Court utilized Hawaii state law rather than

California law. 

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Case No. C 06-04191 JF 

ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

(JFEX1)

Southwest Signs shall have sixty (60) days within which to file an amended pleading.4

IV. ORDER

Good cause therefore appearing, IT IS HEREBY ORDERED that the motion to dismiss

is GRANTED with leave to amend. Any amended complaint must be filed within sixty (60)

days of the date of this order.

DATED: April 24, 2007

 

JEREMY FOGEL

United States District Judge

Case 5:06-cv-04191-JF Document 48 Filed 04/24/07 Page 5 of 6
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Case No. C 06-04191 JF 

ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

(JFEX1)

This Order has been served upon the following persons:

Erwin E. Adler eadler@adlerlawgroup.com, ddeanda@adlerlawgroup.com 

Joshua S. Goodman jgoodman@jgn.com, nsands@jgn.com 

Pavan L. Rosati prosati@jgn.com, cwalker@jgn.com 

Michael M. Shea , Jr rr@shea-shea.com

Domenic Dante Spinelli domenics@lsdlaw.com, lauries@lsdlaw.com 

Andrew Sigmund Werner awerner@cwmlaw.com 

Notice will be delivered by other means to: 

Nicole N. Hancock 

Shea and Shea

A Professional Law Corporation

255 North Market Street1

Suite 190

San Jose, CA 95110

Jose Montalvo 

Cesari Werner and Moriarty

360 Post Street, Fifth Floor

San Francisco, CA 94108-4908

Dennis F. Moriarty 

Cesari, Werner and Moriarty

360 Post Street

5th Floor

San Francisco, CA 94108

Michael Shea , Sr

Shea & Shea

A Professional Law Corporation

255 North Market Street

Suite 190

San Jose, CA 95110

Case 5:06-cv-04191-JF Document 48 Filed 04/24/07 Page 6 of 6