Judge: Jon R. Takasugi, Case: 22STCV37405, Date: 2023-07-12 Tentative Ruling

Case Number: 22STCV37405    Hearing Date: March 21, 2024    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

Defendants’ demurrer is SUSTAINED, WITH 20 DAYS LEAVE TO AMEND.

Defendant’s motion to strike is MOOT.

On 11/29/2022, Plaintiff HK Yuntao, Inc. Limited (Plaintiff) filed suit against American Fashion Network, LLC, OTR Corporate Apparel, LTD, and Jacqueline Ferrari aka Jacqueline Wilson. On 6/30/2023, Plaintiff filed a first amended complaint (FAC) alleging: (1) breach of contract; (2) goods sold and delivered; (3) account stated; (4) open book account; (5) fraud; and (6) unfair business practices.

            Now, Defendants demur to Plaintiff’s FAC.

Discussion

            Defendants argue that subject matter jurisdiction is lacking in this matter, that Plaintiff does not have standing to pursue these claims, and the claims are insufficiently pled.

              After review, the Court agrees that Plaintiff has not alleged sufficient facts to state a claim, and that the lack of supporting allegations creates uncertainty as to issues of standing and subject matter jurisdiction.

It is well-established in California, that “if the action is based on an alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written instrument must be attached and incorporated by reference.” (Wise v. Southern Pacific Co. (1963) 223 Cal. App.2 d 50, 59.) Moreover, given Plaintiff alleges it is an assignee, Plaintiff must allege facts which could show that the assignor meant to assign rights and obligations under the contracts. (Britton v. Co-op Banking Group (9th Cir. 1993). 4 F.3d 742, 746.)

As noted by Defendant, Plaintiff has not done any of the following: (1) attach any of the agreements that it claims to sue upon; (2) plead the essential terms and conditions of the contracts upon which it sues; (3) identify any specific memoranda executed by the parties to be charged in connection with any transaction; and/or (4) attach or plead the existence of any assignment from any of the third parties that actually provided goods relevant to this Action.

While Plaintiff’s FAC references exhibits included in an Application for a Right to Attach, “[r]ecords and papers cannot be made a part of a pleading by merely referring to them, and praying that they may be taken as a part of such pleading, without annexing the originals or copies as exhibits or incorporating them with it so as to form a part of the record in the case.” (Ratner v. Mun. Ct. of Los Angeles Jud. Dist., Los Angeles Cnty. (1967) 256 Cal. App. 2d 925, 928, citing Legg v. United Ben. Life Ins. Co. of Omaha (1960) 182 Cal. App. 2d 573, 578.)

As such, Plaintiff must either incorporate the referenced exhibits into the complaint itself, or must plead all the essential terms and conditions of the relevant contracts.

In opposition, Plaintiff argues that the allegations are sufficient because “the FAC specifically refers to the Appendix filed in this action, specifies the exhibits to the Appendix which contain the purchase orders and invoices at issue and incorporates them by reference in the FAC.” (Opp., 7: 22-24.) However, no such Appendix is included in the 14-page FAC. And Plaintiff’s pleadings are bound by the four corners of the Complaint. Plaintiff’s repeated references and reliance on the Appendix to support her allegations, without the actual inclusion of this Appendix or Exhibits, renders her claims insufficiently pled, regardless of whether that Appendix or Exhibits have been previously included elsewhere.

Given that Plaintiff has not alleged sufficient facts which could show that binding contracts exist, or that it it has standing to pursue claims based on an alleged breach of those contracts, Plaintiff has necessarily failed to allege sufficient facts to support its underlying claims, which are all based on allegations stemming from performance of the contract.

However, in anticipation of future motion practice, the Court notes that if Plaintiff is able to resolve this deficiency, she will have alleged sufficient facts to support her underlying claims.

Contrary to Defendant’s contention, Plaintiff alleges fraud with the requisite specificity, alleging that from late 2023 until as recently as October 2022, “Defendant Ferrari, on behalf of herself and Defendants AFN and OTR, repeatedly assured Plaintiff, both in writing and orally, that Defendants would pay for all of the garments Defendants AFN and OTR had ordered from Plaintiff and/or its assignors to induce Plaintiff to accept more orders from Defendants AFN and OTR.” (FAC ¶ 44.) Plaintiff alleges that Defendant knew these representations were false, and had no intention of paying for the goods. (FAC ¶ 46.) Moreover, it is not appropriately determined at the pleading stage whether or not the UCL applies to none, some, or all alleged transactions, given that there has been no factual determination as to if or where any of the alleged transactions took place. Notably, none of the cases cite by Defendant dealt with a demurrer or involved rulings made at the pleadings stage.

Moreover, while Defendants argue that Plaintiff does not have standing to sue because assignments must be in writing, an assignment of contract rights can be found even where it is not in writing. (CACI No. 326.)

Based on the foregoing, Defendants’ demurrer is sustained, with 20 days leave to amend. Accordingly, Defendant’s motion to strike is moot. 

It is so ordered.

Dated:  March    , 2024

   Hon. Jon R. Takasugi
   Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative.  If all parties to a motion submit, the court will adopt this tentative as the final order.  If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar.  For more information, please contact the court clerk at (213) 633-0517.