Judge Kerry Bensinger, Case Number: 23STCV26997, Date: 2025-04-09 Tentative Ruling

On November 3, 2023, plaintiffs MIH, LLC dba Vertical Companies (“MIH”) and Todd Kaplan (“Kaplan”) (collectively, “Plaintiffs”) filed a complaint against defendants[1] Kelly Dooley (“Dooley”) and Luxe Rebellion Styling Haus, LLC (“Luxe”) (collectively, “Defendants”), alleging causes of action for (1) breach of implied contract, (2) breach of oral agreement, (3) breach of implied covenant of good faith and fair dealing, and (4) violation of Business and Professions Code sections 17200 and 17500.

According to the Complaint, Dooley entered into an implied contract with Plaintiffs for the sale of $940,000 of cannabis. Plaintiffs supplied Dooley with the Cannabis in November 2020. MIH sent multiple invoices to Dooley’s business, Kanna Kingdom, LLC for payment. When MIH did not receive payment, Plaintiffs requested that Dooley enter into a payment plan to pay off the debt. A payment plan was agreed to, and Dooley sent a summary of the payment plan to Kaplan via text message. Under the plan, Dooley was to make monthly payments of $20,000 towards the debt beginning in August 2021 until the balance of $940,000 was cleared. However, on August 31, 2021, Dooley sent a wire payment of $1,333 and indicated she would not be able to make the monthly payment of $20,000. On January 4, 2022, Dooley paid another $11,111 towards the debt. Dooley has not made any additional payments since then. Plaintiffs now seek to recover the outstanding balance of $927,556.

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 argue this claim fails because it is uncertain and time barred. The arguments are meritorious. First, Plaintiffs allege that Dooley and MIH entered into an agreement for the purchase of cannabis. However, it is not clear if Dooley or MIH purchased the cannabis because Plaintiffs confusingly allege that Dooley was to pay Plaintiffs the sum of $940,000 for the cannabis (Complaint, ¶ 10) and that the cannabis “was supplied to the Plaintiffs” (Complaint, ¶ 11). The court further notes there are no allegations describing defendant Luxe’s role in these events.[2] Given the foregoing, a defendant would not understand the nature of the allegations asserted against them.

Further, assuming that Plaintiffs’ claims are based on upon Dooley’s purchase of cannabis from Plaintiffs for $940,000, the breach of contract claim appears to be time barred. The elements of a breach of contract cause of action are: (1) the existence of a valid contract between the plaintiff and the defendant, (2) the plaintiff’s performance, (3) the defendant’s unjustified failure to perform, and (4) damages to the plaintiff caused by the defendant’s breach. (CACI No. 303; Careau & Co. v. Security Pacific Business, Inc. (1990) 222 Cal.App.3d 1371, 1388 (Careau); Otworth v. Southern Pac. Transportation (1985) 166 Cal.App.3d 452, 458.) “[T]he complaint must indicate on its face whether the contract is written, oral, or implied by conduct.” (Otworth, 166 Cal.App.3d at pp. 458-459.)¿ The elements of a breach of oral contract claim are the same as those for a breach of written contract. (Careau, 222 Cal.App.3d at p. 1388.)¿ A claim for breach of oral contract must be brought within two years of the breach.¿ (Code Civ. Proc., § 339(1).)¿ Here, Dooley allegedly breached the implied contract for the purchase of cannabis in November of 2020. This action followed more than two years later on November 3, 2023.

Accordingly, the demurrer to the First Cause of Action is SUSTAINED. Leave to Amend is GRANTED.

Defendants argue the Second Cause of Action fails because is barred by the statute of limitations in two ways.

First, Defendants argue this claim is time barred. The court agrees. As alleged, Dooley orally agreed to make monthly payments of $20,000 towards clearing her debt of $940,000. (Complaint, ¶¶ 11, 24.) The payments were to begin in August 2021. Dooley eventually submitted a payment of $1,333 on August 31, 2021, and indicated she would not be able to make the agreed upon payment of $20,000. (Complaint, ¶¶ 14, 31-33.) Accordingly, the allegations show that Dooley breached the agreement on August 31, 2021. A claim for breach of oral contract must be brought within two years of the breach.¿ (Code Civ. Proc., § 339(1).) Here, this action was filed more than two years later on November 3, 2023.

Second, Defendants argue the statute of frauds bars Plaintiffs claim. The statute of frauds is codified at Civil Code section 1624. Section 1624 states, in pertinent part, “(a) The following contracts are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party's agent: (1) An agreement that by its terms is not to be performed within a year from the making thereof.” Here, Defendants correctly point out that under the terms of the purported oral agreement to make monthly payments of $20,000 towards the $940,000 debt, it would take more than three years for Dooley to perform the agreement. This runs afoul of Civil Code section 1624. The Second Cause of Action is barred by the statute of frauds.

Accordingly, the demurrer to the Second Cause of Action is SUSTAINED. Leave to Amend is GRANTED.

C. Breach of Implied Covenant of Good Faith and Fair Dealing (3^rd Cause of Action)

Defendant argues the Third Cause of Action fails because it is duplicative of the First and Second Causes of Action.

To allege a cause of action for breach of the implied covenant of good faith and fair dealing, plaintiff must allege the following elements: (1) plaintiff and defendant entered into a contract; (2) plaintiff did all, or substantially all, of the significant things that the contract required him to do, or that he was excused from having to do those things; (3) all conditions required for defendant’s performance had occurred, or were excused; (4) defendant engaged in specified conduct that plaintiff claims prevented plaintiff from receiving the benefits under the contract; (5) that by doing so, defendant did not act fairly and in good faith; and (6) plaintiff was harmed by defendant’s conduct.¿ (CACI No. 325.)¿¿¿

“[I]f the plaintiff’s allegations of breach of the covenant of good faith ‘do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.’” (Bionghi v. Metro. Water Dist. of So. California (1999) 70 Cal.App.4th 1358, 1370, citing Careau, supra, 222 Cal.App.3d at p. 1395; see also Avidity Partners, LLC v. State of California (2013) 221 Cal.App.4th 1180, 1203 [disregarding breach of implied covenant of good faith and fair dealing claim as superfluous because “it relies on the same alleged acts and seeks the same relief claimed in [the] breach of contract cause of action”].)

Here, Plaintiffs do not allege any facts or seek any damages in support of the Third Cause of Action that are different from the First or Second Causes of Action. This claim is superfluous.

Accordingly, the demurrer to the Third Cause of Action is SUSTAINED. Leave to Amend is GRANTED.

D. Violation of Business & Professions Code §§ 17200 and 17500 (4^th Cause of Action)

Defendants argue Fourth Cause of Action fails because it is duplicative of the contract claims. The court agrees. “[A]n action under the UCL is not an all-purpose substitute for a tort or contract action.” (Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1150 (citations and quotations omitted).) Here, Plaintiffs seek only to recover the outstanding balance owed by Dooley. (See Complaint, ¶¶ 55, 56.) Plaintiffs are using the UCL claim as a substitute for a contract action. The UCL claim fails.[3]

Plaintiffs are ordered to serve and file the First Amended Complaint within 15 days of this order.

¿¿¿

¿ Kerry Bensinger¿¿

¿ Judge of the Superior Court¿

[1] Plaintiff also named Kanna Kingdom, Kelly Dooley Official, LLC, and Queen Dooley Trust as defendants. On February 19, 2025, these defendants were dismissed from this action.

[2] It is also unclear what plaintiff Kaplan’s role is in these events beyond requesting that Dooley enter into a payment plan.

[3] Defendants also argue the UCL claim is barred because it is based on a contract that does not involve either the public in general or individual consumers who are parties to the contract. “[W]here a UCL action is based on contracts not involving either the public in general or individual consumers who are parties to the contract, a corporate plaintiff may not rely on the UCL for the relief it seeks.” (Linear Tech. Corp. v. Applied Materials, Inc. (2007) 152 Cal.App.4th 115, 135.) The court agrees but notes this authority would bar plaintiff MIH’s UCL claim, not plaintiff Kaplan’s. But, as noted elsewhere, it is unclear what role Kaplan plays in these events. In this respect, and others, the Complaint is uncertain.