Judge: Lee W. Tsao, Case: 22NWCV00688, Date: 2023-01-31 Tentative Ruling
Case Number: 22NWCV00688 Hearing Date: January 31, 2023 Dept: C
OPTIMA ENERGY, INC., et al. v. CHOI, et al.
CASE NO.: 22NWCV00688
HEARING: 1/31/23 @ 1:30 PM
#6
TENTATIVE RULING
Defendant Christopher
Choi’s demurrer to Plaintiffs’ complaint is SUSTAINED with 10 days leave to
amend as to the 5th, 11th, and 17th causes of
action, and otherwise OVERRULED as to the remaining causes of action.
Opposing
Party to give NOTICE.
Defendant Christopher Choi demurs to the 1st – 19th
causes of action on the grounds that they do not state facts sufficient to
constitute a cause of action, and are uncertain.
[The
Court notes that Defendant Christopher Choi has filed a 19-page Demurrer, in
violation of CRC 3.1113(d), which limits a memorandum to 15 pages. This court will overlook Defendant’s transgression this once. Any subsequent filings beyond the page limitations
will not be considered.]
Plaintiffs Optima Energy, Inc. and Planet Optima, JV
(collectively, “Optima”)’s Complaint alleges that Defendants used Plaintiffs’
good name and reputation in the industry to present sham project contracts to
the County of Los Angeles with forged signatures of property owners and
managers to receive county funding that would be used, instead, to line
Defendants’ pockets. (Complaint, ¶ 2.) Defendants falsified proposals and misused
Optima’s resources, including the Californian, Whispering Fountains, and
Belcourt projects with no valid incentive, signature, or planned construction
dates. Based thereon, the Complaint
asserts causes of action for:
1.
Forgery
2.
Fraudulent
Misrepresentation
3.
Negligent
Misrepresentation
4.
Intentional
Misrepresentation
5.
Conversion
6.
Misappropriation
7.
Identity
Theft (Ca. Civ. Code §§ 1798.92 – 1798.97)
8.
Breach
of Employment Contract
9.
Breach
of Implied Covenant of Good Faith and Fair Dealing
10.
Fraudulent
Concealment
11.
Unjust
Enrichment
12.
Negligence
13.
Negligent
Supervision and Hiring
14.
Violation
of B&P Code § 17200, et seq.
15.
Intentional
Interference of Prospective Economic Advantage
16.
Negligent
Interference of Prospective Economic Advantage
17.
Tortious
Interference with Business Contracts
18.
Violation
of California Uniform Trade Secrets Act
19.
Promissory
Fraud
On January 19, 2023, Plaintiffs dismissed the 1st, 7th,
and 13th causes of action.
UNCERTAINTY
“A
demurrer for uncertainty is strictly construed, even where a complaint is in
some respects uncertain, because ambiguities can be clarified under modern
discovery procedures.” (Khoury v.
Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.) A
demurrer for uncertainty will be sustained only where the complaint is so bad
that a defendant cannot reasonably respond. (Ibid.)
The court finds that the Complaint is not so uncertain that
Defendant cannot reasonably respond. The
demurrer based on uncertainty is OVERRULED.
2nd,
3rd, 4th, 10th, and 19th CAUSES OF
ACTION
FRAUDULENT/INTENTIONAL
MISREPRESENTATION:
The elements are: 1) misrepresentation (false representation,
concealment, or nondisclosure); 2) knowledge of falsity (scienter); 3) intent
to defraud or induce reliance; 4) justifiable reliance; and 5) damages. (See
CC § 1709.) Fraud actions are subject to
strict requirements of particularity in pleading. (Committee on Children’s Television, Inc. v.
General Foods Corp. (1983) 35 Cal. 3d 197, 216.) A plaintiff must allege what was said, by
whom, in what manner (i.e. oral or in writing), when, and, in the case of a
corporate defendant, under what authority to bind the corporation. (See
Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th
772
The
court finds that Choi’s misrepresentations are adequately pled at ¶¶ 29 42,
52-56, 61-67, 70, and 72. ¶ 103 alleges
scienter. ¶ 108 alleges intent to induce
reliance. ¶¶ 110-111 allege Plaintiffs’
justifiable reliance, and ¶ 112 alleges resulting damages. The court finds the fraud allegations are
sufficiently particular.
NEGLIGENT MISREPRESENTATION:
The elements are: (1) the defendant made a false
representation as to a past or existing material fact; (2) the defendant made
the representation without reasonable ground for believing it to be true; (3)
in making the representation, the defendant intended to deceive the plaintiff;
(4) the plaintiff justifiably relied on the representation; and (5) the
plaintiff suffered resulting damages. (Majd
v. Bank of Am, N.A. (2015) 243 Cal.App. 4th 1293, 1307 citing West v.
JPMorgan Chase Bank, N.A. (2013) 214 Cal. App.4th 780, 792.)
¶ 114 incorporates the prior fraud allegations,
and ¶ 118 alleges that Defendants had no reasonable grounds to believe that the
misrepresentations were true. The court finds the
fraud allegations are sufficiently particular.
“[T]he elements of a cause of action for FRAUD
BASED ON CONCEALMENT are: (1) the defendant must have concealed or suppressed a
material fact, (2) the defendant must have been under a duty to disclose the
fact to the plaintiff, (3) the defendant must have intentionally concealed or
suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff
must have been unaware of the fact
and would not have acted as he did if he had known of the
concealed or suppressed fact, and (5) as a result of the concealment or
suppression of the fact, the plaintiff must have sustained damage.” (Kaldenbach v. Mutual of Omaha Life Ins.
Co. (2009) 178 Cal. App. 4th 830, 850.) “There are four
circumstances under which that duty arises: (1) when the
defendant is in a fiduciary relationship with the plaintiff; (2) when the
defendant had exclusive knowledge of material facts not known to the plaintiff;
(3) when the defendant actively conceals a material fact from the plaintiff;
and (4) when the defendant makes partial representations but also suppresses
some material facts.” (Immobiliare, LLC v. Westcor Land Title Insurance Co.,
424 F. Supp.3d 882, 888-89 (E.D. Cal. 2019) (internal quotations omitted).
¶ 181 incorporates the prior fraud allegations,
which includes Choi’s concealment or suppressed material facts, and ¶¶ 182-183
additionally alleges that Defendant Choi was under a duty to disclose these
facts. ¶ 186 alleges that Plaintiffs
were unaware of the concealed facts, and ¶¶ 188-190 alleges resulting damages. The court finds the
fraud allegations are sufficiently particular.
PROMISSORY FRAUD: The elements are: 1) specific
factual circumstances beyond contract breach; and 2) inferring a contemporaneous intent not to perform. (Hills Transportation Co. v. Southwest
Forest Ind., Inc. (1968) 266 Cal.App.2d 702, 707; Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18,
30; Agosta v. Astor (2004) 120 Cal.App.4th
596, 603, 607; Cicone v. URS Corp. (1986) 183 Cal.App.3d 194, 206 - fraudulent
intent may be alleged merely as a conclusion.)
¶ 266
incorporates the prior allegations. ¶
267 additionally alleges that Choi made misrepresentations about his numerous
connections and pending projects, and ¶ 268 alleges that instead, Defendant’s
intent was to steal Plaintiffs’ confidential information and reputation to
competitively advantage his own businesses and affiliations. The court finds the fraud allegations are
sufficiently particular.
Demurrers
to the 2nd,
3rd, 4th, 10th, and 19th causes of
action are OVERRULED.
5th CAUSE OF ACTION
CONVERSION: The elements are: 1) Plaintiff's ownership or right to
possession of personal property; 2) defendant's disposition of the property inconsistent
with plaintiff's rights; and 3) resulting damages. (Fremont Indemnity Co. v. Fremont General
Corp. (2007) 148 Cal.App.4th 97, 119; PCO, Inc. v.
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007)
150 Cal.App.4th 384, *5 - money cannot be the subject of a cause of action for
conversion unless there is an identifiable sum.)
Although
Plaintiffs allege that Defendants converted money, Plaintiffs fail to allege an
identifiable sum. Accordingly, the
demurrer is SUSTAINED with 10 days leave to amend.
6th
CAUSE OF ACTION
Common law MISAPPROPRIATION has three elements:
“(1) a plaintiff must have invested substantial time and money in developing a
property, (2) the defendant must have appropriated the property at little or no
cost, and (3) the plaintiff was injured by the defendant’s conduct.” (Lebas Fashion Imports of USA, Inc. v. ITT
Hartford Ins. Group (1996) 50 Cal. App. 4th 548, 564.)
¶¶
147-153 allege that Plaintiffs made a substantial investment of time and money
in cultivating business relationship and techniques, Defendant appropriated
Defendant’s business relationships and techniques for their own use and
profits, and Plaintiffs have suffered resulting damages.
Accordingly,
the demurrer is OVERRULED.
8th
CAUSE OF ACTION
BREACH OF EMPLOYMENT
CONTRACT: The elements for a breach of
contract cause of action are: (1) the contract; (2) plaintiff’s performance or
excuse for nonperformance; (3) defendant’s breach; and (4) resulting
damages. (Reichert v. General Ins.
Co. (1968) 68 Cal.2d 822, 830.) In
alleging a breach of contract cause of action, it is necessary to specify
whether the contract is written, oral or implied by conduct. (CCP § 430.10(g).) To plead a written contract, a plaintiff must
do one of the following: (1) set forth the contract in haec verba; or (2) plead the contract’s legal effect by
alleging the substance of its relevant terms.
(4 Witkin, California Procedure 4th Ed., 479-481.) In order to plead an oral contract, a
plaintiff must plead its legal effect, i.e., allege the substance of the
contractual terms. (Id. at 483.)
¶ 163 allege that
Plaintiffs and Defendant Choi entered into employment agreements. ¶ 165 alleges the terms of the
agreement. ¶ 166 alleges Plaintiffs’
performance, ¶¶ 167-170 allege Defendant’s breach, and ¶ 171 and 175 allege
Plaintiffs’ resulting damage.
Demurrer
is OVERRULED.
9th
CAUSE OF ACTION
Choi
contends the underlying contract is defective, and therefore, the bad faith
cause of action is defective for the same reasons. However, as discussed above, the court finds
the contract cause of action is adequately pled.
Accordingly,
the demurrer is OVERRULED.
11th
CAUSE OF ACTION
UNJUST
ENRICHMENT: Under the law of
restitution, an individual may be required to make restitution if he is
unjustly enriched at the expense of another. A person is enriched if he
receives a benefit at another's expense. (Ghirardo v. Antonioli (1996)
14 Cal.4th 39, 51.)
There
is a split of authority across the appellate courts regarding whether unjust
enrichment is a cause of action or a principle of law. (Jogani v. Superior Court (2008) 165
Cal.App.4th 901, 911 and Melchior v. New Line Prods., Inc. (2003) 106
Cal.App.4th 779, 794 hold that unjust enrichment is a principle underlying
various doctrines and remedies, including quasi-contract. On the other hand, Hirsch
v. Bank of America (2003) 107 Cal.App.4th 708, First Nationwide Savings
v. Perry (1992) 11 Cal.App.4th 1657, and Lectrodryer v. Seoul Bank
(2000) 77 Cal.App.4th 723 view it as a separate cause of action.)
This
court follows the Jogani line of cases and finds that Unjust Enrichment
is not a cause of action. However,
Plaintiffs may still allege it as a theory supporting the remedy of rescission. A complaint may state multiple legal theories
upon which recovery might be predicated for one claim for relief. (Newhall Land & Farming Co. v. Superior
Court (1993) 19 Cal.App. 4th 334, 351.)
Accordingly,
demurrer is SUSTAINED with 10 days leave to amend. Plaintiffs are ORDERED to strike the title, “Eleventh
cause of action Unjust Enrichment and ¶ 191”
(Complaint, 30:3-7), but the allegations at ¶¶ 192-199 may remain.
12th
CAUSE OF ACTION
NEGLIGENCE: The elements are: 1) Legal duty owed to plaintiffs to use due
care; 2) breach of duty; 3) causation; and 4) damage to plaintiff. (Ladd v. County of San Mateo (1996) 12
Cal.4th 913, 917.)
Defendant
Choi contends he owes no duty to Plaintiffs.
However, ¶ 202 adequately alleges Defendant’s duty. ¶ 203 alleges breach, ¶ 204 alleges
causation, and ¶ 205 alleges resulting damages.
Demurer
is OVERRULED.
14th
CAUSE OF ACTION
VIOLATION OF B&P
CODE § 17200, ET SEQ.: The Unfair Business Practices Act shall include “any
unlawful, unfair or fraudulent business act or practice.” (B&P Code § 17200.) A plaintiff alleging unfair business
practices under these statutes must state with reasonable particularity the
facts supporting the statutory elements of the violation. (Khoury v. Maly's of California, Inc.
(1993) 14 Cal.App.4th 612, 619.) Even a
single incident - a one-time act that is unfair, unlawful or fraudulent - is
sufficient to state a claim under 17200.
(Klein v. Earth Elements, Inc. (1997) 59 Cal.App.4th 965, 969 fn.
3.)
The
court finds the Fraud and unfair business practices prongs are adequately
pled. Demurrer is OVERRULED.
15th
CAUSE OF ACTION
INTENTIONAL
INTERFERENCE OF PROSPECTIVE ECONOMIC ADVANTAGE:
To prevail on a cause of action for intentional interference with
prospective economic advantage in California, a plaintiff must plead and prove
(1) an economic relationship between the plaintiff and some third party, with
the probability of future economic benefit to the plaintiff; (2) the
defendant's knowledge of the relationship; (3) the defendant's intentional acts
designed to disrupt the relationship; (4) actual disruption of the
relationship; and (5) economic harm to the plaintiff proximately caused by the
defendant's acts. (Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1152 n. 6.) A plaintiff that chooses to bring a claim for interference
with prospective economic advantage has a more rigorous pleading burden since
it must show that the defendant's conduct was independently wrongful other than the fact of interference
itself. (Korea Supply Co. v. Lockheed
Martin Corp. (2003) 29 Cal.4th 1134; Della Penna v.
Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 393.)
¶
227 alleges Plaintiffs’ prospective business relationships with third parties,
¶ 228 alleges Defendant’s knowledge of those relationships, ¶ 229 alleges
Defendant’s intentional interference, ¶ 231 alleges actual disruption, and ¶
232 alleges resulting harm. The Fraud
allegations sufficiently allege Defendant’s independently wrongful acts.
Demurrer
is OVERRULED.
16th
CAUSE OF ACTION
NEGLIGENT INTERFERENCE WITH PROSPECTIVE
ECONOMIC RELATIONS: The elements
are: an economic relationship between the plaintiff
and a third party; that contained a reasonably probable future economic benefit
or advantage to plaintiff; defendant knew of the existence of the relationship
and was aware, or should have been, that if it did not act with due care, its
actions would interfere with the relationship and cause plaintiff to lose in
whole or in part the probable future economic benefit or advantage; the
defendant was negligent; the negligence caused damage to plaintiff because of
actual interference or disruption; and plaintiff lost in whole or in part the
economic benefits or advantage reasonably expected from the relationship. (North Amer. Chem. Co. v. Sup. Ct. (1997) 59 Cal. App. 4th 764, 786.) Both intentional
and negligent varieties of interference with prospective economic relations
require the plaintiff to plead facts showing that the defendant engaged
“wrongful conduct” that falls outside the bounds of fair competition. (Della
Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 393.)
¶
236 alleges Plaintiffs’ prospective business relationships with third parties,
¶ 237 alleges Defendant’s knowledge of those relationships, ¶ 238 alleges
Defendant’s intentional interference, ¶ 240 alleges actual disruption, and ¶
244 alleges resulting harm. The Fraud
allegations sufficiently allege Defendant’s independently wrongful acts.
Demurrer
is OVERRULED.
17th
CAUSE OF ACTION
TORTIOUS INTERFERENCE
WITH BUSINESS CONTRACTS: The elements
are: 1) valid contract between plaintiff
and third party; 2) defendant's knowledge of that; 3) defendant's intentional
acts designed to induce disruption of the relationship; 4) actual disruption;
and 5) resulting damage. (Reeves v.
Hanlon (2004) 33 Cal. 4th 1140, 1148; Scripps Clinic v. Superior Court
(2003) 108 Cal. App. 4th 917, 929.)
The
court finds the Complaint fails to allege valid contracts between Plaintiffs
and third parties. Instead, Plaintiffs
allege at ¶ 247 that they “had an opportunity for valid contracts.” Such is insufficient to support a claim for
interference with contract.
Accordingly,
the demurrer is SUSTAINED with 10 days leave to amend.
18th
CAUSE OF ACTION
VIOLATION
OF CALIFORNIA UNIFORM TRADE SECRETS ACT:
Essential elements of a trade secret
misappropriation cause of action are: 1)
the existence of a trade secret; and 2) misappropriation of that trade
secret. (CC § 3426.1.) The California Uniform Trade Secrets Act
(“CUTSA”) defines a “trade secret” as “information, including a formula,
pattern, compilation, program, device, method, technique, or process,” that
“[d]erives independent economic value, actual or potential, from not being
generally known to the public or to other persons who can obtain economic value
from its disclosure or use” and [i]s the subject of efforts that are reasonable
under the circumstances to maintain its secrecy.” (CC § 3426.1(d)(1), (2).)
CUTSA “does not displace a contract
claim ... and does not displace noncontract claims that, although related to a
trade secret misappropriation, are independent and based on facts distinct from
the facts that support the misappropriation claim.” (Angelica Textile Services, Inc. v. Park
(2014) 220 Cal.App.4th 495, 506 - reversing summary judgment where
trial court improperly invoked UTSA preemption to grant summary judgment on the
plaintiff’s conversion claims, unfair competition claims and breach of
fiduciary claims. See also, Integral
Dev. Corp. v. Tolat (9th Cir. 2017) 675 F. App’x 700, 704 - “The plain
language of CUTSA also provides that it does not preempt “contractual remedies,
whether or not based upon misappropriation of a trade secret.”)
Further, CUTSA “does not affect ...
civil remedies that are not based upon misappropriation of a trade
secret.” (CC § 3426.7(b).) If a breach of fiduciary duty is not “based
on the same nucleus of facts as [the] trade secret misappropriation,” CUTSA
will not preempt the claim. (See K.C.
Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc. (2009) 171
Cal.App.4th 939); Integral Dev. Corp. v. Tolat (9th Cir. 2017), 675 F.
App’x 700, 704.)
At this juncture, the court finds
that the complaint adequately alleges independent common law causes of action
that are not based on the same nucleus of facts as the trade secret
misappropriation claim. Accordingly, the
demurrer is OVERRULED.