Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_08-cv-01992/USCOURTS-casd-3_08-cv-01992-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1330 Breach of Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 1 - 09cv1992

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

GABRIEL TECHNOLOGIES

CORPORATION and TRACE

TECHNOLOGIES, LLC,

Plaintiffs,

CASE NO. 08 CV 01992 MMA (POR)

ORDER DENYING PLAINTIFFS’

MOTION FOR LEAVE TO

AMEND COMPLAINT

[Doc. No. 84]

vs.

QUALCOMM INCORPORATED,

SNAPTRACK, INC., and NORMAN

KRASNER,

Defendants.

On July 6, 2010, the Court granted Plaintiffs Gabriel Technologies Corporation and Trace

Technologies, LLC (“Plaintiffs”) motion to modify the Court’s March 30, 2010 scheduling order

to permit Plaintiffs to file a motion to amend the complaint after the deadline had passed. [Doc.

No. 83.] The same day, the Clerk of Court filed Plaintiffs’ motion for leave to file a fifth amended

complaint. [Doc. No. 84.] Defendants Qualcomm Incorporated, SnapTrack, Inc., and Norman

Krasner (“Defendants”) submitted their opposition on July 16 [Doc. No. 88], and Plaintiffs

submitted their reply brief on July 23 [Doc. No. 89]. The Court considered Plaintiffs’ motion

suitable for decision on the papers and without oral argument pursuant to Civil Local Rule

7.1(d)(1). For the following reasons, the Court DENIES Plaintiffs’ motion for leave to file a fifth

amended complaint. 

Case 3:08-cv-01992-AJB-MDD Document 104 Filed 08/13/10 Page 1 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 - 09cv1992

BACKGROUND

On September 3, 2009, the Court set forth the events giving rise to this action in its

memorandum order granting in part and denying in part Defendants’ motion to dismiss Plaintiffs’

first amended complaint. [See Doc. No. 35.] The Court incorporates that section of its September

3 order by reference herein. 

In its September 3 order, the Court also dismissed six of Plaintiffs’ claims with prejudice,

and dismissed Plaintiffs’ third cause of action for “fraud and fraudulent inducement” without

prejudice, and with leave to amend. [Id.] On September 14, 2009, Plaintiffs filed a second

amended complaint, which contained an amended fraud and fraudulent inducement claim and

incorrectly re-alleged the claims dismissed with prejudice. [Doc. No. 36.] The Court held a

telephonic status conference with the parties on October 8, and granted Plaintiffs leave to file a

third amended complaint that did not include the claims previously dismissed with prejudice. 

[Doc. No. 39.] Plaintiffs filed their third amended complaint on October 9, which included the

amended fraud and fraudulent inducement claim. [Doc. No. 40.] Defendants again moved to

dismiss Plaintiffs’ fraud claim. [Doc. No. 41.] 

On December 14, 2009, the Court granted Defendants’ motion and dismissed Plaintiffs’

fraud and fraudulent inducement claim with prejudice. [Doc. No. 48.] On January 11, 2010,

Plaintiffs filed their fourth amended complaint, which did not contain any causes of action for

fraud. [Doc. No. 53.] Defendants answered on January 29. [Doc. No. 54.] Thereafter, the parties

participated in an early neutral evaluation conference on March 29, and the magistrate judge

entered a scheduling order the following day, which stated in relevant part, “Any motion to join

other parties, to amend the pleadings, or to file additional pleadings shall be filed on or before

April 19, 2010.” [Doc. No. 61 ¶3 (italics added).] 

On April 19, Plaintiffs filed a fifth amended complaint, which the Court struck on April 23

for failure to comply with the scheduling order. [Doc. Nos. 65, 71.] After additional motion

practice, the Court accepted Plaintiffs’ motion for leave to amend the complaint for filing on July

6. [Doc. No. 72.] In connection with the pending motion, Plaintiffs submitted their proposed fifth

Case 3:08-cv-01992-AJB-MDD Document 104 Filed 08/13/10 Page 2 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 - 09cv1992

amended complaint, which includes two additional patents, and a “new” claim for fraudulent

concealment. [See Doc. No. 84, Exhibit A ¶¶63(x), 63(xi), 156-168.]

DISCUSSION

I. LEGAL STANDARD

Plaintiffs assert the Court must consider whether their proposed fifth amended complaint is

proper under the liberal requirements of Federal Rule of Civil Procedure 15. Rule 15(a)(2) states 

the court should freely grant plaintiff leave to amend the complaint when justice so requires. Fed.

R. Civ. Proc. 15(a)(2). In cases where the defendant has filed a responsive pleading, “leave to

amend should be granted unless amendment would cause prejudice to the opposing party, is sought

in bad faith, is futile, or creates undue delay.” Johnson v. Mammoth Recreations, Inc., 975 F.2d

604, 607 (9th Cir. 1992) (citation omitted); see also AmerisourceBergen Corp. v. Dialysist West,

Inc., 465 F.3d 946 , 951 (9th Cir. 2006). Defendants assert “[t]he district court’s discretion to

deny leave to amend is particularly broad where plaintiff has previously amended the complaint.” 

Allen v. Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990). In addition, Defendants correctly point

out that a “motion for leave to amend the Complaint to add a claim that was previously dismissed

with prejudice is improper.” Ruiz v. Gap, Inc., 2009 U.S. LEXIS 10400 *8 (N.D. Cal., Feb. 3,

2009) (emphasis added).

II. GROUNDS FOR LEAVE TO AMEND

Plaintiffs argue they should be allowed to amend the complaint to add a “new” cause of

action for “fraudulent concealment.” [Doc. No. 84, p.1.] Plaintiffs assert this new theory is based

on the same set of operative facts involved in its existing causes of action, but is distinct from their

earlier fraud and fraudulent inducement claims, which were dismissed with prejudice. [Doc. No.

84, p. 2; see Doc. No. 48; Doc. No. 35 p.8-13.] In addition, Plaintiffs assert leave to amend is

warranted under Rule 15 because they promptly sought to add this new theory in good faith, the

amendment will not prejudice Defendants, and Plaintiffs will suffer prejudice if they are not

permitted to add this meritorious claim. [See generally, Doc. No. 84.] Defendants, however,

contend Plaintiffs’ request for leave should be denied because Plaintiffs have merely re-labeled

their prior fraud and fraudulent inducement claims as one for fraudulent concealment. [Doc. No.

Case 3:08-cv-01992-AJB-MDD Document 104 Filed 08/13/10 Page 3 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 - 09cv1992

88, p.3-6.] Defendants further argue Plaintiffs’ request does not satisfy Rule 15, because Plaintiffs

fail to justify the undue delay in asserting this new theory, Defendants will suffer significant

prejudice if the late amendment is permitted, and the proposed amendment is futile and would not

survive a motion to dismiss. [Doc. No. 88, p.6-18.] 

III. COMPARISON OF PREVIOUSLY DISMISSED AND PROPOSED FRAUD CLAIMS

The Court first considers Defendants’ primary argument that Plaintiffs’ “new” fraudulent

concealment claim is merely an attempt to re-label and re-plead their fraud and fraudulent

inducement claim, which the Court dismissed with prejudice in December 2009. Plaintiffs argue

their fraudulent concealment claim is separate and distinct from their earlier fraudulent inducement

claim because each cause of action requires proof of different elements. 

(A) Fraudulent Concealment

To state a fraudulent concealment claim, Plaintiffs must allege facts that demonstrate: (1)

Defendants concealed or suppressed a material fact (2) that they had a duty to disclose, (3) with

the intent to deceive Plaintiffs who were “unaware of the concealed fact and would not have acted

had [they] known of the fact.” Melanson v. United Air Lines, Inc., 931 F.2d 558, 563 (9th Cir.

1991). Thus, in their proposed fifth amended complaint, Plaintiffs allege that Locate (Plaintiff

Gabriel Technologies’ predecessor in interest) engaged in co-development efforts and negotiations

with Defendant Snaptrack in or around 1999 through 2001. [Doc. No. 84, Exhibit A, ¶¶2, 157,

160.] During this time, Locate disclosed substantial confidential information to SnapTrack, with

the expectation that such information would remain confidential. [Id. at ¶¶158-59.] For example,

Locate provided SnapTrack “confidential information concerning other Locate inventions that

were its own intellectual property separate and apart from the co-development program with

SnapTrack.” [Id. at ¶161.] Defendants then “used Locate’s intellectual property, confidential

information, and inventions to unjustly file patent applications in their own names, as if Krasner

and other Qualcomm employees, alone and in combination, were the actual inventors.” [Id. at

162.] 

[Defendants] intentionally and knowingly concealed their

misappropriation of Locate’s innovative technology and the fact that

they were filing patent applications [that] incorporat[ed] jointly-owned

Case 3:08-cv-01992-AJB-MDD Document 104 Filed 08/13/10 Page 4 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 5 - 09cv1992

Program Technology as well as Locate’s solely-owned technology

without notifying Locate and obtaining patents on those filed patent

applications. Had Locate known that . . . [Defendants] were going to

take Locate’s technology for themselves, Locate would not have shared

its confidential information and intellectual property [with Defendants.]

[Id. at 163 (emphasis added).] In short, Plaintiffs allege Defendants concealed their wrongful

misappropriation of Locate’s technology, and if Plaintiffs had known Defendants intended to

misuse Locate’s confidential information as their own, Locate would never have disclosed it. 

(B) Fraudulent Inducement

Plaintiffs’ assert their prior fraudulent inducement claim is distinct, because it required

proof that, (1) Defendants made a promise about a material matter (2) with no intention of

honoring that promise (3) which induced Plaintiffs to take action that they otherwise would not

have taken. Melanson, 931 F.2d at 563. In Plaintiffs’ third amended complaint, they alleged

Defendants fraudulently induced Plaintiff Gabriel to enter the 1999 License Agreement by:

[I]ntentionally and knowingly misrepresent[ing] that Locate would

jointly own Program Technology and that Locate would retain its own

intellectual property. In addition, . . . [Defendants] intentionally and

knowingly failed to disclose that they were misappropriating Locate’s

technology and filing patents and patent applications incorporating

jointly-owned Program Technology as well as Locate’s technology. 

[Doc. No. 40, ¶138 (emphasis added).] Defendants intended Plaintiffs “ to rely on the

misrepresentations and/or concealment prior to and after entering into the License Agreement.” 

[Id. at ¶139 (emphasis added).] Plaintiffs justifiably “relied on the misrepresentations and/or the

undisclosed information” and were not immediately aware of Defendants’ wrongdoing due to their

“false representations and concealment.” [Id. at ¶140 (emphasis added).] In sum, Plaintiffs’

fraudulent inducement claim asserted that Defendants misrepresented their intentions regarding

Locate’s intellectual property, and concealed that they were unlawfully misappropriating Locate’s

confidential information to induce Locate to enter the 1999 License Agreement. 

In the current motion, Plaintiffs argue the Court’s prior orders “do not discuss or even

mention a fraudulent concealment claim.” [Doc. No. 84, p.8.] The Court disagrees. First, in its

December 2009 order, the Court expressly considered Plaintiffs’ allegations regarding Defendants’

concealment and failure to disclose certain information, as well as Plaintiffs’ assertions of

Case 3:08-cv-01992-AJB-MDD Document 104 Filed 08/13/10 Page 5 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 6 - 09cv1992

affirmative misrepresentations. [Doc. No. 48.] As a whole, Plaintiffs’ allegations failed, again, to

satisfy the pleading requirements of Rule 9(b), and the Court determined additional opportunities

to amend would be futile. [Id.] Second, the label a plaintiff attaches to its cause of action is not

dispositive—the court must examine the factual allegations to determine the nature of the

plaintiff’s claim. Rains v. Criterion Sys., 80 F.3d 339, 343 n.2 (9th Cir. 1996); Howe v. Bank of

America N.A., 179 Cal. App. 4th 1443, 1449 (2009); Peterson v. Cellco Partnership, 164 Cal.

App. 4th 1583, 1595-96 (2008). Here, despite the different labels Plaintiffs have attached to the

allegations in their various attempts to state a viable cause of action for fraud, the gravaman of the

allegations has remained the same throughout. 

When Plaintiffs’ fraud claims in the third amended complaint and proposed fifth amended

complaint are considered side by side, the similarities are readily apparent. In the third amended

complaint, Plaintiffs alleged Defendants “misrepresented,” “failed to disclose,” and “concealed”

their misappropriation of Locate’s technology “prior to and after entering the License Agreement.” 

[Third Amended Complaint, Doc. No. 40, ¶¶138-140.] Plaintiffs asserted Defendants engaged in

this fraudulent behavior to induce Gabriel to enter the 1999 License Agreement. [Id.] Similarly,

in the proposed fifth amended complaint, Plaintiffs allege Defendants “concealed their

misappropriation” of Locate’s technology, and “intended Plaintiffs to rely on the concealment

prior to and after entering into the License Agreement, causing Gabriel to enter into the License

Agreement and causing Gabriel to share its valuable trade secrets with [Defendants].” [Doc. No.

84, Exhibit A ¶¶163, 166.] Although Plaintiffs omit the word “induce” from their proposed new

claim, both the third and fifth amended complaints allege that Defendants concealed their

misappropriation to obtain access to Locate’s confidential information and technology. Whether

stated as concealment to “induce Gabriel to rely on the misrepresentations and/or concealment

prior to and after entering into the License Agreement” [Doc. No. 40, ¶139] or concealment of the

misappropriation “causing Gabriel to enter into the Licensing Agreement” [Doc. No. 84, Exhibit A

¶166], Plaintiffs seek damages for alleged deceptive conduct that caused them to take actions they

would not have otherwise taken if they had known the truth. In other words, Plaintiffs assert they

Case 3:08-cv-01992-AJB-MDD Document 104 Filed 08/13/10 Page 6 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 7 - 09cv1992

would have acted differently if they had known Defendants intended to utilize and disclose

Locate’s information for their own benefit. 

Accordingly, Plaintiffs’ allegations that Defendants concealed information from Locate is

not new. Both of the Court’s prior orders from September 3, 2009 and December 14 2009

addressed Plaintiffs’ allegations that Defendants “concealed” and “failed to disclose” certain

information. [See Doc. No. 35, p.10; Doc. No. 48, p.3-5.] And, in its December order, the Court

dismissed Plaintiffs’ fraud claim without further leave to amend. Although Plaintiffs have

attached a different label to their newly proposed fraud claim, the gravaman of the wrongful

conduct and the resulting harm are the same as before. Because the Court previously dismissed

Plaintiffs’ fraud claim with prejudice and without leave to amend, the Court DENIES Plaintiffs’

motion for leave to file a fifth amended complaint that reasserts the previously dismissed claim. 

CONCLUSION

For the reasons stated herein, the Court DENIES Plaintiffs’ motion for leave to file a fifth

amended complaint. Accordingly, the pleadings are closed and the Fourth Amended Complaint,

filed January 11, 2010 [Doc. No. 53], remains the operative pleading in this action. 

IT IS SO ORDERED.

DATED: August 13, 2010

Hon. Michael M. Anello

United States District Judge

Case 3:08-cv-01992-AJB-MDD Document 104 Filed 08/13/10 Page 7 of 7