Judge: Daniel S. Murphy, Case: 23STCV21282, Date: 2024-11-27 Tentative Ruling

Case Number: 23STCV21282    Hearing Date: November 27, 2024    Dept: 32

BACKGROUND

            On September 5, 2023, Plaintiff VISM Studio filed this action against Defendants Woo-Jin Choi and Eunmi Song, alleging breach of contract. The complaint alleges that Choi and Song breached their employment contracts by abandoning their positions at VISM’s tattoo studio, causing lost profits. The operative First Amended Complaint was filed on August 26, 2024. The FAC adds defendants Grey Studio, LLC, John Prezas, and Andres Navarro Garcia. The FAC also adds causes of action for fraud, contractual interference, and interference with economic advantage. The FAC alleges that Choi and Song left VISM to work for Grey Studio, a rival tattoo parlor owned by Prezas and Garcia.

            Choi and Song have cross-complained against VISM, with the operative Second Amended Cross-Complaint (SACC) filed on June 5, 2024. The SACC asserts causes of action for (1) breach of the implied covenant of good faith and fair dealing, (2) intentional misrepresentation, (3) negligent misrepresentation, (4) unfair business practices, and (5) common count – goods and services rendered. The SACC alleges that Choi and Song were induced into working for VISM through false promises. VISM also allegedly required Choi and Song to pay VISM’s staff for overtime and allegedly instructed Choi and Song to stop working before May 15, 2023 to prevent them from receiving certain commissions for the month of April 2023.

            On October 30, 2024, Choi and Song filed the instant motion to strike against the FAC. VISM filed its opposition on November 12, 2024. Choi and Song filed their reply on November 18, 2024.

LEGAL STANDARD

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.)

DISCUSSION

I. Timeliness

            “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 thereof.” (Code Civ. Proc., § 435(b)(1).) Choi and Song filed their motion to strike beyond the time for a responsive pleading, and after they had already filed an answer. However, the Court has discretion to hear an untimely motion. (See Jackson v. Doe (2011) 192 Cal.App.4th 742, 750.) The court may strike a pleading “upon a motion made pursuant to Section 435, or at any time in its discretion.” (Code Civ. Proc., § 436.) Thus, the lateness of the motion does not prevent the Court from addressing the merits.

II. 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.)

Here, defense counsel sent a meet and confer letter after the deadline for a responsive pleading. (See Code Civ. Proc., § 435.5(a)(2) [meet and confer must occur five days before motion to strike is due].) However, the Court notes that the meet and confer letter did specifically identify the punitive damage and prejudgment interest allegations as the purported defects. (Lee Decl., Ex. A.) Plaintiff’s counsel rejected the legitimacy of the motion to strike, indicating the parties had reached an impasse. (Ibid.) Regardless, insufficient meet and confer is not a basis to overrule a demurrer or deny a motion to strike. (See Code Civ. Proc., §§ 430.41(a)(4), 435.5(a)(4).) Therefore, the Court proceeds on the merits.

III. Punitive Damages

            “In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.” (Civ. Code, § 3294, subd. (a).) “‘Malice’ means 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.” (Id., subd. (c)(1).) “‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Id., subd. (c)(2).) Fraud is “intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (Id., subd. (c)(3).)

            Here, Choi and Song have not demurred to the fraud claim. (See FAC ¶¶ 40-42, 54-60.) Fraud is an independent basis for punitive damages. Additionally, the allegations support a reasonable inference that Choi and Song colluded with the Grey Defendants to interfere with VISM’s contracts and deprive VISM of two irreplaceable employees, for the sake of earning higher commissions at the rival business. (See FAC ¶¶ 16-32.)

The allegations suggest that Choi and Song acknowledged the potential impropriety of contracting with another tattoo studio while contracted with VISM. (FAC ¶¶ 26, 32.) Choi considered dating his contract with Grey after his contract with VISM ended to avoid the appearance of a “double contract.” (Id., ¶ 26.) Choi told the Grey Defendants that “he did not ‘think it should be revealed [to VISM] that we made contact first.’” (Ibid.) Song expressed an intent to tell VISM that “there are no other studios that I have contacted yet” even though she was already in contact with Grey Studios. (Id., ¶ 28.) Choi and Song also allegedly attempted to create a pretext to get terminated from VISM. (Id., ¶ 29.)

For pleading purposes, these acts may be considered in “conscious disregard of the rights” of VISM or subjecting VISM to “unjust hardship in conscious disregard of that person’s rights.” (See Civ. Code, § 3294(c).) 

            The motion to strike is DENIED as to punitive damages.

IV. Prejudgment Interest

            Choi’s and Song’s authority on prejudgment interest, while correct, has no bearing on VISM’s ability to allege prejudgment interest. Furthermore, Civil Code section 3288 provides for prejudgment interest at the court’s discretion upon entry of judgment. The Court will not determine at the pleading stage whether VISM is entitled to prejudgment interest. Whether VISM is ultimately entitled to prejudgment interest is a matter to be addressed separately, if VISM prevails and moves for prejudgment interest.

            The motion to strike is DENIED as to prejudgment interest.  

BACKGROUND

            On September 5, 2023, Plaintiff VISM
Studio filed this action against Defendants Woo-Jin Choi and Eunmi Song,
alleging breach of contract. The complaint alleges that Choi and Song breached
their employment contracts by abandoning their positions at VISM’s tattoo
studio, causing lost profits. The operative First Amended Complaint was filed
on August 26, 2024. The FAC adds defendants Grey Studio, LLC, John Prezas, and
Andres Navarro Garcia. The FAC also adds causes of action for fraud,
contractual interference, and interference with economic advantage. The FAC
alleges that Choi and Song left VISM to work for Grey Studio, a rival tattoo
parlor owned by Prezas and Garcia.

            Choi and Song have cross-complained
against VISM, with the operative Second Amended Cross-Complaint (SACC) filed on
June 5, 2024. The SACC asserts causes of action for (1) breach of the implied
covenant of good faith and fair dealing, (2) intentional misrepresentation, (3)
negligent misrepresentation, (4) unfair business practices, and (5) common
count – goods and services rendered. The SACC alleges that Choi and Song were
induced into working for VISM through false promises. VISM also allegedly required
Choi and Song to pay VISM’s staff for overtime and allegedly instructed Choi
and Song to stop working before May 15, 2023 to prevent them from receiving
certain commissions for the month of April 2023.

            On November 1 and 5, 2024, Grey
Studio, Prezas, and Garcia (collectively, Grey Defendants) filed the instant
demurrer and motion to strike against the FAC. VISM filed its opposition on
November 14, 2024.

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.)

On October 30, 2024, defense counsel
emailed Plaintiff’s counsel to indicate his recent substitution and authority
to accept service on behalf of Defendants. (Satnick Decl., Ex. 1.) In that
email, defense counsel requested Plaintiff’s counsel to send a notice of
acknowledgment and receipt, after which he would file a responsive pleading. (Ibid.)
But the very next day, defense counsel sent an email indicating an intent to
file a demurrer with motion to strike and gave Plaintiff’s counsel one day to
respond. (Id., Ex. 2.) This does not demonstrate a good faith effort to
meet and confer.

Nonetheless, insufficient meet and confer
is not a basis to overrule a demurrer or deny a motion to strike. (See Code
Civ. Proc., §§ 430.41(a)(4), 435.5(a)(4).) Therefore, the Court proceeds on the
merits. 

DISCUSSION

I.
Demurrer

            The Grey Defendants demur to the
sixth cause of action for negligent interference with prospective economic
advantage, arguing that there is no duty of care as a matter of law. “The tort
of negligent interference with economic relationship arises only when the defendant
owes the plaintiff a duty of care.” (LiMandri v. Judkins (1997) 52
Cal.App.4th 326, 348.) A duty of care may arise by “statute or contract,” “the
nature of the activity or the relationship of the parties.” (Lake Almanor
Associates L.P. v. Huffman-Broadway Group, Inc. (2009) 178 Cal.App.4th
1194, 1205.) “Recognition of a duty to manage business affairs so as to prevent
purely economic loss to third parties in their financial transactions is the
exception, not the rule, in negligence law . . . so courts are reluctant to
impose duties to prevent purely economic harm to third parties.” (Ibid.)

            VISM argues that the Grey Defendants
owed it a duty not to provide bogus legal advice to Choi and Song, inducing
them to leave VISM. VISM argues that imposition of a duty is justified under
the so-called Biakanja factors: “the extent to which the transaction was
intended to affect the plaintiff, the foreseeability of harm to him, the degree
of certainty that the plaintiff suffered injury, the closeness of the
connection between the defendant's conduct and the injury suffered, the moral
blame attached to the defendant's conduct, and the policy of preventing future
harm.” (Biakanja v. Irving (1958) 49 Cal.2d 647, 650.)

However, “subsequent cases have limited
the application of the Biakanja principles,” especially “with respect to
losses that were purely economic.” (Adelman v. Associated Int'l Ins. Co.
(2001) 90 Cal.App.4th 352, 363-64.) As clarified in later cases, the Biakanja
factors impose liability in the following circumstance: “where the ‘end and aim’
of the contractual transaction between a defendant and the contracting party is
the achievement or delivery of a benefit to a known third party or the
protection of that party's interests, then liability will be imposed on the
defendant for his or her negligent failure to carry out the obligations
undertaken in the contract even though the third party is not a party thereto.”
(Id. at p. 363.)  

            For example, in Biakanja, the
plaintiff’s brother died and left a will which devised all of his property to
the plaintiff, but the defendant, the notary who prepared the will, negligently
caused the will to be denied for lack of sufficient attestation. (Biakanja,
supra, 49 Cal.2d at p. 648.) As a result, the plaintiff only received
one-eighth of her brother’s estate through intestate succession. (Ibid.)
In imposing a duty of care on the defendant, the court reasoned that “the ‘end
and aim’ of the transaction was to provide for the passing of Maroevich's
estate to plaintiff.” (Id. at p. 650.) Thus, the defendant could be
liable to the plaintiff for negligently preparing the will. (Ibid.) In J'Aire
Corp. v. Gregory (1979) 24 Cal.3d 799, 804, another case cited by VISM, the
defendant was a contractor who contracted with the county to renovate a
premises in which the plaintiff maintained its business. Thus, the defendant’s
“performance was intended to, and did, directly affect” the plaintiff. (Ibid.)
As a result, the defendant was liable to the plaintiff for construction delays
which harmed the plaintiff’s business. (Id. at pp. 804-05.)

            By contrast, no such connection
exists between VISM and the Grey Defendants in this case. The Grey Defendants
did not enter into a contract or transaction with Choi and Song which had the
“end and aim” of benefitting VISM. Rather, VISM is a rival tattoo studio who
allegedly stole two of VISM’s employees. While this may have been wrongful
conduct, it does not give rise to a negligence duty of care.

VISM also argues that the legal advice
constituted unauthorized practice of law in violation of Business and
Professions Code sections 6125 and 6126, thereby constituting negligence per se
under statute. However, the alleged illegal advice was provided to Choi and
Song. VISM fails to demonstrate that these statutory provisions impose a duty
of care on the Grey Defendants towards VISM under these facts. In fact, courts
have held that an attorney is not liable to a third party for negligent advice
provided to the attorney’s client, even if the client deals with the third
party using the negligent advice. (See Adelman, supra, 90 Cal.App.4th at
p. 364, citing Goodman v. Kennedy (1976) 18 Cal.3d 335.)  

In sum, the Grey Defendants did not owe
VISM a duty of care in their interactions with Choi and Song. There is no basis
for imposing negligence liability against the Grey Defendants for their conduct
in inducing Choi and Song to leave VISM. The demurrer is SUSTAINED as to the
sixth cause of action.

II.
Motion to Strike

            a. Attorney’s Fees

            Generally, “[a]ttorney fees are not
recoverable unless a fee award is expressly authorized by either statute or the
parties' contract.” (Ilshin Investment Co., Ltd. v. Buena Vista Home
Entertainment, Inc. (2011) 195 Cal.App.4th 612, 627.) However, “[a] person
who through the tort of another has been required to act in the protection of
his interests by bringing or defending an action against a third person is
entitled to recover compensation for the reasonably necessary loss of time,
attorney's fees, and other expenditures thereby suffered or incurred.” (Prentice
v. North American Title Guaranty Corp. (1963) 59 Cal.2d 618, 620.) In such
a case, the attorney’s fees are considered “damages wrongfully caused by
defendant's improper actions.” (Id. at p. 621.)

            Here, VISM seeks to recover
attorney’s fees as damages under the theory that the Grey Defendants’
wrongdoing forced VISM to sue Choi and Song. (FAC ¶¶ 93-97.) The Grey
Defendants argue that the “tort of another” doctrine is inapplicable because “Plaintiff’s
claims against the Grey Defendants are not brought in a distinct and separate
third-party action but within the context of Plaintiff’s primary action against
Choi and Song.” (Dem. 6:14-16.) However, “there is no reason why recovery of
such fees should be denied simply because the two causes (the one against the
third person and the one against the party whose breach of duty made it
necessary for the plaintiff to sue the third person) are tried in the same
court at the same time.” (Prentice, supra, 59 Cal.2d at p. 621.)

            VISM has alleged that the Grey
Defendants’ actions caused it to sue Choi and Song and thereby incur attorney’s
fees as damages. It makes no difference whether VISM sued Choi and Song and the
Grey Defendants in one action or separate actions. Prentice explicitly states
that attorney’s fees are recoverable in either scenario. It also makes no
difference that VISM sued Choi and Song first and then later brought the Grey
Defendants in through amendment. As the Grey Defendants acknowledge, the “tort
of another” doctrine applies if VISM was “required to act in the protection of
its interests by bringing an action against Defendants Choi and Song due to the
Grey Defendants’ wrongful conduct.” (Reply 3:7-9.) “Plaintiff must have been
forced to file this lawsuit against Choi and Song due to the Grey Defendants’
tortious interference.” (Reply 3:9-10.) That is precisely what VISM alleges,
and these allegations must be assumed true on a demurrer. The mere fact that
the Grey Defendants were sued later than Choi and Song has no bearing on the
sufficiency of the facts alleged.  

Sooy v. Peter (1990) 220
Cal.App.3d 1305, cited by the Grey Defendants, does not compel the opposite
conclusion. The court in Sooy did not draw any distinction between a
single action or separate actions, and did not hold that “tort of another”
damages are barred if they are brought “within the context of the primary
action.” (See Reply 3:15-17.) Sooy merely acknowledges that the “tort of
another” doctrine requires “violation of a traditional tort duty between the
tortfeasor who is required to pay the attorney fees and the person seeking
compensation for those fees.” (Sooy, supra, 200 Cal.App.3d at p. 1310.)
In Sooy, this requirement was not met because the complainant sought
“tort of another” damages from a negligent attorney who did not represent him
and, if anything, represented an adverse party. (Id. at pp. 1312-13.)
“[A]n attorney is not liable to a nonclient for the consequences of
professional negligence” and “has no duty of due care to protect the interests
of an adverse party.” (Id. at p. 1313.) Because the attorney could not
commit legal malpractice against the nonclient, there was no underlying tort to
support recovery of “tort of another” damages.  

            By contrast, VISM has alleged
various torts against the Grey Defendants which the Grey Defendants have not
challenged on this demurrer. The Grey Defendants reiterate that the complaint
fails to allege a duty of care for purposes of negligent interference with
prospective economic advantage, but that is not the only tort alleged against
them. The remaining torts of intentional interference with contract and
intentional interference with prospective economic advantage may serve as the
underlying torts upon which VISM may claim damages, including attorney’s fees
incurred in suing Choi and Song. The Grey Defendants cite no authority
suggesting otherwise.

            The motion to strike is DENIED as to
attorney’s fees.  

            b. Punitive Damages

            “In an action for the breach of an
obligation not arising from contract, where it is proven by clear and
convincing evidence that the defendant has been guilty of oppression, fraud, or
malice, the plaintiff, in addition to the actual damages, may recover damages
for the sake of example and by way of punishing the defendant.” (Civ. Code, §
3294, subd. (a).) “‘Malice’ means 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.” (Id., subd. (c)(1).) “‘Oppression’ means
despicable conduct that subjects a person to cruel and unjust hardship in
conscious disregard of that person’s rights.” (Id., subd. (c)(2).) Fraud
is “intentional misrepresentation, deceit, or concealment of a material fact
known to the defendant with the intention on the part of the defendant of
thereby depriving a person of property or legal rights or otherwise causing
injury.” (Id., subd. (c)(3).)

            Here, the alleged facts sufficiently
establish that the Grey Defendants intentionally interfered with VISM’s
contracts and relationships with Choi and Song. The Grey Defendants allegedly
knew that Choi and Song were contracted with VISM, yet the Grey Defendants
provided false advice to Choi and Song that they could freely leave VISM. (FAC
¶¶ 16-32.) The Grey Defendants also allegedly knew that Choi and Song intended
to lie to VISM about contacting and contracting with another tattoo studio. (Id.,
¶¶ 26, 28.) Stealing employees in this manner may be considered “a willful and
conscious disregard of the rights” of VISM, or subjecting VISM to “unjust
hardship in conscious disregard of that person’s rights.” (See Civ. Code, §
3294(c).) 

            The motion to strike is DENIED as to
punitive damages.

            c. Prejudgment Interest

            The Grey Defendants’ authority on
prejudgment interest, while correct, has no bearing on VISM’s ability to allege
prejudgment interest. Furthermore, as the Grey Defendants acknowledge, Civil
Code section 3288 provides for prejudgment interest “at the court’s discretion
upon entry of judgment.” (Mtn. 10:5-7.) The Court will not determine at the
pleading stage whether VISM is entitled to prejudgment interest. Whether VISM
is ultimately entitled to prejudgment interest is a matter to be addressed
separately, if VISM prevails and moves for prejudgment interest.

            The motion to strike is DENIED as to
prejudgment interest.  

CONCLUSION

            The Grey Defendants’ demurrer is
SUSTAINED with leave to amend. The motion to strike is DENIED.