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Wang v. Hull

United States District Court, W.D. Washington, Seattle

November 8, 2019

ZHIZHENG WANG, for the WANG GROUP, Plaintiff,
v.
BRUCE HULL, an individual, Defendant,
v.
DECATHLON ALPHA III, L.P., Intervenor Defendant.

          ORDER GRANTING MOTION TO DISMISS COUNT II OF ZHIZHENG WANG'S CROSSCLAIMS

          Robert S. Lasnik United States District Judge.

         This matter comes before the Court on Intervenor Plaintiff Decathlon Alpha III, L.P.'s (“Decathlon”) motion to dismiss Count II of Plaintiff Zhizheng Wang's (“Wang”) Crossclaims. Dkt. # 54. Wang and Decathlon are each lenders to G.A.E.M.S., Inc. (“GAEMS”). Id. Although Wang's loan predated Decathlon's chronologically, Decathlon's loan was contingent on the subordination of Wang's loan. Dkt. #1-1. Wang alleges that Decathlon will violate the implied covenant of good faith and fair dealing by postponing the Maturity Date of its loan to GAEMS, which will have the effect of delaying Wang's recovery from GAEMS. Dkt. #50 at 13; Dkt. #56 at ¶¶ 3-5, 7. Wang asks this Court to enjoin Decathlon from postponing the loan's maturity date and to award Wang damages for Decathlon's alleged violations. Dkt. #50 at ¶¶ 4-43, p. 14. Decathlon seeks dismissal of this claim, arguing that Wang has not identified a contractual provision to which the duty of good faith applies and has therefore failed to state a claim upon which relief may be granted. Dkt. #54.

         LEGAL STANDARD

         The question for the Court on a motion to dismiss under Fed. R. Civ. Proc. 12(b)(6) is whether the facts alleged in the complaint and supporting documents sufficiently state a “plausible” ground for relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible 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 (2009).

         At this stage, “[a]ll well-pleaded allegations of material fact in the complaint are accepted as true and are construed in the light most favorable to the non-moving party.” Faulkner v. ADT Sec. Servs., Inc., 706 F.3d 1017, 1019 (9th Cir. 2013) (citing Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008)). The Court, however, need not accept as true factual allegations that contradict exhibits or constitute unreasonable inferences. Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). Dismissal is appropriate where the complaint fails to state a cognizable legal theory or fails to provide facts sufficient to support a claim. Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir 2010).

         Having reviewed the memoranda, declaration, and exhibits submitted by the parties[1] as well as Wang's crossclaims and the various contracts, the Court GRANTS Decathlon's Motion to Dismiss Count II of Wang's Crossclaims.

         DISCUSSION

         A. The Court will not consider some of the materials referenced in Wang's response to Decathlon's motion to dismiss.

         In opposing Decathlon's motion, Wang submitted materials outside the pleadings, to which Decathlon objects. Dkt. #59 at 3-4. As a general rule, “a district court may not consider any material beyond the pleadings in ruling on a Rule (12)(b)(6) motion.” Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (citing Branch v. Tunnell, 14 F.3d 449, 453 (9th Cir. 1994)). The Court, however, may consider materials attached to the complaint as well as “unattached evidence on which the complaint ‘necessarily relies.'” Id. The Court will only consider unattached evidence that meet the following conditions: (1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party disputes the authenticity of the document. U.S. v. Corinthian Colleges, 655 F.3d 984, 999 (9th Cir. 2011). The Court may also consider matters of public record so long as they are not reasonably subject to dispute. Gemtel Corp. v. Cmty. Redevelopment Agency of City of Los Angeles, 23 F.3d 1542, 1544 n.1 (9th Cir. 1994).

         Wang cites several sources that are outside the pleadings and do not meet any of the above exceptions, including deposition transcripts and correspondence with GAEMS executives. Dkt. #56 at 3, 4. None of these materials was attached to Wang's crossclaims against Decathlon, nor do they form the basis for the crossclaims. See Dkt. #50; Corinthian Colleges, 655 F.3d at 999. The Court therefore will not consider information from the Mercier email correspondence, the Griffith declaration, or the Borchers deposition.

         Decathlon also disputes Wang's reliance on a publicly posted GAEMS stock price. Dkt. # 59 at 3. This stock price is a matter of public record and is therefore properly before the Court on a motion to dismiss. Gemtel Corp., 655 F.3d at 1544 n. 1.

         B. Washington law requires only that parties perform their contractual obligations in good faith.

         To succeed on a breach of contract claim, the plaintiff must demonstrate duty, breach, causation, and damages. BP West Coast Prods. LLC v. SKR Inc., 989 F.Supp.2d 1109, 1121 (W.D. Wash. 2013). Washington law recognizes an implied covenant of good faith and fair dealing in every contract which requires the parties to “perform in good faith the obligations imposed by their agreement.” Badgett v. Security State Bank, 116 Wn.2d 563, 570 (1991); Keystone Land & Dev. Co. v. Xerox Corp., 152 Wn.2d 171, 178 (2004) (there must be a contractual duty in order for the implied duty of good faith to attach). However, “there cannot be a breach of the duty of good faith when a party simply stands on its rights to require performance of a contract according to its terms.” Keystone Land & Dev. Co, 152 Wn.2d at 178. The Court cannot read additional duties into an agreement under the guise of enforcing a covenant of good faith. Building 11 Investors LLC v. City of Seattle, 912 F.Supp.2d 972, 978-79 (W.D. Wash. 2012). Although “good faith applies when the contract gives one party discretionary authority to determine a contract term, ” the duty “does not apply to contradict contract terms.” Goodyear Tire & Rubber Co. v. Whiteman Tire, Inc., 86 Wn.App.732, 738 (1997) (emphasis in original).

         Wang's claim that Decathlon breached the duty of good faith and fair dealing can survive Decathlon's Motion to Dismiss if Wang has plausibly alleged the following: that Decathlon owed him a duty of good faith to perform an obligation articulated in their contract; that Decathlon failed to honor it; and, ...


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