F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

D A L E B O Z Z I O , individually and on behalf of all others similarly situated, Plaintiff-Appellant

,

v

.

EMI G R O U P L I M I T E D ; C A P I T O L R E C O R D S , L L C; EMI M U S I C N O R T H A M E R I C A , L L C; EMI R E C O R D E D M U S I C ; and EMI M A R K E T I N G , Defendants-Appellees

. N o. 13-15685

D.C. No. 4:12-cv-02421- YGR

OPI NI ON

A ppeal from the United States District Court for the Northern District of California Y vonne Gonz a lez Rog ers, District J udg e, Presiding

Arg ued and Submitted J une 10, 2015—San F rancisco, California

F iled J anuary

26, 2016

B efore: Mary

M. Schroeder, Sandra S. I kuta, and Morg an Christen, Circuit J udg es.

Opinion by J udg e ChristenB O Z Z I O V

. EMI G R O U P 2

SUMMARY *

Standing / Third-P arty Benef iciary

The panel reverse d t h e d istrict court’s dismissal o f a complaint filed b y third -party beneficiary Dale B oz z io alleg ing brea c h of a r ecording contract between B oz zio’s former b and, Missing Per s o n s, and d efendant recording companies, and remanded.

The panel held that the district court erred in concluding that u nder California law Missing Persons, I n c .’s status as a suspended corpo r ation p recluded B oz z io’s third-party be n e f i ciary suit. The panel f urther h eld that it could not

a ffirm on the g round that B oz z io waived the benefits of th e M i s s ing Persons, I n c. contract. The panel held that B o z z i o pleaded f a cts suf f i c ient to establish her standing to sue as a third-party beneficiary on the contract between M i s s ing Persons, I nc. and the r ecording companies. F inally

, the panel held that the district court e rred in d ismissin g Bo z z io’s complaint w ith prejudice because amendment may not have been futile.

COUNSEL

Cadio Z irpoli (arg

ued), G uido Saveri, R. Alex a nder Saveri, and Carl N. Hammarskjold, Saveri & Saveri, San F rancisco, California; Robert J

. B onsig nore a nd L isa Sleboda,

* T h is su m m ary co n stitu

tes n o part o f th e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.B O Z Z I O V

. EMI G R O U P 3

B onsig nore a

nd B r e wer, B elmont, New Hampshire, for Plaintiff-Appellant.

Peter I

. Ostroff, Rollin A

. Ransom, and Michelle B

. Goodman (arg ued), Sidley Austin L L P, L os Ang eles, California, for Defendants-Appellees.

OP INION

CHRI STEN, Circuit J udg e:

BACK G ROUND

This is a breach of contra c t c ase. Dale B oz z io, front

woman of the f

ormer band Missing Pers o n s, claims the defendant recording companies improperly treated c ertain sales o f Missing P e r sons’s recording s—throug h music download services, mobile phone mastertone downloads, a nd licensing for music streaming services—as record sales rather than revenue from licensing

, and, as a result, paid the artists

a lower r o y alty rate than the one provided for in their recording c ontracts. B oz z io is no t a p ar ty to the recording
contracts she seeks to e n force, but she filed suit as a thirdparty beneficiary

.

The d istrict court d ismisse d B oz z io’s complaint. The
court reasoned that even if B oz z io was an intended thi rdparty beneficiary

, the contracting p a r ty , Missing Persons, I nc., w as a suspended corporation when B oz z io fil e d her complaint and its suspended status prevented it from bring ing

s u it under California law. T h e d istrict court ruled that because Missing Persons, I nc. lacked capacity to sue, a thirdpar t y b e neficiary of Missing Persons, I nc.’s c ontract wasB O Z Z I O V

. EMI G R O U P 4

similarly without capacity to sue. The district court decided that any a mendment would be futile and dismissed B oz zio’s complaint with prejudice.

B o z z io’s appeal requires us to res olve two questions: (1) W hether the district court e rred by concluding that Missing Persons, I nc.’s suspended status precluded B oz zio’s suit; and ( 2) whether B oz z io pleaded facts sufficient to

es t a b l i s h her standing to sue as a third-party beneficiary o f the contract between Missing Persons, I n c. and the recording companies. W e answer “y es” to both q uestions, and we therefore reverse. 1

I. F acts 2

I n 1980, Dale B oz z io (“B oz zio”), Terry B oz z io, a nd W a r ren Cuccurullo founded the b and Missing Perso n s. According to the c o mplaint, as the band’ s front woman, B oz z io “personified the sound and the look of the new wave scene in 1980s L os Ang e les.”

Capitol Records sig n ed the b and a n d e n tered into a Personal Services Ag reement with th e individual artists in 1982. Their ag reement prov i d e d that the artists comprising Missing Persons would create master recording s that Capitol

1 T h e d istrict co u rt h ad j u

risd ictio n p u rsu an t to 28 U.S.C. § 13 3 2, an d w e h av e j u risd i ctio n

p u rsu an t to 2 8 U.S.C. § 1 2 9 1.

2 T h ese f acts are tak en f

ro m th e co m

p lain t an d its ex h ib its. S

ee Akh t a r

v. Mesa
, 69 8 F.3 d 1 2 0 2
, 1 2 12 (9 th Cir. 2 0 1 2 ) (“ Wh en rev iew in g a m o tio n to dism iss, w e ‘ co n sid er o n l y alleg a t i o n s co n tain ed in th e p lead i n g s,

ex h ib its attach ed to th e co m p lain t, an d m atters p ro p erly su bj ect to j u d icial

n o tice.’ ” (q u o tin g S

wa rtz v. KPMG LLP
, 4 7 6 F.3 d 7 5 6
, 7 6 3 (9 th Cir. 2 0 0 7 ) (p er cu riam ))).B O Z Z I O V

. EMI G R O U P 5

would sell a

nd li cense. I n return, Capitol promised to “pay
roy alties a t rates rang ing from 20 % t o 2 4% for sales in the United States and Canada, and from 7% to 8% for sales in the
rest of the world.” Th e ag reement also provided that the artists would receive 50 % o f Capitol’s net roy alties from licensing

, and that it would be construed in accordance with California law.

I n 1983, B oz z io and the other b an d members formed Missing Persons, I nc., a California corporation, to serve as a loan-out company throug h w hich they w ould provide services
to Capi t o l

. “A loan-out corporation is a leg al f iction employ e d for the f

i n a ncial benefit of successful artists a nd entertainers

. I t is a d

uly org aniz ed corporation, ty pically wholly owned by a

n artist, the sole function o f which i s to ‘l oan out’ the services of the artist-owner to p roducers a nd other p otential employ ers.” Aaron J

. Moss & Kenneth B a sin, Copy r i ght Termination and Loan-Out Corporations: Reconciling Practice and Policy

, 3 H arv. J

. Sports & E nt. L

. 55, 72 (2012). The form offers “limited p ersonal liability a nd beneficial tax treatment.” Id. At least initially

, B oz z io served as the president of Missing Persons, I nc.

C a p itol subsequently entered into a new contract, call e d the L o an-Out Ag re e m ent, with Missing Persons, I nc. The L oan-Out Ag reement substituted Missing Persons, I nc. in place o f the individual b and members in the orig inal Personal Services A g reement and required Capitol to pay a ll artist
roy alties to Missing P er s o ns, I nc., not to the artists. I t also stated that Missing Persons, I nc. was to receive all contractual benefits, and that it, not Capi t o l

, was to pay the individual artists all required roy a lties and a dv ance s

. As part of the L oan-Out Ag reement, e ach b and member ex ecuted a n Artist Declaration “as further induceme n t for Capitol to e nter intoB O Z Z I O V

. EMI G R O U P 6

t h e Capitol-Company Ag reement.” B oz z io’s d eclarati o n states that she “ag ree[ s] to look solely to [ Missin g P e r s ons, I nc.] for the pay

ment of [ h e r ] f

ees a nd / o r r o y alties

. . . , a

nd will not assert any claims in this reg ard ag ainst Capitol.”

The music g roup disbanded in 1986, and, as of J uly 1, 1988, Missing Persons, I nc. was suspended under California Revenue and Tax a tion Code § 23301 due to f ai l u r e t o pay franchise tax es. The partie s d o n ot dispute that Missing Persons, I nc. r emained a suspended corporation when B oz z io filed her complaint in this lawsuit.

II. P roceedings

I n 2 012, B oz z io filed a putative c l a s s a c tion suit in the Northern District of California. The operative complaint alleg es breach of c o ntract a n d o t h e r claims ag ainst EMI Group, L td., Capitol R e c o r d s, L L C, EMI Music N orth America, L L C, E MI Recor d e d M usic, and EMI Marketing (collectively

, “Capitol”). Specifically

, the complaint alleg e s that Capitol failed to “properly account for a n d p a y its

re c o r d ing artists and music p roducers for income it has received, and continues to r e c e ive, from the licenses of its recorded music catalog for the sale of dig i tal downloads, ring tones (or ‘ma s tertones’), a nd streaming music.” I t requests declaratory judg ment, injunctive relief, restitution, and attorney s’ fees.

Capitol moved to dismiss B o z z io’s complaint under F ederal Rule of Civil Procedure 12(b)(6). Capitol p rimarily
arg ued that B oz z io could n ot f ile suit because s h e ex pressly
ag reed in the Artist Declaration to “ look solely to” the loanout corporation for roy alty pay ments and promised to “ not

a s s e r t any claim in this reg ard a g ainst Capitol.” B o z z i oB O Z Z I O V

. EMI G R O U P 7

countered that she was an intended third-party beneficiary o f the L oan-Out Ag reement with an individual rig ht to sue that is separate from the corporation’s. According to B oz z io, the Artist D eclarations “only prohibit[ ] an artist from a sserting a claim ag ainst EMI when there is a dispute among individual band members over the internal a llocation and distribution o f
roy alties that h ave a l ready been properly accounted for a nd paid b y the record label to the artists’ musical g roup or loanout corporation.” She further arg ued t h a t the intent of the
p arties in ex ecuting the Artist Declarations presents fa c t u al questions that cannot b e resol v e d b y a motion to dismiss. Recog niz ing the corpor a t i o n’s suspended status, the district

c o u r t requested additional briefing from the parties on the following q

uestion: “[ S ] hould plaintiff be permitted to proceed directly ag ainst Capitol if the loan-out company that is the party to the ag reements with Capito l i s a suspended corporation? ”

After supplemental b r iefing and oral a r g ument, the district court g ranted Capitol’s motion to dismiss. The court did not r esolve whether B o zz io is a third-party beneficiary o f the L oan-Out Ag r eement. I nstead, the court deci d e d t h at because the contracting party , Missing Persons, I n c., was a suspended c orporation, “reg ardless o f B oz z io’s standing to bring claims as a third party beneficiary

, she cannot sue to enforce that ag reement w h en the contracting corporation would have no capacity to d o so

. ” Th e court observed that California suspends corporate p owers under California Revenue and Tax ation Code § 23301 and § 2 3305 to induce corporations to pay tax es and maintain g ood stand ing

. I t concluded that allowing Bo z zio to sue as a third-party beneficiary of the recording contract w ould permit h e r to

“ u s[ e] the corporate entity to contract, and g ain the benefit s of the c orporate form, y et [ a llow her] to retain the rig ht to sueB O Z Z I O V

. EMI G R O U P 8

as an i n d i v i d

ual, third p a

r ty beneficiary e ven when the corporation could n ot, on account of its failure to comply [ with] its corporate oblig ations, including its tax liability

. ” The d istrict court ruled that it would be futile t o g r a n t leave
to amend and dismissed Bo z z i o’s complaint with prejudice. B oz z io timely

appealed.

STANDARD OF REVIEW

W e review de n o v o a d istrict court’s decision to g rant a motion to dismiss. Lacano Inv s

. , LLC v. Balash

, 765 F .3d 1068, 1071 (9th Cir. 2 0 14). W e r eview “the district court’s denial of leave to amend for abuse of discretion.” Id.

D ISCUSSION

I

. The district c ourt erred by gran t i n g B ozzio’s m otion to dismiss on the ground t h a t Missing Persons, Inc. lacked capacity to sue.

B o z z io’s complaint alleg ed that Missing Persons, I nc. a nd Ca p i tol entered into the L oan-Out Ag reement for her o wn benefit and for the benefit of her bandmates, and that she is therefore entitled t o b ring suit to protect her interests. The district court held that B oz z io cannot sue on the contract beca u s e, even if she is a third-party beneficiary to the Ag reement, the contracting party —Missing Persons, I nc.—is a suspended corporation. On a p p eal, B oz z io a

rg u e s that the suspended s tatus of the contracting corporate party is irrelevant when the party b r i n ging the action is a third-party benef i c iary of the contract, a

nd the district court’s d ismissal of the F irst Amended C o m plaint o n that basis constitutes reversible error. W e ag ree with B oz z io that the district court erred in holding that, even if B oz z io is a t h i rd-partyB O Z Z I O V

. EMI G R O U P 9

b e n eficiary

, she cannot b ring an action while Missi n g Persons, I nc. is suspended.

C a l i fornia law provides that if a corporation fails to p a y tax es, penalties, interests, o r a ny liability

, its “ corporate powers, r ig hts and privileg es” will b e suspended. C al

. Rev. & Tax Code § 2 3 301. “The suspension of the corporat e powers, rig hts, and privileg es means a suspended corporation
cannot sue or defend a lawsuit while its tax es remain unpaid.” Kaufman & Broad Cmtys., I nc. v. Performance Plasteri ng, Inc.
, 39 Cal. Rptr. 3d 3 3, 3 6 (Cal. Ct. App. 2006); see also Gar-Lo, Inc. v. Prudential Sav. & Loan A ss’n
, 116 Cal. Rptr. 389, 390 (Ca l

. C t

. App. 1974) (discussing the effect o f suspension under § 23301 on a corporation’s rig ht to sue).

I n dismissing B oz z io’s complai n t, the district court concluded that, even if B oz z io is a third-party beneficiary o f the c ontract b etween Missing Persons, I nc. and Capitol Records, she c annot sue to e nforce the ag reement because the contracting party would have no capacit y t o do so. B ut the

cases cited by the district court for this proposition, Kaufman & Broad Com m u n i t ies, I nc. , 39 Cal. Rptr. 3d 33, a nd AMESCO Exports, Inc. v. Associated Aircraft Manufacturing & S a les, Inc.
, 977 F

. Supp. 1014 (C.D. Cal. 1 997), ord e r

v a c a t e d o n other grounds

, 87 F

. Supp. 2d 1013 (C.D. Cal. 1997), do not support it. Kaufman & Broad Communities, Inc. h eld only

that an insurance company could not step into the shoes of a suspended corporation and litig ate in its name; rather, it had to intervene in the leg al action ag a inst its insured. 39 Cal. Rptr. 3 d at 34–37. The court d id not address whether a third-party beneficiary

, which has an independent

c a use of action on a contract, see Cal. Civ. Code § 1 5 5 9
, could bring an action for breach of contract ag ainst the promisor w hen the promisee is a suspended co rporation.B O Z Z I O V

. EMI G R O U P 10

AMESCO E

xports, Inc. also fails to support the proposition. I t conc l u ded that the sole shareholder of a suspended corporation could not bring a breach of contract claim ag ainst

a manufacturer based on a contract sig ned by the suspe n d e d corporation and the manu f a c t urer, but this conclusion was premised on the sole shareholder’s inability to demonstrate that it was a third-party beneficiary of the contract. AMESCO does n ot a

nswer whether the shareholder wo uld have been allowed to sue if the p r omisee had intended to gi v e the beneficiary

such a rig ht. 977 F

. Supp. at 1016.

T h e p a r ties h ave not cited, and we h ave not found, a n y California case holding that a thir d-party beneficiary cannot

sue the promisor for breach of contract when the promisee is

a suspended corporation. F urther, the California case m o st closely on point supports B oz z i o ’ s arg ument that Missing Persons, I nc.’s incapacity does n o t bar her third-party beneficiary suit. See Performance Pl a s t ering v. Richmond Am. Homes of Cal., Inc. ( Richmond Ame r i c an Homes)

, 63 Cal. Rptr. 3d 537 ( C a l

. Ct. A pp. 2007). Richmond American Homes involved a series of construction cla i m s between a homebuilder and one o f its subcont r a c t ors, Performance Plastering

. Id. at 540. Throug hout the series o f claims, Performance Plastering was a suspended corporation for failing to pay

tax es. I d. at 541.

After the homebuilder rec e i v e d complaints about the quality of P e rformance Plastering ’s stucco work, the two entered into a settlement a g reement that rele a s e d P e r formance Plastering and its insurers from liabi l i t y f or claims a

rising from t h e c o n s truction of six ty -five homes in ex chang e for a cash pay ment. Id. Additional defective construction claims

were alleg ed, and the homebuilder and Performa n c e Plastering ’s insurer entered i n t o a second settlementB O Z Z I O V

. EMI G R O U P 11

ag reement b y which the homebuilder accept e d a nother cash
pay ment, dismissed Performance Plastering from all claims, and ag reed to g ive five-day s n o tice to the insurer of any potential indemnity claims. Id. A third complaint was filed for construction defects, this time ag ainst the h o mebuild e r, and the homebuilder filed a cross-complaint ag ainst Performance Plast e r ing

. Id. I n response, Performance Plastering filed a cr o s s-claim in which it alleg e d that the homebuilder’s claims were barred b ecause it f ailed to g ive the insurer five day s notice as required by the second settlement
ag reeme nt. Id. Throug h the insurer, the parties e ntered a third settlement a g r e e ment, reserving the “ rig ht to seek judicial determination o f the applicability and e nforceability ” of the previous ag reements. Id. The insurer and Performance Plastering then sued the homebuilder for breach of con t ract and declaratory relief based on the homebuilder’s violation o f those previous settlement ag reements. I d.

The trial court dismissed the case because i t concluded that Performance Plastering ’s suspended corporate status p revented it from bring ing suit, and the insurer h ad n o standing to sue as e ither a party or third-party beneficiary

. Id.
at 5 42. The California Court of Appeal reversed. Id. a t 545. I t held that Performance Pla s t e r ing ’s suspended status rendered its contracts with the homebuilder voidable, but because neither party to the contract had soug ht rescission, the insurer had standing to sue the homebuilder for b reach o f
contract as a third-party benefi c i a r y of the settlement
ag reements. Id. a t 544–45. Althoug h t h e c ourt did not

ex p ressly address the question whether Performance Plastering ’s lack of capacity to sue due to its suspended status deprived the insurer o f that capacity

, the court let the case g o forward, imply ing that such lack of capacity does notB O Z Z I O V

. EMI G R O U P 12

necessarily depri v e a third-party b eneficiary o f standing to

sue.

L ike the insurer in Richmond Ame r i can Homes
, B oz z io

a r gu e s that she is a third-party beneficiary of the L oan- O u t Ag reement and that the suspended status of Missing Persons, I nc. does not bar her indi v i dual suit. Althoug h Richmond American H

omes does not g o that far, it indicates that California courts do not consider the incapacit y o f the promisee to a contract to be a n absolute bar to a lawsuit by a third-party b eneficiary

. See id. ; R o nay F amily Ltd. P’ship v

. T w e e d

, 157 Cal. Rptr. 3d 680, 687 (Cal. Ct. App. 201 3 ) (“[ T] he rule that a promisor’s defense a g ainst a promisee is also g ood ag a inst a third p arty beneficiary d o e s not a pply when the lang uag e of the contract or the circumstances surrounding its ex ecution e stablish that t h e rig hts of the beneficiary

are not subject to that defense.”).

The distric t c ourt recog n iz ed that R ichmond American Homes lends support to B oz z io’s position, but it disti n g u i s h ed the case from B oz z i o ’s situation based on B oz zio’s relationship to Missing Persons, I nc. Th e d istrict court

reasone d t h at “the insurer in [ Richmond American Homes ]

was n ot closely related to the [ su s p e n d ed] corporation a nd

was not in a position to revive the corporation and pursue its leg al r i ghts.” The c ourt considered B o z z io’s relationship to Missing Persons, I nc. to be dispositive:

B y contrast, in this c a se Boz z io is directly

, thoug h not n ecessarily entirely

, responsible for the suspended status o f the corporation. W h ile the loan-out corporation here is not in B o z z io’s sole control, she has alleg ed that she is its president a

nd the “driving force” behindB O Z Z I O V

. EMI G R O U P 13

it. [ Citing to F irst Amended Compl a i nt parag raphs 22 and 23] Presumably

, she could take a ction to revive the corporation

. Moreover, whether Bo z zio could r evive the corporati o n on her own does not present a question of fact barring dismissal

, as she

co n t e n ds. To the c ontrary , the corporation’s and thus B oz z io’s, lack of c a p acity to pursue the claims appears from the face of the complaint.

W h en sitting in diversity jurisdiction, “[ t] hi s co u rt will follow a state supreme court’s interpretation

. . . in the absence o f ex traordinary c ircumstances.” Dimidowich v. Bell & H owell

, 8 03 F .2d 1 473, 1482 (9th Cir. 1986). W here the state’s hig hest court has not decided a n issue, “th i s co u r t looks for ‘g uidance’ to decisions by intermediat e a p pellate
courts of the state an d b y co u rts in other jurisdictions.” Id. Here, the California Supreme Court has not decided whether

a promisee corporation’s suspended stat us precludes suit b y

a third-party beneficiary of the cont r a c t , but in Richmond American Homes
, the California Court of Appeal s u gg ested that a third-party beneficiary suit may g o forw a r d notwithstanding the promisee’s incapacity to sue. See 63 Cal. Rptr. 3d a t 544–45. Therefore, the district court erred in its determination that a t hird-party b eneficiary cannot state a claim if the promi s e e i s a suspended corporation under Cal. Rev. & Tax Code § 23301.

W e a re not persuaded that B oz z io’s r elationship to Missing Persons, I nc. ends her appeal. F irst, whether B oz z io “could take action to revive t h e corporation” does not necessarily disting uish h e r from the insurer in Richmond American Homes

. Califor n ia law provides that revival of aB O Z Z I O V

. EMI G R O U P 14

corporation “ may be made by any stockholder or creditor, b y

a majority of the surviving trustees or directors thereof, by an officer, or by any other person who has interest in the relief from suspension .” Cal. Rev. & Tax Code § 23305 (emphasis

a d ded). As an entity impacted by Performance Plaster i n g’ s tax default, the insurer in Richmond American Homes appears to have had “ an interest” in that com p a n y ’ s revival a nd therefore—like B oz z io—likely had the ability to apply for its revival.

Second, no California c ase has decided whether a party ’s
status as a former s h a

reholder or officer of a suspended corporation neg ates that party ’s ability to bring suit as a thirdparty beneficiary of a contract entered into by the corporation. The d istrict court concluded that permitting B oz z io to sue on her own behalf would allow her to reap the b e n ef i t s o f the corporate form while avoiding the co n sequences of Missing Persons, I nc.’s tax default, but its analy sis fails to account for § 23305b, a provision that ex p ressly allows the F ranchise Tax B oard to revive a corporation “without f ull pay ment o f the
tax es, penalties, and interest due” if revival “will improve the prospects for collection of the full amount due.” Cal. Rev. & Tax Code § 2 3305b. This statu t e r eflects the leg islature’s intention that certain suspended corporations may be revived if doing so serves the state’s ultimate g oal of collecting back
tax es and p enalties. Considering this p rovision, we do not ag ree that allowing Bo z z io’s suit to g o forward would necessarily undermine leg islative intent. As far as we k now, the State of California has n ot considered whether to reinstate Missing Persons, I nc. to allow it to p u r sue its claim ag ainst Capitol.

F inally

, the record does not support the district co urt’s finding that B oz z io has control over the defunct corporationB O Z Z I O V

. EMI G R O U P 15

and an ability to r evive it. Contrary t o t h e d istrict court’s interpretation, B oz z i o never alleg e d she is currently the driving force behind the loan-o u t corporation. Rather, the complaint alleg ed that—from the time the band was f ormed in the 1980s, until the g roup broke up—B oz z io was a “member a

nd driving sig na t u re force” o f the b and

. B oz z io served as president of Missing Persons, I nc. for some period of time, but she arg ued in our court that she cannot revive the corporation under § 23305 because only Missing P er s o ns, I nc. can a cc e s s the r o y alty statements and relevant records that are necessary to c alculate the amount of back tax es owed. According to B oz z io, she cannot calculate, much less pay , the
corpo r a t i o n’s back tax e s because she cannot access the
roy alty statements. Case law app l y ing § 23301 recog niz e s t h a t its purposes are not served “by p enaliz ing an inn o c e n t person or entity .” Biggs v. Cal. Ins. Guarantee Assn.
, 179 Cal. Rptr. 16, 19 (Cal. Ct. App. 1981). While B oz z io is
not “innocent” in the sense that she is unrelated to the defunct corporation, the face of the complaint does n ot demonstrate that B oz z io is “directly

. . . responsible f o r t h e suspended status of the corporation.”

I n lig ht of the a

bove, it was an er r o r t o g rant the motion
to dismiss on the g round that Missing Persons, I nc. was a suspended corporation.

I I

. W e cannot affirm the d

istrict court on the ground that Bozzio waived the b enefits of the Missing Persons, Inc.
contract.

Even if Missing Persons, I nc.’s suspended status does not pre c l u d e B oz zio’s suit, Capitol maintains that dismissal is
p r o p e r because B oz z io waived a ny r ig h t t o s u e Capitol—includ i n g the rig h t to sue as a third-partyB O Z Z I O V

. EMI G R O U P 16

beneficiary

—by sig ni n g a n A rtist Declaration in which she

a gr e ed that she would not “look to” Capitol for pay ment o f
roy alties:

F or the ex p ress and direct benefit of Capitol, I hereby :

. . . Ag ree to look solely to [ Missing Perso n s, I nc.] for the p ay

ment of my fees and/or
roy alties, as the case may b e, a n d will not assert any claim in this reg ard a g ainst Capitol

or attempt to preven t t h e manufacture, sale, l i c e n s i n g o r d i s t r i b u t i o n o f r e c o r d s manufactured from the masters produced under the Capitol-Company Ag r eement.

This lang u ag e f

rom the Artist Declaration s u gg ests that B oz z io waived h er rig ht to sue as a third- p arty beneficiary

, but other lang uag e in the L oan-Out Agr e e ment is in tension with that conclusion.

“Under California law, a ‘contract, made ex pressly for the benefit o f a thir d party , may be enforced by him a t a ny time before the p arties thereto rescind it.’” Balsam v. Tucows Inc.
, 627 F .3d 1 158, 1161 (9th Cir. 2010) (quoting Cal. Civ. Code § 1559). “[ A] t h i r d party beneficiary contract must either satisfy an oblig ation of the promisee to pay mon ey to the beneficiary

, o r the circumstances indicate the promisee intend s t o g ive the beneficiary the benefit of the promised performance.” Med. Staff o f Doctors Med. Ctr. in Modesto v

. Kamil

, 33 Cal. Rptr. 3d 853, 858 (Cal. Ct. App. 2005).B O Z Z I O V

. EMI G R O U P 17

W h e ther “the circumstances indicate that” Capitol a n d Missing Persons, I nc. intended to g ive B oz z io “the benefit o f the promised performance” cannot be resolved on the face o f the parties’ pleading s. See id. The L oan-Out A g r e e m e n t

ex p r e s s ly provides that B oz z io and her bandmates would incur oblig ations and r e c eive benefits, notwithstanding the fact that they were no long er c ontrac t i n g parties. F o r

ex a mple, if Missing Pers o n s , I nc. c eased to e x ist, the individual artists were to assume its contractual oblig ations in the Ag reement with Capitol:

I f during the term of the Capitol-Company Ag reement or any ex t e nsions, renewals o r modifications thereof, Company shall cease to be e n t itled to make my services available to Capitol in accord ance with the terms of the Capitol-Company Ag reement, or if Company shall fail or refuse to make my s e r v i ces available to Capit o l

, I shall, at Capitol’s request, do all such acts a nd thing s as shall
g ive to Capitol the same r ig hts, privileg es a nd benefits as Capitol would have under the Capitol

- C o m

p a ny Ag reement if Company h ad continued to be entitl e d to my services, and I shall make the same available to Capitol, a nd such rig hts, privileg e s and benefits shall be enforceable on Capitol’s behalf ag ainst me.

F urther, the L oan

- O ut Ag reement contemplates roy alty
pay ments to individual artists:

Company [ Missing Persons, I nc.] shal l have the benefit o f all a g reements, representation s and warranties made by C a p itol to Artist inB O Z Z I O V

. EMI G R O U P 18

the [ orig ina l ag reement] provided, however, that Company shall not receive an y r ig hts hereunder g reater than th o se which Artist would receive under the [orig inal ag reement] h a d this document never been ex ecuted. Company shall pay Artist a ll royal t i es and advances required to be p aid p ursuant to the Exhibit. [ 3 ]

(emphasis added). These provisions sug g est the part ies contemplated that “the promisee intends to g ive [ B oz z io] the benefit of the pro m i sed performance.” See Med. Staff of Doctors Med. Ctr. in M

odesto

, 33 Cal. Rptr. 3 d a t 8 5 8; see also Prouty v. Gores Tech. Grp.
, 18 Cal. Rpt r

. 3 d 178, 184 (Cal. Ct. App. 2004) (“I f the terms of the contract necessarily require the promisor to c o nfer a b enefit on a third p e r s o n , then the contract, and hence the parties thereto, contemplate a benefit to the third person.” (citation omitted)).

Capitol st r e nuously arg u es that b y ag reeing “not [ to]
assert any claim[ s]

. . . a g ainst Capito l

, ” B oz z io waived her rig ht to sue as a third-party beneficiary

. B oz z io counters that this “look solely to” c lause was intended to prohibit an artist from asserting a claim a gainst Capitol only “when there is a dispute among ind i v i dual band members over the internal allocation a

nd distribution of roy alties that have already been properly accounted for and paid b y the record label to the

ar t i sts’ musical g roup or loan-out corporation.” N othing in

3 In t h e Lo a n -O u t A g reem en t, th e f o o tn o te to th i s tex t in d icates:

“ [P ]ro v id ed th at su ch m o n i es are p aid by Cap i t o l to Co m p an y , w h ich
p a y m e n t b y Cap ito l sh all b e co n ditio n ed u p o n Co m p an y ’ s an d A

rtist’ s p erf o rm an ce o f its m a t erial o b lig atio n s h ereu n d er an d p u rsu an t to th e A g reem en t.”B O Z Z I O V

. EMI G R O U P 19

the rec o r d forecloses B o z z io’s reading of this contract lang uag e.

W e ag ree with B o z z io that whethe r s h e forfeited the ability to sue as a third -party beneficiary is a fact-bound inquiry ill-suited to resolution at the motion to dismiss stag e

. See Prouty
, 18 Cal. Rptr. 3d at 184 (“W hether the third party is an intended beneficiary or merely an incidental b eneficiary involves construction of the intention of the parties, g athered from reading the co n t ra ct as a whole in lig h t of the circumstances under w hich it was entered.” (q u o ting E. Aviation Grp., Inc. v. Airborne Express, Inc.
, 8 Cal Rptr. 2d 355, 357–58 ( Cal. Ct. App. 1992)). On remand, a record can be developed that will a llow consideration of B oz z io’s claim that she w as an intend e d third-party beneficiary o f the Ag reement.

I I I

. Amendment may not have been futile.

B ec a u s e amendment may not have been futile, it was

error to dismiss B oz z io’s complaint with prejudice. See Sharkey v. O’Neal

, 778 F .3d 7 67, 774 (9th Cir. 2015) (noting that district c ourts are r e q u i r e d to allow parties to freely amend a bsent “undue delay , bad faith . . . repeated failure to

cure d e ficiencies by

amendments previously allowed, undue prej u d i c e t o the opposing party

. . . , [ or] futility o f amendment” (quoting Foman v

. Davis
, 371 U.S. 178, 182 (1962))).

The d istrict cou rt dismissed B oz z io’s complaint on the sole g round that B oz z io “ c annot sue to e n force [ the]

a greement when the contracting corporation[

, Missi n g Persons, I nc.,] would have no capacit y t o do so.” The court denied B oz z io leave to amend p resumably beca u s e B oz z ioB O Z Z I O V

. EMI G R O U P 20

disclaimed a

ny ability to rev i v e the corporation under § 23305, rendering

any amendment futile.

L ikely b ecause the part i e s failed to brief the issue, the court’s order did not take int o a c count that California’s tax code may allow B oz z io to revive Missing Per s ons, I nc. without pay ing back tax es. Section 23305b provides: “[ T] he Franchise Tax B oard may revive a corporation t o go o d standing without full p ayment of the tax es, penal ties, a nd interest due if it d etermines that the revivor will improve the prospects for collection of the full amount due .” Cal. Rev. & T a x Code § 23305b (emphasis added). An application t o

r e v ive a suspended corporation “may be made by a n y stockholder or creditor, by a majority of the surviving trustees

or directors thereof, by an o fficer, or b y a ny o ther p e rson w ho has interest in the relief f r o m s u s p ension.” Id. § 23305. I t appears that B oz z io is elig ible t o a p p ly to have Missing Persons, I nc. restored to g ood standing under § 23305b because she is a “person who h as interest in th e r e l i e f from suspension.” California may decide that revival under this provision is consistent with its objective of securing pay ment of c o rporate tax es because—once revived—Missing Persons, I nc. could p ursue its claims and ther e b y “ improve the prospects for collection of the fu l l a mount due.” See id. § 23305b. B ecause revival under § 23305b may be possible,
we cannot say that amendment was f utile. The district court therefore abused its discretion by dismissing B o z z i o ’s complaint with prejudice. See Sharkey , 778 F .3d at 774.

CONCLUSION

The district court erred in dismissing the complain t , a nd we cannot affirm on different g rounds.B O Z Z I O V

. EMI G R O U P 21

REVERSED AND REMANDED.