Judge: Maurice A. Leiter, Case: 24STCV05665, Date: 2024-11-26 Tentative Ruling

Case Number: 24STCV05665    Hearing Date: November 26, 2024    Dept: 54

Hearing Date: November 26, 2024

Department 54, Judge Maurice Leiter

Demurrer to First Amended Cross-Complaint and Motion to Strike

Moving Party: Plaintiffs/Cross-Defendants STG Port Services, LLC and STG Cartage, LLC

Responding Party: Defendant/Cross-Complainant Cargomatic, Inc.

T/R:      STG’S DEMURRER TO THE FOURTH CAUSE OF ACTION IS SUSTAINED.

THE DEMURRER TO THE REMAINING CAUSES OF ACTION IS OVERRULED.

THE MOTION TO STRIKE IS DENIED.

CARGOMATIC TO FILE AND SERVE A SECOND AMENDED CROSS-COMPLAINT WITHIN 30 DAYS OF NOTICE OF RULING. STG TO FILE AND SERVE A RESPONSE WITHIN 30 DAYS THEREAFTER.

STG TO NOTICE.

If the parties wish to submit on the tentative, please email the courtroom at SMCdept54@lacourt.org with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing.

The Court considers the moving papers, opposition, and reply.

BACKGROUND

On March 6, 2024, Plaintiffs STG Port Services, LLC and STG Cartage, LLC sued Defendant Cargomatic, Inc., asserting causes of action for (1) breach of contract; (2) quantum meruit; (3) account stated; and (4) open book account. STG alleges Cargomatic contracted for STG’s cargo handling services. STG alleges Cargomatic owes more than $1 million to STG for services provided by STG.

On August 8, 2024, Cargomatic, Inc. filed the operative first amended cross-complaint against STG Port Services, LLC and STG Cartage, LLC, asserting causes of action for (1) fraud; (2) negligent misrepresentation; (3) breach of contract; (4) negligence; (5) unjust enrichment; (6) indemnity; and (7) UCL violations. Cargomatic alleges STG failed to perform its services adequately.

ANALYSIS

A demurrer to a complaint may be taken to the whole complaint or to any of the causes of action in it.  (CCP § 430.50(a).)  A demurrer challenges only the legal sufficiency of the complaint, not the truth of its factual allegations or the plaintiff's ability to prove those allegations.  (Picton v. Anderson Union High Sch. Dist. (1996) 50 Cal. App. 4th 726, 732.)  The court must treat as true the complaint's material factual allegations, but not contentions, deductions or conclusions of fact or law.  (Id. at 732-33.)  The complaint is to be construed liberally to determine whether a cause of action has been stated.  (Id. at 733.)

A. First and Second Causes of Action for Fraud

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.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.) In California, fraud, including negligent misrepresentation, must be pled with specificity. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) “The particularity demands that a plaintiff plead facts which show how, when, where, to whom, and by what means the representations were tendered.” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.)

STG demurs to the first and second causes of action for fraud on the grounds that Cargomatic has failed to allege the claims with the requisite specificity. Cargomatic alleges that in a series of emails STG’s predecessor, XPO Logistics Port Services, LLC, misrepresented its capacity to make timely moves of substantial amounts of time sensitive cargo resulting in shipments failing to make it to their destinations by Christmas and Valentine’s Day. Cargomatic alleges the untimely shipments caused Cargomatic’s client, Dollar Tree, to lose “millions” and Dollar Tree refused to pay Cargomatic. This is sufficient to allege causes of action for fraud.

The demurrer to the first and second causes of action is OVERRULED.

B. Third Cause of Action for Breach of Contract and Breach of the Implied Covenant of Good Faith and Fair Dealing

“The standard elements of a claim for breach of contract are: ‘(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) damage to plaintiff therefrom.’” (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.)

STG asserts that the third cause of action fails because Cargomatic has not adequately pleaded the terms of the contract. This is contrary to the allegations in the FACC. STG alleges several terms of the parties’ oral contact, including that XPO would pick up and transport containers from the Los Angeles and Long Beach Ports, transload and store containers as needed, transport the relevant cargo to distribution centers and then to end locations of Cargomatic’s customer, and timely return the empty containers to the Port facilities, so as not to incur demurrage or detention charges. Cargomatic alleges STG breached these terms in bad faith. This is sufficient to allege a cause of action for breach of contract.

The demurrer to the third cause of action is OVERRULED.

C. Fourth Cause of Action for Negligence

STG demurs to the fourth cause of action for negligence on the ground that it is barred by the economic loss rule. The Court agrees. There is no recovery in tort for “negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Sheen v. Wells Fargo Bank (2022) Cal.5th 905, 922.) Cargomatic alleges only economic losses.

The demurrer to the fourth cause of action is SUSTAINED.

D. Fifth Cause of Action for Unjust Enrichment

STG asserts that the fifth cause of action fails because it is not a recognized cause of action in California. Unjust enrichment is an equitable remedy doctrine. Cargomatic may allege STG was unjustly enriched.

The demurrer to the fifth cause of action is OVERRULED.

E. Sixth Cause of Action for Indemnity

STG asserts Cargomatic has failed to allege a claim for express or implied indemnity. Cargomatic alleges STG must indemnify Cargomatic under the express terms of STG’s “Terms and Conditions.” This is sufficient to allege a claim for indemnity.

The demurrer to the sixth cause of action is OVERRULED.

F. Seventh Cause of Action for UCL Violations

California Business and Professions Code section 17200 prohibits “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. Code § 17200; see Clark v. Superior Court (2010) 50 Cal.4th 605, 610.) Cargomatic has sufficiently alleged fraud and as a result has sufficiently alleged a claim for UCL violations.

The demurrer to the seventh cause of action is OVERRULED.

G. Motion to Strike

“Any party, within the time allowed to response to a pleading, may serve and file a notice of motion to strike the whole or any part" of that pleading. (CCP § 435(b)(1).) “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 asserted 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." (CCP § 436.)

Punitive damages are available in noncontract cases where the defendant is guilty of “oppression, fraud, or malice.”  (Civil Code § 3294(a).)  Conclusory allegations are insufficient to support a claim for punitive damages.  (See, e.g., Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal. App. 3d 590, 620.)  However, “the stricken language must be read not in isolation, but in the context of the facts alleged in the rest of petitioner's complaint.”  (Perkins v. Superior Court (1981) 117 Cal. App. 3d 1, 6.)

STG moves to strike the claims for punitive damages and restitution. As Cargomatic has alleged a claim for fraud, Cargomatic has alleged entitlement to punitive damages. Cargomatic may request restitution as a remedy.

The motion to strike is DENIED.