Judge Elaine W. Mandel, Case 21SMCV01266 2022-09-27 Tentative Ruling

Judge: Elaine W. Mandel, Case: 21SMCV01266, Date: 2022-09-27 Tentative Ruling

Case Number: 21SMCV01266 Hearing Date: September 27, 2022 Dept: P

Tentative Ruling
Elysienne, LLC v. Mehdizadeh et al., Case No. 21SMCV01266
Hearing Date September 27, 2022
Cross-Defendants Elysienne, LLC and Cohen’s Demurrer/Motion to Strike FACC

Plaintiff Elysienne contracted with cross-complainants Pineapple Ventures and Zadeh to perform interior design services. Pineapple and Zadeh cross-complained, alleging inadequate and negligently performed services. On April 27, 2022, the court sustained Elysienne’s demurrer to the fraud cause of action with leave to amend. Elysienne now demurs to the causes of action for fraud and unfair business practices in the first amended cross-complaint and moves to strike. On September 14, 2022, Zadeh and Pineapple filed untimely oppositions, which the court will consider in the interest of justice. On September 22, 2022, Elysienne filed its reply.

Demurrer

Fraud
Opinions are generally not actionable as fraud, unless accompanied by active misrepresentations or concealment or relate to a subject as to which the parties have no knowledge or means of ascertaining the truth. Dyke v. Zaiser (1947) 80 Cal.App.2d 639.

Elysienne argues the fraud cause of action is supported by statements of opinion, not fact—specifically that Elysienne was “qualified” to do the work. FACC ¶27. This opinion was made in a context of other alleged misrepresentations. Pineapple Ventures and Zadeh lacked means or knowledge to ascertain Elysienne’s qualifications. These allegations can be treated as actionable statements of fact, sufficient to support a cause of action for fraud.

The demurrer argues Elysienne’s alleged false representation that it was licensed cannot the support a fraud claim, since the initial cross-complaint stated Elysienne was a “licensed design professional,” contradicting the FACC. This is correct. Additionally, the FACC states “it is not clear if Cohen or Elysienne was ever a licensed design professional[.]” FACC ¶27. The FACC does not actually allege that Cohen or Elysienne misrepresented their licensing status. The FACC does allege Elysienne intentionally misrepresented that it had “routinely done such work before,” which could constitute a misstatement of fact sufficient to support a fraud cause of action.

The FACC does not state how, when, where, and by what means Elysienne allegedly misrepresented it had routinely done such work before. The FACC alleges “on or about January 27, 2021, Cross-Complainants confirmed with Cohen/Elysienne the facts above, which she reiterated again that she was licensed, competent and qualified to do the work when in fact Cross-Defendants were not.” FACC ¶27 (emphasis added).

The FACC fails to allege causation and damages. The FACC only alleges “[a]s a result of cross-defendants’ fraudulent statements, promises, and representations, cross-complainants were harmed[.]” FACC ¶29. There is no further explanation. This is not sufficiently specific. SUSTAINED with ten days leave to amend.

Unfair Business Practices
A cause of action for unfair business practice based on fraud “stand[s] or fall[s] depending on the fate of the antecedent substantive causes of action.” Krantz v. BT Visual Images, LLC (2001) 89 Cal.App.4th 164, 178. A claim for “unfairness” under the unfair competition law must be defined in connection with a legislatively declared policy. Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144, 1166-67.

Elysienne argues Zadeh and Pineapple’s allegations regarding unfair business practices are based on fraud or unfairness. The FACC’s tort claim for fraud fails for the reasons stated above. However, as Zadeh and Pineapple note, the “fraudulent” prong of an unfair business practices claim “bears little resemblance to common law fraud or deception. Prata v. Superior Ct. (2001) 91 Cal.App.4th 1128, 1146. Zadeh and Pineapple adequately alleged conduct likely to deceive the public, so the UBP claim based on fraud can proceed. OVERRULED.

Motion to Strike
Elysienne argues Zadeh and Pineapple cannot recover punitive damages under their negligence and breach of covenant and good faith fair dealing claims because such damages are barred as a matter of law. Punitive damages are not recoverable for breach of the implied covenant of good faith and fair dealing, except in cases involving insurance policies. See Cates Construction, Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 43–44. GRANTED.

Fraud Claim: The court sustained the demurrer to the fraud claim with leave to amend. DENIED as moot.

Professional Negligence Claim: To state a prima facie claim for punitive damages, a complaint must set forth allegations that the defendant has been guilty of oppression, fraud, or malice. Civ. Code, § 3294, subd. (a). Under the fourth cause of action for professional negligence, the FACC alleges the cross-defendants engaged in “fraudulent, malicious and despicable conduct.” FACC ¶33.

The only facts offered are that cross-defendants failed to (1) disclose they were not qualified to perform the work and (2) discharge their duties of loyalty, care, skill, prudence, and diligence. FACC ¶32. This is not sufficient to support a claim for punitive damages. In addition, cross-complaints fail to explain how they can amend to allege facts to support their request for punitive damages. GRANTED.

Attorneys’ Fees
“The unfair competition law does not provide for attorney fees, and relief is generally limited to injunctive relief and restitution.” Walker v. Countrywide Home Loans, Inc. (2002) 98 Cal.App.4th 1158, 1179 (Walker). However, “[i]f a plaintiff prevails in an unfair competition law [“UCL”] claim, it may seek attorney fees as a private attorney general pursuant to Code of Civil Procedure section 1021.5.” Walker, supra, 98 Cal.App.4th at p. 1179.

The FACC seeks attorney’s fees under Business and Professions Code section 17200 and related sections. FACC ¶41. However, it does not allege that Zadeh and Pineapple are seeking to recover attorney’s fees as private attorney generals pursuant to section 1021.5.

A plaintiff cannot recover attorney’s fees under a claim solely based on the UCL unless it does so as a private attorney general. That is true even when a contract provides for attorney’s fees.

In Shadoan v. World Savings & Loan Ass’n. (1990) 219 Cal.App.3d 97 plaintiffs brought a single cause of action under the UCL. Walker, supra, 98 Cal.App.4th at p. 1180, citing Shadoan, supra, 219 Cal.App.3d at pp. 101, 108. The parties’ loan agreement provided for attorney’s fees. Shadoan, supra, 219 Cal.App.3d at p. 107. Nevertheless, the Court of Appeal held “no [attorney] fees should be awarded to the extent the action was brought solely to enjoin an unfair business practice.” Id. at p. 108 (emphasis added).

Where a plaintiff brings a single cause of action under the UCL but requests different forms of relief, “[t]he proper procedure would be for the trial court, in its discretion, to apportion the fees so that the losing party is only required to pay for such fees as were incurred in prosecuting, or defending, the contract action.” Shadoan, supra, 219 Cal.App.3d at p. 108. The “Court of Appeal held that the trial court properly apportioned attorney fees between those recoverable fees incurred in connection with the [plaintiffs’] private action for relief from their contract and those unrecoverable fees incurred in connection with the [plaintiffs’] efforts to enjoin an unfair business practice.” Walker, supra, 98 Cal.App.4th at p. 1180.

Here, unlike in Shadoan, Zadeh and Pineapple are not suing Elysienne under a single cause of the UCL, and they do not allege that their UCL claim arises from the unenforceability of the parties’ contract. GRANTED.