Plaza Home Mortgage, Inc. v. Automated Data Processing, Inc.
3:20-cv-01352
S.D. Cal.Jan 4, 2021Background
- Plaza Home Mortgage (Plaintiff) contracted with ADP (Defendant) under a 2017 ADP Workforce Now Comprehensive Services Master Services Agreement (the 2017 Agreement).
- Plaza alleges ADP negligently designed/implemented payroll/time-attendance software that failed to flag various California meal-period violations (missed, late, short, and 10‑hour premiums), causing payroll underpayments.
- Plaza discovered defects, paid certain premiums to mitigate liability, and received wage-and-hour claims (McDonough and Guerrero). Plaza notified ADP and requested indemnity and document preservation; ADP refused indemnity and declined the preservation demand.
- Plaza sued for breach of contract, express indemnity, equitable indemnity, unfair competition (Cal. Bus. & Prof. Code § 17200), and declaratory relief; ADP moved to dismiss under FRCP 12(b)(6) and 9(b).
- The Court held Plaza adequately alleged performance and ADP’s breaches/denial of indemnity and denied dismissal of the contract, express indemnity, equitable indemnity, and declaratory relief claims, but granted dismissal of the UCL claim (Plaintiff did not oppose dismissal of that claim).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract | Plaza performed and ADP breached by providing defective services that caused third‑party claims and damages | ADP says Plaza misused services, failed to give required instructions/notice, and thus no breach or indemnity owed | Court: Plausible breach alleged; claim survives dismissal |
| Express indemnity | Contract expressly requires ADP to indemnify for ADP negligence/willful misconduct; Plaza timely sought indemnity | ADP says contract conditions (notice, control, mitigation) not met and indemnity not triggered | Court: Plaza sufficiently pleaded conditions and denial; claim survives |
| Equitable indemnity | Plaza seeks indemnity for pre‑2017 period where ADP’s software caused liability to class members through no fault of Plaza | ADP argues other pre‑2017 agreements lacked indemnity and Plaza fails to plead tort basis | Court: Plaza plausibly alleges ADP’s fault and entitlement to equitable indemnity; claim survives |
| Declaratory relief | Plaza seeks judicial declaration that ADP must indemnify/defend for claims arising from ADP’s negligence | ADP calls the dispute hypothetical and says conditions precedent may not be met | Court: Actual controversy alleged based on present disputes; declaratory claim survives |
| Unfair competition (UCL) | Plaza alleged ADP misrepresented product and sold defective services | ADP argued insufficiency; Plaza withdrew opposition to this claim | Court: UCL claim dismissed (Plaintiff non‑opposition) |
Key Cases Cited
- Conservation Force v. Salazar, 646 F.3d 1240 (9th Cir. 2011) (standard for dismissal under Rule 12(b)(6))
- Thompson v. Davis, 295 F.3d 890 (9th Cir. 2002) (pleading facts taken as true at motion to dismiss)
- Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001) (courts need not accept conclusory allegations)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for claims)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (requirement that well‑pleaded factual allegations be plausible)
- Moss v. U.S. Secret Serv., 572 F.3d 962 (9th Cir. 2009) (application of plausibility standard and reasonable inferences)
- Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274 (2d Cir. 1989) (contract interpretation principles)
- Eternity Glob. Master Fund Ltd. v. Morgan Guar. Tr. Co. of N.Y., 375 F.3d 168 (2d Cir. 2004) (plain‑meaning rule for unambiguous contracts)