Judge Gail Killefer, Case Number: 24STCV31436, Date: 2025-04-18 Tentative Ruling

TENTATIVE: Defendants’ demurrer is sustained with 10 days leave to amend. The motion to strike is denied as moot. The court sets the OSC RE: Amended Complaint for May 14, 2025, at 8:30 a.m. The Case Management Conference is continued to the same date and time. Defendants to give notice.

On November 27, 2024, Direct Counsel, LLC (“Plaintiff”) filed a Complaint against Farahi Law Firm, APC (“Firm”), Justin Farahi (“Farahi”) (collectively “Defendants”), and Does 1 to 10.

Defendants now demurs and move to strike the Complaint. Plaintiff opposes the Motion. The matter is now before the court.

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, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)¿“To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.”¿(C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)¿For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded.¿ (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.)¿A demurrer “does not admit contentions, deductions or conclusions of fact or law.”¿(Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)¿¿

¿Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof. (CCP, § 435(b)(1); CRC, rule 3.1322(b).) The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (CCP, § 436(a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].)¿¿¿¿

“Where the defect raised by a motion to strike or by demurrer is reasonably capable of cure, leave to amend is routinely and liberally granted to give the plaintiff a chance to cure the defect in question.” (CLD Construction, Inc. v. City of San Ramon (2004) 120 Cal.App.4th 1141, 1146.) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)¿¿¿

Demurrer[1]

Plaintiff provides staffing services, primarily in the legal field. (Compl., ¶ 1.) The FAC alleges that on or about November 1, 2023, Defendant Farahi, as an authorized agent for Defendant Firm, requested that Plaintiff submit qualified attorney candidates for a trial attorney position. (Id. ¶ 8.) The Complaint alleges that on November 2, 2023, Plaintiff sent Defendant Farahi about 7 qualified candidates, and on November 8, 2023, Defendant Farahi identified a candidate for an interview. (Id. ¶ 9.) “Thus began an extended search for qualified candidates for FARAHI FIRM.” (Ibid.)

The Complaint alleges that email correspondence between Defendant Farahi and Plaintiff from November 30, 2023, through December 7, 2023 reflects the fact that Defendant Farahi agreed and accepted a 15% referral fee of the candidates’ annual salary.

The November 29, 2023 email from a Brenna Sargent (“Brenna”), with the subject line “Re: New Attorney – Will Skinner” attached a resume and summary for a candidate named Jason R. Doucette (“Jason”) and asked Defendant Farahi if he was interested in Jason. (Compl., Ex. A.) After Defendant Farahi confirmed interest, on November 30, 2023, Defendant Farahi asked Brenna “How much do you charge for the connection?” (Ibid.) Breanna responded as follows:

Generally, we charge 25% but if you need me to go back and be flexible, I might be able to work something out.

Unfortunately, that will not work. The rate you are asking for comes out to 4%. We generally do not go below 20% for attorneys. However, I am willing to go back and see if we can at least do 15%. Otherwise, I am afraid it will not work.

We are in agreement with the 15% of the candidate's salary. However, Jason has just informed us that he has accepted another offer. We agree to the 15% if we find you another candidate. It is definitely a tight market and they are moving fast.

The Complaint asserts that despite not having found the ideal candidate, “MR. F ARAHI continued to solicit candidate submissions from DIRECT COUNSEL.” (Compl., ¶ 11.) Plaintiff asserts that on or about April 30, 2024 It submitted two highly qualified candidates to Defendant Farahi, including a Dianna Albini (“Albini”). (Id. ¶ 12, Ex. B.) While Albini was hired by Defendants, neither Defendants nor Albini informed Plaintiff of the fact. (Id. ¶ 12.)

On August 16. 2024, Plaintiff learned that Albini had been hired, and Plaintiff requested payment of its 15% fee, “which is believed to be no less than Two Hundred Twenty-Five Thousand Dollars ($225,000), or Thirty-Three Thousand Seven Hundred Fifty Dollars ($33,750), whichever is greater”, Defendants refused to pay. (Compl., ¶¶ 12-14.) Defendants asserted that Albini was recruited be a competing recruiter. (Id. ¶ 15, Ex. D.) An August 5, 2024 email from Arthur Zakaryan on behalf of the Plaintiff confirms there is no exclusivity agreement with candidates. (Id. Ex. D.)

Consequently, Plaintiff filed this action, asserting they are entitled to compensation from Defendants for the recruitment of Albini. Defendants now demur to the Complaint.

B. 1st and 3rd Causes of Action – Breach of Contract and Breach of Implied Contract

The elements of a claim for breach of contract are: “(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.) In addition, the complaint must demonstrate damages proximately caused by the breach. (St. Paul Ins. v. American Dynasty (2002) 101 Cal.App.4th 1038, 1060.) Furthermore, “the complaint must [also] indicate on its face whether the contract is written, oral, or implied by conduct.” (Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 458-59 citing CCP, § 430.10(g).)

“If the action is based on alleged breach of 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, 308.) “If the action is based on an 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 instrument must be attached and incorporated by reference.” (Otworth v. Southern Pac. Transportation Co. (1985) 16 Cal.App.3d 452, 459 [internal citations omitted].)

Defendants assert that there was no mutual assent or offer and acceptance because the email pertained only to Jason’s salary expectation. Whether the plaintiff will be able to prove the pleaded facts is irrelevant to ruling upon the demurrer.” (Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 609–610.) The last email dated December 7, 2023 shows that Brenna believe the parties had reached an agreement as to the 15% fee, a belief that Defendant Farahi neither confirmed nor denied:

We are in agreement with the 15% of the candidate's salary. However, Jason has just informed us that he has accepted another offer. We agree to the 15% if we find you another candidate. It is definitely a tight market and they are moving fast.

“Silence in the face of an offer is not an acceptance, unless there is a relationship between the parties or a previous course of dealing pursuant to which silence would be understood as acceptance.” (Southern California Acoustics Co. v. C. V. Holder, Inc. (1969) 71 Cal.2d 719, 722.) “There are several well-recognized exceptions to this rule. Acceptance of an offer may be inferred from inaction in the face of a duty to act, [citations], and from retention of the benefit offered [citations].) (Golden Eagle Ins. Co. v. Foremost Ins. Co. (1993) 20 Cal.App.4th 1372, 1386; refencing Civ. Code, § 1589 [“A voluntary acceptance of the benefit of a transaction is equivalent to a consent to all the obligations arising from it, so far as the facts are known, or ought to be known, to the person accepting.”].)

The Complaint alleges that even after Jason’s recruitment fell through, Defendant Farahi continued to solicit candidate submissions from Plaintiff, including that of Albini. (Compl., ¶ 14.) Therefore, Defendants continued to reap a benefit from their transactions with Plaintiff despite purporting not to have agreed to the fee. To the extent that Defendants assert that it believed the 15% fee applied only to Jason, the burden is on Defendants to show that it should not bear the risk of the mistake. (Civ. Code, § 1577; Stewart v. Preston Pipeline Inc. (2005) 134 Cal.App.4th 1565, 1588.)

Therefore, the court agrees that the FAC alleges sufficient facts to show there is an agreement to a pay 15% recruitment fee. The court rejects Defendants’ argument that Breena Sargent lacked the capacity to contract, because the fact is not judicially noticeable and refers to matters outside of the Complaint. Moreover, such a fact is not supported by the allegations in the Complaint.

However, the other material terms of the Agreement are uncertain. The terms of a contract must be reasonably certain by providing a basis for determining the existence of a breach and by providing an appropriate remedy. (Bowers v. Raymond J. Lucia Companies, Inc. (2012) 206 Cal.App.4th 724, 734.) “If, by contrast, a supposed “contract” does not provide a basis for determining what obligations the parties have agreed to, and hence does not make possible a determination of whether those agreed obligations have been breached, there is no contract.” (Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 811.)

The Complaint alleges that Defendants breached the contract in three ways: (1) by failing to inform Plaintiff that it had offered employment to and hired Albini, a direct counsel candidate, (2) failing and refusing to remit “the greater of the agreed on fee of fifteen percent (15%) of MS. ALBINl'S annual salary, or Thirty-Three Thousand Seven Hundred Fifty Dollars ($33,750)”, and (3) by misrepresenting to Plaintiff that a competing recruiter had submitted Albini to Defendants prior to Plaintiff’s submission. (Compl., ¶ 20 subd. (a)-(c).)

The Complaint fails to point out what provisions in the email show that Defendants had a contractual obligation to Plaintiff to inform Plaintiff that Albini had been hired and not misrepresent that Albini had been hired through another recruiter. Moreover, as the alleged agreement does not provide for exclusivity, Plaintiff fails to state who or by what means payment is determined in the event a candidate is submitted to Defendants by both Plaintiff and a competitor. Plaintiff also fails to show that Defendants agreed Plaintiff would be paid even if a candidate was submitted by a competitor. Who are the Defendants obligated to pay if Plaintiff’s candidate submission was first, but a competitor’s submission is reviewed first by the Defendants? What factual allegations exist to show Defendants agreed that the first recruiter who submitted a candidate's details would be the party entitled to payment?

Without such terms, the court finds that the contract, as reflected by the email chain, was not sufficiently certain to be enforceable. Therefore, the demurrer to the 1st cause of action for breach of contract is sustained with leave to amend.

The third cause of action for breach of implied contract also requires that the contract terms be sufficiently certain. (See Allied Anesthesia Medical Group, Inc. v. Inland Empire Health Plan (2022) 80 Cal.App.5th 794, 808.) The Complaint fails to allege sufficient facts to show the existence of an implied in fact contract that contains all the essential terms.

Furthermore, Plaintiff may either plead the existence of an express or an implied contract, but not both unless one is pled in the alternative. “There cannot be a valid, express contract and an implied contract, each embracing the same subject matter, existing at the same time.” (Wal-Noon Corp. v. Hill(1975) 45 Cal.App.3d 605, 613.) “When a pleader is in doubt about what actually occurred or what can be established by the evidence, the modern practice allows that party to plead in the alternative and make inconsistent allegations.” (Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1402.) The breach of written contract and breach of implied contract must be pled in the alternative and cannot coexist if they relate to the same contract.

Accordingly, the demurrer to the 3rd cause of action is sustained with leave to amend.

On reply, Defendant asserts that for the first time that the contract violates the statute of frauds but fails to explain why the contract is subject to the statute of frauds. “Points raised for the first time in a reply brief will not be considered.” (Malmstrom v. Kaiser Aluminum & Chemical Corp. (1986) 187 Cal.App.3d 299, 320, 231.) Defendants contend that Civ. Code § 1812.503(a) mandates that employment agencies execute written contracts, but section 1812.503(a) contains no such requirement:

Every employment agency subject to this title shall maintain a bond issued by a surety company admitted to do business in this state. The principal sum of the bond shall be three thousand dollars ($3,000). A copy of the bond shall be filed with the Secretary of State.

C. 2nd Cause of Action – Breach of the Implied Covenant of Good Faith and Fair Dealing

“The prerequisite for any action for breach of the implied covenant of good faith and fair dealing is the existence of a contractual relationship between the parties, since the covenant is an implied term in the contract.” (Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 712-713.) “The covenant does not exist independently of the underlying contract.” (Id. at p. 713.)

As Plaintiff’s breach of contract claim fails, so does 2nd cause of action as it cannot exist without a contractual obligation. The demurrer to the second cause of action is sustained with leave to amend.

Civ. Code § 1710 defines one species of deceit as “[a] promise, made without any intention of performing it.” “A cause of action for promissory fraud requires the plaintiff to allege that the promissor did not intend to perform at the time the promise was made, that the promise was intended to deceive and induce reliance, that it did induce reliance, and that this reliance resulted in damages.” (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1411.)

“In California, fraud must be pled specifically; general and conclusory allegations do not suffice.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) Specificity “necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Id. at p. 631.)

The fraud cause of action is based on the fact that Defendant Farahi has agreed to the 15% fee, but the misrepresentation was false at the time it was made, and was made with the intent to Plaintiff to search and identify candidates for Defendants. (Compl., ¶¶ 41, 42, 43.)

The court agrees that as pled in the Complaint, the misrepresentations are not based on a tort duty owed but a contractual obligation. California law does not permit a plaintiff to recover tort damages for contract claims. As explained by the California Supreme Court, “the economic loss rule prevents the law of contract and the law of tort from dissolving into the other.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal. 4th 979, 989.) “Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury; for breach of the covenant of good faith and fair dealing in insurance contracts; for wrongful discharge in violation of fundamental public policy; or where the contract was fraudulently induced. In each of these cases, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.” (Id. at pp. 989-990.)

To plead a cause of action for conversion, one must allege (1) the plaintiff’s ownership or right to possession of personal property; (2) defendant’s disposition of the property inconsistent with plaintiff’s rights; and (3) resulting damages. (Fremont Indemnity Co. v. Fremont General Corp.(2007) 148 Cal.App.4th 97, 119.) “Money may be the subject of conversion if the claim involves a specific, identifiable sum . . . .” (Welco Electronics, Inc. v. Mora (2014) 223 Cal.App.4th 202, 209.) As the Court of Appeal has explained, “money can only be treated as specific property subject to being converted when it is ‘identified as a specific thing.’” (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal. App. 4th 384, 395; see also id. at p. 396 [“California cases permitting an action for conversion of money typically involve those who have misappropriated, commingled, or misapplied specific funds held for the benefit of others.”].)

The court agrees that the conversion claim is barred by the economic loss rule, as Plaintiff pleads a contractual right to the money due. “Were it otherwise, the tort of conversion would swallow the significant category of contract claims that are based on the failure to satisfy ‘ “mere contractual right[s] of payment.” ’ ” (Voris v. Lampert (2019) 7 Cal.5th 1141, 1151–1152.)

“ ‘[T]he simple failure to pay money owed does not constitute conversion.’ ” (Id. at p. 1151.)

Business and Professions Code § 17200 (“UCL”) prohibits “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. Code, § 17200; see Clark v. Superior Court (2010) 50 Cal.4th 605, 610.) “An unlawful business practice or act is an act or practice, committed pursuant to business activity, that is at the same time forbidden by law.” (Klein v. Earth Elements, Inc. (1997) 59 Cal.App.4th 965, 969.) “A business practice is unfair within the meaning of the UCL if it violates established public policy or if it is immoral, unethical, oppressive or unscrupulous and causes injury to consumers which outweighs its benefits.” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1473.) Lastly, a fraudulent business practice claim under section 17200 “is not based upon proof of the common law tort of deceit or deception, but is instead premised on whether the public is likely to be deceived.” (Pastoria v. Nationwide Ins. (2003) 112 Cal.App.4th 1490, 1499.)

On its face, the Complaint fails to state if the UCL claim is based on the unlawful, unfair, or fraudulent prong of the UCL and what specific facts support each prong. To plead this statutory claim, the pleadings 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, 619.)

Moreover, in a private action, remedies are limited to injunctive relief or restitution. (Clark v. Superior Court (2010) 50 Cal.4th 605, 610.) The Complaint requests damages in the form of “f all sums properly owed to DIRECT COUNSEL under the terms of the Agreement plus interest . . .” (Compl., ¶ 58.) As the UCL claim is insufficiently pled, the demurrer to the 6th cause of action is sustained with leave to amend.

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 by imprisonment in a county jail for not more than one year, or imprisonment pursuant to subdivision (h) of Section 1170.

Pen. Code § 496(c) allows any person injured by receipt of stolen property under Penal Code § 496(a) to “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.” (Pen. Code, § 496(a).)

Pursuant to Siry Investment, L.P. v. Farkhondehpour (2022) 13 Cal.5th 333, Plaintiffs are required to plead that Defendants acted with criminal intent to be liable under section 496(c). “To prove theft, a plaintiff must establish criminal intent on the part of the defendant beyond ‘mere proof of nonperformance or actual falsity.’ ” (Id. at pp. 361-362.) Plaintiff must allege “theft” as defined by Penal Code § 484 and not common law fraud. “[S]ection 496(c) is unambiguous, and that read together with sections 496(a) and 484, and in conformity with our standard approach to interpretation [citation], section 496(c) must be understood as yielding the understanding attributed to it in those decisions: A plaintiff may recover treble damages and attorney's fees under section 496(c) when property has been obtained in any manner constituting theft.” (Id. at p. 361.)

The seventh cause of action fails to allege that each Defendant acted with felonious intent and committed theft as defined by Pen. Code § 484(a). Moreover, the Complaint as pled fails to show that Plaintiff is the rightful owner of the funds. Therefore, the demurrer to the 7th cause of action is sustained with leave to amend.

To state a declaratory relief claim, the plaintiff must allege a proper subject of declaratory relief and an actual controversy involving justiciable questions relating to the party’s rights or obligations. (See CCP § 1060; Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909.) “Declaratory relief operates prospectively to declare future rights, rather than to redress past wrongs.” (Canova v. Trustees of Imperial Irrigation Dist. Employee Pension Plan (2007) 150 Cal.App.4th 1487, 1497 (Canova).) “Where, as here, a party has a fully matured cause of action for money, the party must seek the remedy of damages, and not pursue a declaratory relief claim.” (Ibid.) “ ‘The declaratory relief statute should not be used for the purpose of anticipating and determining an issue which can be determined in the main action. The object of the statute is to afford a new form of relief where needed and not to furnish a litigant with a second cause of action for the determination of identical issues.’ ” (Id. at p. 324.)

The 8th cause of action asserts that Defendant Farahi refused to perform under the Agreement while Plaintiff contends that Albani’s application was not submitted by a competing recruiter. (Compl., ¶¶ 67, 68.) “A declaration by this Court is necessary and appropriate at this time to settle the matter in controversy among the parties involved and to avoid a multiplicity of actions.” (Id. ¶ 69.)

The court agrees that the 8th cause of action as pled is duplicative of the breach of contract claim and seeks redress for past conduct not the Parties’ future obligations. “Where, as here, a party has a fully matured cause of action for money, the party must seek the remedy of damages, and not pursue a declaratory relief claim.” (Canova, supra, 150 Cal.App.4th at p. 1497.)

Defendants’ demurrer is sustained with 10 days leave to amend. The motion to strike is denied as

moot. The court sets the OSC RE: Amended Complaint for May 14, 2025, at 8:30 a.m. The Case

Management Conference is continued to the same date and time. Defendants to give notice.

[1] Pursuant to CCP §§ 430.41 and 435.5(a), the meet and confer requirement has been met. (Farahi Decl., ¶ 6.)