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					       Case3:10-cv-02160-VRW Document10-1           Filed06/16/10 Page1 of 2



 1   ROBERT E. FREITAS (State Bar No. 80948)
     rfreitas@orrick.com
 2   MATTHEW H. POPPE (State Bar No. 177854)
     mspillner@orrick.com
 3   KRISTIN S. CORNUELLE (State Bar No. 245728)
     kcornuelle@orrick.com
 4   JACOB A. SNOW (to be admitted pro hac vice)
     jsnow@orrick.com
 5   ORRICK, HERRINGTON & SUTCLIFFE LLP
     1000 Marsh Road
 6   Menlo Park, CA 94025
     Telephone:     (650) 614-7400
 7   Facsimile:     (650) 614-7401

 8   Attorneys for Defendant
     Hantle USA, Inc.
 9
10                                  UNITED STATES DISTRICT COURT

11                             NORTHERN DISTRICT OF CALIFORNIA

12                                     SAN FRANCISCO DIVISION

13

14   HYOSUNG (AMERICA), INC. and                  Case No. CV10-2160 VRW
     NAUTILUS HYOSUNG INC.,
15                                                [PROPOSED] ORDER GRANTING
                      Plaintiffs,                 HANTLE USA, INC.’S MOTION TO
16
                                                  DISMISS PURSUANT TO FED. R. CIV.
17          v.                                    P. 12(B)(1) AND 12(B)(6)

18   HANTLE USA, INC.,

19                    Defendant.

20                                                Date:        September 2, 2010
                                                  Time:        10:00 a.m.
21                                                Courtroom:   6, 17th Floor
                                                  Judge:       Hon. Vaughn R. Walker
22

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28
                                                                         [PROPOSED] ORDER GRANTING
                                                                      HANTLE USA’S MOTION TO DISMISS
                                                                           CASE NO. CV 10 2160 (VRW)
       Case3:10-cv-02160-VRW Document10-1               Filed06/16/10 Page2 of 2



 1          TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:

 2          Before the Court is Defendant Hantle USA, Inc.’s (“Hantle USA’s”) Motion to Dismiss

 3   Hyosung (America), Inc.’s and Nautilus Hyosung Inc.’s (“Hyosung’s”) Complaint Pursuant to

 4   Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Having considered all of the documents

 5   filed in support of and in opposition to the Motion, and following oral argument on September 2,

 6   2010, and all other evidence as appropriate, the Court HEREBY ORDERS as follows:

 7          1.     Hantle USA’s Motion to Dismiss is hereby GRANTED.

 8          2.     Hyosung’s Complaint is hereby DISMISSED without leave to amend.

 9          IT IS SO ORDERED.
10

11   Dated: __________________                   __________________________________________
                                                  The Honorable Vaughn R. Walker
12                                                United States District Judge
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28
                                                                              [PROPOSED] ORDER GRANTING
                                                  -1-                      HANTLE USA’S MOTION TO DISMISS
                                                                                CASE NO. CV 10 2160 (VRW)
       Case3:10-cv-02160-VRW Document10           Filed06/16/10 Page1 of 11



 1   ROBERT E. FREITAS (State Bar No. 80948)
     rfreitas@orrick.com
 2   MATTHEW H. POPPE (State Bar No. 177854)
     mspillner@orrick.com
 3   KRISTIN S. CORNUELLE (State Bar No. 245728)
     kcornuelle@orrick.com
 4   JACOB A. SNOW (to be admitted pro hac vice)
     jsnow@orrick.com
 5   ORRICK, HERRINGTON & SUTCLIFFE LLP
     1000 Marsh Road
 6   Menlo Park, CA 94025
     Telephone:     (650) 614-7400
 7   Facsimile:     (650) 614-7401

 8   Attorneys for Defendant
     Hantle USA, Inc.
 9
10                                  UNITED STATES DISTRICT COURT

11                             NORTHERN DISTRICT OF CALIFORNIA

12                                     SAN FRANCISCO DIVISION

13

14   HYOSUNG (AMERICA), INC. and                  Case No. CV10-2160 VRW
     NAUTILUS HYOSUNG INC.,
15                                                HANTLE USA, INC.’S NOTICE OF
                      Plaintiffs,                 MOTION AND MOTION IN SUPPORT
16                                                OF ITS MOTION TO DISMISS
17          v.                                    PURSUANT TO FED. R. CIV. P.
                                                  12(B)(1) AND 12(B)(6);
18   HANTLE USA, INC.,                            MEMORANDUM OF POINTS AND
                                                  AUTHORITIES IN SUPPORT
19                    Defendant.
                                                  THEREOF
20
                                                  Date:        September 2, 2010
21                                                Time:        10:00 a.m.
                                                  Courtroom:   6, 17th Floor
22                                                Judge:       Hon. Vaughn R. Walker

23

24

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28
                                                                     HANTLE USA’S MOTION TO DISMISS
                                                                          CASE NO. CV 10 2160 (VRW)
          Case3:10-cv-02160-VRW Document10                 Filed06/16/10 Page2 of 11



 1                                         NOTICE OF MOTION

 2           PLEASE TAKE NOTICE that on September 2, 2010 at 10:00 a.m. or as soon thereafter as

 3   the matter may be heard, in Courtroom 6 on the 17th Floor of the United States District Court for

 4   the Northern District of California, Defendant Hantle USA, Inc. (“Hantle USA”) will and hereby

 5   does move this Court, pursuant to Federal Rules of Civil Procedure 9(b), 12(b)(1), and 12(b)(6),

 6   for an order dismissing each claim identified in the Complaint of Plaintiffs Hyosung (America),

 7   Inc. and Nautilus Hyosung Inc. (collectively, “Hyosung”). Each claim should be dismissed

 8   because Plaintiffs have failed to allege an amount in controversy sufficient to support this Court’s

 9   subject matter jurisdiction. In addition, each of Plaintiffs’ asserted claims is based on allegations

10   of fraud, yet none is pled with particularity and therefore all fail to state a claim upon which relief

11   can be granted. This motion is based on this Notice of Motion and accompanying Memorandum

12   of Points and Authorities, all pleadings, records and papers on file in this action, and such other

13   and further oral argument or documentary evidence as may be presented at or before the hearing.

14                                 STATEMENT OF RELIEF SOUGHT

15           Hantle USA respectfully seeks an order dismissing Hyosung’s Complaint without leave to

16   amend based on lack of subject matter jurisdiction pursuant to Rule 12(b)(1) and failure to state a

17   claim upon which relief can be granted under Rules 9(b) and 12(b)(6).

18                        MEMORANDUM OF POINTS AND AUTHORITIES

19   I.      INTRODUCTION.

20           Pursuant to Federal Rules of Civil Procedure 9(b), 12(b)(1), and 12(b)(6), Defendant

21   Hantle USA, Inc. (“Hantle USA”) hereby moves to dismiss the Complaint of Plaintiffs Hyosung

22   (America) Inc. and Nautilus Hyosung, Inc. (collectively, “Hyosung”).

23           The Complaint contains no allegations sufficient to support the exercise of subject matter

24   jurisdiction by this Court. Attempting to establish diversity jurisdiction, Hyosung alleges only

25   that more than $10,000 is in controversy, and there are no allegations sufficient to establish an

26   independent basis for federal jurisdiction. Accordingly, the Complaint should be dismissed under

27   Rule 12(b)(1).

28   //

                                                                                HANTLE USA’S MOTION TO DISMISS
                                                     -1-                             CASE NO. CV 10 2160 (VRW)
          Case3:10-cv-02160-VRW Document10                  Filed06/16/10 Page3 of 11



 1             Each of the individual claims asserted against Hantle USA is also inadequate. Hyosung’s

 2   claims are based on allegations of fraudulent conduct, and must therefore be pled with

 3   particularity pursuant to Rule 9(b). Hyosung did not satisfy the particularity requirement. The

 4   Complaint rests on speculation and unsupported conclusions and contains no factual allegations

 5   sufficient to support a finding that Hantle USA engaged in the “deliberate scheme” alleged.

 6             The Complaint alleges the following basic facts, many of which are disputed, but must be

 7   assumed to be true for purposes of this motion. Hantle USA is an affiliate of Tranax

 8   Technologies, Inc. (“Tranax”). Complaint at ¶ 1. Both are 100% owned by the same parent and

 9   have the same president. Id. at ¶ 5. Both have engaged in the business of selling the same ATM
10   products. Id. at ¶¶ 1, 14-16. Upon learning that a $5 million dollar arbitration award was being

11   issued against it, Tranax determined to stop selling ATMs and otherwise discontinue its “income-

12   producing activities.” Id. at ¶¶ 12-15, 23. Thereafter, Hantle USA acquired some of Tranax’s

13   computers and office equipment, hired some of Tranax’s former employees, formed a relationship

14   with Tranax’s former ATM supplier, and began selling to Tranax’s former customers. Id. at ¶¶ 1,

15   16-17.

16             There is, of course, nothing wrongful in this scenario. The corporate form exists to limit

17   the liability of shareholders who create a company to conduct business in good faith. The law

18   does not require a failed or poorly-performing business to continue to operate in an attempt to

19   earn enough to satisfy its obligations. Judgment creditors, like others, are not guaranteed that

20   their debtors will succeed, or that debtors will be able to pay judgment. A failed or troubled

21   business has every right to shut its doors, and another company, affiliated or not, is free to make a

22   fresh start at the same business. The new company can acquire assets from the other for fair

23   value and can contact suppliers, employees, and customers of the old business. A new company

24   does not need the approval of creditors to launch its effort. In California, at will employees

25   cannot be prevented from commencing new employment, and employees can never be considered

26   the property of their employer whose mobility can be restrained under a “fraudulent transfer”

27   rubric.

28   //
                                                                               HANTLE USA’S MOTION TO DISMISS
                                                      -2-                           CASE NO. CV 10 2160 (VRW)
           Case3:10-cv-02160-VRW Document10                 Filed06/16/10 Page4 of 11



 1            Hyosung attempts to inject an element of wrongfulness into this scenario by alleging that

 2   Tranax made fraudulent transfers to Hantle USA. These allegations require specific pleading

 3   under Rule 9(b), but Hyosung provides no factual details regarding any alleged transfer, let alone

 4   why any transfer was fraudulent. For example, Hyosung lists categories of allegedly transferred

 5   assets, but leaves out any mention of specifically what was transferred, which individuals were

 6   responsible for the transfers, when the transfers took place, how the transfers were effected, or the

 7   value of the transferred property. The Complaint restates the provisions of California’s

 8   fraudulent transfer statute, but contains no allegations of specific facts sufficient to support the

 9   elements of the statutory cause of action. Hyosung alleges that Hantle USA conspired with and
10   aided and abetted Tranax in conducting fraudulent transfers, but avers no specific facts to support

11   these conclusory allegations. As discussed in detail below, Hyosung has not alleged sufficient

12   facts to support of any of the five claims it asserts. Accordingly, if the Court concludes that it has

13   subject matter jurisdiction, the Complaint should be dismissed under Rule 9(b) and 12(b)(6).

14   II.      THE COMPLAINT FAILS TO ALLEGE A BASIS FOR FEDERAL SUBJECT
              MATTER JURISDICTION.
15

16            Hyosung alleges that this Court has subject matter jurisdiction under 28 U.S.C. § 1332

17   based on diversity of citizenship. Complaint at ¶ 7. All of the claims asserted are based on state

18   law. Under Section 1332, subject matter jurisdiction exists when there is a dispute between

19   citizens of different states, or citizens of a state and citizens of a foreign state, if the amount in

20   controversy exceeds $75,000, exclusive of interests and costs. 28 U.S.C. § 1332(a)(1).

21   Generally, the amount in controversy is “determined from the face of the pleadings.” Crum v.

22   Circus Circus Enters., 231 F.3d 1129, 1130 (9th Cir. 2000). Hyosung’s Complaint alleges only

23   that the amount in controversy is more than $10,000. Complaint at ¶ 7. It therefore must be

24   dismissed under Rule 12(b)(1) for lack of subject matter jurisdiction. See Anthony v. Sec. Pac.

25   Fin. Servs., Inc., 75 F.3d 311, 316-18 (7th Cir. 1996) (affirming dismissal for lack of subject

26   matter jurisdiction); see also Airlines Reporting Corp. v. S & N Travel, 58 F.3d 857, 864 (2d Cir.

27   1995) (affirming dismissal for lack of subject matter jurisdiction); see also Matsunoki Group, Inc.

28   v. Timberwork Oregon, Inc., 2008 U.S. Dist. LEXIS 103082 at *18-19 (N.D. Cal. 2009) (granting
                                                                                  HANTLE USA’S MOTION TO DISMISS
                                                      -3-                              CASE NO. CV 10 2160 (VRW)
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 1   plaintiff’s motion to dismiss counterclaim for lack of subject matter jurisdiction because the

 2   amount in controversy did not exceed $75,000 based on the allegations of the counterclaim).

 3           Hyosung’s Complaint makes no other reference to the amount in controversy that might

 4   support federal jurisdiction. In particular, it is devoid of any reference to an approximate amount

 5   or value of the alleged fraudulent transfers. For example, Hyosung alleges that Tranax

 6   transferred computer and office equipment to Hantle USA, but makes no mention of the alleged

 7   value of the goods transferred. Id. at ¶ 17. Hyosung also avers that Tranax began transferring

 8   assets and business “from which Plaintiffs might recover on the Arbitral Award,” but again makes

 9   no mention of the value of the assets or business allegedly transferred that might impact this
10   recovery. All in all, the Complaint fails to allege a basis for subject matter jurisdiction and should

11   be dismissed.

12   III.    THE COMPLAINT IS SUBJECT TO DISMISSAL UNDER RULE 9(b) AND RULE
             12(b)(6) FOR FAILURE TO STATE A CLAIM.
13

14           A complaint must be dismissed under Rule 12(b)(6) for failure to state a claim if the

15   factual allegations do not show a plausible claim for relief. See Bell Atlantic v. Twombly, 550

16   U.S. 544, 556, 566 (2007) (“We think nothing contained in the complaint invests either the action

17   or inaction alleged with a plausible suggestion of conspiracy.”). A court must accept all material

18   facts as true, with doubts resolved in the manner most favorable to the plaintiff. Sprewell v.

19   Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). However, the court is “not required to

20   accept as true allegations that are merely conclusory, unwarranted deductions of fact, or

21   unreasonable inferences.” See id. Conclusory allegations and legal conclusions are insufficient

22   to defeat a motion to dismiss for failure to state a claim. See Ashcroft v. Iqbal, 129 S. Ct. 1937,

23   1951 (2009) (“conclusory nature” of the allegations); see also McGlinchy v. Shell Chemical Co.,

24   845 F.2d 802, 810 (9th Cir. 1988) (conclusory allegations are insufficient to defeat a motion to

25   dismiss).

26   //

27   //

28   //
                                                                              HANTLE USA’S MOTION TO DISMISS
                                                    -4-                            CASE NO. CV 10 2160 (VRW)
        Case3:10-cv-02160-VRW Document10                  Filed06/16/10 Page6 of 11



 1           A.     Hyosung’s Complaint Is Subject To The Heightened Pleading Requirement
                    Of Rule 9(b).
 2

 3           Because Hyosung’s Complaint alleges fraud, it must satisfy a heightened pleading

 4   standard. Rule 9(b) provides that “[i]n all averments of fraud or mistake, the circumstances

 5   constituting fraud or mistake shall be stated with particularity.” Rule 9(b)’s particularity

 6   requirement applies to state law causes of action such as those asserted by Hyosung. See Vess v.

 7   Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003). Even when fraud is not an element

 8   of a claim, Rule 9(b) applies if the plaintiff alleges that the defendant has engaged in a “unified

 9   course of fraudulent conduct,” regardless of whether the claims are labeled as fraud claims. See

10   id. at 1103-04; see also Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). If

11   allegations of fraud are based on “information and belief,” the allegations must set forth the facts

12   on which the belief is founded. See Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993) (“The

13   complaint must specify such facts as the times, dates, places, benefits received and other details

14   of the alleged fraudulent activity.”). Vague or conclusory allegations are insufficient to meet the

15   particularity requirement of Rule 9(b). See Moore v. Kayport Package Express, Inc., 885 F.2d

16   531, 540 (9th Cir. 1989). Consequently, when “an entire complaint, or an entire claim within a

17   complaint, is grounded in fraud and its allegations fail to satisfy the heightened pleading

18   requirements of Rule 9(b), a district court may dismiss a complaint or claim.” Vess, 317 F.3d at

19   1107.

20           Hyosung’s entire complaint is grounded in allegations of fraud. Hyosung alleges that

21   Hantle USA “was aware of, agreed to assist, and knowingly assisted Tranax in the scheme to

22   hinder, delay or defraud Plaintiffs as creditors,” and “acted with fraud, oppression and malice as

23   to Plaintiffs.” Complaint at ¶¶ 27, 29. Hyosung further asserts that “Hantle has committed

24   common law fraud as to Plaintiffs by deliberately participating in a scheme to transfer the ATM

25   Business to Hantle so that Hantle can make profits from conducting the ATM Business, while

26   simultaneously shielding Hantle from liability for Tranax’s debts.” Id. at ¶ 36; see also id. at ¶ 40

27   (“In transferring the ATM Business with intent to defraud Plaintiffs, Hantle agreed to act and in

28   fact acted in concert with Tranax.”). These and other allegations of fraud are the basis of

                                                                               HANTLE USA’S MOTION TO DISMISS
                                                    -5-                             CASE NO. CV 10 2160 (VRW)
        Case3:10-cv-02160-VRW Document10                   Filed06/16/10 Page7 of 11



 1   Hyosung’s entire Complaint. Thus, Rule 9(b) applies.

 2          B.        Hyosung Has Failed To Allege Facts Supporting Any Claim Of Fraudulent
                      Conduct By Hantle USA.
 3

 4          Aside from the conclusory generalizations about Hantle USA’s alleged “fraudulent

 5   scheme” mentioned above, Hyosung fails to provide any particulars with regard to when, where

 6   or how the alleged fraudulent conduct by Hantle USA took place. See Moore, 885 F.2d at 540

 7   (“While statements of the time, place and nature of the alleged fraudulent activities are sufficient,

 8   mere conclusory allegations of fraud are insufficient”). The complaint is therefore deficient and

 9   should be dismissed.
10                    1.    Hyosung’s First And Second Claims Fail To Allege A Fraudulent
                            Transfer For Which Hantle USA Might Be Liable.
11

12          The First and Second Claims allege that some type of transfer of Tranax’s “ATM

13   Business” occurred on or after January 29, 2010, and that the transfer was fraudulent under Cal.

14   Civ. Code §§ 3439.04(a)(1), 3439.04(a)(2) and 3439.05. See Complaint at ¶¶ 23, 26, 32, 34.

15   Under Section 3439.04(a)(1), a transfer is fraudulent as to a creditor if the transfer was made

16   “[w]ith actual intent to hinder, delay, or defraud any creditor of the debtor.” A transfer made

17   “[w]ithout receiving a reasonably equivalent value in exchange” is fraudulent under Section

18   3439.04(a)(2). Hyosung provides no detail regarding the nature of the allegedly transferred

19   property, the transactions by which the property was allegedly transferred, or the other elements

20   of the claims.

21          Regarding the nature of the transferred property, Hyosung alleges that Tranax transferred

22   its “primary product line, supplier relationships, employees, customers and related accounts, lists

23   and goodwill.” Complaint at ¶ 23. Despite the lengthy list of assets allegedly transferred,

24   Hyosung has pled no specific facts regarding a “transfer,” and failed to identify “property” that

25   might be the subject of a cognizable fraudulent transfer. See Cal. Civ. Code §§ 3439.04(a);

26   3439.01(a) (“asset”), (h) (“property”), (i) (“transfer”).

27          “Primary product line”: Hyosung makes no mention of the products at issue, the basis for

28   claiming Tranax had a property interest in its “product line,” see Cal. Civ. Code § 3439.01(h), the
                                                                              HANTLE USA’S MOTION TO DISMISS
                                                     -6-                           CASE NO. CV 10 2160 (VRW)
       Case3:10-cv-02160-VRW Document10                   Filed06/16/10 Page8 of 11



 1   value of the “product line,” or how the alleged transfer of the “product line” occurred.

 2   Allegations of who transferred which products and when are critical elements necessary to

 3   support such an allegation of fraud.

 4          “Supplier relationships”: The Complaint lacks allegations as to which suppliers were

 5   transferred, how the “transfer” of a supplier occurred, who transferred the “supplier relationships”

 6   or when. In addition, the Complaint fails to indicate how “supplier relationships” could constitute

 7   property or the fair market value of this alleged property.

 8          “Employees”: There is no way that employees can qualify as “property” that might be the

 9   subject of a fraudulent transfer. See Cal. Civ. Code § 3439.01(h). That aside, the Complaint fails
10   to indicate which employees were transferred, how many were transferred, when the transfer took

11   place, how it was effected, or which individuals were responsible. There is nothing in Hyosung’s

12   Complaint sufficient to transform an individual’s change of employment into a fraudulent transfer

13   of “property.”

14          “Customers and related accounts and lists”: Hyosung again omits any allegations

15   regarding which customers or how many were transferred, the specific identity or value of any

16   customer accounts or lists, or when or how the alleged transfer of these customers or related

17   accounts occurred. Unless Tranax transferred valuable trade secrets in customers or customer

18   information to Hantle USA without reasonable compensation – which Hyosung has not alleged –

19   Hantle USA was free to contact, and to do business with, any and all potential customers. See

20   e.g., Moss, Adams & Co. v. Shilling, 179 Cal. App. 3d 124, 130 (1986) (agreements not to solicit

21   customers are invalid “except where their enforcement is necessary to protect trade secrets”);

22   Garden & Termite Control v. Terrones, 84 Cal. App. 3d 176, 178-79 (1978) (refusing to enforce

23   non-solicitation covenant where no trade secrets were used).

24          The First and Second Claims include no particularized effort to satisfy the requirements of

25   the claims they attempt to assert. Instead, they merely regurgitate the statutory language. In

26   addition to the failings noted above, the Complaint contains no specific facts supporting the

27   conclusion that Tranax was insolvent or about to be insolvent, that Tranax was or was about to be

28   engaged in a business or transaction in relation to which its remaining assets were unreasonably
                                                                             HANTLE USA’S MOTION TO DISMISS
                                                    -7-                           CASE NO. CV 10 2160 (VRW)
       Case3:10-cv-02160-VRW Document10                   Filed06/16/10 Page9 of 11



 1   small, or that Tranax reasonably should have believed that it would incur debts beyond its ability

 2   to pay as they came due. Likewise, no specific facts are alleged in connection with the

 3   conclusory allegations that Tranax made the alleged transfers with actual intent to hinder, delay or

 4   defraud Hyosung, see Complaint at ¶¶ 24, 26, or that Hantle USA was aware of and knowingly

 5   assisted, conspired with, and aided and abetted Tranax in the alleged fraudulent transfers. See id.

 6   at ¶¶ 27-28. Hyosung is apparently trying to allege in part that assets were transferred without

 7   receipt by Tranax of “a reasonably equivalent value,” but the allegations on this element are also

 8   conclusory, non-existent, or transparently inadequate. For example, Hyosung makes reference to

 9   “computer and office equipment” in Paragraph 17 of the Complaint. Hyosung alleges only that as
10   of a certain date, payment had not been made for the equipment, although it was “expected.”

11   Complaint at ¶ 17. This is not an allegation that fair value was not received.

12                  2.      Hyosung’s Third Claim Fails To Allege Common Law Fraud.
13          In its Third Claim for Relief, Hyosung alleges that Hantle USA “has committed common

14   law fraud as to Plaintiffs by deliberately participating in a scheme to transfer the ATM Business

15   to Hantle.” Complaint at ¶ 36. Hyosung bases this claim on the same conclusory assertions

16   about Hantle USA’s allegedly fraudulent actions, while again failing to allege any underlying

17   facts upon which such allegations could be founded. In order to prove common law fraud under

18   California law, Hyosung must show that Hantle USA made a false representation, with

19   “knowledge of its falsity, intent to defraud, justifiable reliance upon the representation and

20   damage resulting from the justifiable reliance.” Stansfield v. Starkey, 220 Cal. App. 3d 59, 73

21   (1990). Hyosung’s Complaint fails to indicate the alleged misrepresentation, if any, that Hantle

22   USA made, nor does it allege that Hyosung relied on the alleged misrepresentation, or that

23   Hyosung’s reliance was the proximate cause of its alleged damages.

24                  3.      Civil Conspiracy Is Not A Claim For Relief.
25          Hyosung’s Fourth Claim for Relief alleges that Hantle USA “agreed to act and in fact

26   acted in concert with Tranax” with regard to the alleged fraudulent transfer. Complaint at ¶ 40.

27   Hyosung also alleges that Hantle USA “acted with fraud, malice and oppression.” Id. at ¶ 42. In

28   addition, Hyosung alleges that “Hantle not only was aware of Tranax’s intention to hinder, delay
                                                                              HANTLE USA’S MOTION TO DISMISS
                                                    -8-                            CASE NO. CV 10 2160 (VRW)
       Case3:10-cv-02160-VRW Document10                 Filed06/16/10 Page10 of 11



 1   and defraud Plaintiffs, but willingly conspired with and aided and abetted Tranax therein.” Id. at

 2   ¶ 28. Hyosung also alleges that the object of the conspiracy – the alleged transfer – was

 3   fraudulent, although it makes no attempt to satisfy Rule 9(b). See id. at ¶¶ 23-38.

 4          “Conspiracy is not a cause of action, but a legal doctrine that imposes liability on persons

 5   who, although not actually committing a tort themselves, share with the immediate tortfeasors a

 6   common plan or design in its perpetration.” Kesmodel v. Rand, 119 Cal. App. 4th 1128, 1140

 7   (2004); Richard B. LeVine, Inc. v. Higashi, 131 Cal. App. 4th 566, 574 (2005) (“There is no

 8   separate tort of civil conspiracy, and there is no civil action for conspiracy to commit a

 9   recognized tort unless the wrongful act itself is committed and damage results therefrom.”) (citing
10   5 Witkin, Summary of Cal. Law, Torts, § 44, p. 107 (9th ed. 1988)). Hyosung’s Fourth Claim for

11   Relief must therefore be dismissed, and its conclusory allegations of conspiracy would not

12   support a finding of liability under any circumstances.

13                  4.      Hyosung’s Fifth Claim Fails To Allege Liability For Aiding And
                            Abetting.
14

15          Hyosung’s Fifth Claim for Relief is also based on allegations that do not suggest a

16   recognized claim for relief. Hyosung attempts to assert a claim for aiding and abetting, but, like

17   conspiracy, aiding and abetting is a theory of liability, not a claim. Hyosung bases its aiding and

18   abetting allegations on the alleged fraudulent transfers, and the allegations are inadequate because

19   the fraudulent transfers are not alleged in a manner that is sufficient under Rule 9(b).

20          Where aiding and abetting is properly asserted as a theory of liability, California law

21   imposes two distinct requirements. A party aids and abets the commission of an intentional tort if

22   the party: “(a) knows the other’s conduct constitutes a breach of duty and gives substantial

23   assistance or encouragement to the other to so act or (b) gives substantial assistance to the other in

24   accomplishing a tortious result and the person’s own conduct, separately considered, constitutes a

25   breach of duty to the third person.” Richard B. LeVine, Inc., 131 Cal. App. 4th at 574 (citing Fiol

26   v. Doellstedt, 50 Cal. App. 4th 1318, 1326 (1996)). “Mere knowledge that a tort is being

27   committed and the failure to prevent it does not constitute aiding and abetting.” Fiol, 50 Cal.

28   App. 4th at 1326.
                                                                              HANTLE USA’S MOTION TO DISMISS
                                                    -9-                            CASE NO. CV 10 2160 (VRW)
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 1          Consistent with its overall disregard of Rule 9(b), Hyosung merely restates the elements

 2   of aiding and abetting. Hyosung’s pleading asserts that Hantle USA “was aware” of Tranax’s

 3   intention to defraud, yet the allegations are devoid of any facts showing Hantle USA’s actual

 4   knowledge of any wrongdoing or intentional wrongful acts by Tranax. Hyosung alleges that

 5   Hantle USA provided “substantial assistance,” yet nowhere avers any facts showing how Hantle

 6   USA participated in a wrongful act with actual knowledge of the wrongful conduct. Hyosung’s

 7   speculative conclusions about Hantle USA’s “knowledge” and “assistance” are not sufficient to

 8   establish aiding and abetting, and, as explained above, Hyosung also failed to satisfy Rule 9(b)

 9   with respect to the underlying fraudulent transfer claim.
10   IV.    CONCLUSION.
11          For the reasons set forth above, Hantle USA respectfully requests that the Court dismiss

12   Hyosung’s Complaint against Hantle USA.

13

14   Dated: June 16, 2010                           Respectfully submitted,
15                                                  ROBERT E. FREITAS
                                                    MATTHEW H. POPPE
16                                                  KRISTIN S. CORNUELLE
                                                    JACOB A. SNOW
17                                                  ORRICK, HERRINGTON & SUTCLIFFE LLP
18
                                                                 /s/ Matthew H. Poppe /s/
19                                                                   Matthew H. Poppe
                                                                  Attorneys for Defendant
20                                                                   Hantle USA, Inc.
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                                                                              HANTLE USA’S MOTION TO DISMISS
                                                   - 10 -                          CASE NO. CV 10 2160 (VRW)

				
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