Judge: Margaret L. Oldendorf, Case: 23AHCV00785, Date: 2023-12-13 Tentative Ruling

Case Number: 23AHCV00785    Hearing Date: December 13, 2023    Dept: P

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES

NORTHEAST DISTRICT

          I.        INTRODUCTION

          In this action, Plaintiff Espoir & Amour LLC (Espoir & Amour) alleges that Defendants Misc Group LLC and its owner, Defendant Ye Wu (collectively Defendants) breached a contract between them, and committed related civil wrongs.

Espoir & Amour allegedly contracted with Defendants to manage the marketing and general business of Espoir & Amour’s Amazon storefront. The Complaint alleges that Defendants breached the contract by improperly managing Plaintiff’s Amazon business.   The Complaint contains four causes of action: breach of contract, breach of the implied covenant of good faith and fair dealing, unfair business practices in violation of Business and Professions Code Section 17200, and fraud.

          Defendants filed the instant demurrer on August 14, 2023. Plaintiffs filed an opposition on November 28, 2023. Defendants filed a reply on December 6, 2023.

For the reasons that follow, the demurrer is sustained with leave to amend.

II.      DEMURRER

A. Legal Standard

Code Civ. Proc. Section 430.10(e) provides for a demurrer on the basis that a complaint fails to state a cause of action. (CCP § 430.10(e).) A demurrer tests the legal sufficiency of a complaint. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) 

CCP Section 430.10(g) provides for a demurrer where “[i]n an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral or is implied by conduct.” (CCP § 430.10(g).)

          B. The Meet and Confer Requirement Is Satisfied

          The Declaration of Andrew R. Nelson is offered in support of defense counsel’s compliance with Code Civ. Proc. Section 430.41. Nelson declares that he met and conferred with Plaintiff’s Counsel by telephone on July 27, 2023. He further declares that a resolution was not reached. (Nelson Declaration ¶ 2.) Consequently, the meet and confer requirement has been met.

          Espoir & Amour counsel asserts, without any evidentiary support, that a meet and confer was never held. (Opposition, p. 3: 8-9.) The Declarations of Defendant’s counsel  clearly disproves this assertion.

          C. Timeliness of the Demurrer

          Espoir & Amour argues (again without any evidentiary support) that the demurrer was untimely, as it was filed more than  30 days after service of the Complaint. (Opposition, p. 4: 8-9, referencing CCP § 430.40(a).)

Defendants have presented evidence that the parties agreed to extend the time in which to “respond” to the Complaint (Reply, p.2: 23-28.) Defendants’ evidence disproves Plaintiff’s claim on this point as well.  The Court thus declines to rule that this demurrer is untimely.

D. Demurrer to the First Cause of Action is Sustained

          Defendants demur to the first cause of action for breach of contract on the basis that the cause of action fails to state facts sufficient to state a cause of action, and that the Complaint fails to allege whether the contract is oral, written or implied by conduct.

          The elements of a claim for breach of contract are “(1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff." (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) Here, the Complaint alleges that a contract exists between the parties (Complaint ¶ 2); that plaintiffs fully performed (Complaint ¶ 3); that defendants breached the contract by alleged improper management, self-dealing, and the diversion of business (Complaint ¶¶ 4-6); and that plaintiff was harmed as a result (Complaint ¶ 7.)

Despite these allegations, it is unclear what Defendants’ obligations were under the alleged agreement(s). Plaintiff urges that Defendants breached the agreement(s) by improperly managing the Amazon business, committing self-dealing by paying themselves  first, and using alleged trade secrets to divert business.  But Plaintiff has not adequately alleged the obligations that support a finding that this conduct constitutes a breach thereof.  Plaintiff’s opposition does not resolve this issue.

Secondly, Defendants argue that the demurrer should be sustained because it is unclear whether the contract is oral or written, or implied by conduct. (Motion, p. 6: 19.) If a written contract is at issue, it “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.” (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 993.) In this case, the contract is not attached, nor are its terms recited verbatim in the Complaint. To plead a contract by its legal effect, plaintiff must “allege the substance of its relevant terms. This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions.” (See Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-99.) The Court agrees with Defendants that this is another reason why the First Cause of Action is defective.  

Accordingly, the demurrer is sustained as to the first cause of action per CCP Section 430.10(g).

          E. Demurrer to the Second Cause of Action is Sustained

          A claim for breach of the covenant of good faith and fair dealing first requires that there be a valid contract. (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 3733.)

          Because the breach of contract claim is insufficient, the demurrer is also properly sustained as to the second cause of action for breach of the covenant of good faith and fair dealing, per CCP Section 430.10(g)..

          F. Demurrer to the Third Cause of Action is Sustained

          Defendants demur to the third cause of action for unfair business practices on the basis that the cause of action fails to state sufficient facts. In support, Defendants cite Linear Technology Corp. v. Applied Materials, Inc. and In re Webkinz for the proposition that a commercial dispute over parties’ economic relationship cannot, in and of itself,  support a separate claim under California Unfair Competition Law. (Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal App. 4th 115, 135; In re Webkinz (N.D. Cal. 2010) 695 F. Supp. 2d 987.) Linear Technologies stands for the proposition that “where 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 Technology Corp., supra at 135.)

Here, the contract is apparently entered into between two corporate entities, Espoir & Amour and Misc Group LLC. Defendants’ argument has merit.

          Accordingly, the demurrer to the third cause of action for unfair business practices is sustained.

          G. Demurrer to the Fourth Cause of Action is Sustained

          The policy of liberal construction does not apply to fraud claims. Fraud actions are subject to “strict requirements of particularity in pleading.  . . . Accordingly, the rule is everywhere followed that fraud must be specifically pleaded. The effect of this rule is twofold: (a) General pleading of the legal conclusion of ‘fraud’ is insufficient; the facts constituting the fraud must be alleged. (b) Every element of the cause of action for fraud must be alleged in the proper manner (i.e., factually and specifically), and the policy of liberal construction of the pleadings ... will not ordinarily be invoked to sustain a pleading defective in any material respect.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216, superseded by statute on other grounds.) A fraud cause of action must contain: “(1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages.” (Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1816.) “This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73, citations omitted.) 

This required particularity is missing here. The fourth cause of action refers to a “misrepresentation” by Defendant to Plaintiff, but does not indicate how, when or where this misrepresentation allegedly occurred. Additionally, the misrepresentation itself is not specifically alleged.

Consequently, the demurrer to the fourth cause of action is sustained.

III.     CONCLUSION AND ORDER

 Defendants’ demurrer is sustained as to all four causes of action asserted against it in the Complaint.

          Espoir & Amour LLC is given 20 days’ leave to file and serve a First Amended Complaint.   

Defendants are ordered to give notice of this ruling.  

Dated:                                                              _______________________________

                                                                              MARGARET L. OLDENDORF

                                                                       JUDGE OF THE SUPERIOR COURT