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

ORDER

PAGE - 1

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT SEATTLE

SEATTLE PACIFIC INDUSTRIES, INC., )

) CASE NO. C06-834RSM

Plaintiff, )

) ORDER GRANTING MOTION TO DISMISS

v. ) AND DENYING LEAVE TO AMEND

)

MELMARC PRODUCTS, INC., )

)

Defendant. )

____________________________________)

I. INTRODUCTION

 This matter comes before the Court on plaintiff’s Motion to Dismiss and defendant’s related

Motion to Amend. (Dkts. #11 and #14). Essentially, plaintiff argues that defendant’s first cause of

action and first affirmative defense should be dismissed because they do not satisfy particularity

requirements under Rule 9(b), and do not allege sufficient facts to state a claim under Rule 12(b)(6). 

Plaintiff asserts that defendant fails to state a claim for relief because it alleges misrepresentations that

relate to future promises, which are not actionable under controlling Washington state law. Defendant

does not directly respond to the merits of plaintiff’s motion to dismiss, but instead argues that the

appropriate remedy for a failure to plead with particularity is granting leave to amend, rather than

dismissal. (Dkt. #13). For the reasons set forth below, the Court disagrees with defendant and

GRANTS plaintiff’s motion to dismiss.

II. BACKGROUND

Plaintiff, Seattle Pacific Industries, Inc. (“SPI”) manufactures and markets clothing under

Case 2:06-cv-00834-RSM Document 17 Filed 01/31/07 Page 1 of 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

ORDER

PAGE- 2

several different brand names including Unionbay and UB, and holds a registered trademark for both

names. The present dispute arises from a Trademark License Agreement (“Agreement”) between

plaintiff and defendant, another clothing manufacturer, Melmarc Products, Inc. (“Melmarc”), to

produce screen-printed knit tops bearing the Unionbay and UB logos. In consideration for the license

to use plaintiff’s logos, defendant agreed to several conditions including: to make guaranteed minimum

royalty payments to plaintiff, to attain guaranteed minimum net sales, to pay certain advertising

payments and sales commissions to plaintiff, to submit certain sales reports and sales projections, to

maintain certain insurance coverage, and to obtain from its bank a new additional credit line of at least

$2,000,000 as additional working capital by June 18, 2004.

Plaintiff alleges that defendant breached the license agreement. It filed the instant suit on June

14, 2006 to request termination of the agreement, enforcement of required payments, and damages in

an amount to be determined at trial. 

Defendant filed a counterclaim alleging three causes of action. First, that plaintiff induced

defendant to enter the Agreement by fraudulent representations, upon which defendant reasonably

relied. Second, that plaintiff is in material breach of its obligations for the reasons stated in the

affirmative defense. And third, that plaintiff wrongfully prevented defendant from performance. The

instant motions followed.

III. LEGAL STANDARDS

A. 12(b)(6) Standard of Review

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court must dismiss a

complaint if “it appears beyond doubt that plaintiff can prove no set of facts in support of his claim

which would entitle him to relief.” Van Buskirk v. Cable News Network, Inc. 284 F.3d 977, 980 (9th

Cir. 2002). All allegations of material fact are construed in a light most favorable to the non moving

party. Allwaste, Inc. v. Hecht, 65 F.3d 1523, 1527 (9th Cir. 1995). 

Case 2:06-cv-00834-RSM Document 17 Filed 01/31/07 Page 2 of 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

ORDER

PAGE- 3

When a complaint is dismissed for failure to state a claim, “leave to amend should be granted

unless the court determines that the allegation of other facts consistent with the challenged pleading

could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d

1393, 1401 (9th Cir. 1986). Futile amendments should not be permitted. Klamath-Lake

Pharmaceutical Ass’n v. Klamath Medical, 701 F.2d. 1276, 1293 (9th Cir. 1983). 

B. Rule 9(b) Heightened Pleading Standard for Fraud Claims

Under Rule 9(b) of the Federal Rule of Civil Procedure, “in all averments of fraud or mistake,

the circumstances constituting fraud or mistake shall be stated with particularity.” Fed. R. Civ. P. 9(b).

A complaint must state the “time, place and specific content of the false representations as well as the

identities of the parties to the misrepresentation.” Teamsters Local #427 v. Philco-Ford Corp., 661

F.2d 776, 782 (9th Cir. 1981). A plaintiff must also state the “circumstances indicating falseness” or an

explanation as to how an alleged statement or omission was false or misleading when made. In re

GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1545 (9th Cir. 1994). 

A motion to dismiss a claim of fraud under Rule 9(b) for failure to plead with particularity is

the functional equivalent of a motion to dismiss under Rule 12(b)(6)). Vess v. Ciba-Geigy Corp. USA,

317 F.3d 1097, 1107 (9th Cir. 2003). When a complaint is dismissed under Rule 9(b), a court should

grant leave to amend unless amendment would be futile. Id. at 1108.

IV. DISCUSSION

A. Plaintiff’s Motion to Dismiss

The Court agrees with plaintiff that defendant fails to meet the heightened pleading standard

under Rule 9(b) and that defendant fails to state a claim under Rule 12(b)(6) for the following reasons.

First, defendant’s affirmative defense fails to state “the who, what, when, where and how of the

misconduct charged” as required by Rule 9(b). Vess 317 F.3d at 1106 (quoting Cooper v. Pickett, 137

F.3d 616, 627 (9th Cir. 1997). Under Rule 9(b), pleadings must be specific enough “to give defendants

Case 2:06-cv-00834-RSM Document 17 Filed 01/31/07 Page 3 of 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

ORDER

PAGE- 4

notice of the particular misconduct so that they can defend against the charge and not just deny that

they have done anything wrong.” Id. Defendant’s identification of “authorized agents” is insufficient

to state who was involved in the fraudulent conduct under Rule 9(b). See Segal Co. v. Amazon.com,

280 F. Supp.2d 1229, 1231 (W.D. Wash. 2003)(“a complaint’s reference to certain ‘representatives’

of [plaintiff] is too vague to sufficiently identify the alleged perpetrators.”). Also, defendant fails to

provide the time and place for the alleged fraud. See First Global Commc’n, Inc. V. Bond, 2006 WL

231634, at *5-7 (W.D. Wash. 2006)(dismissing fraud claim that did not “satisfy the time and place

particularity requirements of Rule 9(b));” and see Segal Co. v. Amazon.com, 280 F. Supp.2d 1229,

1231)(dismissing fraud claim that did not “adequately indicate when and where the alleged fraud took

place.”) 

Second, defendant’s first cause of action fails to state a claim for which relief can be granted.

Defendant’s claim cannot withstand a 12(b)(6) motion because it fails to allege each of the nine

elements of fraud under Washington law, specifically that an “existing fact” was misrepresented by

plaintiff. Washington courts have said that in a claim for fraud, a plaintiff must allege: (1) a

representation of an existing fact; (2) its materiality; (3) its falsity; (4) the speaker’s knowledge of its

falsity or ignorance of its truth; (5) his intent that it should be acted on by the person to whom it is

made; (6) ignorance of its falsity on the part of the person to whom it is made; (7) the latter’s reliance

on the truth of the representation; (8) his right to rely upon it; and (9) his consequent damage. See

Leadbetter v. Comcast Cable Communications, Inc. 2005 WL 2030799, at *8 (W.D. Wash.

2005)(citing Hambleton Bros. Lumber Co. V. Balkin Enters., Inc., 397 F.3d 1217, 1233-34 (9th Cir.

2005)). Failure to establish any one element of a fraud claim makes all other elements immaterial. West

Coast, Inc. v. Snohomish County, 112 Wash.App.200, 206 (2002). 

A promise of future performance is not a representation of an existing fact and will not support

a fraud claim. Segal, 280 F. Supp.2d at 1232 (quoting West Coast, Inc.,112 Wash.App. at 206). The

Case 2:06-cv-00834-RSM Document 17 Filed 01/31/07 Page 4 of 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

ORDER

PAGE- 5

reasons for this rule include: (a) a statement of future performance is merely an estimate of something

to take place in the future, (b) a representation that something will be done in the future, from its

nature cannot be true or false at the time it was made, and (c) “were the rule otherwise, any breach of

contract would amount to fraud.” Nyquist v. Foster, 44 Wash.2d 465, 470 (1954). Defendant alleges

that plaintiff made the following five fraudulent representations: 

a. That defendant would have the exclusive right to sell embellished knit tops bearing the

licensed trademarks during the duration of the Agreement.

b. That the limits set for Guaranteed Minimum Net Sales were a “conservative” number

that plaintiff’s sales force would easily attain on defendant’s behalf.

c. That defendant’s representative would be in charge of plaintiff’s sales force with

respect to Licensed Products.

d. That payments made under paragraph 10 of the Agreement [“Additional Covenants”]

were a sales commission, i.e. an incentive to plaintiff’s sales force to sell the Licensed

Products.

e. That plaintiff would show and promote the Licensed Products to its customers and

feature the Licensed Products at apparel trade shows. 

(Dkt. #3 at 5). 

In Nyquist, the court distinguished between (a) a future event, and (b) an existing fact, using

the following test: 

Where the fulfillment or satisfaction of the thing represented depends upon a promised

performance of a future act, or upon the occurrence of a future event, or upon a particular

future use, or upon future requirements of the representee, then the representation is not

of an existing fact...On the other hand, a statement is one of existing fact if a quality is

asserted which inheres in the article so that, at the time the representation is made, the

quality may be said to exist independently of future acts or performance of the one making

the representation, independently of other particular occurrences in the future, and

independently of particular future uses or future requirements of the buyer. 

Id. at 471. Following this test, the court finds that each of the plaintiff’s statements sets forth a

promise or prediction of future performance, not an existing fact. 

In general, the appropriate remedy is to grant leave to amend to allow defendant an

opportunity to cure defects in its pleadings, rather than simply dismissing the claim. See Bly-Magee v.

California, 236 F.3d 1014, 1019 (when dismissing for failure to comply with Rule 9(b) “leave to

amend should be granted unless the district court determines that the pleading could not possibly be

Case 2:06-cv-00834-RSM Document 17 Filed 01/31/07 Page 5 of 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

ORDER

PAGE- 6

cured by the allegation of other facts”); Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 701 (In a

motion to dismiss under Rule 12(b)(6), “leave to amend should be granted if it appears at all possible

that the plaintiff can correct the defect”)(internal quotation marks omitted). Thus, the Court now turns

to defendant’s related motion to amend. 

B. Defendant’s Motion to Amend

Defendant has moved to amend its pleading to correct any defect of which the plaintiff

complains. (Dkt. #14 at 2). However, for the following reasons, the Court finds that such amendment

would be futile.

As a threshold matter, the Court agrees that defendant’s proposed amended counterclaim

satisfies Rule 9(b). (Dkt. #14, Exhibit A). While its original affirmative defense fails to identify the

parties to the fraud, in its proposed amendment, defendant provides specific names – Ms. Catherine

Underwood as plaintiff’s agent, and Mr. Brian Hirth as defendant’s agent. Defendant also fails to

provide the time and place of the alleged fraud in its initial claim, but provides a more particular

statement in its amended claim. While defendant admits that the exact dates of the fraud are unknown,

it states that the alleged fraud took place “in the days immediately before execution of the

Agreement.” The Court finds this statement sufficient to satisfy Rule 9(b).

However, defendant’s proposed amended first cause of action continues to fail under Rule

12(b)(6) because it does not allege that an “existing fact” was misrepresented by defendant. Defendant

asserts that plaintiff’s agent made representations “concerning [plaintiff’s] past and then-current

experience, and [its] present intentions with respect to sales of the types of products to be licensed

under the Agreement.” (Dkt. #14, Ex. A at 9). Regardless of the “present” quality of plaintiff’s

intentions, such intentions are nonetheless by their nature, estimates of future events and do not

support a fraud claim. Additionally, to the extent that plaintiff’s “then-current” sales experience is an

existing fact, it is still only material to defendant’s reliance in that defendant hoped to reproduce such

Case 2:06-cv-00834-RSM Document 17 Filed 01/31/07 Page 6 of 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

ORDER

PAGE- 7

sales on its own in the future, and thus resembles a future estimate more than a current inherent

quality. Defendant further alleges an amended set of false representations including:

a. That plaintiff’s sales of embellished knit tops in the year prior to the term of the

Agreement were in excess of ten million dollars.

b. That plaintiff was, at that time, projecting and expecting likely sales of embellished knit

tops during the term of the Agreement in the range of ten to thirty million dollars

annually.

c. That as a result of plaintiff’s past and then-current experience in the sales of

embellished knit tops, the limits set in the Agreement for Guaranteed Minimum Net

Sales were a “conservative” figure that plaintiff’s sales force would easily attain on

defendant’s behalf. 

d. That plaintiff intended that defendant would be the exclusive seller of the Licensed

Products. 

(Dkt. #14, Ex. A at 9). Of these, only the first statement – that plaintiff’s sales exceeded ten million

dollars the prior year – could possibly allege an “existing fact.” But this is also only relevant to the

extent that defendant believed future sales would equal those of the past. Accordingly, the Court

agrees with plaintiff that defendant’s amended counterclaim cannot support a fraud claim.

V. CONCLUSION

The Court has reviewed plaintiff’s motion to dismiss, defendant’s response, defendant’s motion

to amend, and plaintiff’s reply, along with the remainder of the record, and hereby finds and

ORDERS:

(1) Plaintiff’s Motion to Dismiss (Dkt. #11) is GRANTED, and the first cause of action and

first affirmative defense of the defendant’s counterclaim are DISMISSED.

(2) Defendant’s Motion to Amend (Dkt. #14) is DENIED. 

(3) The Clerk SHALL send a copy of this Order to all counsel of record.

DATED this 31st day of January, 2007.

A

RICARDO S. MARTINEZ

UNITED STATES DISTRICT JUDGE 

Case 2:06-cv-00834-RSM Document 17 Filed 01/31/07 Page 7 of 7