Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-00608/USCOURTS-cand-4_06-cv-00608-1/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

G. HIRSCH & COMPANY, INC.,

Plaintiff,

v.

AMERISOURCEBERGEN CORPORATION,

Defendant.

 /

No. C 06-00608 CW

ORDER DENYING

DEFENDANT'S

MOTION TO DISMISS

Defendant AmerisourceBergen Corporation (Amerisource) moves to

dismiss three of four claims brought by Plaintiff G. Hirsch &

Company (Hirsch). Hirsch opposes this motion. The matter was

heard on March 31, 2006. Having considered all of the papers filed

by the parties and oral argument on the motion, the Court DENIES

the motion.

BACKGROUND

The following facts are alleged in Hirsch’s complaint. Hirsch

is a California corporation that manufactures and sells disposable

medical and hygiene products such as diapers, briefs, liners, and

underpads. Amerisource has ordered products, goods, and equipment

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from Hirsch for over twelve years. Beginning in September, 2002

and continuing through 2006, Amerisource agreed to a new Tiered

Price Contract and ordered products from Hirsch under that

contract, but only made partial payments for products ordered. 

Despite the shortfalls in payments, Hirsch continued to supply

Amerisource with its products based upon a number of

representations and promises made by Amerisource (between March,

2004 and January, 2005) to pay the outstanding balance, plus

interest, in full. Despite repeated demands by Hirsch, Amerisource

has failed and refused to pay the amount owed. 

On October 11, 2005, Hirsch filed a complaint against

Amerisource alleging four causes of action: (I) breach of contract,

(II) common count, (III) conversion, and (IV) fraud. Hirsch’s

common count claim alleges that an account was stated in writing by

the parties in which it was agreed that Amerisource was indebted to

Hirsch in excess of $144,000.00 plus interest for products, goods,

and equipment sold and delivered. Hirsch’s conversion claim

alleges that Amerisource refused to pay in full for products

ordered and delivered, and converted those products to its own use

and benefit. Hirsch’s fraud claim alleges that Amerisource’s

promises of payment were false when made and made with the intent

to induce Hirsch to provide additional goods to Amerisource.

On January 30, 2006, Amerisource removed this action to this

Court pursuant to 28 U.S.C. § 1441(b) and 28 U.S.C. § 1332. 

Pursuant to Rule 12(b)(6), Amerisource moves to dismiss counts II

and III for failure to state a claim upon which relief can be

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granted and to dismiss count IV for failure to meet Rule 9(b)’s

heightened pleading requirements for fraud.

LEGAL STANDARD

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). 

A complaint must contain a “short and plain statement of the

claim showing that the pleader is entitled to relief.” Fed. R.

Civ. P. 8(a). “Each averment of a pleading shall be simple,

concise, and direct. No technical forms of pleading or motions are

required.” Fed. R. Civ. P. 8(e). These rules “do not require a

claimant to set out in detail the facts upon which he bases his

claim. To the contrary, all the Rules require is ‘a short and

plain statement of the claim’ that will give the defendant fair

notice of what the plaintiff’s claim is and the grounds on which it

rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957).

When granting a motion to dismiss, a court is generally

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

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

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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.” In

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

DISCUSSION

I. Claim for Common Count

Amerisource moves to dismiss Hirsch’s common count claim on

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the ground that Hirsch has failed to allege the required elements

for such a claim.

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

defendant to a plaintiff, generally for goods or services rendered.

See Arthur Linton Corbin, Corbin on Contracts ¶ 20 (1963)(the

common counts are statements "that the defendant is indebted to the

plaintiff for a variety of commonly occurring reasons, such as

money had and received, money lent, work and labor done, and goods

sold and delivered. They are allegations of indebtedness, and the

action may be properly described as indebitatus assumpsit."). 

In California, the essential elements for a common count are

(1) a statement of indebtedness in a certain sum; (2) consideration

(i.e., goods sold); and (3) non-payment. Farmers Ins. Exchange v.

Zerin, 53 Cal. App. 4th 445, 460 (1997). In footnote 4 of its

reply, Amerisource argues that Hirsch’s common count claim is in

fact one for an account stated. An account stated is one form of

a common count claim. See Truestone, Inc., v. Simi West Industrial

Park II, 163 Cal. App. 3d 715 (1984). Regardless of which type of

common count claim Hirsch seeks to allege, the analysis is the

same.

Amerisource cites Mike Nelson Co., Inc. v. Weston Hathaway,

2005 WL 2179310 (E.D. Cal., 2005), as an example of a common count

claim for account stated that was dismissed because it was not

plead with sufficient factual allegations. In Nelson, the court

found that the plaintiff’s complaint was insufficient because it

merely alleged that the plaintiff made a demand for payment upon

the defendant, but did not allege that any “balance” was struck nor

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that any understanding was reached between the parties as to the

amount of outstanding debt. Id. at *3. Moreover, an account

stated is an entirely new contract by and under which the parties

have adjusted their differences and mutually reached an agreement;

it is not based upon the original terms, but upon a balance agreed

to by the parties. Gleason v. Klamer, 103 Cal. App. 3d 782, 786-

87, (1979).

Here, Hirsch alleges that “in excess of $144,000.00 plus

interest” was owed by Amerisource and that an account was stated in

writing by the parties in which it was agreed that Amerisource was

indebted to Hirsch. Comp. at ¶¶ 13-14. Amerisource is correct

that a common count claim requires an account stated that is

separate and apart from the existing contract, but because the

allegations in the complaint are to be taken as true and construed

in light most favorable to the plaintiff, Hirsch’s claim that an

account stated exists is sufficient to survive a Rule 12(b)(6)

motion. The allegation that products were shipped by Hirsch to

Amerisource serves to plead consideration, and Hirsch alleges only

partial payment by Amerisource. Accordingly, Amerisource’s motion

to dismiss the common count claim is denied.

II. Conversion

Amerisource moves to dismiss Hirsch’s conversion claim on the

ground that Hirsch has failed to allege that it had ownership or an

immediate right to possession of the alleged property at the time

of conversion.

Conversion has been generally defined as “any act of dominion

wrongfully exerted over another’s personal property in denial of or

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inconsistent with his rights therein.” Zaslow v. Kroenert, 29 Cal.

2d 541, 549 (1946); Hartford Fin. Corp. v. Burns, 96 Cal. App. 3d

591, 602 (1979). Under California law, the elements of a

conversion cause of action are (1) a plaintiff’s ownership or right

to possession of the personal property at the time of conversion;

(2) a defendant’s conversion by wrongful act or disposition of the

plaintiff’s property rights; and (3) damages. Id. at 598;

Messerall v. Fulwider, 199 Cal. App. 3d 1324, 1329 (1988). 

 Hirsch asserts that ordering goods and receiving them without

paying for them in full is a wrongful act and constitutes

conversion. Hirsch also alleges right to possession and damages.

Amerisource argues that, because Hirsch admits that Amerisource

submitted partial payments, Hirsch cannot in good faith claim that

it had ownership or an immediate right to possession of the goods

sold to Amerisource. However, Amerisource fails to cite any legal

authority supporting its proposition that partial payment of

delivered goods precludes the assertion of an immediate right of

possession by the seller. Viewed in the light most favorable to

Hirsch, the complaint can be construed to allege that Amerisource

paid in full for some of the goods delivered, but paid nothing for

some of the goods, such that a conversion claim would lie, at least

for the goods not paid for. Therefore, Amerisource’s motion to

dismiss Hirsch’s conversion claim is denied.

III. Fraud

Amerisource moves to dismiss Hirsch’s fraud claim on the

ground that Hirsch has failed to plead it with the required

particularity.

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Under California law, the elements needed to establish fraud

are (1) misrepresentation (false representation, concealment, or

nondisclosure); (2) knowledge of falsity (or scienter); (3) intent

to defraud, i.e., to induce reliance; (4) justifiable reliance; and

(5) resulting damages. Lazar v. Superior Court, 12 Cal. 4th 631,

638 (1996). While mere conclusory allegations of fraud are

insufficient, statements of the time, place and nature of the

alleged fraudulent activities are sufficient. Id.

Hirsch’s fraud claim avers that Amerisource represented, among

other things, that it would promptly provide a full accounting to

Hirsch, pay all outstanding invoices, and pay interest and other

charges owed to Hirsch in conformance with their initial agreement. 

According to Hirsch, the alleged misrepresentations were made

periodically by two named Amerisource executives on specific dates

between 2004 and 2005. Amerisource argues that the particularity

requirement mandates that Hirsch must plead facts explaining why

the statements in question were false when made. Hirsch’s

complaint avers that Amerisource had no intention of paying for

Hirsch’s goods or providing an accurate accounting, either at the

time Amerisource initially ordered the products, or subsequently

when Amerisource persuaded Hirsch to continue to provide additional

products. Scienter, malice, intent and and other condition of mind

of a person may be averred generally. In re GlenFed, Inc., Sec.

Litig., 42 F.3d 1541, 1545-47 (9th Cir. 1994). Hirsch’s complaint

also alleges justifiable reliance, as well as damages. Therefore,

Amerisource’s motion to dismiss Hirsch’s fraud claim is denied.

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CONCLUSION

For the foregoing reasons, Amerisource’s motion to dismiss is

DENIED. 

IT IS SO ORDERED.

Dated: 5/17/06

 

CLAUDIA WILKEN

United States District Judge

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