Judge: Joseph Lipner, Case: 24STCV05008, Date: 2025-05-01 Tentative Ruling
Case Number: 24STCV05008 Hearing Date: May 1, 2025 Dept: 72
SUPERIOR COURT OF CALIFORNIA
COUNTY OF LOS ANGELES
DEPARTMENT 72
TENTATIVE
RULING
|
STATE OF CALIFORNIA, et al., Plaintiffs, v. AAA SOLAR ELECTRIC, INC., et al., Defendants. |
Case No:
24STCV05008 Hearing Date: May 1, 2025 Calendar Number: 4 |
Defendants AAA Solar Electric, Inc. (“AAA Solar”); AAA
Network Solutions, Inc. (“AAA Network”) (collectively with AAA Solar, “AAA”);
David Ngo (“Ngo”); and Keith Hippard (“Hippard”) (collectively with AAA,
“Defendants”) move for judgment on the pleadings as to the Complaint filed by
Plaintiffs George Toro (“Relator”) as relator for the State of California (the
“State”); California Department of Education (the “Department”); and Los
Angeles Unified School District (“LAUSD”) (collectively, “Plaintiffs”).
The Court GRANTS the motion for judgment on the pleadings.
This is a qui tam action brought under the California False
Claims Act, Government Code, sections 12650, et seq (the “FCA”). The following
facts are taken from the allegations of the Complaint, which the Court accepts
as true for the purposes of the motion for judgment on the pleadings.
AAA Solar was the general contractor for certain
construction contracts with LAUSD. AAA Network is AAA Solar’s successor in
interest. Plaintiffs allege that Defendant Ngo is the de facto owner, director,
and sole shareholder of AAA. Plaintiffs allege that Defendant Hippard is AAA’s
financial controller.
Plaintiffs allege that Defendants violated the FCA by
failing to pay sums due to a subcontractor, WnG Construction J.V., Inc. (“WnG”),
for low voltage equipment work that WnG performed on behalf of LAUSD at between
14 and 16 LAUSD schools. Relator was the principal of WnG and employed by WnG.
Plaintiffs allege that approximately 60 payment applications submitted by AAA
Solar, representing a total of $2,500,000.00, contained false and fraudulent
claims because the funds, once received by AAA Solar, were never paid to WnG.
Plaintiffs allege that the payment applications contained false statements (1)
that AAA Solar would use the funds it received to pay WnG; and (2) that AAA
Solar had already paid certain amounts to WnG at the time of the payment
applications.
Relator pleads that he first learned of the allegedly false
representations made by AAA Solar on payment applications at trial in the
course of litigation between WnG and AAA Solar.
On April 13, 2016, WnG filed a complaint for various counts
of breach of contract, enforcement of stop payment order, and enforcement of
liability on payment bond in the Los Angeles Superior Court against AAA Solar,
LAUSD, and Philadelphia Insurance Company, captioned WnG Construction, JV,
Inc., v. AAA Solar Electric, Inc., et al., Case No. VC065473 (the “WnG
Case”). (See Request for Judicial Notice (“RFJN”), Ex. A [attached to the
declaration of Kristopher S. Davis].) It
is this lawsuit against LAUSD that forms the basis for Defendants’ statute of
limitations defense.
WnG alleged that AAA Solar had failed to pay WnG $2,358,244.97
under subcontracts between AAA Solar and WnG for the projects at LAUSD schools.
(RFJN, Ex. A ¶¶ 1-9.) WnG alleged in its complaint that AAA Solar had been
receiving payments but had not been forwarding to WnG its fair share. (RFJN,
Ex. A ¶¶ 13-15.) LAUSD answered with a general denial.
On July 15, 2016, WnG filed a First Amended Complaint,
restating those allegations. (RFJN, Ex. B ¶¶ 13-15.)
A bench trial was held in March 2022 and concluded in July
2022. On April 3, 2023, the court rendered a written decision in favor of WnG
on certain issues and AAA Solar on other issues. There is currently an appeal
pending in that action.
In July 2021, WnG filed a complaint against AAA, Ngo, and
Hippard in the Orange County Superior Court, captioned WnG Construction, JV,
Inc., v. AAA Solar Electric, Inc., et al., No. 30-2021-01212856 (the
“Orange County Case”). (RFJN, Ex. D.) WnG sought to void certain transactions
and impose a constructive trust as to AAA’s assets. The Orange County Case has
been stayed.
Relator filed this action on February 27, 2024, raising
claims for (1) violation of FCA, presenting false claims (Gov. Code, § 12651,
subd. (a)(1)); (2) violation of FCA, making or using false records or
statements to obtain payment (Gov. Code, § 12651, subd. (a)(2)); (3) violation
of FCA, conspiracy to violate the FCA (Gov. Code, § 12654, subd. (a)(3)); (4)
violation of FCA, avoiding obligation to reimburse (Gov. Code, § 23+62, subd.
(a)(7); and (5) violation of FCA, retention of proceeds of inadvertently submitted
false claims (Gov. Code, § 12651, subd. (a)(8)).
On September 17, 2024, the State declined to intervene.
On March 4, 2025, Defendants moved for judgment on the
pleadings. Relator filed an opposition and Defendants filed a reply.
The Court grants Defendants’ requests for judicial notice
and takes notice of the submitted public records, the FCA, and the submitted LAUSD
Board of Education rules.
Either prior to trial, but after the time to answer or demur
has passed, or at the trial, the plaintiff or the defendant may move for
judgment on the pleadings and that the appropriate ground for such a motion is
the same as that arguable by general demurrer, namely, the failure to state a
cause of action or defense. (Dobbins v. Hardister (1966) 242 Cal.App.2d
787, 791; See also Sofias v. Bank of America (1985) 172 Cal.App.3d 583,
586 [The non-statutory motion for judgment on the pleadings can be made at any
time, even during trial, since the grounds for a general demurrer are never
waived.], see also Code Civ. Proc., §438(f).)
A motion for judgment on the pleadings performs the same
function as a general demurrer, and hence attacks only defects disclosed on the
face of the pleadings or by matters that can be judicially noticed. (See, e.g.,
Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (TRG 1998)
§§ 7:275, 7:322; Lance Camper Manufacturing Corp. v. Republic Indemnity Co.
(1996) 44 Cal.App.4th 194, 198.) Presentation of extrinsic evidence is
therefore not proper on a motion for judgment on the pleadings. (Id.; Cloud
v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999.) Both a demurrer
and a motion for judgment on the pleadings accept as true all material factual
allegations of the challenged pleading, unless contrary to law or to facts of
which a court may take judicial notice. (Mechanical Contractors Assn. v.
Greater Bay Area Assn. (1998) 66 Cal.App.4th 672, 677; Edwards v. Centex
Real Estate Corp, (1997) 53 Cal.App.4th 15, 27.)
The motion may be made only after one of the following
conditions has occurred: (1) If the moving party is a plaintiff, and the
defendant has already filed his or her answer to the complaint and the time for
the plaintiff to demur to the answer has expired; (2) If the moving party is a
defendant, and the defendant has already filed his or her answer to the
complaint and the time for the defendant to demur to the complaint has expired.
(Code Civ. Proc., § 438(f).) The motion provided for in Code of Civil Procedure
section 438 may be made even though either of the following conditions exist: (1)
The moving party has already demurred to the complaint or answer, as the case
may be, on the same grounds as is the basis for the motion provided for in this
section and the demurrer has been overruled, provided that there has been a
material change in applicable case law or statute since the ruling on the
demurrer; (2) The moving party did not demur to the complaint or answer, as the
case may be, on the same grounds as is the basis for the motion provided for in
this section. (Code Civ. Proc., § 438(g).) No motion may be made pursuant to
Code of Civil Procedure section 438 if a pretrial conference order has been
entered pursuant to Code of Civil Procedure section 575, or within 30 days of
the date the action is initially set for trial, whichever is later, unless the
court otherwise permits. (Code Civ. Proc., § 438(e).)
Suits under the FCA “shall not be filed more than six years
after the date on which the violation of Section 12651 is committed, or more
than three years after the date when facts material to the right of action are
known or reasonably should have been known by the Attorney General or
prosecuting authority with jurisdiction to act under this article, but in no
event more than 10 years after the date on which the violation is committed,
whichever of the aforementioned occurs last.” (Gov. Code, § 12654, subd. (a).)
“[T]he limitations period under section 12654, subdivision
(a), commences when the ‘official ... charged with responsibility to act in the
circumstances’ either knows of the false claim or knows of facts which would
lead a reasonably prudent person to suspect it.” (Debro v. Los Angeles
Raiders (2001) 92 Cal.App.4th 940, 952.)
Thus, Plaintiffs’ claims are time-barred if both of
the following are true: (1) the alleged violations occurred prior to February
27, 2018 (6 years before this case was filed); and (2) the Attorney
General or prosecuting authority knew or should have known of facts which would
lead a reasonable prudent person to suspect that the claims were false.
It
is undisputed that the alleged wrongdoing occurred prior to 2018, because WnG
filed its initial complaint in 2016.
The
parties dispute when the prosecuting authority had notice. Defendants argue
that the ‘prosecuting authority’ was the Office of the General Counsel for
LAUSD and had notice in 2016 when it was served as a defendant in the WnG Case.
Relator argues that LAUSD is not a prosecuting authority because it is a school
district.
“
‘Prosecuting authority’ refers to the county counsel, city attorney, or other
local government official charged with investigating, filing, and conducting
civil legal proceedings on behalf of, or in the name of, a particular political
subdivision.” (Gov. Code, § 12650, subd. (b)(8).)
“
‘Political subdivision’ includes any city, city and county, county, tax or
assessment district, or other legally authorized local governmental entity with
jurisdictional boundaries.” (Gov. Code, § 12650, subd. (b)(6).)
Based
on these definitions, the Court agrees with Defendants’ position. LAUSD is a
political subdivision. “[A] school district …. is said to be a political
subdivision of the state, but as such is an independent and separate
governmental agency distinct from the county, city or town in which it is
wholly or in part territorially situated.” (Gould v. Richmond School Dist.
(1943) 58 Cal.App.2d 497, 502.) And the local government official charged with
investigating, filing, and conducting civil legal proceedings on behalf of
LAUSD is the LAUSD Office of the General Counsel. (See L.A. Unified Sch. Dist. Bd.
of Educ., Rule 130.) Thus, the LAUSD Office of the General Counsel is the
applicable prosecuting authority.
Relator
argues that there is a factual dispute as to whether LAUSD would have been put
on notice by the complaint in the WnG case, because that complaint primarily
alleged breach of contract, and did not allege fraud. The Court disagrees. It
is not the assertion to the prosecuting authority of the legal theory of fraud
that puts them on notice, rather, it is knowledge “facts which would lead a
reasonably prudent person to suspect it.” (Debro v. Los Angeles Raiders,
supra, 92 Cal.App.4th at p. 952.) Here, the complaint in the WnG Case
alleged that AAA Solar was receiving payments under the general contract with
LAUSD, was not forwarding the fair share of the payments to WnG, and was paid
retention amounts on several projects but failed to pay WnG its retention.
(RFJN, Ex. A ¶¶ 13-15.) The fact that one of LAUSD’s subcontractors alleged
that AAA Solar was wrongfully retaining payments made to it would lead a
reasonably prudent person to suspect that AAA Solar was making false claims on
LAUSD. LAUSD therefore had notice by the time it filed its answer on August 15,
2016. (See RFJN, Ex. C.)
Because
(1) the wrongful act occurred more than six years before the filing of this
case and (2) the prosecuting authority had notice of the false claims more than
three years before the filing of this case, Relator’s FCA claims are
time-barred by section 12654, subd. (a).
The
Court therefore grants the motion for judgment on the pleadings.