Q Level, LLC v. Moog Music, Inc.

• Decision Date: 04 September 2020
• Docket Number: CIVIL CASE NO. 1:20-cv-00046-MR-WCM
• Court: U.S. District Court — Western District of North Carolina
• Parties: Q LEVEL, LLC, a Nevada limited Liability company, Plaintiff, v. MOOG MUSIC, INC., and MOOG INSTITUTE, INC., Defendants.

Q LEVEL, LLC, a Nevada limited Liability company, Plaintiff, v. MOOG MUSIC, INC., and MOOG INSTITUTE, INC., Defendants.

CIVIL CASE NO. 1:20-cv-00046-MR-WCM

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA ASHEVILLE DIVISION

September 4, 2020

ORDER

THIS MATTER is before the Court on the Defendants' Motion to Dismiss [Doc. 44]; the Magistrate Judge's Memorandum and Recommendation [Doc. 50] regarding the disposition of the Motion to Dismiss; the Defendants' Objections to the Memorandum and Recommendation [Doc. 51]; and the Plaintiff's Objections to the Memorandum and Recommendation [Doc. 52].

I. BACKGROUND

On October 17, 2019, the Plaintiff Q Level, LLC, (the "Plaintiff") filed a Complaint in the United States District Court for the Central District of California asserting breach of contract, quantum meruit, and promissory estoppel claims against Moog Music, Inc., and Moog Institute, Inc. (the "Defendants"). [Doc. 1].

On November 12, 2019, the Defendants filed a motion to dismiss for lack of personal jurisdiction, a motion to transfer venue, and a motion to dismiss for failure to state a claim. [Doc. 18-14]. On December 23, 2019, the Plaintiff filed an amended complaint (the "First Amended Complaint"). [Docs. 29, 31, 32].

On January 10, 2020, the Defendants filed a new motion to dismiss for lack of personal jurisdiction, a motion to transfer venue, and a motion to dismiss for failure to state a claim. [Doc. 33].

On February 11, 2020, the Central District of California found that it lacked personal jurisdiction over the Defendants and granted the Defendants' motion to transfer the case to this District. [Doc. 37].

On February 21, 2020, the Defendants filed the present Motion to Dismiss. [Doc. 44]. The Plaintiff responded and the Defendants replied. [Docs. 48, 49].

Pursuant to 28 U.S.C. § 636(b) and the standing Orders of Designation of this Court, the Honorable W. Carleton Metcalf, United States Magistrate Judge, was designated to consider the Defendants' Motion to Dismiss and to submit a recommendation for its disposition. On June 15, 2020, theMagistrate Judge filed a Memorandum and Recommendation recommending that the Defendants' Motion to Dismiss be granted as to the claim for breach of contract and be denied as to the claims for quantum meruit and promissory estoppel. [Doc. 50].

The parties were advised that any objections to the Magistrate Judge's Memorandum and Recommendation were to be filed in writing within fourteen (14) days of service. On June 29, 2020, each party timely filed objections. [Docs. 51, 52]. On July 13, 2020, each party responded. [Docs. 53, 54].

II. STANDARD OF REVIEW

The Federal Magistrate Act requires a district court to "make a de novo determination of those portions of the report or specific proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1). In order "to preserve for appeal an issue in a magistrate judge's report, a party must object to the finding or recommendation on that issue with sufficient specificity so as reasonably to alert the district court of the true ground for the objection." United States v. Midgette, 478 F.3d 616, 622 (4th Cir. 2007). The Court is not required to review, under a de novo or any other standard, the factual findings or legal conclusions of the magistrate judge to which no objections have been raised. Thomas v. Arn, 474 U.S. 140, 150 (1985).Additionally, the Court need not conduct a de novo review where a party makes only "general and conclusory objections that do not direct the court to a specific error in the magistrate's proposed findings and recommendations." Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir. 1982).

III. DISCUSSION

The Defendants present two objections to the Memorandum and Recommendation. [Doc. 51]. First, the Defendants object that the Magistrate Judge improperly denied the motion to dismiss the promissory estoppel claim because North Carolina does not recognize promissory estoppel claims and promissory estoppel under California law requires a definite and certain promise. [Id. at 2-7]. Second, the Defendants object that the Magistrate Judge improperly denied the motion to dismiss the quantum meruit claim because the First Amended Complaint failed to allege that the Plaintiff had a reasonable expectation of payment from either of the Defendants. [Id. at 8-11].

The Plaintiff presents two objections to the Memorandum and Recommendation. [Doc. 52]. First, the Plaintiff objects that the Magistrate Judge's made premature recommendations regarding the materiality of provisions missing from the parties' agreement because questions of materiality are generally for the jury under North Carolina and California law.[Id. at 3-4]. Second, the Plaintiff objects that the Magistrate Judge erred by finding that the last act concerning the formation of the MOU occurred in November 2018 when the MOU was amended. [Id. at 4-5].

A. Defendants' First Objection

The Defendants' first objection challenges the Magistrate Judge's recommendation that the Plaintiff's promissory estoppel claim not be dismissed. [Doc. 51 at 7]. The Defendants agree with the Magistrate Judge that the promissory estoppel claim cannot proceed under North Carolina law. They object, however, to the Magistrate Judge's conclusion that the promissory estoppel claim may be able to proceed under California law. They argue that promissory estoppel claims under California law require a clear and definite promise. The Magistrate Judge concluded that the Memorandum of Understanding ("MOU") was too uncertain and indefinite to be enforced. [Id.]. Therefore the Defendants argue that the MOU cannot serve as the basis for a promissory estoppel claim. They also argue that the promises in the MOU are insufficient because the agreement was conditional. [Id. at 4].

The Magistrate Judge determined that the parties had provided an insufficient record at this stage for the Court to determine whether North Carolina or California law applied. [Doc. 50 at 21]. The Court agrees withthe Magistrate Judge that the present record makes it impossible to determine which state's law should govern this matter. [Doc. 50 at 21]. Therefore, even though it appears to be undisputed that this promissory estoppel claim cannot survive if North Carolina law applies, the claim can nonetheless survive dismissal under Rule 12(b)(6) if it remained viable under California law. This, of course, does not preclude an ultimate determination that North Carolina law applies.

Under California law, "[t]he elements of a promissory estoppel claim are (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) the reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance." Flintco Pac., Inc. v. TEC Mgmt. Consultants, Inc., 1 Cal. App. 5th 727, 734 (Ct. App. 2016) (internal quotations and citations omitted). "To be enforceable, a promise need only be definite enough that a court can determine the scope of the duty[,] and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages . . . . [T]hat a promise is conditional does not render it unenforceable or ambiguous." Aceves v. U.S. Bank, N.A., 192 Cal. App. 4th 218, 226, 120 Cal. Rptr. 3d 507, 514 (Cal. App. 2 Dist. 2011) (citations and quotations omitted).

The Defendants attempt to tie the viability of the promissory estoppel claim to the enforceability of the MOU. [Doc. 51 at 4]. However, clear and definite promises in an unenforceable agreement can form the basis for a promissory estoppel claim. US Ecology, Inc. v. State of California, 129 Cal. App. 4th 887, 902, 28 Cal. Rptr. 3d 894, 905 (2005) (stating that "promissory estoppel is an equitable doctrine to allow enforcement of a promise that would otherwise be unenforceable . . .") (emphasis added) (citation omitted).¹ As such, the fact that the MOU is unenforceable does not dictate that a clear and unambiguous promise therein is insufficient to support a promissory estoppel claim. Moreover, the fact that the MOU contained "conditionally binding terms" does not mean that the promises in the MOU cannot support a promissory estoppel claim. Aceves, 192 Cal. App. 4th at 226, 120 Cal. Rptr. 3d at 514 (stating that the fact "that a promise is conditional does not render it unenforceable or ambiguous.") (citations and quotations omitted). As such, the viability of the promissory estoppel claim depends on whether the promise was clear and definite, not whether the promise was made in the unenforceable MOU.

Here, the First Amended Complaint alleges that the Defendants

made clear and unambiguous promises to Q Level for the purpose of inducing it to continue providing services and expend promotional efforts for the Festival as outlined in the MOU, including the promise that Q Level would produce the Festival in 2020 and subsequent years, and the promise that Moog was engaging in good-faith efforts to negotiate a long-form agreement.

[Doc. 32 at ¶ 44]. The promise to have the Plaintiff produce the 2020 Festival is clear and unambiguous, even though the Plaintiff does not allege by what means such a promise was made - whether as part of the MOU or otherwise. Nonetheless, at this stage the Court takes the allegations as true for the purpose of determining whether they state a claim. As such, the Plaintiff's promissory estoppel claim under California law survives the Defendants' motion to dismiss. Accordingly, the Defendants' first objection is overruled.

B. Defendants' Second Objection

In their second objection, the Defendants argue that the Magistrate Judge's recommendation that the Court not dismiss the Plaintiff's quantum meruit claim was in error because the First Amended Complaint contains no allegations that the Plaintiff had a reasonable expectation to receive payment from the Defendants. [Doc. 51 at 8].

The North Carolina Supreme...