Judge: Deborah C. Servino, Case: 30-2022-01260915, Date: 2023-08-11 Tentative Ruling
Defendant Starship Logistics, LLC’s motion to strike portions of Plaintiff Etekcity Corporation’s Third Amended Complaint (“TAC”) is granted in part and denied in part. The motion is granted as to striking Xander Xu, an individual,” and “Levin Liu, an individual” from the TAC. The motion is denied as to the punitive damages allegations.
General Legal Authority
Pursuant to Code of Civil Procedure section 436, the court may:
(a) Strike out any irrelevant, false, or improper matter inserted in any pleading.
(b) Strike out 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.
“The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Code Civ. Proc., § 437, subd. (a).) “[J]udges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth.” (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.)
Merits
New Defendants
Defendant argues that Plaintiff’s inclusion of two new defendants (Xander Xu and Levin Liu) is beyond the scope of the court’s March 24, 2023 order granting the motion to strike portions of the Second Amended Complaint, with leave to amend. Defendant relies upon cases dealing with demurrers, in which the courts held that when a demurrer is sustained with leave to amend, the scope of the permissible amendment is limited to the causes of action to which the demurrer was sustained. (See People v. Clausen (1967) 248 Cal.App.2d 770, 785-786 [finding that adding new party after demurrer is improper]; Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023 [ruling that adding new cause of action after demurrer is improper].)
Plaintiff points to Code of Civil Procedure section 474, arguing that it is permitted to add defendants when their true names are discovered. In principle, this is correct, but it applies to fictitiously-designated defendants. Here, Plaintiff is not adding Liu and Xu as Doe defendants. The TAC still refers to Does 1-10 as Doe Defendants, who are unknown. (See TAC, Caption and at ¶ 11.)
In Schaefer v. Berinstein (1956) 140 Cal.App.2d 278, 299, court held that leave of court was required to add defendants, stating:
The third amended complaint designates as defendants all of those who were so named in the original and first two amended complaints and joins two new defendants, Berinstein and Rombotis. These two defendants were not sued under fictitious names. No order of court was obtained permitting their joinder. Berinstein and Rombotis moved to strike the complaint from the file and to strike therefrom all references to them as parties defendant on the ground they were not proper parties defendant as no leave of court had been granted permitting their joinder. The motions were granted. No claim is made that the motions were not well grounded. Leave of court is required under section 473 of the Code of Civil Procedure to add new parties defendant. [Citations.] There was no error in granting the motion of Berinstein and Rombotis to strike the third amended and supplemental complaint from the files and all references to them therefrom.
Plaintiff contends that the addition of Xu and Liu was pursuant to the court’s prior order granting Defendant’s motion to strike portions of the Second Amended Complaint with leave to amend, specifically with respect to the punitive damages allegations. The court’s minute order included the following:
Here, Plaintiff did not allege sufficient facts to show oppression, fraud, or malice. Plaintiff alleges Defendant is a limited liability company. Plaintiff did not allege facts to show malice by any of Defendant’s employees, or that Defendant had advanced knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct. Plaintiff did not allege sufficient facts to show that such advance knowledge and conscious disregard, authorization, ratification, or act of oppression, fraud, or malice was by Defendant’s officer, director, or managing agent. Accordingly, the motion to strike the punitive damages allegations and prayer for punitive damages is granted, with 15 days leave to amend.
(3/24/2023 Minute Order [ROA 65].)
The order is not the equivalent of granting leave to add new defendants. In order to add new defendants to this action, Plaintiff must follow the proper procedures set forth in Code of Civil Procedure sections 473 or 474. As a result, the motion to strike “Xander Xu, an individual,” and “Levin Liu, an individual” from the TAC is granted.
Punitive Damages
Plaintiff may recover exemplary damages in an action for the breach of an obligation not arising from contract if Plaintiff proves by clear and convincing evidence that Defendant is “guilty of oppression, fraud, or malice.” (Civ. Code, § 3294, subd. (a).) Malice is 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.” (Civ. Code, § 3294, subd. (c)(1).) Oppression is defined as “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Civ. Code, § 3294, subd. (c)(2).) Fraud is defined as “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.” (Civ. Code § 3294, subd. (c)(3).)
Punitive damages cannot be pled in conclusory terms, instead the facts supporting a claim for punitive damages must be set out clearly, concisely, and with particularity. (Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1041-1042.) However, “it has long been recognized that ‘(t)he distinction between conclusions of law and ultimate facts is not at all clear and involves at most a matter of degree.’” (Perkins v. Superior Court (1981) 117 Cal.App.3d 1, 6.) “What is important is that the complaint as a whole contain sufficient facts to apprise the defendant of the basis upon which the plaintiff is seeking relief.” (Ibid.) “[S]tricken language must be read not in isolation, but in the context of the facts alleged in the rest of petitioner’s complaint.” (Ibid.)
“When the defendant is a corporation, ‘[a]n award of punitive damages against a corporation . . . must rest on the malice of the corporation’s employees.’” (Wilson v. Southern California Edison Co. (2015) 234 Cal.App.4th 123, 164 [citing Cruz v. HomeBase (2000) 83 Cal.App.4th 160, 167].)
An employer shall not be liable for punitive damages “based upon acts of an employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.” (Civ. Code, § 3294, subd. (b).)
In the TAC, Plaintiff specifically alleges that Xu and Liu (CEO and managing partner) purposefully charged Etekcity unconscionable storage fees at 150% of the agreed rate under the Agreement, refused to allow it to use certain docking bays so Etekcity could remove its products from Starship’s warehouse, intentionally transferred products between warehouses to deprive Etekcity use of its products, and stole from Etekcity by continuing to use Etekcity’s UPS shipping account to ship unknown goods, thereby making knowingly unauthorized charges to Etekcity’s UPS shipping account. (TAC, at ¶¶ 26, 28, 30, 31, 32.)
With respect to these actions, Plaintiff alleges that this conduct constituted malice “in order to wrongfully charge an unreasonable and unjustified late charge penalty,” and “injury Etekcity in order to drive up their costs in a conscious disregard of Etekcity’s rights.” (TAC, at ¶¶ 34-36, 60.) These allegations are sufficient to state a claim for punitive damages against Defendant Starship. The motion to strike the punitive damages allegations is denied.
No later than August 28, 2023, Defendant shall file its answer to the TAC. Defendant shall serve its answer pursuant to the Code of Civil Procedure.
Defendant shall give notice of the ruling.
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