Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-03747/USCOURTS-cand-3_05-cv-03747-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Tort/Non-Motor Vehicle

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

COGNITIM, INC., a California

corporation,

Plaintiff,

 v.

OBAYASHI CORPORATION, a Japanese

corporation; TOSHINORI IWAMOTO;

SAVIO FERNANDES,

Defendants. 

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No. C-05-3747 SC

ORDER DENYING IN PART

AND GRANTING IN PART

DEFENDANTS' MOTION TO

DISMISS 

I. INTRODUCTION

Cognitim, Inc. ("Plaintiff" or "Cognitim") brought this

action in the Superior Court for the County of San Francisco,

California against the Obayashi Corporation ("Obayashi"),

Toshinori Iwamoto ("Iwamoto"), and Savio Fernandes ("Fernandes"),

(collectively "Defendants"), alleging, inter alia, fraud and

interference with economic expectation. Plaintiff's Complaint at

3-8 ("Compl."). 

Presently before the Court is Defendants' motion to dismiss

Plaintiff's six causes of action pursuant to Federal Rule of Civil

Procedure ("FRCP") 12(b)(6) or to order Plaintiff to file a more

definite statement under FRCP 12(e). Defendants' Memorandum in

Support of Motion to Dismiss at 6 ("Defs.' Mem."). The Court,

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1

 Neither party has stated what sort of business Obayashi

engages in. 

2 A conversion fee is, apparently, a courtesy amount one

business pays to another in order to compensate the other company

for the costs it paid to obtain the services of a non-U.S. citizen

employee. Compl. at 2. 

Fernandes is a citizen of India. Id. at 1. Cognitim

2

having reviewed the parties' submissions, hereby DENIES 

Defendants' motion to dismiss Plaintiff's first, second, third,

and sixth claims. The Court GRANTS Defendant's motion as to

Plaintiff's fourth and fifth claims. The Court DISMISSES

Plaintiff's fourth and fifth claims and GRANTS Plaintiff thirty

days' leave to amend its Complaint as to its fourth and fifth

claims. 

II. BACKGROUND

The following allegations are taken from Plaintiff's

Complaint and will be assumed as true for purposes of the present

motion. 

Obayashi contracted with Plaintiff, a computer technical

support firm, to perform computer networking tasks.1 Compl. at 2,

3. Plaintiff assigned its employee, Fernandes, to perform these

tasks for Obayashi. Id. While there, Fernandes "habitually and

systematically under-reported" to Cognitim the hours he worked at

Obayashi. Id. 

Iwamoto, an employee of Obayashi, told Vipin Suneja

("Suneja"), president of Cognitim, that Obayashi wanted to hire

Fernandes. Id. Suneja agreed, provided that Obayashi would pay

the conversion fee for taking Fernandes.2 Id. Iwamoto said that

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sponsored Fernandes for purposes of obtaining a H-1B visa for him,

posted the bond for his visa, and paid for his relocation fees. 

Id. at 2. 

3

Obayashi did not want to pay the conversion fee and that it would

not hire Fernandes directly. Id.

DirectApps, an entity not a party to this action, wanted to

hire Cognitim but wanted to interview Fernandes, as the primary

Cognitim employee on the proposed project, before agreeing to hire

Cognitim. Compl. at 2-3. After the interview, DirectApps told

Obayashi that it would not hire Cognitim. Id. at 3. A week after

that, Fernandes quit his job at Cognitim and told Suneja that he

was taking a job in Dallas. Id. The following week, Suneja

learned that Fernandes had "bombed the interview" with DirectApps

causing DirectApps not to hire Cognitim. Id. Some time after

this, Cognitim learned that Fernandes had taken a position with

Obayashi. Id. 

Plaintiff brought an action in the Superior Court for the

County of San Francisco, California alleging that Defendants 

(1) committed fraud, (2) conspired to commit fraud, (3) breached

the implied covenant of good faith and fair dealing, 

(4) intentionally interfered with a prospective economic

advantage, (5) negligently interfered with a prospective economic

advantage, and (6) breached an implied contract. Id. at 3-8.

Defendants timely removed the action to Federal Court, alleging

that complete diversity existed between Plaintiff and Defendants. 

Notice of Removal at 1-2. 

In the present motion, Defendants contend that the six claims

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should be dismissed under FRCP 12(b)(6). Defs.' Mem. at 6. In

the alternative, Defendants move the Court to order Plaintiff to

file a more definite statement under FRCP 12(e) because the

"claims are confusingly written and fail to identify which

defendant is the target of which claim." Id. at 2. 

III. LEGAL STANDARD

"[A] complaint should not be dismissed for failure to state a

claim unless it appears beyond doubt that the plaintiff can prove

no set of facts in support of his claim which would entitle him to

relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). "In

reviewing a 12(b)(6) motion, this Court must accept the factual

allegations of the complaint as true and must draw all reasonable

inferences in favor of the plaintiff." Bernheim v. Litt, 79 F.3d

318, 321 (2d Cir. 1996); see also Usher v. City of Los Angeles,

828 F.2d 556, 561 (9th Cir. 1987). The complaint need not set out

the facts in detail; what is required is a "short and plain

statement of the claim showing that the pleader is entitled to

relief." FRCP 8(a); see also La Salvia v. United Dairymen, 804

F.2d 1113, 1116 (9th Cir. 1986). Thus, the Court's task "is

merely to assess the legal feasibility of the complaint, not to

assay the weight of the evidence which might be offered in support

thereof." Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998). 

In diversity cases, state law determines whether claims exist

and what defenses are recognized. See Taylor v. United States,

821 F.2d 1428, 1433 (9th Cir. 1987). The Federal Rules, however,

govern the manner in which these claims and defenses are raised. 

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5 Wright & Miller, Federal Practice and Procedure, § 1204. 

The Federal Rules provide for notice pleading. See Conley v.

Gibson, 355 U.S. 41, 47-48 (1957). This means that (a) the

pleadings need not set out in detail the alleged facts

constituting the claim for relief or defense, unless heightened

pleading standards are required and (b) the pleadings need give,

through a short and plain statement, only fair notice of the

pleader's claim or defense so that opposing parties can respond,

undertake discovery, and prepare for trial. Id. 

IV. DISCUSSION

A. First Claim: Fraud

Defendants contend that Plaintiff has failed to meet the

heightened pleading requirements for fraud under FRCP 9(b). 

Defs.' Mem. at 7.

Plaintiff alleges that Fernandez "under-reported" to Cognitim

the hours he worked at Obayashi. Compl. at 2. 

In all averments of fraud or mistake the circumstances

constituting fraud or mistake shall be stated "with

particularity." FRCP 9(b). Plaintiffs must put forth the "who,

what, where, and when of the alleged fraud" in order to "assure

that the charge of fraud is responsible and supported, rather than

defamatory and extortionate." Ackerman v. Northwestern Mutual

Life Insurance Company, 172 F.3d 467, 469 (7th Cir. 1999). FRCP

9(b)'s particularity requirement is in place so that the

"defendant can prepare an adequate answer from the allegations,"

Moore v. Kayport Package Express, Inc., 885 F.2d 531, 540 (9th

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Cir. 1989), and "not just deny that they have done anything

wrong." Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). 

Fraud, under California law, consists of the following

elements: (1) misrepresentation; (2) scienter; (3) intent to

induce reliance; (4) justifiable reliance on the

misrepresentation; and (5) damage caused by reliance on the

misrepresentation. Witkin, Summary of California Law (10th ed.

2005), Volume 5, Torts, § 772.

The Court finds that the Plaintiff has put forth with

particularity a set of facts sufficient to state a claim of fraud. 

Specifically, Plaintiff has stated that Fernandes, during the time

he worked for Obayashi and at Obayashi's behest, under-reported to

Plaintiff the hours he worked, so that Obayashi could pay

Plaintiff less than it should have. Compl. at 2. This pleading

gives Defendants fair notice of the nature of the claim. 

The Court denies Defendants' motion to dismiss the first

claim. 

The following section discusses Defendants' contention that

Plaintiff's first claim does not make it clear against whom the

allegations are directed. 

 B. Second Claim: Conspiracy to Defraud

Defendants contend that there is no cause of action for

conspiracy to defraud under California law. Defs.' Mem. at 9. 

Defendants also contend that Plaintiff's second claim simply

duplicates the first claim. Id. 

Defendants are right and wrong. "[T]here is no civil action

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for conspiracy to commit a recognized tort unless the wrongful act

itself is committed and damage results from that act." Witkin,

Summary of California Law (10th ed. 2005), Volume 5, Torts, § 45. 

"Hence, where the complaint charges a conspiracy and the

commission of a wrongful act, the only significance of the

conspiracy charge is that each member may be held responsible as a

joint tortfeasor, regardless of whether that member directly

participated in the act." Id. 

The Court finds that Plaintiff has properly pled a charge of

conspiracy. Specifically, Plaintiff has alleged, in his first

claim, a claim of fraud. Then, by bringing a charge of

conspiracy, Plaintiff claims that each defendant should be held

responsible as joint tortfeasors for the fraud. This pleading

gives Defendants fair notice of the nature of the claim. 

 The Court therefore denies Defendants' motion to dismiss

Plaintiff's second claim. 

C. Third Claim: Breach of Implied Covenant of Good Faith

 and Fair Dealing

Defendants contend that Plaintiff has failed to "allege or

identify any contract language or operative transactional facts

from which the Court can infer an implied covenant." Defs.' Mem.

at 10. More specifically, Defendant asserts that when parties

rely on a written contract, the exact terms of that contract must

be given in order to demonstrate a breach of the covenant. Id. 

Plaintiff contends that Fernandes breached the covenant by

falsely representing his continued employment with Cognitim and

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that Obayashi breached the covenant by misrepresenting its

intentions in regard to Cognitim and Fernandes. Compl. at 5-6. 

Defendants' contentions are without merit. First, Plaintiff

does not contend that there were written contracts. Under

California law, contracts can be express or implied, the

difference between the two being only the manifestation of assent.

See Witkin, Summary of California Law (10th ed. 2005), Volume 1,

Contracts, § 102. 

The Court finds that Plaintiff has adequately pled a set of

facts to support a claim for breach of the covenant of good faith

and fair dealing by declaring that Fernandes and Obayashi breached

contracts each had with Plaintiff. This pleading gives Defendants

fair notice of the nature of the claim. 

As to Plaintiff's third claim, the Court denies Defendants'

motion to dismiss. 

D. Fourth Claim: Intentional Interference with Prospective

 Economic Advantage

Plaintiff contends that despite Obayashi's assurances, it

intended to have Fernandes work for Obayashi immediately, without

the payment of the conversion fee. Compl. at 6. As part of this

conspiracy, Plaintiff contends, Fernandes "sabotaged his interview

with DirectApps" which caused DirectApps not to hire Cognitim for

the networking contract, even though DirectApps "was already an

existing client of Cognitim." Id. Plaintiff also alleges that as

part of this interference "defendants falsely represented to

Cognitim that Cognitim's services were no longer needed and that

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3

 The other elements are (a) an economic relationship between

the plaintiff and some third party, with the probability of future

economic benefit to the plaintiff; (b) the defendant's knowledge of

the relationship; (c) intentional acts by the defendant designed to

disrupt the relationship; (d) actual disruption of the

relationship; and (e) economic harm to the plaintiff proximately

caused the acts of the defendant. Witkin, Summary of California

Law (10th ed. 2005), Volume 5, Torts § 742. 

4 Plaintiff has not demonstrated to the Court's satisfaction

that the failure to pay the conversion fee is a legally wrongful

act. 

9

Fernandes was quitting to go to work for another firm in Dallas,

Texas." Id. 

Defendants contend that Plaintiff's "theory makes no sense,

because even if Mr. Fernandes did well at the interview, there was

nothing to stop Mr. Fernandes from quitting and going to work for

Obayashi." Defs.' Mem. at 11. 

One element of the tort is "[c]onduct that was wrongful by

some legal measure other than the fact of the interference

itself."3

 Witkin, Summary of California Law (10th ed. 2005),

Volume 5, Torts, § 742. Examples of these wrongful acts are

bribery or offering sexual favors. Id. at § 744. 

Plaintiff has not alleged to the Court's satisfaction any

facts demonstrating that Defendants' interference was in itself

wrongful by some legal measure other than the fact of the

interference itself.4 Without alleging such facts, it is not

legally feasible for the Plaintiff to bring this claim. 

The Court grants Defendants' motion as to the fourth claim. 

The Court therefore dismisses the fourth claim and grants

Plaintiff thirty days' leave to amend its Complaint as to this

claim.

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5 Plaintiff has not demonstrated to the Court's satisfaction

that the failure to pay the conversion fee is a legally sufficient

wrongful act. 

10

E. Fifth Claim: Negligent Interference with Prospective

 Economic Advantage

Plaintiff puts forth the same allegations in his fifth claim

as he put forth in his fourth claim. Compl. at 7. 

As with the former tort, a plaintiff must plead and prove

that defendant's conduct, other than the interference itself, was

wrongful. Witkin, Summary of California Law (10th ed. 2005),

Volume 5, Torts, § 742. 

Plaintiff has not alleged to the Court's satisfaction any

facts that Defendants' interference was wrongful in some legal

measure other than the fact of the interference itself.5 Without

such allegations of fact, it is not legally feasible for the

Plaintiff to bring this claim. 

The Court grants Defendants' motion as to the fifth claim. 

The Court therefore dismisses the fifth claim and grants Plaintiff

thirty days' leave to amend its Complaint as to this claim.

F. Sixth Claim: Breach of Implied Contract

Plaintiff contends that Fernandes, by quitting his job at

Cognitim and accepting a position at Obayashi, breached his

implied contract with Cognitim, which required him to work for

Plaintiff long enough to compensate it for paying for his visa. 

Compl. at 7-8. 

Defendants contend that Plaintiff "already alleged [that]

these terms were the subject of an express contract" as stated in

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Paragraph 6 of Plaintiff's Complaint. Defs.' Mem. at 15-16. 

Specifically, Defendants contend that because an express contract

and an implied contract - both embracing the same subject matter

at the same time - cannot exist, this claim should be dismissed. 

Id. at 16. 

Paragraph 6 states that Fernandes "agreed to work for

Cognitim for a sufficient period of time to allow Cognitim to

recoup its costs of sponsoring Fernandes for [the] visa." Compl.

at 2. 

The Court does not agree with Defendants' contentions. A

party, subject to the requirements of Rule 11, may set forth

inconsistent theories and inconsistent factual allegations. See

FRCP 8(e)(2); Henry v. Daytop Village, Inc., 42 F.3d 89, 95 (2d

Cir. 1994). 

The Court therefore denies Defendants' motion to dismiss

Plaintiff's sixth claim.

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V. CONCLUSION

The Court finds that Plaintiff's first, second, third, and

sixth claims are sufficiently pled. The Court further finds that

Plaintiff's fourth and fifth claims do not allege facts sufficient

to sustain them. 

For the reasons discussed above, the Court hereby DENIES 

Defendants' motion to dismiss Plaintiff's first, second, third,

and sixth claims. The Court hereby GRANTS Defendants' motion as

to Plaintiff's fourth and fifth claims. The Court hereby

DISMISSES Plaintiff's fourth and fifth claims and GRANTS Plaintiff

thirty days' leave to amend its Complaint as to these claims. If

Plaintiff fails to refile within the thirty-day period, the Court

will bar Plaintiff from bringing these claims against Defendants. 

IT IS SO ORDERED.

Dated: November 15, 2005

 

UNITED STATES DISTRICT JUDGE

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