Xerox Corporation v. Far Western Graphics, Inc.

Full title: XEROX CORPORATION, Plaintiff, v. FAR WESTERN GRAPHICS, INC., Defendant

Court: United States District Court, N.D. California, San Jose Division

Date published: Oct 6, 2004

Case Number C-03-4059-JF (PVT), Doc. Nos. 57, 60, 63 (N.D. Cal. Oct. 6, 2004)

Opinion

Case Number C-03-4059-JF (PVT), Doc. Nos. 57, 60, 63.

October 6, 2004

ORDER (1) GRANTING PLAINTIFF'S MOTION TO DISMISS SECOND CAUSE OF ACTION SET FORTH IN THE THIRD AMENDED COUNTERCLAIM WITH LEAVE TO AMEND; (2) GRANTING PLAINTIFF'S MOTION TO STRIKE CERTAIN PORTIONS OF THIRD AMENDED COUNTERCLAIM WITH LEAVE TO AMEND; AND (3) DENYING PLAINTIFF'S MOTION FOR MORE DEFINITE STATEMENT

JEREMY FOGEL, District Judge

Plaintiff moves (1) to dismiss the second cause of action set forth in the third amended counterclaim, (2) to strike portions of the third amended counterclaim and (3) for a more definite statement of fraud allegations in the third amended counterclaim. The Court has considered the moving and responding papers as well as the oral arguments presented at the hearing on October 1, 2004. For the reasons discussed below, the Court will grant the motion to dismiss with leave to amend, grant the motion to strike with leave to amend and deny the motion for more definite statement.

I. BACKGROUND

The parties and the Court are familiar with the factual and procedural background of this case, which need not be set forth in detail here. In brief, Plaintiff Xerox Corporation ("Xerox") leased two printing machines to Defendant Far Western Graphics, Inc. ("FWG") pursuant to a written equipment lease agreement and a written equipment maintenance agreement. The parties subsequently had a falling out. Xerox claims that FWG failed to pay monies owed under these agreements, and FWG claims that Xerox did not fulfill its contractual obligations to maintain the machines in good working order. FWG also claims that it suffered a decline in business partly because Xerox entered the printing market in direct competition with FWG.

Xerox's operative first amended complaint asserts the following claims against FWG and David Motekaitis:¹ (1) breach of the lease agreement, (2) common count for amounts due and owing under the lease agreement, (3) breach of the maintenance agreement, (4) common count for amounts due and owing under the maintenance agreement, (5) recovery of personal property (the equipment leased to FWG), (6) breach of a written promissory note, (7) common count for amounts due and owing under the promissory note and (8) breach of a personal guaranty. Xerox seeks approximately $350,000 in damages.

1 Only the eighth claim for breach of personal guaranty is asserted against David Motekaitis.

FWG's operative third amended counterclaim ("TAC") asserts the following claims against Xerox: (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) intentional interference with prospective economic relations, (4) negligent interference with prospective economic relations and (5) unfair business practices under Cal. Bus. Prof. Code § 17200. Xerox moves to dismiss the second claim for breach of the implied covenant, to strike portions of the TAC and for a more definite statement of fraud allegations.

II. MOTION TO DISMISS

For purposes of a motion to dismiss, the plaintiff's allegations are taken as true, and the Court must construe the complaint in the light most favorable to the plaintiff. Jenkins v. McKeithen, 395 U.S. 411, 421 (1969); Argabright v. United States, 35 F.3d 472, 474 (9th Cir. 1994). Leave to amend must be granted unless it is clear that the complaint's deficiencies cannot be cured by amendment. Lucas v. Department of Corrections, 66 F.3d 245, 248 (9th Cir. 1995). When amendment would be futile, however, dismissal may be ordered with prejudice. Dumas v. Kipp, 90 F.3d 386, 393 (9th Cir. 1996); Albrecht v. Lund, 845 F.2d 193, 195-96 (9th Cir. 1988); Beezley v. Fremont Indemnity Co., 804 F.2d 530, 531 (9th Cir. 1986).

The Court previously dismissed FWG's claim for breach of the implied covenant, as it was framed in the second amended counterclaim, because the claim was based solely upon Xerox's alleged failure to fulfill its contractual obligations to provide maintenance to the leased printing machines and was duplicative of FWG's claim for breach of contract. FWG has added allegations that Xerox obtained confidential information — apparently when Xerox was servicing the machines leased by FWG — and used this information unfairly to compete with FWG, thereby frustrating in part the purpose for which FWG leased the machines. While these allegations, if adequately pled, would be sufficient to state a contractual claim for breach of the implied covenant, FWG gives few specifics as to what information allegedly was misappropriated. At the hearing, counsel for FWG expressed reluctance to be explicit in the pleadings, thereby publicizing information FWG considers confidential. FWG need not be so particular in its pleading as to give away confidential information, but must be particular enough so that the Court at least has an idea as to what type of information is at issue and how Xerox obtained it. Accordingly, the Court will grant Xerox's motion to dismiss this claim with leave to amend.²

2 Xerox also seeks dismissal of FWG's request for punitive damages. The Court concludes that the punitive damages claims more appropriately are addressed in the context of Xerox's motion to strike.

III. MOTION TO STRIKE

Pursuant to Federal Rule of Procedure Rule 12(f), the Court may strike "from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed.R.Civ.P. 12(f). Motions to strike generally will not be granted unless it is clear that the matter to be stricken could not have any possible bearing on the subject matter of the litigation. LeDuc v. Kentucky Central Life Insurance Co., 814 F.Supp. 820, 830 (N.D. Cal. 1992). Allegations "supplying background or historical material or other matter of an evidentiary nature will not be stricken unless unduly prejudicial to defendant." Id. Moreover, allegations that contribute to a full understanding of the complaint as a whole need not be stricken. Id.

FWG requests punitive damages, but fails to allege any conduct by an officer, director or managing agent of Xerox sufficient to support the imposition of punitive damages against Xerox. See Cal. Civ. Code § 3294(b) (providing for imposition of punitive damages against a corporation only upon a showing of the requisite mental state of an officer, director or managing agent); Cruz v. HomeBase, 83 Cal.App.4th 160, 167 (2000) (discussing the requirements for imposition of punitive damages upon a corporate defendant). Accordingly, the request for punitive damages will be stricken with leave to amend.

Xerox requests that the Court strike FWG's new claim for intentional interference with prospective economic advantage on the ground that the Court did not authorize the inclusion of such new claim in the amended pleading. While it is true that the Court did not explicitly grant leave to assert a new claim, the claim nonetheless arises from the same operative facts as the other claims previously asserted by FWG. The Court will deny Xerox's motion to strike on this basis.

Xerox also requests that the Court strike FWG's new allegations regarding the contractual agreements between the parties, in particular, FWG's new allegations that a "pooling agreement" was built into the equipment lease, that Xerox made an oral promise to restructure the terms of the pooling agreement but failed to honor this promise; and that Xerox was obligated to provide service within a "four hour window." These new allegations do appear to conflict with FWG's prior allegations regarding the scope of the contractual relationship between the parties and the TAC contains no explanation as to why new contract allegations are appearing for the first time in a third amended pleading, ten months into the litigation. Accordingly, the Court will grant Xerox's motion to strike these allegations without prejudice to FWG's repleading them in conjunction with a good faith explanation as to its failure to plead the allegations previously. If the Court ultimately allows the new allegations regarding the parties' contractual relationship, the Court may do so on the condition that FWG pay for any additional costs Xerox incurs in redeposing witnesses as a result of the new allegations.

Finally, Xerox requests that the Court strike FWG's new prayer for attorneys' fees. The TAC does not set forth a basis for attorneys' fees. Accordingly, the Court will strike the prayer for attorneys' fees without prejudice.

IV. MOTION FOR MORE DEFINITE STATEMENT

Xerox moves for a more definite statement regarding fraud allegations pursuant to Fed.R.Civ.P. 9(b). However, Rule 9(b) does not apply because there are no fraud claims in the TAC and none of the claims stated therein turn upon allegations of fraud. Accordingly, the Court will deny the motion for more definite statement.³

3 The Court notes that FWG did not oppose the motion for more definite statement and Xerox did not file a reply brief. It is possible that Xerox abandoned the motion or that the parties resolved the motion informally but failed to inform the Court.

V. ORDER

(1) The motion to dismiss the claim for intentional interference is GRANTED WITH LEAVE TO AMEND;

(2) The motion to strike certain portions of the third amended counterclaim is GRANTED WITH LEAVE TO AMEND as set forth above;

(3) The motion for more definite statement pursuant to Fed.R.Civ.P. 9(b) is DENIED;

(4) Any amended counterclaim shall be filed and served within twenty (20) days after service of this Order; and

(5) In view of the fact that FWG has had several opportunities to assert viable counterclaims, further leave to amend will not be granted.