Judge: Christopher K. Lui, Case: 24STCV23671, Date: 2024-12-18 Tentative Ruling
Case Number: 24STCV23671 Hearing Date: December 18, 2024 Dept: 76
The following
tentative ruling is issued pursuant to Rule of Court 3.1308 at 2:54 PM on December 17,
2024.
Notice of intent
to appear is REQUIRED pursuant to California Rule of Court 3.1308(a)(1). The Court does not desire oral argument on
the motion addressed herein.
As required by
Rule 3.1308(a)(1), any party seeking oral argument must notify ALL OTHER
PARTIES and the staff of Department 76 by 4:00 p.m. on December 17,
2024.
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, oral argument will not
be permitted.
Plaintiffs allege that Defendants have consistently told Plaintiff Dealership’s customers that Dealership fabricated their rodent damage claims, that it was attempting to defraud Mercury Insurance, that it was engaged in consistent illegal behavior, and that Dealership was ripping off its customers. Mercury, its agents and employees, and especially Shideh, contacted employees at Dealership and accused them of fabricating evidence, intentionally damaging customer vehicles to make insurance claims, and disparaging Dealership’s reputation.
Defendants Shahorkh Shideh and Shideh Engineering, Inc. demur to the First Amended Complaint.
TENTATIVE RULING
OVERRULED as to the sixth and eighth causes of action, and SUSTAINED without leave to amend as to the ninth and tenth causes of action.
Defendants are to answer the remaining allegations of the First Amended Complaint within 10 days.
ANALYSIS
Demurrer
Meet and Confer
The Declaration of Bayan Salehi reflects that Defendants’ counsel satisfied the meet and confer requirement set forth in Civ. Proc. Code, § 430.41.
Discussion
Defendants Shahorkh Shideh and Shideh Engineering, Inc. demur to the First Amended Complaint as follows:
1. Sixth
Cause of Action (General Negligence).
Defendants
argue that they did not owe Plaintiffs a duty of care because Shideh was
retained by Mercury to provide professional services inspecting vehicles and
giving expert opinions about the claims, and Plaintiffs were not intended
third-party beneficiaries of this engagement by Mercury.
Here,
because Plaintiffs allege economic harm resulting from Defendants’ alleged
negligence, the Court must examine whether a special relationship exists so as
to impose a duty of care owed toward Plaintiffs:
The four elements of a negligence claim are
well established: (1) duty; (2) breach; (3) proximate causation; and (4)
injury. (Brown v. USA Taekwondo (2021) 11 Cal.5th 204, 213 [276
Cal. Rptr. 3d 434, 483 P.3d 159] (Brown) [“To establish a cause of
action for negligence, the plaintiff must show that the ‘defendant had a duty
to use due care, that he breached that duty, and that the breach was the
proximate or legal cause of the resulting injury.’”]; Kesner v.
Superior Court (2016) 1 Cal.5th 1132, 1158 [210 Cal. Rptr. 3d 283, 384
P.3d 283]; Nally v. Grace Community Church (1988) 47 Cal.3d
278, 292 [253 Cal. Rptr. 97, 763 P.2d 948].) In moving for summary judgment,
Chase argued the Law Firm could not establish three of the elements: duty,
breach, and causation. We agree with the Law Firm that Chase owed the Law
Firm a duty of care, and the Law Firm has created a triable issue of fact as to
breach and causation.
1. Duty of care owed to third parties
“Whether a duty exists is a question of law
to be resolved by the court.” (Brown, supra, 11 Cal.5th at p. 213;
accord, Southern California Gas Leak Cases (2019) 7 Cal.5th
391, 398 [247 Cal. Rptr. 3d 632, 441 P.3d 881] [*193] (Gas Leak
Cases).) The general rule governing duty of care is set forth in Civil
Code section 1714. (Brown, at p. 213.) Civil Code section 1714,
subdivision (a), provides, “Everyone is responsible, not only for the result of
his or her willful acts, but also for an injury occasioned to another by his or
her want of ordinary care or skill in the management of his or her property or
person … .” Under this provision, “[i]n general, each person has a duty to act
with reasonable care under the circumstances.” (Regents, supra, 4
Cal.5th at p. 619; accord, Gas Leak Cases, at p. 398 [“In
California, the ‘general rule’ is that people owe a duty of care to avoid
causing harm to others and that they are thus usually liable for injuries their
negligence inflicts.”].)
However, “[d]uty is not universal; not every
defendant owes every plaintiff a duty of care. A duty exists only if ‘“the
plaintiff's interests are entitled to legal protection against the defendant's
conduct.”’” (Brown, supra, 11 Cal.5th at p. 213; accord, Sheen
v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 920 [290 Cal. Rptr.
3d 834, 505 P.3d 625] (Sheen).) For example, “[t]he law does not impose
the same duty on a defendant who did not contribute to the risk that the
plaintiff would suffer the harm alleged.” (Brown, at p. 214.)
A significant exception to the general
duty of care under Civil Code section 1714 applies where the defendant causes
only economic loss, commonly called the “economic loss rule.” (Sheen,
supra, 12 Cal.5th at p. 922 [“The [economic loss rule] is deceptively easy
to state: In general, there is no recovery in tort for negligently inflicted
‘purely economic losses,’ meaning financial harm unaccompanied by physical or
property damage.”]; see Gas Leak Cases, supra, 7 Cal.5th at p.
406 [liability in negligence for “purely economic losses” is “the exception,
not the rule”].)
This case presents such a situation—the Law
Firm alleges it suffered solely an economic loss as a result of Chase's
negligence in releasing all the funds in the blocked account to
Brumfield. Although the economic loss rule is therefore implicated,
there is an exception to the rule's limitation on liability where the plaintiff
and defendant have a special relationship and policy considerations
support finding a duty. (Gas Leak Cases, supra, 7 Cal.5th at p.
400; J'Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 804 [157
Cal. Rptr. 407, 598 P.2d 60] (J'Aire).) As the Supreme Court explained
in Gas Leak Cases, “The primary exception to the general rule of
no recovery for negligently inflicted purely economic losses is where the
plaintiff and the defendant have a ‘special relationship.’
[Citation.] What we mean by special relationship is that the plaintiff was
an intended beneficiary of a particular transaction but was harmed by
the defendant's negligence in carrying it out.” (Gas Leak Cases, at
p. 400.)
. . . [*194] . . .
The Supreme Court in Biakanja, supra,
49 Cal.2d at page 650 explained “[t]he determination whether in a specific case
the defendant will be held liable to a third person not in privity is a matter
of policy and involves the balancing of various factors … .” The court
considered six factors typically described as the Biakanja factors:
(1) the extent to which the transaction was intended to affect the plaintiff;
(2) the foreseeability of harm to the plaintiff; (3) the degree of certainty
that the plaintiff suffered injury; (4) the closeness of the connection between
the defendant's conduct and the injury suffered; (5) the moral blame
attached to the defendant's conduct; and (6) the policy of preventing future
harm. (Ibid.; see Gas Leak Cases, supra, 7 Cal.5th at p. 401
[“Discerning whether there is a special relationship justifying liability [for
purely economic loss by a third party] can nonetheless be a [*195]
subtle enterprise” involving balancing of the Biakanja factors]; J'Aire,
supra, 24 Cal.3d at p. 804 [applying Biakanja factors to
find duty of care owed to third party lessee]; Beacon Residential
Community Assn. v. Skidmore, Owings & Merrill LLP (2014) 59
Cal.4th 568, 578 [173 Cal. Rptr. 3d 752, 327 P.3d 850] [“Biakanja set
forth a list of factors that inform whether a duty of care exists between a
plaintiff and defendant in the absence of privity.”].)
The Supreme Court in J'Aire, supra,
24 Cal.3d at page 806 emphasized that a “key component” in this analysis is
the foreseeability of the harm. However, as the Supreme Court explained
in Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 398
[11 Cal. Rptr. 2d 51, 834 P.2d 745] (Bily), even where the economic
loss is foreseeable, the court has considered factors in addition to those
in Biakanja in declining to impose a duty of care, for
example, where “damage awards threatened to impose liability out of proportion
to fault or to promote virtually unlimited responsibility for intangible injury.”
Rather, “[d]eciding whether to impose a duty of care turns on a careful
consideration of the ‘“‘“the sum total”’”’ of the policy considerations at
play, not a mere tallying of some finite, one-size-fits-all set of factors.” (Gas
Leak Cases, supra, 7 Cal.5th at p. 401; see Goonewardene v. ADP,
LLC (2019) 6 Cal.5th 817, 841 [243 Cal. Rptr. 3d 299, 434 P.3d 124]
[declining to impose on third party payroll company a duty of care to employee
of hiring business after “[c]onsidering the ‘“sum total”’ of the relevant
considerations of policy”]; Lucas v. Hamm (1961) 56 Cal.2d
583, 589 [15 Cal. Rptr. 821, 364 P.2d 685] [“Since defendant was authorized to
practice the profession of an attorney, we must consider an additional factor
not present in Biakanja, namely, whether the recognition of
liability to beneficiaries of wills negligently drawn by attorneys would impose
an undue burden on the profession.”].)
(The Law Firm of Fox & Fox
v. Chase Bank, N.A. (2023) 95 Cal. App. 5th 182, 192-195.)
The
Court addresses the Biakanja factors:
(1) The
extent to which the transaction was intended to affect the plaintiff;
Given that Defendant Shideh of SEI was sent
by Mercury to respond to insurance claims (see, e.g., 1AC, ¶ 20), there
is an implied contractual relationship between Defendants and Mercury, not the
dealership Plaintiffs. As such, the transaction was not intended to affect the
Plaintiffs.
This factor weighs against a finding of
duty.
(2) The
foreseeability of harm to the plaintiff;
As the Supreme Court explained in Bily
v. Arthur Young & Co. (1992) 3 Cal.4th 370, 398 [11 Cal. Rptr. 2d
51, 834 P.2d 745] (Bily), even where the economic loss is
foreseeable, the court has considered factors in addition to those in Biakanja in
declining to impose a duty of care, for example, where “damage awards
threatened to impose liability out of proportion to fault or to promote
virtually unlimited responsibility for intangible injury.” Rather,
“[d]eciding whether to impose a duty of care turns on a careful consideration
of the ‘“‘“the sum total”’”’ of the policy considerations at play, not a
mere tallying of some finite, one-size-fits-all set of factors.”
Here, it is highly foreseeable that
negligent performance of inspections would affect the Plaintiffs. Moreover,
because the implication of Defendants’ findings is that Plaintiffs engage in
fraud, there is not threat of imposing disproportionate liability to fault.
This factor favors a finding of duty.
(3) The
degree of certainty that the plaintiff suffered injury;
Plaintiffs’ reputation could certainly been
damaged from being accused of insurance fraud, but economic loss may not be
certain unless potential customers testify that they learned of the alleged
insurance fraud and decided not to do business with Plaintiffs.
This factor is neutral.
(4) The
closeness of the connection between the defendant's conduct and the injury
suffered;
Again, being accused of insurance fraud is
closely connected to reputational damage, but economic loss flowing therefrom
may be attenuated unless there is direct testimony of potential customers
deciding not to do business with Plaintiffs because of the reputation for
committing insurance fraud.
This factor is neutral.
(5) The
moral blame attached to the defendant's conduct;
If Plaintiffs’ allegations are proven, there
is a high degree of moral blame attached to Defendants’ conduct in deliberating
misrepresenting the nature of the damage as man-made when there is overwhelming
evidence of rodent damage.
This factor favors a finding of duty.
(6) The
policy of preventing future harm.
The policy of preventing future harm
supports the imposition of a duty, as allegedly misrepresenting the nature of
damage which wrongfully points the finger at someone as committing insurance
fraud should be prevented.
This factor favors a finding of duty.
Conclusion
In
light of the foregoing, the Court finds that Defendants owed a duty to
Plaintiffs in performing the inspections.
The
demurrer to the sixth cause of action is OVERRULED.
2. Eighth Cause of Action (Professional Negligence).
The elements of a cause of action for professional negligence are (1) the existence of the duty of the professional to use such skill, prudence, and diligence as other members of the profession commonly possess and exercise; (2) breach of that duty; (3) a causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the professional negligence. (Ibid.)
(Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)
Defendants relied upon their absence of duty arguments above re: the sixth cause of action to support the demurrer to the eighth cause of action. For the reasons discussed above, the Court finds the existence of a duty.
The demurrer to the eighth cause of action is OVERRULED.
3. Ninth Cause of Action (Intentional Misrepresentation) and Tenth Cause of Action (Negligent Misrepresentation).
Defendants argue that Plaintiffs do not plead direct misrepresentations to Plaintiff upon which Plaintiffs relied.
“To establish a claim for deceit based on intentional misrepresentation, the plaintiff must prove seven essential elements: (1) the defendant represented to the plaintiff that an important fact was true; (2) that representation was false; (3) the defendant knew that the representation was false when the defendant made it, or the defendant made the representation recklessly and without regard for its truth; (4) the defendant intended that the plaintiff rely on the representation; (5) the plaintiff reasonably relied on the representation; (6) the plaintiff was harmed; and (7) the plaintiff's reliance on the defendant's representation was a substantial factor in causing that harm to the plaintiff. (Citations omitted.)” (Manderville v. PCG&S Group, Inc. (2007) 146 Cal.App.4th 1486, 1498 [italics omitted].)
“The elements of negligent misrepresentation are ‘(1) the
misrepresentation of a past or existing material fact, (2) without reasonable
ground for believing it to be true, (3) with intent to induce another's
reliance on the fact misrepresented, (4) justifiable reliance on the
misrepresentation, and (5) resulting damage.’ (Citation omitted.)” (National
Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group,
Inc. (2009) 171 Cal.App.4th
35, 50.)
“ ‘[A]ctual reliance occurs
when a misrepresentation is “ ‘an immediate cause of [a plaintiff's] conduct,
which alters his legal relations,’ ” and [*1063] when, absent such
representation,’ the plaintiff” “would not, in all reasonable probability,
have entered into the contract or other transaction.” ’ ” (Hall v. Time
Inc. (2008) 158 Cal.App.4th 847, 855, fn. 2 [70 Cal. Rptr. 3d 466].) To allege
actual reliance with the requisite specificity, “[t]he plaintiff must plead
that he believed the representations to be true … and that in reliance thereon
(or induced thereby) he entered into the transaction. [Citation.]” (Younan,
supra, 111 Cal.App.3d at p. 513.)
(Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1062-63 [bold emphasis added].)
Here, the 1AC does not allege that Defendants made representations upon which Plaintiffs relied because they believed Defendants’ representations were true. To the contrary, Plaintiffs allege that they believed Defendants’ representations were false. Plaintiffs’ fraud-based causes of action fail as against these Defendants.
The demurrer to the ninth and tenth causes of action is SUSTAINED without leave to amend.
Defendants
are to answer the remaining allegations of the First Amended Complaint within
10 days.