Judge Lisa K. Sepe-Wiesenfeld, Case Number: 22SMCV01999, Date: 2023-08-03 Tentative Ruling

Judge: Lisa K. Sepe-Wiesenfeld, Case: 22SMCV01999, Date: 2023-08-03 Tentative Ruling

On July 21, 2023, Plaintiff Howard Feldman (“Plaintiff”) filed his First Amended Complaint, and on August 21, 2023, he filed a document entitled “Errata Plaintiff’s First Amended Complaint,” which includes identical allegations as those of the complaint, but Plaintiff changed several allegations and identified the changes with use of underlined and bolded text. These changes were substantive changes to the complaint, such that a notice of errata was improper, as a notice of errata is used to correct typographical or other minor errors (see, e.g., Flores v. Nature’s Best Distribution, LLC (2016) 7 Cal.App.5th 1, 6 [notice of errata filed as to a missing exhibit), not to make a substantive change to a pleading (see, e.g., Falahati v. Kondo (2005) 127 Cal.App.4th 823, 827, 834 [notice of errata used to add a name to caption of complaint was improper]).

While it would be proper to strike the pleading filed without leave of court, in the interest of judicial economy, the Court considers the “Errata Plaintiff’s First Amended Complaint” document as if it is a Second Amended Complaint, despite the improper filing of the document. To avoid confusion, the Court refers to the “Errata Plaintiff’s First Amended Complaint” as the First Amended Complaint (“FAC”) in this ruling.

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”]; Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 [“A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment.”]; Vaccaro v. Kaiman (1998) 63 Cal.App.4th 761, 768 [“When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend.”].) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

“The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

In his first cause of action, Plaintiff alleges that Defendants misrepresented that Defendant Wayne Gretzky (“Wayne”) lost weight after using OMG gum, and the statements were meant to be disseminated to investors so they would invest or re-invest in BuChew, OMG gum’s distributor. (FAC ¶¶ 14-17.) Plaintiff states that he would not have continued to invest in BuChew but for these statements, and he has been damaged in an amount of $1,000,000. (Compl. ¶¶ 16, 20.)

While Plaintiff alleges the nature of the statements made, and Plaintiff identifies when, where, and to whom the statements were made, Plaintiff fails to identify statements that were specifically made to him. Instead, Plaintiff references 12 specific statements from promotional and investor material (FAC ¶ 14), but he fails to allege facts that would support a conclusion that Defendants intended to defraud Plaintiff specifically, as there are no facts showing that Defendants themselves prepared the investor materials, i.e., the trier of fact may reasonably conclude that another party simply used Wayne’s likeness to purportedly persuade Plaintiff to invest, such that Plaintiff’s failure to allege specific facts about the creation of promotional materials renders his allegations insufficient to support a finding of fraud. Further, Plaintiff alleges that he invested in BuChew in June 2018 and January 2019 (FAC ¶¶ 8, 10, 19, 26), but only two statements were made before January 2019 (FAC ¶ 14, Nos. 1, 2), with one article published in “Fall 2018” (FAC ¶ 14, No. 7), such that Plaintiff was already an investor in June 2018 before all the purported misrepresentations were made, and the three statements that were made between June 2018 and January 2019 do not allege facts to support a conclusion that Plaintiff invested in January 2019 for any new or different reason than he did in June 2018. Further, although Plaintiff alleges when the statements or publications were made, Plaintiff fails to allege when those communications reached Plaintiff, i.e., it is not clear that the purported fraudulent statements reached Plaintiff before he invested in January 2019. Again, Plaintiff was already an investor in BuChew, and BuChew was marketing the gum as a weight loss gum, i.e., Defendants’ statements were mere reiteration of BuChew’s representations, such that Plaintiff provides insufficient facts that would allow the trier of fact to conclude Defendants’ statements caused Plaintiff’s harm.

Moreover, as stated in the Court’s prior ruling, Plaintiff has failed to allege how he suffered $1,000,000 in damages from the purported fraud when he alleges he invested only $10,000 after hearing Defendants’ statements. (FAC ¶ 10.) Plaintiff’s statement that he “actively began advising management, thereby also increasing his profit potential” (ibid.) does not sufficiently allege damage as a result of reliance on purported fraudulent statements by Defendants; rather, it appears that Plaintiff’s harm, if any, was caused by BuChew, not Defendants.

The elements of a cause of action for negligent misrepresentation include “[m]isrepresentation of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another’s reliance on the fact misrepresented; ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed; and resulting damage.” (Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154, quotation marks omitted.)

Plaintiff’s claim for negligent misrepresentation is based on the same facts as Plaintiff’s claim for fraud, which is one alleging intentional misrepresentation, such that this claim fails for the same reason. Plaintiff includes no new or different facts in this claim, and this claim, too, lacks sufficient facts as to statements that were made directly to Plaintiff, the creation of materials disseminated to Plaintiff, or how Defendants’ statements caused the harm alleged in the complaint.