Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_09-cv-05617/USCOURTS-cand-3_09-cv-05617-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-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

BOON RAWD TRADING

INTERNATIONAL CO., LTD.,

Plaintiff,

 v.

PALEEWONG TRADING CO., INC.,

Defendant. /

AND RELATED COUNTERCLAIMS.

 /

No. C 09-05617 WHA

ORDER GRANTING IN PART

AND DENYING IN PART 

COUNTERDEFENDANT’S

MOTION TO DISMISS AND

VACATING HEARING

INTRODUCTION

In this contractual beer brawl involving the exclusive importation rights for Singha Beer,

the crisp and refreshing “original premium Thai beer,” plaintiff and counterdefendant Boon Rawd

Trading International Co., Ltd. (“BRTI”) moves to dismiss seven counterclaims asserted by

defendant and counterclaimant Paleewong Trading Co., Inc. (“PTC”). For the reasons set forth

below, the motion must be GRANTED IN PART and DENIED IN PART.

STATEMENT

Boon Rawd Sreshthaputra was born in Thailand in 1872. Schooled by his father until he

was eleven years old, he was then sent away to be educated by Buddhist monks, as was custom at

the time for young Thai men. His working career began humbly, first as a teacher in his teenaged

years, and then as a clerk at the British-owned logging company, A.J. Dickson. After a lengthy 

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 Singha Corporation Co., Ltd. Home Page, History, http://www.boonrawd.co.th (last

visited February 18, 2010). 

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career in the logging industry, Sreshthaputra bet his dreams on entrepreneurship, starting a small

ferry company to transport Bangkokians across the Chao Praya river between the cities of

Bangkok and Thonburi. He faced stifling competition, first from rival ferrymen, and then from

industrious bridge builders. In 1929, his ferry business underwater, Sreshthaputra abandoned his

ships and turned to alcohol. Brewing, that is. After honing his skills in the tradition-soaked beer

halls of Germany and Denmark, the first bottle of Singha Beer rolled off the assembly line at

Boon Rawd Brewery in 1933. Thailand’s oldest and most popular beer was launched.1

Plaintiff and counterdefendant BRTI is a Thai corporation and wholly owned subsidiary of

Singha Corporation Co., Ltd., which is owned in its entirety by Boon Rawd Brewery Co., Ltd.,

the original family brewery founded by Boonrawd Sreshthaputra over 75 years ago (Compl. ¶ 7). 

Today, BRTI exports Singha Beer to over 37 countries around the world, including the United

States (ibid.). Defendant and counterclaimant PTC, a New York corporation, began serving as a

U.S. importer and distributor of Singha Beer in the 1970s, eventually becoming the only importer

and distributor of Singha Beer in the United States (id. ¶¶ 9, 10, 11). The crux of this dispute is

whether “only” in this context meant “exclusive.”

This motion to dismiss targets seven counterclaims raised by PTC in its answer (Dkt. No.

6). To be clear, plaintiff BRTI’s complaint asserted only a single claim for declaratory relief,

claiming that it had the right to freely terminate its relationship with PTC as an importer of

Singha Beer (Compl. ¶¶ 20–23). An important fact underlying both BRTI’s claim and PTC’s

counterclaims in this dispute is that there was never any written contract evidencing the alleged

“exclusive” agreement between the parties. Rather, PTC alleged in its answer that a “course of

conduct” formed the basis of such an agreement. With this procedural posture set forth, the facts

below are as alleged in PTC’s answer and counterclaims.

According to PTC, it has been for the past 32 years the exclusive importer and distributor

of products manufactured by Boon Rawd Brewery within a defined territory of 32 states (Ans. ¶

27). Singha Beer is the most significant of these products, all of which are encompassed by this

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2

 This order notes, however, that neither the complaint nor the answer mentions any

Boon Rawd product other than Singha Beer. However, the language used in both pleadings

indicates that there are additional products at issue in this litigation. 

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dispute.2

 For the past 26 years, this exclusivity agreement also extended to portions of California

and New York (ibid.). In 2002, PTC alleged that BRTI began engaging in a “tactical scheme” to

strip PTC of its exclusive importation rights by unilaterally encroaching into PTC’s defined

territory, appointing a subsidiary as a “dual importer” to compete with PTC, practicing price

discrimination against PTC, misappropriating PTC’s confidential proprietary information,

unilaterally setting artificial sales goals, and accusing PTC of various improprieties expounded on

later in this order (id. ¶ 28).

While PTC’s answer alleged that it had exclusive importation rights to Boon Rawd

products dating back to 1976, it bears noting that BRTI was not Boon Rawd Brewery’s exporter

of its products until 2000. Prior to that date, a different entity, Rajvitee Co., Ltd., served as the

exporter of Boon Rawd’s products (id. ¶¶ 9–10, 39). Nevertheless, PTC’s answer alleged that in

1976, Boon Rawd Brewery — the parent company who is not a party to this action — appointed

PTC as its exclusive U.S. importer and distributor for states straddling the east coast, including

New York (id. ¶ 36). This agreement purportedly included distribution rights within New York,

as well as the right to appoint wholesalers and distributors in other states (ibid.). PTC further

alleged that in 1993, Boom Rawd Brewery appointed it as the exclusive importer and distributor

in exclusive territories within California (id. ¶ 38).

When BRTI took over as the exporter of Boon Rawd products in 2000, PTC claimed that

there was a “mutual understanding” between the parties that PTC would continue to serve as the

exclusive importer and distributer of Boon Rawd products for the territories outlined above. This

mutual understanding was allegedly pursuant to an agreement created by the “course of conduct”

between PTC and BRTI’s predecessors-in-interest over the prior 25 years (id. ¶ 39). Moreover, it

supposedly was always “understood and agreed” between BRTI (and its predecessors) and PTC

that PTC’s importation rights could not be terminated without good cause (id. ¶ 40). In the event

that a termination of the agreement occurred, however, the agreement purportedly entitled PTC to

“compensation for the value of [their] importation rights” (ibid.). 

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 On this point, BRTI claimed that SNA was created to fill the void left by another

former importer of Boon Rawd products, Paulaner North America. Prior to SNA’s creation,

Paulaner apparently imported Singha Beer into the territories that were not being

“exclusively” served by PTC (Ans. ¶¶ 43). 

4

Despite this alleged exclusivity agreement, BRTI supposedly began a “tactical campaign”

in 2002 to diminish the value of PTC’s importation rights, diminish PTC’s profits, and create a

pretextual basis to terminate PTC’s importation agreement for cause (id. ¶ 41). As an example, in

2003, PTC claimed that BRTI formed Singha North America (“SNA”) to (1) compete with PTC

as an importer and distributor of Boon Rawd products and (2) eventually replace PTC in the

exclusive territories it served (id. ¶ 42). PTC made this claim despite BRTI’s alleged

representation that the new entity would only import products into those territories that were not

serviced by PTC, and would not encroach into PTC’s alleged exclusive territories (id. ¶ 43).3

 In

sum, PTC alleged that SNA was formed by BRTI to eventually become the exclusive importer for

the entire United States (id. ¶ 44).

The answer further alleged that in 2003, PTC learned of BRTI’s first attempt to terminate

its exclusive importation rights in California without good cause (id. ¶ 45). Upon information and

belief, PTC alleged it was BRTI’s intent to transfer these importation rights to SNA once they

were stripped from PTC (ibid.). After discussions between the parties, however, BRTI

purportedly withdrew its termination notice because it had “no good cause” and the compensation

offered to PTC was neither “appropriate” nor “acceptable” (id. ¶ 46). Over the next few years,

plaintiff allegedly re-attempted on numerous occasions to obtain PTC’s exclusive importation

rights for a nominal sum. These proposals, however, went unrequited (id. ¶¶ 47, 48).

BRTI then pursued a different approach. In or around 2006, BRTI proposed that SNA and

PTC form a joint venture that would share importation rights to Boon Rawd products, while

leaving PTC with its exclusive distribution rights in their alleged exclusive territories (id. ¶ 49). 

During the negotiation process, however, BRTI nevertheless began exporting its products to SNA

for distribution within defendant’s exclusive territories (id. ¶ 51). This produced considerable

ferment between the parties. To assuage these concerns while negotiations continued, BRTI

represented to PTC that “the dual importing would not cause any problems . . . in light of the fact

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that the joint venture would soon be completed” and that PTC “would benefit from these sales”

being consummated by SNA (id. ¶ 51). Additionally, BRTI allegedly promised PTC that SNA

would only sell Boon Rawd products to one distributor in California — Young’s Market — who

in turn would only be permitted to sell the products to limited number of accounts, none of which

belonged to PTC (id. ¶ 52). PTC claimed that it relied upon these representations by BRTI and,

in the interests of finalizing the joint venture agreement, did not protest these sales (id. ¶ 53). 

Despite these representations, SNA supposedly began competing directly with PTC in California,

selling to two of PTC’s sub-distributors. Additionally, Young’s Market began distributing Boon

Rawd products to accounts being served by PTC (id. ¶ 54). Finally, the answer alleged that SNA

— who is not a party to this action — hired a key PTC employee in 2006 to enable itself to

compete in California, and that BRTI misappropriated PTC’s confidential proprietary information

and provided it to SNA (id. ¶¶ 55, 56). These acts supposedly were performed by BRTI and SNA

in furtherance of aforementioned “tactical campaign” to strip PTC of its importation rights by

“making the brand less valuable to [PTC]” (id. ¶ 57).

After good faith negotiations ended in 2006, BRTI refused to go forward with the joint

venture it had originally proposed (id. ¶ 50). According to defendant, BRTI — recognizing that it

could not simply terminate defendant’s exclusive agreement to import Boon Rawd products in

California and New York — then offered to purchase defendant’s importation rights for $3

million. This offer by BRTI allegedly left PTC’s distribution rights intact in California and New

York, and left in place all prior agreements between the parties involving logistical, brokerage,

marketing, advertising, and product promotion services. On December 14, 2006, the parties

allegedly executed a Memorandum of Understanding evidencing this agreement (id. ¶ 58). 

In July 2007, however, after the parties had negotiated the terms of this agreement in good

faith, BRTI purportedly refused to go forward with the transaction without cause or explanation

(id. ¶¶ 59, 60). Following this unilateral cessation of negotiations, PTC alleged that BRTI

renewed its efforts to pressure PTC out of the import business through various tactics it employed

with SNA, including: (1) improper pricing practices, (2) continuing to allow SNA to import Boon

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4

 The “off-premise” market for Boon Rawd products included liquor and chain stores

(i.e. establishments where the product was purchased and consumed off-site). By contrast,

the “on-premise” market included retail establishments where the product was consumed at

the point of purchase, such as restaurants (Compl. ¶ 14).

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Rawd products into California, (3) fabricating complaints about PTC, and (4) making

unreasonable demands on PTC (id. ¶ 61).

A final round of negotiations occurred in 2008, involving the same basic terms set forth in

the December 14 agreement (id. ¶ 62). During these discussions, however, PTC allegedly

discovered that SNA was selling Boon Rawd products to distributors in California at below the

cost that BRTI was selling those same products to PTC (id. ¶ 63). Around this time, BRTI

allegedly increased its criticism of PTC by accusing it of “not developing the off-premise market”

for Boon Rawd products, despite PTC’s opinion that it was BRTI’s own pricing scheme that had

made these products uncompetitive in that market (id. ¶ 64).4

 While negotiations continued into

2009, PTC did not agree to sell its importation rights due to concerns that its business would not

be sustainable as a distribution-only operation (id. ¶ 65). Finally, BRTI sent PTC a notice on

August 20, 2009, advising PTC that its importation rights to Boon Rawd products would be

terminated effective December 31, 2009 (id. ¶ 66). 

According to PTC, this purported termination was without good cause. On this issue,

BRTI supposedly agreed with PTC that it was entitled to reasonable compensation for the

termination of its importation rights, and requested that PTC submit an offer (id. ¶ 67). In

response, PTC requested that the parties sign a confidential non-disclosure agreement prior to

such a submission. The request was refused (id. ¶¶ 68, 69). PTC then made an offer to BRTI on

August 29, 2009 (id. ¶ 70). As an apparent rejection of the offer, BRTI proceeded to file this civil

action on November 30, 2009 (id. ¶¶ 71, 72; Dkt. No. 1). Shortly thereafter, BRTI indicated to

PTC that it would be terminating PTC’s importation rights effective December 31, 2009, just as it

had advised months before (Ans. ¶ 72).

ANALYSIS

To survive a motion to dismiss for failure to state a claim, a pleading must contain

sufficient factual matter, accepted as true, to state a claim that is plausible on its face. FRCP

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12(b)(6); Ashcroft v. Iqbal, — U.S. —, 129 S. Ct. 1937, 1949 (2009). A claim is facially

plausible when there is sufficient factual content to draw a reasonable inference that the defendant

(or in this motion, the counterdefendant) is liable for the misconduct alleged. While the Court

“must take all of the factual allegations in the complaint as true,” it is “not bound to accept as true

a legal conclusion couched as a factual allegation.” Id. at 1949–50. “[C]onclusory allegations of

law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a

claim.” Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir.1996).

PTC, in its answer, raised eight counterclaims against BRTI (Ans. ¶¶ 14–21): 

1. Breach of implied contract due to BRTI’s termination of PTC’s

importation rights on December 31, 2009;

2. Breach of implied contract due to the “dual importation” of Boon

Rawd products by BRTI beginning in 2006;

3. Intentional interference with prospective economic advantage; 

4. Breach of implied covenant of good faith and fair dealing; 

5. Promissory estoppel; 

6. Conversion of defendant’s import rights and goodwill;

7. Unjust enrichment; and

8. Violation of the California Franchise Relations Act (Cal. Bus. &

Prof. Code Section 20000, et seq.).

BRTI targets all but the first of PTC’s counterclaims in the instant motion. These

counterclaims will now be addressed in turn.

1. COUNTERCLAIM TWO: BREACH OF IMPLIED CONTRACT

PTC’s second counterclaim alleged that “beginning in 2006 and thereafter,” BRTI

exported Boon Rawd products to SNA for distribution in the United States in violation of PTC’s

purportedly exclusive importation and distribution rights, thereby constituting a breach of an

implied contractual agreement (Compl. ¶¶ 83–91). The instant motion brought by BRTI focuses

solely on whether this “dual importation” counterclaim (as referred to in the answer) is timebarred under the applicable statute of limitations. 

The parties agree that a two-year limitations period applies to this counterclaim (Br. 5–7,

Opp. 7). See Cal. Code Civ. Proc. § 339 (providing that a two-year statute of limitations applies

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to actions “upon a contract, obligation or liability not founded upon an instrument in writing”). 

The parties disagree, however, on (1) whether the counterclaim accrued in 2006, (2) whether

BRTI is equitably estopped from asserting a statute of limitations defense, and (3) whether the

doctrine of contractual severability applies to this action and preserves PTC’s right to relief.

A. ACCRUAL OF COUNTERCLAIM TWO

For state law claims in federal court, state statutes of limitations, including their tolling

rules, are “substantive” for Erie purposes. Guaranty Trust Co. of New York v. York, 326 US 99,

110 (1945). Under California law, a cause of action must be brought in state court within the

limitations period after it has accrued. Cal. Code Civ. Proc. § 312. A cause of action accrues at

“the time when the cause of action is complete with all of its elements.” Norgart v. Upjohn Co.,

21 Cal. 4th 383, 397 (1999). An important exception to this rule of accrual, however, is the

“discovery rule,” which postpones accrual until the plaintiff discovers, or has reason to discover,

the facts underlying the cause of action. Ibid.

In its answer, PTC alleged that BRTI began dual importing into its exclusive territory

during negotiations in 2006 (Ans. ¶¶ 51, 88). Furthermore, PTC admitted that during these

negotiations, it brought to BRTI’s attention it’s concerns that such “dual importation” was

occurring (id. ¶¶ 52, 88). Indeed, PTC’s opposition concedes that it knew in 2006 that BRTI had

been engaging in “dual importation” — the very act that forms the basis for its second

counterclaim (Opp. 4). As such, PTC cannot avail itself of the “discovery rule” to postpone

accrual of its second breach of implied contract counterclaim.

In its opposition, PTC raises the argument that because there existed “ongoing contractual

obligations” between the parties at the time BRTI first breached the exclusive importation

agreement in 2006, it was not required to assert its counterclaim for breach of implied contract by

2008. Rather, PTC asks the Court to find that the statute of limitations did not even begin to run

until it elected to treat the implied contract as terminated, which was at the end of 2009 (Opp. 12). 

To support this argument, PTC cites to Romano v. Rockwell Int’l, Inc., 14 Cal. 4th 479 (1996),

which addressed whether an employee’s claim for wrongful termination against his employer

accrued on the date of his termination or on the date the employee was notified that his

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employment was going to be terminated. In Romano, the court held that “because Romano

continued to perform and accept compensation until the time of actual termination,” this

“reflect[ed] an election to treat the [employment] contract as still in effect.” Romano, 14 Cal. 4th

at 490. As such, the court determined that the statute of limitations period should have been

measured from the date of the employee’s termination, since “the [p]laintiff should not be

penalized for leaving to the defendant an opportunity to retract his wrongful repudiation.” Id. at

489 (citation omitted). The Romano court went further to state that “whether [a] breach is

anticipatory or not, when there are ongoing contractual obligations the plaintiff may elect to rely

on the contract despite a breach, and the statute of limitations does not begin to run until the

plaintiff has elected to treat the breach as terminating the contract.” Id. at 490. PTC also cited

Lambert v. Commonwealth Land Title Ins. Co., 53 Cal. 3d 1072, 1078 (1991), which applied a

similar rule to a breach of duty claim against a title insurance company. 

Neither Romano nor Lambert apply here. In Romano, the court’s primary concern was

ensuring that an employee was not penalized for affording his employer the opportunity to retract

a wrongful repudiation before the actual date of termination. See Romano, 14 Cal. 4th at 489. 

Indeed, the Romano court expressly recognized the option of plaintiff to “treat the repudiation as

an empty threat, wait until the time for performance arrives and exercise his remedies for actual

breach if a breach does in fact occur at such time.” Ibid. (citations omitted) (emphasis added). 

The Lambert decision was reached on similar grounds. See Lambert, 53 Cal. 3d at 1074–77

(holding that the title holder could wait “until a final judgment had been entered and [his

insurer’s] duty to defend had ceased,” because the title insurer “could have assumed [this duty] at

any time . . . before final judgment”). Here, the alleged “dual importation” conducted by BRTI in

2006 was not an empty threat, but rather an actual and material breach of the importation

agreement’s most important provision: exclusivity. Additionally, since the alleged agreement

between PTC and BRTI was open-ended, there was no specific point in time — or “time for

performance” as explained in Romano — where the parties could definitively gauge whether an

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 PTC’s citation to Witkin on this point is similarly inapposite (Opp. 11). The

excerpt from Witkin referred specifically to delaying accrual to “the time for final

performance” and “the date when the last performance is due.” Here, the alleged implied

contract extended into perpetuity, with no final or last performance date contemplated.

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actual breach “d[id] in fact occur.” Indeed, an actual breach had already occurred in 2006, as

readily admitted in PTC’s answer.5

In sum, PTC asks the Court to (1) ignore PTC’s admitted knowledge of BRTI’s actual

breach of the alleged exclusivity agreement in 2006 and (2) toll the statute of limitations

indefinitely until the date PTC elected to treat the breach as terminating the contract. If this were

really the rule, had BRTI not terminated the contract itself in 2009, PTC could have waited fifty

years before filing this action, and would be entitled to the full fifty years worth of damages. This

is not the law in California, and not the rule contemplated by Romano. It would lead to absurd

and inequitable results. As such, this order finds that PTC’s second counterclaim accrued in

2006.

B. EQUITABLE ESTOPPEL

In its answer, PTC — perhaps anticipating a statute of limitations defense — alleged that

BRTI’s conduct in 2006 (and thereafter) prevented it from filing its second counterclaim within

the limitations period (Ans. ¶¶ 88, 89). BRTI targets this equitable estoppel argument in its

motion (Br. 5–8).

To preserve its second counterclaim under a theory of equitable estoppel, PTC must allege

sufficient facts establishing the following four elements: (1) the party to be estopped must be

apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must so act that

the party asserting the estoppel has a right to believe it was so intended; (3) the other party must

be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury.” Strong

v. County of Santa Cruz, 15 Cal. 3d 720, 725 (1975). Additionally, while “[a]n estoppel may

arise” absent a “designed fraud on the part of the person sought to be estopped,” the statement or

conduct at issue “must amount to a misrepresentation bearing on the necessity of bringing a

timely suit,” and any reliance on the misrepresentation must be reasonable. Lantzy v. Centex

Homes, 31 Cal. 4th 363, 384 n.18 (2003) (emphasis added).

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First, there can be no doubt that PTC knew “the true state of facts” underlying its second

counterclaim in 2006 to bring this counterclaim within the limitations period. In its answer, PTC

alleged that it “did not protest the dual importation of Boon Rawd [p]roducts based upon BRTI’s

misrepresentations that BRTI would promptly complete the joint venture it was negotiating with

[defendant] pursuant to which the import rights in the United States would be owned by the joint

venture company and that SNA would not sell products to [defendant’s] customers” (Ans. ¶ 88). 

As discussed in the prior section on accrual, BRTI’s “dual importation” conduct is the basis for

PTC’s second breach of contract counterclaim.

Second, the alleged misrepresentation — as least based upon the facts as pled — was not a

statement bearing on the necessity of bringing a timely suit. Indeed, the alleged misrepresentation

had nothing to do with whether the exclusivity agreement between the parties had been breached. 

Rather, BRTI represented to PTC that “the dual importing would not cause any problems for

[PTC], in light of the fact that the joint venture would soon be completed, and [PTC] would then

benefit from these sales” (id. ¶ 52). While PTC alleged that these representations were contrary

to BRTI’s true intentions and conduct, and that it relied upon BRTI’s statements by choosing to

“not protest the dual importation,” this cannot form the basis of an equitable estoppel argument

(id. ¶¶ 48, 52, 54, 89).

One reason for this conclusion is that the above negotiations, whether fraudulently

motivated or not, failed in 2006, well within the two-year limitations period (id. ¶ 50). While the

parties may have engaged in subsequent negotiations, those renewed negotiations apparently

ended in July 2007 (id. ¶¶ 58–60). A third round of negotiations between the parties did not

resume until 2008 (id. ¶ 62). Taking these facts as true, plaintiff clearly had the opportunity — at

least during the period between July 2007 and 2008 — when no negotiations were occurring to

bring its second counterclaim within the limitations period. 

A second reason for barring the application of equitable estoppel is that PTC discovered in

2006 that BRTI’s representations allegedly made during negotiations were false (id. ¶ 54). Thus,

even if BRTI’s misrepresentations could have formed the basis of an equitable estoppel argument,

PTC ceased being “ignorant of the true state of facts” in 2006, will within the limitations period.

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Finally, it must be noted that PTC, after learning that BRTI had breached its purportedly

exclusive importation agreement, knowingly made the business decision to pursue a mirage of

riches — the proposed joint venture with SNA — rather than enforce its rights under the

contract. While BRTI may have misrepresented its willingness to pursue such a venture, PTC

was never bound to entertain such an offer. In the end, negotiations failed. Given these alleged

facts, it would seem an improper application of equitable estoppel when BRTI made no

statements bearing upon the necessity of PTC to bring a timely suit. Rather, BRTI simply offered

a more lucrative deal, which PTC — with dollar signs in its eyes — elected to pursue.

For these reasons, equitable estoppel cannot apply to this counterclaim.

 C. SUCCESSIVE BREACH AND CONTINUOUS ACCRUAL

PTC’s third and final argument with respect to BRTI’s statute of limitations defense

invokes the theories of successive breach and continuous accrual (Opp. 11). While PTC admits

that dual importing of Boon Rawd products first occurred in 2006, it asserts that BRTI “resumed

its dual importing in California in 2007 and 2008” and 2009 (ibid.). Citing no law, defendant

then argues that these additional allegations of dual importing are sufficient to demonstrate

successive breaches of the parties’ implied contract, and that it is entitled to bring its second

counterclaim for conduct occurring within the two years prior to its filing its answer.

This argument is both factually and legally deficient. First, PTC’s answer says nothing

about BRTI resuming its dual importing activities in California in the years mentioned above. 

Rather, PTC’s answer clearly states that in 2007, BRTI “continu[ed] to dual import in California”

(Ans. ¶ 61). Indeed, nowhere in the answer is it alleged that BRTI ever ceased engaging in dual

importation after beginning the practice in 2006. Thus, this order does not find that “successive

breaches” of the purported contract have been alleged. Second, the alleged facts do not support

the applicability of continuous accrual. As explained by BRTI in its reply brief, whether PTC can

recover for any breaches of the purported exclusive importation agreement within the two year

period preceding the filing of its counterclaims hinges upon the doctrine of contractual

severability (Reply 2–3). Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co., 116 Cal. App.

4th 1375, 1388–89 (2004). In Armstrong, the California Supreme Court noted that “[w]here a

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contract is divisible and, thus, breaches of its severable parts give rise to separate causes of action,

the statute of limitations will generally begin to run at the time of each breach; in other words,

each cause of action for breach of a divisible part may accrue at a different time for purposes of

determining whether an action is timely under the applicable statute of limitations.” Ibid.

(citation omitted). Typical examples of severable contracts are installment contracts, periodic

rental payments, and “contracts calling for periodic, pension-like payments on an obligation with

no final and fixed amount.” Id. at 1388.

The Armstrong court cautioned, however, that the context of continuing accrual for

periodic breach “is to be distinguished from that of a single breach or other wrong which has

continuing impact.” Id. at 1389 (citations omitted). Additionally, “[i]f the parties to its making

intend an entire contract, not a severable one, the courts will not find it divisible despite periodic

performance.” Ibid. Here, there is no indication in the facts alleged that the purported exclusive

importation agreement was severable, or that the parties intended it to be. Furthermore, there is

no indication how payments or shipments under the contract were handled. In other words, PTC

has not alleged any facts to support a finding that the implied contract involved “a periodic

procedure for the performance of their respective obligations.” Id. at 1390. Had PTC done so,

breaches that occurred within the limitations period might not be barred.

Absent a sufficient factual basis to determine whether the implied contract can be treated

as severable, BRTI’s motion to dismiss PTC’s second counterclaim must be GRANTED, and

PTC’s second counterclaim is hereby DISMISSED. 

2. COUNTERCLAIM THREE: INTENTIONAL INTERFERENCE WITH PROSPECTIVE

ECONOMIC ADVANTAGE

In counterclaim three, PTC alleged “a scheme and pattern of tortious conduct” that

purportedly began in 2003 with the formation of SNA and continued through the commencement

of this action (Opp. 13; Ans. ¶¶ 42–45, 51, 52, 54, 56, 86, 87). As with the prior counterclaim,

BRTI argues that a two-year limitations period bars PTC’s third counterclaim for the tort of

intentional interference with prospective economic advantage (Br. 8).

PTC does not dispute that a two-year limitations period applies to this tort (Opp 13). See

Cal. Code Civ. Proc. § 339. Rather, PTC argues that the facts as alleged in its answer set forth a

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almost exclusively in disputes involving continuing nuisances or trespasses (Reply 6).

7

 PTC filed its answer on December 21, 2009 (Dkt. No. 6).

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“continuing wrong,” and therefore “the statute of limitations does not begin to run until the date

of the last injury or when the tortuous [sic] acts cease.” Pugliese v. Superior Court, 146 Cal.

App. 4th 1444, 1452 (2007). What PTC fails to mention, however, is that Pugliese — the

decision upon which it relies for this argument — involved the statutory tort of domestic

violence, and entailed an extensive analysis of the related California code provisions setting forth

specific rules governing its accrual. Id. at 1448–49. Indeed, based upon an examination of

California decisions that have applied the “continuing tort” doctrine, none have extended the

doctrine to the tort of intentional interference with prospective economic advantage.6

 Given that

PTC has alleged numerous discrete acts to support this counterclaim, including price

discrimination, dual importation, misappropriation of confidential information, and fabricating

complaints, there is no basis to treat these acts as a single, continuous wrong. As such, the

undersigned declines to extend the continuing tort doctrine to this counterclaim.

This, however, does not end the analysis. Given the discrete nature of the alleged

wrongful acts underlying its third counterclaim, PTC may bring its third counterclaim for any

allegedly wrongful act committed within the two-year limitations period. See Reeves v. Hanlon,

33 Cal. 4th 1140 (2004) (the tort of intentional interference with prospective economic advantage

requires, among other things, proof that the defendant committed an act of interference that was

wrongful by some legal measure other than the fact of interference itself). Given that at least

some of the accused acts purportedly fell within the limitations period — e.g. the price

discrimination that purportedly occurred in 2008 — this counterclaim as to those acts is not timebarred (Ans. ¶ 63). In sum, BRTI’s motion on this counterclaim with respect to alleged wrongful

acts committed prior to December 21, 2007, is GRANTED.

7

 This includes the act of dual

importation, since its wrongfulness stems from the alleged breach of contract claim that accrued

in 2006. Conversely, the motion with respect to acts that occurred on or after December 21,

2007, must be DENIED.

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 PTC raised the same argument under Romano — that the statute of limitations did

not even begin to run until 2009 — that it raised for its second counterclaim (Opp. 15). For

the same reasons set forth earlier in this order, that argument is rejected. 

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3. COUNTERCLAIM FOUR: BREACH OF IMPLIED COVENANT OF GOOD FAITH &

FAIR DEALING

Echoing its prior arguments, BRTI again asserts that a two-year limitations period bars

PTC’s counterclaim (Br. 8–9). As before, there is no dispute that a two-year limitations period

applies to this counterclaim (Opp. 14–15). With respect to its fourth counterclaim, however, it is

clear that PTC has sufficiently alleged discrete acts falling within the two-year limitations period

for this counterclaim, most obviously the termination of the importation agreement between the

parties in 2009 “without just cause” (Ans. ¶ 99). As such, BRTI’s motion with respect to alleged

breaching conduct committed prior to December 21, 2007, is GRANTED. Conversely, the motion

with respect to alleged breaching conduct that occurred on or after December 21, 2007, must be

DENIED.

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4. COUNTERCLAIM FIVE: PROMISSORY ESTOPPEL

Rather than raise a statute of limitations argument, BRTI attacks PTC’s promissory

estoppel counterclaim on its merits. Promissory estoppel requires: (1) a promise that is clear and

unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) the reliance

must be reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by

his or her reliance. Ecology, Inc. v. State of California, 129 Cal. App. 4th 887, 901-902, 904

(2005). The purpose of this doctrine is to make a promise that lacks consideration (in the usual

sense of something bargained for and given in exchange) binding under certain circumstances. 

Youngman v. Nevada Irrigation District, 70 Cal. 2d 240, 249 (1969).

With respect to its fifth counterclaim, PTC alleged that (Ans. ¶ 102):

In order to induce [PTC] to become and remain the exclusive

importer for Boon Rawd [p]roducts and to actively develop the

market for such products, the Brewery and BRTI, by their

statements and their conduct, expressly and impliedly made clear

and definite promises to [PTC], including without limitation, that

(i) [PTC] would be granted exclusive territories, (ii) [PTC] would

not be terminated as the exclusive importer without good cause;

and (iii) in the event [PTC] was terminated without good cause,

[PTC] would receive reasonable compensation for its importation

rights to the Boon Rawd [p]roducts which it developed.

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Additionally, PTC claimed that it reasonably and foreseeably relied to its detriment upon these

alleged representations by developing and building the market for Boon Rawd products, investing

“considerable time, effort and money” in the process (id. ¶¶ 103–106).

The doctrine of promissory estoppel is only applicable when an alleged promise lacks

adequate consideration. Youngman, 70 Cal. 2d at 249. In its motion, BRTI focuses on this

requirement and contends that PTC’s fifth counterclaim fails as a matter of law because the

purported detrimental reliance alleged by PTC — its development of a market for Boon Rawd

products — was nothing more than the very performance requested by BRTI under the alleged

implied agreement (Br. 9–10). In other words, under the facts alleged by PTC, the promises made

by BRTI were bargained for and given in exchange for performance. Since this means that there

was consideration, there can be no claim for promissory estoppel.

This argument is supported by the longstanding rule that “[i]f the promisee’s performance

was requested at the time the promisor made his or her promise and that performance was

bargained for, the doctrine of promissory estoppel is inapplicable.” Healy v. Brewster, 59 Cal. 2d

455 (1963); Youngman, 70 Cal. 2d at 249–50; Raedeke v. Gibraltar Sav. & Loan Assn., 10 Cal. 3d

665 (1974); Signal Hill Aviation Co. v. Stroppe, 96 Cal. App. 3d 627 (1979). Here, PTC clearly

alleged in its answer that BRTI’s various promises pertaining to exclusivity were made “to induce

[PTC] to become and remain the exclusive importer for Boon Rawd [p]roducts and to actively

develop the market for such products” (Ans. ¶ 102). PTC then alleged that it did, in fact, develop

the market for Boon Rawd products to its supposed detriment (id. ¶¶ 103–106).

Under Healy and its progeny, this performance by PTC to its detriment constituted

adequate consideration for the alleged promises made by BRTI. 59 Cal. 2d at 463. As such,

since the presence of adequate consideration renders the doctrine of promissory estoppel

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 The Healy decision provides the clearest explanation as to why promissory estoppel

is inapplicable when a promise is made in exchange for performance. Under such

circumstances, the only reliance that can make the promisor’s failure to perform actionable is

the promisee’s doing what was requested. If that reliance was detrimental, it would

constitute consideration for the promise, thereby rendering promissory estoppel inapplicable. 

If it was not detrimental, it would not constitute consideration, but it would fail to satisfy an

essential element of promissory estoppel. Healy, 59 Cal. 2d at 463.

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inapplicable, BRTI’s motion with respect to this counterclaim must be GRANTED.

9

 PTC’s fifth

counterclaim is therefore DISMISSED without leave to amend.

5. COUNTERCLAIM SIX: CONVERSION

In another merits-based attack, BRTI argues that PTC’s conversion counterclaim must be

dismissed as a purported “conversion of intangible goodwill,” which is not actionable under

California law (Br. 10-12).

Under California law, a claimant must plead three elements to state a claim for

conversion: (1) ownership or right to possession of personal property; (2) a defendant’s wrongful

interference with the claimant’s possession; and (3) damage to the claimant. PCO, Inc. v.

Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, 150 Cal. App. 4th 384, 394

(2007). While early California cases expressly held that an intangible interest such as customer

goodwill cannot be the subject of a claim for conversion, later cases merely held that an

intangible interest must be “merged with, or reflected in, something tangible.” Compare Adkins

v. Model Laundry Co., 92 Cal. App. 575, 583 (1928) and Olschewski v. Hudson, 87 Cal. App.

282, 288 (1927) with Thrifty-Tel, Inc. v. Bezenek, 46 Cal. App. 4th 1559, 1565 (1996). Notably,

the Ninth Circuit recently held that to the extent “California retains some vestigial merger

requirement, it is clearly minimal, and at most requires only some connection to a document or

tangible object.” Kremen v. Cohen, 337 F.3d 1024, 1033 (9th Cir. 2003) (internal quotations and

citations omitted). 

Despite the clear trend that intangible property can be the subject of conversion, BRTI

nevertheless asserts that the longstanding law in California is that customer goodwill cannot be

the subject of conversion (Br. 11). Indeed, BRTI is correct in that there are no published cases

that have held that goodwill can be the subject of a claim for conversion, under even the more

permissive modern line of cases. 

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Perhaps cognizant of the rule set forth in Kremen, however, PTC argues that its claim for

conversion of goodwill is sufficiently connected to tangible assets “including but not limited to its

tangible detailed sales information, account level, name, volume, pricing, and delivery

information” (Ans. ¶ 111). Unsurprisingly, BRTI counters that this “conclusory allegation” does

not evidence an actual relationship between the tangible and intangible property interests, and is

inconsistent with the law (Reply 9). Although this issue — given the clearly shifting nature of

conversion law outlined above — is a close one, the undersigned declines to extend the tort of

conversion to customer goodwill. Unlike the domain name at issue in Kremen or net operating

loss at issue in Freemont Indemnity Co. v. Freemont General Corp., 148 Cal. App. 4th 97 (2007),

the goodwill of a business is a highly abstract property interest that does not lend itself to the

elements of conversion. Indeed, it is difficult to fathom how one could determine whether a

defendant wrongfully interfered with the claimant’s possession of such abstract property. 

This does not end the inquiry, however, as counterclaim six also states a claim for

conversion of PTC’s import rights. Like goodwill, however, importation rights is an intangible

asset that has not traditionally been subject to conversion. Rather, it is an intangible contractual

right protected under contract law, not tort law. Moreover, no California case has ever allowed a

conversion claim for contractual rights to importation. PTC’s counterclaim for conversion of its

import rights is therefore dismissed for the same reasons as stated above.

In sum, BRTI’s motion as to counterclaim six must be GRANTED, and PTC’s sixth

counterclaim is DISMISSED.

6. COUNTERCLAIM SEVEN: UNJUST ENRICHMENT

Returning again to statutes of limitations, plaintiff argues that counterclaim seven fails to

state a claim because it is time barred by CCP § 339(1) (Br. 12). Additionally, in its reply brief,

BRTI asserts that there is no cause of action for unjust enrichment in California (Reply 10). As

the latter argument is an alternative basis for dismissal, which was not briefed by PTC, it will be

addressed last. 

A. APPLICABLE STATUTE OF LIMITATIONS

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Unlike counterclaims two through four, the parties disagree over the limitations period

that should apply to counterclaim seven. As with other claims, BRTI asserts that a two-year

limitations period applies under CCP § 339(1). PTC, however, states that unjust enrichment is

subject to a three-year limitations period for “fraud or mistake” as set forth in CCP § 338(d).

There is no dispute that Section 338(d) provides a three-year statute of limitations for

“[a]n action for relief on the ground of fraud or mistake.” Puzzlingly, however, PTC does not

explicitly allege any fraudulent act or mistake in its seventh counterclaim, even though it is

clearly required for Section 338(d) to apply. Nor are there any facts pleaded with particularity

that indicate that fraud or mistake apply. Given this absence, the two-year statute of limitations

under CCP § 339(1) must apply.

B. CONTINUING TORT DOCTRINE

As with counterclaim three, PTC invokes the continuing tort doctrine for the proposition

that the statute of limitations did not begin to run until BRTI terminated PTC’s importation rights

on December 31, 2009. As this argument is identical to the one discussed under counterclaim

three, above, its resolution is the same. Given that PTC has alleged numerous discrete acts to

support this counterclaim, including price discrimination, dual importation, misappropriation of

confidential information, and setting artificial sales goals, there is no basis to treat these acts as a

single, continuous wrong. As such, the undersigned declines to extend the continuing tort

doctrine to counterclaim seven. 

That said, as with counterclaim three, there is no question that PTC sufficiently alleged

that BRTI committed numerous allegedly wrongful acts within two years of the filing of PTC’s

answer on December 21, 2009. Given the discrete nature of these alleged wrongful acts

committed by BRTI, this order finds that PTC is not barred from bringing its seventh

counterclaim for any allegedly wrongful act committed within the two-year limitations period. 

C. UNJUST ENRICHMENT

While arguments first made in reply briefs are typically disregarded, BRTI makes the

argument that there is no cause of action for “unjust enrichment” in California (Reply 10). This is

true. Indeed, unjust enrichment is “not a cause of action . . . or even a remedy, but rather a

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general principle, underlying various legal doctrines and remedies. It is synonymous with

restitution.” McBride v. Boughton, 123 Cal. App. 4th 379, 387 (2004). As such, a claim for

unjust enrichment is properly pled as a claim for a contract implied-in-law. It “does not lie when

an enforceable, binding agreement exists defining the rights of the parties.” Paracor Fin., Inc. v.

Gen. Elec. Capital Corp., 96 F.3d 1151, 1167 (9th Cir. 1996). California, however, recognizes an

exception to the rule that unjust enrichment does not lie when an enforceable contract exists:

“Restitution may be awarded in lieu of breach of contract damages when the parties had an

express contract, but it was procured by fraud or is unenforceable or ineffective for some reason.” 

McBride, 123 Cal. App. 4th at 388.

Given this backdrop, to properly state a claim, PTC would have had to either allege that

the parties’ rights were not squarely set out in a binding agreement, or allege that any express

contract was procured by fraud or was ineffective for some reason. Since PTC failed to properly

state a claim for unjust enrichment under these standards, BRTI’s motion to dismiss PTC’s sixth

counterclaim must be GRANTED. As such, PTC’s seventh counterclaim is DISMISSED.

7. COUNTERCLAIM EIGHT – VIOLATION OF THE CALIFORNIA FRANCHISE

RELATIONS ACT

With respect to counterclaim eight, BRTI argues that defendant failed to allege the

required elements to state a claim under the California Franchise Relations Act. To state a claim

for a violation of the CFRA, a plaintiff must allege that there was a “contract or agreement,

express or implied, in which the purported franchisee meets three criteria,” and that the franchisor

committed some act prohibited by CFRA, such as terminate the relationship without cause. See

Gabana Gulf Distrib., Ltd. v. GAP Int’l Sales, Inc., 2006 WL 2355092, at *7 (N.D. Cal. Aug. 14,

2006) (Breyer, J.). The three criteria for a franchisee under the CFRA are (1) the franchisee is

granted the right to engage in the business of offering, selling or distributing goods or services

under a marketing plan or system prescribed in substantial part by a franchisor, (2) the operation

of the franchisee’s business pursuant to that plan or system is substantially associated with the

franchisor’s trademark, service mark, trade name, logotype, advertising, or other commercial

symbol designating the franchisor or its affiliate, and (3) the franchisee is required to pay, directly

or indirectly, a franchise fee. Cal. Bus. & Prof. Code 20001. 

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In its motion to dismiss, BRTI correctly asserts that a failure to satisfy any of the three

criteria is fatal to a claim under CFRA (Br. 13). That said, the only issue at this stage is whether a

party is required to plead the specific criteria constituting a franchise in order to state a claim

under CFRA. Under Ashcroft v. Iqbal, the Supreme Court noted that “[w]hile legal conclusions

can provide the complaint’s framework, they must be supported by factual allegations.” 129 S.Ct.

at 1940. Under this standard, PTC must provide at some some factual allegations to support an

inference that it is a franchisee within the meaning of CFRA, and that BRTI violated the CFRA.

In its counterclaim, PTC simply stated that its relationship with BRTI “is a ‘franchise’

within the meaning of the California Franchise Relations Act § 20000 et seq.,” and that BRTI’s

termination of the relationship without cause violated the CFRA (Ans ¶¶ 123–124). No facts,

however, are alleged anywhere in the answer that give rise to a reasonable inference that BRTI

substantially prescribed a marketing plan or system for the distribution of its beers. Indeed, to the

contrary, PTC states that BRTI’s predecessor-in-interest “did not support [PTC]’s efforts to build

the Singha brand in the United States at all,” and that “[PTC] has created a market for Boon Rawd

Products . . . in the United States: (Ans. ¶¶ 8-9). Additionally, nowhere in the answer is it alleged

that PTC paid, directly or indirectly, a franchise fee. In light of these factual deficiencies, BRTI’s

motion to dismiss counterclaim eight must be GRANTED. Accordingly, PTC’s eighth

counterclaim is DISMISSED.

CONCLUSION

For the reasons set forth above, BRTI’s motion to dismiss PTC’s seven counterclaims is

GRANTED IN PART and DENIED IN PART. The hearing scheduled for this motion is hereby

VACATED. PTC may file a motion seeking leave to amend their counterclaims — attaching the

amended pleading thereto — BY NOON ON THURSDAY, MARCH 4, 2010, explaining why the

amended counterclaims properly state claims for relief.

IT IS SO ORDERED.

Dated: February 19, 2010. WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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