Opinion
No. C 04-02266 JW.
September 15, 2004
I. INTRODUCTION
This case arises out of a number of disputes between a number of corporations and individuals over a number of large construction projects. Plaintiffs Advanced Mictrotherm, Inc. ("AMT") and HVAC Sales, Inc. ("HVAC") (collectively "Plaintiffs") are California corporations in the business of, inter alia, obtaining orders for manufacturers of commercial and industrial ventilation systems. Defendants are an amalgam of corporations and individuals involved in the construction industry, including: other businesses that obtain orders for manufacturers of ventilation systems, landowners, construction engineering firms, construction management firms, architectural firms, and their employees. Plaintiffs originally filed suit in San Francisco County Superior Court, and individually and jointly allege 15 causes of action against various combinations of defendants: (1) Breach of Statutes in Restraint of Trade with respect to a construction project at University of California, San Francisco ("UCSF"); (2) Breach of Statutes in Restraint of Trade with respect to a construction project at University of California, Davis ("UCD"); (3) Breach of Statutes in Restraint of Trade with respect to "other construction projects" (including, inter alia, construction projects at San Francisco International Airport, San Jose International Airport, Asian Art Museum in San Francisco, and University of California, Santa Cruz); (4) Breach of California's False Claims Act; (5) Breach of Contract; (6) Breach of Implied Covenant of Good Faith and Fair Dealing; (7) Promissory Estoppel; (8) Declaratory Relief; (9) Defamation; (10) Intentional Interference with Business Relationship against one set of defendants; (11) Negligent Interference with Business Relationship against that same set of defendants; (12) Intentional Interference with Business Relationship against another set of defendants; (13) Negligent Interference with Business Relationship against that other set of defendants; (14) Breach of Competitive Bid Statutes; and (15) Injunctive Relief.
The acronym HVAC is used as a shorthand for "Heating, Ventilation, and Air Conditioning."
The statutes under which Plaintiffs' "Breach of Statutes in Restraint of Trade" claims (i.e., Plaintiffs' First, Second, and Third Causes of Action) are brought are: 15 U.S.C. § 1 (Sherman Act), 15 U.S.C. §§ 12-14 (Clayton Act), CAL. BUS. PROF. CODE §§ 16720, 16726 (Cartwright Act), and CAL. BUS. PROF. CODE §§ 17043, 17045-48 (Unfair Practices Act).
CAL. GOV'T CODE §§ 12651 et seq.
Defendant Norman Wright Mechanical Equipment Corporation ("NSW") moves under FED. R. CIV. P. 12(b)(6) ("Rule 12(b)(6)") to dismiss Plaintiffs' First, Second, Third, Fourth, Ninth, Tenth, Eleventh, Twelfth, and Thirteenth Causes of Action; under FED. R. CIV. P. 12(e) ("Rule 12(e)") for more definite statement; and under FED. R. CIV. P. 12(f) ("Rule 12(f)") to strike portions of Plaintiffs' complaint. For the reasons stated below, this Court grants in part and denies in part NSW's motion to dismiss, and denies NSW's motion for more definite statement and motion to strike.
II. BACKGROUND
A. UCSF: The Parnassus Project
On or about November 29, 2001, Defendant Regents of the University of California ("Board of Regents") and/or UCSF accepted construction bids on the Parnassus Services Seismic Replacement Building ("Parnassus Project"), a building in which medical research on animals would be conducted. The Board of Regents and/or UCSF contracted with Defendant AMEC, Inc. ("AMEC") for construction management services, and with Defendant Affiliated Engineering W, Inc. ("AEI") for design engineering services. At all times relevant to this case, AMEC was the construction manager of record, and AEI was the design engineer of record for the Parnassus Project. As such, they were allegedly agents of the Board of Regents and/or UCSF.
McCarthy Company ("McCarthy"), a general contractor, submitted the lowest bid on the Parnassus Project and received the contract. Defendant Air Conditioning Company, Inc. ("ACCO"), a sub-contractor specializing in the design and installation of ventilation systems, submitted the lowest bid on the mechanical aspects of the Parnassus Project and received that sub-contract. In formulating its bid to McCarthy, ACCO itself had invited bids from various distributors of mechanical equipment. Plaintiff HVAC allegedly submitted the lowest bid to ACCO. The two then reached an agreement: HVAC agreed to lower its bid even further and ACCO agreed to purchase all mechanical equipment listed on HVAC's bid sheet from HVAC. ACCO used HVAC's reduced bid in its bid to McCarthy. After McCarthy selected ACCO as the Parnassus Project's mechanical sub-contractor, ACCO repeatedly confirmed to HVAC its intention to abide by their agreement. As a result, HVAC allegedly incurred a number of expenses in reliance thereupon.
1. Intimidations, Threats, Misrepresentations, and Interferences with Business Relationships
At some time after the bidding period closed, Plaintiffs allege that NSW, a direct competitor of Plaintiffs, through the use of intimidation and threats, caused ACCO to abandon its agreement with HVAC and to purchase mechanical equipment from NSW instead. NSW's intimidation tactics and threats were allegedly effective because of NSW's tremendous market power over sales of ventilation systems in Northern California. Plaintiffs further allege that NSW's vice president, Defendant George Speights ("Speights"), misrepresented himself to ACCO personnel as the construction manager of the Parnassus Project. In fact, an AMEC employee was the true construction manager. As the "construction manager," Speights threatened to summarily reject any purchases made by ACCO from any mechanical equipment distributor other than NSW. At one meeting between NSW and ACCO, Speights allegedly stated that he "would not be happy" if ACCO attempted to provide submittals from HVAC or any other distributor. Moreover, Speights stated that he would not leave the meeting until a deal was entered into between ACCO and NSW.
2. "Flat Spec'ing" and Bundling
Plaintiffs further allege that NSW and AEI entered into a trust to "flat spec" — i.e., mandate the use of — certain mechanical equipment sold only by NSW. Specifically, Plaintiffs allege, NSW and AEI "flat spec'ed" the Phoenix valve and the Dri-Steem humidifier, both of which are sold only by NSW. NSW and AEI had claimed that said equipment had "no known equal," but, according to Plaintiffs, there was no rational or legitimate basis for making such a claim. In fact, Defendants allegedly were aware that HVAC could provide valves and humidifiers of equal or superior quality for significantly less.
Furthermore, Plaintiffs allege that, in order to purchase "flat spec'ed" equipment, NSW requires purchasers to purchase other, distinct equipment. As a result, Plaintiffs claim that the Board of Regents' and/or UCSF's failure to "break out" the "flat spec'ed" equipment resulted in an illegal bundling of all mechanical equipment.
"Breaking out" "flat spec'ed" equipment means allowing non-"flat spec'ed" equipment to be separately and competitively bid upon.
3. Illegitimate Preferences and Inflated Performance Specifications for NSW's Equipment
Plaintiffs also allege that NSW, AEI, and the Board of Regents and/or UCSF entered into a scheme to lessen competition by identifying NSW's equipment as the preferred components for use in the Parnassus Project. To achieve this preferred status, NSW allegedly conferred secret payments of money, benefits, and services upon AEI. Plaintiffs allege that there was no rational or legitimate basis for preferring NSW's equipment. As a result of this preference, HVAC and others were forced to submit their products as "substitutions," to submit line-item comparisons between their components and NSW's components, and to lower their prices. HVAC claims that this resulted in the unnecessary expenditure of time, money, and resources.
Furthermore, Plaintiffs allege, NSW and AEI purposefully inflated the component performance criteria in the Parnassus Project's specifications. These criteria required non-NSW "substitutions" to perform at levels superior to the actual performance levels of NSW products, which were the bases of design. NSW's and AEI's alleged purpose was to eliminate competition.
B. UCD: Plant and Environmental Sciences Construction Project and Genome Construction Project
Within the last four years, UCD accepted construction bids on the Plant and Environmental Sciences Construction Project ("PES Project") and the Genome Construction Project ("Genome Project") (collectively "UCD Projects"). Although the parties involved in the UCD Projects differ somewhat from those involved in UCSF's Parnassus Project, the general factual allegations are similar.
The Board of Regents and/or UCD contracted with Defendants Ove Arup Partners USA and Ove Arup Partners California Ltd. (collectively "Ove Arup") for design engineering services. As the mechanical design engineer of record on the UCD Projects, Ove Arup was an agent of the Board of Regents and/or UCD. Plaintiffs allege, inter alia, that NSW and Ove Arup conspired to interfere with their business relationships, to "flat spec" NSW products, to bundle "flat spec'ed" products to other products, and to baselessly identify NSW products as preferred products.
1. Intimidations, Threats, Misrepresentations, Interferences with Business Relationships, "Flat Spec'ing," and Bundling
Lawson Mechanical Corporation ("Lawson") was awarded the mechanical building contract for the PES Project. Marelich, Inc. ("Marelich") was awarded the mechanical building contract for the Genome Project. During the bidding processes for both UCD Projects, NSW allegedly threatened and intimidated Lawson and Marelich in an effort to coerce them to reject bids from distributors of mechanical equipment other than NSW. NSW allegedly threatened to ensure that Ove Arup and UCD would reject bids or submittals from distributors other than NSW, that NSW would "make life rough" on Lawson and/or Marelich should either/both not heed NSW's warnings, that NSW itself would no longer submit bids to Lawson and/or Marelich should either/both purchase products from a distributor other than NSW, and that Lawson and/or Marelich would suffer severe and damaging repercussions should either/both submit bids or submittals from distributors other than NSW.
Plaintiff AMT submitted the lowest bid to Lawson for installing mechanical equipment in the PES Project. Plaintiff HVAC submitted the lowest bid to Marelich for installing the mechanical equipment in the Genome Project. Despite receiving threats from NSW, both Lawson and Marelich agreed to purchase their mechanical equipment from AMT and HVAC respectively. Both AMT and HVAC allegedly incurred a number of expenses to meet their obligations.
After learning that Lawson and Marelich intended to purchase their mechanical equipment from AMT and HVAC, NSW allegedly conspired with Ove Arup and the Board of Regents and/or UCD to force Lawson and Marelich to purchase mechanical equipment from NSW. For example, Plaintiffs allege that NSW and Ove Arup conspired to "flat spec" Phoenix air valves, Ruskin fire smoke dampers, and Flanders filter containment housings, all of which are sold only by NSW. NSW and Ove Arup claimed that said equipment had "no known equal," but, according to Plaintiffs, there was no rational or legitimate basis for making such a claim. In fact, Defendants allegedly were aware that both AMT and HVAC could provide air valves, fire smoke dampers, and filter containment housings of equal or superior quality for significantly less.
Furthermore, Plaintiffs allege that, in order to purchase "flat spec'ed equipment," NSW requires purchasers to purchase other, distinct equipment. As a result, Plaintiffs claim that the Board of Regents' and/or UCD's failure to "break out" the "flat spec'ed" equipment resulted in an illegal bundling of all mechanical equipment.
3. Illegitimate Preferences for NSW's Equipment
Plaintiffs also allege that NSW, Ove Arup, and the Board of Regents and/or UCD entered into a scheme to lessen competition by identifying NSW's equipment as the preferred components for use in the UCD Projects. To achieve this preferred status, NSW allegedly conferred secret payments of money, benefits, and services to Ove Arup and certain employees at UCD. Plaintiffs allege that there was no rational or legitimate basis for preferring NSW's products. In fact, Plaintiffs allege, certain NSW products themselves failed to satisfy the performance criteria set forth in the projects' specifications. As a result of this preference, Plaintiffs and others were forced to submit their products as "substitutions," to submit line-item comparisons between their components and NSW's components, and to lower their prices. Plaintiffs claim that this resulted in the unnecessary expenditure of time, money, and resources.
C. Other Construction Projects
Plaintiffs allege that Defendants and others have engaged in conduct similar to that described above in no less than 32 other large construction projects. Although Plaintiffs do not allege that all Defendants were involved in all of the other construction projects, they do allege that NSW and its president, Defendant Richard Leao, were involved in all of the other construction projects.
III. STANDARDS
A. Motion to Dismiss Under Rule 12(b)(6)
The strict standard for granting a motion to dismiss under Rule 12(b)(6) is set forth in Conley v. Gibson, 355 U.S. 41 (1957). A motion to dismiss under Rule 12(b)(6) must not be granted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. at 45-46. As the Ninth Circuit has observed, "The [Rule 12(b)(6)] motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted." Gilligan v. Jamco Develop. Corp., 108 F.3d 24, 249 (9th Cir. 1997).
B. Motion for More Definite Statement Under Rule 12(e)
Motions for more definite statement — like motions to dismiss for failure to state a claim — are viewed with disfavor, and are rarely granted. Cellars v. Pacific Coast Packaging, Inc., 189 F.R.D. 575, 578 (N.D. Cal. 1999) They are proper only where a complaint is so indefinite that the defendant cannot ascertain the nature of the claim being asserted. Id.
C. Motion to Strike Under Rule 12(f)
Motions to strike — like motions to dismiss for failure to state and claim and motions for more definite statement — are viewed with disfavor. Colaprico v. Sun Microsystems, Inc., 758 F. Supp. 1335, 1339 (N.D. Cal. 1991). "Motions to strike should not be granted unless it is clear that the matter to be stricken could have no possible bearing on the subject matter of the litigation." Id.
IV. DISCUSSION
A. Motion to Dismiss Under Rule 12(b)(6)1. Plaintiffs' First, Second, and Third Causes of Action: Breaches of Statutes in Restraint of Trade
Plaintiffs' First, Second, and Third Causes of Action each asserts breaches of statutes in restraint of trade — but asserts them with respect to different construction projects. Plaintiffs' First Cause of Action asserts breaches of statutes in restraint of trade with respect to UCSF's Parnassus Projects; Plaintiffs' Second Cause of Action asserts breaches of statutes in restraint of trade with respect to the UCD Projects; and Plaintiffs' Third Cause of Action asserts breaches of statutes in restraint of trade with respect to the other construction projects. The specific statutes in restraint of trade that Plaintiffs assert are fourfold: 15 U.S.C. § 1 (Sherman Act), 15 U.S.C. §§ 12-14 (Clayton Act), CAL. BUS. PROF. CODE §§ 16720, 16726 (Cartwright Act), and CAL. BUS. PROF. CODE §§ 17043, 17045-48 (Unfair Practices Act).
a. 15 U.S.C. § 1 (Sherman Act)
A violation of 15 U.S.C. § 1 requires three elements: (1) concerted activity involving more than one actor, (2) an unreasonable restraint of trade, and (3) an effect on interstate commerce.
i. Concerted Activity Involving More Than One Actor
The requirement that an antitrust plaintiff prove "concerted activity involving more than one actor" itself requires that the antitrust plaintiff prove two elements: (1) a plurality of actors, and (2) concerted action. Plaintiffs here have sufficiently pled these elements. The very thrust of Plaintiffs' complaint is that NSW, the Board of Regents, AEI, Ove Arup, and others, in various combinations, acted pursuant to common schemes designed to achieve unlawful objectives via UCSF's Parnassus Project, the UCD Projects, and the other construction projects. Plaintiffs have suggested that certain defendants conferred secret payments of money, benefits, and services upon other defendants in furtherance of the common scheme. Under the Sherman Act, concerted action does not require an express agreement; tacit or informal agreements are sufficient. See Esco Corp. v. United States, 340 F.2d 1000, 1007 (9th Cir. 1965) ("A knowing wink can mean more than words"). These allegations are sufficient to place Defendants on notice as to the incidents for which they are being sued. It does not appear beyond doubt that Plaintiffs can prove no set of facts in support of their claim.
ii. An Unreasonable Restraint of Trade
Although the text of 15 U.S.C § 1 states that every contract, trust, or conspiracy "in restraint of trade or commerce" is illegal, the courts have interpreted it to apply only to unreasonable restraints of trade. See Standard Oil Co. v. United States, 221 U.S. 1 (1911). The very thrust of Plaintiffs' complaint is that Defendants' concerted activities with respect to UCSF's Parnassus Project, the UCD Projects, and the other construction projects constitute unreasonable restraints of trade. For example, Plaintiffs' complaint alleges that NSW engaged in illegal tying arrangements. (Second Amended Complaint for Injunction and Treble Damages at 21-27) (hereinafter Compl.) (section titled "NSW's . . . Practice of Employing Tying Arrangements). Tying arrangements can constitute per se violations of the Sherman Act. See Northern Pacific Ry. v. United States, 356 U.S. 1, 5 (1958) and Digidyne Corp. v. Data Gen. Corp., 734 F.2d 1336, 1338 (9th Cir. 1984). In addition, Plaintiffs' complaint highlights NSW's market power — a relevant factor in determining the unreasonableness of a restraint of trade. Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U.S. 2, 13-14 (1984) ("Accordingly, we have condemned tying arrangement when the seller has some special ability — usually called 'market power' — to force a purchaser to do something that he would not do in a competitive market"). Illustratively, Plaintiffs highlight NSW's market share over sales of specific mechanical equipment in Northern California. (Compl. at 22-24); see also JULIAN O. VON KALINOWSKI, PETER SULLIVAN MAUREEN McGUIRL, ANTITRUST LAWS AND TRADE REGULATION § 12.03[2] (2d ed. 2004) ("Proof of relevant market mandates proof of a product market and a geographic market within which market power is assessed"). Plaintiffs also suggest that Defendants' use of intimidation and threats, their baseless use of "flat specs," and their baseless preference for NSW's equipment were unreasonable.
Plaintiffs allege that Defendants engaged in the aforementioned behavior with respect to UCSF's Parnassus Project, the UCD projects, and the other construction projects. Consequently, Plaintiffs' complaint sufficiently notifies Defendants as to the incidents for which they are being sued. It does not appear beyond doubt that Plaintiffs can prove no set of facts in support of their claim.
iii. Effect on Interstate Commerce
The third essential element of a Sherman Act violation is that the restraint of trade affect interstate commerce. As a general matter, this element is easy to satisfy. The restraint, no matter how local, need only affect interstate commerce in a "substantial" or a "not insubstantial" way. United States v. ORS, Inc., 997 F.2d 628, 629 (9th Cir. 1993). The United States Supreme Court, in Summit Health, Ltd. v. Pinhas, 500 U.S. 322 (1991), held that a restraint by a hospital against one opthalmologist in the Los Angeles area could affect interstate commerce. The Court reasoned that if the restraint were successful, the market for opthalmological services in the Los Angeles area would be affected, and that would affect interstate commerce. This reasoning could easily be applied here. Even if Plaintiffs did not explicitly plead an effect on interstate commerce, they could easily remedy this factual gap through discovery. It does not appear beyond doubt that Plaintiffs can prove no set of facts in support of their claim.
b. 15 U.S.C. §§ 12-14 (Clayton Act)
Section 3 of the Clayton Act, 15 U.S.C. § 14 (2004), states that:
It shall be unlawful for any person engaged in commerce, in the course of such commerce, to . . . make a sale . . . of goods . . . for use . . . within the United States . . . on the condition . . . that the . . . purchaser . . . shall not use . . . the goods . . . of a competitor . . . of the . . . seller, where the effect of such . . . sale . . . may be to substantially lessen competition or tend to create a monopoly in any line of commerce.
Tying arrangements force customers to accept unwanted commodities in order to obtain a desired commodity. Tying arrangements are covered by the Clayton Act. See United States v. Loew's, Inc., 371 U.S. 38, 44-45 (1962) (tying arrangements "are objects of anti-trust concern for two reasons — they may force buyers into giving up the purchase of substitutes for the tied product . . . and they may destroy the free access of competing supplies of the tied product to the consuming market"). Plaintiffs claim that all mechanical equipment in UCSF's Parnassus Project, the UCD Projects, and the other construction projects were tied to "flat spec'ed" equipment. Through discovery, Plaintiffs can flesh out their claims. For now, it is sufficient to note that Plaintiffs' complaint adequately notifies Defendants as to the incidents for which they are being sued under the Clayton Act. Moreover, it does not appear beyond doubt that Plaintiffs can prove no set of facts in support of their claim.
c. CAL. BUS. PROF. CODE §§ 16720, 16726 (Cartwright Act)
CAL. BUS. PROF. CODE § 16726 (West 2004) states that "every trust is unlawful, against public policy and void." CAL. BUS. PROF. CODE § 16720 (West 2004) defines a "trust" as "a combination of capital, skill or acts by two or more persons" for any of a number of enumerated purposes, including, inter alia: (a) creating or carrying out restrictions in trade or commerce, (b) limiting or reducing production, or increasing the price of merchandise, produce or any commodity, and (c) preventing competition in manufacturing, making, transportation, sale or purchase of merchandise, produce or any commodity. Plaintiffs allege that NSW acted in concert with other defendants (namely AEI, Ove Arup, and the Board of Regents) to restrict trade and prevent competition in the mechanical equipment industry. They allegedly did so by baselessly "flat spec'ing" equipment sold exclusively by NSW, by baselessly preferring NSW's equipment, and by baselessly inflating the performance specifications required of non-NSW equipment. Furthermore, Plaintiffs allege that NSW secured these benefits by conferring secret payments of money, benefits, and services upon said co-defendants. Plaintiffs allege that, as a result of Defendants' restraint of trade, they suffered $750,000 in damages with respect to UCSF's Parnassus Project, $1,350,000 in damages with respect to the UCD Projects, and $10,000,000 with respect to the other construction projects.
NSW argues that "[a]llegations of violations of Cartwright Act require a 'high degree of particularity' of 'overt acts in furtherance . . .' of the violations," and that Plaintiffs have failed to meet this heightened pleading standard. (NSW's Memorandum of Points and Authorities in Support of Motion to Dismiss Plaintiffs' First, Second, Third, Fourth, Ninth, Tenth, Eleventh, Twelfth, and Thirteenth Causes of Action [FRCP 12(b)(6)]; Motion to Strike Certain Portions of Plaintiffs' Complaint [FRCP 12(f)]; and Motion for a More Definite Statement [FRCP 12(e)] at 9) (hereinafter NSW's Motion). To support its argument, NSW cites a California Supreme Court case, Chicago Title Ins. Co. v. Great Western Financial Corp., 69 Cal.2d 305, 316-18 (1968). This, however, is federal court. As such, the Federal Rules of Civil Procedure govern here. FED. R. CIV. P. 8 does not require plaintiffs to set out in detail the facts on which they base their claim. Instead, it only requires that plaintiffs set forth "a short and plain statement of the claim," in order to give defendants fair notice of the grounds on which plaintiffs' claims rest. Moreover, "[i]n federal court actions based on state law claims, state substantive law determines whether a claim exists and what defenses are recognized, but the Federal Rules of Civil Procedure govern the manner and time in which claims and defenses may be raised. . . . Hence, although state law may impose a requirement of detailed pleading on certain types of claims, the heightened standard does not apply in federal court." Francis v. State of California, 2004 U.S. Dist. LEXIS 16816, *12 (N.D. Cal. 2004); see Galbraith v. County of Santa Clara, 307 F.3d 1119, 1125 (9th Cir. 2002) ("Nearly all of the circuits have now disapproved any heightened pleading standard in cases other than those governed by Rule 9(b)") and South Austin Coalition Community Council v. SBC Communications Inc., 274 F.3d 1168, 1171 (7th Cir. 2001) (applying Rule 8's simplified pleading standard to an antitrust action). Under FED. R. CIV. P. 8, Plaintiffs have sufficiently alleged their claims under the Cartwright Act. It does not appear beyond doubt that Plaintiffs can prove no set of facts in support of their claim.
Moreover, NSW's argument fails on its own terms. To reiterate, NSW cites Chicago Title Ins. Co., 69 Cal. 2d 305 (1968), for the proposition that "[a]llegations of violations of Cartwright Act require a 'high degree of particularity' of 'overt acts in furtherance . . .' of the violations." First, the phrase "high degree of particularity" appears nowhere in Chicago Title Ins. Co.. Second, Chicago Title Ins. Co., 69 Cal. 2d at 317-18, itself sets forth a rule that, "in a civil action for damages based upon our anti-trust statute, it is incumbent upon the complaining party, not only to allege and prove the existence of an unlawful trust or combination but also to allege and prove that his business or property has been injured by the very fact of the existence and prosecution of such unlawful trust or combination." In this Court's opinion, Plaintiffs have even satisfied this standard.
d. CAL. BUS. PROF. CODE §§ 17043, 17045-48 (Unfair Practices Act)
CAL. BUS. PROF. CODE § 17043 (West 2004) states that "It is unlawful for any person engage in business within this State to sell any article or product at less than the cost thereof . . . or to give away any article or product, for the purpose of injuring competitors or destroying competition." (Emphasis added.) NSW attacks Plaintiffs' § 17043 claim on the ground that Plaintiffs have failed to specifically allege NSW's costs. This may be true. However, § 17043 also prohibits a business from" giv[ing] away any article or product, for the purpose of injuring competitors or destroying competition." Id. Plaintiffs allege that NSW conferred secret payments of money, benefits, and services to various entities and persons for the purpose of injuring Plaintiffs or destroying competition. This could constitute the "giving away" of "articles" for the purpose of "injuring competitors or destroying competition." It does not appear beyond doubt that Plaintiffs can prove no set of facts in support of their claim.
CAL. BUS. PROF. CODE § 17045 (West 2004) states that "The secret payment or allowance of rebates, refunds, commissions, or unearned discounts, . . . or secretly extending to certain purchasers special services or privileges not extended to all purchasers purchasing upon like terms and conditions, to the injury of a competitor and where such payment or allowance tends to destroy competition, is unlawful." Plaintiffs allege that NSW conferred secret payments of money, benefits, and services to various purchasers/co-defendants for the purpose of injuring Plaintiffs or destroying competition. Plaintiffs' complaint is sufficient. NSW cites Exhibit 1 of Plaintiffs' Complaint, which is an internal audit report conducted by UCD to investigate alleged improprieties in its construction projects, as evidence that competition was not destroyed. Exhibit 1 states that "the University of California could not positively identify a preferential treatment of favoritism to the vendors . . . arising from acceptance of gifts." However, just because internal auditors of the University of California could not "positively identify" preferential treatment does not necessarily mean that Plaintiffs could not, after discovery, prove some injury to themselves. It does not appear beyond doubt that Plaintiffs can prove no set of facts in support of their claim.
CAL. BUS. PROF. CODE § 17046 (West 2004) states that "It is unlawful for any person to use any threat, intimidation, or boycott, to effectuate any violation of this chapter." CAL. BUS. PROF. CODE § 17047 (West 2004) states that "It is unlawful for any . . . vendor . . . to solicit any violation of this chapter." CAL. BUS. PROF. CODE § 17048 (West 2004) states that "It is unlawful for any . . . vendor . . . jointly to participate or collude with any other such person in the violation of this chapter." Again, NSW cites Exhibit 1 of Plaintiffs' Complaint as evidence that competition was not destroyed. The passage that NSW cites states simply that "the University [of California] awards construction contracts to the lowest responsible bidder." But it is unclear how this statement — even if true — detracts from Plaintiffs' claims. Plaintiffs' claims do not arise from a direct contract dispute with the University; rather, they arise from NSW's allegedly anti-competitive behavior, which interfered with Plaintiffs' relationship with the University's sub-contractors. It does not appear beyond doubt that Plaintiffs can prove no set of facts in support of their claim.
2. Plaintiffs' Fourth Cause of Action: False Claims Act
NSW argues that Plaintiffs' Fourth Cause of Action, which is brought under the False Claims Act, CAL. GOV'T CODE §§ 12651 et seq., "fails to identify with particularity which defendants allegedly committed which acts." (NSW's Motion at 11.) Plaintiffs "concede that the allegations in support of the Fourth Cause of Action for violation of the False Claims Act may require a more clear definition" and moves for leave to amend their Fourth Cause of Action. (Plaintiffs' Opposition to Notice of Motion and Motion to Dismiss Plaintiffs' First, Second, Third, Fourth, Ninth, Tenth, Eleventh, Twelfth, and Thirteenth Causes of Action [FRCP 12(b)(6)]; Motion to Strike Certain Portions of Plaintiffs' Complaint [FRCP 12(f)]; and Motion for a More Definite Statement [FRCP 12(e)]; Motion for Leave to Amend in the Event that the Court Grants Any Aspect of NSW's Motions at 11-12.) Accordingly, this Court grants NSW's motion to dismiss Plaintiffs' Fourth Cause of Action.
However, since FED. R. CIV. P. 15, which governs amendment of pleadings, favors granting leave to amend freely, this Court grants Plaintiffs leave to amend their complaint. Plaintiffs are free to add a claim under the Federal False Claims Act, if they believe that the facts support such a claim. In Forman v. Davis, 371 U.S. 178, 182 (1962), the United States Supreme Court observed, "Rule 15 (a) declares that leave to amend 'shall be freely given when justice so requires'; this mandate is to be heeded. . . . If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits."See Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) ("[T]here exists a presumption under Rule 15(a) in favor of granting leave to amend") (emphasis in original) and Union Pac. R.R. Co. v. Nevada Power Co., 950 F.2d 1429, 1432 (9th Cir. 1991) ("Amendments seeking to add claims are to be granted more freely than amendments adding parties"). NSW argues that, by granting Plaintiffs leave to amend, this Court will prejudice NSW. NSW argues that leave to amend will result in delay, and may result in the loss of witnesses, the diminishment of witness recollection, and the destruction of documents. These risks, however, are inherent in any delay in proceedings. Moreover, NSW's has not substantiated its fear that evidence will be destroyed. NSW bears the burden of proving that the prejudice that it will suffer is substantial. NSW has failed in this regard.
3. Plaintiffs' Ninth Cause of Action: Defamation
The caption on NSW's Motion indicates that it moves to dismiss Plaintiffs' Ninth Cause of Action (Defamation). However, the body of NSW's Motion contains no argument along those lines. Accordingly, this Court denies NSW's Rule 12(b)(6) Motion to Dismiss Plaintiffs' Ninth Cause of Action.
4. Plaintiffs' Tenth, Eleventh, Twelfth, and Thirteenth Causes of Action: Interference with Business Relations
a. Plaintiffs' Tenth and Eleventh Causes of Action
In the Tenth Cause of Action, Plaintiff HVAC alleges that Defendants NSW and others intentionally interfered with HVAC's business relationship with ACCO on UCSF's Parnassus Project. In the Eleventh Cause of Action, Plaintiff HVAC alleges that said Defendants negligently interfered with said business relationship.
NSW argues that these Causes of Action fail because Plaintiffs "have failed to allege any facts sufficient to state a claim within the requisite time period." (NSW's Motion at 12.) Thus, NSW concludes, Plaintiffs' Tenth and Eleventh Causes of Action are time-barred. (NSW's Motion at 12.) Any failure on HVAC's part to specifically plead within the statute of limitations is immaterial. Under FED. R. CIV. P. 8(c), the statute of limitations is an affirmative defense. As such, NSW bears the burden of affirmatively proving that HVAC's claims are time-barred. NSW simply invokes a two-year statute of limitations without providing any facts to support its argument. Consequently, it has not satisfied its burden.
Alternatively, NSW argues that HVAC's Tenth and Eleventh Causes of Action fail because "Plaintiffs fail to allege facts establishing the existence of a valid contract between HVAC and ACCO." (NSW's Motion at 13.) In fact, Plaintiffs allege that HVAC submitted the lowest bid to ACCO, that HVAC then agreed to lower its bid even further and ACCO agreed to purchase all mechanical equipment from HVAC, that ACCO repeatedly confirmed its intention to abide by its agreement with HVAC, and that HVAC incurred a number of costs in reliance upon their agreement. It does not appear beyond doubt that Plaintiffs can prove no set of facts in support of its claim that a valid contract existed between HVAC and ACCO. In fact, it appears quite feasible that Plaintiffs can prove that a valid contract exited betwen HVAC and ACCO. Accordingly, this Court denies NSW's Motion to Dismiss Plaintiffs' Tenth and Eleventh Causes of Action.
b. Plaintiffs' Twelfth and Thirteenth Causes of Action
In their Twelfth Cause of Action, Plaintiffs AMT and HVAC allege that Defendants NSW and others intentionally interfered with AMT's business relationship with Lawson and HVAC's business relationship with Marelich on the UCD Projects. In their Twelfth Cause of Action, Plaintiffs allege that said Defendants negligently interfered with said business relationships.
NSW argues that Plaintiffs' Twelfth and Thirteenth Causes of Action fail because Plaintiffs "have failed to allege any facts sufficient to state a claim within the requisite time period." (NSW's Motion at 13.) Thus, NSW concludes, Plaintiffs' Twelfth and Thirteenth Causes of Actions are time-barred. For the reasons set forth in Part IV.A.4.a., supra, this Court rejects NSW's argument.
Alternatively, NSW argues that HVAC's Twelfth and Thirteenth Causes of Action fail because "[N]o where [sic] in plaintiffs' complaint does [sic] plaintiffs allege any facts that [sic] concerning a probable economic benefit or advantage to plaintiffs." (NSW's Motion 14.) NSW also argues that Plaintiffs "fail to allege facts showing that defendants engaged in wrongful conduct designed to interfere with or disrupt plaintiffs' relationship." (NSW's Motion 14.) The appropriate legal standard is not whether "plaintiffs allege any facts" with respect to a key element. Rather, the appropriate legal standard is whether "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."Conley, 355 U.S. at 45-46. Here, the "probable economic benefit or advantage" to Plaintiffs is obvious. Plaintiffs are in the business of selling mechanical equipment. Plaintiffs allege that Lawson and Marelich agreed to purchase mechanical equipment from them. Such a sale would have resulted in economic benefits to Plaintiffs. Furthermore, Plaintiffs' complaint contains numerous allegations that Defendants interfered with Plaintiffs' business relationships with Lawson and Marelich. See supra Part II.B. It does not appear beyond doubt that Plaintiffs can prove no set of facts in support of their claim. Thus, this Court denies NSW's Motion to Dismiss Plaintiffs' Twelfth and Thirteenth Causes of Action.
B. Motion for More Definite Statement Under Rule 12(e)
Motions for more definite statement are proper only where a complaint is so indefinite that the defendant cannot ascertain the nature of the claim being asserted. Cellars, 189 F.R.D. at 578. Plaintiffs' complaint is by no means a paragon of pellucidity. It is long and convoluted; it contains misspellings and typographical errors; it refers to parties without explanation of who they are; its paragraphs are misnumbered; and its prose is untidy. However, as demonstrated by the Background section of this Order, supra Part II., it is not so indefinite that Defendants cannot ascertain the nature of the claims being asserted. Accordingly, this Court denies NSW's Motion for More Definite Statement.
As an aside, similar critiques can be leveled against Plaintiffs' and NSW's motion, opposition, and reply, which this Court is presently considering. This Court raises this observation in the hope that the parties will make greater efforts in the future to file quality memoranda.
C. Motion to Strike Under Rule 12(f)
"Motions to strike should not be granted unless it is clear that the matter stricken could have no possible bearing on the subject matter of the litigation." Colaprico, 758 F. Supp. at 1339 (emphasis added). NSW bears a heavy burden to persuade this Court to grant this disfavored motion. NSW seeks to strike Plaintiffs' prayer for relief, Ninth Cause of Action (Defamation), and a number of paragraphs in the Complaint on the grounds that they are "vague," "ambiguous," "conclusory," and/or "prejudicial." (NSW's Motion 17-19.) Plaintiffs' prayer for relief and Ninth Cause of Action obviously bear on the subject matter of the litigation. With respect to the various paragraphs that NSW wishes to strike, mere rote invocation of terms such as "conclusory" is insufficient to prove that a paragraph has no possible bearing on the subject matter of the litigation. This Court has looked at every paragraph that NSW moves to strike. This Court concludes that each paragraph has some bearing on the subject matter of the litigation and, therefore, denies NSW's Motion to Strike Certain Portions of Plaintiffs' Complaint.
V. CONCLUSION
For the reasons stated above, this Court denies NSW's Motion to Dismiss Plaintiffs' First, Second, Third, Ninth, Tenth, Eleventh, Twelfth, and Thirteenth Causes of Action. This Court grants NSW's Motion to Dismiss Plaintiffs' Fourth Cause of Action, but it also grants Plaintiffs leave to amend their complaint. Furthermore, this Court denies NSW's Motion for More Definite Statement and NSW's Motion to Strike Certain Portions of Plaintiffs' Complaint.