Judge: H. Jay Ford, III, Case: 22SMCV00260, Date: 2023-07-11 Tentative Ruling

Case Number: 22SMCV00260    Hearing Date: July 11, 2023    Dept: O

  Case Name:  Hutton v. Electric Entertainment, Inc., et al.

SUBJECT:                 DEMURRER TO FAXC

MOVING PARTY:   Plaintiff/Cross-Defendant Timothy Hutton and Tarquin Enterprises

RESP. PARTY:         None as of 6-27-23

TENTATIVE RULING

            Plaintiff/Cross-Defendants Timothy Hutton and Tarquin Enterprises’ (collectively referred to as “Hutton”) Demurrer to the First Amended Cross-Complaint (FAXC) is OVERRULED as to the 1^st cause of action for fraud in the inducement and SUSTAINED WITHOUT LEAVE TO AMEND as to the 2^nd cause of action for violation of B&PC 17200, the 3^rd cause of action for breach of the implied covenant of good faith and fair dealing and the 4^th cause of action for declaratory relief.  Cross-Defendants to answer in 20 days.

Cross-Defendants’ RJN is DENIED.  An IMDb page and the parties’ private agreement are not proper subjects of judicial notice under Evidence Code §452. 

I.  1^st cause of action for fraud in the inducement—OVERRULED

            “A plaintiff asserting fraud by misrepresentation is obliged to establish a complete causal relationship between the alleged misrepresentations and the harm claimed to have resulted therefrom.  This requires a plaintiff to allege specific facts not only showing he or she actually and justifiably relied on the defendant's misrepresentations, but also how the actions he or she took in reliance on the defendant's misrepresentations caused the alleged damages.”  Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1499 (plaintiff failed to allege reliance on defendant’s promised loan modifications or how defendants’ promised loan modifications caused them “hundreds of thousands of dollars” in damages). 

            “The required elements for fraudulent concealment are: (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would not have acted as he or she did if he or she had known of the concealed or suppressed fact; and (5) plaintiff sustained damage as a result of the concealment or suppression of the fact.”  Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 606.

            There are “four circumstances in which nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts.”  LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.  A duty to disclose in the absence of a fiduciary relationship and in “each of the other three circumstances in which nondisclosure may be actionable presupposes the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise.”  Id. at 336-337 (counsel for debtors could not state a cause of action for concealment against counsel for creditors, because there was no relationship or transaction between the two attorneys that would give rise to a duty of disclosure). 

            Electric is not alleging fraud by affirmative misrepresentation.  Electric is alleging fraudulent nondisclosure or concealment.  Electric’s fraud claim is based on Hutton’s failure to disclose the rape allegations against him, the alleged victim’s demand for compensation, his attempt to settle the matter with her and Buzzfeed’s pending story regarding the accusations.  See FAXC, ¶¶34-42. 

Electric sufficiently alleges damages flowing from Hutton’s alleged fraud. Electric alleges that it suffered damages in the amount of $3,000,000 due to Hutton’s fraud, including increased production costs, fees and other expenses due to having to replace Hutton in the face of the rape allegations and Buzzfeed article.  See FAXC, ¶42.

            Electric also alleges grounds to impose a duty to disclose this information on Hutton.  A duty to disclose sufficient to support a fraudulent concealment cause of action would arise only if Defendants (1) were in a fiduciary relationship with Electric, (2) had exclusive knowledge of material facts not known to Electric, (3) actively concealed a material fact, or (4) made partial representations but also suppressed material facts.  See LiMandri v. Judkins (1997) 52 Cal. App. 4th 326, 336. 

Electric alleges that Hutton had exclusive knowledge of the rape accusations, the pending Buzzfeed story and Hutton’s attempts to kill the Buzzfeed story.  See FAXC, ¶¶35, 37, 38.  Electric also alleges that there was a transaction between itself and Hutton that would support imposition of such a duty, namely the parties continuing relationship under the Performance Agreement executed in connection with the original “Leverage” and the pending negotiations regarding the reboot.  See FAXC, ¶¶12-20. 

Electric alleges a duty of disclosure and damages in support of the fraudulent concealment claim.  Hutton’s Demurrer to the 1^st cause of action for fraud in the inducement is OVERRULED.

II.  2^nd cause of action for violation of B&PC §17200—SUSTAINED WITHOUT LEAVE

            “‘Unlawful business activity' proscribed under section 17200 includes anything that can properly be called a business practice and that at the same time is forbidden by law.”  Farmers Ins. Exchange v. Supr. Ct. (1992) 2 Cal.4th 377, 383.  An action under B&PC 17200 based on an unlawful business practice “borrows violations of other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under section 17200 et seq. and subject to the distinct remedies provided thereunder.”  Id. 

Any “person” “who has suffered injury in fact and has lost money or property as a result of the unfair competition” is entitled to sue under relief under B&PC §17200.  See B&PC §17204.  Under B&PC 17204, only plaintiffs who have suffered injury capable of restitutionary disgorgement or have basis for injunctive relief may sue under BPC 17200.  A plaintiff cannot obtain damages of any other kind.  See Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4^th 1132, 1148. 

            Electric alleges that “it was required to expend significant sums in order to secure the lead actor in “Leverage 2.0” [the reboot] as well as other delayed and increased production costs.”  See FAXC, ¶47.  Electric’s allegation does not state a claim for restitution.

            Electric also alleges that Hutton’s fraudulent nondisclosure of the rape accusations breached the Performer Agreement executed in connection with the original “Leverage” and the payments Hutton received thereunder are capable of restitution.  See FAXC, ¶48.  However, Electric fails to allege that Hutton actually breached the “moral turpitude” clause alleged in ¶14 of the FAXC by raping a minor, only that Hutton has been accused of doing so while on the set of the original “Leverage.” 

            More fundamentally, an unfair competition claim cannot be applied to a contractual dispute involving contracts that do not involve either the public in general or individual consumers who are parties to the contract.  See Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal.App.4^th 115, 135.  “The UCL was enacted to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.”  Id.  Electric has not alleged any unfair business practice and it cannot base a 17200 claim on breach of a private agreement. 

            Electric did not respond to Hutton’s demurrer to its 2^nd cause of action for violation of B&PC 17200.  Electric was required to demonstrate that the defects raised in the demurrer were capable of cure with leave to amend.  See Hendy v. Losse (1991) 54 Cal.3d 723, 742.  Electric failed to do so.  Hutton’s demurrer to the 2^nd cause of action for violation of B&PC §17200 is SUSTAINED without leave to amend.  Electric fails to allege any loss capable of restitution due to an unfair business practice or a consumer or competitor violation. 

III. 3^rd cause of action for breach of the implied covenant of good faith and fair dealing—SUSTAINED WITHOUT LEAVE TO AMEND

            Electric alleges in its 3^rd cause of action that Hutton breached the implied covenant of good faith and dealing in the oral agreement alleged by Hutton in the underlying complaint.  Electric alleges Hutton breached the implied covenant of good faith and fair dealing by failing to disclose the rape allegations during negotiations and that such disclosure would have either altered or ceased negotiations entirely.  See FAXC, ¶¶50-51.  Electric argues Hutton’s breach of the implied covenant excuses it from having to perform under the express oral agreement to employ or pay Hutton to star in the Leverage reboot.  Id. at ¶50.

            Electric fails to allege breach of the implied covenant of good faith and fair dealing contained in the alleged oral agreement to star Hutton in the Leverage reboot.  Electric claims Hutton’s nondisclosure during “negotiations” breached the implied covenant. However, there was no agreement to breach during negotiations.  No agreement had yet been reached. 

            In addition, Electric claims it is “excused” from performing under the oral agreement to “pay or play” Hutton in the Leverage reboot, because Hutton breached the implied covenant of good faith.  Based on this allegation, Electric’s requested “relief” is not affirmative relief at all but an affirmative defense to Hutton’s underlying complaint for breach of contract. 

            Electric’s 3^rd cause of action for breach of the implied covenant is SUSTAINED WITHOUT LEAVE TO AMEND.  Electric fails to allege breach of an implied covenant contained in any enforceable agreement, nor does Electric seek affirmative relief in connection with any breach. 

IV.  4^th cause of action for declaratory relief—SUSTAIN WITHOUT LEAVE TO AMEND

            Electric alleges there is currently a controversy between Hutton and itself regarding whether Hutton breached the moral turpitude provision in the Performer Agreement executed in connection with the original “Leverage” show.  Electric seeks a declaratory order regarding whether the conduct alleged in Hutton’s complaint and the FAXC against Hutton (alleged rape of a 14-year old in 1983) qualifies as a breach of the moral turpitude clause contained in the Performer Agreement. Electric claims the declaratory order affects Hutton’s rights to future payments for Leverage, the original, under the Performer Agreement. 

            “The purpose of a declaratory judgment is to serve some practical end in quieting or stabilizing an uncertain or disputed jural relation.  Another purpose is to liquidate doubts with respect to uncertainties or controversies which might otherwise result in subsequent litigation.  One test of the right to institute proceedings for declaratory judgment is the necessity of present adjudication as a guide for plaintiff's future conduct in order to preserve his legal rights.”  Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 364–365.

            In Osseous, the Court of Appeals created a conceptual framework classifying declaratory relief into three types for the purpose of determining whether the trial court erred by dismissing a declaratory relief cause of action.  In a “Type 1” declaratory relief cause of action, the complaint alleges only a past breach of contract, a breach of contract remedy is available, and declaratory relief is unnecessary to guide future conduct.  Id. at pp. 365, 366–368. The court must dismiss the Type 1 type of declaratory relief claims. Id.

            A “Type 2” declaratory relief cause of action alleges an actual and ongoing controversy,

such as a continuing contractual relationship, and future consequences that depend on the court's

interpretation of the contract. Id. at pp. 369–371. A trial court must not dismiss a Type 2

declaratory relief cause of action.  Id. at p. 365.

            A “Type 3” declaratory relief cause of action alleges a current controversy over a past

breach of contract and the potential a declaration of the parties' rights under a contract might be

necessary to guide the parties' future conduct in a continuing contractual relationship.  Id. at pp.

374–376.  A trial court has discretion to dismiss a Type 3 declaratory relief cause of action.  Id.

at p. 365.

Electric’s request for declaratory relief qualifies as a “Type 3” declaratory relief cause of action under Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4^th 357, 364-365.  In a “Type 3” declaratory relief cause of action, the complaint alleges only a past breach of contract, a breach of contract remedy is available, and declaratory relief might be necessary to guide future conduct.  Id. at pp. 365, 366–368. The court has discretion to dismiss such declaratory relief claims.  Id at 365.

            Hutton’s Demurrer to the 4^th cause of action for declaratory relief is SUSTAINED WITHOUT LEAVE TO AMEND.  Electric’s declaratory relief claim is based on a past of breach of contract, a breach of contract remedy is available and declaratory relief might be necessary to guide future conduct.  The Court exercises its discretion to dismiss this declaratory relief claim.