Judge: Joseph Lipner, Case: 23STCV05285, Date: 2024-12-10 Tentative Ruling

Case Number: 23STCV05285    Hearing Date: December 10, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Cross-Defendants Brad Hakala and The Hakala Law Group, P.C., a California Corporation (“Hakala”) move the Court for an order sustaining their demurrer to the First Amended Cross-Complaint of Cross-Complainants Sabrina Rindels and Prestige Global Solutions, LLC (“Rindels”), without leave to amend.  The hearing is set on December 10, 2024.

The Court SUSTAINS WITH LEAVE TO AMEND Hakala’s demurrer to the  first, second and third causes of action of the First Amended Cross-Complaint. 

The Court GRANTS the motion to strike with leave to amend as to the punitive damages claim.

Background

According to the second amended complaint, in April of 2018, Plaintiff Englander, a managing member of Plaintiff EG, was referred to Defendant Rindels in order to acquire CBD Isolate. (SAC, ¶ 12.) The referral came from Brad Hakala (“Hakala”), Plaintiff Englander’s attorney. (Id.) The Complaint alleges that Defendant Rindels assured Plaintiff Englander that she had experience in delivering CBD Isolate. (Id.) Because there was a minimum order of 300 kilograms of CBD Isolate to secure a price point, Plaintiff Englander called a friend to agree to purchase 100 kilograms for $520,000.00, which was wired to Hakala’s trust account.  (SAC, ¶ 14.)  After establishing a delivery date, Plaintiff EG and Defendant Prestige entered into an oral Purchase and Sales Agreement (the “Agreement”) where Plaintiff EG would exchange $1,237,500.00 for 225 kilograms of CBD. (SAC, ¶¶ 16-17.) Plaintiff EG wired another $1,237,500.00 to the Hakala Law Group, P.C., based on the representation that Defendant Prestige would deliver the 225 kilograms of CBD on or before April 21, 2018. (SAC, ¶ 17.)  Here, the Complaint alleges that Defendant Prestige received the money, and that after receipt, Defendant Rindels assured Plaintiff Englander that she would deliver the CBD Isolate, however the delivery never came. (Complaint, ¶¶ 18-21.)  Plaintiff Englander and Plaintiff EG (collectively, “Plaintiffs”) filed a Complaint on March 27, 2023, alleging three causes of action: (1) Breach of Contract, (2) Fraud – Intentional Misrepresentation, and (3) Negligent Misrepresentation.

            Rindels and her company, Prestige Global Solutions, LLC then filed a Cross-Complaint against Hakala and his law firm, The Hakala Law Group, alleging that Hakala was not just legal representation but also a business partner in the transaction, and that Hakala had violated the explicit and implicit terms of his partnership and legal agreements with Rindels.  (FAXC, ¶ 1.)  Rindels states in her Cross-Complaint that she and Hakala had in 2017 entered into a verbal agreement to form a partnership, and their joint venture would focus on procuring and facilitating deals in cannabis and cannabidiol (“CBD isolate”).  (FAXC, ¶ 15.)  The operative complaint is the First Amended Cross-Complaint filed on May 9, 2024 against Cross-Defendants Hakala alleging causes of action for (1) equitable indemnity, (2) fraud by intentional misrepresentation, (3) fraud by concealment, (4) breach of contract, and (5) breach of fiduciary duty by attorney.  Hakala demurs as to the first three causes of action, alleging that they fail to state facts sufficient to state claims upon which relief can be granted.

Legal Standard

             Demurrer

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”]; Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 [“A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment.”]; Vaccaro v. Kaiman (1998) 63 Cal.App.4th 761, 768 [“When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend.”].) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

            Equitable Indemnity—First Cross-Claim

“To state a claim for equitable indemnity, a defendant must allege the same harm for which he may be held liable is properly attributable—at least in part—to the cross-defendant.” (Platt v. Coldwell Banker Residential Real Estate Services (1990) 217 Cal.App.3d 1439, 1445, fn.7.)   The principle behind equitable indemnity is to allocate loss among multiple tortfeasors on a comparative fault basis. (BFGC Architects Planners, Inc. v. Forcum/Mackey Construction, Inc. (2004) 119 Cal.App.4th 848, 852 ["The doctrine applies only among defendants who are jointly and severally liable to the plaintiff."].) There must be some basis for tort liability against the proposed indemnitor (Hakala). (Id.) 

The FAXC does not allege a basis for tort liability against Hakala for Plaintiff’s injuries.  Rindel argues that the doctrine of equitable indemnity is broader than that, citing language in the case law stating that a claim to indemnify may arise “when in equity and good conscience the burden of the judgment should be shifted from the shoulders of the person seeking indemnity to the one from whom indemnity is sought.”. (Fireman’s Fund Ins Co. v. Haslam (1994) 29 Cal.App.4th 1347, 1353-1354.) Such general statements notwithstanding, the Court is unaware of law stating that equitable indemnity applies to a fact pattern similar to the one alleged in the complaint.  Neither the case law cited by Rindel nor the allegations in the current complaint explain or support why this case presents an equitable indemnity claim.

            For this reason, the Court sustain the demurrer but grants Rindel leave to amend and clarify this claim.

            Fraud by Intentional Misrepresentation—Second Cross-Claim

“The elements of a cause of action for intentional misrepresentation are (1) a misrepresentation, (2) with knowledge of its falsity, (3) with the intent to induce another’s reliance on the misrepresentation, (4) actual and justifiable reliance, and (5) resulting damage.” (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166.) 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.)

Here, none of the allegations in this cause of action are plead with the required specificity, and they also fail to allege facts that plead the required elements of reliance and resulting damage.  (FAXC, ¶¶ 55-63.)  Accordingly, the Court sustains the demurrer with leave to amend.

            Fraud by Concealment—Third Cross-Claim

“The elements of fraud 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.)

Similarly, this cause of action fails as Rindels has failed to allege sufficient facts with the required specificity as to what material facts are alleged to have been concealed or suppressed, with intent to defraud, Rindels’ unawareness of those specific facts, and reliance on the concealment, and that Rindels sustained damage on the account of the allegedly suppressed facts.  (FAXC, ¶¶64-73.)  For this reason, the Court sustains the demurrer to this claim with leave to amend.

MOTION TO STRIKE

In a separate motion, Hakala requests that the court strike Cross-Complainant’s requests for punitive damages and declaratory relief.

Legal 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 that 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.)

California Civil Code section 3294 authorizes the recovery of punitive damages “[i]n an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice . . . .”  (Civ. Code § 3294(a), emphasis added.) “Malice” is defined as conduct intended to cause injury to a person or despicable conduct carried on with a willful and conscious disregard for the rights or safety of others. (Turman v. Turning Point of Cent. Cal., Inc. (2010) 191 Cal.App.4th 53, 63.) “Oppression” means despicable conduct subjecting a person to cruel and unjust hardship, in conscious disregard of the person’s rights. (Ibid.) “Fraud” is an intentional misrepresentation, deceit, or concealment of a material fact known by defendant, with intent to deprive a person of property, rights or otherwise cause injury. (Ibid.) Conclusory allegations, devoid of any factual assertions, are insufficient to support a conclusion that parties acted with oppression, fraud or malice. (Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1042.) 

Discussion

Here, the Court has sustained the demurrer as to the claims of action based on fraud, as specific facts have not been plead as to fraud. The breach of fiduciary duty claim, as pled, does not currently support a claim for punitive damages. The Court therefore GRANTS the motion to strike the request for punitive damages, but does so with leave to amend if Rindels amends the claims of the cross-complaint.

            As to Rindels’s request for declaratory relief, “To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909, quotation marks and brackets omitted.)   A cause of action for declaratory relief should not be used as a second cause of action for the determination of identical issues raised in another cause of action. (General of America Insurance Co. v. Lilly (1968) 258 Cal.App.2d 465, 470.) “The availability of another form of relief that is adequate will usually justify refusal to grant declaratory relief” (California Insurance Guarantee Association v. Superior Court (1991) 231 Cal.App.3d 1617, 1624), and a duplicative cause of action is subject to demurrer (Palm Springs Villas II Homeowners Association, Inc. v. Parth (2016) 248 Cal.App.4th 268, 290). Further, “there is no basis for declaratory relief where only past wrongs are involved.” (Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 366, quotation marks omitted.) 

Rindels has not established a proper subject of declaratory relief, or that other forms of relief will not be adequate.  In addition, this case only involves past wrongs.  The motion to strike the request for declaratory relief is GRANTED.