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Hydroblend, Inc. v. Nothum Manufacturing Co.

United States District Court, D. Idaho

December 3, 2014

HYDROBLEND, INC., Plaintiff,


EDWARD J. LODGE, District Judge.

Before the Court in the above entitled matter is the Defendant's Motion to Dismiss the First Amended Complaint. The parties have filed their responsive briefing and the matter is ripe for the Court's review. Having fully reviewed the record herein, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, the Motion shall be decided on the record before this Court without oral argument.


In September of 2009, Plaintiff Hydroblend, Inc., an Idaho corporation, and Defendant Nothum Manufacturing Company, a Missouri corporation, executed a Letter of Understanding which represented the terms and conditions of the parties' legal understanding and agreement moving forward in a joint venture for the purpose of developing and manufacturing a bread crumb applicator machine, for the industrial food processing marketplace, capable of achieving superior handling and application characteristics for Hydroblend's fresh Nama Panko coating. (Dkt. 24 at ¶ 7 and Ex. A.) The parties also executed a Term Sheet which summarized the principal terms with respect to the anticipated formation of the joint venture discussed in the Letter of Understanding. (Dkt. 24, Ex. B.)[1] Under the terms of the Agreements each party was obligated to make cash contributions as well as adhere to other duties as outlined in the Agreements.

On October 15, 2013, Hydroblend commenced this action by filing a Verified Complaint alleging claims against Nothum arising from the Agreements for: 1) Breach of Contract and Breach of the Covenant of Good Faith and Fair Dealing, 2) Breach of Fiduciary and Statutory Duties, 3) Fraud, and 4) Dissolution and Winding Up of the Joint Venture. (Dkt. 1.) The claims relate to Hydroblend's allegations that Nothum failed to perform as required by the Agreements. Generally, Hydroblend alleges Nothum did not meet certain milestones, failed to manufacture any functional prototype machines, and did not complete regular performance reports. In addition, the claims arise from allegations that Nothum had accepted a purchase order for one machine at a price of $140, 000 from King & Prince and had received a $70, 000 down payment. (Dkt. 1 at ¶¶ 21-28.) Nothum allegedly never informed Hydroblend about that purchase order or down payment and no machine was ever delivered to King & Prince.

Nothum filed a Motion to Dismiss arguing the claims fail to state a cause of action as a matter of law or, alternatively, that Hydroblend should be ordered to file a more definite statement. (Dkt. 5.) In addition, Nothum has filed counterclaims against Hydroblend alleging: 1) Breach of Contract, 2) Negligent Misrepresentation, 3) Fraudulent Misrepresentation/Inducement, and 4) Breach of Fiduciary Duty. (Dkt. 20.) This Court entered an Order granting in part and denying in part Nothum's Motion, dismissing the Second and Fourth causes of action alleging statutory breach of fiduciary duty and dissolution of the joint venture. (Dkt. 23.) The Court also granted Hydroblend leave to file an amended complaint which it did on July 28, 2014. (Dkt. 23, 24.) Nothum has now filed the instant Motion to Dismiss the First Amended Complaint which the Court takes up in this Order. (Dkt. 26.)


A motion to dismiss made pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a party's claim for relief. When considering such a motion, the Court's inquiry is whether the allegations in a pleading are sufficient under applicable pleading standards. Federal Rule of Civil Procedure 8(a) sets forth minimum pleading rules, requiring only a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2).

A motion to dismiss will only be granted if the complaint fails to allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citations omitted). Although "we must take all of the factual allegations in the complaint as true, we are not bound to accept as true a legal conclusion couched as a factual allegation." Twombly, 550 U.S. at 555. Therefore, "conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim." Caviness v. Horizon Comm. Learning Cent., Inc., 590 F.3d 806, 811-12 (9th Cir. 2010) (citation omitted).


As in the prior Motion to Dismiss, Nothum generally argues that Hydroblend's claims should be dismissed because the allegations arise from the fact that the parties' joint venture was not successful. (Dkt. 26 at 2.) Hydroblend counters that this argument "ignores that the primary purpose of the joint venture was for Nothum to develop and manufacture the machines meeting the joint venture's specifications" and, thus, "the agreement was for the sale of goods manufactured by Nothum." (Dkt. 28 at 2.)

A. Breach of Contract and Covenant of Good Faith and Fair Dealing

"The elements for a claim for breach of contract are: (a) the existence of the contract, (b) the breach of the contract, (c) the breach caused damages, and (d) the amount of those damages." Edged In Stone, Inc. v. Northwest Power Systems, LLC, 321 P.3d 726, 730 (Idaho 2014) (quoting Mosell Equities, LLC v. Berryhill & Co., Inc., 154 Idaho 269, 278, 297 P.3d 232, 241 (2013)). "An implied contract occurs where there is no express agreement but the conduct of the parties implied an agreement from which an obligation in contract exists.'" Wandering Trails, LLC v. Bib Bite Excavation, Inc., No. 40124, 2014 WL 2765956, at *5 (Idaho June 18, 2014) (quoting Forest Prod. Inc. v. Chandler Supply Co., 518 P.2d 1201, 1205 (Idaho 1974). "For a contract to exist, a distinct understanding that is common to both parties is necessary. An enforceable contract must be complete, definite, and certain in all of the contract's material terms." Id. (citations omitted). "The implied covenant of good faith and fair dealing requires the parties [to a contract] to perform, in good faith, the obligations required by their agreement.'" Silicon Intern. Ore, LLC v. Monsanto Co., 314 P.3d 593, 602 (Idaho 2013) (quoting Fox v. Mountain W. Elec., Inc., 52 P.3d 848, 855-56 (Idaho 2002)).

The First Amended Complaint ("FAC') alleges the parties entered into a contract to engage in a joint venture for the purpose of developing, manufacturing, and selling bread crumb applicator machines. (Dkt. 24 at ¶ 35.) It goes on to allege that Hydroblend performed all of its obligations under the Agreements and to specify certain acts and omissions by Nothum that materially breached the terms and conditions of the Agreements as well as the implied covenant of good faith and fair dealing resulting in damages to Hydroblend. (Dkt. 24 at ¶¶ ...

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