Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_14-cv-05264/USCOURTS-cand-3_14-cv-05264-1/pdf.json

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

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

KENTWOOL COMPANY,

Plaintiff,

v.

NETSUITE INC,

Defendant.

Case No. 14-cv-05264-JST 

ORDER GRANTING IN PART AND 

DENYING IN PART MOTION TO 

DISMISS

Re: ECF Nos. 34, 35

Before the Court is Defendant NetSuite, Inc.’s Motion to Dismiss Plaintiff Kentwool 

Company’s Complaint Pursuant to Federal Rule of Civil Procedure Section 12(b)(6), ECF No. 34, 

and Defendant NetSuite Inc.’s Request for Judicial Notice in support of the motion to dismiss, 

ECF No. 35. For the reasons set forth below, the motion to dismiss is granted in part and denied 

in part. The request for judicial notice is granted. 

I. BACKGROUND

For the purpose of deciding the motion to dismiss, the Court accepts as true the following 

factual allegations from the plaintiff’s complaint. ECF No. 1 Ex. A at 8. 

A. Factual History 

Kentwool Company (“Kentwool”) is a textile company headquartered in Greenville, South 

Carolina that “operates a state-of-the-art wool-based yarn spinning plant . . . serving a diversified 

international customer base.” Compl. ¶ 7. NetSuite, Inc. (“NetSuite”) is a software company and 

provider of Enterprise Resource Planning (“ERP”) software. Id. ¶ 8. On or about March 14, 

2013, Kentwool and NetSuite entered into a Subscription Services Agreement pursuant to which 

NetSuite agreed to provide its ERP software to Kentwool over a one-year term from March 18, 

2013 to March 17, 2014. Id. ¶ 10-11. Prior to the parties entering this agreement, NetSuite 

represented to Kentwool on numerous occasions that it had experience in the manufacturing 

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industry and that its software could integrate the management of Kentwool’s manufacturing, 

inventory, purchasing, financial, sales, and shipping processes. Id. ¶ 12. At this time, NetSuite 

knew that the software lacked the functionality to perform as represented. Id. ¶ 14. 

The ERP software failed to operate as represented by NetSuite. Id. ¶ 17. Relying on 

NetSuite’s assurances that it could correct the problems with the software, Kentwool continued to 

pay for consulting services and technical support. Id. ¶ 18. Kentwool ultimately paid NetSuite 

$317,851.26 — significantly more than NetSuite’s original $245,784.65 estimate. Id. On or about 

December 10, 2013, Mark Kent, the president of Kentwool, wrote to NetSuite to express doubt 

about NetSuite’s ability to perform and to demand adequate assurances that NetSuite would 

deliver a functional product. Id. ¶ 20. In response, NetSuite submitted a revised Statement of 

Work with a proposed additional cost of $215,912.00 and requested an extension of the 

implementation period to May 2014. Id. ¶ 21. Because Kentwool had failed to provide assurances 

that it would deliver a functional product and had indicated that implementation would involve 

additional time and expenditures, Kentwool provided notice of termination of its agreement with 

NetSuite and demanded a full refund. Id. ¶ 22. NetSuite did not agree to correct the issues with 

the software at its own expense or to provide a refund. Id. ¶ 25. 

B. Procedural History

On May 27, 2014, Kentwool filed suit in a South Carolina state court, asserting the 

following claims for relief: (1) breach of contract; (2) breach of express warranty; (3) breach of 

implied warranty of merchantability; (4) breach of implied warranty of fitness for a particular 

purpose; (5) fraud/misrepresentation; (6) negligent misrepresentation; (7) violation of South 

Carolina’s Unfair Trade Practices Act; (8) fraud in the inducement; (9) rescission; and (10) unjust 

enrichment/restitution. Compl. ¶¶ 26-95. NetSuite subsequently removed the lawsuit to the 

United States District Court for the District of South Carolina. ECF No. 1. On December 1, 

2014, the District Court granted NetSuite’s motion to transfer venue to the United States District 

Court for the Northern District of California on the basis of a forum selection clause in the 

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contract between the parties.

1

 ECF No. 22. 

NetSuite filed its motion to dismiss and request for judicial notice on January 5, 2015. 

ECF Nos. 34, 35. 

C. Jurisdiction 

The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332. 

II. REQUEST FOR JUDICIAL NOTICE

NetSuite requests that in considering its motion to dismiss, the Court take judicial notice 

of: (A) the March 14, 2013 Subscription Services Agreement between the parties, including two 

associated exhibits (the Estimate/Order Form and NetSuite Professional Services Addendum); 

(B) NetSuite’s Main Terms of Service (incorporated by reference in the Subscription Services 

Agreement); and (C) the March 14, 2013 Shared Statement of Work between the parties. ECF No. 

35. Kentwool does not object to the Court taking judicial notice of either the Subscription 

Services Agreement and its two exhibits or NetSuite’s Main Terms of Service. ECF No. 42 at 2. 

Although Kentwool did file a response objecting to the Court taking judicial notice of the Shared 

Statement of Work because of problems with the version of the document filed by NetSuite, ECF 

No. 42 at 2, the parties have since filed a stipulation providing a new version of the document, 

correcting these deficiencies, ECF Nos. 43, 44. Kentwool has made no other objections to the 

Court taking judicial notice of the Shared Statement of Work. 

A. Legal Standard

Although a court’s review on a motion to dismiss is generally limited to the allegations in 

the complaint, the Court may properly “rel[y] on the doctrine of ‘incorporation by reference’ to 

consider documents that [are] referenced extensively in the complaint and [are] accepted by all 

 

1

In its opposition to the motion to transfer venue, Kentwool argued that because its complaint is 

based on fraudulent inducement, the forum selection clause was unenforceable. ECF No. 22 at 4. 

The court concluded, however, that “[i]n order for [it] to find a forum selection clause invalid due 

to fraud, the fraud must be to the clause itself and not to the agreement as a whole.” Id. at 6. 

Because Kentwool’s arguments concerning fraud related to the entire agreement and not to the 

forum selection clause specifically, the court found that it had failed to meet its burden to prove 

that the forum selection clause should not be enforced due to fraud. Id. It reached no conclusion 

concerning the enforceability of the agreement as a whole. 

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parties as authentic.” Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir. 

2002) (citing In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999), superseded 

by statute on other grounds (“[The incorporation by reference] doctrine permits a district court to 

consider documents whose contents are alleged in a complaint and whose authenticity no party 

questions, but which are not physically attached to the plaintiff’s pleading.” (internal quotation 

marks omitted))). The incorporation by reference doctrine extends 

to situations in which the plaintiff’s claim depends on the contents 

of a document, the defendant attaches the document to its motion to 

dismiss, and the parties do not dispute the authenticity of the 

document, even though the plaintiff does not explicitly allege the 

contents of the document in the complaint.

Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). Under this rule, “a court may look beyond 

the pleadings without converting the Rule 12(b)(6) motion into one for summary judgment.” Van 

Buskirk, 284 F.3d at 980. A court “must take judicial notice if a party requests it and the court is 

supplied with the necessary information.” Fed. R. Evid. 201(c)(2); see Sato v. Wachovia Mortg., 

FSB, No. 11-cv-00810-EJD (PSG), 2011 WL 2784567, at *2 (N.D. Cal. July 13, 2011). 

B. Discussion 

Defendant’s request for judicial notice is granted. Kentwool’s claim depends on the 

contents of the agreement between Kentwool and NetSuite. The parties identify all three 

documents as components of the agreement at issue. ECF No. 34 at 1 n.1; ECF No. 41 at 2 n.1. 

No party contests their authenticity. The first document, the Subscription Services Agreement, is 

extensively referenced in the complaint. See, e.g., Compl. ¶¶ 10-13, 27-30. Although the 

remaining documents are not specifically referenced in the complaint,2 Kentwool’s claim depends

on the contents of the agreement of which these documents were a part. Consequently, these 

documents also fall within the scope of the incorporation by reference doctrine. See Knievel, 393 

F.3d at 1076. 

 

2

The complaint mentions a proposed “revised Statement of Work,” but not the original Statement 

of Work signed by the parties on March 14, 2013. See Compl. ¶ 21; ECF No. 44 at 26.

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III. MOTION TO DISMISS

Defendant NetSuite moves to dismiss the complaint pursuant to Federal Rule of Civil 

Procedure 12(b)(6). ECF No. 34. NetSuite seeks an order dismissing Kentwool’s first cause of 

action without prejudice and Kentwool’s second through tenth causes of action with prejudice. Id. 

A. Legal Standard

A complaint must contain “a short and plain statement of the claim showing that the 

pleader is entitled to relief,” in order to “give the defendant fair notice of what the . . . claim is and 

the grounds upon which it rests.” Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 

544, 555 (2007). “To survive a motion to dismiss, a complaint must contain sufficient factual 

matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 

556 U.S. 662, 678 (2009) (internal quotation marks omitted). “A claim has facial plausibility 

when the plaintiff pleads factual content that allows the court to draw the reasonable inference that 

the defendant is liable for the misconduct alleged.” Id. “Dismissal under Rule 12(b)(6) is 

appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support 

a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th 

Cir. 2008). The Court must “accept all factual allegations in the complaint as true and construe 

the pleadings in the light most favorable to the nonmoving party.” Knievel, 393 F.3d at 1072. 

Fraud claims are subject to a heightened pleading standard. “In alleging fraud or mistake, 

a party must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. 

P. 9(b). “Rule 9(b) demands that 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.” Kearns v. Ford Motor Co., 567 

F.3d 1120, 1124 (9th Cir. 2009) (quoting Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 

2001)). To meet this standard, a “complaint must ‘identify the who, what, when, where, and how 

of the misconduct charged, as well as what is false or misleading about the purportedly fraudulent 

statement, and why it is false.’” Salameh v. Tarsadia Hotel, 726 F.3d 1124, 1133 (9th Cir. 2013) 

(quoting Cafasso, U.S. ex rel. v. General Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 

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2011)). 

B. Discussion

1. Implied Warranties

NetSuite argues that Kentwool’s third and fourth causes of action, for breach of an implied 

warranty of merchantability and breach of an implied warranty of fitness for a particular purpose, 

Compl. ¶¶ 35-42, must be dismissed with prejudice. ECF No. 34 at 3-7. First, NetSuite contends 

that Kentwool has failed to plead that the Uniform Commercial Code (UCC) applies to the 

transaction at issue, and that it does not apply in any event because the services aspect of the 

transaction predominates over the provision of goods. Id. at 3-4. Second, NetSuite argues that 

even if the UCC does apply to provide warranties to Kentwool, the implied warranty of 

merchantability and implied warranty of fitness for a particular purpose were effectively 

disclaimed by the parties when they entered into the contract at issue. ECF No. 34 at 5-7. 

Because the Court agrees that the UCC does not apply to this transaction and the warranties are 

therefore inapplicable, it does not consider NetSuite’s alternative arguments.

The UCC applies to transactions in goods, defined as “all things (including specially 

manufactured goods) which are movable at the time of identification to the contract for sale . . . .” 

Cal. Com. Code §§ 2102, 2105. Because transactions involving software often combine elements 

of both goods and services and “[b]ecause software packages vary depending on the needs of the 

individual consumer, we apply a case-by-case analysis” to determine whether a software 

transaction is covered by the UCC. RRX Indus., Inc. v. Lab-Con, Inc., 772 F.2d 543, 546 (9th Cir. 

1985). Courts look to the essence of the agreement to “determine whether the predominant factor 

or purpose of the contract is rendition of services, with goods incidentally involved, or is rendition 

of goods, with labor incidentally involved.” Simulados Software, Ltd. v. Photon Infotech Private, 

Ltd., No. 5:12-cv-04382-EJD, 2014 WL 1728705, at *5 (N.D. Cal. May 1, 2014); see also Gross 

v. Symantec Corp., No. 12-cv-00154-CRB, 2012 WL 3116158, at *8 (N.D. Cal. July 31, 2012). 

Courts have generally found that “mass-produced, standardized, or generally available 

software, even with modifications and ancillary services included in the agreement, is a good that 

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is covered by the UCC.” Simulados Software, 2014 WL 1728705, at *5 (collecting cases); see, 

e.g., RRX Indus., 772 F.2d at 546 (“Here, the sales aspect of the transaction predominates. The 

employee training, repair services, and system upgrading were incidental to sale of the software 

package and did not defeat characterization of the system as a good.”). On the other hand, courts 

have reached varying conclusions concerning software adapted for specific customer needs. 

Simulados Software, 2014 WL 1728705, at *6 (collecting cases); compare Advent Sys. Ltd. v. 

Unisys. Corp., 925 F.2d 670, 675 (3d Cir. 1991) (“The fact that some programs may be tailored 

for specific purposes need not alter their status as ‘goods’ . . . .”), with Sys. Am., Inc. v. Rockwell 

Software, Inc., No. 03-cv-02232 JF (RS), 2007 WL 218242, at *4 (N.D. Cal. Jan. 26, 2007) 

(concluding that a software agreement was not covered by the UCC where “[t]he essence or thrust 

[was the] development of software from scratch and the granting of a license” and where the 

developer “retain[ed] all ownership rights to the software”). 

Here, Kentwool’s complaint states that the parties entered into an agreement that “required 

Defendant to sell, customize, configure, and, implement its ERP Software for Kentwool’s specific 

needs and uses [and] . . . to provide training and consulting services to enable Kentwool to utilize 

the Software in managing its business needs” over a one year term. Compl. ¶¶ 10-11. The 

Subscription Services Agreement states that NetSuite “shall make the Service available to 

Customer,” and explains that “NetSuite shall host the Service and may update the functionality, 

user interface, usability and other user documentation, training and educational information of, 

and relating to the Service from time to time in its sole discretion . . . .” ECF No. 35, Ex. A ¶ 1. 

The agreement restricts Kentwool from outsourcing, renting, reselling, or sublicensing the 

software. Id. ¶ 3. The licensing agreement is for a term of twelve months, after which the license 

must be renewed. Id. ¶ 4.1. 

The Court concludes that in this particular case, the predominant purpose of the contract is 

the provision of services, and the UCC therefore does not apply. Kentwool did not purchase preexisting software that it could download and retain indefinitely or transfer to others. Rather, it 

contracted to access an online service customized for its needs, subject to updates at any time, and 

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available only for a fixed term. See Simulados Software, 2014 WL 1728705, at *6 (“Where 

software is designed from scratch, or the transaction is mainly for one party's knowledge and skills 

in creating software, the software is often found to be a service rather than a good.”). Because the 

UCC does not apply to this transaction, the implied warranty claims are dismissed without leave to 

amend.3 

2. Fraud and Negligent Misrepresentation

NetSuite next argues that Kentwool’s fifth, sixth, and eighth causes of action — for fraud 

by misrepresentation, negligent misrepresentation, and fraud in the inducement — fail because 

(1) fraud cannot consist of promises contrary to those contained in the parties’ integrated written 

contract; (2) Kentwool has not pleaded justifiable reliance; and (3) in any event, fraud was not 

pleaded with particularity as required by Federal Rule of Civil Procedure 9(b). ECF No. 34 at 

8-13.

a. Parol Evidence Rule 

Kentwool’s fraud and misrepresentation claims involve statements made by NetSuite, both 

before and after the Subscription Services Agreement was signed, concerning NetSuite’s 

experience and the capabilities of its software. The parties’ Subscription Services Agreement and 

Statement of Work contain unambiguous language indicating that the written contract is fully 

integrated. For example, the Subscription Services Agreement contains the following statement:

This Agreement, including all exhibits and/or Estimate/Order 

Forms, shall constitute the entire understanding between Customer

and NetSuite and is intended to be the final and entire expression of 

their agreement. The parties expressly disclaim any reliance on any 

and all prior discussions, emails, RFP’s and/or agreements between 

the parties. There are no other verbal agreements, representations, 

 

3

In its reply brief, Netsuite makes the additional argument that because title never passed from 

Netsuite to Kentwool, no “sale” was consummated under the California UCC, and so the UCC 

does not apply. See ECF No. 45 at 6-8; Cal. Com. Code § 2106. It is unnecessary for the Court to 

reach that argument, however, since the Court concludes that the software at issue is not subject to 

the UCC because it is not a “good.” In any event, the Court does not consider new facts or 

argument made for the first time on reply. “It is inappropriate to consider arguments raised for the 

first time in a reply brief.” Ass'n of Irritated Residents v. C & R Vanderham Dairy, 435 F.Supp.2d 

1078, 1089 (E.D. Cal. 2006). 

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warranties[,] undertakings or other agreements between the parties. 

ECF No. 35 Ex. A ¶ 9. NetSuite seeks to rely on the parol evidence rule, which “generally 

prohibits the introduction of any extrinsic evidence, whether oral or written, to vary, alter or add to 

the terms of an integrated written instrument.” Casa Herrera, Inc. v. Beydoun, 32 Cal. 4th 336, 

343 (2004); see also Riverisland Cold Storage, Inc. v. Fresno-Madera Prod. Credit Ass’n, 55 Cal. 

4th 1169, 1174 (2013) (“[W]hen the parties put all the terms of their agreement in writing, the 

writing itself becomes the agreement. The written terms supersede statements made during the 

negotiations . . . to ensure that the parties’ final understanding, deliberately expressed in writing, is 

not subject to change.”). 

While the parol evidence rule precludes reliance on extrinsic evidence to vary the terms of 

a fully integrated contract, it does permit the use of extrinsic evidence to prove fraud. Cal. Code 

Civ. Proc. § 1856(g). In Riverisland, the California Supreme Court recently reaffirmed “the 

venerable maxim[:] . . . [I]t was never intended that the parol evidence rule should be used as a 

shield to prevent the proof of fraud.” 55 Cal. 4th at 1182 (internal quotation marks omitted). This 

exception has been interpreted to permit both fraud and negligent misrepresentation claims to go 

forward, even in the face of an integration clause. See Thrifty Payless, Inc. v. Americana at 

Brand, LLC, 218 Cal. App. 4th 1230, 1241 (2013) (“[U]nder Riverisland, extrinsic evidence is 

admissible to establish fraud or negligent misrepresentation in the face of the lease’s integration 

clause.”). 

NetSuite seeks to avoid this result by pointing to cases concluding that plaintiffs may not 

assert fraud claims involving promises that contradict the terms of their written agreements. See

Rosenthal v. Great Western Fin. Sec. Corp., 14 Cal. 4th 394, 423 (1996) (negligent failure to 

acquaint oneself with the contents of a written agreement precludes a finding that the contract is 

void for fraud in the execution); Groth-Hill Land Co., LLC v. General Motors LLC, No. 13-cv1362-TEH, 2013 WL 3853160, at *15 (N.D. Cal. July 23, 2013) (plaintiffs are barred from 

introducing alleged oral promises which contradict the terms of the written agreements they 

signed); Crane v. Wells Fargo, No. 13-cv-01932-KAW, 2014 WL 1285177, at *6 (N.D. Cal. Mar. 

24, 2014) (“a fraud claim may not consist of promises that run counter to the written contract”). 

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The reasoning of these cases does not apply here, for two reasons. First, the cases do not 

address situations in which plaintiffs, like Kentwool, attack the validity of the contract. See

Groth-Hill Land Co., 2013 WL 3853160, at *15 (“Plaintiffs are correct that a fraud exception to 

the parol evidence rule permits the use of extrinsic evidence to attack the validity of an integrated 

agreement.”); Riverisland, 55 Cal. 4th at 1183 n.11 (“We expressed no view in Rosenthal on the 

‘validity’ and ‘exact parameters’ of a more lenient rule that has been applied when equitable relief 

is sought for fraud in the inducement of a contract.”); see also May v. Semblant, Inc., No. 13-cv01576-BLF, 2014 WL 3725296, at *4 (N.D. Cal. July 23, 2014) (“Typically, application of the 

fraud exception to the parol evidence rule would be urged by a party to a written contract 

challenging the validity of the written agreement, seeking rescission or damages caused by 

fraudulent inducement . . . ”). Second, Kentwool does not seek to enforce promises that “run 

counter to the terms of the written contract[].” Groth-Hill Land Co., 2013 WL 3853160, at *15. 

Rather, Kentwool’s claims involve misrepresentations concerning the functionality of the ERP 

software NetSuite agreed to provide and NetSuite’s ability to implement the software and correct 

problems as they arose — statements that are consistent with the agreements contained in the 

contract. 

b. Justifiable Reliance

One necessary element of a fraud claim is justifiable reliance on the alleged 

misrepresentation. Lazar v. Superior Court, 12 Cal. 4th 631, 638 (1996). NetSuite contends that 

Kentwool has failed to plead justifiable reliance because its claim that it relied on NetSuite’s precontract and post-contract statements, despite the existence of a fully integrated contract signed by 

two sophisticated parties, is precluded by the California Supreme Court’s decision in Rosenthal. 

ECF No. 34 at 12-13 (citing Rosenthal, 14 Cal. 4th at 419). As discussed above, the court’s

analysis in Rosenthal concerning whether parties may justifiably rely on misrepresentations when 

they do not read their contracts does not apply here. 

In the complaint, Kentwool states:

Based on NetSuite’s superior knowledge of its Software and its 

ability to customize, configure, and implement the Software for 

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Kentwool’s specific needs and uses, Kentwool, who had no actual 

knowledge of the Software’s capabilities, justifiably relied upon

NetSuite’s representations by entering into the Agreement and 

continuing the relationship with NetSuite.

Compl. ¶ 51; see also ¶¶ 65, 82. The Court concludes that these statements are sufficient to plead 

justifiable reliance at this stage. 

c. Rule 9(b) 

Having concluded that Kentwool’s fraud claims are not barred by the parol evidence rule, 

the Court considers NetSuite’s alternate argument that Kentwool has failed to meet the heightened 

pleading requirements for fraud claims. ECF No. 34 at 8; see Fed. R. Civ. P. 9(b). To meet the 

standard, the “complaint must ‘identify the who, what, when, where, and how of the misconduct 

charged, as well as what is false or misleading about the purportedly fraudulent statement, and 

why it is false.’” Salameh, 726 F.3d at 1133 (quoting Cafasso, 637 F.3d at 1055). 

For reasons discussed more fully in Howard v. First Horizon Home Loan Corporation, No. 

12-cv-05735-JST, 2013 WL 6174920 (N.D. Cal. Nov. 25, 2013), the Court concludes that Rule 

9(b) does not apply to claims for negligent misrepresentation. In Howard, the Court explained that 

“the language and underlying policy of Rule 9(b) do not support applying that rule to claims for

negligent misrepresentation . . . . ‘[B]ecause an allegation of negligent misrepresentation suggests 

only that the defendant failed to use reasonable care — an objective standard — it does not result 

in the kind of harm that Rule 9(b) was designed to prevent.’” Id. at *5 (quoting Petersen v. 

Allstate Indem. Co., 281 F.R.D. 413, 418 (C.D. Cal. 2012)). Accordingly, NetSuite’s motion to 

dismiss Kentwool’s negligent misrepresentation claim for failure to satisfy the Rule 9(b) pleading 

requirements is denied. 

Rule 9(b) does, of course, apply to Kentwool’s fifth and eighth causes of action, for 

fraud/misrepresentation and fraud in the inducement. The Court concludes that, as to these claims,

the complaint fails to adequately “identify the who, what, when, where, and how of the 

misconduct” such that defendants have “notice of the particular misconduct” alleged. Salameh, 

726 F.3d at 1133; Kearns, 567 F.3d at 1124. Kentwool alleges the following: 

Prior to Kentwool entering into the Agreement with NetSuite, 

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NetSuite represented to Kentwool that the Software would integrate 

the management of Kentwool’s manufacturing, inventory, 

purchasing, financial, sales and shipping processes, specifically 

including providing visibility and management of blended products 

through the manufacturing process. NetSuite further represented to 

Kentwool that the Software functionality would include, among 

others, advanced financials, item management, production planning, 

manufacturing control, cost control, lot and serial control, multidivision/multi-site solutions, and order management. 

During the implementation process NetSuite represented to 

Kentwool that it would, and did, correct the problems experienced 

by Plaintiff so that the Software would perform as originally 

represented to Kentwool. . . .

NetSuite also represented to Kentwool that complete 

implementation would be achieved on or around October 1, 2013. 

Compl. ¶¶ 44-45, 76. Although Kentwool has indicated what the misrepresentations were, the 

complaint does not describe with particularity which representative or representatives of NetSuite 

made these statements, when they were made, where they were made, or whether they were made 

in person, by phone, or via email or other correspondence. Because Kentwool has not given 

NetSuite adequate notice of “the who, what, when, where, and how of the misconduct” alleged, as 

required by Rule 9(b), its fraud claims are dismissed with leave to amend. 

3. Breach of Contract

“A cause of action for breach of contract requires pleading of a contract, plaintiff’s 

performance or excuse for failure to perform, defendant’s breach and damage to plaintiff resulting 

therefrom.” McKell v. Washington Mut., Inc., 142 Cal. App. 4th 1457, 1489 (2006). “[I]t is 

unnecessary for a plaintiff to allege the terms of the alleged contract with precision,” but “the 

Court must be able generally to discern at least what material obligation of the contract the 

defendant allegedly breached.” Langan v. United Servs. Auto. Ass’n., No. 13-cv-04994-JST, 

2014 WL 4744790, at *7 (N.D. Cal. Sept. 23, 2014). 

NetSuite argues that Kentwool’s claim for breach of contract must be dismissed because 

plaintiff has failed to (1) allege that it performed its obligations under the contract and (2) point to 

the terms of the contract that it claims were breached. ECF No. 34 at 13-14. The Court concludes 

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that Kentwool has adequately pleaded its breach of contract claim. In the complaint, Kentwool 

states that “Kentwool paid NetSuite $317,851.26, satisfying its obligations under the Agreement.” 

Compl. ¶ 28. NetSuite correctly points out the agreement between the parties allocates other 

responsibilities to Kentwool in addition to payment. See, e.g., ECF No. 44 at 17 (describing 

“Customer Roles”). Pleading that Kentwool paid is therefore not necessarily tantamount to 

pleading that Kentwool performed. However, the complaint includes the phrase, “satisfying its 

obligations under the Agreement.” Compl. ¶ 28. Construing the pleadings in the light most 

favorable to Kentwool, the Court therefore finds that the complaint adequately alleges that 

Kentwool satisfied all of its obligations under the contract. 

The Court also finds that Kentwool’s complaint, which described “a valid and existing 

contract for the purchase, customization, configuration, and implementation of NetSuite’s ERP 

software for Kentwool’s specific needs and uses,” adequately alleged that NetSuite breached the 

contract “by supplying defective and non-functional Software, and/or failing to properly configure 

and implement functional software.” Compl. ¶¶ 27, 29; see Ronpak, Inc. v. Elecs. for Imaging, 

Inc., No. 14-cv-04058-JST, 2015 WL 179560, at *5 (N.D. Cal. Jan. 14, 2015) (finding that 

plaintiff adequately alleged that defendant failed to perform under the contract where plaintiff 

alleged that defendant “failed to deliver functioning software;” that defendant was required “to 

deliver functional software as promised in the license agreement, to configure the software and/or 

deliver software that is configurable by either party;” and that defendant “failed to meet any of its 

obligations under the license agreement”). 

For the foregoing reasons, NetSuite’s motion to dismiss the breach of contract term is 

denied. 

4. Express Warranty and South Carolina’s Unfair Trade Practices Act

NetSuite next argues that Kentwool’s second cause of action for breach of an express 

warranty must be dismissed with prejudice because it is based on statements inconsistent with the 

terms of the parties’ fully integrated written contract and is therefore barred by the parol evidence 

rule. ECF No. 34 at 14. Similarly, NetSuite contends that any claim under South Carolina’s 

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Unfair Trade Practices Act is barred by the choice of law provision in the parties’ contract. Id. at 

14-15; see ECF No. 35 Ex. A ¶ 9. Kentwool maintains that it has properly pleaded alternative 

theories of recovery, including that the contract is void due to fraud, rendering NetSuite’s warranty 

disclaimers and the choice of law provision ineffective. ECF No. 41 at 8, 17-18 (citing Compl. ¶¶ 

75-90). Because Kentwool has not adequately pleaded a claim for fraud, the express warranty 

claim and Unfair Trade Practices Act claim, which rely on the written contract being invalid, 

necessarily fail. These causes of action are therefore dismissed with leave to amend. See PlasPro 

GMBH v. Gens., No. 09-cv-04302-PSG, 2011 WL 1000755, at *5 (N.D. Cal. Mar. 21, 2011). 

5. Rescission, Unjust Enrichment, and Restitution 

Kentwool’s rescission, unjust enrichment, and restitution claims also depend on 

Kentwool’s claims that the contract is invalid due to fraud. See Plaspro GMBH, 2011 WL 

1000755, at *5 (“[Plaintiff] has not adequately pleaded a claim for fraud. Therefore, any claim 

based on fraud, including rescission based on fraud, necessarily fails.”); Svenson v. Google, Inc., 

No. 13-cv-04080-BLF, 2014 WL 3962820, at *4 (N.D. Cal. Aug. 12, 2014) (“A plaintiff may not 

plead the existence of an enforceable contract and maintain a quasi-contract claim at the same 

time, unless the plaintiff has pled facts suggesting that the contract may be unenforceable or 

invalid.”). Accordingly, the rescission cause of action is dismissed with leave to amend. 

Kentwool’s claims for unjust enrichment and restitution suffer from the additional defect 

that they duplicate each other. In California “‘[t]here is no cause of action for unjust enrichment. 

Rather, unjust enrichment is a basis for obtaining restitution based on quasi-contract or imposition 

of a constructive trust.’” Clancy v. The Bromley Tea Co., No. 12-CV-03003-JST, 2013 WL 

4081632, at *11 (N.D. Cal. Aug. 9, 2013) (quoting Myers–Armstrong v. Actavis Totowa, LLC,

382 Fed. Appx. 545, 548 (9th Cir.2010) (unpublished). “The doctrine applies where plaintiffs, 

while having no enforceable contract, nonetheless have conferred a benefit on defendant which 

defendant has knowingly accepted under circumstances that make it inequitable for the defendant 

to retain the benefit without paying for its value.” Hernandez v. Lopez, 180 Cal. App. 4th 932, 

938, 103 Cal. Rptr. 3d 376, 380 (2009), as modified (Dec. 28, 2009). If Kentwool amends its 

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complaint, it must eliminate its duplicative unjust enrichment claim. 

CONCLUSION

For the reasons discussed above, Defendant’s motion to dismiss is denied as to Kentwool’s 

breach of contract and negligent misrepresentation claims. The motion is granted with leave to 

amend as to Kentwool’s claims for breach of express warranty, fraud/misrepresentation, violation 

of Unfair Trade Practices Act, fraud in the inducement, rescission, and unjust enrichment/

restitution. The motion is granted with prejudice as to Kentwool’s claims for breach of implied 

warranty of merchantability and breach of implied warranty for a particular purpose. 

Any amended complaint shall be filed within thirty days of the date of this order. 

IT IS SO ORDERED.

Dated: February 18, 2015

______________________________________

JON S. TIGAR

United States District Judge

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