582 F.Supp.3d 725
S.D. Cal.2022Background
- Plaintiff Soil Retention Products, Inc. (California) contracted with defendant Brentwood Industries, Inc. (Pennsylvania) for manufacture of molds used to make Plaintiff’s Drivable Grass® products; the parties had a vendor relationship dating to 2006.
- Beginning in 2018 Plaintiff sought modified production molds (thermoforming instead of injection molding); the parties exchanged quotes and Plaintiff issued four purchase orders (Sept. 24, 2018; Apr. 29, 2019; May 9, 2019; Jan. 7, 2020) totaling approximately $128,416.90.
- Plaintiff alleges repeated delays and nonconforming molds (thermoformed then vacuum-formed), increased production time/costs, lost sales, and at least $1.4 million in damages; Plaintiff also alleges Brentwood began developing a competing product and misappropriated Plaintiff’s trade secrets.
- Defendant moved to dismiss the First Amended Complaint under Rule 12(b)(6) (challenging contract formation, Statute of Frauds, acceptance/rejection) and to strike attorney-fee damages under Rule 12(f).
- The court held Plaintiff’s amended allegations (purchase orders, course of dealing, payments/shipments, exceptions to the Statute of Frauds, and trade-secret allegations) were sufficient under Rule 8 to survive dismissal and denied the motion to strike fees; factual issues remain for trial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of breach-of-contract pleadings / contract formation (UCC) | POs, course of dealing, payments and shipments, and alleged exceptions to Statute of Frauds (written confirmation, specially manufactured goods, payment/acceptance) establish plausible contracts | POs unsigned, no proof Brentwood accepted POs, Statute of Frauds requires signed writing | Denied dismissal: plaintiff plausibly alleged contractual agreement and Statute of Frauds exceptions; factual questions for trial |
| Acceptance, rejection, cure, and revocation under the UCC | Nonconforming deliveries excused performance; Plaintiff alleges rejection/revocation and subsequent mitigation (new vacuum order) | Plaintiff accepted shipments or cured deliveries and therefore cannot later reject or recover for accepted goods | Denied dismissal: sufficiency of allegations; acceptance/rejection and cure are factual issues for trial |
| Misappropriation of trade secrets | SRP owned proprietary design/specs for Drivable Grass®, shared with Brentwood solely to make molds; Brentwood used/disclosed secrets and developed a competing product | (Brentwood contends inadequacy/denies misappropriation) | Denied dismissal: allegations of ownership, secrecy, disclosure/use and competitive development are plausible to survive Rule 12(b)(6) |
| Motion to strike attorney-fee damages under Rule 12(f) | Plaintiff seeks attorneys’ fees; entitlement to fees to be determined later | Brentwood moved to strike fee claim under Rule 12(f) | Denied: Rule 12(f) cannot be used to strike damage claims; fee entitlement decided post-pleadings |
Key Cases Cited
- Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025 (9th Cir.) (pleadings are assumed true and construed in plaintiff's favor on Rule 12(b)(6))
- Hickcox-Huffman v. US Airways, Inc., 855 F.3d 1057 (9th Cir.) (elements of a breach-of-contract claim under California law)
- Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970 (9th Cir.) (Rule 12(f) cannot be used to strike damages; factual disputes inappropriate to resolve on pleadings)
- Norcia v. Samsung Telecommunications Am., LLC, 845 F.3d 1279 (9th Cir.) (UCC contract formation by conduct and merchants’ confirmation rule)
- Grimes v. New Century Mortg. Corp., 340 F.3d 1007 (9th Cir.) (common-law contract formation elements)
- E. Iowa Plastics, Inc. v. PI, Inc., 889 F.3d 454 (8th Cir.) (distinction between injection molding and thermoforming relevant to parties’ communications)
- Ramos v. Mercedes-Benz USA, LLC, 55 Cal. App. 5th 220 (Cal. Ct. App.) (standards for revocation of acceptance / substantial impairment)