Judge Holly J. Fujie, Case Number: 23STCV08063, Date: 2024-03-19 Tentative Ruling

On January 4, 2024, Plaintiff Hicks Media, Inc., as successor to M&M Momar, Inc. (“Plaintiff”) filed this operative First Amended Complaint (“FAC”) against Defendants Big Ticket Productions, Inc., Paramount Pictures Corporation, CBS Studios f/k/a CBS Television Studios, a subsidiary of CBS Entertainment Group, a division of ViacomCBS Inc., and DOES 1-50, inclusive for: (1) Breach of Written Contract; (2) Breach of the Implied Covenant of Good Faith and Fair Dealing; (3) Intentional Interference With Contract; and (4) Accounting.

On February 2, 2024, Defendants filed this instant Demurrer and Motion to Strike. On March 6, 2024, Plaintiff filed its opposition. On March 12, 2024, Defendants filed their reply.

The Court finds that the parties sufficiently engaged in the meet and confer process.

“The primary function of a pleading is to give the other party notice so that it may prepare its case [citation], and a defect in a pleading that otherwise properly notifies a party cannot be said to affect substantial rights.” (Harris v. City of Santa Monica (2013) 56 Cal.4th 203, 240.)¿¿

“A¿demurrer¿tests the legal sufficiency of the factual allegations in a complaint.” (Ivanoff v. Bank of America, N.A.¿(2017) 9 Cal.App.5th 719, 725.) The Court looks to whether “the complaint alleges facts sufficient to state a cause of action or discloses a complete defense.” (Id.) The Court does not “read passages from a complaint in isolation; in reviewing a ruling on a demurrer, we read the complaint ‘as a whole and its parts in their context.’ [Citation.]” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 804.) The Court “assume[s] the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded and matters of which judicial notice has been taken.” (Harris, supra, 56 Cal.4th p. 240.) “The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.]” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.)¿¿

A general demurrer may be brought under Code of Civil Procedure Section 430.10, subdivision (e) if insufficient facts are stated to support the cause of action asserted or under section 430.10, subdivision (a), where the court has no jurisdiction of the subject of the cause of action alleged in the pleading. All other grounds listed in Section 430.10, including uncertainty under subdivision (f), are special demurrers. Special demurrers are not allowed in limited jurisdiction courts. (Code Civ. Proc., § 92, subd. (c).)¿¿

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Id.)¿¿

Defendants demur to Plaintiff’s FAC on the ground that the second and third causes of action do not state facts sufficient to constitute a cause of action.

The Second Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing

“The [implied] covenant of good faith and fair dealing [is] implied by law in every contract. The covenant is read into contracts and functions ‘as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party's rights to the benefits of the contract.’” (Thrifty Payless, Inc. v. The Americana at Brand, LLC (2013) 218 Cal.App.4th 1230, 1244.) As such, “A breach of the implied covenant of good faith is a breach of the contract.” (Id.)

“Establishing that claim requires a showing of “(1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff.” (D’Arrigo Bros. of California v. United Farmworkers of America (2014) 224 Cal.App.4th 790, 800.)

Defendants argue this claim mirrors Plaintiff’s first cause of action for breach of contract and does not state a viable independent duty that any of the Defendants violated. Specifically, Defendants contend Plaintiff’s breach of contract claim against Defendants BTP, Paramount and CBS is premised on the general allegation that Defendants have breached the agreements by failing to pay monies due to Plaintiff. (FAC, ¶ 27.) Similarly, Defendants contend Plaintiff alleges that Defendants breached the implied covenant of good faith and fair dealing by “unfairly interfering with the Plaintiff’s right to receive the benefits of their respective agreements” by failing to correctly credit/allocate certain revenues, and failing to accurately calculate/substantiate costs and expenses. (Id. at ¶ 33.) As such, Defendants argue both the breach of contract and implied covenant causes of action come down to whether Defendants made all payments required under the terms of the M&M Agreement(s).

In opposition, Plaintiff argues the ultimate facts which must be pled are set forth in jury instructions, so it is not required to plead every evidentiary fact it seeks to introduce at trial. Furthermore, Plaintiff argues it has put Defendants on fair notice of its claims. Plaintiff also contends it has pled sufficient facts to allege Defendant breached the implied covenant of good faith and fair dealing because it pled (1) the parties entered into a contract; (2) Plaintiff performed all conditions, covenants, and promises required to be performed by the contract in accordance with the terms of its agreement; (3) Defendants prevented Plaintiff from receiving the benefits of the contract by committing significant financial malfeasance; and (4) Plaintiff was harmed by the conduct. In addition, Plaintiff contends the acts included in this claim are distinctly different than those that would be included under a simple breach of contract cause of action because (1) the allegation that the manipulation of the financials caused a decrease in the revenue Plaintiff was entitled to is not reflected within a simple breach of contract claim and (2) Plaintiff alleges Defendants improperly categorized costs, expenses, depreciation, etc., which negatively affected Plaintiff’s revenue.

In reply, Defendants argue Plaintiff understates the required pleading requirements. Defendants reiterate that an implied covenant claim which relies on the same alleged acts and seeks the same relief as a companion contract claim “may be disregarded as superfluous” unless there is a basis for tort recovery. Furthermore, Defendants assert that Plaintiff makes no attempt to address Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th 85, 102, which confirmed that outside of the insurance context, and absent violation of an independent duty that arises from tort law principles, breaches of contract, even intentional or wrongful, do not give rise to tort damages. Additionally, Defendants contend that nowhere in the implied covenant cause of action is there an alleged breach identified that is unique from the alleged breaches also included in the breach of contract cause of action. As such, Defendants argue that Plaintiff attempts to turn a breach of contract action into a tort case.

The FAC incorporates by reference and realleges each and every allegation in Paragraphs 1 through 28 including the allegations set forth in the First Cause of Action for Breach of Written Contract. (FAC, ¶ 29.) The FAC alleges that every contract in California contains an implied covenant of good faith and fair dealing that neither party will do anything which will injure the right of the other to receive the benefits of the agreement. (Id. at ¶ 30.) The FAC further alleges the implied covenant finds particular application in situations where one party is invested with discretionary power affecting the rights of another. (Id.) The FAC further alleges that in distributing the Series, Defendants had discretionary power to incur, categorize, valuate, and structure its exploitation strategy, from costs and expenses incurred to the licensing deals it reached with third-party exhibitors and broadcasters. (Id. at ¶ 31.) The FAC also alleges that the implied covenant of good faith and fair dealing imposed a duty on Defendants to exercise the foregoing discretion fairly and accurately under the parties’ agreements and Defendants breached that duty by unfairly interfering with Plaintiff’s right to receive the benefits of their respective agreements. (Id. at ¶¶ 32-33.) Specifically, the FAC alleges Defendants (a) failed to credit significant revenues, as well as improperly deducting costs and expenses, when calculating the Series’ profits, to Plaintiff’s detriment; (b) failed to properly allocate revenues earned from agreements in which the Series was licensed in packages with other properties, to Plaintiff’s detriment; (c) failed to accurately calculate costs, expenses, and revenues streams, variously underreporting or overinflating same to Plaintiff’s detriment; (d) failed to substantiate the incurrence of costs and expenses to Plaintiff’s detriment; and (e) failed to engage in arms-length transactions or otherwise avoid self-dealing when contracting with vertically-integrated or otherwise-related entities. (Id. at ¶ 33.) The FAC alleges Plaintiff suffered monetary damages as a direct and proximate result of Defendants’ breaches of the implied covenant of good faith and fair dealing. (Id. at ¶ 34.)

In Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395, the court held that allegations asserting a claim for implied covenant of good faith and fair dealing “must show that the conduct of the defendant, whether or not it also constitutes a breach of a consensual contract term, demonstrates a failure or refusal to discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.)

However, “[i]f the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.” (Id.) “[A]bsent those limited cases where a breach of a consensual contract term is not claimed or alleged, the only justification for asserting a separate cause of action for breach of the implied covenant is to obtain a tort recovery.” (Id.)

The Court finds that the FAC does not allege sufficient facts to support a cause of action for breach of the implied covenant of good faith and fair dealing. Plaintiff merely alleges facts that demonstrate a breach of contract. Furthermore, Plaintiff relies on the same facts alleged in the First Cause of Action for Breach of Written Contract. As such, this claim is duplicative of the first cause of action and does not plead facts sufficient to justify a recovery in tort.

Therefore, the demurrer as to the second cause of action is SUSTAINED without leave to amend, as Plaintiff has not demonstrated that this claim can be alleged in a way that constitutes a valid cause of action for breach of the implied covenant of good faith and fair dealing.

“In order to state a cause of action for intentional interference with contract, a plaintiff must show: “(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.” (Winchester Mystery House, LLC v. Global Asylum, Inc. (2012) 210 Cal.App.4th 579, 596.)

Defendants argue that this claim fails because it is based on boilerplate, conclusory allegations and assumptions. Defendants further argue that Plaintiff pleads interference with a contract to which CBS is alleged to be a party. Specifically, Defendants contend that Plaintiff has attempted to plead an interference claim based not on actual knowledge, nor even on “information and belief,” but simply reciting elements of the cause of action rather than pleading any facts that would, if true, support a finding that elements of the claim were satisfied. (FAC, ¶¶ 36-40.) Moreover, Defendants contend that CBS is not a stranger to the agreement(s) that is/are the subject of the claim because Plaintiff alleges that CBS is a party to the M&M Agreement(s), an agent of contracting parties BTP and/or Paramount, and purportedly conspired with vertically-integrated or otherwise-related entities to under-account to Plaintiff. (FAC, ¶ 13.) Thus, Defendants argue those allegations cannot serve as a basis for a tortious interference with contract claim because CBS supposed wrongful conduct was alleged to have been performed on behalf of BTP and/or Paramount and for their and other related entities’ benefit. Likewise, Defendants argue CBS cannot be held liable for interfering with its alleged principals’ contract(s).

In opposition, Plaintiff argues that it has pled sufficient facts to allege the third cause of action for tortious interference with a contract. Specifically, Plaintiff contends it alleges that Defendant CBS is a licensee and not an assignee or an agent to Defendant BTP. (FAC, ¶¶ 36-40.) Plaintiff further contends agency immunity does not apply to shield persons who merely have an “economic interest” in another party’s contract relations such as CBS in this allegation. Plaintiff also contends the third cause of action was pled in the alternative, so Defendant CBS is not a party to the contract nor an agent to any of the other Defendants. Moreover, Plaintiff argues that Defendant CBS has knowledge of the contract and actions alleged in the FAC caused a breach of contract and damages to Plaintiff.

In reply, Defendants argue that California law is clear that for a party to tortiously interfere with a contract, that party must be a stranger to the contract, whereas Plaintiff has alleged the exact opposite, i.e., that it has a contractual relationship with all three of the Defendants including CBS. (FAC, ¶ 7.) Defendant further reiterates that an agent or representative of a contracting party cannot be held personally liable for interfering with its principal’s contract and Plaintiff alleges that Defendants, including CBS, are agents of the other remaining Defendants. Moreover, Defendants argue that Plaintiff cites to no legal authority making a licensee any more subject to a tortious interference claim than an agent. Defendants also argue that a mere economic interest in a contract is not alleged in the FAC because Plaintiff alleges CBS wrongfully failed to do more to maximize Plaintiff’s rights under the M&M Agreement, thus plainly contemplates performance by CBS related to that Agreement. In addition, Defendants contend that Plaintiff makes no effort to clarify how CBS’s conduct allegedly induced BTP or Paramount to breach the M&M Agreement or disrupted their performance under that Agreement.

The FAC incorporates by reference and realleges each and every allegations in Paragraphs 1 through 34. (FAC, ¶ 35.) The FAC alleges Plaintiff pleads this cause of action in the alternative based on the fact that Plaintiff has not seen numerous underlying contracts for the Series and it is currently unknown whether Defendants CBS and DOEs 26-50 are acting as licensees or assignees of the contractual rights created by the agreements between Plaintiff and Defendant BTP. (Id. at ¶ 36.) The FAC further alleges that Defendants CBS and DOES 26-50 are licensees for the purpose of this cause of action alone. (Id.) The FAC further alleges that, assuming arguendo that Defendants CBS and DOES 26-50 are licensees and through the conduct described in aforementioned paragraphs, they: (1) intended to disrupt or prevent the performance by BTP and/or Paramount of the M&M Agreement(s) as set forth above and did disrupt or prevent that performance; (2) caused damage to Plaintiff by collaborating and/or participating in acts that reduced the Series’ AGR and ultimately Plaintiff’s contingent compensation in connection with the Series; (3) were a substantial factor in causing Plaintiff’s harm; and (3) were engaged with a deliberate, cold, callous, fraudulent, and intentional manner in order to injure and damage Plaintiff and/or with a conscious disregard of Plaintiff’s rights. (Id. at ¶¶ 37-40.)

In Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, the court held that “[w]hen a pleader is in doubt about what actually occurred or what can be established by the evidence, the modern practice allows that party to plead in the alternative and make inconsistent allegations.” (Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1402.)

Similarly, in PMC, Inc. v. Saban Entertainment, Inc. (1996) 45 Cal.App.4th 579, the court held that a manufacturer could not state a claim for interference with a contract against a licensee absent an enforceable contract with the owner.

The Court finds that the FAC does allege sufficient facts to support a cause of action for intentional interference with contract. Although Plaintiff alleges in previous paragraphs that CBS is a party or an agent of a party to the subject agreements, the law allows Plaintiff to plead in the alternative and to make inconsistent allegations. Plaintiff alleges in the alternative that it is currently unknown whether Defendants CBS and DOES 26-50 are licensees or assignees to numerous underlying contracts in this case. Plaintiff further alleges that there were enforceable contracts with Defendants CBS and DOES 26-50’s principals and Plaintiff. Lastly, Plaintiff alleges that Defendants CBS and DOES 26-50 were aware of those contracts, intended to breach or disrupt the contractual relationship; did breach or disrupt the contractual relationship, and caused Plaintiff damages as a result of their conduct.

“Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof, but this time limitation shall not apply to motions specified in subdivision (e).” (Code Civ. Proc., § 435, subd. (b)(1).)

“The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading.” (Code Civ. Proc., § 436, subd. (a).)

Defendants move to strike Paragraph 40 and the Prayer for Relief, in whole or in part, from the FAC on the ground that the request for punitive damages is insufficient as a matter of law. Defendants argue that Plaintiff does not adequately allege facts to support that Defendant CBS acted with fraud, oppression, malice, or willful conduct. Furthermore, Defendants argue that Plaintiff does not include sufficient allegations to seek punitive damages against a corporate entity. Specifically, Defendants contend Plaintiff does not identify a single officer, director, or managing agent or even an employee of CBS or any other Defendant entity at all, who acted, much less attribute wrongful conduct and intent to any specific individuals. Instead, Defendants assert the FAC merely alleges that an unidentified managing agent, officer, or director engaged in bad acts alleged, which is insufficient. (FAC, ¶ 40.) Moreover, Defendants argue that Plaintiff fails to allege that anyone acted maliciously, oppressively or fraudulently towards Plaintiff. Rather, Defendants contend Plaintiff’s allegations in the FAC are focused on what CBS supposedly did towards the writers and creators of the Series and that the writers and creators participated in the audit. (FAC, ¶ 20.) As such, Defendants argue that allegations of withholding documents to an auditor that did not represent Plaintiff cannot serve as the basis of any claim by Plaintiff. Finally, Defendants assert that allegations based on Plaintiff’s assumptions are irrelevant and improper because Plaintiff’s requests for damages are directly tied to allegations where the facts are currently unknown and prefaced with “assuming arguendo.” (FAC, ¶¶ 36-40.)

To state a claim for punitive damages under Civil Code section 3294, a plaintiff must allege specific facts showing that the¿defendant has been guilty of malice, oppression or fraud. (Smith v. Superior Court (1992) 10 Cal. App. 4th 1033, 1042.) The basis for punitive damages must be pled with specificity; conclusory allegations devoid of any factual assertions are insufficient. Id. A motion to strike may lie where the facts alleged, if proven, would not support a finding that the defendant acted with malice, fraud or oppression. (Turman v. Turning Point of Central California (2010) 191 Cal. App. 4th 53, 63.)¿

“Malice” is defined in section 3294(c)(1) as “conduct which is intended by the defendant to cause injury” or “despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” “Oppression” is defined in section 3294(c)(2) as “despicable conduct subjecting a person to cruel and unjust hardship in conscious disregard of that person’s rights.” The term “despicable” has been defined in the case law as actions that are “base,” “vile,” or “contemptible.” (Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal. App. 4th 847, 891.)¿¿“Fraud” is defined in section 3294(c)(3) as “an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.”¿

To prove that a defendant acted with “willful and conscious disregard of the rights or safety of others,” it is not enough to prove negligence, gross negligence or even recklessness. (Dawes v. Superior Court (1980) 111 Cal. App. 3d 82, 87.) Rather, a plaintiff must allege facts demonstrating that “the defendant acted in such an outrageous and reprehensible manner that the jury could infer that he [or she] knowingly disregarded the substantial certainty of injury to others.” (Id. at 90). Further, the allegations must be sufficient for a reasonable jury to conclude that Defendant’s conduct was “despicable” defined as “base, vile or contemptible.” (College Hospital Inc. v. Superior Court (1994) 8 Cal. 4th 704, 725.)

In opposition, Plaintiff argues that Defendants overstate the standards required merely to plead a claim for punitive damages because there is no requirement to “prove evidence” at the pleading stage, so there is no heightened pleading standard. Plaintiff further argues that the punitive damages standard was sufficiently pled in its third cause of action. As such, Plaintiff contends it alleged that Defendant CBS’s managing agent, officers, or directors were engaged in deliberate, cold, callous, fraudulent, and intentional manners in order to injure and damage Plaintiff and/or with conscious disregard of Plaintiff’s rights. (FAC, ¶ 40.) Plaintiff also contend it alleges these actions were ratified and/or affirmed by Defendant CBS’s managing agent, officers, or directors. (Id.) Moreover, Plaintiff argues that it alleged that Defendant CBS has a history and/or business practice of interfering with contacts with talents ability to receive their royalties. (Id. at ¶ 41.) Additionally, Plaintiff argues that the claim that it was required to provide specific names of officers, directors, or managing agents is not supported by case law or statute, only to place Defendants on notice of the intent to seek punitive damages. Plaintiff further contend that pleading of the statutory language does not mean that the FAC pleads mere conclusions, and the pleading states actual facts supporting the prayer for punitive damages. (FAC, ¶ 21 (b).) Lastly, Plaintiff contends that it has sufficiently pled its third cause of action, so the punitive damages claim must survive.

In reply, Defendants argue that Plaintiff misstates the California pleading standard for punitive damages. Defendants reiterate that California courts have repeatedly and unequivocally held that to maintain a punitive damages prayer against a corporate entity, the plaintiff must include specific allegations about a specific managing agent, officer or director engaging in or ratifying acts rising to the level of malice, oppression or fraud. Defendants argue that Plaintiff has not done so. Furthermore, Defendants reiterate that Plaintiff’s allegations are focused on what CBS supposedly did to others. Lastly, Defendants reiterates that the request for punitive damages is based solely on the third cause of action, which Plaintiff has not sufficiently pled.

In Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 167, the court held “Civil Code section 3294, subdivision (b)sets forth the circumstances under which an employer may be held liable for punitive damages based upon acts of an employee. They include the employer's (1) advance knowledge of the employee's unfitness; (2) authorization or ratification of the wrongful conduct; and (3) personal culpability. Moreover, a corporate employer may be liable only if the knowledge, authorization, ratification or act was on the part of an officer, director or managing agent of the corporation.” (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 167.)

The FAC alleges at Paragraph 40: “Assuming arguendo that Defendants CBS and DOES 26-50 are licensees (and not assignees) and in engaging in the misconduct alleged herein, Defendants CBS and DOES 26-50 including by and through their managing agents, officers, or directors were engaged with a deliberate, cold, callous, fraudulent, and intentional manner in order to injure and damage Plaintiff and/or with a conscious disregard of Plaintiff’s rights. These actions were either made and/or affirmed and/or ratified by Defendants CBS and DOES 26-50's managing agents, officers, or directors. Such acts were with malice, oppression, and/or fraud, and in willful disregard of Plaintiff’s rights and interests, thus entitling Plaintiff to an award of punitive damages in an amount appropriate to punish or make an example of Defendants CBS and DOES 26-50, pursuant to Civil Code § 3294.”

The Court finds that the FAC does sufficiently plead facts to support the request for punitive damages. Taking the FAC as whole, Plaintiff alleges Defendants CBS and DOES 26-50 including by and through their managing agents, officers, or directors engaged in financial malfeasance as set forth in Paragraph 21 of the FAC, which describes intentional misconduct. Furthermore, the Plaintiff alleges Defendants CBS and DOES 26-50 ratified and/or affirmed this conduct by their managing agents, officers, or directors. A reasonable jury could find that Defendants alleged actions that were done with the willful disregard as to Plaintiff’s contractual rights.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Hon. Holly J. Fujie

Judge of the Superior Court