Opinion
Case No. 6:20-cv-2177-ACC-DCI
2021-03-04
RADIATION MEDICINE PHYSICIANS, P.A., Plaintiff, v. TOMOTHERAPY INCORPORATED and Accuray Incorporated, Defendants.
Brandon Wayne Banks, Walsh Banks Law, Brian Michael Walsh, Harold E. Morlan, II, Walsh Law Group, Orlando, FL, for Plaintiff. Timothy Allen Andreu, Kyle Robisch, Bradley Arant Boult Cummings LLP, Tampa, FL, for Defendants.
Brandon Wayne Banks, Walsh Banks Law, Brian Michael Walsh, Harold E. Morlan, II, Walsh Law Group, Orlando, FL, for Plaintiff.
Timothy Allen Andreu, Kyle Robisch, Bradley Arant Boult Cummings LLP, Tampa, FL, for Defendants.
ORDER
ANNE C. CONWAY, United States District Judge
This cause comes before the Court on the Motion to Dismiss filed by Defendants TomoTherapy Incorporated and Accuray Incorporated (Doc. 12). Plaintiff Radiation Medicine Physicians, P.A. ("RMP") has filed a Response in Opposition (Doc. 13); therefore, the Motion is ripe. For the reasons set forth below, Defendants’ Motion will be granted in part and denied in part and RMP's Complaint will be dismissed with leave to amend.
I. BACKGROUND
A. Facts as Alleged in RMP's Complaint
In this breach of contract case, RMP's claims arise out of three contracts that the parties executed in 2015 and 2016. (Doc. 1-1). RMP is a Florida professional association owned by David J. Catalano, M.D. that provides "physician independent contractor services" in the radiation oncology field. (Id. ¶¶ 2, 8). Defendant TomoTherapy is "in the business of selling, servicing, and maintaining TomoTherapy machines," which combine "imaging and treatment delivery to precisely target a wide variety of cancer." (Id. ¶ 3). TomoTherapy is a wholly owned subsidiary of Accuray, the company that manufactures and sells TomoTherapy machines. (Id. ¶¶ 3, 5). Dr. Catalano, the owner of RMP, uses TomoTherapy machines to treat his patients who have cancer. (Id. ¶¶ 9-10).
In 2014, Dr. Catalano worked at Clinical PET of Ocala, LLC d/b/a Radiological Institute of the Villages, LLC ("RIV") as a radiation oncologist pursuant to a professional services agreement. (Id. ¶ 8). RIV had a TomoTherapy machine that Dr. Catalano used in his practice. (Id. ¶ 9). While Dr. Catalano was working at RIV, RIV experienced financial difficulties and the owner of RIV stopped maintaining RIV's TomoTherapy machine. As a result, RMP, which is wholly owned by Dr. Catalano, paid Accuray to perform maintenance on RIV's TomoTherapy machine so Dr. Catalano could continue using the machine to treat his patients. (Id. ).
In late 2015, Dr. Catalano met with TomoTherapy and Accuray representatives to discuss RMP's interest in purchasing its own TomoTherapy machine. (Id. ¶ 11). RMP alleges that, during this meeting, the representatives told Dr. Catalano about two machines even though one of the machines was still being developed and had not been approved by the Food and Drug Administration ("FDA"). (Id. ). Dr. Catalano was particularly interested in acquiring this new, unapproved machine; however, the down payment on this machine was $75,000 and the payment was "non-refundable but transferable." (Id. ¶ 13). In response to Dr. Catalano's insistence that his deposit be refundable, one of the Accuray representatives informed Dr. Catalano that, "although federal regulations allegedly prevented the down payment from being refundable, there was a ‘work around.’ " (Id. ). The representative suggested that, "instead of making a down payment on [the unapproved] machine, RMP could overpay on the RIV service contract for the RIV Machine and the overpaid funds would be transferred to a prepayment of the service fee for a new machine, as service fees are refundable." (Id. ).
After the parties’ initial meeting, Defendants informed Dr. Catalano "that they could not legally enter into a sales contract for the [unapproved] machine because the machine was not yet available on the market." (Id. ¶ 14). Therefore, Defendants "recommended that RMP enter into a sales contract to purchase a TomoTherapy machine that was already in existence" so Defendants could substitute the new, unapproved machine when it became available. (Id. ). Relying on these representations, in December 2015, RMP and Defendants executed a sales agreement under which RMP agreed to purchase a TomoTherapy TomoHDA machine. (Id. ; see id. at 20-34; Doc. 12-1).
RMP notes that the December 2015 agreement stated that $75,000 was due upon signing. (Doc. 1-1 ¶ 14). Additionally, RMP included two amendments to the December 2015 agreement with its Complaint. (See id. at 36-47). Amendment One appears to reflect RMP's requirement that its down payment be refundable and changes the anticipated delivery date from March 1, 2015 to March 1, 2017. (Id. at 36-37). Amendment Two substitutes a different machine for the TomoTherapy TomoHDA machine and changes the anticipated delivery date to March 1, 2018. (Id. at 40-43). However, neither amendment was executed by both parties. (Id. at 38, 43).
Both parties have submitted identical copies of the contracts at issue in this case. (See Docs. 1-1, 12-1, 12-2, 12-3). The Court will cite to all relevant documents unless the font is too small to read.
After the parties executed the December 2015 agreement, Dr. Catalano terminated his contract with RIV to practice at a new facility that did not have a TomoTherapy machine. (Doc. 1-1 ¶ 18). Consequently, Defendants offered to lease a portable TomoTherapy machine and trailer to Dr. Catalano to use while he waited for the unapproved machine. (Id. ). RMP alleges:
In conveying this offer, Defendants made false statements to RMP that the portable TomoTherapy machine and trailer were available for lease (even though Defendants at this time knew or should have known that the only trailer in existence for a portable TomoTherapy machine was already leased out to a medical practice elsewhere) and that Accuray would manufacture and Defendants would sell/deliver [one of the new, unapproved machines] to RMP.
(Id. ).
In March 2016, relying again on Defendants’ representations, RMP and Defendants executed a rental agreement and a second sales agreement under which "RMP agreed to purchase the upcoming ‘TomoTherapy reNEW TomoHD Treatment System.’ " (Id. ¶¶ 19-20). Both the rental agreement and second sales agreement required down payments that were due at signing—the rental agreement required a $30,000 payment and the second sales agreement required a $44,000 payment. (Id. at 50, 68; Doc. 12-2 at 3; Doc. 12-3 at 3). Additionally, both contracts listed July 15, 2016 as the anticipated delivery date for the machines. (Doc. 1-1 at 50, 68; Doc. 12-2 at 3; Doc. 12-3 at 3).
The second sales agreement replaced the parties’ initial December 2015 sales agreement. (Doc. 1-1 ¶ 20).
Before the parties executed the March 2016 contracts, they executed a letter regarding the initial payments due under these contracts. (Doc. 1-1 at 81-82). In the letter, Defendants explained that RMP was "entitled to a refund of $80,183.16 (inclusive of taxes paid)" for payments that RMP made on behalf of RIV. (Id. at 81). Defendants further stated that, at RMP's request, Accuray would apply the refund to the initial payments due under the parties’ March 2016 contracts in lieu of paying RMP the full refund amount. (Id. ). RMP alleges that its leftover credit of $6,183.16 "was to be applied to the Agreements once the machines thereunder had been delivered to and were in use by RMP." (Id. ¶ 21).
However, after the March 2016 contracts were executed, RMP "learned that Defendants were unable to deliver the portable TomoTherapy machine and trailer as agreed" and that Defendants would not be able to manufacture and deliver the TomoTherapy reNEW TomoHD Treatment System because they failed to obtain FDA approval. (Id. ¶ 22). Thus, "RMP contacted Defendants to obtain the Refund through other means," but "Defendants steadfastly refused to provide same to RMP" because the initial payments were nonrefundable. (Id. ¶ 23). RMP initially requested a refund on June 26, 2019 and thereafter "repeatedly demanded to be paid the Refund," including in an email dated September 16, 2019. (Id. ¶ 25; see id. at 84-85).
In their Motion to Dismiss, Defendants assert that RMP's statement of the facts is incorrect because RMP was actually the breaching party and RMP misrepresented the ages and features of the TomoTherapy machines it agreed to purchase. (Doc. 12 at 2-3). Although the Court must accept the factual allegations in the Complaint as true, the Court notes that Defendants state that they "planned to make both the Portable System and the reNEW System available for Catalano as anticipated," but Dr. Catalano "stonewalled efforts to secure site visits, refused to confirm the final site location, never confirmed siting work (e.g., hiring an architect or starting construction, which were necessary for system installation), made little effort to begin necessary system trainings, and, in the end, demanded that TomoTherapy refund his nonrefundable deposits." (Id. at 4-5).
B. Procedural History
On October 29, 2020, RMP filed its Complaint against Defendants in the Circuit Court of the Ninth Judicial Circuit in and for Orange County, Florida. (Doc. 1-1). In its Complaint, RMP asserts claims against Defendants for breach of contract (Counts I and II), unjust enrichment (Count III), fraud in the inducement (Count IV), negligent misrepresentation (Count V), rescission (Count VI), conversion (Count VII), and breach of the implied duty of good faith and fair dealing (Counts VIII and IX). (Id. ). On November 30, 2020, Defendants removed the case to this Court on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332. (Doc. 1). In their Motion to Dismiss, Defendants argue that RMP's Complaint is due to be dismissed with prejudice. (Doc. 12).
Case No. 2020-CA-10834-O. Both the rental agreement and the second sales agreement contain a choice of venue clause that states: "Customer irrevocably and unconditionally ... consents to submit to the exclusive jurisdiction of the state and federal courts located in Orlando, Florida, USA ("Venue") for the resolution of any dispute between the parties concerning such products or services." (Doc. 12-2 at 12; Doc. 12-3 at 11).
RMP's breach of contract claims relate to the rental agreement and the second sales agreement. (Doc. 1-1 ¶¶ 31, 37).
II. LEGAL STANDARD
For purposes of deciding a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), the Court accepts as true the factual allegations in the complaint and draws all reasonable inferences in the light most favorable to the plaintiff. Randall v. Scott , 610 F.3d 701, 705 (11th Cir. 2010). When analyzing a motion to dismiss, the court is "limited primarily to the face of the complaint and attachments thereto." Brooks v. Blue Cross & Blue Shield of Fla., Inc. , 116 F.3d 1364, 1368–69 (11th Cir. 1997).
"Generally, under the Federal Rules of Civil Procedure, a complaint need only contain ‘a short and plain statement of the claim showing that the pleader is entitled to relief.’ " Randall , 610 F.3d at 705 (quoting Fed. R. Civ. P. 8(a)(2) ). However, the plaintiff's complaint must provide "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). "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." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). Thus, the Court is not required to accept as true a legal conclusion merely because it is labeled a "factual allegation" in the complaint; it must also meet the threshold inquiry of facial plausibility. Id.
III. ANALYSIS
As an initial matter, the contracts at issue are governed by California law. Specifically, both agreements contain a choice of law provision that states: "The rights and obligations of the parties under this Agreement shall be governed in all respects by the laws of the United States and the State of California without regard to conflicts of laws principles that would require the application of the laws of any other jurisdiction." (Doc. 12-2 at 12; Doc. 12-3 at 11). As California law does not recognize a claim for rescission, Count VI is due to be dismissed with prejudice.
The Court notes that the parties’ briefings rely on California law and that neither party has disputed whether California law applies.
Nakash v. Superior Ct. , 196 Cal.App.3d 59, 241 Cal. Rptr. 578, 584 (1987) ("Rescission is not a cause of action; it is a remedy."); Strasburger v. Blackburne & Sons Realty Cap. Corp. , No. CV 20-220-CJC( ), 2020 WL 6128223, at *7 (C.D. Cal. June 25, 2020) (finding that it was improper to plead rescission as a freestanding claim under California law and dismissing claims for recission with prejudice).
A. RMP's Contract and Tort Claims
1. RMP's Tort Claims are Barred by the Economic Loss Rule
In their Motion, Defendants assert that RMP's fraud in the inducement, negligent misrepresentation, and conversion claims are due to be dismissed with prejudice pursuant to California's economic loss rule. (Doc. 12 at 13-14). The Court agrees.
"California's economic loss rule prohibits parties from recovering tort damages for what is essentially a breach of contract claim." Zhejiang Crafab Elec. Co., Ltd. v. Advantage Mfg., Inc. , No. SACV 17-02268 JVS(JPRx), 2018 WL 6177952, at *5 (C.D. Cal. Apr. 23, 2018) (citing Robinson Helicopter Co. v. Dana Corp. , 34 Cal.4th 979, 22 Cal.Rptr.3d 352, 102 P.3d 268, 272–73 (2004) ). Specifically, the "economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise." Robinson Helicopter , 22 Cal.Rptr.3d 352, 102 P.3d at 272–73. "Therefore, the duty that gives rise to the tort liability must be either completely independent of the contract or arise from conduct which is both intentional and intended to harm." Zhejiang Crafab , 2018 WL 6177952, at *5 (citing Robinson Helicopter , 22 Cal.Rptr.3d 352, 102 P.3d at 273–74 ).
The economic loss rule "does not bar a plaintiff's fraud claims if they are independent of a defendant's breach of contract"; however, "this exception ‘is narrow in scope’ " Id. (quoting Robinson Helicopter , 22 Cal.Rptr.3d 352, 102 P.3d at 273–74 ). "It only applies ‘to a defendant's affirmative misrepresentations on which a plaintiff relies and which expose a plaintiff to liability for personal damages independent of the plaintiff's economic loss.’ " Id. (quoting Robinson Helicopter , 22 Cal.Rptr.3d 352, 102 P.3d at 273–74 ).
In this case, RMP's fraud in the inducement and negligent misrepresentation claims are not independent of Defendants’ contract breaches and RMP was not exposed to liability for personal damages independent of its economic loss. Therefore, RMP's fraud in the inducement and negligent misrepresentation claims are barred by the economic loss rule and are due to be dismissed with prejudice. See JMP Securities LLP v. Altair Nanotechnologies Inc. , 880 F. Supp. 2d 1029, 1043–44 (N.D. Cal. 2012) (dismissing fraud and negligent misrepresentation claims with prejudice where the tort claims consisted "of nothing more than [defendant's] alleged failure to make good on its contractual promises.").
Under the same analysis, RMP's conversion claim is also due to be dismissed with prejudice as "no harm has been alleged other than a broken contractual promise." Lever Your Bus., Inc. v. Sacred Hoops & Hardwood, Inc. , No. 5:19 cv 1530 CAS, 2019 WL 7050226, at *7 (C.D. Cal. Dec. 23, 2019) (collecting cases). Because Defendants’ actions with respect to RMP's down payments were governed by contract, "this amounts to nothing more than a claim of harm due to a broken contractual promise." Pollok v. Vanguard Grp., Inc. , No. 2:16-cv-6482-JLS-JCGx, 2017 WL 4786007, at *5 (C.D. Cal. Aug. 21, 2017). RMP's conversion claim fails to allege Defendants violated "a duty independent of the contract arising from principles of tort law"; thus, this claim is barred by the economic loss rule and will be dismissed with prejudice. Id. at *4 ; See Zhejiang Crafab , 2018 WL 6177952, at *6 (dismissing conversion claim barred by the economic loss rule with prejudice).
2. RMP's Contract and Tort Claims are Time-Barred
In their Motion, Defendants argue that RMP's Complaint should be dismissed with prejudice because RMP's claims are contractually untimely. (Doc. 12 at 6-9). The parties’ rental agreement states, in relevant part: "No action, regardless of form, arising out of or related to any Accuray Deliverable may be brought by Customer more than one (1) year after Customer has or should have become aware of the cause of action." (Doc. 12-2 at 11). Similarly, the second sales agreement states: "No action, regardless of form, arising out of or related to any Accuray Deliverable may be brought by Customer more than one (1) year after the cause of action has occurred." (Doc. 12-3 at 11).
In its Response, RMP first argues that its claims are not time-barred in light of California's "discovery rule." (Doc. 13 at 9-11). Under California law, a "cause of action for breach of contract accrues at the time of the breach of contract, and the statute of limitations begins to run at that time regardless of whether any damage is apparent or whether the injured party is aware of his right to sue." Perez-Encinas v. AmerUs Life Ins. Co. , 468 F. Supp. 2d 1127, 1134 (N.D. Cal. 2006) (citing Niles v. Louis H. Rapoport & Sons , 53 Cal.App.2d 644, 128 P.2d 50, 54 (1942) ; Neel v. Magana, Olney, Levy, Cathcart & Gelfand , 6 Cal.3d 176, 98 Cal.Rptr. 837, 491 P.2d 421, 428 (1971) ("The plaintiff's ignorance of the cause of action ... does not toll the statute.")). "However, the harshness of this rule has been ameliorated in some cases where it is manifestly unjust to deprive plaintiffs of a cause of action before they are aware that they have been injured." Id. (quoting Moreno v. Sanchez , 106 Cal.App.4th 1415, 131 Cal. Rptr. 2d 684, 689 (2003) ) (internal quotation marks omitted). Specifically, the discovery rule provides that "a cause of action accrues when the plaintiff discovers or could have discovered, through the exercise of reasonable diligence, all of the facts essential to his cause of action." Id. (citing April Enters., Inc. v. KTTV , 147 Cal.App.3d 805, 195 Cal. Rptr. 421, 432–33 (1983) ); see Moreno , 131 Cal. Rptr. 2d at 689.
RMP fails to mention in its Response that the "discovery rule" only applies under certain circumstances. The discovery rule is properly applied when: "(1) the injury or the act causing the injury, or both, have been difficult for the plaintiff to detect; (2) the defendant has been in a far superior position to comprehend the act and the injury; and (3) the defendant had reason to believe the plaintiff remained ignorant he had been wronged." Id. (quoting Gryczman v. 4550 Pico Partners, Ltd. , 107 Cal.App.4th 1, 131 Cal. Rptr. 2d 680, 682 (2003) ) (internal quotation marks omitted). Further, the discovery rule is governed "by two overarching principles: plaintiffs should not suffer where circumstances prevent them from knowing they have been harmed and defendants should not be allowed to knowingly profit from their injuree's ignorance." Gryczman , 131 Cal. Rptr. 2d at 682 (citation and internal quotation marks omitted).
None of the delineated discovery rule circumstances apply in this case. Moreover, RMP has not pleaded any facts that demonstrate either: (1) there were circumstances that prevented RMP from knowing it had been harmed or (2) Defendants knowingly profited from RMP's ignorance. Instead, the Complaint demonstrates that RMP waited more than four years after the "anticipated delivery date" for both machines to file its cause of action. Accordingly, RMP has not sufficiently alleged that California's discovery rule saves its claims.
Next, RMP argues that its claims are not time-barred because the shortened limitations period is unreasonable. (Doc. 13 at 11). California courts generally afford "contracting parties considerable freedom to modify the length of a statute of limitations" if the shortened limitations period is reasonable. Moreno v. Sanchez , 106 Cal.App.4th 1415, 131 Cal. Rptr. 2d 684, 695 (2003). " ‘Reasonable’ in this context means the shortened period nevertheless provides sufficient time to effectively pursue a judicial remedy." Id. In other words, a shortened limitations period is reasonable "if the plaintiff has a sufficient opportunity to investigate and file an action, the time is not so short as to work a practical abrogation of the right of action, and the action is not barred before the loss or damage can be ascertained." Wind Dancer Prod. Grp. v. Walt Disney Pictures , 10 Cal.App.5th 56, 215 Cal. Rptr. 3d 835, 848–50 (2017) (citation and internal quotation marks omitted). "California courts routinely have enforced contractual provisions shortening the four-year statute of limitations for breach of a written contract to periods of one year or less." Id. at 851. In this case, RMP had sufficient time to effectively pursue a judicial remedy. RMP has not pleaded any facts that establish: (1) it did not have a sufficient opportunity to investigate and file an action, (2) the shortened limitations period works a practical abrogation of the right of action, or (3) its action was barred before the loss or damage could be ascertained. Rather, the facts demonstrate that RMP waited more than sixteen months after it first requested a refund to file suit. Thus, the shortened limitations period provided for in the contracts is reasonable.
Additionally, the California Commercial Code states: "An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it." Cal. Com. Code § 2725(1).
Finally, RMP argues that its claims are not time-barred because Defendants’ breaches occurred less than one year before the date that RMP filed suit. (Doc. 13 at 11-12). Since RMP filed suit on October 29, 2020 and the Court finds that the shortened limitations period is reasonable and enforceable, any breach of contract that occurred prior to October 29, 2019 is time-barred.
RMP's Complaint and the exhibits thereto establish: (1) the contracts at issue were executed in March of 2016; (2) the anticipated delivery date for the two TomoTherapy machines was July 15, 2016; (3) RMP initially requested to have its payments refunded on June 26, 2019; and (4) RMP again requested to have its payments refunded on September 16, 2019. These dates demonstrate that Defendants breached the contracts prior to October 29, 2019.
As noted, RMP included an email from Dr. Catalano to several of Defendants’ employees as an exhibit to its Complaint. (Doc. 1-1 at 84-85). The email discusses the refund that Dr. Catalano believed was due and states:
Please note: my initial request for return of my funds, pursuant to our agreements, was June 26, 2019—now approaching 90 days. Our contracts state you will return my funds within 30 days of my request, and that they will not be unreasonably withheld. I am closing on a real estate contract next week and would like this resolved before then, please.
(Id. )
RMP's Complaint also provides a summary of RMP's refund discussions with Defendants and states:
23. As a result of Defendants’ failure to deliver the consideration under the Rental Agreement and the New Sales Agreement, RMP contacted Defendants to obtain the Refund through other means, such as a check to RMP in the amount of the Refund. Despite trying to obtain the Refund, Defendant steadfastly refused to provide same to RMP , claiming that, pursuant to the Agreements, the initial payments are "non-refundable" even though the agreed-upon consideration underlying said Agreements was never provided and could never be provided.
(Doc. 1-1 ¶¶ 22-23) (emphasis added).
Reading Dr. Catalano's email alongside RMP's Complaint, the breaches of contract accrued—at the latest—on September 16, 2019. As early as September 16, 2019, the rental agreement and second sales agreement were in existence, RMP had "paid" Defendants the down payments which were due under the contracts, Defendants had failed to deliver the consideration (which had been scheduled to be delivered more than three years earlier), and RMP had requested a refund that it did not receive. As the breaches of contract occurred and the causes of action accrued prior to October 29, 2019, RMP's breach of contract claims are time-barred.
RMP's breach of the implied duty of good faith and fair dealing and tort claims are also time-barred because they arise out of and relate to Defendant's failure to deliver the consideration; thus, the shortened limitations period applies to these claims as well. Because these claims accrued prior to or at the same time the breach of contract claims accrued, they are also time-barred by the shortened limitations period. See Umana v. Lea , No. CV 08-00673 CJC (AN), 2008 WL 4375750, at *3–7 (C.D. Cal. Aug. 21, 2008) ("Given the contractually-shortened limitations period, the Court finds that the fraud and negligent misrepresentation claims contained in the first amended complaint are time-barred."); Maxcess, Inc. v. Lucent Technologies, Inc. , 433 F.3d 1337, 1342 (11th Cir. 2005).
Although it will be difficult for RMP to state a contract claim that is not time-barred by the shortened limitations period, RMP will be granted leave to amend its Complaint, provided RMP can do so in good faith and in accordance with Rule 11 of the Federal Rules of Civil Procedure. Consequently, Counts I and II are due to be dismissed without prejudice.
Given the Court's dismissal of RMP's breach of contract claims, the Court need not address Defendants’ other arguments regarding these claims. To the extent Defendants argue RMP's breach of contract claims fail because they contradict unambiguous contractual language, Defendants may assert this argument in response to the Amended Complaint, if applicable.
3. RMP Fails to State a Claim for Breach of the Implied Duty of Good Faith and Fair Dealing
In their Motion, Defendants argue that RMP's breach of the implied duty of good faith and fair dealing claims should be dismissed because they are subsumed by RMP's breach of contract claims. (Doc. 12 at 16). Under California law:
The covenant of good faith and fair dealing is implied in every contract. Guz v. Bechtel Nat'l Inc. , [24 Cal.4th 317, 100 Cal.Rptr.2d 352] 8 P.3d 1089, 1110 (Cal. 2000) ]. To plead a breach of covenant of good faith, a plaintiff must allege that a defendant unfairly interfered with plaintiff's right to receive the benefits under the agreement. Id. A breach of contract may also constitute a breach of covenant of good faith. Id. [at 1111–12]. However, when a party's acts are directly actionable as a breach of contract, "a claim that merely realleges that breach as a violation of the covenant is superfluous." Id. [at 1112]. This is so because the remedy for breach of contract, including the covenant of good faith, is "solely contractual ," and thus, the breach of good faith theory affords no separate measure of recovery. Id. (emphasis in original). Accordingly, a breach of good faith claim must go beyond a statement of a mere contract breach. Careau [& Co. v. Sec. Pac. Bus. Credit, Inc. , 272 Cal. Rptr. 387, 400 (Cal. Ct. App. 1990) ].
Bella Canvas, LLC v. TSC Apparel, LLC , No. 2:20-cv-05947-RGK-AS, 2020 WL 7048306, at *3 (C.D. Cal. Sept. 17, 2020).
Stated another way, "[i]f the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated." Careau , 272 Cal. Rptr. at 400. In this case, RMP's breach of the implied duty of good faith and fair dealing claims are not only time-barred; they also rely on the same alleged acts and seek the same damages as its breach of contract claims. RMP's breach of the implied duty of good faith and fair dealing claims fail to go beyond the statement of a mere contract breach, and RMP's decision to state the claims in the alternative and its use of other terms will not redeem these claims. Although it may be difficult for RMP to state a claim for breach of the implied duty of good faith and fair dealing that is not time-barred, RMP will be granted leave to amend these claims. Counts VIII and IX will be dismissed without prejudice.
See Doc. 13 ¶ 37 ("Here, RMP's allegations in Counts VIII and IX do go beyond mere allegations of breach of contract as evidenced by the following: (a) in paragraphs 76 and 84, RMP clearly alleges that they are alternative claims ‘to the extent that the Court interprets that the question of RMP's entitlement to a refund is not resolved by the terms of the’ respective Agreements; and (b) both claims include elements beyond mere breach, including reasonable commercial expectations and bad faith.").
B. RMP's Unjust Enrichment Claim
In their Motion, Defendants assert that RMP's "unjust enrichment claim (Count III) fails twice over: California does not recognize an unjust enrichment claim, and even if it did, [RMP's] breach of contract claims preclude the claim." (Doc. 12 at 14). Defendants are correct, "there is no standalone cause of action for ‘unjust enrichment’ or ‘restitution’ " under California law. UCP Biosciences, Inc. v. Am. Screening, LLC , No. 20-cv-0886-NC, 2020 WL 4569469, at *4 (N.D. Cal. Aug. 6, 2020) (citing Astiana v. Hain Celestial Grp., Inc. , 783 F.3d 753, 762 (9th Cir. 2015) ). However, "[w]hen a plaintiff alleges unjust enrichment, a court may construe the cause of action as a quasi-contract claim seeking restitution." Astiana , 783 F.3d at 762 (citation and internal quotation marks omitted). In this case, even if the Court construes RMP's unjust enrichment claim as a quasi-contract claim seeking restitution, it fails.
"As a general rule, a quasi-contract claim cannot lie where there exists between the parties a valid express contract covering the same subject matter." UCP Biosciences , 2020 WL 4569469, at *4 (quoting Lance Camper Mfg. Corp. v. Republic Indem. Co. , 44 Cal.App.4th 194, 51 Cal. Rptr. 2d 622, 628 (1996) ) (internal quotation marks omitted). "But a party to an express contract can assert a claim for restitution based on unjust enrichment by alleging in that cause of action that the express contract is void or was rescinded." Id. (quoting Rutherford Holdings, LLC v. Plaza Del Rey , 223 Cal.App.4th 221, 166 Cal. Rptr. 3d 864, 872 (2014) ) (internal quotation marks omitted).
California courts are split on whether a plaintiff may plead a breach of contract claim and a quasi-contract claim that is alleged in the alternative. Id. at *5 (citations omitted). However, the Court need not reach this issue because, even if the Court found that RMP could plead these claims together, RMP's quasi-contract claim is due to be dismissed because RMP has not sufficiently alleged that the express contracts were procured by fraud or are otherwise unenforceable. Id. at *5.
In Count III, RMP states: "This is an alternative cause of action for unjust enrichment in the event that the Court determines that the Rental Agreement and New Sales Agreement are not valid or enforceable." (Doc. 1-1 ¶ 40). However, this pleading is insufficient because RMP fails to: (1) allege that the express contracts were procured by fraud or are otherwise unenforceable and (2) deny the existence or enforceability of the parties’ agreements. See Saroya v. Univ. of the Pac. , 503 F.Supp.3d 986, 999 (N.D. Cal. 2020) ("Plaintiff's unjust enrichment claim did not deny the existence or enforceability of the alleged enforceable agreement. Accordingly, he is precluded from asserting a quasi-contract claim under the theory of unjust enrichment."). As RMP's present unjust enrichment claim (Count III) does not meet these requirements, it is due to be dismissed without prejudice.
IV. CONCLUSION
Based on the foregoing, it is ordered as follows:
1. Defendants TomoTherapy Incorporated and Accuray Incorporated's Motion to Dismiss (Doc. 12) is GRANTED in part and DENIED in part:
a. To the extent the Motion seeks dismissal of Counts IV, V, VI, and VII with prejudice, the Motion is GRANTED;
b. To the extent the Motion requests the Court to dismiss Counts I, II, III, VIII, and IX with prejudice, the Motion is DENIED.
2. Counts I, II, III, VIII, and IX are DISMISSED WITHOUT PREJUDICE.
3. In accordance with the terms of this Order, Plaintiff Radiation Medicine Physicians, P.A. is GRANTED leave to file an amended complaint within fourteen days . The amended complaint shall not serve as an opportunity to add new claims. Rather, this represents a chance for RMP to remedy the pleading deficiencies identified herein. Failure to file an amended complaint within fourteen days may result in the dismissal of this case without further notice.
DONE and ORDERED in Chambers, in Orlando, Florida on March 4, 2021.