In the Black Resources, LLC v. Blitz Design,Inc.

Background

In the Black Resources, LLC, doing business as Black Wall Street, and its Chief Operating Officer, Marye Dean, sued Blitz Design, Inc. The case concerns an alleged contract for marketing and promoting a book, producing four promotional events in multiple cities, and publishing books.

The complaint alleged that the plaintiffs paid Blitz $45,000 and that Blitz failed to perform several promised services for the first promotional event, including booking hotels, creating branding materials, providing event amenities, obtaining media coverage, and carrying out marketing and publishing work. The plaintiffs requested a refund. They alleged that Blitz later agreed to provide a new team and negotiated another agreement requiring an additional $15,000, but that Blitz did not perform the new agreement’s promised services.

The first amended complaint asserted seven claims: breach of contract; breach of the implied promise of good faith and fair dealing; unjust enrichment; intentional infliction of emotional distress; negligence; gross negligence; and violation of the Texas Deceptive Trade Practices and Consumer Protection Act. The Southern District of Texas had previously determined that California law applied to the contract-related claims, and this court followed that determination after the case was transferred to the Northern District of California.

Legal standard

Blitz moved to dismiss all seven claims under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim. At this stage, the court accepts plausible factual allegations as true and draws reasonable inferences for the plaintiffs, but it does not accept mere legal conclusions or unsupported inferences.

Breach of contract

The court held that In the Black Resources, LLC adequately alleged a contract, its own performance, Blitz’s breach, and damages. The complaint identified contract terms and described specific services that Blitz allegedly failed to provide. The court therefore denied the motion to dismiss In the Black Resources, LLC’s breach-of-contract claim.

The court reached a different conclusion regarding Dean’s contract claim. The complaint did not clearly identify the contract’s parties or allege facts showing that Dean was a party. Dean’s breach-of-contract claim was dismissed with leave to amend so she could plead facts showing that she was a party to a contract.

Good faith and fair dealing

The court found that neither plaintiff sufficiently alleged a separate claim for breach of the implied promise of good faith and fair dealing. The alleged failures—such as late planning, poor communication, and poor-quality marketing materials—described possible breach of contract, bad judgment, or negligence, but did not show the deliberate conduct required for a separate claim. Both claims were dismissed with leave to amend. Dean was also required to plead facts showing that she was a party to the underlying contract.

Unjust enrichment

The court explained that California law may treat an unjust-enrichment claim as a request for restitution under a quasi-contract theory. A plaintiff may plead that theory alongside breach of contract when the contract may be invalid or unenforceable. Because the complaint appeared to rely on a valid contract and did not allege that the contract was invalid or unenforceable, the unjust-enrichment claim was dismissed with leave to amend if the plaintiffs could plead the necessary facts.

Intentional infliction of emotional distress

The court found that the complaint did not adequately allege extreme and outrageous conduct, intent or reckless disregard, severe emotional distress, or causation. Although Dean alleged that a Blitz employee insulted her and that she began crying during a call, the complaint did not allege facts satisfying the required elements. It also did not explain how In the Black Resources, LLC, a business entity, could bring this claim under California law. The claim was dismissed with leave to amend.

Negligence and gross negligence

The negligence claim was based on Blitz’s alleged failure to perform its contractual duties. Because the complaint alleged only financial losses from the claimed contract breach and did not identify physical or property damage or an independent duty outside the contract, the court held that the claim was barred by California’s economic-loss rule. The negligence claim was dismissed with leave to amend.

The gross-negligence claim also failed because the complaint did not allege facts showing the required extreme conduct. The court did not decide whether the economic-loss rule separately barred that claim because the claim failed for lack of allegations showing extreme conduct. The gross-negligence claim was dismissed with leave to amend.

Deceptive trade practices

The plaintiffs pleaded a claim under the Texas consumer-protection statute. Because the court had previously determined that California law governed the contract-related claims, it held that the plaintiffs could not proceed under the Texas statute on the allegations presented. The claim was dismissed with leave to amend; the plaintiffs could amend to assert a claim under the equivalent California statute if they could adequately plead one.

Disposition

Judge William H. Orrick granted in part and denied in part Blitz Design’s motion to dismiss. In the conclusion, the court stated that Dean’s breach-of-contract claim and all claims for breach of the implied promise of good faith and fair dealing, unjust enrichment, intentional infliction of emotional distress, negligence, gross negligence, and deceptive trade practices were dismissed with leave to amend. In the Black Resources, LLC’s breach-of-contract claim remained. Dean was required to amend the first amended complaint as directed by the order to strike and could amend as allowed by this order within 20 days.