Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_09-cv-04024/USCOURTS-cand-3_09-cv-04024-2/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

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

VIESTE, LLC, et al.,

Plaintiffs,

 v.

HILL REDWOOD DEVELOPMENT, LTD.,

et al.,

Defendants.

 /

No. C 09-04024 JSW

ORDER (1) GRANTING

DEFENDANTS’ MOTION TO

DISMISS PLAINTIFFS’ FIRST

THREE CLAIMS AND (2)

GRANTING IN PART AND

DENYING IN PART AS MOOT

PLAINTIFFS’ MOTION FOR

EXTENSION OF TIME FOR

SERVICE

Now before the Court is the motion to dismiss filed defendants Hill International, Inc.

(“Hill”) and Redwood Capital Advisors, LLC (“Redwood”) (collectively, “Defendants”) and

the motion to extend time for service filed by plaintiffs Vieste, LLC and Vieste Development,

LLC (“Vieste”). These matters are now fully briefed and ripe for decision. The Court finds that

these matters are appropriate for disposition without oral argument and the matters are deemed

submitted. See N.D. Civ. L.R. 7-1(b). Accordingly, the hearing set for January 15, 2010 is

HEREBY VACATED. Having considered the parties’ arguments and relevant legal authority,

the Court hereby grants Defendants’ motion to dismiss and grants in part and denies in part as

moot Vieste’s motion to extend time for service.

Case 3:09-cv-04024-JSW Document 33 Filed 01/11/10 Page 1 of 6
United States District Court

For the Northern District of California

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BACKGROUND

Vieste alleges that they and defendants Hill, Redwood, Hill Redwood Development,

Ltd., and Hill International Development Ltd. entered into a joint venture to develop projects,

including major development initiatives in Metropolis, Illinois and in Xalapa, Veracruz in

Mexico. (Compl, ¶¶ 14-16.) As part of that agreement, Vieste alleges that Redwood agreed to

fund all “seed equity” to cover fees and expenses from October 15, 2008 through the project

closings. (Id., ¶ 16.) The “seed funding” was to occur upon execution of memoranda of

understanding with each municipality. (Id., ¶ 16.) 

Vieste alleges that they, Hill, and Redwood met with officials in Metropolis in

November 2008 and shortly thereafter, executed a memorandum of understanding with

Metropolis. (Id., ¶ 17.) Similarly, in December 2008, Vieste, Hill and Redwood met with

officials in Xalapa and shortly thereafter, executed a memorandum of understanding with

Xalapa. (Id., ¶ 18.) During and subsequent to the execution of the memoranda of

understanding, Vieste expended significant resources to proceed with the development projects. 

(Id., ¶ 19.)

In late December 2008, representatives of Hill, Redwood, Hill Redwood Development,

Ltd., and Hill International Development Ltd. assured Vieste that it would receive shortly

almost $300,000 to cover Vieste’s services, fees and expenses dating back to October 15, 2008. 

(Id., ¶ 20.) On December 31, 2008, Mike Comparato (“Comparato”), President and Chief

Executive Officer of Vieste, emailed Steve Goodman, a partner in Redwood and a managing

director of Hill Redwood Development, Ltd. to confirm that Vieste would receive $290,000 by

January 6 and that the entire $5.5 million would be funded by January 9. (Id.)

Although Hill, Redwood, Hill Redwood Development, Ltd., and Hill International

Development Ltd. did not pay Vieste for its services, fees and expenses as promised, Vieste

continued to perform work on the development projects. (Id., ¶ 21.) On January 26, 2009, Dick

Sargon, President of Hill International Development Ltd., a managing director of Hill Redwood

Development, Ltd., and previously a president with Hill, left a voicemail message for

Comparato stating that the investment of a quarter of million in Vieste will “come through”

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United States District Court

For the Northern District of California

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upon documentation from Comparato and that the investment for $500 million is still pending

and unsure. (Id., ¶ 23.)

Based upon these allegations, Vieste asserts the following claims against Hill, Redwood,

Hill Redwood Development, Ltd., Hill International Development Ltd., Steven Goodman, and

S. Dick Sargon: (1) fraud and intentional misrepresentation; (2) negligent misrepresentation; (3)

constructive fraud; (4) breach of contract; (5) breach of implied covenant of good faith and fair

dealing; and (6) promissory estoppel. Hill and Redwood now move to dismiss Vieste’s first

three claims on the grounds that they are not plead with sufficient particularity.

A. Legal Standards Applicable to Motion to Dismiss.

A motion to dismiss is proper under Federal Rule of Civil Procedure 12(b)(6) where the

pleadings fail to state a claim upon which relief can be granted. The complaint is 

construed in the light most favorable to the non-moving party and all material allegations in the

complaint are taken to be true. Sanders v. Kennedy, 794 F.2d 478, 481 (9th Cir. 1986). The

court, however, is not required to accept legal conclusions cast in the form of factual

allegations, if those conclusions cannot reasonably be drawn from the facts alleged. Clegg v.

Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994) (citing Papasan v. Allain, 478

U.S. 265, 286 (1986)). Conclusory allegations without more are insufficient to defeat a motion

to dismiss for failure to state a claim upon which relief may be granted. McGlinchy v. Shell

Chemical Co., 845 F.2d 802, 810 (9th Cir. 1988). Even under the liberal pleading standard of

Federal Rule of Civil Procedure 8(a)(2), a plaintiff must do more than recite the elements of the

claim and must “provide the grounds of his entitlement to relief.” Bell Atlantic Corporation v.

Twombly, 550 U.S. 544, 555 (2007) (internal brackets and quotations omitted). The pleading

must not merely allege conduct that is conceivable. Rather, plaintiffs must allege “enough facts

to state a claim to relief that is plausible on its face.” Id. at 570.

Pursuant to Federal Rule of Civil Procedure 9(b), Plaintiffs must allege with

particularity the circumstances constituting fraud. See Greebel v. FTP Software, Inc., 194 F.3d

185, 193 (9th Cir. 1999); Fed. R. Civ. P. 9(b). However, the particularity requirements of Rule

9(b) must be read in harmony with the requirement to make out a “short and plain” statement of

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the claim. Fed. R. Civ. P. 8(a)(2). Thus, the particularity requirement is satisfied if the

complaint “identifies the circumstances constituting fraud so that a defendant can prepare an

adequate answer from the allegations.” Moore v. Kayport Package Exp., Inc., 885 F.2d 531,

540 (9th Cir. 1989); see also Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir.

2003) (“Rule 9(b) demands that, when averments of fraud are made, the circumstances

constituting the alleged fraud 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.”) (internal quotation marks and citations omitted). Accordingly, “[a]verments

of fraud must be accompanied by ‘the who, what, when, where, and how’ of the misconduct

charged.” Vess, 317 F.3d at 1107 (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir.

1997)). 

Documents whose contents are alleged in a complaint and whose authenticity no party

questions, but which are not physically attached to the pleading, may be considered in ruling on

a Rule 12(b)(6) motion to dismiss. Such consideration does not convert the motion to dismiss

into a motion for summary judgment. See Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994);

United States v. Ritchie, 343 F.3d 903, 908 (9th Cir. 2003). 

B. Defendants’ Motion to Dismiss Plaintiffs’ Fraud Claims.

Pursuant to Rule 9(b), plaintiffs must allege with particularity the circumstances

constituting fraud. See Greebel v. FTP Software, Inc., 194 F.3d 185, 193 (9th Cir. 1999); Fed.

R. Civ. P. 9(b). In the Ninth Circuit, negligent misrepresentation claims are subject to the

heightened pleading requirements under Rule 9(b). See Neilson v. Union Bank of California,

N.A., 290 F. Supp. 2d 1101, 1141 (C.D. Cal. 2003) (“It is well-established in the Ninth Circuit

that both claims for fraud and negligent misrepresentation must meet Rule 9(b)’s particularity

requirements.); see also Glen Holly Entertainment, Inc. v. Tektronix, Inc., 100 F. Supp. 2d

1086, 1093 (C.D. Cal. 1999) (“Claims for fraud and negligent misrepresentation must meet the

heightened pleading requirements of Rule 9(b)”); Rosal v. First Federal Bank of California,

2009 WL 2136777, *10 (N.D. Cal. July 15, 2009). The facts supporting a claim for

constructive fraud also must be alleged with particularity under Rule 9(b). See In re Verisign,

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Inc., Derivative Litigation, 531 F. Supp. 2d 1173, 1219 (N.D. Cal. 2007) (finding that plaintiffs

failed to allege constructive fraud claim with particularity as required in federal court); see also

Munday v. Real Estate Advisors, Inc., 1995 WL 549015, *2 (N.D. Cal. Sept. 12, 1995). Here,

Vieste has not alleged any misrepresentations with sufficient particularity. 

Moreover, where, as here, there are multiple defendants, “Rule 9(b) does not allow a

complaint to merely lump multiple defendants together but requires plaintiffs to differentiate

their allegations when suing more than one defendant ... and inform each defendant separately

of the allegations surrounding his alleged participation in the fraud.” Swartz v. KPMG LLP,

476 F.3d 756, 764-765 (9th Cir. 2007) (internal quotes and citation omitted). At a minimum, “a

plaintiff must ... identify the role of each defendant in the alleged fraudulent scheme.” Id. at

765 (internal quotes and citation omitted). In the complaint, Vieste fails to identify the role of

each defendant in the alleged fraud.

 Furthermore, Vieste’s constructive fraud claim fails for the additional reason that Vieste

has not plead that any of the defendants “gained an advantage” by making any alleged

misrepresentations. Although Vieste argues in opposition to the motion to dismiss how

defendants generally gained an advantage, Vieste did not include such allegations in the

complaint.

C. Vieste’s Motion to Extend Time for Service.

 Vieste moves pursuant to Federal Rule of Civil Procedure 4(m) to extend time for

service of the Complaint and Summons on Defendants Hill Redwood Development, Ltd., Hill

International Development, Ltd., Stephen Goodman and S. Dick Sargon. With respect to

Defendants Stephen Goodman and S. Dick Sargon, this motion is now MOOT because they

have waived the requirement of formal service and have appeared in this action. With respect

to Defendants Hill Redwood Development, Ltd. and Hill International Development, Ltd., the

Defendants who have appeared in this matter have filed a statement of non-opposition. The

Court finds good cause to extend the time for service and, thus, HEREBY GRANTS Vieste’s

motion as to Defendants Hill Redwood Development, Ltd. and Hill International Development,

Ltd. 

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CONCLUSION

For the foregoing reasons, the Court GRANTS Hill and Redwood’s motion to dismiss

Vieste’s first three claims. However, the Court will provide Vieste leave to amend. Vieste shall

file any amended complaint within thirty days of the date of this Order. If an amended

complaint is filed, Defendants shall either file an answer or move to dismiss within twenty days

of service of the amended complaint. If Vieste does not file an amended complaint, Defendants

shall file an answer within twenty days after Vieste’s time to file an amended complaint has

expired. 

The Court DENIES Vieste’s motion to extend time for service as to Defendants Stephen

Goodman and S. Dick Sargon as MOOT and GRANTS Vieste’s motion to extend time for

service as to Defendants Hill Redwood Development, Ltd. and Hill International Development,

Ltd. Vieste shall have 120 days from entry of this Order to serve the Summons and Complaint

upon Defendants Hill Redwood Development, Ltd. and Hill International Development, Ltd. If

service is not affected upon Defendants Hill Redwood Development, Ltd. and Hill International

Development, Ltd. within the 120-day extension period, Vieste shall dismiss Defendants Hill

Redwood Development, Ltd. and Hill International Development, Ltd. without prejudice.

IT IS SO ORDERED.

Dated: January 11, 2010 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

Case 3:09-cv-04024-JSW Document 33 Filed 01/11/10 Page 6 of 6