Judge: Curtis A. Kin, Case: 21STCV45683, Date: 2023-01-19 Tentative Ruling
Case Number: 21STCV45683 Hearing Date: January 19, 2023 Dept: 72
DEMURRER (2) AND MOTION TO STRIKE (2)
PLAINTIFF’S MOTION TO COMPEL FURTHER RESPONSES TO
REQUESTS FOR PRODUCTION
Case: SDG School of Business, Inc.
v. Jong Kil Ryu et al. (21STCV45683)
TENTATIVE RULING:
Demurrer to Second Amended Complaint filed by defendants
America Evangelical University, Jongkil Ryu, and Sanghoon Lee is SUSTAINED IN
PART.
Motion to Strike Portions of Second Amended Complaint filed
by defendants America Evangelical University, Jongkil Ryu, and Sanghoon Lee is DENIED.
Demurrer to Second Amended Complaint filed by defendant
Sierra States University is OVERRULED.
Motion to Strike Portions of Second Amended Complaint filed
by defendant Sierra States University is DENIED.
Plaintiff SDG School of Business,
Inc.’s Motion to Compel Further Responses to Requests for Production, Set One
is DENIED.
I.
DEFENDANTS AMERICA EVANGELICAL UNIVERSITY,
JONGKIL RYU, AND SANGHOON LEE’S DEMURRER TO SECOND AMENDED COMPLAINT
A.
First Cause of Action – Breach of Contract
With respect to the first cause of action for breach of
contract, demurring defendant America Evangelical University (“AEU”) contends
that plaintiff SDG School of Business, Inc. (“SDG”) fails to plead the
existence of a contract between SDG and AEU. (CACI 303 [element of breach of
contract is that plaintiff and defendant entered into a contract].) SDG alleges
that AEU and non-party Hudson Taylor University (“HTU”) entered into an
agreement on March 3, 2017. (SAC ¶¶ 15, 35.)
SDG contends that it can enforce the agreement as a
third-party beneficiary. “A contract, made expressly for the benefit of a third
person, may be enforced by him at any time before the parties thereto rescind
it.” (Civ. Code § 1559.) SDG alleges that AEU and HTU “contemplated and agreed”
that SDG “would automatically be assigned” the obligations and benefits of the
agreement, “without need for further agreement.” (SAC ¶ 35). SDG also alleges
that the assignment is evidenced by SDG’s assumption of a donation due to AEU
in the agreement. Even though SDG alleged that the donation was made to AEU,
SDG alleges that it was made on SDG’s behalf. (SAC ¶ 23) SDG sufficiently
alleges that the assignment of the agreement between AEU and HTU to SDG
occurred.
AEU also argues that SDG fails to attach the contract or
state the terms of the contract verbatim. Although a written contract is usually pleaded by alleging its making and
attaching a copy which is incorporated by reference, a written contract can
also be pleaded by alleging the making and the substance of the relevant terms.
(Perry v. Robertson (1988) 201
Cal.App.3d 333, 341; see also Construction
Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189,
198-99 [“In an action based on a written contract, a plaintiff may plead the
legal effect of the contract rather than its precise language”].) SDG sets
forth the terms of the agreement that AEU purportedly violated, including the
prohibition on establishment of competing curricula and the requirement to
provide best efforts in establishing SDG. (SAC ¶¶ 18, 22, 37, 42.)
For the foregoing reasons, SDG sufficiently alleges that it
was a party to a contract which it can enforce. The demurrer to the first cause
of action is OVERRULED.
B.
Fifth Cause of Action – Fraud
With respect to defendant Jongkil Ryu and AEU, defendants
contend that the fifth cause of action is time-barred by the three-year statute
of limitations set forth in CCP § 338(d). Ryu made the alleged
misrepresentations in 2017 prior to the execution of the agreement between AEU
and HTU. (SAC ¶¶ 15 [agreement entered into on March 3, 2017], 18-20, 22, 31,
71-74, 76.) SDG did not commence this action until December 15, 2021, more than
three years from 2017. Accordingly, on the face of the SAC, the fifth cause of
action may be time-barred.
However, SDG sufficiently alleges application of the
discovery rule. “In order to rely on the discovery rule for delayed accrual of
a cause of action, ‘[a] plaintiff whose complaint shows on its face that his
claim would be barred without the benefit of the discovery rule must
specifically plead facts to show (1) the time and manner of discovery and (2)
the inability to have made earlier discovery despite reasonable diligence.’
[Citation.]” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797,
808.) SDG alleges that it did not discover Ryu’s representations with respect
to AEU’s agreement not to establish curricula in competition with SDG until
2019. (SAC ¶¶ 24, 77.) SDG alleges that, in 2019, AEU informed SDG of AEU’s
agreement with defendant Sierra States University to offer a business academic
curriculum. (SAC ¶¶ 24, 77.)
SDG also alleges that it could not have discovered the
agreement between AEU and SSU earlier because neither AEU nor SSU told SDG
about the agreement. (SAC ¶¶ 24, 77.) Whether SDG should not have solely relied
on AEU’s notification for discovery and should have made additional efforts,
such as checking the Internet, to ascertain the existence of an agreement
between AEU and SSU is a question of fact to be determined on summary judgment
or trial.
(United States Liab. Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d
586, 597 [“There are no hard and fast rules for determining what facts or
circumstances will compel inquiry by the injured party and render him
chargeable with knowledge. [Citation.] It is a question for the trier of fact”].)
Accordingly, SDG’s cause of action based on Ryu’s
misrepresentations is not time-barred.
Nonetheless, SDG does not sufficiently allege any reliance
on Ryu’s misrepresentations. (Cadlo v. Owens-Illinois, Inc. (2004) 125
Cal.App.4th 513, 519 [elements of fraud include justifiable reliance on
misrepresentation].) SDG alleges that it relied on Ryu’s misrepresentations,
including the representation that Ryu would comply with the provision for
exclusivity of curriculum, prior to the execution of the agreement. (SAC ¶¶
18-20, 22, 31, 71-74, 76.) This is not possible. The agreement, which provided for the
creation of SDG, was between AEU and HTU. (FAC ¶ 15.) Even if SDG were a
third-party beneficiary of that agreement, SDG fails to allege how it relied on
the representations of Ryu prior to the execution of the agreement if SDG did
not even exist until after the execution of the agreement.
Further, even if SDG sufficiently alleged reliance, Ryu’s
alleged misrepresentations lacking the requisite specificity. The facts and
circumstances constituting fraud must be set out clearly, concisely and with
sufficient particularity to inform the opposing party of what must be answered.
(Scafidi v. Western Loan & Bldg. Co. (1946) 72 Cal.App.2d 550, 558.)
“This particularity requirement necessitates pleading facts which ‘show how,
when, where, to whom, and by what means the representations were tendered.’” (Stansfield
v. Starkey (1990) 220 Cal.App.3d 59, 73, citing Hills Trans. Co. v.
Southwest (1968) 266 Cal.App.2d 702, 707.)
SGD merely alleges that, prior to the execution of the
agreement on March 3, 2017, Ryu made “numerous specific representations” that
purportedly confirmed Paragraphs 5, 6, 7, and 9 of the agreement to SGD’s
principals. (SAC ¶¶ 15, 18-20, 22, 71-74.) However, SDG fails to allege what
Ryu said. Allegations of “numerous specific representations” are not
sufficiently particular to inform Ryu and AEU of the nature of their purported
fraud. Further, SDG still does not allege with sufficient particularity, when,
where, to whom, and by what means Ryu made such misrepresentations. Because SDG
allegedly relied on the misrepresentations, the representations were
necessarily made to SDG. Accordingly, SDG ought to possess the information
required to plead the misrepresentations with specificity and must accordingly
do so.
With respect to defendant Sanghoon Lee, SDG alleges that,
when it contacted AEU of the breach of the exclusivity provision in 2019, Lee,
the new president of AEU, represented that AEU would carry out the original
agreement and develop SDG. (SAC ¶¶ 77. 78.) Lee allegedly misrepresented the
intention to carry out the agreement based on Lee and AEU’s decision in 2020 to
remove SDG from the BPPE list of approved sites and offer business programs
through defendant Kairos University (“Kairos”). (SAC ¶¶ 77. 78.) These allegations are not sufficiently
particular. SDG does not allege where, by what means, and the persons at SDG to
whom Lee made such misrepresentations.
Moreover, even taking such allegations as true and
sufficiently particular, SDG fails to allege resulting damages. (Cadlo v.
Owens-Illinois, Inc. (2004) 125 Cal.App.4th 513, 519.) SDG alleges that it
delayed initiating legal action based on Lee’s misrepresentation. (SAC ¶ 78.)
SDG does not allege what damage resulted from the delay in the commencement of
legal action. SDG alleges that AEU offered business programs through Kairos
University. SDG also alleges that Kairos’ actions impacted SDG’s ability to
attract students. (SAC ¶ 54.) However, SDG does not allege that AEU would not
have offered programs through Kairos if it had initiated legal action
earlier.
Based on the failure to allege reliance and plead the
misrepresentations with the required specificity, and because SDG had the
opportunity to amend this cause of action and the cause of action still fails,
the demurrer to the fifth cause of action is SUSTAINED WITHOUT LEAVE TO AMEND
as to defendants Jongkil Ryu, American Evangelical University, and Sanghoon Lee.
II.
DEFENDANTS AMERICA EVANGELICAL UNIVERSITY,
JONGKIL RYU, AND SANGHOON LEE’S MOTION TO STRIKE PORTIONS OF FIRST AMENDED
COMPLAINT
Defendants America Evangelical University (“AEU”), Jongkil
Ryu, and Sanghoon Lee move to strike allegations regarding the breach of
contract arising from AEU’s agreement with co-defendant Sierra States
University (“SSU”) to allow SSU to offer a business curriculum in violation of
the exclusivity provision in the alleged contract with SDG. (SAC ¶¶ 18, 24,
27.) The alleged breach occurred “sometime during 2016 and 2017,” prior to
AEU’s execution of the agreement with HTU regarding the formation of SAC. (SAC
¶¶ 15, 24.) On the face of the SAC, the first cause of action may be
time-barred as to this claimed breach because SDG alleges the breach to have
first occurred in 2016. SDG did not commence this action until December 15,
2021, more than three or four years from 2016. (See CCP § 337(a)
[four-year statute of limitations for breach of contract cause of action].)
For the reasons stated above, plaintiff sufficiently alleges
application of the delayed discovery rule. The reason why the fraud cause of
action is not time-barred applies equally to the breach of contract cause of
action. SDG commenced this action with four years of 2019. With respect to
items 1 through 5 listed in the notice of motion, corresponding to paragraphs
24, 25, 29, 37, and 39 of the SAC, the motion as to these items is DENIED.
With respect to items 6 through 12 listed in the notice of
motion, these items correspond to paragraphs 71 through 77 of the SAC contained
in the fifth cause of action for fraud. Based on the ruling on the demurrer to
the fraud cause of action, the motion as to items 6 through 12 is DENIED as
MOOT.
In summary, the motion is DENIED as to items 1 through 5
listed in the notice of motion and DENIED as MOOT as to items 6 through 12
listed in the notice of motion.
Ten (10) days to answer.
III.
DEFENDANT SIERRA STATES UNIVERSITY’S DEMURRER TO
SECOND AMENDED COMPLAINT
A.
Request for Judicial Notice
Defendant Sierra States University’s (“SSU”) requests for
judicial notice are DENIED as “unnecessary to the resolution” of the issues
before the Court. (Martinez v. San Diego County Credit Union (2020) 50
Cal.App.5th 1048, 1075.)
B.
Statute of Limitations
SSU maintains that the second cause of action for
intentional interference with contractual relationship and third cause of
action for intentional interference with prospective economic advantage are
time-barred.
The second and third causes of action are subject to a
two-year statute of limitations. (CCP § 339(1); Murphy v. Hartford Acc.
& Indem. Co. (1960) 177 Cal.App.2d 539, 543-44 [interference with
contractual relations]; Augusta v. United Serv. Auto. Assn. (1993) 13
Cal. App. 4th 4, 10 [interference with prospective economic advantage].) SSU
argues that SDG did not commence this action until December 15, 2021, more than
two years after March 3 and July 7, 2017, when AEG entered into the agreement
and amendment with HTU, respectively. (SAC ¶¶ 15, 16.)
However, SDG sufficiently invokes the discovery rule by
stating that it did not discover the agreement between AEU and SSU until 2019.
(SAC ¶¶ 24, 77.) SDG sufficiently alleges that it could not have discovered the
agreement between AEU and SSU earlier because neither AEU nor SSU told SDG
about the agreement. (SAC ¶¶ 24, 77.) Whether SDG should have been on notice of
the agreement between AEU and SSU based on SSU’s location one floor below SDG
is a question of fact to be determined on summary judgment or trial. (United
States Liab. Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586, 597
[“There are no hard and fast rules for determining what facts or circumstances
will compel inquiry by the injured party and render him chargeable with
knowledge. [Citation.] It is a question for the trier of fact”].)
For the foregoing reasons, the second and third causes of
action are not time-barred.
C.
Second Cause of Action – Intentional Interference
with Contractual Relationship
“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.” (Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1148.)
SSU argues that SDG fails to allege that SSU was aware of
the exclusivity provision in the agreement between AEU and HTU concerning the
formation of SDG. SSU refers to the allegation that AEU already had an
agreement with SSU when AEU entered into the agreement concerning SDG. (Cf.
SAC ¶¶ 15 [agreement between AEU and HTU concerning SDG executed on March 3,
2017], 24 [AEU entered into agreement with SSU “[s]ometime during 2016 and
2017], 37 [“Unbenownst [sic] to Plaintiff, AEU had already entered into an
agreement...in which it allowed SIERRA STATES UNIVERSITY to offer business
academic curriculum….”].)
Even if SSU’s relationship with AEU pre-dated any agreement
concerning SDG, SDG sufficiently alleges that SSU continued to provide the same
program as SDG even after becoming aware of AEU’s agreement concerning SDG’s
exclusive provision of business programs. (SAC ¶¶ 44, 45.) SSU does not cite
any authority indicating that its pre-existing relationship can defeat an
allegation as a matter of law that its maintenance of that relationship might
run afoul of a subsequent agreement. Contentions unsupported by citation of
authority are disregarded. (Niko v. Foreman (2006) 144 Cal.App.4th 344,
368; Valov v. Department of Motor Vehicles (2005) 132 Cal.App.4th 1113,
1132.) In short, SDG sufficiently alleges that, upon execution of the agreement
between AEU and HTU, SSU was on notice that it could no longer provide the same
business program as SDG.
The demurrer to the second cause of action is OVERRULED.
D.
Third Cause of Action – Intentional Interference
with Prospective Economic Advantage
“The five elements for intentional interference with
prospective economic advantage are: (1) an economic relationship between the
plaintiff and some third party, with the probability of future economic benefit
to the plaintiff; (2) the defendant's knowledge of the relationship; (3)
intentional acts on the part of the defendant designed to disrupt the
relationship; (4) actual disruption of the relationship; and (5) economic harm
to the plaintiff proximately caused by the acts of the defendant.” (Youst v.
Longo (1987) 43 Cal.3d 64, 71.)
“[I]ntentionally interfering with prospective economic
advantage requires pleading that the defendant committed an independently
wrongful act,” which is an act “proscribed by some constitutional, statutory,
regulatory, common law, or other determinable legal standard.” (Ixchel
Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th 1130, 1142, quoting Korea
Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1158-59.)
SSU argues that it could not have been expected to be aware
of SDG’s subsequent agreement with AEU because SSU’s agreement with AEU
pre-dated it. It is hard to see why that
is necessarily so. As explained above with
respect to the second cause of action, even if SSU’s relationship with AEU existed
before SDG, it can still be true that SSU subsequently became aware of the
relationship created between AEU and SDG for purposes of alleging the knowledge
element for interference with prospective economic advantage. (See SAC ¶
53),
SSU also argues that SDG failed to allege an independently
wrongful act. SDG alleges that operating a competing business school resulted
in SDG losing students and income, which accordingly constituted unfair
competition and unfair business practices in violation of Business and Professions
Code § 17200 et seq. (SAC ¶¶ 54, 55.) SDG sufficiently alleges actions “proscribed
by some constitutional, statutory, regulatory, common law, or other
determinable legal standard.” (Ixchel, 9 Cal.5th at 1142,
quoting Korea Supply, 29 Cal.4th at 1159.)
The demurrer to the third cause of action is OVERRULED.
IV.
DEFENDANT SIERRA STATES UNIVERSITY’S MOTION TO
STRIKE PORTIONS OF SECOND AMENDED COMPLAINT
SSU seeks to strike allegations pertaining to punitive
damages. SDG alleges that SSU knew about AEU’s agreement concerning SDG’s
exclusive right to offer business programs. Nevertheless, SSU continued to
provide the same business program as SDG, resulting in SDG losing students and
income. (SAC ¶¶ 44, 45, 48, 51, 53, 54.) SDG’s allegations rise to the level of
malice or oppression. (Civ. Code § 3294(a); 3294(c)(1) [“malice” defined as
“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”]; 3294(c)(2)
[“oppression” defined as “despicable conduct that subjects a person to cruel
and unjust hardship in conscious disregard of that person’s rights”].)
The motion is DENIED.
V.
PLAINTIFF’S MOTION TO COMPEL FURTHER REPONSES TO
REQUESTS FOR PRODUCTION
Plaintiff SDG School of Business, Inc. (“SDG”) moves to
compel further responses from defendant Kairos University, A Campus of America
Evangelical University (“Kairos”) to Requests for Production, Set One, Nos.
1-22, 24, 26, 28, 30-53, 55, 57, 59, 61, 63-68, 75-114.
Kairos argues that SDG failed to provide a separate
statement. In lieu of a separate statement, the Court may allow a “concise
outline of the discovery request and each response in dispute” to serve as a
substitute for a separate statement. (CCP § 2033.290(b)(2).) Arguably, in the
motion, SDG sets forth descriptions of documents, Kairos’ responses, and the
reasons why Kairos’ responses are insufficient. (See, e.g., Motion at
5:11-12 [description of documents sought in Request Nos. 63-68], 5:2-4
[description of Kairos’ response], 5:5-10 [reason why Kairos’ response is
insufficient].)
However, SDG does not set good cause justifying its document
requests. CCP §2031.310(b)(1) requires that a party moving for further
responses to requests for production must state specific facts showing good
cause justifying the discovery sought by the demand. Specific facts must be presented by way of
declaration. (Calcor Space Facility v. Superior Court (1997) 53
Cal.App.4th 216, 224 [directing trial court to vacate its order compelling
nonparty to produce records pursuant to subpoena because the moving party had
failed to provide specific facts showing good cause for their production].) “In
law and motion practice, factual evidence is supplied to the court by way of
declarations.” (Ibid.) “[T]o establish good cause, a discovery proponent
must identify a disputed fact that is of consequence in the action and explain
how the discovery sought will tend in reason to prove or disprove that fact or
lead to other evidence that will tend to prove or disprove the fact.” (Digital
Music News LLC v. Superior Court (2014) 226 Cal.App.4th 216, 224,
disapproved of on other grounds in Williams v. Superior Court (2017) 3
Cal.5th 531.)
Here, SDG does not set forth any specific facts
demonstrating the good cause for production of the requested documents in the
declaration, as required by CCP § 2031.310(b)(1). In the reply, SDG contends that
it provided “fact-specific showings of why each request is relevant” through
the meet and confer process and in the motion. (Reply at 3:1-2.) In its meet
and confer letter dated September 20, 2022, SDG only discusses why Kairos’
responses are not code-complaint and otherwise insufficient, not why SDG’s
document requests are relevant. (Shinder Decl. ¶ 6 & Ex. 4 at 1 [“Despite
providing Defendant with two good faith extensions, Defendant’s clear disregard
for the Discovery Act is evident in its responses. Defendant’s responses are
patently false, deficient, nonresponsive, and evasive”].) In the motion, SDG
only describes the categories of documents sought in the requests. (See,
e.g., Motion at 2:16-18 [“These instant requests related to the production
of documents pertaining or relating to the undergraduate/graduate programs that
were offered during the respective identified semesters.”], 4:1-2 [“These
instant requests were regarding the production of documents pertaining to
undergraduate coursework offered by Defendant during the specified year and
semester”].)
SDG fails to identify any disputed facts and how the
requested documents would prove the facts. SDG does not describe how the
requested documents are probative of its causes of action against Kairos.
Because SDG did not set forth good cause for this motion, as required by CCP §
2031.310(b)(1), SDG fails to meet its burden as the moving party. The motion is
DENIED.
For unsuccessfully making this motion, the Court imposes a
monetary sanction in the amount of $950 against plaintiff SDG School of
Business, Inc. and counsel of record, jointly and severally. The monetary
sanction is based on 1.5 hours of work reviewing the motion and preparing the
opposition, instead of the 2 hours claimed, and 0.5 hours of work reviewing the
reply and attending the hearing, instead of the one hour claimed. Monetary
sanctions are payable to defendant Kairos University, A Campus of America
Evangelical University’s counsel of record within 30 days hereof.
VI.
CONCLUSION
In sum, the Court rules as follows:
Defendants America Evangelical University, Jongkil Ryu, and
Sanghoon Lee’s Demurrer is SUSTAINED WITHOUT LEAVE TO AMEND as to the Fifth
Cause of Action for Fraud but otherwise OVERRULED. Their Motion to Strike is DENIED.
Defendant Sierra States University’s Demurrer is OVERRULED
and its Motion to Strike is DENIED.
Defendants have ten (10) days to Answer.
Plaintiff SDG School of Business,
Inc.’s Motion to Compel Further Responses to Requests for Production, Set One
is DENIED. Plaintiff shall pay $950 in
monetary sanctions to counsel for defendant Kairos University within 30 days
hereof.