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noting that "[w]hile Harara asserts that the indemnity provision does not apply to the factual circumstances here, on a motion to dismiss the court accepts as true all allegations in the complaint and views them in the light most favorable to the nonmoving party" and counterclaimant had properly pled a claim for express indemnity
Summary of this case from Gen. Supply & Servs., Inc. v. Action Servs. Grp., Inc.Opinion
No. C04-0515 BZ.
January 27, 2005.
ORDER DENYING COUNTERDEFENDANT'S MOTIONS TO DISMISS
Marwan Ahmed Harara has moved to dismiss ConocoPhillips Company's ("Conoco") first, third, fourth and fifth counterclaims for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). The facts underlying this dispute are set forth in my June 3, 2004 order granting in part with leave to amend defendants' motion to dismiss plaintiff's first amended complaint. Having reviewed the papers, I find no need for an argument and VACATE the hearing presently scheduled for February 2, 2005.
On November 1, 2004, Conoco answered Harara's second amended complaint and alleged five counterclaims: (1) breach of contract, (2) goods sold and delivered, (3) express indemnity, (4) equitable indemnity, and (5) negligence.
"The motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted." Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 249 (9th Cir. 1997). A complaint should not be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts entitling it to relief. Conley, 355 U.S. at 45-46; Parks Sch. of Bus. Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). On a motion to dismiss, the court accepts as true all allegations in the complaint and views them in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996).
To the extent that Conoco's first counterclaim asserts that Harara breached the Dealer Station Lease and Motor Fuel Supply Agreement ("Agreement") by "failing to comply with applicable laws, ordinances, rules and regulations (i.e., by failing to address drug use and sales at the station . . .)," Harara's motion to dismiss is DENIED. Conoco's Answer to Plaintiff's Second Amended Complaint and Counterclaims ("Compl.") ¶ 422. "A cause of action for damages for breach of contract is comprised of the following elements: (1) the contract, (2) the plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff." Armstrong Petroleum Corp. v. Tri-Valley Oil Gas Co., 116 Cal. App. 4th 1375, 1391 n. 6 (2004). Under Federal Rule of Civil Procedure 8, a plaintiff need only provide "a short and plain statement of the claim" giving the defendant "fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957); Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir. 2001); Fed Rule Civ. P. 8(a)(2). "A copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes." Fed.R.Civ.P. 10(c).
Conoco's first counterclaim also alleges that Harara breached the Agreement "by failing or refusing to pay for the delivery of various motor fuel oil products; failing or refusing to operate the facility for the promotion and sale of "76" and "Union 76" branded motor fuels and other products,; failing or refusing to maintain adequate inventory of motor fuel oil and other products." Compl. ¶ 422. Harara's motion does not address these allegations.
Conoco attached a copy of the Agreement to its pleading. Compl., Ex. A. Paragraph 5(4)(O) of the Agreement provides that Harara "shall comply with all laws, ordinances, rules and regulations of constituted public authority governing the use and occupancy of the Station and the conduct of [Harara's] business at the Station." Compl., Ex. A. Paragraph 6, titled "Prohibited Uses," provides that the Harara shall not "store, sell, or consume any illegal drugs, or permit drug paraphernalia to be present or tolerated at the Station." Id. The factual allegations in Conoco's first counterclaim, if true, could constitute a breach of these provisions. See id. ¶ 422. Conoco also alleges that it has performed under the Agreement and that it has been damaged as a result of Harara's alleged breaches. Id. ¶¶ 423-24. Accepting these allegations as true, Conoco has stated a claim for breach of contract.
Harara's motion to dismiss Conoco's third counterclaim for express indemnity is also DENIED. "Upon an indemnity against liability, expressly, or in other equivalent terms, the person indemnified is entitled to recover upon becoming liable." Cal. Civ. Code § 2778(1);CC-California Plaza Associates v. Paller Goldstein, 51 Cal. App. 4th 1042, 1054 (1996). Section 27 of the Agreement provides:
[Harara] shall protect, defend, indemnify and hold [Conoco] . . . harmless from and against any an all liabilities . . . of whatsoever nature for violation of laws ordinances or regulations . . . which may be imposed upon, incurred by, or asserted against [Conoco] directly or indirectly and resulting from or connected with any occurrence arising out of [Harara's] use, non-use, possession, condition, operation, or maintenance of the Station and the business conducted by [Harara] thereon.
Compl., Ex. A. Conoco alleges that it had to pay the City of Oakland $56,868.73, exclusive of interest, due to Harara's failure to comply with the requests of Conoco and the Oakland Police Department to take steps to curtail repeated drug use and sales at the station. Compl. ¶¶ 430-31. Accepting this allegation as true, Conoco may be entitled to indemnity under the Agreement. While Harara asserts that the indemnity provision does not apply to the factual circumstances here, on a motion to dismiss the court accepts as true all allegations in the complaint and views them in the light most favorable to the nonmoving party. See Cahill, 80 F.3d at 337-38. Accepting the facts alleged in the third counterclaim as true, Conoco has properly pled a claim for express indemnity.
This is particularly true of Harara's argument that Conoco should be estopped from bringing a counterclaim for indemnity. See DRG/Beverly Hills Ltd. v. Chopstix Dim Sum Café Takeout III, Ltd., 30 Cal App. 4th 54, 61 (1994) ('The estoppel issue is a nonjury fact question to be determined by the trial court in accordance with applicable law."). While Harara may raise the doctrine of equitable estoppel as an affirmative defense, the doctrine does not apply to the facts as alleged in Conoco's counterclaims.
Conoco's fourth counterclaim states a claim for equitable indemnity, and Harara's motion to dismiss it is DENIED. While the duty to indemnify is often defined by contract, equitable indemnity may apply when "the duty established by contract is by the terms and conditions of its creation inapplicable to the particular factual setting before the court." E.L. White Inc. v. City of Huntington Beach, 21 Cal. 3d 497, 511-12 (1978); see also People of the State of California v. Daly City Scavenger Co., 19 Cal. App. 3d 277, 280-81 (1971) (noting that whether the express indemnity provision in a contract precludes recovery under a theory of equitable indemnity "necessarily depends upon whether the contract, construed as a whole, was intended to convey indemnification rights with respect to the particular occurrence at issue").
Conoco's claim for equitable indemnity alleges essentially the same facts as its claim for express indemnity. See Compl. ¶ 433. While Conoco may not be entitled to recover under both theories, Conoco is not required at this stage to elect the theory under which it chooses to proceed. See Fed.R.Civ.P. 8(a) ("Relief in the alternative or of several different types may be demanded."); Fed.R.Civ.P. 8(e)(2) ("A party may also state as many separate claims or defenses as the party has regardless of consistency and whether based on legal, equitable, or maritime grounds."). Were I to preclude Conoco from seeking equitable indemnity, and later determine, for example, that the express indemnity provision was invalid, Conoco might be without a remedy. I also decline the invitation to consider the facts asserted in Harara's motion. Whether particular factual circumstances exist that make recovery under a theory of equitable indemnity unwarranted, is an issue for summary judgment, not for a motion to dismiss.
Harara's motion to dismiss Conoco's fifth counterclaim for negligence is also DENIED. To state a claim for negligence a plaintiff must allege (1) defendant's legal duty of care to plaintiff; (2) defendant's breach of duty; (3) injury to plaintiff as the result of the breach; and (4) damage to plaintiff. Bernard E. Witkin, et al., California Procedure, Pleadings § 537 (4th Ed. 2004). Conoco alleges that Harara had a duty to ensure that drug use and sales did not take place at the station premises which he breached by failing to take prompt and effective action to curtail such conduct. See Compl. ¶¶ 435-36. It further alleges that Harara's conduct directly and proximately caused Conoco injury, and seeks relief in the form of compensatory damages. Compl. ¶ 437. Conoco's allegations state a claim for negligence and are more than sufficient to place Harara on notice of that claim and the grounds upon which it rests. See Fed.R.Civ.P. 8(a). The factual assertions made by Harara in his motion are not relevant to the disposition of this motion. See Cahill, 80 F.3d at 337-38.
For the foregoing reasons, IT IS HEREBY ORDERED that Harara's motion to dismiss Conoco Phillip's counterclaims is DENIED.