Judge: Michael Small, Case: 23STCV12465, Date: 2024-03-11 Tentative Ruling

Case Number: 23STCV12465    Hearing Date: March 11, 2024    Dept: 57

Pending before the Court is the Defendants' demurrer to Plaintiffs' Second Amended Complaint ("SAC"). The Court's rulings on the demurrer are as follows. Plaintiff Ethello Hall, Jr. dismissed all of his claims against the Defendants after the Defendants filed their demurrer to his claims. Accordingly, the Defendants' demurrer as to Hall's claims is overruled on the ground that it is moot. Defendants' demurrer as to the fraud claims of Plaintiff LikeWhoa, LLC is sustained with leave to amend because the SAC contains no allegations as to fraudulent statements made by Defendants to LikeWhoa. Defendants demurrer as to the fraud claims of Plaintiffs Lopez and Coulter are sustained with leave to amend on the ground that those claims are barred the applicable three-year statute of limitations. In particular, the Court holds that Lopez and Coulter have failed to plead their fraud claims within the ambit of the "discovery rule." That rule “postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.”  (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807.)  Put another way, “[t]he discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action.”  (Ibid.)  This means that plaintiffs “are required to conduct a reasonable investigation after becoming aware of an injury, and are charged with knowledge of the information that would have been revealed by such an investigation.”  (Id. at p. 808.)  “The limitations period begins once the plaintiff has notice or information of circumstances to put a reasonable person on inquiry.”  (Alexander v. Exxon Mobil (2013) 219 Cal.App.4th 1236, 1251, citation omitted).  The discovery rule imposes a pleading requirement on a party seeking the protection of the rule in the face of a demurrer.  Specifically, “[i]n order to rely on the discovery rule for delayed accrual of a cause of action, ‘a plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery, and (2) the inability to have made earlier discovery despite reasonable diligence.’”  (Fox, su, 35 Cal.4th at p. 809, citation omitted.)  On the face of the SAC, the fraud claims of Lopez and Coulter are barred by the three-year statute of limitations on fraud claims. (Lopez and Coulter do not argue in their opposition to the demurrer that the time for bring their fraud claims to trial was extended by the Judicial Council's Emergency Rule 9(a) that was promulgated at the outset of the COVID-19 pandemic.) The SAC alleges that Lopez and Coulter did not discovery the Defendants' fraud until 2023. In the Court's view, however, the SAC fails to allege that Plaintiffs Lopez and Coulter were unable to have discovered the Defendants' alleged fraud prior to 2023 and within the three-year limitations period. In reaching this conclusion, the Court has not relied on the "sham pleading" doctrine, which Defendants assert supports their argument on the statute of limitations. Aside from the statute of limitations problem, the Court holds that Lopez and Coulter's allegations in the SAC state claims for fraud. The rejects Defendants' argument in the demurrer that the fraud claims simply seek recovery for breach of an oral agreement. Plaintiffs' claim for money had and received is dependent on the their fraud claim. Because the demurrer is sustained with leave as to the fraud claim with leave to amend, the same goes for the claim for money had and received. The Court is overruling the Defendants' demurrer as to the Plaintiffs' claims for breach of fiduciary duty, declaratory relief, and an accounting. In the Court's view, the allegations in the SAC are sufficient to support those claims. The Defendants also filed a motion to strike portions of the SAC on the ground that it contains irrelevant, false or improper allegations as to the fraud claims to the extent that the fraud claims are barred by the statute of limitations. Because the Court is sustaining the demurrer with leave to amend as to the fraud claims, the motion to strike is denied as moot.