Byelick v. Ryvyl Inc.

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 J. DREW BYELICK, an individual, Case No.: 24-cv-01096-GPC-SBC 12 Plaintiff, ORDER GRANTING: (1) 13 v. PLAINTIFF’S REQUESTS FOR JUDICIAL NOTICE, (2) 14 RYVYL INC. (f/k/a GREENBOX POS), a DEFENDANT’S MOTION TO Nevada corporation, 15 STRIKE, AND (3) DEFENDANT’S Defendant. MOTION TO DISMISS 16 17 [ECF Nos. 9, 13, 18] 18 19 Before the Court are Plaintiff’s request for judicial notice, ECF No. 13, 20 Defendant’s ex parte motion to strike, ECF No. 18, and Defendant’s motion to dismiss, 21 ECF No. 9. Defendant did not oppose Plaintiff’s request for judicial notice. Plaintiff 22 opposed the motion to strike, ECF No. 20. Plaintiff also opposed the motion to dismiss, 23 ECF No. 15, and Defendant filed a reply, ECF No. 16. 24 For the reasons below, the Court GRANTS the request for judicial notice, 25 GRANTS the motion to strike, and GRANTS the motion to dismiss with leave to amend 26 as to Counts Two, Three, Four, Five, and Six. 27 1 BACKGROUND 2 In June 2022, Plaintiff Drew Byelick accepted Defendant RYVYL Inc.’s (“Ryvyl”) 3 offer to become the company’s CFO. ECF No. 1 (“Compl.”) ¶ 55. Defendant initially 4 reached out to Plaintiff regarding the position via Robert Half, a recruiting firm, in April 5 2022. Id. ¶ 44. Plaintiff went through several rounds of interviews with Defendant’s 6 executives, id. ¶¶ 47, 49, received an offer letter in May 2022, id. ¶ 51; ECF No. 1-2 at 7 58-67, and visited Defendant’s San Diego campus for an in-person meeting, Compl. ¶ 54, 8 before accepting the offer, id. ¶ 55. Plaintiff relocated from Texas to San Diego, 9 California to become Defendant’s CFO. Id. ¶ 15. 10 Defendant’s offer letter to Plaintiff contains several key terms. See ECF No. 1-2 at 11 68-71. While the letter states that it “is an offer of employment not an employment 12 contract,” id. at 70, it later states that “if you accept this offer, the terms described in this 13 letter will be the terms of employment,” id. (emphasis added). Because Plaintiff 14 ultimately accepted the offer, Compl. ¶ 55, the terms of the letter became the terms of his 15 employment. Generally, the offer outlines Plaintiff’s salary, bonuses, benefits, and start 16 date. ECF No. 1-2 at 69-70. The letter also states that Plaintiff’s “employment with the 17 Company will be ‘at will’ and may be terminated by either [Plaintiff] or the Company at 18 any time without notice.” Id. at 70. 19 Plaintiff alleges that Defendant made numerous misrepresentations to him 20 throughout the hiring process. Plaintiff alleges that Defendant misrepresented that its 21 prior SEC filings and 2021 annual report were accurate and complied with generally 22 accepted accounting principles (“GAAP”), id. ¶ 16(B), that Defendant “had adequate 23 internal financial controls,” id. ¶ 16(C), and that Plaintiff “would have free and unfettered 24 access to all documents, records, and persons” required to perform his job as CFO, id. ¶ 25 16(D). Plaintiff also alleges that between May and June 2022, Defendant misrepresented 26 27 1 to him that it would hire at least two financial assistants to assist in Plaintiff’s duties as 2 CFO. Id. at ¶ 18(F). 3 Plaintiff alleges that Defendant misrepresented and omitted this information in the 4 hiring process for several improper reasons. Id. ¶ 18. For instance, Plaintiff alleges that 5 Defendant knew that its existing accounting software “lacked adequate internal financial 6 controls; . . . was not integrated; . . . [and] was woefully inadequate.” Id. ¶ 18(A). 7 Plaintiff alleges that the inadequate software directly led to inaccurate financial 8 statements. Id. Plaintiff also states that Defendant’s SEC filings failed to account for 9 nearly $6 million in unreported “insider share trading transactions” in violation of GAAP 10 and SEC rules and regulations, and that Defendant was aware of these transactions. Id. at 11 ¶ 18(B). Plaintiff further claims that Defendant was aware of the PCAOB’s inspection of 12 its previous auditor, BF Borgers, and that the “inspection identified multiple material 13 deficiencies and departures from GAAP,” but that Defendant failed to disclose this to 14 Plaintiff. Id. at ¶ 18(C)-(D); see also ECF No. 1-2 at 13-37. In sum, Plaintiff essentially 15 alleges that Defendant knowingly made numerous misrepresentations and omissions to 16 him, and that these misrepresentations and omissions played a key role in his decision to 17 relocate to San Diego, California to become Defendant’s CFO. Id. ¶ 22. 18 In January 2023, Defendant’s new auditor, Simon & Edwards, reported that 19 Defendant’s 2021 “financial statements were so replete with material misrepresentations 20 and omissions that such statements could no longer be relied upon.” Id. ¶ 59. Defendant 21 filed a Form 8-K with the SEC disclosing to the public that the 2021 financial statements 22 were no longer reliable and would be restated. ECF No. 1-2 at 3-4. Upon learning of the 23 2021 financial statements’ inaccuracies, Plaintiff recommended to Defendant’s CEO and 24 Board of Directors that each “each and every ‘adjusting entry’ identified . . . be restated 25 to properly account for every such transaction according to GAAP,” but Defendant 26 allegedly refused to cooperate with these efforts. Compl. ¶ 60. Because Defendant 27 1 would not cooperate with Plaintiff’s recommended remedial efforts, “Plaintiff was left 2 with no choice but to resign . . ., because Plaintiff could not and would not certify” that 3 any existing or proposed financial statements were accurate and reliable. Id. ¶ 61. 4 Plaintiff feared that remaining as Defendant’s CFO “would likely subject [him] to future 5 liability.” Id. Accordingly, Plaintiff resigned. Id.; ECF No. 1-2 at 53-57. 6 Defendant’s disclosure of inaccuracies in its financial statements and subsequent 7 restatement of numerous financial statements resulted in a separate securities fraud class 8 action lawsuit. See Cullen v. RYVYL Inc., 2024 WL 4536471 (S.D. Cal. Oct. 21, 2024). 9 Byelick was initially named as a Defendant in Cullen because he was Ryvyl’s CFO 10 during certain relevant periods. Id. at *2 n.3. However, the claims against Byelick were 11 dismissed with prejudice. Id. Byelick subsequently filed the instant lawsuit against 12 Ryvyl. 13 REQUESTS FOR JUDICIAL NOTICE 14 Plaintiff requests that the Court take judicial notice of (1) several of Defendant’s 15 SEC filings (Exhibits 1-2, 4-7) and (2) a Public Company Accounting Oversight Board 16 (“PCAOB”) Inspection Report of Ryvyl’s former auditor, BF Borgers (Exhibit 3). ECF 17 No. 13 at 3-4; see ECF Nos. 13-1 and 13-2 (Exhibits). 18 A court may take judicial notice of a fact or document when it “can be accurately 19 and readily determined from sources whose accuracy cannot be reasonably questioned.” 20 Fed. R. Evid. 201(b)(2). 21 I. Exhibits 1-2, 4-7: SEC Filings 22 Plaintiff requests that the Court take judicial notice of various SEC filings, 23 including a Form 10-K (Exhibit 1), multiple Form 8-Ks (Exhibits 2, 4, 6, and 7), and a 24 form 10-Q (Exhibit 5). ECF No. 13 at 3-4; see ECF Nos. 13-1 and 13-2 (Exhibits). 25 Defendant does not oppose this request. SEC filings are a matter of public record and 26 therefore are the proper subject of judicial notice. See Hammitt v. Lumber Liquidators, 27 1 Inc., 19 F. Supp. 3d 989, 1004 (S.D. Cal. 2014); Dreiling v. Am. Exp. Co., 458 F.3d 942, 2 946 n.2 (9th Cir. 2006); Oklahoma Firefighters Pension & Ret. Sys. v. IXIA, 50 F. Supp. 3 3d 1328, 1349 (C.D. Cal. 2014). The Court therefore GRANTS Defendants’ request for 4 judicial notice as to Exhibits 1, 2, 4, 5, 6, and 7. ECF No. 13. 5 II. Exhibit 3: PCAOB Inspection Report of BF Borgers 6 Plaintiff also requests judicial notice of a PCAOB Inspection Report of 7 Defendant’s former auditor, BF Borgers (“Inspection Report”). See ECF No. 13-1 at 12- 8 36. When ruling on a Rule 12(b)(6) motion, documents attached to the complaint and 9 incorporated by reference are treated as part of the complaint. In re NVIDIA Corp. Sec. 10 Litig., 768 F.3d 1046, 1051 (9th Cir. 2014). Plaintiff attaches the Inspection Report to 11 the Complaint and references it extensively throughout, Compl. ¶¶ 3, 6, 9, 12, 18(C), 12 18(D), 42, and thus it is incorporated by reference to the Complaint. Khoja v. Orexigen 13 Therapeutics, Inc., 899 F.3d 988, 1002 (9th Cir. 2018). The Court will thus consider 14 Exhibit 3 in deciding the motion to dismiss. 15 Accordingly, Plaintiff’s request for judicial notice of Exhibits 1 through 7 is 16 GRANTED. ECF Nos. 13, 13-1, 13-2. 17 MOTION TO STRIKE 18 Defendant moves ex parte to strike Plaintiff’s Declaration, ECF No. 15-1, in 19 Support of his Opposition to Defendant’s motion to dismiss.1 ECF No. 18-1. Courts 20 may “strike from a pleading . . . any redundant, immaterial, impertinent, or scandalous 21 matter.” Fed. R. Civ. P. 12(f). 22 23 24 1 Plaintiff also attaches two exhibits to his Declaration—Exhibit 8, which is an email 25 description of the CFO position from a recruiter, ECF No. 15-2 at 1-10, and Exhibit 9, 26 which is the offer letter he received from Defendant, id. at 11-14. As Defendant points out, these exhibits are already attached to the Complaint. ECF No. 1-2 at 58-71. 27 1 “As a general rule, a district court may not consider any material beyond the 2 pleadings in ruling on a Rule 12(b)(6) motion.” Lee v. City of Los Angeles, 250 F.3d 668, 3 688 (9th Cir. 2001) (citation and internal quotation marks omitted). There are three 4 exceptions to this rule. “A court may consider (1) documents attached to the complaint; 5 (2) documents incorporated by reference in the complaint; and (3) matter that is judicially 6 noticeable under Federal Rule of Evidence 201.” City of Royal Oak Ret. Sys. v. Juniper 7 Networks, Inc., 880 F. Supp. 2d 1045, 1060 (N.D. Cal. 2012) (citing United States v. 8 Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003)). 9 Here, Plaintiff’s Declaration does not fall within an exception to the general rule 10 against considering material beyond the pleadings. It is not attached to the complaint, 11 incorporated by reference in the complaint, or subject to judicial notice. Nor does 12 Plaintiff argue that it is in his opposition to the motion to strike. See ECF No. 20 13 (absence). Rather, Plaintiff’s Declaration repeats some of the Complaint’s allegations, 14 compare ECF No. 15-1 at 9-10 ¶ 17 with Compl. ¶ 61, and even makes new allegations, 15 ECF No. 15-1 at 3 ¶ 3(G) (“I have never participated in or approved either the 16 preparation or filing of any false and/or misleading SEC filing . . .”). Such material 17 cannot properly be considered by the Court at this phase. See Block Sci., Inc. v. True 18 Diagnostics, Inc., 2023 WL 27348, at *4 n.3 (S.D. Cal. Jan. 3, 2023) (striking declaration 19 filed with the plaintiff’s opposition to motion to dismiss because it did not fall within any 20 of the exceptions to the rule that a district court may not consider material beyond the 21 pleadings); cf. Schneider v. Cal. Dep’t of Corr., 151 F.3d 1194, 1197 n.1 (9th Cir. 1998) 22 (“[i]n determining the propriety of a Rule 12(b)(6) dismissal, a court may not look 23 beyond the complaint to a plaintiff's moving papers, such as a memorandum in 24 opposition to a defendant's motion to dismiss”) (emphasis in original). The Court 25 26 27 1 therefore STRIKES Plaintiff’s Declaration in support of his opposition to the motion to 2 dismiss, ECF No. 15-1, from the record.2 3 MOTION TO DISMISS 4 Defendant moves to dismiss each count of the complaint pursuant to Federal Rules 5 of Civil Procedure (“Rule”) 12(b)(6) and 8(a). To survive a motion to dismiss under 6 Rules 12(b)(6) and 8(a), the complaint must “state a claim to relief that is plausible on its 7 face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The plaintiff must plead 8 sufficient facts to “raise a right to relief above the speculative level,” id. at 555, and the 9 Court must be able to “draw the reasonable inference that the defendant is liable for the 10 misconduct charged,” Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). Further, under Rule 11 8(a)(2), a complaint must “a short and plain statement of the claim showing that the 12 13 14 2 In opposing the motion to strike, Plaintiff argues that ex parte proceedings are disfavored and that Defendant’s motion “fails to identify any necessity, emergency, or 15 claim of irreversible damage or injury which would make the entry of an ex parte Order 16 appropriate.” ECF No. 20 at 2-3. To justify ex parte relief, the moving party must show that their “cause will be irreparably prejudiced if the underlying motion is heard 17 according to regular noticed motion procedures” and that they are “without fault in 18 creating the crisis that requires ex parte relief.” Mission Power Eng’g Co. v. Cont’l Cas. Co., 883 F. Supp. 488, 492 (C.D. Cal. 1995). 19 Defendant filed the motion to strike on November 25, 2024, ECF No. 18—just 17 days 20 after Plaintiff filed the declaration which Defendant seeks to strike, ECF No. 15-1. If the 21 regular noticed motion procedures were followed, the motion to strike would not be heard until December 23, 2023—10 days after the motion to dismiss hearing, ECF No. 12. See 22 L.R. 7.1(e)(1) (motion must be filed at least 28 days before the date for which it is 23 noticed). Thus, following the regular procedures would irreparably prejudice Defendant, as the Court would hear the motion to dismiss and consider the declaration Defendant 24 seeks to strike. Defendant is without fault in creating this timeline; Plaintiff’s filing of 25 the declaration amid the motion to dismiss briefing is what led to this series of events. 26 Even if Plaintiff’s ex parte motion were improper here, the Court would “act . . . on its own” to strike Plaintiff’s Declaration. Fed. R. Civ. P. 12(f)(1). 27 1 pleader is entitled to relief[.]” Keesee v. Stanislaus County, 2024 WL 4268071, at *1 2 (E.D. Cal. Sept. 23, 2024) (internal citation and quotation marks omitted). 3 On review of a Rule 12(b)(6) motion, the Court accepts all facts alleged in the 4 complaint as true and draws all reasonable inferences in favor of the plaintiff. Newcal 5 Indus., Inc. v. Ikon Off. Sol., 513 F.3d 1038, 1043 n.2 (9th Cir. 2008). Although the 6 general rule prohibits the Court from considering extrinsic evidence in reviewing a 7 motion to dismiss, it may consider matters that are incorporated into the complaint by 8 reference and that are properly subject to judicial notice. Tellabs, Inc. v. Makor Issues & 9 Rts., Ltd., 551 U.S. 308, 322 (2007); Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 10 981, 989 (9th Cir. 2009). Accordingly, the Court will consider the complaint, its 11 attachments, and Exhibits 1-7, ECF Nos. 13-1 and 13-2, in deciding the motion to 12 dismiss. 13 I. Count One: Fraudulent Inducement of Employment 14 Plaintiff’s Count One is a claim for fraudulent inducement of employment pursuant 15 to Labor Code § 970. Compl. ¶¶ 64-76. Labor Code § 970 provides that “[n]o person . . . 16 shall influence, persuade, or engage any person to [relocate] . . . for the purpose of 17 working in any branch of labor, through or by means of knowingly false representations” 18 concerning (a) the kind or character of the work, (b) the length of employment or 19 compensation, (c) the housing conditions relating to the work, or (d) any existing or 20 potential labor disputes in the workplace. 21 Defendant moves to dismiss this claim because it is barred by the applicable statute 22 of limitations, or, in the alternative, because it fails to state a claim under Rules 12(b)(6) 23 and 9(b). ECF No. 9-1 at 8-12. Plaintiff responds that the claims are timely and that, 24 even if they are not, he sufficiently pleads the claims. ECF No. 15 at 5-10. 25 Because the statute of limitations presents a threshold issue, the Court will address 26 it first. The parties disagree over the applicable statute of limitations. Defendant argues 27 1 that California Code of Civil Procedure § 340(a), which provides a one-year limitations 2 period for statutes with civil penalties, is applicable here. ECF No. 9-1 at 8. Plaintiff 3 argues that California Code of Civil Procedure § 338(a), which provides a three-year 4 limitations period for statutes providing for liability “other than a penalty or forfeiture,” is 5 applicable. ECF No. 15 at 5. 6 The Court finds that the applicable limitations period is one year pursuant to 7 California Code of Civil Procedure § 340(a). Labor Code § 972 provides that violators of 8 § 970 must pay a civil penalty to the aggrieved party. Thus, Labor Code § 970 falls 9 within the ambit of Code of Civil Procedure § 340(a)’s one-year limitations period 10 because it provides for a civil penalty. Courts are unanimous in finding that the 11 applicable limitations period for Labor Code § 970 claims is one year. See Keenan v. 12 Cox Commc’ns Cal., LLC, 835 F. App’x 193, 195 (9th Cir. 2020) (unpublished) (“the 13 California Supreme Court would find that the [Labor Code § 970] claim imposes a 14 penalty and is subject to the one-year limitations period”); Suber, 2023 WL 8143876, at 15 *5 (“[c]laims for fraudulent inducement to relocate [pursuant to Labor Code § 370] are 16 governed by a one-year statute of limitations”); O’Malley v. Columbia Cap., LLC, 2015 17 WL 13918148, at *3 (C.D. Cal. Sept. 14, 2015) (acknowledging “that the governing 18 statute of limitations for § 970 is one year”); Aguilera v. Pirelli Armstrong Tire Corp., 19 223 F.3d 1010, 1018 (9th Cir. 2000) (“assum[ing] the correctness” of district court’s 20 application of one-year limitations period to Section 970 claim). 21 Plaintiff filed the instant suit on June 25, 2024. ECF No. 1. Plaintiff’s § 970 claim 22 accrued, at the latest, on March 2, 2023—when he resigned due to the fallout that resulted 23 from the “numerous material misrepresentations.” Compl. ¶ 74. At this point, 24 Defendant’s misrepresentations and omissions which allegedly induced Plaintiff to 25 relocate for employment had already been relied upon by Plaintiff and publicly 26 announced as inaccurate. Compl. ¶¶ 67-72. Plaintiff’s subsequent disagreement with 27 1 Defendant and its officers regarding how to respond to the incorrect financial statements 2 is what led him to resign. Id. ¶¶ 73-74. Thus, at the time of Plaintiff’s resignation, he 3 knew of the alleged fraud and had confronted the Defendant regarding the fraud. His 4 cause of action accrued at this time. See Lopez v. Booz Allen Hamilton, Inc., 2020 WL 5 7342396, at *3 (E.D. Cal. Dec. 14, 2020) (“discovery of the fraud sets the anchor date for 6 when the one-year limitations period begins to run”); cf. Suber v. VVP Servs., LLC, 2023 7 WL 8143876, at *5 (C.D. Cal. Oct. 25, 2023) (“Plaintiff's claim here would have accrued 8 at least as of her detailed resignation letter, in which she alleges that she details the false 9 representations that induced her move to California”). Accordingly, Plaintiff’s § 970 10 claim is time barred because it was filed more than one year after his cause of accrued. 11 Defendant’s motion to dismiss Count One is GRANTED. 12 II. Counts Two and Three: Common Law Fraud Claims 13 A. Treatment of “Duplicative Claims” 14 Defendant argues that Plaintiff’s other fraud claims—Counts Two (intentional 15 misrepresentation) and Three (concealment)—must be dismissed because they are 16 duplicative of the untimely Count One. ECF No. 9-1 at 12-13. Plaintiff does not respond 17 to this argument. See ECF No. 15 at 5-10 (absence). 18 In support of its argument, Defendant cites McBride v. Boughton, 123 Cal. App. 19 4th 379 (2004), and Foulk v. Pacific Coast Roofers Pension Plan, 2021 WL 1181748 20 (C.D. Cal. Feb. 16, 2021). Defendant argues that McBride stands for the proposition that 21 common law fraud claims that are mere “recitations of a § 970 claim” must rise or fall 22 with § 970 claims. ECF No. 9-1 at 13 (citing McBride, 123 Cal. App. 4th at 395). And 23 Defendant argues that the court in Foulk dismissed “duplicative common counts because 24 [the] breach of contract claim was time-barred.” ECF No. 9-1 at 13 (citing Foulk, 2021 25 WL 1181748, at *2). 26 27 1 Upon reviewing McBride, Foulk, and other cases relying on McBride, the Court 2 finds that Defendant’s reliance on these cases is misplaced. Both McBride and Foulk 3 involved common counts. “A common count is not a specific cause of action, however; 4 rather, it is a simplified form of pleading normally used to aver the existence of various 5 forms of monetary indebtedness, including that arising from an alleged duty to make 6 restitution under an assumpsit theory.” McBride, 123 Cal. App. 4th at 394. “When a 7 common count is used as an alternative way of seeking the same recovery demanded in a 8 specific cause of action, and is based on the same facts, the common count is demurrable 9 if the cause of action is demurrable.” Id. McBride and cases relying on McBride deal 10 with a “cause of action framed as a common count for money had and received.” Id.; see 11 Integrity Med. Prod. Sols., LLC v. Seroclinix Corp., 2024 WL 1914361, at *5-6 (S.D. 12 Cal. May 1, 2024) (relying on McBride to dismiss “common count for money had and 13 received”); Pro. Collection Consultants v. Lujan, 23 Cal. App. 5th 685, 688 (2018) 14 (“alleging a cause of action for common counts”). These “common counts” involve, for 15 instance, situations where a “Defendant became indebted to Plaintiff . . . for work labor, 16 services and materials rendered . . . and for which defendant promised to pay plaintiff.” 17 Foulk, 2021 WL 1181748, at *1 (internal quotation marks and citation omitted). The 18 common law fraud claims here are not common counts seeking recovery of monies that 19 Defendant has received or are owed to Plaintiff as a debt. In addition, Plaintiff’s fraud 20 claims do not seek the same recovery available for a Labor Code § 970 claim, i.e., a civil 21 penalty. Compare Cal. Lab. Code § 972 (providing for civil penalties for violations of 22 Labor Code § 970) with Compl. ¶¶ 85, 91 (alleging “damages of incidental financial 23 losses, relocation fees and moving costs . . ., as well as non-economic damages, including 24 . . . damage to Plaintiff’s professional reputation . . ., and loss of business opportunities”). 25 Thus, McBride has no application to the Plaintiff’s statutory fraud claims. 26 27 1 Defendant does not cite any other case law that mandates dismissal of common law 2 fraud claims based on the same facts as statutory claims that are otherwise barred by the 3 statute of limitations. Ultimately, each cause of action has its own statute of limitations 4 determined by the California legislature and the Court is required to identify the 5 limitations period for each cause of action and apply it. Courts do not have the power to 6 disregard the statute of limitations. Brown v. Napa Valley Unified Sch. Dist., No. 11-cv- 7 05673–JCS, 2012 WL 4364673, at *6 (N.D. Cal. Sept. 24, 2012) (citing Baldwin Cnty. 8 Welcome Ctr. v. Brown, 466 U.S. 147, 152 (1984) (“Procedural requirements established 9 by Congress for gaining access to the federal courts are not to be disregarded by courts 10 out of a vague sympathy for particular litigants.”)). The fact that the claims are 11 duplicative does not, without more, affect the analysis. In Russell v. Mamam, the court 12 recognized: 13 With regard to duplicative claims, a party may plead as many separate claims as it can, provided that the claims are pleaded in 14 compliance with Rule 11. . . . To the extent there is overlap in 15 the legal theories [Plaintiff] chooses to pursue in this case, he may maintain them as alternate theories. Therefore, even 16 assuming the claims are duplicative, there is no basis to dismiss 17 them at this juncture. 18 19 2019 WL 13039744, at *4 (N.D. Cal. June 19, 2019). In this case, Plaintiff has 20 alleged alternate theories regarding fraud employed to induce him to accept employment 21 and relocate to the State of California. Defendant does not assert that the Labor Code § 22 972 statute of limitations applies to common law fraud claims. Counts Two and Three 23 allege common law fraud claims for misrepresentations and concealment. Under Civil 24 Code § 338(d), fraud claims have a three-year statute of limitations. Vera v. REL-BC, 25 LLC, 66 Cal. App. 5th 57, 65-66 (2021). To the extent that Plaintiff’s cause of action 26 27 1 accrued on March 2, 2023, when he resigned, Compl. ¶ 74, his Complaint filed on June 2 25, 2024 is timely. 3 Accordingly, the Court will proceed to the merits of Plaintiff’s common law fraud 4 claims. 5 B. Rule 9(b) 6 Alternatively, Defendant argues that “Plaintiff’s additional fraud-based claims still 7 fail because he fails to plead fraud with the requisite clarity and specificity” under Rule 8 9(b). ECF No. 9-1 at 13. 9 Rule 9(b) requires a plaintiff to “state with particularity the circumstances 10 constituting fraud or mistake.” Fed. R. Civ. P. 9(b). Allegations of fraud must be 11 “specific enough to give defendants notice of the particular misconduct which is alleged 12 to constitute the fraud charged so that they can defend against the charge and not just 13 deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th 14 Cir. 1985). To meet this requirement, plaintiffs must allege the “who, what, when, 15 where, and how” of the alleged fraudulent conduct. Cooper v. Pickett, 137 F.3d 616, 627 16 (9th Cir. 1997). 17 Omissions claims are also subject to Rule 9(b). Tapia, 116 F. Supp. 3d at 1163. 18 Plaintiffs must “describe the content of the omission and where the omitted information 19 should or could have been revealed.” Erickson v. Boston Sci. Corp., 846 F. Supp. 2d 20 1085, 1092 (C.D. Cal. 2011) (internal quotation marks and citation omitted). While the 21 standard is somewhat relaxed for omissions, “it does not eliminate Rule 9(b)’s 22 requirements that the plaintiff plead with particularity all other elements of his claim.” 23 Poston v. Gen. Motors, LLC, 2024 WL 3558377, at *5 (S.D. Cal. July 22, 2024). 24 i. Intentional Misrepresentation 25 Count Two is a claim for common law intentional misrepresentation. “The 26 elements of a claim for intentional misrepresentation are (1) a misrepresentation; (2) 27 1 knowledge of falsity; (3) intent to induce reliance; (4) actual and justifiable reliance; and 2 (5) resulting damage.” Cisco Sys., Inc. v. STMicroelectronics, Inc., 77 F. Supp. 3d 887, 3 897 (N.D. Cal. 2014) (citing Lazar v. Superior Court, 12 Cal. 4th 631, 638 (1996)). 4 Plaintiff alleges a broad group of misrepresentations that occurred in May 2022. 5 Compl. ¶¶ 16-17. Specifically, Plaintiff alleges that Defendant, through its officers, 6 misrepresented (1) the reason for the CFO job opening; (2) the accuracy of its past SEC 7 filings; (3) the adequacy of its internal controls; (4) that Plaintiff would have “unfettered 8 access” to all documents and records; and (5) that Defendant had not misrepresented “the 9 company’s prior financial position.” Id. ¶ 16. He further alleges that Defendant provided 10 “repeated explicit assurances . . . that there were ‘no problems’” with its financial 11 statements, id. ¶ 18(E), and that Defendant told him that it had already arranged to hire 12 two more financial assistants on his staff, id. ¶ 18(F). 13 But Plaintiff fails to allege who specifically made the alleged misrepresentations to 14 him, on which specific dates these conversations took place, and whether the individuals 15 knew the statements were false. Further, Plaintiff does not allege circumstances that 16 indicate Defendant’s intent to induce Plaintiff’s reliance with intentional 17 misrepresentations. Rather, Count Two of the Complaint broadly alleges that Defendant, 18 through six of its senior executives and employees, made vague and broad 19 misrepresentations at some point between May and June 2022. See id. ¶¶ 78-79. These 20 allegations are not “specific enough to give defendants notice of the particular 21 misconduct.” Semegen, 780 F.2d at 731. Accordingly, these allegations do not satisfy 22 Rule 9(b)’s heightened pleading standards. 23 ii. Fraudulent Concealment 24 Count Three is a claim for fraudulent concealment. The elements of fraudulent 25 concealment are (1) concealment of a material fact; (2) the defendant owed the plaintiff a 26 duty to disclose; (3) the defendant intended to defraud the plaintiff by concealing the fact; 27 1 (4) the plaintiff was unaware of the fact and would have acted differently if she knew had 2 known of the fact; and (5) the plaintiff suffered damages. Tapia v. Davol, Inc., 116 F. 3 Supp. 3d 1149, 1163 (S.D. Cal. 2015) (citing Graham v. Bank of Am., N.A., 226 Cal. 4 App. 4th 594, 606 (2014)). 5 Plaintiff alleges two broad groups of omissions. First, Plaintiff alleges that 6 Defendant’s SEC filings failed to account for nearly $6 million in unreported “insider 7 share trading transactions” in violation of GAAP and SEC rules and regulations, and that 8 Defendant was aware of these transactions, but allegedly concealed them from Plaintiff. 9 Id. at ¶ 18(B). Second, Plaintiff alleges that, between May and June 2022, Defendant 10 concealed (1) the inadequacy of its accounting process and internal controls; (2) that its 11 auditor had been inspected by the PCAOB; and (3) the inaccuracy of its past SEC filings. 12 Id. ¶ 18(A), (C), (D). 13 While the Complaint does allege that Defendant failed to disclose certain 14 information to Plaintiff, “[f]raudulent concealment is more than the simple nondisclosure 15 of material facts. . . . [P]laintiffs must point to specific affirmative acts defendants took in 16 hiding, concealing, or covering up the matters complained of.” Poston, 2024 WL 17 3558377, at *5 (citing Cho v. Hyundai Motor Co., Ltd., 636 F. Supp. 3d 1149, 1166 (C.D. 18 Cal. 2022)) (cleaned up). Plaintiff does not allege any affirmative acts Defendant took to 19 hide this information from him. 20 Further, Plaintiff does not identify specific conversations with specific individuals 21 where this information could have been disclosed, nor does he allege that this information 22 was concealed with the intent to defraud him. And while Plaintiff generally points to his 23 hiring and onboarding process as the period during which this information was concealed 24 from him, he does not allege that Defendant had a duty to disclose any of this information 25 during this time. Instead, Count Three of the Complaint broadly alleges that Defendant, 26 through six of its senior executives and employees, concealed a broad collection of 27 1 information from him at some point between May and June 2022. Compl. ¶ 88. 2 Plaintiff’s vague and general allegations are insufficient. See Renner v. Bluegreen Corp., 3 2016 WL 10835981, at *4 (C.D. Cal. Aug. 15, 2016) (finding that Plaintiff’s “fraudulent 4 concealment allegations are vague, general, and conclusory,” and therefore do not satisfy 5 Rule 9(b)). Therefore, Plaintiff fails to state a claim for fraudulent concealment under 6 Rules 12(b)(6) and 9(b). 7 Accordingly, the Court GRANTS Defendant’s motion to dismiss Counts Two and 8 Three.3 9 III. Count Four: Breach of Contract 10 To state a claim for breach of contract, Plaintiff must allege “(1) the existence of 11 the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s 12 breach, and (4) the resulting damages to the plaintiff.” Codding v. Pearson Educ., Inc., 13 842 F. App’x 70, 72 (9th Cir. 2021). Defendant argues that Plaintiff has failed to 14 adequately allege elements (1), (3), and (4). ECF No. 9-1 at 13-14. Plaintiff responds 15 that he has sufficiently alleged all elements for a breach of contract claim. ECF No. 15 at 16 10-11. Accordingly, the Court will only address whether Plaintiff has alleged elements 17 (1), (3), and (4). 18 // 19 // 20 21 22 3 If granted leave to amend, Plaintiff must narrow the focus of his allegations to pinpoint who made fraudulent misrepresentations or omissions, when these conversations 23 occurred, who he had these conversations with, why information was misrepresented to 24 or concealed from him, and how he relied on the information or absence of information. Plaintiff should also keep Rule 8’s requirements in mind: any amended complaint should 25 include “a short and plain statement of the claim[s],” Fed. R. Civ. P. 8(a)(2), and “[e]ach 26 allegation must be simple, concise, and direct,” Fed. R. Civ. P. 8(d)(1). More precise and concise allegations would provide Defendant clearer notice of Plaintiff’s claims. 27 1 A. Existence of a Contract 2 A valid contract “requires parties capable of contracting, their consent, a lawful 3 object, and a sufficient cause or consideration.” J.B.B. Inv. Partners Ltd. V. Fair, 37 Cal. 4 App. 5th 1, 9 (2019) (citing Cal. Civ. Code § 1550). Plaintiff argues that he and 5 Defendant “entered into an employment contract on or about August 16, 2022,” and that 6 this allegation is sufficient to plead an existing contract. ECF No. 15 at 10. Defendant 7 responds that the complaint fails to identify a contract or any of its purported terms, and 8 that to the extent Plaintiff alleges that his offer letter, see ECF No. 1-2 at 68-71, this letter 9 did not create a contract between the parties. ECF No. 9-1 at 13-14. 10 The parties did in fact enter into an employment contract. Defendant points out 11 that “[t]he offer letter clearly states that ‘[t]his letter is an offer of employment, not an 12 employment contract.” ECF No. 9-1 at 14 (citing ECF No. 1-2 at 70 (emphasis added)). 13 But Plaintiff then accepted the terms of the offer letter, see ECF No. 1-2 at 49-52, which 14 the offer letter expressly invited, see ECF No. 1-2 at 70 (“[i]f you accept this offer, the 15 terms described in this letter will be the terms of your employment”). At this point, the 16 terms of the offer letter, which included Plaintiff’s compensation, job title, bonus 17 information, and other relevant employment provisions, see id. at 68-71, became the 18 terms of the employment contract. See Lenk v. Monolithic Power Sys., Inc., 2015 WL 19 7429498, at *4 (N.D. Cal. Nov. 23, 2015) (finding that plaintiff’s employment agreement 20 was his job offer, which “has all of the terms included within it, such as his 21 compensation, job title, and bonus information,” and which plaintiff signed and 22 accepted). Because an employment contract involves a lawful object and sufficient 23 consideration (Plaintiff’s labor in exchange for wages), Plaintiff has pled the basic 24 elements of a contract. 25 Defendant makes a brief challenge to the lack of “specificity as to [the contract’s] 26 purported terms.” ECF No. 9-1 at 13. But, as the offer letter states, the terms of the letter 27 1 control. ECF No. 1-2 at 70. These terms “supersede[] any previous discussions or 2 offers,” and “[a]ny additions to or modifications of these terms must be in writing and 3 signed by” both parties. Id. Thus, the complaint adequately alleges the terms of the 4 contract, which are clearly outlined in the offer letter. 5 Accordingly, Plaintiff has alleged the existence of a valid employment contract. 6 B. Breach 7 Defendant argues that Plaintiff fails to allege what terms of the contract Defendant 8 breached, and that Plaintiff’s resignation cannot be considered a breach because his 9 employment was at will. ECF No. 9-1 at 14. Plaintiff responds that he has alleged two 10 breaches: first, that Defendant did not give Plaintiff access to its banking records, which 11 blocked him from being able to perform his CFO duties, and second, that Defendant and 12 its officers engaged in financial transactions without Plaintiff’s input, which prevented 13 him from being able to comply with SEC and SOX rules and regulations. ECF No. 15 at 14 11. 15 Plaintiff alleges that Defendant’s conduct prevented him from continuing as CFO 16 and left him no choice to resign because he could not certify that any “existing or 17 proposed financial statements” complied with SEC and SOX rules and regulations. 18 Compl. ¶ 100. But Plaintiff had no contractual right to access Defendant’s banking 19 records or to be involved in all financial transactions. Plaintiff points to no provision in 20 the employment agreement that required Defendant to oblige with such conditions. See 21 ECF No. 1-2 at 68-71 (absence). And Plaintiff does not allege that these were implied 22 terms of the employment agreement. Thus, Plaintiff has not properly alleged a breach of 23 any terms of the contract. See Young v. Facebook, Inc., 790 F. Supp. 2d 1110, 1117 24 (N.D. Cal. 2011) (“a plaintiff must allege the specific provisions in the contract creating 25 the obligation the defendant is said to have breached”) (citing Miron v. Herbalife Int’l, 26 Inc., 11 F. App’x 927, 929 (9th Cir. 2001)); see also San Mateo Union Sch. Dist. v. Cnty. 27 1 of San Mateo, 213 Cal. App. 4th 418, 440 (2013) (“[t]he flaw in plaintiffs’ contract action 2 is the lack of any proper allegation of breach of the contract,” as they “have not alleged 3 that defendants failed to perform” their contractual duties). 4 The fact that Plaintiff felt forced to resign as CFO is not a breach of the contract, 5 either, because the employment was at will. See ECF No. 1-2 at 70 (“your employment 6 with the Company will be ‘at will’ and may be terminated . . . at any time without 7 notice”). Any resignation or constructive termination4 cannot constitute a breach of an at 8 will employment agreement. See Lenk, 2015 WL 7429498, at *5 (“the employment 9 agreement unambiguously stated that the employment was at will, and thus any 10 termination ‘would not be a violation of the employment agreement’”); see also Ingram 11 v. Johnson & Johnson, 4 F. App’x 347, 348 (9th Cir. 2001) (“Ingram’s claims for breach 12 of contract . . . fail because the undisputed evidence establishes that Ingram was an at- 13 will employee”); Soliman v. CVS RX Servs., Inc., 570 F. App’x 710, 711 (9th Cir. 2014) 14 (finding that plaintiff failed to allege a claim for breach of contract because terminating 15 an at will employee is not a breach). 16 The Court will not address whether Plaintiff has adequately alleged damages. 17 Because the Plaintiff has failed to adequately plead a breach, he has failed to state claim 18 for breach of contract. Defendant’s motion to dismiss Count Four is GRANTED. 19 // 20 // 21 22 23 4 Plaintiff’s allegations that he was forced to resign because of the alleged 24 misrepresentations and Defendant’s alleged failure to adequately respond to them read as a claim that he was constructively terminated. See Turner v. Anheuser-Busch, Inc., 7 Cal. 25 4th 1238, 1244 (1994) (en banc) (“[c]onstructive discharge occurs when the employer’s 26 conduct effectively forces an employee to resign”). Thus, case law regarding the termination of at-will employment is analogous here. 27 1 IV. Count Five: Breach of Covenant of Good Faith and Fair Dealing 2 Plaintiff also brings a claim for a breach of the covenant of good faith and fair 3 dealing under the common law. Compl. ¶¶ 102-07. “A claim for breach of the implied 4 covenant of good faith and fair dealing requires the same elements as a claim for breach 5 of contract, except that instead of showing that defendant breached a contractual duty, the 6 plaintiff must show, in essence, that defendant deprived the plaintiff of a benefit 7 conferred by the contract in violation of the parties’ expectations at the time of 8 contracting.” Upper Deck Co. v. Flores, 2022 WL 686318, at *7 (S.D. Cal. Mar. 8, 9 2022) (quoting Patera v. Citibank, N.A., 79 F. Supp. 3d 1074, 1090 (N.D. Cal. 2015)) 10 (cleaned up). The covenant of good faith and fair dealing, implied by law in all contracts 11 under California law, “prevent[s] one contracting party from unfairly frustrating the other 12 party’s right to receive the benefits of the agreement or hindering the other party’s 13 performance.” Id. (citing Guz v. Bechtel Nat’l, Inc., 24 Cal. 4th 317, 349 (2000)). 14 The alleged breach seems to be the same for both the breach of contract claim and 15 the breach of the covenant of good faith and fair dealing claim. See Compl. ¶¶ 100, 104. 16 Specifically, Plaintiff alleges that the alleged misrepresentations and Defendant’s failure 17 to adequately respond to them “left [him] with no choice but to resign.” Id. Defendant 18 argues that this forced resignation cannot be the alleged breach because Plaintiff’s 19 employment was at will. ECF No. 9-1 at 15. 20 Much like in the breach of contract context, termination of at-will employment 21 cannot be the alleged breach of the covenant of good faith and fair dealing. In Guz, the 22 California Supreme Court rejected the argument “that even if [a plaintiff’s] employment 23 was at will, his arbitrary dismissal frustrated his contract benefits and thus violated the 24 implied covenant of good faith and fair dealing.” Guz, 24 Cal. 4th at 350. Similarly, here 25 the Plaintiff cannot argue that his apparent constructive termination constitutes a breach 26 of his at-will employment. When employment is at will, “no contract term . . . protect[s 27 1 Plaintiff] from termination at any time.” Lenk, 2015 WL 7429498, at *6 (dismissing 2 breach of covenant of good faith and fair dealing claim where the alleged breach was the 3 termination of Plaintiff’s at-will employment). 4 Plaintiff’s opposition brief also mentions that Defendant failed to provide Plaintiff 5 with the “promised . . . staffing and funds” to perform his CFO duties, which violated a 6 “condition precedent to the contract.” ECF No. 15 at 12; see also Compl. ¶ 13 (alleging 7 that Defendant “withheld vital . . . information and staff resources needed for Plaintiff to 8 perform the job as RYVYL’s CFO, which intentional deprivations breached Plaintiff’s 9 contract”). Defendant summarily responds that Plaintiff has not alleged any contractual 10 benefits which violate the parties’ expectations at the time of contracting. ECF No. 16 at 11 6-7 (citing Upper Deck, 2022 WL 686318, at *7). 12 The covenant of good faith and fair dealing “cannot be endowed with an existence 13 independent of its contractual underpinnings. It cannot impose substantive duties or 14 limits on the contracting parties beyond those incorporated in the specific terms of their 15 agreement.” Guz, 24 Cal. 4th at 349-50. Plaintiff’s argument seeks to impose additional 16 substantive duties on Defendant under the employment agreement. Specifically, Plaintiff 17 argues that he was contractually entitled to certain information and resources which are 18 not provided for in the employment agreement. See ECF No. 1-2 at 68-71. This is the 19 precise argument that the California Supreme Court renounced in Guz. Further, to the 20 extent Plaintiff believes he was promised such access and resources in the discussions 21 leading up to the agreement, see, e.g., Compl. ¶¶ 18(F)-(G), such allegations are 22 irrelevant because the offer letter states that it contains the terms of employment and 23 “supersedes any previous discussions or offers,” ECF No. 1-2 at 70. Any such alleged 24 promises were not part of the contract. Accordingly, Plaintiff has not alleged a breach of 25 the covenant of good faith and fair dealing. 26 Defendant’s motion to dismiss Count Five is GRANTED. 27 1 V. Count Six: Indemnification Under Nevada Law 2 Plaintiff’s Count Six alleges a violation of a Nevada indemnification statute. NRS 3 § 78.751(1)(a) provides that corporations shall indemnify officers in defending against 4 civil actions brought against them in their roles as officers of the corporation for 5 “expenses actually and reasonably incurred by the person in connection with defending 6 the action, including, without limitation, attorneys’ fees.” 7 Defendant, in a footnote in its motion to dismiss, argues that the Court cannot 8 apply Nevada law as a federal court sitting in diversity. ECF No. 9-1 at 11 n.3. In 9 response, Plaintiff filed a choice of law motion arguing that the Court should apply 10 California law to Counts One through Five and Nevada law to Count Six. See ECF No. 11 14-1 at 7-9. The parties also briefly discuss whether Plaintiff has adequately pled a claim 12 for indemnification in their papers. See ECF No. 9-1 at 15-16; ECF No. 15 at 13-15. 13 A. Application of Nevada Law 14 “Under the Erie doctrine, federal courts sitting in diversity apply state substantive 15 law and federal procedural law.” Snead v. Metro. Prop. & Cas. Ins. Co., 237 F.3d 1080, 16 1090 (9th Cir. 2001) (cleaned up) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 17 (1938)). Here, the statute at issue—NRS § 78.751—provides for the existence of 18 Plaintiff’s claim. Therefore, it is clearly substantive. 19 Defendant, in its reply, argues that Plaintiff cannot “cherry-pick the laws of the 20 state that are most favorable to each of the claims” and that any choice of law analysis 21 would govern all, and not some, of Plaintiff’s claims. ECF No. 16 at 7. But this 22 contention is incorrect. Choice of law rules are deemed “substantive” for Erie purposes, 23 and thus the Court applies California’s choice of law rules. See Klaxon Co. v. Stentor 24 Elec. Mfg. Co., 313 U.S. 487, 496 (1941) (“[t]he conflict of law rules to be applied by the 25 federal court in Delaware must conform to those prevailing in Delaware’s state courts”). 26 The Ninth Circuit has recognized that, in California, “a separate choice-of-law inquiry 27 1 must be made with respect to each issue in the case.” Dalkilic v. Titan Corp., 516 F. 2 Supp. 2d 1177, 1187 (S.D. Cal. 2007) (quoting S.A. Empresa De Viacao Aerea Rio 3 Grandense v. Boeing Co., 641 F.2d 746, 749 (9th Cir. 1981)); see also Bartel v. Tokyo 4 Elec. Power Co., Inc., 371 F. Supp. 3d 769, 791 (S.D. Cal. 2019) (“where a party raises 5 choice of law issues with regard to more than one cause of action, a separate conflict of 6 laws inquiry must be made with respect to each issue in the case”) (cleaned up). Thus, 7 the Court would need to conduct a separate choice of law inquiry for each individual 8 claim here. 9 However, the choice of law analysis has not been fully developed by either party. 10 If Plaintiff is requesting this claim-by-claim approach, he must establish why California 11 law applies to Counts One through Five. But he merely argues that “because California 12 was the location where Plaintiff was to move permanently and work as CFO for 13 Defendant RYVYL, California law . . . should be applied.” ECF No. 14-1 at 7-8; see 14 also id. at 2-3, 9. This analysis is insufficient. Plaintiff more clearly goes through a 15 choice of law analysis for Count Six, but his analysis regarding the states’ interests in 16 having their law applied is underdeveloped. See id. at 8-9. And because Defendant 17 hangs its hat on the argument that an “issue by issue” analysis is not appropriate, it never 18 delves into a choice of law analysis for any of the claims. ECF No. 16 at 7-8 (absence). 19 The Court finds that the choice of law issue is not ripe for decision at this stage of 20 the litigation. “The question of whether a choice-of-law analysis can be properly 21 conducted at the motion to dismiss stage depends on the individual case.” Czuchaj v. 22 Conair Corp., 2014 WL 1664235, at *9 (S.D. Cal. Apr. 18, 2014) (citing Hamby v. Ohio 23 Nat’l Life Assur. Corp., 2012 WL 2568149, at *2 (D. Haw. June 29, 2012)). Here, 24 because the briefing is insufficient for the Court to engage in a thorough choice of law 25 analysis, it will opt to decide the issue at a later point in the litigation. See Czuchaj, 2014 26 WL 1664235, at *9 (finding a choice of law determination to be premature at the motion 27 1 to dismiss phase because the court had “insufficient briefing to engage in a careful 2 analysis of the differences between the various bodies of law or the interests of the 3 different states”); Dean v. Colgate-Palmolive Co., 2015 WL 3999313, at *11 (C.D. Cal. 4 June 17, 2015) (finding choice of law analysis inappropriate at motion to dismiss stage 5 because Defendant did not provide analysis to support its assertions); Brazil v. Dole Food 6 Co., Inc., 2013 WL 5312418, at *11 (N.D. Cal. Sept. 23, 2013) (same). 7 Therefore, the Court will decline to make a choice of law determination at this 8 stage and instead consider whether Plaintiff states a claim for relief under NRS 78.751.5 9 B. Failure to State a Claim 10 Rule 8(a)(2) requires a complaint to provide “a short and plain statement of the 11 claim showing that the pleader is entitled to relief.” “A complaint that feels to meet this 12 standard may be dismissed pursuant to Rule 12(b)(6).” Shah v. Fandom, Inc., --- F. 13 Supp. 3d ----, 2024 WL 4539577, at *2 (N.D. Cal. Oct. 21, 2024). Plaintiff seeks 14 indemnification under NRS 78.751(1)(a), which provides: 15 1. A corporation shall indemnify any person who is a director, officer, employee or agent to the extent that the person is 16 successful on the merits or otherwise in defense of: 17 (a) Any threatened, pending or completed action, suit or 18 proceeding, whether civil, criminal, administrative or 19 investigative, including, without limitation, an action by or in the right of the corporation, by reason of the fact that the 20 person is or was a director, officer, employee or agent of the 21 corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of 22 another corporation, partnership, joint venture, trust or other 23 enterprise . . . 24 25 26 5 The Court directs the parties to address the choice of law issue more fully if it arises in a future motion to dismiss. 27 1 against expenses actually and reasonably incurred by the person in connection with defending the action, including, without 2 limitation, attorney's fees. 3 4 Defendant argues that the Complaint fails to meet this bar because it alleges no 5 facts to support an indemnification claim under NRS 78.751, fails to identify any specific 6 indemnifiable expenses incurred, and lacks specificity regarding Plaintiff’s alleged 7 previous requests for indemnification. ECF No. 9-1 at 16. Plaintiff responds that he 8 successfully defeated claims brought against him as Ryvyl’s CFO in Cullen v. RYVYL 9 Inc., No. 23-cv-00185-GPC-SBC (S.D. Cal.); that he subsequently requested 10 indemnification for expenses he incurred, including attorneys’ fees; and that Defendant 11 has refused to indemnify him. ECF No. 15 at 14-15; Compl. ¶¶ 113-15. 12 Plaintiff adequately pleads that he was successful in the defense of a civil action 13 that was brought against him in his role as Defendant’s CFO. Compl. ¶ 110-13. 14 However, Plaintiff does not provide a plain statement of “expenses actually and 15 reasonably incurred . . . in connection with defending the action, including, without 16 limitation, attorneys’ fees.” NRS 78.751(1). Attorneys’ fees are the only relevant 17 expenses Plaintiff mentions in the Complaint. See Compl. ¶ 114. But, as Defendant 18 points out, Plaintiff was not represented by an attorney in the Cullen lawsuit. See ECF 19 No. 9-1 at 16 n.4. Plaintiff is not entitled to indemnification for attorneys’ fees that he 20 did not incur. And Plaintiff otherwise fails to allege any other expenses that he could be 21 indemnified for under NRS 78.751. See Compl. ¶ 114 (absence). Accordingly, the 22 Complaint does not “state a claim to relief that is plausible on its face.” Twombly, 550 23 U.S. at 570. 24 Defendant’s motion to dismiss Count Six is GRANTED. 25 // 26 // 27 1 ||VI. Leave to Amend 2 Where a motion to dismiss is granted, “leave to amend should be granted ‘unless 3 || the court determines that the allegation of other facts consistent with the challenged 4 || pleading could not possibly cure the deficiency.’” DeSoto v. Yellow Freight Sys., Inc., 5 F.2d 655, 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture 6 || Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). In other words, where leave to amend would 7 || be futile, the Court may deny leave to amend. See DeSoto, 957 F.2d at 658; Schreiber, 8 F.2d at 1401. Here, although Plaintiff does not request leave to amend, the Court 9 ||recognizes that Counts Two, Three, Four, Five, and Six would benefit from more specific 10 allegations which would cure the deficiencies noted in this order. However, amendment 11 to Count One would be futile because no further factual allegations could change the 12 || fact that this claim is time barred. Accordingly, the Court GRANTS Plaintiff leave to 13 ||amend Counts Two, Three, Four, Five, and Six. 14 CONCLUSION 15 The Court GRANTS Plaintiffs requests for judicial notice. ECF No. 13. The 16 || Court GRANTS Defendant’s ex parte motion to strike, ECF No. 18, and therefore 17 STRIKES Plaintiff’s Declaration in support of his opposition to the motion to dismiss, 18 || ECF No. 15-1, from the record. The Court also GRANTS Defendant’s motion to dismiss 19 || with leave to amend Counts Two, Three, Four, Five, and Six. Plaintiff is to file an 20 ||amended complaint within 30 days of this order. 21 IT IS SO ORDERED. 22 23 ||Dated: December 19, 2024 <= 5 United States District Judge 26 27 26 28 24-ev-01096-GPC-SBC