Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_12-cv-01162/USCOURTS-caed-2_12-cv-01162-3/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1446 Petition for Removal

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

BRIAN T. MICHALUK, D.O., 

Plaintiff, No. CIV S- 12-1162 KJM CKD

vs.

VOHRA HEALTH SERVICES, P.A.,

et al., ORDER

Defendants.

 /

Defendant Vohra Health Services has filed a motion to dismiss the fourth and

fifth causes of action and the claim for punitive damages in plaintiff’s first amended complaint

(FAC). Plaintiff has opposed the motion and defendant has filed a reply. The court ordered the

matter submitted without argument, L.R. 230(g), and GRANTS defendant’s motion.

I. BACKGROUND

On March 21, 2012, plaintiff filed a complaint in Solano County Superior Court

alleging seven causes of action: (1) breach of contract; (2) failure to pay fees, wages and waiting

time penalties, CAL. LAB. CODE §§ 202, 203; (3) violation of California Labor Code § 2802(a);

(4) unlawful business practices, CAL. BUS. & PROF. CODE § 17200; (5) negligent and intentional

misrepresentation and fraud and deceit; (6) declaratory relief; and (7) interference with

contractual relations and prospective economic advantage. Complaint, ECF No. 1-1. 

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Defendant removed the case to this court on April 30, 2012, invoking this court’s

diversity jurisdiction, and on May 7 filed a motion to dismiss portions of the complaint ECF

Nos. 1, 8. On September 11, 2012, the court granted the motion, giving plaintiff leave to file an

amended complaint. ECF No. 21. 

On September 13, 2012, the court adopted the parties’ stipulation, consolidating

this action and Vohra Health Services, P.A. v. Brian T. Michaluk, D.O., Civ. No. S-12-1971, as

both cases arise out of the contractual relationship between the parties. ECF No. 22.

On September 27, 2012, plaintiff filed his first amended complaint (FAC),

comprised of six causes of action: (1) breach of contract; (2) failure to pay fees and wages and

waiting time penalties; (3) violation of California Labor Code § 2802; (4) unlawful business

practices (UCL), CAL. BUS. & PROF. CODE § 17200; (5) negligent and intentional

misrepresentation, fraud and deceit; and (6) declaratory relief. 

II. STANDARDS FOR A MOTION TO DISMISS

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a party may move to

dismiss a complaint for “failure to state a claim upon which relief can be granted.” A court may

dismiss “based on the lack of cognizable legal theory or the absence of sufficient facts alleged

under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.

1990). A motion to dismiss under this rule may also challenge the sufficiency of fraud

allegations under the more particularlized standard of Rule 9(b) of the Federal Rules of Civil

Procedure. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003). 

Although a complaint need contain only “a short and plain statement of the claim

showing that the pleader is entitled to relief,” FED. R. CIV. P. 8(a)(2), in order to survive a motion

to dismiss this short and plain statement “must contain sufficient factual matter . . . to ‘state a

claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint must include

something more than “an unadorned, the-defendant-unlawfully-harmed-me accusation” or

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“‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action.’” Id.

(quoting Twombly, 550 U.S. at 555). Determining whether a complaint will survive a motion to

dismiss for failure to state a claim is a “context-specific task that requires the reviewing court to

draw on its judicial experience and common sense.” Id. at 679. Ultimately, the inquiry focuses

on the interplay between the factual allegations of the complaint and the dispositive issues of law

in the action. See Hishon v. King & Spalding, 467 U.S. 69, 73 (1984). 

In making this context-specific evaluation, this court must construe the complaint

in the light most favorable to the plaintiff and accept as true the factual allegations of the

complaint. Erickson v. Pardus, 551 U.S. 89, 93-94 (2007). This rule does not apply to “‘a legal

conclusion couched as a factual allegation,’” Papasan v. Allain, 478 U.S. 265, 286 (1986)

(quoted in Twombly, 550 U.S. at 555), nor to “allegations that contradict matters properly subject

to judicial notice” or to material attached to or incorporated by reference into the complaint.

Sprewell v. Golden State Warriors, 266 F.3d 979, 988-89 (9th Cir. 2001). A court’s

consideration of documents attached to a complaint or incorporated by reference or matter of

judicial notice will not convert a motion to dismiss into a motion for summary judgment. 

United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003); Parks Sch. of Bus. v. Symington,

51 F.3d 1480, 1484 (9th Cir. 1995); compare Van Buskirk v. Cable News Network, Inc., 284 F.3d 

977, 980 (9th Cir. 2002) (noting that even though court may look beyond pleadings on motion to

dismiss, generally court is limited to face of the complaint on 12(b)(6) motion). 

III. ANALYSIS

A. Fraud, Deceit And Misrepresentation – Fifth Cause Of Action 

Defendant asserts that plaintiff has not alleged defendant’s misrepresentations

with the particularity demanded by the Federal Rules of Civil Procedure. Plaintiff retorts that his

pleading is sufficient to withstand dismissal and that he can amend, if necessary, to allege

additional facts supporting the claim. 

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In California, a claim of fraudulent misrepresentation has five elements:

(1) misrepresentation, which encompasses false representation, concealment and nondisclosure;

(2) knowledge of falsity; (3) intent to defraud; (4) justifiable reliance; and (5) damage. Lazar v.

Superior Court, 12 Cal. 4th 631, 638 (1996). A claim of deceit based on intentional

misrepresentation has seven elements: (1) the defendant represented to plaintiff that an

important fact was true; (2) the representation was false; (3) the defendant knew the

representation was false or made it recklessly without regard for the truth; (4) the defendant

intended that plaintiff rely on the representation; (5) the plaintiff reasonably relied on the

representation; (6) the plaintiff was harmed; and (7) the plaintiff’s reliance was a substantial

factor in causing the harm. Manderville v. PCG & S Group, Inc., 146 Cal. App. 4th 1486, 1498

(2007). The elements for a claim of negligent misrepresentation are (1) a misrepresentation of a

past or existing material fact, (2) without reasonable grounds for believing it to be true, (3) with

intent to induce another’s reliance, and (4) justifiable reliance by a party who was ignorant of the

truth. B.L.M. v. Sabo & Deitsch, 55 Cal. App. 4th 823, 834 (1997). 

 In addition to the pleading requirements of Rule 8, allegations of fraud must meet

heightened pleading standards. Under Rule 9(b), a plaintiff who alleges fraud “must state with

particularity the circumstances constituting the fraud,” but may “aver[] generally” the state of

mind animating the fraud. The pleading must “‘be specific enough to give defendants notice of

the particular misconduct . . . so that they can defend against the charge and not just deny that

they have done anything wrong.’” Sanford v. Memberworks, Inc., 625 F.3d 550, 558 (9th Cir.

2010) (quoting Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009)); Neubronner v.

Milken, 6 F.3d 666, 671-72 (9th Cir. 1993) (“A pleading is sufficient under Rule 9(b) if it

identifies the circumstances constituting fraud so that the defendant can prepare an adequate

answer from the allegations.”; internal quotation marks, citation, omitted); Odom v. Microsoft

Corp., 486 F.3d 541, 553 (9th Cir. 2007) (recognizing that “plaintiffs may aver scienter

generally, just as the rule states–that is, simply by saying that scienter existed”; internal

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quotation marks, citation, omitted). To avoid dismissal, the complaint must describe the time,

place, and specific content of the false representations and identify the parties to the

misrepresentations. Kearns, 567 F.3d at 1124. Because averments of fraud must meet this

pleading standard, courts in the Ninth Circuit have applied the standard to claims of intentional

and negligent misrepresentation, which in California are a species of fraud. Meridian Project

Systems,Inc. v. Hardin Construction Co., 404 F. Supp. 2d 1214, 1219-20 (E.D. Cal. 2005);

Neilson v. Union Bank of California, N.A., 290 F. Supp. 2d 1101, 1131-32 (C.D. Cal. 2003); Bily

v. Arthur Young & Co., 3 Cal. 4th 370, 407 (1992) (negligent misrepresentation is a species of

the tort of deceit); see generally Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1104-05 (9th Cir.

2003).

Here, plaintiff alleges he was induced to enter into a contract with defendant

based on emails he received from defendant’s employee Min Hong, which stated that a full time

practitioner could earn at least $220,000 a year and plaintiff would be assigned to work at ten to

fifteen facilities where he would see a minimum of twenty patients a day, and from defendant’s

Vice President Mitchell Diamond, which said that plaintiff’s expected earnings would be

between $200,000 to $250,000 a year. The fee schedule in effect at the time plaintiff signed the

contract with defendant suggested plaintiff could expect annual revenue of $206,400. The

representations were false; “[p]laintiff is informed and believes and thereon alleges that

Defendant knew Plaintiff would not be assigned the number of facilities, have the number of

encounters, or earn anywhere near the sum which Defendant misrepresented to Plaintiff;

“[p]laintiff is informed and believes . . . that Defendant made the above-referenced

misrepresentations for the specific purpose of defrauding [p]laintiff.” FAC, ECF No. 24 ¶¶ 7, 9,

12, 39-40, 43.

Defendant takes issue with plaintiff’s reliance on “information and belief”

without any factual support for his belief. In Neubronner, the Ninth Circuit said that “a plaintiff

who makes allegations on information and belief must state a factual basis for his belief,” while

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also recognizing that this rule may be relaxed “with respect to matters within the opposing

party’s knowledge,” because a plaintiff “cannot be expected to have personal knowledge of the

relevant facts.” 6 F.3d at 672. In Neubronner, the court found plaintiff’s attempt to rely on

“information and belief” insufficient when the complaint failed to show any connection between

defendant and the wrongful conduct. See also Wilson v. Metals USA, Inc., No. CIV. S-12-0568

LKK/GGH, 2012 WL 4888477 at *11 (E.D. Cal. Oct. 12, 2012) (finding complaint did not

satisfy Rule 9(b) when plaintiff pled “several critical facts” on information and belief without

providing the factual basis for the belief). Here one of the averments, that defendant made the

statements with the intent to defraud, describes defendant’s scienter and so is adequately

pleaded..

Defendant is correct, however, that plaintiff has not specifically described the

fraudulent nature of defendant’s representations. Plaintiff has averred that one of defendant’s

employees told plaintiff that a full-time practitioner would be assigned to work at ten to fifteen

facilities, where he would see twenty patients a day and that this representation was false. ECF

No. 24 ¶¶ 7, 9. He has not alleged, however, anything supporting his characterization, apart

from the fact that his earnings did not approach those estimated by defendant’s employees. Id. ¶

12. In his opposition to the motion, however, plaintiff says he will be able to amend his

complaint to allege that at the time the representations were made, defendant did not have

established relationships with facilities at which plaintiff could work, a circumstance suggesting

that defendant’s initial representations were false. Plaintiff will be given leave to file a second

amended complaint. 

B. Unlawful Business Practices – Fourth Cause Of Action

Defendant argues this cause of action is insufficiently pled because California’s

Unfair Competition Law (UCL), CAL. BUS. & PROF. CODE § 17200, borrows other claims and

treats them as independently actionable, yet plaintiff has not alleged a viable claim of fraudulent

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misrepresentation. Plaintiff argues again that his claims of fraudulent misrepresentation are

adequate. 

“To bring a UCL claim, a plaintiff must show either an (1) unlawful, unfair, or

fraudulent business act or practice, or (2) unfair, deceptive, untrue or misleading advertising.”

Lippitt v. Raymond James Fin. Servs., Inc., 340 F.3d 1033, 1043 (9th Cir. 2003) (internal

quotations omitted); Gardner v. Am. Home Mortgage Servicing, Inc., 691 F. Supp. 2d 1192,

1201 (E.D. Cal. 2010). 

Because the statute is phrased in the disjunctive, a practice may be unfair or

deceptive even if is not unlawful, or vice versa. Lippitt, 340 F.3d at 1043. An action is unlawful

under the UCL and independently actionable if it constitutes a violation of another law. Farmers

Ins. Exchange v. Superior Court, 2 Cal. 4th 377, 383 (1992); Gardner, 691 F. Supp. 2d at 1201. 

An act is “unfair” under the UCL if it “significantly threatens or harms competition, even if it is

not specifically proscribed by another law.” Cel-Tech Communications, Inc. v. Los Angeles

Cellular Tel. Co., 20 Cal. 4th 163, 180, 187 (1999); Swanson v. EMC Mortgage Corp., No. CV F

09-1507 LJO DLB, 2009 WL 4884245, at *9 (E.D. Cal. Dec. 9, 2009). Finally, an action is

fraudulent under the UCL if it deceives some member of the public or harms the public interest. 

Patacsil v. Wilshire Credit Corp., No. 2:09-cv-01660 MCE KJM, 2010 WL 500466, at *6 (E.D.

Cal. Feb. 8, 2010). 

As noted above, plaintiff’s fraud claims are not sufficiently pleaded. To the

extent this claim rests on those fraud claims, it too is insufficiently pleaded. Plaintiff will be

given leave to amend.

C. Punitive Damages

In California, punitive damages are available where clear and convincing

evidence establishes that a defendant is guilty of oppression, fraud, or malice. CAL. CIV. CODE §

3294(a). In light of the fact that plaintiff is being given leave to amend the complaint, any

evaluation of the claim for punitive damages is premature. 

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IT IS THEREFORE ORDERED:

1. Defendant’s motion to dismiss (ECF No. 27) is granted; and

2. Plaintiff’s second amended complaint is due twenty-one days from the date of

this order.

DATED: January 3, 2013.

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