Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_19-cv-06484/USCOURTS-cand-4_19-cv-06484-2/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 

Northern District of Californi

a

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

CONVERGENT MOBILE, INC.,

Plaintiff, 

v. 

JTH TAX, INC. DBA LIBERTY TAX SERVICE, 

Defendant. 

Case No. 4:19-cv-06484-YGR 

ORDER: (1) GRANTING IN PART AND 

DENYING IN PART MOTION TO DISMISS;

(2) DENYING MOTION TO STRIKE; AND 

(3) SETTING CASE MANAGEMENT 

CONFERENCE

Dkt. Nos. 6, 7 

The Court is in receipt of defendant JTH Tax, Inc. dba Liberty Tax Service’s (“JTH”) 

motion to dismiss and motion to strike. (Dkt. Nos. 6 and 7.) For the reasons set forth below: the 

motion to dismiss is DENIED as to claims for breach of contract and for breach of the covenant of 

good faith and fair dealing, and GRANTED as to the claim for promissory estoppel; and the motion 

to strike is DENIED. The standards with respect to these motions are well-known and are not in 

dispute. 

I. MOTION TO DISMISS 

The complaint alleges three causes of action: Breach of Contract (First Cause of Action), 

Promissory Estoppel (Second Cause of Action), and Breach of the Covenant of Good Faith and 

Fair Dealing (Third Cause of Action). The core of this Order is based on a fundamentally 

different view of the complaint by the Court as opposed to JTH’s reading. Under the Federal 

Rules of Civil Procedure, a plaintiff need only provide allegations to satisfy the notice pleading 

standard under Rule 8. This is fundamentally a business dispute arising out of commercial 

interactions. There is no surprise, and plaintiff Convergent Mobile, Inc. (“Convergent”) need not 

provide the level of detail JTH seeks. JTH is undeniably on notice of the basic dispute described 

in the complaint. 

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With respect to the first cause of action, a breach of contact claim, while the statements of 

law referenced in JTH’s briefing are accurate with respect to one method of proving a breach of 

contract claim, other manners of proving a breach of contract also exist. Fundamentally: to 

“prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) 

the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s 

breach, and (4) the resulting damage to the plaintiff.” Richman v. Hartley, 224 Cal.App.4th 1182, 

1186 (2014). The Court finds the complaint sufficiently alleges each of these elements. The 

motion as to this claim is therefore DENIED. 

With respect to the second cause of action, a claim for promissory estoppel, the Court 

agrees that “[u]nder California law, the same allegations that give rise to a breach of contract 

claim cannot also ‘give rise to a claim for promissory estoppel, as the former [is] predicated on a 

promise involving bargained-for consideration, while the latter is predicated on a promise 

predicated on reliance in lieu of such consideration.’” JMP Securities LLP v. Altair 

Nanotechnologies Inc. 880 F.Supp.2d 1029, 1040-41 (N.D. Cal. 2012) (quoting Co-Investor, AG 

v. FonJax, Inc., C 08-01812 SBA, 2008 WL 4344581, at *3 (N.D. Cal. Sept. 22, 2008) (collecting 

California cases)). While the Court agrees that in general a party may plead in the alternative, 

Convergent suggests no facts which would suffice to frame a separate and independent claim. The 

motion is therefore GRANTED as to this claim. 

The claim for the breach of the covenant of good faith and fair dealing, the third cause of 

action, is frequently pled in conjunction with a breach of contract claim. Usually at the pleading 

stage, a court has an incomplete record to determine whether it should be dismissed as a matter of 

law: where allegations indicate that the defendant “violated the [agreement’s] implied covenant of 

good faith and fair dealing by [acting] in a in a way not reasonably contemplated by the contract or 

the parties,” a plausible claim exists. See Co-Investor, AG, supra, (citing Egan v. Mut. of Omaha 

Ins. Co. 24 Cal.3d 809, 818 (1979); Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal.App.3d 

1371, 1394-95 (1990)). Here, while indeed bare bone, the allegations are sufficient to allege that 

JTH acted in a manner knowing that its conduct would materially cause Convergent to enter into 

obligations with other third parties for JTH’s benefit and later causing harm given JTH’s actions. 

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The motion as to this claim is therefore DENIED. 

Accordingly, for the foregoing reasons, the motion to dismiss is GRANTED IN PART and 

DENIED IN PART. 

II. MOTION TO STRIKE 

A court “may strike from a pleading an insufficient defense or any redundant, immaterial, 

impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). “The function of a [Rule] 12(f) motion 

to strike is to avoid the expenditure of time and money that must arise from litigating spurious 

issues by dispensing with those issues prior to trial . . . .” Whittlestone, Inc. v. Handi–Craft Co., 

618 F.3d 970, 973 (9th Cir. 2010) (quoting Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 

1993) rev’d on other grounds, 510 U.S. 517 (1994)). “Motions to strike ‘are generally disfavored 

because they are often used as delaying tactics and because of the limited importance of pleadings 

in federal practice.’” Shaterian v. Wells Fargo Bank, N.A., 829 F. Supp. 2d 873, 879 (N.D. Cal. 

2011) (quoting Rosales v. Citibank, Fed. Sav. Bank, 133 F. Supp. 2d 1177, 1180 (N.D. Cal. 

2001)). 

Further, because Rule 12(f) motions are disfavored, “courts often require a showing of 

prejudice by the moving party before granting the requested relief.” Sanchez v. City of Fresno, 

914 F. Supp. 2d 1079, 1122 (E.D. Cal. 2012) (quoting Cal. Dep't of Toxic Substances Control v. 

Alco Pac., Inc., 217 F. Supp. 2d 1028, 1033 (C.D. Cal. 2002)). “If there is any doubt whether the 

portion to be stricken might bear on an issue in the litigation, the court should deny the 

motion.” Holmes v. Elec. Document Processing, Inc., 966 F. Supp. 2d 925, 930 (N.D. Cal. 2013) 

(quoting Platte Anchor Bolt, Inc. v. IHI, Inc., 352 F. Supp. 2d 1048, 1057 (N.D. Cal. 2004)). It is 

within the sound discretion of the district court whether to grant a motion to strike. See

Whittlestone, 618 F.3d at 973 (citing Nurse v. United States, 226 F.3d 996, 1000 (9th Cir. 2000)). 

Here, JTH was advised against filing a motion to strike. JTH nevertheless did, and yet 

failed to articulate any prejudice necessitating such a motion. While the Court understands the 

desire to eliminate the prospect of attorney fees from litigation, this alone is an insufficient reason 

to bring a Rule 12(f) motion to busy courts, especially where the contract itself creates an issue. 

The state court in Brown Bark III, L.P. v. Haver, 219 Cal. App. 4th 809, 818–19 (2013), 

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provides a good overview as to attorney fees under California state law. Thus: 

[In general, under California law, a] party may not recover attorney 

fees unless expressly authorized by statute or contract. Code Civ. 

Proc., § 1021; Sessions Payroll Management, Inc. v. Noble 

Construction Co., 84 Cal.App.4th 671, 677 (2000). In the absence of 

a statute authorizing the recovery of attorney fees, the parties may 

[nevertheless] agree on whether and how to allocate attorney fees. 

Xuereb v. Marcus & Millichap, Inc., 3 Cal.App.4th 1338, 1341 

(1992). They may agree the prevailing party will be awarded all the 

attorney fees incurred in any litigation between them, limit the 

recovery of fees only to claims arising from certain transactions or 

events, or award them only on certain types of claims. The parties 

may agree to award attorney fees on claims sounding in both contract 

and tort. Id. at pp. 1341–42. To ensure mutuality of remedy, 

however, section 1717 makes an attorney fee provision reciprocal 

even if it would otherwise be unilateral either by its terms or in its 

effect. Santisas v. Goodin, 17 Cal.4th 599, 610 (1998); Reynolds 

Metals Co. v. Alperson, 25 Cal.3d 124, 128 (1979). 

Brown Bark III, 219 Cal. App. 4th at 818-19 (internal citations altered). 

Here the contract appears to contemplate unilateral attorney fees solely for JTH in 

paragraph 10(b) of the parties’ agreement. The Court need not decide at this juncture whether 

section 1717 would render reciprocal the unilateral attorney fees provision. Suffice it to say, the 

allegations in the complaint should not be stricken at this juncture. To the extent that the motion 

sought to strike more that the attorney fees allegation, such a motion would be wholly without 

merit. Accordingly, the motion to strike is DENIED. 

III. CONCLUSION 

For the reasons set forth above: (1) the motion to dismiss is GRANTED IN PART as to the 

claim for promissory estoppel and DENIED IN PART as to claims for breach of contract and for 

breach of the covenant of good faith and fair dealing; and (2) the motion to strike is DENIED. 

Convergent additionally requested leave to amend in response to the motion to dismiss 

with respect to all three claims. Given (i) the delay in the progress of this case, (ii) that the motion 

was denied as to two of the claims, and (iii) the likely futility of any amendment as to the claim for 

promissory estoppel, the request to amend is DENIED. JTH shall file an answer to the complaint 

by May 8, 2020. Should Convergent maintain that sufficient independent facts exist to establish a 

claim for promissory estoppel, it may file a motion to amend by no later than May 6, 2020. If so 

filed, JTH is relieved of the May 8th filing deadline and instead shall respond to the motion to 

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amend on a normal briefing schedule as permitted under the local rules. 

A case management conference is hereby scheduled for June 1, 2020 at 2:00 p.m. In light 

of the uncertainties with the ongoing coronavirus disease (COVID-19) pandemic, the parties are 

instructed to check the Court’s scheduling notes to determine whether the conference will be held 

in person or by some alternate platform. 

This Order terminates Docket Numbers 6 and 7 

IT IS SO ORDERED. 

Dated: April 22, 2020 

______________________________________ 

 YVONNE GONZALEZ ROGERS

UNITED STATES DISTRICT JUDGE

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