Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_15-cv-04391/USCOURTS-cand-3_15-cv-04391-2/pdf.json

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

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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 FIRST AMENDED 

COMPLAINT

Re: Dkt. No. 32

I. INTRODUCTION

Plaintiffs Royal Primo Corporation (“Royal Primo”) and Don Lee bring this action 

alleging that Defendant Whitewater West Industries, Ltd. (“Whitewater”) agreed to pay Plaintiffs 

a 17% commission for work undertaken to secure Whitewater a contract for construction of water 

park in South Korea, but failed to pay after Plaintiffs completed their work and Whitewater 

secured the contract. The Court previously dismissed Plaintiffs‟ original Complaint for failure to 

plausibly state a claim on which relief could be granted. Order Granting Mot. to Dismiss 

(“Order,” dkt. 26).1 Plaintiffs have now filed a First Amended Complaint (“FAC,” dkt. 28), and 

Whitewater again moves to dismiss. The Court held a hearing on April 29, 2016. For the reasons 

stated below, Whitewater‟s Motion is GRANTED, and Plaintiffs‟ First Amended Complaint is 

DISMISSED with leave to further amend. Plaintiffs may file a second amended complaint no 

later than May 20, 2016.2

 

1

Royal Primo Corp. v. Whitewater W. Indus., Ltd., No. 15-CV-04391-JCS, 2016 WL 467467 

(N.D. Cal. Feb. 8, 2016). Citations herein to page numbers in the previous Order refer to the 

version filed in the Court‟s ECF docket.

2

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 38 Filed 04/29/16 Page 1 of 7
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II. BACKGROUND

A. Original Complaint and Dismissal Order

Plaintiffs‟ original Complaint alleged that Lee (and possibly also Royal Primo)3 worked 

with non-party CDM Group, Inc. (“CDM”) to approach Whitewater in 2005 regarding an 

opportunity for water park design services in South Korea. See Compl. (dkt. 1) ¶ 9. “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 . . . 

agreed to pay a 17% commission on any future contract reached by Whitewater.” Id. ¶ 10. 

Whitewater‟s president and CEO “confirmed” the terms of that agreement on multiple occasions, 

including in a letter dated March 12, 2009. Id. That letter, which was attached to the Complaint, 

stated that Whitewater would pay a 17% commission for promotional work “completed by CDM 

in association with Mr. Don Lee of Korea,” and that it would pay that commission “directly to 

CDM or to another as directed by CDM.” Id. Ex. A. The original Complaint sought only 

declaratory relief. Id. ¶¶ 15−17.

Whitewater moved to dismiss on the grounds that: (1) Plaintiffs failed to adequately allege

that they had any rights under a contract that, by its terms, called for payment to non-party CDM; 

and (2) CDM was a necessary party to the action. See Mot. to Dismiss Compl. (dkt. 16). The 

Court agreed that the Complaint did not plausibly allege any entitlement to relief where Plaintiffs 

specifically alleged that the attached letter confirmed the terms of the agreement, and the letter 

called for payment to CDM. Order at 5−7. The Court did not reach the question of whether CDM 

was a necessary party, but noted that it “likely” was, and instructed Plaintiffs to either add CDM 

as a party or explain why CDM was not necessary to the case. Id. at 7−8. The Court granted 

Plaintiffs leave to amend. Id. at 8.

 

3

The original Complaint ambiguously defined the term “Lee” in one instance to refer to both 

Plaintiffs collectively, and in another instance to refer only to Don Lee. See Compl. at 1. The 

Court identified that ambiguity in its previous Order and instructed Plaintiffs to resolve it in their 

First Amended Complaint. Order at 6. The First Amended Complaint nevertheless repeats the 

conflicting definitions of the term. See FAC at 1. Any further pleading that repeats this error will 

be stricken.

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B. First Amended Complaint

Plaintiffs‟ First Amended Complaint omits all reference to CDM and to any written 

confirmation of the parties‟ alleged agreement. Instead, it alleges that Lee approached 

Whitewater‟s president Geoff Chutter in 2005 about an opportunity that Lee and Royal Primo had 

developed in South Korea, FAC ¶ 9—omitting a previous reference to Lee “confirm[ing] 

Whitewater‟s credentials through his contact with CDM,” Compl. ¶ 9. The First Amended 

Complaint alleges that Chutter orally agreed to pay Lee and Royal Primo a 17% commission for 

any contract that Whitewater obtained for work on the project in Korea. Id. There is no reference 

to Chutter confirming the agreement‟s terms in writing, nor any suggestion that CDM was 

involved in the promotional work or would receive the commission. See generally id. As in the 

original Complaint, Plaintiffs go on to allege that Lee and Royal Primo expended significant effort 

on Whitewater‟s behalf, Whitewater obtained a lucrative contract as a result, and Whitewater has 

refused to pay Plaintiffs the agreed commission. See id. ¶¶ 10−13. The First Amended Complaint 

includes claims for breach of contract, quasi-contract, fraud, and an accounting. Id. ¶¶ 14−37. 

Unlike the original Complaint, the First Amended Complaint seeks money damages. Id. ¶¶ A−C 

(prayer for relief).

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). 

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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, 

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).

Rule 9(b) of the Federal Rules of Civil Procedure sets a heightened pleading standard for 

claims based on fraud. “In alleging fraud or mistake, a party must state with particularity the 

circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). The Ninth Circuit has held 

that in order to meet this standard, a “complaint must specify such facts as the times, dates, places, 

benefits received, and other details of the alleged fraudulent activity.” Neubronner v. Milken, 6 

F.3d 666, 672 (9th Cir. 1993); see also McMaster v. United States, 731 F.3d 881, 897 (9th Cir. 

2013). The heightened standard does not apply to “[m]alice, intent, knowledge, and other 

conditions of a person‟s mind.” Fed. R. Civ. P. 9(b).4

B. Plaintiffs’ Allegations Remain Implausible for Failure to Explain CDM’s Role

Whitewater‟s present Motion turns primarily on whether the First Amended Complaint, 

which does not discuss CDM and alleges an oral contract between Whitewater and Plaintiffs, 

contradicts the original Complaint, which alleged a business relationship that involved CDM to at 

least some extent and a contract “confirmed” by an email from Whitewater to CDM—and if so, 

 

4 Whitewater does not invoke the heightened pleading standard of Rule 9(b) as an argument 

for dismissal, but Plaintiffs should keep this standard in mind if they wish to include a claim for 

fraud in any further pleadings.

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whether that renders the current allegations implausible.

The principle that a court may look to prior pleadings in determining the plausibility of an 

amended complaint is well established. See, e.g., Rodriguez v. Sony Comput. Entm’t Am., LLC, 

801 F.3d 1045, 1054 (9th Cir. 2015) (“Rodriguez‟s subsequent attempt to thwart the statutory 

language by artfully pleading . . . is unconvincing, especially considering that the more recent 

pleading completely contradicts the earlier pleading.”). Generally, an amended complaint should 

contain “additional allegations that are „consistent with the challenged pleading‟ and that do not 

contradict the allegations in the original complaint.” United States v. Corinthian Colleges, 655 

F.3d 984, 995 (9th Cir. 2011) (quoting Reddy v. Litton Indus., Inc., 912 F.2d 291, 296−97 (9th Cir.

1990)). Ninth Circuit precedent is inconsistent as to whether amended pleadings may ever 

contradict earlier allegations. Compare Airs Aromatics, LLC v. Opinion Victoria’s Secret Stores 

Brand Mgmt., Inc., 744 F.3d 595, 600 (9th Cir. 2014) (“A party cannot amend pleadings to 

directly contradict an earlier assertion made in the same proceeding.” (citation, brackets, and 

internal quotation marks omitted)) (holding that leave to amend would be futile), with PAE Gov’t 

Servs., Inc. v. MPRI, Inc., 514 F.3d 856, 860 (9th Cir. 2007) (“The short of it is that there is 

nothing in the Federal Rules of Civil Procedure to prevent a party from filing successive pleadings 

that make inconsistent or even contradictory allegations.”) (holding that a district court erred in 

striking inconsistent pleadings as sham litigation). At the very least, however, “when evaluating 

an amended complaint, „[t]he court may also consider the prior allegations as part of its “contextspecific” inquiry based on its judicial experience and common sense to assess whether‟ an 

amended complaint „plausibly suggests an entitlement to relief.‟” McKenna v. WhisperText, No. 

5:14-CV-00424-PSG, 2015 WL 5264750, at *3 (N.D. Cal. Sept. 9, 2015) (quoting Cole v. 

Sunnyvale, No. C-08-05017-RMW, 2010 WL 532428, at *4 (N.D. Cal. Feb. 9, 2010)) (alteration 

in original).

While the allegations of the First Amended Complaint in this case may not overtly 

contradict the original Complaint, there is at least significant tension between the two. In the 

original Complaint, Plaintiffs alleged that Whitewater “confirmed the terms” of its agreement with 

Plaintiffs in a letter stating that Whitewater would pay a 17% commission to CDM for work 

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“completed by CDM in association with Mr. Don Lee.” Compl. ¶ 10 & Ex. A. The First 

Amended Complaint‟s relatively conclusory allegation that Whitewater orally agreed to pay 

Plaintiffs a 17% commission for the same work is not plausible without some explanation of how 

the alleged oral contract relates to the previously-alleged agreement with CDM. There are any 

number of conceivable theories of recovery consistent with both the oral contract alleged in the 

First Amended Complaint and the letter attached to the original Complaint.5 Without setting forth 

allegations explaining such a theory, however, the First Amended Complaint neither “„give[s] 

[Whitewater] fair notice of what the . . . claim is and the grounds upon which it rests,‟” nor 

provides a sufficient factual basis “to raise a right to relief above the speculative level.” See

Twombly, 550 U.S. at 555 (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)) (ellipsis in 

original). Plaintiffs have made some effort to provide such an explanation in their present 

Opposition, at the hearing, and in a declaration submitted in opposition to the first motion to 

dismiss, but such materials and arguments cannot substitute for allegations missing from their 

complaints.

The deficiency is perhaps even more significant in this case because—as discussed in the 

Court‟s previous Order—there is reason to believe that CDM may be an indispensible party. See 

Order at 7−8. If Plaintiffs‟ theory of the case would require joining CDM as a party, that issue 

should be resolved at the outset, particularly where CDM‟s joinder might in turn raise issues of 

this Court‟s jurisdiction. See Compl. ¶ 9 (alleging that CDM “work[ed] out of Valencia, 

California”); FAC ¶¶ 1−2 (alleging that Plaintiffs are domiciled in California); id. ¶ 4 (asserting 

diversity jurisdiction under 28 U.S.C. § 1332).6

Further factual detail is needed for all four of Plaintiffs‟ claims. This Order therefore does 

 

5

In light of the sort of considerations identified in PAE—parties‟ understandable uncertainty 

as to relevant facts and law, time pressure for filing complaints, and the accepted practices of 

filing unverified complaints and pleading in the alternative, see PAE, 514 F.3d at 858−59—the 

Court will not hold Plaintiffs to a strict reading of their previous allegation that the letter to CDM 

“confirmed the terms” of their agreement with Whitewater. But having attached it to the previous 

Complaint, Plaintiffs cannot now simply pretend that the letter does not exist. 

6

Plaintiffs‟ counsel suggested at the hearing that CDM may be defunct. If Plaintiffs believe 

that CDM no longer exists, and that its nonexistence may bear on the question of whether it is a 

necessary party, they may include allegations to that effect in a second amended complaint.

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not reach the parties‟ arguments regarding the quasi-contract claim, including whether it is 

precluded by Plaintiffs‟ contract theory and whether (as first raised in Whitewater‟s Reply) the 

statute of limitations has expired. See Mot. (dkt. 32) at 6; Opp‟n (dkt. 35) at 8−9; Reply (dkt. 36) 

at 5−6. Similarly, the Court declines to reach Whitewater‟s argument (unanswered in Plaintiffs‟ 

Opposition and abandoned in Whitewater‟s Reply) that Plaintiffs cannot seek an accounting 

because their claim is for an amount subject to straightforward calculation. See Mot. at 6−7. 

More detailed allegations in a second amended complaint may bring those issues into clearer 

focus.

IV. CONCLUSION

For the reasons stated above, Whitwater‟s Motion is GRANTED, and Plaintiffs‟ First 

Amended Claim is DISMISSED with leave to further amend. Plaintiffs may file a second 

amended complaint no later than May 20, 2016. Plaintiffs are advised that failure to include 

sufficient allegations on their third attempt may lead the Court to conclude that further amendment 

would be futile.

IT IS SO ORDERED.

Dated: April 29, 2016

______________________________________

JOSEPH C. SPERO

Chief Magistrate Judge

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