Judge: Christopher K. Lui, Case: 23STCV25323, Date: 2024-03-15 Tentative Ruling
Case Number: 23STCV25323 Hearing Date: March 15, 2024 Dept: 76
Pursuant to California Rule of Court
3.1308(a)(1), the Court does not desire oral argument on the motion addressed
herein. Counsel must contact the staff
in Department 76 to inform the Court whether they wish to submit on the
tentative, or to argue the matter. As
required by Rule 3.1308(a), 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.
Per Rule of Court 3.1308, if notice of intention to appear is not given, the Court may adopt the tentative ruling as the final ruling.
Plaintiff is a general contractor alleging that Defendant issued an unfounded and fabricated “for cause” termination certification so that the owner of the project could terminate the contract without paying additional costs associated with a “for convenience” termination.
Defendant HLW International LLP demurs to the First Amended Complaint.
TENTATIVE RULING
Defendant HLW International LLP’s demurrer to the First
Amended Complaint is SUSTAINED without leave to amend as to the first
through fifth causes of action. The case is ordered dismissed with prejudice.
ANALYSIS
Demurrer To First Amended
Complaint
Request For Judicial Notice
Defendant’s
request that the Court take judicial notice of the Complaint, demurrer thereto,
and First Amended Complaint filed in this action is GRANTED per Evid. Code, §
452(d)(court records).
Discussion
1. First
Cause of Action (Intentional Interference with Contractual Relations).
Defendant
argues that Plaintiff is bound by the sham pleading doctrine given that in the
original Complaint the actual alleged breach of the GC Contract occurred on
November 17, 2020, and/or November 19, 2020,(Complaint, ¶18), but the allegedly
wrongful, intentional act of Defendant was Defendant’s certification letter to
the Owner dated February 16, 2021—three months later. Defendant argues that
there was no valid contract between Plaintiff and Defendant at the time of
Defendant’s allegedly wrongful conduct.
To prevail on a cause of action
for intentional interference with contractual relations, a plaintiff must plead
and prove (1) the existence of a valid contract between the plaintiff and a third party; (2) the
defendant's knowledge of that contract; (3) the 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. (Ibid.) To establish the claim, the plaintiff
need not prove that a defendant acted with the primary purpose of disrupting
the contract, but must show the defendant's knowledge that the interference was
certain or substantially certain to occur as a result of his or her action.
(Citation omitted.)
(Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1148
[bold emphasis added].)
“Proof the interfering conduct was
wrongful, independent from the interference itself, is not required to recover
for interference with contractual relations. (Citation omitted.)” (Sole
Energy Co. v. Petrominerals Corp. (2005) 128 Cal.App.4th 212, 237-38.)
Here,
the 1AC alleges the following:
12. Shortly
after Plaintiff commenced working on the Project in September 2020, Plaintiff’s
reasonable insistence on complete and timely payments in accordance with the
Contract terms led Owner to conclude that the only way to excuse its
own mismanagement of the Project and avoid its obligations to pay Plaintiff
when installment payments were due would be to terminate Plaintiff's Contract.
13. Although
Owner could terminate its Contract with Plaintiff “for convenience” or “for
cause,” any termination for convenience would require Owner to pay significant
sums to Plaintiff if terminated for Owner’s convenience. To avoid the need to pay the additional costs
associated with a for convenience” termination, Owner sought HLW’s
certification that there were sufficient grounds to support a
termination “for cause.”
14. HLW
initially and repeatedly advised Owner that it was unable to certify that
there were any grounds upon which Plaintiff could be terminated “for cause.”
. . .
16. Using
its financial clout in the industry, promises of other work, and implications
that an existing business relationship between Owner and HLW would be
irreparably damaged if HLW failed to provide the requested “for cause”
termination certification, Owner applied financial pressures and incentives
to HLW to procure that certification. . . .
(1AC, ¶¶ 12,
13, 14, 16 [bold emphasis and underlining added].)
By Plaintiff’s own factual
allegations, demurring Defendant HLW did not cause a breach or disruption of
Owner’s contract with Plaintiff—rather Owner decided to terminate
(breach/disrupt) the contract and pressured Defendant HLW to provide
documentation to justify such termination. The essential element of causation
is not pled.
The demurrer to the first cause of
action is SUSTAINED without leave to
amend, unless Plaintiff can demonstrate a reasonable possibility of
successful amendment.
2. Second
Cause of Action (Inducing Breach of Contract).
[W]e consider first the cause of
action for inducing breach of the agreement. The elements of this tort--a
species of intentional interference with contractual relations--are a valid
contract between the plaintiff and a third party, defendant's knowledge of
it, "defendant's intentional acts designed to induce a breach
. . . of the contractual relationship," consequent breach, and resulting
damage. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 55
[77 Cal. Rptr. 2d 709, 960 P.2d 513] (Quelimane).)
(1-800 Contacts, Inc. v. Steinberg (2003) 107 Cal.App.4th 568, 585
[bold emphasis and underlining added].)
As discussed above, Plaintiff’s
alleged facts are that Owner decided to breach the contract, then pressured
demurring Defendant HLW to provide documentation to
justify such termination. The essential element of causation is not pled.
The demurrer to the second cause of
action is SUSTAINED without leave to
amend, unless Plaintiff can demonstrate a reasonable possibility of
successful amendment.
3. Third
Cause of Action (Intentional Interference with Prospective Economic Relations).
In order to prove a claim for intentional
interference with prospective economic advantage, a plaintiff has the burden of
proving five elements: (1) an economic relationship between the plaintiff and a
third party, with the probability of future economic benefit to the plaintiff;
(2) the defendant's knowledge of the relationship; (3) an intentional act by
the defendant, designed to disrupt the relationship; (4) actual disruption
of the relationship; and (5) economic harm to the plaintiff proximately caused by
the defendant's wrongful act, including an intentional act by the defendant
that is designed to disrupt the relationship between the plaintiff and a third
party. (Citation omitted.) The plaintiff must also prove that the interference
was wrongful, independent of its interfering character. (Citation omitted.)
“[A]n act is independently wrongful if it is unlawful, that is, if it is
proscribed by some constitutional, statutory, regulatory, common law, or other
determinable legal standard.” (Citation omitted.)
(Edwards v. Arthur Andersen LLP
(2008) 44 Cal.4th 937, 944 [bold emphasis added].)
It
appears that the independently wrongful conduct must be tortious, not a
contractual breach:
We conclude, therefore, that an act is
independently wrongful if it is unlawful, that is, if it is proscribed by some
constitutional, statutory, regulatory, common law, or other determinable legal
standard. n11 (See Marin Tug &
Barge, Inc., supra, at p. 835; see also Della Penna, supra, 11 Cal.4th at 408
(conc. opn. of Mosk, J.) ["It follows that the tort may be satisfied by
intentional interference with prospective economic advantage by independently tortious means"].)
FOOTNOTES
n11 We need not in this case further define
which sources of law can be relied on to determine whether a defendant has
engaged in an independently wrongful act, other than to say that such an act
must be wrongful by some legal measure, rather than merely a product of an
improper, but lawful, purpose or motive. To the extent that the lower courts
have determined otherwise, these decisions are disapproved. (See, e.g., PMC,
Inc. v. Saban Entertainment, Inc. (1996) 45 Cal.App.4th 579, 603 [52 Cal. Rptr.
2d 877] [stating that liability may arise from either improper motive or
improper means].)
As discussed above, Plaintiff’s
alleged facts are that Owner decided to breach the contract, then pressured
demurring Defendant HLW to provide documentation to
justify such termination. The essential element of causation is not pled.
Moreover,
Plaintiff has not pled an independently wrongful act committed by HLW.
The
demurrer to the third cause of action is SUSTAINED without leave to amend, unless Plaintiff can demonstrate a
reasonable possibility of successful amendment.
4. Fourth
Cause of Action (Fraudulent Concealment).
[T]he elements of a cause of action for fraud
based on concealment are: “ ‘(1) the defendant must have concealed or
suppressed a material fact, (2) the defendant must have been under a duty to
disclose the fact to the plaintiff, (3) the defendant must have intentionally
concealed or suppressed the fact with the intent to defraud the plaintiff, (4)
the plaintiff must have been unaware of the fact and would not have acted as he
did if he had known of the concealed or suppressed fact, and (5) as a result of
the concealment or suppression of the fact, the plaintiff must have sustained
damage. [Citation.]’ [Citation.]” (Citation omitted.)
(Kaldenbach v. Mutual of Omaha Life
Ins. Co. (2009) 178 Cal.App.4th 830, 850.)
“There are ‘four circumstances in which
nondisclosure or concealment may constitute actionable fraud: (1) when the
defendant is in a fiduciary relationship with the plaintiff; (2) when the
defendant had exclusive knowledge of material facts not known to the plaintiff;
(3) when the defendant actively conceals a material fact from the plaintiff;
and (4) when the defendant makes partial representations but also suppresses
some material facts. [Citation.]’ ” (Citations omitted.) Where, as here, there
is no fiduciary relationship, the duty to disclose generally presupposes a
relationship grounded in “some sort of transaction between the parties.
[Citations.] Thus, a duty to disclose may arise from the relationship between
seller and buyer, employer and prospective employee, doctor and patient, or
parties entering into any kind of contractual agreement. [Citation.]” (Citation
omitted.)
(OCM Principal Opportunities Fund, L.P. v.
CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 859.)
Here,
Plaintiff alleges that Defendant HLW, as administrator for the contract, owed
Plaintiff a duty to disclose any performance or billing related issues that
would rise to the level of constituting grounds for termination. (1AC, ¶ 52.) However,
Plaintiff admits that such performance and billing related issues were
fabricated. (Id. at ¶ 53.)
Here,
Plaintiff admits that no such reasons existed, so there was no performance or
billing related issued to disclose during Plaintiff’s performance of its
contract with the Owner. Moreover, Plaintiff has not pled out-of-pocket loss
caused by the alleged concealment of facts which, Plaintiff admits, were
fabricated after the Owner had decided to terminate the contract.
Cases involving fraud where property was not
acquired have limited damages to out-of-pocket losses. Thus, in Gray v. Don
Miller & Associates, Inc. (1984) 35 Cal.3d 498 [198 Cal.Rptr. 551, 674 P.2d
253, 44 A.L.R.4th 763] defendant falsely represented that plaintiff could
acquire certain property upon which to expand his business. When plaintiff
discovered the representation was false, he sought damages for amounts spent in
reliance upon the certainty of sale plus "delay damages." The delay
damages arose because the cost to construct the planned improvements
increased during the time plaintiff waited for the sale to close. The
Supreme Court reversed the delay damage award, stating plaintiff "was
entitled only to the 'actual losses suffered because of the misrepresentation.'
[Citation.] His inability to begin construction on the property was not caused
by [the] misrepresentation, but by the seller's refusal to accept his offer of
sale." (Id. at p. 504.) Gray holds that a defrauded party may recoup his out-of-pocket losses and expenditures
in reliance on the fraud, but he may not recover benefit-of-the-bargain damages
(i.e., damages placing him in the economic position he would have occupied had
the representation been true), at least where the recovery is not premised on a
specific property actually acquired by the defrauded party.
(Kenly v. Ukegawa (1993) 16 Cal.App.4th 49, 54 [bold emphasis
added].)
As
such, the demurrer to the fourth cause of action is SUSTAINED without
leave to amend, unless Plaintiff can
demonstrate a reasonable possibility of successful amendment.
5. Fifth
Cause of Action (Unfair Business Practices—Bus. & Prof. Code, § 17200).
The
“injury in fact” requirement incorporates the established federal meaning of
that phrase. (Kwikset, supra, 51 Cal.4th at p. 322.) Under federal law, an
injury in fact “is ‘an invasion of a legally protected interest which is (a)
concrete and particularized … and (b) “actual or imminent, not ‘conjectural’ or
‘hypothetical.’”’” (Ibid.) “‘Particularized’ in this context means simply that
‘the injury must affect the plaintiff in a personal and individual way.’” (Id.
at p. 323.) In addition to requiring “injury in fact,” the UCL requires that
the “injury be economic” (Kwikset, at p. 324), that is, it must take the form
of “lost money or property” (Bus. & Prof. Code, § 17204; Kwikset, at p.
324). The requirement that the “injury be economic renders standing under
[Business and Professions Code] section 17204 substantially narrower than
federal standing under article III, section 2 of the United States
Constitution, which may be predicated on a broader range of injuries.”
(Kwikset, at p. 324.) Thus, “in sharp contrast to the state of the law before
passage of Proposition 64, a private plaintiff filing suit now must establish
that he or she has personally suffered” economic injury in fact caused by the
alleged unfair competition. (Id. at pp. 322-323, italics added.)
(Rincon Band of Luiseño Mission Indians etc.
v. Flyn (2021) 70
Cal.App.5th 1059, 1096-97.)
Here, as
discussed above, Plaintiff’s alleged facts are that Owner decided to
breach the contract, then pressured demurring Defendant HLW to provide documentation to justify such termination. The
essential element of causation and loss of money or property as a result of
Defendant’s actions is not pled. Indeed, Plaintiff does not plead that it gave
any money or property to Defendant which could be disgorged to Plaintiff as
restitution.
intended to preclude consumers from
seeking the return of money they paid for a product that turned out to be not
as represented. Rather, the holding of
Korea Supply on the issue of restitution is that the remedy the plaintiff seeks
must be truly “restitutionary in nature”—that is, it must represent the return
of money or property the defendant acquired through its unfair practices.
(Shersher v. Superior Court
(2007) 154 Cal.App.4th 1491, 1498 [bold emphasis added].)
The demurrer to the fifth cause of action is SUSTAINED without leave to amend, unless Plaintiff can demonstrate a reasonable possibility of successful amendment.
The Court makes an overall observation as to why leave to amend is not likely to be granted. Plaintiff is basically alleging that HLW conspired with the Owner to breach the contract. However, the Owner cannot be held liable for conspiring to breach its own contract. (Kasparian v. County of Los Angeles (1995) 38 Cal.App.4th 242, 263-64.) As such, there is no other party with which HLW could conspire. (City of Industry v. City of Fillmore (2011) 198 Cal.App.4th 191, 211-12 [noting that a conspiracy requires at least two persons].)
The
case is ordered dismissed with prejudice.