Soil Retention Products, Inc. v. Brentwood Industries, Inc.Soil Retention Products, Inc. v. Brentwood Industries, Inc.
(1) DENYING DEFENDANT’S MOTION TO DISMISS THE COMPLAINT PURSUANT TO RULE 12(b)(6) OF THE FEDERAL RULES OF CIVIL PROCEDURE and
(2) DENYING DEFENDANT’S MOTION TO STRIKE
[ECF No. 11]
I. INTRODUCTION
Plaintiff SOIL RETENTION PRODUCTS, INC., a California corporation brings this action for, inter alia, breach of contract against Defendant BRENTWOOD INDUSTRIES, INC., a Pennsylvania corporation. Before the Court is Defendant’s Motion to Dismiss the First Amended Complaint pursuant to
II. BACKGROUND
A. Statement of Facts1
The background facts were described in this Court’s prior order (dated February
In May 2018, Plaintiff and Defendant initiated discussions in which Plaintiff detailed its business plan and requested Defendant’s assistance in modifying the molds so Plaintiff’s plan could be executed. FAC at 4, ¶ 9. Plaintiff alleges that Defendant “understood [Plaintiff] was relying upon [Defendant] to timely deliver modified production molds.” Id. According to Plaintiff, these discussions transpired for several months until August 2018, when Plaintiff asked if Defendant could employ injection molding to create the molds. Id. Plaintiff pleads that David Reinhart, Defendant’s representative, advised Plaintiff that “the process would be too expensive (up to $350,000) and he was confident [Defendant] could accomplish [Plaintiff]’s goals using Thermoforming to create the molds.”3 Id.
On September 7, 2018, Defendant sent Plaintiff a written quote to design and make modified molds. FAC at 4, ¶ 10. On September 19, 2018 and September 21, 2018, Defendant sent Plaintiff revised quotes. Id. By September 20, 2018, the parties had agreed upon terms for Defendant to create a sample mold, production mold, and related parts in exchange for Plaintiff’s agreement to first pay Defendant $5,656.00 for the sample mold and related parts. Id. at 4, ¶ 11. Plaintiff alleges that Defendant represented to Plaintiff that: (1) the lead time for the sample molds would be five to six weeks from receiving the tooling order with an additional material lead time of three to four weeks; and (2) the sample mold would meet Plaintiff’s requirements. Id.
On September 24, 2018, Plaintiff sent Defendant a written purchase order memorializing the size of the sample mold, scope of the related parts, and price of the mold and parts ($5,656.90). FAC at 4-5, ¶ 11; see also Exhibit “1” to FAC (attaching the September 24, 2018 Purchase
Plaintiff alleges that by April 2019, Defendant “committed to manufacturing the production mold and parts within 8-9 weeks.” FAC at 5, ¶ 13. Accordingly, on April 29, 2019, Plaintiff issued another written purchase order to Defendant memorializing the scope of the production mold and payment terms: Plaintiff would pay Defendant $22,400.00 for the production mold to be manufactured by Defendant using Thermoforming. FAC at 5, ¶ 13. Plaintiff alleges that it paid Defendant for the Thermoformed production mold, which Defendant provided, but Plaintiff claims also it did not meet its expectations. Id.
In May 2019, the parties allegedly agreed on a price for the finalized molds. FAC at 6, ¶ 14. Plaintiff alleges that on May 9, 2019, it issued a written purchase order to Defendant, pursuant to which Defendant would manufacture 6,000 molds using Thermoforming for a total cost of $64,800.00. FAC at 6, ¶ 14. Plaintiff alleges that Defendant “never performed pursuant to this purchase order as the production molds fell below standard of care and did not meet the parties’ expectations.” Id.
Plaintiff further pleads that in late June 2019, it received the production mold, and Nick Jannson, Plaintiff’s representative, informed Defendant’s representative, David Reinhart, that the features did not conform to the shop drawing approved by Plaintiff. FAC at 6, ¶ 15. Plaintiff alleges that the next month, in July 2019, Mr. Reinhart visited Plaintiff’s manufacturing plant in Perris, California to deliver new samples and learn more about Plaintiff’s needs. Id. Plaintiff alleges that at this time, it rejected the samples. Id.
Plaintiff pleads that on August 14, 2019, “[f]ollowing more delays and excuses,” it received the further modified materials and immediately reported problems to Defendant. FAC at 6, ¶ 16. Plaintiff alleges that around this same time, it learned Defendant was developing a product to compete with Plaintiff’s Drivable Grass. FAC at 6, ¶ 17.
In October 2019, “[f]ollowing additional discussions between the parties,” Defendant sent Plaintiff more sample production molds, which Plaintiff approved for etching. FAC at 6, ¶ 18. In December 2019, Plaintiff received production molds, which Plaintiff alleges were: (1) received over a year after placing its order; and (2) of an inferior quality to the samples Plaintiff had approved because they crumbled easier than prior samples and could not be used for their intended purpose. FAC at 6-7, ¶ 18.
In January 2020, Plaintiff placed another order with Defendant for vacuum formed molds. FAC at 7, ¶ 19. Plaintiff alleges it placed this order because it had no other options given the Thermoformed molds “could not be used for their intended purpose.” Id. Accordingly, on January 7, 2020, Plaintiff issued a written purchase order to Defendant memorializing the type and size of the vacuum formed molds to be manufactured by Defendant, pursuant to which Plaintiff would pay Defendant $35,560.00 for 3,500 vacuum formed molds. FAC at 7, ¶ 20; see also Exhibit “4” to FAC, ECF No. 10-4 at 2.
Plaintiff claims it has sustained over $1.4 million in unspecified damages. FAC at 11, ¶ 41. Plaintiff now alleges two separate breach of contract claims, arising out of the four purchase orders. These purchase orders are summarized below:
| Purchase Order No. | Order Date: | Product: | Amount: |
|---|---|---|---|
| P-11670 | September 24, 2018 |
Sample Mold
| $5,656.90 |
| P-11694 | April 29, 2019 | Production Mold 2x2 Molds Drivable Grass – Production Tooling Pricing (1.00 at $22,400.00 per unit) | $22,400.00 |
| P-11697 | May 9, 2019 | Final Production Molds 2x2 Concrete Form Molds Drivable Grass (6,000 at $10.80 per unit) | $64,800.00 |
| P-11721 | January 7, 2020 | 2x2 Concrete Form Molds Drivable Grass (3,500 at $10.16 per unit) | $35,560.00 |
| TOTAL: | $128,416.90 | ||
See Exhibits “1” through “4” to FAC, ECF Nos. 10-1 at 2, 10-2 at 2, 10-3 at 2, 10-4 at 2.
B. Procedural History
On May 26, 2020, Plaintiff filed this action against Defendant in the San Diego Superior Court, alleging nine claims for relief for: (1) breach of contract; (2) fraud; (3) negligent misrepresentation; (4) unfair business practices in violation of
Defendant filed a motion to dismiss, which the Court granted in part. Plaintiff timely filed its amended complaint, which now alleges three claims for relief: (1) breach of contract (Thermoformed Molds); (2) breach of contract (Vacuum Formed Molds); and (3) misappropriation of trade secrets.
III. LEGAL STANDARD
A. Motion to Dismiss
1. Claims for Breach of Contract
A claim for relief for breach of contract under California law must show: (1) a legally enforceable contract between the parties; (2) the defendant’s breach of that contract; and (3) damage to the plaintiff caused by the defendant’s breach. Hickcox-Huffman v. US Airways, Inc., 855 F.3d 1057, 1062 (9th Cir. 2017); McKell v. Wash. Mut., Inc., 142 Cal. App. 4th 1457, 1489 (2006). In federal court, a plaintiff need not plead the contract terms with unusual specificity. All that is required is “a short and plain statement of the claim showing that the pleader is entitled to relief.” See
In the Court’s previous order, Plaintiff failed to plead facts showing what its performance entailed, when Defendant performed, whether Plaintiff accepted the performance, and whether that performance complied with the relevant provisions of the California Commercial Code governing payment and acceptance or rejection of the allegedly non-conforming goods.” Order, ECF No. 9 at 19. In the amended complaint, Plaintiff has made sufficient allegations to satisfy the earlier shortcomings.
Plaintiff also attached purchase orders that are alleged to reflect the contracts as exhibits to the amended complaint. The documents attached to the amended complaint are not fully executed contracts but rather unsigned purchase orders of the type merchants might exchange over a long course of dealing. “A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.”
Neither party argues that the parties were incapable of contracting, that the alleged contract involved an unlawful object, or that the contract lacked sufficient consideration. As such, the Court again finds that these elements are not at issue. Whether there was mutual consent will be a fact question. Here, Defendant disputes agreeing to the terms and contends a valid contract never came into existence. Defendant may ultimately prove correct, but it is a matter for summary judgment or trial. Likewise, at trial Plaintiff will have to prove agreement by both parties. For purposes of Rule 8, however, the allegations are sufficient. “The parties may well argue at a later stage of litigation that the intent of the parties or properly admitted extrinsic evidence supports their respective interpretations of the contract. Such factually based arguments are appropriate . . . at a later stage of litigation, not on the pleadings.” Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 976 (9th Cir. 2010). This is also the case if the contract is silent as to the time for delivery. “The time for shipment or delivery or any other action under a contract if not provided in this division or agreed upon shall be a reasonable time.”
Plaintiff alleges that the sample mold met Plaintiff’s requirements. Plaintiff does not need to plead what those precise requirements were at the complaint stage of the litigation. Plaintiff alleges that the parties’ agreement “was followed by [Plaintiff]’s written purchase order to [Defendant] on September 24, 2018 “memorializing the size of the sample mold, scope of the related parts and the price of the mold and parts.” FAC at 4-5, ¶ 11 (attaching and incorporating by reference a copy of the September 24, 2018 purchase order as Exhibit “1”). With respect to Purchase Order No. 2, Plaintiff alleges that “[b]y April 2019, [Defendant] committed to manufacturing the production mold and parts within 8-9 weeks.” FAC at 5, ¶ 13. Plaintiff alleges that this agreement was confirmed in writing by virtue of Plaintiff sending “a written purchase order to [Defendant] memorializing the scope of the production mold and payment terms,” pursuant to which Plaintiff would pay Defendant $22,400.00 for the production mold to be manufactured by Defendant using Thermoforming. Id. Again, the actual purchase order contains no terms assuring delivery would be made by a specific time, and in fact, expressly states under a section entitled “Terms,” that there are “NO TERMS.” See ECF No. 10-2 at 2. However, the delivery term may be proven to be whatever a reasonable time entails. Plaintiff alleges that Defendant “accepted the terms of the parties’ agreement as memorialized in Exhibit ‘2.’” FAC at 5, ¶ 13. Further, Plaintiff alleges the production molds “did not meet [Plaintiff]’s expectations or the representations made by [Defendant].” As a result, Plaintiff has pleaded sufficient facts to plausibly establish mutual assent.
As to all four purchase orders, while Plaintiff does not allege the specifics of when or how Defendant accepted the purchase orders, it need only give fair notice of the claim. Each purchase order shows an order date, and a “Required Date.” Under Ship Via, Purchase Order Nos. 1 and 3 indicate “Best Way,” (Purchase Order Nos. 2 and 4 are blank). Under “Terms,” Purchase Order Nos. 1, 3, and 4 state “Net 30 days,” while Purchase Order No. 2 states “NO TERMS.” All four purchase orders state, “F.O.B.” See ECF Nos. 10-1 at 2, 10-2 at 2, 10-3 at 2, and 10-4 at 2.
Defendant repeatedly points out that: (1) all four purchase orders are unsigned; (2) Plaintiff has provided no proof that Defendant consented to the purchase orders Plaintiff prepared; and (3) absent a signed writing, Plaintiff cannot overcome the Statute of Frauds. See Mot. at 15:25-26. Ultimately, if Plaintiff cannot prove at trial that Defendant accepted the purchase orders, then Defendant will prevail. However, proof is a matter for trial and is not required to meet Rule 8(a)(2)’s short and plain statement pleading standard. Whittlestone, 618 F.3d at 976.
Defendant notes that § 2201 of the California Commercial Code requires contracts for the sale of goods “for the price of $500 or more,” such as the four purchase orders in this case, to be in writing and signed in order to be enforceable.
As applies to this case, that absence of signatures from the purchase orders does not require dismissal for failure to state a claim for relief. The allegations plead a plausible exception to the signing requirement. It may be shown at trial, for example, that Plaintiff prepared the purchase orders (as Plaintiff alleges it did),
Furthermore, under the second exception to the Statute of Frauds, a contract that fails to meet the requirements will be upheld if: (1) “the goods are to be specially manufactured for the buyer”; (2) “are not suitable for sale to others in the ordinary course of the seller’s business”; and (3) the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement.”
Plaintiff also argues the purchase orders overcome any Statute of Frauds issue due to the exception for “goods for which payment has been made and accepted or which have been received and accepted (Section 2606).”
In the Court’s previous order, it also explained that “Plaintiff fails to plead facts showing what its performance entailed, when Plaintiff performed, whether Defendant accepted the performance, and whether that performance complied with the relevant provisions of the California Commercial Code governing payment and acceptance or rejection of the allegedly non-conforming goods.” Order, ECF No. 9 at 19. The newly amended complaint now alleges Plaintiff “performed all conditions, covenants and promises required by it to be performed in accordance with the terms and conditions of the . . . Contract, except to the extent that [Plaintiff] was prevented or excused from performing by agreement, action or by the breach of [Defendant].” FAC at 10-11, ¶ 39, 11-12, ¶ 46.
The Court notes that in the typical injection molding process, inexpensive sample molds are manufactured first. See Sec. & Exch. Comm‘n v. Revolutions Med. Corp., No. 1:12-CV-3298-LMM, 2015 WL 11199068, at *1 (N.D. Ga. Apr. 3, 2015). “[O]nce product from those [test/sample] molds is functional, the manufacturer then produces expensive … volume production molds.” Id. Thus, sample molds are “used to make production molds.” See Mode Art Jewelers Co. v. Expansion Jewelry, Ltd., No. 75 CIV. 519, 1977 WL 22762, at *2 (S.D.N.Y. Nov. 30, 1977) (noting that “the sample molds [were] in turn …used to make production molds”). “Following the final molds’ production and the product passing final testing and approvals, mass production can then begin.” Revolutions Med., 2015 WL 11199068, at *1; see also Mode Art Jewelers Co., 1977 WL 22762, at *2 (noting that in that case, “production molds, which may produce as little as fifty sets of molded parts or as many as three hundred sets, are destroyed after they lose their usefulness as production tools”). As a result, the Court finds that although Plaintiff could be clearer in pleading whether it accepted, rejected, or revoked any of the molds, a plausible inference is that Plaintiff accepted the sample molds in order to continue with ordering production molds. Thus, the allegations give rise to a plausible inference that Defendant attempted to deliver goods under Purchase Order No. 1.4
If Plaintiff rejected the goods, it would be required to prove at trial that the rejection was communicated within a reasonable time.5 If some of the deliveries were Defendant’s attempt to cure, and they still failed to conform, Plaintiff would be able to revoke acceptance if the nonconformity “substantially impair[ed]” the value of the goods.
With respect to Purchase Order No. 2, Plaintiff alleges that “[b]y April 2019, [Defendant] committed to manufacturing the production mold and parts within 8-9 weeks.” FAC at 5, ¶ 13. Plaintiff pleads the production molds were received in late June 2019, or within 8-9 weeks. FAC at 6, ¶ 15. Plaintiff pleads that in July 2019, Mr. Reinhart visited Plaintiff’s manufacturing plant to deliver new samples. FAC at 6, ¶ 15. It is plausible that new “sample production molds” would be in response to Plaintiff’s rejection of production molds in June 2019, with Defendant exercising a right to cure by delivering new “sample production molds” in July 2019. FAC at 6, ¶ 15. Paragraph 14 references Plaintiff
receiving “further modified materials on August 14, 2019 and immediately report[ing] problems to [Defendant].” Id. at 6, ¶ 16. Paragraph 18 states that Defendant sent Plaintiff “more sample production molds in October 2019, and [Plaintiff] approved the master mold for etching.” Id. at 6, ¶ 18. The allegations suggest that Defendant was exercising its right to cure a nonconforming delivery of production molds. Id. More importantly, it plausibly alleges a contract between the parties existed. Plaintiff alleges that in December 2019, it finally received “production molds,” pleading they were received “over a year after placing [the] order on September 24, 2018.” FAC at 6-7, ¶ 18. Plaintiff alleges the production molds “did not meet [Plaintiff]’s expectations or the representations made by [Defendant].”
PRODUCTION TOOLING PRICING: 2-UP Aluminum Positive Billet Machined Mold
460 REN Plug nested in P/Box
Steel Pressure Box
Textured w/ CE-742 (after mold has been approved)
Production Tooling Terms: 50% down, 50% due NET 30
See ECF No. 10-2 at 2. As such, it plainly appears Plaintiff has adequately alleged a course of dealing between Plaintiff and Defendant over an arrangement to produce molds. Ultimately, the Court concludes that the amended complaint sufficiently alleges facts to support a breach of contract claim for relief.
For Purchase Order No. 4 which is said to reflect the second contract, Plaintiff alleges that in January 2020, it placed another order with Defendant for vacuum formed molds. FAC at 7, ¶ 19. The amended complaint pleads that on January 7, 2020, Plaintiff issued a written purchase order to Defendant “memorializing the type and size of the vacuum form molds to be manufactured by [Defendant],” pursuant to which Plaintiff would pay Defendant $45,560.00 for 3,500 vacuum formed molds. Id. at 7, ¶ 20. Purchase Order No. 4 provides the specific requirements that the 2x2 drivable grass molds would be “2’ x 2’ concrete form, Brentwood Part # ACHG18073.” ECF No. 10-4 at 2. However, Plaintiff alleges that “the vacuum formed molds Brentwood delivered in February 2020 were inferior (i.e., compromised and weaker) than the multiple vacuum formed molds Defendant had delivered to Plaintiff since 2006. Id. at 7, ¶ 21. Plaintiff also now alleges that “[b]ecause the vacuum formed molds could not be used for their intended function and purpose, [Plaintiff] was excused from performing under the Vacuum Form Contract.” Id. at 8, ¶ 21. Plaintiff, alleges four times that various goods failed their intended purpose, see id. at 7, ¶ 18, ¶ 19, 8, ¶ 21. Upon review, Plaintiff has alleged sufficient facts to plausibly claim a contract existed and was breached in that Defendant did not deliver goods conforming to the purchase orders.
Defendant argues that “[t]he FAC makes clear that with the exception of the purported non-conformance that Defendant cured, Plaintiff accepted each shipment under the purchase orders.” Mot. at 18:1-2. Thus, “[t]hat the goods did not meet Plaintiff’s subjective standards is immaterial not only [because] such terms were not included in any agreement, but also under the provisions of the Commercial Code.” Id. at 18:2-4. Defendant contends that “[o]nce the goods were accepted, Plaintiff became obligated to pay the contract rate for the goods accepted and could no longer reject the goods.” Id. at 4-7 (citing
The Court’s previous order advised that Plaintiff had insufficiently pleaded damages. In the amended complaint, Plaintiff alleges that “[a]s a direct and proximate result of [Defendant]’s breach of the Thermoform Contract, [Plaintiff] has been damages in a sum which is which is currently unascertainable, but is no less than $1.4 million.” FAC at 11, ¶ 41. Plaintiff also pleads that “[a]s a direct and proximate result of [Defendant]’s breach of the Vacuum Form Contract, [Plaintiff] has been
Here, the amended complaint alleges that “left with no other choices and in an effort to mitigate its damages and mounting financial losses, [Plaintiff] placed an order with [Defendant] for vacuum formed molds in January 2020 since the Thermoformed molds manufactured by [Defendant] could not be used for their intended purpose.” FAC at 7, ¶ 19. Plaintiff also alleges that it “immediately reported problems” to Defendant with respect to “further modified materials” received on August 14, 2019. FAC at 6, ¶ 16. Plaintiff also alleges that it “has incurred substantial costs mitigating its losses by engaging another company to manufacture its molds, costs which [Plaintiff] seeks to recover from [Defendant].” Id. at 10, ¶ 34. Plaintiff alleges that Defendant’s breach of contract “doubled the amount of time required to manufacture [Plaintiff]’s products, which has added to [Plaintiff]’s damages through increased production costs and additional manufacturing delays.” FAC at 7-8, ¶ 21. The amended complaint alleges that Plaintiff sustained “lost sales and loss of business goodwill” along with “lost profits, lost sales, and lost opportunity costs.” FAC at 9-10, ¶¶ 27, 34. “Lost profits have been recoverable as damages in numerous similar cases involving breach of warranty” and breach of a contract. Serian Bros., Inc. v. Agri-Sun Nursery, 25 Cal. App. 4th 306, 326 (1994) (reversing the trial court’s decision granting nonsuit as to claims for which the plaintiff could recover lost profits because the plaintiff-buyer could recover such damages for its claims for, inter alia, breach of contract and breach of warranty).
As mentioned earlier, a plaintiff need not plead contract damages with unusual specificity. To survive a
2. Misappropriation of Trade Secrets
To plead a claim for misappropriation of trade secrets, a plaintiff must allege both the existence of a trade secret and subsequent misappropriation of that trade secret. Pellerin v. Honeywell Int’l, Inc., 877 F. Supp. 2d 983, 988 (S.D. Cal. 2012). Plaintiff’s new allegations plead sufficient facts to support a plausible claim for the existence of a trade secret and its misappropriation.
Plaintiff’s amended complaint alleges that it owned patents and related proprietary
B. Motion to Strike
Defendant moves to strike the damages claim for attorney’s fees. Motions to strike are generally disfavored. Motions to strike claims for damages are not allowed at all. The Ninth Circuit has held that, as a matter of law,
IV. CONCLUSION
For the above reasons, the Court ORDERS as follows:
- Defendant’s Motion to Dismiss the Complaint is DENIED.
- Defendant’s Motion to Strike is DENIED.
- Defendant shall file its Answer within 10 days.
- The parties shall promptly jointly report to the assigned Magistrate Judge for an immediate scheduling order.
IT IS SO ORDERED.
DATED: January 27, 2022
HON. ROGER T. BENITEZ
United States District Judge