PAGE 1 – OPINION AND ORDER

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

GREGORY FUNDING LLC, an Oregon 

limited liability company,

Plaintiff,

v.

SAKSOFT, INC., a Colorado corporation,

Defendants.

Case No. 3:16-cv-480-SI

OPINION AND ORDER

Richard S. Yugler and Christine N. Moore, LANDYE BENNETT BLUMSTEIN LLP, 3500 SW Fifth 

Avenue, Suite 3500 Portland, OR 97201. Of Attorneys for Plaintiff.

Steven Rizzo and J. Michael Mattingly, RIZZO MATTINGLY BOSWORTH PC, 1300 SW Sixth 

Avenue, Suite 330, Portland, OR 97201. Of Attorneys for Defendant.

Michael H. Simon, District Judge.

Plaintiff, Gregory Funding LLC (“Gregory”), services residential loans. Defendant, 

Saksoft, Inc. (“Saksoft”), provides information management and software development services. 

In this lawsuit, Plaintiff alleges four claims against Defendant: (1) breach of express contract;

(2) breach of the implied contractual duty of good faith and fair dealing; (3) breach of the

implied warranty of fitness for a particular purpose under the Uniform Commercial Code 

Case 3:16-cv-00480-SI Document 26 Filed 08/24/16 Page 1 of 18
PAGE 2 – OPINION AND ORDER

(“UCC”); and (4) intentional misrepresentation.

1 Defendant moves for an order dismissing 

Plaintiff’s second, third, and fourth claims under Rule 12(b)(6) and Rule 9(b) of the Federal 

Rules of Civil Procedure. Defendant also moves under Rule 12(e) for an order requiring Plaintiff 

to make certain allegations more definite and certain. For the following reasons, Defendant’s

motion is granted in part and denied in part.

STANDARDS

A motion to dismiss for failure to state a claim may be granted only when there is no 

cognizable legal theory to support the claim or when the complaint lacks sufficient factual 

allegations to state a facially plausible claim for relief. Shroyer v. New Cingular Wireless Servs., 

Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). In evaluating the sufficiency of a complaint’s factual 

allegations, the court must accept as true all well-pleaded material facts alleged in the complaint 

and construe them in the light most favorable to the non-moving party. Wilson v. HewlettPackard Co., 668 F.3d 1136, 1140 (9th Cir. 2012); Daniels-Hall v. Nat’l Educ. Ass’n, 629 

F.3d 992, 998 (9th Cir. 2010). To be entitled to a presumption of truth, allegations in a complaint 

“may not simply recite the elements of a cause of action, but must contain sufficient allegations 

of underlying facts to give fair notice and to enable the opposing party to defend itself 

effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). All reasonable inferences from 

the factual allegations must be drawn in favor of the plaintiff. Newcal Indus. v. Ikon Office 

Solution, 513 F.3d 1038, 1043 n.2 (9th Cir. 2008). The court need not, however, credit the 

plaintiff’s legal conclusions that are couched as factual allegations. Ashcroft v. Iqbal, 556 

U.S. 662, 678-79 (2009).

 

1

Plaintiff titles its fourth claim “misrepresentation” and clarifies in its response to 

Defendant’s motion to dismiss that Plaintiff is asserting a claim of intentional, rather than 

negligent, misrepresentation.

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A complaint must contain sufficient factual allegations to “plausibly suggest an 

entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the 

expense of discovery and continued litigation.” Starr, 652 F.3d at 1216. “A claim has facial 

plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable 

inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing 

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).

BACKGROUND

For purposes of this motion, the Court accepts as true the well-pleaded material facts in 

Plaintiff’s Complaint (“Compl.”) (ECF 1). Plaintiff, an Oregon limited liability company, 

engages in the business of residential loan servicing on behalf of lenders. Defendant, a Colorado 

corporation, is a wholly-owned subsidiary of Saksoft Limited, a company organized under the 

laws of India. Defendant is primarily engaged in the business of providing information 

management and software development.

On or about May 16, 2012, Plaintiff entered into a written agreement with Defendant,

entitled “Master Software Services Agreement” (“Master Agreement”), which included two

statements of work, one dated April 25, 2012 (“SOW 1”) and the other dated February 25, 2013 

(“SOW 2”). (The Master Agreement, SOW 1, and SOW 2, are collectively referred to as the 

“Contract.”) The purpose of the Contract was for Defendant to create for Plaintiff a custom 

mortgage servicing platform in the form of “Concept to Completion” software.

Under the Contract, Defendant had discretion to determine staffing, coding, 

programming, and methods for completing the software that would comprise Plaintiff’s 

mortgage servicing platform. Compl. ¶ 27. Defendant was to provide Plaintiff with a “Synergy 

Team,” consisting of an onsite project manager, two developers, and an offshore project manager 

in India, whose duties would be governed by the SOWs. Compl. ¶ 8. In developing the platform, 

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the Synergy Team would employ the methods described in SOW 1 as “C2C-Concept to 

Completion development, testing, implementation, and post-production.” Compl. ¶ 9. In SOW 1, 

Defendant stated that its services would provide a “30% to 40% cost savings over an internal 

staffing model.” Compl. ¶ 10.

The Master Agreement limits the liability of Defendant in the event of misrepresentation, 

negligence, breach of contract, or failure to meet conditions specified in the SOWs to no more 

than 100 percent of the fees paid under the SOWs. Compl. ¶ 12; Master Agreement at 6, ¶ 7

(ECF 23 at 7). The Master Agreement also precludes recovery of any “indirect or consequential 

loss or damage.” Master Agreement at 6, ¶ 8 (ECF 23 at 7).

In approximately October 2012, Plaintiff considered the first onsite project manager 

supplied by Defendant to be inadequate and requested a replacement. Defendant responded by 

engaging Jayakumar Viswanathan to create a plan to get the project back on track and to hire a 

new onsite project manager. In February 2013, the project was behind schedule, and Plaintiff and 

Defendant entered into SOW 2 to supplement the Master Agreement and SOW 1 by, among 

other things, adding a business analyst position to the Synergy Team. On March 1, 2013, several 

months after Mr. Viswanathan was hired, he found a replacement onsite project manager for 

Plaintiff’s project. Defendant also agreed that Plaintiff need not pay Defendant’s invoices during 

the two months that it took for Mr. Viswanathan to find a replacement onsite project manager. 

The new project manager hired three different business analysts in succession to fill the newly 

created position under SOW 2, but Plaintiff found each to be inadequate. Plaintiff alleges that 

after interviewing and hiring one business analyst, Defendant sent a different person to work as 

the business analyst for Plaintiff, whom Plaintiff had not previously interviewed or approved.

Compl. ¶ 17.

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In January 2015, Plaintiff hired its own business analyst and terminated the business

analyst provided by Defendant under SOW 2. Plaintiff refused to pay Defendant’s invoices for 

July and August, asserting that the “project is a disaster,” and Plaintiff also has refused to pay 

Defendant’s invoices for November and December 2015. Compl. ¶ 20. Between October 16, 

2015, and February 17, 2016, Plaintiff and Defendant attempted to negotiate a resolution of their 

disputes, but were unsuccessful. Plaintiff filed this action on March 21, 2016. The parties agree 

that Oregon law applies.

DISCUSSION

Defendant does not move against Plaintiff’s first claim, alleging breach of express 

contract. Instead, Defendant moves to dismiss: (a) Plaintiff’s second claim, alleging breach of the 

implied covenant of good faith and fair dealing; (b) Plaintiff’s third claim, alleging breach of 

warranty in the sale of goods; and (c) Plaintiff’s fourth claim, alleging intentional 

misrepresentation. Defendant also moves for an order requiring Plaintiff to make more definite 

and certain its factual allegations contained in Compl. ¶ 22(c). Finally, Defendant moves either 

to dismiss a portion of Plaintiff’s request for damages or, alternatively, for an order requiring 

Plaintiff to make more definite and certain its damage allegations contained in Compl. ¶ 23.

A. Breach of Implied Duty of Good Faith and Fair Dealing

Under Oregon law, every contract contains an implied duty of good faith and fair dealing. 

Klamath Off-Project Water Users, Inc. v. Pacificorp, 237 Or. App. 434, 445, (2010). “A duty of 

good faith and fair dealing,” however, “may be implied as to a disputed issue only if the parties 

have not agreed to an express term that governs that issue.” Oregon Univ. Sys. v. Oregon Pub. 

Employees Union, Local 503, 185 Or. App. 506, 511 (2002) (emphasis added). Thus, the implied 

duty cannot provide a remedy for an “unpleasantly motivated act that is permitted expressly by 

the contract.” Zygar v. Johnson, 169 Or. App. 638, 645 (2000).

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When a contract allows a party to exercise discretion, however, and that discretion is 

exercised for purposes inconsistent with the objectively reasonable expectations of the parties, 

the party exercising discretion still may be found to be acting in bad faith. Best v. U.S. Nat. Bank 

of Oregon, 303 Or. 557, 563 (1987). After deciding Best, the Oregon Supreme Court appears to 

have constrained the holding in that case. In Tolbert v. First Nat. Bank of Oregon, 312 Or. 485 

(1991), which began as a companion case to Best, the Oregon Supreme Court held that “it is only 

the objectively reasonable expectations of parties that will be examined in determining whether 

the obligation of good faith has been met.” Id. at 494. Accordingly, the Court found that the 

parties’ agreement to a contract that expressly provided one party with discretion to set price 

terms was evidence of the parties’ reasonable expectations. Id.

During the next several years, the Oregon Supreme Court decided Pac. First Bank v. New 

Morgan Park Corp., 319 Or. 342 (1994), and Uptown Heights Assoc. Ltd. P'ship v. Seafirst 

Corp., 320 Or. 638 (1995). In Pac. First Bank, the Court held that when a contract expressly 

provides for a unilateral exercise of discretion, the duty of good faith cannot circumscribe that 

discretion. The Court explained: “[T]he duty of good faith operates to effectuate the reasonable 

expectations of the parties as determined under the terms of their contract. Here, those terms 

demonstrate that the parties agreed to—that is, reasonably expected—a unilateral, unrestricted 

exercise of discretion.” Pac. First Bank, 319 Or. at 354; see also Uptown Heights, 320 Or. 

at 647–48 (“the reasonable contractual expectations of the parties are shown[ ] by the 

unambiguous terms of the contract” (emphasis added; internal quotation marks and citation 

omitted)).

The Oregon Court of Appeals has continued to develop this doctrine, noting that the 

reasonable expectations of the parties to a contract may include evidence from outside the terms 

Case 3:16-cv-00480-SI Document 26 Filed 08/24/16 Page 6 of 18
PAGE 7 – OPINION AND ORDER

of the contract and generally present a question of fact. See Iron Horse Eng’g Co., v. Nw. Rubber 

Extruders, Inc., 193 Or. App. 402, 421 (2004) (“[H]olding the parties to industry standards and 

practices effectuates the reasonable contractual expectations of the parties.”); see also Brown v. 

Am. Prop. Mgmt. Corp., 167 Or. App. 53, 63 (2000) (“[U]pon our review of the record, we 

conclude that there is evidence . . . from which a jury could have concluded that defendant 

exercised its authority . . . in bad faith . . . .”); Cantua v. Creager, 169 Or. App. 81, 97 (2000)

(noting that “the question of whether the defendant acted with the requisite bad motive is a 

question of fact for the jury”).

At oral argument, Plaintiff confirmed that its second claim, alleging breach of the implied 

covenant of good faith and fair dealing, is limited to its allegations relating to Defendant’s 

staffing decisions. Plaintiff’s Complaint lists several instances in which Defendant allegedly 

supplied inadequate staff for Plaintiff’s “Synergy Team.” See, e.g., Compl. ¶ 22(b). Notably, 

Plaintiff describes instance when, after a person was selected to be hired, a different person was 

sent to Plaintiff’s business to fill the business analyst position for the project. Compl. ¶ 17. 

Although an express term of the parties’ Contract allowed Defendant to exercise discretion over 

staffing, the Contract did not specify the precise method with which Defendant was to exercise 

staffing discretion. Thus, the duty of good faith still applies. As limited to Defendant’s exercise 

of discretion concerning staffing decisions for Plaintiff’s project, Plaintiff alleges sufficient facts 

to state a facially plausible claim for breach of the implied duty of good faith and fair dealing.

Defendant’s motion to dismiss Plaintiff’s second claim is denied.

B. Breach of Implied Warranty of Fitness for a Particular Purpose

Defendant argues that Plaintiff’s third claim, alleging breach of the implied warranty of 

fitness for particular purpose pursuant to Or. Rev. Stat. § 72.3150, which is materially identical 

to UCC § 2-315, should be dismissed because the Contract at issue is primarily one for services

Case 3:16-cv-00480-SI Document 26 Filed 08/24/16 Page 7 of 18
PAGE 8 – OPINION AND ORDER

and, thus, the UCC does not apply. Chapter Two of the UCC, as adopted under Oregon law,

applies only to transactions in the sale of goods. Or. Rev. Stat. § 72.1020. Goods are defined as 

“all things (including specially manufactured goods) which are movable at the time of 

identification to the contract . . . .” Or. Rev. Stat. § 72.1050. 

When a contract involves both goods and services, a court should “look to the essence of 

the agreement.” RRX Industries, Inc. v. Lab-Con, Inc., 772 F.2d 543, 546 (9th Cir. 1985). In 

other words, in such cases a court should consider whether “the predominant factor,” “thrust,” or 

“purpose” of the contract “is the rendition of service, with goods incidentally involved . . . or is a 

transaction of sale with labor incidentally involved . . . .” United States ex rel. Bartec Industries, 

Inc. v. Union Pacific Co., 976 F.2d 1274, 1277 (9th Cir. 1992) (quoting United States v. City of 

Twin Falls, Idaho, 806 F.2d 862, 871 (9th Cir. 1986).

“The issue of mixed or hybrid goods and services often arises in the context of 

transactions involving software.” TK Power, Inc. v. Textron, Inc., 433 F. Supp. 2d 1058, 1061 

(N.D. Cal. 2006)). “Because software packages vary depending on the needs of the individual 

consumer, [the Ninth Circuit] appl[ies] a case-by-case analysis.” RRX Indus., Inc., 772 F.2d 

at 546; see also Simulados Software, LTD v. Photon Infotech Private, LTD, 40 F. Supp. 3d 

1191,1199 (N.D. Cal. 2014) (“The primary test used by courts to determine whether software is a 

good under the UCC is the predominant factor test, where courts look to the ‘essence of the 

agreement’ on a case-by-case basis to decide how to characterize the transaction. Courts 

determine whether the predominant factor or purpose of the contract is rendition of services, with 

goods incidentally involved, or is rendition of goods, with labor incidentally involved.” (citations 

omitted)).

Case 3:16-cv-00480-SI Document 26 Filed 08/24/16 Page 8 of 18
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Although there is no authority from the Ninth Circuit that controls the instant dispute, 

several district courts have considered whether the UCC applies to similar contracts that concern

the development of new software, generally referred to as “concept to completion” or “concept 

to realization” projects. In one case, the court concluded that the UCC did not apply to a contract 

in which one party was to develop a software system from scratch (identified as “concept to 

realization”), and in which the developer would be paid on a time and materials basis. Pearl 

Invs., LLC v. Standard I/O, Inc., 257 F. Supp. 2d 326, 353 (D. Me. 2003). In another case, the 

court found, in resolving a motion to dismiss, that because the defendant was to develop new 

software for the plaintiff, the contract was one for services and the UCC did not apply. Sys. Am., 

Inc. v. Rockwell Software, Inc., 2007 WL 218242, at *4 (N.D. Cal. Jan. 26, 2007). In that case, 

the court explained that although the contract was formed with the ultimate purpose of creating 

software that could be sold as goods to the plaintiff’s customers, that purpose did not transform a 

software development contract into a contract for the sale of goods. Id. 

In another case, the defendant and the plaintiff agreed jointly to develop a new software 

product. Multi-Tech Systems, Inc. v. Floreat, Inc., 2002 WL 432016, at *3 (D. Minn. Mar. 18, 

2002). The court determined that the parties’ method of dealing with each other and the terms of 

the contract all indicated that the plaintiff paid mainly for the defendant’s contribution of 

knowledge and expertise to the design and development of the software product. Id. Thus, the 

court held that services were the predominant purpose of the contract, with goods incidentally 

involved, and that the UCC did not apply. Id. at *4.

Although Plaintiff did not originally attach to the Complaint a copy of the Contract, 

Plaintiff did quote from portions of the Contract throughout the Complaint. Compl. ¶¶ 7, 8, 9, 10, 

12, 13. Because the nature of the parties’ relationship as set forth in the Contract is relevant to 

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determining whether the predominant factor in the agreement between the parties was goods or 

services, the Court requested that Plaintiff file a copy of Contract, and Plaintiff did so. ECF 23. 

The Contract may be considered by the Court in ruling on Defendant’s motions.2

Considering the Contract as a whole, the Court finds that it was one predominantly for 

services, with goods only incidentally involved. The Master Agreement is entitled the “Master 

Software Services Agreement” and labels Defendant as the “Service Provider.” Master 

Agreement at 1 (ECF 23 at 2). Defendant agreed to provide services as a “work made for hire.”

Master Agreement at 2 (ECF 23 at 3). One of the promises by Defendant that Plaintiff alleges 

was breached was the promise in SOW 1 that by using Defendant’s services Plaintiff would 

save 30 to 40 percent as compared to an “internal staffing model.” Compl. ¶ 10. This is a 

promise of savings in labor, not purchase of goods.

Additionally, as was the case in Pearl Investments, Defendant was to develop the custom 

software for Plaintiff through “Concept to Completion” or “Concept to Realization”

development, and Defendant was to be paid based on monthly invoices for the hours worked 

each month. SOW 1 at § 5.2 (ECF 23 at 16); SOW 1 at § 6.4 (ECF 23 at 24). The parties’ 

Contract in this case also resembles the agreement in Multi-Tech Systems, where the plaintiff was 

 

2 As a general rule, a district court may not consider any material beyond the pleadings in 

ruling on a motion under Fed. R. Civ. P. 12(b)(6). Lee v. City of Los Angeles, 250 F.3d 668, 688–

89 (9th Cir. 2001). When matters outside the pleadings are presented to the court, a motion to 

dismiss generally must be converted to a motion for summary judgment under Rule 56, with the 

parties being given an opportunity to present all pertinent material. Fed. R. Civ. P. 12(d). There 

are, however, two exceptions to this rule. First, a court may consider “material which is properly 

submitted as part of the complaint.” Lee, 250 F.3d at 688. This includes both documents 

physically attached to the complaint and those on which the complaint “necessarily relies” whose 

authenticity is not contested. Id. Second, the court may take judicial notice of “matters of public 

record” pursuant to Rule 201(b) of the Federal Rules of Evidence without being required to 

convert the Rule 12(b)(6) motion into a motion for summary judgment under Rule 56. Lee, 250 

F.3d at 688–89.

Case 3:16-cv-00480-SI Document 26 Filed 08/24/16 Page 10 of 18
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contracting with the defendant primarily for the defendant’s knowledge and expertise. SOW 1

detailed Defendant’s technical depth, domain expertise, and knowledge of industry best 

practices. Compl. ¶ 10. Additionally, the majority of Plaintiff’s allegations concern Defendant’s

purportedly inadequate contribution of knowledge and expertise to the development of the 

software by providing less than fully competent project managers and analysts. Compl. ¶¶ 14-19. 

Indeed, Plaintiff’s second claim alleges that Defendant breached the Contract’s implied covenant 

of good faith and fair dealing in the manner in which Defendant exercised its discretion over 

staffing decisions for Plaintiff’s project.

The cases cited by Plaintiff in which the UCC applied to software contracts are 

distinguishable. Both RRX Industries, Inc., 772 F.2d at 543, and Phoenix Solutions, Inc. v. Sony 

Electronics, Inc., 637 F. Supp. 2d 683 (2009), involved contracts concerning the installation,

modification, and repair of software, not the creation of new custom software. In those cases, the 

software was bought “off the shelf” and the services rendered were merely support services. 

Thus, in those cases, services were merely incidental to the goods involved in those contracts.

In Advent Systems Ltd. v. Unisys. Corp., 925 F.2d 670 (3rd Cir. 1991), the court 

explained that looking to the compensation structure of the contract can be useful in determining 

whether goods or services are incidental in a contract. In that case, the court concluded that the 

contract was one primarily for goods, rather than services, because payments were to be made 

through individual purchases of hardware and software and not based on fees for services or 

work performed. Id. at 676. In the instant case, however, the opposite is true. Defendant charged 

Plaintiff an hourly fee for labor and sent Plaintiff monthly invoices under the Contract. Here, the 

Contract states that the “service provider shall invoice the client for payment of fees in 

accordance with the provisions of the relevant SOW.” Master Agreement at 5 (ECF 23 at 4)

Case 3:16-cv-00480-SI Document 26 Filed 08/24/16 Page 11 of 18
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(emphasis added). Accordingly, based on Plaintiff’s allegations in the Complaint and the 

Contract itself, services were the thrust of the Contract, while goods were involved only 

incidentally. Thus, the UCC does not govern the Contract. Defendant’s motion to dismiss 

Plaintiff’s claim for breach of implied warranty of fitness for a particular purpose is granted.

C. Intentional Misrepresentation

Defendant moves to dismiss Plaintiff’s fourth claim, alleging intentional 

misrepresentation, or fraud. In Oregon, a plaintiff must allege the following elements to state a 

claim for fraud:

(1) a representation; (2) its falsity; (3) its materiality; (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 and in the manner 

reasonably contemplated; (6) the hearer’s ignorance of its falsity; 

(7) his reliance on its truth; (8) his right to rely thereon; (9) and his 

consequent and proximate injury.

Or. Pub. Emps.’ Ret. Bd. ex rel. Or. Pub. Emps.’ Ret. Fund v. Simat, Helliesen & Eichner, 191 

Or. App. 408, 424 (2004) (quotation marks omitted).

In addition, Plaintiff’s claim of intentional misrepresentation is subject to the 

requirements of Rule 9(b) of the Federal Rules of Civil Procedure. That rule provides:

In alleging fraud or mistake, a party must state with particularity 

the circumstances constituting fraud or mistake. Malice, intent, 

knowledge, and other conditions of a person's mind may be alleged 

generally.

Fed. R. Civ. P. 9(b).

Rule 9(b) applies not only to federal causes of action, but also to state-law causes of 

action alleged in federal court. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir.

2003); see also Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). “The Federal 

Rules of Civil Procedure apply irrespective of the source of subject matter jurisdiction, and 

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PAGE 13 – OPINION AND ORDER

irrespective of whether the substantive law at issue is state or federal.” Vess, 317 F.3d at 1102, 

citing Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965).

In addition, Rule 9(b) applies to all allegations, or averments, of fraud in all civil cases in 

federal court, even when fraud is not an essential element of the claim. As explained by the 

Ninth Circuit in Vess:

In cases where fraud is not a necessary element of a claim, a 

plaintiff may choose nonetheless to allege in the complaint that the 

defendant has engaged in fraudulent conduct. In some cases, the 

plaintiff may allege a unified course of fraudulent conduct and rely 

entirely on that course of conduct as the basis of a claim. In that 

event, the claim is said to be “grounded in fraud” or to “sound in 

fraud,” and the pleading of that claim as a whole must satisfy the 

particularity requirement of Rule 9(b). . . . 

In other cases, however, a plaintiff may choose not to allege a 

unified course of fraudulent conduct in support of a claim, but 

rather to allege some fraudulent and some non-fraudulent conduct. 

In such cases, only the allegations of fraud are subject to 

Rule 9(b)'s heightened pleading requirements. The text of 

Rule 9(b) requires only that in “all averments of fraud . . ., the 

circumstances constituting fraud . . . shall be stated with 

particularity.” Fed. R. Civ.P. 9(b) (emphasis added).3The rule does 

not require that allegations supporting a claim be stated with 

particularity when those allegations describe non-fraudulent 

conduct.

In such cases, application of Rule 9(b)'s heightened pleading 

requirements only to “averments” of fraud supporting a claim 

rather than to the claim as a whole not only comports with the text 

of the rule; it also comports with the rule's purpose of protecting a 

defendant from reputational harm. . . . Fraud allegations may 

damage a defendant's reputation regardless of the cause of action 

in which they appear, and they are therefore properly subject to 

Rule 9(b) in every case. To require that non-fraud allegations be 

 

3 An “averment” is a positive declaration or affirmation of fact; an assertion or allegation 

in a pleading is an averment. Bryan A. Garner, ed., BLACK'S LAW DICTIONARY 156 (9th ed. 

2009). In 2007, the text of Rule 9 was amended to make it “more easily understood . . . . These 

changes are intended to be stylistic only.” Fed. R. Civ. P. 9 Advisory Committee's Note, 2007 

Amendment. Thus, the change from “averments of fraud” to “alleging fraud” does not affect this 

analysis.

Case 3:16-cv-00480-SI Document 26 Filed 08/24/16 Page 13 of 18
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stated with particularity merely because they appear in a complaint 

alongside fraud averments, however, serves no similar reputationpreserving function, and would impose a burden on plaintiffs not 

contemplated by the notice pleading requirements of Rule 8(a).

Vess, 317 F.3d at 1103–05 (first emphasis in original; second emphasis added).

To satisfy the pleading requirements of Rule 9(b), a plaintiff “must identify the who, 

what, when, where, and how of the misconduct charged, as well as what is false or misleading 

about the purportedly fraudulent statement, and why it is false.” Cafasso, U.S. ex rel. v. Gen. 

Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (quotation marks and alteration 

omitted). The plaintiff’s allegations must provide “notice of the particular misconduct which is 

alleged to constitute the fraud charged,” in enough detail to permit the defendant to “defend 

against the charge and not just deny that [it has] done anything wrong.” Ebeid ex rel. U.S. v. 

Lungwitz, 616 F.3d 993, 999 (9th Cir. 2010) (quotation marks omitted). Both the plausibility 

requirement of Rule 8(a) and the particularity requirement of Rule 9(b) apply to allegations of 

fraud. Cafasso, 637 F.3d at 1055. Allegations of scienter, however, may be pled generally, Fed. 

R. Civ. P. 9(b), but must still include sufficient factual material to be plausible. Eclectic Props. 

East, LLC v. Marcus & Millichap Co., 751 F.3d 990, 995 n.5 (9th Cir. 2014).

In its Complaint, Plaintiff alleges two locations of Defendant’s fraud. First, Plaintiff 

alleges that Defendant’s “promises in the parties’ Contract were knowingly false when made or 

were made with reckless indifference to its ability to perform those promises.” Compl. ¶ 35. This 

allegation is insufficient to satisfy Rule 9(b), primarily because it does not identify the specific 

allegedly fraudulent statements in the Contract. As Plaintiff acknowledged during oral argument, 

Plaintiff does not assert that every statement in the Contract was knowingly or recklessly false.

To satisfy Rule 9(b), Plaintiff must identify the specific statements in the parties’ Contract that 

Plaintiff alleges were knowingly or recklessly false when made.

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Second, Plaintiff alleges that, “[a]s in inducement to enter into the Contract, and for 

Contract continuations beyond the minimum one year term, [Defendant] falsely represented on 

its consolidated website with its parent company” certain specified allegedly false statements. 

Compl. ¶ 36. Although Plaintiff identifies the specific allegedly fraudulent statements, this 

allegation is insufficient to satisfy Rule 9(b), primarily because it does not identify the “who,” 

“when,” or “how” that the rule requires. To satisfy Rule 9(b), Plaintiff must, at the minimum, 

identify who read which allegedly false website representation, when (e.g., before Plaintiff 

entered into the Contract), and how that allegedly false representation was reasonably relied 

upon by Plaintiff. 

Further, many of the allegedly fraudulent representations contained on Defendant’s 

website appear to be no more than commercial puffery. For example, Plaintiff alleges reliance on 

the website statements that Defendant will “establish a roadmap for your business information 

journey” and will “understand the problem; Plan the solution(s).” Compl. ¶36(a). “[G]eneralized, 

vague and unspecific assertions constitute[e] mere ‘puffery’ upon which a reasonable consumer 

[cannot] rely.” Glen Holly Entm’t., Inc. v. Tektronix, Inc., 343 F.3d 1000, 1015 (9th Cir. 2003) 

(holding that statements made by company regarding film editing programs that stated new 

software would be “released within a few months,” and that it would “develop a more aggressive 

marketing campaign to advertise” the program could not form the basis for a fraud or negligent 

misrepresentation claim because they were puffery.); see also Cook, Perkiss, and Lieh, Inc. v. N. 

Cal. Collection Serv. Inc., 911 F.2d 242, 245 (9th Cir. 1990). To satisfy Rule 9(b), Plaintiff must 

(a) identify the specific allegedly fraudulent website statements that Plaintiff relied upon; and

(b) plausibly allege facts showing that the statements that Plaintiff relied upon are not mere 

puffery.

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Defendant’s motion to dismiss Plaintiff’s fourth claim, alleging intentional 

misrepresentation, is granted. Plaintiff may replead.

D. Paragraph 22(c)

Defendant moves to make more definite and certain paragraph 22(c) of Plaintiff’s 

Complaint. A court may order a more definite statement if the pleading “is so vague or 

ambiguous that the [opposing] party cannot reasonably prepare a response.” Fed. R. Civ. 

P. 12(e). A motion for a more definite statement must “point out the defects complained of and 

the details desired.” Id. Paragraph 22(c) of Plaintiff’s Complaint reads:

Saksoft has materially breached its contractual obligations to 

Gregory . . . [b]y not promptly complying with Gregory’s 

reasonable requests for information to facilitate development of a 

complete vision for the project necessary for product decisions to 

achieve that vision by failing to achieve transparency for sharing 

business status, goals, achievements and missteps among team 

members

Compl. ¶ 22(c).

Although paragraph 22(c) is not a model of clarity, it is not so vague that Defendant 

cannot reasonably prepare a response. Plaintiff is alleging that Defendant has not complied with 

its contractual obligation to disclose information upon Plaintiff’s request and has thus failed to 

ensure transparency in the project. Master Agreement at 3 (ECF 23 at 4). Further, Defendant has 

not pointed to any additional details desired in reference to this allegation. Defendant’s motion to 

make more definite and certain paragraph 22(c) of the Complaint is denied.

E. Paragraph 23

Defendant moves to dismiss or in the alternative make more definite and certain 

paragraph 23 of Plaintiff’s Complaint pertaining to damages sought for Plaintiff’s claim for 

breach of contract. Paragraph 23 states: 

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PAGE 17 – OPINION AND ORDER

As a direct result of that breach, Plaintiff has sustained economic 

damage in an amount to be proven at trial and determined by a 

jury, but presently calculated to be a full refund of the $1,319,720 

paid to date, and costs and expenses incurred, in an effort to 

mitigate the loss consisting of $230,400 for additional Gregory 

Staff time, $13,400 for additional licenses, and $7,100 in penalties 

for a total of approximately $1,570, 620, plus prejudgment interest 

at the Oregon statutory rate of 9% per annum until paid.

Compl. ¶ 23.

The Master Agreement provides:

7. Except as provided in this Section, the liability of either the 

Service Provider or Client under or in connection with this 

Agreement whether for negligence, misrepresentation, 

breach of contract or otherwise, for direct loss or damage 

arising out of the failure to meet conditions recited in the 

SOW, including conditions relating to schedules and timing 

of Deliverables set forth therein, shall not exceed 100% of 

the fees paid under the SOW.

8. Except as provided in this Section, neither party shall be 

liable to the other for indirect or consequential loss or 

damage or including indirect or consequential loss of 

profits, business, revenue, goodwill or anticipated savings 

of an indirect nature or loss or damage incurred by the 

other party as a result of third party claims relating to a 

failure to meet conditions of the Deliverables as recited in 

the SOW, including conditions relating to schedules and 

timing of Deliverables set forth therein.

Master Agreement at 6, ¶¶7-8 (ECF 23 at 7) (emphasis added).

Defendant argues that Plaintiff, in paragraph 23, seeks damages in excess of the 

agreed-upon liability limitation contained in the parties’ Contract. That a form of relief is or

might be unavailable under a cause of action, however, does not render that cause of action 

susceptible to a Rule 12(b)(6) motion to dismiss. Glob. Res. Mgmt. Consultancy, Inc. v. 

Geodigital Int’l Corp., 2016 WL 1065796 at *3 (C.D. Cal Mar. 17, 2016). Thus, the Court 

declines to dismiss Plaintiff’s breach of contract claim for damages that may be unavailable 

under the Contract at this stage of the proceedings.

Case 3:16-cv-00480-SI Document 26 Filed 08/24/16 Page 17 of 18
PAGE 18 – OPINION AND ORDER

In the alternative, Defendant moves under Rule 12(e) for an order directing Plaintiff to 

make its damages allegations more definite and certain. Plaintiff’s Complaint is not so vague that 

Defendant cannot prepare a response. Thus, Defendant’s motion to dismiss or make more 

definite and certain paragraph 23 of the Complaint is denied.

That said, at some point, whether it be at summary judgment, at the pretrial conference, 

or at trial, Defendant will be arguing that Plaintiff may not seek damages in excess of the 

limitations stated in the parties’ Contract. To facilitate the Court’s analysis of that issue, Plaintiff 

should specify in its forthcoming amended complaint, which of Plaintiff’s alleged damages 

constitute “direct loss or damage arising out of the failure to meet conditions recited in the 

SOW” and thus are subject to the limitations set forth in paragraph 7 of the Master Agreement 

and which of Plaintiff’s alleged damages are excluded from the limitation of paragraph 7. 

Further, to the extent that Plaintiff contends that some of its damages do not fall within the 

exclusion under paragraph 8 of the Master Agreement of “indirect or consequential loss or 

damage,” Plaintiff should clearly allege that contention and which specific alleged damages are 

outside of the exclusion of paragraph 8. Such precision and clarity at this stage will assist the 

Court and the parties later in these proceedings.

CONCLUSION

Defendant’s motions to dismiss and to make more definite and certain (ECF 12) are

GRANTED IN PART AND DENIED IN PART as set forth in this Opinion and Order. Plaintiff 

has leave to file an amended complaint on or before September 12, 2016.

IT IS SO ORDERED.

DATED this 24th day of August, 2016.

/s/ Michael H. Simon

Michael H. Simon

United States District Judge

Case 3:16-cv-00480-SI Document 26 Filed 08/24/16 Page 18 of 18