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Wednesday, August 21, 2019

Alcohol trader again wants Calif. fraud claims dismissed


By Karen Kidd | Jul 24, 2018

SAN JOSE, Calif. (Legal Newsline) – This fall, a federal judge in San Jose is expected to hear arguments from a wine and spirits trade company about why a defunct restaurant and bar owner's putative class action lawsuit should, again, be dismissed.

The case in U.S. District Court for California's Northern District, San Jose Division, Arena Restaurant and Lounge Inc. v. Southern Glazer's Wine and Spirits, is scheduled for hearing before Judge Lucy H. Koh on Thursday, Oct. 11. 

Southern Glazer's claims in its 22-page motion filed in May asking Arena Restaurant's third amended complaint to be dismissed on six different grounds, including failure to plead fraud claims as required under the Federal Rule of Civil Procedure.

U.S. District Court Judge Lucy H. Koh

"Moreover, as plaintiffs have failed to make out a viable claim for fraudulent inducement, their fraud claims are barred by California’s economic loss rule," the motion said.

The motion also claims that Arena Restaurant's claims concerning below-cost sales and loss leader sales filed to show the restaurant sustained "an actionable injury," the motion said. Arena Restaurant also failed to show, under secret rebates and differential pricing claims, "that they were subject to any secret rebates, an injury to a competitor, or that the purportedly secret allowance tended to destroy competition," the motion said.

The Arena Restaurant case, also known as the "Nguyen" case after the original named plaintiff, James C. Nguyen, was filed about a year ago with allegations that include fraud and deception in sale and distribution of wine and spirits in California.

In April, Koh issued an order granting the defendants' motion to dismiss the case but granted plaintiffs leave to amend on most of their claims, which included allegations of promissory fraud, below-cost sales, loss leader sales, secret rebates, unlawful threats and intimidation, common law and unfair business practices.

In its motion asking Koh to dismiss the third amended complaint, Southern Glazer claims the latest amended complaint "does not add a single factual allegation" related to the four named plaintiffs in the case. 

"Once again, plaintiffs fail to plead specific facts suggesting that they were fraudulently induced into contractual agreements with Southern Glazer or that Southern Glazer misused their account information to perpetuate a fraudulent scheme," the motion said. "Nor do plaintiffs identify Southern Glazer's sale prices, the costs of its products, or an actionable injury as a result of a below-cost or loss-leader sale."

Plaintiffs in the case also don't "allege a secret rebate that tended to destroy competition" or that they were unlawfully threatened or intimated by Southern Glazer, the motion said.

"Plaintiffs yet again fail to establish that any of them actually suffered harm from the alleged scheme, by misreporting a tax liability, having to restate any tax filings, or suffering any penalty," the motion said. "And although plaintiffs assert a claim for breach of contract, the third amended complaint still fails to attach the operative contract between Southern Glazer and any named plaintiff (or any other Southern Glazer customer) to the complaint, or quote the contractual terms plaintiffs allege were breached."

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U.S. District Court for the Northern District of California, San Jose Division

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