Judge Lynette Gridiron Winston, Case Number: 22PSCV00602, Date: 2024-05-09 Tentative Ruling

Judge: Lynette Gridiron Winston, Case: 22PSCV00602, Date: 2024-05-09 Tentative Ruling

Cross-Defendant M Capital Global’s Demurrer to Cross-Complainants’ Cross-Complaint

Cross-Defendant M Capital Global’s Motion to Strike Cross-Complainants’ Cross-Complaint

The Court SUSTAINS the demurrer with leave to amend as to the First, Second, Third, and Fifth Causes of Action in the cross-complaint. The Court OVERRULES the demurrer to the Fourth and Sixth Causes of Action.

The Court GRANTS the motion to strike paragraph 2 of Lo’s prayer for relief and paragraph 2 of Chang’s prayer for relief with leave to amend, but DENIES the motion to strike paragraph 77 and paragraph 2 of Wang’s prayer for relief.

Cross-Complainants must file and serve an amended cross-complaint within 20 days of the Court’s order.

Plaintiff is ordered to give notice of the Court’s ruling within five calendar days of this order.

This is a business dispute. On June 17, 2022, plaintiff M Capital Global California LLC (Plaintiff) filed this action. On November 7, 2022, Plaintiff filed the operative First Amended Complaint (FAC) against defendants Jones Day, Inc. (Jones Day), Chia Jui Wen (Wen), Min Jing Chang (Chang), Roger Lo (Lo), Wenyi Wang (Wang), and Does 1 through 50, alleging causes of action for fraud and conversion.

On November 28, 2023, Jones Day, Chang, Lo, and Wang (collectively, Cross-Complainants) filed a cross-complaint against Plaintiff, Sokly Chen aka Xing Chen (Chen), Mengmeng Li (Li), and Roes 1 through 50, alleging causes of action for breach of contract, fraud, negligent misrepresentation, intentional infliction of emotional distress, wrongful termination, and conversion.

On February 29, 2024, Plaintiff demurred to and moved to strike the cross-complaint. On April 15, 2024, Cross-Complainants opposed the demurrer. Plaintiff did not file a reply by the time this tentative ruling was prepared.

A demurrer is a pleading used to test the legal sufficiency of other pleadings. It raises issues of law, not fact, regarding the form or content of the opposing party's pleading (complaint, answer or cross-complaint). (Code Civ. Proc., § 422.10; see Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) It is not the function of the demurrer to challenge the truthfulness of the complaint; and for purposes of ruling on the demurrer, all facts pleaded in the complaint are assumed to be true. (Id.)

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. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Donabedian, supra, 116 Cal.App.4th at p. 994.) No other extrinsic evidence can be considered. (Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881 [error for court to consider facts asserted in memorandum supporting demurrer]; see also Afuso v. United States Fid. & Guar. Co. (1985) 169 Cal.App.3d 859, 862, disapproved on other grounds in Moradi-Shalal v. Fireman’s Fund Ins. Cos. (1988) 46 Cal.3d 287 [error to consider contents of release not part of court record].)

A demurrer can be utilized where the “face of the complaint” itself is incomplete or discloses some defense that would bar recovery. (Guardian North Bay, Inc. v. Superior Court (2001) 94 Cal.App.4th 963, 971-972.) The “face of the complaint” includes material contained in attached exhibits that are incorporated by reference into the complaint, or in a superseded complaint in the same action. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94; see also Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505 [“[W]e rely on and accept as true the contents of the exhibits and treat as surplusage the pleader’s allegations as to the legal effect of the exhibits.”])

A demurrer can only be sustained when it disposes of an entire cause of action. (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119; Kong v. City of Hawaiian Gardens Redev. Agency (2003) 108 Cal.App.4th 1028, 1046.)

Per Code of Civil Procedure section 430.41, subdivision (a), Plaintiff was required to meet and confer in person or by telephone before bringing this demurrer. (Code Civ. Proc., § 430.41, subd. (a).) Plaintiff failed to meet and confer in person or by telephone. (Ma Decl., ¶¶ 5-10.) Nevertheless, the Court may not overrule a demurrer for failure to adequately meet and confer. (Code Civ. Proc., § 430.41, subd. (a)(4).) The Court will still consider the demurrer, but admonishes Plaintiff to comply with the requirements of the Code of Civil Procedure going forward.

“A cause of action for breach of contract requires pleading of a contract, plaintiff's performance or excuse for failure to perform, defendant's breach and damage to plaintiff resulting therefrom. [Citation.] A written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect. [Citation.]” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.)

Plaintiff demurs to the First Cause of Action for breach of contract in the cross-complaint on the grounds that it fails to state facts sufficient to constitute a cause of action and on the grounds that it is uncertain. Plaintiff contends Lo and Jones Day failed to attach the written agreements alleged in the cross-complaint, and that the alleged agreement with Wang fails to set forth the specific terms of the agreement or whether the contract was oral, written, or implied by conduct. Plaintiff further contends this cause of action fails because it is unclear when the agreements were to be performed, the parties to the agreements, who was required to perform, how much was to be paid, who was to be paid, what the exact terms were, and how the agreements were breached.

In opposition, Cross-Complainants contend they have sufficiently pleaded the terms of the contracts at issue.

The Court finds the cross-complaint fails to allege sufficient facts to state a cause of action for breach of contract. Plaintiff correctly contends the cross-complaint fails to sufficiently set forth the terms of the alleged agreements between the parties. Cross-Complainants allege Lo entered into separate written contracts with Plaintiff. (Cross-Complaint, ¶ 37.) No such written agreements are attached to the cross-complaint, nor are their terms set forth verbatim or by their legal effect. (See Cross-Complaint, ¶¶ 20, 36-40; see McKell, supra, 142 Cal.App.4th at p. 1489.) The cross-complaint does not allege the duration of the purported contracts, when they were to be performed, the precise amount of compensation, or when the compensation was to be paid. (See Moncada v. West Coast Corp. (2013) 221 Cal.App.4th 768, 777, internal quotation marks omitted [“Where a contract is so uncertain and indefinite that the intention of the parties in material particulars cannot be ascertained, the contract is void and unenforceable. [Citation.]”]

The cross-complaint also does not set forth sufficient terms of the alleged contract between Plaintiff and Chen on the one hand and Wang on the other. For example, it does not allege the duration of the agreement, when the contract was to be performed, or the manner in which Wang agreed to assist Plaintiff and Chen. (Cross-Complaint, ¶¶ 27, 42; see Moncada, supra, 221 Cal.App.4th at p. 777.) It is not clear what Cross-Complainants mean when Wang agreed to help Plaintiff and Chen in handling disputes with another company. (Cross-Complaint, ¶¶ 27, 42.)

Moreover, although not raised in the parties’ respective briefs, the Court notes some internally contradictory or inconsistent allegations. For example, the cross-complaint alleges that one of Lo’s obligations to Plaintiff was to form Jones Day. (Cross-Complaint, ¶ 20.) It is unclear how Jones Day, which ostensibly did not exist when the agreements were allegedly entered into, could then become a party to those alleged agreements or could breach the agreement. (See Id. and ¶ 39.) Additionally, to the extent Cross-Complainants allege breach of contract between different parties over different agreements, they should be pleaded separately from each other rather than combined into one cause of action.

Based on the foregoing, the Court SUSTAINS the demurrer to the First Cause of Action with leave to amend.

To state a cause of action for intentional misrepresentation, the plaintiff must allege facts demonstrating, “(1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damage. [Citation.]” (Aton Ctr., Inc. v. United Healthcare Ins. Co. (2023) 93 Cal.App.5th 1214, 1245.) “In California, fraud must be pled specifically; general and conclusory allegations do not suffice. [Citations.] ‘Thus ‘ “the policy of liberal construction of the pleadings ... will not ordinarily be invoked to sustain a pleading defective in any material respect.’ ‘ [Citation.] [¶] This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.’ [Citation.] A plaintiff's burden in asserting a fraud claim against a corporate employer is even greater. In such a case, the plaintiff must ‘allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.’ [Citation.]” (Lazar v. Superior Ct. (1996) 12 Cal.4th 631, 645.)

To state a cause of action for negligent misrepresentation, the plaintiff must allege facts demonstrating, “[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.... [Citation].” (Hydro-Mill Co. v. Hayward, Tilton & Rolapp Ins. Assocs., Inc. (2004) 115 Cal.App.4th 1145, 1154, internal quotation marks omitted.) Claims for negligent misrepresentation must also be pleaded with specificity. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.)

Plaintiff demurs to the Second Cause of Action for fraud and Third Cause of Action for negligent misrepresentation on the grounds that that cross-complaint fails to allege sufficient facts to constitute causes of action and that they are uncertain. Plaintiff contends the cross-complaint fails to plead facts with the requisite specificity, such as how, when, or where Plaintiff and Chen made the alleged representations, and to whom they were made. Plaintiff also contends these causes of action fail under the economic loss rule since they only allege that they were not compensated as agreed, and do not allege damages beyond the value of those alleged broken promises.

In opposition, Cross-Complainants contend they have sufficiently pleaded their claims for fraud and negligent misrepresentation.

The Court finds the cross-complaint fails to state causes of action for fraud and negligent misrepresentation. The cross-complaint does not allege how, when, where, or by what means the alleged misrepresentations were made. (See Cross-Complaint, ¶¶ 46-56.) The cross-complaint also does not allege the additional required allegations for Plaintiff, who is a corporate employer, requiring allegations of what was said or written and when the representations were said or written. (See Id.; Lazar, supra, 12 Cal.4th at p. 645.)

The Court finds Plaintiff’s arguments regarding the economic loss rule to be unavailing, as that applies to tort remedies in the context of sales of products and strict liability. (See Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 987, internal quotation marks omitted [“Simply stated, the economic loss rule provides: [W]here a purchaser's expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only economic losses.”]) Sales of defective products is not an issue here.

But, the Court does find that the cross-complaint alleges at most a mere failure to perform as promised, which is not grounds for a fraud claim. (Bldg. Permit Consultants, Inc. v. Mazur (2004) 122 Cal.App.4th 1400, 1414 [“’The mere failure to perform a promise made in good faith does not constitute fraud.’ [Citation.]”])

Additionally, to the extent Cross-Complainants allege claims against different parties based on different transactions, they should be pleaded separately from each other rather than combined into one cause of action.

Based on the foregoing, the Court SUSTAINS the demurrer to the Second and Third Causes of Action with leave to amend.

To state a cause of action for intentional infliction of emotional distress, the plaintiff must allege facts demonstrating, “(1) defendant engaged in extreme and outrageous conduct (conduct so extreme as to exceed all bounds of decency in a civilized community) with the intent to cause, or with reckless disregard to the probability of causing, emotional distress; and (2) as a result, plaintiff suffered extreme or severe emotional distress.” (Berry v. Frazier (2023) 90 Cal.App.5th 1258, 1273.)

Plaintiff demurs to the Fourth Cause of Action on the grounds that it fails to state facts sufficient to constitute a cause of action and is uncertain. Plaintiff contends the allegations of installing a GPS tracking device on Wang’s vehicle and calling her when she was near a government building is not extreme and outrageous conduct. Plaintiff also contends the cross-complaint fails to allege facts demonstrating that the conduct was done intentionally or recklessly.

In opposition, Cross-Complainants contend they have pleaded sufficient facts for a claim of intentional infliction of emotional distress.

The Court finds the cross-complaint alleges sufficient facts to state a cause of action for intentional infliction of emotional distress. The cross-complaint alleges that Chen called Wang each time she was near a federal building where U.S. Customs and Immigration Services was located, and that she found a tracking device had been installed in the inner fender of her car. (Cross-Complaint, ¶ 72.) Whether this alleged conduct is extreme and outrageous is a question of fact. (Berry, supra, 90 Cal.App.5th at p. 1274.) Demurrers are not the appropriate place for determining the truth of disputed facts. (See Panterra GP, Inc. v. Superior Court of Kern County (2022) 74 Cal. App. 5th 697, 709.) Moreover, this cause of action is alleged against Chen, not Plaintiff. Thus, Plaintiff lacks standing to demur to this cause of action.

Accordingly, the Court OVERRULES the demurrer to the Fourth Cause of Action for intentional infliction of emotional distress.

"The elements of a claim for wrongful discharge in violation of public policy are (1) an employer-employee relationship, (2) the employer terminated the plaintiff's employment, (3) the termination was substantially motivated by a violation of public policy, and (4) the discharge caused the plaintiff harm." (Yau v. Allen (2014) 229 Cal.App.4th 144, 154.) The plaintiff must allege facts demonstrating the policy, (1) is supported by either constitutional or statutory provisions; (2) inures to the benefit of the public rather than serving merely the interests of the individual; (3) is well established at the time of the discharge; and (4) is substantial and fundamental. (Id. at 155; see also Phillips v. St. Mary Reg'l Med. Ctr. (2002) 96 Cal.App.4th 218, 226.)

Plaintiff demurs to the Fifth Cause of Action for wrongful termination on the grounds that it fails to state facts sufficient to constitute a cause of action and is uncertain. Plaintiff contends Cross-Complainants fail to allege the constitutional or statutory provision that was violated when they were terminated. Plaintiff contends that the issue of “ghost employees” on the company’s payroll and the refusal to terminate these “ghost employees” before submitting the related L-1 visa petition is not a basis for a wrongful termination claim. Plaintiff further contends Cross-Complainants fail to establish how this violated public policy.

In opposition, Cross-Complainants contend they have pleaded sufficient facts to state a cause of action for wrongful termination, referencing California Labor Code section 1102.5, which prohibits an employer from firing an employee for reporting a legal, safety, or health violation in the workplace, i.e., “whistleblowing.”

The Court agrees with Plaintiff. The cross-complaint does not allege the specific statutory provisions or constitutional provisions upon which this cause of action is based. (Cross-Complaint, ¶¶ 78-86.) Cross-Complainants reference to Labor Code section 1102.5 does not save this cause of action from demurrer since that code section is not alleged in the cross-complaint. (See Blank, 39 Cal.3d at p. 318 [demurrer limited to allegations on the face of the pleading or facts subject to judicial notice]; Donabedian, supra, 116 Cal.App.4th at p. 994.) The Court may not consider facts outside of the cross-complaint. (See Ion Equip. Corp., supra, 110 Cal.App.3d at p. 881 [error for court to consider facts asserted in memorandum supporting demurrer].)

Therefore, the Court SUSTAINS the demurrer to the Fifth Cause of Action with leave to amend.

To state a cause of action for conversion, the plaintiff must allege facts demonstrating, “(1) the plaintiff's ownership or right to possession of the property; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages....” Lee v. Hanley (2015) 61 Cal.4th 1225, 1240, internal quotation marks omitted.)

Plaintiff demurs to the Sixth Cause of Action for conversion on the grounds that it fails to state facts sufficient to constitute a cause of action and that it is uncertain. Plaintiff contends the cross-complaint has not alleged any wrongful conduct, arguing that Cross-Defendants did not assume any control or ownership over the property. Plaintiff contends Cross-Complainants only allege Wang was terminated and that she was prohibited from entering the office.

In opposition, Cross-Complainants contend they have sufficiently pleaded facts to state a cause of action for conversion with respect to Wang’s personal belongings, which she was unable to retrieve after her employment was terminated.

The Court finds the cross-complaint alleges sufficient facts to state a cause of action for conversion. The cross-complaint alleges Wang was prohibited from going back into the office to retrieve specific items belonging to her after she was terminated, namely some red wine, women’s accessories, and a special electronic heater purchased from China, plus other small items. (Cross-Complaint, ¶ 91.) The Court finds these allegations sufficient to demonstrate she was deprived of her right to those items. (See Lee, supra, 61 Cal.4th at p. 1240.)

Based on the foregoing, the Court OVERRULES the demurrer to the Sixth Cause of Action.

Plaintiff makes multiple arguments throughout the demurrer regarding allegations in the Cross-Complaint made against Chen and Li. Cross-Complainants correctly contend that Plaintiff’s demurrer does not extend to them. Only Plaintiff demurred to the Cross-Complaint. (See Notice of Demurrer, pp. 1-2; Demurrer, p. 3; see Cal. Rules of Court, rule 3.1320, subd. (e).) Plaintiff’s counsel also does not represent Chen or Li. Accordingly, the Court disregards Plaintiff’s arguments regarding Chen and Li.

“Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof, but this time limitation shall not apply to motions specified in subdivision (e).” (Code Civ. Proc., § 435, subd. (b)(2).) “The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” (Id., § 436.)

Per Code of Civil Procedure section 435.5, subdivision (a), Plaintiff was required to meet and confer in person or by telephone before bringing this demurrer. (Code Civ. Proc., § 435.5, subd. (a).) Plaintiff failed to meet and confer in person or by telephone. (Ma Decl., ¶¶ 5-10.) Nevertheless, the Court may not deny a motion to strike for failure to adequately meet and confer. (Code Civ. Proc., § 435.5, subd. (a)(4).) The Court will still consider the motion to strike, but admonishes Plaintiff to comply with the requirements of the Code of Civil Procedure going forward.

A claim for punitive damages is subject to a motion to strike when the allegations fail to rise to the level of malice, oppression, or fraud necessary under Civil Code section 3294. (Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 64.)

Plaintiff moves to strike paragraph 77 and the Cross-Complainants’ respective requests for punitive damages under their prayers for relief. Plaintiff contends the cross-complaint fails to allege facts sufficient support Cross-Complainants’ requests for punitive damages, reiterating Plaintiff’s prior arguments in the demurrer regarding the Second Cause of Action for fraud and Fourth Cause of Action for intentional infliction of emotional distress.

Given the Court overruled the demurrer to the Fourth Cause of Action for intentional infliction of emotional distress brought by Weng, the Court finds the cross-complaint has also alleged sufficient facts to support the allegations in paragraph 77 and in Wang’s request for punitive damages. (See Turman, supra, 191 Cal.App.4th at p. 64.)

Given the Court sustained the demurrer to the Second Cause of Action for fraud brought by Lo, and the Fifth Cause of Action for wrongful termination (the only cause of action brought by Chang), the Court finds the cross-complaint fails to allege sufficient facts to support Lo’s and Chang’s requests for punitive damages.

Based on the foregoing, the Court GRANTS the motion to strike paragraph 2 of Lo’s prayer for relief and paragraph 2 of Chang’s prayer for relief, but DENIES the motion to strike paragraph 77 and paragraph 2 of Wang’s prayer for relief.

Cross-Complainants must file and serve an amended cross-complaint within 20 days of the Court’s order.

Plaintiff is ordered to give notice of the Court’s ruling within five calendar days of this order.

[1] The Court notes that the Cross-Complaint mislabels the causes of action for wrongful termination and conversion both as the “Fourth Cause of Action,” rather than the Fifth and Sixth causes of action. The amended complaint should correctly label them.