United States District Court, D. Oregon
LEIGH COLBY, D.D.S., an individual; OCD INVESTMENTS, LLC, an Oregon limited liability company; and OREGON DENTAL, P.C., Plaintiffs,
INTERDENT SERVICE CORPORATION, Defendant.
OPINION AND ORDER
Michael McShane United States District Judge.
bring a breach of contract claim against defendant Interdent
Service Corporation. Interdent moves to dismiss. As discussed
below, Interdent's motion to dismiss, ECF NO. 6, is
December 22, 2015, plaintiffs and Interdent executed an Asset
Purchase Agreement (APA) outlining Interdent's purchase
of plaintiffs' dental practice. Compl. ¶ 5.
Interdent purchased the practice for $2, 834, 484 in cash.
APA § 1.04-1. The APA also contained an “Earnout
Payment” setting out Interdent's promise to pay
plaintiffs a payment calculated on revenues earned by the
practice in second year following the execution of the APA.
Compl. ¶ 7. Specifically, Interdent would pay plaintiffs
an earnout based on a sliding scale ranging from $0 if net
revenues were lower than $4, 800, 000 up to a maximum of
$500, 000 if revenues hit $5, 300, 000 or more. APA ¶
1.06-1. Interdent's alleged breach of the APA as related
to the earnout payment forms the basis of the dispute at
As of the effective date of the APA, Plaintiffs were
operating the Practice in a manner that, if continued, would
have resulted in a maximum Earnout Payment of $500, 000. For
approximately five months, the Practice continued in a
similar fashion. However, Defendant made several changes to
the Practice that had a substantial impact on the bottom line
and reduced the Practice's revenue to a point where
Plaintiffs would not be entitled to any Earnout Payment under
the formula contained in the APA.
Interdent: (1) cancelled a dental services financing plan
used by over half of the practice's patients, resulting
in a substantial drop in appointments and revenue; (2)
cancelled an agreement with a “major healthcare
insurance plan” resulting in a substantial drop in
patients and revenue; and (3) failed to pay dentists employed
by the practice as agreed in employment agreements, resulting
in a loss in revenues as at least two “high producing
dentists” left the practice. Compl. ¶¶ 9-10.
As alleged herein, since the effective date of the APA,
Defendant has taken several steps that were intended to and
have caused the Plaintiffs Earnout Payment potential to drop
to $0 when it had been on track to be paid out at the maximum
amount of $500, 000. Defendant is in breach of the APA and
Plaintiffs are entitled a judgment against Defendant in the
amount of $500, 000.
survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a
complaint must contain sufficient factual matter that
“state[s] a claim to relief that is plausible on its
face.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007). A claim is plausible
on its face when the factual allegations allow the court to
infer the defendant's liability based on the alleged
conduct. Ashcroft v. Iqbal, 556 U.S. 662, 663
(2009). The factual allegations must present more than
“the mere possibility of misconduct.”
Id. at 678.
considering a motion to dismiss, the court must accept all
allegations of material fact as true and construe those facts
in the light most favorable to the non-movant. Burget v.
Lokelani Bernice Pauahi Bishop Trust, 200 F.3d 661, 663
(9th Cir. 2000). But the court is “not bound to accept
as true a legal conclusion couched as a factual
allegation.” Twombly, 550 U.S. at 555. If the
complaint is dismissed, leave to amend should be granted
unless “the pleading could not possibly be cured by the
allegation of other facts.” Doe v. United
States, 58 F.3d 494, 497 (9th Cir. 1995).
moves to dismiss the lone claim for breach of contract,
arguing plaintiffs fail to allege Interdent acted in bad
faith with the requisite intent to avoid the earnout payment.
I agree. The APA outlines the agreement of the parties as to