Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_19-cv-02305/USCOURTS-cand-3_19-cv-02305-0/pdf.json

Parties Involved:
Creditors Adjustment Bureau, Inc.
Plaintiff
IBT Media Inc.
Defendant
Instart Logic
Plaintiff

Document Text:

ORDER – No. 19-cv-02305-LB

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

San Francisco Division

CREDITORS ADJUSTMENT BUREAU, 

INC.,

Plaintiff,

v.

IBT MEDIA INC.,

Defendant.

Case No. 19-cv-02305-LB

ORDER DENYING DEFENDANT’S

MOTION TO DISMISS

Re: ECF No. 8

INTRODUCTION

This case involves a collection agency trying to collect on an alleged debt under a contract

involving two other entities, one of whom is not a party in this lawsuit. In 2017, non-party Instart 

Logic, Inc. and defendant IBT Media Inc. entered into a contract. Plaintiff Creditors Adjustment 

Bureau, Inc. (“CAB”), a collection agency, alleges that IBT owes Instart $658,974.33 under the 

contract and that Instart assigned its claim to that debt to CAB. CAB brought this action in state 

court against IBT to collect. IBT removed this action to federal court on the basis of diversity 

jurisdiction and moved to dismiss, arguing that its contract with Instart prohibits Instart from 

assigning its rights (to CAB or to anyone else) without IBT’s consent, and thus CAB does not 

have standing to collect. The court can decide the IBT’s motion without oral argument. N.D. Cal. 

Civ. L.R. 7-1(b). The court denies IBT’s motion to dismiss. CAB, as an alleged assignee of Instart, 

has standing to bring this action.

Case 3:19-cv-02305-LB Document 24 Filed 07/15/19 Page 1 of 4
ORDER – No. 19-cv-02305-LB 2

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STATEMENT1

In January 2017, Instart and IBT entered into a written Master Services Agreement.2 The 

Agreement is governed by California law.3 The parties agreed to two “service orders” under the 

Agreement, wherein Instart would provide IBT with certain services and IBT would make certain 

payments.4 The Agreement stated that:

Neither party may transfer and assign its rights and obligations under this 

Agreement without the prior written consent of the other party. Notwithstanding 

the foregoing, Instart may transfer and assign its rights under this Agreement 

without consent from the other party in connection with a change in control, 

acquisition or sale of all or substantially all of its assets.5

IBT owes Instart $658,974.33 under the Agreement.6IBT has not paid the money it owes to 

Instart despite demands for payment.7

Instart assigned to CAB its claim against IBT for the money owed under the Agreement.8

ANALYSIS

1. Governing Law

“Federal Rule of Civil Procedure 17 governs whether or not a party can bring suit.” Gottlieb v. 

Alphabet Inc., No. 5:17-cv-06860-EJD, 2018 WL 2010976, at *2 (N.D. Cal. Apr. 30, 2018) (citing 

U-Haul Int’l, Inc. v. Jartran, Inc., 793 F.2d 1034, 1038 (9th Cir. 1986)). “The rule requires that an 

action ‘be prosecuted in the name of the real party in interest.’” Id. (quoting Fed. R. Civ. P. 17(a)). 

“Who or what qualifies as a real party in interest is not defined; ‘instead, it allows a federal court 

 

1 Unless otherwise stated, the facts in the Statement are allegations from the complaint and are 

presumed to be true for the purposes of this order.

2 Compl. – ECF No. 1-1 at 8 (¶ 19); Compl. Ex. 1 (Agreement) – ECF No. 7.

3 Compl. Ex 1 (Agreement) – ECF No. 7 at 6 (¶ 8.6).

4

Id. at 9–16.

5

Id. at 6 (¶ 8.2).

6 Compl. – ECF No. 1-1 at 5 (¶ 2), 6–7 (¶ 10).

7

Id. at 7 (¶ 10).

8

Id. at 5–6 (¶ 4).

Case 3:19-cv-02305-LB Document 24 Filed 07/15/19 Page 2 of 4
ORDER – No. 19-cv-02305-LB 3

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to entertain a suit at the instance of any party to whom the relevant substantive law grants a cause

of action.’” Id. (internal brackets omitted) (quoting U-Haul, 793 F.2d at 1038).

Instart’s and IBT’s Agreement is governed by California law. “Provisions prohibiting 

assignment of a contract, or any rights or interests in a contract, are generally valid and 

enforceable in California.” Id. (citing Fluor Corp. v. Super. Ct., 61 Cal. 4th 1175, 1189–90 

(2015)). “But such restrictions are strictly construed, and California courts have developed a 

‘distinction between an assignment of a contract and an assignment of the proceeds of the 

contract.’” Id. at *4 (citing Benton v. Hofmann Plastering Co., 207 Cal. App. 2d 61, 67–68 

(1962)). “‘A provision in a contract or a rule of law against assignment does not preclude the 

assignment of money due or to become due under the contract or of money damages for the breach

of the contract.’” Id. (internal brackets omitted) (quoting Trubowitch v. Riverbank Canning Co., 

30 Cal. 2d 335, 339 (1947)). Among other things, a contractual provision that prohibits the 

assigning of the “rights” under a contract “does not forbid the assignment of a cause of action for 

breach of contract, or the assignment of money damages for a breach of contract, in the absence of 

circumstances specifying a different intention by the parties.” Id. (citing Restatement (Second) of 

Contracts § 322 (“A contract term prohibiting assignment of rights under the contract, unless a 

different intention is manifested . . . does not forbid assignment of a right to damages for breach of 

the whole contract or a right arising out of the assignor’s due performance of his entire 

obligation.”) (ellipsis in original)); accord, e.g., SK Networks Co. Ltd. v. Bentley Forbes Holdings, 

LLC, No. CV 12-08997 MMM (SHx), 2013 WL 12131715, at *18–19 (C.D. Cal. Nov. 7, 2013)

(holding that under California law, contractual provision that “‘[n]one of the Parties to [the]

Agreement may sell, assign or otherwise transfer any of its rights or obligations hereunder, 

without the prior written consent of the other Parties hereto’. . . . does not preclude assignment of 

a cause of action for money damages”) (citing Trubowitch, 30 Cal. 2d at 339; Rosencrans v. 

William S. Lozier, Inc., 142 F.2d 118, 124 (9th Cir. 1944); Shiveley v. Semi-Tropic Land & Water 

Co., 99 Cal. 259, 261 (1893)).

Case 3:19-cv-02305-LB Document 24 Filed 07/15/19 Page 3 of 4
ORDER – No. 19-cv-02305-LB 4

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2. Application

IBT argues that its Agreement with Instart provides that “[n]either party may transfer and 

assign its rights and obligations under this Agreement without the prior written consent of the 

other party.”9(IBT notes that this provision not only prohibits assignment of the contract but also 

of all “rights” under the contract.) But as courts have held, a contractual provision prohibiting the 

assignment of “rights” under the contract does not on its own prohibit the right to assign a claim 

for damages for a breach of contract. See, e.g., Gottlieb, 2018 WL 2010976, at *4; SK Networks, 

2013 WL 12131715, at *18–19. IBT does not cite any cases that hold to the contrary.10

IBT also argues that CAB has not provided sufficient evidence that Instart assigned to CAB its 

claims for the money owed under the Agreement. IBT cites no cases that hold that CAB needs to 

provide that evidence at this juncture. Cf. Kniss v. Booth, No. SA CV 07-1215 AHS (PJWx), 2010 

WL 11506619, at *4 (C.D. Cal. Jan. 4, 2010) (holding that there is no requirement under Federal 

Rule of Civil Procedure 8 for a plaintiff to provide at the pleading stage all documents proving the 

assignment of a claim) (citing cases). While CAB ultimately will have to prove that there was a 

valid assignment to prevail on its claims in the end, a supposed failure to do so at the pleading 

stage is not a basis for dismissal.

CONCLUSION

The court denies IBT’s motion to dismiss.

IT IS SO ORDERED.

Dated: July 15, 2019 ______________________________________

LAUREL BEELER

United States Magistrate Judge

 

9 Def. Mot. – ECF No. 8 at 4–5; Def. Reply – ECF No. 19 at 2.

10 IBT’s reliance on Henkel Corp. v. Hartford Accident and Indemnity Co., 29 Cal. 4th 934 (2003)

(cited by Def. Reply – ECF No. 19 at 4), overruled by Fluor, 61 Cal. 4th 1175, is misplaced. The 

contractual rights at issue in Henkel were the right to defense and indemnity under an insurance 

contract. Id. at 944. The Henkel court expressly distinguished those rights from “the assignment of 

money due or to become due under the contract or of money damages for the breach of contract.” Id.

(internal citations omitted) (quoting Trubowitch, 30 Cal. 2d. at 339–40).

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