Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_06-cv-06637/USCOURTS-cand-5_06-cv-06637-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition For Removal--Other Contract

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND TO STRIKE—No. C-06-06637 RMW

SPT

United States District Court

For the Northern District of California

E-FILED on 2/14/07

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

CARDONET, INC.,

Plaintiff,

v.

IBM CORPORATION, et al.,

Defendants.

No. C-06-06637 RMW

ORDER GRANTING DEFENDANT'S

MOTION TO DISMISS AND TO STRIKE

[Re Docket No. 3, 10]

This action was originally filed in Santa Clara Superior Court and removed to this court on

grounds of diversity. Plaintiff Cardonet, Inc. ("Cardonet" or "plaintiff") pleads the following seven

claims 1) breach of contract; 2) promissory estoppel; 3) fraud; 4) negligent misrepresentation; 5)

violation of California Business and Professions Code section 17200; 6) unjust enrichment; and 7)

conversion. Defendant IBM Corporation ("IBM" or "defendant") moves to dismiss plaintiff's

second through seventh claims on the grounds that the claims are barred by New York law, which

IBM contends is the law that must be applied in this matter. IBM further moves to strike plaintiff's

request for punitive damages. For the reasons set forth below, the court grants IBM's motion to

dismiss and grants IBM's motion to strike.

Case 5:06-cv-06637-RMW Document 23 Filed 02/14/07 Page 1 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 In support of its motion, defendant requests judicial notice of two documents: 1) IBM Base

Agreement #490S3033 ("Base Agreement") and 2) Addendum to License Agreement between IBM

Corporation and Cardonet, Inc. Agreement No. 490S3033 ("Addendum"), both signed by the parties

on December 23, 2003. It would appear that these agreements were intended to be attached to the

complaint as Exhibit A. Compl. ¶ 11 ("A true and correct copy of the Agreement [executed in

December 2003] is attached hereto as Exhibit A."). Further, the parties do not dispute the

authenticity of the documents, thus the court grants defendant's request for judicial notice. 

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND TO STRIKE—No. C-06-06637 RMW

SPT 2

I. BACKGROUND

Cardonet is in the business of developing, licensing, and providing maintenance and support

for its product information management software. Compl. ¶ 6. IBM, allegedly after having used

Cardonet's software by way of a licensing agreement with Interwoven, engaged in direct discussions

with Cardonet to enter a licensing agreement. Compl. ¶ 7. As an interim accommodation to IBM's

needs and hoping to induce IBM to enter a licensing agreement with Cardonet (which Cardonet

anticipated being lucrative), Cardonet granted IBM unlimited use of its software for 90 days

beginning on September 30, 2003. Id.

Cardonet and IBM entered into a written software licensing and maintenance agreement,

dated December 23, 2003.1

 Cardonet prices its software based on usage and measures that usage in

"SKUs." Compl. ¶ 8. Pursuant to that agreement, Cardonet contends that it granted IBM license to

use its software for 1,385,724 SKUs at a significant discount from its usual pricing. Compl. ¶¶ 10,

12. According to Cardonet, IBM agreed to meet with Cardonet in October 2004 to discuss IBMs

additional needs beyond the original number of SKUs provided and the amount of additional fees to

be paid for usage in excess of that original number. Compl. ¶ 13.

By January 1, 2004, IBM's SKU usage totaled 1,403,149 and Cardonet blocked IBM's use. 

Compl. ¶ 14. IBM demanded that Cardonet unblock the software. Compl. ¶ 15. Allegedly agreeing

upon the promise made by IBM to meet in October 2004 to discuss payment for IBM's additional

usage, Cardonet complied with IBM's request to unblock IBM's use of the software. 

Eventually, IBM's SKU usage was 2.6 million SKUs over the original agreement. Compl. ¶ 18.

According to Cardonet, IBM has not paid for the use of the additional SKUs, nor has it paid

the agreed upon maintenance fees. Compl. ¶ 19. Cardonet alleges that at approximately the same

time that IBM was demanding use of Cardonet's software in excess of the original 1,385,724 SKUs,

IBM was also in the process of acquiring a company called TRIGO Technologies, Inc. ("TRIGO"),

Case 5:06-cv-06637-RMW Document 23 Filed 02/14/07 Page 2 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND TO STRIKE—No. C-06-06637 RMW

SPT 3

which was a competitor of Cardonet and marketed similar product information management

software. Compl. ¶ 16. Based upon the timing of the acquisition, Cardonet alleges that IBM knew

that the acquisition of TRIGO would allow IBM to use an alternative software solution and thus

avoid meeting with Cardonet or paying for its additional usage of Cardonet's software. Compl. ¶ 17. 

II. ANALYSIS

Dismissal under Fed. R. Civ. P. 12(b)(6) is proper only when a complaint exhibits either a

"lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal

theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). The court must

accept the facts alleged in the complaint as true. Id. "A complaint should not be dismissed 'unless it

appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would

entitle him to relief.'" Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 248 (9th Cir. 1997) (quoting

Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).

Fed. R. Civ. P. 12(f) provides that the court may upon motion by a party "order stricken from

any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous

matter." 

A. Choice of Law

IBM argues that New York law applies to plaintiff's claims for relief based on a choice-oflaw provision in the Base Agreement. Section 14.3 of the Base Agreement provides in relevant part:

This Agreement and the performance of transactions under this Agreement will be

governed by the laws of the country where the Buyer entering into the relevant

agreement or PA is located, except: . . . in the United States . . . the laws of the State of

New York applicable to contracts executed and performed entirely within that State

govern this Agreement.

Def.'s RJN, Ex. A at 6 § 14.3. Cardonet does not dispute that this provision is part of the agreement

between the parties. However, Cardonet argues that the provision does not apply to its tort claims

because those claims are based on wrongful conduct outside the written agreement. It contends the

choice-of-law provision is a restrictive one and does not reach "actions of the parties outside of the

agreement or to laws concerning any claim not 'applicable to contracts executed in and performed

entirely within' New York." Pl.'s Opp'n at 4:26-28; 6:3-18 (emphasis in original). Plaintiff further

contends that under Nedlloyd Lines B.V. v. Superior Court, 3 Cal. 4th 459 (1992) and Discover Bank

Case 5:06-cv-06637-RMW Document 23 Filed 02/14/07 Page 3 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 2

 Plaintiff discussed the scope of the choice-of-law provision under only California law. See

Pl.'s Opp'n at 6:3-18. 

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND TO STRIKE—No. C-06-06637 RMW

SPT 4

v. Superior Court, 36 Cal. 4th 148 (2005), the choice-of-law provision is unenforceable as to the its

third, fourth, fifth, and seventh claims. 

The court first addressees the initial issue of whether the choice-of-law provision at issue is

broad enough to encompass the claims before the court. Wash. Mut. Bank, FA v. Superior Court, 24

Cal. 4th 906, 916 (2001) ("the trial court should first examine the choice-of-law clause and ascertain

whether the advocate of the clause has met its burden of establishing that the various claims of

putative class members fall within its scope"). Here, the parties dispute the import of the clause "the

laws of the State of New York applicable to contracts executed in and performed entirely within that

State." IBM argues that the language in the provision means that the choice-of-law provision

broadly covers all disputes even if the underlying transaction was performed in another state. 

Cardonet argues that the clause merely modifies the preceding phrase, "the laws of the State of New

York"; thus, the provision only stands for the proposition that New York contract law applies to the

agreement, not any other New York law. The scope of a choice-of-law provision is ordinarily

determined under the law designated in the contract between the parties. Wash. Mut. Bank, 24 Cal.

4th at 916 n.3; Nedlloyd, 3 Cal. 4th at 469 n.7. We therefore consider the scope of the choice-of-law

provision under New York law.2

New York law favors enforcement of choice-of-law provisions. See Triple Z Postal Servs.,

Inc. v. United Parcel Serv., Inc., 2006 WL 3393259, *5 (N.Y. Sup. Ct. 2006) ("[i]t is the policy of

the courts of this State to enforce contractual provisions for choice of law and selection of a forum

for litigation") (citations and internal quotation marks omitted); see also Reger v. Nat'l Ass'n of

Bedding Mfrs. Group Ins. Trust Fund, 372 N.Y.S.2d 97, 114 (N.Y. Sup. Ct. 1975) ("The courts of

this state have recognized, as controlling, contractual provisions pertaining to which state law

governs, where the law chosen bears a reasonable relationship to the transaction."). In Triple Z, the

court in construing a forum selection clause held that because public policy favors enforcement of

forum selection clauses, public policy also supports a broad reading of these clauses. Id. at *7. 

Although the Triple Z court was not construing a choice-of-law provision, it also noted that New

Case 5:06-cv-06637-RMW Document 23 Filed 02/14/07 Page 4 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 3

 It is also undisputed that California law would applicable under the rule of § 188 absent an

effective choice of law provision. 

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND TO STRIKE—No. C-06-06637 RMW

SPT 5

York policy similarly favors enforcement of choice-of-law provisions. Applying this rationale here,

the court concludes that the restrictive reading of the clause proposed by Cardonet would not accord

with policies for interpreting choice-of-law provisions under New York law. Cf. Nedlloyd Lines

B.V. v. Superior Court, 3 Cal. 4th 459, 464 (Cal. 1992) (noting that the enforceability of a choice-oflaw provision is "closely related" to the issue of enforceability of a forum selection provision and

affirming that public policy supports broad enforcement of both). Therefore, the choice-of-law

provision reaches all of plaintiff's claims since the claims as pled seek the benefit of plaintiff's

bargain with IBM and seek damages of the type remedial in contract under New York laws. 

B. Enforceability of Choice-of-Law Provision

Because the basis for federal jurisdiction in this case is diversity, California conflict of laws

principles apply in addressing enforceability of the present provision. See S.A. Empresa De Viacao

Aerea Rio Grandense v. Boeing Co., 641 F.2d 746, 749 (9th Cir. 1981). "In determining the

enforceability of arm's-length contractual choice-of-law provisions, California courts shall apply the

principles set forth in Restatement section 187, which reflects a strong policy favoring enforcement

of such provisions." Nedlloyd, 3 Cal. 4th at 464-65. Restatement (Second) of Conflicts of Law §

187(2) provides in part:

The law of the state chosen by the parties to govern their contractual rights and duties

will be applied, even if the particular issue is one which the parties could not have

resolved by an explicit provision in their agreement directed to that issue, unless either

(a) the chosen state has no substantial relationship to the parties or the transaction and

there is no other reasonable basis for the parties' choice, or (b) application of the law of

the chosen state would be contrary to a fundamental policy of a state which has a

materially greater interest than the chosen state in the determination of the particular

issue and which, under the rule of § 188, would be the state of the applicable law in the

absence of an effective choice of law by the parties.

Here, it is not disputed that the first prong—whether the chosen state has a substantial relationship to

the parties or transaction—is met as IBM is incorporated and headquartered in New York.3

 See

Nedlloyd Lines, 3 Cal. 4th at 467 (finding that a substantial relationship is clearly established where one

of the parties is incorporated and has a registered office in the chosen country). 

Case 5:06-cv-06637-RMW Document 23 Filed 02/14/07 Page 5 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND TO STRIKE—No. C-06-06637 RMW

SPT 6

At issue is the second prong—whether application of New York law in the present case

would be contrary to a fundamental policy of the State of California. Under the second prong, if

there is a fundamental conflict with California law, "the court must then determine whether

California has a materially greater interest than the chosen state in the determination of the particular

issue." Id. at 466 (internal citation and quotation marks omitted). If so, the choice of law provision

is not enforced. Id. Plaintiff argues that application of the second prong warrants application of

California law to its third, fourth, fifth, and seventh claims. 

Plaintiff argues that fundamental California policies are implicated because of relevant

California statutes. Specifically, its fifth claim is brought under Cal. Bus. & Prof. Code § 17200, its

third and fourth claims of fraud and misrepresentation implicate Cal. Civ. Code §§ 1572, 1709, and

1710, and its seventh claim for conversion implicate's California's "long history of forbidding

conversion of property." However, merely because plaintiff's claims might implicate California

statutes is not sufficient to establish that application of New York law to the claims would be

contrary to any of the policies embodied in the statutes. 

In Ribbens Intern'l, S.A. de C.V. v. Transport Intern'l Pool, Inc., 47 F. Supp. 2d 1117, 1122

(C.D. Cal. 1999), the court considered the text and state case law applying the statute at issue in

determining whether a California statute embodied a fundamental California policy and concluded

that it did:

[T]he very text of the statute suggests this conclusion: "Attorney's fees provided for by

this section shall not be subject to waiver by the parties to any contract which is entered

into after the effective date of this section. Any provision in any such contract which

provides for a waiver of attorney's fees is void." Cal. Civ. Code § 1717(a). This language

is mandatory, unavoidable and emphatic. Section 1717(a) is no default provision or

gapfiller, subject to override by the parties. Rather, it represents a basic and fundamental

policy choice by the state of California that nonreciprocal attorney's fees contractual

provisions create reciprocal rights to such fees.

The court then also noted that although the choice-of-law provision dictated that Pennsylvania law

did not provide the same mutuality requirement to one-way attorney fee provisions and therefore

application of Pennsylvania law would conflict with the policy in Cal. Civ. Code § 1717. 

In contrast, here, plaintiff does not argue that application of New York law would conflict

with any fundamental California policies in the statutes at issue. Indeed, plaintiff argues that New

York law recognizes fraud claims, negligent misrepresentation, and conversion (as well as

Case 5:06-cv-06637-RMW Document 23 Filed 02/14/07 Page 6 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND TO STRIKE—No. C-06-06637 RMW

SPT 7

promissory estoppel). Pl.'s Opp'n at 9:12-18. In General Signal Corp. v. MCI Telecommunications

Corp., 66 F.3d 1500, 1506 (9th Cir. 1995), the Ninth Circuit concluded that application of New

York law to fraud claims did not violate California public policy, even if New York law required

fraud to be established by clear and convincing evidence while California only required a showing

by a preponderance of the evidence. Therefore, the court concludes that the choice-of-law provision

is applicable to plaintiff's fraud claim.

In addition, defendant's argument that to the extent application of New York law to fraud

claims does not conflict with fundamental California policy, neither would the application of New

York law to the less culpable negligent conduct applicable to plaintiff's negligent misrepresentation

claim. The court finds defendant's argument persuasive. As noted above, plaintiff agrees that New

York recognizes a claim for negligent misrepresentation. Moreover, plaintiff cites no case which

suggests that application of New York law to a negligent misrepresentation claim would conflict

with fundamental California policy. Finally, although defendant does not make this same argument

as to plaintiff's conversion claim, the court likewise concludes that application of New York law to

plaintiff's conversion claim would not conflict with fundamental California policy. Notably,

plaintiff only relies upon California's "long history of forbidding conversion of property" in arguing

a fundamental California policy is implicated.

Next, defendant argues that application of New York law to plaintiff's fifth claim under

§ 17200 would not conflict with fundamental California policy because New York also has its own

unfair business practices statute which prohibits deceptive and unfair business practices. See N.Y.

Gen. Bus. Law § 349. Plaintiff argues there is a policy conflict because the court in Korea Supply

Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1150 (2003), stated, "the overarching legislative

concern" of § 17200 was "to provide a streamlined procedure for the prevention of ongoing or

threatened acts of unfair competition." Plaintiff's argument is unpersuasive. Whether a § 17200

claim implicates fundamental California policy depends on the predicate violation. Compare Nibeel

v. McDonald's Corp., 1998 WL 547286 at *11 (N.D. Ill. 1998) (concluding that § 17200 claim did

not implicate fundamental California policy so as to bar enforcement of choice-of-law provision

after finding that enforcement of provision as to underlying fraud claim would not implicate

Case 5:06-cv-06637-RMW Document 23 Filed 02/14/07 Page 7 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 4

 Plaintiff did not oppose defendant's argument that the choice-of-law provision is enforceable

as to plaintiff's sixth claim for unjust enrichment. 

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND TO STRIKE—No. C-06-06637 RMW

SPT 8

fundamental California policy) with Application Group, Inc. v. Hunter Group Inc., 61 Cal. App. 4th

881, 907-08 (1998) (concluding that there was a conflict of California policy as to § 17200 claim

after determining that there was a conflict as to underlying statutory claim).

Moreover, the fact that New York law differs from California law does not necessarily

signify that application of New York law would contravene California public policy. See

Sarlot-Kantarjian v. First Pennsylvania Mortgage Trust, 599 F.2d 915, 918 (9th Cir. 1979). 

Similarly, "the mere fact that the chosen law provides greater or lesser protection than California

law, or that in a particular application the chosen law would not provide protection while California

law would, are not reasons for not applying California law. " Medimatch, Inc. v. Lucent Techs., Inc.,

120 F. Supp. 2d 842, 862 (N.D. Cal. 2000). The court therefore concludes that the choice-of-law

provision is enforceable as to all of plaintiff's claims.4

C. Economic Loss Rule

 IBM argues that plaintiff's second through seventh claims are barred by New York's

economic loss rule. New York's economic loss doctrine restricts plaintiffs "who have suffered

'economic loss,' but not personal or property injury, to an action for the benefit of their bargain. If

the damages are the type remedial in contract, a plaintiff may not recover in tort." Carmania Corp.,

N.V. v. Hambrecht Terrell Int'l, 705 F. Supp. 936, 938 (S.D.N.Y. 1989). Where claims allege only

economic loss, the means of redress is an action for breach of contract. A tort action for economic

loss is inappropriate. See Long Island Lighting Co. v. Transamerica Delaval, 646 F. Supp. 1442,

1457 (S.D.N.Y. 1986). Thus, even where a plaintiff has alleged a breach of duty by the defendant

separate and distinct from the duty to perform a contract, a tort claim will nevertheless fail if the

damages sought are recoverable in contract. Id. Under certain circumstances, however, a

contractual party may be liable in tort if its defective performance of contractual services results in

injury to the person or property of the other contracting party. See Netzer v. Continuity Graphic

Assocs., Inc., 963 F. Supp. 1308, 1320 (S.D.N.Y. 1997).

Case 5:06-cv-06637-RMW Document 23 Filed 02/14/07 Page 8 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

 While defendant asserts that "[t]he economic loss rule has been applied to bar tort claims

based on [fraud and deceit and negligent misrepresentation allegations]," the court notes that this the

law is not so settled as defendant would like the court to believe. The general rule under New York

law is that economic loss is not recoverable under a theory of negligence or strict liability," Am. Tel.

& Tel., Co. v. New York Human Res. Admin., 833 F. Supp. 962, 982 (S.D.N.Y. 1993). And, as

defendant asserts, the economic loss rule has also been cited as a basis for dismissing fraud claims,

but the application of this rule under New York law is by no means consistent. Compare, e.g.,

Shred-It USA, Inc. v. Mobile Data Shred, 222 F. Supp. 2d 376, 379 (S.D.N.Y. 2002) (dismissing

fraud claim based on the economic loss doctrine but citing only to authority applying the doctrine to

strict liability and negligence) with In re Ford Motor Corp. Vehicle Paint Litig., 1997 WL 539665,

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND TO STRIKE—No. C-06-06637 RMW

SPT 9

Plaintiff contends that it seeks to recover damages that are not otherwise recoverable in

contract. It claims that it has suffered property loss, specifically that IBM's actions have resulted in

lost business reputation, violation of its intellectual property rights, and the "illegal taking of

Cardonet's property in the conversion cause of action," which constitute damage to Cardonet's

property. Pl.'s Opp'n at 8. The court is unconvinced. First, plaintiff does not meaningfully allege

that its business reputation was damaged, stating that it suffered such damage in the most conclusory

of fashions. Compl. ¶¶ 37, 41 ("As a result of Defendant IBM's wrongful conduct, Plaintiff

CARDONET has suffered and will continue to suffer economic losses, and other general and

specific damages, including but not limited to damages to business reputation, lost profits...."). 

Second, the damage incurred from the alleged violation of intellectual property rights and the

conversion of the software are varieties of damage that are addressed by a breach of contract claim

on a software licensing contract. The parties would have contracted for the rights, however limited,

to use Cardonet's software and conditions for the cessation of its use upon breach of the contract or

termination of the contract. 

Plaintiff also argues that its claims are not based solely upon defendant's breach of contract. 

Plaintiff contends that its second through seventh claims are based upon IBM's representation that it

would pay for the additional SKUs that it allegedly procured above and beyond the terms of the

contract between the parties. Plaintiff submits that it can amend its complaint to clarify this

distinction. The court agrees that the facts alleged may lend themselves to stating tort claims that

may not be barred by the economic loss doctrine. Should Cardonet successfully establish a

transaction that occurred outside of the contract, there may be grounds for tort recovery separate

from those recoverable under the contract.5

 Thus, the court will dismiss plaintiff's second, third,

Case 5:06-cv-06637-RMW Document 23 Filed 02/14/07 Page 9 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

at *6-*7 (E.D. La. Aug. 27, 1997) (stating that "this Court has found no New York authority

applying the economic loss doctrine to an action for fraud" and observing that "New York courts

commonly permit fraud claims seeking recovery for economic injuries to proceed"). 

6

 Because the court concludes that New York law applies, plaintiff's fifth claim under Cal.

Bus. & Prof. Code § 17200 is dismissed with prejudice. 

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND TO STRIKE—No. C-06-06637 RMW

SPT 10

fourth, sixth, and seventh claims with leave to amend to clarify its position that the tort claims do not

arise from IBM's alleged breach of contract.6

 

D. Failure to Plead Fraud Claims with Particularity

Defendant seeks dismissal of plaintiff's third claim (fraud and deceit) and fourth claim

(misrepresentation) for failure to plead with particularity under Federal Rule of Procedure 9(b). The

rule states: "In all averments of fraud or mistake, the circumstances constituting fraud or mistake

shall be stated with particularity." Fed. R. Civ. P. 9(b). The allegations must be "specific enough to

give defendants notice of the particular misconduct which is alleged to constitute the fraud charged

so that they can defend against the charge and not just deny that they have done anything wrong."

Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985).

Plaintiff has agreed to reallege these claims with particularity, thus, plaintiff's third and

fourth claims are dismissed with leave to amend. 

E. Punitive Damages

Defendant's motion to strike plaintiff's demand for punitive damages is granted since the tort

claims are being dismissed. However, because the court has given plaintiff leave to amend the

dismissed tort claims, punitive damages may yet be recoverable.

Case 5:06-cv-06637-RMW Document 23 Filed 02/14/07 Page 10 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND TO STRIKE—No. C-06-06637 RMW

SPT 11

III. ORDER

For the foregoing reasons, the court grants defendant's motion to dismiss and to strike as

follows:

1. Plaintiff's second, third, fourth, sixth, and seventh claims are dismissed with twenty

days' leave to amend to replead under New York law, and to replead with

particularity under Rule 9 where necessary.

2. Plaintiff's fifth claim under California Business and Professions Code section 17200

is dismissed with prejudice.

3. Defendant's motion to strike plaintiff's request for punitive damages is granted with

twenty days' leave to amend.

DATED: 2/14/07

RONALD M. WHYTE

United States District Judge

Case 5:06-cv-06637-RMW Document 23 Filed 02/14/07 Page 11 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND TO STRIKE—No. C-06-06637 RMW

SPT 12

Notice of this document has been electronically sent to:

Counsel for Plaintiff:

Kenneth N. Frucht Kfrucht@aol.com 

Frederick J. Geonetta landglawyers@msn.com 

Thomas Marc Litton tmlitton@compuserve.com 

Counsel for Defendants:

Shon Morgan shonmorgan@quinnemanuel.com, amykuzio@quinnemanuel.com

Joseph Mel Paunovich joepaunovich@quinnemanuel.com 

Counsel are responsible for distributing copies of this document to co-counsel that have not

registered for e-filing under the court's CM/ECF program.

Dated: 2/14/07 SPT

Chambers of Judge Whyte

Case 5:06-cv-06637-RMW Document 23 Filed 02/14/07 Page 12 of 12