Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-05370/USCOURTS-cand-3_04-cv-05370-0/pdf.json

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

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

EZONICS CORPORATION,

Plaintiff,

 v.

PRIMAX ELECTRONICS, LTD.,

Defendant /

No. C-04-5370 MMC

ORDER GRANTING DEFENDANT’S

MOTION TO DISMISS SECOND AND

THIRD CAUSES OF ACTION; DENYING

AS MOOT DEFENDANT’S MOTION, IN

THE ALTERNATIVE, FOR A MORE

DEFINITE STATEMENT; DISMISSING

SECOND AND THIRD CAUSES OF

ACTION WITH LEAVE TO AMEND;

VACATING HEARING

Before the Court is defendant Primax Electronics, Ltd.’s motion, pursuant to Rule

12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the Second and Third Causes

of Action in plaintiff Ezonics Corporation’s First Amended Complaint (“FAC”), and, in the

alternative, for a more definite statement pursuant to Rule 12(e). Plaintiff has filed

opposition, to which defendant has replied. Having reviewed the papers filed in support of

and in opposition to the motion, the Court deems the matter suitable for decision on the

papers, VACATES the hearing scheduled for July 22, 2005, and rules as follows.

Plaintiff’s Second Cause of Action, alleging a claim of negligent misrepresentation,

and Third Cause of Action, alleging a claim of fraud, are based on the allegation that

defendant, for purposes of inducing plaintiff to enter into a contract with defendant, made

false representations that a “firmware change” defendant proposed to implement in
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The FAC does not set forth, even in general terms, the nature of the proposed

“firmware change” or the “quality problems” that may have existed.

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cameras to be manufactured for plaintiff “would solve the quality problems,” (see FAC

¶ 7),1

 plaintiff had noted in samples defendant had provided earlier, (see FAC ¶ 6). 

Defendant argues that the representations are non-actionable forward-looking statements. 

See In re Syntex Corp. Sec. Litig., 95 F. 3d 922, 929 (9th Cir. 1996) (holding “fact that a

prediction proves to be wrong in hindsight does not render the statement untrue when

made”).

Rule 9(b) requires a plaintiff pleading a claim of fraud to “state the time, place, and

specific content of the false representations as well as the identities of the parties to the

misrepresentation.” See Schreiber Distributing Co. v. Serv-Well Furniture Co., 806 F. 2d

1393, 1401 (9th Cir. 1986). Here, although plaintiff has alleged the identity of the

participants and the time frame, plaintiff has failed to set forth the specific content of any of

the representations. Rather, plaintiff, after alleging that defendant made several

representations concerning a proposed firmware change over a period of three months,

has paraphrased each such representation as a statement that defendant “would solve the

quality problems.” (See FAC ¶ 7.) Such general, as well as ambiguous, allegations do not

comport with Rule 9(b).

Similarly, the FAC contains no allegations as to the reason or reasons the

representations were false when made. See In re Glenfed, 42 F. 3d 1541, 1548-49 (9th

Cir. 1994) (holding “plaintiff must set forth an explanation as to why the statement or

omission complained of was false or misleading,” as well as an explanation as to why any

statement was false or misleading “when made”) (emphasis in original). Although plaintiff

alleges that the “firmware upgrade proposed by [defendant] would not solve the quality

issues,” (see FAC ¶ 8) (emphasis added), plaintiff’s use of the conditional word “would,”

coupled with plaintiff’s failure to set forth the nature of the proposed “firmware upgrade” and

the “problems” such upgrade was intended to remedy, renders the allegation ambiguous as

to the true fact(s) defendant allegedly knew concerning the efficacy of the firmware.
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Defendant also argues that plaintiff has failed to plead the existence of a causal

relationship between the representations and plaintiff’s damages. Resolution of this issue

is premature, given the representations are not pleaded with the requisite particularity. 

Defendant further argues that plaintiff has not pleaded special damages with the specificity

required by Rule 9(g). “[T]he purpose [of Rule 9(g)] is to give notice; the more natural are

the damages, the less pleading is needed.” Suarez Matos v. Ashford Presbyterian

Community Hosp., Inc., 4 F. 3d 47, 52 (1st Cir. 1993). Because the nature of the alleged

fraud has not been pleaded with the requisite particularity, it is premature to determine how

“natural” the alleged damages are, and, as a consequence, whether plaintiff has complied

with Rule 9(g).

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In light of the ambiguities set forth above, the Court is unable to determine whether,

as a matter of law, the alleged representations are non-actionable. Nevertheless, because

plaintiff has failed to allege with the requisite specificity the content of the representations

and further has failed to sufficiently allege why the representations were knowingly false

when made, the Second and Third Causes of Action are subject to dismissal under Rule

9(b), with leave to amend.2 As a result of the dismissal, defendant’s alternative request for

a more definite statement as to the Second and Third Causes of Action is moot.

CONCLUSION

For the reasons stated above, defendant’s motion, to the extent it seeks dismissal of

the Second and Third Causes of Action, is hereby GRANTED, and, to the extent it seeks a

more definite statement, is DENIED as moot.

Plaintiff may, no later than August 5, 2005, file a Second Amended Complaint to

cure the deficiencies identified above. If plaintiff does not amend within the time provided,

the action will proceed as to the First Cause of Action in the FAC.

IT IS SO ORDERED.

Dated: July 15, 2005 /s/ Maxine M. Chesney 

MAXINE M. CHESNEY

United States District Judge