Pebble Beach Investment Group, LLC v. Square One Starts, LLC

Background

Pebble Beach Investment Group, LLC sued Square One Starts, LLC. The complaint alleged that the parties entered a contract on June 29, 2020, under which Square One would germinate 14,400 of Pebble Beach’s Kush Hemp seeds in exchange for $3,312. Pebble Beach alleged that it provided the seeds and payment, but Square One failed to perform its obligation because thousands of the seeds were destroyed.

Pebble Beach asserted claims for negligent misrepresentation, intentional misrepresentation, unfair competition, negligence, breach of contract, and breach of fiduciary duty. Square One moved to dismiss the claims.

Court’s analysis

The court held that the misrepresentation-related claims were not adequately pleaded. An actionable misrepresentation must make a specific and measurable statement that can be shown to be false or reasonably understood as an objective fact. The statements identified in the complaint—Square One’s claims of “Large-Scale Capacity & Predictability,” “State-of-the-Art Facilities,” and having the “experience, resources, training, facilities, and capability” to germinate the seeds—were, standing alone, generalized and non-quantifiable. The court noted that additional facts about the context of the statements might make them specific enough to support a claim, but the complaint did not include those facts. The unfair competition claim was based on the misrepresentation claims and therefore also failed under the current allegations.

The court also held that the negligence claim was inadequately pleaded. Under California law, a plaintiff seeking purely economic losses resulting from a contract must allege a “special relationship” creating a duty independent of the contract. Pebble Beach’s allegation that Square One owed it a duty of care because Square One was entrusted with the seeds was conclusory and insufficient.

The court allowed the breach of contract claim to proceed. It found that Pebble Beach had alleged the material terms of a specific contract, its own performance by providing the seeds and payment, and Square One’s alleged breach by allowing thousands of the seeds to be destroyed.

The court held that the breach of fiduciary duty claim was also inadequately pleaded. Ordinary, arms-length business dealings generally do not create a fiduciary relationship. The complaint did not allege facts showing that Square One knowingly assumed fiduciary responsibilities, acted as Pebble Beach’s agent, or participated with Pebble Beach in a joint venture or partnership.

Disposition

Judge Vince Chhabria granted Square One’s motion to dismiss in part and denied it in part. The motion was granted as to all claims except the breach of contract claim. Discovery could move forward on that claim. The court gave Pebble Beach 14 days to file any amended complaint and set response deadlines for Square One. The opinion does not state a disposition using the terms “with prejudice” or “without prejudice.”