Gladden Far East, LTD v. Starship, LLC

 

DEMURRER TO FIRST AMENDED COMPLAINT

 

MOVING PARTY: Defendant Starship, LLC

RESPONDING PARTY(S): Plaintiff Gladden Far East, LTD

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

 

Plaintiff Gladden Far East, LTD, a garment manufacturer based in Hong Kong, alleges Defendant ordered merchandise from Plaintiff.  Plaintiff alleges it filled and shipped the orders to Defendant, but Defendant failed to make payment.  Plaintiff brings causes of action or (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) intentional misrepresentation, and (4) unjust enrichment. [FN 1]

Defendant Starship, LLC now demurs to the First Amended Complaint. Plaintiff opposed.

TENTATIVE RULING:

Defendant’s Demurrer as to the First and Second Causes of Action is OVERRULED.

Defendant’s Demurrer as to the Third Cause of Action is SUSTAINED.  Whether leave to amend is granted or not shall be determined at the hearing.

Defendant’s Demurrer as to the Fourth Cause of Action is SUSTAINED.  Leave to amend shall be permitted, as discussed infra.

Moving party to give notice, unless waived.  

DISCUSSION:

Demurrer

I. Meet and Confer

The Declaration of Michael J. Perry, Counsel for Defendant, reflects that the meet and confer requirement was met.

II. Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action.  (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.)  When considering demurrers, courts read the allegations liberally and in context.  (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal. App. 4th 1216, 1228.)  In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice.  (CCP § 430.30(a).)  A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.  (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.)  Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.  (Id.)  The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.  (Hahn, 147 Cal.App.4th at 747.)  

III. Analysis

Defendant demurs to each cause of action in the Complaint.  Each is addressed in turn.

A. Demurrer to First Cause of Action (Breach of Contract)

Plaintiff, a Chinese garment manufacturer, alleges that “Defendant placed numerous orders for merchandise” and that Plaintiff “filled and shipped [the orders] to the Defendant” in the United States. (Compl. ¶ 7.) Plaintiff alleges the “agreed upon payment term for all invoices between Plaintiff and Defendant was and is Net 7 days.” (Id. ¶ 8.) 

Defendant contends the term “Net 7 days” is ambiguous. First, it is unclear if this is a material term of the agreement, or if it has any relevance to the current dispute.  Be that as it may, contracts “are interpreted so as to give effect to the mutual intention of the parties at the time of contracting, to the extent ascertainable and lawful.” (Fireman's Fund Ins. Co. v. Workers' Comp. Appeals Bd. (2010) 189 Cal. App. 4th 101, 110.) Where necessary, “[e]xtrinsic or parol evidence may be used to explain ambiguity, context or related matter.” (Id.) But that is unnecessary now, because a demurrer only concerns itself with the pleadings. (SKF Farms, supra, 153 Cal. App. 3d at 905.)  Thus, the ambiguity, to the extent there is one, is not grounds for a demurrer.

Accordingly, Defendant’s Demurrer to the First Cause of Action is OVERRULED.

B. Demurrer to Second Cause of Action (Breach of the Implied Covenant)

Defendant next demurrers to the second cause of action for breach of the implied covenant.  

To establish breach of good faith and fair dealing, a Plaintiff must allege that: (1) the parties entered into a contract; (2) Plaintiff fulfilled its contractual obligations; (3) any conditions precedent to Defendant’s performance occurred; (4) Defendants unfairly interfered with Plaintiff’s right to receive the benefits of the contract; and (5) Plaintiff was harmed by Defendant’s conduct. (CACI No. 325.)

Defendant contends there is no claim for breach of the implied covenant as between merchants.  Defendant cites no authority for this position in its motion or reply.  And for good reason: it is well settled that “every contract imposes upon each party a duty of good faith and fair dealing.” (Jonathan Neil & Associates, Inc. v. Jones (2004) 33 Cal.4th 917, 937.) This argument fails.

Defendant then contends the breach of implied covenant claim fails because Plaintiff has alleged no facts beyond the contractual breach. “If the allegations [of breach of the implied covenant] do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.” (Careau & Co. v. Sec. Pac. Bus. Credit, Inc. (1990) 222 Cal. App. 3d 1371, 1395.)  

Here, Plaintiff alleges Defendant “illegally withh[eld] the goods without justification, [held] goods hostage, [and] provid[ed] false information.” (Compl. ¶ 29.) Thus, at least as plead, the claim is not necessarily superfluous of the breach of contract claim, because it alleges conduct beyond the breach itself.

Accordingly, Defendant’s Demurrer to the Second Cause of Action is OVERRULED.

C. Demurrer to Third Cause of Action (Intentional Misrepresentation)

Defendant contends that Plaintiff has not pled the intentional misrepresentation cause of action with the requisite particularity for fraud-based claims. In opposition, Plaintiff attempts to distinguish between fraud and intentional misrepresentation—claiming intentional misrepresentation need not be plead with particularity. But the two are interchangeable and require the same elements.  (See Anderson v. Deloitte & Touche (1997) 56 Cal. App. 4th 1468, 1474.)

To plead fraud, a Plaintiff must allege “(1) a representation, (2) that is false, (3) made with knowledge of its falsity, and (4) with an intent to deceive, coupled with (5) actual detrimental reliance and (6) resulting damage.” (Lim v. The.TV Corp. Internat. (2002) 99 Cal. App. 4th 684, 694.) Fraud-based claims are subject to strict requirements of particularity in pleading. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) To advance a cognizable fraud claim, “every element of the cause of action . . . must be alleged in full, factually and specifically, and the policy of liberal construction of pleading will not usually be invoked to sustain a fraud claim deficient in any material respect.” (Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1331).

Here, Plaintiff alleges in conclusory fashion that Defendant “misrepresented their true intentions when initially forming the business relationship between Plaintiff and Defendants,” and had the true intention “to obtain Plaintiff’s products without paying for all of the products ordered.” (Compl. ¶ 32.) Defendant allegedly “later misrepresented their intentions [to] ‘catch up’ on their outstanding balances.” (Id.) Plaintiff, however, does not include even the rough content of the alleged misrepresentations, nor who made them or when.  This fails to meet the heightened pleading requirements for fraud. 

Accordingly, Defendant’s Demurrer to the Fourth Cause of Action is SUSTAINED.

Demurrer to Fourth Cause of Action (Unjust Enrichment)

Defendant first contends that unjust enrichment is not a standalone cause of action. The elements of an unjust enrichment claim are the “receipt of a benefit and [the] unjust retention of the benefit at the expense of another.” (Lectrodryer v. SeoulBank (2000) 77 Cal.App.4th 723, 726.) The modern trend appears to take the position that unjust enrichment is a claim for restitution rather than a separate cause of action.  (See De Havilland v. FX Networks, LLC (2018) 21 Cal.App.5th 845.)

Accordingly, Defendant’s Demurrer to the Fourth Cause of Action is SUSTAINED, with leave to amend.  Plaintiff may include a claim for restitution not as a standalone cause of action, but in its prayer for relief. 

Moving party to give notice.

IT IS SO ORDERED.

Dated:   May 9, 2023 ___________________________________

Randolph M. Hammock

Judge of the Superior Court


FN 1 - The case is related to Tom Trading Co., LTD v. Starship, LLC (22STCV31885) also in Department 49. The cases involve the same Defendant, the same causes of action, and nearly identical allegations. It also appears the Plaintiffs in each case may share a common ownership or management.

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept49@lacourt.org by no later than 4:00 p.m. the day before the hearing.  All interested parties must be copied on the email.  It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.