Desert Salon Servs., Inc. v. KPSS, Inc., 2:12-CV-1886 JCM (CWH)
| Decision Date | 06 February 2013 |
| Docket Number | 2:12-CV-1886 JCM (CWH) |
| Parties | DESERT SALON SERVICES, INC., Plaintiff(s), v. KPSS, INC., Defendant(s). |
| Court | U.S. District Court — District of Nevada |
Presently before the court is defendant KPSS, Inc.'s (Kao USA, Inc.) partial motion to dismiss. (Doc. # 5). Plaintiff Desert Salon Services, Inc. responded (doc. # 7), and defendant replied (doc. # 9).
On January 16, 1991, defendant's predecessor-in-interest, Goldwell Cosmetics (U.S.A.) Inc., ("Goldwell"), entered into a regional buying agreement with plaintiff's predecessor-in-interest, Andrew Muckersie ("Muckersie"). The regional buying agreement granted Muckersie the exclusive right to sell certain hairdressing and skin care products and cosmetics manufactured by Goldwell ("product line") within a specified region. The regional buying agreement was amended to include portions of Nevada in this specified region. On October 31, 2010, the regional buying agreement expired. Upon merger with Goldwell, defendant assumed and became liable for all obligations of Goldwell under the regional buying agreement.
Plaintiff alleges that in June 2006, defendant negotiated with Cadeau Express, Inc. ("Cadeau") to sell the product line directly to Cadeau. However, upon plaintiff's discovery of this relationship, defendant cancelled the transaction. Further, defendant cancelled plaintiff's shipment to Cadeau and refused to ship any products to Cadeau. Plaintiff alleges that by refusing to permit plaintiff to sell the product line to Cadeau and by negotiating directly with Cadeau to sell the product line, defendant intentionally interfered with plaintiff's prospective contractual relations.
Plaintiff alleges that in April 2009, defendant interfered with plaintiff's existing contractual relationship with Euphoria Salons & Day Spas ("Euphoria") by negotiating directly with Euphoria to treat it has a regional chain; and in December 2009, by negotiating directly with Euphoria to treat it as a national chain. Further, on October 6, 2010, defendant sold the product line directly to Euphoria.
Plaintiff also alleges that in March 2009, a Goldwell wholly-owned distributor, Essential Salon Services Inc. ("Essential"), was selling the product line to a salon that was selling the product line on the internet. Plaintiff alleges that defendant, by knowingly allow the sale of its product line on the internet, interfered with plaintiff's existing and prospective business relationships in Nevada.
On October 1, 2012, plaintiff filed a complaint alleging breach of contract, intentional interference with contractual relations, intentional interference with prospective economic advantage, and breach of the implied covenant of good faith and fair dealing; plaintiff also requests punitive damages. Defendant's partial motion to dismiss seeks dismissal of plaintiff's causes of action for intentional interference with contractual relations (claims 3 and 4), intentional interference with prospective economic advantage (claims 2 and 4), and breach of the implied covenant of good faith and fair dealing (claim 5).
A court may dismiss a plaintiff's complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide "[a] short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 does not require detailed factualallegations, it demands "more than labels and conclusions" or a "formulaic recitation of the elements of a cause of action." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citation omitted).
"Factual allegations must be enough to rise above the speculative level." Twombly, 550 U.S. at 555. Thus, to survive a motion to dismiss, a complaint must contain sufficient factual matter to "state a claim to relief that is plausible on its face." Iqbal, 129 S.Ct. at 1949 (citation omitted).
In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply when considering motions to dismiss. First, the court must accept as true all well-pled factual allegations in the complaint; however, legal conclusions are not entitled to the assumption of truth. Id. at 1950. Mere recitals of the elements of a cause of action, supported only by conclusory statements, do not suffice. Id. at 1949.
Second, the court must consider whether the factual allegations in the complaint allege a plausible claim for relief. Id. at 1950. A claim is facially plausible when the plaintiff's complaint alleges facts that allows the court to draw a reasonable inference that the defendant is liable for the alleged misconduct. Id. at 1949.
Where the complaint does not permit the court to infer more than the mere possibility of misconduct, the complaint has "alleged - but not shown - that the pleader is entitled to relief." Id. (internal quotations omitted). When the allegations in a complaint have not crossed the line from conceivable to plausible, plaintiff's claim must be dismissed. Twombly, 550 U.S. at 570.
The Ninth Circuit addressed post-Iqbal pleading standards in Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). The Starr court stated, Id.
To prove intentional interference with contractual relations, "a plaintiff must establish: (1) a valid and existing contract; (2) the defendant's knowledge of the contract; (3) intentional acts intended or designed to disrupt the contractual relationship; (4) actual disruption of the contract; and (5) resulting damage." J.J. Indus., LLC v. Bennett, 119 Nev. 269, 273, 71 P.3d 1264, 1267 (2003). To prove an intentional interference, "the plaintiff must establish that the defendant had a motive to induce breach of the contract with the third party." Id. at 1268.
To prove intentional interference with prospective economic advantage, a plaintiff must establish: "(1) a prospective contractual relationship between the plaintiff and a third party; (2) knowledge by the defendant of the prospective relationship; (3) intent to harm the plaintiff by preventing the relationship; (4) the absence of privilege or justification by the defendant; and (5) actual harm to the plaintiff as a result of the defendant's conduct." Wichinsky v. Mosa, 109 Nev. 84, 85-88, 847 P.2d 727, 729-30 (1993).
Claims for intentional interference with prospective business advantage and contractual relations are subject to the three-year statute of limitations in NRS 11.190(3)©. Stalk v. Mushkin, 125 Nev. 21, 22, 199 P.3d 838, 839 (2009).
Defendant argues that plaintiff's second and fourth claims are barred by the statute of limitations. (Doc. # 5). Plaintiff concedes that defendant is not liable for conduct that exceeds the three-year statute of limitations; however, plaintiff argues some of its allegations against defendant are not limited in time. Plaintiff therefore asserts that defendant should be liable for any misconduct committed after October 1, 2009, and on or before October 31, 2010.
While some of plaintiff's allegations in claims two and four do not reference when the wrongful conduct occurred, these allegations are closely tied to allegations that reference dates that are beyond the three-year statute of limitations. Thus, to the extent that plaintiff's intentional interference with contractual relations and prospective business advantage causes of actions arebased on events that occurred before October 1, 2009, these causes of action are dismissed with prejudice.
Further, to the extent that plaintiff's intentional interference with contractual relations and prospective business advantage causes of actions are based on events that occurred between October 1, 2009, and October 31, 2010, these are not sufficiently pleaded "to give fair notice and to enable the opposing party to defend itself effectively." Starr, 652 F.3d at 1216. These allegations are dismissed without prejudice.
"[A]ll contracts impose upon the parties an implied covenant of good faith and fair dealing, which prohibits arbitrary or unfair acts by one party that work to the disadvantage of the other." Brochu v. Foote Enterprises, Inc., case no. 55963, 2012 WL 5991571, at *5 (Nev. Nov. 29, 2012); see also Hilton Hotels v. Butch Lewis Productions, 109 Nev. 1043, 1046, 862 P.2d 1207, 1209 (1993) ().
Where a breach of the implied covenant of good faith and fair dealing is alleged, a plaintiff can make a claim for damages under a contract theory and/or a tort theory. Hilton Hotels Corp. v. Butch Lewis Productions, Inc., 107 Nev. 226, 232-33, 808 P.2d 919, 922-23 (1991). When one party holds "vastly superior bargaining power," Nevada courts have extended tort liability for breach of the implied covenant of good faith and fair dealing. Insurance Co. of the West v. Gibson Tile, 122 Nev. 455, 462, 134 P.3d 698, 702 (2006) (quoting Aluevich v. Harrah's, 99 Nev. 215, 217, 660 P.2d 986, 986 (1983)). The covenant rises in tort only where there is a special relationship between the victim and tortfeasor "characterized by elements of public interest,...
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