Judge: David A. Rosen, Case: 22GDCV00594, Date: 2022-12-09 Tentative Ruling
Case Number: 22GDCV00594 Hearing Date: December 9, 2022 Dept: E
Case No: 22GDCV00594
Hearing Date: 12/09/2022 – 10:00am
Trial Date: UNSET
Case Name: BZD LABS, LLC, a California Limited
Liability Company v. HCMM d/b/a GLENMED BILLING SERVICES, INC. and DOES 1-10,
inclusive
TENTATIVE RULING ON
DEMURRER AND MOTION TO STRIKE
Moving Party: Defendant, HCMM dba GlenMed Billing Services,
Inc. (“GlenMed” or “Defendant”)
Responding Party: Plaintiff,
BZD Labs, LLC (“Plaintiff”)
(Oppo and Reply
Submitted)
Proof of Service
Timely Filed (CRC Rule 3.1300): ok
16/21 Court Days Lapsed (CCP 1005(b)): ok
Proper Address: ok
RELIEF REQUESTED
Defendant, GlenMed, demurs pursuant to CCP §430.10 et seq. to the
following causes of action on the following grounds:
1.
First Cause of Action for Breach of Written Contract as it is
fatally uncertain and fails to state facts sufficient to state a cause of
action and is therefore subject to demurrer under California Code of Civil Procedure
sections 430.10(e)&(f).
2.
The Second Cause of Action for Promissory Estoppel as it is
fatally uncertain and fails to state facts sufficient to state a cause of
action and is therefore subject to demurrer under California Code of Civil Procedure
sections 430.10(e)&(f).
3.
The Third Cause of Action for Breach of Covenant of Good Faith and
Fair Dealing as it is fatally uncertain and fails to state facts sufficient to
state a cause of action and is therefore subject to demurrer under California
Code of Civil Procedure sections 430.10(e)&(f).
4.
The Fourth Cause of Action for Intentional Misrepresentation as it
is fatally uncertain and fails to state facts sufficient to state a cause of
action and is therefore subject to demurrer under California Code of Civil
Procedure sections 430.10(e)&(f).
5.
The Fifth Cause of Action for Fraudulent Inducement as it is
fatally uncertain and fails to state facts sufficient to state a cause of
action and is therefore subject to demurrer under California Code of Civil
Procedure sections 430.10(e)&(f).
6.
The Sixth Cause of Action for Fraudulent Concealment as it is
fatally uncertain and fails to state facts sufficient to state a cause of
action and is therefore subject to demurrer under California Code of Civil
Procedure sections 430.10(e)&(f).
7.
The Seventh Cause of Action for Negligent Misrepresentation as it
is fatally uncertain and fails to state facts sufficient to state a cause of
action and is therefore subject to demurrer under California Code of Civil
Procedure sections 430.10(e)&(f).
8.
The Eleventh Cause of Action for Unfair Competition as it is
fatally uncertain and fails to state facts sufficient to state a cause of
action and is therefore subject to demurrer under California Code of Civil
Procedure sections 430.10(e)&(f).
BACKGROUND
On September 9, 2022,
Plaintiff filed a Complaint against Defendant alleging the following causes of
action: (1) Breach of Written Contract, (2) Promissory Estoppel, (3) Breach of
Covenant of Good Faith and Fair Dealing, (4) Fraud – Intentional
Misrepresentation, (5) Fraudulent Inducement, (6) Fraudulent Concealment, (7)
Negligent Misrepresentation, (8) Negligence, (9) Conversion, (10)
Misappropriation of Trade Secrets, and (11) Unlawful and Unfair Business
Practices in Violation of Cal. Bus. & Prof. Code §17200.
This
case arises out of Plaintiff, BZD, alleging it entered into a written services
agreement with Defendant, GlenMed for GlenMed to provide BZD professional services
in connection with medical billing, processing and collection, and billing
compliance consulting in exchange for commission-based payment of certain fees.
BZD alleges it discovered that GlenMed was failing to competently perform and
adequately perform its duties in violation of the Agreement.
PROCEDURAL
Meet
and Confer
A party filing a
demurrer “shall meet and confer in person or by telephone with the party who
filed the pleading that is subject to demurrer for the purpose of determining
whether an agreement can be reached that would resolve the objections to be
raised in the demurrer.” (Code Civ.
Proc., §430.41, subd. (a).) “The parties
shall meet and confer at least five days before the date the responsive
pleading is due. If the parties are not able to meet and confer at least five
days prior to the date the responsive pleading is due, the demurring party
shall be granted an automatic 30-day extension of time within which to file a
responsive pleading, by filing and serving, on or before the date on which a
demurrer would be due, a declaration stating under penalty of perjury that a
good faith attempt to meet and confer was made and explaining the reasons why
the parties could not meet and confer.”
(Code Civ. Proc., §430.41, subd. (a)(2).) Failure to sufficiently meet
and confer is not grounds to overrule or sustain a demurrer. (Id., §430.41(a)(4).)
Moving
party alleges it met and conferred with Plaintiff on October 7, 2022. (Decl.
George ¶3.)
LEGAL STANDARDS FOR DEMURRERS
Demurrer
– Sufficiency
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.) The court “treat[s] the demurrer as admitting
all material facts properly pleaded, but not contentions, deductions or
conclusions of fact or law ….” (Berkley
v. Dowds (2007) 152 Cal.App.4th 518, 525.)
In a demurrer proceeding, the defects must be apparent on the face of
the pleading or via proper judicial notice.
(Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968,
994.) A demurrer tests the pleadings
alone and not the evidence or other extrinsic matters; therefore, it lies only
where the defects appear on the face of the pleading or are judicially
noticed. (Code Civ. Proc., §§ 430.30,
430.70.) 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.)
The
general rule is that the plaintiff need only allege ultimate facts, not
evidentiary facts. (Doe v. City of
Los Angeles (2007) 42 Cal.4th 531, 550.)
“All that is required of a plaintiff, as a matter of pleading … is that
his complaint set forth the essential facts of the case with reasonable
precision and with sufficient particularity to acquaint the defendant with the
nature, source and extent of his cause of action.” (Rannard v. Lockheed Aircraft Corp.
(1945) 26 Cal.2d 149, 156-157.)
On
demurrer, a trial court has an independent duty to “determine whether or not
the … complaint alleges facts sufficient to state a cause of action under any
legal theory.” (Das v. Bank of
America, N.A. (2010) 186 Cal.App.4th 727, 734.) Demurrers do not lie as to only parts of
causes of action, where some valid claim is alleged but “must dispose of an
entire cause of action to be sustained.”
(Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97,
119.) “Generally
it is an abuse of discretion to sustain a demurrer without leave to amend if
there is any reasonable possibility that the defect can be cured by
amendment.” (Goodman v. Kennedy
(1976) 18 Cal.3d 335, 349.)
Demurrer – Uncertainty
A special demurrer for uncertainty, CCP section 430.10(f), is disfavored
and will only be sustained where the pleading is so bad that defendant cannot
reasonably respond—i.e., cannot reasonably determine what issues must be
admitted or denied, or what counts or claims are directed against
him/her. (Khoury v. Maly’s of Calif., Inc. (1993) 14
Cal.App.4th 612, 616.) Moreover, even if the pleading is somewhat vague,
“ambiguities can be clarified under modern discovery procedures.” (Ibid.)
ANALYSIS
First Cause of Action - Breach of Written Contract
Defendant
argues that the instant Complaint does not include a copy of the contract that
was the subject of the alleged breach, nor does it state verbatim the terms of
the contract or the provisions of the contract that are at issue. (Def. Mot.
p.6 citing Otworth v. Southern Pac. Transportation Co. (1985) 166
Cal.App.3d 452, 458-459.) Therefore, Defendant argues this cause of action is
subject to demurrer.
In Opposition, Plaintiff argues the key provisions of
the Services Agreement are detailed throughout the Complaint and that it
enumerated the obligations/professional duties that Defendant was expected to
meet verbatim, the payment structure of the Services Agreement, and the term of
the Services Agreement. (Pl. Oppo. p. 3 citing Compl. ¶¶7-9.)
In Reply, Defendant first argues that Plaintiff does
not dispute that where the cause of action is for breach of written contract,
the terms of the contract must be stated verbatim in the complaint, or, in the
alternative the contract must be attached. Defendant also argues that Plaintiff
appears to argue that it somehow met the requirement to plead the terms
verbatim in paragraphs 7-9 of the Complaint. However, Defendant argues
Paragraphs 7-9 only explains the creation of the contract and BZD’s
interpretation of what the duties and obligations were from BZD’s perspective
and BZD’s expectations, not the verbatim terms of the contract.
Discussion – Breach of Written Contract
To state a cause of action for
breach of contract, Plaintiff must allege “(1) the existence of the contract,
(2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s
breach, and (4) resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011)
51 Cal.4th 811, 821.) A cause of action
for breach of contract is subject to demurrer if “it cannot be ascertained from
the pleading whether the contract is written, is oral, or is implied by
conduct.” (Code Civ. Proc., §430.10(g).)
Existence
of the Contract
Plaintiff alleged sufficient facts
to meet this element of a breach of contract claim. Plaintiff alleged, “On
February 7, 2022, BZD and GlenMed entered into a written Services Agreement.”
(Compl. ¶19.)
Plaintiff’s
Performance or Excuse for Nonperformance
Plaintiff alleged sufficient facts
to meet this element of a breach of contract claim. Plaintiff alleged, “BZD
substantially and materially complied with its obligations under the Agreement
and provided GlenMed the necessary information for GlenMed to process the
claims in a timely manner. BZD is not in breach of any of the obligations
imposed upon it under the Agreement.” (Compl. ¶22.) Further, Plaintiff alleged
in Paragraph 10 of the Complaint, which was incorporated by reference in
Paragraph 18, “BZD fulfilled its obligations under the Agreement and provided
GlenMed the necessary information for GlenMed to process the claims in a timely
manner. BZD is not in breach of any of the obligations imposed upon it under
those terms.” (Compl. ¶10.)
Defendant’s
Breach
Plaintiff alleged sufficient facts
to meet this element of a breach of contract claim. Plaintiff alleged, “GlenMed
has breached the Agreement by, among other conduct, engaging in the
above-detailed Wrongful Conduct and not fulfilling its Obligations.” (Compl.
¶23.)
“Obligations”
is defined in the Complaint in Paragraph 8.
“Pursuant to
the terms of the Agreement, GlenMed’s professional duties included, without
limitation: performing billing and collection services with reasonable skill
and care; providing processing services for BZD’s medical billing and insurance
claims for Medi-Cal, Medicare, PPO, HRSA, third-party payers, and any other
insurance claims in a timely manner; reprocessing denied insurance claims
within thirty (30) days of the denial date; providing to BZD monthly gross
revenue and accounts receivable reports per entity in detail; and providing
“Billing Compliance Consulting” services to BZD (collectively, the
“Obligations”).” (Compl. ¶8.)
“Wrongful
Conduct” is defined in the Complaint in Paragraphs 11-12.
“However, in
approximately mid-2022, BZD discovered that GlenMed was failing to perform the
Obligations. At that time, BZD discovered that GlenMed failed to competently
and adequately perform its duties, in violation of its Obligations under the
Agreement, in violation of its legal duty of care, in violation of industry
standards, and contrary to its representations (collectively, the “Wrongful
Conduct”).” (Compl. ¶11.)
“GlenMed’s
Wrongful Conduct includes, but is not limited to, the following: Failing to
file claims at all; Filing incomplete claims; Failing to provide all requested
information to insurers; Failing to follow up with insurers and diligently
pursue claims; Filing untimely claims and appeals; Failing to reprocess denied
claims within thirty (30) days of the denial date; Failing to provide to BZD monthly
gross revenue and accounts receivable reports per entity in detail; Failing to
provide “Billing Compliance Consulting” to BZD; Intentionally failing to inform
BZD of the above actions and inactions; and Intentionally failing to inform BZD
of GlenMed’s billing and collection activity or inactivity.” (Compl. ¶12.)
In addition,
Wrongful Conduct is defined in Paragraph 13 as, “In addition, Defendant’s
Wrongful Conduct also includes various oral and written false representations
made by GlenMed to BZD regarding the nature and quality of services provided to
BZD. Such false and inaccurate representations include, but are not limited to:
Warranties and representations that
GlenMed would perform its billing and collection services with reasonable skill
and care; Warranties and representations that GlenMed would use commercially
reasonable efforts to collect on billings, including rebilling and appropriate
follow-up with payers, patients, and providers and/or facilities; Warranties
and representations that GlenMed was equipped to diligently follow up on
claims; Warranties and representations that GlenMed would provide “Billing
Compliance Consulting” to BZD.” (Compl. ¶13.)
Resulting
Damages to the Plaintiff
Here, Plaintiff alleged this element,
“BZD, as a direct result of GlenMed’s breach, has harmed and suffered losses
and damages including, but not limited to, thousands of unprocessed and/or
unprocessable claims which have resulted in significant damages in an amount in
excess of the minimum unlimited jurisdiction limits of this Court and in an
amount to be proven at trial.” (Compl. ¶24.)
Verbatim/Legal Effect
“A written
contract may be pleaded either by its terms—set out verbatim in the complaint
or a copy of the contract attached to the complaint and incorporated therein by
reference—or by its legal effect. [Citation.] In order to plead a contract by
its legal effect, plaintiff must ‘allege the substance of its relevant terms.
This is more difficult, for it requires a careful analysis of the instrument,
comprehensiveness in statement, and avoidance of legal conclusions.’
[Citation.]” (Heritage Pacific Financial, LLC v. Monroy (2013) 215
Cal.App.4th 972, 993.)
Here, while Plaintiff did not attach the written contract to
the Complaint, Plaintiff argues that it pleaded the contract verbatim, whereas
Defendant argues that Plaintiff did not state the verbatim terms or the
provisions of the contract that are at issue in the Complaint. Movant cites a disfavored case, Otworth,
supra, 166 Cal. App. 3d at 458-459 as to the requirement of verbatim pleading
of contract terms where the contract itself is not attached to the Complaint.
The correct California Supreme Court rule is that “a
plaintiff may plead the legal effect of the contract rather than its precise
language.” Construction Protective
Services, Inc. v. TIG Speciality Ins. Co. (2002) 29 Cal. 4th
189, 199; Miles v. Deutsche Bank National Trust Co. (2015-4th
Dist.) 236 Cal. App. 4th 394, 402.
Plaintiff has clearly pled the legal effect of the Contract,
as well as its terms, if not verbatim, then sufficiently.
Tentative Ruling First Cause of Action –
Breach of Contract
Defendant’s demurrer is overruled. Plaintiff alleged sufficient facts to constitute
a cause of action for breach of contract.
Second Cause of Action – Promissory Estoppel
“The
elements of a promissory estoppel claim are (1) a promise clear and unambiguous
in its terms; (2) reliance by the party to whom the promise is made; (3) [the]
reliance must be both reasonable and foreseeable; and (4) detriment-the party
asserting the estoppel must be injured by his reliance.” (Jones v. Wachovia
Bank (2014) 230 Cal.App.4th 935, 945.)
“Because promissory estoppel is an equitable doctrine
to allow enforcement of a promise that would otherwise be unenforceable, courts
are given wide discretion in its application. (US Ecology, Inc. v. State of
California (2005) 129 Cal.App.4th 887, 902.)
Moving party argues that BZD’s cause of action for
promissory estoppel is improper as it does not allege any “promises” outside of
GlenMed’s and BZD’s written contract. Moving party argues that BZD is essentially
alleging a breach of its contract with GlenMed and GlenMed’s alleged negligence
in performing its obligations pursuant to the contract.
Opposition argues that it alleged all four elements
for a promissory estoppel cause of action. Further, Opposition points out that
Defendant points to no case law to support its argument that a promissory
estoppel cause of action must be distinct from the cause of action for breach
of contract. Further, Opposition argues that either way it pled numerous
promises outside the context of the obligations of the Services Agreement,
particularly that Defendant made promises that it had the expertise to effectively
perform the obligations under the Services Agreement and, further, that it was
equipped to effectively perform the obligations. Plaintiff argues the promise here is outside the scope of
the Services Agreement and instead was made to induce Plaintiff into entering
the contract with Defendant.
In Reply, Defendant argues, “Promissory estoppel does
not apply if the promisee gave actual consideration and, therefore, a cause of
action for promissory estoppel is inconsistent with a cause of action for breach
of contract based on the same facts. (Fleet v. Bank of America N.A. (2014) 229
Cal.App.4th 1403, 1412-1413.” (Def. Reply p.3.)
The Court is persuaded that the promise Plaintiff
seeks to enforce by way of promissory estoppel in this Second Cause of Action
is separate from that which Plaintiff seeks to enforce in the First Cause of
Action for Breach of Contract.
TENTATIVE RULING
– Promissory Estoppel
Plaintiff has
pled the elements of promissory estoppel, as follows:
(1)
a
promise clear and unambiguous in its terms
“As alleged
herein, GlenMed made a promise to BZD – specifically, that it had the expertise
and was equipped to effectively perform its Obligations as described above.”
(Compl. ¶26)
(2)Reliance by the party to whom made the promise is made
“BZD actually
and reasonably did rely on those promises.” (Compl. ¶29.)
(3)The reliance must be both reasonable and foreseeable
Pled in
paragraphs 28 and 29 of the Complaint.
(4)The party asserting the estoppel must be injured by
his reliance
“BZD’s reliance
on GlenMed’s promise was a substantial factor in causing its harm. As a direct
and proximate result of GlenMed’s failure to perform the promise made to BZD,
BZD has suffered significant damages in an amount in excess of the minimum
unlimited jurisdiction limits of this Court and in an amount to be proven at
trial.” (Compl. ¶¶32-33.)
Although
a cause of action for promissory estoppel is inconsistent with a cause of
action for breach of contract based on the same facts (see, e.g. Money Store Investment Corp. v.
Southern Cal. Bank (2002)
98 Cal.App.4th 722, 732, 120 Cal.Rptr.2d 58), “[w]hen a pleader is in doubt about
what actually occurred or what can be established by the evidence, the modern
practice allows that party to plead in the alternative and make inconsistent
allegations.”
(Mendoza
v. Continental Sales Co. (2006) 140 Cal.App.4th 1395,
1402, 45 Cal.Rptr.3d 525; see also Crowley
v. Katleman (1994) 8 Cal.4th 666, 690, 34
Cal.Rptr.2d 386, 881 P.2d 1083.)
The Demurrer to the 2d Cause of Action is OVERRULED.
Third Cause of Action – Breach of Covenant
of Good Faith and Fair Dealing
A
breach of the implied covenant of good faith and fair dealing involves
something beyond breach of the contractual duty itself and it has been held
that bad faith implies unfair dealing rather than mistaken judgment. (Careau
& Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d
1371, 1394.)
Defendant argues that this cause of action fails because
it is based upon and arises out of the first cause of action for breach of
contract
In Opposition, Plaintiff argues that this cause of
action does include conduct related to the breach of contract, but it further
incorporates fraudulent misrepresentations that were made by Defendant to
induce Plaintiff into entering into the contract. Opposition argues that these
include misrepresentations made by Defendant that it had the expertise and
experience that Plaintiff was looking for in a company that would handle
billing, among others. [The Court notes that for these misrepresentations, Plaintiff
cites to paragraph 43 which is located in the fourth cause of action for fraud.]
In Reply, Defendant notes how Plaintiff admitted in
Opposition that this action is based on conduct related to its breach of
contract cause of action. Further, Defendant points out that the
misrepresentations that Plaintiff points out in Paragraph 43 are not incorporated
into the third cause of action at issue.
Discussion – Third Cause of Action
Plaintiff
alleges as follows, “GlenMed breached the implied covenant of good faith and
fair dealing in depriving BZD of its bargained agreement by, among other
conduct, engaging in Wrongful Conduct and making misrepresentations to BZD.”
(Compl. ¶38.)
It appears that the portion in Paragraph 38 that
states, “depriving BZD of its bargained agreement, among other conduct,
engaging in Wrongful Conduct,” is simply alleging the same basis under which
the breach of contract issue is premised. Therefore, this is improper. A breach
of the implied covenant of good faith and fair dealing involves something
beyond breach of the contractual duty itself and it has been held that bad
faith implies unfair dealing rather than mistaken judgment. (Careau &
Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371,
1394.)
The portion of Paragraph 38 that states, “…and making
misrepresentations to BZD,” is the portion that Plaintiff appears to be relying
on for breach of the implied covenant of good faith and fear dealing based on
the Opposition. However, as noted by Defendant, Opposition cites these
representations to be in Paragraph 43, which is not incorporated into this
cause of action since it is in the fourth cause of action.
TENTATIVE RULING
THIRD CAUSE OF ACTION
Demurrer
as to the third cause of action is SUSTAINED with 20 day’s leave to amend granted.
Fourth – Seventh Causes of Action
Fourth Cause of Action – Fraud-Intentional
Misrepresentation
“ ‘The elements of
fraud, which gives rise to the tort action for deceit, are (a)
misrepresentation (false representation, concealment, or nondisclosure); (b)
knowledge of falsity (or “scienter”); (c) intent to defraud, i.e., to induce reliance;
(d) justifiable reliance; and (e) resulting damage.’ “ (Small v. Fritz
Companies, Inc. (2003) 30Cal.4th
167, 173 citing Lazar v. Superior Court (1996) 12 Cal.4th 631,
638.)
Fraud must be pleaded with specificity rather than with “‘general and conclusory
allegations.’” (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167,
184.) The specificity requirement means a plaintiff must allege facts showing
how, when, where, to whom, and by what means the representations were made,
and, in the case of a corporate defendant, the plaintiff must allege the names
of the persons who made the representations, their authority to speak on behalf
of the corporation, to whom they spoke, what they said or wrote, and when the
representation was made. (Lazar v. Superior Court (1996)12 Cal.4th 631,
645.)
Fifth Cause of Action – Fraudulent
Inducement
[In
Opposition, Plaintiff used the same elements for fraudulent misrepresentation
as it did for fraudulent inducement.]
Sixth Cause of Action – Fraudulent
Concealment
“’[T]he
elements of an action for fraud and deceit based on concealment are: (1) the
defendant must have concealed or suppressed a material fact, (2) the defendant
must have been under a duty to disclose the fact to the plaintiff, (3) the
defendant must have intentionally concealed or suppressed the fact with the
intent to defraud the plaintiff, (4) the plaintiff must have been unaware of
the fact and would not have acted as he did if he had known of the concealed or
suppressed fact, and (5) as a result of the concealment or suppression of the
fact, the plaintiff must have sustained damage.’” (Boschma v. Home Loan
Center, Inc. (2011) 198 Cal.App.4th 230, 248 citing Hahn v. Mirda (2007)
147 Cal.App.4th 740,748.) “Fraud must be pleaded with specificity rather than
with “’general and conclusory’” allegations.” (Boschma, supra, at 248
citing Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.)
Seventh Cause of Action – Negligent
Misrepresentation
“The elements of negligent misrepresentation are well
established. A plaintiff must prove the following in order to recover.
‘Misrepresentation of a past or existing material fact, without reasonable
ground for believing it to be true, and with intent to induce another’s
reliance on the fact misrepresented; ignorance of the truth and justifiable
reliance on the misrepresentation by the party to whom it was directed; and
resulting damage…’” (Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp
Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154.)
TENTATIVE RULING
Fourth, Fifth, Sixth, and Seventh Causes of Action
The
Court sustains the demurrers with 20 day’s leave to amend as to the fourth,
fifth, sixth, and seventh causes of action.
As a preliminary matter, it is entirely uncertain as
to what the difference is that Plaintiff is alleging between each of these
causes of action. Each of these causes of action appear to be based on the same
exact conduct – inducing BZD to enter into the agreement, inducing BZD into
continuing to use GlenMed’s services, and inducing BZD to not take legal action
against GlenMed. (Compl ¶44, fourth cause of action; ¶54, fifth cause of
action; ¶64, sixth cause of action; ¶72, seventh cause of action.) All three of
those bases of fraud are asserted in the fourth, fifth, sixth, and seventh
cause of action, and the Court is unclear as to what the difference is between
each cause of action that Plaintiff is alleging.
Further, although the Court will not go into the
specific elements as to each cause of action, the causes of action do not meet
the specificity requirements for fraud of any type given the uncertainty of the
allegations. For example, in alleging all of the fraudulent conduct alleged –
inducing BZD to enter into the agreement, inducing BZD into continuing to use
GlenMed’s services, and inducing BZD to not take legal action – the Plaintiff fails
to distinguish the how, when, where, to whom, and by what means the
representations were made as to each type of cause of action for fraud. Plaintiff
says in the fourth, fifth, and seventh causes of action, “These promises and
representations were made to Boris Dobrin by GlenMed’s employees and
representatives in writing and orally through telephone communications
specifically via GlenMed employee Maria Verdian.” (Compl. ¶43, fourth cause of
action; ¶53, fifth cause of action; ¶69, seventh cause of action.)
Further as to a corporate defendant, the plaintiff
must allege the names of the persons who made the representations, their
authority to speak on behalf of the corporation, to whom they spoke, what they
said or wrote, and when the representation was made. (Lazar v. Superior
Court (1996)12 Cal.4th 631, 645.)
Not only does Plaintiff not allege Glen Med employee
Maria Verdian’s authority to speak, but Plaintiff makes allegations as to who
made the misrepresentations unclear by simultaneously saying GlenMed employee
Maria Verdian made them but also saying representations and promises were made
to Boris Dobrin by Glen Med’s “employees and representatives.” “Employees and
representatives” is plural, Maria Verdian is singular.
Eleventh Cause of Action – Unlawful and
Unfair Business Practices
The
Complaint alleges as follows:
“BZD re-alleges the allegations contained in
paragraphs 1 through 91, inclusive, and incorporates these paragraphs herein by
this reference as though fully set forth. As described herein, GlenMed
repeatedly engaged in the Wrongful Conduct during the term of the Agreement
with BZD. GlenMed’s actions constitute unlawful, unfair, and fraudulent
business acts and practices which are prohibited by California Business and
Professions Code § 17200 et seq. As a direct and proximate
result of GlenMed’s unfair business practices, suffered significant damages in
an amount in excess of the minimum unlimited jurisdiction limits of this Court
and in an amount to be proven at trial.” (Compl. ¶¶92-95.)
Moving party argues no specific and particular facts
are alleged as to the statutory elements of the violation, and that Plaintiff
pleads nothing more than a cause of action for negligence and claims that are
very specific to this contract with GlenMed. Moving party argues that BZD has
not alleged with specificity how any of the alleged conduct by GlenMed was
unfair, violated a legislatively declared policy, or impacted competition in
any way or defrauded it. Moving party argues that BZD simply alleges that
GlenMed engaged in unlawful conduct.
In Opposition, Plaintiff asserts it alleged a cause of
action by stating that Defendant engaged in a legal violation by breaching its
contract with Defendant.
Discussion
The purpose of the UCL
“is to protect both consumers and competitors by promoting fair competition in
commercial markets for goods and services.” (Drum v. San Fernando Valley Bar
Assn. (2010) 182 Cal.App.4th 247, 252 citing Kasky v. Nike, Inc. (2002)
27 Cal.4th 939, 949.) Business and Professions Code section 17200 provides:
“[a]s used in this chapter, unfair competition shall mean and include any
unlawful, unfair or fraudulent business act or practice and unfair, deceptive,
untrue or misleading advertising and any act prohibited by Chapter 1 (commencing
with Section 17500) of Part 3 of Division 7 of the Business and Professions
Code.” (Progressive West Ins. Co. v. Superior Court (2005) 135
Cal.App.4th 263, 284.) Because the UCL
is written in the disjunctive, it establishes three varieties of unfair competition
– acts or practices which are unlawful, or unfair, or fraudulent. (Adhav v.
Midway Rent a Car, Inc. (2019) 37 Cal.App.5th 954, 970 citing Cel-Tech
Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20
Cal.4th 163, 180.)
Unlawful
“ ‘The “unlawful” practices prohibited by … section 17200 are any practices
forbidden by law, be it civil or criminal, federal, state, or municipal,
statutory, regulatory, or court-made. [Citation.] It is not necessary that the
predicate law provide for private civil enforcement. [Citation.] As our Supreme
Court put it, section 17200 “borrows” violations of other laws and treats them
as unlawful practices independently actionable under section 17200 et seq.’” (South
Bay Chevrolet v. General Motors Acceptance Corp. (1999) 72 Cal.App.4th 861,
880 citing Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499,
531-532.) “A plaintiff alleging unfair business practices under these statutes
must state with reasonable particularity the facts supporting the statutory
elements of the violation.” (Khoury v. Maly’s of California, Inc. (1993)
14 Cal.App.4th 612, 619; “Demurrer was properly sustained as to this cause of
action because the second amended complaint identifies no particular section of
the statutory scheme which was violated and fails to describe with any
reasonable particularity the facts supporting violation.”
Here, Plaintiff has not identified any statute
with reasonable particularity as to how it is basing its cause of action under a
theory of “unlawful” practices.
Unfair
There
is authority that the test to determine whether a business practice is unfair
differs depending on whether the plaintiff in a UCL case is a competitor of the
defendant or a consumer. (Drum v. San Fernando Valley Bar Assn. (2010)
182 Cal.App.4th 247, 253.) In competitor cases, a business practice is “unfair”
only if it “threatens an incipient violation of an antitrust law, or violates
the policy or spirit of one of those laws because its effects are comparable to
or the same as a violation of the law, or otherwise significantly threatens of
harms competition.” (Id. citing Cel-Tech, supra, 20 Cal.4th at
187.)
In
consumer cases, the Supreme Court has not established a definitive test to
determine whether a business practice is unfair. (Drum v. San Fernando
Valley Bar Assn., supra, 182 Cal.App.4th
at 246 citing Cel-Tech, supra, 20 Cal.4th at 187, fn. 12.)
Several
definitions of “unfair” under the UCL have been formulated, and they are:
1. “An act or practice is unfair if the consumer
injury is substantial, is not outweighed by any countervailing benefits to
consumers or to competition, and is not an injury the consumers themselves
could reasonably have avoided.” (Daugherty v. American Honda Motor Co., Inc.
(2006) 144 Cal.App.4th 824, 839.)
2. “’[A]n “unfair business practice occurs when
that practice “offends an established public policy or when the practice is
immoral, unethical, oppressive, unscrupulous or substantially injurious to
consumers.” [Citation.]’ [Citation.]” (Smith v. State Farm Mutual Automobile
Ins. Co. (2001) 93 Cal.App.4th 700, 719.)
3. An unfair business practice means the “ ‘the
public policy which is a predicate to the action must be “tethered” to specific
constitutional, statutory or regulatory provisions.’” (Scripps Clinic v.
Superior Court (2003) 108 Cal.App.4th 917, 940.)
(West v. JPMorgan Chase Bank, N.A. (2013)
214 Cal.App.4th 780, 806.)
“The balancing test required by the unfair
business practice prong of section 17200 is fact intensive and is not conducive
to resolution at the demurrer stage. ‘[U]nfairness’ is an equitable concept
that cannot be mechanistically determined under the relatively rigid legal
rules applicable to the sustaining or overruling of a demurrer.” (Progressive
West Ins. Co. v. Superior Court (2005) 135 Cal.App.4th 263, 287 citing Schnall
v. Hertz Corp. (2000) 78 Cal.App.4th 1144, 1167.)
While there is no definitive test for
“unfairness” at the demurrer stage, even if this Court were to assume that all
three definitions apply, Plaintiff has not made any allegations falling under any
three of the unfairness tests. Plaintiff simply alleges GlenMed’s actions
constitute unlawful, unfair, and fraudulent business practices which are
prohibited by California Business and Professions Code §17200 et seq.
Fraudulent
“A
fraudulent business practice under section 17200 ‘is not based upon proof of
the common law tort of deceit or deception, but is instead premised on whether
the public is likely to be deceived.’” (Progressive West Ins. Co. v.
Superior Court (2005) 135 Cal.App.4th 263, 284 citing Pastoria v.
Nationwide Ins. (2003) 112 Cal.App.4th 1490, 1498.) Stated another way, “In
order to state a cause of action under the fraud prong of [section 17200] a
plaintiff need not show that he or others were actually deceived or confused by
the conduct or business practice in question. ‘The “fraud” prong of [section
17200] is unlike common law fraud or deception. A violation can be shown even
if no one was actually deceived, relied upon the fraudulent practice, or
sustained any damage. Instead, it is only necessary to show that members of the
public are likely to be deceived.’ [Citations.]” (Progressive West Ins. Co.,
supra, 135 Cal.App.4th at 284 citing Schnall v. Hertz Corp. (2000)
78 Cal.App.4th 1144, 1167.)
Here, Plaintiff makes no allegations
about whether the public is likely to be deceived.
TENTATIVE RULING – Eleventh Cause of Action
Defendant’s demurrer as
to the eleventh cause of action is sustained with 20 day’s leave to amend granted.
MOTION 2 – Motion to Strike
Moving
Party: Defendant, HCMM dba GlenMed Billing Services,Inc. (“GlenMed”)
Responding Party:
[Opposition and Reply Submitted]
Proof of Service
Timely Filed (CRC Rule 3.1300) : ok
16/21 Court Days Lapsed (CCP 1005(b)): ok
Proper Address: ok
RELIEF REQUESTED
Defendant
GlenMed Billing Services, Inc. moves to strike the following portions of the
Complaint:
1. Page 9:20-24 which states “The acts of GlenMed were
willful, wanton, malicious, oppressive, and fraudulent. Specifically, GlenMed
purposely used fraudulent misrepresentations to induce BZD to enter into the
Agreement, to continue to use GlenMed’s services, and to not pursue legal
action against GlenMed. Accordingly, BZD is entitled to exemplary and punitive
damages in an amount sufficient to deter Defendant from against acting as
alleged above.”
2. Page 11:3-4 which states “The acts of GlenMed were
willful, wanton, malicious, oppressive, and fraudulent. Specifically, GlenMed
purposely used fraudulent misrepresentations to induce BZD to enter into the
Agreement. Accordingly, BZD is entitled to exemplary and punitive damages in an
amount sufficient to deter Defendant from against acting as alleged above.”
3. Page 12:11-14 which states “The acts of GlenMed
were willful, wanton, malicious, oppressive, and fraudulent. Specifically,
GlenMed purposely used fraudulent misrepresentations to induce BZD to enter into
the Agreement. Accordingly, BZD is entitled to exemplary and punitive damages
in an amount sufficient to deter Defendant from against acting as alleged
above.”
4. Page 14:20-22 which states “The acts of GlenMed
were willful, wanton, malicious, oppressive, and fraudulent. Accordingly, BZD
is entitled to exemplary and punitive damages in an amount sufficient to deter
Defendant from again acting as alleged above.”
5. Prayer for Relief, lines 2-12 which states “For
punitive damages accordingly to proof at the time of trial (as to the fourth,
fifth, sixth, and ninth cause of action”.
PROCEDURAL
Meet
and Confer
Before filing a motion to strike pursuant to
this chapter, the moving party shall meet and confer in person or by telephone
with the party who filed the pleading that is subject to the motion to strike
for the purpose of determining if an agreement can be reached that resolves the
objections to be raised in the motion to strike. If an amended pleading is
filed, the responding party shall meet and confer again with the party who
filed the amended pleading before filing a motion to strike the amended
pleading. (CCP §435.5(a).)
Moving party alleged it
met and conferred. (Decl. George ¶3.)
Legal Standard Motion to Strike
The court may, upon a
motion made pursuant to Section 435, or at any time in its discretion, and upon
terms it deems proper, strike any irrelevant, false, or improper matter
inserted in any pleading. (Code Civ. Proc. § 436(a).) The court may also strike
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. (Code Civ. Proc. §
436(b).) A motion to strike cannot be based upon the grounds that a
complaint fails to state facts sufficient to constitute a cause of action, but
instead is properly based on grounds of superfluous or abusive allegations, or
improprieties in form or procedure. (Ferraro v. Camarlinghi (2008)
161 Cal.App.4th 509, 528-29.)
The grounds for moving
to strike must appear on the face of the pleading or by way of judicial
notice. (Code. Civ. Proc. § 437; Turman v. Turning Point of
Central California, Inc. (2010) 191 Cal.App.4th 53, 63 [“In passing on the
correctness of a ruling on a motion to strike, judges read allegations of a
pleading subject to a motion to strike as a whole, all parts in their context,
and assume their truth.”].)
ANALYSIS
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 by way of punishing the defendant. (Cal. Civ. Code
§3294(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.” (CCP §3294(c)(1).)
“‘Oppression’ means despicable conduct that subjects a person to cruel and
unjust hardship in conscious disregard of that person’s rights. (CCP
§3294(c)(2).) “‘Fraud’ means an 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. (CCP §3294(c)(3).)
“In order to survive a motion to strike
an allegation of punitive damages, the ultimate facts showing an entitlement to
such relief must be pled by a plaintiff.” (Clauson v. Superior Court
(1998) 67 Cal. App. 4th 1253, 1255.) Conclusory allegations, devoid of any
factual assertions, are insufficient to support a conclusion that parties acted
with oppression, fraud or malice. (Smith v. Sup. Ct. (1992) 10 Cal. App.
4th 1033, 1042.)
TENTATIVE RULING
As a preliminary matter, Defendant numbered the first four
portions it wants to strike as 1-4. The Court notes that none of the quotations
and citations in Movant’s 1-4 actually say what Defendant alleges it says at
those citations. Presumably, based on the language of the quotations for 1-4,
Defendant is referring to the last paragraphs in the fourth (fraud), fifth
(fraud), sixth (fraud), and ninth (conversion) causes of action. Perhaps this motion is based on the fourth,
fifth, sixth, and ninth causes of action, as the 5th request in the
motion to strike appears to pertain to punitive damages with respect to the
fourth, fifth, sixth, and ninth causes of action.
The Motion to Strike is thus DENIED as a
result of the lack of clear notice as to what Movant seeks to strike.