Judge: Frank M. Tavelman, Case: 24NNCV00296, Date: 2024-09-13 Tentative Ruling

Case Number: 24NNCV00296    Hearing Date: September 13, 2024    Dept: A

LOS ANGELES SUPERIOR COURT

NORTH CENTRAL DISTRICT - BURBANK

DEPARTMENT A

DEMURRER & MOTION TO STRIKE

MP:     Complete Merchant Services, Inc. (Plaintiff)            

RP:     Signature Payments, LLC (Defendant)

NOTICE:

The Court is not requesting oral argument on this matter.  The Court is guided by California Rules of Court, Rule 3.1308(a)(1) whereby notice of intent to appear is requested.  Unless the Court directs argument in the Tentative Ruling, no argument is requested and any party seeking argument should notify all other parties and the court by 4:00 p.m. on the court day before the hearing of the party’s intention to appear and argue.  The tentative ruling will become the ruling of the court if no argument is received.  

Notice may be given either by email at BurDeptA@LACourt.org or by telephone at (818) 260-8412.

ALLEGATIONS:

Complete Merchant Services, Inc. (Plaintiff) brings this action against Signature Payments, LLC (Defendant). Plaintiff alleges that Defendant improperly transferred a merchant account, attributable to merchant Digica, Inc. (Digica). Plaintiff argues that this transfer has resulted in Defendant’s refusal to pay Plaintiff residuals owned under their agency contract. Plaintiff’s First Amended Complaint (FAC) states causes of action for (1) Specific Performance, (2) Breach of Contract, (3) Breach of the Covenant of Good Faith and Fair Dealing, (4) Unjust Enrichment, (5) Conversion, (6) Common Count, (7) Violation of Penal Code § 496, and (8) Unfair Competition.

Defendant now demurs to each cause of action on grounds that Plaintiff fails to allege sufficient facts. Defendant also moves to strike Plaintiff’s request for punitive damages. Plaintiff opposes the demurrer and the motion to strike. Defendant replies.

ANALYSIS:

I.                    LEGAL STANDARDS

Demurrer

The grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. (C.C.P. § 430.30(a); Blank v. Kirwan (1985) 39 Cal. 3d 311, 318.) A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) The only issue involved in a demurrer hearing is whether the complaint states a cause of action. (Id.)

A demurrer assumes the truth of all factual, material allegations properly pled in the challenged pleading. (Blank v. Kirwan, supra, 39 Cal. 3d at p. 318.) No matter how unlikely or improbable, the plaintiff’s allegations must be accepted as true for the purpose of ruling on the demurrer. (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.  App. 3d 593, 604.) But this does not include contentions; deductions; conclusions of fact or law alleged in the complaint; facts impossible in law; or allegations contrary to facts of which a court may take judicial notice.  (Blank, supra, 39 Cal. 3d at 318.)

Pursuant to C.C.P. §§ 430.10(e) and (f), the party against whom a complaint has been filed may demur to the pleading on the grounds that the pleading does not state facts sufficient to constitute a cause of action, or that the pleading is uncertain, ambiguous and/or unintelligible. It is an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable probability that the defect can be cured by amendment. (Schifando v. City of Los Angeles (2003) 31 Cal. 4th 1074, 1082.)

Motion to Strike

Motions to strike are used to reach defects or objections to pleadings that are not challengeable by demurrer, such as words, phrases, and prayers for damages. (See C.C.P. §§ 435, 436, and 437.) The proper procedure to attack false allegations in a pleading is a motion to strike. (C.C.P. § 436(a).) In granting a motion to strike made under C.C.P. § 435, “[t]he court may, upon a motion made pursuant to Section 435 [notice of motion to strike whole or part of complaint], or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading.” (C.C.P. § 436(a).) Irrelevant matters include immaterial allegations that are not essential to the claim or those not pertinent to or supported by an otherwise sufficient claim. (C.C.P. § 431.10.)

The court may also “[s]trike 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.” (C.C.P. § 436 (b).)

II.                 MERITS

Meet and Confer

C.C.P. §§ 430.41(a) and 435.5(a) requires that the moving party meet and confer with the party who filed the pleading that is subject to the demurrer and/or motion to strike. Upon review the Court finds the meet and confer requirements were met. (Pearson Decl. ¶ 3.)

Facts

Defendant is alleged to run an Independent Sales Organization (ISO). (FAC ¶ 7.) Plaintiff explains that the purpose of an ISO is to provide payment processing services to various merchants through banks who are members of the ISO. (FAC ¶ 7.) Plaintiff serves as an independent contract agent for Defendant, bringing potential merchants to Defendant’s ISO in exchange for some portion of the processing fees the merchant generates. (FAC ¶¶ 8-9.) Plaintiff would present the merchant’s application to Defendant and the revenue split would be memorialized in a Sales Agent Agreement. (FAC ¶ 10.)

On February 23, 2023, Plaintiff and Defendant entered into the Sale Agent Agreement (hereinafter the Agreement) which is the subject of this action. (FAC ¶ 11.) On February 26, 2023, Plaintiff allegedly submitted to Defendant a merchant processing application for Digica. (FAC ¶ 15.) Plaintiff alleges that Defendant approved the application and opened a merchant account for Digica under the Merchant Identification Number (MID) 9025742704076469.  (FAC ¶ 15.)

On July 19, 2023, Plaintiff alleges it received an email from Defendant that Digica’s account would be migrating to a new backend service provider and would be assigned a new MID. (FAC ¶ 17.) As of August 30, 2023, Digica shifted all of its processing to the new MID and ceased processing on the original MID that had been opened for its account. (FAC ¶ 18.) Plaintiff alleges it has received no residuals in connection with Digica after this switch occurred. (FAC ¶ 19.) When Plaintiff requested clarification from Defendant, they were told that the switch had resulted from an internal error. (FAC ¶ 23.) Plaintiff thereafter demanded that the account be switched back, but Defendant refused. (FAC ¶¶ 25, 26.)

First COA – Specific Performance – Sustained with Leave to Amend

Plaintiff’s first cause of action seeks specific performance of the Merchant Agreement between Digica and Defendant (this contract is separate from the Agreement between Plaintiff and Defendant). Plaintiff concedes that Specific Performance is not a separate cause of action in the State of California but asks that the Court grant leave to amend so that they can properly allege specific performance as an alternative remedy. Defendant argues that such an amendment would be improper because Plaintiff seeks to enforce an agreement to which they are not a party.

“There are no separate causes of action for specific performance or injunctive relief, which are instead remedies.” (Green Valley Landowners Ass'n v. City of Vallejo (2015) 241 Cal.App.4th 425, fn. 8, citing Wong v. Jing (2010) 189 Cal.App.4th 1354, 1360, fn. 2 [specific performance and injunctive relief are equitable remedies and not causes of action for injuries].)

The Court notes that the Merchant Agreement between Digica and Defendant is not attached to Plaintiff’s Complaint. If a breach of contract claim “is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) In some circumstances, a plaintiff may also “plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.)

As the Merchant Agreement is not attached to the Complaint, any determination that Plaintiff is a party to the Merchant Agreement, or an intended third-party beneficiary, would be premature. Such determinations would necessarily require the attachment of the Merchant Agreement.  

Accordingly, the demur to this cause of action is SUSTAINED with 20 days’ leave to amend.

Second COA- Breach of Contract – Overruled

To state a cause of action for breach of contract, Plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

Defendant demurs to this cause of action arguing that Plaintiff has not pled sufficient facts as to the element of breach.  Defendant argues that the Agreement between the parties pertains only to MID 9025742704076469. Defendant argues that Digica voluntarily chose to switch its MID and service agent away from Plaintiff. Defendant thus argues that any transactions occurring under the new MID are not subject to residual payments under the Agreement with Plaintiff.  

The Court finds Defendant’s arguments do not speak to the sufficiency of Plaintiff’s pleadings. First, Defendant’s assertion that Digica voluntarily switched MID is a matter entirely apart from the factual sufficiency of Plaintiff’s pleadings. This argument speaks to a defense for breach of contract, not Plaintiff’s failure to state one. Second, Defendant’s arguments necessarily implicate the issue of contract interpretation, which is not resolvable upon demurrer.

“Where a complaint is based on a written contract which it sets out in full, a general demurrer to the complaint admits not only the contents of the instrument but also any pleaded meaning to which the instrument is reasonably susceptible.” (Aragon–Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239.) “[W]here an ambiguous contract is the basis of an action, it is proper, if not essential, for a plaintiff to allege its own construction of the agreement. So long as the pleading does not place a clearly erroneous construction upon the provisions of the contract, in passing upon the sufficiency of the complaint, we must accept as correct plaintiff's allegations as to the meaning of the agreement.” (Id. [internal quotation marks omitted].)

Here, Defendant’s argument is essentially that the Court should interpret Section 7 and Schedule A of the Agreement as limiting the payment of residuals to transactions occurring under the original MID. For sake of clarity, Section 7(a) is reproduced below:

The Company shall pay to Agent an amount equal to (the “Revenue Share”) (1) the sum of (i) the gross transactional revenue for the Services paid by the Merchant in connection with those fees provided for in the “Buy Rates” section of Schedule A, less (ii) all applicable returns and other credits, and less (iii) all costs, fees and expenses, including but not limited to Card Association and processing costs calculated pursuant to the Buy Rates, each as determined by the Company in its sole discretion, multiplied by (2) the applicable “Revenue Split” set forth in Schedule A. Upon 30-day’s notice to Agent, Company may modify Schedule A, provided that, unless otherwise agreed upon by the Parties, such changes will only apply to those Merchants approved following such notice. Notwithstanding the foregoing, Company may pass through increases to costs at any time without notice. Company shall have the right, in accordance with Section 13(e), to terminate all payments to Agent hereunder and at which point, Company shall have no further obligation to make any such payments. Company shall also have the right to cease making payments under this Section 7(a) when the amount of such compensation would be less than $100 per month for three (3) consecutive months. Furthermore, notwithstanding anything contained in this Agreement to the contrary, Agent agrees and acknowledges that, with respect to any given Merchant, Company shall be under no obligation to pay the Revenue Share unless Company receives its corresponding income in connection with the respective Merchant. In the event Agent is required to share revenue with any third party, Agent understands and agrees all such revenue sharing obligations shall be satisfied solely by Agent and that the Company shall not be required to pay any amount to any third party pursuant to this Agreement.

(FAC Exh A, p. 27.)

Schedule A of the Contract reads, in relevant part, as follows:

The following table sets forth the Revenue Split associated with the percentage paid on the then current portfolio of Merchants for which Agent is entitled to compensation pursuant to Section 7(a) of this Agreement (“Portfolio”)

(FAC Exh. A, p. 31.)

The Court first notes that nothing in the language of Section 7 references transactions occurring under a specific MID. The Agreement simply entitles Plaintiff to payment equal to the sum of the gross transactional revenue for services paid pursuant to Schedule A. Schedule A in turn entitles Plaintiff to a revenue split associated with the percentage paid on “the then current portfolio of Merchants for which Agent is entitled to compensation…” Defendant interprets the phrase “then current portfolio” to mean the MID initially associated with Digica. Plaintiff argues the opposite, that the phrase entitles them to payment on any transactions Defendant facilitates on behalf of Digica.

As previously stated, the merits of these interpretations are a matter not suitable for resolution on demurrer. So long as Plaintiff’s presentation of its claim does not present a clearly erroneous interpretation of the contract, its cause of action should survive demurrer. The Court does not find Plaintiff’s interpretation to be so erroneous. Nothing in the language of the Agreement explicitly limits its terms to the initial MID number. Further, it would make little sense for the Agreement to be so limited in the absence of language stating that Digica could elect to switch its service agent at will. While this interpretation may be proven in a subsequent dispositive motion, it is not appropriately resolved in this demurrer.

Accordingly, the demurrer to this cause of action is OVERRULED.

Third COA – Breach of Implied Covenant of Good Faith and Fair Dealing – Overruled

“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.) “If the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated … [T]he only justification for asserting a separate cause of action for breach of the implied covenant is to obtain a tort recovery.” (Id. at 1394-1395.) To recover in tort for breach of the implied covenant, the defendant must “have acted unreasonably or without proper cause.” (Id. at 1395, [citations and italics omitted].)

Defendant argues that this claim is merely duplicative of Plaintiff’s breach of contract action. The Court finds this argument unpersuasive. Plaintiff alleges facts which speak directly to Defendant’s alleged bad faith in handling the Agreement. Specifically, Plaintiff alleges that after the breach, Defendant was made aware of the improper transfer and admitted it was an error. (FAC ¶ 23.) Despite this, Defendant is alleged to have completely refused to switch Digica’s account to the prior MID. (FAC ¶ 25.)

Further, Plaintiff alleges that Defendant has a track record of routinely inventing ways in which they can deny paying out the merchants they service. (FAC ¶ 29.) Plaintiff alleges that Defendant constructs arbitrary barriers to recovery by merchants in hopes of divesting merchants of money they are rightfully owed. (Id.) Plaintiff alleges that Defendant now seeks to employ the same tactics to deprive Plaintiff of its rightfully earned residuals. (FAC ¶ 30.) While the veracity of these claims is far from determined, the fact remains that Plaintiff has pled conduct beyond breach of contract which can support this cause of action.

Accordingly, the demurrer to this cause of action is OVERRULED.

Fourth COA – Unjust Enrichment – Sustained without Leave to Amend

Some California courts have held that unjust enrichment is not a stand-alone cause of action, but a principle underlying various legal doctrines and remedies. E.g., Hooked Media Group, Inc. v. Apple Inc. (2020) 55 Cal.App.5th 323, 336. Other courts, including courts within the second appellate district, recognize unjust enrichment as a cause of action with its own set of elements. E.g., Prof'l. Tax Appeal v. Kennedy-Wilson Holdings, Inc. (2018) 29 Cal.App.5th 230, 238.

Defendant argues there is no separate cause of action for unjust enrichment. The Court acknowledges some authorities support this position, but other binding precedents upholds unjust enrichment as a separate cause of action. Because there is a split in authority, the court follows the rule that most promotes expedience and judicial efficiency and treats unjust enrichment as a valid, separate cause of action.

Nevertheless, the Court still finds the cause of action is subject to demurrer. “[A]s a matter of law, a quasi-contract action for unjust enrichment does not lie where, as here, express binding agreements exist and define the parties’ rights.” (California Medical Ass’n, Inc. v. Aetna U.S. Healthcare of California, Inc. (2001) 94 Cal.App.4th 151, 172; see also Wal-Noon Corp. v. Hill (1975) 45 Cal.App.3d 605, 650) Here, the rights and obligations of the parties are expressly governed by written agreement. Plaintiff has alleged no obligation to Defendant which does not derive from the contract between them. Nor does the Court see a way in which amendment could rectify this deficiency.

Accordingly, the demurrer to this cause of action is SUSTAINED without leave to amend.

Fifth COA – Conversion – Overruled

“Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages.” (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240.)

Normally, money cannot be converted. (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1491.) But money can be the subject of a conversion action when a specific sum capable of identification is involved. (See SP Investment Fund I LLC v. Cattell (2017) 18 Cal.App.5th 898, 907.)

The simple failure to pay money owed does not constitute conversion, otherwise the tort of conversion would swallow the category of contract claims based on the “mere contractual right of payment. (Voris v. Lampert (2019) 7 Cal.5th 1141, 1151.) Cases recognizing claims for the conversion of money “typically involve those who have misappropriated, commingled, or misapplied specific funds held for the benefit of others.” (Id. at 1152.)

Here, the Court finds that Plaintiff has sufficiently stated a cause of action for conversion. First, Defendant’s argument that Plaintiff has not sufficiently alleged a right to funds converted is unpersuasive. Plaintiff has clearly alleged that they are entitled to all residuals stemming from Defendant’s activity in processing Digica’s payments. Second, while the Court agrees that the law does not permit an action for conversion without a specified sum, it finds that such a sum has been sufficiently alleged in the Complaint. Plaintiff alleges that Defendant has substantially interfered with its ownership of funds in a total of no less than $993,272. (FAC ¶ 60.) This number is purportedly derived from Defendant’s own statistics showing Digica’s continued processing of transactions and the residuals associated. (FAC ¶ 61.) Taking the pleadings as true, as the Court must do on Demurrer, it appears Plaintiff has sufficiently alleged a specified sum such that they can state a claim for conversion.

Accordingly, the demurrer to this cause of action is OVERRULED.

Sixth COA – Money Had and Received (Common Count) – Overruled

The required elements of a common count claim are “(1) the statement of indebtedness in a certain sum, (2) the consideration, i.e., goods sold, work done, etc., and (3) nonpayment. A cause of action for money had and received is stated if it is alleged the defendant is indebted to the plaintiff in a certain sum for money had and received by the defendant for the use of the plaintiff.” (Farmers Insurance Exchange v. Zerin (1997) 53 Cal.App.4th 445, 460 [citation and quotation marks omitted].)

Here, Defendant argues that this cause of action is based on the same facts as the cause of action for conversion, which is also subject to demurrer. (See McBride v. Boughton (2004) 123 Cal.App.4th379, 394.)

“When a common count is used as an alternative way of seeking the same recovery demanded in a specific cause of action, and is based on the same facts, the common count is demurrable if the cause of action is demurrable.” (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1560.) A common count is proper notwithstanding that it relates to an original transaction involving an express or implied contract. (Utility Audit Co. v. City of L.A. (2003) 112 Cal.App.4th 950, 958.)

The Court having found the demurer to cause of action for conversion is overruled, it follows from the above authority that the demurrer to the cause of action for Common Count is also overruled.

Accordingly, the demurrer to this cause of action is OVERRULED.

Seventh COA – Violation of Penal Code § 496 – Overruled

Penal Code § 496(a) provides in relevant part:

Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained, shall be punished...

A principal in the actual theft of the property may be convicted pursuant to this section. However, no person may be convicted both pursuant to this section and of the theft of the same property.

Penal Code § 496(c) provides:

Any person who has been injured by a violation of subdivision (a) or (b) may bring an action for three times the amount of actual damages, if any, sustained by the plaintiff, costs of suit, and reasonable attorney's fees.

Defendant first argues that this cause of action is subject to demurrer because Plaintiff has not alleged the theft of any property. This argument is predicated on the success of Defendant’s argument as to the interpretation of the Agreement, which as previously stated is not resolvable upon demurrer.

Defendant also argues that Plaintiff has not pled that Defendant possessed the requisite intent to sustain this cause of action. Defendant cites to the recent California Supreme Court decision in Siry Investment, L.P. v. Farkhondehpour, which they argue stands for the idea that an action cannot be maintained under Penal Code § 496(c) where a Plaintiff alleges only simple misrepresentation. The Court finds this argument inconsistent with the Court’s understanding of the holding in Siry.

The court in Siry did explain that not all consumer fraud or misrepresentations fall within the purview Penal Code § 496. “To prove theft, a plaintiff must establish criminal intent on the part of the defendant beyond mere proof of nonperformance or actual falsity. If misrepresentations or unfulfilled promises are made innocently or inadvertently, they can no more form the basis for a prosecution for obtaining property by false pretenses than can an innocent breach of contract.” (Siry Investment, L.P. v. Farkhondehpour (2022) 13 Cal.5th 333, 362 [internal quotation marks and citations omitted].) Siry simply did not concern the sufficiency of pleadings. The Siry court reinforced that a plaintiff must prove theft and intent to commit theft in order to recover under the statute, but they did not opine on the circumstances under which a plaintiff’s pleadings concerning theft and intent were sufficient.

Here, Plaintiff has alleged that despite Defendant’s clear knowledge that the Digica account was mistakenly transferred, it has continually refused to transfer the account back such that Plaintiff can collect the residuals due under the agreement. Such allegations are indicative of Defendant’s intent to deprive Plaintiff of money to which they are entitled. Further, as previously discussed, Plaintiff has alleged that this willful refusal to correct an alleged mistake is in fitting with Defendant’s regular business conduct.

The holding in Siry makes clear that Plaintiff will eventually have to prove Defendant’s intent in committing theft to succeed on his cause of action. This is an element which separates the cause of action under 496(c) from those of fraud and conversion such that the statutory cause of action is not duplicative. While Plaintiff may ultimately be unable to prove the intent required to recover on this cause of action, it does not follow that the cause of action is subject to demurrer.

Accordingly, the demurrer to this cause of action is OVERRULED.

Eighth COA – Unfair Competition – Overruled

“California Business and Professions Code §§ 17000, et seq…states…that unfair competition shall mean and include unlawful, unfair or fraudulent business practices…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, 618-619.) The Court notes that “[b]ecause Business and Professions Code section 17200 is written in the disjunctive, it establishes three varieties of unfair competition-acts or practices which are unlawful, or unfair, or fraudulent. An act can be alleged to violate any or all of the three prongs of the UCL-unlawful, unfair, or fraudulent.” (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1554 [internal quotation marks and citation omitted].)

Defendant demurs to this cause of action, arguing that Plaintiff has failed to allege any activity of Defendant which is unlawful, unfair, or fraudulent. The Court finds this argument unpersuasive. At the very least Plaintiff has alleged that Defendant was engaged in the unfair practice of improperly transferring Digica’s account to a different agent with the intent to deprive Plaintiff of residuals due under the agreement. Defendant’s argument here mirrors its argument as to the breach of contract argument. Defendant argues that because it never refused to pay residuals on the original MID account, it never deprived Plaintiff of anything. As previously discussed, this argument is unresolvable upon demurrer as it necessarily implicates interpretation of a contract.

Accordingly, the demur to this cause of action is OVERRULED.

Motion to Strike

Defendant moves to strike Plaintiff’s claim for punitive damages. In ruling on a motion to strike punitive damages, “judges 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.) To state a prima facie claim for punitive damages, a plaintiff must allege the elements set forth in the punitive damages statute. (College Hosp., Inc. v. Superior Court (1994) 8 Cal.4th 704, 721.) Per C.C.P. § 3294(a), a plaintiff must allege that the defendant has been guilty of oppression, fraud, or malice.

Defendant argues that breach of contract actions cannot be the basis of punitive damages. (See C.C.P. § § 3294 (a) [“In an action for the breach of an obligation not arising from contract…”].) Plaintiff counters that they only assert punitive damages in connection with their fifth cause of action for Conversion. "There is no question that punitive damages may be recovered in an action for conversion." (Krusi v. Bear, Stearns & Co. (1983) 144 Cal. App. 3d 664, 678.)  The Court finds that Plaintiff’s punitive damages claims are properly stated as concerns their cause of action for Conversion. (Voris v. Lampert (2019) 7 Cal. 5th 1141, 1151).

However, although permitted, the Court finds the Complaint is insufficiently detailed as to Defendant’s alleged malice. Punitive damages claims “must include specific factual allegations showing that defendant's conduct was oppressive, fraudulent, or malicious . . . [p]unitive damages may not be pleaded generally.” (Today's IV, Inc. v. Los Angeles County Metropolitan Transportation Authority (2022) 83 Cal.App.5th 1137, 1193.)

Here, Plaintiff relies upon its allegations that Defendant purposefully refused to correct their alleged mistake in transferring Digica’s account. Plaintiff’s only allegations on this front are that Defendant stated the transfer was a mistake and that Defendant has refused to rectify. While these allegations may be sufficient to sustain a cause of action for conversion, they are far too general to allege conduct that is “so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people.” (See Johnson & Johnson Talcum Powder Cases (2019) 37 Cal.App.5th 292, 332, 333.)

Accordingly, the motion to strike punitive damage is GRANTED with 20 days’ leave to amend.

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RULING:

In the event the parties submit on this tentative ruling, or a party requests a signed order or the Court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the Court’s records.

ORDER

Signature Payments, LLC’s Demurrer and Motion to Strike came on regularly for hearing on September 13, 2024, with appearances/submissions as noted in the minute order for said hearing, and the Court, being fully advised in the premises, did then and there rule as follows:

THE DEMURRER TO THE FIRST CAUSE OF ACTION IS SUSTAINED WITH 20 DAYS’ LEAVE TO AMEND.

THE DEMURRER TO THE SECOND, THIRD, FIFTH, SIXTH, SEVENTH, AND EIGHTH CAUSES OF ACTION IS OVERRULED.

THE DEMURRER TO THE FOURTH CAUSE OF ACTION IS SUSTAINED WITHOUT LEAVE TO AMEND.

THE MOTION TO STRIKE IS GRANTED WITH 20 DAYS’ LEAVE TO AMEND.

UNLESS ALL PARTIES WAIVE NOTICE, DEFENDANT TO GIVE NOTICE.

IT IS SO ORDERED.

DATE:  September 13, 2024                          _______________________________

                                                                        F.M. Tavelman, Judge

                                                                        Superior Court of California

County of Los Angeles