Etchegaray Farms, LLC v. Lehr Bros., Inc.
| Decision Date | 19 June 2018 |
| Docket Number | CASE NO. 1:17-CV-1449 AWI JLT |
| Citation | 326 F.Supp.3d 987 |
| Court | U.S. District Court — Eastern District of California |
| Parties | ETCHEGARAY FARMS, LLC, a California limited liability company, Plaintiff v. LEHR BROTHERS, INC., a California corporation d/b/a Big L Packers, et al., Defendant and Related Claims |
Bartholomew Mark Botta, June T. Monroe, Patricia Jane Rynn, Rynn & Janowsky, LLP, Newport Beach, CA, Tracy M. Saiki, Barry L. Goldner, Klein, Denatale, Goldner, Rosenlieb, Cooper & Kimball LLP, Bakersfield, CA, for Plaintiff
Elizabeth C. Estrada, William L. Alexander, Alexander & Associates, PLC, Bakersfield, CA, for Defendant.
ORDER ON ETCHEGARAY FARMS' MOTION TO DISMISS
This is a Perishable Agricultural Commodities Act ("PACA") ( 7 U.S.C. § 499a et seq. ) case based on the sale and distribution of organic lemons. This action was consolidated and merged with Lehr Bros., Inc. v. Etchegaray Farms , LLC , 1:17-CV-1762 AWI JLT, a case that was removed from the Kern County Superior Court. Currently before the Court is Etchegaray Farms' ("Etchegaray") motion to dismiss Lehr Brothers ("Lehr") and California Potato Sales' ("CPS") first and second causes of action for the common counts of open book account and money lent. Etchegaray moves to dismiss under Rule 12(b)(6), but alternatively moves for summary judgment under Rule 56. See Doc. No. 5. For the reasons that follow, the motion to dismiss will be granted in part and denied in part, the motion for summary judgment will be granted in part, but amendment will be permitted.
From Lehr/CPS's Complaint ("Complaint"), Etchegaray grows organic lemons. In 2011, Lehr contracted with Etchegaray for the packing and marketing of Etchegaray's lemons. CPS was given the right to sell lemons on behalf of Etchegaray. As part of these agreements, CPS periodically advanced money to Etchegaray to aid in the lemon harvesting process. These sums were intended and agreed to be repaid to CPS by deductions from any future proceeds generated by the sale of Etchegaray's organic lemons.
Within a year of October 2017, CPS discovered that beginning in 2013, the sums advanced by CPS to Etchegaray exceeded the proceeds generated by the organic lemon sales by the following amounts: 2013—$6,456.74; 2014—$409,403.79; 2015—$381,534.58; 2016—$18,064.66. Lehr and CPS discovered that their accountings and pack-out reports (some of which were provided to Etchegaray) erroneously reflected a higher percentage of fruit being packed per bin, greater numbers of bins being sold, and lower hauling costs incurred. These errors obscured the significant disparities between the actual and reported information, and served to create a misperception that the crop advances provided by CPS had been repaid by Etchegaray. Lehr and CPS's accountings and pack-out reports were so inconsistent with the actual numbers of fruit packed per bin, the numbers of bins sold, and the hauling costs, that the error should have been obvious to any person in the lemon/agriculture industry, including an experienced grower like Etchegaray. When Lehr and CPS discovered the erroneous accounts, they notified Etchegaray.
Also, beginning in January 2017, an employee or agent of Lehr and CPS purported to agree to purchase organic lemons from Etchegaray with payment terms that were remarkably different from the customs and prevailing practices in the industry and from the prior course of dealing between the parties, including terms related to hauling costs, bin guarantees, and "ups" (sale proceeds generated from the sale of lemons).
Lehr and CPS now bring claims against Etchegaray for open book account, money lent, rescission, reformation, and declaratory relief. Under the first cause of action for open book, Lehr and CPS, after incorporating all prior paragraphs by reference, allege that, within the last four years, Etchegaray has become indebted to CPS on an open book account for money due in the sum of $726,456.22, but after CPS demanded payment, Etchegaray refused to pay. Under the second cause of action for money leant, after incorporating all prior paragraphs by reference, Lehr and CPS allege that Etchegaray has become indebted to them within the last four in the sum of $726,456.22, but after CPS demanded payment, Etchegaray refused to pay.
Under Federal Rule of Civil Procedure 12(b)(6), a claim may be dismissed because of the plaintiff's "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under a cognizable legal theory. See Mollett v. Netflix, Inc., 795 F.3d 1062, 1065 (9th Cir. 2015). In reviewing a complaint under Rule 12(b)(6), all well-pleaded allegations of material fact are taken as true and construed in the light most favorable to the non-moving party. Kwan v. SanMedica, Int'l, 854 F.3d 1088, 1096 (9th Cir. 2017). However, complaints that offer no more than "labels and conclusions" or "a formulaic recitation of the elements of action will not do." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Johnson v. Federal Home Loan Mortg. Corp., 793 F.3d 1005, 1008 (9th Cir. 2015). The Court is "not required to accept as true allegations that contradict exhibits attached to the Complaint or matters properly subject to judicial notice, or allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences."
Seven Arts Filmed Entm't, Ltd. v. Content Media Corp. PLC, 733 F.3d 1251, 1254 (9th Cir. 2013). To avoid a Rule 12(b)(6) dismissal, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 ; Mollett, 795 F.3d at 1065. "A claim has facial plausibility when the plaintiff pleads 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, 129 S.Ct. 1937 ; Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013). "Plausibility" means "more than a sheer possibility," but less than a probability, and facts that are "merely consistent" with liability fall short of "plausibility." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 ; Somers, 729 F.3d at 960. The Ninth Circuit has distilled the following principles for Rule 12(b)(6) motions: (1) to be entitled to the presumption of truth, allegations in a complaint or counterclaim may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively; (2) the factual allegations that are taken as true must plausibly suggest 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. Levitt v. Yelp! Inc., 765 F.3d 1123, 1135 (9th Cir. 2014). In assessing a motion to dismiss, courts may consider documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice. In re NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1051 (9th Cir. 2014). If a motion to dismiss is granted, "[the] district court should grant leave to amend even if no request to amend the pleading was made...." Ebner v. Fresh, Inc., 838 F.3d 958, 962 (9th Cir. 2016). However, leave to amend need not be granted if amendment would be futile or the plaintiff has failed to cure deficiencies despite repeated opportunities. Garmon v. County of L.A., 828 F.3d 837, 842 (9th Cir. 2016).
With respect to an open book account, Etchegaray contends that there was no valid open account. After each growing season, Etchegaray received a final accounting. Thus, the practice described by Lehr and CPS does not fit the definition of an "open book account," rather what is described is a closed account.
In reply, Etchegaray argues inter alia that the Complaint is inconsistent in that it alleges an open book account balance due of over $700,000.00, but then also alleges that only within the last year did Lehr and CPS determine that Etchegaray owed money. If Lehr and CPS only recently determined that a balance was owed, then this is inconsistent with an open book account because the account would have shown a balance immediately and for a number of years.
With respect to money lent, Etchegaray argues that the facts and dates alleged in the Complaint show that the claims for money lent in 2013, 2014, and 2015 are barred by the two year limitation period of California Code of Civil Procedure 339(1).
Lehr & CPS argue that they have pled a plausible book account claim. There does not appear to be a dispute that there was a book account agreement between the parties. The dispute is whether the account is open or closed, but the only distinction between an open book account and a closed book account is the running of the statute of limitations. The four year limitations period does not begin until the account is closed. The limitations issue is irrelevant here because the complaint only seeks sums that fall within four years of filing. If necessary, Lehr/CPS request leave to amend to allege a closed account.
With respect to money lent, Lehr/CPS argues that the claim is subject to a four year statute of limitation.
Under California law, "common counts" are general pleadings that seek to recover money owed without necessarily specifying the nature of the claim. See Title Ins. Co. v. State Bd. of Equalization, 4 Cal.4th 715, 731, 14 Cal.Rptr.2d 822, 842 P.2d 121 (1992) ; Interstate Grp. Adm'rs v. Cravens, 174 Cal.App.3d 700, 706 & n.2, 220 Cal.Rptr. 250 (1985). "A common count is proper whenever the plaintiff claims a sum...
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