Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_14-cv-00046/USCOURTS-caed-2_14-cv-00046-4/pdf.json

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

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UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF CALIFORNIA 

COPART, INC., 

PlaintiffCounterdefendant, 

v. 

SPARTA CONSULTING, INC., 

DefendantCounterplaintiff. 

No. 2:14-CV-00046-KJM-CKD 

ORDER 

 This matter is before the court on the motion by plaintiff-counterdefendant Copart, 

Inc. (Copart) to dismiss the second, fourth and fifth claims in defendant-counterplaintiff Sparta, 

Inc.’s (Sparta) first amended counterclaim under Federal Rule of Civil Procedure 12(b)(6). Mot., 

ECF No. 58. Sparta opposes the motion. ECF No. 60. The matter is decided without a hearing. 

As set forth below, Copart’s motion is DENIED. 

I. PROCEDURAL BACKGROUND 

 Copart filed its action against Sparta in Texas state court on November 1, 2013. 

See Case No. 2:14-cv-01884-KJM-CKD, ECF No. 1 (consolidated with this action on September 

22, 2014). Sparta removed the state case to the United States District Court for the Northern 

District of Texas, and then filed this separate suit in this court on January 8, 2014. ECF No. 1. 

This court subsequently consolidated the cases, ECF No. 30, and aligned the parties to designate 

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Copart as plaintiff-counterdefendant and Sparta as defendant-counterplaintiff. ECF No. 33. 

Sparta then filed its counterclaim on November 20, 2014, alleging claims for breach of contract, 

promissory estoppel, breach of the implied covenant of good faith and fair dealing, account 

stated, quantum meruit, unjust enrichment, unfair competition, and declaratory relief. ECF No. 

46. Copart moved to dismiss Sparta’s counterclaims for promissory estoppel, breach of the 

implied covenant of good faith and fair dealing, account stated, quantum meruit, unjust 

enrichment, and unfair competition. ECF No. 47. On June 9, 2015, the court found that Sparta 

“d[id] not specify with any detail the work performed outside the scope of the contemplated 

Agreement . . . [and therefore] d[id] not give adequate notice to Copart as to what alleged work is 

covered by the agreement and what is not.” The court dismissed Sparta’s claims for promissory 

estoppel, quantum meruit, and unjust enrichment. ECF No. 55 at 10. 

 On June 30, 2015, Sparta filed its first amended counterclaim, asserting its claims 

for breach of contract, breach of the implied covenant of good faith and fair dealing, and 

declaratory relief, and repleading claims for promissory estoppel, unjust enrichment, and quantum 

meruit. First Am. Countercl., ECF No. 57. Sparta included additional allegations to support its 

previously dismissed equitable claims. See id. at 5–7. 

 Copart has now filed the instant motion to dismiss the counterclaim of promissory 

estoppel, quantum meruit, and unjust enrichment. ECF No. 58. 

II. ALLEGATIONS OF THE COUNTERCLAIM 

 With the exception of the additional allegations concerning the scope of the 

parties’ agreement and additional work performed, Sparta’s allegations remain largely the same 

as those pled in the original counterclaim. The court briefly reviews the allegations relevant to 

the pending motion. 

 Plaintiff-counterdefendant Copart is a Delaware corporation with its principal 

place of business in Dallas, Texas. Am. Countercl. ¶ 2. It is a worldwide provider of online 

vehicle auctions and vehicle remarketing services, providing a means for sellers to sell their 

vehicles over the internet in online auctions. Id. Defendant-counterplaintiff Sparta is a California 

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corporation with its principal place of business in Folsom, California. Id. ¶ 1. Sparta is an 

information technology consulting company. Id. 

 Copart’s Auction System (CAS) coordinated the collection, storage, retrieval and 

sale of sellers’ vehicles on its website. In an effort to update the system, it contracted with Sparta 

to design and build a new system called “AIMOS.” Id. ¶¶ 6-8. Copart hired Sparta on October 6, 

2011, executing an Implementation Services Agreement (ISA), attached to the complaint and 

governed by California law. Ex. A, ECF No. 57. The parties agreed that the design and 

implementation of the new system would proceed in two phases: (1) The “design” phase, 

whereby Sparta would design the new system; and (2) the “realization” phase, whereby Sparta or 

another vendor would build and implement the design in accordance with the specifications 

documented in phase one. Am. Countercl. ¶ 10. The parties also executed a Design Statement of 

Work (Design SOW), which defined the services to be provided under the design phase of the 

project, as well as Copart’s payment schedule. Id. ¶ 11. Sparta worked on the design phase 

between October 2011 and March 2012, and Copart paid Sparta the agreed $3.7 million for that 

phase. Id. Following the design phase, Copart solicited bids for the realization phase, and again 

contracted with Sparta. Id. ¶ 12. At Copart’s request, Sparta estimated the realization phase 

would require approximately 193,000 hours of work. Id. ¶ 12. That estimation was confirmed by 

KPMG, an auditing consulting firm retained by Copart. Id. ¶¶ 12-13. 

 On March 28, 2012, Sparta and Copart executed a Realization Statement of Work 

(Realization SOW) for phase two, which encompassed (i) the actual software coding and 

customization as designed and documented, and signed off by Copart in phase one; and (ii) its 

deployment and integration across Copart’s three major geographic areas: Canada, the United 

Kingdom and the United States. See Ex. C, Am. Countercl. 

 Sparta completed the first three milestones of phase two as defined by the 

Realization SOW to Copart’s satisfaction, and Copart paid according to the payment schedule, 

with the exception of $200,000, which was deferred to the next milestone payment. Am. 

Countercl. ¶ 19. The issues underlying this litigation began with the next milestone, which 

involved implantation and deployment in three geographic markets, with Canada scheduled to 

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“go–live” by October 2012. Id. ¶ 22. This “aggressive schedule,” Sparta alleges, was 

impracticable due to Copart’s delay in developing its own operational system. Id. ¶ 22(a). 

 Sparta’s counterclaim alleges that the Realization SOW contemplated more than 

900 distinct tasks, and Copart “ultimately demanded” “hundreds of additional tasks that were 

outside the scope of the agreement.” Id. ¶ 22(b). The Realization SOW describes the phases of 

the AIMOS system. Am. Countercl. ¶ 22. The system was to be carried out through six technical 

areas: 1) work flows; (2) reports; (3) interfaces; (4) conversions; (5) enhancements; and (6) forms 

(collectively referred to as “WRICEFs”). The Realization SOW comprised a total of 920 

technical objects, i.e., 920 distinct technical tasks, across these six technical areas and across the 

three geographic areas that were included as part of the contract. Id. ¶ 22.b. Sparta alleges the 

additional work requested by Copart called for “approximately 300 new software functionalities 

and enhancements which were outside the agreed upon design for the AIMOS system, and were 

not included among the 920 technical objects, and were therefore outside the scope of the 

contract.” Id. The amended counterclaim continues with examples of alleged out-of-scope work 

that Copart requested, not contemplated by the agreement: a separate auction database, an online 

payment system that required third party involvement, and “verification of outstanding blank 

checks; the automatic clearing of checks; lot ownership transfer from the seller to Copart; and 

damage code/loss validation in the context of closing of work orders.” Id. These additional 

requests are allegedly documented in numerous “Change Requests,” submitted to Copart from 

Sparta, which Copart denied. Id. 

 In contrast to the approximately 193,000 hours Sparta estimated it would take to 

complete the entire Realization phase of the project, Sparta ultimately spent approximately 

235,000 hours on this phase, based allegedly in large part on the additional out-of-scope 

enhancements and functionalities demanded by Copart. In addition, delays, inadequate resources, 

Copart’s user error and lack of training, defects in Copart’s proprietary systems, and Copart’s 

relocation to Texas also led to overruns. Id. ¶ 22.b-d. The additional time required of Sparta 

included approximately 59,646 hours spent on enhancement development alone. Id. 

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 On August 16, 2013, the parties amended the ISA in writing. See Ex. D, Am. 

Countercl. On September 17, 2013, without prior warning, Copart sent a notice to Sparta that it 

was terminating the ISA for “convenience.” See Ex. E, Am. Countercl. Copart requested that 

Sparta invoice Copart for the amount Copart owed based on work performed and completed as of 

that date. Id. On October 18, 2013, Sparta responded to Copart’s request, seeking $12 million, 

and asking for a response by November 1, 2013. Id. ¶ 27. In lieu of a response, Copart filed its 

claims against Sparta two weeks later in the Texas state court, alleging fraud, negligent 

misrepresentation and unfair business practices. Id. ¶ 28. 

III. LEGAL STANDARD 

 Under Federal Rule of Civil Procedure 12(b)(6), 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). 

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), 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 “‘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 presume all factual 

allegations of the complaint to be true and draw all reasonable inferences in favor of the 

nonmoving party.” Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). This rule 

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does not apply to “a legal conclusion couched as a factual allegation,” Twombly, 550 U.S. at 555 

(quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)), 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 (9th Cir. 2001). A court’s 

consideration of documents either attached to a complaint or incorporated by reference, or of 

matters 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). 

IV. DISCUSSION 

A. Pleading in the Alternative 

 Copart argues that Sparta may not plead alternative quasi-contract claims unless it 

alleges no express agreement existed, and Sparta does not. Mot. at 9–10. 

 Federal Rule of Civil Procedure 8(d)(2) expressly permits pleading in the 

alternative: “A party may set out 2 or more statements of a claim or defense alternatively or 

hypothetically, either in a single count or defense or in separate ones. If a party makes alternative 

statements, the pleading is sufficient if any one of them is sufficient.” Fed. R. Civ. P. 8(d)(2). 

Alternative claims may be asserted “regardless of consistency” between theories of liability. 

Fed.R.Civ.P. 8(d)(3). “At the pleading stage, a plaintiff 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)). As here, a plaintiff may “seek both an equitable remedy of estoppel and a 

legal remedy for breach of contract.” Arnold & Assocs., 275 F.Supp.2d at 1030 n.11. 

 The court finds Copart’s argument unpersuasive. Copart itself alleges that the 

agreement is unenforceable. See Copart Second Am. Compl., ECF No. 38 at 18 (pleading 

fraudulent inducement). At the same time, Copart argues a valid agreement exists barring Sparta 

from bringing equitable claims. Mot. at 9–10. Copart, like Sparta, is free to take such 

inconsistent legal positions at this time, and what is good for the goose is good for the gander. Of 

course, neither party may eventually recover under both inconsistent theories. But the court need 

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not dismiss Sparta’s equitable claims at this stage. Sparta has sufficiently alleged its theories in 

the challenged claims. 

B. Out-of-Scope Work 

 Pursuit of alternate relief does not relieve a party of its obligation to plead 

sufficient factual allegations in support of its claims. Garcia v. M–F Athletic Co., No. 11–2430, 

2012 WL 531008, at *2 (E.D. Cal. Feb. 17, 2012) (though plaintiffs are allowed to plead in 

alternative, on motion to dismiss plaintiff must allege facts that “plausibly suggest an entitlement 

to relief” (quoting Iqbal, 556 U.S. at 680)). In its previous dismissal of these claims, the court 

found that Sparta’s equitable claims could survive “only if the work giving rise to the equitable 

claims is different from the work covered by the written agreement”; if a contract provides the 

terms of a party’s performance, equitable principles would not apply, rather the contract’s terms 

would. Order, ECF No. 55 at 9. Sparta argues here that “because it is ambiguous which 

contractual provisions are applicable here, and because the ‘scope of work’ question is a factual 

one,” the equitable claims should be permitted to be pled in the alternative. Opp’n at 1. 

 Turning to the claims Copart challenges, promissory estoppel requires: “(1) a 

promise that is clear and unambiguous in its terms; (2) reliance by the party to whom the promise 

is made; (3) the reliance must be reasonable and foreseeable; and (4) the party asserting the 

estoppel must be injured by his or her reliance.” Boon Rawd Trading Int’l Co., Ltd. v. Paleewong 

Trading Co., Inc., 688 F.Supp.2d 940, 953 (N.D. Cal. 2010) (citations omitted). “Quantum 

meruit is an equitable theory which supplies, by implication and in furtherance of equity, 

implicitly missing contractual terms.” Hedging Concepts, Inc. v. First Alliance Mortgage Co., 41 

Cal. App. 4th 1410, 1419 (1996), as modified on denial of reh’g (Feb. 22, 1996). “[E]quitable 

entitlement to a quantum meruit payment is not implied where the parties have actual contract 

terms covering payment.” Id. “The reason for the rule is simply that where the parties have 

freely, fairly and voluntarily bargained for certain benefits in exchange for undertaking certain 

obligations, it would be inequitable to imply a different liability . . . .” Wal–Noon Corp. v. Hill, 

45 Cal.App.3d 605, 613 (1975). Unjust enrichment, known as restitution under California law,1

 1 The Ninth Circuit recently clarified whether unjust enrichment is recognized under California 

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provides a claim where an opposing party has been unjustly conferred a benefit “through mistake, 

fraud, coercion, or request.” 55 Cal. Jur. 3d Restitution § 2. The return of that benefit is the 

remedy “typically sought in a quasi-contract cause of action.” Id.; see Munoz v. MacMillan, 195 

Cal.App.4th 648 (2011) (“Common law principles of restitution require a party to return a benefit 

when the retention of such benefit would unjustly enrich the recipient; a typical cause of action 

involving such remedy is ‘quasi-contract.’”). 

 Upon review of the amended counterclaim, the court finds Sparta has stated its 

claims with sufficient particularity. Copart has sufficient notice of the nature of the claims and 

what work is alleged to have been outside the scope of the agreement. See Benson Elec. Co. v. 

Hale Bros. Associates, 246 Cal. App. 2d 686, 697 (1966) (finding general rule barring equitable 

remedies when written agreement controls inapplicable where damages sought for value of 

“extras for which there was no underlying express contract”); see also Shum v. Intel Corp., 630 

F.Supp.2d 1063, 1077 (N.D. Cal. 2009), aff’d, 633 F.3d 1067 (Fed. Cir. 2010) (unjust enrichment 

claim not precluded by parties’ written agreement where court ruled agreement covered conduct 

different from that underlying unjust enrichment claim). The court cautions, however, that the 

equitable claims will not lie if Sparta ultimately seeks the same remedy as for the breach of 

contract claims, or if, after a more developed factual record emerges, the court finds the 

agreement covered “the same subject matter” as that supporting the equitable claims. 

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 law. In Astiana v. Hain Celestial Grp., Inc., 783 F.3d 753, 762 (9th Cir. 2015), it held, 

in California, there is not a standalone cause of action for “unjust 

enrichment,” which is synonymous with “restitution.” Durell v. Sharp 

Healthcare, 183 Cal.App.4th 1350 (2010); Jogani v. Superior Court, 165 

Cal.App.4th 901 (2008). However, unjust enrichment and restitution are 

not irrelevant in California law. . . When a plaintiff alleges unjust 

enrichment, a court may “construe the cause of action as a quasi-contract 

claim seeking restitution.” Rutherford Holdings, LLC v. Plaza Del Rey, 

223 Cal.App.4th 221 (2014). 

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V. CONCLUSION 

The motion to dismiss, ECF No. 58, is DENIED. 

IT IS SO ORDERED. 

DATED: September 14, 2015. 

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