Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00208/USCOURTS-caed-1_05-cv-00208-1/pdf.json

Nature of Suit Code: 130
Nature of Suit: Miller Act
Cause of Action: 40:270 Miller Act

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1A motion to remand to state court was filed and reviewed by Magistrate Judge Beck. Thereafter, the

motion was dropped and the issue has ultimately been resolved. 

2

Because this is a Rule 12(b)(6) motion to dismiss, the following facts are taken from Plaintiffs’ First

Amended Complaint and are assumed to be true for purposes of resolving the motion. See Smith v. Jackson, 84 F.3d

1213, 1217 (9th Cir. 1996). 

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

MIKE NELSON COMPANY, INC., a )

California Corporation, )

)

Plaintiff, )

v. )

)

WESTON HATHAWAY, and DOES )

1 through 10, )

)

Defendants. )

____________________________________)

CV F 05-0208 AWI DLB

ORDER ON DEFENDANT WESTON

HATHAWAY’S MOTION TO

DISMISS AND MOTION FOR

SANCTIONS

This is essentially a contractual dispute between subcontractors to the Fresno Federal

Courthouse project. Plaintiff initially brought suit in state court, and Defendant removed the case

to this Court on February 14, 2005.1 Defendant then filed a motion to dismiss, but Plaintiff filed

a First Amended Complaint before any ruling on the motion was made. This motion to dismiss

followed the filing of the First Amended Complaint. 

FACTUAL ALLEGATIONS2

In January 2003, the Mike Nelson Company, Inc. (“Plaintiff”) sent Weston Hathaway

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(“Defendant”) a bid request form for pricing on steel metal framing materials, drywall, and the

stocking of materials relating to the construction of the federal courthouse in Fresno, California. 

Defendant responded by filling in pricing on the bid request form for the requested materials and

stocking. Defendant faxed the form back to Plaintiff on February 3, 2003. Thereafter, Plaintiff

orally accepted Defendant’s prices for the goods and services, and proceeded to work based upon

the pricing information provided by Defendant. According to Plaintiff, this process is the habit

and custom of the industry throughout California and in Fresno. The agreement called for

Defendant to place or stock materials in certain designated work areas and supply Plaintiff with

the construction materials at a particular set price. 

Plaintiff argues that Defendant breached the agreement by failing to complete the

stocking of the construction materials in the designated work areas. Defendant initially

performed its stocking obligations, but stopped performance when it was required to pay

prevailing federal wages. Similarly, Defendant provided some framing and drywall at the agreed

upon price, but then, unilaterally and without Plaintiff’s consent, selectively raised prices of the

building materials.

Defendant’s failure to provide materials for the stated price required Plaintiff to purchase

steel at a substantially higher price than that agreed upon, and the failure to stock materials at the

construction site caused Plaintiff to expend manpower and extra labor costs to stock the

construction site. Plaintiff states that it has been damaged in an amount greater than $25,000. 

12(b)(6) MOTION TO DISMISS STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a claim may be dismissed because of the

plaintiff’s “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6).

This rule provides for dismissal of a claim if, as a matter of law, “it is clear that no relief could be

granted under any set of facts that could be proved consistent with the allegations.” Neitzke v.

Williams, 490 U.S. 319, 327 (1989); Parks Sch. of Business, Inc. v. Symington, 51 F.3d 1480,

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1484 (9th Cir. 1995). Thus, the determinative question is whether there is any set of “facts that

could be proved consistent with the allegations of the complaint” that would entitle plaintiff to

some relief. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002). In reviewing a complaint

under Rule 12(b)(6), all allegations of material fact are taken as true and construed in the light

most favorable to the non-moving party. Newman v. Sathyavaglswaran, 287 F.3d 786, 788 (9th

Cir. 2002); Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). The Court must also assume

that general allegations embrace the necessary, specific facts to support them. Peloza v.

Capistrano Unified Sch. Dist., 37 F.3d 517, 521 (9th Cir. 1994). But, the Court is not required

“to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or

unreasonable inferences.” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001);

see also Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003); Western

Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Courts will not “assume the truth of

legal conclusions merely because they are cast in the form of factual allegations.” Warren, 328

F.3d at 1139; Western Mining Council, 643 F.2d at 624. Furthermore, Courts will not assume

that plaintiffs “can prove facts which [they have] not alleged, or that the defendants have violated

. . . laws that have not been alleged.” Associated General Contractors of California, Inc. v.

California State Council of Carpenters, 459 U.S. 519, 526 (1983).

In deciding whether to dismiss a claim under Rule 12(b)(6), the Court is generally limited

to reviewing only the complaint, but may review materials which are properly submitted as part

of the complaint and may take judicial notice of public records outside the pleadings. Lee v. City

of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001); Campanelli v. Bockrath, 100 F.3d 1476,

1479 (9th Cir. 1996); MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986). A

dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the

absence of sufficient facts alleged under a cognizable legal theory. Navarro v. Block, 250 F.3d

729, 732 (9th Cir. 2001); Balistreri v. Pacifica Police Dep’t., 901 F.2d 696, 699 (9th Cir. 1988).

If a Rule 12(b)(6) motion to dismiss is granted, “[the] district court should grant leave to amend

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3

The first cause of action, breach of contract, is not being challenged by Defendant in this motion. 

4

even if no request to amend the pleading was made, unless it determines that the pleading could

not possibly be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th

Cir. 2000) (en banc) (quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995)).

DISCUSSION3

A. Second Cause of Action: Account Stated 

1. Arguments

a. Defendant’s Motion

Defendant argues that in order to state a claim for an “account stated,” the claim must be

based on a new/separate contract and not on the original express transaction. Here, Plaintiff has

alleged no separate contract. Defendant also argues that an “account stated” claim cannot be

based upon a debt connected with the breach of an express contract. Defendant states that

because Plaintiff’s second cause of action endeavors to impermissibly split the breach of contract

cause of action, it must fail. 

b. Plaintiff’s Opposition

In response, Plaintiff argues that an “account stated” is an agreement between parties that

a particular sum be paid and accepted in discharge of the obligation. Plaintiff also argues that

any bill can be subject to an “account stated” and that as Defendant agreed to provide materials

and stock the project and did not do so, Plaintiff was forced to mitigate and has demanded the

amount it expended from Defendant. 

2. Legal Standard

An account stated is an agreement between the parties that a certain sum shall be paid and

accepted in discharge of an obligation. Truestone, Inc. v. Simi West Industrial Park II, 163

Cal.App.3d 715, 725 (1984); Withers v. Matthews, 192 Cal.App.2d 139, 141 (1961). To

establish an account stated, the Plaintiff must show three elements:

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...[A]t the time of the statement, an indebtedness from one party to the other

existed, a balance was then struck and agreed to be the correct sum owing from

the debtor to the creditor, and the debtor expressly or impliedly promised to pay to

the creditor the amount thus determined to be owing.

Truestone, 163 Cal.App.3d at 725 (quoting H. Russell Taylor's Fire Prevention Service, Inc. v.

Coca Cola Bottling Corp., 99 Cal.App.3d 711, 726 (1979)). Thus, an action on 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, and no inquiry may be made into original terms. Gleason v. Klamer, 103

Cal.App.3d 782, 786-787 (1980); Fogarty v. McGuire, 170 Cal.App.2d 405, 409 (1959); Gardner

v. Watson, 170 Cal. 570, 574 (1915). “An account stated is an agreed balance of accounts; an

account which has been examined and accepted by the parties. It implies an admission that the

account is correct, and that the balance struck is due and owing from one party to the other.” 

Perry v. Schwartz, 219 Cal.App.2d 825, 829 (1963); see Truestone, 163 Cal.App.3d at 725

(1984). “The law is established in California that a debt which is predicated upon the breach of

the terms of an express contract cannot be the basis of an account stated.” Moore v.

Bartholomae Corp., 69 Cal.App.2d 474, 477 (1945).

3. Analysis

The three elements set forth in Truestone must be pled with sufficient factual allegations

by Plaintiff in order to state a claim for an account stated. Here, however, the complaint does not

allege that any “balance” was struck, or that there was any understanding reached between both

parties as to the amount of outstanding debt. There is also no allegation in the complaint to

demonstrate that Defendant made a promise to pay any debt or to forward any such amount to

Plaintiff. Instead, the facts indicate that Plaintiff made a demand upon Defendant for payment,

but Defendant has refused the demand. 

Simply stated, the complaint does not present sufficient factual allegations to show that a

second agreement, separate from the first agreement to provide materials and stocking services,

was created to settle an outstanding debt. See Truestone, 163 Cal.App.3d at 725; Gleason, 103

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4

Incorporating prior allegations by reference into a separate cause of action may create internal

inconsistencies and/or defeat that cause of action. See SMC Corp. v. Peoplesoft USA, Inc., 2004 U.S. Dist. LEXIS

22811 at *10, 2004 WL 2538641 at *3 (S.D. Ind. 2004) (holding that dismissal of claim for unjust enrichment was

appropriate where allegations for breach of contract were incorporated by reference under the allegations for unjust

enrichment); Canadian Pac. Ry. Co. v. Williams-Hayward Protective Coatings, Inc., 2003 U.S. Dist. LEXIS 6518 at

*12-*13, 2003 W L 1907943 at *5 (N.D.Ill. 2003) (same). It is true that the Ninth Circuit has held that, under Rule

8(e), “a pleading should not be construed as an admission against another alternative or inconsistent pleading in the

same case.” McCalden v. California Library Ass’n, 955 F.2d 1214, 1219 (9th Cir. 1992); Molsbergen v. United

States, 757 F.2d 1016, 1019 (9th Cir. 1985). However, McCalden and Molsbergen involved situations where the

district court looked to allegations in the complaint that were not incorporated by reference into separate causes of

action, i.e. the district court erroneously compared separated, “non-incorporated” allegations. See McCalden, 955

F.2d at 1219; Molsbergen, 757 F.2d at 1018-19. Furthermore, in this case, the allegations in paragraphs 12-14 are

not materially different from the allegations of paragraphs 5-11.

6

Cal.App.3d at 786-87; Fogarty, 170 Cal.App.2d at 409. The portion of the complaint that alleges

an “account stated” (paragraphs 12 through 14) expressly incorporates the paragraphs (5 through

11) that allege and form the basis for “breach of contract.” When the allegations of paragraphs 5

through 14 are read together, it appears that Plaintiff and Defendant entered into a single

agreement that required Defendant to provide construction materials and labor to Plaintiff for an

agreed upon price; this is not sufficient to plead the existence of an account stated.4 Truestone,

163 Cal.App.3d at 725; Gleason, 103 Cal.App.3d at 786-87; Fogarty, 170 Cal.App.2d at 409;

Moore, 69 Cal.App.2d at 477. Given the foregoing, Defendant’s motion will be granted as to

this claim. 

B. Third Cause of Action: Common Count

1. Arguments

a. Defendant’s Motion

Defendant argues that the complaint’s “common count” allegation is simply repetitive

pleading and an impermissible splitting of causes of action. Defendant argues that since the

common count allegation is based on the same facts of the first cause of action, breach of

contract, Plaintiff’s claim is redundant and should therefore fail. Relying on Professor Witkin’s

treatise on California Procedure, Defendant argues that Plaintiff is not permitted to plead in the

alternative under the facts of this case.

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5

Rule 8(e)(2) reads in its entirety:

A party may set forth two or more statements of a claim or defense alternately or hypothetically, either in one count

or defense or in separate counts or defenses. When two or more statements are made in the alternative and one of

them if made independently would be sufficient, the pleading is not made insufficient by the insufficiency of one or

more of the alternative statements. A party may also state as many separate claims or defenses as the party has

regardless of consistency and whether based on legal, equitable, or maritime grounds. All statements shall be made

subject to the obligations set forth in Rule 11.

7

b. Plaintiff’s Opposition

Plaintiff argues that a common count can properly be pled when a plaintiff has performed

an obligation of an express contract and what remains is the defendant’s obligation to pay the

plaintiff for performance. Plaintiff argues that it makes no difference whether the original

transaction is based on an express contract or not. As applied to this case, Plaintiff argues that: 

Defendant agreed to supply materials and labor for stocking materials to Plaintiff; that Defendant

failed to perform fully all of its duties under this agreement; that Plaintiff was forced to hire other

labor and seek other suppliers for the material and thus incurred damages; and that Plaintiff

requested payment, but that Defendant refused. Plaintiff’s Opposition at 5:4-8. Plaintiff also

argues that it is pleading in the alternative because there is uncertainty as to the nature of the

contractual obligation that the evidence may establish.

2. Legal Standard

In federal court, Rule 8(e)(2) provides for pleading in the alternative: “A party may set

forth two or more statements of a claim or defense alternately or hypothetically, either in one

count or defense or in separate counts or defenses.”5 “Under the Federal Rules, a plaintiff may

set forth inconsistent legal theories in its pleadings and will not be forced to elect a single theory

on which to seek recovery.” Arnold & Assocs., Inc. v. Misys Healthcare Sys., 275 F. Supp. 2d

1013, 1030 n.11 (D. Ariz. 2003) (citing Arthur v. United States by and Through VA, 45 F.3d

292, 296 (9th Cir. 1995)); see also Brookhaven Landscape & Grading Co. v. J.F. Barton

Contracting Co., 676 F.2d 516, 523 (11th Cir. 1982). Thus, for example, a plaintiff may “seek

both an equitable remedy of estoppel and a legal remedy for breach of contract.” Arnold &

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Assocs., 275 F.Supp.2d at 1030 n.11; Atlantic Paper Box Co. v. Whitman’s Chocolates, 844

F.Supp. 1038, 1043 (E.D. Pa. 1994); see also Detroit Tigers, Inc. v. Ignite Sports Media, L.L.C.,

203 F.Supp.2d 789, 793 (E.D. Mich. 2002). However, a party “may not recover on inconsistent

theories when one theory precludes the other or is mutually exclusive of the other.” Brookhaven

Landscape & Grading, 676 F.2d at 523; see Scott v. District of Columbia, 101 F.3d 748, 753

(D.C. Cir. 1996).

The essential elements of a common count are: a statement of indebtedness in certain

sum, consideration, and nonpayment. Farmers Ins. Exchange v. Zerin, 53 Cal.App.4th 445, 460

(1997); Allen v. Powell, 248 Cal.App.2d 502, 510 (1967); 4 Witkin, California Procedure:

Pleading § 518 (4th ed). California courts have recognized that a plaintiff may plead a cause of

action for a breach of contract and a common count. See, e.g., Leoni v. Delany, 83 Cal.App.2d

307-09 (1948) (discussing and citing, inter alia, Wilson v. Smith, 61 Cal. 209 (1882)). 

A common count is proper whenever the plaintiff claims a sum of

money due, either as an indebtedness in a sum certain, or for the

reasonable value of services, goods, etc., furnished. It makes no

difference in such a case that the proof shows the original

transaction to be an express contract, a contract implied in fact, or a

quasi-contract.

Utility Audit Co. v. City of Los Angeles, 112 Cal.App.4th 950, 958 (2003); Kawasho Internat.,

U.S.A. Inc. v. Lakewood Pipe Service, Inc., 152 Cal.App.3d 785, 793 (1983); 4 Witkin,

California Procedure: Pleading § 515. The element of indebtedness excludes actions based on

express contract where: (1) the contract is still executory on the plaintiff’s side; (2) the plaintiff

seeks either damages for breach or specific performance, for example, when a buyer seeks

damages for partial failure to deliver goods after full payment of price; and (3) the obligation of

the defendant is something other than the payment of money. 4 Witkin, California Procedure:

Pleading § 515 (and cases cited therein). 

3. Analysis

As argued by Plaintiff, the complaint endeavors to make use of pleading in the

alternative. The practice of pleading in the alternative has long been recognized and accepted by

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6Defendant’s citation to Professor Witkin is not persuasive as his discussion relates to California state

practice. “Under the present federal procedure a party may plead inconsistently, subject only to the requirements of

making a reasonable inquiry under the circumstances and interposing a pleading only for proper purposes, which are

the limits set forth in Rule 11.” 5 Wright & Miller, Federal Practice and Procedure § 1283.

7

Paragraphs 12-14 of the complaint allege “account stated” and are also incorporated by reference under the

common count claim.

9

the federal courts. As set forth above, for purposes of a common count, “[i]t makes no difference

in such a case that the proof shows the original transaction to be an express contract, a contract

implied in fact, or a quasi-contract.” Utility Audit, 112 Cal.App.4th at 958. As Rule 8(e)(2)

permits Plaintiff to plead these two claims in the alternative, a common count may be pled along

with a claim for breach of contract.

6

 See Arthur, 45 F.3d at 296; Brookhaven Landscape &

Grading, 676 F.2d at 523; Arnold & Assocs., 275 F. Supp. 2d at 1030 n.11; Detroit Tigers, 203

F.Supp.2d at 793. 

However, Defendant’s argument is that Plaintiff has failed to state a claim primarily

because it impermissibly splits its breach of contract claim into three redundant causes of action,

when in reality, there is but one cause of action being alleged. A common count may be based on

an express contract. However, when the common count is based on an express contract, the

element of indebtedness is not satisfied where the plaintiff seeks damages for breach or where the

obligation of the defendant is something other than the payment of money. Willett & Burr v.

Alpert, 181 Cal. 652, 662 (1919); 4 Witkin, California Procedure: Pleading § 516. The portion

of the complaint that alleges “common count” incorporates by reference the allegations that

constitute breach of contract. When the breach of contract allegations (paragraphs 5-11) and the

common count allegations (paragaphs 15-17) are read together, the common count appears to be

based on the alleged contract between Plaintiff and Defendant.7 This is confirmed in Plaintiff’s

opposition. See Plaintiff’s Opposition at 5:4-8. The facts alleged and the argument of Plaintiff

show that the obligation was for Defendant to provide services and materials to Plaintiff, it was

not to pay money. Moreover, the “debt” that Plaintiff seeks, the costs of replacement materials

and labor, are damages arising from the breach of the alleged contract. Furthermore, Plaintiff has

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not alleged any conduct on its part wherein it provided goods, services, or money to Defendant. 

See Matthew Bender, California Forms of Pleadings and Practice, Vol. 12, Ch. 121, Common

Counts: §§ 121:23-121:25 (2005) (explaining the types of common counts and describing each as

based on some form of conduct by the plaintiff for the defendant); 4 Witkin, California

Procedure: Pleading §§ 522-528 (same). Although pleading in the alternative is permissible, the

common count allegations show a request for damages based on breach and that Defendant’s

obligation under the agreement was the provision of goods and services – not the payment of

money. Under these allegations, Plaintiff has failed to state a claim for a common count. See

Willett & Burr, 181 Cal. at 662; 4 Witkin, California Procedure: Pleading §§ 516, 522-528; see

also Matthew Bender, California Forms of Pleadings and Practice, Vol. 12, Ch. 121, Common

Counts: §§ 121:23-121:25. Accordingly, Defendant’s motion will be granted as to this claim.

C. Fourth Cause of Action: Promissory Estoppel

1. Arguments

a. Defendant’s Motion

Defendant argues that the doctrine of promissory estoppel is only available to a plaintiff

who, in reliance, performs an act other than the one for which he bargained. Defendant cites 

Plaintiff’s allegation that, “Plaintiff relied upon the contract between Mike Nelson and Weston

for material pricing and to supply stocking on the project,” and argues that it shows reliance by

Plaintiff on performance of an act bargained for. Thus, promissory estoppel is unavailable.

b. Plaintiff’s Opposition

In response, Plaintiff argues that promissory estoppel may be invoked in the particular

situation where a general contractor takes a number of subcontractors’ bids in order to make his

own bid for the main contract. See Drennan v. Star Paving Co., 51 Cal.2d 409 (1958). Plaintiff

also argues that there are three elements to promissory estoppel, the existence of which are

questions of fact. 

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2. Legal Standard

“Promissory estoppel is a doctrine which employs equitable principles to satisfy the

requirement that consideration must be given in exchange for the promise sought to be enforced.”

US Ecology, Inc. v. State, 129 Cal.App.4th 887, 901-902 (2005); Toscano v. Greene Music, 124

Cal.App.4th 685, 692 (2004). Promissory estoppel is invoked where “[a] promise which the

promisor should reasonably expect to induce action or forbearance of a definite and substantial

character on the part of the promisee and which does induce such action or forbearance is binding

if injustice can be avoided only by enforcement of the promise.” Diede Const., Inc., v. Monterey

Mechanical Co., 125 Cal.App.4th 380, 385 (2004). Thus, in a promissory estoppel action, the

plaintiff must prove all of the necessary elements of a contract except for the requirement of

consideration. U.S. Ecology, 129 Cal.App.4th at 903. “The elements of promissory estoppel are

(1) a clear promise, (2) reliance, (3) substantial detriment, and (4) damages measured by the

extent of the obligation assumed and not performed.” Helmer v. Bingham Toyota Isuzu, 129

Cal.App.4th 1121, 1130 fn. 3 (2005); see also U.S. Ecology, 129 Cal.App.4th at 901. However,

in California, 

the only reliance which 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. If it was not detrimental, it would not constitute

consideration; and since detrimental reliance is an essential feature of promissory

estoppel, that doctrine could not be invoked to make the promisor liable. In other

words, where the promisee’s reliance was bargained for, the law of consideration

applies; and it is only where the reliance was unbargained for that there is room

for application of the doctrine of promissory estoppel.

Youngman v. Nevada Irrigation Dist., 70 Cal. 2d 240, 249-50 (Cal. 1969); Healy v. Brewster, 59

Cal.2d 455, 463 (1963); see also Walker v. KFC Corp., 728 F.2d 1215, 1219-20 (9th Cir. 1984);

Raedeke v. Gibraltar Savings & Loan Assn., 10 Cal.3d 665, 673 (1974). Thus, “If [a plaintiff’s]

only claimed reliance is performance of the act bargained for, [promissory estoppel] is

unavailable.” 1 Witkin, Summary of California Law: Contracts § 251 (9th ed.). 

3. Analysis 

A review of Plaintiff’s complaint shows that promissory estoppel is pled in the alternative

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8

These allegations distinguish this case from Drennan, as pointed out by Defendant. In Drennan, the

contractor relied on a bid by a subcontractor in making a bid for a project. Drennan, 51 Cal.2d at 411-12. The

morning after the contractor was awarded the bid and before the contractor communicated its acceptance of the

subcontractor’s bid, the subcontractor informed the contractor that it had made an error in its subcontracting bid. Id.

at 412. The subcontractor refused to honor the bid and the contractor was forced to obtain a substitute subcontractor

at a higher cost. Id. at 412-13. In contrast, in the case at bar, Plaintiff accepted Defendant’s bid, communicated the

acceptance, and Defendant actually performed for a period of time under the agreement. Id.

12

to breach of contract. As discussed earlier, such pleading in the alternative is appropriate. 

Nevertheless, Defendant’s point is well taken that reliance on an act that is bargained for

precludes the application of promissory estoppel. Under the promissory estoppel section of the

complaint, Plaintiff alleges that it “relied upon the contract between Mike Nelson and Weston for

material pricing and to supply stocking on the project.” Plaintiffs’s First Amended Complaint at

¶ 22. Plaintiff further alleges that, “Weston has increased the pricing . . . without notice or

consent of the Plaintiff . . . [and] after commencing to stock the project, Defendant Weston failed

and refused to continue stocking same when requested to provide certified payrolls for the

project.” Id. at ¶ 24. Plaintiff also incorporates by reference paragraphs 1 through 17, which are

the basis for the breach of contract, account stated, and common count claims. In these

incorporated paragraphs, Plaintiff alleges in part, “Nelson orally accepted Weston’s material

pricing and stocking of materials, and proceeded to work based upon the pricing information

provided by Weston.” Id. at ¶ 6. “Defendant undertook and started stocking but stopped

performance when defendant was required to pay federal prevailing wages.” Id. at ¶ 7. “In

regards to goods, Defendant did provide some goods at the agreed upon price, then, unilaterally

and without plaintiff’s consent, selectively raised prices of the goods.” Id. at ¶ 8. When the

allegations are read together, Plaintiff accepted Defendant’s bid, communicated that acceptance,

and performance on the agreement commenced. For a period of time, Defendant actually

performed what it had agreed or bargained to do.8 In other words, from both the allegations

made and incorporated under the promissory estoppel section of the complaint, Plaintiff relied on

what it had bargained for with Defendant: the provision of materials and stocking at a certain

cost. Promissory estoppel is appropriate when there is a lack of consideration. Raedeke, 10

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Cal.3d at 672-73; US Ecology, 129 Cal.App.4th at 901-02. “Where the promisee’s reliance was

bargained for, the law of consideration applies.” Youngman, 70 Cal. 2d at 249-50; Healy, 59

Cal.2d at 463. Because the allegations show that Plaintiff relied on a “requested” or “bargained

for” performance, promissory estoppel is inapplicable. Raedeke, 10 Cal.3d at 672-73;

Youngman, 70 Cal.2d at 249-50; Healy, 59 Cal.2d at 463; 1 Witkin, Summary of California Law:

Contracts § 251. Given the foregoing, Defendant’s motion to dismiss will be granted as to this

claim. 

D. Doe Defendant Liability 

Defendant argues that Plaintiff’s allegations regarding Doe Defendants are too vague and

unspecific. Plaintiffs have responded that “[in] section ‘D’, Weston argues for dismissal of

‘Doe’ defendants. Nelson does not object to this action by this court.” Plaintiff’s Opposition,

page 9, lines 16-17. As Plaintiff has no objection to dismissal as to these Doe Defendants,

dismissal will be granted. 

E. Attorney’s Fees

1. Arguments

a. Defendant’s Motion

Defendant argues that Plaintiff has failed to allege facts sufficient to show an entitlement

to attorney’s fees. Specifically, Defendant argues that Plaintiff has failed to identify a statutory

basis for attorney’s fees and has failed to reference a particular portion of the contract that

provides for attorney’s fees or even allege that a contract exists that provides for attorney’s fees.

b. Plaintiff’s Opposition

Plaintiff argues that California Civil Code § 1717 provides the statutory basis for an

award of attorney’s fees in this case. Furthermore, Plaintiff argues that Defendant also seeks

attorney’s fees on the basis of a credit application attached as an exhibit to Defendant’s

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Code of Civil Procedure § 1032 in relevant part reads: “Except as otherwise expressly provided by statute,

a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.” Cal. Code. Civ. Pro. §

1032(b).

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counterclaim. Plaintiff argues that if Defendant’s pleadings are accurate as required by Rule 11,

then Plaintiff is entitled to attorney’s fees under § 1717.

2. Legal Standard

“In an action involving state law claims, [federal courts] apply the law of the forum state

to determine whether a party is entitled to attorneys’ fees, unless it conflicts with a valid federal

statute or procedural rule.” MRO Communs., Inc. v. AT&T Co., 197 F.3d 1276, 1282 (9th Cir.

1999). In California, attorney fees are “allowable as costs under Section 1032 [of the Code of

Civil Procedure]”when they are “authorized by” either “Contract,” “Statute,” or “Law.”9 Cal.

Code Civ. Pro. § 1033.5; Santisas v. Goodin, 17 Cal.4th 599, 606 (1998). “Thus, recoverable

litigation costs do include attorney fees, but only when the party entitled to costs has a legal

basis, independent of the cost statutes and grounded in an agreement, statute, or other law, upon

which to claim recovery of attorney fees.” Santisas, 17 Cal.4th at 606; see also Cal. Code Civ.

Pro. § 1021 et. seq.; Carver v. Chevron USA, Inc., 97 Cal.App.4th 132, 143-44 (2002). With

respect to contract actions, “where the contract specifically provides that attorney’s fees and

costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or

to the prevailing party, then the party who is determined to be the party prevailing on the contract

. . . shall be entitled to reasonable attorney’s fees in addition to other costs.” Cal. Civ. Code §

1717(a). The contract relied upon must contain a provision for the award of attorney fees in

order to trigger the operation of § 1717. Khajavi v. Feather River Anesthesia Medical Group, 84

Cal.App.4th 32, 62 (2000); Campbell v. Scripps Bank, 78 Cal.App.4th 1328, 1337 (2000). 

Without an attorney’s fees provision within the contract, a contract claim for attorney’s fees will

fail. Khajavi, 84 Cal.App.4th at 62.

3. Analysis

Here, Plaintiff has responded that it is relying on § 1717 for its claim of attorneys’s fees. 

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However, there are no allegations in the complaint that Plaintiff is relying on a contractual

provision that authorizes the award of attorneys’s fees. That Defendant in its own pleading may

have described a contractual basis for attorneys’s fees is immaterial to Plaintiff’s complaint. 

Because Plaintiff has not identified a basis for attorneys’s fees, dismissal is appropriate. See Cal.

Civil Code § 1717; Khajavi, 84 Cal.App.4th at 62. 

F. Sanctions

1. Arguments

a. Defendant’s Motion

Defendant argues that sanctions are appropriate because Plaintiff filed a first amended

complaint that contained defects that were addressed in Defendant’s first motion to dismiss (two

improperly pled causes of action, doe defendants, and improperly pled request for attorneys’s

fees). Defendant argues that Plaintiff learned that various positions were without legal merit

through Defendant’s first motion, yet the same deficiencies remain in the operative, amended

complaint. 

Defendant also argues that removal was based on Miller Act claim rights as the dispute

between Plaintiff and Defendant arose from the construction of the Fresno Federal Courthouse. 

The motion to remand was unmeritorious and by filing the motion, Plaintiff unreasonably

multiplied the proceedings in this matter.

b. Plaintiff’s Opposition

Plaintiff argues that filing its amended complaint was proper and a right as a matter of

law under Federal Rule of Civil Procedure 15(a). Additionally, Plaintiff argues that it withdrew

its motion to remand because Defendant filed a lengthy counter-claim naming the general

contractor and Plaintiff’s bonding company. Plaintiff argues that this resulted in demands for

defense so that Plaintiff would have to prosecute the State Court action and defend the Miller

Bond claim simultaneously. The decision was then made to withdraw the motion for remand.

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2. Legal Standards

a. Rule 11 Sanctions

Under Rule 11of the Federal Rules of Civil Procedure, an award of sanctions is required

if a frivolous paper is filed. Price v. State of Hawaii, 939 F.2d 702, 709 (9th Cir. 1991). 

“Frivolous filings are those that are both baseless and made without a reasonable and competent

inquiry.” Buster v. Greisen, 104 F.3d 1186, 1190 (9th Cir. 1997). Rule 11, Federal Rules of

Civil Procedure, provides in pertinent part as follows:

(b) Representations to Court. By presenting to the court (whether by signing,

filing, submitting, or later advocating) a pleading, written motion, or other 

paper, an attorney or unrepresented party is certifying that to the best of the

person's knowledge, information, and belief, formed after an inquiry reasonable

under the circumstances,--

 (1) it is not being presented for any improper purpose, such as to harass

or to cause unnecessary delay or needless increase in the cost of litigation;

 (2) the claims, defenses, and other legal contentions therein are warranted

by existing law or by a nonfrivolous argument for the extension,

modification, or reversal of existing law or the establishment of new law;

 (3) the allegations and other factual contentions have evidentiary support

or, if specifically so identified, are likely to have evidentiary support after

a reasonable opportunity for further investigation or discovery; and

 (4) the denials of factual contentions are warranted on the evidence or, if

specifically so identified, are reasonably based on a lack of information or

belief.

(c) Sanctions. If, after notice and a reasonable opportunity to respond, the court

determines that subdivision (b) has been violated, the court may, subject to the

conditions stated below, impose an appropriate sanction upon the attorneys, law

firms, or parties that have violated subdivision (b) or are responsible for the

violation.

Rule 11 imposes a duty on attorneys to certify that (1) they have read the pleadings or

motions they file and (2) the pleading or motion is grounded in fact, has a colorable basis in law,

and is not filed for an improper purpose. See Smith v. Ricks, 31 F.3d 1478, 1488 (9th Cir.1994). 

 A court considering a request for Rule 11 sanctions should consider whether the position taken

was “frivolous,” “legally unreasonable,” or “without factual foundation, even if not filed in

subjective bad faith.” Zaldivar v. City of Los Angeles, 780 F.2d 823, 831 (9th Cir.1986). 

“Rule 11(c)(1)(A) provides strict procedural requirements for parties to follow when they

move for sanctions under Rule 11.” Radcliffe v. Rainbow Const. Co., 254 F.3d 772, 788 (9th

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Cir. 2001). Rule 11(c)(1)(A) provides that:

A motion for sanctions under this rule shall be made separately from other

motions or requests and shall describe the specific conduct alleged to violate

subdivision (b). It shall be served as provided in Rule 5, but shall not be filed with

or presented to the court unless, within 21 days after service of the motion (or

such other period as the court may prescribe), the challenged paper, claim,

defense, contention, allegation, or denial is not withdrawn or appropriately

corrected.

The purpose of Rule 11(c)(1)(A)’s safe harbor is to give the offending party the opportunity to

withdraw the offending pleading and thereby escape sanctions. Barber v. Miller, 146 F.3d 707,

710 (9th Cir.1998). 

The procedural requirements of Rule 11(c)(1)(A)’s safe harbor are mandatory. Radcliffe,

254 F.3d at 789; Barder 146 F.3d at 710-11. Informal warnings threatening to seek Rule 11

sanctions do not satisfy the strict requirement that a motion be served on the opposing party

twenty-one days prior to filing. Barder, 146 F.3d at 710. That a party has advanced warning

that another party finds allegations objectionable does not cure a failure to comply with the strict

procedural requirement of Rule 11(c)(1)(A). Radcliffe, 254 F.3d at 789. Additionally, a request

for Rule 11 sanctions must be made “separately form other motions or requests and [must]

describe the specific conduct alleged to violate [Rule 11(b)].” Fed. R. Civ. Pro. 11(c)(1)(A);

Divane v. Krull Elec. Co., 200 F.3d 1020, 1025 (7th Cir. 1999). “Permitting a motion for

sanctions to be made in conjunction with another motion constitutes an abuse of discretion.” 

Divane, 200 F.3d at 1025; In re Deville, 280 B.R. 483, 493 (9th Cir. B.A.P. 2002). Thus, the

failure to comply with the mandatory procedural requirements makes Rule 11 sanctions

inappropriate. 

b. 28 U.S.C. § 1927 Sanctions

28 U.S.C. § 1927 provides:

Any attorney or other person admitted to conduct cases in any court of the United

States or any Territory thereof who so multiplies the proceedings in any case

unreasonably and vexatiously may be required by the court to satisfy personally

the excess costs, expenses, and attorneys' fees reasonably incurred because of such

conduct.

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Sanctions are appropriate under § 1927 “when there is no obvious violation of the Federal Rules,

but where, within the rules, the proceeding is conducted in bad faith for the purpose of delay or

increasing costs.” Pickern v. Pier 1 Imps. (U.S.), Inc., 339 F.Supp.2d 1081, 1091 (E.D. Cal.

2004) (citing In re Yagman, 796 F.2d 1165, 1187 (9th Cir. 1986), as amended by 803 F.2d 1085

(9th Cir. 1986)). Stated differently, sanctions under § 1927 are appropriate when: (1) the

attorney multiplied the proceedings; (2) the attorney’s conduct was unreasonable and vexatious;

and (3) the conduct resulted in an increase in the cost of the proceedings. B.K.B. v. Maui Police

Dep’t, 276 F.3d 1091, 1107 (9th Cir. 2002); Pickern, 339 F.Supp.2d at 1091. An award of

sanctions under 28 U.S.C. § 1927 thus requires a finding of recklessness or bad faith. Ingle v.

Circuit City, 408 F.3d 592, 596 (9th Cir. 2005); B.K.B., 276 F.3d at 1107. Conduct is vexatious

or unreasonable when it is done recklessly, with knowledge. B.K.B., 276 F.3d at 1107; Pickern,

339 F. Supp.2d at 1091. 

3. Analysis

Defendant’s Rule 11 motion for sanction is filed as part of Defendant’s motion to

dismiss. See Court’s Docket Document Nos. 29, 31. Additionally, there is no indication that

Defendant has complied with the mandatory notice and 21-day waiting period. It is an abuse of

discretion to impose sanctions when the mandatory procedures of Rule 11(c)(1)(A) have not been

followed. Because Defendant has failed to follow the requirements of Rule 11(c)(1)(A),

Defendant’s request for sanctions under Rule 11 will be denied. See Fed. R. Civ. Pro.

11(c)(1)(A); Radcliffe, 245 F.3d at 789; Divane, 200 F.3d at 1025; In re Deville, 280 B.R. at 493.

For purposes of 28 U.S.C. § 1927, Defendant has not sufficiently shown recklessness or

bad faith. After receiving the opposition to the motion to remand, Plaintiff withdrew its motion. 

Furthermore, that Defendant may have found the complaint objectionable under Rule 12(b)(6)

and that Plaintiff disagrees is insufficient to show recklessness or bad faith. When Plaintiff filed

the first amended complaint and maintained the substance of the original complaint despite a

prior Rule 12(b)(6) motion, this indicates that Plaintiff believed that its complaint was sufficient. 

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Additionally, Plaintiff resisted the motion to dismiss with argument and citation to case law. 

Defendant has not supplied sufficient evidence to show recklessness or bad faith. Defendant’s

motion for sanctions under § 1927 will be denied. 

CONCLUSION

Given the foregoing, granting Defendant’s 12(b)(6) motion without prejudice and denial

of Defendant’s request for sanctions is appropriate.

Accordingly, IT IS HEREBY ORDERED that:

1. Defendant’s Rule 12(b)(6) motion to dismiss is GRANTED without prejudice;

2. Defendant’s motion for sanctions under Rule 11 and 28 U.S.C. § 1927 is

DENIED; and

3. Plaintiff is granted leave to file an amended complaint on or by 4:00 p.m.

September 29, 2005.

IT IS SO ORDERED.

Dated: September 8, 2005 /s/ Anthony W. Ishii 

0m8i78 UNITED STATES DISTRICT JUDGE

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