Judge: Michael J. Strickroth, Case: 2022-01288248, Date: 2023-08-21 Tentative Ruling

Demurrer to Amended Complaint

The Demurrer of Defendants Fredric L. Sattler and Wayne Baglin to the 5^th and 6^th causes of action to Plaintiff’s First Amended Complaint (FAC) is SUSTAINED with leave to amend.

The Court’s STAY order entered on 05/17/2023 is lifted as a result of the 05/26/2023 withdrawal of Plaintiff’s motion to remove its own attorney Much Shelist, P.C. as its attorney of record.

Defendants demur to the fifth cause of action for inducing breach of contract and the sixth cause of action for intentional interference with contractual relationship. First, Defendants contend that as officers/directors of Defendant Festival of Arts of Laguna Beach (Festival), they cannot be held liable for interference with a contract to which Festival was a party. Second, Defendants contend the FAC fails to allege facts supporting elements of the fifth and sixth causes of action. The Court sustains the demurrer on both grounds. 

“To prevail on a cause of action for intentional interference with contractual relations, a plaintiff must plead and prove (1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant's knowledge of that contract; (3) the defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1148.

“The elements of a claim of interference with economic advantage and prospective economic advantage are: (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant. A plaintiff must also show that the defendant's conduct was independently unlawful, that is, ‘proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.’” Winchester Mystery House, LLC v. Global Asylum, Inc. (2012) 210 Cal.App.4th 579, 596.

Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517 (cleaned up), holds:

“A demurrer tests the sufficiency of a complaint by raising questions of law. In determining the merits of a demurrer, all material facts pleaded in the complaint and those that arise by reasonable implication, but not conclusions of fact or law, are deemed admitted by the demurring party. The complaint must be construed liberally by drawing reasonable inferences from the facts pleaded. [¶] In addition to the facts actually pleaded, the court considers facts of which it may or must take judicial notice. Moreover, a party may not avoid demurrer by omitting facts pleaded in the original complaint or by suppressing facts which prove the pleaded facts false. Inasmuch as the principle is that of truthful pleading, the court also will consider such facts.”

Mintz v. Blue Cross of California (2009) 172 Cal.App.4th 1594, 1604, holds:

“[I]t is settled that “corporate agents and employees acting for and on behalf of a corporation cannot be held liable for inducing a breach of the corporation's contract.” (Shoemaker v. Myers (1990) 52 Cal.3d 1, 24, 25, 276 Cal.Rptr. 303, 801 P.2d 1054 (Shoemaker ) [where defendants were agents of the employer who were “vested with the power to act for the employer (rightly or wrongly)” they “stand in the place of the employer, because the employer ... cannot act except through such agents”]; cf. Applied Equipment, supra, 7 Cal.4th at p. 512, fn. 4, 28 Cal.Rptr.2d 475, 869 P.2d 454 [under “agent's immunity rule,” agents and employees of a corporation “ ‘cannot conspire with their corporate principal or employer where they act in their official capacities on behalf of the corporation and not as individuals for their individual advantage’”; rule “ ‘derives from the principle that ordinarily corporate agents and employees acting for or on behalf of the corporation cannot be held liable for inducing a breach of the corporation's contract’ ”].)”

Here, the FAC does not expressly plead Defendants are officers or directors of Festival, although Exhibit 1 to the FAC also reflects Defendant Sattler’s signature as Festival’s Treasurer. Plaintiff does not dispute Defendants’ status as Festival’s officers/directors. Under Rodas, Plaintiff’s attempt to suppress facts regarding Defendants’ status as Festival’s board members by omitting such facts from the FAC is not well-taken. Plaintiff has failed to plead facts supporting an exception to the general rule precluding liability of corporate agents for interference with the corporate entity’s contractual relations.

Moreover, Plaintiff fails to plead facts supporting the essential elements of its claims against Defendants. The FAC alleges that Defendants “propagated various lies” including “that Plaintiff had done unlicensed/unpermitted work at the property (and at other affiliated properties), that it had engaged in illegal activities, and that Plaintiff’s owner Honarkar was a dishonest and less than honorable businessman.” (FAC ¶ 78(b).) Plaintiff further alleges it “caught Sattler, Baglin and Orgill trespassing on the property, and taking photos/video. It is unclear why they were trespassing, but on information and belief, they intended to interfere with the Agreement so as to take over the property after a false claim of breach by FOA, to their own economic benefit.” (FAC ¶ 78(c).)

Plaintiff fails to adequately allege Defendants’ acts were designed to disrupt the relationship or induce a breach of contract between Plaintiff and Festival. Plaintiff fails to allege who Defendants made false statements to, when such statements were made, or how such false statements actually interfered with Plaintiff’s relationship with the Festival. 

Therefore, the Demurrer is sustained with 20 days’ leave to amend.

Further and additionally, the Court sets this matter for a Case Management Conference on 11/20/2023, at 8:30 AM in Department C15.

Plaintiff to give notice.