United States District Court, W.D. Washington, Seattle
following Minute Order is made by direction of the Court, the
Honorable Thomas S. Zilly, United States District Judge:
Defendants' Motion for Partial Judgment on the Pleadings,
docket no. 17, is DENIED. A Rule 12(c) motion for judgment on
the pleadings may not be granted unless, accepting all
factual allegations in the complaint as true and drawing all
reasonable inferences in favor of the nonmoving party, the
moving party is entitled to judgment as a matter of law.
See Gregg v. Haw. Dep't of Pub. Safety, 870 F.3d
883, 886-87 (9th Cir. 2017). Defendants have not made the
requisite showing that any of them is entitled to judgment as
a matter of law.
(a) With regard to plaintiffs' first claim for
“recovery of license payments, ” the most
defendants have demonstrated is that plaintiffs mislabeled
their cause of action, which seeks a refund of amounts they
paid to defendant Medstreaming, LLC
(“Medstreaming”). Plaintiffs pursue such remedy
on grounds that Medstreaming failed to cure material breaches
of the parties' agreement (i.e., breach of
contract) and, in the alternative, was unjustly enriched.
Compl. at ¶¶ 4.3 & 4.5 (docket no. 1-1).
Plaintiffs' first claim will be treated as asserting
breach of contract and/or unjust enrichment.
(b) With regard to plaintiffs' second, third, and fourth
claims for breach of contract (revocation or rejection),
breach of express warranty, and breach of implied warranties,
whether plaintiffs assert such claims against individual
defendants Wael Elseaidy and Ryan Plasch is unclear, but to
the extent such claims are alleged against Messrs. Elseaidy
and Plasch, the Court construes them, in conjunction with
plaintiffs' seventh claim for “negligent
participation liability by officer, ” as contending
that a basis exists for piercing the corporate veil or for
imposing liability on a corporate officer for engaging in or
ratifying wrongful conduct. See Grayson v. Nordic Constr.
Co., 92 Wn.2d 548, 553-54, 599 P.2d 1271 (1979);
Johnson v. Harrigan-Peach Land Dev. Co., 79 Wn.2d
745, 751-54, 489 P.2d 923 (1971). Whether plaintiffs can
prove such theory of individual liability remains to be seen,
but at this stage of the proceedings, Messrs. Elseaidy and
Plasch are not entitled to judgment on the second, third,
fourth, or seventh causes of action.
(c) With regard to plaintiffs' fifth claim for fraudulent
inducement, defendants cite to Rule 9(b), which requires that
allegations of fraud be stated with particularity, but they
appear to seek either judgment as a matter of law or
dismissal with prejudice. Neither remedy is appropriate.
Moreover, the Court is satisfied that plaintiffs have pleaded
fraudulent inducement with sufficient particularity, and any
questions about exactly which of Medstreaming's owners,
officers, and/or employees allegedly made the
misrepresentations at issue can be sorted out in discovery.
(d) With regard to plaintiffs' sixth claim for violation
of Washington's Consumer Protection Act
(“CPA”), plaintiffs have adequately pleaded the
facts necessary to allege a “plausible” cause of
action. See Bell Atl. Corp. v. Twombly, 550 U.S.
544, 556-70 (2007). Plaintiffs' CPA claim alleges unfair
or deceptive acts or practices not regulated by statute but
in violation of public interest. See Klem v. Wash. Mut.
Bank, 176 Wn.2d 771, 787, 295 P.3d 1179 (2013).
Defendants contend that the pleadings fail to establish two
of the five elements of a CPA claim,  namely an “unfair or
deceptive” practice and a “public
interest.” Defendants' arguments lack merit for the
(i) When a business practice is not per se unfair or
deceptive, the question is whether the practice is either
unfair or deceptive under the criteria developed in
Washington jurisprudence. See Rush v. Blackburn, 190
Wn.App. 945, 962-63, 361 P.3d 217 (2015) (outlining a
three-part test for “unfair” acts and a separate
standard for “deceptive” practices). The complaint
alleges that Medstreaming misrepresented the status and/or
capabilities of its software and that the software did not
perform as Medstreaming indicated it would. The complaint
further asserts that Medstreaming arranged for plaintiffs to
enter into a finance agreement with non-party Balboa Capital
Corporation (“Balboa”) via which Medstreaming
received payment up front for the software licensed by
plaintiffs, and plaintiffs are required to continue to make
periodic payments to Balboa even though Medstreaming's
software never worked and plaintiffs no longer have access to
the product. Contrary to defendants' arguments, the Court
cannot say as a matter of law that, assuming these facts to
be true, plaintiffs cannot prove the “unfair or
deceptive” act element of their CPA claim.
(ii) An unfair or deceptive act or practice affects the
public interest if it injures others besides the plaintiff or
has or had the capacity to injure others. RCW 19.86.093.
Washington courts have applied a five-factor test when
evaluating whether an essentially consumer transaction
involves the public interest,  and a different four-part inquiry
when the dispute is contractual or private in nature,
in both scenarios, no one factor is dispositive, and not all
factors need to be present. Rush, 190 Wn.App. at
969. Moreover, the “consumer transaction” /
“private contract” dichotomy does not apply in
every case, and that “neat distinction” was
disregarded by the Washington Court of Appeals in
Rush. Id. at 969-70. In this matter, the
Court is similarly unconvinced that the “private
contract, ” as opposed to the “consumer
transaction, ” set of factors control, and to the
extent that Medstreaming is engaged in an ongoing, unfair
and/or deceptive course of conduct, plaintiffs might be able
to demonstrate the type of public interest required to
proceed on their CPA claim.
(iii) Corporate officers who participate in wrongful conduct
or with knowledge approve of wrongful conduct that violates
the CPA cannot use the corporate form to shield themselves
from liability. Washington v. Ralph Williams' N.W.
Chrysler Plymouth, Inc., 87 Wn.2d 298, 322, 553 P.2d 423
(1976); see Strategic Intent, LLC v. Strangford Lough
Brewing Co., 2011 WL 1810474 at *17 (E.D. Wash. May 11,
2011). Plaintiffs have alleged sufficient facts to proceed on
their claims against the individual defendants under the CPA.
Defendant Medstreaming's Motion for Protective Order,
docket no. 23, is GRANTED as follows. Any materials produced
by Balboa in response to plaintiffs' Rule 45 subpoena
duces tecum that contain the identity and/or contact
information of Medstreaming's customers or clients,
and/or any pricing information, shall be treated as
confidential. Such documents and information (the
“Confidential Material”) shall be maintained in a
secure manner, may not be used for any purpose other than
prosecuting, defending, or attempting to settle this
litigation, and may not be disclosed to any person other
(a) plaintiffs' counsel of record in this action, as well
as employees of plaintiffs' counsel to whom it is
reasonably necessary to disclose the Confidential Material
for this litigation;
(b) plaintiffs' officers, directors, and employees to
whom disclosure is reasonably necessary for this litigation;
(c) experts and consultants to whom disclosure is reasonably
necessary for this litigation and who have signed an
“Acknowledgment and Agreement to Be Bound” in the
form attached to the district's model stipulated