Judge Gail Killefer, Case Number: 23STCV15653, Date: 2025-02-10 Tentative Ruling

On July 5, 2023, Nu Label Clothing Inc. (“Plaintiff” or “Nu Label”) filed an action against Fashion Nova LLC (“Defendant” or “Fashion Nova”) for (1) breach of contract, (2) goods sold and delivered, (3) account stated, (4) open book account, (5) money due, and (6) unjust enrichment.

The Complaint alleges that Defendant breached a contract for the sale of goods by failing to pay Plaintiff for the goods delivered and instead depositing the amount due in another account not belonging to Plaintiff.

Defendant Fashion Nova now moves for summary judgment, or summary adjudication in the alternative, as to all causes of action alleged in the Complaint. Plaintiff opposes the Motion. The matter is now before the court.

Objection 1 is overruled. Pursuant to Serri v. Santa Clara University (2014) 226 Cal.App.4th 830, 856, Defendant cannot object to the same evidence it relies on to show that it paid the amount due on Plaintiff’s invoices. (See Defendant’s Compendium of Evidence Ex. 1, 24.) Moreover, Plaintiff’s invoices are admissible under the business records exception to the hearsay rule. (Evid. Code, § 1271.)

Objection 2 is sustained. Plaintiff cannot add exhibits without explaining why it failed to present all evidence required to oppose this Motion. “In motions for summary judgment or adjudication, ‘all material facts must be outlined in the separate statement.’” (Los Angeles Unified School District v. Torres Construction Corp. (2020) 57 Cal.App.5th 480, 492 [italics original] [interna citations and quotation marks omitted].” “ ‘This is the Golden Rule of Summary Adjudication: if it is not set forth in the separate statement, it does not exist.’ ” (Ibid. [italics original].)

Objection No. 1 is overruled. Defendant relies on the same invoices objected to. (See Serri v. Santa Clara University (2014) 226 Cal.App.4th 830, 856.)

Objection Nos. 1, 2, 3, 4, 5, 6, and 7 are based on lack of relevance. The court declines to rule on these objections because they are immaterial to the court’s disposition of this Motion. (CCP, § 437c(q).) All objections not ruled upon are preserved for appeal.

The court may take judicial notice of “official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States,” “[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States,” and “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code, § 452, subds. (c), (d), and (h).) “Taking judicial notice of a document is not the same as accepting the truth of its contents or accepting a particular interpretation of its meaning.” (Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374.)

1) Exhibit 1: a true and correct copy of the Complaint filed by Plaintiff in the instant action (“Complaint”), on July 5, 2023, in the Superior Court of Los Angeles, Case No. 23STCV15653.

2) Exhibit 2: a true and correct copy of Defendant’s conformed Answer to Complaint filed in the instant action on November 8, 2023, in the Superior Court of Los Angeles, Case No. 23STCV15653.

Defendant objects to the request for judicial notice on the basis it is hearsay, lacks authentication, and is irrelevant. The court may take judicial notice of the contents of a government website. (See Wood v. Superior Court (2020) 46 Cal. App. 5th 562, 259 [where the court took judicial notice of several pages from the website of the Department of Fair Employment and Housing.]; People v. Morales (2018) 25 Cal.App.5th 502, 512, fn. 7 [“[C]ourts may take judicial notice of information published on official government websites.”].)

While the court may take judicial notice of the contents of the FBI website, the court may not accept its contents as true. (Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 193.)

motion for summary judgment/adjudication

The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.”¿ (Aguilar v. Atl. Richfield Co. (2001) 25 Cal. 4th 826, 843.) “Code of Civil Procedure section 437c, subdivision (c), requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) Summary adjudication may be granted as to one or more causes of action within an action, or one or more claims for damages. (CCP § 437c(f).)¿¿¿¿¿¿¿¿

A defendant moving for summary judgment bears two burdens: (1) the burden of production – presenting admissible evidence, through material facts, sufficient to satisfy a directed verdict standard; and (2) the burden of persuasion – the material facts presented must persuade the court that the plaintiff cannot establish one or more elements of a cause of action, or a complete defense vitiates the cause of action. (Code Civ. Proc., § 437c(p)(2);¿Aguilar,¿25 Cal.4th at p. 850-851.) A defendant may satisfy this burden by showing that the claim “cannot be established” because of the lack of evidence on some essential element of the claim.¿¿(Union Bank v. Superior Court (1995) 31 Cal.App.4th 574, 590.)¿¿Once the defendant meets this burden, the burden shifts to the plaintiff to show that a “triable issue of one or more material facts exists as to that cause of action or defense thereto.”¿(Id.)¿¿¿¿¿¿¿

“On ruling on a motion for summary judgment, the court is to ‘liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.’” (Cheal v. El Camino Hospital¿(2014) 223 Cal.App.4th 736, 760.) On a summary judgment motion, the court must therefore consider what inferences favoring the opposing party a factfinder could reasonably draw from the evidence. While viewing the evidence in this manner, the court must bear in mind that its primary function is to identify issues rather than to determine issues. [Citation.]” (Binder v. Aetna Life Ins. Co.¿(1999) 75 Cal.App.4th¿832, 839.)¿¿¿¿

Defeating summary judgment requires only a single disputed material fact. (See CCP § 437c(c) [a motion for summary judgment “shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”] [emphasis added].) Thus, any disputed material fact means the court must deny the motion – the court has no discretion to grant summary judgment. (Zavala v. Arce (1997) 58 Cal.App.4th 915, 925, fn. 8; Saldana v. Globe-Weis Systems Co. (1991) 233 Cal.App.3d 1505, 1511-1512.)¿¿¿¿¿

Defendant asserts that Plaintiff’s Opposition is untimely because it was filed on January 11, 2025, rather than on January 10, 2025. (Mourad Supp. Decl., Ex. 1.) Even if Plaintiff’s Opposition is untimely, Defendant fails to show it has been prejudiced by the delay. The court has the discretion to consider Plaintiff’s untimely opposition. (CRC, rule 3.1300 [the court may entertain untimely opposition “in its discretion”]; see Tate v. Superior Court (1975) 45 Cal.App.3d 925, 930 [The court may treat the appearance of Defense counsel at the hearing and her opposition to the motion on its merits as a waiver of defective notice of the motion.].)

Even if the court struck Plaintiff’s Opposition, Defendant failed to meet its initial burden of showing no triable issues of material fact exist.

Therefore, the court considers Plaintiff’s Opposition and addresses the Motion on the merits.

The following facts are undisputed by the Parties unless supported by citation to the evidence. On August 7, 2019, Plaintiff Nu Label entered into a written vendor agreement (the “Vendor Agreement”) with Defendant Fashion Nova regarding the sale of garments to Defendant. (Undisputed Material Fact (“UMF”) Nos. 1 -8; Defendant’s Compendium of Evidence (“DCOE”) Ex. 5 [Vendor Agreement].)

Fashion Nova’s accounting department communicated with Cristian Hong (Nu Label’s point of contact) via his email address, “cristian@nulabelclothing.com”, and Fashion Nova’s accounting department’s email address, “accounting@fashionnova.com.” (UMF No. 9.) This was in accord with the Vendor Agreement that required shipping and payment discussions and claim inquiries be made to Defendant’s Accounts Payable Department at “accounting@fashionnova.com.” (DCOE Ex. 5 at p. 26 of 38.)

The Vendor Agreement contains a section entitled, “Terms and Conditions of Purchase Agreement” which provides that “No prior course of dealings between parties, or usage of trade shall be relevant to explain or supplement any term used in this Agreement.” (DCOE Ex. 5 at p. 32 of 38.) The “Terms and Conditions further provide that “All remedies of Fashion Nova contained herein are cumulative, and are in addition to, and not in lieu of any other remedy available to Fashion Nova at law or in equity, including without limitation, Fashion Nova’s remedies under the Uniform Commercial Code.” (Id. at p. 37 of 38.)

Defendant maintains that because an email came from Plaintiff’s email server requesting a change of payment to a different bank and Plaintiff’s invoices were paid to the new bank account, Plaintiff was paid for the garments and Plaintiff’s claims against Defendant fail as a matter of law.

On March 5, 2021, Fashion Nova received an email from cristian@nulabelclothing.com with a letter attached requesting payments be made to a bank account at Capital One (the “Capital One Account”). (UMF, 10, DCOE Ex. 6 [March 5, 2021 Email].)

The subject of the email stated: “Change of Remittance Information ACH* preferred” and stated:

Nu Label Clothing has changed banks from US Metro Bank to Capital One N.A effective immediately. Please update your records to reflect our new payment instructions at your earliest convenience.

Please note that our preferred method to receive payment is via ACH. If your company is currently paying via check but can remit via ACH, please convert our payment method to ACH and notify us with an email to cristian@nulabelclothing.com. Remittance information can be sent to the same email address.

Should you have any questions, please contact Cristian Hong at 213.747.9647. Thank you for your prompt attention to this matter.

At the time the March 5, 2021 Email was sent, Defendant’s IT department had implemented security protocols that would detect spoof and spam emails and authenticate emails sent from known vendors. (UMF No. 11.) Christopher Allen (“Allen”) oversees Defendant’s IT operations and is familiar with “the security protocols, security implementation, policies and procedures for Fashion Nova with respect to its email server.” (Allen Decl., ¶¶ 2, 3.) Allen asserts that Defendant’s Domain-based Message Authentication, Reporting, and Conformance (“DMARC”) authentication system authenticated the March 5, 2021 Email as coming from Hong’s email address and from Nu Label’s email server. (Id., 20.) Allen asserts he pulled metadata from Fashion Nova’s email server, which indicated the email came from Plaintiff’s email server. (Allen Decl., ¶ 20, DCOE Ex. 16 [Metadata for the March 5, 2021 Email].) “Thus, based upon my education, experience, knowledge and review of this information, the metadata shows someone gained access (whether authorized or unauthorized) to Nu Label’s email server and sent this email using Nu Label’s email server to Fashion Nova.” (Allen Decl. ¶ 23.)

Plaintiff does not dispute the fact that the March 5, 2021 Email came from the email address “cristian@nulabelclothing.com”, that the email originated from Plaintiff’s email server, and that Fashion Nova’s email security protocols would have detected emails sent by an unknown vendor. (UMF Nos. 10-12.)

On March 19, 2021, Hong received an email purportedly from Fashion Nova’s accounting department from a spoof email address of “accounting@fashoinnova.co” requesting account statements. (UMF Nos. 13, 14.) Hong responded to the request and provided a spreadsheet of the outstanding invoices totaling $251,112.80. (UMF No. 15.) The March 19, 2021 Spoof Email was not sent from Defendant’s email server and Defendant does not utilize that email. (UMF No. 18.) It would not be until May 17, 2021, that Hong forwarded the March 19, 2021 Spoof Email he received from “accounting@fashoinnova.co” to Fashion Nova’s AP Supervisor Julia Garcia (“Garcia”). (UMF No. 17.)

Commencing on or after March 10, 2021, a total of five ACH payments were sent to the Capital One Account and debited from Fashion Nova’s bank account, totaling $232,761.10:

The Capital One bank records show the account holder is Sara Brandenburg, who received Fashion Nova’s ACH payments totaling $232,761.10. (UMF 21.) There is no dispute that Fashion Nova made the payments, but it is disputed whether the payments were made to Plaintiff. Plaintiff asserts that Defendant has a remaining balance due of $232,874.60. (Hong Decl, ¶ 4, 15, Plaintiff’s Compendium of Evidence (“PCOE”) Ex. 1.)

Defendant asserts that it paid all of Plaintiff’s invoices in accordance with terms of the Vendor Agreement because the March 5, 2021 Email asserting a change in Plaintiff’s banking information came from Plaintiff’s email server. Plaintiff does not dispute that Defendant did not receive the funds paid to the Capital One bank account and that Defendant is not associated with Sara Brunchenberg. (UMF 21.)

C. Defendant Fails to Meet Its Initial Burden of Showing No Triable Issues of Fact Exist or that It is Entitled to Judgment as a Matter of Law

Defendant Fashion Nova fails to show that the Capital One account holder, Sara Brandenburg, is an agent of Plaintiff such that Plaintiff has been paid and its obligations under the Vendor Agreement have been fulfilled.

Defendant appears to assert that because the March 5, 2021 Email came from Plaintiff’s email server, Plaintiff ratified the change of banking information. Defendant cites no authority for this proposition. Plaintiff asserts that it has always banked with US Metro Bank, all prior payments were by check not by wire transfer, and that Hong never “personally sent” an email to Defendant asking that the banking information be changed to Capital One. (Hong Decl., ¶¶ 9-14.) On Reply, Defendant asserts that beginning in 2020, Defendant started paying certain vendors via ACH payment (an electronic money transfer across a network called the “Automated Clearing House”). (Siebens Supp. Decl., ¶ 3, DCOE Ex. 22.) However, Defendants fail to show that prior to the March 5, 2021 Email, Plaintiff has accepted ACH payments from Defendant. (See DCOE Ex. 22-009, 23-017.) Defendant asserted that it started sending money via ACH to the Capital One account on or after March 21, 2021. (UMF No. 16.) Moreover, Defendant’s payment of certain invoices fails to show that payment was made to an account belonging to Plaintiff.

Defendant failed to produce evidence showing that Plaintiff is the owner of the Capital One Bank Account and has received payment for all invoices due under the Vendor Agreement. Accordingly, UMF Nos. 20 and 22 are in dispute.

Moreover, the Vendor Agreement did not expressly state how Plaintiff was to receive payment, only that the payment “may” be discussed with the Accounts Payable Department. (DCOE Ex. 5 at p. 26 of 38.) Defendant asserts it was not contractually obligated to inquire about the bank account change or confirm the bank account change before making payments to the Capital One Account because the email came from Plaintiff’s account. By the same token, the Vendor Agreement did not expressly state that billing change requests would come exclusively from Hong’s email address or that Plaintiff was required to implement DMARC security protocols to protect against unauthorized access to Plaintiff’s email server.^{^[1]} On Reply, Defendant implies that it unilaterally “switched to paying certain vendors, including but not limited to, Nu Label, via ACH payment” without specifying if the changes were discussed and agreed to by Nu Label or the other vendors or if unilateral changes to billing and payment were not prohibited under the Vendor Agreement. (Siebens Supp. Decl., ¶ 2.) Regardless of how billing and payment changes were to be made, the undisputed fact is that the Vendor Agreement obligated Defendant to pay Plaintiff for the garments it received. (DCOE Ex. 5.)

Accordingly, the fact that an email came from Plaintiff’s server requesting changes in the form of payment does not alone excuse Defendant’s obligation to pay for the goods it received from Plaintiff under the Vendor Agreement.

D. Defendant Fashion Nova Fails to Show that Plaintiff Should Bear the Risk of Loss Due to Wrongful Payment

“[T]he impostor rule is applicable only when the issuance of the check has been accomplished through impersonation of the payee[.]” (Title Ins. Co. v. Comerica Bank - California (1994) 27 Cal.App.4th 800, 804 [italics original.) “If a check payable to an impostor, fictitious payee, or payee not intended to have an interest in the check is paid, the effect of subsections (a) and (b) is to place the loss on the drawer of the check rather than on the drawee or the Depositary Bank that took the check for collection. . . The drawer is in the best position to avoid the fraud and thus should take the loss.” (See Cal. U. Com. Code, § 3404, com. 3.)

Cal. U. Com. Code § 3404(d) “applies principles of comparative negligence to permit the drawer to recover from” against the bank or the person receiving payment. (Unlimited Adjusting Group, Inc. v. Wells Fargo Bank, N.A. (2009) 174 Cal.App.4th 883, 893.) Plaintiff relies on Cal. U. Com. Code § 3404(d) to assert that Defendant should bear the risk of the loss due to wrongful payment. Defendant asserts the risk should be allocated to Plaintiff who “was in the best position to prevent the fraud” due to having lax email security protocols. (See Beau Townsend Ford Lincoln, Inc. v. Don Hinds Ford, Inc. (6th Cir. 2018) 759 Fed.Appx. 348, 359 (Beau Townsend); Arrow Truck Sales, Inc. v. Top Quality Truck & Equipment, Inc. (M.D. Fla., Aug. 18, 2015, No. 8:14-CV-2052-T-30TGW) 2015 WL 4936272, at *5 (Arrow); Jetcrete North America LP v. Austin Truck & Equipment, Ltd. (D. Nev. 2020) 484 F.Supp.3d 915, 919 (Jetcrete); Bile v. RREMC, LLC (E.D. Va., Aug. 24, 2016, No. 3:15CV051) 2016 WL 4487864, at *2 (Bile).

The cases cited above and relied on by the Parties do not persuade the court that the issue of who should bear the loss of wrongful payment can be decided on summary judgment. In Beau Townsend, the Sixth Circuit ruled it an error of the trial court to resolve the allocation of risk via summary judgment and found that “the district court must hold a trial” because the question of risk should be decided by the factfinder. (Beau Townsend Ford Lincoln, Inc. v. Don Hinds Ford, Inc. (6th Cir. 2018) 759 Fed.Appx. 348, 359.) Moreover, Beau Townsend focused on the defense of mutual mistake and agency by estoppel, which Fashion Nova did not assert in its moving papers. (Id. at pp. 353-358.) Similarly, Arrow, Jetcrete, and Bile were also decided after a bench trial.

Defendant also fails to show that Plaintiff should bear the risk of loss. Cal. U. Com. Code § 3103(a)(7) defines “Ordinary care” as “in the case of a person engaged in business means observance of reasonable commercial standards, prevailing in the area in which the person is located, with respect to the business in which the person is engaged.” Defendant failed to produce evidence that DMARC security protocols in email servers are reasonable commercial standards for merchants such as Plaintiff. Neither Defendant nor Defendant’s IT operations supervisor produced evidence that DMARC standards are an industry norm. Secondly, Defendant fails to show that it did not lack ordinary care in failing to confirm Plaintiff’s new banking and payment instructions.

Unlike the party in Bile, Defendant fails to show that prior to the March 5, 2021 Email Plaintiff knew its email server had been compromised. The March 19, 2021 Spoof Email from “accounting@fashoinnova.co” was sent after the March 5, 2021 Email and Defendant fails to show how Plaintiff receiving a spoof email, purportedly from Defendant, would put Plaintiff on notice that its email server was compromised. Plaintiff did not know that a third party had instructed Defendant to send payment to a new bank account because Defendant never communicated the change to Plaintiff. The attached letter to the March 5, 2021 email came from a “Zoe Riley,” a name Plaintiff asserts was never involved in the parties’ communication and is not an employee of Plaintiff. (Plaintiff’s UMF No. 36; Hong Decl., ¶ 36.) Plaintiff further asserts that Plaintiff and Defendant are California entities, and that Plaintiff had always accepted payment by check, such that Defendant should have been on notice of the discrepancies in requesting payment by wire to a new bank account that was part of an out-of-state branch located in Utah. (Opposition, at p. 6:6-13.)

In Ostrich Int'l Co., Ltd v. Michael A. Edwards Grp. Int'l Inc. (C.D. Cal., May 18, 2023, No. 221CV00639JVSASX) 2023 WL 4025870, SRG and its counsel, Mr. Dokko, were on notice that its email servers “had been vulnerable to security breaches” in the past—a fact that was not disclosed to Defendants, and two fraudulent emails had been sent from SRG’s email server. (Id. at *5.) Nevertheless, the District Court found that Defendants were the parties in the best position to prevent the harm because they “could have more easily avoided the loss by simply calling Mr. Dokko to confirm the wiring instructions.” (Ibid.) Here, Defendant fails to show that it was excused from not confirming Plaintiff’s new banking information despite there being “inconsistencies” in the March 5, 2021 Email.

Defendant fails to rebut Plaintiff’s evidence that the attached letter by a “Zoe Riley” was a person unknown to both parties and had never been involved in the Parties’ business transaction. (Plaintiff’s UMF No. 36; Hong Decl., ¶ 36.) Plaintiff contends that since signing the Vendor Agreement, Plaintiff always accepted payment by check, not wire. (Plaintiff’s UMF No. 27; Hong Decl., ¶ 10.) Defendant’s evidence fails to show that before March 5, 2021, Plaintiff accepted payment by ACH. (DCOE Ex. 22, 23.) Since the Parties entered into the Vendor Agreement, Plaintiff’s bank was U.S. Metro. (Plaintiff’s UMF No. 29, Hong Decl., ¶ 9.) The March 5, 2021 Email requested payment to a new bank account located in Utah.

Based on these facts, the court does not find that as a matter of law, Plaintiff was in a better position to avoid fraud and should bear the loss of nonpayment. Moreover, Defendant’s moving papers fail to show that Fashion Nova did pay Plaintiff. The moving papers also failed to assert other contract defenses that excused the Defendant’s nonpayment. As triable issues of fact exist, summary judgment is denied as to all causes of action[2].

[1] Plaintiff’s opposition did not put forth any evidence of its email security protocols.

[2] This is inclusive of the unjust enrichment claim because the fact Defendant made payment to a third party does not mean it did not retain a benefit. After all, Fashion Nova received Plaintiff’s garments without proper payment.

For check remitters:	For overnight checks:
Nu Label Clothing	Capital One N.A Lockbox Services
4383 Fruitland Ave, Vernon CA 90058	Nu Label Clothing
	PO Box 30285
*ACH preferred	Salt Lake City, UT 84130-0287