Judge: Helen Zukin, Case: 22SMCV00998, Date: 2023-03-15 Tentative Ruling
Case Number: 22SMCV00998 Hearing Date: March 15, 2023 Dept: 207
Background
Plaintiff Real Ketones, LLC (“Plaintiff”) brings this action
against Defendant CaseStack, LLC, (“CaseStack”) and its parent company,
Defendant Hub Group, Inc. (“Hub Group” or, collectively with CaseStack,
“Defendants”) stemming from a contract between Plaintiff and CaseStack.
Plaintiff’s operative Second Amended Complaint (“SAC”), filed January 10, 2023,
asserts five causes of action in connection with alleged breaches of this
contract, as well as alleged fraudulent inducement and misrepresentations in
connection with its formation.
Defendants bring this demurrer to Plaintiff’s causes of
action for fraudulent inducement, negligent misrepresentation, and unfair
business practices under Business and Professions Code § 17200 under Code Civ.
Proc. § 430.10(e), arguing Plaintiffs have failed to cure the deficiencies
which led the Court to sustain Defendants’ demurrer to those causes of action
as asserted in Plaintiff’s prior First Amended Complaint (“FAC”). Defendants
separately move to strike certain of Plaintiff’s claims for damages sought in
the SAC. Plaintiff opposes the demurrer and motion to strike.
Demurrer Standard
When considering demurrers, courts read the allegations
liberally and in context. (Wilson v. Transit Authority of City of Sacramento
(1962) 199 Cal.App.2d 716, 720-21.) In a demurrer proceeding, the defects must
be apparent on the face of the pleading or via proper judicial notice. (Donabedian
v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the
pleading alone, and not on the evidence or facts alleged.” (E-Fab, Inc. v.
Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such,
the court assumes the truth of the complaint’s properly pleaded or implied
factual allegations. (Id.) However, it does not accept as true
deductions, contentions, or conclusions of law or fact. (Stonehouse Homes
LLC v. City of Sierra Madre (2008) 167 Cal.App.4th 531, 538.)
The general rule is that the plaintiff need only allege
ultimate facts, not evidentiary facts. (Doe v. City of Los Angeles
(2007) 42 Cal.4th 531, 550.) “All that is required of a plaintiff, as a matter
of pleading, even as against a special demurrer, is that his complaint set
forth the essential facts of the case with reasonable precision and with
sufficient particularity to acquaint the defendant with the nature, source and
extent of his cause of action.” (Rannard v. Lockheed Aircraft Corp.
(1945) 26 Cal.2d 149, 156-157.)
Motion to Strike Standard
The court may, upon a motion, or at any time in its
discretion, and upon terms it deems proper, strike any irrelevant, false, or
improper matter inserted in any pleading. (Code Civ. Proc., § 436(a).) The
court may also strike all or any part of any pleading not drawn or filed in
conformity with the laws of this state, a court rule, or an order of the court.
(Id., § 436(b).) The grounds for a
motion to strike are: the pleading has irrelevant, false, or improper matter,
or has not been drawn or filed in conformity with laws. (Id. § 436.) The grounds for moving to strike must appear on the
face of the pleading or by way of judicial notice. (Id. § 437.)
Analysis
1. Meet and
Confer Requirement
The Court
finds Defendants have complied with the meet and confer requirements set forth
under Code of Civil Procedure §§ 430.41 and 435.5. (Goldman Decls. at ¶2.)
2. Negligent Misrepresentation
On February 28, 2023, Plaintiff
filed a request for dismissal of its third cause of action for negligent
misrepresentation, which was entered by the clerk that same day. As the third
cause of action for negligent misrepresentation has been dismissed from this
action, Defendants’ demurrer to this cause of action is OVERRULED as moot.
3. Fraudulent
Inducement
“The elements of fraud,” including
a cause of action for fraudulent inducement, “are (a) a misrepresentation
(false representation, concealment, or nondisclosure); (b) scienter or
knowledge of its falsity; (c) intent to induce reliance; (d) justifiable
reliance; and (e) resulting damage.” (Hinesley
v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.) The facts
constituting the alleged fraud must be alleged factually and specifically as to
every element of fraud, as the policy of “liberal construction” of the
pleadings will not ordinarily be invoked. (Lazar
v. Superior Court (1996) 12 Cal.4th 631, 645.) To properly allege fraud
against a corporation, the plaintiffs must plead the names of the persons
allegedly making the false representations, their authority to speak, to whom
they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mut. Auto. Ins. Co.
(1991) 2 Cal.App.4th 153, 157.)
As with the prior FAC, Plaintiff’s
claim for fraudulent inducement in the SAC is based on three allegations of
fraudulent conduct by Defendants:
1.
Defendants made it
appear Plaintiff’s products would be stored in the same or similar type of
warehouse as the Grand Prairie Warehouse owned, possessed, or controlled by
Defendants. (SAC at ¶77.)
2.
Hub Group employee
Benito Capellan told Plaintiff CaseStack was “acquiring” the temperature-controlled
Midpoint Warehouse. (Id. at ¶78.)
3.
Defendants never
disclosed they did not own, possess, or control the Midpoint Warehouse. (Id.
at ¶79.)
In sustaining Defendants’ prior
demurrer to this cause of action, the Court found Plaintiff had sufficiently
alleged the element of causation, but had not sufficiently pled the element of
reasonable reliance. The Court found the subject contract expressly stated “CaseStack’s
services under these Conditions include arranging for various transportation,
logistics and warehousing services with respect to goods in which Customer has
an interest (the ‘Goods’) to be performed by underlying third-party providers
retained by CaseStack (each, a ‘Provider’) including, but not limited to, the
following: … (iv) warehousing storage of inventory Goods at Warehouse
Fulfillment Centers (‘WFC’) owned or operated by Providers (‘Warehouse Service’).”
(Ex. A to SAC at § 1.1.)
The Court thus found the express terms of the underlying
contract state third-party warehouses would be used for storage of Plaintiff’s
products, and as a matter of law Plaintiff could not establish justifiable
reliance on pre-contractual statements which are directly controverted by the
express terms of a written contract. (Marketing West, Inc. v. Sanyo Fisher
(USA) Corp. (1992) 6 Cal.App.4th 603, 611 [affirming summary judgment where
“Plaintiffs' asserted causes of action for fraud and negligent
misrepresentation … cannot be established, since, as a matter of law,
plaintiffs could not reasonably have relied upon alleged oral representations
or alleged concealed facts which contradicted the unambiguous ‘without cause’
termination provisions of the written Agreements”]; Slivinsky v.
Watkins-Johnson Co. (1990) 221 Cal.App.3d 799 [“employee's reliance on an
employer's oral promise of continuing employment was not justified because the
representation contradicted the parties' integrated employment agreement which
provided that employment was at will”]; accord Ailing v. Universal
Manufacturing Corp. (1992) 5 Cal. App. 4th 1412, 1436-37; Dore v. Arnold
Worldwide, Inc. (2006) 39 Cal.4th 384, 393-394.)
Plaintiff seeks to avoid the same result here by alleging
the reference to “third-party providers” is ambiguous because “Hub Group and
CaseStack are separate and distinct corporate entities. Hub Group is factually and
legally a third party under Real Ketones’s and CaseStack’s Logistics Agreement
and the Terms and Conditions agreement.” (SAC at ¶84.) The SAC also alleges “On
information and belief, CaseStack typically stores its clients’
products at warehouses owned, controlled, or possessed by Hub
Group.” (Id. at ¶86.) Plaintiff thus argues it is ambiguous whether “third-party
providers” referred to Hub Group or other entities and thus CaseStack’s
pre-contractual statements do not directly controvert the terms of the
agreement.
The Court notes the SAC does not allege what facts or information
give rise to this “information and belief.” A “‘[p]laintiff may allege on information
and belief any matters that are not within his personal knowledge, if he has
information leading him to believe that the allegations are true’” (Doe v. City
of Los Angeles (2007) 42 Cal.4th 531, 550.) A pleading made on information and
belief is insufficient if it “merely assert[s] the facts so alleged without alleging
such information that ‘lead[s] [the plaintiff] to believe that the allegations are
true’” (Id. at 551, fn. 5; accord Pridonoff v. Balokovich (1951) 36
Cal.2d 788, 792) The SAC does not allege any information which supposedly led
Plaintiff to believe this was true. As such, this allegation on information and
belief is insufficient to show the term “third-party providers” is ambiguous as
it was used in the subject contract.
Furthermore, even if CaseStack “typically” stored its clients’
products at Hub Group warehouses, this would not render the contract ambiguous.
The reference to multiple potential “providers” in the contract indicates the
parties were aware there were multiple potential third-party storage providers
CaseStack could retain to store Plaintiff’s products beyond Hub Group. Even if
CaseStack typically used Hub Group warehouses, the contract clearly allows for
CaseStack to use other providers. The Court thus finds the language of the
contract unambiguous on this point and again finds Plaintiff has not
sufficiently pled the element of justifiable reliance as the pre-contract
statements and representations on which Plaintiff allegedly relied are directly
controverted by unambiguous language of the parties’ contract. Defendants’
demurrer to Plaintiff’s cause of action for fraudulent inducement is SUSTAINED.
Plaintiff bears the
burden of demonstrating it can cure the defects in the SAC through further
amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) While Plaintiff
requests leave to amend in its opposition, it offers no showing as to how this
issue could be cured through further amendment. The Court thus sustains
Defendants’ demurrer without leave to amend.
4. Unfair Business
Practices
The parties acknowledge
Plaintiff’s claim under Business and Professions Code § 17200 will stand or
fall with Plaintiff’s claim for fraudulent inducement. (Demurrer at 14;
Opposition at 1.) As the Court has sustained Defendants’ demurrer to the cause
of action for fraudulent inducement without leave to amend, the same result
follows with respect to Plaintiff’s claim for unfair business practices.
5. Motion to Strike
Defendants separately move to
strike the damages mentioned in paragraphs 114, 123, and 126 of the SAC.
Paragraph 114 is part of Plaintiff’s cause of action for negligent
misrepresentation and paragraphs 123 and 126 are part of Plaintiff’s cause of
action for unfair business practices. As Plaintiff’s claim for negligent
misrepresentation has been dismissed from the case and the Court has sustained
Defendants’ demurrer to Plaintiff’s cause of action for unfair business
practices without leave to amend, these paragraphs no longer have any force or
effect in this action. The Court thus DENIES Defendants’ motion to strike these
paragraphs as moot.
Conclusion
Defendants’ demurrer to causes of action for fraudulent
inducement and unfair business practices is SUSTAINED without leave to amend.
Defendants’ demurrer to the cause of action for negligent misrepresentation is
OVERRULED as moot. Defendants’ motion to strike is DENIED as moot.