BRANZELL v. CALIFORNIA CRYOBANK LLC (2020)

Order GRANTING IN PART and DENYING IN PART Defendants’ (Dkts. 46, 47).

Before the Court are Motions to Dismiss filed by Defendants California Cryobank LLC and CCB-NWC LLC (Dkt. 46) and NW Reproductive LLC ¹ (Dkt. 47) (together, the “Motions”) on July 1, 2020. Plaintiff Bryce Branzell filed opposition on July 22, 2020 (Dkts. 51, 53), and Defendants replied on August 3, 2020 (Dkts. 54, 55). After considering all papers filed in connection with the Motions, the Court finds the matter suitable for resolution without hearing pursuant to Local Rule 7-15. The Court GRANTS IN PART and DENIES IN PART the Motions.

I. BACKGROUND

Plaintiff alleges that, in 2008, he submitted a sperm sample to NW Andrology and Cryobank Inc. (“NW Andrology”)² , doing business as NW Cryobank, as the first step in potentially becoming a donor. (Dkt. 38 ¶ 14). Before leaving NW Andrology's facility, however, Plaintiff had a change of heart and informed a staff member that he did not wish to become a donor and did not want his sperm sample to be medically screened. (Id.). NW Andrology informed Plaintiff it would destroy his sample. (Id. ¶ 15). According to Plaintiff, however, NW Andrology failed to follow through and retained his sperm as part of its biological inventory. (Id. ¶ 16).

Over the following decade, the corporate entities involved here went through a series of reorganizations. First, in or around November 2008, Defendant NW Reproductive purchased the assets of NW Andrology, allegedly including the latter's tangible property, biological inventory, customer donor agreements, accounts receivable, licenses, and goodwill. (Id. ¶ 20). Plaintiff alleges NW Andrology transferred to NW Reproductive “all agreements and commitments connected to [NW Cryobank], including its agreements with Branzell” (id. ¶ 21) and that NW Reproductive “agreed to assume certain liabilities, including those associated with biological inventory” (id. ¶ 22). Plaintiff also contends the NW Reproductive seamlessly assumed NW Andrology's operations and continued using the same office, personnel, and business name. (Id. ¶ 20). Next, in or around August 2016, NW Reproductive allegedly sold the NW Cryobank business to CCB-NWC LLC ³ (“CCB”). (Id. ¶ 30). Plaintiff alleges CCB assumed the liabilities of the NW Cryobank business, including those associated with his sperm sample. (Id. ¶¶ 30, 33).

Around the same time the 2008 asset sale occurred ⁴ , a customer of NW Cryobank named C.C. purchased several vials of sperm and successfully conceived, giving birth to a child, T.C., in July 2009. (Id. ¶¶ 26–29). In August 2018, C.C. submitted a DNA sample from T.C. to a third-party online genetic testing company and discovered T.C. was not, in fact, the biological child of the donor C.C. believed she had chosen. (Id. ¶¶ 34–37). CCB confirmed the mix-up on November 28, 2018 but did not inform C.C. of the actual father's identity. (Id.). Through the online genetic testing company, C.C. reached out to Plaintiff's relatives and, in January 2019, ultimately connected with Plaintiff himself, at which point it became clear T.C. was Plaintiff's biological child. (Id. ¶¶ 40–44).

In March 2019, Plaintiff's counsel contacted CCB to demand that Defendants identify Plaintiff's sperm sample and seek to discover whether any other NW Cryobank customers may have received the sample in error. (Id. ¶ 49). Plaintiff alleges Defendants refused to take any action. (Id.). Plaintiff brought this lawsuit on December 19, 2019 (Dkt. 1) and filed the operative Second Amended Complaint (Dkt. 38, the “SAC”) on June 3, 2020. The SAC alleges ten claims: (1) negligence; (2) invasion of privacy; (3) trespass to personal property; (4) conversion; (5) breach of fiduciary duty; (6) intentional infliction of emotional distress (“IIED”); (7) negligent infliction of emotional distress (“NIED”); (8) violation of California Business and Professions Code (“CBPC”) § 17200 et seq.; violation of CBPC § 17500 et seq.; and (10) fraud. (See generally Dkt. 38). Defendants seek to dismiss the SAC in its entirety for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6). (See generally Dkts. 46, 47).

I. LEGAL STANDARD

Federal Rule of Civil Procedure 8(a) requires that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” A defendant may move to dismiss a complaint for failing to state a claim upon which relief can be granted under Rule 12(b)(6). “Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). To survive a 12(b)(6) motion, a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is facially plausible when a plaintiff pleads “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

In reviewing the plausibility of a complaint, courts “accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nonetheless, courts do not “accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (quoting Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001)).

Additionally, claims sounding in fraud are subject to the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure, which require that a plaintiff alleging fraud “state with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b); see Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009). To satisfy the heightened standard under Rule 9(b), the allegations must be “specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). Thus, claims sounding in fraud must allege “an account of the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (per curiam) (internal quotation marks omitted); see also Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (“Averments of fraud must be accompanied by the who, what, when, where, and how of the misconduct charged.”) (internal quotation marks omitted).

Where a motion to dismiss is granted, “leave to amend should be granted ‘unless the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.’ ” DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). In other words, where leave to amend would be futile, the Court may deny leave to amend. See Desoto, 957 F.2d at 658; Schreiber, 806 F.2d at 1401.

II. DISCUSSION

Defendants first assert two grounds for dismissal that apply to the SAC broadly—successor liability and ripeness. (See generally Dkts. 46, 47). The Court considers these arguments before turning to arguments specific to each of the SAC's claims.

A. Successor Liability

Defendants argue they are not liable for the alleged misconduct of NW Andrology—conduct that occurred before Defendants acquired NW Cryobank—as Plaintiff fails to plead a viable exception to the general rule of successor nonliability. (See Dkt. 46-1 at 13–16; Dkt. 47 at 15–18). Plaintiff responds that he not only alleges successor liability adequately but also that certain claims relate to events that took place after Defendants’ respective asset purchases. (See generally Dkts. 51, 53).

In California, “[t]he general rule of successor nonliability provides that where a corporation purchases, or otherwise acquires by transfer, the assets of another corporation, the acquiring corporation does not assume the selling corporation's debts and liabilities.” Fisher v. Allis–Chalmers Corp. Prod. Liab. Tr., 95 Cal. App. 4th 1182, 1188, 116 Cal.Rptr.2d 310 (2002) (citing Ray v. Alad Corp., 19 Cal.3d 22, 28, 136 Cal.Rptr. 574, 560 P.2d 3 (1977)). There are four exceptions to the rule: where “(1) there is an express or implied agreement of assumption, (2) the transaction amounts to a consolidation or merger of the two corporations, (3) the purchasing corporation is a mere continuation of the seller, or (4) the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller's debts.” Ray, 19 Cal.3d at 28, 136 Cal.Rptr. 574, 560 P.2d 3. “[T]he liberal requirements of Rule 8(a)(2) apply to ․ successor-in-interest allegations ․.” Pacific Rollforming, LLC v. Trakloc Int'l, LLC, 2008 WL 4183916, at *3 (S.D. Cal. Sept. 8, 2008). “Rule 8(a)(2) requires a short and [plain] statement of the claim for relief necessary to provide [d]efendants with fair notice so as to enable them to respond.” Id.

As to both the 2008 and 2016 asset sales, the SAC alleges the acquiring entity—first NW Reproductive and then CCB—expressly assumed the liabilities of the seller, including those associated with biological inventory and, specifically, Plaintiff's sperm sample. (Dkt. 38 ¶¶ 21–22, 30, 33). Defendants argue these allegations are too conclusory and that the SAC must specify the terms of the asset sales in order to plead express assumption. (See Dkt. 46-1 at 13–14) (citing Gerritsen v. Warner Bros. Entm't Inc., 116 F. Supp. 3d 1104, 1128 (C.D. Cal. 2015)).

Plaintiff's allegations of successor liability satisfy Rule 8(a)(2)’s requirements. While it is true that some courts have required plaintiffs to “plead the specific terms of the purported assumption,” Gerritsen, 116 F. Supp. 3d at 1128, “other courts have held that a plaintiff sufficiently pleads a claim for successor liability when ‘the allegations are sufficient to put [the successor] on notice’ of the claim against them,” Grey Fox, LLC v. Plains All Am. Pipeline, L.P., 2019 WL 4196066, at *10 (C.D. Cal. Apr. 8, 2019) (citing City of Los Angeles v. Wells Fargo & Co., 22 F. Supp. 3d 1047, 1062 (C.D. Cal. 2014)). The Court believes the latter approach better reflects Rule 8(a)(2) and is more appropriate here. Plaintiff has offered enough factual allegations, including the existence of an agreement and the relevant terms, to put Defendants on notice. See Grey Fox, 2019 WL 4196066, at *10 (“Plaintiff's allegation at least states the existence of an agreement ․ and the terms, albeit in barebones, of the agreement—that Defendants purchased all of [the predecessor entities’] assets and liabilities. More importantly, Plaintiff's allegation appears to meet the pleading standards under Rule 8(a). The Court is bound to accept as true allegations reasonably made in Plaintiff's FAC, and Plaintiff's allegation appears sufficient to put Defendants on notice of the nature of Plaintiff's claim.”). In fact, Plaintiff's allegations are as specific as they could be without the asset purchase agreement itself in front of him and, by alleging the relevant terms generally, satisfy the more rigorous standard applied in Gerritsen.⁵

B. Ripeness

“For a case to be ripe, it must present issues that are ‘definite and concrete, not hypothetical or abstract.’ ” Bishop Paiute Tribe v. Inyo Cty., 863 F.3d 1144, 1153 (9th Cir. 2017) (quoting Thomas v. Anchorage Equal Rights Comm'n, 220 F.3d 1134, 1138 (9th Cir. 2000)). Defendants contend that Plaintiff's claims based on conduct after their respective acquisitions of NW Cryobank are hypothetical and therefore unsuitable for adjudication. They point to the SAC's allegations that there is an “outstanding risk that [Plaintiff] is or will be the unwilling father of additional offspring” (Dkt. 38 ¶ 49) and a “probability that NW Cryobank has further sold or otherwise distributed his sperm against his wishes, resulting in untold offspring who were or will be conceived with his sperm” (id. ¶ 51). Defendants contend that “Plaintiff alleges no facts to support this theory of ‘untold offspring,’ and the mere possibility of some conjectural future harm is not enough to satisfy federal ripeness and standing requirements.” (Dkt. 46-1 at 17; Dkt 47 at 19).

Defendants stress that the “mere prospect” Plaintiff's sample still exists and has been distributed to other customers is too speculative to show ripeness (see, e.g., Dkt. 54 at 12), even though his sample already has been distributed against his directive. Beyond the fact they think it unlikely, Defendants offer no reason to conclude the same alleged misconduct has not taken place since 2008 (or 2016, in the case of CCB) and will not occur in the future. Moreover, Plaintiff notes that his claims rely on more than conjectural events. He points to allegation in the SAC that NW Reproductive failed to identify the issues with Plaintiff's sample while conducting diligence on NW Andrology's biological inventory (Dkt. 38 ¶¶ 19, 21); that NW Reproductive failed to adhere to procedures that would have prevented the sale of the sample to C.C. (id. ¶ 47); and that CCB's inability or unwillingness to locate the sample and track down any other recipients constitutes ongoing harm (id. ¶ 48). Accordingly, the Court rejects Defendants’ ripeness argument.

C. Plaintiff's Individual Claims

Although Defendants present arguments for dismissal for each individual claim, several of these assume the Court declines to apply successor liability. Accordingly, the Court DENIES the Motion as to the following claims:

• Negligence (Claim 1) and NIED (Claim 7) against NW Reproductive;

• Invasion of Privacy (Claim 2) against CCB;

• Breach of Fiduciary Duty (Claim 5) against all Defendants;

• IIED (Claim 6) against all Defendants 6; and

• Fraud (Claim 10) against all Defendants.

Below, the Court addresses only those arguments for dismissal that are independent of successor liability.

1. Negligence (Claim 1) and NIED (Claim 7) against CCB

CCB contends that “economic loss alone, without physical injury,” is inadequate to support claims for negligence and NIED (Dkt. 46-1 at 20–21 (quoting Cty. of Santa Clara v. Atl. Richfield Co., 137 Cal. App. 4th 292, 318, 40 Cal.Rptr.3d 313 (2006))), and that, while Plaintiff alleges he has suffered from “anxiety, guilt, humiliation, remorse, and distress” (id. (quoting Dkt. 38 ¶ 51)), he makes “[n]o mention[ ] of physical injury” (id.). CCB's quotation of the SAC contains an important ellipsis; in fact, Plaintiff alleges he has suffered from “anxiety, guilt, humiliation, remorse, and distress, which manifest in physical symptoms.” (Dkt. 38 ¶ 51). Plaintiff's opposition points this out (Dkt. 51 at 23), and CCB makes no counterargument in its reply. The Court thus DENIES the Motion as to the Negligence and NIED claims against CCB.

2. Invasion of Privacy (Claim 2) against NW Reproductive

NW Reproductive argues that (1) Plaintiff had no legally protected privacy interest in his sperm and (2) the sperm's sale to C.C. did not disclose any private information about Plaintiff. (Dkt. 47 at 23–25). NW Reproductive cites no authority for the first contention, and the Court finds it unpersuasive. For the second, NW Reproductive relies on Eisenhower Medical Center v. Superior Court, 226 Cal. App. 4th 430, 172 Cal.Rptr.3d 165 (2014), which dealt with the disclosure of information by health care providers under the Confidentiality of Medical Information Act (“CMIA”). NW Reproductive does not contend, however, that it qualifies as a health care provider; even if it does, Plaintiff was considering becoming a donor—not receiving medical care—and explicitly rejected Defendants’ right to retain any private information associate with his sperm. See id. at 434, 172 Cal.Rptr.3d 165 (“The CMIA provides that no health care provider shall disclose or release medical information regarding a patient of the provider ․.” (emphasis added)). Finally, NW Reproductive's argument that “Plaintiff's sperm sample did not disclose any individually identifiable medical information” (Dkt. 47 at 24) is without merit, as it contained sufficient genetic material to allow C.C. to track down Plaintiff. The Court thus DENIES the Motion as to the invasion of privacy against NW Reproductive.

3. Trespass to Personal Property (Claim 3) and Conversion (Claim 4) Against All Defendants

Both Motions argue Plaintiff's trespass and conversion claims are time-barred under California's default, three-year, statute of limitations. (Dkt. 46-1 at 22; Dkt. 47 at 29). Plaintiff counters that the limitations period was tolled by the discovery rule, which “postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.” Norgart v. Upjohn Co., 21 Cal.4th 383, 397, 87 Cal.Rptr.2d 453, 981 P.2d 79 (1999) (citation omitted). Plaintiff alleges he did not discover the trespass and conversion until January 2019, at the earliest. (See Dkt. 51 at 18).

“As a general rule, the statute of limitations for conversion is triggered by the act of wrongfully taking property. But there is an exception in cases where ‘a fiduciary has concealed the material facts giving rise to the cause of action.’ ” Bono v. Clark, 103 Cal. App. 4th 1409, 1433, 128 Cal.Rptr.2d 31 (2002) (quoting Strasberg v. Odyssey Group, Inc., 51 Cal. App. 4th 906, 915–916, 59 Cal.Rptr.2d 474 (1996)); see also AmerUS Life Ins. Co. v. Bank of Am., N.A., 143 Cal. App. 4th 631, 639, 49 Cal.Rptr.3d 493 (2006) (“To the extent our courts have recognized a ‘discovery rule’ exception to toll the statute, it has only been when the defendant in a conversion action fraudulently conceals the relevant facts or where the defendant fails to disclose such facts in violation of his or her fiduciary duty to the plaintiff.”). Despite CCB's assertion to the contrary, this exception appears to apply here, where Plaintiff alleges fraud and the existence of a fiduciary relationship. As to trespass, not only does the discovery rule permit Plaintiff's claim to proceed, but “[w]here, as here, a trespass is continuing, but not necessarily permanent, the statute does not bar an action until three years after the last act of trespass.” Baugh v. Garl, 137 Cal. App. 4th 737, 747, 40 Cal.Rptr.3d 539 (2006).

Next, Defendants argue Plaintiff cannot establish an injury to his property or his rights in it, a required element for conversion and trespass. (Dkts. 46-1 at 23; Dkt. 47 at 25–26). Indeed, they argue there can be no harm to the sperm sample when the relief Plaintiff seeks is the sample's destruction. (Id.). Defendants’ position is too narrow. The Court notes, as a threshold matter, that individuals have a property right in their sperm. See Hecht v. Superior Court, 16 Cal. App. 4th 836, 850, 20 Cal.Rptr.2d 275 (1993). Both conversion and trespass to property involve an “act of dominion wrongfully exerted over another's personal property in denial of or inconsistent with his rights therein.” Igauye v. Howard, 114 Cal. App. 2d 122, 126, 249 P.2d 558 (1952); see Intel Corp. v. Hamidi, 30 Cal. 4th 1342, 1350–51, 1 Cal.Rptr.3d 32, 71 P.3d 296 (2003). In an action for trespass and conversion, “the law is clear that ‘damages may be recovered for annoyance and distress, including mental anguish ․.’ ” Gonzales v. Pers. Storage, Inc., 56 Cal. App. 4th 464, 475, 65 Cal.Rptr.2d 473 (1997) (quoting Armitage v. Decker, 218 Cal. App. 3d 887, 905, 267 Cal.Rptr. 399 (1990)). Here, Plaintiff alleges that Defendants’ interference with his sperm sample caused him “mental anguish and physical suffering” (Dkt. 38 ¶ 69; see also id. ¶ 64), satisfying the pleading standard for trespass to property and conversion. NW Reproductive's argument that Plaintiff has no property right in his sperm (see Dkt. 47 at 26–27) is also without merit, for the reasons set forth in Plaintiff's opposition (see Dkt. 53 at 15–16).

Accordingly, the Court DENIES the Motion as to Claims 3 and 4.

4. Violations of CBPC § 17200 (Claim 8) Against All Defendants and § 17500 (Claim 9) Against CCB

CCB argues the Unfair Competition Law (“UCL,” § 17200 et seq.) and False Advertising Law (“FAL,” § 17500 et seq.) claims must be dismissed, as neither provision permits non-California residents to sue for conduct that occurred outside of California. See Norwest Mortg., Inc. v. Superior Court, 72 Cal. App. 4th 214, 222–227, 85 Cal.Rptr.2d 18 (1999); Churchill Vill., L.L.C. v. Gen. Elec. Co., 169 F. Supp. 2d 1119, 1126 (N.D. Cal. 2000), aff'd sub nom. Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566 (9th Cir. 2004). NW Reproductive argues the same with regard to the UCL only.⁷ (Dkt. 47 at 31). Plaintiff is a citizen and resident of Texas and does not allege he resided in California at any time relevant to this case. (See Dkt. 38 ¶ 4). The conduct alleged in the SAC occurred in Montana. (See generally id.).

Plaintiff does not directly dispute the territoriality limitations of his claims but argues “[n]onresident businesses whose wrongful conduct affects California residents may be held liable under the UCL.” (Dkt. 51 at 19) (citing Application Grp., Inc. v. Hunter Grp., Inc., 61 Cal. App. 4th 881, 908, 72 Cal.Rptr.2d 73 (1998)). Application Group is distinguishable, however, as one of the plaintiffs in that case was a California corporation seeking to preclude the enforcement of non-competition agreements against prospective employees who wished to work in California. 61 Cal. App. 4th at 908, 72 Cal.Rptr.2d 73. There is no such connection to California here, and while it may be that some of Defendants’ alleged misconduct, such as false or misleading advertising or statements, also occurred in California or affected Californians, Plaintiff lacks standing to sue on that account.

Accordingly, the Court GRANTS the Motions as to Plaintiff's eighth and ninth clams against CCB and as to Plaintiff's eighth claim against NW Reproductive without leave to amend.

III. CONCLUSION

The Court therefore GRANTS IN PART and DENIES IN PART the Motions and DISMISSES, without leave to amend, Plaintiff's eighth and ninth clams against CCB and California Cryobank and Plaintiff's eighth claim against NW Reproductive.

IT IS SO ORDERED.

FOOTNOTES

1.   NW Reproductive LLC's Motion exceeds the Court's 25-page limit by five pages. See Dkt. 11 (Standing Order) at 2. The Court declines to consider arguments pre-sented in the surplus pages.

2.   NW Andrology is named as a defendant in this lawsuit but has not been served.

3.   California Cryobank LLC is the parent company of CCB. Throughout this Order, the Court refers to the two entities together as “CCB” when discussing arguments made in, or in opposition to, their joint Motion.

4.   Plaintiff alleges C.C. began her relationship with NW Cryobank shortly before the asset sale, while NW Reproductive was conducting pre-purchase diligence. (Id. ¶ 19). By the time C.C. purchased the sperm she ultimately used to conceive, NW Reproductive had purchased NW Andrology's assets and was operating the business. (Id. ¶ 26).

5.   Because the Court finds Plaintiff adequately pleads express assumption, it does not address the parties’ arguments concerning continuation or de facto merger.

6.   The Court further disagrees with CCB's argument that its alleged refusal to investigate whether Plaintiff's sample still exists and has been sent to other customers does not rise to the level of “outrageous” conduct. (See Dkt. 46-1 at 25).

7.   NW Reproductive discusses § 17500 only after exceeding the 25-page limit.

Virginia A. Phillips, United States District Judge