Opinion
CV 22-00459-RSWL-JDEx
11-17-2022
NKLOSURES, INC., Plaintiff, v. AVALON LODGING LLC, et al., Defendants.
ORDER RE: MOTION TO DISMISS [41]
HONORABLE RONALD S.W. LEW, SENIOR U.S. DISTRICT JUDGE
Plaintiff nKlosure, Inc. (“Plaintiff”) brought this Action against Defendants Avalon Lodging, LLC (“Defendant Avalon”); Bipin Morari (“Defendant Morari”); Best Western International, Inc.; W&W Land Design Consultants, Inc.; Winston Liu, P.E.; and Tom Lau, AIA (collectively, “Defendants”) alleging copyright infringement, breach of contract, and unfair business practices. Currently before the Court is Defendants Avalon and Morari's Motion to Dismiss [41] (“Motion”). Having reviewed all papers submitted pertaining to this Motion, the Court NOW FINDS AND RULES AS FOLLOWS: the Court GRANTS in part and DENIES in part Defendants' Motion.
I. BACKGROUND
A. Factual Background
Plaintiff's First Amended Complaint (“FAC”) alleges as follows:
On or about May 25, 2014, Plaintiff, a licensed architectural firm, contracted with Mr. Thakor Patel to provide architectural design services for a new Los Angeles hotel. First Am. Compl. (“FAC”) ¶ 12, ECF No. 39. The contract (the “Agreement”) indicated that Plaintiff was the sole author, owner, and copyright holder of the architectural drawings and plans (the “Drawings”) and that once the Planning Department approved the Drawings, Mr. Patel would retain Plaintiff as the architect for the hotel's construction. Id. Moreover, the Drawings were stamped with language providing that they could not be copied or transmitted without Plaintiff's express written permission. Id. ¶ 13.
After the Drawings were approved, Plaintiff learned in June 2015 that Mr. Patel was selling the hotel project to Defendant Avalon. Id. ¶ 14. In response, Plaintiff's principal, Mr. Nikhil Kamat (“Mr. Kamat”), reached out to Defendant Avalon's principal and managing agent, Defendant Morari, to notify him that the Planning Department had approved the Drawings and Plaintiff could continue work on the project. Id. ¶¶ 5, 15. Defendant Morari then asked for a proposal for Plaintiff's work. Id. ¶ 15. Mr. Kamat made it clear that Plaintiff would only disclose the Drawings in its proposal on the condition that Defendant Avalon could not use the Drawings for the hotel unless Defendant Avalon paid Plaintiff for them and hired Plaintiff as the project architect. Id.
Three weeks later, Mr. Kamat sent Defendant Morari an e-mail containing Plaintiff's proposal. Id. ¶ 17. In the e-mail, Mr. Kamat indicated that Plaintiff was the sole owner, author, and copyright holder of the Drawings created for the hotel, and that upon execution of a contract, Plaintiff would grant Defendant Avalon a license to use the Drawings in the hotel's construction. Id. In two subsequent phone calls, Defendant Morari told Mr. Kamat that he would review the proposal and get back to him. Id. ¶ 18. Defendant Morari understood that if he decided to use the Drawings, Defendant Avalon would have to pay for them and use Plaintiff as the architect on the project. Id. Thereafter, Defendant Morari went silent and cut off all contact with Mr. Kamat. Id.
Several weeks later, Mr. Kamat sent an e-mail to follow up on the proposal, but Defendant Morari did not respond nor contact Plaintiff again. Id. ¶ 19. Mr. Kamat therefore inferred that Defendant Morari was not interested in using the Drawings for the hotel. Id.
On or about June 22, 2020, Mr. Kamat saw an advertisement for the sale of a hotel that had since been constructed on the property and recognized the design as his own. Id. ¶ 21. He also learned that Defendant Avalon had hired Defendant W&W Land Design Consultant, Inc. (“W&W”) for the next stage of project development and that Defendants had used Plaintiff's preliminary schematic design and drawings in the hotel's construction. Id. Sometime thereafter, Plaintiff learned that the Drawings were included in a Power Point presentation (the “Presentation”) marketing the property. Id. ¶ 20.
On January 13, 2022, Plaintiff filed a copyright application for the Drawings and the United States Copyright Office granted Copyright Registration Certificate No. VA 2-282-647 for the Drawings five days later. Id. ¶¶ 24-25.
B. Procedural Background
Defendants filed the instant Motion [42] on September 8, 2022. Plaintiff opposed [48] the Motion on October 4, 2022. Defendants replied [49] on October 7, 2022.
II. DISCUSSION
A. Legal Standard
Federal Rule of Civil Procedure 12(b)(6) allows a party to move for dismissal of one or more claims if the pleading fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). A complaint must “contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotation omitted). Dismissal is warranted for a “lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988) (citation omitted).
In ruling on a Rule 12(b)(6) motion, a court may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice. Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A court must presume all factual allegations of the complaint to be true and draw all reasonable inferences in favor of the non-moving party. Klarfeld v. United States, 944 F.2d 583, 585 (9th Cir. 1991). The question is not whether the plaintiff will ultimately prevail, but whether the plaintiff is entitled to present evidence to support its claims. Jackson v. Birmingham Bd. of Educ., 544 U.S. 167, 184 (2005) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). While a complaint need not contain detailed factual allegations, a plaintiff must provide more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a recovery is very remote and unlikely.'” Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).
B. Analysis
1. Judicial Notice
Before turning to the merits of Defendants' Motion, the Court should first address Defendants' request for judicial notice. A court may take judicial notice of an adjudicative fact that is “not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b). Matters of public record may be judicially noticed, but disputed facts contained therein may not. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018). “[A]ccuracy is only part of the inquiry under Rule 201(b).” Id. “A court must also consider-and identify-which fact or facts it is noticing from” the documents. Id.
Here, Defendants filed a request seeking judicial notice of the following twelve documents: (A) the May 25, 2014 Agreement (the “Agreement”) between Plaintiff and Mr. Patel; (B) Plaintiff's initial statecourt complaint in Case No. 20BBCV00441 (the “State Case”); (C) The Los Angeles Superior Court (“LASC”) September 3, 2021 Order in the State Case; (D) Plaintiff's first-amended complaint in the State Case; (E) The LASC December 16, 2021 Order in the State Case; (F) Plaintiff's second-amended complaint, in the State case; (G) the demurrer and request for judicial notice Defendants filed in the State Case; (H) the LASC's March 23, 2022 tentative ruling on Defendants' demurrer; (I) Plaintiff's voluntary dismissal of the State Case; (J) Plaintiff's responses to Defendants' Special Interrogatory No. 49, Request for Admission No. 32, and Form Interrogatory 17.1; (K) Plaintiff's supplemental responses to Defendants' Request for Admission Nos. 40-41; (L) The Presentation Plaintiff referred to in the FAC. See generally Req. for Judicial Notice (“RJN”), ECF No. 42; RJN, Exs. A-L, ECF Nos. 42-1 through 42-12.
The documents are attached to the Request for Judicial Notice as exhibits and are referred to here by their exhibit letter.
a. Documents Subject to Judicial Notice
Exhibits B through I are court filings and records in related proceedings and are thus properly subject to judicial notice. See Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (taking judicial notice of pleadings, memoranda, and other court documents from related litigation). The Court takes judicial notice of the existence of these proceedings, their filing dates, Plaintiff's claims, and the court's dispositions. See Limcaco v. Wynn, No. 220CV11372RSWLMAAX, 2021 WL 5040368, at *5 (C.D. Cal. Oct. 29, 2021). The Court should not, however, take judicial notice of these documents for the truth of the matters asserted therein. See Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001); Garber v. Heilman, No. CV 08-3585-DDP (RNB), 2009 WL 409957, at *1 (C.D. Cal. Feb. 18, 2009).
b. Documents Subject to Incorporation by Reference
Under the judicially created incorporation by reference doctrine, “[a] court may consider evidence on which the complaint ‘necessarily relies' if: (1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion.” Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006).
Exhibit A is the Agreement between Plaintiff and Mr. Patel. See RJN, Ex. A. Plaintiff's FAC also extensively referenced the Agreement. See FAC ¶¶ 12-13. Plaintiff did not question Exhibit A's authenticity in its Opposition and instead asserted that the license it granted to Mr. Patel in the Agreement did not transfer to Defendants. See Opp'n 3:26-4:11. The Agreement is therefore central to Plaintiff's infringement claim, so the Court may incorporate Exhibit A by reference into its analysis of the current Motion.
Exhibit L is the Presentation allegedly used to market the property that included the Drawings. See FAC ¶ 20. Neither party questions Exhibit L's authenticity, and Plaintiff references the Presentation in its FAC. See FAC ¶ 20. Absent direct evidence of copying, a plaintiff asserting copyright infringement must prove that a defendant had “access” to the underlying work. See Three Boys Music Corp. v. Bolton, 212 F.3d 477, 481 (9th Cir. 2000). Thus, because Plaintiff alleges that the Presentation provided Defendants with access to the Drawings, the document is central to the infringement claim. The Court may therefore also incorporate the Presentation by reference into its analysis of the current Motion.
Since the Court incorporates by reference Exhibits A and L, judicial notice is not necessary. See Rainville v. Anthem Um Servs., No. 18-cv-07099-RS, 2019 WL 13203765, at *2 n.2 (N.D. Cal. Feb. 12, 2019).
c. Documents Not Subject to Judicial Notice or Incorporation by Reference
Exhibit J and Exhibit K purportedly contain Plaintiff's discovery responses in the related state court proceedings, and Defendants rely on the responses to undermine Plaintiff's allegations. See RJN, Exs. J & K; Defs.' Mot. to Dismiss (“Mot.”). However, a court may only judicially notice an adjudicative fact if it is not subject to reasonable dispute because it: “(1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b). A document is “self-authenticating" - and therefore deemed not subject to reasonable dispute - if it requires no extrinsic evidence of genuineness to be admitted as evidence. United States v. Alvirez, 831 F.3d 1115, 1123 (9th Cir. 2016). Discovery responses are not self-authenticating documents. See United Safeguard Distribs. Ass'n, Inc, v. Safeguard Bus. Sys., Inc., 145 F.Supp.3d 932, 942 (C.D. Cal. 2015) (“Discovery items . . . are not proper subjects for judicial notice because they are not 'self-authenticating' and thus cannot be verified."); Garber v. Heilman, No. CV 08-3585-DDP (RNB), 2009 WL 409957, at *1 (C.D. Cal. Feb. 18, 2009); Brown v. Allstate Ins. Co., 17 F.Supp.2d 1134, 1138 (S.D. Cal. 1998) (refusing to judicially notice requests for admissions because “[t]he court proceeds with particular caution with respect to a request for judicial notice, when, as here, it is urged so to resolve a fundamental, dispositive factual dispute"). Therefore, the Court should deny Defendants' request for judicial notice for Exhibits J and K.
2. Copyright Act Claim
a. The Court Need Not Determine Whether Defendants Possessed a License
A motion to dismiss challenges a complaint's sufficiency, so it is generally inappropriate to raise an affirmative defense in a 12(b)(6) motion. Scott v. Kuhlmann, 746 F.2d 1377, 13788 (9th Cir. 1984). Therefore, to survive a motion to dismiss, plaintiffs do not need to plead “on the subject of affirmative defenses.” Rivera v. Peri & Sons Farms, Inc., 735 F.3d 892, 902 (9th Cir. 2013). Rather, only when a complaint's allegations suffice to establish an affirmative defense can a defendant properly raise the defense in a 12(b)(6) motion. Id.; Sams v. Yahoo! Inc., 713 F.3d 1175, 1179 (9th Cir. 2013). The existence of a license is an affirmative defense to a copyright infringement claim. Worldwide Church of God v. Philadelphia Church of God, Inc., 227 F.3d 1110, 1114 (9th Cir. 2000).
Here, Defendants assert that the Agreement granted them an express, or at least an implied, license to use the Drawings. Mot. 11:21-24. However, Defendants were not a party to the Agreement. See RJN, Ex. A. Instead, they contend that Mr. Patel transferred the Agreement's license to a third-party, RSP, who in turn sold the land, drawings, and license to them. Id. at 11:13-20. But the Ninth Circuit has held that a licensee cannot transfer a copyright license without authorization. Harris v. Emus Recs. Corp., 734 F.2d 1329, 1334 (9th Cir. 1984) (“A licensee, however, had no right to resell or sublicense the rights acquired unless he has been expressly authorized to do so.”) (quoting M. NIMMER, NIMMER ON COPYRIGHT § 10.01[c][4] (1983)). The Court should not consider the express license defense because the FAC and Agreement provide no evidence that Plaintiff authorized the license's transfer. See generally FAC; RJN, Ex. A.
Alternatively, copyright owners can grant nonexclusive licenses by implication. Foad Consulting Grp., Inc, v. Azzalino, 270 F.3d 821, 826 (9th Cir. 2001). However, "implied licenses" are, by their very nature, implied. Consequently, courts generally resolve questions concerning implied licensing at summary judgment - and not on motions to dismiss - because they require factual inquiry and analysis. Erwin v. Sestero, No. CV143890RSWLPJWX, 2014 WL 12591480, at *3 (C.D. Cal. Dec. 18, 2014); see, e.g., Effects Associates, Inc, v. Cohen, 908 F.2d 555, 559 (9th Cir. 1990) (establishing the three-element Effects Test to determine whether an implied license exists).
Here, the Court declines to determine whether Defendants possessed an implied license to use the Drawings because the affirmative defense is not apparent from the FAC's allegations and the Agreement. See Sams, 713 F.3d at 1179 (maintaining that to serve as a basis for dismissal, affirmative defenses should be "apparent from the face of the complaint"). For example, the Effects Test's third prong asks whether the licensor intended for the licensee to copy and distribute the work. See Asset Mktg. Sys., Inc, v. Gagnon, 542 F.3d 748, 755 (9th Cir. 2008). Plaintiff explicitly alleged that (1) the Agreement contained a clause restricting Mr. Patel's right to copy or disseminate the Drawings and (2) Plaintiff told Defendants that it was the “sole owner, author, and copyright holder” of the Drawings and would only grant them a license for their use “upon execution of [a] contract.” FAC ¶¶ 13, 17. The Agreement further provides, in pertinent part, that “[Plaintiff] is, at all times, the author, owner and copyright holder of all drawings . . . for this Project [and] . . . [Plaintiff] grants the Owner a license to use the [Drawings] for the limited purpose of this Project only.” RJN, Ex. A at 5 (emphasis added). Thus, the FAC's allegations and incorporated Agreement do not clearly establish an implied license, particularly considering that the Agreement purported to limit the license's scope and transferability. See id.
In sum, although the Agreement granted Mr. Patel an express license to use the Drawings, the Court need not, on a motion to dismiss, determine whether he transferred (or legally could transfer) the license to Defendants when they purchased the hotel project. Additionally, the Court should refrain from determining whether Defendants possess an implied license because the FAC's allegations and the Agreement do not obviously establish the defense. See Gomez v. Quicken Loans, Inc., 629 Fed.Appx. 799, 801 (9th Cir. 2015) (“An affirmative defense cannot serve as a basis for dismissal unless it is obvious on the face of the complaint.”).
b. The Court Tolls the Statute of Limitations
Under the Copyright Act, a plaintiff must commence an infringement action within three years of the claim accruing. 17 U.S.C. § 507(b). The Ninth Circuit has adopted “the discovery rule,” which holds that a claim “accrues” when the copyright holder “has knowledge of a violation or is chargeable with such knowledge.” Roley v. New World Pictures, Ltd., 19 F.3d 479, 481 (9th Cir. 1994). In other words, the three-year clock begins when a plaintiff discovers the infringement, so long as the plaintiff's prior unawareness of the infringement was reasonable under the circumstances. Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 706 (9th Cir. 2004); see also Starz Ent., LLC v. MGM Domestic Television Distrib., LLC, 39 F.4th 1236, 1246 (9th Cir. 2022) ([B]ecause the discovery rule is an exception to the general incident of injury rule, . . . the three-year limitations period begins only when the copyright holder knows or should have known of the infringing act.”).
Ultimately, “precisely when a claim accrues is a question of fact.” Starz Ent., LLC v. MGM Domestic Television Distrib., LLC, No. CV 20-4085-DMG (KSX), 2021 WL 566500 (C.D. Cal. Jan. 5, 2021), motion to certify appeal granted, No. CV 20-4085-DMG (KSX), 2021 WL 945237 (C.D. Cal. Feb. 22, 2021), and aff'd, 39 F.4th 1236 (9th Cir. 2022) (holding the parties should pursue discovery to determine whether the pleadings accurately reflected when a claim accrued). Because factual issues cannot be resolved at the pleadings stage, a court should only find a copyright claim time-barred on a motion to dismiss if no reasonable finder of fact could conclude that a copyright plaintiff's lack of knowledge of infringement prior to its alleged discovery was reasonable under the circumstances. Mavrix Photo, Inc, v. Rant Media Network, LLC, No. CV197270DMGAFMX, 2020 WL 8028098, at *3 (C.D. Cal. Nov. 2, 2020).
In its Motion, Defendants contend that Plaintiff "could have easily checked the records of the City of L.A. and learned that Defendant Avalon's new architects had submitted plans from scratch for the new 5-story hotel by August of 2015." Mot. 28:9-12. Indeed, constructive knowledge can trigger the statute of limitations, and "suspicion" of infringement "place[s] upon [the plaintiff] a duty to investigate further into possible infringements of [its] copyrights." Wood v. Santa Barbara Chamber of Commerce, Inc., 705 F.2d 1515, 1521 (9th Cir. 1983); Oracle Am., Inc, v. Hewlett Packard Enter. Co., 971 F.3d 1042, 1047 (9th Cir. 2020) . "[A] plaintiff is deemed to have had constructive knowledge if it had enough information to warrant an investigation which, if reasonably diligent, would have led to discovery of the [claim].” Pincay v. Andrews, 238 F.3d 1106, 1110 (9th Cir. 2001).
Defendants assert that Plaintiff reasonably should have recognized infringement from "scratch-made" architectural plans for a hotel with a different number of stories than the one Plaintiff had designed. Mot. 28:9-12. Defendants cannot have it both ways; either Defendants' hotel design infringed on the Drawings - and thus Plaintiff should have recognized the hotel as its own design - or Defendants generated an entirely independent design.
Here, however, Plaintiff alleged that Defendants failed to follow up on its proposal to execute a contract that would grant Defendants a license for the Drawings and make Plaintiff the lead architect for construction. FAC ¶¶ 15-19. On a motion to dismiss, the Court should not impose a duty to investigate upon a plaintiff unless the complaint clearly evidences the plaintiff's suspicion or constructive knowledge of infringement. See Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 969 (9th Cir. 2010) (“[A] complaint cannot be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts that would establish the timeliness of the claim."). Unlike in Wood, where a plaintiff had filed a similar lawsuit many years prior, thus evidencing suspicion, the FAC here does not demonstrate that Plaintiff suspected infringement before Mr. Kamat viewed the hotel advertisement in 2020. See Wood, 705 F.2d at 1521; FAC ¶ 21. Any evidence to the contrary can be revealed in discovery and would properly be considered on a motion for summary judgment.
Therefore, presuming the FAC's factual allegations as true, the Court should find that a reasonable fact finder could believe that Plaintiff first discovered the alleged infringement on or about June 22, 2020, and that its prior unawareness was reasonable. Thus, the Court applies the discovery rule, tolls the statute of limitations, and holds that Plaintiff timely filed its claim under the Copyright Act.
In summary, the Court need not determine on the current Motion whether Defendants' license defense has merit. The Court also applies the discovery rule and tolls the statute of limitations, thus rendering the claim timely filed. The Court therefore DENIES Defendants' Motion to Dismiss the copyright infringement claim.
3. Breach of Contract Claim
a. Plaintiff's Breach of Contract Claim Is Not Preempted by the Copyright Act
The Copyright Act preempts a state law claim if the underlying work falls within the "subject matter" of the Act and the rights the plaintiff asserts under state law are equivalent to those protected by the Act. Kodadek v. MTV Networks, Inc., 152 F.3d 1209, 1212 (9th Cir. 1998). “For preemption purposes, ideas and concepts that are fixed in a tangible medium fall within the scope of copyright." Montz v. Pilgrim Films & Television, Inc., 649 F.3d 975, 979 (9th Cir. 2011) .
Here, Plaintiff alleged it provided Defendants a copy of the Drawings in its e-mail proposal, so the work at issue was fixed in a tangible medium. See FAC ¶¶ 18, 35. Therefore, the Drawings fall within the subject matter afforded protection by the Copyright Act. See Kodadek, 152 F.3d at 1212.
Next, "[t]o survive preemption, the state cause of action must protect rights that are qualitatively different from the rights protected by copyright: the complaint must allege an 'extra element' that changes the nature of the action." Grosso v. Miramax Film Corp., 383 F.3d 965, 968 (9th Cir. 2004), opinion amended on denial of reh'g, 400 F.3d 658 (9th Cir. 2005). For a breach of contract claim, courts look to the rights created by the contract and determine whether they "differ from the prohibition of unauthorized reproduction, performance, distribution, or display of work protected under copyright law." Rumble, Inc, v. Daily Mail & Gen. Tr. PLC, No. CV 19-08420-CJC(EX), 2020 WL 2510652, at *3 (C.D. Cal. Feb. 12, 2020).
Here, no express contract exists, but Plaintiff alleged that its correspondence with Defendants created an implied-in-fact contract. See FAC ¶ 39. "[W]here an idea is furnished by one party to another, a contract sometimes may be implied even in the absence of an express promise to pay." Grosso, 383 F.3d at 967. "California law allows for recovery for the breach of an implied-in-fact contract when the recipient of a valuable idea accepts the information knowing that compensation is expected, and subsequently uses the idea without paying for it." Landsberg v. Scrabble Crossword Game Players, Inc., 802 F.2d 1193, 1196 (9th Cir. 1986) .
This implied promise to pay suffices as an “extra element” for preemption purposes. Grosso, 383 F.3d at 968.
Plaintiff alleged that Defendants knew it disclosed the Drawings on the condition that Defendants could not use them unless Defendants paid for them and hired Plaintiff as the architect for construction. FAC ¶ 15. Taken as true, this understanding constitutes an extra element enabling the breach of contract claim to avoid preemption under the Copyright Act. See Landsberg, 802 F.2d at 1196-97; see also Grosso, 383 F.3d at 968 (finding a plaintiff's disclosure of his playscript to defendants evidenced a bilateral expectation of compensation which constituted an extra element for preemption purposes).
b. Plaintiff Pled Sufficient Facts to Establish a Prima Facie Breach of Contract Claim
Under California law, a plaintiff must plead the same elements for a breach of an implied-in-fact contract claim as for the breach of an express contract. Marshall & Swift/Boeckh, LLC v. URS Corp., No. CV0804375GAFSSX, 2009 WL 10668449, at *21 (C.D. Cal. Aug. 26, 2009). Therefore, Plaintiff must plead (1) that a valid contract existed; (2) Plaintiff's performance, or excused nonperformance, of the contract; (3) Defendants' breach; and (4) resulting damages. To state a Desny claim for breach of an implied-in-fact contract, a plaintiff must allege that the plaintiff (1) prepared the work, (2) disclosed the work to the defendant for sale, and (3) did so under circumstances from which it could be concluded that the defendant voluntarily accepted the disclosure knowing the conditions on which it was tendered and the reasonable value of the work. Grosso, 383 F.3d at 967.
The Supreme Court of California originally created the concept of implied-in-fact contracts to protect film writers from being deprived of the ideas they pitch to studio producers without just compensation. See Desny v. Wilder, 299 P.2d 257 (Cal. 1956). Courts have since applied the concept to various types of intellectual property disclosure, including patent technology, website designs, and toys. See, e.g., JBF Interlude 2009 Ltd. v. Quibi Holdings LLC, No. 220CV02250CASSKX, 2020 WL 6203555 (C.D. Cal. Oct. 19, 2020); Riggs v. MySpace, Inc., 444 Fed.Appx. 986 (9th Cir. 2011); Gunther-Wahl Prods., Inc. v. Mattel, Inc., 128 Cal.Rptr.2d 50 (2002). Therefore, the Court should find that architectural design disclosure can also form an implied-in-fact contract.
Here, Plaintiff alleges the following: (1) it created the Drawings; (2) Mr. Kamat disclosed the Drawings to Defendant Morari in its June 26, 2015, proposal; and (3) Mr. Kamat told Defendant Morari over the phone and in his June 26, 2015 e-mail that if Defendant Avalon wanted to use the Drawings, it would have to pay for them and hire Plaintiff as the hotel architect. FAC ¶¶ 12-13, 17-18. Plaintiff further alleges that on the phone calls, the two principals discussed what drawings would be provided. Id. Given Plaintiff's allegations regarding the parties' telephone communication and Mr. Kamat's e-mail indicating that Plaintiff would only grant a license for the Drawings use upon execution of a contract, the Court should find that the FAC sufficiently alleged that Defendant Morari understood the condition on which Plaintiff tendered the Drawings. See id. ¶¶ 17-18; JBF, 2020 WL 6203555, at *6 (holding that a defendant's interest in “purchasing” disclosed technology sufficiently implied that he knew he had to pay for it).
In sum, Plaintiff sufficiently alleged it formed an implied-in-fact contract, it performed by delivering the Drawings in the proposal, and Defendants breached the implied-in-fact contract by using the Drawings without compensating Plaintiff for their use. See FAC ¶¶ 17-19, 21, 23. Plaintiff also alleged Defendants' breach caused Plaintiff harm and damages in an amount to be proved at trial. FAC ¶¶ 41-42. Therefore, Plaintiff has sufficiently pled a prima facie breach of contract case to survive a motion to dismiss.
c. Plaintiff's Breach of Implied-in-Fact Contract Claim Is Plausible on Its Face
In the Motion, Defendants asserted that Plaintiff's own statements prove that Plaintiff never provided the Drawings to Defendant Avalon at all. Id. at 22:28-23:1. Defendants relied on two purported excerpts from Plaintiff's discovery responses in the previous state action to undermine the FAC. Id. 21:4-26. However, because the discovery responses in Exhibits J and K are not properly subject to judicial notice, the Court should not determine whether the statements therein render Plaintiff's breach of contract claim implausible. See Swartz, 476 F.3d at 763 (“In ruling on a 12(b)(6) motion, a court may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice.”); Safeguard, 145 F.Supp.3d at 942 (“Discovery items . . . are not proper subjects for judicial notice because they are not ‘self-authenticating' and thus cannot be verified.”). Presuming all the factual allegations in the FAC to be true - including that Plaintiff e-mailed the Drawings to Defendant Morari - Plaintiff has pled a breach of implied-in-fact contract claim that is plausible on its face. Consequently, the Court DENIES Defendants' motion to dismiss Plaintiff's implied-in-fact contract claim.
Defendants' first contention - that in its response to Special Interrogatory No. 49, Plaintiff said it failed to take steps to protect the Drawings because it “was unaware that Defendants had possession of the [D]rawings" - appears in Exhibit J. Id. at 21:12-13. However, Defendants' second example - that in response to form interrogatory 17.1, Plaintiff claimed it “did not know and could not have known that Defendants had obtained [the Drawings]" - did not appear in the documents attached to the Motion. See RJN, Ex J & K.
4. The Court Dismisses Plaintiff's Unfair Competition Law Claim Without Leave to Amend
In its Opposition, Plaintiff requested that the Court dismiss its unfair competition law (“UCL”) claim, “subject to the unlikely scenario of [P]laintiff seeking leave from the Court to reassert [the] claim.” Opp'n 7:22-24. In its Reply, Defendants accepted the concession. Reply 10:1. Therefore, the Court GRANTS Defendants' motion to dismiss Plaintiff's UCL claim.
Plaintiff requested that the Court dismiss the UCL claim with leave to amend. Opp'n 7:23. “Where a motion to dismiss is granted, a district court must decide whether to grant leave to amend." Winebarger v. Pennsylvania Higher Educ. Assistance Agency, 411 F.Supp.3d 1070, 1082 (C.D. Cal. 2019). “The court should give leave [to amend] freely when justice so requires." Fed.R.Civ.P. 15(a)(2). In the Ninth Circuit, “Rule 15's policy of favoring amendments to pleadings should be applied with 'extreme liberality.'" United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981). Against this extremely liberal standard, the Court may consider “the presence of any of four factors: bad faith, undue delay, prejudice to the opposing party, and/or futility." Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001) .
Here, leave to amend should be denied. Plaintiff admits it cannot "identify any material relief uniquely available under the UCL that would justify extensive argument and litigation activity to carry forward this separate cause of action" and therefore it is "unlikely" to reassert the UCL claim in the future. See Opp'n 7:18-23. Given these statements and Plaintiff's previous amendment, it is clear that amendment would be futile.
“The district court's discretion to deny leave to amend is particularly broad where plaintiff has previously amended the complaint.” Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990). Here, Plaintiff filed three state court complaints alleging its unfair business practices claim, and it has already amended its complaint in federal court once. See RJN, Exs. B, D, F, ECF Nos. 42-2, 42-4. Thus, Plaintiff has had multiple opportunities to refine its claim. Yet Plaintiff concedes that despite its amendment, its claim should not proceed and that is unlikely it can cure its claim. Opp'n 7:23-24. Plaintiff's statements ring true. It is unlikely Plaintiff would reassert its UCL claim, because amending Plaintiff's claim would not make available relief that is not already sought under Plaintiff's other claims. Therefore, the Court should find that granting leave to amend would be futile. See In re Vantive Corp. Sec. Litig., 283 F.3d 1079 (9th Cir. 2002) (holding that because plaintiffs had three opportunities to plead their case, it was not unreasonable for the district court to conclude that it would be pointless to provide another chance to amend). The Court therefore GRANTS Defendants' Motion to Dismiss the UCL claim without leave to amend.
III. CONCLUSION
Based on the foregoing, the Court DENIES Defendants' Motion to Dismiss the copyright infringement and breach of contract claims and GRANTS Defendants' Motion to Dismiss the UCL claim without leave to amend.
IT IS SO ORDERED.