Judge: Melissa R. Mccormick, Case: "Metro East Healthcare Ltd. v. NextGen Healthcare Information Systems, Inc.", Date: 2022-07-28 Tentative Ruling

Defendant NextGen Healthcare Information Systems, Inc.’s Demurrer to First Amended Complaint

Defendant NextGen Healthcare Information Systems, Inc. demurs to the second, fourth, fifth, and sixth causes of action in plaintiff Metro East Healthcare Ltd.’s first amended complaint.  For the following reasons, defendant’s demurrer is sustained in part and overruled in part.

In ruling on a demurrer, a court must accept as true all allegations of fact contained in the complaint.  Blank v. Kirwan (1985) 39 Cal.3d 311, 318.  A demurrer challenges only the legal sufficiency of the affected pleading, not the truth of the factual allegations in the pleading or the pleader’s ability to prove those allegations.  Cundiff v. GTE Cal., Inc. (2002) 101 Cal.App.4th 1395, 1404-05.  Questions of fact cannot be decided on demurrer.  Berryman v. Merit Prop. Mgmt., Inc. (2007) 152 Cal.App.4th 1544, 1556.  Because a demurrer tests only the sufficiency of the complaint, a court will not consider facts that have not been alleged in the complaint unless they may be reasonably inferred from the matters alleged or are proper subjects of judicial notice.  Hall v. Great W. Bank (1991) 231 Cal.App.3d 713, 718 n.7.

The second cause of action alleges breach of oral contract.  Metro East alleges that “[i]n April 2019” NextGen promised Metro East it would compensate Metro East for the fees Metro East had paid NextGen and for other alleged damages.  First Amended Complaint ¶ 69.  Metro East alleges NextGen breached this promise by “never paying Metro East any refund or compensation for lost productivity or revenue.”  Id. ¶ 71. 

The elements of a cause of action for breach of contract are:  (1) the contract, (2) the plaintiff's performance or excuse for nonperformance, (3) the defendant's breach, and (4) the resulting damages to plaintiff.  Coles v. Glaser (2016) 2 Cal.App.5th 384, 391.  Metro East alleges each of these elements and factual allegations supporting each element.  NextGen’s arguments, which rest on factual allegations outside the first amended complaint, cannot be resolved on demurrer.  NextGen’s demurrer to the second cause of action is overruled.

The fourth cause of action alleges unjust enrichment.  There is no cause of action in California for unjust enrichment.  IB Melchior v. New Line Prods. (2003) 106 Cal.App.4th 779, 793; see also Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370 (same).  The phrase “unjust enrichment” does not describe a theory of recovery, but an effect:  the result of a failure to make restitution under circumstances where it is equitable to do so.  IB Melchior, 106 Cal.App.4th at 793.  Unjust enrichment is a general principle, underlying various legal doctrines and remedies, rather than a remedy itself.  Id.  It is synonymous with restitution.  Id.  NextGen’s demurrer to the fourth cause of action is sustained without leave to amend.

The fifth cause of action alleges negligent and fraudulent misrepresentation and concealment against NextGen.  The elements of fraud by misrepresentation are:  (1) a misrepresentation; (2) knowledge of its falsity; (3) intent to induce reliance on the misrepresentation; (4) justifiable reliance on the misrepresentation; and (5) resulting damages.  Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.  Each element of an intentional misrepresentation cause of action must be pleaded with specificity.  Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166.  General and conclusory allegations do not suffice.  Lazar, 12 Cal.4th at 645.  The particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.  Id.

In addition, NextGen is an entity.  To plead fraud against a corporation, the complaint must allege the name of the person who made the representations, their authority to speak, to whom they spoke, what was said and when.  Perlas v. GMAC Mortgage, LLC (2010) 187Cal.App.4th 429, 434; Lazar, 12 Cal.4th at 645.  The elements of a negligent misrepresentation cause of action are the same as those for fraud except for the requirement of scienter.  Bains v. Moores (2009) 172 Cal.App.4th 445, 454.  Metro East’s fifth cause of action satisfies the above pleading standards.  NextGen’s demurrer to the fifth cause of action is overruled.

The sixth cause of action alleges violation of Business & Professions Code section 17200 et seq.  The first amended complaint alleges NextGen breached the parties’ agreement by failing to provide functional software and engaged in related fraud and that, as a result, Metro East suffered harm including economic injury.  The first amended complaint also alleges the alleged misconduct “occurred, at least in substantial part, in Orange County.”  First Amended Complaint ¶ 5.  These allegations are sufficient to state a claim for violation of section 17200.  NextGen’s desire for more information about the alleged facts underlying these allegations can be addressed in discovery.

Defendant NextGen Healthcare Information Systems, Inc. is ordered to file an answer by August 8, 2022.

Defendant NextGen Healthcare Information Systems, Inc. to give notice.