Northern California Record

Friday, November 22, 2019

ScanX granted motion to dismiss breach of contract dispute with Carlson Produce


By Charmaine Little | Jun 3, 2019


SAN JOSE – Rock Clapper, the president of ScanX, prevailed in a breach of contract claim against him and the company in the U.S. District Court for the Northern District of California, San Jose Division.

Magistrate Judge Virginia K. DeMarchi ruled May 22 to grant Clapper and ScanX's partial motion to dismiss. DeMarchi dismissed all of the plaintiffs' claims but denied the parties' requests for judicial notice.

Craig Carlson and Carlson Produce LLC sued Clapper and ScanX over allegations of breach of contract, breach of duty of good faith and fair dealing, fraud, promissory estoppel and quantum meruit/unjust enrichment. 

U.S. District Court Magistrate Judge Virginia K. Demarchi |

ScanX develops devices for “real-time” monitoring to see if there are bacteria and chemicals in food. Carlson Produce manufactures hardware and software items for the produce supply business. ScanX and Carlson Produce partnered together via a four-year services agreement in 2016 where Carlson Produce was the consultant and ScanX was the company.

In response to the lawsuit, Clapper and ScanX asked the court to dismiss Carlson’s lawsuit, the breach of duty and good faith and fair dealing claims as well as their claims filed against Clapper in his individual capacity with the exception of the fraud allegation.

DeMarchi agreed with the defendants' argument that Carlson didn’t have standing because he is not a third-party beneficiary of the agreement.

“...Mr. Carlson has not alleged facts supporting a claim that he was an employee of ScanX or Mr. Clapper separate from the service agreement pursuant to which Carlson Produce, the limited liability company of which Mr. Carlson is the sole member, is identified as the consultant,’” the judge wrote.

DeMarchi added that this is enough cause to determine Carlson doesn’t have standing.

DeMarchi then addressed the breach of duty of good faith and fair dealing claims. The plaintiffs asked for $509,098 in damages, stating they fulfilled the terms of the service agreement. Still, they failed to point out any conduct from the defendants that could interfere with the agreement “that differ in any way from acts plaintiffs say constitute defendants’ failure to perform their obligations under that agreement, which plaintiffs claim is a breach of contract,” DeMarchi wrote.

DeMarchi added that the plaintiffs ask for the same damages for breach of implied contract as breach of contract. She also determined that the plaintiffs didn’t properly state a claim against Clapper.

Under the 2016 agreement, the ruling states Carlson Produce would offer services and get $210,000 a year as well as a 35 percent salary annual bonus and 5.5 percent in ScanX’s stock for four years. 

Carlson Produce and Carlson sued over allegations that the defendants rendered payment for the two months but failed to do so after that, even though they were delivering their end of the agreement. Carlson Produce and Carlson then filed the current lawsuit.

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