Convergent Mobile, Inc. v. JTH Tax, Inc.

Background

Convergent Mobile, Inc. brought three claims against JTH Tax, Inc. doing business as Liberty Tax Service: breach of contract, promissory estoppel, and breach of the covenant of good faith and fair dealing. JTH filed a motion to dismiss and a motion to strike. The court described the dispute as a business dispute arising from commercial interactions and applied the federal notice-pleading standard, under which a complaint must give the defendant notice of the basic dispute and the claims being made.

Motion to Dismiss

The court denied the motion to dismiss the breach-of-contract claim. It found that Convergent sufficiently alleged the required elements: a contract, Convergent’s performance or an excuse for nonperformance, JTH’s breach, and resulting damages.

The court granted the motion to dismiss the promissory-estoppel claim. Although parties may generally plead alternative theories, the court found that Convergent had not alleged facts establishing a separate and independent promissory-estoppel claim apart from its contract claim.

The court denied the motion to dismiss the claim for breach of the covenant of good faith and fair dealing. It found that, although the allegations were bare-bones, they were sufficient to allege that JTH acted in a way not reasonably contemplated by the contract or the parties and knew its conduct would materially affect Convergent.

Thus, the motion to dismiss was granted in part as to the promissory-estoppel claim and denied in part as to the breach-of-contract and good-faith-and-fair-dealing claims.

Motion to Strike

A motion to strike asks the court to remove an insufficient, redundant, immaterial, impertinent, or scandalous matter from a pleading. The court denied JTH’s motion to strike because JTH had not shown the prejudice required for that disfavored type of motion. The court also concluded that the allegations concerning attorney fees should not be stricken at that stage. It noted that the parties’ contract appeared to address attorney fees, but did not decide whether California law would make the provision reciprocal.

Disposition and Further Proceedings

The court denied Convergent’s request to amend all three claims. It stated that Convergent could file a motion to amend by May 6, 2020, if it maintained that sufficient independent facts existed to support a promissory-estoppel claim. JTH was ordered to answer the complaint by May 8, 2020. The court also scheduled a case-management conference for June 1, 2020, and terminated Docket Nos. 6 and 7.