“Directors and officers are not 1 personally liable on contracts signed by them for and on behalf of the corporation unless 2 they purport to bind themselves individually.”
How later courts described this case
- “Directors and officers are not 1 personally liable on contracts signed by them for and on behalf of the corporation unless 2 they purport to bind themselves individually.”
Written by the judges who cited it.
The opinion
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8 UNITED STATES DISTRICT COURT
9 SOUTHERN DISTRICT OF CALIFORNIA
10
11 TODD E. VERBICK, an individual, Case No.: 20-CV-611 TWR (DEB)
12 Plaintiff,
ORDER (1) GRANTING MOTION
13 v. TO DISMISS FIRST AMENDED
COMPLAINT, AND (2) DISMISSING
14 THE MOVEMENT TECHNOLOGY
WITHOUT PREJUDICE
COMPANY, INC., a Washington
15 PLAINTIFF’S FIRST AMENDED
corporation; PREDICTUV
COMPLAINT
16 TECHNOLOGIES, INC., a Delaware
corporation; PREDICTUV LLC, a
17 (ECF No. 52)
Delaware limited liability company;
18 KELVIN HILL, an individual; ZSOLT
CSENDE, an individual; VIVIEN
19
SZAKACS, an individual;
20 CHRISTOPHER KEIL, an individual;
NIALL LAWLOR, an individual;
21
GERRY LAWLOR, an individual; ROB
22 GRINNELL, an individual; and DOES 1
to 100,
23
Defendants.
24
25
26 Specially Appearing Defendants The Movement Technology Company, Inc.
27 (“TMC”), Kelvin Hill, Zsolt Csende, and Vivien Szakács have moved to dismiss Plaintiff
28 Todd E. Verbick’s First Amended Complaint or, alternatively, to transfer venue (“MTD,”
1 ECF No. 52). Plaintiff opposes (“Opp’n,” ECF No. 58) and Defendants filed a Reply in
2 Support of the Motion to Dismiss (“Reply,” ECF No. 59). The Court finds the issues
3 suitable for disposition without oral argument. See Civ. L.R. 7.1(d)(1). For the reasons set
4 forth below, the Court GRANTS Defendants’ Motion to Dismiss.
5 BACKGROUND
6 I. Factual Background
7 Defendant TMC is a Washington corporation headquartered in Seattle, Washington.
8 (ECF No. 50 (“FAC”) ¶ 23.) Defendant Kelvin Hill is a principal of TMC and a resident
9 of the State of Washington. (Id. ¶ 5). Defendant Zsolt Csende is a principal of TMC, a
10 shareholder in Defendant Predictuv Technologies, and his place of residence is unknown
11 to Plaintiff. (Id. ¶ 6.) Defendant Vivien Szakács is a principal of TMC, and her place of
12 residence is unknown to Plaintiff. (Id. ¶ 8.)
13 On October 19, 2017, Defendants Niall Lawlor, Jerry Lawlor, and Rob Grinnell
14 (making up Defendant Predictuv Technologies Inc.) met in San Diego, California, with
15 TMC’s then-CEO, Dean Granziano. (Id. ¶ 18.) This meeting initiated Predictuv
16 Technologies’ acquisition of TMC. (Id.) Around October 30, 2017, Plaintiff Verbick
17 purchased a Convertible Security from TMC for $25,000, which entitled him to a security
18 interest in TMC. (Id. ¶ 26.)
19 In December 2017, a meeting took place in Washington to discuss Predictuv
20 Technologies’ acquisition of TMC. (Id. ¶ 27.) Following the meeting, Granziano was told
21 he could no longer be CEO, and that if he did not agree to leave, TMC’s Board of Directors
22 would shut down TMC—rendering all noteholders’ securities worthless. (Id. ¶ 30.)
23 Granziano agreed to leave and he lost both his position and the majority of his TMC shares
24 in January 2018. (Id. ¶ 32.) Defendant Szakács became the new CEO in April 2018. (Id.
25 ¶ 36.)
26 On August 7, 2018, Defendant Hill informed noteholders that TMC would be
27 closing and that Predictuv Technologies was in the process of making an offer to purchase
28 the company. (Id. ¶ 43.) The correspondence requested that all noteholders reply in
1 support of TMC’s acquisition by Predictuv Technologies and threatened that the alternative
2 would be for TMC to shut down, causing the noteholders to lose their investments. (Id.
3 ¶¶ 44, 45.)
4 On January 7, 2019, Defendant Csende informed noteholders that Predictuv
5 Technologies’ acquisition of TMC was complete. (Id. ¶ 51.) However, on June 28, 2019,
6 Defendant Hill informed noteholders that the acquisition had fallen through. (Id. ¶ 65.)
7 Plaintiff believes Hill’s information was inaccurate and that the acquisition did in fact go
8 through. (Id. ¶ 66.) Plaintiff has not received any communication from TMC since June
9 28, 2019. (Id. ¶ 67.)
10 II. Procedural History
11 On February 25, 2020, Plaintiff filed a Complaint in the Superior Court of California,
12 County of San Diego, alleging causes of action against the TMC Defendants for (1) breach
13 of contract, (2) breach of fiduciary duty, and (3) fraud. The Complaint further alleged
14 causes of action against the Predictuv Defendants for (1) intentional interference with
15 contractual relations inducing breach of contract, (2) intentional interference with
16 contractual relations by interference with performance, and (3) interference with
17 prospective economic advantage (the “intentional interference claims”). (See ECF No. 1-
18 2.) On March 30, 2020, Defendants removed this case to federal court pursuant to 28
19 U.S.C. § 1441(b). (ECF No. 1.)
20 On April 6, 2020, Defendants TMC and Kelvin Hill filed a motion to dismiss, (ECF
21 No. 4); on April 20, 2020, Defendants Predictuv Technologies, Inc and Predictuv LLC,
22 (ECF No. 7), and Vivien Szakács, (ECF No. 12), moved to dismiss; and on April 22, 2020,
23 Defendant Christopher Kiel filed a motion to dismiss. (ECF No. 16.) The Honorable
24 Anthony J. Battaglia took the motions under submission without oral argument pursuant to
25 Civil Local Rule 7.1(d)(1) (ECF No. 27), and subsequently this action was transferred to
26 the undersigned. (ECF No. 41.) On March 25, 2021, the Court granted Defendants’
27 Motions to Dismiss and granted Plaintiff leave to amend his complaint. (ECF No. 48.)
28 / / /
1 On April 15, 2021, Plaintiff filed the operative First Amended Complaint. (ECF
2 No. 50.) On May 5, 2021, Defendants TMC, Zsolt Csende, Kelvin Hill, and Vivien
3 Szakács filed the instant Motion to Dismiss. (ECF No. 52.)
4 ANALYSIS
5 I. Federal Rule of Civil Procedure Rule 12(b)(2)
6 A. Legal Standard
7 “A Court’s power to exercise jurisdiction over a party is limited by both statutory
8 and constitutional considerations.” In re Packaged Seafood Prod. Antitrust Litig., 338 F.
9 Supp. 3d 1118, 1135 (S.D. Cal. 2018). Constitutionally, “[t]he Due Process Clause of the
10 Fourteenth Amendment constrains a State’s authority to bind a nonresident defendant to a
11 judgment of its courts.” Walden v. Fiore, 571 U.S. 277, 283 (2014) (citing World-Wide
12 Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980)). Statutorily, “California’s long-
13 arm statute allows the exercise of personal jurisdiction to the full extent permissible under
14 the U.S. Constitution.” Daimler AG v. Bauman, 571 U.S. 117, 125 (2014); see also Cal.
15 Civ. Proc. Code § 410.10.
16 The Supreme Court has recognized “two types of personal jurisdiction: ‘general’
17 (sometimes called ‘all-purpose’) jurisdiction and ‘specific’ (sometimes called ‘case-
18 linked’) jurisdiction.” Bristol-Myers Squibb Co. v. Super. Ct., 582 U.S. ___, 137 S. Ct.
19 1773, 1780 (2017) (citing Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S.
20 915, 919 (2011)). “For an individual, the paradigm forum for the exercise of general
21 jurisdiction is the individual’s domicile; for a corporation, it is an equivalent place, one in
22 which the corporation is fairly regarded as at home.” Id. (quoting Goodyear, 564 U.S.
23 at 924). “A court with general jurisdiction may hear any claim against that defendant, even
24 if all the incidents underlying the claim occurred in a different State.” Id. (emphasis in
25 original) (citing Goodyear, 564 U.S. at 919).
26 For a court to exercise specific jurisdiction, by contrast, “‘the suit’ must ‘aris[e] out
27 of or relat[e] to the defendant's contacts with the forum.’” Id. (alterations and emphasis in
28 original) (quoting Daimler, 571 U.S. at 127 (2014)) (citing Burger King Corp. v.
1 Rudzewicz, 471 U.S. 462, 472–473 (1985); Helicopteros Nacionales de Colombia, S.A. v.
2 Hall, 466 U.S. 408, 414 (1984)). “In other words, there must be ‘an affiliation between the
3 forum and the underlying controversy, principally, [an] activity or an occurrence that takes
4 place in the forum State and is therefore subject to the State’s regulation.’” Id. (alteration
5 in original) (quoting Goodyear, 564 U.S. at 919). “For this reason, ‘specific jurisdiction is
6 confined to adjudication of issues deriving from, or connected with, the very controversy
7 that establishes jurisdiction.’” Id. (quoting Goodyear, 564 U.S. at 919).
8 B. Analysis
9 Seeking dismissal, Defendants argue that this Court lacks personal jurisdiction over
10 them under Rule 12(b)(2). As set forth below, Defendants are correct.
11 1. General Jurisdiction
12 Defendants argue that the Court lacks general jurisdiction because there is no
13 evidence that Defendants “have or had substantial or continuous and systematic contacts
14 with California.” (MTD at 2.) A forum state has general jurisdiction over a defendant
15 when the defendant consents to jurisdiction, is served within that state, or is domiciled
16 within that state. J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. 873, 880 (2011).
17 Alternatively, a defendant is subject to general jurisdiction when its contacts with the forum
18 state are “continuous and systematic,” CollegeSource, Inc. v. Academy One, Inc., 653 F.3d
19 1066, 1074 (9th Cir. 2011) (quoting Goodyear, 564 U.S. at 919), and “so substantial . . . as
20 to justify suit against [a defendant] on causes of action arising from dealings entirely
21 distinct from those activities.” Id. (quoting King v. Am. Family Mut. Ins. Co., 632 F.3d
22 570, 579 (9th Cir. 2011)). Continuous and systematic contacts is “an exacting standard . . .
23 because a finding of general jurisdiction permits a defendant to be haled into court in the
24 forum state . . . .” See Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th
25 Cir. 2004).
26 Here, Plaintiff has not alleged sufficient facts to establish general jurisdiction.
27 Plaintiff has not established that any of the Defendants have consented to jurisdiction in
28 California, have been served process in California, or are domiciled in California.
1 Additionally, Plaintiff has not established that Defendants have made “continuous and
2 systematic” and “substantial” contacts with California. Indeed, Plaintiff’s First Amended
3 Complaint alleges only that (1) Plaintiff’s causes of action stem from a meeting in San
4 Diego, California between Defendant Predictuv Technologies and Defendant TMC’s
5 former CEO (FAC ¶ 18); and (2) Defendant TMC’s managing partner of its automotive
6 team was “regularly and actively cultivating business . . . in California” on two listed
7 occasions. (Id. ¶ 21.) It is undisputed that TMC is a corporation formed in the State of
8 Washington with its principal place of business in Washington. (MTD at 2; FAC ¶ 2.) All
9 of TMC’s obligations under the contract at issue in this case were to be fulfilled in
10 Washington. (MTD at 2.) Defendants state that Kelvin Hill is a lifelong resident of
11 Washington and never has traveled to California on behalf of TMC or for any business
12 related to the case at issue. (Id. at 3.) Further, Defendants state that Vivien Szakács lives
13 in Texas and never has traveled to California on behalf of TMC or for any business related
14 to the case at issue. (Id.) Finally, Defendants state that Zolt Csende does not live in
15 California and never has traveled to California on behalf of TMC or for any business related
16 to the case at issue. (Id.) None of the Specially Appearing Defendants are subject to the
17 Court’s general jurisdiction because they lack substantial, continuous, and systematic
18 contact with California. See Helicopteros Nacionales de Colombia, 466 U.S. at 416
19 (finding that one trip to the forum state by defendant’s CEO for purposes of contract
20 negotiation was not continuous and systematic). Additionally, Plaintiff fails to make
21 specific allegations that general jurisdiction exists in his First Amended Complaint. (See
22 generally FAC.)
23 2. Specific Jurisdiction
24 Although Plaintiff contends that the Court’s specific personal jurisdiction is proper
25 based on a single meeting that took place in San Diego, California, on October 19, 2017,
26 (FAC ¶ 18), there are no allegations that Defendants Hill, Csende, or Szakács (“Individual
27 Defendants”) attended the October 2017 meeting. (See generally id.) The meeting was
28 attended by individuals making up Predictuv Technologies Inc. and TMC’s then-Chief
1 Executive Officer Dean Granziano. (Id. ¶ 18.) Plaintiff alleges that the “underlying
2 controversy in this case arises directly out of [the meeting] and contact with San Diego and
3 this forum.” (Id. ¶ 19.) Plaintiff further contends that jurisdiction comports with fair play
4 and substantial justice because the Defendants are “joint entrepreneurs, shareholders,
5 officers, and directors” of “the entity Defendants.” (Id. ¶ 20.)
6 Jurisdiction over each defendant must be assessed individually. Calder v. Jones,
7 465 U.S. 783, 790 (1984). Due process requires “fair warning” when a forum seeks to
8 exercise specific personal jurisdiction over an individual. Burger King Corp. v. Rudzewicz,
9 471 U.S. 462, 472, (1985). It is “essential in each case that there be some act by which the
10 defendant purposefully avails itself of the privilege of conducting activities within the
11 forum State.” Id. (quoting Hanson v. Denckla, 357 U.S. 235, 253, (1958)). This
12 requirement “ensures that a defendant will not be haled into a jurisdiction solely as a result
13 of ‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts.” Id. A purposeful availment analysis
14 is used for suits sounding in contract. Schwarzenegger, 374 F.3d at 802. To examine
15 whether specific personal jurisdiction exists, the court looks to the contacts that
16 “proximately result from actions by the defendant himself.” Picot v. Weston, 780 F.3d
17 1206, 1213 (9th Cir. 2015) (quoting Burger King, 471 U.S. at 475). Physical entry into a
18 state is a relevant contact, but the inquiry focuses on whether that entrance created a
19 “substantial connection” with the state. Id.
20 Specific jurisdiction requires “certain minimum contacts . . . such that the
21 maintenance of the suit does not offend ‘traditional notions of fair play and substantial
22 justice.’” Walden, 571 U.S. at 283 (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310,
23 316 (1945)). The Ninth Circuit applies a three-part test to assess whether a non-resident
24 defendant has sufficient contacts to be subject to a State’s personal jurisdiction:
25 (1) The non-resident defendant must purposefully direct his activities or
consummate some transaction with the forum or resident thereof; or
26
perform some act by which he purposefully avails himself of the
27 privilege of conducting activities in the forum, thereby invoking the
benefits and protections of its laws;
28
1 (2) the claim must be one which arises out of or relates to the defendant’s
2
forum-related activities; and
3
(3) the exercise of jurisdiction must comport with fair play and substantial
4
justice, i.e. it must be reasonable.
5
Morrill v. Scott Fin. Corp., 873 F.3d 1136, 1142 (9th Cir. 2017) (quoting Schwarzenegger,
6
374 F.3d at 802). “The plaintiff bears the burden of satisfying the first two prongs of the
7
test. If the plaintiff fails to satisfy either of these prongs, personal jurisdiction is not
8
established in the forum state.” Id. (quoting Schwarzenegger, 374 F.3d at 802). “If the
9
plaintiff succeeds in satisfying both of the first two prongs, the burden then shifts to the
10
defendant to ‘present a compelling case’ that the exercise of jurisdiction would not be
11
reasonable.” Id. (quoting Schwarzenegger, 374 F.3d at 802).
12
a. Defendant TMC
13
Plaintiff alleges sufficient facts to satisfy the first prong of the Ninth Circuit’s test—
14
whether the defendant performed some act by which he purposefully availed himself of the
15
privilege of conducting activities in the forum. A separate three-part test is used to assess
16
the first prong and “requires that the defendant have (1) committed an intentional act, (2)
17
expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to
18
be suffered in the forum state. Schwarzenegger, 374 F.3d at 805 (internal citations
19
omitted). Here, the CEO, acting on behalf of TMC, initiated intentional discussions with
20
Defendant Predictuv Technologies for the “express purpose” of Predictuv Technologies
21
acquiring TMC. (FAC ¶ 18.) Those discussions took place in San Diego, California. (Id.
22
¶ 19.) Defendant TMC could therefore reasonably anticipate that harm resulting from that
23
meeting would likely be suffered in California.
24
However, Plaintiff fails the second prong of the Ninth Circuit’s test—whether a
25
particular claim arises out of forum-related activities. Plaintiff alleges that “but-for” the
26
former CEO’s actions on behalf of TMC, Plaintiff’s claims would never have arisen. (Id.)
27
While it is true that the Ninth Circuit applies a “but-for” test as described by Plaintiff, that
28
1 test “preserves the requirement that there be some nexus between the cause of action and
2 the defendant's activities in the forum.” Shute v. Carnival Cruise Lines, 897 F.2d 377, 385
3 (9th Cir. 1990), rev'd on other grounds, 499 U.S. 585 (1991). Here, that nexus is missing.
4 At the meeting the parties only discussed the “potential applications of TMC’s platforms
5 for the financial investment and securities industry and the potential investment in TMC’s
6 proprietary products and services.” (Id. ¶ 25.) This link is too attenuated to find that the
7 underlying alleged harm in the instant case arose from TMC’s actions at the initial
8 meeting.1 See Matter of Star & Crescent Boat Co., Inc., No. 321CV00169BENJLB, 2021
9 WL 2988467, at *16 (S.D. Cal. July 15, 2021) (finding that insufficient evidence existed
10 to allow the court to conclude that the harm actually arose from the movants’ actions and
11 not those of a third party even though the movants’ actions were “certainly” a but-for cause
12 of the harm). Thus, Plaintiff fails the second prong, and the Court GRANTS Defendants’
13 Motion to Dismiss as to TMC and DISMISSES Plaintiff’s claims against TMC for lack of
14 personal jurisdiction under Rule 12(b)(2).
15 b. Individual Defendants
16 With respect to the Individual Defendants, Plaintiff fails the first prong of the Ninth
17 Circuit’s test—whether they purposefully directed their activities toward the forum. The
18 First Amended Complaint does not provide evidence that any of the Individual Defendants
19 attempted to avail themselves of California laws or direct activities towards California
20 given that none of them attended the October 2017 meeting. (See generally FAC.) There
21 are no allegations that Individual Defendants performed any intentional acts directed
22 toward the forum state. (Id.) There is no evidence that any Individual Defendant has ever
23 traveled to California to conduct business on behalf of TMC or that any Individual
24 Defendant has ever reached out to California to conduct business on behalf of TMC.
25 Although the First Amended Complaint alleges that the Individual Defendants are “joint
26
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1 Further demonstrating the attenuation, Plaintiff was not even present at the meeting in San
28 Diego, California, nor had he purchased the Convertible Security at issue. (See generally FAC
1 entrepreneurs, shareholders, officers, and directors of the entity Defendants who stood to
2 gain,” (FAC ¶ 20), without more, that is not sufficient to find specific personal jurisdiction.
3 See Glob. Commodities Trading Grp., Inc. v. Beneficio de Arroz Choloma, S.A., 972 F.3d
4 1101, 1109 (9th Cir. 2020) (stating the court does not “impute a corporation’s forum
5 contacts to each of the corporation’s employees”). Further, Plaintiff’s additional
6 allegations in his opposition do not provide a sufficient basis for the Court to exercise
7 specific personal jurisdiction. (See generally Opp’n.) Therefore, the Court GRANTS
8 Defendants’ Motion as to Individual Defendants and DISMISSES Plaintiff’s claims
9 against them for lack of personal jurisdiction under Rule 12(b)(2).
10 II. Federal Rule of Civil Procedure Rule 12(b)(5)
11 A. Legal Standard
12 “Service of process is the mechanism by which the court acquires” jurisdiction over
13 a defendant. United States v. 2,164 Watches, More or Less Bearing a Registered
14 Trademark of Guess?, Inc., 366 F.3d 767, 771 (9th Cir. 2004). Accordingly, a plaintiff’s
15 failure adequately to serve process results in the court’s lack of jurisdiction over the
16 defendant. See id. A defendant may mount a defense by claiming insufficient service of
17 process under Federal Rule of Civil Procedure 12(b)(5). When such a challenge is
18 advanced, the plaintiff “bear[s] the burden of establishing that service was valid under
19 [Federal Rule of Civil Procedure] 4.” Brockmeyer v. May, 383 F.3d 798, 801 (9th Cir.
20 2004). “[I]n the absence of proper service of process, the district court has no power [over
21 the defendant] unless the defendant has consented to jurisdiction or waived the lack of
22 process.” S.E.C. v. Ross, 504 F.3d 1130, 1138 (9th Cir. 2007).
23 B. Analysis
24 Defendants Csende and Szakács move to dismiss under Rule 12(b)(5) for
25 insufficient service of process. Service of process requires a plaintiff to serve a copy of
26 the summons and complaint on the defendant. Fed. R. Civ. P. 4(c). To serve a defendant
27 individually, a plaintiff may serve process according to the laws of the state (1) where the
28 district court is located, or (2) where service is made. Fed. R. Civ. P. 4(e)(1). Here, it is
1 undisputed that Defendant Csende has not been served and that Defendant Szakács was
2 improperly served. (MTD at 7; Opp’n at 17.) Since Defendants Csende and Szakács have
3 not been properly served in this case, the Court GRANTS Defendants Csende and
4 Szakács’s Motion to Dismiss for insufficient service of process under Rule 12(b)(5).
5 III. Federal Rule of Civil Procedure Rule 12(b)(6)
6 Even if Plaintiff adequately had pled personal jurisdiction over Defendants,
7 Plaintiff’s causes of action would fail under Rule 12(b)(6) for failure to state a claim on
8 which relief can be granted.
9 A. Legal Standard
10 Federal Rule of Civil Procedure 12(b)(6) allows a court to dismiss a complaint for
11 “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). To
12 survive a motion to dismiss, the complaint must contain a “short and plain statement
13 showing that the pleader is entitled to relief,” backed by sufficient facts that make the claim
14 “plausible on its face.” Fed. R. Civ. P. 8(a)(2); Ashcroft v. Iqbal, 556 U.S. 662, 678, (2009)
15 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547 (2007)). Plausibility requires
16 “more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 566 U.S. at
17 678. Rather, it demands enough factual content for the court to “draw the reasonable
18 inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550
19 U.S. at 556). The court must accept as true “all factual allegations in the complaint” and
20 “construe the pleadings in the light most favorable to the nonmoving party.” Manzarek v.
21 St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). This presumption
22 does not extend to conclusory allegations, “unwarranted deductions of fact, or
23 unreasonable inferences.” See In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir.
24 2008).
25 For claims based in fraud, Federal Rule of Civil Procedure 9(b) applies and imposes
26 a heightened pleading standard. See Davidson v. Kimberly-Clark Corp., 889 F.3d 956, 964
27 (9th Cir. 2018). Under Rule 9(b), the plaintiff must state with “particularity the
28 circumstances constituting the fraud or mistake.” Fed. R. Civ. P. 9(b). This means that the
1 plaintiff must state the “who, what, when, where, and how’ of the misconduct charged.”
2 Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (citation omitted).
3 The plaintiff must also state “what is false or misleading about the purportedly fraudulent
4 statement, and why it is false.” Davidson, 889 F.3d at 964 (citations omitted). In cases
5 involving more than one defendant, Rule 9(b) does not allow the plaintiff to “lump [the]
6 multiple defendants together.” Swartz v. KPMG LLP, 476 F.3d 756, 764–65 (9th Cir.
7 2007). Rather, the plaintiff must “differentiate their allegations” and “inform each
8 defendant separately of the allegations surrounding his alleged participation in the fraud.”
9 Id. This ensures that each defendant has notice of their particular misconduct so that they
10 can “defend against the charge and not just deny that they have done anything wrong.”
11 Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001) (internal quotations marks
12 and citation omitted).
13 B. Analysis
14 1. Breach of Contract
15 Plaintiff alleges a cause of action for breach of contract, contending that the TMC
16 Defendants failed to perform pursuant to the terms of the Convertible Security. (FAC
17 ¶¶ 71, 74.) To have a viable breach of contract claim, there must be (1) a contract,
18 (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and
19 (4) damages to plaintiff. Coles v. Glaser, 2 Cal. App. 5th 384, 391 (2016).
20 Here, Plaintiff properly alleges existence of a contract between himself and TMC in
21 the form of a Convertible Security. (See FAC Ex. A.) Plaintiff contends that he “performed
22 all conditions, covenants, and promises required by [him] to be performed in accordance
23 with the terms and conditions of the Convertible Security,” (id. ¶ 73), and that
24 “Defendants” breached the terms of the Convertible Security. (Id. ¶ 74.) Finally, Plaintiff
25 alleges damages in excess of $1,000,000. (Id. ¶ 75.) However, as Specially Appearing
26 Defendants note, Plaintiff fails to allege that any of the Individual Defendants themselves
27 are parties to the Convertible Security and thus liable for breaching it. See U.S. Liab. Ins.
28 Co. v. Haidinger-Hayes, Inc., 1 Cal. 3d 586, 595 (1970) (“Directors and officers are not
1 personally liable on contracts signed by them for and on behalf of the corporation unless
2 they purport to bind themselves individually.”). Plaintiff does not cite any case law or facts
3 sufficient to support his breach of contract claim against the Individual Defendants.
4 Plaintiff therefore fails to properly allege breach of contract against the Individual
5 Defendants, and the Court thus GRANTS Defendants’ Motion to Dismiss as to Defendants
6 Hill, Csende, and Szakács.
7 2. Breach of Fiduciary Duty
8 Plaintiff also alleges breach of fiduciary duty because Specially Appearing
9 Defendants failed to perform pursuant to the terms of the Convertible Security. (FAC
10 ¶ 71.) Breach of fiduciary duty occurs when there is (1) the existence of a fiduciary duty,
11 (2) breach of that duty, and (3) damage proximately caused by the breach. Gutierrez v.
12 Girardi, 194 Cal. App. 4th 925, 932 (2011). A fiduciary relationship is “any relation
13 existing between parties to a transaction wherein one of the parties is in duty bound to act
14 with the utmost good faith for the benefit of the other party.” Cleveland v. Johnson, 209
15 Cal. App. 4th 1315, 1338 (2012).
16 Plaintiff alleges that he is owed a fiduciary duty by TMC and Individual Defendants.
17 (FAC ¶¶ 77–89.) On the other hand, Defendants contend that Plaintiff, as a noteholder, is
18 similarly situated to a warrant holder “to whom company directors and officers owe no
19 fiduciary duty.” (MTD at 8; see also Speirs v. Bluefire Ethanol Fuels, Inc. 243 Cal. App.
20 4th 969, 982–83 (2015).) Plaintiff does not cite any authority regarding a fiduciary duty
21 owed to noteholders in particular, instead baldly alleging that he, as a debtor, is owed a
22 fiduciary duty. (FAC ¶ 78.) The Court does not have to accept as true legal conclusions
23 couched as factual allegations. See Twombly, 550 U.S. at 555. The Court therefore
24 GRANTS Defendants’ Motion to Dismiss under Rule 12(b)(6).
25 3. Fraud
26
Finally, Plaintiff alleges a cause of action for fraud. (See FAC ¶¶ 90–97.) Plaintiff,
27
however, fails to meet Rule 9(b)’s heightened pleading standard because he does not
28
1 differentiate the allegations against each Defendant as required. Instead, Plaintiff simply
2 alleges that the “written representations” by Defendant Hill “on behalf of and by the
3 ratification of all the TMC Defendants” were “patently false when conveyed to Plaintiff.”
4 (Id. ¶ 91.) This is insufficient to meet the heightened standard as it does not provide the
5 specificity required by Rule 9(b). See Moore v. Kayport Package Exp., Inc., 885 F.2d 531,
6 541 (9th Cir. 1989) (dismissing the complaint because it did not attribute specific conduct
7 to individual defendants or “specify either the time or place of the alleged wrongful
8 conduct”). Thus, the Court GRANTS Defendants’ Motion to Dismiss and DISMISSES
9 Plaintiff’s fraud cause of action.
10 IV. Transfer of Venue
11
Finally, the Specially Appearing Defendants seek to transfer this case, though they
12
do not specify to which venue. “For the convenience of parties and witnesses, in the
13
interest of justice, a district court may transfer any civil action to any other district or
14
division where it might have been brought or to any district or division to which all parties
15
have consented.” 28 U.S.C. § 1404(a). The moving party bears the burden of
16
demonstrating that transfer is appropriate. See Commodity Futures Trading Comm’n v.
17
Savage, 611 F.2d 270, 279 (9th Cir. 1979). The Parties did not brief this issue, and the
18
Specially Appearing Defendants have failed to meet their burden. Accordingly, the Court
19
DENIES the Specially Appearing Defendants’ Motion to Transfer.
20
CONCLUSION
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In light of the foregoing, the Court GRANTS Specially Appearing Defendants’
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Motion to Dismiss (ECF No. 52), DISMISSES WITHOUT PREJUDICE Plaintiff’s First
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Amended Complaint (ECF No. 49), and DENIES Specially Appearing Defendants’
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Motion to Transfer (ECF No. 52).
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1 Plaintiff MAY FILE an amended complaint curing the deficiencies outlined in this
2 || Order within fourteen (14) days of the electronic docketing of this Order. Should Plaintiff
3 || elect not to file a timely amended complaint, this action will be dismissed without prejudice
4 || without further Order of the Court.
5 IT IS SO ORDERED.
6 Dated: November 19, 2021 —_—sT
7 dd) (2 D (oe
g Honorable Todd W. Robinson
9 United States District Judge
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