Judge: Anne Richardson, Case: 23STCV05645, Date: 2024-02-08 Tentative Ruling

DEPARTMENT 40 - JUDGE ANNE RICHARDSON - LAW AND MOTION RULINGS
The Court issues tentative rulings on certain motions.The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) email Dept 40 by 8:30 a.m. on the day of the hearing (smcdept40@lacourt.org) with a copy to the other party(ies) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no email is necessary and all parties should appear at the hearing in person or by Court Call. 

Case Number: 23STCV05645    Hearing Date: March 21, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Court Order

I. Background

A. Pleadings

Plaintiff David Gastelo sues Defendants Automobile Club of Southern California, Interinsurance Exchange of the Automobile Club (Auto Club), ACSC Management Services, Inc. (ACSC), HVACi (business entity unknown), HVAC Investigators, Garret Electric, P.W. Stephens, Environmental, Inc. (Stephens Environmental), Excel Restoration, Inc. (Excel Restoration), Sydney Klittivit, and Does 1-200 pursuant to a March 14, 2023, Complaint.

The Complaint alleges claims of: (1) Bad Faith/Breach of the Implied Covenant of Good Faith and Fair Dealing and (2) Breach of Contract against AAA and Does 1-25; (3) Breach of Fiduciary Duty against ACSC and Does 1 through 125; (4) Intentional and (5) Negligent Interference with Contract against ACSC, HVACi, HVAC Investigators, Garrett Electric, Stephens, Environmental, Excel Restoration and Does 1 through 125; (6) Negligence against Stephens Environmental and Does 66 through 85; and (7) Intentional Infliction of Emotional Distress (IIED) against all Defendants.

The claims arise from the following allegations. The Auto Club, acting through Defendants ACSC (as “attorney-in-fact”) and/or Sydney Klittivit, acted in bad faith to deny Plaintiff Gastelo of an insurance policy for real and personal property owned by Plaintiff and located at 15260 Binney Street, Hacienda Heights, California 91745 (the Subject Property). These actions were knowingly ratified by the Auto Club’s management. The real and personal property were severely damaged by a fire that occurred on March 18, 2021, causing clear and obvious physical damage, and creating significant environmental issues, including exposure to asbestos.

Defendants HVACi, Garrett Electric, Stephens Environmental, and Excel Restoration—specifically not agents of the Auto Club—were engaged by Auto Club to assist it in wrongfully denying and/or lowballing Plaintiff’s insurance claim. Specifically: the Auto Club, acting through ACSC, dispatched HVACi, HVAC Investigators, Garrett Electric, Stephens Environmental, and Excel Restoration to generate false structure, environmental, and content reports to assist Auto Club in lowballing Plaintiff’s insurance claim for damage on the Property; HVACi, HVAC Investigators, Garrett Electric, Stephens Environmental, and Excel Restoration acted in concert with the Auto Club; and ACSC, HVACi, HVAC Investigators, Garrett Electric, Stephens Environmental, and Excel Restoration aided and abetted Auto Club in severely delaying proper payment. In doing so, Auto Club acting through ACSC, HVACi, HVAC Investigators, Garrett Electric, Stephens Environmental, and Excel Restoration violated the Insurance Code, the Claim regulations, and Penal Code Section 550, which makes it a crime to submit false data in response to an insurance claim.

Defendants HVACi, HVAC Investigators, Garrett Electric, Stephens Environmental, and Excel Restoration interfered with the insurance contract or disrupted the relationship in various ways, including but not limited to: (a) by dramatically lowballing various issues; (b) by violating PC section 550 by submitting false data in response to a valid insurance claim; (c) assisting, aiding and abetting Auto Club in lowballing; and, (d) in various other ways, according to proof.

The acts and omissions of the Auto Club (through its claims manager, Cara Calhoon, and Chief Operating Officer, John Boyle), HVACi, HVAC Investigators, Garrett Electric, Stephens Environmental, and Excel Restoration (a) were done with a conscious disregard of Plaintiff’s rights and with an intent to vex, injure, annoy Plaintiff, such as to constitute oppression, fraud or malice pursuant to Civil Code section 3294, and (b) were committed by or authorized, ratified, or otherwise approved by officers, directors or managing agents of Defendants, entitling Plaintiff to punitive damages in an amount appropriate to punish, deter, or set an example of Defendants.

B. Motion Before the Court

On December 4, 2023, Garrett Electric filed a demurrer challenging the Complaint’s fourth, fifth, and seventh causes of action, the only three claims alleged against this Defendant.

On March 8, 2024, Plaintiffs filed an opposition to Garrett Electric’s demurrer.

On March 14, 2024, Garrett Electric filed a reply to Plaintiffs’ opposition.

Garrett Electric’s demurrer is now before the Court.

II. Demurrer

A. Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; see Code Civ. Proc., § 430.10, subd. (e).) This device can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) To sufficiently allege a cause of action, a complaint must allege all the ultimate facts—that is, the facts needed to establish each element of the cause of action pleaded. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 212, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) Thus, “[t]o survive a [general] demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) In testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.) A demurrer, however, “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228, disapproved on other grounds, Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162.) The face of the complaint includes exhibits attached to the complaint. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.) If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence. (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447, superseded by statute on other grounds as stated in White v. Cridlebaugh (2009) 178 Cal.App.4th 506, 521.)

B. Analysis

1. Demurrer, Complaint, Fourth and Seventh Causes of Action, Intentional Interference with Contract and Intentional Infliction of Emotional Distress: OVERRULED.

“The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126 (Pacific Gas).)

“A cause of action for intentional infliction of emotional distress exists when there is ‘(1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff’s suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant’s outrageous conduct.’ A defendant’s conduct is ‘outrageous’ when it is so ‘extreme as to exceed all bounds of that usually tolerated in a civilized community.’ And the defendant’s conduct must be ‘intended to inflict injury or engaged in with the realization that injury will result.’” (Hughes v. Pair (2009) 46 Cal.4th 1035, 1050-1051.)

In its demurrer, Garrett Electric argues that the fourth and seventh causes of action are alleged as conclusions of law and lack sufficient evidentiary details to state valid causes of action. Garrett Electric also argues that mental suffering and emotional distress damages are not generally compensable in a mere contract action, that no contract exists between itself and Plaintiff Gastelo, and that the Complaint fails to allege duty factors relevant to determining whether the parties contemplated mental suffering and emotional distress. (Demurrer, pp. 7-10, 10-11.)

In opposition, Plaintiff Gastelo argues in favor of the sufficiency of the fourth cause of action but fails to address Garrett Electric’s IIED arguments. (Opp’n, pp. 5-7.)

In reply, Garrett Electric reiterates its arguments related to duty and lack of a contract. Garrett Electric also argues that the Complaint does not sufficiently allege the wrongdoing Garrett Electric committed and does not allege a nexus between its alleged conduct and damages to Plaintiff Gastelo. (Reply, pp. 2-4.)

The Court finds in favor of Plaintiff Gastelo.

The general rule is that a complaint must contain allegations of ultimate facts as opposed to allegations of legal conclusions. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 551, fn. 5, citation omitted.) The complaint ordinarily is sufficient if it alleges ultimate rather than evidentiary facts. (Id. at p. 550; see, e.g., Careau & Co. v. Sec. Pac. Bus. Credit, Inc. (1990) 222 Cal.App.3d 1371, 1391 [within context of breach of contract claim, pleadings did not sufficiently allege ultimate facts for the position that “conditions in the [the parties’ agreement] had been satisfied, excused or waived,” instead limiting itself to evidentiary facts that did not sufficiently plead this element of breach of contract].)

Here, the Complaint alleges sufficient ultimate facts to support intentional interference with contractual relations and IIED against Garrett Electric: at the behest of the Auto Club, Garrett Electric intentionally and knowingly submitted false documents and data in response to Plaintiffs’ valid insurance claim for the fire that damaged the Subject Property and chattel within (“lowballing” as to “electrical system and related issues”), which Garrett Electric did in violation of Section 550 of the California Penal Code, or did to aid and abet the Auto Club’s “lowballing” (Complaint, ¶¶ 23-24, 31(r)-(t), 44, 46(d)-(f), 47(a), 51, 62); Garrett Electric performed these actions in concert with the Auto Club and other Defendants as to deny Plaintiff his rights under the insurance policy with the Auto Club (Complaint, ¶ 54); the Auto Club relied on those reports to lowball the insurance coverage due to Plaintiff (see, e.g., Complaint, ¶ 31); management at Garrett Electric ratified this conduct (Complaint, ¶ 54); and damages of $3 million to Plaintiff through general damages, loss of use of funds and the Subject Property, and cost of consultants, public adjuster, and attorney’s fees, among other things (Complaint ¶¶ 53-54). (See also, e.g., Complaint, ¶¶ 51 [specific ultimate facts of interference with Auto Club insurance policy’s intended benefits], 62 [specific ultimate facts for IIED].)

Such allegations state the existence of an insurance policy in favor of Plaintiff as issued by the Auto Club, of which Garrett Electric was aware, with Garrett Electric’s conduct disrupting the contractual relationship by denying Plaintiff Gastelo the benefit of the contract, thus damaging Plaintiff. (See Pacific Gas, supra, 50 Cal.3d at p. 1126.)

Moreover, the Court determines that a scheme designed to deny a homeowner their rights under an insurance contract, the purpose of which is to make the homeowner whole in case of a loss, such as alleged here with the fire damaging the Subject Property and personal property within, may constitute extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress, which could cause Plaintiff severe or extreme emotional distress, as well as damages. (Hughes v. Pair, supra, 46 Cal.4th at pp. 1050-1051; see, e.g., Complaint, ¶¶ 23-24, 31, 31(r)-(t), 44, 46(d)-(f), 47(a), 51-54, 61-63, 61-63 [appearing twice in pleading], 65.)

The Court finds no merit to the demurrer argument that the Complaint lacks sufficient evidentiary facts to apprise Garrett Electric of the bases for liability against it. The Complaint need only plead ultimate facts (Doe v. City of Los Angeles, supra, 42 Cal.4th at p. 551, fn. 5) and is clear. As cited above, Garrett Electric is alleged to have been hired to draft certain “electrical issue” reports that knowingly contained falsified data, so drafted for the purpose of giving the Auto Club a basis to lowball Plaintiff’s insurance coverage for the Subject Property following the fire that damaged that Property and the chattel within. Those ultimate facts sufficiently support the two above claims, as discussed in the preceding paragraphs. Evidentiary facts need not be alleged and can be ascertained during discovery. (See Khoury v. Maly’s of California, Inc., supra, 14 Cal.App.4th at p. 616 [“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures”]; see also Dahlquist v. State (1966) 243 Cal.App.2d 208, 212-213 [Because discovery through “depositions, interrogatories, requests for admission, etc.” is the “modern method of” “ascertain[ing] every fact known to plaintiffs and their witnesses,” “reason [exists] for some relaxation of rigidity in application of the rules relating to the sufficiency of complaints,” citations omitted].)

Accordingly, Garrett Electric’s demurrer is OVERRULED as to the Complaint’s fourth and seventh causes of action.

2. Demurrer, Complaint, Fifth Cause of Action, Negligent Interference with Contract: SUSTAINED, without leave to amend.

There is no cause of action for negligent interference with a contract in California. (Davis v. Nadrich (2009) 174 Cal.App.4th 1, 9.) It therefore follows that the fifth cause of action is fatally defective. (Demurrer, p. 10 [making this argument].) The opposition accepts this conclusion. (Opp’n, p. 3, ¶ e.)

Garrett Electric’s demurrer is thus SUSTAINED to this cause of action, without leave to amend. 

III. Conclusion

Defendant Garrett Electric’s Demurrer [CRS# 3811] is OVERRULED in part and SUSTAINED in part as follows:

(1) OVERRULED as to the Complaint’s fourth and seventh causes of action; and

(2) SUSTAINED, without leave to amend, as to the Complaint’s fifth cause of action.