Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-03410/USCOURTS-cand-4_06-cv-03410-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition For Removal--Other Contract

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

NORCAL WASTE SYSTEMS, INC., a

California corporation,

Plaintiff,

v.

APROPOS TECHNOLOGY, INC., an Illinois

corporation; and DOES 1 through 

50, inclusive,

Defendants.

 /

No. C 06-3410 CW

ORDER DENYING

DEFENDANT'S

MOTION TO DISMISS

Defendant Apropos Technology, Inc., moves pursuant to Federal

Rules of Civil Procedure 9(b) and 12(b)(6) to dismiss the complaint

filed against it by Plaintiff Norcal Waste Systems, Inc., and, in

the alternative, to strike Plaintiff's claim for punitive damages. 

Plaintiff opposes the motion. The matter was taken under

submission on the papers. Having considered all of the papers

filed by the parties, the Court denies the motion to dismiss. 

BACKGROUND

Unless otherwise noted, the following facts are taken from the

Complaint and are assumed to be true for purposes of this motion. 

Defendant asks the Court also to consider the parties'

December 23, 2004 Customer Purchase and License Agreement

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(hereinafter the License Agreement), attached as Exhibit A to the

Meretsky Declaration. Plaintiff does not dispute that the License

Agreement is authentic and relevant to its claims, but argues that

it is confidential and thus Defendant's filing violates the

confidentiality clause. Plaintiff may seek to protect the License

Agreement by establishing that it is privileged or protectable as a

trade secret and by requesting a Court order to seal it, in whole

or in part, pursuant to Civil Local Rule 79-5(a). However,

Plaintiff has shown no reason why the Court should refuse to

consider the License Agreement in deciding Defendant's motion. See

United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003) (noting

that courts may consider on a motion to dismiss documents

incorporated by reference into a complaint if referred to

extensively or if they form the basis for the plaintiff's claim). 

Plaintiff, a California corporation, and Defendant, an

Illinois corporation, entered into a written contract ("the

Contract") on January 15, 2005, for a Multi-Channel Interactive

Management software solution ("MCIM Solution") related to telephony

voice processing to be used in Plaintiff's waste management

business. While the parties were negotiating the terms of the

contract, Defendant represented to Plaintiff that the MCIM Solution

"contained tight integration with Plaintiff's existing telephony

voice processing information." Complaint ¶ 8. Defendant's

demonstrations of the product used "'canned' data, which did not

accurately represent how it would work with Plaintiff's existing

telephony infrastructure"; Defendant verbally indicated "that the

MCIM SOLUTION would work 'seamlessly' with Plaintiff's existing

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1

Voice over Internet Protocol (VoIP) is a technology that

allows a user to make telephone calls using a broadband Internet

connection instead of a regular (or analog) phone line. Federal

Communications Commission, Consumer & Governmental Affairs Bureau,

Voice Over Internet Protocol: Frequently Asked Questions,

http://www.fcc.gov/voip/ (last visited July 21, 2006).

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telephony infrastructure"; and Defendant failed to include

necessary hardware in its written "Customer Procurement"

requirements. Id. ¶ 9. Plaintiff alleges that these

representations regarding the MCIM Solution's ability to function

with Plaintiff's existing telephony voice processing infrastructure

were false, and that Plaintiff now finds it must "add and/or

upgrade hardware and/or implement VoIP."1 Id. ¶ 14. Plaintiff

alleges that it reasonably relied on the false representations;

that they were made with a reckless disregard for their truth or

veracity; and that they were "mistaken and/or made with an intent

to deceive Plaintiff for the purpose of inducing Plaintiff into

entering into the CONTRACT." Id. ¶ 17. Plaintiff also alleges

that Defendant's failure to provide an MCIM Solution that could

operate using Plaintiff's existing telephony infrastructure

constitutes a material failure of consideration in connection with

the Contract. 

Plaintiff paid Defendant $240,080.60 in consideration for the

contract, as well as $3,137.24 for additional professional

services. Plaintiff brings claims for (1) rescission of the

Contract based on fraud, mutual mistake and failure of

consideration; (2) intentional misrepresentation; (3) negligent

misrepresentation; (4) breach of the implied covenant of good faith

and fair dealing; and (5) a common count for money had and

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received. Plaintiff seeks general and punitive damages, as well as

costs and attorneys' fees. 

In support of its motion to dismiss, Defendant notes that the

License Agreement contains an integration clause that provides:

"This Agreement sets forth the entire agreement of the parties with

respect to the subject matter set forth herein and supersedes any

and all prior agreements." License Agreement § 10.13. However,

other portions of the License Agreement expressly incorporate by

reference additional documents. According to § 5.1 of the License

Agreement, Defendant warrants that the software "will conform to

the functional specifications set forth in the Statement of Work

and Documentation provided by Apropos to Customer." 

"Documentation" is defined to mean "any documentation that

accompanies the Software." Id. § 1.8. Neither the Statement of

Work nor the Documentation are part of the record before the Court. 

Defendant also bases its motion to dismiss on the License

Agreement's disclaimers and limitations of warranties. Other than

the warranty in § 5.1, the License Agreement expressly limits

applicable warranties:

Apropos has no obligation, other than the limited warranty

obligations set forth in this Section 5, to support any

Software except as may be specifically agreed in writing by

Apropos in a separate agreement or in an Attachment to this

Agreement. Apropos does not warrant that any Software will

meet Customer's requirements or that operation of the Software

will be uninterrupted or error free.

License Agreement § 5.3. In addition, a disclaimer in bold, all

capital typeface states,

Except as expressly set forth in this Agreement, Apropos

expressly disclaims any representations or warranties, express

or implied, including any implied warranties of

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merchantability, fitness for a particular purpose and

noninfringement, any implied warranties arising from course of

dealing or course of performance and any warranties relating

to the speed or proficiency with which the Software performs.

Id. § 6.2 (capitalization and emphasis omitted). Defendant's

liability is limited:

Under no circumstances will Apropos be liable for indirect,

incidental, consequential, special or exemplary damages (even

if Apropos has been advised of the possibility of such

damages) arising from this Agreement, or the use or inability

to use the Software . . . .

Id. § 6.1 (capitalization and emphasis omitted). 

LEGAL STANDARDS

I. Rule 12(b)(6)

A motion to dismiss for failure to state a claim will be

denied unless it is “clear that no relief could be granted under

any set of facts that could be proved consistent with the

allegations.” Falkowski v. Imation Corp., 309 F.3d 1123, 1132 (9th

Cir. 2002), citing Swierkiewicz v. Sorema N.A., 534 U.S. 506

(2002). All material allegations in the complaint will be taken as

true and construed in the light most favorable to the plaintiff. 

NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). 

Although the court is generally confined to consideration of the

allegations in the pleadings, when the complaint is accompanied by

attached documents, such documents are deemed part of the complaint

and may be considered in evaluating the merits of a Rule 12(b)(6)

motion. Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th

Cir. 1987).

When granting a motion to dismiss, a court is generally

required to grant a plaintiff leave to amend, even if no request to

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Defendant mistakenly relies on Desaigoudar v. Meyercord, 223

F.3d 1020, 1022 (9th Cir. 2000) for the proposition that averments

of fraud must be plead with a "high degree of meticulousness"; this

standard refers to the requirements of the Private Securities

Litigation Reform Act. 

6

amend the pleading was made, unless amendment would be futile. 

Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911

F.2d 242, 246-47 (9th Cir. 1990). In determining whether amendment

would be futile, a court examines whether the complaint could be

amended to cure the defect requiring dismissal “without

contradicting any of the allegations of [the] original complaint.” 

Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir. 1990). 

Leave to amend should be liberally granted, but an amended

complaint cannot allege facts inconsistent with the challenged

pleading. Id. at 296-97. 

II. Rule 9(b)

“In all averments of fraud or mistake, the circumstances

constituting fraud or mistake shall be stated with particularity.” 

Fed. R. Civ. P. 9(b). The allegations must be “specific enough to

give defendants notice of the particular misconduct which is

alleged to constitute the fraud charged so that they can defend

against the charge and not just deny that they have done anything

wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). 

Statements of the time, place and nature of the alleged fraudulent

activities are sufficient, Wool v. Tandem Computers, Inc., 818 F.2d

1433, 1439 (9th Cir. 1987), provided the plaintiff sets forth “what

is false or misleading about a statement, and why it is false.”2

In re GlenFed, Inc., Sec. Litig., 42 F.3d 1541, 1548 (9th Cir.

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1994). Scienter may be averred generally, simply by saying that it

existed. See id. at 1547; see Fed. R. Civ. P. 9(b) (“Malice,

intent, knowledge, and other condition of mind of a person may be

averred generally”). As to matters peculiarly within the opposing

party’s knowledge, pleadings based on information and belief may

satisfy Rule 9(b) if they also state the facts on which the belief

is founded. Wool, 818 F.2d at 1439.

DISCUSSION

I. Rescission and Intentional Misrepresentation Claims

Defendant moves to dismiss Plaintiff's claims for rescission

and intentional misrepresentation on the grounds that (1) they rest

on allegations of fraudulent representations which were not

contained in the License Agreement, and thus evidence of those

representations is barred by the parol evidence rule; and (2) the

alleged misrepresentations are mere "sales talk" not actionable as

fraud. Defendant also moves to dismiss these claims on the grounds

that they are not plead with the particularity required by Rule

9(b). 

A. Parol Evidence Rule

1. Applicable Law

California law provides, "Terms set forth in a writing

intended by the parties as a final expression of their agreement

with respect to such terms as are included therein may not be

contradicted by evidence of any prior agreement of or a

contemporaneous oral agreement." Cal. Code Civ. P. § 1856(a). 

However, a court is required to consider preliminarily all credible

parol evidence offered to prove the intention of the parties. 

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Pacific Gas & Elec. Co. v. G. W. Thomas Drayage & Rigging Co., 69

Cal. 2d 33, 39 (1968); see also Trident Center v. Conn. Gen. Life.

Ins. Co., 847 F.2d 564, 565 (9th Cir. 1988) (under California law,

courts must interpret any contract by first considering extrinsic

parol evidence even if contract is unambiguous). If, after

considering the evidence, the court determines that the language of

the contract is "fairly susceptible" to the proposed

interpretation, extrinsic evidence relevant to prove the meaning is

admissible. Pacific Gas, 69 Cal. 2d at 40. 

Thus, the applicable law is best summarized as a two-step

process. First, the Court must "engage in a preliminary

consideration of credible evidence offered to prove the intention

of the parties." U.S. Cellular Inv. Co. v. GTE Mobilnet, Inc., 281

F.3d 929, 939 (9th Cir. 2002). The Court may consider subsequent

conduct of the parties in order to determine their contractual

intent. Id. at 937. Second, if the Court decides that the

evidence makes the contract "fairly susceptible" to an

interpretation contrary to its plain meaning, extrinsic evidence of

that contrary meaning is admissible in determining the parties'

contractual intent. Id. at 939. "Where the interpretation of

contractual language turns on a question of credibility of

conflicting extrinsic evidence, interpretation of the language is

not solely a judicial function." Morey v. Vannucci, 64 Cal. App.

4th 904, 912-13 (1998) (emphasis in original.) It is the

responsibility of the trier of fact to resolve this conflict. Id.

Further, the rule excluding parol evidence does not apply

where the external evidence is used "to establish illegality or

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fraud." Cal. Code Civ. P. § 1856(g). This exception is somewhat

limited. In Bank of Am. Nat'l Trust and Sav. Ass'n v. Pendergrass,

4 Cal. 2d 258, 263 (1935), where the California Supreme Court

stated, 

Our conception of the rule which permits parol evidence of

fraud to establish the invalidity of the instrument is that it

must tend to establish some independent fact or

representation, some fraud in the procurement of the

instrument or some breach of confidence concerning its use,

and not a promise directly at variance with the promise of the

writing. 

Cf. Continental Airlines, Inc. v. McDonnell Douglas Corp., 216 Cal.

App. 3d 388, 419 (1989) (stating that fraud exception to parol

evidence rule does not apply to allegations of promissory fraud

unless false promise is independent of or consistent with the

written instrument). For example, in Wang v. Massey Chevrolet, 97

Cal. App. 4th 856, 876 (2002), the court affirmed the trial court's

summary judgment ruling on a claim for fraud on the grounds that an

alleged oral agreement to allow pre-payment of a lease without

penalty was "directly at variance" with the written contract's

clear provision for a substantial charge in the event of

prepayment, and thus the alleged oral agreement was inadmissible.

Another exception to the parol evidence rule has been created

where "a mistake or imperfection of the writing is put in issue by

the pleadings" or where "the validity of the agreement is the fact

in dispute." Cal. Code Civ. P. § 1856(e); see also Coast Bank v.

Holmes, 19 Cal. App. 3d 581, 590 (1971) ("parol evidence is

admissible to show lack or failure of consideration"). The mistake

exception to the parol evidence rule occurs "where the writing

itself, through mistake, does not express the intention of the

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parties who entered into it." Hess v. Ford Motor Co., 27 Cal. 4th

516, 525 (2002) (quoting Pasqualetti v. Galbraith, 200 Cal. App. 2d

378, 381 (1962)). 

2. Analysis

Plaintiff's claims rest on both oral and written

representations which it alleges were false, misleading or

mistaken. See Complaint ¶ 9 (alleging that Defendant verbally

indicated that the MCIM Solution would work seamlessly and

specified in writing an incomplete list of required hardware). 

Defendant's argument that those alleged representations necessarily

rest on inadmissible parol evidence is not well-taken, and is

misplaced in the context of this motion to dismiss. 

As an initial matter, in order for the Court to decide, as

Defendant urges, that the License Agreement was intended by the

parties to be a final and complete expression of their agreement,

the Court would have to consider preliminarily all credible parol

evidence, including all evidence relating to the allegations in

Plaintiff's complaint. Such an analysis is not possible on

Defendant's Rule 12(b)(6) motion. Plaintiff may be able to prove,

consistent with both the allegations of the Complaint and the terms

of the License Agreement, that the License Agreement is not a

complete and integrated contract. Any such conclusion would be

supported by the License Agreement's express reference to

additional documents that are not before the Court. 

Furthermore, even assuming that the License Agreement is an

integrated, unambiguous instrument, Plaintiff may be able to prove,

consistent with both the allegations of the Complaint and the terms

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of the License Agreement, that some or all of the alleged false or

misleading representations were not in direct variance (or were

consistent) with the parties' written agreement. In fact,

Plaintiff asserts that some of the alleged representations were

contained within those written documents that are incorporated by

reference into the License Agreement. Defendant itself

acknowledges that it "promised that the Software would conform to

the specifications set forth in the Statement of Work and

Description." Def.'s Mot. at 9. In that event, the alleged

representations could be admissible under the fraud exception to

the parol evidence rule. 

Finally, Plaintiff claims that the Contract is invalid due to

mutual mistake or failure of consideration, also circumstances

justifying the admission of parol evidence. Defendant has not

shown any reason why Plaintiff could not, consistent with the

Complaint and the License Agreement, show facts proving that the

parties were mistaken about a term or terms contained in the

Contract. Likewise, depending on the Court's construction of the

Contract as a whole, it may be that Plaintiff can state a claim for

rescission based on failure of consideration. 

Therefore, the Court denies Defendant's motion to dismiss the

claims for rescission and intentional misrepresentation based on

the parol evidence rule. 

B. Sales Talk or Puffery

1. Applicable Law

"[A]n expression of opinion or belief, if nothing more, and if

so understood and intended, is not a representation of fact, and

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although false, does not amount to actual fraud." Carlson v.

Brickman, 110 Cal. App. 2d 237, 247 (1952) (quoting Stockton v.

Hind, 51 Cal. App. 131, 136 (1921). Thus, it cannot be grounds for

fraud damages or rescission. Id. A "representation is one of

opinion if it expresses only (a) the belief of the maker, without

certainty, as to the existence of a fact; or (b) his judgment as to

the quality, value, authenticity, or other matters of judgment." 

Gentry v. eBay, 99 Cal. App. 4th 816, 835 (2002) (quoting Rest. 2d

Torts § 538A) (internal paragraph marks omitted). "[P]redictions

of future facts are ordinarily considered nonactionable expressions

of opinion." Richard P. v. Vista Del Mar Child Care Serv., 106

Cal. App. 3d 860, 865 (1980) (finding prediction that premature

infant would be healthy child to be expression of opinion). A

seller's mere "puff talk" is also an expression of opinion that is

not actionable as fraud. Corbett v. Otts, 205 Cal. App. 2d 78, 83

(1962). However, the opinion of a party with superior knowledge

may be treated as a factual representation. Cory v. Villa

Properties, 180 Cal. App. 3d 592, 598-99, rev. denied (1986). 

2. Analysis

Defendant describes the alleged representation that its MCIM

Solution "would work 'seamlessly' with Plaintiff's existing

telephony infrastructure" as a non-actionable expression of

opinion. Although "seamlessly" could, arguably, be shown to be

mere sales talk or puffery, the statement that the MCIM Solution

"would work . . . with Plaintiff's existing telephony

infrastructure" is not. Neither is Defendant's alleged false

representation regarding the necessary hardware or its alleged

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misleading demonstration of how the MCIM Solution would work. 

Defendant has cited no apposite authority. Cf., e.g., InterPetrol

Bermuda Ltd. v. Kaiser Aluminum Int'l Corp., 719 F.2d 992, 996 (9th

Cir. 1983) (finding representation that "supplier had a reputation

for dependability" to be opinion); Corbett, 205 Cal. App. 2d at 83

(representation that apartment was "very livable" and "better" than

others was "seller's talk" or "puff talk"); Williams v. Lowenthal,

124 Cal. App. 179, 18 (1932) (seller's representation that

phonograph machine would generate thirty dollars per month in

profits found to be mere expression of opinion); Graphic Arts Sys.

v. Scitex Am. Corp., No. CV-92-6997-WMB, 1993 U.S. Dist. LEXIS

21052, *25-*26 (C.D. Cal. May 26, 1993) (finding software seller's

prediction of increased productivity to be opinion where

productivity outcome depended on many factors under the control of

plaintiffs as well as defendant). Unlike the statements found in

those cases to be non-actionable opinion, Defendant's alleged

representations were not nebulous predictions of value or quality. 

Moreover, Defendant presumably has superior knowledge of its own

software system, and therefore even its expressed opinion regarding

the operation of the MCIM Solution could be actionable if false. 

Therefore, the Court denies Defendant's motion to dismiss on this

ground. 

C. Pleading with Particularity

Plaintiff states in its Complaint that Defendant made certain

representations in December, 2004, in connection with the parties'

negotiation of the January 15, 2005 Contract in San Francisco,

California. Plaintiff has also specifically described the nature

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of the alleged misrepresentations. See, e.g., Complaint ¶¶ 9, 14. 

The circumstances constituting fraud are stated with sufficient

particularity to give Defendant notice of the alleged misconduct so

that it can defend against the charges. Therefore, the Court

denies Defendant's motion to dismiss under Rule 9(b). 

II. Negligent Misrepresentation

Defendant moves to dismiss Plaintiff's claim for negligent

misrepresentation on the grounds that (1) California law does not

recognize a cause of action for negligent false promise; (2) the

alleged misrepresentations are barred by the parol evidence rule;

and (3) the economic loss doctrine bars Plaintiff's claim. 

Defendant's argument regarding the parol evidence rule is decided

in Section I(B) above; the other issues are addressed below. 

A. Claim for Negligent Misrepresentation

"Where a defendant makes false statements, honestly believing

them to be true, but without reasonable grounds for such belief, he

may be held liable for negligent misrepresentation, a form of

deceit." Cicone v. Urs Corp., 183 Cal. App. 3d 194, 208 (1986)

(quoting Roberts v. Ball, Hunt, Hart, Brown & Baerwitz, 57 Cal.

App. 3d 104, 111 (1976)). "To be actionable, a negligent

misrepresentation must ordinarily be as to past or existing

material facts." Tarmann v. State Farm Mutual Auto. Ins. Co., 2

Cal. App. 4th 153, 158-59 (1991) (internal citations omitted). In

Tarmann, (the case upon which Defendant relies), the court found

that a promise to pay money in the future was not actionable as

negligence because it was a misrepresentation of intention rather

than a misrepresentation of fact. Id. at 158-59. 

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However, the representations alleged in the Complaint do not

involve statements of Defendant's intention regarding its future

conduct. Representations such as that Defendant's MCIM Solution

would work within Plaintiff's existing telephony system are

statements about the functionality of the product, and thus are

actionable under a theory of negligent misrepresentation. 

Therefore, the Court denies Defendant's motion to dismiss

Plaintiff's claim for negligent misrepresentation on this ground. 

B. Economic Loss Rule

Under California's economic loss rule, to recover in tort for

damages caused by a defective product, a plaintiff must demonstrate

personal injury or damage to property other than the product

itself. Jimenez v. Super. Ct., 29 Cal. 4th 473, 483 (2002); Aas v.

Super. Ct., 24 Cal. 4th 627, 635-36 (2000). However, claims of

fraud and intentional misrepresentation that are independent of a

breach of contract are not subject to the economic loss rule. 

Robinson Helicopter Co. v. Dana Corp., 34 Cal. 4th 979, 991 (2004). 

It is possible that Plaintiff will prove facts, consistent

with the Complaint and the License Agreement, that support a claim

for negligent misrepresentation involving a breach of duty

independent of the Contract. This may depend in part on which of

Defendant's alleged representations were in fact included in the

Contract, which in turn depends on the scope and construction of

the Contract itself, an issue which is not before the Court at this

time. Therefore, the Court denies Defendant's motion to dismiss

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3In another case, this Court has held that negligent

misrepresentation is a species of fraud, and that the economic loss

rule is therefore not applicable to such a claim. Kalitta Air, LLC

v. Cent. Tex. Airborne Systems, Inc., No. C 96-2494 CW, Order

Denying Def.'s Mot. for Summ. J. and Granting Pl.'s Mot. to Enforce

Remand, at *8-9 (N.D. Cal. Dec. 12, 2003) and Order Granting in

Part and Denying in Part Def.'s Mot. for J. as a Matter of Law, at

*19 (July 22, 2005). The Court certified its order to allow

interlocutory appeal of this and other holdings, and the Ninth

Circuit agreed to permit an interlocutory appeal, which is now

pending. 

16

Plaintiff's claim for negligent misrepresentation.3 

III. Breach of Implied Covenant of Good Faith and Fair Dealing

Defendant moves to dismiss Plaintiff's claim for breach of the

implied covenant for good faith and fair dealing on the grounds

that it is also based on alleged representations that are

inadmissible under the parol evidence rule. For the reasons

described in Sections I(A), Defendant's motion to dismiss on this

basis is denied. 

Defendant also moves to dismiss this claim as barred, to the

extent that Plaintiff seeks damages beyond those for breach of

contract. The California Supreme Court has articulated "a general

rule precluding tort recovery for noninsurance breach, at least in

the absence of a violation of 'an independent duty arising from

principles of tort law.'" Freeman & Mills, Inc. v. Belcher Oil

Co., 11 Cal. 4th 85, 102 (1995) (internal citation omitted). Here,

Plaintiff may not recover in tort for breach of an implied covenant

of good faith and fair dealing unless Plaintiff also establishes

that Defendant breached an independent duty (i.e., committed

another tort). Because the Court finds that Plaintiff has stated a

claim for intentional and negligent misrepresentation, it denies

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Defendant's motion to dismiss Plaintiff's request for tort damages

arising from its claim for breach of the implied covenant of good

faith and fair dealing. 

IV. Common Count for Money Had and Received

Defendant moves to dismiss Plaintiff's claim for common count

for money had and received, on the ground that Plaintiff cannot

allege the necessary elements to support such a claim. 

A common count claim is a claim based on a debt owed by a

defendant to a plaintiff. The circumstances in which a common

count for "money had or received" is available include:

Where the money is paid under a contract rescinded by the

plaintiff for ordinary mistake, fraud in the inducement, or

innocent misrepresentation, or ordinary incapacity. . . . [Or,

w]here the plaintiff elects the remedy of restitution after

the defendant's breach or failure of consideration, or where

the contract has become executed on one side by the

plaintiff's full performance, and he elects to plead his cause

of action on express contract as a common count.

4 B.E. Witkin, California Procedure § 522 (1997) (internal

citations omitted). 

Because the Court has found in Section I above that Plaintiff

has stated claims for intentional misrepresentation and rescission

of the Contract, Defendant's arguments that Plaintiff has failed to

state a claim for common count are precluded. See, e.g., Shultz v.

Harney, 27 Cal. App. 4th 1611, 1623 (1994) (concluding that

plaintiff effectively stated a cause of action for money had and

received where contract was found to be void). 

V. Punitive Damages

Finally, Defendant moves to strike Plaintiff's demand for

punitive damages. To the extent that Defendant's motion rests on

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Plaintiff's alleged failure to state a claim that would support

punitive damages, it is denied because the Court finds that

Plaintiff has adequately stated its claims. As the Court noted in

Section III above, whether Plaintiff's claim for breach of an

implied covenant of good faith and fair dealing sounds in contract

or tort cannot be decided at this time. 

Defendant also relies on the portion of the License Agreement

which bars liability for special or exemplary damages "arising from

this Agreement, or the use or inability to use the Software." 

License Agreement § 6.1 (capitalization and emphasis omitted). 

However, Defendant provides no explanation for why this portion of

the License Agreement would prohibit punitive damages arising out

of a claim such as intentional misrepresentation. See Tracer

Research Corp. v. Nat'l Envtl. Serv. Co., 42 F.3d 1292, 1295 (9th

Cir. 1994) (concluding that arbitration clause covering disputes

"arising under" an agreement did not extend to cover tort claims

related to the agreement). Defendant provides no reasoning or

authority to explain why it believes Tracer Research to be

inapposite outside of the arbitration context. Therefore,

Defendant's motion to strike Plaintiff's request for punitive

damages is denied. 

CONCLUSION

For the foregoing reasons, the Court DENIES Defendant's motion

to dismiss (Docket No. 6). 

IT IS SO ORDERED.

Dated: 8/10/06 

CLAUDIA WILKEN

United States District Judge

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