Judge: H. Jay Ford, III, Case: 21SMCV01431, Date: 2022-10-13 Tentative Ruling

Case Number: 21SMCV01431    Hearing Date: October 13, 2022    Dept: O

Case Name:  Costanzo v. Nieman, et al.

SUBJECT:                DEMURRER TO SAC

MOVING PARTY:   Defendants Taylor Nieman, Shaun Merritt, Brandon Dietz and Toucan Technologies Inc.

RESP. PARTY:         Plaintiff Jessica Costanzo

TENTATIVE RULING

            Defendants Taylor Nieman, Shaun Merritt, Brandon Dietz and Toucan Technologies Inc.’s Demurrer is SUSTAINED WITHOUT LEAVE TO AMEND as to the 3^rd cause of action for conversion and OVERRULED as to the 1^st cause of action for breach of oral contract, 2^nd cause of action for fraud, 5^th cause of action for promissory estoppel and 6^th cause of action for declaratory relief.  Defendants did not demur to the 4^th cause of action for unjust enrichment.  Defendants to answer in 20 days. 

I.  Statute of Limitations—OVERRULED

            The Court previously sustained demurrer to the 1^st cause of action for breach of oral contract, 6^th cause of action for promissory estoppel and 7^th cause of action for declaratory judgment with leave to amend based on statute of limitations.  The Court found that the claims were time-barred based on the two-year SOL under CCP §339(1) and gave Plaintiff leave to plead delayed discovery. To rely on the discovery rule, plaintiff must specifically allege facts showing “(1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.  In assessing the sufficiency of the allegations of delayed discovery, the court places the burden on the plaintiff to ‘show diligence’; ‘conclusory allegations will not withstand demurrer.’”  See Fox v. Ethicon Endo–Surgery, Inc. (2005) 35 C4th 797, 808. 

            Plaintiff sufficiently alleges the details of her discovery of the breach in or around September 2020.  See SAC, ¶¶29-33.  Plaintiff also alleges facts supporting her inability to discover the breach earlier.  Plaintiff alleges that (1) Defendant Nieman told her on 4-25-19 that Defendants would not be pursuing her language learning business concept; (2) Defendants would be pursuing an entirely different idea called “Hey Robin”; and (3) Defendants chose to name their business “Toucan,” which was not the name agreed upon by the parties when they were working to develop and promote Plaintiff’s language learning idea.

            “When a plaintiff reasonably should have discovered facts for purposes of the accrual of a cause of action or application of the delayed discovery rule is generally a question of fact, properly decided as a matter of law only if the evidence ... can support only one reasonable conclusion.”  Stella v. Asset Management Consultants, Inc. (2017) 8 Cal.App.5th 181, 193.  The Court cannot find that Plaintiff’s allegations of delayed discovery are insufficient as an matter of law. 

            Based on Plaintiff’s allegations, a trier of fact could conclude that Plaintiff could not have discovered Defendants’ breach earlier than September 2020 despite reasonable diligence.  In particular, Plaintiff had no reason to believe that Defendants were going to start a business using her language learning business concept, because Defendants affirmatively represented to Plaintiff that they were abandoning her business concept to pursue an entirely different one under the name “Hey Robin.”  Id.

            The public availability of Toucan’s records and the Toucan application on the Google Play Store does not change this analysis.  Based on Defendants’ statements that they were pursuing the “Hot Robin” business concept, not Plaintiff’s language learning business concept, Plaintiff had no reason to investigate or search out whether Defendants had started a business based on Plaintiff’s business concept. Plaintiff also alleges Toucan was not the name the parties considered for the language learning business, and she therefore had no reason to search for Toucan, nor would the name have been significant to her. 

            Defendants’ Demurrer to the SAC based on statute of limitations is OVERRULED.

II. 1^st cause of action for breach of oral contract as to Dietz and Merritt—OVERRULED

            The Court previously sustained demurrer to the breach of oral contract claim as to Dietz and Merritt.  The Court found the breach of oral contract claim did not (1) allege an agreement with sufficiently definite terms to be enforceable; and (2) exchange of consideration for Merritt’s and Dietz’s promises not to proceed with the business without Plaintiff.

            “Under California law, a contract will be enforced if it is sufficiently definite (and this is a question of law) for the court to ascertain the parties' obligations and to determine whether those obligations have been performed or breached.  To be enforceable, a promise must be definite enough that a court can determine the scope of the duty, and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages.  Where a contract is so uncertain and indefinite that the intention of the parties in material particulars cannot be ascertained, the contract is void and unenforceable.  The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.  But if 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.”  Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th 199, 209. 

            Plaintiff’s alleged contracts are sufficiently definite to determine what obligations the parties agreed to and whether those agreed obligations have been breached.  Plaintiff is suing for breach of the promise not to proceed with the business without her.  Plaintiff alleges she and Defendants agreed she would be given 70% of the company as compensation.  Plaintiff alleges Defendants created the business without her and did not give her a 70% stake in that company. In addition, Plaintiff now alleges that Merritt and Dietz promised not to move forward with the business without Plaintiff before Plaintiff disclosed her business idea to them.  See SAC, ¶¶18 and 21. 

            Plaintiff sufficiently alleges an oral agreement with both Dietz and Merritt.  Plaintiff alleges that on 4-14-19, Plaintiff and Neiman brought Defendant Merritt into the business and the parties entered into an oral agreement.  The alleged oral agreement obligated Merritt to focus on the technical aspects of the business and to join the business.  In exchange, Plaintiff disclosed the business idea to Merritt and Merritt was promised equity in the company in an amount to be determined later.  Merritt further promised not to move forward with the language learning business without Plaintiff.  See SAC, ¶18.  Accepting Plaintiff’s allegations as true, Plaintiff’s oral agreement with Merritt was supported by consideration and the absence of an agreement  specific amount of equity is not grounds to find lack of an enforceable agreement on demurrer. 

            Plaintiff alleges an oral agreement with Dietz entered into between 4-18-19 and 4-22-19.  Plaintiff alleges Dietz agreed to focus on the product side of the business and he would be compensated with equity in the business in an amount to be determined later.  In exchange for allowing him to join the business, receive equity and gain knowledge of Plaintiff’s ideas, Dietz agreed to provide product services, to join the business and not to move forward with the business without Plaintiff.  See SAC, ¶21.  Accepting Plaintiff’s allegations as true, Plaintiff’s oral agreement with Dietz was supported by consideration and the absence of a specific amount of equity is not grounds to find lack of an enforceable agreement on demurrer. 

            Defendants’ Demurrer to the breach of contract claim is OVERRULED.

III.  2^nd cause of action for fraud—OVERRULED

            Plaintiff sufficiently alleges promissory fraud with specificity.  Plaintiff alleges:  (1) Nieman, Merritt and Dietz verbally promised Plaintiff that they would not form a language learning business without Plaintiff’s knowledge or approval (SAC, ¶¶47-48); (2) Nieman made this promise several times from February 2019 through April 18, 2019: (3) Merritt made this promise on 4-14-19 (SAC, ¶48); and (4) Dietz made this promise on 4-18-19 and 4-22-19 (SAC, ¶48).  Plaintiff alleges that Defendants made these promises without any intention of performing and with knowledge that they were false.  See SAC, ¶¶51-52.  Plaintiff alleges justifiably relied on Defendants’ promises and fully disclosed her language learning business idea to Defendants.  Id. at ¶54. 

            As a result, Plaintiff alleges she was damaged.  Plaintiff claims she was not allowed to participate in Toucan, which was based on her idea, and she never received any compensation or the ideas she disclosed to Defendants, which they ultimately used to form their own business.    These allegations must be accepted as true and sufficiently state a claim for fraud. 

IV.  3^rd cause of action for conversion—SUSTAINED WITHOUT LEAVE TO AMEND

            Plaintiff’s amendments do not cure the defects raised in the Court’s prior ruling.  The conversion claim is based on the conversion of Plaintiff’s 70% of Toucan’s shares.  Plaintiff fails to allege that she ever had ownership or a right to possess the shares of Toucan when they were allegedly converted.  Defendants’ Demurrer to the conversion claim is SUSTAINED WITHOUT LEAVE TO AMEND. 

V.  4^th cause of action for unjust enrichment—Defendants did not demur to this cause of action

VI.  5^th cause of action for promissory estoppel—OVERRULED

            As the Court previously noted in its ruling on the demurrer to the FAC, Plaintiff alleged a clear and unambiguous promise by Merritt and Dietz not to develop the language learning business without her.  However, the Court sustained demurrer based on Plaintiff’s failure to allege detrimental reliance on their promises.  Plaintiff previously alleged that Defendants Merritt and Dietz made these promises on 4-25-19, after Plaintiff had already disclosed her ideas to them and when they informed her they were not moving forward with Plaintiff’s language learning business at all.  See FAC, ¶¶22-23, 27. 

            Plaintiff now alleges that Defendants Merritt and Dietz made these promises before 4-25-19 and before she disclosed her business ideas to them.  Plaintiff alleges Merritt and Dietz promised not to proceed without her when they first joined the business venture.  See SAC, ¶¶18, 21.  Plaintiff alleges she detrimentally relied on these promises when she disclosed her ideas for the business to the Defendants and expended resources on the initial stages of the business.  Id. at ¶74.  Plaintiff alleges she also detrimentally relied on Defendants’ 4-25-19 statements that they would not move forward without her.  Plaintiff alleges she stopped working on the language learning business herself, because she believed Defendants were no longer pursuing the idea.  Id. at ¶75. 

            Plaintiff now alleges detrimental reliance.  Defendants’ demurrer to the promissory estoppel cause of action is OVERRULED. 

VII.  6^th cause of action for declaratory relief—OVERRULED

            Defendants demur to the declaratory relief cause of action on grounds of statute of limitations and Plaintiff’s failure to state a claim for breach of oral contract against Dietz and Merritt.  Defendants’ demurrer based on statute of limitations is overruled.  Defendants’ demurrer to the breach of oral contract claim against Dietz and Merritt is overruled.  The demurrer to the declaratory relief is therefore also overruled.