Judge: Daniel S. Murphy, Case: 22STCV15634, Date: 2023-09-06 Tentative Ruling

Case Number: 22STCV15634    Hearing Date: September 6, 2023    Dept: 32

BACKGROUND

            On July 5, 2023, Plaintiff Mike Sarian filed this action against Defendants Meher Der Ohanessian and Meher Der Ohanessian, Inc., asserting causes of action for (1) professional negligence and (2) unfair business practices.

            Plaintiff alleges that in 2020, he was audited by the Franchise Tax Board (FTB) for his 2015 and 2017 taxes. (Compl. ¶ 9.) Plaintiff hired Defendants to handle this matter. (Id., ¶ 10.) Plaintiff alleges that Defendants regularly missed deadlines to respond or provide information to the FTB, resulting in erroneous assessments of Plaintiff’s taxes. (Id., ¶¶ 13-18, 27-30.) Defendants also allegedly missed the deadline to appeal the 2015 audit despite telling Plaintiff that they had filed an appeal. (Id., ¶¶ 19-22.) Defendants also allegedly advised Plaintiff to extend the statute of limitations on his 2015 taxes so that Defendants could resolve the issue with FTB, but Defendants allegedly never worked with the FTB to resolve the matter. (Id., ¶¶ 23-26.) Plaintiff alleges that there were multiple substantive arguments Defendants could have made to challenge FTB’s assessment of Plaintiff’s taxes and that Defendants failed to make them, thus resulting in additional taxes, penalties, and interest. (Id., ¶¶ 32-38.)

            On August 8, 2023, Defendants filed the instant demurrer and motion to strike against the complaint. Plaintiff filed his opposition on August 23, 2023. Defendants filed their reply on August 29, 2023.

LEGAL STANDARD

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (Code Civ. Proc., § 430.30, subd. (a).) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Ibid.) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, supra, 147 Cal.App.4th at 747.)

Any party, within the time allowed to respond to a pleading, may serve and file a notice of motion to strike the whole or any part of that pleading. (Code Civ. Proc., § 435, subd. (b).) The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike (1) any irrelevant, false, or improper matter inserted in any pleading and (2) all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Id., § 436.) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Id., § 437.)

MEET AND CONFER

Before filing a demurrer or a motion to strike, the demurring or moving party is required to meet and confer with the party who filed the pleading demurred to or the pleading that is subject to the motion to strike for the purposes of determining whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer. (Code Civ. Proc., §§ 430.41, 435.5.) The Court notes that Defendants have complied with the meet and confer requirement. (See Segura Decl. ¶ 2.)

DISCUSSION

I. Demurrer

            Defendants demur to the second cause of action for violation of the Unfair Competition Law (UCL). Business and Professions Code section 17200 prohibits unlawful, unfair, or fraudulent business acts or practices. Each of the three prongs is an independent basis for relief. (Smith v. State Farm Mutual Automobile Insurance Co. (2001) 93 Cal.App.4th 700, 718.)

            a. Repetitive Conduct

            Defendants argue that the UCL claim fails because Plaintiff has not alleged facts demonstrating repetitive fraudulent conduct targeting the public at large. Instead, Defendants contend that the complaint only pertains to a single private communication between Plaintiff and Defendants regarding extending the statute of limitations for Plaintiff’s 2015 taxes.

“A fraudulent business practice is one in which members of the public are likely to be deceived.” (Tucker v. Pacific Bell Mobile Services (2012) 208 Cal.App.4th 201, 225.) “The determination as to whether a business practice is deceptive is based on the likely effect such [a] practice would have on a reasonable consumer.” (Id. at p. 226.) The standard is whether a practice is “likely to deceive” members of the public, not whether Defendant has actually deceived other members of the public. (See South Bay Chevrolet v. General Motors Acceptance Corp. (1999) 72 Cal.App.4th 861, 888 [“a section 17200 violation, unlike common law fraud, can be shown even if no one was actually deceived, relied upon the fraudulent practice, or sustained any damage”].) Therefore, proof of repetitive conduct towards others is not required. Section 17200 proscribes any unlawful, unfair or fraudulent “act or practice” (singular).  

Defendants cite Benton v. Allstate Ins. Co. (C.D. Cal., Feb. 26, 2001, No. CV-00-00499) 2001 WL 210685, at *8 for the proposition that the UCL requires “facts relating to ‘committing or performing [misconduct] with such frequency as to indicate a general business practice.’” However, the court in Benton was discussing the requirements under Insurance Code section 790.03(h), which defines unfair claims settlement practices as “[k]nowingly committing or performing [certain defined acts] with such frequency as to indicate a general business practice.” (Ibid.) The plaintiff in Benton needed to establish a violation of the Insurance Code in order to satisfy the “unlawful” prong of the UCL. The plaintiff failed to prove frequent conduct amounting to a business practice, thereby failing to establish an Insurance Code violation, which meant that her UCL claim failed as well. Therefore, it was the Insurance Code that required frequent conduct, not the UCL. It should also be noted that the plaintiff in Benton failed to provide evidence to maintain his claim on summary judgment, whereas this case is still at the pleading stage. Benton did not address the sufficiency of a complaint alleging a UCL violation.

Cases addressing the issue have confirmed that a single act is sufficient to give rise to a UCL claim. (See, e.g., Rufini v. CitiMortgage, Inc. (2014) 227 Cal.App.4th 299, 311 [UCL may be invoked “based on a single instance of unfair conduct”]; UFW of Am. v. Dutra Farms (2000) 83 Cal.App.4th 1146, 1163 [“under the current version of the statute, even a single act may create liability”].)  

For pleading purposes, Defendants’ conduct as discussed above is sufficiently likely to deceive the public. Defendants allegedly lied about appealing an FTB audit and falsely advised Plaintiff to extend the statute of limitations. This conduct is “likely to deceive” members of the public regardless of whether Defendants have actually done it to others.  

b. Fraudulent Conduct

Defendants contend that the “fraudulent” prong of the UCL cannot be satisfied because Plaintiff has not alleged the elements of fraud. However, Defendants’ own caselaw acknowledges that “‘[f]raudulent,’ as used in the statute, does not refer to the common law tort of fraud but only requires a showing members of the public ‘are likely to be deceived.’” (South Bay Chevrolet v. General Motors Acceptance Corp. (1999) 72 Cal.App.4th 861, 888.)

As discussed above, Plaintiff has alleged sufficient facts to support a reasonable inference that members of the public are likely to be deceived. Plaintiff need not allege the elements for a common law fraud claim.

c. Restitution

For the first time in reply, Defendants argue that the UCL claim fails because Plaintiff only alleges damages resulting from Defendants’ conduct, in the form of increased tax penalties and interest. (Reply 3:3-9.) Defendants point out that the UCL only allows restitution. This was not a contention made in Defendants’ moving papers for the demurrer. “In general, points raised for the first time in a reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument.” (Tellez v. Rich Voss Trucking, Inc. (2015) 240 Cal.App.4th 1052, 1066, internal citations omitted.)

In any case, “Plaintiff seeks restitution of all monies paid to Defendants.” (Compl. ¶ 54.) Therefore, Plaintiff did properly allege restitution, not just damages.

II. Motion to Strike

            a. Damages

            “The scope of the remedies available under the UCL, however, is limited. A UCL action is equitable in nature; damages cannot be recovered. We have stated under the UCL, [p]revailing plaintiffs are generally limited to injunctive relief and restitution.” (Tucker, supra, 208 Cal.App.4th at p. 226.)

            Defendants move to strike paragraph 4 of Plaintiff’s prayer, which requests the Court to “[a]ward Plaintiff any and all financial, economic and compensatory damages entitled to by law, on Count II,” the UCL claim. This prayer must be stricken because damages are not allowed under the UCL. Plaintiff submits to striking this prayer.

            Defendants also move to strike paragraph 53 of the complaint for the same reason. Paragraph 53 states: “Plaintiff lost money due to the unfair business practices of Defendants, and has suffered injury in fact.” This allegation is pertinent to Plaintiff’s standing under the UCL, which requires an individual to have “suffered injury in fact and has lost money or property as a result of the unfair competition.” (Bus. & Prof. Code, § 17204.) Paragraph 53 is not a prayer for damages. The actual prayer for damages has been stricken, as discussed above.

            b. Attorneys’ Fees

“Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties . . . .” (Code Civ. Proc., § 1021.) Therefore, a plaintiff must allege either a statutory or contractual basis for attorneys’ fees.

Defendants move to strike the phrase “and attorneys’ fees” from prayer 7 in the complaint. The complaint does not allege a contractual or statutory basis for attorneys’ fees. “The Business and Professions Code does not provide for an award of attorney fees for an action brought pursuant to section 17203, and there is nothing in the statutory scheme from which such a right could be implied.” (Shadoan v. World Sav. & Loan Ass'n (1990) 219 Cal.App.3d 97, 108, fn. 7.) Plaintiff submits to striking the prayer for attorneys’ fees.

CONCLUSION

            Defendants’ demurrer is OVERRULED. The motion to strike is GRANTED in part as set forth above without leave to amend.