Culver Clinic Dev. v. Harms Software, Inc.

• Decision Date: 07 January 2022
• Docket Number: CV 21-8374 DSF (GJSx)
• Court: U.S. District Court — Central District of California
• Parties: CULVER CLINIC DEVELOPMENT, INC. et al., Plaintiffs, v. HARMS SOFTWARE, INC. et al., Defendants.

CULVER CLINIC DEVELOPMENT, INC. et al., Plaintiffs,
v.
HARMS SOFTWARE, INC. et al., Defendants.

No. CV 21-8374 DSF (GJSx)

United States District Court, C.D. California

January 7, 2022

ORDER DENYING MOTION TO REMAND (DKT. 22), DENYING MOTION TO STRIKE (DKT. 21), AND GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS (DKT. 20)

Dale S. Fischer United States District Judge

Plaintiffs move to remand this action to Los Angeles Superior Court. Dkt. 22 (MTR). Defendant Millennium Systems International, LLC, f/k/a Harms Software, Inc. (MSI) opposes. Dkt. 30 (Remand Opp'n).

MSI moves to strike Plaintiffs' First Amended Complaint (FAC). Dkt. 21 (MTS). Plaintiffs oppose. Dkt. 31 (MTS Opp'n). MSI also moves to dismiss Plaintiffs' FAC. Dkt. 20 (MTD). Plaintiffs oppose. Dkt. 32 (MTD Opp'n).

The Court deems these matters appropriate for decision without oral argument. See Fed.R.Civ.P. 78; Local Rule 7-15. For the reasons stated below, Plaintiffs' motion to remand is DENIED, MSI's motion to strike the FAC is DENIED as moot, and MSI's motion to dismiss is GRANTED in part and DENIED in part.

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I. BACKGROUND

A. The Parties

Plaintiffs are California corporations with their principal places of business in Los Angeles County and Orange County, California. FAC ¶¶ 1-6. Plaintiffs Culver Clinic, Santa Monica Clinic, and WMC Clinic are franchisees of ME SPE Franchising, LLC, previously doing business as Massage Envy Franchising LLC (Massage Envy). Id. ¶ 16. Plaintiffs OC Clinic, Marina Clinic, and Redondo Clinic were franchisees of Massage Envy until they shut down their operations in 2020. Id. ¶ 17.

MSI is a New Jersey corporation with its principal place of business in Parsippany, New Jersey; it conducts substantial business in the State of California. Id. ¶ 7. Defendants OC Development Group, LLC (OCDG) and Franchise Management Group, Inc. (FMG, and collectively with OCDG, the Regional Developers) are a California limited liability company^[1] and corporation, respectively, with their principal places of business in Los Angeles County, California. Id. ¶¶ 8-9.

Plaintiffs originally filed this action in California Superior Court in Los Angeles County on February 24, 2021. Id. ¶ 13. On October 22, 2021, MSI removed this action based on diversity jurisdiction. Id. ¶ 14.

B. Meevo Demonstrations

MSI owns, operates, markets, and distributes a point-of-sale product, service, or system known as “Meevo.” Id. ¶ 18. Meevo is a “software as a service” for point-of-sale systems, inventory management, appointment and reservation booking management, employee and human resources management, business goals tracking, and daily task management. Id. ¶ 19. MSI has produced several in-person and online demonstrations of Meevo to Massage Envy and its

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franchisees, including in-person demonstrations in 2018 and 2019 to Plaintiffs at their respective locations. Id. ¶¶ 20, 22-24.

On September 28, 2018 Plaintiffs attended a Meevo presentation in Orange County, California. Id. ¶ 29. During that presentation, an MSI employee represented to Plaintiffs that Meevo would “transform their businesses” and would improve “point-of-sale transactions, charge dues and fees, process refunds and cancellations, conduct inventory management, book and manage appointments, provide employee and human resources data and payroll information and reports, communicate with clients, manage client and member information and transactions, coordinate and document clients' individual needs and requests, process and report franchise related payments . . . .” Id.

On April 4, 2017, MSI set up a vendor booth in the Massage Envy annual franchisee meeting in Orlando, Florida. Id. ¶ 30. Several MSI employees, including John Harms, demonstrated to a representative of all Plaintiffs how to use Meevo. Id. Harms allegedly “represented that MSI's technology could safely, lawfully and adequately migrate the data from MSI's prior system (Millennium) to Meevo and implement Meevo with the Meevo Functions in Plaintiffs' businesses and the franchise network.” Id.

On April 25, 2018, MSI again participated in the Massage Envy annual franchisee meeting, which was held in Grapevine, Texas. Id. ¶ 31. Harms again demonstrated to Plaintiffs' representative how to use Meevo and represented it could safely, lawfully, and adequately migrate the data from Millennium to Meevo and implement Meevo with Plaintiffs' businesses and “further falsely represented to Plaintiffs that Meevo would improve their business operations and sales, and improve functionality in their management reporting and service.” Id.

Plaintiffs also allege “MSI falsely represented that by subscribing to Meevo, the Plaintiffs' businesses would realize substantial improvements in revenue.” Id. ¶ 32.

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C. Plaintiffs' Use of Meevo

Plaintiffs allege they “executed a Subscription Agreement with MSI for Meevo and MSI products and services.” Id. ¶ 33. Plaintiffs pay monthly fees to Massage Envy for use of Meevo services, products, and support, which Massage Envy then remits to MSI per the Subscription Agreement. Id. ¶ 34. In late February 2019, Plaintiffs closed their locations for three days to begin implementation of Meevo on February 26, 2019 (the Launch). Id. ¶ 36. Soon after the Launch, “Plaintiffs began to encounter significant and serious defects, malfunctions, and irregularities with Meevo.” Id. ¶¶ 37-38. As a result, Plaintiffs have encountered issues with their clients, including cancellations, negative feedback, increased expenses, loss of reputation, and loss of goodwill. Id. ¶ 39. Plaintiffs also lost substantial revenue and business. Id. ¶ 43.

Plaintiffs' FAC asserts causes of action against MSI for (1) violation of Cal. Bus. & Prof. Code §§ 17500 et seq. (California's False Advertising Law (FAL)); (2) negligent misrepresentation; (3) breach of written contract; (4) breach of implied covenant of good faith and fair dealing; (5) breach of implied warranty of merchantability; (6) breach of implied warranty of fitness for a particular purpose; (7) unjust enrichment in the alternative; and (8) professional negligence. Id. ¶¶ 50-96.

The FAC also asserts a cause of action against the Regional Developers for negligence. Id. ¶¶ 97-101. The Regional Developers were named as defendants in this action for the first time in the FAC. Id. ¶ 15.

II. LEGAL STANDARD

A. Removal

“Federal courts are courts of limited jurisdiction” and “possess only that power authorized by [the] Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Generally, a case may be removed on the basis of diversity of citizenship if the amount in controversy exceeds $75, 000 and the

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plaintiff and defendant are citizens of different states. 28 U.S.C. § 1332(a). But cases may not be removed on the basis of diversity of citizenship “if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.” 28 U.S.C. § 1441(b)(2).

“If after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court.” 28 U.S.C. § 1447(e).

“The defendant bears the burden of establishing that removal is proper.” Provincial Gov't of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir. 2009). Generally, doubts as to removability are resolved in favor of remanding the case. See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941); Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992).

B. Motion to Strike

A district court “may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). In considering a motion to strike, the court must view the pleading under attack in the light most favorable to the non-moving party. Robinson v. Managed Accounts Receivable Corp., 654 F.Supp.2d 1051, 1065 (C.D. Cal. 2009). Therefore, “motion[s] to strike should not be granted unless the court is convinced that there are no questions of fact, that any questions of law are clear and not in dispute, and that under no set of circumstances could the claim succeed.” Id. (citation omitted).

C. Motion to Dismiss

Rule 12(b)(6) allows an attack on the pleadings for failure to state a claim on which relief can be granted. “[W]hen ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint.” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam). However, a court is “not bound to accept as

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true a legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Id. (alteration in original) (quoting Twombly, 550 U.S. at 557). A complaint must “state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. This means that the complaint must plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. There must be “sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively . . . and factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).

Ruling on a motion to dismiss will be “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to...