Judge Andrew E. Cooper, Case Number: 24CHLC15465, Date: 2025-05-29 Tentative Ruling

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MAY 28, 2025

Los Angeles Superior Court Case # 24CHLC15465

MOVING PARTY: Plaintiff/Cross-Defendant Credit Corp Solutions, Inc., Assignee of Lendingpoint LLC (“Plaintiff”)

RESPONDING PARTY: Defendant/Cross-Complainant Mitchel Hacker (“Defendant”)

RELIEF REQUESTED: Plaintiff demurs to Defendant’s entire first amended cross-complaint (“FAXC”).

TENTATIVE RULING: The demurrer is overruled, and the motion to strike is denied. Plaintiff to file its answer to Defendant’s FAXC within 20 days.

This is a collections action in which Plaintiff alleges that Defendant owes it $5,855.32 under a loan agreement. (Compl. ¶¶ 6–8.) On 4/23/24, Plaintiff filed its complaint against Defendant, alleging a sole cause of action for Breach of Contract.

On 1/10/25, Defendant filed his answer and cross-complaint, alleging against Plaintiff, Lendingpoint LLC, and Finwise Bank the following causes of action: (1) Breach of Loan Agreement; (2) Breach of Covenant of Good Faith; (3) Breach of Statutory Duties (CCP § 631; CC § 1788 et seq.; and (4) Breach of Statutory Duties (Business & Professions Code § 17200 et seq.) On 1/14/25, Defendant filed his operative FAXC, alleging the same causes of action.

On 3/6/25, Plaintiff filed the instant demurrer with motion to strike. On 5/15/25, Defendant filed his opposition. On 5/22/25, Plaintiff filed its reply.[1]

As a general matter, a party may respond to a pleading against it by demurrer on the basis of any single or combination of eight enumerated grounds, including that “the pleading does not state facts sufficient to constitute a cause of action” and is uncertain, meaning “ambiguous and unintelligible.” (Code Civ. Proc., § 430.10, subds. (e) and (f).) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.¿(Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.)¿

“A demurrer tests the pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the pleading’s properly pleaded or implied factual allegations. (Ibid.) The only issue a demurrer is concerned with is whether the pleading, as it stands, states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)

Here, Plaintiff demurs to Defendant’s entire FAXC on the basis that Defendant fails¿to allege facts sufficient any of the causes of action alleged against Plaintiff.

Before filing its demurrer, “the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc. § 430.41, subd. (a).) The demurring party must file and serve a meet and confer declaration stating either: “(A) The means by which the demurring party met and conferred with the party who filed the pleading subject to demurrer, and that the parties did not reach an agreement resolving the objections raised in the demurrer;” or “(B) That the party who filed the pleading subject to demurrer failed to respond to the meet and confer request of the demurring party or otherwise failed to meet and confer in good faith.” (Id. at subd. (a)(3).)

Here, Plaintiff’s counsel declares that on 2/7/25, she called Plaintiff’s counsel and sent a meet and confer letter discussing the issues raised in the instant demurrer but received no substantive response. (Decl. of Nathalia A. Aguirre ¶¶ 3–4.) Accordingly, the Court finds that counsel has satisfied the preliminary meet and confer requirements set forth by Code of Civil Procedure section 430.31.

Defendant’s first cause of action alleges against Plaintiffs a Breach of Loan Agreement. To state a cause of action for breach of contract, a plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) A written contract may be pleaded either verbatim or generally “according to its legal intendment and effect.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198–199.)

Here, Defendant alleges that he demanded arbitration of the instant dispute, including a demand for Plaintiff to pay for all arbitration costs and expenses, pursuant to the terms of the loan agreement between the parties. (FAXC ¶ 13, citing Ex. A to FAXC.) Defendant further alleges that Plaintiff breached the agreement because it “refused to proceed with HACKER’s demand. CC refused and demanded HACKER expend his own funds in this action.” (Ibid.)

Plaintiff argues that “one cannot allege a breach of duties that never existed.” (Dem. 16:13.) “Nowhere in the Agreement was Cross-Defendant required to dismiss its action, and Cross-Complainant’s mistaken assumption to the contrary does not create an obligation where none was agreed upon.” (Id. at 14:9–12.)

In opposition, Defendant argues that “nowhere does Hacker plead he demanded a dismissal of CC’s complaint.” (Opp. 8:14.) Defendant maintains that he has sufficiently alleged that Plaintiff breached the arbitration agreement by refusing to pay for the arbitration fees, as provided under the subject loan agreement. (See FAXC ¶¶ 13–15.)

Based on the foregoing, the Court agrees with Defendant that he has alleged facts sufficient to constitute a cause of action for Breach of Contract. Accordingly, the demurrer to Defendant’s first cause of action is overruled.

Defendant’s second cause of action alleges against Plaintiff a Breach of the Implied Covenant of Good Faith. Every contract contains an implied covenant of good faith and fair dealing that neither party will do anything to interfere with the other party’s right to receive the benefits of the agreement. (Howard v. American Nat'l Fire Ins. Co. (2010) 187 Cal.App.4th 498, 528.) The precise nature and extent of the duty depends on the nature and purpose of the underlying contract and the parties’ legitimate expectations arising from the contract. (Ibid.) “A breach of the implied covenant of good faith is a breach of the contract … and breach of a specific provision of the contract is not ... necessary to a claim for breach of the implied covenant of good faith and fair dealing.” (Thrifty Payless, Inc. v. The Americana at Brand, LLC (2013) 218 Cal.App.4th 1230, 1244.)

Here, Defendant alleges that Plaintiff breached the implied covenant of good faith and fair dealing because it “interprets the loan agreement unreasonably and in violation of California law, by requiring that HACKER pay judicial and arbitration fees and waive a jury trial. (Compl. ¶ 19.)

Plaintiff argues that “as previously stated, the fees in question were existing obligations of Cross-Complainant, independent of arbitration.” (Dem. 16:27–17:1.) Plaintiff further argues that “Requiring Cross-Complainant to file an answer before proceeding to arbitration was neither an arbitrary burden nor an act of bad faith. It was a standard legal procedural requirement inherent to litigation.” (Id. at 17:21–24.) In opposition, Defendant argues that Plaintiff “had no right to force Hacker to spend his own funds to arbitrate — or to force him to appear herein first. Nowhere does The Agreement require Hacker to do anything more than he undisputedly did: demand arbitration.” (Opp. 10:16–18.)

Based on the foregoing, the Court finds that at the demurrer stage, Defendant has alleged facts sufficient to constitute a cause of action for a Breach of the Implied Covenant of Good Faith. Accordingly, the demurrer against Defendant’s second cause of action is overruled.

Defendant’s third cause of action alleges various statutory violations against Plaintiff, including fair debt collection laws such as the Rosenthal Fair Debt Collection Practices Act (Civil Code section 1788 et seq.) (the “Rosenthal Act”). The Rosenthal Act was enacted “to prohibit debt collectors from engaging in unfair or deceptive acts or practices in the collection of consumer debts and to require debtors to act fairly in entering into and honoring such debts.” (Stats. 1977, ch. 907, § 1; Civ. Code § 1788.1, subd. (b).)

Section 1788.13 of the Rosenthal Act incorporates section 1692e of the Federal Debt Collection Practices Act, which provides, “a debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” “Whether a debt collection effort entails false representations, threats, or deception is judged objectively from the perspective of the ‘least sophisticated debtor.’ … This unsavvy consumer is charged with a ‘basic level of understanding and willingness to read with care’ … but is of ‘below average sophistication or intelligence,’ and is ‘uninformed or naive.’ … He or she is ‘under no obligation to seek explanation of conflicting or misleading language in debt collection letters.’” (Alborzian v. JPMorgan Chase Bank, N.A. (2015) 235 Cal.App.4th 29, 37 [internal citations omitted].)

Here, Defendant alleges that cross-defendants “FB and LP, its agent, was required to provide HACKER with timely billing statements to repay his consumer loan but did not do so. As a result they declared his loan to be in default and sold it to CC, a debt buyer.” (FAXC ¶ 9–10, 12.)

Plaintiff argues that the operative cross-complaint “is so fact-barren that it does not allow Cross-Defendant to determine which specific violations are even being alleged in order to form a meaningful response. Cross-Complainant did not specify any false representations made or actions of Cross-Defendant that were unfair, unconscionable, or constituted deception.” (Dem. 21:2–6.) The Court disagrees, and finds that here, at the pleading stage, the facts alleged are sufficient to constitute a cause of action for breach of both the federal Fair Debt Collection Practices Act and the Rosenthal Act. Accordingly, the demurrer to Defendant’s third cause of action is overruled.

However, to the extent that Defendant alleges that Plaintiff violated his right to trial by jury under Civil Code section 631, this argument is neither well pled nor well-taken. The Court agrees with Plaintiff that Defendant cannot simultaneously argue that the arbitration provision of the loan agreement was valid and enforceable, while arguing that the waiver of judicial resolution contained therein deprives him of his statutory rights.

Defendant’s fourth cause of action alleges that Plaintiff violated Business and Professions Code section 17200 et seq. (the “UCL”). To set forth a claim for unfair business practices in violation of the UCL, a plaintiff must establish that the defendant was engaged in an “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising” and certain specific acts. (Bus. & Prof. Code, § 17200.)

“In essence, an action based on Business and Professions Code section 17200 to redress an unlawful business practice ‘borrows’ violations of other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under section 17200 et seq. and subject to the distinct remedies provided thereunder.” (People ex rel. Bill Lockyer v. Fremont Life Ins. Co. (2002) 104 Cal.App.4th 508, 515.) A plaintiff alleging an “unfair” business practice under the UCL must show that the defendant's conduct is “tethered to an underlying constitutional, statutory or regulatory provision, or that it threatens an incipient violation of an antitrust law, or violates the policy or spirit of an antitrust law.” (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 613.) “‘Fraudulent,’ as used in the statute, does not refer to the common law tort of fraud but only requires a showing members of the public ‘are likely to be deceived.’” (Olsen v. Breeze, Inc. (1996) 48 Cal.App.4th 608, 618.)

Here, Plaintiff argues that “Cross-Complainant asserts that Cross-Defendant failed to provide timely loan payment statements or correct financial and transactional documents. This is insufficient to support a claim under §17200 because the allegation lacks specificity regarding timeliness, the repercussions of the alleged failure, or how any inaccuracies in the documents materially harmed Cross-Complainant.” (22:1–6.)

In opposition, Defendant argues that his fourth cause of action is viable under the “unlawful” prong because Plaintiff’s “federal and state violations thus are charged here.” (Opp. 12:8–9.) The Court agrees, and further notes its findings that Defendant has adequately pled Defendant’s violations of his first, second, and third causes of action. Additionally, Plaintiff fails to provide any legal authority supporting its argument that this cause of action requires a higher pleading standard.

Based on the foregoing, the Court finds that Defendant has alleged facts sufficient to constitute a cause of action for unfair business practices under the UCL. Accordingly, the demurrer against Defendant’s fourth cause of action is overruled.

Plaintiff contends that “California’s Anti-SLAPP statute and litigation privilege (Civ. Code §47(b)) serve as an absolute bar to [Defendant’s] claims given that they are entirely predicated on the filing of a lawsuit.” (Dem. 12:7–9.) “It is evident that the Cross-Complaint and Amended Cross-Complaint were filed solely in response to Cross-Defendant’s lawful exercise of its right to petition by initiating and maintaining the underlying action.” (Id. at 23:3–6.)

To this extent, Defendant argues that Plaintiff’s “Demurrer attempts to be a Special Motion to Strike without complying with § 425.16.” (Opp. 12:22–23.) “No reasonable attorney would include an anti-slapp motion in a demurrer.” (Id. at 14:7–8.)

In reply, Plaintiff concedes “the procedural distinction raised by Cross-Complainant, [but] it does not alter the central point: the Cross-Complaint fails because it is based on communications and conduct that are privileged under Civil Code §47(b).” (Reply 5:3–6.) Plaintiff maintains that “Cross-Complainant asserts that Cross-Defendant was obligated to dismiss its action and reinitiate the proceedings entirely in arbitration.” (Id. at 5:14–16.)

However, the Court finds that the conduct complained of concerns Plaintiff’s alleged refusal to pay for arbitration fees, in breach of the loan agreement, as well as all cross-defendants’ unfair debt collections practices. As stated above, “nowhere does Hacker plead he demanded a dismissal of CC’s complaint.” (Opp. 8:14.)

Based on the foregoing, the Court denies Plaintiff’s code-deficient motion to strike.

The demurrer is overruled, and the motion to strike is denied. Plaintiff to file its answer to Defendant’s FAXC within 20 days.

[1] The Court notes that Plaintiff’s reply was filed one day late and does not include a proof of service on Defendant. (Code Civ. Proc. § 1005, subd. (b).)