Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-01478/USCOURTS-cand-3_07-cv-01478-1/pdf.json

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

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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

DSU AVIATION, LLC, a Washington

Limited Liability Company, and

DAVID AND NAYDA UTTERBERG, as

individuals and on behalf of their

marital community,

Plaintiffs,

 v.

PCMT AVIATION, LLC, a California

Limited Liability Company, n/k/a

XOJET, Inc., a California

Corporation, PAUL TOUW, an

individual, and WILL LANGMANN, an

individual,

Defendants/

Counterclaim 

Plaintiffs,

v.

DSU AVIATION, LLC, a Washington

Limited Liability Company, and

DAVID AND NAYDA UTTERBERG, as

individuals and on behalf of their

marital community,

Counterclaim 

Defendants.

 

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Case No. 07-1478 SC

ORDER GRANTING IN

PART AND DENYING IN

PART DEFENDANTS'

MOTION TO DISMISS

I. INTRODUCTION

This matter comes before the Court on Defendants' Motion to

Dismiss ("Motion"). See Docket No. 23. Plaintiffs filed an

Opposition and Defendants submitted a Reply. See Docket Nos. 32,

Case 3:07-cv-01478-SC Document 39 Filed 11/14/07 Page 1 of 18
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For the Northern District of California

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1

 Unless otherwise noted, the background facts are taken from

the parties' Joint Case Management Statement and from the Order

issued by the district court in Washington transferring the case to

this Court. See Docket Nos. 15, 1.

2

38. For the following reasons, the Court GRANTS IN PART and

DENIES IN PART Defendants' Motion.

II. BACKGROUND1

Plaintiff/Counter-Defendant DSU Aviation, LLC ("Plaintiff" or

"DSU"), is a Washington limited liability company owned by DSU

Medical Corporation, a Nevada corporation. Plaintiffs/CounterDefendants David and Nayda Utterberg ("Plaintiffs" or

"Utterbergs") are married and David is the founder and President

of DSU Medical Corporation. 

Defendant XOJet, Inc. ("Defendant" or "XOJet"), is a Delaware

corporation that provides airplane management, maintenance and

charter services. XOJet is the successor-in-interest to PCMT

Aviation, LLC. Defendant Paul Touw is the founder, President, and

Chief Executive Officer of XOJet. Defendant Will Langmann is an

employee of XOJet. 

In June 2005, Mr. Utterberg, through his company DSU

Aviation, purchased a jet and hired XOJet to manage it. The

agreement between Mr. Utterberg and XOJet was memorialized in a

Memorandum of Understanding ("MoU") executed by Plaintiffs on July

7, 2005, and Defendants on August 15, 2005. Pursuant to the MoU,

XOJet agreed to provide certain management services in relation to

the jet, including providing pilots, mechanics, maintenance,

insurance and chartering the jet to third parties when it was not

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28 3

being used by Plaintiffs. Second Am. Compl. ¶¶ 14-30. In

exchange, Plaintiffs agreed to pay Defendants $67,700 per month

plus an initial deposit of $150,000. Opp'n at 3.

XOJet managed the plane from July 1, 2005, until February 3,

2006. In late 2005 and early 2006 Plaintiffs withheld certain

payments pending resolution of several accounting issues that had

arisen between Plaintiffs and Defendants. The parties discussed

these issues on February 2, 2006, but were unable to resolve the

issues at that time. On February 3, 2006, XOJet terminated its

management of the jet effective immediately and stopped paying the

insurance and other costs associated with the jet. Plaintiffs

assert that this cancellation was improper and forced them to

cancel a business trip to Asia scheduled for February 3, 2006. 

Defendants claim that Plaintiffs breached the agreement by failing

to make the required payments. Plaintiffs filed the present

action on June 28, 2006, amended the Complaint for the first time

on November 21, 2006, and filed a Second Amended Complaint on

August 6, 2007. See Docket No. 22.

III. DISCUSSION

A. Legal Standard

A motion to dismiss under Federal Rule of Civil Procedure

12(b)(6) tests the legal sufficiency of the claims asserted in the

complaint. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38

(9th Cir. 1996). "All factual allegations are to be taken as true

and construed in the light most favorable to the non-moving

party." Levine v. Diamanthuset, Inc., 950 F.2d 1478, 1482 (9th

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2

 The Court addresses the causes of action in the same order

presented in Defendants' Motion.

4

Cir. 1991) Dismissal "is proper only where it appears beyond

doubt that the plaintiff can prove no set of facts in support of

his claim which would entitle him to relief." Id. (internal

citations and quotations omitted).

B. Analysis

As a preliminary matter, the Court addresses the issue of

which state's substantive law applies to Plaintiffs' claims. 

Plaintiffs filed their initial Complaint in the Western District

of Washington. The federal district court had diversity

jurisdiction under 28 U.S.C. § 1332. The case was then

transferred to this Court pursuant to 28 U.S.C. § 1404. The Court

must therefore decide whether Washington or California law

applies. If the MoU contains a choice of law provision, neither

party has relied on it nor brought it to the Court's attention. 

In their moving papers both parties have assumed that California

law applies. The Court thus finds that California law governs

Plaintiffs' claims and Defendants' counterclaims.

In their Second Amended Complaint Plaintiffs presented eight

causes of action. Defendants have moved to dismiss all of them. 

The Court addresses each in turn.2

1. Unjust Enrichment (Eighth Cause of Action)

Defendants assert that Plaintiffs' unjust enrichment claim

should be dismissed because unjust enrichment is neither a cause

of action nor a remedy. Mot. at 6. California courts have

indicated that unjust enrichment "is not a cause of action . . .,

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or even a remedy, but rather a general principle, underlying

various legal doctrines and remedies." McBride v. Boughton, 123

Cal. App. 4th 379, 387 (Ct. App. 2004). As another court in this

district has stated, however, "courts finding that California does

not allow an 'unjust enrichment' cause of action have made

essentially semantic arguments--focusing on the interrelationship

between the legal doctrine of unjust enrichment and the legal

remedy of restitution." Nordberg v. Trilegiant Corp., 445 F.

Supp. 2d 1082, 1100 (N.D. Cal. April 4, 2006). Such reasoning is

persuasive and the Court understands Plaintiffs' unjust enrichment

cause of action to be a claim for restitution. See id. (stating

that "[a]lthough their Eighth cause of action is entitled 'unjust

enrichment' it is clear that plaintiffs are seeking restitution").

Defendants also argue that this cause of action should be

dismissed because California law does not allow recovery of unjust

enrichment when a party pleads breach of an enforceable contract,

which Plaintiffs have in their first cause of action. Mot. at 6. 

Plaintiffs counter that their unjust enrichment claim is properly

pleaded as an alternative to their claim for breach of contract. 

Opp'n at 5.

Under California law, "unjust enrichment is an action in

quasi-contract, which does not lie when an enforceable, binding

agreement exists defining the rights of the parties." Paracor

Fin., Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 1167 (9th

Cir. 1996). In the present case, it is far from clear that an

enforceable, binding agreement exists. Indeed, Defendants

themselves argue that the MoU terminated 14 days after its

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execution and subsequently had "no legal effect." Mot. at 14.

Because the Court understands Plaintiffs' claim for unjust

enrichment to be a claim for restitution pled in the alternative

to their breach of contract claim, Defendants' Motion to Dismiss

this cause of action is DENIED.

2. Breach of the Covenant of Good Faith and Fair

Dealing (Second Cause of Action)

Defendants argue that this cause of action should be

dismissed because it is superfluous to Plaintiffs' claim for

breach of contract. "Every contract imposes on each party a duty

of good faith and fair dealing in each performance and in its

enforcement." Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222

Cal. App. 3d 1371, 1393 (Ct. App. 1990) (internal quotation marks

omitted). Thus, "the implied covenant imposes upon each party the

obligation to do everything that the contract presupposes they

will do to accomplish its purpose." Id. (internal quotation marks

omitted). While a breach in the covenant of good faith "will

always result in a breach of the contract, . . . a breach of a

consensual (i.e., an express or implied-in-fact) contract term

will not necessarily constitute a breach of the covenant." Id. at

1393-94. Accordingly, allegations which assert a cause of action

for breach of the covenant of good faith must show the following:

[T]hat the conduct of the defendant,

whether or not it also constitutes a

breach of a consensual contract term,

demonstrates a failure or refusal to

discharge contractual responsibilities,

prompted not by an honest mistake, bad

judgment or negligence but rather by a

conscious and deliberate act, which

unfairly frustrates the agreed common

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3 For example, Plaintiffs assert that "XOJet falsely

represented its intention to hire permanent Seattle-based pilots."

Second Am. Compl. ¶ 30. In addition, Plaintiffs allege that

Defendants "fraudulently mark[ed] up the costs of outside

services." Id. ¶ 35.

7

purposes and disappoints the reasonable

expectations of the other party[,]

thereby depriving that party of the

benefits of the agreement. Just what

conduct will meet these criteria must be

determined on a case by case basis and

will depend on the contractual purposes

and reasonably justified expectations of

the parties. If the allegations do not

go beyond the statement of a mere

contract breach and, relying on the same

alleged acts, simply seek the same

damages or other relief already claimed

in a companion contract cause of action,

they may be disregarded as superfluous as

no additional claim is actually stated.

Id. at 1395.

In the present case, the Court can make no meaningful

distinction between Plaintiffs' breach of contract cause of action

and their breach of the covenant of good faith cause of action. 

To the contrary, the factual allegations in each cause of action

are identical. Nonetheless, Plaintiffs' Second Amended Complaint

contains allegations that Defendants' "refusal to discharge

contractual responsibilities . . . [was] conscious and

deliberate."3 Id. The Court therefore finds that Plaintiffs have

stated a claim for breach of the covenant of good faith and

Defendants' Motion to Dismiss this cause of action is DENIED. 

3. Conversion (Fifth Cause of Action)

Defendants argue that Plaintiffs have failed to allege an

interference with ownership rights as required for a claim for

conversion.

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Conversion is the wrongful exercise of

dominion over the property of another.

The elements of a conversion are the

plaintiff's ownership or right to

possession of the property at the time of

the conversion; the defendant's

conversion by a wrongful act or

disposition of property rights; and

damages. 

Farmers Ins. Exch. v. Zerin, 53 Cal. App. 4th 445, 451-52 (Ct.

App. 1997). 

Plaintiffs' conversion claim is based on the allegation that

"Defendants converted Plaintiffs' money to their own use by

fraudulently marking up the costs of parts" for the jet. Opp'n at

8. "Money cannot be the subject of an action for conversion

unless there is a specific, identifiable sum involved, such as

where an agent accepts a sum of money to be paid to another and

fails to make the payment." Farmers, 53 Cal. App. 4th at 451-52. 

In the present case, Plaintiffs' allegation that they were

overcharged by Defendants for various jet parts falls short of a

claim for conversion. See, e.g., McKell v. Wash. Mutual, Inc.,

142 Ca. App. 4th 1457, 1492 (Ct. App. 2006) (stating "Plaintiffs

cite no authority for the proposition that a cause of action for

conversion may be based on an overcharge. Consequently, they have

failed to demonstrate that they have stated a cause of action for

conversion."). Defendants' Motion to Dismiss this cause of action

is GRANTED without leave to amend.

4. Violation of California Business and Professional

Code Section 17200 (Seventh Cause of Action)

Defendants argue that Plaintiffs' section 17200 claim should

be dismissed because section 17200 was not intended to be used in

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private litigation between two parties and because Plaintiffs have

not alleged any deception to the members of the public. 

Plaintiffs allege that "members of the public would likely be

deceived by Defendants' practices and that members of the public,

i.e. [Plaintiffs], were in fact deceived by Defendants'

practices." Opp'n at 9 (emphasis removed).

"California's unfair competition statute prohibits any unfair

competition, which means 'any unlawful, unfair or fraudulent

business act or practice.'" In re Pomona Valley Med. Group, 476

F.3d 665, 674 (9th Cir. 2007) (citing Cal. Bus. & Prof. Code §§

17200, et seq.). "This tripartite test is disjunctive and the

plaintiff need only allege one of the three theories to properly

plead a claim under section 17200." Med. Instrument Dev. Lab. v.

Alcon Lab., CV 05-1138, 2005 WL 1926673, at * 5(N.D. Cal. Aug. 10,

2005). Plaintiffs in the present action have alleged all three

theories. See Second Am. Compl. ¶ 84.

Under the fraudulent theory of section 17200, courts have

held that it is necessary to "show deception to some members of

the public interest," Watson Labs., Inc. v. Rhone-Poulenc Rorer,

Inc., F. Supp. 2d 1099, 1121 (C.D. Cal. 2001), or allege that

"members of the public are likely to be deceived . . . ." Med.

Instrument Labs. v. Alcon Labs., CV 05-1138, 2005 WL 1926673, at

*5 (N.D. Cal. 2005) (internal quotation marks omitted). 

Plaintiffs have failed to include any factual allegations to

support their claim that members of the public other than

themselves may have been deceived by Defendants. "Although a

plaintiff's allegations are generally taken as true, the court

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4 For example, it would not be unreasonable to view

Plaintiffs' status as that of consumers purchasing certain services

from Defendants.

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need not accept conclusory allegations of law or unwarranted

inferences, and dismissal is required if the facts are

insufficient to support a cognizable claim." Perfect 10, Inc. v.

Visa Int'l Serv. Ass'n, 494 F.3d 788, 794 (9th Cir. 2007). 

This does not end the analysis, however. As the court in

Medical Instrument Laboratories indicated, if a plaintiff is a

member of the public or a consumer, rather than a direct

competitor, he or she may be entitled to "protection under the

fraudulent business practices theory of section 17200." 2005 WL

1926673, at *5. See also Watson, F. Supp. 2d at 1120 (stating

that plaintiff was "not entitled to the protection of this [the

fraudulent] prong of § 17200 because [he] is not a member of the

public or a consumer entitled to such protection"). 

At this stage it is unclear whether Plaintiffs are

consumers.4 Given that this issue has arisen on a motion to

dismiss and neither party has briefed the issue of Plaintiffs'

status as consumers/non-consumers, the Court DENIES the Motion to

Dismiss the fraudulent business practice claim.

Plaintiffs also allege unlawful business practices and unfair

business practices under § 17200. See Second Am. Compl. ¶ 84. 

Under the unfair theory of § 17200, 'unfair' "means conduct that

threatens an incipient violation of an anti-trust law, or violates

the policy or spirit of one of those laws because its effects are

comparable to or the same as a violation of the law, or otherwise

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5 Whether Plaintiffs allege sufficient facts for these two

theories is less than clear. Nonetheless, while a district court

may sua sponte dismiss a cause of action for failure to state a

claim, Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir.

2001), the Court declines to do so, agreeing that "[s]ua sponte

dismissals are strong medicine, and should be dispensed sparingly." 

Gonzalez-Gonzalez v. United States, 257 F.3d 31, 33 (1st Cir.

2001).

11

significantly threatens or harms competition." Cel-Tech

Communications Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th

163, 187 (Ct. App. 1999). Under the unlawful theory, plaintiffs

must allege "practices forbidden by law, be it civil or criminal,

federal, state, or municipal, statutory, regulatory, or court

made." Saunders v. Sup. Ct., 27 Cal. App. 4th 832, (Ct. App.

1994). 

Defendants do not address either of these theories in their

Motion.5 Defendants instead focus on the prong relating to harm

to the public. This prong, however, is applicable only to the

fraudulent business theory of § 17200. Therefore, Defendants'

Motion to Dismiss this cause of action under all three theories of

§ 17200 is DENIED. 

5. Breach of Fiduciary Duty (Sixth Cause of Action)

Defendants argue that Plaintiffs and XOJet entered into an

arms-length transaction, not a fiduciary relationship, and

therefore this cause of action should be dismissed. Plaintiffs

argue that XOJet was in fact DSU's agent and therefore owed DSU a

fiduciary duty. Second Am. Compl. ¶ 80.

"California courts define an agent as 'anyone who undertakes

to transact some business, or manage some affair, for another, by

authority of and on account of the latter, and to render an

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account of such transactions.'" In re Coupon Clearing Serv.,

Inc., 113 F.3d 1091, 1099 (9th Cir. 1997) (citing Violette v.

Shoup, 16 Cal. App. 4th 611, 620 (Ct. App. 1993)). "One of the

chief characteristics of an agency relationship is the 'authority

to act for and in the place of the principal for the purpose of

bringing him or her into legal relations with third parties.'" 

Id. (citing Violette, 16 Cal. App. 4th at 620)). 

The other important aspect in determining

the existence of an agency relationship

is the degree of control exercised by the

principal over the activities of the

agent. The right to control, rather than

its exercise, is sufficient to meet this

standard. . . . If control may be

exercised only as to the result of the

work and not the means by which it is

accomplished, however, an independent

contractor relationship exists.

Id. (internal citations omitted).

Plaintiffs have alleged facts sufficient "to support a

cognizable claim" for breach of a fiduciary duty premised on a

principal/agent relationship. Perfect 10, 494 F.3d at 794. For

example, Plaintiffs have alleged that Defendants were responsible

for securing insurance for the jet and that Defendants had

permission to enter into legal agreements with third parties to

charter the jet when it was not being used by Plaintiffs. Such

allegations demonstrate Plaintiffs' relinquishment to Defendants

of the "authority to transact . . . or manage some affair." 

Coupon, 113 F.3d at 1099. Accordingly, Defendants' Motion to

Dismiss this cause of action is DENIED.

6. Fraud (Third Cause of Action)

Defendants argue that "Plaintiffs' cause of action for fraud

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fails because California law does not provide tort remedies for

causes of action that sound in contract." Mot. at 10. In

addition, Defendants argue that Plaintiffs have failed to allege

the necessary elements for a fraud claim. Reply at 10.

The elements of fraudulent misrepresentation are (1)

misrepresentation; (2) knowledge of the representation's falsity

or tendency to mislead; (3) intent to induce reliance; (4)

justifiable reliance; and (5) damages. Cal. Civ. Code §§ 1709-10;

5 Witkin, Summary of Law (9th ed. 1988 and 1999 supp.) Torts, §

676.

Contrary to Defendants' argument, Plaintiffs have

sufficiently pled this claim. Defendants insist that Plaintiffs

have not addressed "how the statements made by Defendants were

false and misleading." Reply at 10 (emphasis in original). The

statements were false, according to Plaintiffs' allegations,

because Defendants did not intend to comply with the

representations that they made. ¶ 67. Accordingly, the Court

finds that Plaintiffs' claim satisfies the particularity

requirement of Federal Rule of Civil Procedure 9(b).

Furthermore, Defendants' assertion that Plaintiffs are barred

from even pleading contract claims together with tort claims when

the claims arise out of the same facts is without merit. In the

present case, at the very least, Plaintiffs' fraud claim and

breach of contract claim can be read in the alternative. For this

reason alone Plaintiffs have satisfied their burden of properly

pleading a fraud claim.

Defendants' argument that "California law does not provide

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tort remedies for causes of action that sound in contract" is

hardly "well-settled law." Mot. at 10. To the contrary, as a

recent decision from this district demonstrates, California law is

far from settled on this issue. In City and County of San

Francisco v. Cambridge Integrated Servs. Group, Inc., CV 04-1523,

2007 WL 1970092, at *1 (N.D. Cal. July 2, 2007), the court

analyzed California case law dealing with tort and contract

claims. The court stated:

The court takes [the defendant's] point

that these [California court] holdings

seem to state a general rule that if

damages for economic loss would be

recoverable under a contract cause of

action, a similar recovery in tort for

the negligent performance of a services

contract is probably prohibited. The

court notes, however, that Eads[v. Marks, 39 Cal. 2d 807 (1952),] and North

American Chemical[ Co. v. Superior Court, 59 Cal. App. 4th 764 (Ct. App. 1997),] .

. . have not been formally overruled.

Indeed, Erlich[v. Menezes, 21 Cal. 4th

543 (1999),] acknowledged . . . that the

same wrongful act may at times constitute

both a breach of contract and a tort.

Id. at *3.

Finally, Defendants' reliance on Freeman & Mills, Inc. v.

Belcher Oil Co., 11 Cal. 4th 85 (1995), is misplaced. In Freeman,

the California Supreme Court overruled a prior decision of its own

and adopted a "general rule precluding tort recovery for

noninsurance contract breach . . . ." Id. In the present case,

it is far from clear whether a contract ever existed, much less

whether there was a breach. Freeman is thus inapplicable to

Defendants' Motion to Dismiss Plaintiffs' fraud claim.

For these reasons, Defendants' Motion to Dismiss this cause

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of action is DENIED.

7. Negligent Misrepresentation (Fourth Cause of

Action)

Defendants make the same argument for Plaintiffs' negligent

misrepresentation claim as they made for Plaintiffs' fraud claim,

arguing that claims based in contract cannot be converted into

tort claims. For the reasons stated above, the Court finds this

argument to be without merit.

Defendants also argue that Plaintiffs' claim for negligent

misrepresentation is fatally flawed because it contains the

assertion that "Defendants knowingly made false representations .

. . ." Second Am. Compl. ¶ 71.

The elements for a cause of action for negligent

representation are:

(1) representation as to a material fact,

(2) representation is untrue, (3)

regardless of actual belief, the

defendant made the representation without

a reasonable ground for believing it

true, (4) intent to induce reliance, (5)

justifiable reliance by plaintiff who

does not know the representation is

false, and (6) damage.

Masters v. San Bernardino County Employees Ret. Ass'n, 32 Cal.

App. 4th 30, 40 n. 6 (Ct. App. 1995).

Notwithstanding the fact that Plaintiffs' claim for negligent

misrepresentation includes allegations that Defendants acted with

knowledge, not negligence, the Court, at this stage, is

disinclined to dismiss the cause of action. Plaintiffs have

presented sufficient factual allegations to state a claim for

negligent misrepresentation. Defendants' Motion to Dismiss this

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cause of action is therefore DENIED.

8. Breach of Contract (First Cause of Action)

Defendants argue that Plaintiffs' breach of contract claim

should be dismissed because the contract, the MoU, was in fact

only an agreement to agree, and, as such, was not an enforceable

contract. 

Defendants, in support of this argument, point to language in

the MoU stating that the MoU would terminate if a mutually

acceptable Management Agreement was not executed within 14 days of

the MoU. Mot. at 13. Defendants' argument is undercut by the

chronology of the MoU's execution. The MoU went into effect June

27, 2005. Opp'n at 16. Defendants did not sign the MoU until

August 15, 2005. Id. Not withstanding the language of the MoU,

Defendants clearly intended for the MoU to still maintain some

force, as they signed it more than 14 days after it was created. 

Equally damaging to Defendants' argument is the fact that

Defendants acted as if they were bound by the terms of the MoU

from July 2005 through February 3, 2006. Id. Such actions

indicate mutual consent and mutual intent to be bound by the terms

of the MoU. See Bustamante v. Intuit, Inc., 141 Cal. App. 4th

199, 208 (Ct. App. 2006) (stating "[c]ontract formation requires

mutual consent"); see also Alexander v. Codemasters Group Ltd.,

104 Cal. App. 4th 129, 141 (Ct. App. 2002) (stating "[m]utual

consent is determined under an objective standard applied to

outward manifestations or expressions of the parties, i.e., the

reasonable meaning of their words and acts . . ."). Although

"[a]n agreement to make an agreement, without more, is not a

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6

 Touw and Langmann are included as Defendants in Plaintiffs'

third cause of action for fraud, fourth cause of action for

negligent misrepresentation, and seventh cause of action for

violation of California's Business and Professional Code.

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binding contract," Rennick v. O.P.T.I.O.N. Care, Inc., 77 F.3d

309, 315 (9th Cir. 1996), the MoU appears to be more than such an

agreement. "Where the existence of a contract is at issue and the

evidence is conflicting or admits of more than one inference, it

is for the trier of fact to determine whether the contract

actually existed." Bustamante, 141 Cal. App. 4th at 208. 

Defendants' Motion to Dismiss this cause of action is therefore

DENIED.

9. Claims Against Individual Employees of XOJet

Finally, Defendants argue that Plaintiffs' claims against the

individuals Touw and Langmann should be dismissed because Touw and

Langmann were acting within the scope of their employment at XOJet

and cannot be held personally liable for the tortious acts of the

company.6 Touw is XOJet's President and CEO and Langmann is

XOJet's Vice President of Strategic Air Planning and Mission

Control. Opp'n at 2. Plaintiffs argue that the claims against

Touw and Langmann are based on their individual participation in

the wrongful acts and not on their status as directors or officers

of XOJet. Opp'n at 14.

"Directors are jointly liable with the corporation and may be

joined as defendants if they personally directed or participated

in the tortious conduct." Frances T. v. Village Green Owners

Ass'n, 42 Cal. 3d 490, 504 (Ct. App. 1986).

Although Touw and Langmann were acting on behalf of XOJet

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when they made the alleged misrepresentations, this does not, as

Defendants argue, automatically shield them from liability. 

Plaintiffs allege that Touw and Langmann made fraudulent

representations. In other words, Plaintiffs allege that Touw and

Langmann "participated in the tortious conduct." Id. This is all

that is required to state a claim against individual directors of

a corporation. Defendants' Motion to Dismiss Defendants Touw and

Langmann is therefore DENIED. 

IV. CONCLUSION

For the foregoing reasons, the Court GRANTS Defendants'

Motion to Dismiss without leave to amend Plaintiffs' Fifth Cause

of Action for conversion. The Court DENIES Defendants' Motion to

Dismiss all other Causes of Action.

IT IS SO ORDERED.

Dated: November 14, 2007 

UNITED STATES DISTRICT JUDGE

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