Judge: Lee W. Tsao, Case: 20NWCV00224, Date: 2023-01-24 Tentative Ruling

Case Number: 20NWCV00224    Hearing Date: January 24, 2023    Dept: C

A.P. EXPRESS, LLC v. BAY CITIES CONTAINER CORPORATION

CASE NO.:  20NWCV00224

HEARING: 1/24/23 @ 1:30 PM

 

#6

TENTATIVE RULING

 

Cross-Defendants A.P. Express, LLC and World Pack USA, LLC’s motion for summary adjudication is DENIED.

 

Opposing Party to give NOTICE.

 

 

Cross-Defendants A.P. Express, LLC (“AP Express”) and World Pack USA, LLC (“World Pack”) move for summary adjudication of Bay Cities Container Corporation (“Bay Cities”)’s Cross-Complaint pursuant to CCP § 437c.

 

OBJECTIONS

 

Bay Cities’ Objections 1-10 are overruled.

 

AP Express/World Pack’s Objection Nos. 1-4 to Donahue Declaration are overruled.  Objection Nos. 1-3 to Kirkpatrick Declaration are overruled.  Objection Nos. 1-4 to Crosby Declaration are overruled.  Objections to Mysliwiec’s Declaration is sustained as to Nos. 1 and 3-4, and overruled as to No. 2.

 

Complaint

 

Bay Cities’ operative First Amended Cross-Complaint (“FAXC”) alleges that AP Express and/or World Pack fraudulently induced the subject contract.  The FAXC asserts causes of action for:

 

1.    Fraudulent Inducement

2.    Fraud and Deceit

3.    Negligent Misrepresentation

4.    Breach of Implied Contract

5.    Breach of Oral Contract

6.    Negligence

7.    Negligent Interference with Prospective Business Advantage

 

STANDARD

 

A defendant moving for summary judgment/adjudication has met its burden of showing a cause of action has no merit if the defendant can show one or more elements of the plaintiff’s cause of action cannot be established. Once the defendant or cross-defendant has met that burden, the burden shifts to the plaintiff or cross-complainant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.  (CCP § 437c(p)(2).) 

 

MERITS

 

Cross-Defendants A.P. Express, LLC and World Pack USA, LLC move for summary adjudication of six issues.

 

ISSUES 1-3

 

Cross-Defendants contend that the 3rd cause of action for Negligent Misrepresentation the 6th cause of action for Negligence, and the 7th cause of action for Negligent Interference with Prospective Business Advantage are barred by the Economic Loss Rule.

 

Where there is a contractual relationship between parties, a cause of action in tort may sometimes arise out of the negligent manner in which the contractual duty is performed.  (Perry v. Robertson (1988) 201 Cal. App. 3d 333, 340.)  “A contract to perform services gives rise to a duty of care which requires that such services be performed in a competent and reasonable manner.  A negligent failure to do so may be both a breach of contract and a tort.”  (North American Chemical Co. v. Superior Court (1997) 59 Cal. App. 4th 764, 774.)  In such circumstances, a claimant is entitled to pursue both legal theories until an occasion for an election of remedies arises.  (Id.)  Moreover, where the contract is for the performance of services, a “special relationship” between the contracting parties may create an independent duty of care permitting the plaintiff to recover economic losses in tort.  (Id. at 785.)   “Where a special relationship exists between the parties, a plaintiff may recover for loss of expected economic advantage through the negligent performance of a contract although the parties were not in contractual privity… The necessary "special relationship" required by J'Aire was established by consideration of six criteria… (1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to the plaintiff, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant's conduct and the injury suffered, (5) the moral blame attached to the defendant's conduct, and (6) the policy of preventing future harm.  (Id. at 782.)  A contract for the performance of services necessarily carries with it both the reasonable expectation and implied at law promise that it will be performed with reasonable care.  Thus, in cases where damages arise from negligent performance of a contract, these six criteria can be used to determine the existence of a special relationship that subverts the economic loss rule – whether the parties were in privity is not dispositive.  (Id. at 785.)  Tort claims “are barred when they arise from – or are not independent of – the parties’ underlying contracts.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal. 5th 905, 923.)

 

The court finds that triable issues exist regarding whether Bay Cities contracted with World Pack and/or AP Express and whether they had contractual privity.  (Cross-Complainant’s Separate Statement (XCSS) 3-5, 7-8; Complaint.)  Triable issues also exist regarding whether a special relationship duty exists, and therefore, Bay Cities preserves its right for an election of remedies.

 

In Reply, Cross-Defendants argue that even if there was a triable issue as to whether World Pack had a contract, Bay Cities would still have to establish that World Pack provided Bay Cities with services and caused Bay Cities damages.  However, these issues were not the subject of the MSA.  Issues 1-3 specifically pertain to whether the Economic Loss Rule bars the claims.  The court finds that at this juncture, the Economic Loss Rule does not bar the claim.

 

Accordingly, summary adjudication of Issues 1-3 is DENIED.

 

ISSUES 4-5

 

Cross-Defendants contend that the 1st cause of action for Fraud and the 3rd cause of action for Negligent Misrepresentation fails because Cross-Defendants made no false statements or had any knowledge of the falsity of the statements.

 

However, the court finds triable issues exist regarding whether Fabian made false statements and had knowledge of the falsity of those statements in his July 17, 2019, July 18, 2019, and July 26, 2019 emails.  (XCSS 1-4, 7-12; Crosby Decl., ¶ 11; Kirkpatrick Decl., ¶ 4-6.)  Triable issues exist regarding whether Fabian made misrepresentations to lure Bay Cities to contract with AP Express/World Pack.  Bay Cities presents evidence that:  Fabian used World Pack’s email address while negotiating as AP Express, represented “since we last did business” while admitting that he had no idea if this statement was true (Mysliwiec Decl., Ex. D, 33:22-25); represented that AP Express had experience with building displays “over 750,000 built in 2018” (Fabian Decl., Ex. A, BayCities009165), when AP Express only built 450,000 units in 2018 (Olejnike Decl., ¶ 5); and attached photographs of display projects that “we are currently working on” (Fabian Decl., Ex. A, BayCities 009158) when those displays were not built by AP Express.  

 

Accordingly, summary adjudication of Issues 4-5 is DENIED.

 

ISSUE 6

 

Cross-Defendants contend that the 3rd cause of action for Negligent Misrepresentation Fails Because Cross-Defendants made no false statements or that there were reasonable grounds for believing the representations to be true.

 

However, the court finds triable issues exist regarding whether Fabian made false statements in his July 17, 2019, July 18, 2019, and July 26, 2019 emails.  (XCSS 1-4, 7-12; Crosby Decl., ¶ 11; Kirkpatrick Decl., ¶ 4-6.)  Triable issues exist regarding whether Fabian’s use of a World Pack email address, the statement, “since we last did business” (Mysliwiec Decl., Ex. D, 33:22-25), and photographs of display projects done at other facilities, but represented to Bay Cities that “we are currently working on” (Fabian Decl., Ex. A, BayCities 009164) were transmitted to lure Bay Cities into contracting with AP Express/World Pack.  Thus, triable issues also exist regarding whether those representations were made with reasonable grounds for believing them to be true

 

Accordingly, summary adjudication of Issue 6 is DENIED.

 

ISSUE 7

 

Cross-Defendants contend that the 7th cause of action for Negligent Interference with Prospective Business Advantage fails because there was no independently wrongful act or damages.

 

However, as explained in Issues 4-6, the Fraud-based claims demonstrate independently wrongful acts.  “[A]n act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.”  (Reeves v. Hanlon, (2004) 33 Cal. 4th 1140, 1152.)  Fraud is an unlawful act.  (CC §§ 1709 and 3294.)

 

Accordingly, summary adjudication of Issue 7 is DENIED.