Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-02344/USCOURTS-caed-2_04-cv-02344-0/pdf.json

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

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1 Ford Credit moved to dismiss Michael Daugherty and

Daugherty Lincoln-Mercury, Inc.'s First Amended Counterclaim. 

Before the motion was heard, the parties stipulated to allow

counter-claimants to file a "Second Amended Answer of Michael

Daugherty and Counterclaim of Michael Daugherty and Daugherty

Lincoln-Mercury, Inc. against Ford Motor Credit Company and

Lincoln-Mercury." Before the court is Ford Credit’s motion to

dismiss defendants’ second amended counterclaim. 

1

UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

FORD MOTOR CREDIT COMPANY,

Plaintiff,

v. NO. CIV. S-04-2344 LKK/JFM

MICHAEL DAUGHERTY,

Defendant.

 /

AND RELATED COUNTER-CLAIM AND 

THIRD-PARTY COMPLAINT.

 /

Pending before the court is plaintiff’s motion to dismiss 

defendants’ counterclaims.1 Plaintiff, Ford Motor Credit Co.

(“Ford Credit”) also moves for a more definite statement as to two

of defendants’ counterclaims. 

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2 Although Ford Credit only brought suit against Michael

Daugherty in their complaint, counter-claimants include Michael

Daugherty as well as Daugherty Lincoln-Mercury. Michael Daugherty

filed documents with the court verifying that he was the sole owner

of Daugherty Lincoln-Mercury and that he was doing business as

Daugherty Lincoln-Mercury. 

3 In the second amended counterclaim, defendants also bring

suit against Ford Motor Company (Lincoln Mercury Division)(referred

to herein as “Lincoln Mercury”). However, because Lincoln-Mercury

did not originally bring suit against defendants, they cannot be

considered counterclaims. 

The court grants defendants twenty (20) days from the date of

this order to amend the second amended counterclaim so as to assert

a third-party action against Lincoln Mercury.

2

Plaintiff brings two breach of guaranty claims against

defendant, Michael Daugherty, alleging that he entered into a

wholesale agreement and a capital loan agreement and promissory

note. Ford Credit maintains that Daugherty induced it to enter

into these agreements by promising full payment pursuant to two

guaranty agreements, but that Daugherty subsequently breached these

guaranty agreements. Compl. at 2-6. 

Defendants2 asserted fourteen affirmative defenses and

counterclaimed, alleging twelve causes of action against Ford Motor

Credit Co.3: Breach of Contract (1st claim), Breach of Covenant

of Good Faith and Fair Dealings (2nd claim), Unfair Business

Practices (3rd claim), Interference with Contractual Relations (4th

claim), Tortious Interference with Prospective Business Advantage

(5th claim), Misrepresentation, Deceit, Fraud (6th claim),

Negligent Misrepresentation (7th claim), Aiding and Abetting (9th

claim), Fraud as a release from Guaranty (11th claim), Violation

of Continuing Guaranty (12th claim), Violation of California Civil

Case 2:04-cv-02344-LKK -JFM Document 38 Filed 06/01/05 Page 2 of 20
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4 Unless otherwise noted, all facts are derived from

defendants’ counterclaim. As mentioned above, defendants bring

claims against Ford Motor Credit Co. as well as Lincoln Mercury.

Although defendants refer to Lincoln Mercury as a

“counterclaimant,” the court will not do so here as that is

inappropriate. See note 3 supra.

3

Code section 2819 (13th claim), Aiding and Abetting (14th claim).

Ford Credit moves to dismiss causes of action three, four,

five, six, seven, nine, and fourteen. In addition, Ford Motor

Credit Co. moves for a more definite statement as to defendants’

eleventh, twelfth, and thirteenth causes of action. 

I.

FACTS4

On or about June 22, 1999, DLMI signed Dealer Sales and

Service Agreements (“agreements”) with Lincoln Mercury, whereby

DLMI was franchised as a seller and servicer of automobiles

manufactured and distributed by Lincoln Mercury. Each agreement

was for a term which expired on June 30, 2002. By separate

addenda, Lincoln Navigator and Lincoln Blackwood vehicles were

added to the Agreements. 

On or about June 22, 1999, DLMI entered into an agreement with

Ford Credit wherein Ford Credit would supply the wholesale flooring

line for the purchase by DLMI of new Lincoln and Mercury vehicles

from Lincoln Mercury. At that time, DLMI applied for and received

a $2 million credit flooring line, which was the amount required

by Lincoln Mercury for the operation of its Lincoln and Mercury

franchises. DLMI alleges that on June 22, 1999, it was induced by

Ford Credit to sign a Wholesale Continuing Guaranty (“guaranty”)

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5 Defendants explain that a dealer put on “credit hold” is

unable to order additional vehicle inventory from Lincoln Mercury

without a manual computer override from someone at Lincoln Mercury.

Also, Ford Credit would be required to give its consent to any

further outlay of credit to the dealer. Countercl. at 10. 

4

which was required for it to obtain wholesale financing. DLMI

alleges that shortly after it executed the Agreements in June of

1999, and continuing through June 2000, Lincoln Mercury shipped to

DLMI new vehicles which it knew were never ordered by DLMI during

the normal course of its business operations. Consequently, DLMI

became vastly overstocked with both desirable and undesirable

models of Lincoln and Mercury vehicles. By June of 2000, DLMI’s

inventory of Lincoln and Mercury vehicles had risen to over

$7,600,000 - far in excess of DLMI’s approved credit line and

disproportionate to the normal inventory volume in the industry.

At no time had DLMI or Daugherty requested that Ford Credit

increase DLMI’s flooring line to accommodate this inventory. DLMI

and Daugherty learned that representatives of Lincoln Mercury had

met with representatives of Ford Credit in order to secure an

increase in DLMI’s flooring line with Ford Credit without DLMI’s

or Daugherty’s knowledge or consent. 

In July 2000, DLMI’s flooring line was suspended by Ford

Credit. This suspension is referred to in the automobile industry

as being placed on “credit hold.”5 DLMI and Daugherty subsequently

learned that representatives of Lincoln Mercury had again met with

representatives of Ford Credit, without DLMI’s knowledge and had

requested that Ford Credit approve the building by Lincoln Mercury

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5

of even more units for delivery to DLMI. These vehicles would then

be charged against DLMI’s suspended credit line with Ford Credit.

At no time did DLMI and Daugherty agree to further modify the terms

of the credit flooring agreement with Ford Credit to allow for an

additional increase in DLMI’s flooring line. After July 2000,

Lincoln Mercury built and delivered approximately 90 vehicles to

DLMI without DLMI’s approval and Ford Credit placed them on DLMI’s

flooring line. As a direct and proximate result of the conduct of

Lincoln Mercury and Ford Credit, DLMI alleges that it sustained

significant damages and was forced to temporarily cease operations

as a Lincoln Mercury dealer.

II.

STANDARDS

A. DISMISSAL STANDARDS UNDER FED. R. CIV. P. 12(b)(6)

On a motion to dismiss, the allegations of the complaint must

be accepted as true. See Cruz v. Beto, 405 U.S. 319, 322 (1972).

The court is bound to give the plaintiff the benefit of every

reasonable inference to be drawn from the "well-pleaded"

allegations of the complaint. See Retail Clerks Intern. Ass'n,

Local 1625, AFL-CIO v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963).

Thus, the plaintiff need not necessarily plead a particular fact

if that fact is a reasonable inference from facts properly alleged.

See id.; see also Wheeldin v. Wheeler, 373 U.S. 647, 648 (1963)

(inferring fact from allegations of complaint).

In general, the complaint is construed favorably to the

pleader. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). So

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construed, the court may not dismiss the complaint for failure to

state a claim unless it appears beyond doubt that the plaintiff can

prove no set of facts in support of the claim which would entitle

him or her to relief. See Hishon v. King & Spalding, 467 U.S. 69,

73 (1984) (citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).

In spite of the deference the court is bound to pay to the

plaintiff's allegations, however, it is not proper for the court

to assume that "the [plaintiff] can prove facts which [he or she]

has not alleged, or that the defendants have violated the . . .

laws in ways that have not been alleged." Associated General

Contractors of California, Inc. v. California State Council of

Carpenters, 459 U.S. 519, 526 (1983).

B. DISMISSAL STANDARDS UNDER FED. R. CIV. P. 12(e)

“If a pleading to which a responsive pleading is permitted is

so vague or ambiguous that a party cannot reasonably be required

to frame a responsive pleading, the party may move for a more

definite statement before interposing a responsive pleading.” Fed.

R. Civ. P. 12(e). "The situations in which a Rule 12(e) motion is

appropriate are very limited." 5A Charles A. Wright & Arthur R.

Miller, Federal Practice and Procedure § 1377 (1990). Furthermore,

absent special circumstances, a Rule 12(e) motion cannot be used

to require the pleader to set forth “the statutory or

constitutional basis for his claim, only the facts underlying it.”

McCalden v. California Library Ass'n, 955 F.2d 1214, 1223 (9th

Cir.1990). However, "even though a complaint is not defective for

failure to designate the statute or other provision of law

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violated, the judge may in his discretion . . . require such detail

as may be appropriate in the particular case." McHenry v. Renne,

84 F.3d 1172, 1179 (9th Cir. 1996). 

III.

ANALYSIS

Plaintiff, Ford Credit, moves to dismiss seven causes of

action brought against it by defendants. Ford Credit also requests

that defendants provide a more definite statement regarding three

causes of action. I decide these motions based on the parties’

brief and after oral argument. 

A. MOTION TO DISMISS

1. Business Torts

a. Fourth Claim: Interference with Contractual Relations

 The elements which a plaintiff must plead to state the cause

of action for intentional interference with contractual relations

are: (1) a valid contract between plaintiff and a third party; (2)

defendant’s knowledge of this contract; (3) defendant’s intentional

acts designed to induce a breach or disruption of the contractual

relationship; (4) actual breach or disruption of the contractual

relationship; and (5) resulting damage. Quelimane Co., Inc. v.

Stewart Title Guaranty Co., 19 Cal.4th 26, 55 (1998)(quoting 

PG & E, 50 Cal.3d 1118, 1127 (1990)). Ford Credit maintains

defendants’ fourth cause of action should be dismissed because DLMI

failed to plead the existence of a third-party contract. The

contention is without merit.

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8

Ford Credit relies on Applied Equipment Corp. v. Litton Saudi

Arabia Ltd., 7 Cal.4th 503 (1994), to argue that “there can be no

interference with an economic interest between multiple parties who

had contracted to facilitate a single commercial enterprise - even

if two of the parties had conspired against the third.” Mot. at

5. The California Supreme Court concluded in Applied Equipment

that a party may not be held liable for tortious interference with

its own contract. 

The facts of Applied Equipment are somewhat analogous to the

case at bar - two parties (Litton and Varian) were involved in the

same business transaction with Applied Equipment, but each held

separate contracts with Applied Equipment. The court simply held

that each party (Litton and Varian) could not be held liable for

interfering with its own contract with Applied

Equipment. In so holding, the court made clear that:

Nothing we have said suggests that Litton may not be

liable for direct interference with the Applied/Varian

purchase order (to which it was not a party) or that

Varian may not be held liable for direct interference

with the Applied/Litton subcontract (to which it was not

a party), provided that each of the elements of the tort

of interference with contract is satisfied. We offer no

opinion as to whether those elements can be satisfied in

this case; we hold only that Varian may not be held

liabletoAppliedforconspiracytointerferewithVarian’sowncontract-theApplied/Varianpurchase

order. 

Applied, 7 Cal.4th at 521. 

As defendants point out, and as Ford Credit recognizes,

defendants executed separate contracts with both Ford Credit and

Lincoln Mercury. Nevertheless, Ford Credit insists the fourth

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claim was improperly pled with regards to the contractual

relationships that existed between DLMI, Lincoln Mercury, and Ford

Credit. Ford Credit argues that Applied Equipment stands for the

proposition that if all parties were involved in a single business

endeavor, no interloper had interfered with the contract and the

cause of action would fail. In light of the court’s explanation

in Applied Equipment, that argument cannot lie.

Ford Credit can be held liable for interference with contract

if the contract at issue is not one to which it is a party - even

if, in fact, it was one of the parties involved in a single

commercial enterprise, “so long as each of the elements of the tort

of interference is satisfied.” Applied, id. 

Turning to defendants’ counterclaim, they do not allege that

Ford Credit interfered with the contracts between Ford

Credit/Daugherty and DLMI. Rather, defendants’ counterclaim states

that “Ford Credit interfered with DLMI’s existing contractual

relations with Lincoln Mercury . . . .” Countercl. at 15. The

counterclaim here thus alleged a contract between Lincoln Mercury

and defendants, an element of the prima facie case. Ford Credit’s

knowledge of the Lincoln Mercury/DLMI contract is alleged where

defendants aver that Ford gave DLMI a $2 million credit line

because Lincoln Mercury’s contract required that for the operation

of the franchise. Countercl. at 10. Defendants allege disruption

where they explain that because Ford Credit “increased DLMI’s

existing $2 million credit line to approximately $7.6 million

without the knowledge or consent of DLMI or Daugherty,” defendants

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6 Defendants also allege that Ford Credit interfered with

existing contracts between it and its employees, customers, and

suppliers. I need not consider the adequacy of that pleading since

they have alleged facts to support the tort as it relates to the

contractual relationship between DLMI and Lincoln Mercury, and thus

the cause of action cannot be dismissed.

10

were overstocked with cars they could not sell, causing Lincoln

Mercury to put it on a “credit hold” on defendants’ account so they

could not receive additional inventory. Countercl. at 10. 

Finally, defendants allege that Ford acted “with full knowledge

that DLMI would be unable to economically sustain such a

exponentially large increase,” and that DLMI sustained damages and

“was forced to temporarily cease operations as a Lincoln Mercury,”

satisfying the intent and resulting damage elements of the prima

facie case. Countercl. at 16. I conclude that the counterclaim

sufficiently alleges a cause of action for intentional interference

with existing contractual relations.6 

b. Fifth Claim: Interference with Prospective Economic

Advantage

To state a claim for intentional interference with economic

advantage, plaintiff must allege: 1) an existing relationship or

one “containing the probability of future economic benefit”; 2)

knowledge by the defendant of the relationship; 3) acts by

defendant designed to disrupt the relationship; 4) actual

disruption of the relationship; 5) damages proximately caused by

the acts of the defendant. Della Penna v. Toyota Motor Sales, USA,

11 Cal.4th 376, 380 n.1 and 392-93 (1995). The act must be

“wrongful by some legal measure other than the fact of interference

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itself.” Id. at 393. It is “plaintiff[‘s] burden to prove as an

element of the cause of action itself, that the defendant[‘s]

conduct was independently wrongful.” Bed, Bath & Beyond of La

Jolla, Inc. v. La Jolla Vill. Square Venture Partners, 52

Cal.App.4th 867 (1997). The tort of intentional interference with

prospective economic advantage imposes liability for improper

methods of disrupting or diverting the business relationship of

another which fall outside the boundaries of fair competition.

Settimo Assoc. v. Environ Sys., Inc., 14 Cal.App.4th 842, 845

(1993). 

While the tort of intentional interference with contract

requires a valid contract, the tort of intentional interference

with prospective economic advantage merely requires conduct that

was wrongful by some legal measure other than the fact of

interference, Della Penna, supra, and that the conduct disrupts the

business relationship of another. The California Supreme Court has

recognized that both torts enable a party to a contract to sue a

stranger to that contract for interfering with the contract and

both require an intentional act. Pacific Gas & Electric v. Bear

Stearns & Co., 50 Cal. 3d 1118, 1126 (1990). Put somewhat

differently, interference with prospective advantage is a tort that

covers a broader range of conduct, but a party who alleges the

prima facie elements of intentional interference with contract may

also bring a interference with prospective economic advantage claim

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7 As the California Supreme Court explained in Pacific Gas

& Electric:

“The tort of interference with prospective economic

advantage protects the same interest in stable economic

relationships as does the tort of interference with

contract, though interference with prospective advantage

does not require proof of a legally binding contract.

The chief practical distinction between interference

with contract and interference with prospective economic

advantage is that a broader range of privilege to

interfere is recognized when the relationship or

economic advantage interfered with is only prospective.”

50 Cal.3d at 1126 (citation omitted).

12

using the same alleged facts.

7 Ford Credit is thus incorrect in

asserting that a party “seeking damages for the tortious

interference with prospective business advantage must establish the

same elements needed to sustain a claim for relief for the

interference with contractual relations.” Mot. at 7. Rather, a

party may choose to plead both torts if it can establish the

elements for the tortious interference with contractual relations.

Where, as here, plaintiff has alleged the elements for interference

with contract, I conclude that the fifth claim for relief is not

subject to dismissal.

2. Fraud-Related Torts

Ford Credit notes that Daugherty and DLMI allege three claims

for relief that sound in fraud:

(1) Third claim for relief: violation of Section 17200 of the

California Unfair Business Practices Act. Ford Credit explains

that the claim as pled relies on allegations of deceit as defined

by California Civil Code §§ 1709 and 1710. California’s Unfair

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8 Business and Professions Code section 17200 provides: "As

used in this chapter, unfair competition shall mean and include any

unlawful, unfair or fraudulent business act or practice and unfair,

deceptive, untrue or misleading advertising and any act prohibited

by Chapter 1 (commencing with Section 17500) of Part 3 of Division

7 of the Business and Professions Code." The Supreme Court

explained that section 17200 "defines 'unfair competition' as any

'unlawful, unfair or fraudulent business practice and unfair,

deceptive, untrue or misleading advertising . . . .' (§ 17200.)

The Legislature intended this 'sweeping language' to include "

'anything that can properly be called a business practice and that

at the same time is forbidden by law.' " [Citations.] Bank of the

West v. Superior Court, 2 Cal.4th 1254, 1266-1267 (1992). Section

17200 "borrows" violations of federal, state, or local law and

treats them as unlawful practices which are independently

actionable under section 17200. State Farm Fire & Casualty Co. v.

Superior Court , 45 Cal.App.4th 1093, 1102-1103 (1996). Since

section 17200 is in the disjunctive, it establishes three separate

types of unfair competition. The statute prohibits practices that

are either "unfair," or "unlawful," or "fraudulent." See State

Farm, id. at 1102.

DLMI maintains that they did not restrict themselves to claims

under section 17200 based solely on fraud. Opp’n at 14. While the

allegations may well fall within the “unfair” or unlawful rubric,

they also rely on allegations of fraud, and accordingly, the court

must address Ford Credit’s contention.

9 The same elements comprise a cause of action for negligent

misrepresentation, except there is no requirement of intent to

induce reliance. Small v. Fritz Companies, Inc. 30 Cal.4th 167,

173 (2003). In both causes of action, the plaintiff must plead

that he or she actually relied on the misrepresentation. Mirkin v.

Wasserman, 5 Cal.4th 1082, 1088-1089 (1993). 

13

Business Act at Business and Professions Code § 17200 holds a party

liable for unfair competition characterized as “unlawful, unfair,

or fraudulent.”8

(2) Sixth Claim for Relief - Misrepresentation, deceit, fraud

under California Civil Code section 1709. Countercl. at 19, ¶ 120.

(3) Seventh Claim for Relief - Negligent Misrepresentation.9

 Ford Credit maintains that these claims must fail because

defendants do not plead fraud with the specificity required under

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Rule 9(b) of the Federal Code of Civil Procedure. Mot. at 8.

Because these three claims essentially rely on the same allegations

of fraudulent conduct, the discussion below addresses fraud claims

made in all three causes of action.

Under these causes of action, defendants seek damages under

California Civil Code § 1709. That statute imposes liability on

those who engage in fraud - stating, "one who willfully deceives

another with intent to induce him to alter his position to his

injury or risk, is liable for any damages which he thereby

suffers." Cal. Civ. Code § 1709. In order to establish a cause of

action for fraud, a plaintiff must plead and prove all the elements

of fraud, namely: (1) misrepresentation, (2) knowledge of falsity,

(3) intent to induce reliance, (4) justifiable reliance, and (5)

resulting damage. See Conrad v. Bank of America, 45 Cal.App.4th

133, 156 (1996). When pleading claims amounting to fraud, a

plaintiff must satisfy the demands of Rule 9(b) of the Federal

Rules of Civil Procedure, which states that, "in all averments of

fraud or mistake, the circumstances constituting fraud or mistake

shall be stated with particularity." Fed. R. Civ. P. 9. General

pleading of the legal conclusion of fraud is insufficient. Courts

have explained this rule as requiring that claims of fraud include

the “‘who, what, when, where, and how’ of the alleged misconduct.”

Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997). Ultimately,

such claims must be "specific enough to give defendants notice of

the particular misconduct . . . so that they can defend against the

charge." Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1108 (9th

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Cir. 2003).

In the instant case, defendants have adequately met the

pleading requirements for fraud. As they contend, they allege that

without their knowledge Ford Credit “raised the credit limit of

DLMI from the initial limit of $2,000,000 to over $7,600,000, and

then allowed Lincoln Mercury to charge the delivery of vehicles to

DLMI against DLIM’s raised limit.” Countercl. at 19. Ford Credit

purportedly did this twice - once shortly after June of 1999, and

again, after July of 2000 when their credit was already suspended.

Countercl. at 10. They claim that Ford Credit continued to allow

Lincoln Mercury to “continually charge vehicles delivered to DLMI

against DLMI’s suspended credit line” and that through their

“agents and representatives . . . deceive[d] DLMI as to the limit

on its flooring line and as to the proper procedures for charging

vehicles against DLMI’s original credit limit.” Countercl. at 20.

Defendants aver that “[b]y increasing DLMI’s credit line, without

DLMI’s or Daugherty’s knowledge or prior consent . . . Ford Credit

caused DLMI to suffer further financial losses . . . .” Id. Ford

Credit maintain that defendants have failed to allege that actual

representations were made by them and that Ford Credit could not

have made misrepresentations because the meetings attended by

Lincoln-Mercury and Ford Credit were “secret.” Repl. at 5. This

argument is unavailing. 

Under California law, misrepresentation may also include

“concealment” or “nondisclosure,” Small v. Fritz Companies, Inc.,

30 Cal.4th 167, 173 (2003). Here, defendants explain that Ford

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10 In drawing this conclusion, this court recognizes that

Rule 9(b)’s particularity requirement must be read in harmony with

the emphasis on conciseness and the focus on giving fair notice

contained in Federal Rule of Civil Procedure 8(a). I must apply

Rule 9(b) in a manner that effectuates its purpose in ensuring that

allegations of fraud are specific enough to apprise the accused of

the misconduct alleged, so that the accused “can defend against the

charge and not just deny that they have not done anything wrong.”

Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). I find that

the fraud causes of action are specific enough to put Ford Credit

on notice and to allow them to defend against these charges. 

11 Both causes of action appear to make the same claim under

the Vehicle Code. 

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Credit deceived them by increasing their credit line,

misrepresenting what their credit line allowed, and deceived them

as to the proper procedures for charging vehicles against their

original flooring limit. Opp’n at 15. The inference that must and

can be made is that defendants were led to believe through Ford

Credit’s conduct and fraudulent nondisclosure of information that

their credit line was not on “credit hold,” when, in fact, it did

not allow for a higher inventory volume of Lincoln Mercury

vehicles. Upon review of the entire counterclaim, I find that

defendant has alleged particular omissions or misrepresentations

on the part of Ford Credit to comply with Rule 9(b).10 

3. Ninth and Fourteenth Causes of Action: Violation of

Vehicle Code § 1173.211

Defendants charge Ford Credit with aiding and abetting Lincoln

Mercury’s alleged violation of Vehicle Code § 11713.2. Section

11743.2 provides:

It shall be unlawful and a violation of this code for any

manufacturer, manufacturer branch, distributor, or distributor

branch licensed under this code to coerce or attempt to coerce any

dealer in this state:

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(a) To order or accept delivery of any motor vehicle, part or

accessory thereof, appliance, equipment or any other

commodity not required by law which shall not have been

voluntarily ordered by the dealer.

Ford Credit argues that this cause of action should be

dismissed because DLMI never alleged any facts to support that it

was actually coerced, as required under this vehicle code. Their

point is well-taken. Indeed, nowhere in defendants’ 119-paragraph

counterclaim do defendants allege coercion - “threat of physical

harm or economic compulsion” -- which would require them to take

the undesired action - in this case, to accept delivery of excess

Lincoln Mercury vehicles. Louisville Title Ins. Co. v. Surety

Title & Guar. Co., 60 Cal.App.3d 781, 801 (1976). Defendants

allege repeatedly that they were unaware that their credit line had

been increased by Ford Credit in order to allow Lincoln Mercury to

“foist vehicles on DLMI,” but this allegation tends to undermine

defendants’ coercion claims because a “threat of physical harm or

economic compulsion” on the part of Ford Credit and Lincoln Mercury

would necessarily require awareness of the scheme to “foist

vehicles” onto defendants. 

During oral argument, defendants acknowledge that they did not

allege coercion on the part of Ford Credit anywhere in their

counterclaim. Rather, they assert that they will conduct

discovery as to whether coercion existed on Ford Credit’s or

Lincoln Mercury’s part. Although the court may infer that Ford

Credit committed fraudulent acts based on defendants’ allegations,

the court cannot infer from the facts alleged that Ford Credit

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12 As the court has already reminded defendants during 

oral argument, any claims for which there are not sufficient facts

alleged should not be plead. If, through discovery, defendants

discover facts which support a new cause of action, defendants may,

at that point, move to amend the counterclaim to allege the claim.

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coerced or aided and abetted another party in coercing defendants.

Despite the deference the court is bound to pay to the defendants’

allegations, it is not proper for the court to assume that "the

[defendant] can prove facts which [he or she] has not alleged, or

that the defendants have violated the . . . laws in ways that have

not been alleged." Associated General Contractors of California,

Inc. v. California State Council of Carpenters, 459 U.S. 519, 526

(1983). Accordingly, claims nine and fourteen are dismissed

without prejudice.12

B. MOTION FOR A MORE DEFINITE STATEMENT - ELEVENTH, TWELFTH AND

THIRTEENTH CLAIMS FOR RELIEF

Under these three claims, defendants seek a determination that

his continuing guaranty with Ford Credit is not enforceable due to

fraud (eleventh claim), that Ford Credit may enforce the guaranty

because it acted with illegal purpose (twelfth claim), and that the

guaranty is void because Ford altered the terms of the underlying

obligation without his consent (thirteenth claim). Ford Credit

complains that these three claims require more specificity because

“Daugherty does not state which of his personal guaranties he

believes is voidable.” They explain that the transaction between

Ford Credit and defendants involved two guaranties: (1) A

continuing guaranty for the obligations of DLMI under its wholesale

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agreement, and (2) a Continuing guaranty for DLMI’s obligations

under the Capital Loan agreement. 

Ford Credit maintains that the twelfth and thirteenth claims

for relief are unclear because they fail to identify the type of

remedy defendants seek (rescission, exoneration, or monetary

damages). They state that their defenses will vary markedly

depending on which remedy defendants seek and which guaranty is at

issue. The Ninth Circuit has held that a “judge may in his

discretion . . . require such detail as may be appropriate in the

particular case” under Fed. R. Civ. P. 12(e). Defendants are

ordered provide a more definite statement as to the Eleventh,

Twelfth and Thirteenth Claims for Relief. Defendants are directed

to specify which guaranty is at issue for each claim, and the type

of remedy they are seeking as to these claims.

IV.

 CONCLUSION

For all the foregoing reasons, the court hereby ORDERS that:

1. Plaintiff’s motion to dismiss is GRANTED in part and

DENIED in part as follows:

a. Ford Credit’s motions directed to the third, fourth,

fifth, sixth, and seventh causes of action are DENIED.

b. Defendants’ ninth and fourteenth causes of action 

are DISMISSED without prejudice.

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2. Defendants are ordered to provide a more definite

statement as to the eleventh, twelfth, and thirteenth causes of

action within twenty (20) days of this order.

IT IS SO ORDERED. 

DATED: May 27, 2005.

/s/Lawrence K. Karlton 

LAWRENCE K. KARLTON

SENIOR JUDGE

UNITED STATES DISTRICT COURT

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