Judge: Martha K. Gooding, Case: 2019-01082926, Date: 2022-10-03 Tentative Ruling

1) Demurrer to Amended Complaint

 

2) Motion to Strike

 

Demurrer to Third Amended Complaint

 

The Demurrer by Defendants Z Pizza International, Christopher M. Bright, ZBV, LLC, and Amir Sabetian to the Third Amended Complaint of Plaintiff Hockenbergs Equipment And Supply Co., Inc. (“TAC”) is OVERRULED as to the 1st, 2nd, and 6th causes of action.  It is sustained without leave to amend as to the 5th cause of action, as Plaintiff has agreed to dismiss the 5th cause of action.

 

 A demurrer presents an issue of law regarding the sufficiency of the allegations set forth in the complaint.  (Lambert v. Carneghi (2008) 158 Cal.App.4th 1120, 1126.) The challenge is limited to the “four corners” of the pleading (which includes exhibits attached and incorporated therein) or from matters outside the pleading which are judicially noticeable under Evidence Code §§ 451 or 452.  Although California courts take a liberal view of inartfully drawn complaints, it remains essential that a complaint set forth the actionable facts relied upon with sufficient precision to inform the defendant of what plaintiff is complaining, and what remedies are being sought.  (Leek v. Cooper (2011) 194 Cal.App.4th 399, 413.)

 

On demurrer, a complaint must be liberally construed.  (CCP § 452; Stevens v. Superior Court (1999) 75 Cal.App.4th 594, 601.)  All material facts properly pleaded, and reasonable inferences drawn from them, must be accepted as true.  (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.)

 

1st cause of action for promissory fraud and 2nd cause of action for intentional misrepresentation

 

“Promissory fraud” is a subspecies of the action for fraud and deceit. A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud. (See Union Flower Market, Ltd. v. Southern California Flower Market, Inc. (1938) 10 Cal.2d 671, 676, 76 P.2d 503; see Civ.Code, § 1710, subd. (4); 5 Witkin, Summary of Cal.Law, supra, § 685, pp. 786–787.) 

 

The elements of fraud are “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)  Allegations of fraud must be alleged with specificity.  (See Roberts v. Ball, Hunt, Hart, Brown & Baerwitz (1976) 57 Cal.App.3d 104, 109-110.) 

 

“In California, fraud must be pled specifically; general and conclusory allegations do not suffice.” (Lazar, supra, 12 Cal.4th 631, 645, citing Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 74.) 

 

The Court previously sustained Defendants’ demurrer to these to causes of action on the ground that Plaintiff failed to plead these claims with the requisite specificity.  Plaintiff has cured these defects.  Plaintiff has added specifics, including that the representations regarding Defendants’ ability to pay were made by Defendants’ agent, Amir Sabetian, between approximately November 1 and November 6, 2017.  (See TAC, ¶¶ 38, 39, 42, 45-47.)

 

In addition to arguing that Plaintiff failed to plead fraud with the required specificity, Defendants argue that none of the alleged representations are representations of a past fact. This is not completely accurate.  Plaintiff does allege that Defendants represented and provided assurances to Plaintiff (at the time of ordering services/equipment from Plaintiff) that Avita could and would pay Plaintiff in full, and that there were sufficient funds in Avita’s Operating Account to pay the total amount owed. (TAC, ¶ 45.)  That constitutes an actionable misprepresentation.

 

5th cause of action for conversion

 

Plaintiff’s Opposition state it has agreed to dismiss this cause of action.  Thus, the Court SUSTAINS Defendant’s demurrer to the 5th cause of action WITHOUT leave to amend.

 

6th cause of action for unfair business practices – B&P Code § 17200

 

Business & Professions Code section 17200 (“UCL”) prohibits “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” 

 

Under the unlawful prong of the statute, a violation of law may be actionable as unfair competition under Cal. Business & Professions Code section 17200.  Lueras v. BAC Home Loans Servicing, Inc. (2013) 221 Cal.App.4th 49, 81.  “An unfair business practice occurs when that practice offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers…An unfair business practice also means the public policy which is a predicate to the action must be tethered to specific constitutional, statutory or regulatory provisions.”  Id. (internal citations omitted.)  A fraudulent practice “require[s] only a showing that members of the public are likely to be deceived and can be shown even without allegations of actual deception, reasonable reliance and damage.” Id. (internal citations omitted.)  Cal. Business & Professions Code § 17500 states that it “is unlawful for any person to solicit a sale or order for sale of goods or services,” without revealing “that the purpose of the contact is to effect a sale…” 

 

The Court previously sustained the demurrer to this cause of action in the Second Amended Complaint because it was based on the fraud-related allegations in the 1st and 2nd cause of action that the Court had found to be deficient.

 

As noted above, however, Plaintiff has now cured the prior defects.  Therefore, Plaintiff has also now alleged sufficient facts to support this derivative claim for unfair business practices. 

 

As a result, the demurrer is overruled as to the 1st, 2nd, and 6th causes of action.

 

Motion to Strike

 

The Motion to Strike by Defendants Z Pizza International; Christopher M. Bright; ZBV, LL; and Amir Sabetian to strike portions of Plaintiff’s TAC is GRANTED in part and DENIED in part, as set forth below.

 

A court may strike out any irrelevant, false, or improper matter inserted in any pleading or 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.  (Code Civ. Proc. § 436.)  “Irrelevant” matters include   allegations not essential to the claim, allegations neither pertinent to nor supported by an otherwise sufficient claim or a demand for judgment requesting relief not supported by the allegations of the complaint.  (Code Civ. Proc. § 431.10(b).)  A motion to strike can also strike legal conclusions.  (Weil & Brown, Cal. Prac. Guide, Civil Procedure Before Trial, ¶ 7:179 (2010).)  Conclusory allegations are permitted, however, if they are supported by other factual allegations in the complaint.  (Perkins v. Superior Court (1981) 117 Cal.App. 3d 1, 6.)

 

The same liberal policy regarding amendments that applies to the sustaining of demurrers applies to motions to strike.  If a defect may be correctible, leave to amend generally should be given.  (Id. at 168.)

 

Defendants move to strike the following:

 

•         ¶ 3, Lines 17-21: “ZPizza International is a restaurant franchise business that allows franchisees like Avita to operate under the name ‘ZPizza.’ ZPizza International also runs a side-business, to obtain EB-5 visas for ZPizza International’s foreign investor franchisees. Such as in the case of franchisee Avita, the two foreign investor members in Iran contributed $500,000 per person into Avita’s business Operating Account to qualify for EB-5 visas.”

 

•         ¶ 5 in its entirety:  “ZBV, LLC is a management/consulting company that was formed by Christopher Bright and Amir Sabetian for the sole purposes of facilitating franchisor ZPizza International’s side business – to obtain EB-5 visas for foreign investor franchisees.  ZBV, LLC provided management services solely to ZPizza International’s foreign investor franchisees, like Avita Pizza including all aspects of the pre-operation set up of the franchisees’ business as well as the day to day management of the business, once the business was in operation – to facilitate and assist the foreign investor franchisees in meeting the requirements to obtain EB-5 visas.”

 

•         ¶ 6, lines 9-13: “Mr. Bright owns, controls, manages, directs and/or has a controlling interest in ZPizza International and ZBV, LLC, as well as in Avita during the applicable time periods relevant to this action. Mr. Bright serves and/or served in various capacities as the CEO, Secretary, CFO, President, Director, Managing Member, Shareholder of franchisor ZPizza International, the management/consulting company ZBV, LLC, and franchisee Avita.”

 

•         ¶ 8, Lines 19-21: “The two foreign nationals entered into a series of agreements with Christopher Bright and his corporate entities in order to set up franchisee Avita’s pizza restaurants that would qualify them for EB-5 visas.”

 

•         ¶¶ 10, 21-25 in their entirety;

 

•         Exhibits A-D;

 

•         The request for attorney fees; and

 

•         The prayer for punitive damages.

 

The Court agrees that allegations related to Plaintiff’s claim that Defendants franchised ZPizza (Avita dba ZPizza) for the purpose of obtaining EB-5 visas for foreign investors are irrelevant.  Based on the allegations in the TAC, Plaintiff’s claims related to the EB-5 Visa business are not relevant to this action, which centers on Defendants’ alleged failure to pay the full amount owned under the parties’ 11/6/17 agreement, whereby Plaintiff agreed to provide foodservice equipment and labor valued at $107,483.02 to one of Avita’s new restaurants, ZPizza Tap Room, in Oceanside, California. 

 

Thus, the Court strikes the following:

 

Paragraph 3 – the two sentences that begin line 18 and continue through line 21, “ZPizza International also runs a side-business . . . to qualify for EB-5 visas.”

 

Paragraph 5 – the portions of lines 3-7 that state:   “—to obtain EB-5 visas for foreign investor franchisees” and “—to facilitate and assist the foreign investor franchisees in meeting the requirements to obtain EB-5 visas.”

 

Paragraph 8 – the phrase “that would qualify them for EB-5 visas.”

 

Paragraph 21—the sentence on lines 24-26 that states: “Defendants Bright and Sabetian, through their corporate entity ZPizza International, also run a side-business, to obtain EB-5 visas for ZPizza International’s foreign investor franchisee, like Avita.”

 

Paragraph 22 – the phrase at page 6, lines 1-2 “that would qualify them for EB-5 visas.”   And the phrase as page 6, lines 3-5 beginning “dictating the parties’ rights and obligations for purposes of . . . .”

 

Paragraph 23 – all references to Exhibit B as the “EB-5 contract” and the phrase “to facilitate the EB-5 visa side-business” nd the allegations at 7:12-8:16.

 

Paragraph 24 and 25 in their entirety.

 

 

The Court DENIES the Motion to Strike paragraph 6, lines 9-13; and paragraph 10.

 

 

In addition, exhibits A-D are the franchise agreements as well as agreements between ZBV, LLC and Avita regarding the operations of the restaurant.  The Court finds that these contracts are also not relevant to Plaintiff’s allegations related to the 11/6/17 agreement.  Accordingly, the strikes these exhibits from the TAC, with 15 days leave to amend.

 

 

With respect to punitive damages, Civil Code § 3294 provides that punitive damages may be awarded in an action for breach of an obligation not arising from contract, if the plaintiff proves by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.  “Malice” means conduct that is intended to cause injury or despicable conduct that is carried on with a willful and conscious disregard of the right and safety of others.  (Civ. Code § 3294(c)(1).)

 

The TAC lacks specific allegations that each of the Defendants acted with malice. As a result, the motion is granted with 15 days leave to amend as to the punitive damages claim.

 

Lastly, Defendants move to strike the request for attorney fees on the ground that there is no contract or statute providing for attorney fees. In opposition, Plaintiff does not address the arguments related to the claim for attorney fees.  Therefore, the Court also grants the motion to strike the prayer for attorney fees without leave to amend.

 

Defendants are ordered to give notice.