Judge: Daniel S. Murphy, Case: 23STCV16670, Date: 2023-12-06 Tentative Ruling

Case Number: 23STCV16670    Hearing Date: December 6, 2023    Dept: 32

BACKGROUND

            On July 17, 2023, Plaintiff and Cross-Defendant MeUndies, Inc. (MeUndies) filed this action against Defendants Ordergroove, LLC and Ordergroove, Inc. (collectively, Ordergroove), asserting (1) fraudulent inducement, (2) breach of contract, and (3) declaratory relief. The complaint stems from the allegation that Ordergroove induced MeUndies into a contract by falsely representing that Ordergroove’s software could meet MeUndies’ unique business needs. Ordergroove’s software in fact did not meet MeUndies’ needs, but Ordergroove nonetheless demanded that MeUndies continue paying for the software for the duration of the contract, a term of multiple years. MeUndies brings this lawsuit to set aside the contract and recover damages.

            On August 24, 2023, Ordergroove LLC filed a cross-complaint against MeUndies for (1) breach of contract and (2) quantum meruit. The operative First Amended Cross-Complaint (FACC) was filed on October 10, 2023. Ordergroove alleges that MeUndies was responsible for ensuring that its own system was compatible with Ordergroove’s platform and that Ordergroove was limited to a consultative role. Ordergroove alleges that it was not required to create a customized platform for MeUndies. The Master Services Agreement (MSA) between the parties allegedly required MeUndies to pay between $390,000 and $500,000 per year for access to Ordergroove’s platform. Ordergroove alleges that it fulfilled its obligation to assist MeUndies in its implementation of the Ordergroove platform. MeUndies allegedly attempted to terminate the MSA in a way that violates the termination clause in the MSA. Then, MeUndies allegedly refused to make further payments. Ordergroove rejected MeUndies’ demands to recognize the contract as terminated. MeUndies filed this action shortly after Ordergroove demanded payment of $1.1 million due under the MSA for the remainder of the service period.

            On November 7, 2023, MeUndies filed the instant demurrer against the FACC. Ordergroove filed its opposition on November 21, 2023. MeUndies filed its reply on November 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.)

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 MeUndies has complied with the meet and confer requirement. (See Harris Decl.)

DISCUSSION

I. Reasonable Expectation of Payment

MeUndies demurs to the second cause of action for quantum meruit. “Quantum meruit refers to the well-established principle that the law implies a promise to pay for services performed under circumstances disclosing that they were not gratuitously rendered. To recover in quantum meruit, a party need not prove the existence of a contract, but it must show the circumstances were such that the services were rendered under some understanding or expectation of both parties that compensation therefor was to be made.” (Huskinson & Brown v. Wolf (2004) 32 Cal.4th 453, 458, internal citations omitted.)

            Ordergroove seeks to recover in quantum meruit the value of the services it performed for MeUndies, including additional services rendered beyond the 100 hours required by the MSA. (See FACC ¶¶ 25, 48-53.) MeUndies argues that Ordergroove cannot recover compensation for the additional services because Ordergroove gratuitously provided those services for reasons other than monetary compensation. MeUndies contends that the allegations in the cross-complaint admit that Ordergroove’s motive for providing additional services was to transition from the Implementation Period to the Service Period as soon as possible so that Ordergroove could begin collecting payment for the Service Period, and to prevent MeUndies from prematurely leaving the contract. (See FACC ¶¶ 49-50.)  

            However, the fact that Ordergroove had these motives for providing the additional services does not preclude Ordergroove from also expecting payment for the services. It is for the trier of fact to ultimately determine whether Ordergroove expected payment for the additional services. It cannot be determined as a matter of law from the pleadings alone that Ordergroove did not expect payment for the additional services. The allegations in the cross-complaint support a reasonable inference that Ordergroove provided services under circumstances where both parties understood payment was required. (See FACC ¶¶ 48-52 [alleging that Ordergroove expended significant resources to provide additional services which MeUndies benefitted from, that Ordergroove “reasonably expected payment,” and that Ordergroove made “repeated demands for payment”].) “Ordergroove expected to be paid for these services.” (FACC ¶ 27.) The cross-complaint contains no admission that Ordergroove provided the additional services gratuitously.

II. Contradicting the Contract

            MeUndies argues in reply that seeking quantum meruit for the additional services contradicts the parties’ contract. (See Hedging Concepts, Inc. v. First Alliance Mortgage Co. (1996) 41 Cal.App.4th 1410, 1420 [“equitable entitlement to a quantum meruit payment is not implied where the parties have actual contract terms covering payment”].) MeUndies never made this argument in its moving papers, which only focused on the reasonable expectation of payment. “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.)

            Additionally, the argument fails on the merits. In Hedging, the trial court made “factual findings” that the parties had a valid contract and that the contract imposed a condition precedent to payment. (Hedging, supra, 41 Cal.App.4th at p. 1420.) Having failed to procure the condition precedent, the claimant was not entitled to recover payment in quantum meruit. (Ibid.) Here, there have been no factual findings regarding the existence of a contract or whether it imposed a condition precedent, because the case is merely at the pleading stage. “A plaintiff may plead cumulative or inconsistent causes of action.” (Gherman v. Colburn (1977) 72 Cal.App.3d 544, 565.) The allegations do not reveal as a matter of law that the contract imposed a condition precedent to Ordergroove being paid for the additional services. (See FACC ¶¶ 12-15.)

CONCLUSION

            MeUndies’ demurrer is OVERRULED.