-BGS Selfhelpworks.com, Inc. v. 1021018 Alberta LTD. et al, No. 3:2010cv00172 - Document 78 (S.D. Cal. 2010)
Court Description: ORDER granting in part and denying in part iWorks Parties' 66 Motion for Summary Judgment; the motion is denied as to the claims for intentional interference with prospective business advantage and contract, and the constructive trust claims; the motions is granted as to the independent unjust enrichment claim; Signed by Judge John A. Houston on 12/22/10. (kaj)
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-BGS Selfhelpworks.com, Inc. v. 1021018 Alberta LTD. et al Doc. 78 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 SELFHELPWORKS.COM, INC., a California corporation, Plaintiff, 12 v. 13 1021018 ALBERTA LTD., a Canadian limitted liability company, doing business as Wu Yi Source, et. al., 14 15 16 17 18 Defendants. AND RELATED CROSS-CLAIMS. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Civil No. 10cv0172 JAH (BGS) ORDER GRANTING IN PART AND DENYING IN PART iWORKS PARTIES’ MOTION FOR SUMMARY JUDGMENT [Doc. No. 66] INTRODUCTION 19 Plaintiff Selfhelpworks.com (“Plaintiff” or “SHW”), a California corporation, 20 originally filed an action on November 19, 2009, seeking declaratory relief and an order 21 compelling arbitration against WuYi Source, Inc., a Canadian Corporation, and Does 22 1through 25, in the Superior Court of the State of California, County of San Diego. On 23 January 14, 2010, Plaintiff filed a First Amended Complaint seeking an order compelling 24 arbitration, declaratory relief and relief for breach of contract, constructive trust, unjust 25 enrichment, and intentional interference with prospective business advantage and contract. 26 Plaintiff named 1021018 Alberta Ltd, doing business as WuYi Source (“Alberta”), iWorks, 27 Jeremy Johnson (“the iWorks Parties”) and Does 1 through 25 as defendants. Plaintiff 28 alleges it entered into a Marketing Agreement with Defendant Alberta for the up-sell of 10cv172 Dockets.Justia.com 1 SHW’s Living Lean program. Plaintiff further alleges Defendant Alberta breached the 2 agreement by entering into a competing agreement with the iWorks Parties. Defendant 3 Alberta removed the action to federal court on January 21, 2010. 4 On February 11, 2010, Defendant Alberta filed an answer to SHW’s complaint and 5 filed a cross-claim against Jeremy Johnson, doing business as iWorks and Roes 1 through 6 25, asserting claims for fraud in the inducement of contract, indemnity and contribution, 7 breach of contract, breach of the covenant of good faith and fair dealing, breach of 8 fiduciary duty, conversion, unjust enrichment and imposition of constructive trust, money 9 had and received and for accounting. 10 On June 18, 2010, the iWorks Parties filed an answer to the First Amendment 11 Complaint, an answer to Alberta’s cross-claim and filed a cross-claim against Alberta. The 12 iWorks Parties seek relief for breach of contract and breach of the covenant of good faith 13 and fair dealing. The iWorks Parties filed a motion for change of venue on June 24, 2010 14 as to the cross-claims and Alberta filed a motion for leave to file a first amended cross- 15 claim and third party complaint. The cross-claimants filed separate responses to the 16 motions and replies in support of their respective motions. Both motions were set for 17 hearing on August 23, 2010, but were taken under submission pursuant to Local Rule 18 7.1.1 On September 28, 2010, the iWorks Parties filed a motion for summary judgment 19 against Plaintiff SHW. SHW filed an opposition on October 15, 2010, and Movants filed 20 a reply on October 25, 2010. 21 The parties appeared before this Court for hearing on the motion on November 8, 22 2010. Upon finding a genuine issue of material fact as to the interference claims, the 23 Court denied the motion as to the interference claims and constructive claims on the 24 record and reserved ruling on the unjust enrichment claims. DISCUSSION 25 26 27 I. Legal Standard Summary judgment is properly granted when “there is no genuine issue as to any 28 The Court has filed an separate order addressing these motions. 1 2 10cv172 1 material fact and ... the moving party is entitled to judgment as a matter of law.” 2 Fed.R.Civ.P. 56(c). Entry of summary judgment is appropriate “against a party who fails 3 to make a showing sufficient to establish the existence of an element essential to that 4 party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. 5 v. Catrett, 477 U.S. 317, 322 (1986). The party moving for summary judgment bears the 6 initial burden of establishing an absence of a genuine issue of material fact. Celotex, 477 7 U.S. at 323. Where the party moving for summary judgment does not bear the burden 8 of proof at trial, as here, it may show that no genuine issue of material fact exists by 9 demonstrating that “there is an absence of evidence to support the non-moving party’s 10 case.” Id. at 325. The moving party is not required to produce evidence showing the 11 absence of a genuine issue of material fact, nor is it required to offer evidence negating the 12 moving party’s claim. Lujan v. National Wildlife Fed’n, 497 U.S. 871, 885 (1990); 13 United Steelworkers v. Phelps Dodge Corp., 865 F.2d 1539, 1542 (9th Cir. 1989). 14 “Rather, the motion may, and should, be granted so long as whatever is before the District 15 Court demonstrates that the standard for the entry of judgment, as set forth in Rule 56(c), 16 is satisfied.” Lujan, 497 U.S. at 885 (quoting Celotex , 477 U.S. at 323). 17 Once the moving party meets the requirements of Rule 56, the burden shifts to the 18 party resisting the motion, who “must set forth specific facts showing that there is a 19 genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). 20 Without specific facts to support the conclusion, a bald assertion of the “ultimate fact” is 21 insufficient. See Schneider v. TRW, Inc., 938 F.2d 986, 990-91 (9th Cir. 1991). A 22 material fact is one that is relevant to an element of a claim or defense and the existence 23 of which might affect the outcome of the suit. The materiality of a fact is thus determined 24 by the substantive law governing the claim or defense. Disputes over irrelevant or 25 unnecessary facts will not preclude a grant of summary judgment. T.W. Electrical Service, 26 Inc. v. Pacific Electrical Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 1987)(citing 27 Anderson, 477 U.S. at 248). 28 When making this determination, the court must view all inferences drawn from 3 10cv172 1 the underlying facts in the light most favorable to the nonmoving party. See Matsushita, 2 475 U.S. at 587. “Credibility determinations, the weighing of evidence, and the drawing 3 of legitimate inferences from the facts are jury functions, not those of a judge, [when] ... 4 ruling on a motion for summary judgment.” Anderson, 477 U.S. at 255. 5 II. 6 7 Analysis The iWorks Parties move for summary judgment as to SHW’s claims against them. A. Intentional Interference with Prospective Business Advantage 8 Movants argue SHW’s claims for intentional interference with prospective business 9 advantage and contract are barred by the statute of limitations. They further argue 10 Plaintiff cannot prove all the elements of the claims because the undisputed facts show the 11 iWorks Parties had no knowledge of any contractual or economic relationship between 12 SHW and Alberta at the time of the alleged interference. 13 1. Statute of Limitations 14 Movants contend the applicable statute of limitations for the interference claims 15 is two years. They maintain the alleged interference occurred in either December 2007, 16 when Alberta and the iWorks Parties reached an agreement for the up-sell of the Living 17 Lean program, or January 4, 2008, when the parties signed the written contract 18 memorializing the terms of the agreement. They argue the interference claims asserted on 19 January 14, 2010 are barred as untimely. 20 The iWorks Parties argue Alberta’s action in engaging in the agreement with iWorks 21 breached the SHW-Alberta Marketing Agreement which specifically provides that Alberta 22 agrees not to partner or enter into a competing agreement with a similar company for an 23 up-sell internet marketing arrangement, so the SHW-Alberta Marketing Agreement was 24 breached by January 4, 2008 at the latest. They maintain the evidence shows SHW was 25 aware of the breach in mid-December 2007 as evidence by email correspondence between 26 SHW president Lou Ryan and Alberta president Jesse Willms regarding the business 27 relationship between iWorks and Alberta. 28 Plaintiff contends a three year limitations period as set forth in California Code of 4 10cv172 1 Civil Procedure 338(d) applies to its interference claims against iWorks. Plaintiff argues 2 the cause of action arose as a result of SHW discovering, in December 2009, that there 3 was a written agreement between iWorks and Alberta that was not given to SHW because 4 it contained a “confidentiality clause.” SHW maintains it discovered there are two 5 agreements between the parties and Defendant iWorks induced Alberta to enter into the 6 agreements based upon a fraudulent misrepresentation when Alberta filed its cross-claim 7 on February 11, 2010.2 8 Plaintiff further argues there was no basis for the lawsuit at the time iWorks and 9 Alberta entered into their marketing agreement, because Alberta represented that SHW 10 would be paid under the terms of the SHW-Alberta Marketing Agreement, 11 notwithstanding the purported involvement of iWorks. SHW maintains it was not until 12 August 2008, when SHW realized Albert would not pay under the agreement, that the 13 cause of action arose. Plaintiff also argues the First Amended Complaint relates back to 14 the date of the original complaint, November 19, 2009 and therefore is timely. 15 In reply, the iWorks Parties argue the First Amended Complaint does not relate 16 back to the original complaint because SHW was not ignorant of iWorks identity or the 17 facts giving rise to its interference claim against iWorks at the time of the filing of the 18 original complaint, and the complaint does not allege any cause of action against iWorks 19 as a Doe defendant. 20 21 22 23 24 25 26 27 28 Plaintiff further argues the iWorks Parties’ conduct was continuous and ongoing because iWorks received payments from the ongoing sale of SHW’s Living Lean Program from January 1, 2008 up to at least December 31, 2009, and therefore is subject to continuous accrual for statute of limitations purposes. Additionally, Plaintiff maintains iWorks was paid in installments, so the statute of limitations begins to run for the recovery of an upaid installment at the time it is payable. Movants argue the continuous accrual rule is inapplicable because iWorks has no recurring or periodic payment obligation to SHW and the conduct complained of is not a continuing pattern or course of conduct but a discrete act, the inducement of Alberta to enter into a business relationship for the marketing of Living Lean. 2 Under the continuous accrual doctrine, “when an obligation or liability arises on a recurring basis, a cause of action accrues each time a wrongful act occurs, triggering a new limitations period.” State ex. rel. Metz v. CCC Information Services, Inc., 149 Cal.App.4th 402, 418 (2007). There was no recurring obligation by the iWorks Parties to SHW. As such, the continuous accrual doctrine is inapplicable. 5 10cv172 1 Movants further argue the relevant breach, the entering into a competing 2 agreement, occurred prior to January 14, 2008, because the parties reached an agreement 3 in mid-December 2007 and executed the Marketing Agreement on January 4, 2008. They 4 maintain it is possible that after the initial breach SHW and Alberta entered into a new 5 agreement in which Alberta agreed to make payments to SHW, but iWorks is not alleged 6 to have had any involvement in that breach. 7 Plaintiff SHW asserts a claim for intentional interference with prospective business 8 advantage and contract against iWorks and Johnson in its fifth cause of action. Plaintiff 9 alleges it was to collect subscriptions from customers, but Alberta collected the 10 subscriptions and failed to pay Plaintiff the $40.00 per subscription owed to Plaintiff. 11 Complaint ¶ 26. SHW further alleges Defendant Alberta wrongfully entered into an 12 Agreement with Defendant iWorks and wrongfully appointed iWorks to handle the 13 merchant processing and customer service for the up-sell of Plaintiff’s programs. 14 Complaint ¶ 27. 15 Claims for interference with prospective business advantage or contractual 16 obligations are subject to the two year limitations period of section 339 of the California 17 Code of Civil Procedure. See Knoell v. Petrovich, 76 Cal.App.4th 164 (1999). Although 18 Plaintiff argues the three year limitations period for actions seeking relief based upon fraud 19 should apply, there is no allegation of fraud against the iWorks Parties in the complaint. 20 Additionally, Plaintiff provides no support for its contention that the allegations of fraud 21 within Alberta’s cross-claim subjects its claims to the three year limitations period. As 22 such, Plaintiff was required to file its action against the iWorks Parties within two years 23 from the date the action accrued. 24 Generally, an action accrues when the wrongful act occurs and liability arises. See 25 Norgart v. Upjohn Co., 21 Cal.4th 383, 397 (1999). In other words, an action accrues 26 when the action “is complete with all its elements.” Id. The elements of the tort of 27 intentional interference with prospective business advantage are “(1) an economic 28 relationship between the plaintiff and some third party, with the probability of future 6 10cv172 1 economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) 2 intentional acts on the part of the defendant designed to disrupt the relationship; (4) 3 actual disruption of the relationship; and (5) economic harm to the plaintiff proximately 4 caused by the acts of the defendant.” Korea Supply Company v. Lockheed Martine Corp., 5 29 Cal.4th 1134, 1153 (2003). 6 Plaintiff was aware of the agreement between iWorks and Alberta that would 7 disrupt the SHW-Alberta relationship as early as December 2007, as demonstrated by the 8 email correspondence between SHW’s president and Alberta’s president.3 There, however, 9 appears to be a dispute as to when the economic harm occurred, and therefore, when the 10 disruption occurred. The evidence submitted by the parties does not clearly indicate when 11 Alberta stopped paying Plaintiff the money owed under the SHW-Alberta Marketing 12 Agreement. Accordingly, there is a genuine issue of material fact as to when the action 13 accrued. 14 2. Merits of the Claim 15 Movants argue SHW’s interference claims fail because they were unaware of the 16 SHW-Alberta Marketing Agreement or any other economic relationship between SHW 17 and Alberta at the time iWorks entered into its business relationship with Alberta. 18 Johnson declares he was not aware of any contractual or economic relationship between 19 SHW and Alberta at the time Alberta and iWorks entered into the agreement for the up- 20 sell marketing. Johnson Decl. ¶ 3. 21 Plaintiff maintains iWorks was aware of the SHW-Alberta relationship as evidenced 22 by the email from Lou Ryan to Bryce Payne, project manager for iWorks, of the executed 23 up-sell agreement between SHW and iWorks dated October 16, 2007, with the subject 24 “Fully Executed Wu-Yi Signed Upsell Agreement.” Pla’s Exh. B. Additionally, Ryan 25 attests that he told Payne and other iWorks employees about the economic relationship 26 Jesse Willms, Alberta’s president, sent an email dated December 12, 2007, to Lou Ryan, SHW’s president explaining Jeremy Johnson of iWorks would handle the up-sell for Alberta. Movant’s Exh. B. Ryan acknowledged this in an email sent to Willms on May 27, 2008, and further stated he realized “a few days later” that the iWorks Parties would be handling the merchant processing and customer service for the up-sell. Id. 3 27 28 7 10cv172 1 between SHW and Alberta. Ryan Decl. ¶ 3. As such, there is a genuine issue of material 2 fact as to whether the iWorks Parties were aware of the economic relationship between 3 Alberta and SHW at the time they entered into the agreement with Alberta. 4 Movants are not entitled to judgment as to the intentional interference with 5 prospective business advantage and contract claim. Accordingly, the motion is denied as 6 to the interference claims. 7 B. Constructive Trust Claim 8 Movants argue they are entitled to judgment as to SHW’s constructive trust claim 9 because prosecution of the allegedly wrongful act, interference with contract, is barred by 10 the statute of limitations. 11 As discussed above, there is a genuine issue as to whether the interference claim is 12 time-barred. Accordingly, Movants are not entitled to judgment as to the constructive 13 trust claims on the basis the interference claims are untimely. 14 C. Unjust Enrichment Claim 15 Movants argue they are entitled to judgment on SHW’s unjust enrichment claim 16 because it is not an independent cause of action and cannot survive if the interference 17 claims are time-barred. They further argue the claim fails, because SHW does not allege 18 any contract or quasi-contract theory against the iWorks Parties as required. Additionally, 19 the iWorks Parties argue the elements of the claim are not met because there is no 20 evidence that the iWorks Parties received any benefit from SHW. 21 Plaintiff argues the two agreements between Alberta and iWorks are not valid 22 because they were procured by misrepresentations. As such, permitting iWorks to keep 23 the funds as a result of the contract would unjustly confer a benefit on iWorks. iWorks 24 received revenue from the sale of the Living Lean Program and the a constructive trust is 25 necessary given the unjust enrichment. 26 As an initial matter, the motion for summary judgment on the basis the interference 27 claims are untimely is denied. As discussed above, the interference claims are not time- 28 barred as a matter of law. 8 10cv172 1 However, Movants’ argument that it is not an independent cause of action has 2 merit. There is a split of authority as to whether unjust enrichment is cognizable as an 3 cause of action under California law. See Melchior v. New Line Productions, Inc., 106 4 Cal.App.4th 779, 793 (2003) (“[T]here is no cause of action in California for unjust 5 enrichment.”); but see Lectodryer v. Seoulbank, 77 Cal.App.4th 723 (2000) (permitting 6 an unjust enrichment claim to stand). As noted by Movants, courts in this district have 7 generally determined that unjust enrichment is not an independent cause of action. See 8 Albergo v. Immunosyn Corp., 2010 WL 3895364 (S.D.Cal. 2009); Lopez v. U.S.Bank 9 Nat. Ass’n, 2010 WL 3463622 (S.D.Cal. 2010); Walker v. Equity 1 Lenders Group, 2009 10 WL 1364430 (S.D.Cal. 2009); Lorenzo v. Qualcomm, Inc., 603 F.Supp.2d 1291, 1307 11 (S.D.Cal. (2009). These courts found unjust enrichment to be the result of a failure to 12 make restitution. See Walker v. Equity 1 Lenders Group, 2009 WL 1364430 (S.D.Cal. 13 2009); Lorenzo v. Qualcomm, Inc., 603 F.Supp.2d 1291, 1307 (S.D.Cal. (2009). It is 14 typically sought in connection with a “quasi-contract” claim to avoid unjustly conferring 15 a benefit upon a defendant where there is no valid contract. See McBride v. Boughton, 16 123 Cal.App.4th 379, 388 (2004). The Court finds the reasoning of decisions in this 17 district holding unjust enrichment is not a separate cause of action in California 18 persuasive. Accordingly, the iWorks Parties are entitled to judgment on the separate and 19 independent claim for unjust enrichment. CONCLUSION AND ORDER 20 21 Based on the foregoing and in conjunction with the order issued on the record, IT 22 IS HEREBY ORDERED the iWorks Parties’ motion for summary judgment is 23 GRANTED IN PART AND DENIED IN PART. The motion is DENIED as to the 24 claims for intentional interference with prospective business advantage and contract, and 25 // 26 // 27 // 28 // 9 10cv172 1 the constructive trust claims. The motion is GRANTED as to the independent unjust 2 enrichment claim. 3 DATED: December 22, 2010 4 5 6 JOHN A. HOUSTON United States District Judge 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10 10cv172
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