Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_15-cv-04391/USCOURTS-cand-3_15-cv-04391-1/pdf.json

Parties Involved:
CDM Group, Inc.
Cross-defendant
Don Lee
Counter-defendant
Royal Primo Corporation
Counter-defendant
Whitewater West Industries, Ltd
Counter-claimant

Document Text:

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

United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

ROYAL PRIMO CORPORATION, et al.,

Plaintiffs,

v.

WHITEWATER WEST INDUSTRIES, 

LTD,

Defendant.

Case No. 15-cv-04391-JCS 

ORDER GRANTING MOTION TO 

DISMISS

Re: Dkt. No. 16

I. INTRODUCTION

Plaintiffs Royal Primo Corporation (―Royal Primo‖) and Don Lee bring this action seeking 

that the Court declare that Plaintiffs are parties to a contract with Defendant Whitewater West 

Industries, Ltd. (―Whitewater‖) and entitled to a commission of 17% of Whitewater‘s receipts 

from a water park project in Korea. Whitewater moves to dismiss Plaintiffs‘ Complaint for failure 

to state a claim and failure to join a necessary party. The Court finds the matter suitable for 

resolution without oral argument and vacates the hearing set for February 12, 2016. See Civ. 

L.R. 7-1(b). For the reasons stated below, Whitewater‘s Motion is GRANTED, and Plaintiffs‘ 

Complaint is DISMISSED with leave to amend. Plaintiffs may file an amended complaint no later 

than March 4, 2016.1

II. BACKGROUND

A. Facts Alleged

Lee is the president and owner of Royal Primo, and both Lee and Royal Primo ―are 

engaged in the development and planning of amusement parks in South Korea, including water 

parks, and the sourcing of equipment, materials, supplies and service vendors associated with such 

 

1

The parties have consented to the jurisdiction of the undersigned magistrate judge for all 

purposes pursuant to 28 U.S.C. § 636(c).

Case 3:15-cv-04391-JCS Document 26 Filed 02/08/16 Page 1 of 8
2

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

United States District Court

Northern District of California

parks.‖ Compl. ¶ 2. ―Lee assists companies, in particular foreign businesses, in navigating the 

complexities of contracting in South Korea, including government relations, contract negotiations, 

bidding, and outsourcing.‖ Id. ¶ 8. Whitewater, a Canadian corporation, is also engaged in water 

park development, but is not focused specifically on South Korea. See id. ¶ 3.

CDM Group, Inc. (―CDM‖), which is not presently a party to the case, is an amusement 

ride design company based in Valencia, California, and apparently had a working relationship 

with Lee. Id. ¶ 9. After ―confirm[ing] Whitewater‘s credentials‖ through CDM, Lee approached 

Whitewater in 2005 to discuss an opportunity related to a water park in Kangwon Province, South 

Korea. Id. Lee had a strong relationship with the developer of the project and relevant 

government officials. Id.

Lee promoted Whitewater to those contacts ―[f]rom 2005 going forward.‖ Id. ¶ 10. The 

Complaint includes the following allegations regarding a contract entered or confirmed in 2009:

In March 2009, Whitewater both verbally and in writing confirmed 

its contractual relationship with CDM and Lee and as further 

inducement for Lee to continue his efforts promoting the company 

into the Kangwon Land project, agreed to pay 17% commission on 

any future contract reached by Whitewater. Whitewater‘s President 

and CEO, Geoff Chutter, confirmed this agreement multiple times to 

both Lee and CDM. Chutter confirmed the terms again in writing 

on March 12, 2009. See Exhibit A attached hereto.

Id. ¶ 10. The only attachment to the Complaint is a March 12, 2009 letter on Whitewater 

letterhead from Chutter to CDM that reads as follows:

Attention John March

Re Kangwon WaterPark

Dear Sir,

This letter served to confirm that Whitewater West Industries Ltd 

wishes to engage the services of CDM Group Inc. to act as 

Whitewater‘s agent in order to secure the design services and 

product contract for the above mentioned project. To date all of the 

promotional and sales work for this project has been completed by 

CDM in association with Mr. Don Lee of Korea and in order to 

compensate for you [sic] efforts and expenses Whitewater agrees to 

pay a referral fee/commission in the amount of 17% of any future 

contracted amount with WhiteWater [sic]. Such fees shall be paid 

proportionately as payments are received from either CDM or the 

waterpark owner directly. These fees shall be paid directly to CDM 

or to another as directed by CDM.

Case 3:15-cv-04391-JCS Document 26 Filed 02/08/16 Page 2 of 8
3

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

United States District Court

Northern District of California

Should you have any comments or questions on the above please 

feel free to contact the writer.

Best Regards,

[Signature]

Geoff Chutter, C.A.

President & C.E.O.

WHITEWATER WEST INDUSTRIES LTD.

Id. Ex. A.2

In reliance on Whitewater‘s representations, Lee continued to promote Whitewater as a 

supplier for the Kangwon project. Id. ¶ 11. The developer accepted a proposal from non-party 

Dongbu Construction in 2011, and Dongbu Construction selected Whitewater as a supplier of 

parts and services. Id. ¶ 12. Lee believes that Whitewater has received more than $40 million for 

its work on the project. Id. ¶ 13. Whitewater has refused Lee‘s demands that it confirm the terms 

of a contract between Whitewater and Plaintiffs and that Whitewater provide an accounting of its 

payments for the Kangwon project. Id. ¶ 14.

B. Parties’ Arguments

Plaintiffs bring a claim for declaratory judgment, asking that the Court ―declare the rights 

and obligations of Lee, Royal Primo, and Whitewater created under the agreement(s),‖ ―declare 

the agreement(s) as binding and enforceable contract(s) between Lee, Royal Primo, and 

Whitewater,‖ and ―order and direct Whitewater to account to Lee and Royal Primo for amounts 

received and to pay Lee and Royal Primo 17% of those amounts as called for under the 

agreement(s).‖ Id. ¶¶ A−B.

Whitewater argues that the case must be dismissed because the letter attached to the 

Complaint evinces only a contract between Whitewater and CDM, and Plaintiffs cannot bring a 

declaratory relief action related to a contract that they are not parties to. See generally Mot. (dkt. 

16). Whitewater also argues that even if Plaintiffs have any rights under the alleged contract, 

CDM is a necessary party. Id. at 4.

Plaintiffs respond that the allegations of the Complaint adequately establish ―that a 

 

2 Although this letter is not explicitly labeled as Exhibit A, it is the only attachment to the 

Complaint and generally matches the description of ―Exhibit A‖ as cited in Paragraph 10. This 

Order therefore cites the letter as Exhibit A. 

Case 3:15-cv-04391-JCS Document 26 Filed 02/08/16 Page 3 of 8
4

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

United States District Court

Northern District of California

contract exists between Lee and Whitewater for commission to be paid.‖ Opp‘n (dkt. 17) at 2−3. 

According to Plaintiffs, the letter attached to the Complaint ―memorializes certain of the 

contractual elements‖ but is not the entire contract. Id. at 4. Plaintiffs also rely on evidence 

outside the Complaint, specifically a declaration by Lee and an attached email from 2008. Id. at 4 

(citing Lee Decl. (dkt. 19)).

In its Reply, Whitewater argues that Plaintiffs‘ allegations regarding the formation of a 

contract are too conclusory to satisfy the pleading standard of Iqbal and Twombly. Reply (dkt. 21) 

at 1–2. Whitewater also argues that evidence extraneous to the Complaint—Lee‘s declaration and 

the attached email—should be disregarded on a motion to dismiss for failure to state a claim, id. at 

2–3, and notes that Plaintiffs failed to respond to Whitewater‘s assertion that CDM is a necessary 

party, id. at 3.

III. ANALYSIS

A. Legal Standard

A complaint may be dismissed for failure to state a claim on which relief can be granted 

under Rule 12(b)(6) of the Federal Rules of Civil Procedure. ―The purpose of a motion to dismiss 

under Rule 12(b)(6) is to test the legal sufficiency of the complaint.‖ N. Star Int’l v. Ariz. Corp.

Comm’n, 720 F.2d 578, 581 (9th Cir. 1983). Generally, a plaintiff‘s burden at the pleading stage 

is relatively light. Rule 8(a) of the Federal Rules of Civil Procedure states that ―[a] pleading 

which sets forth a claim for relief . . . shall contain . . . a short and plain statement of the claim 

showing that the pleader is entitled to relief.‖ Fed. R. Civ. P. 8(a).

In ruling on a motion to dismiss under Rule 12(b)(6), the court analyzes the complaint and 

takes ―all allegations of material fact as true and construe[s] them in the light most favorable to the 

non-moving party.‖ Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). 

Dismissal may be based on a lack of a cognizable legal theory or on the absence of facts that 

would support a valid theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 

1990). A complaint must ―contain either direct or inferential allegations respecting all the material 

elements necessary to sustain recovery under some viable legal theory.‖ Bell Atl. Corp. v. 

Twombly, 550 U.S. 544, 562 (2007) (citing Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 

Case 3:15-cv-04391-JCS Document 26 Filed 02/08/16 Page 4 of 8
5

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

United States District Court

Northern District of California

1106 (7th Cir. 1984)). ―A pleading that offers  ̳labels and conclusions‘ or  ̳a formulaic recitation 

of the elements of a cause of action will not do.‘‖ Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 

(quoting Twombly, 550 U.S. at 555). ―Nor does a complaint suffice if it tenders  ̳naked 

assertion[s]‘ devoid of  ̳further factual enhancement.‘‖ Id. (quoting Twombly, 550 U.S. at 557). 

Rather, the claim must be ― ̳plausible on its face,‘‖ meaning that the plaintiff must plead sufficient

factual allegations to ―allow[] the court to draw the reasonable inference that the defendant is 

liable for the misconduct alleged.‖ Id. (quoting Twombly, 550 U.S. at 570).

B. Lee’s Declaration Is Improper

Plaintiffs‘ Opposition relies in part on a declaration by Lee and an email attached to that 

declaration. Opp‘n at 4–5; see generally Lee Decl. A motion under Rule 12(b)(6) focuses on the

allegations of the complaint, N. Star Int’l, 720 F.2d at 581, and ―extraneous evidence should not 

be considered in ruling on a motion to dismiss‖ for failure to state a claim. Arpin v. Santa Clara 

Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir. 2001) (citing Branch v. Tunnell, 14 F.3d 449, 

453 (9th Cir. 1994)). Plaintiffs have not identified any authority that would allow the Court to 

consider their extraneous evidence, whether under a doctrine of judicial notice or otherwise. The 

Court therefore disregards Lee‘s declaration and its attachment.

C. Plaintiffs Have Not Plausibly Alleged That They Are Parties to a Contract

It is not clear what state‘s law governs the alleged contract in this case. Because the 

Complaint alleges that ―the contract at issue was created and consummated in this Court‘s 

jurisdiction,‖ the Court assumes for the purpose of this Order that California law applies. See 

Compl. ¶ 5.

Generally, under California law, ― ̳[s]omeone who is not a party to [a] contract has no 

standing to enforce the contract.‖ Gantman v. United Pac. Ins. Co., 232 Cal. App. 3d 1560, 1566 

(1991) (quoting Hatchwell v. Blue Shield of Cal. 198 Cal.App.3d 1027, 1034 (1988)) (alterations 

in original); see also Schulz v. Cisco Webex, LLC, No. 13-CV-04987-BLF, 2014 WL 2115168, at 

*3–5 (N.D. Cal. May 20, 2014) (granting a motion to dismiss where the plaintiff had not 

adequately alleged that she was either a party to the contract or an intended third party 

beneficiary). Plaintiffs do not dispute this basic principle of contract law and do not argue that 

Case 3:15-cv-04391-JCS Document 26 Filed 02/08/16 Page 5 of 8
6

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

United States District Court

Northern District of California

they are intended third party beneficiaries. See generally Opp‘n. The Court therefore examines 

whether Plaintiffs have adequately alleged that they are parties to a contract with Whitewater.

There is no clear allegation, conclusory or otherwise, that Royal Primo was a party to any 

contract. See generally Compl. The Complaint ambiguously defines the word ―Lee,‖ in one 

instance defining it to mean both Don Lee and Royal Primo collectively, and in another instance 

defining it to mean only Don Lee. See id. at 1 (unnumbered introduction and ¶ 1). The remainder 

of the Complaint discusses ―Lee‖ without specifying any involvement of Royal Primo. Because, 

as discussed below, the Complaint does not adequately allege that even Lee himself entered a 

contract with Whitewater, the Court need not address whether allegations regarding ―Lee‖ also 

encompass Royal Primo. If Plaintiffs file an amended complaint, it should resolve that ambiguity.

The Complaint asserts that ―Whitewater and Lee entered into a contract,‖ that ―Whitewater 

both verbally and in writing confirmed its contractual relationship with CDM and Lee,‖ and that 

Whitewater ―agreed to pay a 17% commission on any future contracts.‖ Id. ¶¶ 7, 10. While the 

Complaint includes some details regarding the terms of the purported contract—that Lee would 

―continue his efforts promoting [Whitewater]‖ and Whitewater would pay a 17% commission, id.

¶ 10—it includes almost no factual allegations regarding how the parties allegedly entered the 

contract. It is not clear whether Plaintiffs allege a written or oral contract, or even whether the 

alleged contract was express or implied. See Opp‘n at 2–3, 5 (suggesting that the contract might 

be implied). Plaintiffs allege that Whitewater and its president Chutter ―confirmed‖ the purported 

agreement in 2009, but it is not clear when Plaintiffs believe the contract was actually entered. 

See Compl. ¶ 10. ―A pleading that offers  ̳labels and conclusions‘ . . . will not do,‘‖ and Plaintiffs 

have provided no more than their conclusion on the issue of whether the parties entered a contract. 

Ashcroft, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). The factual allegations of the 

Complaint, without more, do not plausibly support that conclusion.

Plaintiffs‘ conclusion that Lee entered a contract with Whitewater is particularly 

implausible in light of the letter from Chutter attached to the Complaint. The Complaint alleges, 

and the Court takes as true, that Chutter‘s letter ―confirmed the terms‖ of the alleged contract. See 

Compl. ¶ 10. In the letter, Chutter engaged CDM, and confirmed that ―fees shall be paid directly 

Case 3:15-cv-04391-JCS Document 26 Filed 02/08/16 Page 6 of 8
7

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

United States District Court

Northern District of California

to CDM or to another as directed by CDM.‖ Id. Ex. A (emphasis added). If, as the Complaint 

suggests, the letter accurately characterized the alleged contract, then it does not appear that Lee 

was a party, and the contract does not appear to call for any payment to Lee, much less that Lee 

would be entitled to the full 17% commission that the letter states will be paid to CDM.

Plaintiffs argue in their Opposition that the letter does not ―constitute Whitewater‘s 

contract with Lee‖ but instead merely memorialized ―certain of the contractual elements.‖ Opp‘n 

at 4. The two such ―elements‖ noted in the Opposition are that ― ̳all of the promotion and sales 

work for this project as been [sic, ―has been‖ in the original] completed by CDM in association 

with Mr. Don Lee‘‖ and that Whitewater agreed to pay a commission of 17% ―in order to 

compensate for Lee Lee‘s [sic] efforts and expenses.‖ Id. (quoting Compl. Ex. A). Plaintiffs do 

not accurately characterize either the Complaint or the letter. The Complaint alleges that Chutter‘s 

letter ―confirmed the terms,‖ not merely some of the terms. Compl. ¶ 10. And the letter says 

nothing about the commission being intended as compensation for Lee’s efforts and expenses, but 

instead, in clear language that Plaintiffs‘ Opposition fails to address, states that the ―fees shall be 

paid directly to CDM or to another as directed by CDM.‖ Id. Ex. A. There is no allegation that 

CDM directed that fees be paid to Lee. Accordingly, the Complaint does not plausibly allege that 

Whitewater entered a contract with Plaintiffs or agreed to pay Plaintiffs any fees. 

Plaintiffs could, perhaps, allege additional facts that would plausibly support an 

entitlement to relief. The Court accordingly grants Plaintiffs leave to amend.

D. CDM Is Likely a Necessary Party

Failure to join a necessary party can be grounds for dismissal of an action. See Fed. R. 

Civ. P. 12(b)(7); Fed. R. Civ. P. 19. Plaintiffs do no respond to Whitewater‘s argument that CDM 

is a necessary party to this case. See Mot. at 4; Reply at 3.; see generally Opp‘n. 

―[A] party to a contract is necessary, and if not susceptible to joinder, indispensable to 

litigation seeking to decimate that contract.‖ Dawavendewa v. Salt River Project Agricultural

Improvement & Power Dist., 276 F.3d 1150, 1158 (9th Cir. 2002). While Plaintiffs here do not 

seek to ―decimate‖ a contract, they nevertheless ask the Court to interpret a purported contract and 

to declare the parties‘ rights under the contract, including that Plaintiffs are entitled to 17% of 

Case 3:15-cv-04391-JCS Document 26 Filed 02/08/16 Page 7 of 8
8

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

United States District Court

Northern District of California

Whitewater‘s receipts from the Kangwon project. Compl. ¶¶ A, B.

The precise terms of any contract involving Plaintiffs and Whitewater are not clear from 

this Complaint. It appears highly likely, however, that whatever the arrangements were, CDM 

was also involved. See Compl. ¶ 10 (―Whitewater . . . confirmed its contractual relationship with 

CDM and Lee); id. Ex. A (indicating that CDM worked ―in association with‖ Lee and directing 

that fees be paid to CDM). It is also likely that a declaration of Plaintiffs‘ and Whitewater‘s rights 

could either ―impair impede [CDM‘s] ability to protect [its] interest‖ under the purported contract

or ―leave [Whitewater] subject to a substantial risk of incurring double, multiple, or otherwise 

inconsistent obligations.‖ Fed. R. Civ. P. 19(1)(B)(i), (ii). If that is so, Plaintiffs must either join 

CDM as party in their amended complaint or address why the Court should allow the case to 

proceed without CDM.

The Court does not decide on the present Motion whether CDM is a necessary party, 

because that issue will depend on the contract pleaded in the amended complaint. If Plaintiffs do 

not add CDM as a party, Whitewater may raise this issue again on a motion to dismiss the 

amended complaint.

IV. CONCLUSION

For the reasons stated above, Whitewater‘s Motion is GRANTED and Plaintiffs‘ 

Complaint is DISMISSED with leave to amend. If Plaintiffs choose to file an amended complaint, 

they must do so no later March 4, 2016, and must address the deficiencies discussed above. 

Failure to do so may result in dismissal with prejudice.

IT IS SO ORDERED.

Dated: February 8, 2016

______________________________________

JOSEPH C. SPERO

Chief Magistrate Judge

Case 3:15-cv-04391-JCS Document 26 Filed 02/08/16 Page 8 of 8