Judge: Gregory Keosian, Case: 23STCV12577, Date: 2023-11-09 Tentative Ruling

Case Number: 23STCV12577    Hearing Date: November 9, 2023    Dept: 61

Defendant Glanbia Nutritionals, Inc.’s Demurrer to the First Amended Complaint is SUSTAINED with 30 days leave to amend as to the fourth, fifth, ninth, and tenth causes of action, for breach of implied warranties, fraud, and civil conspiracy, and SUSTAINED without leave to amend as to the eleventh cause of action under California’s UCL.

Defendant to give notice.

I.                   DEMURRER

A demurrer should be sustained only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§ 430.30, et seq.) In particular, as is relevant here, a court should sustain a demurrer if a complaint does not allege facts that are legally sufficient to constitute a cause of action. (See id. § 430.10, subd. (e).) As the Supreme Court held in Blank v. Kirwan (1985) 39 Cal.3d 311: “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . . Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Id. at p. 318; see also Hahn. v. Mirda (2007) 147 Cal.App.4th 740, 747 [“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. [Citation.]”)

“In determining whether the complaint is sufficient as against the demurrer … if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated.”  (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

“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 Cal., Inc. (1993) 14 Cal.App.4th 612, 616.) Such demurrers “are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Insurance Agency, Inc. (2017) 14 Cal.App.5th 841, 848.)

A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) The demurrer also may be sustained without leave to amend where the nature of the defects and previous unsuccessful attempts to plead render it probable plaintiff cannot state a cause of action. (Krawitz v. Rusch (1989) 209 Cal.App.3d 957, 967.)

Defendant Glanbia Nutritionals, Inc. (Glanbia) demurrers to the First Amended Complaint (FAC) of Plaintiffs Myers Cocktail, Inc. USA and Myers, Cocktail, Inc. Canada (Plaintiffs) on several grounds. It contends that under their contract with Plaintiffs, their claims are governed by Illinois law, which means Plaintiffs’ claim under California’s Unfair Competition Law must be dismissed. (Demurrer at pp. 12–15.) It further argues that the contract contains express waivers of implied warranties, meaning the fourth and fifth causes of action based on implied warranties must also be dismissed. (Demurrer at p. 8.) Finally, Glanbia argues that the ninth and tenth causes of action for fraud and conspiracy to commit fraud ought to be dismissed because they are not pleaded with sufficient particularity. (Demurrer at pp. 9–11.)

The contract with Glanbia indeed contains a clause stating that the agreement’s “terms and conditions shall be governed by and construed in accordance with Illinois law.” (FAC Exh. 2, ¶ 14.) California’s approach to choice of laws analysis is stated in the case Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459. Under this authority, the court must first determine “(1) whether the chosen state has a substantial relationship to the parties or their transaction, or (2) whether there is any other reasonable basis for the parties' choice of law.” (Id. at p. 466.) If either test is met, “the court must next determine whether the chosen state's law is contrary to a fundamental policy of California. If there is no such conflict, the court shall enforce the parties' choice of law. If, however, there is a fundamental conflict with California law, the court must then determine whether California has a ‘materially greater interest than the chosen state in the determination of the particular issue.’” (Id. at p. 466.)

Here, there is a substantial relationship between at least Glanbia and the state of Illinois, satisfying the first prong of the conflict of laws test. The FAC alleges that Glanbia is an Illinois corporation with its principal place of business in Chicago, albeit with offices also located in Carlsbad and Corona, California. (FAC ¶¶ 3, 10.) Thus a substantial relationship exists with Illinois. Although Plaintiffs contend that Glanbia was actually incorporated in Delaware and has since relocated its principal place of business to Wisconsin (Opposition RJN Exh. A), Glanbia presents authority for the proposition that a subsequent assignment of a party’s claim to a party without connection to the contract-designated state will not obviate the substantial connection for the purposes of the choice of law inquiry. (Schmidt v. Trinut Farm Management, Inc. (2023) 92 Cal.App.5th 997, 1010.) The situation here, involving a subsequent relocation rather than an assignment, is analogous.

However, Plaintiffs argue that enforcing the choice of law provision here would result in a conflict with a fundamental policy of California law. Specifically, application of Illinois Law would require application of Illinois’ unfair competition law, the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1), which “applies only to fraudulent transactions that take place “primarily and substantially” inside Illinois.” (Barbara's Sales, Inc. v. Intel Corp. (2007) 227 Ill.2d 45, 63.) Plaintiff argues that the wrongful conduct alleged here occurred primarily in California, specifically in Carlsbad and Corona, and as such relief would be unavailable under both California’s UCL and Illinois’ consumer fraud statute. (Oppositional t p. 6, citing FAC ¶¶ 12–15.)

The available authority supports Glanbia’s position that no fundamental policy is contradicted by applying Illinois law, even if it results in the dismissal of Plaintiffs’ UCL claim. In the case Net2Phone, Inc. v. Superior Court (2003) 109 Cal.App.4th 583, 590, the court upheld a forum selection clause designating New Jersey as the proper forum in a UCL class action, despite New Jersey law which would not allow the representative plaintiff to prosecute the action in that state. (Id. at p. 589.) Where the plaintiff attempted to analogize their claims to those under the CLRA, the court reasoned: “[T]he CRLA contains a provision that voids any purported waiver of rights as being contrary to California public policy. The UCL, under which Consumer Cause brought this action, contains no such limitation.” (Id. at p. 589.) Plaintiffs do not present any authority for the proposition that Illinois’ restriction of its consumer fraud ordinance to fraudulent transactions in Illinois is in conflict with California law.

The demurrer is therefore SUSTAINED without leave to amend as to the eleventh cause of action under the UCL.

Glanbia also demurrers to the fourth and fifth causes of action for implied warranties. Illinois law permits conspicuous, written disclaimers of the implied warranties of fitness and merchantability. (810 ILCS § 5/2-316, subd. (2).) The “conspicuousness” determination is made “by asking if attention can reasonably be expected to be called to the term or clause.” (R.O.W. Window Co. v. Allmetal, Inc. (Ill. App. Ct. 2006) 367 Ill.App.3d 749, 753.) The disclaimer of implied warranties here is in all capital, bolded letters, under a section heading that states in bold “Limited Warranty,” and which specifically disclaims implied warranties of merchantability and fitness for a particular purpose. (FAC Exh. 2, § 9.2.)

Plaintiffs’ argument in opposition is unpersuasive, and relies not on authority applicable to warranty disclaimers under the Uniform Commercial Code (which the applicable Illinois statute enacts (See R.O.W., supra, 367 Ill.App.3d at p. 753)) but rather to exculpatory clauses seeking to limit liability for negligence damages. (Opposition at p. 9, citing Chicago Steel Rule and Die Fabricators Co. v. ADT Sec. Systems, Inc. (Ill. App. Ct. 2002) 327 Ill.App.3d 642, 651.) No such clause it at issue here.

The demurrer is therefore SUSTAINED with leave to amend as to the fourth and fifth causes of action for breach of implied warranties.

This leaves the claims for fraud and conspiracy to commit fraud. In Illinois, as in California, a fraud claim must be pleaded with “particularity,” and “[t]he pleadings must contain specific allegations from which fraud is the necessary or probable inference, including what representations were made, when they were made, who made the representations, and to whom they were made.” (Hirsch v. Optima, Inc. (Ill. App. Ct. 2009) 397 Ill.App.3d 102, 117.) Here, however, the FAC includes no identification of the speakers who made the relevant representations, to whom they spoke, or by what means, and only relates the alleged misrepresentations by reference to the corporate identities of the defendants. (FAC ¶¶ 19, 24, 26–27, 31, 49.) This is insufficient.

By the same reasoning, Plaintiffs’ claim for conspiracy also fails. In Illinois, as in California, civil conspiracy is “not an independent tort,” and where “a plaintiff fails to state an independent cause of action underlying [the] conspiracy allegations, the claim for a conspiracy also fails.”

(Illinois State Bar Ass'n Mut. Ins. Co. v. Cavenagh (Ill. App. Ct. 2012) 983 N.E.2d 468, 481.) Thus the tenth cause of action fails with the ninth cause of action for fraud.

The demurrer is therefore SUSTAINED with leave to amend as to the ninth and tenth causes of action.