Hellenic Petroleum, LLC v. Sacramento Energy Res.

HELLENIC PETROLEUM, LLC, a Florida limited liability company, Plaintiff v. SACRAMENTO ENERGY RESOURCES, LLC, a Texas limited liability company,BETH JOHNSON, CLIFFORD KAST, and DOES 1-20, Defendants

CASE NO. 1:19-CV-0491 AWI SAB

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

September 30, 2019

ORDER ON DEFENDANTS' MOTION TO DISMISS

(Doc. No. 13)

This is a business dispute between Plaintiff Hellenic Petroleum, LLC ("Hellenic") and Defendants Sacramento Energy Resources, LLC ("SER"), Beth Johnson ("Johnson"), and Clifford Kast ("Kast"). Hellenic brings claims under California law for declaratory relief, trade libel, negligent interference with prospective economic advantage ("NIPEA"), misrepresentation, and unfair competition in violation of Cal. Bus. & Prof. Code § 17200 et seq. ("UCL"). The active complaint is the First Amended Complaint ("FAC"). Currently before the Court is Defendants' Rule 12(b)(6) motion to dismiss. For the reasons that follow, the motion will be granted in part and denied in part.

RULE 12(b)(6) FRAMEWORK

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 a cause of action will not do." Ashcroft v. Iqbal, 556 U.S. 662, 678 (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; 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; 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; 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, ormatters subject to 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).

BACKGROUND

From the FAC, it appears that Hellenic and SER entered into an agreement for the sale and delivery of propane. Part of the deal for the propane was a delivery limit from SER to Hellenic of $200,000 of propane. This limit was agreed to by Johnson. Despite that limit, SER at Kast's direction has sent $1.2 million of propane to Hellenic since December 2018. The delivery of this amount of propane was without Hellenic's consent, and Hellenic refuses to pay SER $1.2 million for the propane. The over-supply of propane created financial pressure on Hellenic.

In February 2019, "Defendants" removed at Kast's direction nine railway cars of propane from Hellenic's facility without Hellenic's prior knowledge or permission. The bills of lading for the nine railroad cars identified Hellenic as a "cosignee," which meant that Hellenic was required to "sign off on any removal of the nine railroad cars. In order to remove the nine railroad cars, Defendants made fraudulent misrepresentations regarding their authority or permission to remove the cars.

Additionally, "Defendants" have made statements in the marketplace to disparage Hellenic. "Defendants" have made statements about Hellenic being untrustworthy and refusing to honor a contract to pay for propane, even though Hellenic never agreed to receive $1.2 million of propane. These statements have caused Hellenic financial loss.

From these allegations, Hellenic seeks declaratory relief and damages through trade libel, NIPEA, misrepresentation, and the UCL.

DEFENDANTS' MOTION

1. First Cause of Action - Declaratory relief

Parties' Arguments

Defendants argue that the claim for declaratory relief fails because there are no allegations of a written or oral agreement between the parties. In fact, the FAC specifically alleges that there was no agreement between the parties. Thus, there is no plausible claim stated.

Hellenic argues the FAC does allege a dispute regarding the delivery of propane which is alleged to be in violation of an agreement. That is sufficient to support a claim for declaratory relief.

Legal Standard

In California, "declaratory relief is designed in large part as a practical means of resolving controversies, so that parties can conform their conduct to the law and prevent future litigation." Meyer v. Sprint Spectrum LP, 45 Cal.4th 634, 648 (2009). In relevant part, Cal. Code. Civ. P. § 1060 provides: "Any person interested under a . . . contract . . . may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action . . . in the superior court . . . for a declaration of his or her rights and duties . . ., including a determination of any question of construction or validity arising under the . . . contract." A complaint for declaratory relief must demonstrate a proper subject for declaratory relief (as set forth in § 1060 and other statutes) and an actual controversy involving justiciable questions relating to the rights or obligations of a party. Sweetwater Union High Sch. Dist. v. Julian Union Elementary Sch. Dist., 36 Cal. App. 5th 970, 984 (2019); Brownfield v. Daniel Freeman Marina Hosp., 208 Cal.App.3d 405, 411 (1989). "The 'actual controversy' requirement concerns the existence of a present controversy relating to the legal rights and duties of the respective parties pursuant to contract [§ 1060], statute, or order." Sweetwater Union, 36 Cal.App.4th at 984; Brownfield, 208 Cal.App.3d at 410.

Discussion

Here, the FAC provides little detail. However, it can be reasonably inferred, see Kwan, 854 F.3d at 1096; TrachtGut, LLC v. L.A. Cnty. Treasurer & Tax Collector, 836 F.3d 1146, 1150(9th Cir. 2016), that Hellenic entered into a contract/agreement with SER for the purchase of not more than $200,000 worth of propane.¹ Despite this limit, $1.2 million of propane was sent to Hellenic and there is a dispute about how much, if anything, Hellenic owes to SER for the delivered propane. Additional terms of the agreement are unknown, as is the very form of the agreement (oral or written).² Nevertheless, the minimal allegations in the FAC are sufficient to indicate that there exists an on-going dispute regarding the obligations of the parties to a contract/agreement for the provision of propane. That is sufficient to allege a plausible claim with respect to SER. See Cal. Code Civ. P. § 1060; Sweetwater Union, 36 Cal.App.4th at 984. Therefore, dismissal of the claim for declaratory relief regarding $1.2 million of propane is inappropriate.

However, the allegations under the declaratory relief cause of action are not limited to the delivery of $1.2 million of propane. Hellenic also alleges that Defendants fraudulently removed nine railway cars of propane from Hellenic's railyard. The significance of this allegation under this cause of action is unclear. Hellenic does not allege that the removal of the nine railway cars was done pursuant to the contract/agreement with SER for the provision of propane. The allegation indicates that Defendants have committed a tort, not that there is a dispute as to rights or obligations under a contract. Without an allegation that ties the removal of the nine railway cars to obligations under a contract, removal of the railway cars does not support a viable claim for declaratory relief. See Sweetwater Union, 36 Cal.App.4th at 984; Brownfield, 208 Cal.App.3d at410. To the extent that the allegation regarding the removal of the nine railway cars is meant to support a claim for declaratory relief, dismissal is appropriate. See id.

2. Second Cause of Action - Trade Libel Parties' Arguments

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