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1 || Scott D. Baker (SBN 84923)
Adaline J. Hilgard (SBN 173213)
2 || REED SMITH Lip
Two Embarcadero Center, Suite 2000 ALA LLED
3 || San Francisco, CA 94111-3922 . A COUNTY
4 {| Mailing Address: JUL & 2 2008
P.O. Box 7936
By Midd
5 || San Francisco, CA 94120- 7936 CLERK OF THE S OR COURT
6 || Telephone: +1 415 543 8700 L/ Deputy
Facsimile: +1 415 391 8269
7
Attomeys for Defendants
8 || BigFix, Inc.,BigFix Holdings PTE, Ltd and
George Billman
9
10 SUPERIOR COURT OF THE STATE OF CALIFORNIA
i ll . FOR THE COUNTY OF ALAMEDA
rs ° ;
a 12 OAKLAND DIVISION
42 |
a
x : 13} BIGFIX ASIA PTE. LTD, No.: RG08390188
=
a gq 34 Plaintiff, MEMORANDUM OF POINTS AND
i & . AUTHORITIES IN SUPPORT OF
ee 15 VS. DEFENDANTS’ DEMURRER TO
; PLAINTIFF'S FIRST, SECOND, THIRD,
z 16 |) BIGFIX, INC., BIGFIX HOLDINGS PTE. LTD.,| SIXTH AND EIGHTH CAUSES OF
E 17 GEORGE BILLMAN and Does 1-25, Inclusive, | ACTION
Defendants. Date: July 30, 2008
18 Time: 2:30 p.m.
Place: Room 510
19 Compl. Filed: May 30, 2008
Trial Date: N/A
20 Honorable Richard Keller
21 Attached Documents: Notice of Demurrer and
Demurrer
22
23 Rest BUUCKY
24
25
26
27
28
OOCSEFO-125177M.2
Briefin Supportof Defendants’Demurrer To BigFix Asia’sComplaint
"1
ee
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1 TABLE OF CONTENTS
2 Page
3 | L.
INTRODUCTION |. cree evesvseesersaeceeuenenqusseseseeseenisessevsuenraeaneusesesasensentanseeceenseyeteetens dl
4 }| IT. FACTUAL BACKGROUND... eens cbeeeeveuenenensaceuaneeegee eeeneessess |
soavevasentaneesureeanataqene
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5 A. The Parties Enter Into An Agreement...ccsscecenssenseceeeeeseeeseseesenessenietctvereneeeseeee
]
6 B. _ Plaintiff Asserts Defective Claims..i....sscssassssanaessesstisteninisniansniannesesetauee 2
7 | TL. LEGAL ANALYSIS ...scsscsesetunseinennuneninennintyitniniainuntaeteeestsineanee 4
8 A. A Demurrer Is Appropriate Where, as Here, Plaintiff Fails To Allege
Facts Sufficient to Constitute a Cause Of Action .........ccscesecstersnerseerenteereneneenenaney
4
° B. The Alleged Fraud Claims Are Insufficient As Matter of essere
Law... 5
i ' 1. The Fraud Claims Fail To Meet the Particularity Requirement ..........ccceun5
% 2, The Fraud Claims are Defective Because the Alleged
a 12 Misrepresentations are at Variance with the Agreement .........-esssesenienn 6
2 é 13 Cc. Plaintiff's Sixth Cause of Action for Tortious Interference with Contract
3 5 Fails to State a Claim .....cccscccsssssueccsssesscestsesessessyesresurssvssescccecsascsssseesassyesrveaneensessaeavensees
8
; “ D Plaintiff's Franchise Investment Law Claim Cannot Withstand Scrutiny teens 9
bevseaecenterent
; ° l. BFI Was Exempt From Any Registration Requirements ..........cciseceseeseeeees
9
: ie 2. Plaintiff's Franchise Investment Law Claim Is Also Barred By the
< 17 Statute of cceeesescsserseceeeeesentessevesscsseeeeseenscetacseacncecevasavenees
Limitations... 10
18 |]LV. CONCLUSION... sscscsssssssssssectnsestiteintnente evstntntntsnireinesetntntennetcnstninnsnenenaen i
19
20
21
22
23
24
25
26
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~i- OOCS9FO-125177M 2
Briefin Supportof Defendants’Demurrer To BigFixAsia's Complaint
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TABLE OF AUTHORITIES
Page
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Cases
{3
Alling v. Universal Manufacturing Corp.
&
5 Cal. App.4th 1412 (1992) oc eceeeeeeens
cesuenaseacaessesesananevaeececeatstetecesescecesssaaseatacaestuagueavansneeensietees
6
James v. Superior Court
261 CalApp.2d 415 (1968) oo. ccccceeceeceesesesnecssereeseeseranetevavsesusceessecessuensoeseneaentesttesseestaneeseeanenaye
4
DH
Kunstman v.Mirizzi
234 Cal. App.2d 753 (1968)...
cccssccscteccsesssereesssssesecesseseceeceesssarevaparseneessatsessisaueesessasieeptceataceseseneesces
4
NSN
Lawrence vy.Bank of America
163 Cal.App.3d 431 (1985) .....csssssssssssesssssssessessssssssssessguevsnusuesssceescpeneavensasavaessereeseusseessessseeeuessevees
5
Co
Lazar vy.Sup. Ct. (Rykoff-Sexton, Inc.)
oO
12 Cal. 4™ 631 (1996)o.oo cccecsseseesessscerescsssearscsuserevenesnseseaescsstevasaecaeeesessegnessenssnsceeeeeasitetsesearsceeeeaes
5
People v. Speedee Oil Change Systems, Inc.,et al.
95 Cal.App.4™ 709 (2002) .oesccsecccsssccecccssseessssnespsossesesssssecensstccersusessseceassrccsssueessaneeceayuessessanvesten
10, 11
of Celeware
Powell v. The Coffee Beanery
932 F.Supp. 985 (B.D. Mich, 1996)... ce cccsssssecssseseesseeestaratseenesetsesseicenesssuseeanseeneteceeeneassees
10, 11
fonnedin the Etate
SCEcorp v. Superior Court (Tuscon Electric Power)
LLP
3 Cal. App.4th 673 (1992) on. cccseseccsusssessacseseeesecscrarsanseacuesestsenevsesesensarssssueseeessesseneessgeraseeseerenaes
9
SMITH
Short v.Nevada Joint Union High School Dist.
limBled jiabfity partnership
63 Cal. App.3d 1087 (1985) oc ccssssssscsssssesceesssssceesssesenssestsesersesesseeneseasscocessensetaueseatinevscseesecaeaeateses
9
REED
Stansfield v. Starkey
220 Cal. App.3d 59, 73 (1990) wccccceeseeseseesstsresecnsneseceesetcaesesesceeassceatcesvarseaeeeesetetuavereeseantesetereeseeates
5
Tarmann vy.State Farm Mut. Auto Ins. Ca.
2 Cal. App.4™ 153 (1991) voceccccecccsssresssssssssesssssessesssseessaseegssesssssssescevecsssuivessaaeseusesqayaecnenseensesseteereerses
5
A
Wang v.Massey Chevrolet
97 Cal App. 47 856 (2002) ....csescssssssssesessessessessssssesesvecessssecssravecssasesssspessuursessesessssustsssssesssasnecessavenss
7
Wilhelm y. Pray, Price, Williams & Russell
186 Cal App.3d 1324 (1986) 00...cceecesssesssssecsesseseessesensecesensssretessenvaceeassieaeceseecueeeteneestetessenreaneeae
5
Statutes
Cal. Civ, Proc. Code § 430.10(e) oo... ccsstcsesescssesersstesseesseeeeceestiscesesacsensesescesersaceneneaseeeestsevsensneesteenecaes
4
Cal. Corp Code §3 1300.0... ccccsesstecsesssssecseasasenenseeseseeceacsevevsesesaessacsecsaveessessaseneenerecsearseeteeaenteseeses
10
Cal. Corp. Code § 31105...
ccccsccscscsscssesesertracsessssesensseseaecaesenveseegratepeesaesesersees
caeeveaeueeaeaetectarseees
9,10
Cal. Corp. Code § 31303...
ecccsesestssreseesenesesssesrerersenseaseestenvenssaeneeses
cavvesenenetaeatritaveceteeseneasetees
10
Corp. Code §31 114 .occcsceccssessessssesssssuscosssneessssssecsosssesanstsecestsnsessseceassusssueeecenusesssssccetivarssasecsestannesersenves
10
Corp. Code §3 1119 ooo ceeccssescecsereereeeseesersrserseesneessseteteeeseaaneetteceseesesseessesssasessevensaeaseatevgrnetenties
10
. Other Authorities
California Forins af Pleading and Practice
23, Fraud and Deceit, Section 269.14[5][c] (Matthew Bender) .........ccccscsseseestetsstiecseeeseeeteeeeteens
6
—ii- DOCSSFO-12517735.2
Briefin Supportof Defendants’Demurter To BigFix Asia’sComplaint
a
O7/O1F2008 16:24 FAX 415 391 oe REED SMITH LLP © @i11f/122
I INTRODUCTION
By this lawsuit, Plaintiff BigFix Asia, Pte. Ltd. (“BFA”) seeks to dodge responsibility for its
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own material breaches of the parties* distribution Agreement and improperly extract money from
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Defendants BigFix, Inc.,its subsidiary, BigFix Holdings, Pte.,Ltd. (collectively “BFI”) and George
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Billman, an officer of BigFix, Inc. BFA, however, has repeatedly conceded itsown dismal contract
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performance and has further admitted to owing BFI over $500,000 in unpaid fees due under the
parties’ distribution Agreement. Against this backdrop, BFA filed the instant lawsuit asserting nine
causes of action, five of which failto survive scrutiny on this demurrer. Specifically, Plaintiff'stwo
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promissory fraud claims and itsnegligent misrepresentation claim are defective as a matter of law
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because they failto meet the particularitypleading requirement and are improperly based on alleged
in the Stag of Delaware
misrepresentations that are directly contradicted by the terms of the parties’ Agreement. Likewise,
Plaintiff'sclaim for alleged interference with customer contracts must failbecause Plaintiff has not,
SMITHiLP
and cannot, plead any breach of a third party contract, an essential element of the claim. Plaintiff's
formed
alleged Franchise Investment Law claim fares no better: It isfatally infirm because an exemption
pasinarship
REED
from the franchise registration requirements directly applies and the claim is,in any event, barred by
4 lunited liatiity
the one year statute of limitations. Because Plaintiff'sclaims are detective as a matter of law,
Defendants’ respectfully request that the Court sustain thisdemurrer.
I. FACTUAL BACKGROUND
A, The Parties Enter Into An Agreement
Defendants BigFix, Inc. and BigFix Holdings Pte. Ltd. (“BFI”) are in the business of
providing security software and technology. [Complaint 2, 4]. In August 2004, BFI and Plaintiff
BFA, a foreign corporation which resides in Singapore, [id 41] entered into an Agreement, acopy of
which is attached to the Complaint. [Complaint Exh. A]. The Agreement provides, among other
things, that BFA would operate as the exclusive master distributor for BigFix products in four
regions of Asia, including Greater China, South East Asia, Australasia and South Asia. [/d.Exh. A].
BFA’s exclusivity, however, was conditioned upon BFA’s continued compliance with the
Agreement, including, specifically, sales targets established by the parties. [7d Exh. A, p.2, 3, Exh,
-i- QOCSSFO-12517734.2
Briefin Supportof Defendants’Demurrer To BigFixAsia’s Complaint
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415 391 , REEQ SHITH LLF Y My ii2/12
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B (“In order to retain exclusivity in the Territory, Partner’s Product Bookings must atleast equal or
exceed the following targets ....”)).
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For each sale, and as a material term of the Agreement, BFA also agreed topay to BFI a
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percentage of gross revenues “within ninety (90) days following delivery of the relevant products or
&
services ... whether or not [BFA] has received payment.” [Jd. Exh. A, p. 8,[7,8 and Exh, AJ6(b),
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1]. As an advance payment on the fees that would become due under the Agreement, BFA also
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agreed to pay BF] a total of $500,000 in two installments due in September and December 2004,
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respectively. [/a. Exh. A, p. 2]. No additional fees under the Agreement would be due until the
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advance payment had been fully applied to the fees owing to BFI. [/d.(bo additional fees due until
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“prepayment [of$500,000] has been exhausted”)]. The parties also agreed that inthe event of a
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formedin the State of Delaware:
material breach, the Agreement could be terminated for cause by either party after 30 day cure
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period. [/d.p. 8,49]. .
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Further, contrary to BFA’s allegation that BFI promised topurchase BFA atsome point in
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the future, the Agreement provides thatthe parttes would review BFA’s performance near the end of
A fimited liability partnershis:
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the contemplated term of the Agreement (Dec. 31, 2008) and “discuss” whether topursue a
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“possible” renewal or acquisition of BFA by BFI. The parties further agreed that they would both
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have “sole discretion” to choose “for any reason” not to renew or not toproceed with an acquisition,
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(ld Exh. A p.4, Exh. B]
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Finally, contrary to BFA’s allegation that BFI promised to pay Singapore withholding taxes,
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the Agreement statesunequivocally thatBFA, not BFI, is obligated to pay for any such taxes. [fd.
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Exh. A, p. 8,96(f),98, p. 10§13(d)). .
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B. ‘PlaintiffAsserts Defective Claims
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In itsComplaint, Plaintiff assertsnine causes of action,at least five of which are fatally
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defective. In itsFirst Cause of Action for alleged promissory fraud against BF, Plaintiffalleges
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generally that BFI “promised and represented to BIGFIX ASIA in the Agreement that BIGFIX
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ASIA would have the exclusive right to sellBFI’s product .. . and related services in a territory
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consisting of four regions. . .” [Complaint J10]. Plaintiff then alleges that “[w]hen BFI entered into
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the Agreement with BIGFIX ASIA on or about August 24, 2004, BFI had no intention ofkeeping its
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-32- DOGSSFO-12517704,2
Briefin Supportof Defendants’Demurrer To BigFix Asia'sComplaint
OT/O1/2008 §:26 FAN 415 391 @ REED SMITH LLP r @1isit2e
promises or performing the Agreement.” [Complaint 411]. Plaintifffurther alleges thatDefendant
“made the Agreement and the promises contained therein to plaintiffin order to induce plaintiffto
pay the sum of five hundred thousand dollars ($500,000) to BFI....*° [7d §12]. Setting aside the
fact thatBFI fully performed under the Agreement, including by allowing BFA to operate
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exclusively in the territoryeven after BFA had a right to do so under the Agreement because BFA
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failed to meet any of itssales targets and thus lost exclusivity rights [id Exh. A, Agreement Exh. B],
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the First Cause of Action failsas a matter of law because it failsto provide any further specificity
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regarding any alleged “misrepresentations.”
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In itsSecond and Third Causes of Action foralleged promissory fraud and negligent
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misrepresentation, respectively, BFA asserts the following alleged misrepresentations, most of
of Defeware
which, as set forthbelow, are directly contradicted by the terms of theAgreement:
In or about 2004 George Billman represented to BIGFIX ASLA’s founder, Chong Foo
liebilidy partnership temied in tha Stabs
LLP
Chaw, (i)that BFI would assist plaintiffin building a business in Asia to market and
SMITH
sell BFI’s product and services; (ii)that BFI would purchase the business after itwas
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built;(iii)that he (Billman) was a key executive in BFI and would protect BIGFIX
ASIA’s business ifitmade an up-front cash payment to BFI; (iv)that David Robbins,
A limited
BFI’s Chief Executive Officer, was [sic] Billman’s partner inall dealings with
plaintiff;and (v) thatplaintiff should not worry about any tax withholding issues
involving the Singapore government because BFI would cover everything. [/d.917,
126)
Plaintiff alleges that these representations were made by Billman “in his capacity as an
officer of BFI .. . and,individually, toobtain personal benefits for himself.” [/d. (18, $27].
According to the Complaint, each of these representations was false when made atthe time of
contracting. [/d.19, 428].
In the Sixth Cause of Action for alleged Tortious Interference with Contracts, the Complaint
states,among other things, thatBFA, in developing its business tosell BFI’s software inAsia,
“entered into contractual relationships, including but not limited to employee and customer
contracts.” (/d.[45]. The Complaint further statesthat: “Defendants interfered with plaintiff's
-3- GOCSSFO-12617734.2
Briefin Supportof Defendants’Demurrer To BigFix Asia’sComplaint
07/01/2008 15:26 FAX 415 391 6 REEQ SHITH LLP Y ) fq iid/122
customer contracts by contacting plaintiff's customers and inducing plaintiff's customers to stop
—
conducting business with plaintiff infavor of doing business with BFI and/or BFH.” [/d.49].
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Absent from the Complaint, however, isany allegation that any of BFA‘s customers actually
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breached any of their contracts with BFA as a resultof any BFI conduct. (This isno surprise given
S&S.
that customers in the industry are generally free to do business with any vendor atany time, and
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BFA lost itsright tosell BigFix products upon termination of the Agreement for cause), As set forth
DR
below, thiscause of action, as itrelates to BFA’s customers, is missing an essential element of the
NY
claim and thus this demurrer should be sustained.
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Finally, in the Eighth Cause of Action against BFI for alleged “Violation of the Franchise
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Investment Law,” Plaintiff asserts thatthe Agreement “constituted the sale of a franchise” and thus
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—
in the Stateof Delaware
required BF] toeither register the franchise or “obtain an exemption” from the registration
ime
—
requirement. [Complaint [60]. Plaintiffalleges thatBFI failed to do so, and thatthat itsfailure was
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“willful,” entitling BFA torescission and damages. As setforth below, however, this cause of action
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formed
failsbecause BFI was exempt from the registration requirements and the claim is barred by the
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paztnership
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statute of limitations in any event.
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Each of Plaintiff's First,Second, Third, Sixth and Eighth claims suffers fatal infirmities and
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thus, Defendants respectfully request that thisdemurrer be sustained.
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III. LEGAL ANALYSIS
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A, A Demurrer Is Appropriate Where, as Here, Plaintiff Fails To Allege Facts Sufficient to
20
Constitute a Cause of Action
The function of a demurrer is topresent issues of law regarding the sufficiency of the
allegations set out in the pleading under attack. James v.Superior Court, 261 Cal.-App.2d 415, 416
(1968). A demurrer isproperly sustained where a pleading does not statefacts sufficient to
constitute a cause of action, Cal. Civ. Proc. Code § 430.10(e). Ifa pleading under attack discloses
facts giving rise to a complete defense to the action, there isa failure to state factssufficient to
constitute a cause of action, and the demurrer should be sustained unless the pleading contains
specific facts avoiding the defense. See generally Kunstman v. Mirizzi, 234 Cal.App.2d 753 (1968).
~~4 ~ 2
OOCESFO-125177H4
Briefin Supportof Defendants’Demurrer To BigFixAsia’s Complaint
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Finally, a demurrer should be sustained without leave to amend where the facts are not in
dispute and the nature of the claim is clear but no liabilityexists under substantive law. Lawrence v.
te
Bank of America, 163 Cal. App.3d 431, 436 (1985); Schonfeldt v. State of California, 61 Cal-App.4th
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1462, 1465 (1998). .
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B. The Alleged Fraud Claims Are Insufficient As Matter of Law
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Plaintiff's alleged fraud and misrepresentation claims are defective because (1)they failto
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meet the requirement that fraud be plead with particularity; and (2) the alleged misrepresentations
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are directly atvariance with the terms of the Agreement.
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1. The Fraud Claims Fail To Meet the Particularity Requirement
In this case, Plaintiffattempts to assert two promissory fraud claims and a negligent
in the State of Deleware
misrepresentation claim, all of which are defective forfailure to meet the particularity requirement.
When pleading a fraud claim, a plaintiffmust allege every element in full. Withelm v. Pray, Price,
LLP
Williams & Russell, 186 Cal.App.3d 1324, 1332 (1986). “Every element of the cause of action for
SMITH
linvted liaba@ity pevtuarsip tormed
fraud must be alleged in the proper manner and the facts constituting the fraud must be alleged with
REED
sufficient specificity to allow defendant to understand fully the nature of the charge made.”
Stansfield v, Starkey, 220 Cai.App.3d 59, 73 (1990) (citationomitted). The particularity requirement
requires the plaintiff to plead “facts which ‘show how, when, where, to whom, and by what means
&
the representations were tendered.’ [Citation.]” Jad. Where, as here, fraud isasserted against a
corporation, the burden is even greater, and the “the plaintiffmust ‘allege the names of the persons
who made the allegedly fraudulent representations, their authority to speak, towhom they spoke,
what they said or wrote, and when itwas said or written.’ [Citation.]” Lazar v.Sup. Ct (Rykoff-
Sexton, Inc.),12 Cal.4" 631, 645 (1996); Tarmann v.State Farm Mut, Auto Ins.Co., 2 Cal.App.4"
153, 157 (1991). The policy behind theparticularity requirement is thatthe Defendant is entitled to
notice of the claims made, “and fairness to the defendant demands that he should receive the fullest
possible detailsof the charge in order to prepare his defense.” Stansfield, 220 Cal.App.3d at 73.
In thiscase, Plaintiffs’ First Cause of Action purports toassert fraud against BFI. Plaintiff,
however, failsto plead any facts thatshow how, where, to whom and by what means the alleged
representations were made. Because BFI isa corporation, Plaintiffwas also required to allege,
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Asia’s Complaint
OT/O1/2008 14:27 FAX 415 394 @ REED SMITH LLP © (4 116/122
among other things, the names of persons who made the representations, their authority to speak and
to whom they spoke. But the FirstCause of Action is devoid of any of these requirements. For
ON
instance, Plaintiff merely asserts that BFI promised to allow BFA to exclusively sella product within
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a specific territorywithout an intention to keep the promise. Plaintiff failsto identify any other
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alleged promise or any individual as the person making the promises. Plaintiffalso failsto address
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the authority of the person or persons to make the representation or to identify the person to whom
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BF! allegedly made the representations. The firstcause of action is hopelessly generalized, failsto
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meet the particularity requirement and cannot withstand demurrer.
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Likewise, the Second and Third Causes of Action foralleged promissory fraud and negligent
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10 Misrepresentation, respectively, also failto meet the particularity requirement. BFA merely alleges
af Detrware
li that George Billman, as an officer of BFI, made certain specific representations to BFA’s principal,
12 Chong Foo Chaw. But Plaintifffails tostate how those promises were made, where they were made
State
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formed in tho
13 and by what means they were tendered. As such, the claims failto meet the particularity
SMITH
14 requirement, |
4 lmnited kability parinership
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15 Moreover, as set forth below, the alleged “misrepresentations” are expressly contradicted by
16 the terms of the parties’ Agreement, and thus these claims cannot withstand demurrer,
17 2. The Fraud Claims are Defective Because the Alleged Misrepresentations are at
18 Variance with the Agreement
19 The parol evidence rule generally prohibits the introduction of any extrinsic evidence,
20 whether oral or written, to vary, alter or add to the terms of an integrated written instrument.
21 Although the so-called “fraud exception” to the parol evidence rule [CCP Section 1856] may
22 sometimes be used to show fraud in obtaining the contract, it does not apply “to promissory fraud if
23 the evidence in question is offered to show a promise which contradicts an integrated written
24 agreement.” Alling v. Universal Manufacturing Corp., 5 Cal.App.4th 1412, 1434 (1992) (oral
25 promise alleged by plaintiff was inadmissible because itwas at variance with provision in integrated
26 contract). Accordingly, itiswell-settled thatan alleged promise that is atvariance with the parties’
a7 contract is not admissible under the parol evidence rule. Jd.at 1436-37; California Forms of
28 Pleading and Practice, 23, Fraud and Deceit, § 269.14(5]{c] (Matthew Bender); Wang v.Massey
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Briefin Supportof Defendants’Demurrer To BigFix Asia'sComplaint
O7/O1/2008 14:27 FAX 474 397 © REED SWITH LLF @ : i1is122
Chevrolet, 97 Cal.App. 4" 856, 873-76 (2002) (summary judgment of promissory fraud claim
appropriate where alleged misrepresentations were atvariance with provisions in the contract). This
HF
rule makes sense because otherwise, parties could allege promissory fraud in every garden variety
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breach of contract dispute.
S&F
In this case, the Agreement is integrated [Agreement p. 10 § 13(f)],! and its terms directly
DH
contradict at least three of the alleged misrepresentations set forth in Plaintiff'sSecond and Third
DR
Causes of Action for alleged promissory fraud and negligent misrepresentation.2 First,BFA alleges
NY
that BFI promised that it“would purchase the business [BFA] after itwas built.” [Complaint 17,
Se
{26]. To the contrary, under the Agreement, both partieshave complete and unfettered discretion
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with regards to whether or not to pursue an acquisition of BFA by BFI. [Iid.,
Exh, A, p.4 (parties
forned in the Stateof Delzwam
will “discuss terms” for“possible acquisition”, but Agreement terminates if the “parties failto
me
ee
execute a written mutually acceptable renewal agreement or purchase agreement for any reason (al
BR
LLP
either party's sole discretion)” (emphasis added)].
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SMITH
Second, whereas BFA alleges that BFI promised to “cover” Singapore withholding tax, the
A lmiled fiability parinership
>
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15 Agreement statesthe opposite: BFA, not BFI assumed responsibility for any Singapore tax
16 withholding issues. [Complaint, Exh. A p. 10913 (parties agree thatBFA is “an independent
17 contractor [and] . ..is solely responsible for allof .. .itslabor costs and expenses (including without
18 limitation, tax withholding obligations) arising in connection therewith)]. Moreover, in the
19 Agreement, BFA expressly warranted thatperformance of the Agreement would not trigger tax
20 withholding inany country within the territory. [/d@6(f) (“neither this Agreement (nor any term
21 hereof) nor the performance of or exercise of artyrights under thisAgreement . .. requires ... tax
22 withholding under . ..any law or regulation of any organization [or] country... within, ..the
23 Territory”) (emphasis added); see also id.{8 (“If a future tax isimposed that affects thisAgreement,
24.
25
| The integration
clausestates:“This Agreement isthe complete andexclusivestatement ofthe mutualunderstanding of
thepartiesand supersedesallpreviouswrittenand oralagreements and communications relatingtothesubjectmatter of
26 thisAgreement... ." [Agreement p.10P13().
27 2 A fourthallegedmisrepresentation— that
Billman statedthat“David Robinson, BFI's ChiefExecutive Officer,
[is]
(sic)Billman’spartnerinalldealingswith plaintiff—issimply immaterial.
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aes on oY O7T/O1/2008 15:24 FAX 415 391 eo “REED SMITH LLP © ; inna 7 1 || Scott D. Baker (SBN 84923) Adaline J. Hilgard (SBN 173213) 2 || REED SMITH Lip Two Embarcadero Center, Suite 2000 ALA LLED 3 || San Francisco, CA 94111-3922 . A COUNTY 4 {| Mailing Address: JUL & 2 2008 P.O. Box 7936 By Midd 5 || San Francisco, CA 94120- 7936 CLERK OF THE S OR COURT 6 || Telephone: +1 415 543 8700 L/ Deputy Facsimile: +1 415 391 8269 7 Attomeys for Defendants 8 || BigFix, Inc.,BigFix Holdings PTE, Ltd and George Billman 9 10 SUPERIOR COURT OF THE STATE OF CALIFORNIA i ll . FOR THE COUNTY OF ALAMEDA rs ° ; a 12 OAKLAND DIVISION 42 | a x : 13} BIGFIX ASIA PTE. LTD, No.: RG08390188 = a gq 34 Plaintiff, MEMORANDUM OF POINTS AND i & . AUTHORITIES IN SUPPORT OF ee 15 VS. DEFENDANTS’ DEMURRER TO ; PLAINTIFF'S FIRST, SECOND, THIRD, z 16 |) BIGFIX, INC., BIGFIX HOLDINGS PTE. LTD.,| SIXTH AND EIGHTH CAUSES OF E 17 GEORGE BILLMAN and Does 1-25, Inclusive, | ACTION Defendants. Date: July 30, 2008 18 Time: 2:30 p.m. Place: Room 510 19 Compl. Filed: May 30, 2008 Trial Date: N/A 20 Honorable Richard Keller 21 Attached Documents: Notice of Demurrer and Demurrer 22 23 Rest BUUCKY 24 25 26 27 28 OOCSEFO-125177M.2 Briefin Supportof Defendants’Demurrer To BigFix Asia’sComplaint "1 ee QTfO1/2008 14:24 FAX 415 391 Y | REEQ SMITH LLP Y @ 109/122 1 TABLE OF CONTENTS 2 Page 3 | L. INTRODUCTION |. cree evesvseesersaeceeuenenqusseseseeseenisessevsuenraeaneusesesasensentanseeceenseyeteetens dl 4 }| IT. FACTUAL BACKGROUND... eens cbeeeeveuenenensaceuaneeegee eeeneessess | soavevasentaneesureeanataqene Colic 5 A. The Parties Enter Into An Agreement...ccsscecenssenseceeeeeseeeseseesenessenietctvereneeeseeee ] 6 B. _ Plaintiff Asserts Defective Claims..i....sscssassssanaessesstisteninisniansniannesesetauee 2 7 | TL. LEGAL ANALYSIS ...scsscsesetunseinennuneninennintyitniniainuntaeteeestsineanee 4 8 A. A Demurrer Is Appropriate Where, as Here, Plaintiff Fails To Allege Facts Sufficient to Constitute a Cause Of Action .........ccscesecstersnerseerenteereneneenenaney 4 ° B. The Alleged Fraud Claims Are Insufficient As Matter of essere Law... 5 i ' 1. The Fraud Claims Fail To Meet the Particularity Requirement ..........ccceun5 % 2, The Fraud Claims are Defective Because the Alleged a 12 Misrepresentations are at Variance with the Agreement .........-esssesenienn 6 2 é 13 Cc. Plaintiff's Sixth Cause of Action for Tortious Interference with Contract 3 5 Fails to State a Claim .....cccscccsssssueccsssesscestsesessessyesresurssvssescccecsascsssseesassyesrveaneensessaeavensees 8 ; “ D Plaintiff's Franchise Investment Law Claim Cannot Withstand Scrutiny teens 9 bevseaecenterent ; ° l. BFI Was Exempt From Any Registration Requirements ..........cciseceseeseeeees 9 : ie 2. Plaintiff's Franchise Investment Law Claim Is Also Barred By the < 17 Statute of cceeesescsserseceeeeesentessevesscsseeeeseenscetacseacncecevasavenees Limitations... 10 18 |]LV. CONCLUSION... sscscsssssssssssectnsestiteintnente evstntntntsnireinesetntntennetcnstninnsnenenaen i 19 20 21 22 23 24 25 26 a7 28 ~i- OOCS9FO-125177M 2 Briefin Supportof Defendants’Demurrer To BigFixAsia's Complaint cnc O7/01F2008 15:26 FAX 475 391 So REEQ SWITH LLP 110/122 TABLE OF AUTHORITIES Page Ww Cases {3 Alling v. Universal Manufacturing Corp. & 5 Cal. App.4th 1412 (1992) oc eceeeeeeens cesuenaseacaessesesananevaeececeatstetecesescecesssaaseatacaestuagueavansneeensietees 6 James v. Superior Court 261 CalApp.2d 415 (1968) oo. ccccceeceeceesesesnecssereeseeseranetevavsesusceessecessuensoeseneaentesttesseestaneeseeanenaye 4 DH Kunstman v.Mirizzi 234 Cal. App.2d 753 (1968)... cccssccscteccsesssereesssssesecesseseceeceesssarevaparseneessatsessisaueesessasieeptceataceseseneesces 4 NSN Lawrence vy.Bank of America 163 Cal.App.3d 431 (1985) .....csssssssssssesssssssessessssssssssessguevsnusuesssceescpeneavensasavaessereeseusseessessseeeuessevees 5 Co Lazar vy.Sup. Ct. (Rykoff-Sexton, Inc.) oO 12 Cal. 4™ 631 (1996)o.oo cccecsseseesessscerescsssearscsuserevenesnseseaescsstevasaecaeeesessegnessenssnsceeeeeasitetsesearsceeeeaes 5 People v. Speedee Oil Change Systems, Inc.,et al. 95 Cal.App.4™ 709 (2002) .oesccsecccsssccecccssseessssnespsossesesssssecensstccersusessseceassrccsssueessaneeceayuessessanvesten 10, 11 of Celeware Powell v. The Coffee Beanery 932 F.Supp. 985 (B.D. Mich, 1996)... ce cccsssssecssseseesseeestaratseenesetsesseicenesssuseeanseeneteceeeneassees 10, 11 fonnedin the Etate SCEcorp v. Superior Court (Tuscon Electric Power) LLP 3 Cal. App.4th 673 (1992) on. cccseseccsusssessacseseeesecscrarsanseacuesestsenevsesesensarssssueseeessesseneessgeraseeseerenaes 9 SMITH Short v.Nevada Joint Union High School Dist. limBled jiabfity partnership 63 Cal. App.3d 1087 (1985) oc ccssssssscsssssesceesssssceesssesenssestsesersesesseeneseasscocessensetaueseatinevscseesecaeaeateses 9 REED Stansfield v. Starkey 220 Cal. App.3d 59, 73 (1990) wccccceeseeseseesstsresecnsneseceesetcaesesesceeassceatcesvarseaeeeesetetuavereeseantesetereeseeates 5 Tarmann vy.State Farm Mut. Auto Ins. Ca. 2 Cal. App.4™ 153 (1991) voceccccecccsssresssssssssesssssessesssseessaseegssesssssssescevecsssuivessaaeseusesqayaecnenseensesseteereerses 5 A Wang v.Massey Chevrolet 97 Cal App. 47 856 (2002) ....csescssssssssesessessessessssssesesvecessssecssravecssasesssspessuursessesessssustsssssesssasnecessavenss 7 Wilhelm y. Pray, Price, Williams & Russell 186 Cal App.3d 1324 (1986) 00...cceecesssesssssecsesseseessesensecesensssretessenvaceeassieaeceseecueeeteneestetessenreaneeae 5 Statutes Cal. Civ, Proc. Code § 430.10(e) oo... ccsstcsesescssesersstesseesseeeeceestiscesesacsensesescesersaceneneaseeeestsevsensneesteenecaes 4 Cal. Corp Code §3 1300.0... ccccsesstecsesssssecseasasenenseeseseeceacsevevsesesaessacsecsaveessessaseneenerecsearseeteeaenteseeses 10 Cal. Corp. Code § 31105... ccccsccscscsscssesesertracsessssesensseseaecaesenveseegratepeesaesesersees caeeveaeueeaeaetectarseees 9,10 Cal. Corp. Code § 31303... ecccsesestssreseesenesesssesrerersenseaseestenvenssaeneeses cavvesenenetaeatritaveceteeseneasetees 10 Corp. Code §31 114 .occcsceccssessessssesssssuscosssneessssssecsosssesanstsecestsnsessseceassusssueeecenusesssssccetivarssasecsestannesersenves 10 Corp. Code §3 1119 ooo ceeccssescecsereereeeseesersrserseesneessseteteeeseaaneetteceseesesseessesssasessevensaeaseatevgrnetenties 10 . Other Authorities California Forins af Pleading and Practice 23, Fraud and Deceit, Section 269.14[5][c] (Matthew Bender) .........ccccscsseseestetsstiecseeeseeeteeeeteens 6 —ii- DOCSSFO-12517735.2 Briefin Supportof Defendants’Demurter To BigFix Asia’sComplaint a O7/O1F2008 16:24 FAX 415 391 oe REED SMITH LLP © @i11f/122 I INTRODUCTION By this lawsuit, Plaintiff BigFix Asia, Pte. Ltd. (“BFA”) seeks to dodge responsibility for its Ww own material breaches of the parties* distribution Agreement and improperly extract money from Ga Defendants BigFix, Inc.,its subsidiary, BigFix Holdings, Pte.,Ltd. (collectively “BFI”) and George & Billman, an officer of BigFix, Inc. BFA, however, has repeatedly conceded itsown dismal contract NO performance and has further admitted to owing BFI over $500,000 in unpaid fees due under the parties’ distribution Agreement. Against this backdrop, BFA filed the instant lawsuit asserting nine causes of action, five of which failto survive scrutiny on this demurrer. Specifically, Plaintiff'stwo -S& promissory fraud claims and itsnegligent misrepresentation claim are defective as a matter of law o because they failto meet the particularitypleading requirement and are improperly based on alleged in the Stag of Delaware misrepresentations that are directly contradicted by the terms of the parties’ Agreement. Likewise, Plaintiff'sclaim for alleged interference with customer contracts must failbecause Plaintiff has not, SMITHiLP and cannot, plead any breach of a third party contract, an essential element of the claim. Plaintiff's formed alleged Franchise Investment Law claim fares no better: It isfatally infirm because an exemption pasinarship REED from the franchise registration requirements directly applies and the claim is,in any event, barred by 4 lunited liatiity the one year statute of limitations. Because Plaintiff'sclaims are detective as a matter of law, Defendants’ respectfully request that the Court sustain thisdemurrer. I. FACTUAL BACKGROUND A, The Parties Enter Into An Agreement Defendants BigFix, Inc. and BigFix Holdings Pte. Ltd. (“BFI”) are in the business of providing security software and technology. [Complaint 2, 4]. In August 2004, BFI and Plaintiff BFA, a foreign corporation which resides in Singapore, [id 41] entered into an Agreement, acopy of which is attached to the Complaint. [Complaint Exh. A]. The Agreement provides, among other things, that BFA would operate as the exclusive master distributor for BigFix products in four regions of Asia, including Greater China, South East Asia, Australasia and South Asia. [/d.Exh. A]. BFA’s exclusivity, however, was conditioned upon BFA’s continued compliance with the Agreement, including, specifically, sales targets established by the parties. [7d Exh. A, p.2, 3, Exh, -i- QOCSSFO-12517734.2 Briefin Supportof Defendants’Demurrer To BigFixAsia’s Complaint ene 415 391 , REEQ SHITH LLF Y My ii2/12 Bo &3 OT/OT/2008 16:25 FAX B (“In order to retain exclusivity in the Territory, Partner’s Product Bookings must atleast equal or exceed the following targets ....”)). FH For each sale, and as a material term of the Agreement, BFA also agreed topay to BFI a WwW percentage of gross revenues “within ninety (90) days following delivery of the relevant products or & services ... whether or not [BFA] has received payment.” [Jd. Exh. A, p. 8,[7,8 and Exh, AJ6(b), A 1]. As an advance payment on the fees that would become due under the Agreement, BFA also DO agreed to pay BF] a total of $500,000 in two installments due in September and December 2004, NHN respectively. [/a. Exh. A, p. 2]. No additional fees under the Agreement would be due until the mM advance payment had been fully applied to the fees owing to BFI. [/d.(bo additional fees due until oD “prepayment [of$500,000] has been exhausted”)]. The parties also agreed that inthe event of a — S formedin the State of Delaware: material breach, the Agreement could be terminated for cause by either party after 30 day cure — — period. [/d.p. 8,49]. . bo — LLP Further, contrary to BFA’s allegation that BFI promised topurchase BFA atsome point in tod ~— SMITH the future, the Agreement provides thatthe parttes would review BFA’s performance near the end of A fimited liability partnershis: — & REED the contemplated term of the Agreement (Dec. 31, 2008) and “discuss” whether topursue a wa = “possible” renewal or acquisition of BFA by BFI. The parties further agreed that they would both nN — have “sole discretion” to choose “for any reason” not to renew or not toproceed with an acquisition, ~I — (ld Exh. A p.4, Exh. B] oo — Finally, contrary to BFA’s allegation that BFI promised to pay Singapore withholding taxes, Oo — the Agreement statesunequivocally thatBFA, not BFI, is obligated to pay for any such taxes. [fd. bo So Exh. A, p. 8,96(f),98, p. 10§13(d)). . —_ to B. ‘PlaintiffAsserts Defective Claims i) ho In itsComplaint, Plaintiff assertsnine causes of action,at least five of which are fatally tw Ww defective. In itsFirst Cause of Action for alleged promissory fraud against BF, Plaintiffalleges ed ys generally that BFI “promised and represented to BIGFIX ASIA in the Agreement that BIGFIX nA Ko ASIA would have the exclusive right to sellBFI’s product .. . and related services in a territory an to consisting of four regions. . .” [Complaint J10]. Plaintiff then alleges that “[w]hen BFI entered into ~l bh the Agreement with BIGFIX ASIA on or about August 24, 2004, BFI had no intention ofkeeping its fe =] bo -32- DOGSSFO-12517704,2 Briefin Supportof Defendants’Demurrer To BigFix Asia'sComplaint OT/O1/2008 §:26 FAN 415 391 @ REED SMITH LLP r @1isit2e promises or performing the Agreement.” [Complaint 411]. Plaintifffurther alleges thatDefendant “made the Agreement and the promises contained therein to plaintiffin order to induce plaintiffto pay the sum of five hundred thousand dollars ($500,000) to BFI....*° [7d §12]. Setting aside the fact thatBFI fully performed under the Agreement, including by allowing BFA to operate a exclusively in the territoryeven after BFA had a right to do so under the Agreement because BFA WM failed to meet any of itssales targets and thus lost exclusivity rights [id Exh. A, Agreement Exh. B], HA the First Cause of Action failsas a matter of law because it failsto provide any further specificity NN regarding any alleged “misrepresentations.” ceo In itsSecond and Third Causes of Action foralleged promissory fraud and negligent Oo misrepresentation, respectively, BFA asserts the following alleged misrepresentations, most of of Defeware which, as set forthbelow, are directly contradicted by the terms of theAgreement: In or about 2004 George Billman represented to BIGFIX ASLA’s founder, Chong Foo liebilidy partnership temied in tha Stabs LLP Chaw, (i)that BFI would assist plaintiffin building a business in Asia to market and SMITH sell BFI’s product and services; (ii)that BFI would purchase the business after itwas REEO built;(iii)that he (Billman) was a key executive in BFI and would protect BIGFIX ASIA’s business ifitmade an up-front cash payment to BFI; (iv)that David Robbins, A limited BFI’s Chief Executive Officer, was [sic] Billman’s partner inall dealings with plaintiff;and (v) thatplaintiff should not worry about any tax withholding issues involving the Singapore government because BFI would cover everything. [/d.917, 126) Plaintiff alleges that these representations were made by Billman “in his capacity as an officer of BFI .. . and,individually, toobtain personal benefits for himself.” [/d. (18, $27]. According to the Complaint, each of these representations was false when made atthe time of contracting. [/d.19, 428]. In the Sixth Cause of Action for alleged Tortious Interference with Contracts, the Complaint states,among other things, thatBFA, in developing its business tosell BFI’s software inAsia, “entered into contractual relationships, including but not limited to employee and customer contracts.” (/d.[45]. The Complaint further statesthat: “Defendants interfered with plaintiff's -3- GOCSSFO-12617734.2 Briefin Supportof Defendants’Demurrer To BigFix Asia’sComplaint 07/01/2008 15:26 FAX 415 391 6 REEQ SHITH LLP Y ) fq iid/122 customer contracts by contacting plaintiff's customers and inducing plaintiff's customers to stop — conducting business with plaintiff infavor of doing business with BFI and/or BFH.” [/d.49]. WH Absent from the Complaint, however, isany allegation that any of BFA‘s customers actually WD breached any of their contracts with BFA as a resultof any BFI conduct. (This isno surprise given S&S. that customers in the industry are generally free to do business with any vendor atany time, and WH BFA lost itsright tosell BigFix products upon termination of the Agreement for cause), As set forth DR below, thiscause of action, as itrelates to BFA’s customers, is missing an essential element of the NY claim and thus this demurrer should be sustained. CO Finally, in the Eighth Cause of Action against BFI for alleged “Violation of the Franchise Oo Investment Law,” Plaintiff asserts thatthe Agreement “constituted the sale of a franchise” and thus font — in the Stateof Delaware required BF] toeither register the franchise or “obtain an exemption” from the registration ime — requirement. [Complaint [60]. Plaintiffalleges thatBFI failed to do so, and thatthat itsfailure was tw — LLP “willful,” entitling BFA torescission and damages. As setforth below, however, this cause of action td — SMITH formed failsbecause BFI was exempt from the registration requirements and the claim is barred by the oy — paztnership REED statute of limitations in any event. —y Ln & frmitad tabllity Each of Plaintiff's First,Second, Third, Sixth and Eighth claims suffers fatal infirmities and an — thus, Defendants respectfully request that thisdemurrer be sustained. ~~ — =] — III. LEGAL ANALYSIS Oo — A, A Demurrer Is Appropriate Where, as Here, Plaintiff Fails To Allege Facts Sufficient to 20 Constitute a Cause of Action The function of a demurrer is topresent issues of law regarding the sufficiency of the allegations set out in the pleading under attack. James v.Superior Court, 261 Cal.-App.2d 415, 416 (1968). A demurrer isproperly sustained where a pleading does not statefacts sufficient to constitute a cause of action, Cal. Civ. Proc. Code § 430.10(e). Ifa pleading under attack discloses facts giving rise to a complete defense to the action, there isa failure to state factssufficient to constitute a cause of action, and the demurrer should be sustained unless the pleading contains specific facts avoiding the defense. See generally Kunstman v. Mirizzi, 234 Cal.App.2d 753 (1968). ~~4 ~ 2 OOCESFO-125177H4 Briefin Supportof Defendants’Demurrer To BigFixAsia’s Complaint a OT/O1/2008 14:26 FAX 416 991 } REED SMITH LLP Y @ 118/122 Finally, a demurrer should be sustained without leave to amend where the facts are not in dispute and the nature of the claim is clear but no liabilityexists under substantive law. Lawrence v. te Bank of America, 163 Cal. App.3d 431, 436 (1985); Schonfeldt v. State of California, 61 Cal-App.4th lw 1462, 1465 (1998). . Se B. The Alleged Fraud Claims Are Insufficient As Matter of Law A DH Plaintiff's alleged fraud and misrepresentation claims are defective because (1)they failto “SO meet the requirement that fraud be plead with particularity; and (2) the alleged misrepresentations OS are directly atvariance with the terms of the Agreement. oOo 1. The Fraud Claims Fail To Meet the Particularity Requirement In this case, Plaintiffattempts to assert two promissory fraud claims and a negligent in the State of Deleware misrepresentation claim, all of which are defective forfailure to meet the particularity requirement. When pleading a fraud claim, a plaintiffmust allege every element in full. Withelm v. Pray, Price, LLP Williams & Russell, 186 Cal.App.3d 1324, 1332 (1986). “Every element of the cause of action for SMITH linvted liaba@ity pevtuarsip tormed fraud must be alleged in the proper manner and the facts constituting the fraud must be alleged with REED sufficient specificity to allow defendant to understand fully the nature of the charge made.” Stansfield v, Starkey, 220 Cai.App.3d 59, 73 (1990) (citationomitted). The particularity requirement requires the plaintiff to plead “facts which ‘show how, when, where, to whom, and by what means & the representations were tendered.’ [Citation.]” Jad. Where, as here, fraud isasserted against a corporation, the burden is even greater, and the “the plaintiffmust ‘allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, towhom they spoke, what they said or wrote, and when itwas said or written.’ [Citation.]” Lazar v.Sup. Ct (Rykoff- Sexton, Inc.),12 Cal.4" 631, 645 (1996); Tarmann v.State Farm Mut, Auto Ins.Co., 2 Cal.App.4" 153, 157 (1991). The policy behind theparticularity requirement is thatthe Defendant is entitled to notice of the claims made, “and fairness to the defendant demands that he should receive the fullest possible detailsof the charge in order to prepare his defense.” Stansfield, 220 Cal.App.3d at 73. In thiscase, Plaintiffs’ First Cause of Action purports toassert fraud against BFI. Plaintiff, however, failsto plead any facts thatshow how, where, to whom and by what means the alleged representations were made. Because BFI isa corporation, Plaintiffwas also required to allege, -5—- DOCSSFO-12817734.2 Briefin Supportof Defendants’Demurrer To BiegFix Asia’s Complaint OT/O1/2008 14:27 FAX 415 394 @ REED SMITH LLP © (4 116/122 among other things, the names of persons who made the representations, their authority to speak and to whom they spoke. But the FirstCause of Action is devoid of any of these requirements. For ON instance, Plaintiff merely asserts that BFI promised to allow BFA to exclusively sella product within OH a specific territorywithout an intention to keep the promise. Plaintiff failsto identify any other Be alleged promise or any individual as the person making the promises. Plaintiffalso failsto address wn the authority of the person or persons to make the representation or to identify the person to whom ON BF! allegedly made the representations. The firstcause of action is hopelessly generalized, failsto Ss meet the particularity requirement and cannot withstand demurrer. Oo Likewise, the Second and Third Causes of Action foralleged promissory fraud and negligent Oo 10 Misrepresentation, respectively, also failto meet the particularity requirement. BFA merely alleges af Detrware li that George Billman, as an officer of BFI, made certain specific representations to BFA’s principal, 12 Chong Foo Chaw. But Plaintifffails tostate how those promises were made, where they were made State LLP formed in tho 13 and by what means they were tendered. As such, the claims failto meet the particularity SMITH 14 requirement, | 4 lmnited kability parinership REED 15 Moreover, as set forth below, the alleged “misrepresentations” are expressly contradicted by 16 the terms of the parties’ Agreement, and thus these claims cannot withstand demurrer, 17 2. The Fraud Claims are Defective Because the Alleged Misrepresentations are at 18 Variance with the Agreement 19 The parol evidence rule generally prohibits the introduction of any extrinsic evidence, 20 whether oral or written, to vary, alter or add to the terms of an integrated written instrument. 21 Although the so-called “fraud exception” to the parol evidence rule [CCP Section 1856] may 22 sometimes be used to show fraud in obtaining the contract, it does not apply “to promissory fraud if 23 the evidence in question is offered to show a promise which contradicts an integrated written 24 agreement.” Alling v. Universal Manufacturing Corp., 5 Cal.App.4th 1412, 1434 (1992) (oral 25 promise alleged by plaintiff was inadmissible because itwas at variance with provision in integrated 26 contract). Accordingly, itiswell-settled thatan alleged promise that is atvariance with the parties’ a7 contract is not admissible under the parol evidence rule. Jd.at 1436-37; California Forms of 28 Pleading and Practice, 23, Fraud and Deceit, § 269.14(5]{c] (Matthew Bender); Wang v.Massey -6- OOCSSFO-125177342 Briefin Supportof Defendants’Demurrer To BigFix Asia'sComplaint O7/O1/2008 14:27 FAX 474 397 © REED SWITH LLF @ : i1is122 Chevrolet, 97 Cal.App. 4" 856, 873-76 (2002) (summary judgment of promissory fraud claim appropriate where alleged misrepresentations were atvariance with provisions in the contract). This HF rule makes sense because otherwise, parties could allege promissory fraud in every garden variety WY breach of contract dispute. S&F In this case, the Agreement is integrated [Agreement p. 10 § 13(f)],! and its terms directly DH contradict at least three of the alleged misrepresentations set forth in Plaintiff'sSecond and Third DR Causes of Action for alleged promissory fraud and negligent misrepresentation.2 First,BFA alleges NY that BFI promised that it“would purchase the business [BFA] after itwas built.” [Complaint 17, Se {26]. To the contrary, under the Agreement, both partieshave complete and unfettered discretion oO with regards to whether or not to pursue an acquisition of BFA by BFI. [Iid., Exh, A, p.4 (parties forned in the Stateof Delzwam will “discuss terms” for“possible acquisition”, but Agreement terminates if the “parties failto me ee execute a written mutually acceptable renewal agreement or purchase agreement for any reason (al BR LLP either party's sole discretion)” (emphasis added)]. Ww SMITH Second, whereas BFA alleges that BFI promised to “cover” Singapore withholding tax, the A lmiled fiability parinership > REED 15 Agreement statesthe opposite: BFA, not BFI assumed responsibility for any Singapore tax 16 withholding issues. [Complaint, Exh. A p. 10913 (parties agree thatBFA is “an independent 17 contractor [and] . ..is solely responsible for allof .. .itslabor costs and expenses (including without 18 limitation, tax withholding obligations) arising in connection therewith)]. Moreover, in the 19 Agreement, BFA expressly warranted thatperformance of the Agreement would not trigger tax 20 withholding inany country within the territory. [/d@6(f) (“neither this Agreement (nor any term 21 hereof) nor the performance of or exercise of artyrights under thisAgreement . .. requires ... tax 22 withholding under . ..any law or regulation of any organization [or] country... within, ..the 23 Territory”) (emphasis added); see also id.{8 (“If a future tax isimposed that affects thisAgreement, 24. 25 | The integration clausestates:“This Agreement isthe complete andexclusivestatement ofthe mutualunderstanding of thepartiesand supersedesallpreviouswrittenand oralagreements and communications relatingtothesubjectmatter of 26 thisAgreement... ." [Agreement p.10P13(). 27 2 A fourthallegedmisrepresentation— that Billman statedthat“David Robinson, BFI's ChiefExecutive Officer, [is] (sic)Billman’spartnerinalldealingswith plaintiff—issimply immaterial. 28