Judge Gail Killefer, Case Number: 21STCP02927, Date: 2023-09-28 Tentative Ruling

TENTATIVE: Defendant RCALA’s demurrer is overruled. Defendant is to give notice.

Allenco Energy, Inc. (“Plaintiff”) formerly operated a facility of oil and gas production in the University Park community of the City of Los Angeles pursuant to an assignment of leases with the Roman Catholic Archbishop of Los Angeles (“RCALA”), which owns the property. The facility consists of 21 oil and gas production wells. Because three of the twenty-one wells extended into property owned by the City (“City Wells”), these wells are subjected to a separate Lease with the City of Los Angeles (“City”). The leases for all wells were assigned to Petitioner in 2009. Two of the three City Wells were considered the highest-producing wells. Petitioner operated the facility for four years until November 2013 when the surrounding community raised odor and health concerns, prompting a response from regulators and public officials.

In 2019, the City advised Plaintiff that the assigned lease expired in 2014 because of Petitioner’s inactivity. Plaintiff Petitioner, and the correspondence was sent by Respondent and Defendant Uduak-Joe Ntuk (“Ntuk”), who was the City’s then-Petroleum Administrator and is currently the State Oil and Gas Supervisor in charge of California’s Geologic Energy Management Division (“CalGEM”).

Consequently, Plaintiff claims that the City’s lease termination frustrated the purpose OF the lease with the RCALA by making it impossible and financially infeasible for Plaintiff to operate the facility. Plaintiff alleges that both leases were terminated simultaneously. As a result, Plaintiff contends it is not the current operator of the subject facility, as defined by Public Resources Code (“PRC”) § 3009. Instead, the RCALA and the City are the de facto operators pursuant to PRC § 3016. However, Plaintiff asserts that it became a “captive holdover tenant” because both RCALA and the City refuse to comply with their obligations as owners/operators of the facility.

On April 14, 2021, Plaintiff informed the defendant of its intention of abandoning the subject facility and ceasing any further maintenance. The parties disagreed and contested the issue of who was the proper operator of the subject facility based on the termination of the subsurface leases. To date, CalGEM treats Plaintiff as the current operator of the subject lease, requiring Plaintiff to abide by inspection demands and to maintain the subject facility.

On September 14, 2022, Plaintiff filed the operative Second Amended Petition for Writ of Mandate and Complaint (“SAC”) alleging ten causes of action: (1) writ of mandate; (2) declaratory relief; (3) breach of contract; (4) breach of implied covenant of good faith and fair dealing; (5) intentional interference with contract and conspiracy to interfere with contract; (6) intentional interference with prospective economic advantage and conspiracy to interfere with prospective economic advantage; (7) negligent interference with prospective economic advantage; (8) inverse condemnation and violation of the Takings Clause of the Fifth and Fourteenth Amendments of the United States Constitution and Article 1, Section 19 of the California Constitution; (9) unfora competition in violation of Bus. & Prof. Code § 17200 et seq.; and (10) unjust enrichment.

1. Order to Plug and Abandon Wells, Decommission Attendant Facilities, and Restore Well Site, No. 1174, dated March 5, 2020, State of California Natural Resources Agency Department of Conservation California Geologic Energy Management Division.

2. Acknowledgement of Appeal in the Matter of the: Order to Plug and Abandon Wells, Decommission Attendant Facilities, Operator: AllenCo Energy, Inc. (A1240), Order No. 1174, dated March 19, 2020, California Department of Conservation.

3. Notice of Formal Hearing in the Matter of the: Order to Plug and Abandon Well, Decommission Attendant Facilities, Operator: AllenCo Energy, Inc. (A1240), Order No. 1174, dated April 1, 2020, California Department of Conservation.

4. Restated Articles of Incorporation of RCALA, filed with the California Secretary of State on April 25, 2002.

5. Drill Site Agreement dated the 20th day of June 1964, by and between the Roman Catholic Archbishop of Los Angeles, a corporation sole, and Standard Oil Company of California, which was assigned to and agreed to by Plaintiff.

The court grants RCALA’s first, second, third, and fourth requests for judicial notice. (Evid. Code, § 452, subd. (c).) The court also grants RCALA’s fifth request for judicial notice. Courts have taken judicial notice of contracts not attached to petitions, where the complainants provided or referenced them with their briefing, without objection. (San Francisco Unif. Sch. Dist. ex rel. Contreras v. Laidlaw Transit, Inc. (2010) 182 Cal.App.4th 438, 444 n.5.)

1. May 26, 2023 Amended Order to Plug and Abandon Wells, Decommission Attendant Facilities, and Restore Well Site, No. 1174A (“Order 1174A”), issued by CalGEM.

The court grants Plaintiff’s request for judicial notice. (Evid. Code, § 452, subd. (c).)

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (CCP § 430.30 (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) 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 (Berkley).) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (CCP., § 452; see also Stevens v. Sup. Ct. (1999) 75 Cal.App.4th 594, 601.) “When a court evaluates a complaint, the plaintiff is entitled to reasonable inferences from the facts pled.” (Duval v. Board of Trustees (2001) 93 Cal.App.4th 902, 906.)

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, even as against a special demurrer, 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.) “[D]emurrers for uncertainty are disfavored and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 841, 848, fn. 3, citing Lickiss v. Fin. Indus. Regulatory Auth. (2012) 208 Cal.App.4th 1125, 1135.) In addition, even where a complaint is in some respects uncertain, courts strictly construe a demurrer for uncertainty “because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616.)

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.)

RCALA demurs to the second cause of action for declaratory relief on the grounds that Plaintiff has failed to exhaust its administrative remedies, the court lacks jurisdiction to grant the requested relief, and the cause of action is uncertain and insufficiently pleaded.

RCALA argues that Plaintiff’s second cause of action for declaratory relief is subject to demurrer because Plaintiff has not exhausted its administrative remedies.

“When a statute or lawful regulation establishes a quasi-judicial administrative tribunal to adjudicate remedies, ‘the aggrieved party is generally required to initially resort to that tribunal and to exhaust its appellate procedure.’” (Tejon Real Estate, LLC v. City of Los Angeles (2014) 223 Cal.App.4th 149, 155 [quoting Jonathan Neil & Assoc., Inc. v. Jones (2004) 33 Cal.4th 917, 930].) “ ‘In the context of administrative proceedings, a controversy is not ripe for adjudication until the administrative process is completed and the agency makes a final decision that results in a direct and immediate impact on the parties.’ ” (McAllister v. County of Monterey (2007) 147 Cal.App.4th 253, 274–275 [quoting Santa Barbara County Flower & Nursery Growers Assn. v. County of Santa Barbara (2004) 121 Cal.App.4th 864, 875].)

The “failure to exhaust administrative remedies is a proper basis for demurrer.” (Parthemore v. Col, 221 Cal.App.4th 1372, 1379.) “A complaint is [] vulnerable to demurrer on administrative exhaustion grounds where the complaint's allegations, documents attached thereto, or judicially noticeable facts indicate that exhaustion has not occurred and no valid excuse is alleged in the pleading to avoid the exhaustion requirement.” (Ibid.) The exhaustion rule “is not a matter of judicial discretion, but is a fundamental rule of procedure . . . binding upon all courts.” (Plantier v. Ramona Municipal Water Dist. (2019) 7 Cal.5th 372, 383.) “[A]n administrative remedy is exhausted only upon termination of all available, nonduplicative administrative review procedures.” (Id. at 382 (internal citations omitted).)

Here, RCALA argues that Plaintiff has failed to exhaust its administrative remedies because the appeal of CalGEM Order 1174 is still pending. Pursuant to CalGEM Order 1174, Plaintiff is required to decommission the facilities and plug and abandon the wells. (Demurrer, 14; O’Brien Decl. ¶ 2, Ex. A.) RCALA argues that Plaintiff’s declaratory relief claim seeks to circumvent the CalGEM Order 1174 before it has become final because Plaintiff seeks, inter alia, the following declarations: (1) “the Company is not the current ‘operator’ of the facility or any of the facility’s wells” and (2) “the City owns the City Wells to the extent they extend into and within City-owned property.” (Demurrer, 14.)

In opposition, Plaintiff argues that its declaratory relief claim does not relate to Order 1174 issued by CalGEM. (Opposition, 12.) Plaintiff contends that its current claim is about the fact that it is being forced to maintain the facility and wells on a day-to-day basis and to respond to CalGEM’s repeated inspection demands even though it is no longer the operator under PRC § 3009. (Ibid.) Plaintiff also contends that the exhaustion doctrine is subject to a futility exception because both CalGEM’s counsel and Ntuk have stated that CalGem will continue to regulate Plaintiff as the current, day-to-day operator until the court resolves the operator issue or the agency receives executed transfer forms from RCALA and/or the City “consistent with the requirements” of PRC §§ 3201 and 3202. (Opposition, 13-14.) Furthermore, Plaintiff contends that RCALA lacks standing to assert an exhaustion argument because it was not a party to the administrative proceedings involving Order 1174. (Opposition, 13.)

In CalGEM Order 1174, CalGEM presumptively asserts that Petitioner is the operator of the subject facility for all relevant times at issue in the orders. (O’Brien Decl. ¶ 2, Ex. A.) Ultimately, while CalGEM made a factual determination that Petitioner is the operator of the subject facility, it did not reach any determination regarding the contractual rights of the parties. For instance, Plaintiff seeks judicial determination of the following: (1) ownership of the property and the on-site wells; and (2) termination of the relevant agreements and their effects. (Second Amended Pet. ¶ 176(a)-(b), (h), (i); (c)-(e).) Thus, the requests for declaratory relief arising from contract between the parties are not subject to the exhaustion requirement and are properly before the court. (CCP § 1060; Western Motors Servicing Corp. v. Land Development & Inv. Co. (1957) 152 Cal.App.2d 509.) While the other requests for declaratory relief have not been administratively exhausted, that fact does not dispose of the entire cause of action. 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.)

RCA also demurs to the second cause of action on the ground that the court lacks jurisdiction.

“With limited exceptions, ... where an adequate administrative remedy is provided ..., resort to that forum is a ‘jurisdictional’ prerequisite to judicial consideration of the claim.” (Styne v. Stevens (2001) 26 Cal.4th 42, 56.)

“When an operator seeks judicial review of a decision of the director . . . the court shall hear the cause on the record before the director . . . New or additional evidence shall not be introduced in court. The court’s inquiry shall extend to whether the director acted without or in excess of jurisdiction, whether there was a fair hearing, and whether there is any prejudicial abuse of discretion.” (Public Recourses Code § 3355.) In instances involving an emergency order, “the operator may seek an order from the appropriate superior court restraining the enforcement of the order pending the outcome of the appeal” only when the operator “believes that it will be irretrievably injured by the performance of the work required to alleviate the emergency pending the outcome of the appeal.” (Public Resources Code § 3350(b)(4).) Petitions must be filed “within 30 days from the date the operator was served with the decision” of the director. (Public Resources Code § 3354.)

Here, RCA argues that the court lacks jurisdiction over the second cause of action because Petitioner asks the court to issue contrary and illegal orders before Order 1174 has become final. (Demurrer, 14.) As stated above, even though the court is sympathetic to the argument that some of the requests for declaratory relief are not ripe, other requests are, and as a result, the entire cause of action would not be resolved. (Poizner, supra, 148 Cal.App.4th at 119.) Moving to strike portions of the amended petition would have been the procedurally correct course of action.

RCA also demurs to the second cause of action on the ground that it is uncertain.

A special demurrer for uncertainty, Code of Civil Procedure § 430.10(f), is disfavored and will only be sustained where the pleading is so bad that one 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.” (Id.) A review of the pleadings reveals that they are not so unintelligible that Defendant cannot reasonably respond. Further, RCA identifies the cause of actions in its demurrer and argues how they are deficient, both of which show that RCA could reasonably respond to the claims directed at it in the SAP.

RCA also argues that Petitioner has failed to allege sufficient facts to support a cause of action for declaratory relief.

“A general demurrer is usually not an appropriate method for testing the merits of a declaratory relief action.” (Qualified Patients Ass’n v. City of Anaheim (2010) 187 Cal.App.4th 734, 751.) An action for declaratory relief lies when there is an actual bona fide dispute between parties as to a legal obligation arising under the circumstances specified in Code of Civil Procedure § 1060 and, in addition, the controversy must be justiciable, i.e., presents a question as to which there is more than one answer. (Western Motors Servicing Corp., supra, 152 Cal.App.2d at 512.)

As stated above, RCA’s demurrer only targets the requests for declaratory relief that stems from the CalGem’s determination that Petitioner is the operator of the subject facility, but this would not dispose of the entire cause of action because there are some requests that are not subjected to any administrative scheme. Thus, even though Petitioner has not alleged that it has exhausted its administrative remedies, the court is not inclined to find that the second cause of action has not been sufficiently pleaded.

B. Ninth Cause of Action: Violation of Business and Professions Code § 17200

To set forth a claim for a violation of Business & Professions Code § 17200 (“UCL”), Petitioner must establish RCA was engaged in an “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising” and certain specific acts. (Bus. & Prof. Code, § 17200.) Since the enactment of Proposition 64, private parties must also establish that they have standing to sue. (Bus. & Prof. Code, § 17204.)

“To satisfy the standing requirements, a party must (1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that the economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.” (Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, 322.) Four injuries qualify under the statute: (1) the plaintiff surrendering more or acquiring less in a transaction than the plaintiff otherwise would have; (2) the plaintiff suffering the diminishment of a present or future property interest; (3) the plaintiff being deprived of money or property to which the plaintiff has a cognizable claim; or (4) the plaintiff being required to enter into a transaction, costing money or property, that would otherwise have been unnecessary. (Id. at 323.) They are not exhaustive. (Ibid.)

RCALA argues that Plaintiff lacks standing because it is not a consumer or competitor of RCALA and must show that it lost money or property because of unfair competition. (Demurrer, 17.) RCALA also argues that Petitioner does not plead sufficient facts regarding the causation element and “unfair” practices element. (Demurrer, 18.) In opposition, Plaintiff argues that it pleaded standing by alleging that in its capacity as a captive holdover tenant, it was forced to undertake obligations owed by RCALA and made substantial investments in the facility and its equipment, thereby resulting in a loss to Plaintiff and a corresponding massive financial windfall to RCALA. (Opposition, 14-15; SAP ¶¶ 11-12, 33, 99-105.) Plaintiff further argues that it alleged causation by stating that Plaintiff would not have needed to undertake obligations owed by the RCALA and expended substantial resources maintaining the Facility and responding to CalGEM inspections if RCALA had accepted its regulatory responsibility as an owner/operator following termination of Plaintiff’s assigned leases and assumed control of its property and wells. (Opposition, 15.) Plaintiff also argues that it alleged unfair practices because as an owner and de facto operator of its wells under PRC §§ 3009 and 3016, the RCALA had a legal obligation to assume control of those wells and maintain them in compliance with applicable regulations. (Ibid.) The court agrees with Plaintiff.

A cause of action for quantum meruit requires the following elements: (1) defendant requested, by words or conduct, that plaintiff perform services/deliver goods for the benefit of defendant; (2) plaintiff performed the services/delivered the goods as requested; (3) defendant has not paid plaintiff for the services/goods; and (4) the reasonable value of the goods/services that were provided. (CACI 371.) Restitution is a synonym for unjust enrichment, which is not a cognizable theory, but instead a general principal related to other claims and remedies. (Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 794.)

RCALA demurs to this cause of action on the ground that unjust enrichment is a remedy rather than a cause of action. (Demurrer, 19.) RCA further argues that the SAC fails to plead what “benefit” it received and how the receipt of said benefit was “unjust.” (Ibid.) In opposition, Plaintiff argues that courts have recognized unjust enrichment as an independent claim, citing Peterson v. Cellco Partnership (2008) 164 Cal.App.4th 1583, 1593. (Opposition, 15.) Plaintiff further argues that it alleged it was forced to expend substantial resources maintaining the facility and wells for the benefit of the RCALA. (Ibid.) The court agrees with Plaintiff.

[1] RCALA submits the declaration of its counsel, Matthew S. O’Brien (“O’Brien”), to demonstrate compliance with statutory meet and confer requirements. O’Brien attests that on May 10, 2023, he conferred with Plaintiff’s counsel, Chelsea Mikula, telephonically after he sent a letter outlining the premise for the instant demurrer. (O’Brien Decl. ¶7.) The O’Brien Declaration is sufficient for purposes of CCP § 430.41.

TENTATIVE: Defendant’s demurrer is overruled in part and sustained in part. Defendant is to give notice.

Plaintiff Allenco Energy, Inc. (“Plaintiff”) formerly operated a facility of oil and gas production in the University Park community of Los Angeles, starting in September 2009, pursuant to an assignment of leases with the Roman Catholic Archbishop of Los Angeles (“RCALA”), which owns the property. The facility comprises of 21 oil and gas production wells. Because three of the 21 wells extended into property owned by the City of Los Angeles (“City Wells”), these wells are subjected to a separate Lease with the City of Los Angeles (“City”), which was also assigned to Plaintiff in 2009. Two of the three City Wells were considered the highest-producing wells. Plaintiff operated the facility for four years until November 2013 when the surrounding community raised odor and health concerns, prompting a response from regulators and public officials.

In 2019, the City advised Plaintiff that the assigned lease had expired in 2014 because of Plaintiff’s inactivity, and the correspondence was sent by Respondent and Defendant Uduak-Joe Ntuk (“Ntuk”), who was Defendant’s then-Petroleum Administrator and is currently the State Oil and Gas Supervisor in charge of California’s Geologic Energy Management Division (“CalGEM”).

Plaintiff claims that this termination frustrated the purpose of the lease with Archbishop by making it impossible and financially infeasible for Plaintiff to operate the subject facility. Thus, Plaintiff alleges that both leases were terminated simultaneously. As a result of the termination of both leases, Plaintiff asserts that it is not the current operator of the subject facility, as defined by Public Resources Code § 3009. Instead, RCALA and the City became the de facto operators pursuant to Public Resources Code § 3016. However, Plaintiff asserts that it became a “captive holdover tenant” because both RCALA and City refused to comply with their obligations as owners/operators of the subject facility.

On April 14, 2021, Plaintiff informed RCALA of its intention of abandoning the subject facility and ceasing any further maintenance. The parties contested the issue of who was the proper operator of the subject facility based on the termination of the subsurface leases. To date, CalGEM treats Plaintiff as the current operator of the subject lease, requiring Plaintiff to abide by inspection demands and to maintain the subject facility.

On September 3, 2021, Plaintiff filed a petition against RCALA and the City. On September 14, 2022, Plaintiff filed the operative Second Amended Petition (“SAP”) alleging ten causes of action: (1) writ of mandate; (2) declaratory relief; (3) breach of contract; (4) breach of implied covenant of good faith and fair dealing; (5) intentional interference with contract and conspiracy to interfere with contract; (6) intentional interference with prospective economic advantage and conspiracy to interfere with prospective economic advantage; (7) negligent interference with prospective economic advantage; (8) inverse condemnation and violation of the Takings Clause of the Fifth and Fourteenth Amendments of the United States Constitution and Article 1, Section 19 of the California Constitution; (9) unfair competition in violation of Bus. & Prof. Code § 17200; and (10) unjust enrichment.

Defendant City now demurs to the second, third, fourth, fifth, sixth, seventh, eighth, and tenth causes of action for failure to state a claim and for uncertainty.

1. May 26, 2023 Amended Order to Plug and Abandon Wells, Decommission Attendant Facilities, and Restore Well Site, No. 1174A (“Order 1174A”), issued by CalGEM.

The court grants Plaintiff’s request for judicial notice. (Evid. Code, § 452, subd. (c).)

Defendant demurs to the second cause of action for declaratory relief for failure to state a claim on the ground that in seeking to have Defendant deemed the operator of the abandoned wells and responsible for maintaining them, Plaintiff relies on a mistaken interpretation of the Public Resources Code (“PRC”) that contradicts the explicit language of PRC § 3016. (Demurrer, 11.) Defendant also demurs on the ground that it cannot act as an operator because its charter expressly prevents it from engaging in industrial or commercial enterprise. (Demurrer, 12.)

Here, because Plaintiff seeks six declarations for relief regarding Defendant, not just the one about being deemed the operator of the wells and responsible for maintaining them, the court cannot sustain the demurrer as to this cause of action. (SAP ¶ 176.)

B. Third and Fourth Causes of Action: Breach of Contract and Breach of Implied Covenant of Good Faith and Fair Dealing

Defendant also demurs to the third and fourth causes of action for failure to state a claim.

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.) A¿written¿contract must be pled verbatim in the body of the complaint, be attached to the complaint, and incorporated by reference, or be pled according to its legal effect.¿¿(Bowden v. Robinson¿(1977) 67 Cal.App.3d 705, 718.)¿¿An allegation of an oral agreement must “set[] forth the substance of its relative terms.”¿ (Gautier v. General Tel. Co.¿(1965) 234 Cal.App.2d 302, 305.)¿¿¿

“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 pp. 1394-1395.)

Defendant City states that in paragraphs 203 and 205 of the SAP, Plaintiff idled its facility and kept the wells inactive since November 2013 in direct violation of the City lease agreement while Paragraph 15 of the City lease agreement contains a limited excuse for idleness relating to acts of G-d and the like, or actual “orders…of a governmental agency.” (Demurrer, 12.)

According to the SAP, Paragraph 15 of the 1963 subsurface lease excuses performance:

“[I]n part or in whole, by strikes, lockouts, labor disturbances, acts of God, unavoidable accidents, laws, ordinances, restrictions, rules, regulations or orders of any Federal, State, municipal or other governmental agency including, but not limited to, failure or refusal to grant land use or operating licenses or permits, or to designate or approve production units, acts of war or conditions arising out of or attributable to war, shortage of necessary material, equipment or labor, or restrictions in or limitations upon the use thereof, delays in transportation or other matters beyond the control of Lessee, whether similar to the matters herein specifically enumerated or not . . . . This lease shall remain in full force and effect during any such suspension of any of Lessee’s obligation, and for a reasonable time thereafter, provided that after the removal of the cause or causes preventing or hindering the performance of such obligation, Lessee subject to the other provisions of this lease, diligently commences or resumes the performance of such obligation.

Defendant City argues that the SAP alleges only that Plaintiff idled the wells in response to general “complaints” and alleged “requests” by regulators and public officials and neither of these general complaints or regulatory requests meet the limited exceptions of Paragraph 15 as quoted in the SAP. Defendant argues that there was no excuse for Plaintiff’s failure to operate the wells from November 2013 to May 31, 2016, and Plaintiff breached the lease. (Demurrer, 12.)

The SAP alleges that on January 7, 2014, the city sought a permanent injunction to prevent Plaintiff from operating the Facility (the “Civil Action”). (SAP ¶ 70.) The case was settled on May 31, 2016, and Plaintiff agreed to no resume operations until the Facility complied with all health and safety regulations. (SAP ¶ 72.) Plaintiff also agreed not to resume operations until it achieved compliance with all health and safety regulations. (Id.) Therefore, a triable issue of fact exists as to whether the Civil Action allowed Plaintiff to idle the wells while the Civil Action was pending as permitted by Paragraph 15 of the 1963 subsurface lease. The SAP sufficiently alleges that contrary to Paragraph 15 of the lease, Defendant City breached the lease by terminating the lease despite the lease remaining in full force and effect during the periods of suspension. (SAP ¶ 206.) Moreover, whether the Civil Action excused Plaintiff’s performance remains a factual dispute not subject to demurrer.

Because the breach of the implied covenant of good faith and fair dealing cause of action do not go beyond the statement of contract breach, the court also overrules the demurrer as to that cause of action.

C. Fifth, Sixth, Seventh, and Tenth Causes of Action: Intentional Interference with Contract and Conspiracy to Interfere with Contract, Intentional Interference with Prospective Economic Advantage and Conspiracy to Interfere with Prospective Economic Advantage, Negligent Interference with Prospective Economic Advantage, and Unjust Enrichment

Defendant also demurs to the fifth, sixth, seventh, and tenth causes of action for failure to state a claim. Defendant argues that the SAP improperly asserts tort causes of action against it in violation of the Tort Claims Act and its immunities. (Demurrer, 13.)

The law states all government tort liability must be based on statute. Gov. Code § 815 provides: “Except as otherwise provided by statute: (a) A public entity is not liable for an injury, whether such injury arises out of an act or omission of the public entity or a public employee or any other person.” (Gov. Code, § 815, subd. (a).)

To state a cause of action every fact essential to the existence of statutory liability must be pleaded with particularity, including the existence of a statutory duty. (Susman v. City of Los Angeles (1969) 269 Cal.App.2d 803, 809.) Duty cannot be alleged simply by stating “defendant had a duty under the law”; that is a conclusion of law, not an allegation of fact. The facts showing the existence of the claimed duty must be alleged. (Id.; see also Rubinow v. County of San Bernardino (1959) 169 Cal.App.2d 67, 71.) Since the duty of a governmental agency can only be created by statute or “enactment,” the statute or “enactment” claimed to establish the duty must at the very least be identified.

Defendant City argues that Plaintiff did not allege any mandatory duty to act and that its employees are immune by their discretionary acts. (Demurrer, 14, 15.) In opposition, Plaintiff argues that its tort claims do not center on a duty to act by Plaintiff. (Opposition, 12.) Plaintiff further argues that by virtue of its status as the owner and de facto operator of the City Wells, Plaintiff had a duty to assume its statutory obligations to maintain those wells in compliance with the requirements of PRC. (Opposition, 12-13.)

As the SAP does not allege the existence of a statutory duty regarding its tort claims against Defendant City, the court sustains the demurrer to the fifth, sixth, and seventh causes of action.

The court notes that the tenth cause of action, unjust enrichment, is not a tort or cause of action. “[T]here is no cause of action in California for unjust enrichment. The phrase ‘Unjust Enrichment’ does not describe a theory of recovery, but an effect: the result of a failure to make restitution under circumstances where it is equitable to do so. [Citation.] Unjust enrichment is a ‘general principle, underlying various legal doctrines and remedies, rather than a remedy itself.’ [Citation.] It is synonymous with restitution.” (Melchior v. New Line Cinema (2003) 106 Cal.App.4^th 779, 793 [internal quotations omitted].) “As a matter of law, an unjust enrichment claim does not lie where the parties have an enforceable express contract.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4^th 1350, 1370.).

As the SAP states that an express contract existed between Defendant City and RCALA regarding operations of the wells, Plaintiff cannot maintain a claim for unjust enrichment as a matter of law. (SAP ¶ 62.) The demurrer to the tenth cause of action is sustained without leave to amend.

D. Eighth Cause of Action: Inverse Condemnation and Violation of the Takings Clause of the Fifth and Fourteenth Amendment of the U.S. Constitution and Article 1, Section 19 of the California Constitution

The elements of inverse condemnation are (1) Plaintiff owned the real property; (2) the property was taken or damaged; (3) the cause was a public project; and (4) damage to private property substantially caused by an inherent risk presented by the deliberate design, construction, or maintenance of the public improvement. (Cal. State Automobile Assn. v. City of Palo Alto (2006) 138 Cal.App.4th 474, 480.)

“[W]hether a particular restriction will be rendered invalid by the government’s failure to pay for any losses proximately caused by it depends largely upon the particular circumstances [in that case. In engaging in these essentially ad hoc, factual inquiries, the Court's decisions have identified several factors that have particular significance. The economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations are, of course, relevant considerations. A ‘taking’ may more readily be found when the interference with property can be characterized as a physical invasion by government, than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good.” (Penn Cent. Transp. Co. v. City of New York (1978) 438 U.S. 104, 124.)

Diminution in property value, standing alone, cannot establish a taking. (See Penn Cent. Transpo. Co. v. City of New York, supra, 438 U.S. 104 at 131.) “As a general matter, so long as a land use regulation does not constitute a physical taking or deprive a property owner of all viable economic use of the property, such a restriction does not violate the takings clause insofar as it governs a property owner's future use of his or her property, except in the unusual circumstance in which the use restriction is properly found to go ‘too far’ and to constitute a ‘regulatory taking’ under the ad hoc, multifactored test discussed by the United States Supreme Court in Penn Central Transp. Co. v. New York City (1978) 438 U.S. 104.” (Cal. Building Industry Assn. v. City of San Jose (2015) 61 Cal.4th 435, 462.)

Defendant City demurs on the ground that the SAP does not and cannot assert any public project, any physical or even regulatory taking of private property, or any inherent risk and substantial causation on the part of a public project. (Demurrer, 17.) In opposition, Plaintiff argues that by unfairly terminating Plaintiff’s leases and seeking to shut down its business at the facility so that Defendant could acquire the RCALA’s property for municipal purposes, Defendant deprived Plaintiff of a valuable property right and thereby committed an unconstitutional taking. (Opposition, 14.) Plaintiff further argues that the Defendant unilaterally terminated Plaintiff’s leases and effectively ousted it from the site, thereby depriving it of any ability to make economic use of the facility. (Opposition, 15.)

“Eminent Domain Law recognizes that, generally, a lessee is entitled to ‘compensation for the value of his leasehold interest [taken], if any, and any of his property taken’ therewith, including ‘goodwill.’” (City of Vista v. Fielder (1996) 13 Cal.4th 612, 616 [internal citations omitted]; see also CCP § 1265.150.) Therefore, Plaintiff may bring an inverse condemnation claim despite not being the owner of the Facility to recover the value of its lease interest.

To plead inverse condemnation, it is sufficient for Plaintiff to plead that the City’s conduct significantly invaded or appropriated the use and enjoyment of the property. (See San Diego Metropolitan Transit Development Bd. v. Handlery Hotel, Inc. (1999) 73 Cal.App.4th 517, 530.) Here, the SAP sufficiently alleges that the Defendant City’s action prohibited Plaintiff’s “extraction expectations and eliminated the value of [Plaintiff’s] investment, property, and mineral interest.” (SAP ¶ 249.) This was done via the City’s enforcement of its ordinances, rules, and regulations which restricted Plaintiff’s ability to use and enjoy the Facility and interfered with Plaintiff’s reasonable expectation of earning revenues from the investment in the Facility and its mineral interests. (Id.)

However, Plaintiff is also required to plead that the damage to its interest in the Facility was caused by an inherent risk associated with the public entity’s conduct that could have been mitigated had Plaintiff complied with its lease obligations. (See City of Oroville v. Superior Court (2019) 7 Cal.5th 1091, 1111.) For example, in City of Oroville, the California Supreme Court found that although the design, operation, and maintenance of the sewer system caused sewage to emerge at the property, the damage to the property was not substantially caused by the city’s sewer system but by the property’s owner’s failure to install a blackwater valve. (Id. at 1111.)

Yet we cannot say the damage was substantially caused by that system when WGS failed to fulfill a responsibility to install a backwater valve, and that reasonable requirement would have prevented or substantially diminished the risk of the mishap that spawned this case. The backup of sewage into WGS's offices was not the necessary result or unavoidable consequence of any risk posed by the sewer system. And the City acted reasonably in adopting the sewer design and presuming private property owners would comply with the law by installing and maintaining backwater valve devices to prevent sewage backups into private property. The City is not liable in inverse condemnation.

Therefore, to sustain a cause of action for inverse condemnation, Plaintiff must plead facts that allege Defendant City’s enforcement of its ordinances, rules, and regulations posed an inherent risk that was not reasonably avoidable in order to prevail on its claim. Therefore, the demurrer to the eighth cause of action is sustained with leave to amend.

A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.) A demurrer for uncertainty may only be sustained when a defendant cannot reasonably determine to what he or she is required to respond. (Id.)

Defendant City demurrers to the SAP in its entirety on the basis that the SAP refers to several exhibits but fails to attach any exhibits despite attaching exhibits to its previous petition. The court overrules the demurrer to the SAP on the basis of uncertainty because Defendant City can obtain the exhibits referenced in the SAP via discovery. However, as the court has given Plaintiff leave to amend, the next amended complaint must include the exhibits referenced in its pleading.

The demurrer to the third, fourth, fifth, sixth, seventh, and eighth causes of action is sustained with leave to amend.

[1] Defendant submits the declaration of its counsel, Pejmon Shemtoob (“Shemtoob”), to demonstrate compliance with statutory meet and confer requirements. Shemtoob attests that on May 5, 2023, he conferred with Plaintiff’s counsel, Chelsea Mikula, telephonically about the objections raised in the instant demurrer. (Shemtoob Decl. ¶ 2.) The Shemtoob Declaration is sufficient for purposes of CCP § 430.41.