“[N]o public 15 policy opposes private, voluntary transactions in which 16 one party, for a consideration, agrees to shoulder a 17 risk which the law would otherwise have placed upon the 18 other party . . . .”
How later courts described this case
- “[N]o public 15 policy opposes private, voluntary transactions in which 16 one party, for a consideration, agrees to shoulder a 17 risk which the law would otherwise have placed upon the 18 other party . . . .”
Written by the judges who cited it.
The opinion
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8 UNITED STATES DISTRICT COURT
9 CENTRAL DISTRICT OF CALIFORNIA
10
11
CV 20-7948-RSWL-E x
12 ALEX KHADAVI, an
individual,
ORDER re: Motion to
13
Dismiss Complaint [9]
Plaintiff,
14
v.
15
16 STALGI, INC., a Florida
corporation; ALDO
17 BERNARDI, an individual;
and DOES 1 through 10,
18
inclusive,
19
Defendants.
20
21
22 Presently before the Court is Defendants Aldo
23 Bernardi and Stalgi, Inc.’s (“Defendants”) Motion to
24 Dismiss Complaint (the “Motion”) [9].
25 Having reviewed all papers submitted pertaining to
26 the Motion, the Court NOW FINDS AND RULES AS FOLLOWS:
27 the Court GRANTS the Motion.
28 ///
1 I. BACKGROUND
2 A. Factual Background
3 1. Current Action
4 Plaintiff Alex Khadavi (“Plaintiff”) alleges the
5 following in his Complaint:
6 Plaintiff is a California citizen and the owner of
7 real property located at 777 Sarbonne Road, Los Angeles,
8 California 90077 (the “Property”). Compl. ¶ 1, ECF No.
9 1. Defendant Stalgi, Inc. (“Defendant Stalgi”) is a
10 Florida corporation, and its president, Defendant Aldo
11 Bernardi (“Defendant Bernardi”), is a Florida resident.
12 Id. ¶ 2. Defendant Stalgi does not maintain a qualified
13 status with the California Secretary of State or the
14 California Franchise Tax Board. Id. ¶ 10(B). Defendant
15 Stalgi is not licensed with the California Contractors
16 State License Board. Id.
17 On or about January 11, 2018, and August 25, 2018,
18 Plaintiff entered into two written contracts with
19 Defendants for the supply, fabrication, and installation
20 of Italian marble and natural stone for the total
21 amounts of $1,813,530.82 and $236,909.76, respectively.
22 Id. ¶ 10(C)-(D). Defendants’ negligent, defective work
23 caused delays, created additional work, and resulted in
24 reordering of replacement materials. Id. ¶ 10(F)-(G).
25 In January 2020, Plaintiff had to refinance the
26 Property because notes were coming due, and Plaintiff
27 was required to pay for an extension. Id. ¶ 10(F).
28 Defendants knew Plaintiff was refinancing the Property
1 and approached Plaintiff to execute deeds of trust,
2 dated November 1, 2018, and February 15, 2019, for
3 $1,735,562.00 and $768,931.00, respectively. Id. ¶
4 10(H)-(I). Defendants convinced Plaintiff that these
5 deeds of trust would be as effective as mechanic’s liens
6 while not interfering with the sale of the Property once
7 the Property is completed. Id. ¶ 10(I). But Defendants
8 knew that they had no ability to effectuate a mechanic’s
9 lien on the Property because they are unlicensed and did
10 not provide Plaintiff with any of the notices required
11 by law. Id. ¶ 10(J). Defendants failed to indicate on
12 any of the contracts, bids, or solicitations that
13 Defendants were not licensed contractors in the state of
14 California. Id. ¶ 10(L). In January and February 2020,
15 Defendants knowingly filed four false mechanic’s liens
16 on the Property so that Plaintiff would be forced to pay
17 any outstanding invoices and liens. Id. ¶ 10(P)-(Q).
18 On or about March 11, 2020, Defendants extorted
19 Plaintiff into entering into a settlement agreement and
20 issuing a promissory note and deed of trust on the
21 Property for the outstanding amounts Defendants claimed
22 Plaintiff owed for the supply, fabrication, and
23 installation of marble and natural stone. Id. ¶ 10(S).
24 In exchange, Defendants agreed to rescind the mechanic’s
25 liens. Id. Defendants purposefully delayed the project
26 and failed to cure any defects, and Plaintiff was forced
27 to sign a settlement agreement in order to refinance the
28 Property. Id.
1 Plaintiff seeks relief based on rescission of the
2 contracts. Id. ¶ 10(Z). Defendants knowingly made the
3 following fraudulent representations to Plaintiff to
4 induce him into entering the contracts: (1) Defendants
5 were licensed contractors; (2) they were qualified to do
6 business in California; (3) the contract complied with
7 statutory requirements; and (4) they would provide
8 proper materials, labor, and services. Id. The
9 settlement agreement is unenforceable because it
10 compromises disputes over the compensation for services
11 performed by an unlicensed construction professional,
12 was not fairly made, and is in contravention of
13 California law or public policy. Id. ¶ 11.
14 In his prayer for relief, Plaintiff seeks special
15 and compensatory damages; an order declaring the
16 settlement agreement null and void, rescinded, and
17 unenforceable, and any and all instruments relating to
18 the Property that Defendants hold to be rescinded and
19 declared null and void and unenforceable; costs and
20 attorneys’ fees; any other appropriate relief; and an
21 order preliminarily and permanently enjoining Defendants
22 from advertising in California and representing
23 themselves as licensed contractors in the state of
24 California. Id. at 18:13-19:3.
25 2. Superior Court Action
26 On January 13, 2020, Plaintiff filed a complaint
27 against Defendant Bernardi, Defendant Stalgi, and Agata
28 Limited, Inc. in the Superior Court of California,
1 County of Los Angeles, in Khadavi v. Bernardi, et al.,
2 No. 20STCV01575 (the “Superior Court Action”). See Req.
3 for Judicial Notice in Supp. of Mot. (“RJN”) Ex. A, ECF
4 No. 10. The Superior Court Action was based on a
5 dispute concerning three contracts for the provision of
6 labor, services, and materials in connection with the
7 installation of marble and stone at the Property. Id.
8 ¶¶ 1, 7-9.
9 Plaintiff asserted fourteen claims for relief in
10 the Superior Court Action, which he stated as:
11 rescission of the contracts; cancellation of deeds of
12 trust; breach of each building contract based on delay
13 in performance; breach of each building contract based
14 on negligent work and defective materials; and temporary
15 restraining orders and preliminary and permanent
16 injunctions sought under California Business and
17 Professions Code § 7028.4. Id. ¶¶ 11-97.
18 On March 11, 2020, the parties executed a
19 settlement agreement. See Compl. Ex. 6. On April 21,
20 2020, Plaintiff filed a request for dismissal of the
21 Superior Court Action with prejudice, which was entered
22 on April 24, 2020. See RJN Ex. K.
23 B. Procedural Background
24 On August 31, 2020, Plaintiff filed his Complaint
25 [1] in this Action, alleging: (1) breach of contracts;
26 (2) violations of Cal. Bus. & Prof. Code § 17500; (3)
27 aiding and abetting violations of Cal. Bus. & Prof. Code
28 § 17500; (4) negligence; and (5) unjust enrichment and
1 imposition of constructive trust. See generally Compl.
2 Defendants filed the instant Motion [9] on October
3 2, 2020. On October 20, 2020, Defendants filed a Reply
4 [12] in which they argue that the Motion should be
5 granted because Plaintiff failed to timely oppose. See
6 Reply in Supp. of Mot. to Dismiss Compl. 2:12-14, ECF
7 No. 13. Plaintiff subsequently filed his untimely
8 Opposition [13] on October 25, 2020.
9 II. DISCUSSION
10 A. Legal Standard
11 Federal Rule of Civil Procedure (“Rule”) 12(b)(6)
12 allows a party to move for dismissal on one or more
13 claims if a pleading fails to state a claim upon which
14 relief can be granted. Fed. R. Civ. P. 12(b)(6). Under
15 Rule 8(a), a complaint must contain “a short and plain
16 statement of the claim showing that the pleader is
17 entitled to relief” to give the defendant “fair notice
18 of what the . . . claim is and the grounds upon which it
19 rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
20 (2007); see Fed. R. Civ. P. 8(a). Dismissal is proper
21 “where the complaint lacks a cognizable legal theory or
22 sufficient facts to support a cognizable legal theory.”
23 Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097,
24 1104 (9th Cir. 2008) (citing Balistreri v. Pacifica
25 Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988)).
26 “To survive a motion to dismiss, a complaint must
27 contain sufficient factual matter, accepted as true, to
28 ‘state a claim to relief that is plausible on its
1 face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
2 (quoting Twombly, 550 U.S. at 570). While a complaint
3 need not contain detailed factual allegations, it must
4 provide more than “labels and conclusions” or “a
5 formulaic recitation of the elements of a cause of
6 action.” Twombly, 550 U.S. at 555. The plaintiff must
7 allege enough facts “to raise a right to relief above
8 the speculative level.” Id. In evaluating a Rule
9 12(b)(6) motion, a court must take all well-pleaded
10 allegations of material fact as true and construe them
11 in the light most favorable to the nonmovant. Great
12 Minds v. Off. Depot, Inc., 945 F.3d 1106, 1109 (9th Cir.
13 2019). A court may generally consider only “the
14 complaint itself and its attached exhibits, documents
15 incorporated by reference, and matters properly subject
16 to judicial notice.” In re NVIDIA Corp. Sec. Litig.,
17 768 F.3d 1046, 1051 (9th Cir. 2014).
18 B. Discussion
19 1. Request for Judicial Notice
20 Defendants request that the Court take judicial
21 notice of eleven filed documents from Plaintiff’s
22 previous state case in the Superior Court of California,
23 County of Los Angeles, Alex Khadavi v. Aldo Bernardi, et
24 al., No. 20STCV01575. See RJN 2:2-4:9, Exs. A-K.
25 Because the Court may take judicial notice of court
26 filings and other matters of public record, judicial
27 notice is proper. See Fed. R. Evid. 201; Harris v.
28 County of Orange, 682 F.3d 1126, 1132 (9th Cir. 2012)
1 (stating that courts “may take judicial notice of
2 undisputed matters of public record, including documents
3 on file in federal or state courts”). Accordingly, the
4 Court GRANTS Defendants’ requests for judicial notice.
5 2. Motion to Dismiss
6 Local Rule 7-9 requires an opposing party to file
7 an opposition or statement of non-opposition to a motion
8 no later than twenty-one days before the designated
9 hearing date. L.R. 7-9. Here, Plaintiff’s Opposition
10 was due by October 13, 2020. But Plaintiff did not file
11 his Opposition until October 25, 2020—just nine days
12 before the scheduled hearing on November 3, 2020—without
13 seeking leave of court or offering any explanation for
14 his tardy response. “The failure to file any required
15 document, or the failure to file it within the deadline,
16 may be deemed consent to the granting or denial of the
17 motion . . . .” L.R. 7-12; see Irvin v. Madrid, 749 F.
18 App’x 546, 547 (9th Cir. 2019) (affirming the district
19 court’s dismissal pursuant to Local Rule 7-12).
20 Accordingly, the Court deems Plaintiff’s failure to
21 timely oppose as consent to grant Defendants’ Motion.
22 While the Court may grant Defendants’ Motion based
23 on Plaintiff’s late-filed Opposition, the Court proceeds
24 to analyze the Motion on the merits. Defendants argue
25 that the Complaint should be dismissed because: (1) all
26 of Plaintiff’s claims are barred by res judicata; (2)
27 all of Plaintiff’s claims are barred by the settlement
28 agreement and release entered into by the parties; and
1 (3) Plaintiff fails to state a claim for rescission of
2 the settlement agreement. Mot. to Dismiss Compl.
3 (“Mot.”) 3:3-14, ECF No. 9.
4 Pursuant to the Full Faith and Credit Act, “a
5 federal court must give to a state-court judgment the
6 same preclusive effect as would be given that judgment
7 under the law of the State in which the judgment was
8 rendered.” Migra v. Warren City Sch. Dist. Bd. of
9 Educ., 465 U.S. 75, 80-81 (1984); see 28 U.S.C. § 1738.
10 The Court thus applies California law to determine the
11 effect of the judgment issued in Plaintiff’s Superior
12 Court Action.
13 “Res judicata, or claim preclusion, prevents
14 relitigation of the same cause of action in a second
15 suit between the same parties or parties in privity with
16 them.” Mycogen Corp. v. Monsanto Co., 28 Cal. 4th 888,
17 896, 51 P.3d 297, 301 (2002). Under California law, res
18 judicata applies “if a second suit involves: (1) the
19 same cause of action (2) between the same parties (3)
20 after a final judgment on the merits in the first suit.”
21 DKN Holdings LLC v. Faerber, 61 Cal. 4th 813, 824
22 (2015). If those requirements are met, res judicata
23 bars not only issues that were actually litigated in the
24 first suit but also those issues that could have been
25 litigated in that suit. SLPR, L.L.C. v. San Diego
26 Unified Port Dist., 49 Cal. App. 5th 284, 298 (2020).
27 There is no question that the present Action
28 involves the same parties, as Plaintiff and Defendants
1 were all parties in the Superior Court Action. See RJN
2 Ex. A. Nor is there any doubt that a dismissal with
3 prejudice, which concluded the Superior Court Action,
4 see RJN Ex. K, “is the equivalent of a final judgment on
5 the merits” for purposes of applying res judicata.
6 Boeken v. Philip Morris USA, Inc., 48 Cal. 4th 788, 793
7 (2010); see also Kim v. Reins Int’l Cal., Inc., 9 Cal.
8 5th 73, 91 (2020) (“A dismissal with prejudice is
9 considered a judgment on the merits preventing
10 subsequent litigation between the parties on the
11 dismissed claim.”). Accordingly, res judicata arises if
12 the present Action involves the same cause of action.
13 To determine what constitutes the same cause of
14 action, California courts employ the “primary rights”
15 theory. Boeken, 48 Cal. 4th at 797. “[I]f two actions
16 involve the same injury to the plaintiff and the same
17 wrong by the defendant then the same primary right is at
18 stake even if in the second suit the plaintiff pleads
19 different theories of recovery, seeks different forms of
20 relief and/or adds new facts supporting recovery.”
21 Gonzales v. Cal. Dep’t of Corr., 739 F.3d 1226, 1233
22 (9th Cir. 2014) (quoting Eichman v. Fotomat Corp., 147
23 Cal. App. 3d 1170, 1174 (1983)). Under this theory,
24 “the determinative factor is the harm suffered. When
25 two actions involving the same parties seek compensation
26 for the same harm, they generally involve the same
27 primary right.” Id. (quoting Boeken, 48 Cal. 4th at
28 798).
1 Defendants argue, and the Court agrees, that the
2 claims alleged here involve the same primary right at
3 issue in the Superior Court Action. Mot. 10:4-17. The
4 Superior Court Action, like this Action, concerned
5 claims arising out of contracts between the parties for
6 the supply, fabrication, and installation of marble and
7 natural stone at the Property. See Compl. ¶ 10(C)-(E);
8 RJN Ex. A ¶¶ 7-10. The substance of Plaintiff’s
9 allegations in both actions is essentially the same:
10 Defendants fraudulently induced Plaintiff to enter into
11 contracts and to later execute deeds of trust, and
12 Defendants performed negligent or otherwise inadequate
13 work, which caused Plaintiff to suffer injury and
14 damages. See Compl. ¶¶ 6, 10(E), 13, 17-19, 32-34; RJN
15 Ex. A ¶¶ 10, 13, 55-57, 73. Plaintiff alleges in both
16 complaints that Defendants made the same false
17 representations: Defendants were licensed contractors;
18 Defendants were qualified to do business in California;
19 the contracts complied with all statutory requirements;
20 and Defendants would provide proper materials, labor,
21 and services. Compl. ¶ 10(Z); RJN Ex. A ¶¶ 13, 43. In
22 both actions, the harm alleged was economic injury
23 caused by the same wrongful conduct by Defendants, which
24 allegedly amounted to false representations, fraudulent
25 inducement, and breach of contracts in connection with
26 the Property.
27 Although the Complaint here may “add new theories
28 of recovery and greater detail[,]” the present Action
1 raises the same causes of action as did the Superior
2 Court Action. Eichman, 147 Cal. App. 3d at 1175 (1983);
3 see also Hi-Desert Med. Ctr. v. Douglas, 239 Cal. App.
4 4th 717, 734 (2015) (“[T]he hospitals sought a different
5 remedy in [the first suit] as opposed to what they later
6 sought, but that was their litigation choice. The same
7 primary right is at stake in both cases.”). To the
8 extent Plaintiff’s claims are premised on these
9 allegations, Plaintiffs’ claims are precluded by res
10 judicata.
11 The Court notes, however, that res judicata “may
12 not apply when there are changed conditions and new
13 facts which were not in existence at the time the action
14 was filed upon which the prior judgment is based.”
15 Plan. & Conservation League v. Castaic Lake Water
16 Agency, 180 Cal. App. 4th 210, 227 (2009) (internal
17 quotation marks and citation omitted). Res judicata
18 does not bar claims “that arise after the filing of the
19 complaint in the first action, but before judgment is
20 entered.” Id.
21 Although the bulk of the factual allegations in the
22 Complaint predate the filing of the Superior Court
23 Action on January 13, 2020, some are based on events
24 that occurred afterwards. Specifically, Plaintiff
25 alleges that Defendants filed four false mechanic’s
26 liens on the Property on January 31 and February 6,
27 2020, and in February to July 2020, Plaintiff incurred
28 costs for removing and replacing materials as a result
1 of Defendants’ negligent installation. See Compl. ¶
2 10(P), (X).
3 Claims arising from these facts are nonetheless
4 barred by the terms of the settlement agreement.
5 Defendants assert, and Plaintiff does not deny, that the
6 settlement agreement resolved any and all claims between
7 the parties, including those related to the Property,
8 the contracts, the mechanic’s liens, and the Superior
9 Court Action. See Mot. 5:9-12; Compl. ¶ 10(S), Ex. 6,
10 Recitals. The parties mutually released all claims,
11 known or unknown, accruing or arising at any time prior
12 to the effective date of the settlement agreement. See
13 Compl. Ex. 6, ¶ 9. The parties also waived the
14 provisions of California Civil Code § 1542 and other
15 such laws. Id. ¶ 10. Further, the parties acknowledged
16 that they were advised of the effect of this waiver, and
17 each of the parties “has been or had the opportunity to
18 be represented by legal counsel with respect to the
19 negotiation of [the settlement agreement].” Id. ¶¶ 10,
20 22. In light of the broad language in the settlement
21 agreement, any claims Plaintiff may have had against
22 Defendants based on the facts alleged in the Complaint
23 are barred by the settlement agreement, if not by res
24 judicata.
25 In his Opposition, Plaintiff does not directly
26 address Defendants’ res judicata argument or dispute the
27 contents of the settlement agreement. Instead,
28 Plaintiff appears to suggest that his claims are not
1 barred by res judicata or the settlement agreement
2 because he alleges a basis for rescission of the
3 settlement agreement—namely, economic duress.1 See
4 Pl.’s Opp’n to Defs.’ Mot. to Dismiss (“Opp’n”) 5:7-10,
5 6:25-9:11, ECF No. 13.
6 Under California law, economic duress can serve as
7 a basis for rescission of a settlement agreement. See,
8 e.g., In re Outlaw Lab’ys, LP Litig., 352 F. Supp. 3d
9 992, 1007 (S.D. Cal. 2018); Lanigan v. City of Los
10 Angeles, 199 Cal. App. 4th 1020, 1034 (2011). The
11 doctrine of economic duress “may come into play upon the
12 doing of a wrongful act which is sufficiently coercive
13 to cause a reasonably prudent person faced with no
14 reasonable alternative to succumb to the perpetrator’s
15 pressure.” Rich & Whillock, Inc. v. Ashton Dev., Inc.,
16 157 Cal. App. 3d 1154, 1158 (1984). The party seeking
17 relief “must have had no ‘reasonable alternative’ to the
18 action it now seeks to avoid (generally, agreeing to
19 contract).” Lanigan, 199 Cal. App. 4th at 1034
20
21 1 Indeed, “[i]f the settlement agreement is subject to
rescission,” then Defendants’ arguments based on res judicata and
22 express release “should not stand in the way of a revival of
[Plaintiff’s] claims” because they “both assume the validity of
23
the settlement.” Kelly v. Provident Life & Acc. Ins., 245 F.
24 App’x 637, 640 (9th Cir. 2007); see Leeper v. Beltrami, 53 Cal.
2d 195, 205 (1959) (citations omitted) (“[A] party may attack any
25 judgment by showing that it was secured by the extrinsic fraud of
the other party. . . . Duress is a species of fraud. [Where the
26 plaintiff pleads duress against the defendants,] any consent
judgment or judgment of dismissal that may have been entered
27
pursuant to a settlement agreement would not act as a bar to the
28 present action.”).
1 (internal quotation marks and citation omitted). “No
2 reasonable alternative may exist ‘when the only other
3 alternative is bankruptcy or financial ruin.’” Hicks v.
4 PGA Tour, Inc., 897 F.3d 1109, 1119 (9th Cir. 2018)
5 (quoting Rich & Whillock, Inc., 157 Cal. App. 3d at
6 1159). “If a reasonable alternative was available, and
7 there hence was no compelling necessity to submit to the
8 coercive demands, economic duress cannot be
9 established.” Id. (quoting CrossTalk Prods., Inc. v.
10 Jacobson, 65 Cal. App. 4th 631, 644 (1998)).
11 Here, Plaintiff fails to allege “a wrongful act
12 which [was] sufficiently coercive” such that he faced
13 “no reasonable alternative [but] to succumb” to
14 Defendants’ pressure. Rich & Whillock, Inc., 157 Cal.
15 App. 3d at 1158. Although Plaintiff offers additional
16 allegations to support his economic duress argument in
17 his Opposition, see Opp’n 8:17-28, the Court does not
18 consider allegations that are not pleaded in the
19 Complaint. Moreover, Plaintiff’s Complaint makes no
20 mention of economic duress whatsoever. Accordingly,
21 Plaintiff fails to plead sufficient facts showing the
22 settlement agreement was procured under economic duress.
23 Plaintiff next argues, albeit confusingly, that the
24 Court should recognize a tort action for damages to
25 remedy a constitutional violation because Plaintiff is
26 an injured member of a protected class of persons,
27 citing California Penal Code § 519, Monex Deposit Co. v.
28 Gilliam, 666 F. Supp. 2d 1135 (C.D. Cal. 2009), and the
1 Restatement (Second) of Torts § 874A. See Opp’n 9:12-
2 10:22. This argument is similarly rejected.
3 Plaintiff’s argument does not appear to be directed to
4 any of the claims actually pleaded in the Complaint.
5 Plaintiff contends that he is a victim of extortion in
6 his Opposition, but he does not explicitly assert a
7 claim for extortion in the Complaint. Nonetheless, the
8 Court construes the following allegations regarding the
9 settlement agreement as one for civil extortion:
10 On or about March 11, 2020, Defendants
extorted Plaintiff into entering into a
11 settlement agreement and issuing a promissory
note and deed of trust on the Property for the
12 outstanding amounts Defendant claimed
Plaintiff owed for the supply, fabrication and
13 installation of marble and natural stone at
the Property. In exchange for the issuance of
14 a settlement agreement, deed of trust and
promissory note, Defendants agreed to rescind
15 the mechanics liens. Plaintiff was forced to
issue a deed of trust and promissory note and
16 sign a settlement agreement so that a
refinance of the Property could finalize.
17 Purposefully delaying the project and failing
to cure any defects Defendants knowingly
18 extorted Plaintiff to comply with Defendants’
demands so that Plaintiff could refinance the
19 Property.
20 Compl. ¶ 10(S).
21 “Extortion is the obtaining of property or other
22 consideration from another, with his or her consent, . .
23 . induced by a wrongful use of force or fear . . . .”
24 Cal. Penal Code § 518. California recognizes “a civil
25 cause of action for the recovery of money obtained by
26 the wrongful threat of criminal or civil prosecution,
27 whether the claim is denominated by ‘extortion, menace,
28 or duress.’” Monex Deposit Co. v. Gilliam, 666 F. Supp.
1 2d 1135, 1136 (C.D. Cal. 2009) (citing Fuhrman v. Cal.
2 Satellite Sys., Inc., 179 Cal. App. 3d 408, 426 (1986)).
3 The definition of a civil extortion claim is derived
4 from the crime of extortion. Id. at 1137; see also
5 Lutfi v. Al Naimi, No. CV 17-08208 SJO (JPRx), 2018 WL
6 6265082, at *3 (C.D. Cal. Jan. 17, 2018). “Fear, such
7 as will constitute extortion, may be induced by a threat
8 . . . [t]o do an unlawful injury to the person or
9 property of the individual threatened or of a third
10 person.” Cal. Penal Code § 519.
11 Here, the Complaint fails to adequately allege a
12 threat. Any additional allegations proffered in
13 Plaintiff’s Opposition are not entitled to the
14 presumption of truth. Plaintiff’s conclusory
15 allegations that he was “extorted” into entering the
16 settlement agreement are insufficient and fail “to raise
17 a right to relief above the speculative level.”
18 Twombly, 550 U.S. at 555. The Complaint, as currently
19 pleaded, does not provide enough factual support to
20 allow the Court “to draw the reasonable inference that
21 [Defendants are] liable for the misconduct alleged.”
22 Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at
23 556). Plaintiff therefore fails to state a claim for
24 civil extortion. Further, even if the Court were to
25 consider Plaintiff’s allegations in his Opposition—that
26 Defendants’ filing of the mechanic’s liens was “in fact
27 done with the intent to extort Plaintiff into
28 acquiescing to their demands,” see Opp’n 9:24-28, those
1 claims are barred by the broad language of the
2 settlement agreement, which contemplated and resolved
3 any disputes related to the mechanic’s liens.
4 The Court next considers Plaintiff’s contentions as
5 to the unenforceability of the settlement agreement. In
6 the Complaint, Plaintiff alleges that the settlement
7 agreement is unenforceable “because it compromises
8 disputes over compensation for services performed by an
9 unlicensed construction professional,” it is “not fairly
10 made,” and “the legislator has a clear policy of
11 invalidating contracts made by unlicensed construction
12 professionals.” Compl. ¶ 11.
13 Under California law, an unlicensed contractor may
14 not “bring or maintain any action, or recover in law or
15 equity in any action, in any court of this state for the
16 collection of compensation for the performance of any
17 act or contract where a license is required.” Cal. Bus.
18 & Prof. Code § 7031(a). But the statute “does not
19 automatically void all contracts entered by unlicensed
20 contractors.” Nash v. Taylor, 327 F. App’x 718, 720
21 (9th Cir. 2009) (quoting MW Erectors, Inc. v.
22 Niederhauser Ornamental & Metal Works Co., 36 Cal. 4th
23 412, 435 (2005)).2
24
2 Further, section 7031 prohibits “judicial aid” to an
25
unlicensed contractor seeking compensation, but “nothing in the
26 statute precludes the satisfied beneficiary of such work from
paying for it voluntarily.” MW Erectors, Inc., 36 Cal. 4th at
27 430 n.10 (noting that section 7031 withholds “judicial aid from
those who seek compensation for unlicensed contract work”
28 (quoting Hydrotech Sys., Ltd. v. Oasis Waterpark, 52 Cal. 3d 988,
1 Contrary to Plaintiff’s assertion, the settlement
2 agreement is not rendered unenforceable simply by virtue
3 of Defendants’ status as unlicensed contractors.
4 Defendants did not “bring or maintain” either this
5 Action or the Superior Court Action. Plaintiff
6 initiated both actions. And, under the present facts,
7 the Court cannot conclude that the settlement agreement
8 was not voluntarily made. Plaintiff’s allegation that
9 the settlement agreement was “not fairly made,” without
10 more, merely indicates buyer’s remorse, which does not
11 constitute a basis for rescinding a settlement
12 agreement. Therefore, the settlement agreement remains
13 a bar to Plaintiff’s claims. See Tarpy v. County of San
14 Diego, 110 Cal. App. 4th 267, 279 (2003) (“[N]o public
15 policy opposes private, voluntary transactions in which
16 one party, for a consideration, agrees to shoulder a
17 risk which the law would otherwise have placed upon the
18 other party . . . .”).
19 In sum, because Plaintiff cannot avoid the
20 preclusive effect of res judicata and the settlement
21 agreement, all of his claims are barred. Accordingly,
22 the Court GRANTS Defendants’ Motion.
23 3. Leave to Amend
24 Leave to amend should be granted with “extreme
25 liberality.” Moss v. U.S. Secret Serv., 572 F.3d 962,
26 972 (9th Cir. 2009); see Fed. R. Civ. P. 15(a)(2) (“The
27
28 995 (1991))).
1 court should freely give leave when justice so
2 requires.”). Where a court grants a motion to dismiss,
3 it should generally provide leave to amend “unless it
4 determines that the pleading could not possibly be cured
5 by the allegation of other facts.” Lopez v. Smith, 203
6 F.3d 1122, 1127 (9th Cir. 2000) (en banc).
7 Plaintiff requests leave to amend should the Court
8 grant Defendants’ Motion. Opp’n 10:25-26. It appears
9 that amendment would not necessarily be futile, as
10 Defendants’ prevailing arguments are premised on the
11 validity of the settlement agreement. Therefore, the
12 Court GRANTS leave to amend, provided that Plaintiff can
13 allege, in good faith, additional facts to support a
14 basis for rescission.
15 III. CONCLUSION
16 Based on the foregoing, the Court GRANTS the Motion
17 without prejudice. Plaintiff may file a first amended
18 complaint, if desired, by no later than March 31, 2021.
19 Failure to timely amend the Complaint will result in the
20 dismissal of all claims with prejudice.
21
22 IT IS SO ORDERED.
23
24 DATED: March 10, 2021 _/s_/_ R_o_n_al_d_ S_.W__. _Le_w_____________
HONORABLE RONALD S.W. LEW
25
Senior U.S. District Judge
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