Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_22-cv-00997/USCOURTS-caed-2_22-cv-00997-3/pdf.json

Parties Involved:
Courtesy Automotive Group, Inc.
Counter Defendant
Courtesy Subaru of Chico
Plaintiff
Subaru of America, Inc.
Counter Claimant

Document Text:

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

COURTESY AUTOMOTIVE GROUP, INC., 

dba COURTESY SUBARU OF CHICO,

Plaintiff,

v.

SUBARU OF AMERICA, INC. and DOES 

1-50, inclusive,

Defendant.

No. 2:22-cv-00997 WBS DMC

ORDER RE: MOTION TO DISMISS

----oo0oo----

Plaintiff Courtesy Automotive Group, Inc. (“Courtesy”) 

brought this action against defendant Subaru of America, Inc. and 

Does 1-50 (collectively “Subaru”) in California Superior Court, 

County of Butte. (Notice of Removal (Docket No. 1).) Defendant 

removed to this court based on diversity of citizenship. (Id.)

Plaintiff alleges claims for breach of contract (Claims 1 and 4),

breach of the covenant of good faith and fair dealing (Claims 2

and 5), account stated (Claim 3), violation of California Unfair 

Competition Law (“UCL”) (Claim 6), intentional and negligent 

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misrepresentation (Claims 7 and 8), and unjust enrichment (Claim 

9) relating to attorney’s fees that defendant allegedly owes 

plaintiff, and plaintiff’s letter of credit which defendant 

allegedly called in violation of parties’ contract. (First Am. 

Compl. (“FAC”) (Docket No. 24).)

I. Factual Background

The court takes the following factual allegations as 

true and draws every factual inference in plaintiff’s favor.

Plaintiff and defendant are engaged in a longstanding 

commercial dispute about plaintiff’s construction of a Subaru 

dealership facility. This dispute was the subject of a protest 

before the California New Motor Vehicle Board (the “Board”) and a 

related litigation in federal district court. (FAC ¶ 9.)

The parties initially resolved both actions and entered 

into a confidential settlement agreement (id. Ex. 1 Ex. 1

(“Settlement”)) on March 20, 2019. (Id. ¶ 10.) Pursuant to the 

Settlement, the Board maintained jurisdiction over the dispute

solely to enforce the Settlement if required in the future. (Id.

¶ 22 & Ex. 1 ¶ 18.) Also pursuant to the Settlement, parties 

entered into another agreement (“Dealer Agreement”) that, among 

other things, set forth benchmark dates for plaintiff’s

completion of a permanent Subaru facility in Chico, CA. (Id. ¶ 

16; Settlement ¶ 15.) The Settlement was amended twice: first, 

on October, 17 2019, to add a Facility Addendum establishing 

certain construction deadlines (id. Ex. 3 (“Facility Addendum”)); 

and second, on May 21, 2020, to push back the construction 

deadlines after plaintiff missed all previous ones (id. Ex. 4 

(“Facility Amendment”)). 

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Two broad provisions of the Settlement are mainly at 

issue here. The first provides that should any party commence a 

legal proceeding to enforce or interpret the Settlement, the 

prevailing party will recover its attorneys’ fees and costs. 

(FAC ¶ 23; Settlement ¶ 38.) The second provision requires

plaintiff to provide defendant a $750,000 letter of credit in 

order to insure plaintiff’s performance under the Dealer 

Agreement. (Id. ¶ 17; Settlement ¶ 15(b); Facility Addendum ¶ 

3(b).)

Both provisions became relevant once defendant issued 

plaintiff a notice of noncompliance with the Settlement on August 

24, 2020. (FAC ¶ 24.) A week later, plaintiff invoked the 

Board’s continuing jurisdiction to enforce the Settlement and

resolve parties’ dispute. (Id.) The Board appointed an 

administrative law judge (“ALJ”) to determine whether plaintiff 

materially failed to comply with the terms of the Settlement. 

(Id.) Parties appeared before the ALJ for oral argument in 

September and October of 2021. (Id. Ex. 6 (“ALJ Decision”) ¶ 

17.)

While the ALJ proceeding was pending, plaintiff was 

notified on March 8, 2022 by BMO Harris, the bank that issued the 

letter of credit, that defendant was calling the letter. (Id. ¶ 

26.) On March 21, BMO Harris released the letter of credit 

funds to defendant. (Id. ¶ 30.) 

Three days later, on March 24, 2022, the ALJ issued her 

decision. (Id. ¶ 31.) The ALJ Decision found that plaintiff did 

not materially breach the Settlement or Dealer Agreement because

any nonperformance was excused by force majeure events -- namely, 

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the arrival of the COVID-19 pandemic and a devastating fire that 

decimated nearby Paradise, CA and caused significant delays for 

construction projects in Chico. (Id. ¶ 32; ALJ Decision ¶¶ 261-

70.)

On March 28, 2022, plaintiff sent defendant a demand 

for attorneys’ fees and costs pursuant to the Settlement’s 

provision for fees. (FAC ¶ 35.) Defendant refused, and sought 

review of the ALJ decision in Alameda County Superior Court on 

May 5, 2022. (Id. ¶¶ 36, 46-51.) The Alameda court denied 

defendant’s request twice, the second time with prejudice on 

April 4, 2023. (Id. ¶¶ 48-51.) Specifically, the Alameda court 

held in relevant part that the ALJ Decision was properly binding 

and non-appealable pursuant to parties’ own negotiated terms. 

(Docket No. 27-1 Exs. 1-2 (“Alameda Orders”); Settlement ¶ 

28(b).)

On June 22, 2022, shortly after the ALJ Decision

issued, plaintiff filed a separate petition with the Board to 

request a Department of Motor Vehicles (“DMV”) investigation into 

whether defendant violated California law and the terms of the 

Settlement by refusing to provide Subaru signage specifications 

to plaintiff. (FAC ¶ 56; id. Ex. 7 (“DMV Petition”).) The Board 

approved the petition and ordered the DMV to investigate (“DMV 

Investigation”). (Id. Ex. 8.)

II. Procedural History

On April 6, 2023, plaintiff filed its original 

complaint in Butte County Superior Court. (FAC ¶ 37.) On June 

8, defendant removed the action to this court based on federal 

diversity jurisdiction. (Id. ¶ 38.)

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Previously, defendant moved to dismiss, and plaintiff 

moved to file an amended complaint because certain documents 

relevant to the complaint were no longer under seal. (Docket 

Nos. 20, 21.) The court denied defendant’s motion to dismiss 

without prejudice and granted plaintiff’s request to file its 

amended complaint. (Docket No. 23.) Plaintiff filed that 

amended complaint on October 2, 2023. (FAC.) Defendant now 

moves to dismiss the amended complaint. (Mot. (Docket No. 25).)

III. Legal Standard

Federal Rule of Civil Procedure 12(b)(6) allows for 

dismissal when the plaintiff’s complaint fails to state a claim 

upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). 

The inquiry before the court is whether, accepting the 

allegations in the complaint as true and drawing all reasonable 

inferences in the plaintiff’s favor, the complaint has alleged 

“sufficient facts . . . to support a cognizable legal theory,” 

Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001), and thereby 

stated “a claim to relief that is plausible on its face,” Bell 

Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In deciding 

such a motion, all material allegations of the complaint are 

accepted as true, as well as all reasonable inferences to be 

drawn from them. Id.

The court “need not accept as true legal conclusions or 

‘[t]hreadbare recitals of the elements of a cause of action, 

supported by mere conclusory statements.’” Whitaker v. Tesla 

Motors, Inc., 985 F.3d 1173, 1176 (9th Cir. 2021) (quoting 

Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009)).

IV. Discussion

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Plaintiff’s claims can generally be sorted into two 

categories: those relating to attorneys’ fees (Claims 1-3), and

those relating to the letter of credit (Claims 4-9).

A. Attorneys’ Fees

1. Breach of Contract (Claim 1)

Plaintiff’s breach of contract claim for unpaid 

attorneys’ fees has two different factual predicates: the ALJ 

proceeding, and plaintiff’s petition to the DMV for an 

investigation.

(i) ALJ Proceeding

Plaintiff alleges that defendant is in breach of a 

contractual promise to pay for plaintiff’s legal fees related to 

the ALJ proceeding. That alleged promise is set forth in 

Paragraph 38 of the Settlement, which provides that “[s]hould it 

become necessary for any Party to this [Settlement] to commence a 

legal proceeding for the purpose of enforcing or interpreting the 

terms of this [Settlement], the prevailing party in such action 

shall be entitled to recover its reasonable attorneys’ fees and 

costs incurred for prosecuting or defending the action.”1 

(Settlement ¶ 38.) 

Plaintiff pleads facts sufficient to sustain its breach 

1 Defendant argues that Paragraph 11 of the Settlement 

should apply, not Paragraph 38. Paragraph 11 states that “Both 

Parties acknowledge and agree that each party is solely 

responsible for its own attorneys’ fees, costs and expenses in 

all circumstances, including the Lawsuit and the Protest.” 

(Settlement ¶ 11.) Defendant’s proffered interpretation would 

render Paragraph 38 entirely superfluous. Therefore, the court 

determines Paragraph 11 more naturally applies to fees incurred 

in the Board protest and lawsuit preceding the Settlement.

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of contract claim at this stage. Black’s Law Dictionary defines 

“legal proceeding” as “Any proceeding authorized by law and 

instituted in a court or tribunal to acquire a right or to 

enforce a remedy.” Black's Law Dictionary (11th ed. 2019). The 

ALJ proceeding was a legal proceeding2 pursuant to Paragraph 38

for the following reasons. The ALJ proceeding was designed and 

entered into pursuant to the parties’ own negotiated agreement. 

(Settlement ¶ 28.) It was further authorized by the Board 

pursuant to its continuing jurisdiction over the parties’ Board 

Protest. (Id. ¶ 28(b).) Its purpose was to determine whether 

defendant had a right to terminate plaintiff’s Subaru franchise 

due to plaintiff’s alleged non-compliance with the Settlement 

terms. (Id. ¶ 28.) It had all the hallmarks of an adjudicative

process, as it featured the live testimony and examination of 

witnesses, extensive briefing, discovery, deposition 

designations, and seven days of live hearing before the ALJ. 

(See generally FAC Ex. 6 (“ALJ Decision”).) The ALJ’s decision 

also involved the “appl[ication of] the common law of contracts 

to interpret the text of a stipulated decision in order to 

determine whether specified conditions have been met,” as 

2 Parties focus much of their briefing on whether the ALJ 

proceeding was an “action on a contract” pursuant to California

Civil Code § 1717. However, the relevant question is whether the 

ALJ proceeding was a legal proceeding, not whether it was an

“action on a contract” pursuant to Section 1717. Even if Section 

1717 did not apply to the ALJ proceeding, as defendant argues,

nothing precludes the parties from setting by contract the 

measure and mode of counsels’ compensation. See Cal. Civ. Proc. 

Code § 1021 (“the measure and mode of compensation of attorneys 

and counselors at law is left to the agreement, express or 

implied, of the parties”).

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confirmed by the Alameda County Superior Court upon defendant’s 

appeal of the ALJ decision to that court. (Docket 27-1 Ex. 1 

(“Alameda Decision I”) at 7.)3 Finally, plaintiff was the 

prevailing party regarding whether the set of facts upon which

defendant rested its August 24, 2020 Notice of Non-Compliance

constituted a material breach of the Settlement, thereby

justifying the termination of plaintiff’s Subaru franchise. The 

ALJ Decision concluded no, which pursuant to parties’ agreement 

is a “binding, non-appealable determination,” i.e., “a final, 

binding settlement of the matter at issue [that waives] any and 

all recourse, right of action, or appeal with respect to the 

resulting ruling . . . .”4 (Settlement ¶ 28(b)-(c).) This

finality was further confirmed by the Alameda County Superior 

Court, which twice held that the ALJ had lawful jurisdiction to 

determine the existence of a material breach of the Settlement

and that the parties, by mutual consent, waived any right to 

3 See also id. at 4 (“The Court is particularly mindful 

of the fact that the parties elected to adjudicate the dispute 

before one of the Board’s ALJ’s -- an open and public process --

and not via private, confidential, and binding arbitration. The 

parties’ Agreement sought to treat the ALJ like a private 

mediator . . . . For better or worse, the parties lack the power 

to transform an ALJ into a private arbitrator.”).

4 Defendant argues that plaintiff was not the prevailing 

party because the ALJ Decision was issued “without prejudice” and 

prevented defendant from terminating plaintiff’s Subaru franchise 

“at this time.” (Mot. at 20 (citing ALJ Decision Conclusion).) 

However, the ALJ Decision is most sensibly read to preserve 

defendant’s right to terminate the franchise on different facts, 

in a different proceeding. This accords with the nonappealability of the ALJ Decision as provided by the parties’ own 

contract (see Settlement ¶ 28(c)) and by the Alameda County 

Superior Court’s denial, with prejudice, of defendant’s appeal of 

the ALJ Decision.

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appeal that determination. (See generally Alameda Decision I; 

Docket 27-1 Ex. 2 (“Alameda Decision II”).) The ALJ proceeding 

therefore is a legal proceeding whose resolution requires the 

losing party to pay fees and costs of the prevailing party --

namely, plaintiff.

The complaint therefore alleges sufficient facts to 

support a viable breach of contract claim on unpaid attorneys’ 

fees relating to the ALJ proceeding. Accordingly, the court will 

not dismiss this claim on this basis.

(ii) DMV Petition and Investigation

Plaintiff also seeks attorneys’ fees relating to a 

separate Department of Motor Vehicles (“DMV”) petition that it 

filed on June 22, 2022, requesting the DMV to investigate whether 

defendant violated certain provisions of the Vehicle Code. (FAC 

¶¶ 56-59.)

With regard to this petition, plaintiff pleads no facts 

as to a “prevailing Party” under Paragraph 38. Plaintiff appears 

to argue that the DMV’s grant of an investigation into 

plaintiff’s allegations (FAC Ex. 8) alone renders it a prevailing

party. However, the mere grant of the investigation does not 

address the merits of plaintiff’s allegations; the 

investigation’s findings will do that. See The Travelers Indem. 

Co. v. Lara, 84 Cal. App. 5th 1119, 1139 (7th Dist. 2022) 

(prevailing “constitutes a final determination on the merits of 

[a] challenge . . . , not simply a procedural victory in an 

ongoing lawsuit”). Therefore, plaintiff has not sufficiently 

alleged a breach of a contractual promise to perform.

Accordingly, the court will dismiss plaintiff’s breach 

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of contract claim to the extent that plaintiff requests fees and 

costs incurred in relation to the DMV petition and investigation. 

The court will otherwise deny defendant’s motion to dismiss as to 

this claim. Plaintiff may amend its complaint to allege facts 

regarding the prevailing party in the DMV dispute, if it is able 

to do so.

2. Breach of the Covenant of Good Faith and Fair 

Dealing (Claim 2)

If a claim for breach of the implied covenant of good 

faith and fair dealing merely restates a breach of contract, and 

further seeks the same remedy from the same allegations, it “may 

be disregarded as superfluous as no additional claim is actually 

stated.” Sprint Spectrum Realty Co., LLC v. Hartkopf, No. 19-CV03099-JSC, 2021 WL 1839705, at *6 (N.D. Cal. May 7, 2021) (citing 

Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d 

1371, 1395 (2d Dist. 1990)).

Plaintiff’s implied covenant claim is a near-verbatim 

recitation of the allegations supporting its breach of contract 

claim, down to the dollar amount in remedies sought. (Id. ¶¶ 70-

83; cf. id. ¶¶ 60-69.) It is therefore superfluous. 

Accordingly, the court will dismiss Claim 2. Dismissal of this 

claim is with prejudice, as it is wholly duplicative of 

plaintiff’s breach of contract claim.

3. Account Stated (Claim 3)

The court will also dismiss plaintiff’s account stated 

claim with prejudice. “An ‘account stated’ is ‘an agreement, 

based on prior transactions between the parties, that all items 

of the account are true and that the balance struck is due and 

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owing from one party to the other.’” Martini E Ricci Iamino 

S.P.A.--Consortile Societa Agricola v. Trinity Fruit Sales Co., 

30 F. Supp. 3d 954, 976 (E.D. Cal. 2014) (Ishii, J.) (citing 

S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1091 (9th Cir. 

1989)). It “constitutes a new contract which supersedes and 

extinguishes the original obligation . . . . [A] debt which is 

predicated upon the breach of the terms of an express contract 

cannot be the basis of an account stated.” Id. at 976-77 

(citations omitted). 

What plaintiff alleges that defendant “impliedly agreed 

it would pay” (FAC ¶ 89) is in fact set forth as an express 

contractual term, whose applicability parties now contest. 

(Settlement ¶ 38.) Plaintiff alleges no facts of a subsequent 

superseding agreement, implied or otherwise, by which defendant 

acknowledged an outstanding balance that it owes to plaintiff --

plaintiff’s every allegation regarding its breach of contract 

claim in fact suggests the exact opposite. The court will 

therefore dismiss Claim 3 with prejudice. 

B. Calling the Letter of Credit

The ALJ Decision found that plaintiff had not 

materially breached the Settlement. Plaintiff argues that this 

precludes defendant from calling the letter of credit based on 

the same facts examined by the ALJ. Defendant disagrees, arguing 

that the ALJ decision only precluded defendant from terminating 

plaintiff’s franchise on the same facts, but did not otherwise 

prevent defendant from calling the letter of credit.

Pursuant to the Settlement, both parties were required 

to execute a new Dealer Agreement. (Settlement ¶ 15.) The 

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Dealer Agreement had to include a facility addendum, one of whose 

terms required plaintiff to provide “a $750,000 letter of credit 

or performance bond to insure [plaintiff’s] performance on its 

commitment to the new ground-up facility on the [new Subaru 

facility].” (Id. ¶ 15(b).) The parties duly executed the 

Facility Addendum in May 2019, which set forth various 

construction benchmarks and included the letter of credit 

provision. (Facility Addendum ¶ 3(b).) The Facility Addendum 

also incorporated all terms of the Settlement. (Id. ¶ 5.) 

Plaintiff obtained the letter of credit from BMO Harris 

on June 22, 2020. (See FAC Ex. 5 (“Letter of Credit”).) 

Defendant could call the letter by writing to BMO Harris the 

following: “Courtesy Automotive Group, Inc. has failed to fulfill 

its obligations pursuant to the Facility Addendum to the Subaru 

Dealer Agreement between [plaintiff and defendant]. Therefore, 

we are drawing [upon the letter].” (Letter of Credit ¶ 1.)

1. Breach of Contract (Claim 4)

The court must determine whether any provisions of the 

Settlement and incorporated documents limit defendant’s ability 

to call the letter of credit.

Paragraph 3 of the Facility Addendum permits plaintiff 

to conduct Subaru operations at a temporary facility, on certain 

conditions. (Facility Addendum ¶ 3.) One of those conditions 

relates to the letter of credit: “Dealer provides a $750,000 

letter of credit or performance bond . . . to insure Dealer’s 

performance on its commitment to construct the Permanent 

Facility.” (Id. ¶ 3(b).) No other provision refers to the 

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letter of credit.5

Paragraph 21 of the Settlement is a force majeure 

provision: “Should [] an event of force majeure take place, 

[defendant] shall extend the time periods . . . to allow for 

delays incurred as a result of the event of force majeure.” 

(Settlement ¶ 21.) 

Put together, these two provisions prohibit defendant 

from calling the letter of credit based on plaintiff’s delay 

caused by a force majeure event. The letter of credit was issued 

to insure plaintiff’s performance on constructing a permanent 

Subaru facility, subject to the benchmark dates that were set 

forth in the Facility Addendum and Facility Amendment. Or, as 

defendant puts it, “the assurance sought [by the letter of 

credit] was the timely construction of a complaint Subaru 

dealership.” (Mot. at 23.) However, the force majeure provision 

of the Settlement requires defendant to change what “timely” is

5 Defendant asserts that it has an independent right to 

call the letter of credit because of the following statement in 

the Facility Amendment: “[S]hould the facility not be completed 

by the agreed upon date, [Defendant] will execute the Letter of 

Credit or Performance Bond that secures this amendment.” (Mot. 

at 22; Facility Amendment at 1.) However, this is a statement of 

intent, not a provision in the parties’ agreement. The Facility 

Amendment comprises a letter from defendant to plaintiff, whose 

opening paragraphs contain prefatory statements about 

construction benchmarks that plaintiff had missed to date. 

(Facility Amendment at 1.) This prefatory section also contains

the statement in question. Only after that does the letter then

state: “Your Agreement is amended as follows: [various 

adjustments to benchmark dates].” (Id.) The letter concludes: 

“Please acknowledge your agreement with the terms of this 

amendment with your signatures.” (Id. at 2.) Only those

amendments, agreed to by plaintiff, are integrated into parties’ 

agreement.

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to account for delays caused by force majeure events. Parties do 

not dispute that plaintiff’s delays were caused by force majeure 

events. (See generally ALJ Decision.) The Settlement therefore 

requires defendant to extend the deadlines in the Facility 

Amendment to accommodate for the delays, and precludes defendant 

from triggering the letter of credit based on delays caused by 

force majeure events.6 

Accordingly, plaintiff sufficiently alleges a breach of 

contract based on defendant’s call on the letter of credit.

2. Breach of the Covenant of Good Faith and Fair 

Dealing (Claim 5)

As is the case with plaintiff’s breach of the covenant 

of good faith and fair dealing claim premised on the non-payment 

of attorneys’ fees, this claim too merely restates the same 

allegations and remedies sought by plaintiff’s cognate breach of 

contract claim. Accordingly, the court will dismiss this claim 

with prejudice.

3. Unfair Competition Law (Claim 6)

Not every plaintiff may bring a UCL claim. 

6 Defendant argues that plaintiff’s breach of contract 

claim is premised on California Commercial Code § 5110, which 

provides that a beneficiary of a letter of credit warrants to the 

applicant that calling the letter does not violate any agreements 

between them. Cal. Comm. Code § 5110. Defendant then argues 

that Section 5110 is inapplicable because plaintiff contracted 

with BMO Harris, a Canadian bank, and therefore Canada law and 

International Standby Practices 1998 should apply instead of 

California law. (Mot. at 22-25.) This argument fails. The 

present dispute is between plaintiff and defendant, not plaintiff 

and BMO Harris. Further, any alleged breach is premised on what 

the contract between plaintiff and defendant permits and forbids; 

the validity of the letter of credit or the meaning of any of its 

terms is not in dispute here.

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“[C]orporate plaintiffs face an uphill battle. When a UCL claim 

is based on a contract that does not involve the public or 

individual consumers, a corporate plaintiff cannot use the 

statute for the relief it seeks.” Hale Bros. Inv. Co., LLC v. 

StudentsFirst Inst., No. 2:16-CV-02284-JAM-EFB, 2017 WL 590255, 

at *10 (E.D. Cal. Feb. 14, 2017) (citing Linear Tech. Corp. v. 

Applied Materials, Inc., 152 Cal. App. 4th 115, 135 (6th Dist. 

2007)). This is because “[t]he UCL was enacted to protect both 

consumers and competitors by promoting fair competition in 

commercial markets for goods and services. [. . .] The central 

issue presented under the UCL is whether the public at large, or 

consumers generally, are affected by the alleged business 

practice of defendants. Thus, a UCL claim fails if it lacks any 

connection to the protection of fair competition or the general 

public.” Sacramento E.D.M., Inc. v. Hynes Aviation Indus., Inc., 

965 F. Supp. 2d 1141, 1154 (E.D. Cal. 2013) (England, J.)

(citations omitted). 

Here, plaintiff’s UCL claim arises out of its business 

relationship with defendant and does not appear to involve the 

public in general or individual consumers who were harmed by 

defendant’s alleged practices. The complaint is also devoid of 

any allegations that parties are competitors, or that defendant’s

alleged practices had a negative effect on competition. The only 

injury alleged in plaintiff’s sixth claim is the amount of the 

letter of credit and attorneys’ fees. (Compl. ¶¶ 161-64.) 

Nothing in the complaint suggests that individual consumers or 

the public at large were harmed as a result of defendant’s

alleged wrongdoing. Because the complaint, as pled, fails “to 

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establish the requisite public or individual consumer interest as 

required under California law,” it fails to state a viable UCL 

claim. See In re Webkinz Antitrust Litig., 695 F.Supp.2d 987, 

998–99 (N.D. Cal. 2010).

Accordingly, the court will dismiss plaintiff’s UCL 

claim. Dismissal will be without prejudice; plaintiff may allege 

additional facts regarding harm to the public at large or 

consumers generally if it is able to do so.

4. Intentional and Negligent Misrepresentation

(Claims 7 and 8)

Plaintiff’s claims for intentional and negligent 

misrepresentation are premised on allegations that defendant 

misled BMO Harris about whether plaintiff failed to meet its 

obligations under parties’ agreement. (Compl. ¶¶ 167, 187.)

Alternatively, plaintiff argues that defendant made a 

misrepresentation to plaintiff directly by way of California 

Commercial Code § 5110, which requires the beneficiary of a 

letter of credit (here, defendant) to warrant to the applicant 

(here, plaintiff) that calling the letter does not violate any 

agreement between the applicant and beneficiary. Cal. Com. Code 

§ 5110(a)(2).7 (Compl. ¶ 170.)

Either way, plaintiff fails to sufficiently allege 

plaintiff’s own reliance on defendant’s alleged 

misrepresentation, which is a core element to both intentional 

7 Defendant reiterates its choice of law argument on the 

inapplicability of Section 5110 against plaintiff’s 

misrepresentation claims. (Docket No. 28 at 11-12.) The 

argument fails for the same reasons addressed above. (See supra, 

at 14 n.7.)

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and negligent misrepresentation claims. See PEO Experts CA, Inc. 

v. Engstrom, No. 217-CV-00318-KJM-CKD, 2018 WL 3817561, at *4 

(E.D. Cal. Aug. 10, 2018) (citing Engalla v. Permanente Med. 

Grp., Inc., 15 Cal. 4th 951, 974-75 (1977)) (elements of 

intentional misrepresentation); Yamauchi v. Cotterman, 84 F. 

Supp. 3d 993, 1018 (N.D. Cal. 2015) (citing Ragland v. U.S. Bank 

Nat. Assn., 209 Cal. App. 4th 182, 196 (4th Dist. 2012))

(elements of negligent misrepresentation).

While a misleading statement to a third party can 

occasion a claim for misrepresentation, a plaintiff still must 

show that it received, however indirectly, and ultimately relied 

on the substance of a defendant’s misleading statements. See, 

e.g., Carlin v. DairyAmerica, Inc., 978 F. Supp. 2d 1103, 1113-15 

(E.D. Cal. 2013) (Ishii, J.) (substance of material fact 

ultimately reached plaintiff and changed conduct); Jones v. AIG 

Risk Mgmt., Inc., 726 F. Supp. 2d 1049, 1058 (N.D. Cal. 2010) 

(“But even where an indirect misrepresentation is involved, there 

must still be reliance, and the reliance must be on the part of 

the indirect recipient of the misrepresentation.”) (citing Mirkin 

v. Wasserman, 5 Cal. 4th 1082, 1096 (1993) (stating that, “[a]s 

the language of the Restatement indicates, a plaintiff who hears 

an alleged misrepresentation indirectly must still show 

‘justifiable reliance upon it’”)).

Here, plaintiff fails to allege any facts showing that 

plaintiff changed its conduct or otherwise demonstrated any kind 

of reliance on defendant’s alleged communication to BMO Harris. 

Plaintiff simply alleges that it was harmed by defendant’s 

misrepresentation to BMO Harris. Reliance is clearly alleged as 

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to BMO Harris (it released the letter of credit funds based on 

defendant’s representation to it that plaintiff breached the 

Settlement), but entirely missing as to plaintiff.

Accordingly, the court will dismiss plaintiff’s 

intentional and negligent misrepresentation claims without 

prejudice.

5. Unjust Enrichment (Claim 9)

Unjust enrichment is an “action in quasi-contract, 

which does not lie when an enforceable, binding agreement exists 

defining the rights of the parties.” Paracor Fin., Inc. v. Gen. 

Elec. Cap. Corp., 96 F.3d 1151, 1167 (9th Cir. 1996); see also

Smart v. Nat'l Collegiate Athletic Ass'n, No. 1:23-CV-00425 WBS 

KJN, 2023 WL 4827366, at *8 (E.D. Cal. July 27, 2023) (“a 

plaintiff cannot sustain a claim under . . . unjust enrichment[]

where there is an enforceable contract”). 

Here, neither party disputes the existence of a binding 

contract. The facts and damages that plaintiff alleges, and the 

relief plaintiff seeks through this claim, are already

encompassed by plaintiff’s breach of contract claim regarding the 

letter of credit. 

Accordingly, the court will dismiss this claim with 

prejudice.

IT IS THEREFORE ORDERED that defendant’s motion to 

dismiss (Docket No. 25) be, and the same hereby is, DENIED as to 

Claim 1 to the extent that plaintiff alleges attorneys’ fees 

incurred in relation to the ALJ proceeding. It is otherwise 

GRANTED as to Claim 1 with leave to amend.

IT IS FURTHER ORDERED that defendant’s motion to 

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dismiss be, and the same hereby is, DENIED as to Claims 4, and 

GRANTED as to Claims 2, 3, 5, 6, 7, 8, and 9. Claims 2, 3, 5, 

and 9 are dismissed with prejudice. Claims 6, 7, and 8 are 

dismissed without prejudice.

Plaintiff has fourteen days from the date of this order 

to file an amended complaint, if it can do so consistent with 

this Order.

Dated: December 14, 2023

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