nKlosures, Inc. v. Avalon Lodging LLC

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NKLOSURES, INC., Plaintiff, v. AVALON LODGING LLC, et al., Defendants.

No. CV 22-00459-RSWL-JDEx

United States District Court, C.D. California

November 17, 2022

ORDER RE: MOTION TO DISMISS [41]

HONORABLE RONALD S.W. LEW, SENIOR U.S. DISTRICT JUDGE

Plaintiff nKlosure, Inc. (“Plaintiff”) brought this Action against Defendants Avalon Lodging, LLC (“Defendant Avalon”); Bipin Morari (“Defendant Morari”); Best Western International, Inc.; W&W Land Design Consultants, Inc.; Winston Liu, P.E.; and Tom Lau, AIA (collectively, “Defendants”) alleging copyright infringement, breach of contract, and unfair business practices. Currently before the Court is Defendants Avalon and Morari's Motion to Dismiss [41] (“Motion”). Having reviewed all papers submitted pertaining to this Motion, the Court NOW FINDS AND RULES AS FOLLOWS: the Court GRANTS in part and DENIES in part Defendants' Motion.

I. BACKGROUND

A. Factual Background

Plaintiff's First Amended Complaint (“FAC”) alleges as follows:

On or about May 25, 2014, Plaintiff, a licensed architectural firm, contracted with Mr. Thakor Patel to provide architectural design services for a new Los Angeles hotel. First Am. Compl. (“FAC”) ¶ 12, ECF No. 39. The contract (the “Agreement”) indicated that Plaintiff was the sole author, owner, and copyright holder of the architectural drawings and plans (the “Drawings”) and that once the Planning Department approved the Drawings, Mr. Patel would retain Plaintiff as the architect for the hotel's construction. Id. Moreover, the Drawings were stamped with language providing that they could not be copied or transmitted without Plaintiff's express written permission. Id. ¶ 13.

After the Drawings were approved, Plaintiff learned in June 2015 that Mr. Patel was selling the hotel project to Defendant Avalon. Id. ¶ 14. In response, Plaintiff's principal, Mr. Nikhil Kamat (“Mr. Kamat”), reached out to Defendant Avalon's principal and managing agent, Defendant Morari, to notify him that the Planning Department had approved the Drawings and Plaintiff could continue work on the project. Id. ¶¶ 5, 15. Defendant Morari then asked for a proposal for Plaintiff's work. Id. ¶ 15. Mr. Kamat made it clear that Plaintiff would only disclose the Drawings in its proposal on the condition that Defendant Avalon could not use the Drawings for the hotel unless Defendant Avalon paid Plaintiff for them and hired Plaintiff as the project architect. Id.

Three weeks later, Mr. Kamat sent Defendant Morari an e-mail containing Plaintiff's proposal. Id. ¶ 17. In the e-mail, Mr. Kamat indicated that Plaintiff was the sole owner, author, and copyright holder of the Drawings created for the hotel, and that upon execution of a contract, Plaintiff would grant Defendant Avalon a license to use the Drawings in the hotel's construction. Id. In two subsequent phone calls, Defendant Morari told Mr. Kamat that he would review the proposal and get back to him. Id. ¶ 18. Defendant Morari understood that if he decided to use the Drawings, Defendant Avalon would have to pay for them and use Plaintiff as the architect on the project. Id. Thereafter, Defendant Morari went silent and cut off all contact with Mr. Kamat. Id.

Several weeks later, Mr. Kamat sent an e-mail to follow up on the proposal, but Defendant Morari did not respond nor contact Plaintiff again. Id. ¶ 19. Mr. Kamat therefore inferred that Defendant Morari was not interested in using the Drawings for the hotel. Id.

On or about June 22, 2020, Mr. Kamat saw an advertisement for the sale of a hotel that had since been constructed on the property and recognized the design as his own. Id. ¶ 21. He also learned that Defendant Avalon had hired Defendant W&W Land Design Consultant, Inc. (“W&W”) for the next stage of project development and that Defendants had used Plaintiff's preliminary schematic design and drawings in the hotel's construction. Id. Sometime thereafter, Plaintiff learned that the Drawings were included in a Power Point presentation (the “Presentation”) marketing the property. Id. ¶ 20.

On January 13, 2022, Plaintiff filed a copyright application for the Drawings and the United States Copyright Office granted Copyright Registration Certificate No. VA 2-282-647 for the Drawings five days later. Id. ¶¶ 24-25.

B. Procedural Background

Defendants filed the instant Motion [42] on September 8, 2022. Plaintiff opposed [48] the Motion on October 4, 2022. Defendants replied [49] on October 7, 2022.

II. DISCUSSION

A. Legal Standard

Federal Rule of Civil Procedure 12(b)(6) allows a party to move for dismissal of one or more claims if the pleading fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). A complaint must “contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotation omitted). Dismissal is warranted for a “lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988) (citation omitted).

In ruling on a Rule 12(b)(6) motion, a court may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice. Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A court must presume all factual allegations of the complaint to be true and draw all reasonable inferences in favor of the non-moving party. Klarfeld v. United States, 944 F.2d 583, 585 (9th Cir. 1991). The question is not whether the plaintiff will ultimately prevail, but whether the plaintiff is entitled to present evidence to support its claims. Jackson v. Birmingham Bd. of Educ., 544 U.S. 167, 184 (2005) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). While a complaint need not contain detailed factual allegations, a plaintiff must provide more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a recovery is very remote and unlikely.'” Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

B. Analysis

1. Judicial Notice

Before turning to the merits of Defendants' Motion, the Court should first address Defendants' request for judicial notice. A court may take judicial notice of an adjudicative fact that is “not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b). Matters of public record may be judicially noticed, but disputed facts contained therein may not. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018). “[A]ccuracy is only part of the inquiry under Rule 201(b).” Id. “A court must also consider-and identify-which fact or facts it is noticing from” the documents. Id.

Here, Defendants filed a request seeking judicial notice of the following twelve documents^[1]: (A) the May 25, 2014 Agreement (the “Agreement”) between Plaintiff and Mr. Patel; (B) Plaintiff's initial statecourt complaint in Case No. 20BBCV00441 (the “State Case”); (C) The Los Angeles Superior Court (“LASC”) September 3, 2021 Order in the State Case; (D) Plaintiff's first-amended complaint in the State Case; (E) The LASC December 16, 2021 Order in the State Case; (F) Plaintiff's second-amended complaint, in the State case; (G) the demurrer and request for judicial notice Defendants filed in the State Case; (H) the LASC's March 23, 2022 tentative ruling on Defendants' demurrer; (I) Plaintiff's voluntary dismissal of the State Case; (J) Plaintiff's responses to Defendants' Special Interrogatory No. 49, Request for Admission No. 32, and Form Interrogatory 17.1; (K) Plaintiff's supplemental responses to Defendants' Request for Admission Nos. 40-41; (L) The Presentation Plaintiff referred to in the FAC. See generally Req. for Judicial Notice (“RJN”), ECF No. 42; RJN, Exs. A-L, ECF Nos. 42-1 through 42-12.

a. Documents Subject to Judicial Notice

Exhibits B through I are court filings and records in related proceedings and are thus properly subject to judicial notice. See Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (taking judicial notice of pleadings, memoranda, and other court documents from related litigation). The Court takes judicial notice of the existence of these proceedings, their filing dates, Plaintiff's claims, and the court's dispositions. See Limcaco v. Wynn, No. 220CV11372RSWLMAAX, 2021 WL 5040368, at *5 (C.D. Cal. Oct. 29, 2021). The Court should not, however, take judicial notice of these documents for the truth of the matters asserted therein. See Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001); Garber v. Heilman, No. CV 08-3585-DDP (RNB), 2009 WL 409957, at *1 (C.D. Cal. Feb. 18, 2009).

b. Documents Subject to Incorporation by Reference

Under the judicially created incorporation by reference doctrine, “[a] court may consider evidence on which the complaint ‘necessarily relies' if: (1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion.” Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006).

Exhibit A is the Agreement between Plaintiff and Mr. Patel. See RJN, Ex. A. Plaintiff's FAC also extensively referenced the Agreement. See FAC ¶¶ 12-13. Plaintiff did not question Exhibit A's authenticity...