Judge Holly J. Fujie, Case Number: 24STCV24447, Date: 2025-02-24 Tentative Ruling

RESPONDING PARTY: Plaintiffs John B. Wilson and Leslie Q. Wilson (collectively, “Plaintiffs”)

The action arises out of the “Varsity Blues” college admission scandal. Plaintiffs John B. Wilson (“Mr. Wilson”) and Leslie Q. Wilson (“Mrs. Wilson”) sue Defendant USC and Does 1 through 30 pursuant to a September 20, 2024 complaint (“Complaint”) alleging causes of action for: (1) fraud; (2) deceit—intentional misrepresentation; and (3) deceit—negligent misrepresentation.

On November 12, 2024, USC filed the instant demurrer (“Demurrer”). On February 7, 2025, Plaintiffs filed an opposition (the “Opposition”). On February 14, 2025, USC filed a reply (the “Reply”).

Pursuant to Evidence Code section 452, subdivision (d), the Court may take judicial notice of “[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States”.

The court, however, may not take judicial notice of the truth of the contents of the documents. (Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375.) Documents are only judicially noticeable to show their existence and what orders were made such that the truth of the facts and findings within the documents are not judicially noticeable. (Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 885.)

Pursuant to USC’s request, the Court takes judicial notice of the following: (1) the United States Court of Appeals for the First Circuit’s opinion in United States v. Abdelaziz, 68 F.4th 1 (1st Cir. 2023) ; (2) the Third Superseding Indictment in Mr. Wilson’s criminal proceeding; (3) the Fourth Superseding Indictment in Mr. Wilson’s criminal proceeding; (4) the January 14, 2020, Consolidated Response in Opposition to Defendants’ Motions to Compel; and (5) the transcript of Day 3 of Mr. Wilson’s criminal trial. (RJN, Exs. B-F.) The Court declines to take judicial notice of the remaining documents as they are not judicially noticeable under Evidence Code section 452.

The Court emphasizes that it takes judicial notice only to the extent of the documents’ existence. “The hearing on demurrer may not be turned into a contested evidentiary hearing through the guise of having the court take judicial notice of documents whose truthfulness or proper interpretation are disputable.” (Fremont Indemnity Co. Fremont General Corp. (2007) 148 Cal.App.4th 97, 115.)

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; Code of Civil Procedure (“CCP”) § 430.10, subd. (e).)

To sufficiently allege a cause of action, a complaint must allege all the ultimate facts—that is, the facts needed to establish each element of the cause of action pleaded. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 212, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) “[E]ach evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)

In testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.) Courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228, disapproved on other grounds, Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162.) A demurrer, however, “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

The statute of limitations for an action for relief on the ground of fraud or mistake is three years, but “is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” (CCP § 338, subd. (d).)

USC argues that each of Plaintiffs’ causes of action is barred by the statute of limitations. USC asserts that the alleged fraud and misrepresentations occurred in 2014 [Demurrer, pp. 14:27-15:2] and that Plaintiffs were on inquiry notice of USC’s alleged fraud and misrepresentations in 2019, when Mr. Wilson was indicted for allegedly participating in the admissions scheme. (Demurrer, p. 15:3-15:7; Compl. ¶ 3.) USC further argues that Plaintiffs were aware of various facts and circumstances which would have made a “reasonably prudent person suspicious” of the alleged fraud as early as 2013. (Demurrer, pp. 16:5-17:3.) USC thus argues that based on either theory, the statute of limitations has run on all three causes of action.

In response, Plaintiffs argue that they only became aware of the illegitimacy of their donation on September 21, 2021, when a USC admissions officer testified that the university has never recognized donations to USC Athletics from parents of prospective students as a legitimate factor in the admissions process. (Opp., p. 9:19-22; Compl., ¶ 64.) Plaintiffs argue that the delayed-discovery rule tolls the statute of limitations. Plaintiffs assert that they did not discover the fraud until that date because USC officials had previously maintained to them that the donation was legitimate. (Opp., pp. 9:23-11:9; Compl., ¶¶ 43-55.) The Complaint alleges that multiple USC officials told Plaintiffs that “USC had a policy of giving an admissions recommendation to the applicant child of donor families with an athlete qualified for a walk-on, non-scholarship spot on the water polo team.” (Compl., ¶¶ 44.) The Complaint also alleges that USC officials told Plaintiffs that donations through Singer’s organization were legitimate and in line with USC policies. (Compl., ¶¶ 44, 51.) The Complaint asserts that Plaintiffs had no reason to doubt the truth of these statements until September 21, 2021, when the USC admissions officer's sworn testimony contradicted them. (Compl. ¶ 64.)

The parties here contest whether facts and circumstances prior to September 21, 2021 sufficiently put Plaintiffs on inquiry notice such to trigger the statute of limitations. “[A] court ruling on a demurrer cannot decide a question that may depend on disputed facts by means of judicial notice. On a demurrer a court's function is limited to testing the legal sufficiency of the complaint. A demurrer is simply not the appropriate procedure for determining the truth of disputed facts.” (Richtek USA, Inc. v. uPI Semiconductor Corp., (2015) 242 Cal.App.4th 651, 660 [internal quotations omitted].) Where, as here, the parties dispute when Plaintiffs had inquiry notice of their fraud and intentional misrepresentation claim, the statute of limitations issue depends on a disputed question of fact and therefore cannot be properly resolved at the demurrer stage. On its face, the Complaint alleges that Plaintiffs discovered the alleged fraud and misrepresentation on September 21, 2021. The Court must accept the allegations in the Complaint as true for purposes of evaluating a demurrer. Thus, Plaintiffs have sufficiently alleged timely causes of action for fraud and intentional misrepresentation.

The elements of fraud are: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.)

USC argues that each of Plaintiffs’ causes of action also fail because Plaintiffs cannot establish that they reasonably relied on USC’s false allegations. USC argues that no reasonable person would have believed that the donation was a sanctioned admission policy. (Demurrer, pp. 20:12-21:11.) In the Opposition, Plaintiffs argue that whether reliance is reasonable is a question of fact. (Opp., pp. 13:25-14:16.) The Complaint alleges that Plaintiffs relied on USC’s representations. (Compl., ¶¶ 15, 52, The Complaint alleges facts supporting Plaintiffs' claim that their reliance was reasonable, including their son's academic and athletic background, multiple USC officials affirming the legitimacy of the donation through Singer's organization, and a thank-you letter from USC Athletics. (Compl., ¶¶ 29-31, 41-52, 54.) At the pleading stage, Plaintiffs need only allege facts to establish each element of the cause of action. The Complaint here alleges that Plaintiffs relied upon USC’s misrepresentations and alleges facts supporting their reliance. While here the parties disagree over whether Plaintiffs’ reliance was reasonable, the reasonableness of reliance in a fraud or misrepresentation cause of action is typically a question of fact and not appropriate for resolution on demurrer unless the facts are undisputed. (See Boeken v. Philip Morris, Inc., (2005) 127 Cal.App.4th 1640.) Thus, Plaintiffs have stated facts sufficient to allege reasonable reliance at the pleading stage.

Lastly, USC argues that the Complaint lacks the requisite specificity as to Mrs. Wilson’s reliance or damages because the donation was made through a company solely owned by Mr. Wilson, and only he was subjected to criminal proceedings. (Demurrer, p. 21:13-20.) In the Opposition, Plaintiffs argue that Mrs. Wilson participated in the meetings with USC personnel, “lost her share of the marital estate to USC’s false representations when the family spent millions on John’s defense fees, and when the Wilson family lost their income” and suffered reputational harm. (Opp., pp. 14:26-15:6.) The Complaint alleges that “Mr. and Mrs. Wilson were induced to make the $100,000.00 donation, causing damages to the Wilsons of the $100,000 donation and in attorneys’ fees to defend themselves from criminal conduct arising out of their justifiable reliance on Defendants’ misrepresentations, lost income, lost future earnings, and pain and suffering in an amount in excess of $75,000,000.00.” (Compl., ¶¶ 74, 81, 89.) This is sufficient at the pleading stage.

Thus, the Demurrer is OVERRULED, as to the first and second causes of action for fraud and intentional misrepresentation.

Negligent misrepresentation is subject to the two-year statute of limitations for obligations or liabilities not founded upon a written instrument. (CCP § 339(1); Ventura County Nat. Bank v. Macker (1996) 49 Cal.App.4th 1528, 1531 [two-year statute of limitations applies even though negligent misrepresentation is “born of the union of negligence and fraud.”].) As discussed above, Plaintiffs allege that they discovered the misrepresentations on September 21, 2021. The Complaint was filed on September 20, 2024. Thus, as negligent misrepresentation is subject to the two-year statute of limitations, as opposed to the three-year statute of limitations for fraud and intentional misrepresentation, the negligent misrepresentation cause of action is barred by the statute of limitations. (CCP § 339(1).)

Thus, the Demurrer is SUSTAINED, without leave to amend, as to the third cause of action for negligent misrepresentation.

The Demurrer is OVERRULED, as to the first and second causes of action and SUSTAINED, without leave to amend, as to the third cause of action.

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