Judge Kerry Bensinger, Case Number: 23STCV24939, Date: 2024-09-17 Tentative Ruling

On October 12, 2022, Plaintiff Taqueria y Birrieria Jamay, Inc. (Jamay or Plaintiff) initiated this action against Defendants Johann Peeters (Peeters) and J.P. Money Tax Group, Inc. The operative pleading, the First Amended Complaint (FAC), was filed on January 8, 2024. The FAC alleges causes of action for (1) Violation of the Tax Preparation Act (Bus. & Prof. Code §§ 22250 et seq.), (2) Fraud, (3) Violation of Penal Code § 496, and (4) Unfair Competition.[1]

The FAC alleges as follows. In January 2021, Plaintiff, by and through its principal, German Pantoja Reyes, hired Defendants to prepare tax returns for Plaintiff. As part of that retention, Defendants requested access to Plaintiff’s finances and bank accounts. At the time of the original retention, Defendants misrepresented that they would prepare tax returns for Plaintiff’s business each year going forward. On February 28, 2022, Plaintiff discovered that, despite paying Defendants approximately $30,000 to prepare Plaintiff’s tax returns, Defendants had not performed any of those tasks. On that date, and prior to that date, Defendants had repeatedly mispresented that they had, in fact, performed those tasks.

On March 1, 2024, Defendants filed this demurrer and motion to strike to the FAC.

A demurrer for sufficiency tests whether the complaint states a cause of action.¿ (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)¿ When considering demurrers, courts read the allegations liberally and in context, accepting the alleged facts as true.¿ (Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1406.)¿ “Because a demurrer challenges defects on the face of the complaint, it can only refer to matters outside the pleading that are subject to judicial notice.”¿ (Arce ex rel. Arce v. Kaiser Found. Health Plan, Inc. (2010) 181 Cal.App.4th 471, 556.)¿

Defendants advances three arguments in support of its demurrer to the FAC: (1) Plaintiff does not have standing to bring this action; (2) the allegations are uncertain; and (3) the fraud claim is not pleaded with sufficient specificity.

Plaintiff is a corporation whose principal is Germany Pantoja Reyes (Reyes). Prior to commencing this action, Mr. Reyes filed a separate action (Case No. 22STCV2259) against Defendants asserting the same causes of action and advancing similar allegations. Defendants requested judicial notice, which the court granted, of Mr. Reyes’s complaint in Case No. 22STCV2259. Defendants now bring a standing challenge in this action based on allegations asserted in Case No. 22STCV2259. This is improper. Although the court may take judicial notice of the existence of court filings in other cases, it may not take judicial notice of the facts or propositions asserted in those filings. “While courts are free to take judicial notice of the existence of each document in a court file, including the truth of results reached, they may not take judicial notice of the truth of hearsay statements in decisions and court files. It is improper to rely on judicially noticed documents to prove disputed facts because judicial notice, by definition, applies solely to undisputed facts.” (Barri v. Workers' Comp. Appeals Bd (2018) 28 Cal.App.5th 428, 437 (cleaned up).) Defendants’ standing challenge as a basis for the demurrer to the FAC is OVERRULED.

Defendants next argue the FAC is uncertain. In support, Defendants again rely on allegations from Mr. Reyes’s complaint in Case No. 22STCV2259. This is improper for the same reasons stated above. Defendant’s uncertainty challenge to the FAC is OVERRULED.

The second cause of action is fraud. Plaintiff’s fraud claim is based on the following allegations: “Defendants made a number of false statements to Plaintiff throughout Defendants’ contacts with Plaintiff. In particular, in January 2021, Defendant misrepresented to Plaintiff’s principal, Mr. Reyes, that Defendant would file tax returns for the Plaintiff. Subsequently, Defendant repeatedly misrepresented to Plaintiff, by and through Plaintiff’s principal Mr. Reyes, that Defendant had in fact filed those tax returns for the Plaintiff. [¶] At all times relevant, Defendants knew that the statements were false. [¶] Plaintiff reasonably relied on the false statements of Defendants, as the truth or falsity of those statements were exclusively within the knowledge of the Defendants. [¶] Plaintiff was harmed by the false statements of Defendants.” (FAC, ¶¶ 20-23.)

Defendants argue the fraud claim lacks sufficient specificity. The court disagrees. “Fraud must be pleaded with specificity rather than with ‘“‘general and conclusory allegations.’”’ (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645; West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.)¿¿¿

Here, Plaintiff’s allegations are sufficiently clear. Defendants falsely stated to Mr. Reyes that the tax returns would be filed on Plaintiff’s behalf. The misrepresentations were made in January 2021 by Defendant (which the court understands to mean Mr. Peeters) to Mr. Reyes as Plaintiff’s principal. These allegations provide Defendants with sufficient notice of the nature of the fraud claim. Defendant’s challenge to the fraud claim in the FAC is OVERRULED.

Any party, within the time allowed to respond to a pleading, may serve and file a motion to strike the whole pleading or any part thereof.¿ (Code Civ. Proc., § 435, subd. (b)(1); Cal. Rules of Court, rule 3.1322, subd. (b).)¿ On a motion to strike, the court may: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court.¿ (Code Civ. Proc., § 436, subds. (a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782.)¿¿

“The grounds for a motion to strike are limited to matters appearing on the face of the challenged pleading or matters which must or may be judicially noticed. (§ 437, subd. (a); Evid. Code, §§ 451, 452.).” (Garcia v. Sterling (1985) 176 Cal.App.3d 17, 20.)¿

Defendants move for an order to strike references to Qui Tam action, requests for statutory civil penalties under the Tax Preparation Act (TPA), and punitive damages in connection to the fraud claim.

Defendants argue the references to statutory penalties under the TPA should be stricken because the TPA is not a qui tam statute and Jamay’s TPA claim is time-barred. The court agrees on both points.

A¿qui¿tam¿action is¿“ ‘[a]n action brought under a statute that allows a private person to sue for a penalty, part of which the government or some specified public institution will receive.’” (People ex rel. Allstate Ins. Co. v. Weitzman¿(2003) 107 Cal.App.4th 534, 538 [quoting Black’s Law Dict. (7th ed.1999) p. 1262, col. 1], emphasis added.) “Under California law, a qui tam action is brought on behalf of the People of the State of California, and the People are the real party in interest.” (People ex rel. Strathmann v. Acacia Rsch. Corrp. (2012) 210 Cal.App.4th 487, 492 (cleaned up).) In short, a qui tam action is an action brought under a statute which (1) allows a private individual to share a portion of any recovered civil penalty with the government, and (2) allows a private individual to represent the interests of the People of California.

Here, the court has concluded the TPA is not a qui tam statute. (See also Discussion in Tentative Ruling filed concurrently herewith in Case No. 22STCV2259.) The TPA does not contemplate any portion of the case proceeds to be deposited with the government or provide that the TPA plaintiff may represent the State of California or the public interest. Jamay argues the language of the TPA is broad because it does not tether a TPA plaintiff’s standing to harm he or she suffered. The TPA states: “The superior court in and for the county in which any person acts as a tax preparer in violation of the provisions of this chapter, may, upon a petition by any person, issue an injunction or other appropriate order restraining the conduct.” (Bus. & Prof. Code § 22256, subd. (a).) “If a tax preparer fails to perform a duty specifically imposed upon him or her pursuant to this chapter, any person may maintain an action for enforcement of those duties or to recover a civil penalty in the amount of one thousand dollars ($1,000), or for both enforcement and recovery.” (Bus. & Prof. Code § 22257, subd. (b).) The court disagrees with Plaintiff’s interpretation. The plain language of the statute simply allows any person to maintain a TPA action. It does not contain express language permitting a TPA action to be filed on behalf of a class of persons. If the Legislature had so intended, it would have included the language.

Code of Civil Procedure section 340(a) requires actions based on statutory violations to be filed within one year. Here, Jamay alleges that it discovered the alleged TPA violations on February 28, 2022. (FAC, ¶ 9.) This action followed more than a year later on October 12, 2023. The TPA action is time-barred.

Jamay waivers on whether its request for TPA civil penalties is time-barred. Instead, Jamay focuses on the timeliness of civil penalties as to any of Defendants’ violations of the TPA. In other words, Jamay relies on an interpretation of the TPA permitting Jamay to prosecute the TPA claim in its representative capacity. The court has rejected this interpretation of the statute.

A motion to strike punitive damages is properly granted where a plaintiff does not state a prima facie claim for punitive damages, including allegations that defendant is guilty of oppression, fraud or malice. (Turman v. Turning Point of Cent. California, Inc. (2010) 191 Cal.App.4th 53, 63.) “The allegations supporting a request for punitive damages must be alleged with specificity; conclusory allegations without sufficient facts are not enough. (Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1041-1042.)

Because the court has found Plaintiff’s fraud claim to be sufficiently pleaded, a motion to strike punitive damages at this stage is premature.

The motion to strike is Granted in Part. References to the Qui Tam action are stricken. The statutory penalties under the TPA are time barred. The references to statutory penalties are stricken. Leave to amend is Denied.

Plaintiff is ordered to file a Second Amended Complaint in compliance with this ordered within 20 days of the date of this order.

Kerry Bensinger

Judge of the Superior Court

[1] This case was ordered consolidated for all purpose with Case No. 22STCV22459 on September 17, 2024. Case No. 22STCV2259 was filed by German Pantoja Reyes in his name.