Opinion
ORDER GRANTING MICROSOFT'S MOTION TO DISMISS CLAIMS TWO AND THREE OF INTERGRAPH'S AMENDED THIRD PARTY COMPLAINT AND GRANTING IN PART AND DENYING IN PART INTERGRAPH'S MOTION TO AMEND
MARTIN JENKINS, District Judge.
INTRODUCTION
Hewlett-Packard Company ("HP") filed this action against Intergraph Corporation ("Intergraph") alleging infringement of four patents, including U.S. Patent No. 4, 635, 208 (the "208 patent"). Intergraph filed a third-party complaint against Microsoft Corporation ("Microsoft") asserting three causes of action. Before the Court is Microsoft's motion to dismiss Claims Two and Three of Intergraph's third party complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) and Intergraph's motion to amend to add three new claims. For the reasons set forth below, the Court GRANTS the first motion and GRANTS IN PART and DENIES IN PART the second.
FACTUAL BACKGROUND
Intergraph's Amended Third Party Complaint alleges generally that Intergraph "purchased and/or licensed" certain Microsoft products ("Microsoft Products") that Intergraph then used to develop products which HP now accuses of infringement ("Intergraph Products"). Am. Third Party Compl. at ¶ 9. Claim Two alleges negligent misrepresentation under Alabama law. Intergraph alleges that Microsoft "knew or should have known of... the 208 Patent, yet despite such knowledge negligently instructed Intergraph to use the Microsoft Products in such a manner that has caused Intergraph to be sued for infringement of the 208 Patent." Id. at ¶ 24. Intergraph further alleges that by instructing Intergraph to use Microsoft products "in the manner used by Intergraph, Microsoft has breached its duty to exercise reasonable care in communicating the appropriate non-infringing uses for the Microsoft Products." Id. at ¶ 25. Intergraph claims that it has been sued by HP "[a]s a result of Intergraph's reasonable reliance upon Microsoft's instructions and representations." Id. at 26. Intergraph concludes that, "[i]n the event that HP prevails in its infringement allegations, it will at least in part be due to the fact that the representations and instructions given to Intergraph with respect to the use of the Microsoft Products were not correct, in that such instructed use was not appropriate or non-infringing." Id. at 27. Although HP accuses the Intergraph Products of infringing the 208 patent, HP has not accused any Microsoft product of infringement, nor does it contend that Intergraph's use of any Microsoft product infringes the 208 patent.
Claim Three of Intergraph's complaint asserts a claim for tortious interference with business relations. Intergraph alleges that it had an existing business relationship with customers who purchased Intergraph products that were created using Microsoft software development tools. Id. at ¶ 30. Intergraph claims that Microsoft "knew, or should have known" that Intergraph sold products that were designed in reliance on Microsoft's instructions and that Microsoft "knew, or should have known" that "if it failed to exercise due care in instructing Intergraph on the appropriate use of the Microsoft Products that Intergraph's relationship with its current and probably future customers would be severely damaged." Id. at ¶¶ 31-32. Intergraph further alleges that "Microsoft negligently, recklessly and/or intentionally instructed Intergraph to use the Microsoft Products in a manner that is alleged to infringe the HP Patents, " as a result of which "Intergraph's relationship with its customers has been disrupted and Intergraph has suffered damages...." Id. at ¶¶ 33-34.
LEGAL STANDARD
A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of the claims asserted in the complaint. See Cahill v. Liberty Mutual Insurance Co., 80 F.3d 336, 337 (9th Cir. 1996). Dismissal of an action pursuant to Rule 12(b)(6) is appropriate only where it "appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Levine v. Diamanthuset, Inc., 950 F.2d 1478, 1482 (9th Cir. 1991). In reviewing such a motion, the Court must assume all factual allegations to be true and must construe them in the light most favorable to the nonmoving party. See North Star v. Arizona Corp. Comm., 720 F.2d 578, 580 (9th Cir. 1983). The Court will dismiss the complaint or any claim in it without leave to amend only if "it is absolutely clear that the deficiencies of the complaint could not be cured by amendment." Noll v. Carlson, 809 F.2d 1446, 1448 (9th Cir. 1987). In the context of a motion to dismiss, review is limited to the contents of the complaint. Allarcom Pay Television, Ltd. v. General Instrument Corp., 69 F.3d 381, 385 (9th Cir. 1995). However, matters properly presented to the court, such as those attached to the complaint and incorporated within its allegations, may be considered as part of the motion to dismiss. See Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir. 1989).
ANALYSIS
I. Claim Two - Negligent Misrepresentation
Microsoft contends Intergraph's negligent misrepresentation claim fails to allege facts sufficient to state a claim. As a threshold matter, the Court must decide whether to apply the pleading standard set forth in Federal Rule of Civil Procedure 8(a), which requires only a "short and plain statement" of the claim, or Rule 9(b), which requires fraud-based claims to be pled with particularity.
As Intergraph concedes, state law claims that sound in fraud are covered by Rule 9(b) while those that do not are covered by Rule 8(a). The question, then, is whether negligent misrepresentation is considered to be a fraud-type claim. That question must be answered by reference to the law of the state that will govern the claim-here, Alabama law. See, e.g., Neilson v. Union Bank of California, N.A., 290 F.Supp.2d 1101, 1141 (C.D. Cal. 2003).
It is clear that in Alabama, negligent misrepresentation is a form of fraud. See Alabama Code § 6-5-101; Foremost Insurance Co. v. Parkham, 693 So.2d 409, 422 (Ala. 1997). Intergraph appears not to disagree with this proposition as a general matter. Instead, it clarifies that its negligent misrepresentation claim is one that arises under Restatement (Second) of Torts section 552, which Alabama has adopted and provides a cause of action for professional negligence. Section 552, however, applies in cases "involving negligent misrepresentation relied upon by third parties, or parties who are not in privity of contract with the person making the representation. " Fisher v. Comer Plantation, Inc., 772 So.2d 455, 461 (Ala. 2000) (emphasis added). As it is portrayed in the Amended Third Party Complaint, Intergraph can hardly be described as a "third party" who was harmed by alleged false representations made by Microsoft. Based on the foregoing, Rule 9(b) pleading requirements apply to the negligent misrepresentation claim.
In its current form, Intergraph's negligent misrepresentation claim does not conform to the requirements of Rule 9(b); Intergraph does not argue otherwise. If Intergraph chooses to amend to cure the deficiencies in this claim, it must include allegations regarding "the statements it claims were false or misleading, give particulars as to the respect in which [it] contends the statements were fraudulent, state when and where the statements were made, and identify those responsible for the statements." In re GlenFed, Inc. Securities Litigation, 42 F.3d 1541, 1548 n.7 (9th Cir. 1994) (en banc).
II. Claim Three - Interference
Under Alabama law, the tort of intentional interference with business relations, to be actionable, requires: (1) the existence of a business relation; (2) the defendant's knowledge of the business relation; (3) intentional interference by the defendant with the business relation; and (4) damage to the plaintiff as a result of defendant's interference. Microsoft seeks dismissal of Intergraph's interference claim on three grounds: (1) Intergraph has failed to allege that Microsoft intended to interfere with any business relationship between Intergraph and any third party or customer; (2) Intergraph has not alleged any tortious conduct aimed at Intergraph's business relations; and (3) Intergraph has failed to plead the existence of "fraud, force, or coercion" or other "improper" conduct by Microsoft, as is required to maintain an interference claim under Alabama law.
The Court is satisfied that, viewed through the lens of Rule 8(a), Intergraph has adequately pled that Microsoft intended to interfere with Intergraph's business relationships and that the alleged tortious conduct was aimed at Intergraph's business relations. See First Amended Compl. ¶¶ 30-33. However, Microsoft notes in its motion that Intergraph has yet to comply with the Court's March 23, 2004 Status Conference Order, which required in part that Intergraph "provide specific information supporting its claims against Microsoft..., including... the specific business relationships with which Intergraph contends Microsoft interfered." If Intergraph elects to amend this claim, it must provide this information in the Second Amended Third Party Complaint.
As for Microsoft's contention that Intergraph is required to plead the existence of "fraud, force, or coercion" or other "improper" conduct by Microsoft to support its interference claim, that is the law in Alabama. See Joe Cooper & Associates, Inc. v. Central Life Assurance Co., 614 So.2d 982, 986 (Ala. 1992); Brown v. Chem Haulers, Inc., 402 So.2d 887, 891 (1981). Accordingly, any amended interference claim must reflect this requirement.
III. Intergraph's Motion to Amend
The new claims in the proposed Second Amended Third Party Complaint are the first, second and sixth. The first and sixth claims (for breach of contract and specific performance) arise out of Microsoft's duty to defend pursuant to Section 6 of the MBA. Intergraph explains in its Reply in support of its Motion to Amend that these claims are based on the fact that "Intergraph incorporated code that it licensed from Microsoft into its products." See p. 6:10-12. However, the fact that section 6 is only triggered by a third party claim against a Microsoft product and the fact that that section specifically states that Microsoft's obligations "will not apply to the extent the claim... is based on... [Intergraph's] combining the product or service deliverables with a non-Microsoft product, data or business process" make Intergraph's first and sixth claims untenable. Accordingly, granting leave to amend with respect to these claims would be futile and the request to so amend is denied.
The proposed second claim presents a more difficult question. Intergraph points to Section 8(e) of the 1998 MSA to support its "Express Contribution" claim. Section 8(e) is unqualified by any other section and provides for proportional representation "[f]or any intellectual property claim attributable in part to a [Microsoft] Product and in part to one or more other products, programs or data with which the [Microsoft] Product is combined." Section 8(a), however, clearly states that for any non-copyright infringement claim, Microsoft, "in its sole discretion, " may determine whether it will indemnify. Section 8(c) further makes clear that Microsoft will not defend claims based on a customer's "combination of a [Microsoft] product with a non-Microsoft product, program or data." A review of these provisions does not lead inexorably to the conclusion either party posits-Microsoft, that section 8(e) is dependent upon or subordinate to sections 8(a) and (c); Intergraph, that sections 8(a) and (c) bear not at all on section 8(e). Therefore, the Court cannot say, on this record, that the proposed second claim is deficient as a matter of law. Intergraph's motion to amend to add this claim is therefore granted.
CONCLUSION
For the reasons set forth above, Microsoft's motion to dismiss is GRANTED with leave to amend. Intergraph's motion to amend is GRANTED IN PART and DENIED IN PART. Intergraph shall file its Second Amended Third Party Complaint within ten (10) days of the date of this order.
IT IS SO ORDERED.