Judge: Michael T. Smyth, Case: 37-2022-00038637-CU-BC-CTL, Date: 2024-03-22 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

DEPT.:

EVENT DATE:

EVENT TIME:

HALL OF JUSTICE

TENTATIVE RULINGS - March 21, 2024

03/22/2024  09:00:00 AM  C-67 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Michael T. Smyth

CASE NO.:

CASE CATEGORY:

EVENT TYPE:

CASE TITLE: CASE TYPE:

Civil - Unlimited  Breach of Contract/Warranty Demurrer / Motion to Strike 37-2022-00038637-CU-BC-CTL PEAK DIAGNOSTIC VS PEAK DIAGNOSTIC SERVICES LLC [IMAGED] CAUSAL DOCUMENT/DATE FILED: Demurrer, 11/06/2023

Plaintiff and Cross-Defendant Peak Diagnostic's ('Peak Medical') Motion to Strike is DENIED in part.

Defendant and Cross-Complainant Peak Diagnostic Services LLC's ('Peak Services') Demurrer is OVERRULED.

The court will hear from the parties on Peak Medical's Demurrer and Motion to Strike as further explained below.

1. Peak Medical's Demurrer to Seventh and Eighth Causes of Action and Motion to Strike Noncompete/Nonsolicitation Allegations In addition to any arguments the parties would like to make, the court requests argument on: - - Are there any cases enforcing a noncompete provision where neither plaintiff nor defendant were the buyer or seller of a business interest? - In determining whether to find that the provisions are enforceable under Section 16601, what weight, if any, should the court attribute to the allegation that the MSA and Employment Agreement were all tied to the transaction between ShareMD and Dr. Wang? - Assuming the court finds that the enforcing entity must be the purchaser of the business interest (i.e., ShareMD) what amendments could be made, if any, to resolve this issue? 2 Peak Medical's Motion to Strike Lease Payment Allegations Peak Medical argues that the MSA did not require lease payments and therefore related allegations should be struck. But the MSA did require payment of operating expenses. (MSA §§ 6.2 [requiring reimbursement of 'certain operating expenses']; 6.4(d) ['Manager will be paid its reimbursable expenses in accordance with the terms set forth herein and any other cumulative direct costs and expenses of operating Practice's business.'] [emphasis added]) Lease payments could reasonably fall in that category. Peak Medical characterizes Section 6.2 as not including lease payments in operating expenses and 6.4 as only setting forth a waterfall (i.e., priority of payments) of payments already enumerated in the agreement. While this is a plausible reading, the court declines to definitively interpret an ambiguous contract at this stage of the proceedings. Thus, the motion is denied on these grounds without prejudice to arguing the meaning of these contractual provisions at a later stage of the proceedings.

Calendar No.: Event ID:  TENTATIVE RULINGS

3092024  9 CASE NUMBER: CASE TITLE:  PEAK DIAGNOSTIC VS PEAK DIAGNOSTIC SERVICES LLC  37-2022-00038637-CU-BC-CTL 3. Peak Services' Demurrer to Plaintiff's Fourth Cause of Action for Fraudulent Inducement California's parol evidence rule provides that '[t]erms set forth in a writing intended by the parties to be a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous agreement.' (Code Civ.

Proc. § 1856(a); see also Civ. Code § 1625 ['The execution of a contract in writing, whether the law requires it to be written or not, supersedes all the negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument.'].) Thus, where a contract includes an integration clause, evidence of additional oral agreements or terms will generally be excluded.

(Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169, 1174.) Section 1856, subdivision (f) establishes a broad exception to the operation of the parol evidence rule: 'Where the validity of the agreement is the fact in dispute, this section does not exclude evidence relevant to that issue.' (See also ibid.) In Riverisland, the California Supreme Court found that this exception allows parol evidence of fraud to prove fraud. (Riverisland, supra, 55 Cal.4th at 1182 ['we . . . reaffirm the venerable maxim . . . : '[I]t was never intended that the parol evidence rule should be used as a shield to prevent the proof of fraud.''].) This holding was subsequently followed in IIG Wireless, Inc. v. Yi (2018) 22 Cal.App.5th 630, 644-645.

Here, it is undisputed that the MSA includes an integration clause. Defendant Peak Services argues that the parol evidence rule demands exclusion of any reference to prior oral agreements that would inform obligations of either party under the MSA. Further, Defendant contends that Riverisland should be contained to its facts where the plaintiff was attempting to rescind the entire contract as invalid.

Defendant argues that the exception to the parol evidence rule under Code of Civil Procedure section 1856(a) should not be applied to allow a plaintiff to add terms to a contract they seek to enforce. But, as Defendant admits, IIG Wireless explicitly 'decline[d] to give Riverisland the narrow reading [Defendant] advances. Although [Plaintiff] was not attempting to rescind the . . . agreements, it set out to prove that [Defendant] had entirely different understandings about the meaning of those agreements based on [Defendant's] fraudulent misrepresentations.' (IIG Wireless, supra, 22 Cal.App.5th at 645.) Even so, Defendant asks the court to find that IIG Wireless was wrongly decided.

In support, Defendant cites to several federal cases purporting to interpret Riverisland as narrowly applying to situations where a plaintiff is seeking to rescind the agreement at issue. But the majority of these federal cases predate IIG Wireless. The sole opinion issued after was LockandLocate, LLC v. Hiscox Ins. Co. (C.D. Cal. Dec. 15, 2021) 2021 WL 9735300, at *3 and in that opinion the Central District did not address IIG Wireless. Even if any of these opinions had addressed IIG Wireless, federal court opinions are weighed only for the persuasive value. In any event, this court is not entitled to find that IIG Wireless was wrongly decided. Under Riverisland and IIG Wireless, Peak Medical is entitled to introduce evidence showing the parties had different understandings about the meanings of the agreement based on alleged fraud.

The demurrer is overruled.

Calendar No.: Event ID:  TENTATIVE RULINGS

3092024  9