Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_13-cv-00802/USCOURTS-caed-2_13-cv-00802-1/pdf.json

Parties Involved:
Rahim Hassanally
Defendant
Maverick Auto Group 2, LLC
Defendant
Volkswagen of America, Inc.
Plaintiff
Volkswagen of Fairfield
Defendant

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

VOLKSWAGEN OF AMERICA, INC.,

Plaintiff,

v.

MAVERICK AUTO GROUP 2, LLC dba 

VOLKSWAGEN OF FAIRFIELD and 

RAHIM HASSANALLY,

Defendants.

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Case No. 2:13-CV-00802-JAM-EFB

ORDER DENYING PLAINTIFF’S 

MOTION FOR JUDGMENT ON THE 

PLEADINGS

This matter is before the Court on Plaintiff Volkswagen of 

America, Inc.’s (“Plaintiff”) Motion for Judgment on the Pleadings 

(Doc. #11) against Defendants Maverick Auto Group 2, LLC dba 

Volkswagen of Fairfield (“Defendant Fairfield”) and Rahim 

Hassanally (“Defendant Hassanally”)(collectively “Defendants”) on 

Plaintiff’s Complaint (Doc. #1). Defendants oppose the motion 

(“Opposition”) (Doc. #12).1 Plaintiff filed a Reply to the 

Opposition (Doc. #13). For the following reasons, Plaintiff’s 

motion is DENIED.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff is the exclusive distributor of Volkswagen of 

America vehicles within the United States. On January 12, 2011, 

 1 This motion was determined to be suitable for decision without 

oral argument. E.D. Cal. L.R. 230(g). The hearing was originally 

scheduled for September 25, 2013.

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Plaintiff and Defendant Fairfield entered into a Volkswagen Dealer 

Agreement (“Dealer Agreement”) authorizing Defendant Fairfield as a 

Volkswagen of America Dealer. As part of the Dealer Agreement, 

Defendant Fairfield agreed to construct a new or renovated 

Volkswagen dealership facility by January 12, 2013, that complied 

in full with all of Plaintiff’s requirements for a “White Frame 

Facility.” The Dealer Agreement further provided for a $600,000 

capital contribution from Plaintiff to Defendant Fairfield. 

Defendants allege that Plaintiff also made representations to 

Defendants that the Volkswagen dealership in Napa, California would 

be moved to a location outside Defendant Fairfield’s marketing 

area. Defendants further allege that Plaintiff made 

representations that Defendant Fairfield would be receiving an 

increased allocation of inventory from Plaintiff. Defendants 

allege that these oral representations were part of the January 12, 

2011 agreement between Plaintiff and Defendants.

Also on January 12, 2011, Defendant Hassanally entered into a 

personal guarantee (“Guarantee”) in which he agreed to be liable to 

Plaintiff for all indebtedness of Defendant Fairfield to Plaintiff 

arising out of the Dealer Agreement.

On February 9, 2012, Plaintiff sent Defendants a letter 

reminding them of the upcoming construction deadlines and the need 

to meet those deadlines or face repayment of the capital 

contribution. On March 20, 2012, Plaintiff sent Defendants a 

letter informing them that Defendant Fairfield was in breach of the 

Dealer Agreement due to its failure to meet the interim 

construction deadlines set forth in the agreement. In this same 

letter, Plaintiff agreed to extend two of the interim construction 

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deadlines to accommodate Defendants’ needs. On September 5, 2012, 

Plaintiff sent Defendants a letter in which it granted Defendant 

Fairfield a one-time extension of the final deadline to complete 

construction of the new facility, now requiring that construction 

be completed by June 12, 2013. On October 17, 2012, Plaintiff sent 

Defendants a letter in which Plaintiff expressed concern over 

Defendant Fairfield’s lack of progress towards completion of the 

new facility. Plaintiff also expressed its position that continued 

lack of progress would constitute an anticipatory breach of the 

Dealer Agreement by Defendant Fairfield.

On February 20, 2013, Plaintiff sent Defendants a letter 

requesting adequate assurances that construction of a White Frame 

compliant facility would be completed by June 12, 2013. On March 

6, 2013, Defendant Fairfield responded to Plaintiff’s February 20th 

letter. In this letter, Defendant Fairfield maintained that 

Plaintiff had made representations to Defendants about its plans to 

relocate the Napa dealership outside of the Fairfield marketing 

area, and that the amount of inventory allocated to Defendants’ 

dealership would be increased. Defendant Fairfield’s March 6th 

letter also noted the existence of California Vehicle Code Section 

11713.13, which makes it unlawful for vehicle distributors to make 

unreasonable demands on dealers. Finally, this letter asked 

Plaintiff for an additional extension of the June 12, 2013 

construction deadline.

On March 14, 2013, Plaintiff responded to Defendant’s letter, 

informing Defendant Fairfield that it had failed to provide 

adequate assurances, and giving it until March 25, 2013 to do so. 

On March 22, 2013, Defendants sent Plaintiff a letter, asking for 

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more time and reiterating its arguments regarding the closure of 

the Napa dealership and increased vehicle allocation issues. On 

April 1, 2013, Plaintiff sent Defendants a letter, demanding 

immediate repayment of the $600,000 capital contribution. 

Defendants have not repaid the $600,000 to Plaintiff.

On April 24, 2013, Plaintiff filed the Complaint (Doc. #1) in 

this Court. Plaintiffs’ Complaint includes the following causes of 

action: (1) Breach of Contract against Defendant Fairfield; and 

(2) Breach of Guarantee against Defendant Hassanally.

This Court has diversity jurisdiction under 28 U.S.C. 

§ 1332(a).

II. OPINION

A. Legal Standard

“A judgment on the pleadings is properly granted when, taking 

all the allegations in the non-moving party’s pleadings as true, 

the moving party is entitled to judgment as a matter of law.” 

Ventress v. Japan Airlines, 603 F.3d 676, 681 (9th Cir. 2010) 

(citations omitted). “For purposes of the motion, the allegations 

of the non-moving party must be accepted as true, while the 

allegations of the moving party which have been denied are assumed 

to be false.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 

F.2d 1542, 1550 (9th Cir. 1989). “Judgment on the pleadings is 

proper when the moving party clearly establishes on the face of the 

pleadings that no material issue of fact remains to be resolved and 

that it is entitled to judgment as a matter of law.” Lorbeer v. 

Am. Tel. & Tel. Co., 958 F.2d 377 (9th Cir. 1992). Therefore, “a 

plaintiff is not entitled to judgment on the pleadings when the 

answer raises issues of fact that, if proved, would defeat 

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recovery.” Gen. Conference Corp. of Seventh-Day Adventists v. 

Seventh-Day Adventist Congregational Church, 887 F.2d 228, 230 (9th 

Cir. 1989).

In considering a motion under Rule 12(c), a court must 

generally limit its review to the pleadings themselves. Hal Roach 

Studios, 896 F.2d at 1542. However, “documents attached to the 

complaint and incorporated by reference are treated as part of the 

complaint, not extrinsic evidence” and, thus, may be considered in 

a Rule 12(c) motion. Summit Media LLC v. City of L.A., CA, 530 F. 

Supp. 2d 1084, 1096 (C.D. Cal. 2008) (citing Voest-Alpine Trading 

USA Corp. v. Bank of China, 142 F.3d 887, 891 n.4 (5th Cir. 1998)). 

Extrinsic evidence that is subject to judicial notice may be 

properly considered in a Rule 12(c) motion. Heliotrope Gen., Inc. 

v. Ford Motor Co., 189 F.3d 971, 981 n.18 (9th Cir. 1999).

B. Discussion

1. First Cause of Action

Plaintiff argues that it is entitled to judgment on the 

pleadings on its first cause of action, a breach of contract claim 

against Defendant Fairfield. Plaintiff claims that the breach of 

contract action “only requires the Court to interpret the effect of 

the contract’s undisputed terms.” Mot. at 8 (citing JMP Sec. LLP 

v. Altair Nanotechnologies Inc., 880 F. Supp. 2d 1029, 1038 (N.D. 

Cal. 2012)). Plaintiff further argues that it is undisputed that 

Defendant repudiated the contract by failing to give adequate 

assurances to Plaintiff. Defendants argue that their Answer (Doc. 

#8) “raises several issues of fact and affirmative defenses which, 

if proved would defeat Plaintiff’s recovery.” Opp. at 4. 

Specifically, Defendants maintain that Plaintiff failed to fulfill 

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several material terms of the agreement between Plaintiff and 

Defendant. Furthermore, Defendants argue that their affirmative 

defenses raise material issues of fact and therefore preclude 

judgment on the pleadings. Finally, Defendants argue that a 

provision of the California Vehicle Code restricts Plaintiff and 

incorporates a “reasonableness” standard that is unsuitable for 

judgment on the pleadings. 

a. Material Terms of Contract

Plaintiff first argues that that the breach of contract claim 

against Defendant Fairfield “rests on the four corners” of the 

written contract between Plaintiff and Defendants, and is therefore

amenable to judgment on the pleadings. Mot. at 7. Plaintiff cites 

a case from the Northern District of California for the proposition 

that judgment on the pleadings is proper when the Court must only 

“interpret the effect of [a] contract’s undisputed terms.” JMP 

Sec. LLP v. Altair Nanotechnologies Inc., 880 F. Supp. 2d 1029, 

1038 (N.D. Cal. 2012). However, this case has only minimal 

relevance to the case at hand. Unlike JMP v. Altair, this case 

does not merely require the interpretation of a contract’s 

“undisputed terms.” Id. Rather, Defendants dispute the material 

terms of the contract. Namely, Defendants have alleged that 

Plaintiff’s “relocation of the Napa dealership and the increased 

vehicle allocation” to Defendants’ dealership were both material 

terms of the agreement. Opp. at 5. Accordingly, Defendants have

raised a material issue of fact with regard to the breach of 

contract claim.

Although the written agreement between Plaintiff and 

Defendants included an integration clause, this clause would not 

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necessarily exclude evidence that the agreement included additional 

material terms. Sicor Ltd. v. Cetus Corp., 51 F.3d 848, 859 (9th 

Cir. 1995) (holding that the “inclusion of an integration clause in 

the written contract is but one factor” in determining the 

admissibility of parol evidence); Enrico Farms, Inc. v. H. J. Heinz 

Co., 629 F.2d 1304, 1306 (9th Cir. 1980) (“an integration clause in 

the written agreement is not necessarily conclusive as to the 

parties’ intent to include their entire agreement in writing”). As 

long as the additional terms agreed upon do not contradict the 

terms of the written agreement, such parol evidence may still be 

admissible. Furthermore, when performance of a contract is 

contingent upon the occurrence of a condition precedent, the parol 

evidence rule does not bar the consideration of extrinsic evidence 

in interpreting the contract. Jewel Companies, Inc. v. Pay Less 

Drug Stores Nw., Inc., 741 F.2d 1555, 1565-66 (9th Cir. 1984). 

Thus, Defendants’ allegations that the agreement included 

additional material terms not included in the written contract, or 

that the agreement itself was conditioned on the occurrence of 

extrinsic events, precludes judgment on the pleadings.

Plaintiff’s motion largely focuses on Defendants’ failure to 

provide adequate assurances in response to Plaintiff’s demand 

letters. However, Defendants’ failure to provide adequate 

assurances is inconsequential if Plaintiff did not perform its 

material obligations under the contract. Wall St. Network, Ltd. v. 

New York Times Co., 164 Cal.App.4th 1171, 1178 (2008) (holding that 

the essential elements of a breach of contract claim include either 

“plaintiff’s performance or excuse for nonperformance”). As 

Defendants have alleged that Plaintiff failed to perform the 

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material terms of the contract, Plaintiff is not entitled to 

judgment on the pleadings for its breach of contract claim against 

Defendant Fairfield.

Furthermore, California Commercial Code section 2609(1)

provides that a demand for adequate assurances of performance may 

only be made “[w]hen reasonable grounds for insecurity arise with 

respect to the performance [of the contract.]” Cal. Com. Code 

§ 2609. Although the issue of whether reasonable grounds for 

insecurity exist may be resolved as a matter of law if a party’s 

“conduct [is] sufficiently extreme,” it generally remains a factual 

question. Trust Co. for USL, Inc. v. Wein Air Alaska, Inc., 114 

F.3d 1196 (9th Cir. 1997); West v. State Farm Fire & Cas. Co., 868 

F.2d 348, 350-51 (9th Cir. 1989) (string citing cases which treat 

reasonableness inquiries as “generally issues of fact”). However, 

the Court need not reach this issue because, as discussed above, 

Defendants have alleged that Plaintiff failed to perform several 

material terms of the contract.

b. Affirmative Defenses

Defendants also argue that they have raised material issues of 

fact by pleading affirmative defenses in the Answer (Doc #8). The 

Ninth Circuit has determined that “if the defendant raises an 

affirmative defense in his answer it will usually bar judgment on 

the pleadings.” Gen. Conference Corp. of Seventh-Day Adventists v. 

Seventh-Day Adventist Congregational Church, 887 F.2d 228, 230 (9th 

Cir. 1989). Defendants assert thirteen affirmative defenses in the

Answer. Most notably, Defendants’ Fourth Affirmative Defense 

alleges that the acts or omissions of the Plaintiff are the sole 

proximate cause of the damages referred to in the Complaint. 

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Answer at 7. Specifically, Defendants argue that “representations 

made by [Plaintiff] to Defendants concerning the relocation of the 

Volkswagen dealership in Napa and the amount of inventory that 

Fairfield would be receiving” were the proximate cause of 

Plaintiff’s damages. Opp. at 7. These allegations are 

incorporated into the pleadings through the March 6, 2013 letter 

from Defendants’ counsel to Plaintiff, attached as an exhibit to 

the Complaint. Ex. G, attached to the Complaint, Doc. #1. 

Accordingly, the allegations raised by Defendants’ Fourth 

Affirmative Defense raise a material issue of fact, precluding 

judgment on the pleadings.

c. Statutory Reasonableness Standard

Finally, Defendants argue that the California Vehicle Code 

imposes restrictions on distributors such as Plaintiff. 

Specifically, section 11713.13 of the Code makes it unlawful for a 

distributor to “[r]equire, by contract or otherwise, a dealer to 

make a material alteration, expansion, or addition to any 

dealership facility unless the required alteration, expansion, or 

addition is reasonable in light of existing circumstances, 

including economic conditions.” Cal. Vehicle Code § 11713.13(c). 

Defendants argue that the application of this reasonableness 

standard cannot be addressed by a motion for judgment on the 

pleadings, presumably because it presents a question of fact. 

Plaintiff argues in its Reply that the enforcement of the 

California Vehicle Code is “not an issue properly before the 

Court,” as Plaintiff is “simply seeking repayment of its $600,000.” 

Reply at 3.

Notably, Defendants fail to draw any connection between the 

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alleged statutory violation and the contract at hand. Defendants 

appear to be arguing that a violation of section 11713.13 would 

render the Dealer Agreement void and unenforceable. However, 

Defendants cite no authority for the proposition that a contract in 

violation of section 11713.13 of the California Vehicle Code is 

unenforceable, or that such a statutory violation is a valid 

defense to a breach of contract claim.

The Ninth Circuit has held that a contract which violates a 

licensing statute is nevertheless valid, in the absence of a clear 

indication of legislative intent to void such contracts. Macco 

Const. Co. v. Farr, 137 F.2d 52, 55 (9th Cir. 1943) (holding that 

“where the violation of a licensing statute . . . does not endanger 

the public health or morals . . . and [there is] no declaration 

that a contract in relation thereto is void or its enforcement 

prohibited, such additional punishment should not be imposed unless 

the legislative intent is expressed or appears by clear 

implication”).

In this case, Defendants claim that Plaintiff has violated 

section 11713.13, which falls under a division of the California 

Vehicle Code governing the issuance of licenses to manufacturers, 

transporters, and dealers of motor vehicles. This provision of the 

California Vehicle Code is a licensing statute, and Defendants fail 

to show any legislative intent that contracts in violation thereof 

are void. Id. Therefore, Defendants argument that the 

reasonableness standard contained in section 11713.13 creates a 

material issue of fact as to Plaintiff’s breach of contract claim 

is misplaced.

Nevertheless, Defendants have raised issues of material fact 

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through (1) disputing the material terms of the agreement and 

(2) raising the affirmative defense that Plaintiff’s acts or 

omissions were the sole proximate cause of the damages referenced 

in the Complaint. Therefore, Plaintiff’s motion for judgment on 

the pleadings with regard to the first cause of action is DENIED.

2. Second Cause of Action

Plaintiff argues that it is entitled to judgment on the 

pleadings for its second cause of action, a breach of guarantee 

claim against Defendant Hassanally. Plaintiff maintains that 

Defendant Hassanally’s signature on the Guarantee settles his 

obligation to repay the $600,000 capital contribution to Plaintiff 

upon Defendant Fairfield’s failure to pay. Ex. K, attached to 

Complaint (Doc. #1). Defendants argue that Plaintiff is not 

entitled to judgment on the pleadings for its breach of guarantee 

claim because it is not entitled to judgment on the pleadings for 

its breach of contract claim.

As Defendants argue, Plaintiff has not established that 

Defendant Fairfield is liable to Plaintiff for breach of contract, 

and therefore there is no basis for finding Defendant Hassanally 

personally liable on the breach of guaranty claim. Accordingly, 

Plaintiff’s motion for judgment on the pleadings with regard to the 

second cause of action is DENIED.

III. ORDER

For the foregoing reasons, Plaintiff’s Motion for Judgment on 

the Pleadings is DENIED

IT IS SO ORDERED.

Dated: November 20, 2013

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