Judge: Mark C. Kim, Case: 22LBCV00381, Date: 2023-05-18 Tentative Ruling
Case Number: 22LBCV00381 Hearing Date: May 18, 2023 Dept: S27
1.
Complaint
Plaintiff, A1 Container Solutions, LLC filed this action against
Defendants, Cargomatic, Inc., Culines Shipping Service Agency (USA), Inc., and
Norton Lilly International, Inc. for breach of contract, common counts, inducing
breach of contract, and intentional interference with contractual relations.
The crux of the complaint against Cargomatic is that A1 agreed to
provide container yard space and related services to Cargomatic pursuant to a
written agreement. Cargomatic made the
first two payments per the contract, then ceased making payments and indicated an
intention not to make further payments.
The crux of the complaint against CU and Norton is that they were
customers of Cargomatic, and they were the ones who insisted Cargomatic enter
into the agreement. Soon after
Cargomatic entered into the contract, CU and Norton realized they did not need Cargomatic’s
service, and they induced Cargomatic to breach the contract.
2.
Cargomatic Cross-Complaint
Cargomatic answered the complaint and filed a cross-complaint against
A1 for fraudulent inducement, breach of contract, breach of the implied
covenant of good faith and fair dealing, intentional interference with contractual
relations, indemnity, breach of the unfair competition law, intentional and negligent
interference with prospective economic advantage, negligent misrepresentation,
and declaratory relief. The crux of the
cross-complaint is that A1, during negotiations, represented that it could handle
the business Cargomatic would be bringing to it, when in reality it lacked the
capacity to provide the services contracted for.
3.
United Supply Chain Services, Inc.’s Cross-Complaint
United Supply Chain Services identifies itself in its cross-complaint
as having been erroneously sued and served as CU Lines Shipping Service Agency
(USA), Inc. in the complaint. It will be
referred to as “United” from this point forward in this ruling.
United filed a cross-complaint against A1 for the same claims asserted
by Cargomatic, with the exception of declaratory relief. The crux of its cross-complaint is that it
was an intended third party beneficiary of the contract between Cargomatic and
A1, and A1’s false representations that it would be able to handle the volume
needed by United caused United harm.
4.
Demurrer to Cross-Complaint
A1 demurs to United’s cross-complaint.
Specifically, it demurs to the first, fifth, sixth, seventh, eighth, and
ninth causes of action in the cross-complaint.
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. It is not the function of the demurrer to
challenge the truthfulness of the complaint; and for purpose of the ruling on
the demurrer, all facts pleaded in the complaint are assumed to be true, however
improbable they may be.
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 39
Cal.3d 311 (1985). No other extrinsic evidence can be considered (i.e., no
“speaking demurrers”). A demurrer is brought under CCP § 430.10 [grounds], §
430.30 [as to any matter on its face or from which judicial notice may be
taken], and § 430.50(a) [can be taken to the entire complaint or any cause of
action within]. Specifically, a demurrer
may be brought per CCP § 430.10(e) if insufficient facts are stated to support the
cause of action asserted. Per CCP
§430.10(a) a demurrer may be brought where the court has no jurisdiction of the
subject of the cause of action alleged in the pleading. Furthermore, demurrer for uncertainty will be
sustained only where the complaint is so bad that the defendant cannot reasonably
respond. CCP § 430.10(f).
However, in construing the
allegations, the court is to give effect to specific factual allegations that
may modify or limit inconsistent general or conclusory allegations. Financial
Corporation of America v. Wilburn, 189 Cal.App.3rd 764, 769 (1987). And, if the
facts pled in the complaint are inconsistent with facts which are incorporated
by reference from exhibits attached to the complaint, the facts in the
incorporated exhibits control. Further, irrespective of the name or label given
to a cause of action by the plaintiff, a general demurrer must be overruled if
the facts as pled in the body of the complaint state some valid claim for relief.
Special demurrers are not allowed in limited jurisdiction courts. (CCP § 92(c).)
Leave to amend must be allowed
where there is a reasonable possibility of successful amendment. Goodman v.
Kennedy, 18 Cal.3d 335, 348 (1976). The burden is on the complainant to show
the Court that a pleading can be amended successfully. (Id.)
Finally, CCP section 430.41
requires that “[b]efore filing a demurrer pursuant to this chapter, the
demurring party shall meet and confer in person or by telephone with the party
who filed the pleading that is subject to demurrer for the purpose of determining
whether an agreement can be reached that would resolve the objections to be
raised in the demurrer.” (CCP §430.41(a).) The parties are to meet and confer
at least five days before the date the responsive pleading is due. (CCP §430.41(a)(2).)
Thereafter, the demurring party shall file and serve a declaration detailing
their meet and confer efforts. (CCP §430.41(a)(3).)
A1’s attorney, Charles G. Bakaly IV, declares he and United’s attorney
met and conferred by phone prior to the filing of this demurrer. The meet and confer requirement is therefore satisfied.
A1 commences its reply by contending the opposition conflicts with the
cross-complaint. Specifically, the
opposition states that, based on the representations made by A1 to Cargomatic,
United entered into a contract with Cargomatic that was back-to-back. The cross-complaint, however, states that A1
was aware, at the time of the negotiations, that any contract with Cargomatic “would
be” back-to-back with the Cargomatic/United contract.
It is unclear how these two allegations are in conflict. At the time of the negotiations, there was a future
intention for Cargomatic and United to enter into an agreement. At the time of the filing of the
cross-complaint, there was actually such an agreement.
To the extent A1 is taking issue with United’s failure to attach its
agreement with Cargomatic to the cross-complaint, (a) A1 did not assert any
such objection in the demurrer, and (b) A1 has not articulated any defect in the
cross-complaint as a result of the failure to attach the Cargomatic/United
contract.
This initial argument in reply is therefore rejected.
A1 demurs to United’s first cause of action for fraudulent inducement,
contending the cross-complaint lacks the requisite specificity. United, in opposition to the demurrer, points
to the various paragraphs in the cross-complaint that specify who said what,
when, to whom, where, and by what means.
In reply, A1 makes arguments that will require findings of fact and that
cannot be decided at the pleading stage.
For example, A1 discusses United’s allegation that A1 knowingly and falsely
told Cargomatic it possessed certain kinds and amounts of the specific
equipment Cargomatic needed to provide CUL (United) pursuant to Cargmoatic’s
agreement with CUL (United). A1 argues
the allegation is deficient because it fails to show that A1 knew this statement
was false at the time it was made.
Pursuant to Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30-31,
knowledge and intent to defraud can be shown by circumstantial evidence. In this case, United pleads that the representations
were made in close proximity to the time the contract was set to commence, such
that A1 can be charged with knowledge of whether it actually had capacity to
deliver according to its promises at the time it made them.
A1 also argues United failed to allege with specificity how and when
the promises made were related by Cargomatic to United. The Court finds, at the pleading stage and taking
the entirety of the cross-complaint as a whole, that this allegation is sufficiently
pled.
The demurrer to the first cause of action is overruled.
United contends, by way of its fifth cause of action, that A1 must indemnify
United because United is a third party beneficiary of the contract between A1
and Cargomatic, and that contract has an indemnification clause. A1 argues the cause of action fails to state
a cause of action against it, because a third party beneficiary cannot enforce
an indemnification provision. A1 relies
on The Ratcliff Architects v. Vanir Construction Management, Inc. (2001) 88
Cal.App.4th 595, 601-602 to support its position.
In opposition, United contends Ratcliff is distinguishable because the
contract at issue in Ratcliff contained an express statement that the agreement
did NOT create any rights in persons who were not parties to the agreement,
whether third party beneficiaries or otherwise.
It contends there is no such language in the contract between Cargomatic
and A1, and therefore the holding of Ratcliff is not on point.
Neither party cites authority directly on point. The contract itself, at ¶6.1, provides, “The
Provider shall fully indemnify…Customer, its agents, and representatives, and
their respective directors, officers, and employees, from and against all
claims…which arise out of or related to…(2) Provider’s breach or violation of
any representation or warranty contained in this Agreement.”
The Court finds that because the contract expressly states for whose
benefit it exists (Cargomatic, its agents, its representatives, and their
respective directors, officers, and employees), and because United does not
fall into any of those categories, the cross-complaint fails to state a claim
for indemnification. The demurrer to this
cause of action is sustained. Because this
is a purely legal issue, leave to amend is denied.
United indicates, in opposition to the demurrer, that it withdraws this
cause of action from the cross-complaint.
The demurrer is therefore sustained without leave to amend.
United concedes, in opposition to the demurrer, that it has not pled
independently wrongful conduct. It contends
it intended to state a claim for intentional and negligent interference with
contractual relations, not prospective economic advantage. The demurrer to these causes of action is sustained
without leave to amend; United is given leave to add claims for interference with
contractual relations if it is able to do so by way of an amended
cross-complaint. The Court will not pass
on the viability of those claims, which are challenged in the reply papers, at
this time. The parties must meet and
confer if United intends to add these claims by way of an amended
cross-complaint.
A1 demurs to this cause of action on the grounds that A1 owed United no
duty of care, as there are no allegations that A1 made false statements to
United, as opposed to Cargomatic.
United, in opposition, argues (a) the statements were made in its
presence, and (b) the statements were made with the intention that Cargomatic
would pass them on to United.
In reply, A1 argues neither of these allegations is made in the cross-complaint. As discussed in connection with the fraud
cause of action, above, it is clear, from reading the entire cross-complaint,
that the parties understood and contemplated that statements made to Cargomatic
would be passed onto and relied on by United.
The demurrer is therefore overruled.
The demurrer to the indemnification, unfair competition, and
intentional and negligent interference with prospective economic relations
causes of action is sustained without leave to amend. The demurrer is otherwise overruled.
If United wishes to add claims for intentional and/or negligent interference
with contractual relations to its cross-complaint, the parties must meet and
confer concerning the sufficiency of the allegations before United files an
amended cross-complaint.
If United opts to file an amended cross-complaint, it must do so within
thirty days. A1 must file a responsive pleading
within the statutory time thereafter. If
United opts not to file an amended cross-complaint, A1 must file an answer to
the original cross-complaint, with the above-detailed causes of action deemed
stricken, within forty days (ten days after the FACC is due).
A1 is ordered to give notice.