Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-02996/USCOURTS-casd-3_11-cv-02996-2/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:0078m(a) Securities Exchange Act

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

SETH WALLACK and SAN DIEGO

VETERINARY IMAGING, INC.,

Plaintiffs,

CASE NO. 11cv2996-GPC(KSC)

ORDER GRANTING IN PART AND

DENYING IN PART 

DEFENDANTS’ MOTIONS TO

DISMISS

[Dkt. Nos. 52, 54.]

vs.

IDEXX LABORATORIES, INC.;

IDEXX REFERENCE

LABORATORIES, INC.; MATTHEW

WRIGHT; an individual; and

STEPHEN WALTERS, an individual

Defendants.

Presently before the Court are Motions to Dismiss filed by Defendants Matthew

Wright (“Wright”) and Stephen Walters (“Walters”), (ECF No. 52); and Idexx

Laboratories, Inc. (“Idexx”) and Idexx Reference Laboratories, Inc. (“Idexx RL”) ,

1

(ECF No. 53). Plaintiffs Seth Wallack (“Plaintiff”) and San Diego Veterinary Imaging,

Inc. (“SD Imaging”) opposed the motions, (ECF Nos. 65, 67), and Defendants replied,

(ECF Nos. 60, 61). Having considered the parties’ submissions and the applicable law,

the Court GRANTS in part and DENIES in part both Defendants’ motions to dismiss.

Idexx RL is a subsidiary corporation that is wholly owned and controlled by 1

Idexx. (ECF No. 50, SAC ¶ 4.)

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Background2

Plaintiff, a licensed veterinarian, established SD Imaging in 2002. Plaintiff was

one of the first veterinary radiologists to promote “tele-radiology” – a digital imaging

technology allowing veterinarians to use the Internet to send x-rays to radiologists for

an immediate consultation. Plaintiffrecognized tele-radiology practices would require

a software platform to store, analyze, and manipulate imagery, as well as a platform to

provide consultations online. With thisin mind, Plaintiff began developing a software

platform to service this need in 2004. SD Imaging hired Defendant Walters, a

professional software developer, and offered him 20% of SD Imaging’s stock. Using

the name “DVMinsight,” Plaintiff named the software, established a website, created

a trademark, and conducted his tele-radiology practice. He also decided to conduct his

tele-radiology practice under the name, “DVMinsight.” 

Plaintiff also registered a trademark for the name DVMinsight(“theTrademark”)

with SD Imaging asthe owner. In 2004, Plaintiff began working on an operation called

the Veterinary Imaging Center of San Diego, Inc. (“the Center”) which formally

launched in December 2005. The Center replaced SD Imaging for most but not all of

Wallack’s work. Eventually, Walters ceased to offer services to SD Imaging and

worked solely at the Center. 

In late 2005, Defendant Wright, a veterinary radiologist, joined Plaintiff and

Walters at the Center. Wright wasinvited to assist Plaintiff in developing the software

platform and in time became the manager and resident radiologist of the Center so that

Wallack could devote time to raise funds. Plaintiff and Wright became close

colleagues and interacted constantly with Walters to develop the software program. 

In 2006, Plaintiff, Wright, and Walters established a new company, 

DVMinsight, Inc. (“DVM”) of which Plaintiff and Wright each owned 40%, and

Walters 20%. All three were named officers and directors of DVM. Plaintiff claims

All factual allegations in this section are taken from the Second Amended

2

Complaint. (ECF No. 50.) 

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the three owners understood that SD Imaging retained ownership of the Trademark but

permitted DVM to conduct all operations under the trade name “DVMinsight” and use

the name “DVMinsight” for the software. DVM was to complete the development of

the software. DVM would provide a website and its own software that allows treating

veterinarians to upload, store, organize and review imagery and allow them to obtain

immediate diagnoses and consultations fromonline veterinary radiologist whomDVM

had previously screened. DVM enrolled its veterinary radiologists in a program called 

“Sighthounds Radiology”. Wright, who handled this matter, had his own company

rather than DVM to register the name “Sighthounds Radiology” as a fictitious business

name. By 2008, DVM largely succeeded in developing the software program and by

2009, DVM’s software program was functional, popular, and successful. 

In April 2009, Wright traveled to Defendant Idexx’s headquarters in Maine and

met with officers and employees to discuss the possibility of selling DVM to Idexx. 

Upon his return, Wright reported that Idexx had “expressed only a passing interest in

purchasing DVM or the Software Program” and “it would not paymore than $1 million

for the entire DVM operation.” Wright said the discussions with Idexx had been

unsuccessful, inconclusive, and they only offered $1 million for DVM. Wright

mentioned that he spoke with a Fred Farber, an officer of Idexx, but provided no other

names. Wright and Plaintiff agreed that the purchase price of $1 million was well

below what they believed the value of DVM at the time. When Wallack inquired

whether Wright would pursue further negotiations or discussions with Idexx, Wright

emphatically responded that any discussions with Idexx were over and there would be

no further discussions. However, Plaintifflater discovered inconsistencies in Wright’s

representation that there would be no further discussions with Idexx. An email dated

July 26, 2009 from Wright to Wallack titled “IDEXX” shows that there was contact

between Wright and RJ Dupree, an executive at Idexx. 

Plaintiff claims thatfrommid-2009 onward, Wright became “inexorably unfair”

towards Plaintiff, on the telephone, in emails, and in the open workplace. Initially, it

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started with mocking Wallack’s alleged lack of social skills and inability to take full

advantage of DVM’s commercial value. Walters began to openly side with Wright

during the near-daily quarrels. Plaintiff also claims Wright convinced key

administrative assistants they would be better off if they sided with Wright and

Walters. Wright had seized control of the books, records and accounting for DVM and

worked solely on DVM business ceasing work on all other related veterinary radiology

business work. By summer of 2009, Wright and Walters began goading Wallack that

they would pay Wallack to “just to go away.” Wright allegedly indicated that if

Plaintiff did not leave DVM, Wright was prepared to manipulate corporate structures

to justify improperly diverting DVM revenues to the private companies of Wright

(Animal Insides, Inc.) and Walters (Computer Bugs). 

In August 2009, Plaintiff had an email exchange with Wright requesting a

general update on DVM’s profitability in the prior months and requested a meeting of

the board of directors of DVM to discuss the current and prior months’ financial

records. In the email exchange, Wright represented that DVM is “not really all that

profitable at this point.” At the meeting of the board of directors in August, Plaintiff

was not presented with standard corporate financial records but was presented with an

Income and Expense Graph separated by months. Plaintiff claims that the bar graph

showed approximate net income for the first seven months of 2009 between $25,000

and $30,000; however, Wrightfalsely stated that DVM was “not really profitable at this

point.” 

In October 2009, Wright and Walters, without notice or consent, terminated

Plaintiff as an administrator of the software program. In December 2009, they also

unilaterally changed ownership of DVM’s domain name and transferred it to a new

host which denied Plaintiff access. Plaintiff no longer had administrative access to

DVM’s platform and was frozen out of the financial matters of DVM by Wright. 

Since the August 2009 meeting, no further financial documents regarding DVM were

provided to Wallack by Wright. Wright and Walters also gave themselves pay raises

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and bonuses without offering Plaintiff the same, and engaged in ongoing discussions

with DVM’s accountant without explaining the nature of these discussions to Plaintiff. 

Also, in an email dated December 7, 2009, Wright indicated that there was going

to be an excess of $120,000 to $150,000 of profit disbursement for 2009. This email

was sent to Plaintiff without any financial data to support the financial findings. 

Plaintiff asserts there is an inconsistency between Wright’s comment in August 12,

2009 that DVM was not really profitable and an email dated December 7, 2009

indicating that there was going to be an excess of $120,000 of profit disbursement for

2009. Plaintiff does not understand how the financial fortunes of DVM could have

drastically improved during those four months. 

Due to the hostile work environment and financial manipulations, in December

2009, Plaintiff agreed to negotiate with Wright and Walters for the sale of his 40%

interest in DVM and proposed they hire a business valuation specialist to assess a fair

price for Plaintiff. Plaintiff claims Wright “angrily refused” and insisted that if the

purchase did not take place immediately, he would find other means of excluding

Plaintiff from DVM. Upon an initial offer of $100,000, Plaintiff called Fred Farber,

an Idexx officer, regarding Wright’s negotiations with Idexx. Farber responded that

Idexx had “floated a sales price ‘in the neighborhood of $1 million’ that Idexx might

be willing to pay for DVM . . . and indicated that he had given no further thought to

this matter and expected that Idexx would not pursue the matter any further.” 

Thereafter, Wright, Walters, and Plaintiff agreed to value DVM at $686,250, offering

Plaintiff $274,500 for his 40% share. The Stock Purchase Agreement (“the Purchase

3

In ruling on a motion to dismiss pursuant toRule 12(b)(6), a Court may consider 3

exhibits attached to the complaint, matters subject to judicial notice, or documents

necessarily relied on by the complaint whose authenticity no party questions. See

Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007); Lee v. City of Los Angeles,

250 F.3d 668, 688–689 (9th Cir. 2001); United States v. Ritchie, 342 F.3d 903, 908

(9thCir. 2003) (“A court may, however, consider certain materials-documents attached

to the complaint, documents incorporated by reference in the complaint, or matters of

judicial notice-without converting the motion to dismiss into a motion for summary

judgment.”) Plaintiff submitted an Appendix of Exhibits attached to his Second

Amended Complaint containing the Stock Repurchase Agreement which is referred to

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Agreement”) was signed on December 31, 2009. 

The Purchase Agreement also included a non-solicitation clause forbidding

Plaintiff from soliciting any listed customer of DVM. Plaintiff claims he realized only

after signing the Purchase Agreement that the list was over-inclusive and included even

potential clients of DVM. Wright angrily insisted that Plaintiff sign the Purchase

Agreement on December 31, 2009. Late in the day on December 31st, Plaintiff was

presented with the customer list that was to list all of DVM’s current customers. 

Wright indicated that if the list was over-inclusive, he would not strictly enforce it

against Plaintiff. After carefully reviewing the list after the Agreement was signed,

Plaintiff claims Wright refused to remove the names of non-customers, even though

prior to signing the Purchase Agreement he indicated he would do so. 

In September 2011, Defendant Idexx RL, a subsidiary corporation owned and

controlled by Idexx, acquired DVM and Animal Insides (a company owned by Wright)

for a total of 3.2 million dollars, $3 million of which Plaintiff attributes to DVM. This

was 4.3 times higher than the value of $686,250 that they used to buy Plaintiff out and

3.2 times more than the alleged $1 million valuation that Idexx had asserted in

December 2009. During the 21 month period from Plaintiff’s sale of his stock in DVM

to Wright and Walters, Plaintiff claims DVM did not acquire or develop any new asset

or line of business of substantial value, did not improve its services or transform itself

so as to increase its value, and the market conditions did not materially improve; in

fact, the market conditions deteriorated during this time. 

During the years in questions, in 2010, DVM worked on about 131,207 cases,

an increase of about 26,000 cases from 2009 or a 24% increase. In 2011, before the

sale of DVM to Idexx in September, DVM performed about 123,088 cases to that

point. Plaintiff alleges that an increase of about 25,000 cases per year would not justify

in the Second Amended Complaint and integral to the Plaintiff’s claims. (ECF No. 50-

2.) Defendants do not object to this document. Accordingly, the Court may consider

the Stock Repurchase Agreement on Defendants’ motions to dismiss. 

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a purchase price of $3.2 million in September 2011 based on a $1million value Idexx

had asserted in April 2009. 

Plaintiff further complains that a reasonable inference can be made that Wright

reached an understanding with Fred Farber and/or TJ Dupree whereby Idexx would

purchase DVM for about $3 million at some future time. Around August 2009, Idexx

bought another veterinary company, VDIC for about $6.7 million. Plaintiff assertsthat

Idexx and Wright agreed to delay the purchase of DVM because Idexx was in the

process of negotiating the purchase of VDIC and it took time for Idexx to integrate and

use VDIC’s software based on tele-radiology platform/services. Theoretically, DVM

could have been sold to Idexx at an earlier time, such as January 2010 after Wallack

sold his stock to Wright/Walters. 

Plaintiff claims that contrary to statements made by Idexx and Wright,

Defendants made an agreement in 2009 for the purchase of DVM for approximately $3

million dollars, an agreement to conceal the purchase price and to delay the purchase

until after Plaintiff’s departure. 

The Second Amended Complaint asserts four causes of action: (1) trademark

infringement by SD Imaging against Idexx and Idexx RL; (2) breach of fiduciary duty

by Walters against Wright and Walters; (3) civil conspiracy by Plaintiffs against all

Defendants; and (4) request for declaratory relief by Plaintiffs against Idexx and Idexx

RL. (ECF No. 50.) Defendants Wright and Walters move to dismiss the second cause

of action for breach of fiduciary duty; and third cause of action for civil conspiracy. 

(ECF. No. 52.) Defendants Idexx and Idexx RL move to dismiss the third cause of

action for civil conspiracy, and move to strike the allegations relating to a purported

$5,000 offer by Idexx to settle any dispute over ownership of the “DVMinsight”

trademark. (ECF. No. 54.) They also join in Defendants Wright and Walters’ motion

to dismiss the third cause of action for civil conspiracy. 

I. Legal Standard on Federal Rule of Civil Procedure 12(b)(6)

Federal Rule of Civil Procedure (“Rule”) 12(b)(6) permits dismissal for “failure

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to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). Dismissal

under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory

orsufficient facts to support a cognizable legal theory. See Balistreri v. Pacifica Police

Dep’t., 901 F.2d 696, 699 (9th Cir. 1990). Under Federal Rule of Civil Procedure

8(a)(2), the plaintiff is required only to set forth a “short and plain statement of the

claim showing that the pleader is entitled to relief,” and “give the defendant fair notice

of what the . . . claim is and the grounds upon which it rests.” Bell Atlantic Corp. v.

Twombly, 550 U.S. 544, 555 (2007). 

A complaint may survive a motion to dismiss only if, taking all well-pleaded

factual allegations as true, it contains enough facts to “state a claim to relief that is

plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly,

550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual

content that allows the court to draw the reasonable inference that the defendant is

liable for the misconduct alleged.” Id. “Threadbare recitals of the elements of a cause

of action, supported by mere conclusory statements, do not suffice.” Id. “In sum, for

a complaint to survive a motion to dismiss, the non-conclusory factual content, and

reasonable inferences from that content, must be plausibly suggestive of a claim

entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir.

2009) (quotations omitted). In reviewing a Rule 12(b)(6) motion, the Court accepts as

true all facts alleged in the complaint, and draws all reasonable inferences in favor of

the plaintiff. al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009). 

Where a motion to dismiss is granted, “leave to amend should be granted ‘unless

the court determines that the allegation of other facts consistent with the challenged

pleading could not possibly cure the deficiency.’” DeSoto v. Yellow Freight Sys., Inc.,

957 F.2d 655, 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv-Well

Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). In other words, where leave to

amend would be futile, the Court may deny leave to amend. See Desoto, 957 F.2d at

658; Schreiber, 806 F.2d at 1401.

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II. Breach of Fiduciary Duty as to Defendants Wright and Walters

Defendants Wright and Walters contend that the Second Amended Complaint

does not state a claim for breach of fiduciary duty. Plaintiff argues that he has pled a

cause of action for breach of fiduciary duty.

To adequately allege breach of fiduciary duty, “a plaintiff must show the

existence of a fiduciary relationship, its breach, and damage caused by the breach.” 

Apollo Capital Fund, 158 Cal. App. 4th at 244. California law clearly recognizes that

officers and directors owe a fiduciary duty to stockholders, and controlling

stockholders owe a fiduciary duty to minority stockholders. Singhania v. Uttarwar, 136

Cal. App. 4th 416, 426 (2006); see also Southern Pac. Co. v. Bogert, 250 U.S. 483, 488

(1919) (finding that the majority has a “fiduciary relation toward the minority, as much

so as the corporation itself or its officers and directors.”). “Majority shareholders may

not use their power to benefit themselves alone or in a manner detrimental to the

minority.” Stephenson v. Drever, 16 Cal. 4th 1167, 1178 (1997). A fiduciary’s

dealings with the corporation “are subjected to rigorous scrutiny and where any of their

contracts or engagements with the corporation is challenged the burden is on the

director or stockholder not only to prove the good faith of the transaction but also to

show its inherent fairness from the viewpoint of the corporation and those interested

therein.” Jones v. H.F. Ahmanson & Co., 1 Cal. 3d 93, 108-09 (1969). 

According to the Complaint, Wright and Walters, as controlling shareholders

owning 60% of DVM, and as officers owed a fiduciary duty to Plaintiff, a minority

shareholder, owning 40% of DVM, and officer of DVM. (ECF No. 50, SAC ¶ 30.) 

Plaintiff has adequately alleged that Wright and Walters, as majority shareholders and

directors, were in a fiduciary relationship with the Plaintiff as co-director and minority

shareholder of DVM. See Singhania, 136 Cal. App. at 426 (finding directors owe a

fiduciary duty to stockholders); Southern Pac. Co., 205 U.S. at 488 (finding the

majority is in a fiduciary relationship with the minority). 

The second amended complaint alleges that the fiduciary duty was allegedly

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breached based on duties owed to Plaintiff which included the failure to disclose and

conceal the following matters from Plaintiff: 

(1) If and to what extent Wright had held or was holding negotiations

with Idexx, whether he and/or IDEXX were actively pursuing having

Idexx purchase DVM and/or any other matters he was discussing with

IDEXX regarding DVM;

(2) Whether and in what amount Idexx had discussed and/or was

prepared to pay to purchase DVM, whether it was $1 million or a price

approximating $3 million; 

(3) that Wright wanted to exclude Wallack from DVM before selling

it to Idexx; 

(4) what DVM’s true financial condition was during 2009, including

its monthly profit and loss figures, especially for the months of May

through December after Wright had effectively taken control ofthe

books and accounting of DVM upon his return from his visit at

IDEXX, as well as the results of any communications and/or work

product received in Wrights communications with the corporate

accountant; 

(5) to not hold 16 secret meetings, or otherwise discuss important

corporate business, without a properly noticed meeting of the board of

directors. This includes decisions related to access as an administrator

of the DVM website, the ownership of the DVM's domain name,

decisions as to corporate officer/director compensation increases

and/or disbursement of bonuses to officers/directors/shareholders/staff;

(6) that where applicable, the provisions in the bylaws and/or other

corporate records must be followed, including in the assessment of

valuation of authorized and issued shares of stock; 

(7) that when a financial report is requested, and indeed a meeting is

scheduled amongst the members of the board, that reliable financial

documents, i.e. profit and loss statements, balance sheet, financial

statement, or some other compilation of the corporations finances be

provided;

(8) that when the person is handling the accounting duties is queried

on the final condition of the corporation, either generally or

specifically, that such responses are truthful and based on reliable

information;

(9) when anymonthly orsimilar financialrecords,financial statements,

profit and lossstatements/summaries and so forth are revised to reflect

information that is inconsistent with prior published financial

documents the corporation; and 

(10) that there is, or is intended to be, transfers of corporate

assets/funds to other companies or to anyone else, including the

members ofthe board, officers and/orshareholdersso thatsuch matters

are appropriately documented. 

(ECF No. 50, SAC ¶ 84.) The Court previously held that these allegations sufficiently

stated a claim for breach of fiduciary duty. (ECF No. 49.)

Defendants first allege that Plaintiffs’ breach of fiduciary duty claim is

predicated on the same allegations of fraud that the Court already deemed insufficient

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and dismissed. Because the Court dismissed all the fraud causes of action, and since

the breach of fiduciary duty claims is also based on fraud, the Court should grant

Defendants’ motion to dismiss. They cite to paragraph 85 of the SAC which alleges

4

that Defendants fraudulently concealed of the ten matters listed in the SAC. 

Here, the breach of fiduciary claim is not limited to fraudulent concealment but

5

also based on hostile work conditions and the illegal non-solicitation clause and other

non-fraud allegations. Thus, Defendants’ first argument is without merit. 

Second, Defendants allege that the Court’s dismissal with prejudice as to the

fraud causes of action resurrects the release contained in the Purchase Agreement. In

the Court’s prior order, the Court concluded that the claim of fraudulent inducement

rendered the release “voidable” and therefore the release did not apply. (ECF. No. 33.) 

Since the Court dismissed the fraud causes of action with prejudice, Defendants assert

that the breach of fiduciary breach of duty based on fraud allegations is barred by the

release. 

Plaintiffs argue that the release is voidable on the breaches of fiduciary duty

because under California law, a release of a liability claim may be rendered void “on

the grounds of fraud, misrepresentation or breach of fiduciary duty of loyalty and/or

honesty based on fraud as long as the releasor’s failure to learn the nature of the terms

was not attributable to his own negligence and rescission is sought.” (ECF No. 67, Ps’ 

Opp. at 9.) In reply, Defendants argue that the breach of fiduciary duty is predicated

on fraud or concealment of material information that induces the other party to enter

into the release. 

“Defendants breached their fiduciary dutiesto Plaintiffin numerousrespects by 4

failing to disclose or properly handle the above matters. In fact, rather than disclose

these matters to Wallack, they fraudulently concealed them from him and made

misleading, partial disclosures to him about these very matters, doing so to induce him

to agree to a hurried sale of his stock at a greatly depressed price that he would never

have accepted if they had disclosed these matters to him.” (ECF No. 50, SAC ¶ 85.)

Any allegations offraudulent concealment would be barred by the Court’s prior

5

order dismissing the cause of action for intentional misrepresentation and fraudulent

concealment. (ECF No. 49 at 19.)

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Here, the breach of fiduciary duty case of action consists of ten different

allegations consisting of non-fraud allegations such as failure to disclose financial

condition of DVM, failure to hold required meetings, and failure to document transfers. 

(ECF No. 50, SAC ¶ 84.) Breach of fiduciary duty does not always involve fraud. See

SEC v. Zandford, 535 U.S. 813, 825 n.4 (2002). Accordingly, the Court DENIES

Defendants Wright and Walters’ motion to dismiss the breach of fiduciary cause of

action. 

III. Civil Conspiracy against all Defendants

As to civil conspiracy, Defendants Wright and Walters and Defendants Idexx

contend that Plaintiff cannot state a claim for civil conspiracy because an employee,

Wright and Waters, and an employer, Idexx, cannot be liable for conspiracy. While

Plaintiffs do not dispute that an employer and employee cannot be liable for civil

conspiracy, they argue that the allegations concerning civil conspiracy include facts

before Wright and Walters became an employee of Idexx. 

While “[c]ivil conspiracy is not a cause of action,” it is “a legal doctrine that

imposes liability on persons who, although not actually committing a tort themselves,

share with the immediate tortfeasors a common plan or design in its perpetration.”

Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 510-51 (1994). To

allege a claim for civil conspiracy, a plaintiff must allege “(1) the formation and

operation of the conspiracy; (2) the wrongful act or acts done pursuant thereto; and (3)

the damage resulting . . . .” Mosier v. S. Cal. Physicians Ins. Exchange, 63 Cal. App.

4th 1022, 1049 (1998). “A conspiracy cannot be alleged as a tort separate from the

underlying wrong it is organized to achieve.” McMartin v. Children’s Inst. Internat’l,

212 Cal. App. 3d 1393, 1406 (1989). “A complaint for civil conspiracy states a cause

of action only when it alleges the commission of a civil wrong that causes damage. 

Though conspiracy may render additional parties liable for the wrong, the conspiracy

itself is not actionable without a wrong.” Okun v. Superior Court, 29 Cal. 3d 442, 454

(1981). The “wrongful act” must satisfy all the elements of a cause of action for some

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other tort or wrong. Gen. Am. Life Ins. Co. v. Rana, 769 F. Supp. 1121, 1125 (N.D.

Cal. 1991) (citation omitted). 

Under the agent’s immunity rule announced in Wise, “agents and employees of

a corporation cannot conspire with their corporate principal or employer where they act

in their official capacities on behalf of the corporation and not as individuals for their

individual advantage.” Wise v. Southern Pac. Co., 223 Cal. App. 2d 50, 72 (1963)

(overruled on other grounds by Applied Equipment Corp., 7 Cal. 4th at 510) (corporate

employees not liable for conspiracy to breach corporation’s contract where they acted

in their official capacities on behalf of the corporation and not for their individual

advantage)); see also Doctors’ Co. v. Superior Court, 49 Cal. 3d 39, 45 (1989). 

The Second Amended Complaint alleges that San Diego Imaging registered the

DVM trademark in 2004 and Wright and Walters knew that Plaintiff SD Imaging

owned the registered DVM trademark. (ECF. No. 50, SAC ¶ 92.) The trademark was

never sold, transferred, or assigned to DVM, Wright or Walters at any time from

December 31, 2009, when Wallack sold his interest in DVM to Wright andWalters, and

September 2011, when Idexx purchased DVM from Wright and Walters. (Id. ¶ 94.) 

On information and belief, at the time when Idexx bought DVM Insight, both Wright

and Walters became employees of Idexx. (Id.) 

In October 2011, Idexx filed an application with the federal trademark registrar

seeking to trademark the same mark as the DVM trademark owned by SD Imaging. 

(Id. ¶ 96.) Plaintiffs believe that the application was virtually the same as the

application and mark that was registered to SD Imaging. (Id.) They do not believe

Idexx’ application was approved but it has continued to use the DVM trademark in

interstate and possibly worldwide market sales of its products. (Id.) Since the DVM

trademark could not be part of the sale to Idexx, “Idexx, Wright and Walters knowingly

agreed to enter into a civil conspiracy to commit the tortious conduct of trademark

infringement by disavowing San Diego Imaging’s rightful ownership of the trademark

and/or representing to third parties that no such rights exist.” (Id. ¶ 97.) Examples of

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overt acts and representations include Idexx with assistance from Wright and Walters

filed a false application with federal trademark authorities attempting to register the

trademark in Idexx’s name and continuing to use the trademark from October 2011 to

the present as part of Idexx’s market and sales literature. (Id.) 

The facts supporting the allegation for civil conspiracy are based on acts after

Wright and Walters joined Idexx as employees in September 2011. Although not

alleged, it appears that Wright and Walters were acting as employees of Idexx and not

as individuals for their individual advantage. 

In their opposition, Plaintiffs argue that the allegations in the SAC demonstrate

that some acts of civil conspiracy occurred before Wright and Walters became

employees of Idexx and cite to paragraphs 76, 77 and 94-97 of the SAC. However,

these cited paragraphs do not support Plaintiffs position. These paragraphs discuss the

offer to purchase the trademark from Mr. Schoefield, an executive of Idexx in

September 2011. These allegations only shows that Idexx made an offer to buy the

trademark, not that Wright and Walters were involved in that offer. (See ECF No. 50,

SAC ¶¶ 94-97.) Moreover, the SAC clearly states that when the $5,000 offer by

Schoefield failed, then at that point, the civil conspiracy was formed. (Id. ¶ 97.) 

Therefore, as employees of Idexx, Wright, and Walter, and Idexx cannot form a civil

conspiracy. See Wise, 223 Cal. App. 2d at 72. Accordingly, the Court GRANTS all

Defendants’ motion to dismiss the civil conspiracy cause of action with prejudice. 

6

IV. Request for Judicial Notice

In support of their motions to dismiss, Defendant Idexx filed a request for

judicial notice. (ECF. Nos. 54-2.) While Plaintiffs do not oppose, the Court DENIES

Idexx also moves to strike the allegations in the complaint pursuant to Federal 6

Rule of Evidence 12(f) relating to a purported $5,000 offer by Idexx to settle any

dispute over ownership of the “DVMinsight” trademark pursuant to Federal Rule of

Evidence 408. In opposition, Plaintiffs argue that the $5000 was an offer to purchase

the trademark and not an offer of settlement and should not be struck. Since the Court

GRANTS all Defendants’ motion to dismiss the cause of action for civil conspiracy,

the motion to strike allegations from the SAC concerning the $5,000 offer is moot. 

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Idexx’s request for judicial notice as the Court did not rely on the documents in ruling

on the motion. 

Conclusion

Based on the above, the Court GRANTS in part and DENIES in part 

Defendants’ motions to dismiss. Specifically, the Court:

1. DENIES Defendants Wright and Walter’s Motion to Dismiss the breach

of fiduciary duty claim; 

2. GRANTS all Defendants’ Motion to Dismiss the civil conspiracy claim

with prejudice as Plaintiffs have had ample opportunity to amend the

complaint and failed to do so;

3. DENIES Idexx’s motion to strike allegations concerning settlement offers

as MOOT;

4. Defendants shall file an answer to the second amended complaint

pursuant to the Federal Rule of Civil Procedure. 

5. The hearing set for April 18, 2014 shall be vacated. 

IT IS SO ORDERED.

DATED: April 14, 2014

HON. GONZALO P. CURIEL

United States District Judge

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