Judge: Michael E. Whitaker, Case: 24SMCV02816, Date: 2025-01-14 Tentative Ruling

Case Number: 24SMCV02816    Hearing Date: January 14, 2025    Dept: 207

TENTATIVE RULING

MOTIONS

On June 12, 2024, Plaintiff Dena Kemp, Inc. (“Plaintiff”) brought suit against Defendants The Residency Experience (“Residency”); Kent Belden (“Belden”); Eric Culberson, also known as EJ King (“Culberson”); Kollin Carter (“Carter”); Wayman Bannerman (“Bannerman); Micah McDonald (“McDonald”); and Wayman & Micah (“Wayman & Micah”).  The operative First Amended Complaint (“FAC”) alleges causes of action for (1) breach of written contract; (2) common counts; (3) conversion; and (4) promissory fraud. 

As to Moving Defendants Residency and Belden (“Defendants”), Plaintiff alleges the following:

·       First Cause of Action for Breach of Written Contract

·       Fifth Cause of Action for Goods Had and Received

·       Ninth Cause of Action for Open Book Account

·       Thirteenth Cause of Action for Conversion

·       Seventeenth Cause of Action for Promissory Fraud

Defendants now demur to the thirteenth cause of action for conversion and the seventeenth cause of action for promissory fraud on the grounds that they fail to state facts sufficient to constitute a cause of action and for uncertainty, pursuant to Code of Civil Procedure section 430.10, subdivisions (e) and (f), respectively.  Defendants also move to strike allegations and claims for punitive damages from the FAC.

Plaintiff opposes both motions and Defendants reply.

ANALYSIS

1.     DEMURRER

“It is black letter law that a demurrer tests the legal sufficiency of the allegations in a complaint.”  (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.)  In testing the sufficiency of a cause of action, a court accepts “[a]s true all material facts properly pled and matters which may be judicially noticed but disregard contentions, deductions or conclusions of fact or law.  [A court also gives] the complaint a reasonable interpretation, reading it as a whole and its parts in their context.”  (290 Division (EAT), LLC v. City & County of San Francisco (2022) 86 Cal.App.5th 439, 450 [cleaned up]; Hacker v. Homeward Residential, Inc. (2018) 26 Cal.App.5th 270, 280 [“in considering the merits of a demurrer, however, “the facts alleged in the pleading are deemed to be true, however improbable they may be”].)

Further, in ruling on a demurrer, a court must “liberally construe” the allegations of the complaint “with a view to substantial justice between the parties.”  (See Code Civ. Proc., § 452.)  “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant.”  (Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1238.)  

In summary, “[d]etermining whether the complaint is sufficient as against the demurrer on the ground that it does not state facts sufficient to constitute a cause of action, the rule is that if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated, or may be intermingled with a statement of other facts irrelevant to the cause of action shown, or although the plaintiff may demand relief to which he is not entitled under the facts alleged.”  (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

A.    UNCERTAINTY

“[D]emurrers for uncertainty are disfavored.”  (Lickiss v. Financial Industry Regulatory Authority (2012) 208 Cal.App.4th 1125, 1135.)  A demurrer for uncertainty will be sustained only where the pleading is so bad that the responding party cannot reasonably respond - i.e., he or she cannot reasonably determine what issues must be admitted or denied, or what claims are directed against him or her.  (Khoury v. Maly’s of California (1993) 14 Cal.App.4th 612, 616.)  Where a demurrer is made upon the ground of uncertainty, the demurrer must distinctly specify exactly how or why the pleading is uncertain, and where such uncertainty appears by reference to page and line numbers.  (See Fenton v. Groveland Comm. Services Dist. (1982) 135 Cal.App.3d 797, 809.) 

Although Defendants bring their demurrers in part on the grounds of uncertainty, Defendants do not make any arguments in the body of the memorandum of points and authorities that the allegations are uncertain.  As such, Defendants do not demonstrate that any portions of the FAC are so bad that they cannot reasonably determine what issues must be admitted or denied, or what claims are directed against them. 

Accordingly, the Court declines to sustain Defendants’ demurrer on the basis of uncertainty. 

B.    FAILURE TO STATE A CAUSE OF ACTION

                                                         i.          Thirteenth Cause of Action – Conversion

“Conversion is generally described as the wrongful exercise of dominion over the personal property of another.  The basic elements of the tort are (1) the plaintiff's ownership or right to possession of personal property; (2) the defendant's disposition of the property in a manner that is inconsistent with the plaintiff's property rights; and (3) resulting damages.”  (Regent Alliance Ltd. v. Rabizadeh (2014) 231 Cal.App.4th 1177, 1181.)

Plaintiff alleges:

12.  On or about October 31, 2019, Dana Kemp and Residency Experience entered into a written agreement ("2019 Agreement") under which, among other things, in consideration of a monthly retainer payment of $5,000.00 by Dena Kemp, Residency Experience agreed to provide services in public relations, promotion and marketing of Dena Kemp jewelry, with an emphasis on celebrity placement of the jewelry pieces, on a short-term rental basis, to celebrity stylists for red-carpet events, photo shoots and celebrity guest appearances on television and other media. The 2019 Agreement terminated by its terms on May 1, 2020 and was not renewed in light of the pandemic and attendant lockdowns and disruptions to business activity.

13.  On or about January 14, 2021, amending and superseding the prior agreement, plaintiff and Residency Experience entered into a new written Agreement ("Residency Experience Agreement"), a true and correct copy of which is attached as Exhibit 1 hereto and incorporated herein by this reference. Under the terms of the Residency Experience Agreement, among other things, in consideration of a monthly retainer of $5,000.00 paid to Residency Experience, it agreed, among other things: to provide a showcase for a curated collection of Dena Kemp jewelry; to offer a platform for celebrity placement dissemination; to facilitate sales and rentals of Dena Kemp jewelry to celebrity clients; and to promote the products of Dena Kemp through proactive outreach to Residency Experience clients, social media and special events. In relevant part, the Agreement also provides as follows:

The Residency Experience shall immediately return all Dena Kemp merchandise, whether in its possession or in the possession of The Residency Experience clients or customers, to Dena Kemp, upon Dena Kemp's written demand to do so. The Residency Experience does not have the right to hold Dena Kemp merchandise as security for any reason nor in the event of any dispute between Dena Kemp and The Residency Experience.

*  *  *  *

Insurance Policy:

The Residency Experience will insure all pieces while in the care of The Residency Experience. Third parties pulling DENA KEMP, for press request are liable for any costs, losses and/or damages and will sort out directly with The Residency Experience, for the reimbursement of any subject pieces.

If an employee of The Residency Experience is negligent with handling jewelry, The Residency Experience will be responsible to cover cost to DENA KEMP.

Third Party Pulls: Lost or Stolen

All third parties pulling DENA KEMP must sign The Residency Experience and DENA KEMP combined "responsibility forms" prior to The Residency Experience releasing jewelry. All third-parties pulling DENA KEMP are responsible for lost, stolen or damaged product. Upon The Residency Experience receiving payment from the third-party, The Residency Experience will release payment to DENA KEMP, through an account credit, bank wire or check.

Identical language appeared in the 2019 Agreement.  Plaintiff relied on Residency Experience’s representation of insurance coverage for plaintiff’s fine jewelry items as a material term without which plaintiff would not have entered into the Agreement.

14.  Plaintiff has performed all things required of it to be performed under the terms of the Residency Experience Agreement, except for those items which have been excused or justified by the acts or omissions of defendants.

15.  Plaintiff is informed and believes and thereon alleges that on or about December 2, 2021, Wayman and Micah borrowed the fine jewelry items specified in Residency Experience Delivery Note 198735 and, in connection therewith, their agent and employee, Ynes Trabelsi, executed the standard-form Dena Kemp Memo Agreement and the Residency Experience Fine Jewelry Responsibility Form appended thereto. A true and correct copy of Delivery Note 198735 including the two executed agreements appended thereto (collectively, the "Wayman and Micah Agreement") is attached as Exhibit 2 hereto and incorporated herein by this reference. Plaintiff is an express third-party beneficiary of the Wayman and Micah Agreement.

16.  Plaintiff is informed and believes and thereon alleges that on or about April 20, 2022, EJ King borrowed the fine jewelry items specified in Residency Experience Delivery Note 206041 and, in connection therewith, executed the standard-form Dena Kemp Memo Agreement and the Residency Experience Fine Jewelry Responsibility Form appended thereto. A true and correct copy of Delivery Note 206041 including the two executed agreements appended thereto (collectively, the "EJ King Agreement") is attached as Exhibit 3 hereto and incorporated herein by this reference. Plaintiff is an express third-party beneficiary of the EJ King Agreement.

17.  Plaintiff is informed and believes and thereon alleges that on or about June 1, 2023, Kollin Carter borrowed the fine jewelry items specified in Residency Experience Delivery Note 227547 and, in connection therewith, his agent, Juan Ortiz, executed the standard-form Dena Kemp Memo Agreement and the Residency Experience Fine Jewelry Responsibility Form appended thereto. A true and correct copy of Delivery Note 227547 including the two executed agreements appended thereto (collectively, the "Carter Agreement") is attached as Exhibit 4 hereto and incorporated herein by this reference. Plaintiff is an express thirdparty beneficiary of the Carter Agreement.

18. On or about June 20, 2022, plaintiff was informed by Stephen Ledezma, Senior Vice President of Residency Experience, that stylists EJ King and Wayman and Micah had failed to return certain pieces of Dena Kemp jewelry which had been lent to them by Residency Express. The retail value of the missing pieces of jewelry was in excess of $137,000.00.

19. Thereafter, commencing on September 12, 2022, a series of communications, by telephone and by email, took place between Dena Kemp and Residency Experience personnel in which, among other things, Dena Kemp demanded return of all the missing pieces. On January 27, 2023, Dena Kemp invoiced Residency Experience for the wholesale value of the missing pieces.

20. On August 28, 2023, Residency Experience informed Dena Kemp that stylist Kollin Carter had "lost" a pair of earrings with a value of $28,000.00. The following day, Dena Kemp invoiced Residence Experience for the value of the missing jewelry lent to Kollin Carter.

21. On October 9, 2023, by letter of the same date, Dena Kemp again made demand on Residency Experience for return of the missing pieces of jewelry which had been lent to EJ King, Wayman and Micah and Carter (collectively, "the stylists").

22. Over the course of the intervening months, certain sums have been collected from the stylists, leaving an outstanding collective balance of $120,700.00 due, owing and unpaid from Residency Experience to Dena Kemp.

23. Plaintiff is informed and believes and thereon alleges, among other things, that:

a. At no time did Residency Experience ever intend to or did obtain the insurance required under the Residency Experience Agreement to cover the cost of Dena Kemp jewelry which was either lost or stolen.

b. The Residency Experience employee(s) who facilitated lending the missing pieces of Dena Kemp jewelry to each of the stylists acted negligently in the handling of the jewelry and documenting these rentals.

c. In breach of the Residency Experience Agreement, Residency Express has failed and refused, and continues to fail and refuse, to return to Dena Kemp the missing jewelry pieces, or to pay for their value.

24.  On March 28, 2024, by email of the same date, Dena Kemp sent a final demand to Residency Experience for return of the missing jewelry pieces or payment of the cost thereof A deadline of April 24, 2024 was set for compliance.

25.  On April 10, 2024, Dena Kemp received a letter from counsel for Residency Express, denying liability for the losses sustained by Dena Kemp as a result of the theft or loss of the missing jewelry pieces.

26.  On April 22, 2024, counsel for Dena Kemp responded to this letter, with a demand for return of the missing jewelry items or payment in full of their value. As of the date this action was filed, defendants and each of them had failed and refused, and continue to fail and refuse, to pay Dena Kemp in full for the losses sustained as a result of the loss or theft of the missing jewelry pieces. As of the filing date of this action, the amount due, owing and unpaid to Dena Kemp for the full retail value of the missing jewelry was the sum of $136,866.66. Since the filing of this action, certain payments have been received from certain of the stylists, reducing this total somewhat. As of August 20, 2024, the amount due, owing and unpaid from the defendants collectively was $120,700.00.

[…]

88.  Under the terms of the Residency Experience Agreement, defendants and each of them knowingly, purposefully and wrongfully exercised dominion and control over plaintiffs personal property, specifically the fine jewelry items enumerated in the Residency Experience Agreement, the Wayman and Micah Agreement, the EJ King Agreement and the Kollin Carter Agreement.

89.  At all material times, plaintiff had a right to the aforesaid items of fine jewelry.

90.  Defendants and each of them knowingly, purposefully and substantially interfered with plaintiffs ownership and possessory interests in the subject property by converting it to defendants' own use by:

a.      Taking possession of the fine jewelry items enumerated in the Residency Experience Agreement, the Wayman and Micah Agreement, the EJ King Agreement and the Kollin Carter Agreement, and converting them to their own purposes;

b.     Preventing plaintiff from gaining access to its property or the retail value thereof; and

c.      Refusing either to tender to plaintiff the lost or stolen items of jewelry, or to pay plaintiff, upon demand, the sums due which had been converted by defendants and each of them.

91.  Plaintiff did not consent to these acts of conversion by defendants and each of them.

92. As a direct and proximate result of the wrongful conduct of defendants and each of them, plaintiff has suffered damages in the minimum sum of $120,700.00, according to proof at time of trial, together with (a) late charges as provided in the Wayman and Micah Agreement, the EJ King Agreement and the Carter Agreement, or at the maximum legal rate, (b) prejudgment interest at the legal rate of ten-percent per annum and (c) costs of suit incurred herein, all according to proof at time of trial.

(FAC ¶¶ 12-26; 88-92.)

            Thus, Plaintiff alleges that Defendants wrongfully took, kept, and/or disposed of Plaintiff’s fine jewelry.

            Defendants argue that (1) Plaintiff cannot show Defendants acted intentionally to wrongfully dispose of the jewelry at issue; and (2) the economic loss doctrine bars Plaintiff’s conversion claim, which is primarily premised on a breach of contract claim.

            Intentional Wrongful Act

            As for the first argument, whether Plaintiff can ultimately show that Defendants committed a wrongful act is a matter of proof to be resolved at later stages of the litigation. 

Further, “Conversion is a strict liability tort. The foundation of the action rests neither in the knowledge nor the intent of the defendant. Instead, the tort consists in the breach of an absolute duty; the act of conversion itself is tortious. Therefore, questions of the defendant's good faith, lack of knowledge, and motive are ordinarily immaterial.”  (Regent Alliance Ltd. v. Rabizadeh (2014) 231 Cal.App.4th 1177, 1181.)  Plaintiff has adequately alleged that Defendants wrongfully kept or otherwise disposed of and failed to return Plaintiff’s fine jewelry sufficient to state a claim for conversion.

            The case Defendants cite to for the contrary proposition is misplaced.  Defendants cite to Duke v. Superior Court  which holds:  “To prove a cause of action for conversion, the plaintiff must show the defendant acted intentionally to wrongfully dispose of the property of another.”  (Duke v. Superior Court (2017) 18 Cal.App.5th 490, 508 (hereafter Duke).)  But this simply means that an intentional act is required, that ultimately wrongfully disposes the property of another.  It does not mean that the Plaintiff must plead and show a wrongful intent.  As Duke itself notes, “A cause of action for conversion does not require a showing of bad faith” and the “parties’ good faith or bad faith is irrelevant to our inquiry[.]”  (Id. at p. 507.)  Further, Duke held that the plaintiff was not foreclosed from alleging a cause of action for conversion at the pleadings stage. 

The Court similarly finds Voris v. Lampert distinguishable, as that case decided the narrow issue of whether a terminated employee may assert a conversion claim based on the nonpayment of wages.  (Voris v. Lampert (2019) 7 Cal.5th 1141 (hereafter Voris).)  Specifically, Voris held that because there already exist extensive remedies for the nonpayment of wages, it was inappropriate to recognize an additional claim for conversion.  (Id. at pp. 1156-1157.) Because this case does not involve unpaid wages, Voris is inapposite.

Economic Loss Doctrine

As for Defendants’ second argument, “[T]he economic loss rule provides: where a purchaser’s expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only economic losses.”  (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988.)  “This doctrine hinges on a distinction drawn between transactions involving the sale of goods for commercial purposes where economic expectations are protected by commercial and contract law, and those involving the sale of defective products to individual consumers who are injured in a manner which has traditionally been remedied by resort to the law of torts.”  (Ibid.) 

In summary, the economic loss doctrine applies when the parties have entered into a contract; the plaintiff sues for tort damages, alleging defendant failed to perform as the contract requires; and negligently caused economic losses flowing from the breach. In such a case, plaintiffs are generally limited to recovery of those economic damages and cannot seek to expand their remedies beyond those available in contract. The doctrine does not apply if defendant's breach caused physical damage or personal injury beyond the economic losses caused by the contractual breach and defendant violated a duty flowing, not from the contract, but from a separate, legally recognized tort obligation.

A case in which the plaintiff sues a contractual party for fraud based on conduct committed during the course of a contractual relationship falls outside the economic loss doctrine. 

(Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 44 (hereafter Rattagan).)

The economic loss rule is best understood as a specific application of the same independent tort principle reflected in Tameny, Applied Equipment, and Freeman & Mills. Whenever a contract breach causes physical harm to a person or property, the economic loss rule's limitation gives way to the recognition that an independent tort duty of care was likely also breached, resulting in an injury not contemplated and provided for by the parties. This is so because any contractual breach resulting in physical injury or property damage normally resides outside the reasonable expectations of the parties when they entered their contractual relationship. The inverse may also be true. When a contractual breach results only in economic losses, the pecuniary injury may fall within the scope of parties' precontractual expectations and their allocation of risks, and it is less likely to implicate the breach of a tort duty independent of their contractual rights and obligations. Whether the alleged harm arises independently from the contract can be a nuanced question. 

When evaluating whether the parties' expectations and risk allocations bar tort recovery, the court must consider the alleged facts. First, applying standard contract principles, it must ascertain the full scope of the parties' contractual agreement, including the rights created or reserved, the obligations assumed or declined, and the provided remedies for breach. Second, it must determine whether there is an independent tort duty to refrain from the alleged conduct. Third, if an independent duty exists, the court must consider whether the plaintiff can establish all elements of the tort independently of the rights and duties assumed by the parties under the contract.

The guiding and distinguishing principle is this. If the alleged breach is based on a failure to perform as the contract provides, and the parties reasonably anticipated and allocated the risks associated with the breach, the cause of action will generally sound only in contract because a breach deprives an injured party of a benefit it bargained for. However, if the contract reveals the consequences were not reasonably contemplated when the contract was entered and the duty to avoid causing such a harm has an independent statutory or public policy basis, exclusive of the contract, tort liability may lie. 

(Rattagan, supra, 17 Cal.5th at pp. 26-27.)

“The lesson to be drawn from this review is that contract and tort obligations are different. The independent tort principle, and its specific application in our economic loss rule cases, honors those differences. The law of contracts protects the interests of parties who enter into an agreement that secures rights and obligations of their choosing. The parties make clear those rights and obligations by the terms they put in the contract. Contract law functions to facilitate commerce by enforcing the agreement the parties adopt. Tort law operates on a different principle. A tort remedy arises, not based on an agreement between the parties, but because the defendant has violated a societal duty that the law itself imposes on everyone. A tortfeasor is held liable not for violating a contract, but for violating an independent legal duty.”  (Rattagan , supra, 17 Cal.5th at p. 37 [cleaned up].)

“But to be held liable in tort, a defendant must commit a tort. If all the defendant has allegedly done is violate the terms of the parties' contract, depriving the plaintiff of the benefits the contract ensures, the defendant's liability is limited by the contract. Broader tort liability only arises if a defendant violates an independent legal duty and the type of harm that ensues was not reasonably contemplated or accounted for by the contractual parties.”  (Rattagan, supra, 17 Cal.5th at p. 37.)

“Within the context of the broader independent tort principles previously summarized, our answer encapsulates steps one and three of the required analysis: (1) a court must ascertain the full scope of the parties' contractual agreement; and (3) the court must determine whether the plaintiff can establish all elements of the tort independent of the rights and duties assumed by the parties under the contract. Step two is satisfied here because, as discussed post, the independent tort duty to refrain from engaging in fraudulent conduct is well established by statute and common law.”  (Rattagan, supra, 17 Cal.5th at p. 38 [cleaned up].)

            Here, the FAC alleges that Defendants failed to return the jewelry or pay the cost thereof in accordance with the parties’ contract.  Thus, the conversion cause of action does not arise out of some separate duty or tort, but rather, is entirely subsumed by the rights and duties imposed by the parties’ contract.  

            Therefore, the court sustains Defendants’ demurrer to the thirteenth cause of action for conversion pursuant to the economic loss doctrine, because the FAC fails to allege tortious conduct separate and apart from Defendants’ duties under the contract.

                                                       ii.          Seventeenth Cause of Action – Promissory Fraud

“In a promissory fraud action, to sufficiently allege[] defendant made a misrepresentation, the complaint must allege (1) the defendant made a representation of intent to perform some future action, i.e., the defendant made a promise, and (2) the defendant did not really have that intent at the time that the promise was made, i.e., the promise was false.”  (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1060.)   

“In California, fraud must be pled specifically; general and conclusory allegations do not suffice.”  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)  “This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.”  (Ibid.) 

“One of the purposes of the specificity requirement is notice to the defendant, to furnish the defendant with certain definite charges which can be intelligently met.”  (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384.)  As such, less specificity is required “when it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy[.]”  (Ibid.)  “Even under the strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party.”  (Ibid.)

Here, in addition to the allegations above, Plaintiff alleges:

116.  During the first half of January 2021, plaintiff's chief financial officer Michael Kemp carried on a series of communications, by email and in telephone calls, with Stephen Ledezma, Senior Vice-President of Residency Experience, regarding a resumption of their earlier 2019 Agreement. In those communications, they discussed the terms of the form of the Residency Experience Agreement, including among others, that all placements of fine jewelry products would be covered by Residency Experience's insurance. This term was explicitly incorporated into the Residency Experience Agreement, ¶13, as set out above: "The Residency Experience will insure all pieces while in the case of The Residency Experience." In those communications between Michael Kemp and Stephen Ledezma, Ledezma represented that the identical terms contained in the 2019 Agreement would apply to the new Residency Experience Agreement, with one significant change only: the new agreement would be on a month-to-month basis, rather than for a term of months.

117. These representations on behalf of the Residency Experience and Belden were intended to induce performance by plaintiff, to wit, by entering into the Residency Experience Agreement and performing thereunder.

118. Plaintiff is informed and believes and thereon alleges that at the time these representations were made, defendants had no intention of performing by providing adequate insurance to cover all fine jewelry pieces entrusted to the Residency Experience.

119. These representations were false, and known by Ledezma, the Residency Experience and Belden to be false, at the time of their making.

120. Plaintiff relied reasonably on these representations and statements by Ledezma and Residency Experience, with whom (together with Belden) plaintiff had carried on a successful business relationship since 2019.

121. Plaintiff executed and rendered performance under the Residency Experience Agreement based on the aforesaid false representations and promises by, among other things, executing that agreement, paying the required monthly fee and making available to defendants the fine jewelry items which are the subject of this lawsuit.

122. As a direct and proximate result of the aforesaid wrongful conduct of defendants and each of them, plaintiff has suffered damages in the minimum sum of $120,700.00, according to proof at time of trial, together with (a) late charges as provided in the Residency Experience Agreement or at the maximum legal rate, (b) prejudgment interest at the legal rate of ten percent per annum and (c) costs of suit incurred herein, all according to proof at time of trial.

(FAC ¶¶ 116-122.)

Although Plaintiff alleges “Plaintiff is informed and believes and thereon alleges that at the time these representations were made, defendants had no intention of performing by providing adequate insurance to cover all fine jewelry pieces entrusted to the Residency Experience” and “These representations were false, and known by Ledezma, the Residency Experience and Belden to be false, at the time of their making” (FAC ¶¶ 118-119) allegations made “on information and belief” are insufficient to satisfy the heightened pleading requirement “unless the facts upon which the belief is founded are stated in the pleading.”  (Dowling v. Spring Valley. Water Co. (1917) 174 Cal.218, 221.)

Here, Plaintiff has not alleged any specific facts supporting its belief that Defendants did not intend to honor their promise at the time it was made.

Therefore, the Court sustains Defendants’ demurrer to the seventeenth cause of action.

2.     MOTION TO STRIKE

Any party, within the time allowed to respond to a pleading, may serve and file a motion to strike the whole pleading or any part thereof.  (Code Civ. Proc., § 435, subd. (b)(1); Cal. Rules of Court, rule 3.1322, subd. (b).)  On a motion to strike, the court may: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court.  (Code Civ. Proc., § 436, subd. (a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782.) 

In ruling on a motion to strike punitive damages, “judges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth.”  (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.)  To state a prima facie claim for punitive damages, a plaintiff must allege the elements set forth in the punitive damages statute, Civil Code section 3294.  (College Hosp., Inc. v. Superior Court (1994) 8 Cal.4th 704, 721.)  Per Civil Code section 3294, a plaintiff must allege that the defendant has been guilty of oppression, fraud, or malice.  (Civ. Code, § 3294, subd. (a).)   As set forth in the Civil Code,

(1) “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.  (2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.  (3) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

(Civ. Code, § 3294, subd. (c)(1)-(3), emphasis added.) 

Further, a plaintiff must assert facts with specificity to support a conclusion that a defendant acted with oppression, fraud or malice.  To wit, there is a heightened pleading requirement regarding a claim for punitive damages.  (See Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1041-1042.)  “When nondeliberate injury is charged, allegations that the defendant’s conduct was wrongful, willful, wanton, reckless or unlawful do not support a claim for exemplary damages; such allegations do not charge malice.  When a defendant must produce evidence in defense of an exemplary damage claim, fairness demands that he receive adequate notice of the kind of conduct charged against him.” (G. D. Searle & Co. v. Superior Court (1975) 49 Cal.App.3d 22, 29 [cleaned up].)  In Anschutz Entertainment Group, Inc. v. Snepp, the Court of Appeal noted that the plaintiffs’ assertions related to their claim for punitive damages were “insufficient to meet the specific pleading requirement.”  (Anschutz Entertainment Group, Inc. v. Snepp (2009) 171 Cal.App.4th 598, 643 [plaintiffs alleged “the conduct of Defendants was intentional, and done willfully, maliciously, with ill will towards Plaintiffs, and with conscious disregard for Plaintiff's rights. Plaintiff's injuries were exacerbated by the malicious conduct of Defendants. Defendants' conduct justifies an award of exemplary and punitive damages”]; see also Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 166 [“The mere allegation an intentional tort was committed is not sufficient to warrant an award of punitive damages.  Not only must there be circumstances of oppression, fraud, or malice, but facts must be alleged in the pleading to support such a claim”].) 

Moreover, “the imposition of punitive damages upon a corporation is based upon its own fault.  It is not imposed vicariously by virtue of the fault of others.”  (City Products Corp. v. Globe Indemnity Co. (1979) 88 Cal.App.3d 31, 36.)  “Corporations are legal entities which do not have minds capable of recklessness, wickedness, or intent to injure or deceive.  An award of punitive damages against a corporation therefore must rest on the malice of the corporation’s employees.  But the law does not impute every employee’s malice to the corporation.  Instead, the punitive damages statute requires proof of malice among corporate leaders:  the officers, directors, or managing agents.”  (Cruz v. Home Base (2000) 83 Cal.App.4th 160, 167 [cleaned up].) 

Here, as discussed above, Plaintiff has not alleged facts with requisite specificity to state a cause of action for fraud against Defendants.  As such, the Court finds that the allegations similarly do not adequately support a claim for punitive damages against Defendants.    

3.     LEAVE TO AMEND

A plaintiff has the burden of showing in what manner the complaint could be amended and how the amendment would change the legal effect of the complaint, i.e., state a cause of action. (See The Inland Oversight Committee v. City of San Bernardino (2018) 27 Cal.App.5th 771, 779; PGA West Residential Assn., Inc. v. Hulven Int'l, Inc. (2017) 14 Cal.App.5th 156, 189.) A plaintiff must not only state the legal basis for the amendment, but also the factual allegations sufficient to state a cause of action or claim. (See PGA West Residential Assn., Inc. v. Hulven Int'l, Inc., supra, 14 Cal.App.5th at p. 189.) Moreover, a plaintiff does not meet his or her burden by merely stating in the opposition to a demurrer or motion to strike that “if the Court finds the operative complaint deficient, plaintiff respectfully requests leave to amend.” (See Major Clients Agency v Diemer (1998) 67 Cal.App.4th 1116, 1133; Graham v. Bank of America (2014) 226 Cal.App.4th 594, 618 [asserting an abstract right to amend does not satisfy the burden].)

Here, Plaintiff has failed to meet its burden.  Although Plaintiff generally requests that the Court grant Plaintiff leave to amend, Plaintiff does not identify any specific facts that it could add to the complaint to cure the deficiencies identified above.    

CONCLUSION AND ORDER

For the reasons stated, the Court sustains Defendants’ demurrer to the thirteenth cause of action for conversion and the seventeenth cause of action for promissory fraud without leave to amend.  Further, the Court grants Defendants’ motion to strike allegations and requests for punitive damages without leave to amend. 

Further, the Court orders Defendants to file and serve (an) Answer(s) to the FAC on or before February 4, 2025. 

Further, on the Court’s own motion for judicial economy, the Court will advance and hold the Case Management Conference on January 14, 2025 instead of January 15, 2025.    

Defendants shall provide notice of the Court’s ruling and file a proof of service regarding the same. 

DATED:  January 14, 2025                                                    ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court