GMC Semitech Co., Ltd. v. Capital Asset Exchange and Trading, LLC

Background

GMC Semitech Co., Ltd. and Suzhou Cycas Microelectronics Co., Ltd. alleged that they entered into three equipment-purchase agreements with Capital Asset Exchange and Trading, LLC, in February and March 2024. The agreements included invoices, purchase orders, and payments. The plaintiffs alleged that they paid in full, provided information related to export controls, and were later told that the equipment could not be shipped to China. They alleged that they never received the equipment or refunds.

Capital Asset moved under Rule 12(b)(6), which permits dismissal when a complaint does not adequately state a legally sufficient claim. The motion challenged five of the complaint’s eight claims: money had and received, breach of the implied covenant of good faith and fair dealing, unjust enrichment, conversion, and unfair business practices under California’s Unfair Competition Law.

Court’s Analysis

The court dismissed the money-had-and-received claim without leave to amend. It treated that claim as a quasi-contract claim, meaning a claim seeking recovery outside an enforceable contract. Because Capital Asset did not dispute that the parties entered written contracts supported by consideration, the court held that the claim could not proceed.

The court dismissed the claim for breach of the implied covenant of good faith and fair dealing with leave to amend. The plaintiffs did not identify a contract provision requiring Capital Asset to acquire the equipment, and some agreement language appeared to contemplate that Capital Asset might not acquire it. The court also found that some allegations merely repeated the alleged contract breaches and that the general allegation that Capital Asset failed to act in good faith was too vague. The court concluded, however, that the purchase orders plausibly alleged some obligation to assist with export compliance. The plaintiffs did not allege specific actions violating that obligation, so the claim was dismissed but could be amended.

The court dismissed the unjust-enrichment claim without leave to amend. Although the court recognized that such a claim may be brought under California law as an independent claim or a quasi-contract claim for restitution, it held that the claim could not proceed because an enforceable agreement governed the parties’ rights.

The court dismissed the conversion claim with leave to amend under California’s economic-loss rule. That rule generally prevents recovery in tort for purely economic losses caused by disappointed contractual expectations unless the plaintiff shows a separate duty and additional harm. The court held that the plaintiffs’ alleged rights to the equipment and refunds arose from the agreements, so the conversion claim was barred on the allegations presented.

The court dismissed the Unfair Competition Law claim with leave to amend. The plaintiffs alleged that Capital Asset unfairly refused refunds, accepted payments for equipment it said could not be shipped, refused to deliver or refund the equipment, and falsely represented that it would assist with export compliance. The court found that the plaintiffs appeared to concede they could not state claims under the law’s unlawful or fraudulent theories. Because the same conduct supported all three theories, the court held that the unfairness theory also failed.

Disposition

The court granted Capital Asset’s motion to dismiss the complaint. It dismissed the implied-covenant, conversion, and Unfair Competition Law claims with leave to amend. It dismissed the money-had-and-received and unjust-enrichment claims without leave to amend. The plaintiffs were required to file an amended complaint or a statement declining to amend by May 13, 2025, and could not add parties or claims without the court’s permission. The opinion does not state the disposition of the three claims that were not challenged by this motion.