Judge: Cherol J. Nellon, Case: 23STCV14579, Date: 2023-10-25 Tentative Ruling

Case Number: 23STCV14579    Hearing Date: February 21, 2024    Dept: 14

Case Background

 

The individual Defendant, Jonas Muthoni (“Muthoni”), is the former Chief Technology Officer (“CTO”) for Plaintiff Care as One, Inc. (“Care”). The corporate Defendant, Deviate Agency, LLC (“Deviate”) is a separate business owned by Defendant Muthoni. Plaintiff Vijai Bhatti (“Bhatti”) is the CEO of Plaintiff Care. Plaintiffs allege that Defendant Muthoni failed to do his job properly, and subcontracted some of his work to Defendant Deviate, which also failed to perform. Plaintiffs allege that this cost them several clients and a lot of money, as well as causing Plaintiff Bhatti emotional distress.

 

On November 14, 2023, Plaintiffs filed their First Amended Complaint (“FAC”) for (1) Breach of Fiduciary Duty, (2) Intentional Misrepresentation, (3) Negligent Misrepresentation, (4) Tortious Interference with Prospective Economic Advantage, (5) Conversion, (6) Receiving Stolen Property, and (7) Unfair Competition against Defendants Muthoni, Deviate, and DOES 1-20.

 

            No trial date has yet been set.

 

(1)       Demurrer

 

            Defendants now demur to the second, third, and fourth causes of action in the FAC on the grounds that the facts alleged are insufficient to support those claims and are uncertain.

 

Decision

 

            The demurrer to the second, third, and fourth causes of action is SUSTAINED, with 10 days leave to amend.

 

Second Cause of Action: Intentional Misrepresentation

 

            The elements of a cause of action for fraud are: (1) a false representation, actual or implied, or concealment of a matter of fact material to the transaction which defendant had a duty to disclose or defendant’s promise made without the intention to perform; (2) defendant’s knowledge of the falsity; (3) defendant’s intent to deceive; (4) plaintiff’s justifiable reliance thereon; and (5) resulting damage to plaintiff. Mosier v. Southern Calif. Physicians Ins. Exchange (1998) 63 Cal.App.4th 1022, 1045.

 

Fraud must be specifically pled, and the particularity requirement necessitates the pleading of facts that “show how, when, where, to whom, and by what means the representations were tendered.” Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73. The purpose of the rules of fraud pleading is to inform the defendant and the court of the specific grounds of the charge and enable them to evaluate it. See Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 231.

 

Defendant Muthoni

 

            In the original complaint, the alleged misrepresentation was Defendant Muthoni’s assertion “that he had the skills, qualifications, and experience to serve as CTO.” (Complaint ¶ 36). The court held that insufficient to satisfy the rules of fraud pleading.

 

Plaintiffs have now added that when Defendant Muthoni was interviewing for the position of CTO, he claimed (1) “that he could implement technical upgrades to Care as One’s software product,” (2) “that he could manage a team of software developers to meet the Care as One’s software product maintenance needs,” and (3) “that he had the skills, qualifications, and experience to serve as CTO.” (FAC ¶ 35).

 

Not every statement can result in a fraud claim. For example, statements about a product’s performance may be discounted as “puffery” (see Consumer Advocates v. Echostar Satellite Corp. (2003) 113 Cal.App.4th 1351, 1361 & fn.3), and opinions, even opinions about future performance, cannot be relied upon because they are not facts yet (see San Francisco Design Center Associates v. Portman Companies (1995) 41 Cal.App.4th 29, 43-44). A general statement made by a candidate in a job interview about their ability to do the job falls within this same category. And that is all Plaintiffs have alleged against Defendant Muthoni.

 

While an employee may certainly commit fraud by representing he has specific qualifications or experience that he does not in fact possess, the mere statement by the employee that he has the ability to do the job is (and must be) merely an opinion. What’s more, it is an opinion every prospective employee is called to their interview to give. If Plaintiffs’ theory were allowed to proceed, every employer who fires an employee for performance issues could then also sue that employee for fraud. It is also worth noting (though neither party has argued the point) that there is a conditional privilege for statements made by those involved in evaluating a prospective employee. See Civil Code § 47(c).

 

Defendant Deviate

 

            In the original complaint, the alleged misrepresentation was Defendant Deviate’s assertion that it “could meet Care as One’s needs” in a manner that would “fulfill Care as One’s promises.” (Complaint ¶¶ 37-38). As with Defendant Muthoni, the court held that insufficient to satisfy the rules of fraud pleading.

 

            The FAC simply restates those allegations. (FAC ¶¶ 40-41). It appears that Plaintiffs may be attempting to plead some sort of promissory fraud theory. But in order to plead promissory fraud, Plaintiffs must both plead the promise with more specificity and plead that Defendant Deviate had no intention to perform when the promise was made. See Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1060. That has not been done.

 

Third Cause of Action: Negligent Misrepresentation

 

            The pleadings, law, and analysis on this claim are the same as on the claim above, and the result should be the same, with one additional note. If Plaintiffs are attempting to make a promissory fraud claim, they may not use the same facts to alternatively plead a negligent misrepresentation claim. See Stockton Mortgage, Inc. v. Tope (2014) 233 Cal.App.4th 437, 458.

 

Fourth Cause of Action: Tortious Interference

 

            The court previously sustained the demurrer to this cause of action on uncertainty grounds – pointing out that there is no single cause of action for “Tortious Interference with Prospective Economic Advantage.” The court instructed Plaintiffs to plead either (a) Intentional Interference with Prospective Economic Advantage, (b) Negligent Interference with Prospective Economic Advantage, or (c) both, as separate claims. The court also pointed out an issue with asserting either claim against Defendant Muthoni, and an ambiguity with the pleading of Defendant Deviate’s contractual relationships.

 

            Plaintiffs have responded to the court’s comments by dropping Defendant Muthoni from this claim and pleading the contractual relationships more precisely. But they still have failed to correct the uncertainty created by their failure to properly identify the cause of action. The Opposition suggests that Plaintiffs mean to plead a single claim for Intentional Interference with Prospective Economic Advantage, and that the “wrongful act” element is met by the preceding cause of action for fraud. But neither of these assertions appear in FAC itself.

 

Conclusion

 

            Because Plaintiffs have failed to properly identify an actionable misrepresentation, and have failed to properly label and fill out their interference claim, they have failed to state facts sufficient to support their second, third, and fourth causes of action. Because the defects in the pleading remain potentially curable, the court grants Plaintiffs 10 days leave to amend.