Judge: Peter A. Hernandez, Case: 22PSCV01602, Date: 2023-08-04 Tentative Ruling


Case Number: 22PSCV01602    Hearing Date: November 27, 2023    Dept: K

Defendants STAAR Lubricants, LLC, STAAR Distributing, LLC, Ryan Gordon and Todd Gordon’s Demurrer to the second through fifth causes of action in the Third Amended Complaint is SUSTAINED, without leave given to amend.  Defendants are ordered to file an Answer within 10 days.

Background   

Plaintiff Daley Technology Systems, Inc. (“Plaintiff”) alleges as follows:

On May 21, 2019, Plaintiff and Defendant STAAR Lubricants, LLC (“STAAR Lubricants”) entered into a 12-month service contract (“Contract”) whereby Plaintiff would provide marketing and branding services and create and operate websites commencing June 2019 in exchange for payment of $6,000.00 per month for 12 months. The Contract was slated to continue thereafter until terminated in writing with 60 days’ notice, which was never provided. Plaintiff is owed money for unpaid amounts incurred during the 12-month initial contract term and thereafter. Also, Plaintiff provided additional services for other operations owned by defendants and worked on a project referred to as the U.S. ADVANCED Bio-Fuel project and other projects.

On August 24, 2023, Plaintiff filed a Third Amended Complaint, asserting causes of action against STAAR Lubricants, STAAR Distributing, LLC (“STAAR Distributing”), Ryan Gordon (“R. Gordon”), Todd Gordon (“T. Gordon”) and Does 1-20 for:

1.                  Breach of Written Contract

2.                  Fraudulent Inducement

3.                  Negligent Misrepresentation in Inducement

4.                  Fraud During Course of Contract

5.                  Negligent Misrepresentation During Course of Contract

6.                  Common Count for Services Rendered

7.                  Common Count for Open Book

A Case Management Conference is set for November 27, 2023.

Legal Standard

A demurrer may be made on the grounds that the pleading, inter alia, does not state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).)

When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905 [citations omitted].) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) “[A] demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction placed on an instrument pleaded therein, or facts impossible in law, or allegations contrary to facts of which a court may take judicial knowledge.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 [citations omitted].)

Discussion

STAAR Lubricants, STAAR Distributing, R. Gordon and T. Gordon (together, “Defendants”) demur to the second through fifth causes of action in Plaintiff’s TAC, on the basis that they each fail to state facts sufficient to constitute causes of action.

Second and Third Causes of Action (i.e., Fraudulent Inducement and Negligent Misrepresentation in Inducement, Respectively)

“[P]romissory fraud requires proof of (1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent not to perform at the time the promise was made; (3) intent to deceive or induce the promisee to enter into a transaction; (4) reasonable reliance by the promisee; (5) nonperformance by the party making the promise; and (6) resulting damage to the promise[e].” (Gruber v. Gruber (2020) 48 Cal.App.5th 529, 540).

“The elements of negligent misrepresentation are (1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.” (Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243.)

“Fraud must be pleaded with specificity…[t]o withstand a demurrer, the facts constituting every element of the fraud must be alleged with particularity, and the claim cannot be salvaged by references to the general policy favoring the liberal construction of pleadings.” (Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782 [emphasis in original].) “This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73 (emphasis in original; quotation marks and citation omitted].) “The requirement of specificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157).

Likewise, “[e]ach element in a cause of action for. . . negligent misrepresentation must be factually and specifically alleged.” (Cadlo v. Owens-Illinois, Inc. (2004) 125 C.A.4th 513, 519 [citation omitted].)

Plaintiff has alleged that Defendants solicited Plaintiff to do the work needed for web-based marketing of one of their new products called Trickshot (TAC, ¶ 21), that Plaintiff was clear that it would not do the work unless there was a long-term agreement of at least one year that provided payments of $6,000/month (Id.), that Defendants did not want to pay Plaintiff for a year-long period but still wanted Plaintiff’s work (Id., ¶ 22), that on or about May 8, 2019, Perry Walrack (“Walrack”), STAAR Lubricants’ President, told Plaintiff that he had informed his CEO, T. Gordon, that Plaintiff would only work under a long-term agreement of at least one year for $6,000/month (Id.), that Walrack also told Plaintiff that T. Gordon had approved such an agreement (Id.), that Plaintiff and STAAR Lubricants entered into the agreement on May 21, 2019 (Id., ¶¶ 7 and 15), that Defendants’ representations to Plaintiff concerning the contract term and their willingness to make the above payments to Plaintiff were false (Id., ¶ 22), that Defendants and their agents, particularly including T. Gordon and R. Gordon, never intended to make these payments but instead sought to obtain materials and branding created by Plaintiff and then withhold further payment once these materials had been received (Id., ¶ 23), that Plaintiff did the work requested (Id.), that Defendants paid Plaintiff for several months under the agreement (Id., ¶¶ 8 and 17) and that Defendants thereafter discontinued payment to Plaintiff for its work (Id., ¶¶ 9 and 17).

Plaintiff does not provide the “how, when, where, to whom, and by what means” concerning any false promise or misrepresentation that would induce reliance. Plaintiff has alleged that it wanted to enter into a long-term agreement with STAAR Lubricants and made clear this was an important term and that STAAR Lubricants agreed to the terms it proposed. (TAC, ¶¶ 21-22). Further, Plaintiff does not plead facts reflecting an “intent to deceive or induce the promisee to enter into a transaction.”

Defendants’ demurrer to the second and third causes of action is sustained.

Fourth and Fifth Causes of Action (i.e., Fraud During Course of Contract and Negligent Misrepresentation During Course of Contract, Respectively)

Plaintiff has alleged that within a few months of the inception of the agreement, Defendants began to “slow pay” Plaintiff under the agreement (TAC, ¶ 33), that on November 25, 2019, T. Gordon told Plaintiff’s owner that Defendants would make payments to Plaintiff if Plaintiff would agree to accept Defendants’ payments on a delayed basis, roughly 60-90 days after the completion of services each month (Id.), that in or about November 2019 T. Gordon informed Plaintiff’s owner that Plaintiff would receive payment under the agreement if Plaintiff performed certain extra-contractual services (Id., ¶ 37), that on or about December 13, 2029 R. Goron promised Plaintiff’s owner that Defendants would pay Plaintiff the amounts then owed under the agreement if Plaintiff would agree to provide certain additional services (Id., ¶ 38), and that on February 6, 8 and 9, 2020, T. Gordon promised Plaintiff’s owner that Defendants would make payment to Plaintiff if Plaintiff performed “even more services and work” (Id., ¶ 43).

Plaintiff does not provide the “how, when, where, to whom, and by what means” concerning any false promise or misrepresentation that would induce reliance. Plaintiff was bound to provide services under the contract after signing same. “If the parties’ obligations are independent, the breach by one party does not excuse the other party's performance. Instead, the nonbreaching party still must perform and its remedy is to seek damages from the other party based on its breach of the contract.” (Colaco v. Cavotec SA (2018) 25 Cal.App.5th 1172, 1183.) The alleged representations were made in November 2019, December 2019 and February 2020, during the 12-month initial term of the Contract. As Defendants state, “Plaintiff alleges that Defendants induced it to perform work outside the agreement by promising payment pursuant to the terms of the agreement. But as the Services Contract was still active, STAAR Lubricants was already obliged to pay under the contract. In other words, the alleged promises made to Plaintiff had no effect on the status quo: the money was already owed to Plaintiff under the agreement and was not consideration.” (Dem., 13:20-23).

Defendants’ demurrer to the fourth and fifth causes of action is sustained.

Leave to Amend

At the last demurrer hearing, the court gave Plaintiff one last opportunity to amend the complaint to specify the alleged false promises or misrepresentation. As shown above, any of the alleged misrepresentations are non actionable and, in any event, the allegations again are nonspecific. Accordingly, the court finds no reasonable probability for subsequent amendments at this time. The demurrer is sustained without leave to amend.