Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_16-cv-02829/USCOURTS-cand-5_16-cv-02829-1/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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Case No. 16-cv-02829 NC 

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United States District Court 

Northern District of California

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

GERALD D.W. NORTH, 

Plaintiff, 

v. 

STEPHEN ROSENOFF, et al., 

Defendants. 

Case No. 16-cv-02829 NC 

ORDER GRANTING IN PART AND 

DENYING IN PART ROSENOFF’S 

MOTION TO DISMISS WITH 

LEAVE TO AMEND AND DENYING 

NORTH’S APPLICATION FOR A 

WRIT OF ATTACHMENT 

Re: Dkt. Nos. 29, 35 

This dispute arises from a legal retainer agreement for plaintiff Gerald D.W. North 

to provide legal services to Clear View Technologies (CVT). North asserts that defendant 

Stephen Rosenoff was a “Funding Member of the Board” of CVT and personally 

guaranteed CVT’s obligations to North. North asserts Rosenoff breached his obligations 

to pay him, and that he is owed $135,901.90. Rosenoff moves to dismiss the First 

Amended Complaint under Federal Rule of Civil Procedure 12(b)(6). Because the Court 

accepts the well-pled facts in the complaint as true, the Court GRANTS IN PART and 

DENIES IN PART Rosenoff’s motion to dismiss, and GRANTS leave to amend. In 

addition, the Court DENIES North’s application for a writ of attachment. 

I. BACKGROUND 

North entered into an agreement to represent CVT in a case against John Rasnick. 

Dkt. No. 27 (Second Amended Complaint, “SAC”) at 2. Rosenoff, a member of the CVT 

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board, was a “party” to the retainer agreement, which stated that the members “would fund 

certain agreed-upon costs incurred in connection with the Rasnick Litigation.” Id. The 

documents at issue in this case are the Legal Representation Agreement and referenced 

Funding Agreement, and the Supplemental Agreement Re: Rasnick Appeal and attached 

Addendum. Id. at 10-20 (attached to SAC). In relevant part, the Legal Representation 

Agreement, dated May 22, 2013, states: 

CVT’s legal expenses are being underwritten by certain 

members of its Board of Directors . . . who have, or are, either 

advancing funds to CVT to prosecute the claims or acquiring 

the claims in return for a contingent payment to CVT. Each of 

these members are hereby personally guaranteeing payment of 

their proportional share of the fees and costs . . . . 

Id. at 11. The Funding Agreement provides that where a funding member misses a 

payment of retainer or costs, that member has seven days to “cure,” but if they do not 

“cure,” they are excluded from further participation in the deal. Id. at 15. In a later 

Supplemental Agreement meant to “make provision” for an appeal of the Rasnick trial, 

effective September 30, 2015, Rosenoff, along with the other funders provided: 

3. Funders hereby reaffirm their personal guarantees of onehalf of the fees and costs of the appeal. Funders further 

reaffirm their outstanding obligation to Counsel, as reflected in 

the most recent Current Balance provided by Counsel, less any 

payment made since. Funders agree to make monthly 

payments . . . 

Id. at 17. North seeks to recover Rosenoff’s portion of the costs from the Rasnick 

Litigation, on which in August 2015, Rosenoff stopped making payments. Id. at 3. The 

remaining balance, according to North is $135,901.90. Id. at 2. 

The operative complaint, the Second Amended Complaint, alleges claims for (1) 

breach of contract against CVT; (2) breach of contract against Rosenoff; (3) third party 

beneficiary liability against Rosenoff; (4) an account stated against Rosenoff; and (5) 

specific performance against CVT. SAC. North and Rosenoff consented to the 

jurisdiction of a magistrate judge under 28 U.S.C. § 636, but CVT has not. Dkt. Nos. 8, 19. 

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II. LEGAL STANDARD 

A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal 

sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). On a 

motion to dismiss, all allegations of material fact are taken as true and construed in the 

light most favorable to the non-movant. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-

38 (9th Cir. 1996). The Court, however, need not accept as true “allegations that are 

merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re 

Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). Although a complaint need 

not allege detailed factual allegations, it must contain sufficient factual matter, accepted as 

true, to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 

550 U.S. 544, 570 (2007). A claim is facially plausible when it “allows the court to draw 

the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft 

v. Iqbal, 556 U.S. 662, 678 (2009). 

If a court grants a motion to dismiss, leave to amend should be granted unless the 

pleading could not possibly be cured by the allegation of other facts. Lopez v. Smith, 203 

F.3d 1122, 1127 (9th Cir. 2000). 

III. DISCUSSION 

Rosenoff moves to dismiss the Second Amended Complaint on the basis that (1) 

North, as a third party, has no standing to sue under the Legal Representation Agreement 

or related Funding Agreement; (2) the Legal Representation Agreement provided North 

with his exclusive remedy if a funding member elected to stop advancing cash to CVT to 

fund the Rasnick Litigation; (3) North failed to plead all conditions precedent to trigger a 

contractual duty by Rosenoff; and (4) the Supplemental Agreement is not an account 

stated. Dkt. No. 35. The Court also considers North’s application for a writ of attachment. 

Dkt. No. 29. 

A. North Sufficiently Alleged Standing to Sue Rosenoff Under the Agreements. 

“A contract, made expressly for the benefit of a third person, may be enforced by 

him at any time before the parties thereto rescind it.” Cal. Civ. Code § 1559. Under a 

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contract, a third party qualifies as a beneficiary if that was the parties’ intent, “and the 

terms of the contract make that intent evident.” Karo v. San Diego Symphony Orchestra 

Ass’n, 762 F.2d 819, 821-22 (9th Cir. 1985) (citations omitted). “Although a third party 

need not be expressly named or identified in a contract, a party must demonstrate ‘that [it] 

is a member of a class of persons for whose benefit it was made.’” Balsam v. Tucows Inc., 

627 F.3d 1158, 1161 (9th Cir. 2010) (quoting Spinks v. Equity Residential Briarwood 

Apartments, 171 Cal. App. 4th 1004, 1023 (2009)). “Whether the third party is an 

intended beneficiary . . . involves construction of the intention of the parties, gathered from 

reading the contract as a whole in light of the circumstances under which it was entered.” 

Prouty v. Gores Tech. Gr., 121 Cal.App.4th 1225 (2004); Balsam, 627 F.3d at 1161. 

Rosenoff, as a board member who signed the Legal Representation Agreement 

between CVT and North, “personally guarantee[d] payment” of his “proportional share” of 

the legal fees and costs incurred as a result of the Rasnick Litigation. SAC at 11 (emphasis 

added). Furthermore, North provides as an exhibit to the Second Amended Complaint the 

Supplemental Agreement regarding the Rasnick Litigation. According to North, in that 

Agreement, Rosenoff, along with the other funders, reaffirmed their “outstanding 

obligation” to North “reflected in the most recent Current Balance provided by” North. Id. 

at 4. Thus, for purposes of this motion, and taking into account the alleged circumstances 

surrounding the entering of the Legal Representation Agreement and Supplemental 

Agreement, the Court finds North was a third party beneficiary of the agreements. 

Balsam, 627 F.3d at 1161. 

B. The Legal Representation Agreement Did Not Provide North His 

“Exclusive and Limited” Remedy If a Funding Member Elected to Stop 

Advancing Cash to CVT to Fund the Rasnick Litigation. 

Rosenoff argues the Legal Representation Agreement states that as between North 

and CVT, “where a Funding Member Stops advancing funds, Plaintiff North could elect to 

absorb the unpaid costs, or take the Funding Member’s contingent share, or withdraw from 

CVT’s representation, period.” Dkt. No. 35 at 21. The Court reject’s Rosenoff’s attempt 

to limit the language of the Agreement, which states: 

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In the event one or more, but not all, of the funding members 

default by failing timely to make a payment of fees or of 

invoiced costs, and the payment is not received within a seven 

(7) day ‘cure’ period, the remaining funding members may 

fund the defaulting member(s) share or may find one or more 

other directors to fund in place of the defaulting member or 

members. In the event they do not do so, North may elect to 

forego the unpaid portion of fees and/or absorb the 

unreimbursed share of costs that were to be paid by the 

defaulting member or members and acquire the member or 

members’ remaining interest in the participation provided in 

the funding agreement between and among the funding 

members and the company or he may elect to withdraw from 

the representation. 

SAC at 12 (emphasis added). Because the quoted language is permissive, not mandatory, 

the Court does not find for purposes of this motion that the Legal Representation 

Agreement was North’s exclusive remedy. The Court finds the same is true with respect to 

the Funding Agreement’s permissive language (in case a funder drops out from funding 

the Rasnick Litigation, the other members assume their position, but if all members drop 

out, North has several unlimited options for relief). SAC at 15. 

C. North Did Not Adequately Plead the Conditions Precedent to Trigger a 

Contractual Duty By Rosenoff. 

Rosenoff argues North has not shown he complied with the conditions precedent in 

the Legal Representation Agreement. Dkt. No. 35 at 24. To state a claim for breach of 

contract, “the plaintiff must plead the existence of a contract, its terms which establish the 

obligation in issue, the occurrence of any conditions precedent to enforcement of the 

obligation, and the breach of that obligation.” FPI Dev., Inc. v. Nakashima, 231 Cal. App. 

3d 367, 383 (1991). “Where contractual liability depends upon the satisfaction or 

performance of one or more conditions precedent, the allegation of such satisfaction or 

performance is an essential part of the cause of action.” Careau & Co. v. Sec. Pac. Bus. 

Credit, Inc., 222 Cal. App. 3d 1371, 1389 (1990), as modified on denial of reh’g (Oct. 31, 

2001). 

As Rosenoff correctly points out, North has not alleged in the complaint he fulfilled 

the conditions precedent regarding preapproved costs in the Legal Representation 

Agreement. Dkt. No. 47 at 10. Yet North cited to declarations that provide that he did 

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fulfill such conditions precedent. Therefore, while the Court does find that North failed to 

allege the satisfaction of conditions precedent in the Second Amended Complaint, given 

the federal system’s liberal amendment policy, the Court grants North leave to amend his 

complaint to add such facts. Lopez, 203 F.3d at 1127. 

D. North Adequately Pled the Supplemental Agreement Was An Account 

Stated. 

The elements of an account stated are: “(1) previous transactions between the 

parties establishing the relationship of debtor and creditor; (2) an agreement between the 

parties, express or implied, on the amount due from the debtor to the creditor; (3) a 

promise by the debtor, express or implied, to pay the amount due.” Zinn v. Fred R. Bright 

Co., 271 Cal. App. 2d 597, 600 (1969). In the Second Amended Complaint, North alleges: 

31. On or around October 10, 2015, Plaintiff provided 

Rosenoff with a statement that the amount Rosenoff owed for 

the Rasnick Costs . . . was $146,154.40. 

32. On or around December 21, 2015, Rosenoff acknowledged 

to Plaintiff in the Supplemental Agreement that Rosenoff 

reaffirmed the obligation to Plaintiff ‘reflected in the mostcurrent balance provided by Counsel [Plaintiff], less any 

payments made since.’ 

SAC at 6. At the motion to dismiss stage, the Court will not weigh the evidence. As a 

result, because of the prior transactions between the parties, and the facts pled in the 

Second Amended Complaint alleging the existence of an account stated and Rosenoff’s 

acceptance of such, the Court finds North adequately pled the Supplemental Agreement 

was an account stated. 

E. North May Not Attach Rosenoff’s Real Property. 

A court may issue a right to attach order if it finds all of the following: 

(1) The claim upon which the attachment is based is one upon 

which an attachment may be issued. 

(2) The plaintiff has established the probable validity of the 

claim upon which the attachment is based. 

(3) The attachment is not sought for a purpose other than the 

recovery on the claim upon which the attachment is based. 

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(4) The amount to be secured by the attachment is greater than 

zero. 

Cal. Civ. Proc. Code § 484.090(a). An attachment may be issued on claims for money 

based on an express or implied contract, “where the total amount of the claim or claims is a 

fixed or readily ascertainable amount not less than five hundred dollars ($500) exclusive of 

costs, interest, and attorney’s fees.” Civ. Proc. § 483.010(a). “A claim has ‘probable 

validity’ where it is more likely than not that the plaintiff will obtain a judgment against 

the defendant on that claim.” Civ. Proc. § 481.190. Where the defendant is a natural 

person, interests in real property may be attached. Civ. Proc. § 487.010. 

The application meets the first prong of § 484.090: this action revolves around a 

readily ascertainable claim arising from a contract for greater than $500. Civ. Proc. § 

484.090(a)(1). The Court stops at the second prong. While the Court denies Rosenoff’s 

motion to dismiss or grants it with leave to amend, the Court’s refusal to dismiss claims 

with prejudice has no bearing on the merits of North’s case. This is especially true where 

the Court has given North leave to amend insufficiently pled facts, so the Court cannot find 

“it is more likely than not” that North will prevail over Rosenoff on the merits. Civ. Proc. 

§ 481.190. 

IV. CONCLUSION 

For the reasons stated above, the Court GRANTS in part and DENIES in part 

Rosenoff’s motion to dismiss the Second Amended Complaint. The Court DENIES the 

application for a writ of attachment. The Court gives North LEAVE TO AMEND his 

complaint accordingly. The amended complaint must be filed within 14 days of this order. 

IT IS SO ORDERED. 

Dated: December 19, 2016 _____________________________________ 

NATHANAEL M. COUSINS 

United States Magistrate Judge 

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