Judge Christopher K. Lui, Case 22STCV15449 2023-02-10 Tentative Ruling

Pursuant to California Rule of Court 3.1308(a)(1), the Court does not desire oral argument on the demurrer and motion addressed herein. As required by Rule 3.1308(a)(2), any party seeking oral argument must notify ALL OTHER PARTIES and the staff of Department 76 of their intent to appear and argue. Notice to Department 76 may be sent by email to smcdept76@lacourt.org or telephonically at 213-830-0776. If notice of intention to appear is not given and the parties do not appear, the Court will adopt the tentative ruling as the final ruling.

Plaintiff alleges that Defendant engaged in price gouging relative to prices on propane gas and other products.

Defendant Suburban Propane, L.P. demurs to the Complaint and moves to strike portions thereof.

Because the First Amended Complaint was untimely filed, it is ordered STRICKEN, and the Court will address the demurrer and motion to strike as to the original Complaint.

Defendant Suburban Propane, L.P.’s demurrer to the Complaint is SUSTAINED with leave to amend as to the first cause of action and without leave to amend as to the fourth cause of action, and OVERRULED as to the second and third causes of action.

The motion to strike is GRANTED with leave to amend as to the Prayer for relief No. 6: “An award of punitive damages in an amount to be proven at trial[.]” (Compl. at 10) and without leave to amend as to the Prayer for Relief for the Second Cause of Action No. 1: “An award of . . . punitive damages according to proof[.]” (Compl. at 10.)

On February 2, 2023, Plaintiff filed a First Amended Complaint. This was untimely relative to the February 10, 2023 hearing date. CCP § 472(a) requires that, unless stipulated to by the parties, an amended complaint filed before the hearing on the demurrer or motion to strike be filed no later than the date for filing an opposition, which is nine court days per CCP § 1005(a), i.e., January 30, 2023.

Because the First Amended Complaint was untimely filed, it is ordered stricken, and the Court will address the demurrer and motion to strike as to the original Complaint.

The Declaration of Phillip Allan Trajan Perez reflects that Defendant’s counsel satisfied the meet and confer requirement set forth in CCP § 430.41.

Defendant’s request that the Court take judicial notice of all documents attached to Plaintiff’s Complaint is GRANTED per Evid. Code § 452(d)(court records).

Defendant argues that there are no facts to support the conclusory statement that Defendant breached the Dispenser Operating Agreement Contracts (“DOACs”)(Exh. A to the Complaint) by charging Plaintiffs prices that were between 15 to 20 percent above their wholesale purchase prices. Defendant argues that Plaintiffs do not allege: (a) the price they paid for the Propane or Related Items, (b) Suburban’s wholesale purchase price for such products during the relevant time, or (c) how the price they paid exceeded any “pricing terms or pricing factors.” Defendant also argues that Plaintiffs passed any additional costs they incurred on to their customers, rather than absorbing the price increase, and thus did not suffer any harm.

“The elements of a breach of contract claim are that a contract was formed; that the plaintiff did everything required by the contract; that the defendant did not do something required by the contract; and that the plaintiff was harmed as a result. (Citation omitted.)” (CSAA Ins. Exch. v. Hodroj (2021) 72 Cal.App.5th 272, 276.) Here, Plaintiffs need not plead the details Defendant advance, such as the price paid, and the wholesale price. The allegation that prices were between 15 to 20 percent above the wholesale price is a factual allegation, and the details Defendant seeks are properly the subject of discovery. “The sole issue raised by a general demurrer is whether the facts pleaded state a valid cause of action, not whether they are true. No matter how unlikely or improbable, plaintiff's allegations must be accepted as true for the purpose of ruling on the demurrer. (Citation omitted.) Furthermore, plaintiff's possible inability or difficulty in proving the allegations of the complaint is of no concern. (Citation omitted.)” (Kerivan v. Title Ins. & Trust Co. (1983) 147 Cal.App.3d 225, 229.)

However, as discussed below, Plaintiffs must allege the contractual provision which prohibits Defendant from charging between 15 to 20 percent above the wholesale price.

Defendant also argues that the contractual limitations period for such claim expired in 2021, more than a year before Plaintiffs filed this suit. (See Complaint, Ex. A No. 10: “No demand, claim, suit, or action shall be made or brought against

Suburban, its related business units, employees, agents, assigns or successors more than two (2) years after the date of the event that caused any Injury, damage or loss.”)

With respect to the validity of a contractual limitations period, we have previously explained: “In general, California courts have permitted [*206] contracting parties to modify the length of the otherwise applicable California statute of limitations, whether the contract has extended or shortened the limitations period.

Here, the Complaint alleges at ¶ 18 that, beginning in or around January 2019, Defendant began consistently began charging Plaintiffs prices for the purchase of Defendant’s propane products that are consistently 15% to 20% above Defendant’s wholesale purchase prices and are in excess of the pricing terms and pricing factors set forth in the DOAR agreements. The Complaint does not allege how long such prices were charged. Arguably, each periodic charge was a continuing accrual of a new limitations period, and thus some of the claims may not be time-barred, although some may be. (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1198-1202.)

“‘A demurrer on the ground of the bar of the statute of limitations will not lie where the action may be, but is not necessarily barred’.... It must appear clearly and affirmatively that, upon the face of the complaint, the right of action is necessarily barred.... This will not be the case unless the complaint alleges every fact which the defendant would be required to prove if he were to plead the bar of the applicable statute of limitation as an affirmative defense.” (Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 881.) “A demurrer based on the statute of limitations may not properly be sustained if any part of the cause of action be not barred.” (Vassere v. Joerger (1938) 10 Cal.2d 689, 694.)

Defendant further argues that the DOACs do not prohibit a 15 to 20 percent increase, so it would not be a breach of contract. Instead, Defendant argues, the parties agreed that in exchange for Suburban’s sale of Propane and Related Items, Plaintiffs would pay “(a) Suburban’s per gallon price for Propane applicable to [Plaintiffs] on the date of delivery” and “(b) Suburban’s applicable fees and charges.” (Id. Ex. A No. 2.) Plaintiffs understood and agreed that the price “could vary with each [Propane] delivery.” (Id. [emphasis added].) The DOACs also set forth the mutually agreed-to terms governing how the price and fees would be set and explain that variability in the price was part of the deal.

The Court agrees that Plaintiffs must allege which contractual terms were breached by Defendant consistently charging 15% to 20% above Defendant’s wholesale prices. On this ground, the demurrer to the first cause of action is properly sustained.

Finally, Defendant argues that the DOACs limit Plaintiff’s recovery to the amount of payments they made to Defendant over the 12-month period before the claim accrued, but those claims and damages are time-barred. As discussed above, the statute of limitations defense is not persuasive on demurrer. Moreover, a demurrer does not lie to only part of a cause of action or a particular type of damage or remedy. (See Kong v. City of Hawaiian Gardens Redevelopment Agency (2003) 108 Cal.App.4^th 1028, 1046; PH II, Inc. v. Superior Court (Ibershof) (1995) 33 Cal.App.4^th 1680, 1682.) The proper procedure is to bring a motion to strike the substantively defective allegation. (Id. at 1682-83.)

Defendant argues that this cause of action fails because the statute and executive order it relies on expressly do not apply to the products Plaintiffs purchased or the relationship between these commercial parties.

¶ 29 alleges that Defendant committed unlawful and unfair business practices by virtue of violating California Executive order N-44-20 and Penal Code § 396.

¶ 26 of the Complaint cites Executive Order N-44-20, whereby the California Governor proclaimed a State of Emergency to exist in California as a result of the threat of COVID-19. ¶ 28 alleges:

Executive Order N-44-20 states “[i]n addition to the prohibitions set forth in Penal Code 396, a person or other entity (including, but not limited to, any business enterprise of any kind) shall not – from February 4, 2020 until September 4, 2020 . . . – sell or offer to sell any item from the categories of goods described therein for a price that is more than 10 percent greater than the highest price charged by that person or entity for that item on February 4, 2020: On September 3, 2020, the Governor extended this order to March 4, 2021.

Thus, a violation of Penal Code § 396 is also a violation of Executive Order N-44-20.

¶ 27 of the Complaint cites Penal Code § 396, which prohibits excessive and unjustified increases in the prices of essential consumer goods and services during a declared state of emergency resulting in abnormal disruption of the market. ¶ 30 alleges:

California Pen. Cod. Section 396 states that when a declared state of emergency results in abnormal disruption of the market, “the public interest requires that excessive and unjustified increases in the prices of essential consumer goods and services be prohibited.

Upon the proclamation of a state of emergency declared by the President of the United States or the Governor, or upon the declaration of a local emergency by an official, board, or other governing body vested with authority to make that declaration in any county, city, or city and county, and for a period of 30 days following that proclamation or declaration, it is unlawful for a person, contractor, business, or other entity to sell or offer to sell any consumer food items or goods, ... emergency supplies, medical supplies, home heating oil, building materials, ... or gasoline or other motor fuels for a price of more than 10 percent greater than the price charged by that person for those goods or services immediately prior to the proclamation or declaration of emergency.

Penal Code § 396(a) also proclaims that the purpose of the statute is to protect consumers regarding essential consumer gods and services, that is “for goods and services that are vital and necessary for the health, safety, and welfare of consumers.” (Penal Code § 396(a).)

(b) Upon the proclamation of a state of emergency declared by the President of the United States or the Governor, or upon the declaration of a local emergency by an official, board, or other governing body vested with authority to make that declaration in any county, city, or city and county, and for a period of 30 days following that proclamation or declaration, it is unlawful for a person, contractor, business, or other entity to sell or offer to sell any consumer food items or goods, goods or services used for emergency cleanup, emergency supplies, medical supplies, home heating oil, building materials, housing, transportation, freight, and storage services, or gasoline or other motor fuels for a price of more than 10 percent greater than the price charged by that person for those goods or services immediately prior to the proclamation or declaration of emergency, or prior to a date set in the proclamation or declaration. However, a greater price increase is not unlawful if that person can prove that the increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, during the state of emergency or local emergency, and the price is no more than 10 percent greater than the total of the cost to the seller plus the markup customarily applied by that seller for that good or service in the usual course of business immediately prior to the onset of the state of emergency or local emergency. If the person, contractor, business, or other entity did not charge a price for the goods or services immediately prior to the proclamation or declaration of emergency, it may not charge a price that is more than 50 percent greater than the cost thereof to the vendor as “cost” is defined in Section 17026 of the Business and Professions Code.

(i) A violation of this section shall constitute an unlawful business practice and an act of unfair competition within the meaning of Section 17200 of the Business and Professions Code. The remedies and penalties provided by this section are cumulative to each other, the remedies under Section 17200 of the Business and Professions Code, and the remedies or penalties available under all other laws of this state.

Here, ¶ 3 of the Complaint alleges that Defendant increased its prices on “propane gas and other products.” Penal Code § 396(j)(8) defines “gasoline” as follows: “ ‘Gasoline’ means any fuel used to power any motor vehicle or power tool.” The Court takes judicial notice that propane may be used to power tools, such as gardening power tools. Thus, the allegation that Defendant charged a more than 10% price increase during an emergency (¶ 14) is sufficient to state a violation of Penal Code § 396(b) which, in turn, is also a violation of B & P Code § 17200. There is no requirement in Penal Code 396 that the person purchasing the gasoline be a consumer. The reference to “consumer” in “consumer food item” “means any article that is used or intended for use for food, drink, confection, or condiment by a person or animal.” (Penal Code §§ 396(j)(3).) Goods’ has the same meaning as defined in subdivision (c) of Section 1689.5[1] of the Civil Code.” (Penal Code, § 396(j)(12).) Thus, “consumer” is not an expressly qualifier applicable to the other enumerated items.

The details of the price increase relative to the prices previously charged by Defendant is a matter of discovery. Whether or not any price increase was justified by

additional costs imposed by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services (Penal Code, § 396(b); Executive Oder N-44-20) is a defense which Defendant may prove, but it outside the scope of this demurrer.

Further, whether or not Plaintiffs can demonstrate economic harm from the alleged violation of Penal Code § 396 because Plaintiffs ultimately passed on the higher cost to consumers is a defense that relies upon evidence extrinsic to the Complaint, and thus may not be considered on demurrer.

“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed (Code Civ. Proc., §§ 430.30, 430.70). The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action [citation].” (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905 [200 Cal. Rptr. 497].)

Defendant argues that damages are unrecoverable under the UCL. Defendant also argues that Plaintiffs cannot recover attorneys’ fees pursuant to CCP § 1021.5. However, as noted above, a demurrer does not lie to a remedy, and the proper procedure is to bring a motion to strike.

Defendant argues that this is a negligence per se cause of action, which fails because Plaintiffs have not pled that Defendant violated Penal Code § 396.

The doctrine of negligence per se provides an evidentiary presumption of negligence where a violation of statute, ordinance or regulation causes death or injury to a person or property for whose protection the statute, ordinance or regulation was adopted. (Johnson v. Honeywell Internat. Inc. (2009) 179 Cal.App.4th 549, 555.)

However, as discussed above, Plaintiffs have sufficiently pled a violation of Penal Code § 396.

Defendant argues that there is no unjust enrichment claim in California, and a claim for restitution does not lie where the parties have an enforceable express contract.

“Unjust enrichment is not a cause of action, however, or even a remedy, but rather ‘ “ ‘a general principle, underlying various legal doctrines and remedies’ ” … . [Citation.] It is synonymous with restitution.’ ” (McBride v. Boughton (2004) 123 Cal.App.4th 379, 387 [20 Cal. Rptr. 3d 115].) Like the trial court, we will construe the cause of action as a quasi-contract claim seeking restitution.

“[A]n action based on an implied-in-fact or quasi-contract cannot lie where there exists between the parties a valid express contract covering the same subject matter.” (Lance Camper Manufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal.App.4th 194, 203 [51 Cal. Rptr. 2d 622].) However, “restitution may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason.” (McBride v. Boughton, supra, 123 Cal.App.4th at p. 388.) Thus, a party to an express contract can assert a claim for restitution based on unjust enrichment by “alleg[ing in that cause of action] that the express contract is void or was rescinded.” (Lance Camper Manufacturing Corp. v. Republic Indemnity Co. supra, at p. 203.) A claim for restitution is permitted even if the party inconsistently pleads a breach of contract claim that alleges the existence of an enforceable agreement. (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1389 [137 Cal. Rptr. 3d 293].)

(Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231 [bold emphasis and underlining added].)

Here, the Complaint alleges that a contract existed between Plaintiffs and Defendants. Plaintiffs do not allege facts which would render those contracts unenforceable or ineffective. As such, this cause of action, even if construed as one for restitution based on unjust enrichment, fails as a matter of law.

The Declaration of Phillip Allan Trajan Perez filed in support of the demurrer reflects that Defendant’s counsel satisfied the meet and confer requirement set forth in CCP § 435.5.

Defendant Suburban Propane, L.P. moves to strike the following portions of the Complaint:

¿ Prayer for relief No. 6: “An award of punitive damages in an amount to be proven at trial[.]” (Compl. at 10.)

In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.”

Moreover, the Complaint fails to factually plead that Defendant acted with malice, oppression or fraud as those terms are defined in Civil Code § 3294(c), in connection with a tort (not contract):

(1) ‘Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

(2) ‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.

(3) ‘Fraud’ means an intentional misrepresentation, desceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

¿ Prayer for Relief for the Second Cause of Action No. 1: “An award of . . . punitive damages according to proof[.]” (Compl. at 10.)

Neither nonrestitutionary nor punitive damages are an available form of remedy under California Business and Professions Code § 17200. (See Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1148; Bank of The West v. Superior Court (1992) 2 Cal.4th 1254, 1266; Alch v. Superior Court (2004) 122 Cal.App.4th 339, 404; Clark v. Superior Court (2010) 50 Cal.4th 605, 610.)

[1]

(c) “Goods” means tangible chattels bought for use primarily for personal, family, or household purposes, including certificates or coupons exchangeable for these goods, and including goods that, at the time of the sale or subsequently, are to be so affixed to real property as to become a part of the real property whether or not severable therefrom, but does not include any vehicle required to be registered under the Vehicle Code, nor any goods sold with this vehicle if sold under a contract governed by Section 2982, and does not include any mobilehome, as defined in Section 18008 of the Health and Safety Code, nor any goods sold with this mobilehome if either are sold under a contract subject to Section 18036.5 of the Health and Safety Code.

(Civ Code § 1689.5(c).)