Judge: Blaine K. Bowman, Case: 37-2023-00016433-CU-BC-NC, Date: 2023-12-01 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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SOUTH BUILDING TENTATIVE RULINGS - November 30, 2023

12/01/2023  10:00:00 AM  N-31 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Blaine K. Bowman

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Civil - Unlimited  Breach of Contract/Warranty Demurrer / Motion to Strike 37-2023-00016433-CU-BC-NC HAYWARD VS. AMERICAN WAVE MACHINES INC. [IMAGED] CAUSAL DOCUMENT/DATE FILED: Demurrer, 09/05/2023

The Demurrer to First Amended Complaint brought by defendant American Wave Machines Inc. (the Wave Company) is disposed as follows: --First Cause of Action (Breach of Contract) – SUSTAINED with leave to amend --Second Cause of Action (Fraud) – SUSTAINED with leave to amend Background Facts According to facts recited in the opposition brief (and notably not recited in the actual allegations of the operative complaint), the Wave Company was founded in 2000 and is in the business of designing machines that generate artificial surfing waves in a pool. (Opposition, p. 2:7-12.) The Wave Company began doing business with plaintiff Louis Hayward (Plaintiff) in 2007 and that business continued through 2018 when the events that triggered this lawsuit arose. (Opposition, p. 2:13-28.) By that time, plaintiff Romey Thornton (who will be referenced collectively herein with Louis Hayward as 'Plaintiffs') was also involved.

Plaintiffs claim that the Wave Company's representatives made representations at a meeting in the early Summer of 2018 that the Wave Company would pay a five percent commission if Plaintiffs found a buyer for certain products – products that are referenced in the operative complaint as 'AWM Products.' (Opposition, p. 2:24-28; First Amended Complaint, pp. 3-4.) Again, though not in the operative complaint, the opposition brief describes that these representations were never reduced to a writing despite Plaintiffs request. (Opposition, p. 3:1-9.) Instead, because the parties had had an ongoing business relationship, the representatives of the Wave Company 'stated that a contract was not necessary' because their 'word was [their] bond.' (Opposition, p. 3:5-9.) They further stated things like 'come on Louie you know you can trust me,' 'yes 5 points baby' and 'make this happen guys.' (Opposition, p. 3:6-9.) Plaintiffs claim that as a result of this meeting they 'entered into a verbal agreement whereby it was agreed that if Plaintiffs found buyers for [the Wave Company]'s products, [the Wave Company] would pay Plaintiffs a five percent (5%) commission of the gross amount of total order of [the Wave Company]'s products purchased.' (Opposition, p. 3:12-15.) Plaintiffs claim that they found a buyer approximately four years later in October of 2022 (which seems like a bit of a long intervening time, but that time span notably includes the judicially-noticeable Covid-19 pandemic time frame). They further claim that that buyer was willing to purchase approximately $10 Calendar No.: Event ID:  TENTATIVE RULINGS

3016586 CASE NUMBER: CASE TITLE:  HAYWARD VS. AMERICAN WAVE MACHINES INC. [IMAGED]  37-2023-00016433-CU-BC-NC million worth of products. However, according to Plaintiffs, the Wave Company declined to pay up on the five percent commission that was allegedly owed.

Procedural History Plaintiffs filed this lawsuit on April 20, 2023 alleging two causes of action (breach of contract and fraud) on a Judicial Council Form complaint. (ROA 1.) According to a declaration from counsel for the Wave Company, the parties engaged in meet and confer regarding the allegations of the complaint at some point between April 20, 2023 and July 6, 2023. (ROA 9, ¶¶ 2-3.) Plaintiffs thereafter filed an amended complaint on June 30, 2023. (ROA 8.) Counsel for the Wave Company declares that attempts were thereafter made to reach out to Plaintiff's counsel for further meet and confer as to the infirmities of the new operative pleading, but Plaintiff's counsel either did not respond or claimed to be unavailable. (ROA 9, ¶¶ 3-6.) Those efforts having failed, the Wave Company filed the instant Demurrer to First Amended Complaint on September 5, 2023. (ROA 10.) Plaintiffs filed an opposition brief on November 15, 2023. (ROA 21.) Notably, according to a declaration by Plaintiff's counsel that accompanies the opposition brief, Plaintiff's counsel 'contacted Defendant's counsel in order to request that they stipulate to granting Plaintiffs leave to file an amended complaint to address Defendant's claimed defects in the operative complaint' the day before the opposition brief was due (i.e. on November 14, 2023). (ROA 21, Longo Decl., ¶ 3.) This meet and confer history strikes the Court as inadequate on the part of Plaintiff.

In any event, the Demurrer to First Amended Complaint that is now before the Court demurs to both causes of action (breach of contract and fraud) on grounds of Code of Civil Procedure §§ 430.10(e) (failure to state a claim) and 430.10(g) (failure to state whether a contract is written, oral, or implied by conduct).

Merits of Motion It goes almost without saying here, simply by looking at the record citations made in the 'Factual Background' above, that most of the facts recited to describe the narrative of what occurred to give rise to this lawsuit is not pled. Rather, instead of actually pleading the factual narrative, Plaintiffs chose to recite broad and general allegations in their Judicial Council Form complaint and then described the actual facts of what happened only in their opposition papers. In fact, the first two pages of the opposition brief lead with a 'Statement of Facts' that breathes life in to describing what actually occurred. This is a problem because most of these facts are not actually alleged – they are merely recited in an opposition brief. A complaint must stand on its own – or perhaps with some reference to information that is judicially-noticeable. It cannot be a vague conglomeration and then rely on points and authorities in another motion to flesh it out. On this basis, the Wave Company is absolutely correct when it argues in reply that: --'...the Opposition [is] full of allegations completely absent from the FAC...' (Reply, p. 1:5) --'It is unknown why these material terms were missing from Plaintiffs' first two iterations of their complaint.' (Reply, p. 1:25-26) Thus, as currently pled, the Court cannot really assess the material terms of the contract because that facts surrounding it have not actually been pled. That initial burden of pleading the material facts falls on Plaintiffs, and, alone, warrants sustaining the demurrer.

There does appear to be a further dispute between the parties as to whether or not Plaintiffs have alleged a breach of contract even if their 'allegation-like' assertions in the opposition brief are to be considered. Specifically, the Wave Company is demurring on grounds that Plaintiffs failed to allege whether the contract at issue was written, oral, or implied by conduct as required by Code of Civil Procedure 430.10(g). While this much is true on the claims as they are alleged, Plaintiffs' description in the opposition brief appears to tell a narrative that would be sufficient to state a cause of action for breach of contract. Simply put, while Code of Civil Procedure § 430.10(g) requires that a claim for Calendar No.: Event ID:  TENTATIVE RULINGS

3016586 CASE NUMBER: CASE TITLE:  HAYWARD VS. AMERICAN WAVE MACHINES INC. [IMAGED]  37-2023-00016433-CU-BC-NC breach of contract make clear whether the contract at issue was written, oral, or implied by conduct, nothing prevents a plaintiff from pleading in the alternative and the facts described by Plaintiff in the opposition brief would seem to apply to such a scenario – i.e. Plaintiff indicates that a written contract was never formed ('Marie McFarland stated that a contract was not necessary and her word was her bond...'), but an oral contract was ('Defendant... and Plaintiffs entered into a verbal agreement whereby it was agreed that if Plaintiff found buyers for Defendant's products, Defendant would pay Plaintiffs a five percent (5%) commission of the gross amount of total order of Defendant's products purchased...'), and, if that oral contract cannot be proven, then the conduct of Plaintiffs doing the work of procuring a buyer for the AMW Products establishes a contract that was implied by conduct. (Opposition, p. 3:5-6, 3:12-15, and 3:16-22.) As such, though Code of Civil Procedure 430.10(g) applies to the First Amended Complaint as currently written, upon amendment it appears that this issue can be cleaned-up somewhat readily.

With regard to fraud, the Wave Company is correct that: Under California law, to maintain a fraud claim based on the same factual allegations as a breach of contract claim, a plaintiff must show that the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm. Foster Poultry Farms v. Alkar-Rapidpak-MP Equipment, Inc. (E.D. Cal. 2012) 868 F.Supp.2d 983, 992, citing Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 989-990.

Moreover, fraud allegations are subjected to a heightened pleading standard requiring specificity and/or particularity in the pleading. See Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157-158. Fraud allegations against a corporate entity require specific pleading of: --the names of those who made the representations --their authority to speak for the corporation --to whom they spoke --what they said or wrote --when it was said or written Weil and Brown, California Practice Guide: Civil Procedure Before Trial (The Rutter Guide 2023) ¶ 6:145, citing Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631, 645, also citing Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157, also citing Perlas v. GMAC Mortg., LLC (2010) 187 Cal.App.4th 429, 434.

The operative complaint, as drafted, fails to do this, but even the supplemental description provided in the opposition brief may not be specific enough to achieve the required specificity. In any event, as leave to amend is being granted, that question need not be fully resolved today.

Leave to Amend Failure to meet and confer cannot be a basis for sustaining or overruling a demurrer. (Code of Civil Procedure § 430.41(a)(4).) However, to the extent that a court exercises discretion in determining whether or not leave to amend is appropriate, the failure to take opportunities to amend, and similar failure to engage in the meet and confer process prior to coming to court, does bear on whether additional opportunities to amend are appropriate. Here, Plaintiffs have availed themselves of one opportunity to amend as of right – though seemingly little was done to amend the complaint at that time other than filing a new pleading that re-started the clock on the time to meet and confer and possibly demur. In other words, while Plaintiffs availed themselves of the opportunity to amend, the actual exercise of that opportunity appears to have been somewhat lackluster.

Then, when counsel for the Wave Company reached out, Plaintiffs' counsel was either unavailable or failed to respond. This is problematic and does not comply with the statutory requirements. (See Code of Civil Procedure § 430.41.) Even more troublesome, it appears that Plaintiffs' counsel reached out to defense counsel the day before an opposition was due seeking a stipulation to file an amended Calendar No.: Event ID:  TENTATIVE RULINGS

3016586 CASE NUMBER: CASE TITLE:  HAYWARD VS. AMERICAN WAVE MACHINES INC. [IMAGED]  37-2023-00016433-CU-BC-NC complaint. While the Court encourages parties to find out-of-court solutions to procedural issues (such as the ability to file an amended pleading to fix a pro forma discrepancy) and might normally look with disfavor upon the Wave Company's decision not to extend such a courtesy, the pattern of Plaintiffs' conduct of (1) making cursory amendments the first time around, (2) being nonresponsive to meet and confer efforts made by defense counsel, (3) waiting until the proverbial '11th hour' (i.e. the day before an opposition was due) to seek such a stipulation, and (4) including about two pages worth of factual allegations and recitations in the opposition brief which could have been included in the operative pleadings (with no explanation given to suggest that these are 'new' facts that were not known to Plaintiffs at the time they wrote their operative pleading), portrays a pattern in which the Wave Company's decision not to extend such a courtesy was reasonable – and Plaintiffs' conduct was not.

With that in mind, the Court cautions Plaintiffs to put their proverbial 'best foot forward' in any amended pleadings that are to be made. While leave to amend is being granted once at this juncture in deference to the general liberality of allowing opportunities to amend under California law, a pattern of delays, sub-par meet and confer efforts, and cursory allegations when specifics appear to be readily available, all counsel against endless rounds of amending. Moreover, from the perspective of judicial efficiency, round after round of amending is disfavored when a party fails to take advantage of the opportunities that exist to learn the discrepancies within his or her pleadings (discrepancies which can be pointed out by the demurring party when the meet and confer outreach is made) and address those discrepancies in a timely fashion and without resorting to court involvement (via amendment as of right in the first instance, and via a timely and good faith request to stipulate to amend after that meet and confer process). Plaintiffs' conduct in this regard appears to have been lackluster, and, accordingly, any future requests for leave to amend will not be reviewed with favor. As such, Plaintiffs are cautioned to put forth their best and strongest allegations now with the leave that is being granted – and further cautioned to participate in the meet and confer process in good faith should any future demurrer efforts be made, as a failure to participate in such process may weigh against extending further leave to amend.

Unless the ruling(s) above indicate that an appearance is necessary, parties who wish to submit, who are satisfied with the above tentative ruling(s), and/or who do not otherwise wish to argue the motion(s) are encouraged to give notice to the Court and each other of their intention not to appear.

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