ANNA J. BROWN, United States District Judge
This matter comes before the Court on Plaintiffs' Motion to Dismiss (#12) Defendant's Third through Tenth Counterclaims and Motion to Strike Defendant's Fifth, Sixth, Eighth, and Ninth Affirmative Defenses.
For the reasons that follow, the Court GRANTS in part Plaintiffs' Motion to Dismiss and DISMISSES without prejudice Defendant's Sixth Counterclaim against Plaintiffs and Defendant's Tenth Counterclaim against Plaintiff MacKenzie. The Court DENIES the remainder of Plaintiffs' Motion to Dismiss and Motion to Strike.
PERTINENT FACTUAL ALLEGATIONS
In Plaintiffs' First Amended Complaint, they allege E.Com International, Inc. (the Company), executed and delivered several convertible promissory notes (the Notes) to certain persons who provided capital for the Company (the Holders) between March 24, 1999, and March 27, 2000. The Holders include Plaintiffs and seven other persons who are not parties to this action (the Other Holders). Defendant alleges Plaintiff Barinaga was both a Holder of several Notes and a member of the Board of Directors of the Company.
Pursuant to the terms of the Notes, the Company promised to pay to each Holder the principal due under the Note in cash and quarterly interest payments on the principal in shares of the Company's common stock. In addition, the Notes provide each Holder has the right to convert the outstanding principal and interest due into common stock at the Holder's sole option after written notice to the Company. The Company also promised to issue to each Holder a certain number of "warrants," which granted to each Holder the right to purchase shares of the Company's common stock based on the Holder's capital investment in the Company.
The Holders were entitled to declare the entire amount of principal, interest, and other sums such as late charges "at once due and payable" if the Company breached the terms of the Notes or defaulted in making any payment due under the Notes.
The Notes also provided each of the Holders would receive a first security interest and senior lien in certain delineated collateral of the Company. The Notes, however, required each of the Holders and the Company to execute an Intercreditor Agreement that provided procedures to be followed in the event of a default or breach by the Company.
The Intercreditor Agreement provided the Holders have equal priority in their rights to receive payments under the Notes and equal priority in their respective security interests in the Company's collateral. Pursuant to the Intercreditor Agreement, a Holder may declare default on a Note only after providing written notice of default to the Company and to each of the Holders. No Holder may proceed against the collateral without advance written notice to each of the Holders. In the event of a demand for payment, the Holders agreed to work cooperatively to exercise their remedies and to engage legal counsel who was mutually satisfactory to each of the Holders.
The Intercreditor Agreement also provided:
No Holder, without the written consent of the others, shall assign its Note, participate any interest in its Note or delegate its duties under the Agreement.
On or about November 19, 2001, Defendant executed various Option Agreements with the Other Holders. The Other Holders agreed to grant Defendant the exclusive option to acquire the Notes, the principal amounts due under the Notes, and the Other Holders' security interests in the Company's collateral.
The Option Agreements explicitly provided the Other Holders would retain the right to receive interest payments and late fees under the Notes, but Defendant would receive "all security interests and all rights under the Intercreditor Agreement in connection with such interest and late fees."
Plaintiffs assert they did not enter into any Option Agreements with Defendant. In addition, Plaintiffs contend they did not give written consent as required by the Intercreditor Agreement to the Other Holders' assignment of their Notes to Defendant. Plaintiffs contend, therefore, the assignment of the Other Holders' Notes to Defendant was invalid, and Defendant has no interest in the Notes or rights under the Intercreditor Agreement.
Defendant, however, alleges Plaintiffs may not rely on the written consent provision of the Intercreditor Agreement for several reasons, including:
1. Plaintiffs orally and by their conduct waived the written consent provision of the Intercreditor Agreement.
2. Plaintiffs are equitably estopped from relying on the written consent provision of the Intercreditor Agreement.
3. Plaintiffs entered into a subsequent, superseding agreement with Defendant and/or a modification of the Intercreditor Agreement in which Plaintiffs "agreed, committed and consented to the terms, conditions, transactions and obligations represented by and embodied in the Option Agreements between Defendant" and the Other Holders. This subsequent agreement was supported by sufficient consideration.
4. Even if the subsequent agreement with Defendant was not a valid contract, Plaintiffs are liable to Defendant in promissory estoppel.
Plaintiffs allege all of the outstanding Notes were due and payable by March 27, 2001. Plaintiffs further allege the Company has not paid the Notes. On December 21, 2001, Plaintiffs gave notice of the Company's default under the Notes held by Plaintiffs and made a demand for payment in full of the principal face amount of the Notes. Plaintiffs sent by certified mail a copy of the Notice of Default and demand to the Company, to each of the Other Holders, and to Defendant.
In response to this Notice, Defendant sent Plaintiffs and their counsel a letter on December 31, 2001, in which Defendant asserted its interest in the Notes and its rights under the Intercreditor Agreement. In the letter, Defendant also asserted Plaintiffs breached the Intercreditor Agreement and their duties under the Notes by failing to cooperate with the Other Holders and by engaging in self dealing and illegal conduct.
STANDARDS I. Motion to Strike Pursuant to Fed.R.Civ.P. 12(f)
Rule 12(f) provides the court "may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Whether to grant a motion to strike is within the court's discretion. Fantasy, Inc. v. Fogarty, 984 F.2d 1524, 1527 (9th Cir. 1993), rev'd on other grounds, 510 U.S. 517 (1994). A motion to strike a defense as insufficient is proper only if the defense is insufficient as a matter of law. Kaiser Aluminum Chemical Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1057 (5th Cir. 1982), cert. denied, 459 U.S. 1105 (1983).
The court must deny a motion to strike unless, viewing the allegations in the light most favorable to the nonmoving party, the court is "convinced there are no questions of fact, any questions of law are clear and not in dispute, and that under no set of circumstances could the defense succeed." S.E.C. v. Sands, 902 F. Supp. 1149, 1165 (C.D.Cal. 1995), aff'd by 142 F.3d 1186 (1998), cert. denied, 525 U.S. 1121 (1999) (internal quotation and citation omitted). See also Lazar v. Trans Union LLC, 195 F.R.D. 665, 669 (C.D.Cal. 2000). "As a general proposition, motions to strike are regarded with disfavor because [they] are often used as delaying tactics, and because of the limited importance of pleadings in federal practice." Hart v. Baca, 204 F.R.D. 456, 457 (C.D.Cal. 2001) (internal quotations and citations omitted).
II. Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(6)
Dismissal under Rule 12(b)(6) "for failure to state a claim is proper `only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" Cervantes v. City of San Diego, 5 F.3d 1273, 1274 (9th Cir. 1993) (quoting Hishon v. King Spalding, 467 U.S. 69, 73 (1984)). The court's review is limited to the operative pleading, and all allegations of material fact are taken as true and viewed in the light most favorable to the nonmoving party. Meek v. County of Riverside, 183 F.3d 962, 965 (9th Cir.), cert. denied, 528 U.S. 1005 (1999). A court should not dismiss a claim, thus depriving the party of an opportunity to establish his claims at trial, "unless it appears beyond doubt that the [party] can prove no set of facts in support of his claim which would entitle him to relief." Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).
Fed.R.Civ.P. 8(a) generally provides a pleading that sets forth a claim must contain "a short and plain statement of the claim showing the pleader is entitled to relief." A claimant need only provide in the initial pleading sufficient factual allegations to give the opposing party "fair notice" of the claim against him and the grounds on which that claim is based. Conley, 355 U.S. at 47.
DISCUSSION
Plaintiffs seek a court order declaring:
1. Plaintiffs' written consent to the assignment of the Other Holders' Notes to Defendant was a condition precedent to Defendant's right to exercise its option to acquire the Notes under the Option Agreements;
2. The condition precedent was not satisfied; and
3. Defendant, therefore, has no rights or interests in the Other Holders' Notes or the Intercreditor Agreement.
Defendant alleges numerous affirmative defenses and counterclaims to this declaratory judgment action.
Plaintiffs, in turn, move the Court to strike certain of those affirmative defenses pursuant to Fed.R.Civ.P. 12(f) and to dismiss some of Defendant's counterclaims pursuant to Fed.R.Civ.P. 12(b)(6).
I. Motion to Strike Defendant's Affirmative Defenses
Plaintiffs move the court for an order striking Defendant's Fifth, Sixth, Eighth, and Ninth Affirmative Defenses.
Plaintiffs offer no argument or legal authority to support their Motion to Strike Defendant's Ninth Affirmative Defense. Accordingly, the Court denies Plaintiffs' Motion to Strike to the extent it is directed toward Defendant's Ninth Affirmative Defense.
With respect to the balance of Plaintiffs' Motion to Strike, the Court finds Plaintiffs have not shown conclusively that Defendant's Affirmative Defenses are inappropriate or insufficient. It would be premature for the Court to take preemptive action by striking Defendant's Affirmative Defenses because this action is still in the very early stages and Defendant has not had the opportunity to conduct discovery sufficient to develop the issues underlying Plaintiffs' claims. As noted, motions to strike are disfavored, especially when they are made early in an action. The Court, therefore, exercises its discretion and denies Plaintiffs' Motion to Strike at this time.
II. Motion to Dismiss Defendant's Third Counterclaim
In its Third Counterclaim, Defendant alleges Plaintiffs "have breached and have failed and neglected to perform the terms and conditions of the Intercreditor Agreement and their obligations and duties in connection with that agreement."
Plaintiffs move this Court to dismiss Defendant's Third Counterclaim on the ground that Defendant is not a party to the Intercreditor Agreement and, therefore, lacks standing to assert this claim.
Under Oregon law, a waiver is the voluntary relinquishment of a known right. Bennett v. Farmers Ins. Co. of Oregon, 332 Or. 138, 156 (2001). A party to a contract may waive a contract provision by conduct or by oral statement. Id. A waiver can be unilateral and need not be supported by consideration. Id. Even if there is no evidence that a party intended to waive a provision of a written contract, the party may be estopped from relying on that provision if it led the other party to believe the provision had been waived and the other party relied on that waiver. Id. at 157.
Finally, the parties to a contract may modify the contract by mutual assent. Id. at 148. Mutual assent can be expressed in words or inferred from the actions of the parties. Id. A subsequent modification of the contract, however, must be supported by additional consideration. Id.
The parties agree Defendant entered into Option Agreements in which the Other Holders purportedly assigned their rights under the Intercreditor Agreement to Defendant, including their rights as shareholders in the Company, their rights as secured creditors in the Company's collateral, and their rights to convert the outstanding principal due on the Notes to Company stock. Plaintiffs allege those assignments were invalid because Plaintiffs did not give their written consent as required under the Intercreditor Agreement.
Defendant, however, alleges the assignments were valid because Plaintiffs either waived the written consent provision or should be equitably estopped from relying on that provision. In the alternative, Defendant alleges Plaintiffs entered into subsequent agreements with Defendant and/or the Other Holders in which they consented to the assignment of the Other Holders' rights to Defendant and relinquished their rights to require written consent.
Plaintiffs argue Defendant has not established Defendant has any rights under the Intercreditor Agreement. Plaintiffs contend they could not have relinquished "known rights" under the Intercreditor Agreement as evidenced by the fact Plaintiffs now seek the assistance of the Court to determine their rights under that agreement. Plaintiffs also argue their declaratory judgment action against Defendant demonstrates their rights are by definition "unknown and uncertain." On the other hand, Plaintiffs also contend the Holders' intent to require written consent before any assignment of rights under the Intercreditor Agreement is "clear and unambiguous." Moreover, Plaintiffs repeatedly argue the Intercreditor Agreement unambiguously bestowed on Plaintiffs the right to refuse to give written consent to an assignment of rights under the Notes and Intercreditor Agreement for any reason. Although the Court agrees the Intercreditor Agreement unambiguously gave Plaintiffs the right to refuse to consent to an assignment, Plaintiffs' subsequent conduct and statements, nonetheless, may affect their right to rely on the written consent provision.
In addition, Plaintiffs argue they could not have waived or modified the Intercreditor Agreement by oral statements or conduct as Defendant alleges. Plaintiffs contend the Intercreditor Agreement refers specifically to the Notes, and the Notes contain a nonwaiver clause. In particular, the nonwaiver provision of the Notes provides no waiver, modification, or amendment of the Notes is valid unless signed and in writing. The Court finds the nonwaiver provision is not dispositive even if it applies to the Intercreditor Agreement. See Moore v. Mutual of Enumclaw Ins. Co., 317 Or. 235, 241 (1993) ("a party to a written contract can waive a provision of that contract by conduct or by oral representation, despite the existence of a nonwaiver clause"). Viewing the allegations in the light most favorable to Defendant, the Court concludes Defendant alleges sufficient facts to support its claim that the written consent provision of the Intercreditor Agreement is not an effective condition precedent to Defendant's rights under the Option Agreements.
Defendant's allegations of waiver, equitable estoppel, subsequent modification, and superseding agreement, if true, would each negate the written consent provision on which Plaintiffs rely. As Plaintiffs concede, Defendant may assert rights under the Intercreditor Agreement pursuant to its Option Agreements with the Other Holders "with no condition precedent in the way." Accordingly, the Court finds Defendant has standing to assert Plaintiffs breached the Intercreditor Agreement, and Defendant's Third Counterclaim does not fail on that basis as a matter of law.
III. Motion to Dismiss Defendant's Fourth and Fifth Counterclaims
In its Fourth Counterclaim, Defendant alleges Plaintiffs intentionally interfered with the Option Agreements between Defendant and the Other Holders. In its Fifth Counterclaim, Defendant alleges Plaintiffs intentionally interfered with the prospective contractual relations between Defendant and the Other Holders and between Defendant and the Company.
To state a claim for intentional interference with economic relations, a party must show 1) the existence of a valid business relationship or expectancy, 2) intentional interference with that relationship, 3) by a third party, 4) accomplished through improper means or for an improper purpose, 5) a causal link between the interference and damage to economic relations, and 6) damages. Uptown Heights Ass'n Ltd. Partnership v. Seafirst Corp., 320 Or. 638, 651 (1995).
In order to prevail on such a claim, the party must show the opposing party had a "`duty of non-interference; i.e., that he interfered for an improper purpose rather than for a legitimate one, or that [he] used improper means which resulted in injury.'" Id. (quoting Straube v. Larson, 287 Or. 357, 361 (1979)). The interference must be wrongful beyond the mere fact of the interference itself. Id. "When a party invokes an express contractual remedy in circumstances specified in the written contract — conduct that reflects, by definition, the reasonable expectations of the parties — that party cannot be liable for intentional interference with economic relations based solely on that party's reason for invoking the express contractual remedy." Id. at 651-52.
Thus, any interference based on an express contractual right necessarily is for a legitimate purpose. Id. at 652. Such interference, nonetheless, may be wrongful if accomplished through improper means. See id. at 652 n. 5 (court's holding was limited to the improper purpose prong of the test).
Defendant alleges Plaintiffs "wrongfully, intentionally, willfully and maliciously" interfered with Defendant's business relations with the Other Holders. Plaintiffs assume the alleged interference was Plaintiffs' refusal to give written consent to the Other Holders' assignments of their rights under the Intercreditor Agreement to Defendant.
Plaintiffs argue they cannot be held liable for intentional interference with Defendant's business relations or prospective business expectancies if Plaintiffs' only interfering acts were to exercise their "rights and remedies under the contract" with the Other Holders.
Defendant, however, challenges conduct beyond Plaintiffs' refusal to give written consent. Defendant also alleges Plaintiffs initially agreed and consented to the terms of the Option Agreements, received the benefit of Defendant's efforts to reorganize the Company pursuant to those Option Agreements, and now are attempting to withdraw their consent to the Option Agreements by relying on the written consent provision in the Intercreditor Agreement and by declaring a default. Viewing the facts in the light most favorable to Defendant, the Court finds a reasonable juror could conclude Plaintiffs had an improper purpose when they engaged in this course of conduct. A reasonable juror also could conclude the misleading manner in which Plaintiffs allegedly exercised their right of refusal was improper even though Plaintiffs had an express contractual right to withhold their consent to the assignments. A reasonable juror also could conclude the misleading manner in which Plaintiffs exercised their express contractual right to withhold their consent to the assignments was improper.
In addition, Plaintiffs argue Defendant cannot show Plaintiffs interfered with Defendant's existing contractual relationships because the Option Agreements were not valid unless and until Plaintiffs gave their written consent to the assignments. Defendant, however, alleges Plaintiffs waived their rights to require written consent, should be equitably estopped from asserting those rights, or modified the agreement to eliminate the written consent provision. Under any of these scenarios, the alleged condition precedent to Defendant's contractual rights disappears. Viewing the facts in the light most favorable to Defendant, the Court finds Defendant alleges sufficient facts to support its claim that it has existing, valid contracts with the Other Holders and Plaintiffs interfered with those contracts for an improper purpose or through improper means. Accordingly, the Court concludes Defendant has stated a claim for intentional interference with business relations or prospective economic advantages.
Plaintiffs also move to strike Defendant's Fourth and Fifth Counterclaims to the extent that they are duplicative. The Fourth Counterclaim, however, pertains only to Plaintiffs' past interference with Defendant's business relationship with the Other Holders while the Fifth Counterclaim pertains only to prospective losses. The Court, therefore, exercises its discretion and denies Plaintiffs' Motion to Strike the Fourth and Fifth Counterclaims as duplicative.
IV. Motion to Dismiss Defendant's Sixth Counterclaim
In its Sixth Counterclaim, Defendant alleges Plaintiffs have been unjustly enriched "by their appropriation and enjoyment of the benefits and value of Defendant's efforts, expenses and contractual and business relations and prospects in connection" with the Other Holders and the Company.
To state a claim for unjust enrichment, a claimant must allege it conferred a benefit on the opposing party, the opposing party was aware of the benefit, and it would be unjust for the opposing party to retain the benefit without paying for it. Volt Serv. Group v. Adecco Employment Serv., Inc., 178 Or. App. 121, 133 (2001), rev. denied, 333 Or. 567 (2002). Injustice can be established by proof that the claimant had a reasonable expectation of payment for the benefit conferred. Jaqua v. Nike, Inc., 125 Or. App. 294, 298 (1993).
Plaintiffs move to dismiss Defendant's Sixth Counterclaim on the ground that Defendant fails to allege and cannot show any injustice, which is required to prevail on an unjust enrichment claim. Again, Defendant challenges conduct beyond Plaintiffs' refusal to give written consent to the Other Holders' assignments of their rights to Defendant. Defendant also alleges Plaintiffs initially agreed and consented to the terms of the Option Agreements, received the benefit of Defendant's efforts to reorganize the Company pursuant to those Option Agreements, and now are attempting to withdraw their consent to the Option Agreements by relying on the written consent provision in the Intercreditor Agreement and by declaring a default. In light of the entire course of Plaintiffs' alleged conduct, a reasonable juror could conclude Defendant had a reasonable expectation that Plaintiffs would not oppose the assignments, declare a default under the Notes, and, as a result, force the Company into bankruptcy and extinguish Defendant's hopes of recouping its investments.
Plaintiffs also argue Defendant' alleged damages are not recoverable under an unjust enrichment claim. Plaintiffs correctly note the appropriate measure of damages is the amount of the unjust benefit that Plaintiffs received rather than the amount of damages suffered by Defendant as a result of Plaintiffs' conduct. Although Defendant properly alleges it conferred a benefit on Plaintiffs, Defendant only identifies the amount of damages suffered by Defendant. The Court is unable to conclude whether the alleged benefit Plaintiffs received and the alleged damages Defendant suffered are the same. The Court, therefore, dismisses Defendant's Sixth Counterclaim and gives Defendant leave to replead.
V. Motion to Dismiss Defendant's Seventh, Eighth, and Ninth Counterclaims
Defendant's Seventh, Eighth, and Ninth Counterclaims involve various claims based on Plaintiffs' alleged breach of duties to the Company and to the Company's shareholders and secured creditors, including the Other Holders and Defendant. Defendant alleges Plaintiffs wrongfully caused the insolvency and bankruptcy of the Company, breached various fiduciary obligations, and breached the covenant of good faith and fair dealing. Plaintiffs contend Defendant lacks standing to assert such claims because Defendant is not a shareholder or secured creditor of the Company nor is it a party to the agreements between Plaintiffs and the Company or between Plaintiffs and the Other Holders.
As explained more fully above, Defendant alleges sufficient facts to show it is entitled to assert the rights of the Other Holders pursuant to the Option Agreements and Notes in spite of Plaintiffs' failure to give written consent to the Other Holders' assignments. According to Defendant's theory of the case, Defendant's rights include those rights of a secured creditor and shareholder of the Company.
Accordingly, the Court concludes Defendant has standing to assert its Seventh, Eighth, and Ninth Counterclaims in its capacity as the assignee of the Other Holders' rights under the Notes and Intercreditor Agreement.
VI. Motion to Dismiss Defendant's Tenth Counterclaim
Defendant's Tenth Counterclaim is a negligence claim. Defendant alleges Plaintiffs negligently breached and failed to fulfill the duties and standards of care they owed to the Company and to its shareholders, including the Other Holders and Defendant.
Again, Plaintiffs argue Defendant does not have standing to assert this claim. The Court disagrees. As noted, Defendant alleges sufficient facts to show the Other Holders' assignments of their rights to Defendant were valid. Thus, Defendant may assert the Other Holders' rights as shareholders and secured creditors pursuant to the Notes and the Intercreditor Agreement.
Plaintiffs also argue Defendant's Tenth Counterclaim fails to state a claim on which relief can be granted because it is a negligence claim based on a purely economic loss. As Plaintiffs correctly point out, "[O]ne ordinarily is not liable for negligently causing a stranger's purely economic loss without injuring his person or property" even if the harm is a foreseeable consequence of negligent conduct. Onita Pacific Corp. v. Trustees of Bronson, 315 Or. 149, 159 (1992).
Nonetheless, if the parties have a "special relationship" that obligates one party to pursue the economic interests of the other, Oregon law holds the obligor-party to a "heightened duty" to act with care when acting on the other party's behalf. Conway v. Pacific Univ., 324 Or. 231, 237 (1996).
Here Defendant alleges Plaintiff Barinaga, as a director of the Company, owed a fiduciary duty to all of its shareholders. Viewing the facts in the light most favorable to Defendant, Barinaga and Defendant had a special relationship, and Barinaga owed a heightened duty of care to Defendant as one of the shareholders. Accordingly, the Court concludes Defendant's negligence claim against Barinaga is sufficiently pleaded as a matter of law.
Generally, a contractual relationship does not give rise to a heightened duty of care and, therefore, cannot form the basis of a negligence claim for purely economic loss. See Onita, 315 Or. at 165. Defendant does not allege any facts that establish Plaintiff MacKenzie owed Defendant a heightened duty beyond the terms of the Intercreditor Agreement. The Court, therefore, concludes Defendant fails to state a negligence claim against MacKenzie. The Court, however, cannot conclude it is beyond doubt that Defendant could allege sufficient facts to show a special relationship between MacKenzie and Defendant. Accordingly, the Court dismisses Defendant's Tenth Counterclaim against MacKenzie and gives Defendant leave to replead this counterclaim.
CONCLUSION
For these reasons, the Court GRANTS in part Plaintiffs' Motion to Dismiss (#12) and DISMISSES without prejudice Defendant's Sixth Counterclaim against Plaintiffs and Defendant's Tenth Counterclaim against Plaintiff MacKenzie. The Court grants Defendant leave to replead these counterclaims by July 15, 2002. The Court DENIES the remainder of Plaintiffs' Motion to Dismiss and Motion to Strike.
IT IS SO ORDERED.