Vascular Imaging Professionals, Inc. v. Digirad Corp.

• Decision Date: 30 July 2019
• Docket Number: Case No.: 19cv486 JM(MSB)
• Court: U.S. District Court — Southern District of California
• Parties: VASCULAR IMAGING PROFESSIONALS, INC., Plaintiff, v. DIGIRAD CORPORATION, et al., Defendants.

401 F.Supp.3d 1005

VASCULAR IMAGING PROFESSIONALS, INC., Plaintiff,

v.DIGIRAD CORPORATION, et al., Defendants.

Case No.: 19cv486 JM(MSB)

United States District Court, S.D. California.

Signed July 30, 2019

Eric John Medel, Medel Law Group APC, Irvine, CA, for Plaintiff.

Brian A. Katz, Pro Hac Vice, Olshan Frome Wolosky LLP, New York, NY, Joseph Thomas Ergastolo, Wright, L'Estrange & Ergastolo, San Diego, CA, for Defendants.

ORDER ON DEFENDANTS' MOTION TO DISMISS

Hon. Jeffrey T. Miller, United States District Judge

Presently before the court is a motion to dismiss pursuant to Federal Rule of Civil Procedure Rule 12(b)(6) filed by Defendants Digirad Corporation ("Digirad Corp.") and Digirad Imaging Solutions, Inc. ("Digirad Imaging") (collectively "Defendants"). (Doc. No. 10.) The motion has been fully briefed and the court finds it suitable for submission on the papers and without oral argument in accordance with Civil Local Rule 7.1(d)(1). For the reasons set forth below, the motion is granted in part and denied in part.

I. Background

On February 1, 2019, Plaintiff filed this lawsuit in San Diego County Superior Court asserting claims for breach of contract, breach of the covenant of good faith and fair dealing, declaratory relief, tortious interference with contract, interference with prospective economic advantage, and unfair competition. (Doc. No. 1 at 8-22.¹ ("the Comp").) On March 13, 2019, Defendants removed to this court pursuant to diversity jurisdiction. (Doc. No. 1.)

In May 2017 Plaintiff, a mobile nuclear imaging service and Digirad Corp., a maintenance provider for nuclear imaging cameras and equipment, entered into a written Equipment Full Maintenance & Support Master Agreement (the "Maintenance Agreement"). (Comp at ¶ 8.) Under the terms of the Maintenance Agreement, Plaintiff was required to pay an annual fee of $19,500 per nuclear camera, paid monthly in advance, and Digirad Corp. was to provide on-demand maintenance services through May 30, 2021. (Id. at ¶ 8(a)(b).) In addition, Digirad Corp. was to provide "a Windows 7 upgrade to five (5) of Plaintiff's cameras and one (1) workstation, for a total of six (6) licenses." (Id. at ¶ 8(c).)

Plaintiff maintains that it has paid all monthly fees and charges and all other acts required under the Maintenance Agreement. (Id. at ¶ 9.) The complaint alleges that Defendants breached the Agreement by failing to provide Windows 7 upgrades and refusing Plaintiff's repeated demands to do so. (Id. at ¶ 10.) Further, it is alleged that in response to "Plaintiff's demands for performance Defendants claimed that its performance was cost prohibitive and then further breached the Maintenance Agreement by purporting to terminate the agreement, without good cause." (Id. ) Despite, terminating the Agreement, Plaintiff claims that Digirad Corp. has continued to withdraw monthly charges from Plaintiff's account. (Id. )

Plaintiff alleges that Defendants breached the implied covenant of good faith and fair dealing because they fabricated grounds for terminating the Agreement in order to interfere with its business operations to benefit Digirad Imaging, a mobile nuclear imaging service and direct competitor of Plaintiff's, and "in order to avoid its own performance obligations under the Management Agreement." (Id. at ¶¶ 2, 15.) It is also alleged that Digirad Corp. had no intention of proceeding in good faith nor delivering the software upgrades the Maintenance Agreement provided for when it entered into the Agreement. (Id. at ¶ 19.) Further, Plaintiff contends that Digirad Corp. intended to use the relationship created by the Maintenance Agreement to undermine its business operations for the benefit of Digirad Imaging. (Id. )

Plaintiff also alleges that Digirad Imaging caused breach or disruption of the Maintenance Agreement by requesting Digirad Corp. withhold software and services and by conspiring in Digirad Corp's termination of the Agreement and continued withdrawal of monies from Plaintiff's accounts, even though none of the contracted services were being performed. (Id. at ¶ 26.) Further, it is alleged that Defendants acted in concert to cause Plaintiff to lose its clients so that they "could be solicited to contract instead with Digirad Imaging." (Id. at ¶ 30.) Specifically, it is alleged that Defendants conspired to undermine Plaintiff's business operations and interrupt Plaintiff's services to customers by withholding services and upgrades that it was required to provide under the terms of the Maintenance Agreement. (Id. )

On April 3, 2017, Defendants filed a motion seeking to dismiss the declaratory relief, tortious interference with a contract, intentional interference with a prospective economic advantage and violation of California's Unfair Competition Law (UCL) claims under Federal Rule of Civil Procedure 12(b)(6). (Doc. No. 10.) Plaintiff filed its opposition to the motion, (Doc. No. 12), and Defendants filed a reply, (Doc. No. 13).

II. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), a party may bring a motion to dismiss based on the failure to state a claim upon which relief may be granted. A Rule 12(b)(6) motion challenges the sufficiency of a complaint as failing to allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Ordinarily, for purposes of ruling on a Rule 12(b)(6) motion, the court "accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the non-moving party." Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). But, even under the liberal pleading standard of Rule 8(a)(2), which requires only that a party make "a short and plain statement of the claim showing that the pleader is entitled to relief," a "pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ). "Determining whether a complaint states a plausible claim for relief ... [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679, 129 S.Ct. 1937.

III. Discussion

Defendants move to dismiss four out of the six claims alleged in the complaint, asserting that either the claims do not plausibly suggest an entitlement to relief or that Plaintiff is seeking relief that is unavailable as a matter of law.

A. Declaratory Relief Claim

Defendants seek to dismiss the declaratory relief claim claiming it is unnecessary because an adequate remedy exists under the breach of contract claim. Specifically, Defendants assert that determination of the breach of contract claim will resolve any question regarding interpretation of the contract, therefore dismissal of this claim is appropriate. (Doc. No. 10-1 at 9-10.) Plaintiff counters that the declaratory relief claim encompasses claims not addressed in its breach of contract claims, namely a request that the Maintenance Agreement be rescinded and that it receive restitution. (Doc. No. 12 at 4.)

28 U.S.C § 2201 provides that "any court of the United States, upon the filing of the appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." Declaratory relief is not intended to redress past wrongs, its purpose is to resolve uncertainties or disputes that may result in future litigation. See U.S. v. Wash., 759 F.2d 1353, 1357 (9th Cir. 1985) (en banc) ("Declaratory relief should be denied when it will neither serve a useful purpose in clarifying or settling the legal relations in issue nor terminate the proceedings and afford relief from the uncertainty and controversy faced by the parties"), cert. denied, 474 U.S. 994, 106 S.Ct. 407, 88 L.Ed.2d 358 (1985). "Various courts have held ... that, where determinations of a breach of contract claim will resolve any question regarding interpretation of the contract, there is no need for declaratory relief, and dismissal of a companion declaratory relief claim is appropriate." Streamcast Networks, Inc. v. IBIS LLC, No. CV 05-04239 MMM (Ex), 2006 WL 5720345, at *3-4 (C.D. Cal. May 2, 2006) (collecting cases). However, "declaratory relief is appropriate where a breach of contract claim will not settle all of the contractual issues concerning which plaintiff seeks declaratory relief." Id. (citing Sierra Foothills Pub. Util. Dist. v. Clarendon Am. Ins. Co., No. CVF05736RECLJO, 2005 WL 2089832, *6-7 (E.D. Cal. Aug. 29, 2005) ; Lunding v. Biocatalyst Res., Inc., No. 03 C 696, 2003 WL 22232831, *3 (N.D. Ill. Sept. 22, 2003) )² .

Here, Plaintiff's breach of contract claim seeks damages and the declaratory relief claim seeks a declaration that the Maintenance Agreement has been rescinded and "that Plaintiff receive restitution of all consideration paid thereunder." (Compl. at ¶ 19.)³ The breach of contract claim seeks damages to redress past wrongs, whereas the declaratory relief claim goes one step further, seeking a declaration that Plaintiff will incur no future liability, meaning resolution of the breach of contract claim will not fully resolve Plaintiff's request for declaratory relief. Because the two claims seek different forms of relief, the court cannot conclude that Plaintiff's declaratory relief claim is duplicative of its breach of contract claim. Accordingly, the court DENIES the motion to dismiss the declaratory relief claim.

B. Tortious Interference with a Contract Claim

Defendants seek to dismiss the tortious contract interference claim asserting that this claim fails as a matter of law because Digirad Corp. cannot be tortiously liable for interfering with performance of its own contract. Defendants also argue that this claim fails...