Case Number: 21TRCV00893    Hearing Date: April 20, 2023    Dept: B

LOS ANGELES SUPERIOR COURT – SOUTHWEST DISTRICT

Honorable Gary Y. Tanaka                                                                                        Thursday, April 20, 2023   

Department B                                                                                                                            Calendar No. 8

PROCEEDINGS

Chase Packaging, LLC v. Air Fayre CA, Inc., et al.

21TRCV00893

1.      Air Fayre CA Inc. and Darryl Terrell’s Demurrer to First Amended Complaint 

2.      Journey Group Limited’s Demurrer to First Amended Complaint   

TENTATIVE RULING

            Air Fayre CA Inc. and Darryl Terrell’s Demurrer to First Amended Complaint is overruled, in part, and sustained without leave to amend, in part.

            Journey Group Limited’s Demurrer to First Amended Complaint is overruled, in part, and sustained with 20 days leave to amend, in part.

            Background

            Plaintiff filed the Complaint on November 2, 2021, and the First Amended Complaint was filed on October 12, 2022.  Plaintiff alleges the following facts.  Plaintiff made and delivered meals to Defendant Air Fayre CA Inc. to be provided to its airline customers.  Air Fayre’s purchase orders commonly omitted the price for the meals it ordered.  Therefore, the parties used a system, designed and maintained by Air Fayre, to set the prices it owed to Chase.  Air Fayre and Defendant Darryl Terrell manipulated the pricing system and underpaid Chase.  Defendants also induced Chase to purchase a new, larger facility in reliance on Defendants’ promises of increasing future business.  However, Air Fayre abruptly terminated the parties’ relationship.  Plaintiff alleges the following causes of action: (1) Breach of Contract; (2) Intentional Interference with Contract; (3) Unjust Enrichment; (4) Promissory Estoppel (meal production); (5) Promissory Estoppel (new facility); (6) Intentional Interference with Prospective Economic Advantage; (7) Intentional Misrepresentation; (8) Unfair Competition.

            Defendant Air Fayre CA filed a Cross-Complaint on February 17, 2022.  Cross-Complainant alleges the following facts.  Air Fayre stopped sending Chase business via purchase orders after American Airlines terminated its contract with Air Fayre based on Chase’s substandard performance as an in-flight meal caterer. Rather than being coerced into buying a new facility, Chase willingly abandoned its old facility to move into a new facility that was not FDA approved.  Thus, in-flight meals prepared in those facilities could not be accepted by any airline.  Cross-Defendants made numerous assurances that it would perform its services properly and in reliance on those assurances Cross-Complainant continued its business relationship with Cross-Defendants which ultimately damaged Cross-Complainants’ business and contractual relationships with third parties.  Cross-Complainant alleges the following causes of action: 1. Fraud; 2. Fraud by Omission; 3. Breach of Contract; 4. Intentional Interference with Contract; 5. Negligent Interference with Prospective Economic Relations; 6. Unjust Enrichment.

            Meet and Confer

            Defendants Air Fayre and Terrell submitted a meet and confer declaration in sufficient compliance with CCP § 430.41.  (Decl., Spencer Persson, ¶¶ 2-4.)

            Defendant Journey submitted a meet and confer declaration in sufficient compliance with CCP § 430.41. (Decl., Spencer Persson, ¶¶ 2-3.)

            Demurrers

            A demurrer tests the sufficiency of a complaint as a matter of law and raises only questions of law. (Schmidt v. Foundation Health (1995) 35 Cal.App.4th 1702, 1706.)  In testing the sufficiency of the complaint, the court must assume the truth of (1) the properly pleaded factual allegations; (2) facts that can be reasonably inferred from those expressly pleaded; and (3) judicially noticed matters. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)  The Court may not consider contentions, deductions, or conclusions of fact or law.  (Moore v. Conliffe (1994) 7 Cal.App.4th 634, 638.) Because a demurrer tests the legal sufficiency of a complaint, the plaintiff must show that the complaint alleges facts sufficient to establish every element of each cause of action.  (Rakestraw v. California Physicians Service (2000) 81 Cal.App.4th 39, 43.)  Where the complaint fails to state facts sufficient to constitute a cause of action, courts should sustain the demurrer.  (C.C.P., § 430.10(e); Zelig v. County of Los Angeles (2002) 27 Cal.App.4th 1112, 1126.)

            Sufficient facts are the essential facts of the case "with reasonable precision and with particularity sufficiently specific to acquaint the defendant with the nature, source, and extent of his cause of action.”  (Gressley v. Williams (1961) 193 Cal.App.2d 636, 643-644.)  "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.)  Under Code Civil Procedure § 430.10(f), a demurrer may also be sustained if a complaint is “uncertain.”  Uncertainty exists where a complaint’s factual allegations are so confusing they do not sufficiently apprise a defendant of the issues it is being asked to meet.  (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.)

            Demurrer of Air Fayre CA Inc. and Darryl Terrell

            Defendants demur to the FAC and the fourth, fifth, seventh, and eighth causes of action on the ground that the causes of action fail to state facts sufficient to constitute a cause of action.

            Fourth Cause of Action for Promissory Estoppel

            Fifth Cause of Action for Promissory Estoppel

            As to Defendant Air Fayre CA, Inc., the demurrer to the fourth and fifth causes of action is overruled. Plaintiff states sufficient facts to state the causes of action.

            “[T]he doctrine of promissory estoppel is used to provide a substitute for the consideration which ordinarily is required to create an enforceable promise.... The purpose of this doctrine is to make a promise binding, under certain circumstances, without consideration in the usual sense of something bargained for and given in exchange....” Aceves v. U.S. Bank, N.A. (2011) 192 Cal.App.4th 218, 230–231 (internal citations and quotations omitted). “The elements of a promissory estoppel claim are ‘(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.” Flintco Pacific, Inc. v. TEC Management Consultants, Inc. (2016) 1 Cal.App.5th 727, 734.

            Plaintiff pleads sufficient facts to meet the elements of promissory estoppel. Plaintiff pleads a clear and unambiguous promises: 1. “[T]o pay CHASE the price approved by the airlines, to request timely updates to the approved price, to reflect the approved prices in the cost file or other system, and to pay enough to cover CHASE’s costs and margin[;]” (FAC, ¶ 84) 2. Promises of increasing volume and business, and, thus the need for expansion and a larger space for Plaintiff. (FAC, ¶¶ 30-36). Plaintiff alleges that it reasonably and foreseeably relied upon these promises and continued to maintain its business relationship with Defendant, through purchase orders, and purchasing and upgrading a new facility. (FAC, ¶¶ 85, 92). Plaintiff alleges that it was damaged by the reliance on these promises by not obtaining full payment for services rendered and by incurring the cost of purchase and renovation of the new facility. (FAC, ¶¶ 89, 94).

            As to Defendant Terrell, the demurrer is sustained without leave to amend.  Plaintiff has stated that, as to Terrell, “Chase consents to the dismissal of the promissory estoppel claims[.]”  (Opposition, page 6, lines 12-13.)

            Defendants’ demurrer to the fourth and fifth causes of action is overruled as to Air Fayre CA and sustained without leave to amend as to Terrell.

            Seventh Cause of Action for Intentional Misrepresentation

            Defendants’ demurrer to the seventh cause of action for Fraud is overruled.  Plaintiff states facts sufficient to state a cause of action.

            “A complaint for fraud must allege the following elements: (1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages.”  Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1816. “Every element of the cause of action for fraud must be alleged in the proper manner and the facts constituting the fraud must be alleged with sufficient specificity to allow defendant to understand fully the nature of the charge made.” Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.  Plaintiff must state facts which “show how, when, where, to whom, and by what means the representations were tendered.”  Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.

            Defendants argue that the alleged damages are the same as the Breach of Contract.  The economic loss rule prohibits recovery of tort damages in a breach of contract case.  See, Robinson Helicopter, Inc. v. Dana Corp. (2004) 34 Cal.4^th 979, 988. “[T]he economic loss rule prevent[s] the law of contract and the law of tort from dissolving one into the other.”  Id.  “[A] contractual obligation may create a legal duty and the breach of that duty may support an action in tort. This is true; however, conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law. An omission to perform a contract obligation is never a tort, unless that omission is also an omission of a legal duty.”  Erlich v. Menezes (1999) 21 Cal.4th 543, 551 (internal citations and quotations omitted).

            With the FAC, Plaintiff has adequately identified a duty independent of the contract.  The allegations do not simply reiterate the same facts and contractual duties with respect to Defendants’ setting of the pricing structure, and the manner in which the contractual duties were breached, as already outlined in the first cause of action.  Instead, Plaintiff alleges that Defendants falsely represented that “Defendants would look into and rectify past underpayments, provide information to CHASE so that it could check/verify past and future prices, and put in processes to ensure that prices were determined and disclosed prior to meal production.”  (FAC, ¶ 103.)  Plaintiff alleged that it relied on these representations to continue to engage in the business relationship with Defendants to Plaintiff’s detriment.  (Id., at ¶¶ 104-06.)  Therefore, the cause of action is not based on the same contractual duties and damages but instead separate duties wherein Defendants made false representations to induce Plaintiff to continue to perform in this business relationship.

            Terrell argues that the demurrer should be sustained as to him merely because he was an agent of Air Fayre CA and acting in the course and scope of his employment. However, “[a]n agent or employee is always liable for his own torts, whether his employer is liable or not.  In other words, when the agent commits a tort . . . the agent is subject to liability.”  Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1411 (2014). Here, Plaintiff has alleged specific facts alleging Terrell’s personal acts of fraud.  (FAC, ¶¶ 30-37.)

            Thus, the demurrer to the seventh cause of action is overruled.

            Eighth Cause of Action for Unfair Competition

            Defendants’ demurrer is overruled.  Plaintiff states facts sufficient to state a cause of action.

            “California Business and Professions Code Sections 17000, et seq., and 17200, et seq., states [sic] that unfair competition shall mean and include unlawful, unfair or fraudulent business practices.” Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 618–19. “By proscribing ‘any unlawful’ business act or practice, the UCL “borrows” rules set out in other laws and makes violations of those rules independently actionable. [Citation.] However, a practice may violate the UCL even if it is not prohibited by another statute.” Los Angeles Memorial Coliseum Com. v. Insomniac, Inc. (2015) 233 Cal.App.4th 803, 835. “The unfair competition law is independent of the Unfair Practices Act and other laws. Its remedies are “cumulative ... to the remedies or penalties available under all other laws of this state” (§ 17205), but its sanctions are less severe than those of the Unfair Practices Act. Prevailing plaintiffs are generally limited to injunctive relief and restitution. (§ 17203; see ABC Internat. Traders, Inc. v. Matsushita Electric Corp. (1997) 14 Cal.4th 1247, 1268 [61 Cal.Rptr.2d 112, 931 P.2d 290].) Plaintiffs may not receive damages, much less treble damages, or attorney fees.” Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 179.

            For the reasons outlined in the Court’s ruling to the demurrer to the original Complaint as to the first and third causes of action, and the Court’s ruling to the demurrer to the First Amended Complaint as to the fourth, fifth, and seventh causes of action, Plaintiff has identified an unlawful or unfair business practice committed by demurring Defendants.  In addition, Plaintiff has alleged facts demonstrating economic loss as required by Business and Professions Code Section 17204.

            Therefore, the demurrer to the eighth cause of action is overruled.

            Demurrer of Journey Group

            Defendant demurs to the second, sixth, and seventh causes of action for failure to state sufficient facts to state a cause of action.

            Second Cause of Action for Intentional Interference with Contract

            Sixth Cause of Action for Intentional Interference with Prospective Economic Advantage

            Defendant’s demurrer to the second and sixth causes of action is sustained with 20 days leave to amend.  Plaintiff fails to state facts sufficient to state a cause of action.

            “The elements of an action for tortious interference [with contract] are (1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage. It has been repeatedly held that a plaintiff, seeking to hold one liable for unjustifiably inducing another to breach a contract, must allege [and prove] that the contract would otherwise have been performed.” Hahn v. Diaz-Barba (2011) 194 Cal.App.4th 1177, 1196 (internal citations and quotations omitted).

            The elements of Intentional Interference with Prospective Economic Advantage are: (a) An economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (b) The defendant's knowledge of the relationship; (c) Intentional acts by the defendant designed to disrupt the relationship; (d) Actual disruption of the relationship; (e) Economic harm to the plaintiff proximately caused by the acts of the defendant; (f) Conduct that was wrongful by some legal measure other than the fact of interference itself. Della Penna v. Toyota Motor Sales, U.S.A. (1995) 11 Cal.4th 376, 378.

            Plaintiff has failed to plead facts of an economic relationship with a “third party” and/or a valid contract between Plaintiff and a “third party.”  “There is an important limitation to the use of this tort as a remedy for the disruption of contractual relationships. It can only be asserted against a stranger to the relationship. “[C]onsistent with its underlying policy of protecting the expectations of contracting parties against frustration by outsiders who have no legitimate social or economic interest in the contractual relationship, the tort cause of action for interference with a contract does not lie against a party to the contract. It is obvious that if an action is brought for interference with contractual relationship by one party to a contract against another who is also a party to that same contract, the grievance of the plaintiff is, in essence, breach of contract; and, in such case, plaintiff is entitled to recover all damages flowing from the breach. In such an instance to allow the plaintiff to sue under the tort theory of wrongful interference with contractual rights would not only be superfluous, but also would enable him to recover tort damages (e.g., punitive damages, damages for mental suffering) to which he is not entitled under California law.” Kasparian v. County of Los Angeles (1995) 38 Cal.App.4th 242, 262.

            Here, Plaintiff has specifically alleged that “AIR FAYRE is a wholly owned subsidiary of JOURNEY GROUP.”  (FAC, 10.)  Plaintiff has specifically alleged that “AIR FAYRE is simply an arm or division of JOURNEY GROUP. . . .  and directed the conduct of AIR FAYRE and TERRELL.”  (FAC, ¶ 10.)  In addition, Plaintiff alleged that “each of the Defendants was the agent and employee and/or alter ego of each of the remaining Defendants, and was, in doing the things herein complained of, acting within the scope of such agency and employment.”  (FAC, ¶ 7.)  Thus, Plaintiff has failed to allege facts to support essential an element of the cause of action – interference with a contract with a third party.

            Further, the Court may take judicial notice of its own files and records, specifically with respect to Journey Group’s Motion to Quash Service of Summons and Complaint and the filings in connection therewith. In opposing the motion, Chase vehemently declared that Journey “considers Air Fayre its ‘US Division,’ uses Air Fayre as its ‘brand name,’ and through Air Fayre operates out of LAX.”  (Opposition to Motion to Quash, page 6.)  Chase also specifically argued that Journey “directed Air Fayre’s and Terrell’s actions with respect to Chase.”  (Id., at page 2.)  In reliance on the opposing arguments and evidence submitted in support, this Court denied the motion to quash and stated that Chase “has [for purposes of the jurisdiction analysis] adequately established that Journey Group has subjected itself to personal jurisdiction through acts of directing and/or controlling the activities of its subsidiary, Air Fayre.”  (Court’s Minute Order, dated Dec. 12, 2022.)

            Plaintiff argues that case law exists that allows interference claims against parents of a corporation for interfering with the contract of a subsidiary. Woods v. Fox Broadcasting (2005) 129 Cal.App.4th 344, 351. Here, however, Plaintiff has alleged more than simply a parent/subsidiary relationship.  Instead, Plaintiff has alleged that the entities were agents and alter egos of each other.  (FAC, ¶ 7.)

            Thus, the demurrer to the second and sixth causes of action is sustained with 20 days leave to amend.

            Seventh Cause of Action for Intentional Misrepresentation

            Defendant’s demurrer to the seventh cause of action for Fraud is overruled.  Plaintiff states facts sufficient to state a cause of action.

            The Court refers the parties to the ruling to the demurrer to the seventh cause of action by Defendants Air Fayre CA and Terrell.  The same analysis applies to Defendant Journey Group.

            Thus, the demurrer to the seventh cause of action is overruled.

            Plaintiff is ordered to give notice of this ruling.