United States District Court, D. Oregon, Medford Division
OPINION & ORDER
D.CLARKE, UNITED STATES MAGISTRATE JUDGE
case comes before the Court on Defendant NIC's Motion to
Dismiss (#70). For the reasons discussed below, NIC's
motion is DENIED.
Rust-Oleum and Defendant NIC entered into a Sales Agreement
concerning the product, "Wipe New," prior to this
litigation. Under the Sales Agreement, Rust-Oleum agreed to
purchase certain minimum quantities of product from NIC or
alternatively pay a specified sum in exchange for the right
to be the exclusive purchaser of the Wipe New product for
"Covered Applications." Compl. Exhibit A, at 1
(#1-1). The parties mutually agreed to terminate the
Agreement approximately two years later and entered into a
Settlement Agreement. After receiving a cease and desist
letter from NIC, Rust-Oleum filed this action seeking a
determination that it has not breached its obligations under
both the Sales Agreement and Settlement Agreement.
Additionally, Rust-Oleum is seeking damages for NIC's
alleged breach of duty of good faith and fair dealing
resulting from interference with Rust-Oleum's business
operations. In response, NIC filed counterclaims for breach
of contract and misappropriation of trade secrets. NIC claims
that Rust-Oleum used trade secrets to reverse engineer Wipe
New and sell it themselves.
conducting some discovery, Rust-Oleum requested leave to file
an amended complaint adding claims of fraud in the
inducements and breach of contract. NIC opposed the proposed
amendments on the grounds they were futile. This Court
granted leave and Rust-Oleum filed its First Amended
Complaint (#64) shortly thereafter. NIC now moves to dismiss
the added claims, arguing the same points that it raised when
opposing Rust-Oleum's motion for leave to amend.
to Rule 12(b)(6) of the Federal Rules of Civil Procedure, a
motion to dismiss will be granted where the plaintiff fails
to state a claim upon which relief may be granted. In order
to state a claim for relief, a pleading must contain "a
short and plain statement of the claim showing that the
pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2).
"A motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6) for failure to state a claim upon which
relief can be granted 'tests the legal sufficiency of a
claim.'" Conservation Force v. Salazar, 646
F.3d 1240, 1242 (9th Cir. 2011) (quoting Navarro v.
Block, 250 F.3d 729, 732 (9th Cir. 2001)).
under Rule 12(b)(6) is proper "if there is a 'lack
of a cognizable legal theory or the absence of sufficient
facts alleged under a cognizable legal theory.'"
Id. (quoting Balistreri v. Paciflca Police
Dep't, 901 F.2d 696, 699 (9th Cir. 1988)). "To
survive a motion to dismiss, 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) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). When evaluating a motion to dismiss, the court may
first identify and strike allegations that are mere legal
conclusions. Id. However, the court must accept
allegations of fact as true and construe those allegations in
the light most favorable to the non-moving party. Id;
Odom v. Microsoft Corp., 486 F.3d 541, 545 (9th Cir.
2007) (internal citations omitted).
argues that Rust-Oleum's added claims of fraud in the
inducement and breach of contract should be dismissed for two
reasons: (1) Rust-Oleum released any and all claims under the
Settlement Agreement; and (2) Rust-Oleum's breach of
contract claim is inconsistent with the terms of the Sales
Agreement. These are the exact same arguments that NIC raised
in its opposition to Rust-Oleum's Motion for Leave to
Amend. Response at 1 (#55). NIC acknowledges that these
arguments were previously briefed by the parties, but asserts
that the Court should consider them again because it can now
apply the Rule 12(b)(6) standard, as opposed to the
"more liberal" Rule 15(a) standard that it applied
before, and because "the Court was not presented with
all of the relevant case authority on this matter." Mtn.
to Dismiss at 7 (#70). This Court previously rejected
NIC's arguments and it does so again.
applying the motion to dismiss legal standard as opposed to
the Rule 15(a) standard makes no difference here. When
opposing Rust-Oleum's request for leave to amend, NIC
argued that the proposed amendments were futile for the same
two reasons stated above. "An amendment is futile when
'no set of facts can be proved under the amendment to the
pleadings that would constitute a valid and sufficient claim
or defense.'" Robillard, 337 F.Supp.3d at 969 (D.
Or. 2018) (quoting Miller, 845 F.2d at 214 (9th Cir. 1988)).
Therefore, to determine whether the new claims were indeed
futile, the Court essentially looked to see whether the new
claims could survive a motion to dismiss under Rule 12(b)(6).
See R&M Jewelry, LLC v. Michael Anthony Jewelers,
Inc., 221 F.R.D. 398 (S.D.N.Y. 2004) ("In
determining if amendment to pleadings would be futile, court
looks to see whether it could survive Fed.R.Civ.P. 12(b)(6)
motion to dismiss, construing amendment in light most
favorable to movant."). Under either standard and for
the reasons explained in the Court's previous opinion,
Rust-Oleum has stated sufficient factual allegations to state
a claim for breach of contract and fraud in the inducement.
if "relevant case authority" existed at the time
the parties previously briefed these arguments, then NIC
should have presented such relevant authority then. In an
abundance of caution and respect for the parties, this Court
reviewed NIC's subsequently presented authority anyway.
The Court remains unconvinced by the additional caselaw. None
of the cited cases provide an example of a court dismissing a
fraud in the inducement claim based on a release at the
pleading stage. Instead, the cases involve appeals from
summary judgment or denied directed verdicts and depend
heavily on the specific language used in the release
agreements, the context of the negotiated release, and the
nature of the relationships between the parties. For example,
in Lindgren v. Berg, which NIC argues is the most
analogous to this case out of the cited cases, the Oregon
Supreme Court extensively reviewed the language and
circumstances of the release and the relationship between the
parties before holding that the fraud claim was barred
because the release expressly encompassed claims arising from
"fraud, nondisclosure, [or] misrepresentation," all
transactions related to the joint venture, and all
relationships between the parties. Lindgren v. Berg,
307 Ore. 659, 665 (1989). By asking this Court to decided on
a motion to dismiss whether Rust-Oleum's fraud in the
inducement claim is barred by the release, NIC is asking this
Court to interpret a contractual provision and rule on the
merits of these claims at a stage where it does not have all
the information it needs to do so. The Court will not
prematurely decide that the Settlement Agreement bars
Rust-Oleum's claims of breach of contract and fraud in
NIC's motion to dismiss is denied because
Rust-Oleum's First Amended Complaint contains sufficient
factual allegations to state a claim for breach of contract
and fraud in the inducement, and arguments on whether the
Settlement Agreement bars these ...