United States District Court, D. Arizona
Honorable John J. Tuchi, United States District Judge.
issue is Defendant Steinway, Inc.'s Motion to Dismiss
Plaintiffs' Second Amended Complaint (Doc. 26, MTD 1), to
which Plaintiffs Kevin and Jami Rindlisbacher filed a
Response (Doc. 34, Resp. 1) and Defendant filed a Reply (Doc.
36, Reply 1). Also at issue is Defendant's Motion to
Dismiss Plaintiff's breach of contract claim (Doc. 52,
MTD 2), to which Plaintiffs filed a Response (Doc. 58, Resp.
2) and Defendant filed a Reply (Doc. 60, Reply 2). The Court
has reviewed the parties' briefs and finds this matter
appropriate for decision without oral argument. See
LRCiv 7.2(f). For the reasons set forth below, the Court
denies in part and grants in part Defendant's Motions to
Third Amended Complaint (Doc. 23, TAC), the operative
Complaint, Plaintiffs allege the following facts.
Plaintiffs have been in the retail piano business for 35
years. (TAC ¶ 32.) In 2002, Plaintiffs approached
Defendant's Western District Sales Manager, Mr. Snyder,
to inquire about becoming a Steinway & Sons
(“Steinway”) dealer in Tucson, Arizona. (TAC
¶ 34.) Instead, in October 2006, Plaintiffs became
Defendant's Spokane, Washington dealer with the alleged
advisement, counseling, and assistance of Mr. Snyder. (TAC
¶¶ 38-40.) From 2007 until July 2017, Plaintiffs
operated the Spokane dealership and exceeded the cumulative
annual sales performance goals that the parties agreed to by
about 25% for all pianos and 89% for upright pianos. (TAC
Defendant's September 2010 dealer conference in Chicago,
Plaintiffs learned that Defendant needed a dealer in the
Phoenix market. (TAC ¶ 20.) Plaintiffs met with Mr.
Snyder in Scottsdale to see the area and discuss becoming
Defendant's Phoenix market dealer. (TAC ¶ 43.)
During that meeting, Mr. Snyder allegedly communicated
“that the Phoenix Market was capable of selling 75
Steinway & Sons grand pianos per year” but that
“45 Steinway & Sons pianos per year was a
reasonable number for sales in the Phoenix Market.”
(TAC ¶¶ 56-57.)
at Mr. Snyder's suggestion, Plaintiff visited
Defendant's store in Hollywood, California because Mr.
Snyder told them that the Phoenix store followed the
Hollywood store's “recipe.” (TAC ¶ 56.)
After visiting the Hollywood store, Plaintiffs expressed
concerns to Mr. Snyder about the demographic differences
between Hollywood, Phoenix and Spokane; particularly,
Plaintiffs noted the disparate average household incomes of
each location. (TAC ¶¶ 60, 62.) Nonetheless, on
November 23, 2010 Mr. Synder emailed Plaintiffs the Phoenix
Dealer Agreement, which included the annual sales performance
goals Defendant found reasonable for Maricopa County. (TAC
¶¶ 64-66.) Mr. Snyder explained that Defendant
would not change its Dealer Agreement. (TAC ¶ 68.)
Plaintiffs signed and returned the documents to Mr. Snyder.
March 1, 2014, Plaintiffs leased a Scottsdale storefront at
Defendant's instruction, despite Plaintiffs' concerns
about “the small size, high cost per square foot, and
seven-year term of the Scottsdale Fashion Square.” (TAC
¶ 70.) Plaintiffs allege that they renovated as
Defendant requested, participated in Defendant's training
and educational programs, implemented the techniques that had
been successful in the Spokane market, and regularly
communicated with Mr. Snyder. (TAC ¶¶ 56-57.)
However, from December 2010 through July 2017,
Plaintiffs' unit sales of Steinway grand pianos were
about 30% of the cumulative reasonable annual sales
performance goals established by the Dealer Agreement. (TAC
the time that Plaintiffs operated the Phoenix dealership,
they attended a national Steinway Dealer Meeting, where they
spoke with the previous Phoenix dealer, Mr. Eric Schwartz.
(TAC ¶ 109.) Mr. Schwartz told Plaintiffs that between
2005 and 2010, the Phoenix dealership sold about ten to
fifteen grand pianos per year-nowhere near the estimate that
Defendant had provided to Mr. Schwartz at the outset of their
relationship. (TAC ¶ 112.)
continued poor sales, Defendant terminated Plaintiffs'
Phoenix Market Dealership on March 21, 2017, effective July
1, 2017. (TAC ¶ 91.) Plaintiffs now allege nondisclosure
or constructive fraud (Count One), fraudulent representations
and omissions (Count Two), and breach of contract (Count
Three). Defendant filed two Motions to Dismiss-one in
response to Counts One and Two (Doc. 26, MTD 1) and a later
one in response to Count Three (Doc. 52, MTD 2). The Court
will evaluate both Motions in this Order.
analyzing a complaint for failure to state a claim for relief
under Federal Rule of Civil Procedure 12(b)(6), the well-pled
factual allegations are taken as true and construed in the
light most favorable to the nonmoving party. Cousins v.
Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). Legal
conclusions couched as factual allegations are not entitled
to the assumption of truth, Ashcroft v. Iqbal, 556
U.S. 662, 680 (2009), and therefore are insufficient to
defeat a motion to dismiss for failure to state a claim.
In re Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th
dismissal under Rule 12(b)(6) for failure to state a claim
can be based on either (1) the lack of a cognizable legal
theory or (2) insufficient facts to support a cognizable
legal claim. Balistreri v. Pacifica Police
Dep't, 901 F.2d 696, 699 (9th Cir. 1990).
“While a complaint attacked by a Rule 12(b)(6) motion
does not need detailed factual allegations, a plaintiff's
obligation to provide the ‘grounds' of his
‘entitle[ment] to relief' requires more than labels
and conclusions, and a formulaic recitation of the elements
of a cause of action will not do.” Twombly,
550 U.S. at 555 (citations omitted). The complaint must thus
contain “sufficient factual matter, accepted as true,
to ‘state a claim to relief that is plausible on its
face.'” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Twombly, 550 U.S. at 570).
“[A] well-pleaded complaint may proceed even if it
strikes a savvy judge that actual proof of those facts is
improbable, and that ‘recovery is very remote and
unlikely.'” Twombly, 550 U.S. at 556
(quoting Scheuer v. Rhodes, 416 U.S. 232, 236
Court will first address Counts One and Two-Plaintiffs'
fraud claims-and Defendant's first Motion to Dismiss.
Defendant argues the following: 1) Plaintiffs' fraud
claims are time-barred; 2) the Economic Loss Doctrine applies
to limit available relief to that agreed upon in the Dealer
Agreement; and 3) Plaintiffs fail to state a claim for fraud
because the parties did not have a confidential relationship
and there was no false representation of material fact.
Fraud Claims (Counts One and Two) 1. Statute of
first argues that Plaintiffs' fraud claims are
time-barred under Arizona law. (MTD 1 at 8-11.) The Arizona
statute of limitations period for fraud is three years from
accrual. A.R.S. § 12-543. In Arizona, a cause of action
for fraud accrues “when the defrauded party discovers
or with reasonable diligence could have discovered the
fraud.” Mister Donut of America, Inc. v.
Harris, 723 P.2d 670, 672 (Ariz. 1986). “As such,
it may begin to run before a person has actual knowledge of
the fraud or even all the underlying details of the alleged
fraud.” Id. (quoting Coronado Development
Corp. v. Superior Court, 678 P.2d 535, 537 (Ariz.Ct.App.
1984)). Ordinarily, “[w]hen discovery occurs and a
cause of action accrues are . . . questions of fact for the
jury.” Doe v. Roe, 955 P.2d 951, 961 (Ariz.
1998). But courts may dismiss a complaint “[i]f the
running of the statute is apparent on the face of the
complaint.” Cervantes v. Countrywide Home Loans,
Inc., 656 F.3d 1034, 1045 (9th Cir. 2011) (quoting
Jablon v. Dean Witter & Co., 614 F.2d 677, 682
(9th Cir. 1980)).
the running of the statute of limitations period is not
apparent from the face of the Complaint. Defendant argues
that Plaintiffs' claim accrued in 2010, when they
“could have learned about actual historical market
sales and business prospects . . . had they exercised any
sort of reasonable due diligence, including obtaining sales
numbers from the prior Steinway dealer in Phoenix.”
(MTD 1 at 9.) Failing that, Defendant argues that, at
some point between 2011 and 2014, Plaintiffs “had
knowledge of facts that would make ...