Judge: Randy Rhodes, Case: 21CHCV00778, Date: 2022-12-23 Tentative Ruling
Case Number: 21CHCV00778 Hearing Date: December 23, 2022 Dept: F51
Dept. F-51¿
Date: 12/23/22¿
Case #21CHCV00778
¿
DEMURRER WITH
MOTION TO STRIKE
Demurrer with Motion to Strike Filed: 10/25/22
MOVING PARTY: Defendants Shaoul Levy, and individual;
B-Perris Grow, LLC, a California limited liability company; and D-Perris Grow,
LLC, a California limited liability company (collectively, “Moving Defendants”)
RESPONDING PARTY: Plaintiffs JBS Enterprises LLC, a
California limited liability company; and Jason Bolding, an individual
(collectively, “Plaintiffs”)
NOTICE: OK
RELIEF REQUESTED: Moving Defendants demur to the
second, fourth, fifth, sixth, and seventh causes of action in Plaintiffs’ second
amended complaint (“SAC”). Moving Defendants moves to strike portions of the SAC
relating to attorney fees.
TENTATIVE RULING: The demurrer is SUSTAINED as to the
second, fourth, fifth, and seventh causes of action in Plaintiffs’ SAC, with 20
days leave to amend. The demurrer is OVERRULED as to Plaintiffs’ sixth cause of
action. Moving Defendants’ motion to strike is GRANTED.
I.
BACKGROUND
Plaintiff Jason Bolding is the
founder and owner of JBS Enterprises LLC (“JBS”), a cannabis cultivation and
distribution company. (SAC ¶
12.) In 2018, Bolding applied for the City of Los Angeles Department of
Cannabis Regulation’s Cannabis Social Equity Program (“SEP”), which was
established to help qualifying applicants to jumpstart their cannabis
businesses by providing “certain application and licensing benefits …,
including expedited processing, exclusive rights to certain types of licenses,
and access to mentorship, business assistance, and capital from ‘sponsors’ or
‘incubators.’” (Id., ¶
17.) Applicants for the program received certain benefits for either qualifying
as a historically marginalized individual or entity, or as an entity willing to
‘incubate” the other category of applicants. (Id., ¶¶ 20–24.) “Incubation” includes
the provision of “material support in the form of capital, ancillary business
costs, education and training, and property.” (Id., ¶ 26.)
Plaintiffs allege that Bolding
applied and was verified for Phase 2 of the SEP licensing process, which began
around August 2018. (Id., ¶¶
19, 27–29.) As such, Bolding was thereafter put in contact with defendant
Shaoul Levy, who represented himself as the owner of non-moving defendant
A-Perris Grow, LLC (“APG”), a business seeking to qualify for the SEP as a
potential incubating entity. (Id., ¶ 30.) Plaintiffs allege that Bolding and Levy
entered into negotiations and ultimately agreed for APG to incubate Plaintiffs by
providing to them certain warehouse space and capital in exchange for APG’s
qualification for the SEP (“APG Agreement”). (Id., ¶¶ 32–34.) Plaintiffs
allege that Levy failed to perform his obligations under the agreement. (Id.,
¶ 26.)
In 2019, Plaintiffs allegedly
learned that moving defendants B-Perris Grow LLC (“BPG”) and D-Perris Grow LLC
(“DPG”), additional entities managed by Levy, had submitted SEP applications
using Bolding as the verified applicant without Bolding’s consent. (Id.,
¶¶ 40–41.)
Thereafter, Bolding entered into negotiations, and ultimately a separate
agreement, wherein Plaintiffs were to receive a separate amount of capital, as
well as an additional loan (“BPG Agreement”). (Id., ¶¶ 42–43.) Plaintiffs
allege that Moving Defendants similarly failed to perform their obligations
under this second agreement. (Id., ¶ 44.)
On 10/5/21, Plaintiffs filed this
action against Levy, APG, BPG, and DPG (collectively, “Defendants”), alleging
the following five causes of action: (1) Breach of Contract; (2) Breach of
Implied Covenant of Good Faith and Fair Dealing; (3) Fraud; (4) Promissory
Estoppel; and (5) Violation of Business and Professions Code § 17200 et seq.
On 3/4/22, Plaintiffs filed their first amended complaint
against Defendants, alleging the following seven causes of action: (1)
Breach of Contract – APG Agreement; (2) Breach of Contract – BPG Agreement; (3)
Breach of Implied Covenant of Good Faith and Fair Dealing – APG Agreement; (4)
Breach of Implied Covenant of Good Faith and Fair Dealing – BPG Agreement; (5)
Fraud – Intentional Misrepresentation; (6) Promissory Estoppel; and (7)
Violation of Business and Professions Code § 17200 et seq.
On 9/9/22, Plaintiffs filed their second amended complaint,
alleging the same seven causes of action against Defendants. On 10/25/22,
Moving Defendants filed the instant demurrer to the second, fourth,
fifth, sixth, and seventh causes of action stated in the SAC, and motion to
strike. On 11/28/22, Plaintiffs filed their opposition. On 12/1/22, Moving
Defendants filed their reply.
II.
DEMURRER
Meet-and-Confer
Before filing its demurrer, “the
demurring party shall meet and confer in person or by telephone with the party
who filed the pleading that is subject to demurrer for the purpose of
determining whether an agreement can be reached that would resolve the objections
to be raised in the demurrer.” (Code Civ. Proc. § 430.41, subd. (a).) “If an
amended complaint, cross-complaint, or answer is filed, the responding party
shall meet and confer again with the party who filed the amended pleading
before filing a demurrer to the amended pleading.” (Ibid.)
Counsel for Moving Defendants
declares that he has met and conferred telephonically with Plaintiffs’ counsel
on multiple occasions to discuss issues with the various iterations of
Plaintiffs’ complaint, including on 11/29/21, 12/10/21, 1/17/22, 3/31/22, and
9/21/22. (Decl. of Adil Khan, ¶¶
3, 5, 7.) Plaintiffs expressed that they would not further amend their
complaint, and Moving Defendants filed the instant demurrer. (Id., ¶¶ 7–8.)
Therefore, counsel has satisfied the
preliminary meet and confer requirements of Code of Civil Procedure section
430.41, subdivision (a).
Analysis
As a general matter, a¿party may
respond to a pleading against it by demurrer on the basis of any single or
combination of eight enumerated grounds, including¿that¿“the pleading does not
state facts sufficient to constitute a cause of action;” is uncertain, meaning
“ambiguous and unintelligible;” or the pleading fails to assert whether an
alleged contract is written, oral, or implied. (Code Civ. Proc., § 430.10,
subds. (e), (f), and (g)).
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 pleading alone, and not the evidence or facts
alleged.” (E-Fab, Inc.¿v.¿Accountants, Inc. Servs.¿(2007) 153
Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the
complaint’s properly pleaded or implied factual allegations. (Ibid.) The
only issue a demurrer is concerned with is whether the complaint, as it stands,
states a cause of action. (Hahn v. Mirda¿(2007) 147 Cal.App.4th 740,
747.)
Here,¿Moving Defendants¿demur to
the second, fourth, fifth, sixth, and seventh causes of action in Plaintiffs’
SAC under Code of Civil Procedure section 430.10, subdivisions¿(e)¿and
(f),¿arguing that each cause of action fails because¿it (1) fails¿to allege
facts sufficient to¿state¿a cause of action against Moving Defendants;¿and (2)
is uncertain. Moving Defendants also demur to Plaintiffs’ second cause of
action under Code of Civil Procedure section 430.10, subdivision¿(g), as
failing to state “whether the contract is written, is oral, or is implied by
conduct.”
1.
Breach of Contract
Plaintiffs’ second cause of action
alleges breach of contract against BPG and DPG as to the BPG Agreement. To state this
cause of action, a plaintiff must be able to establish “(1) the existence of
the contract, (2) plaintiff’s performance or excuse for nonperformance, (3)
defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis
West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) Moreover, a
demurrer may be raised if, “in an action founded upon a contract, it cannot be
ascertained from the pleading whether the contract is written, is oral, or is
implied by conduct.” (Code Civ. Proc. § 430.10, subd. (g).)
Here, as Moving Defendants observe,
Plaintiffs fail to identify whether the subject agreement was written, oral, or
implied by conduct. (Dem. 10:10–11.) Plaintiffs argue in opposition that they
“allege an oral contract.” (Pls.’ Opp., 3:4.) However, a demurrer proceeding
tests the pleading alone, and Plaintiffs fail identify where in the SAC this
allegation is found. The SAC makes numerous references to Plaintiffs “entering
into” agreements and “agreeing” with Defendants, but notably does not allege
whether those agreements were oral or written. (SAC ¶¶ 33, 43, 46, 51.) Therefore, the demurrer is sustained as to this cause
of action because it cannot be ascertained from the face of the SAC whether the
contract is written, oral, or implied by conduct. (Code Civ. Proc. §
430.10, subd. (g).)
Notwithstanding the above finding, the
Court will evaluate the substantive arguments with respect to this cause of
action.
Statute of Frauds
Moving Defendants argue that in the event
the subject agreement was orally made, such agreement violates Civil Code 1624
(the “Statute of Frauds”). (Dem. 11:7–8.) Under the Statute of Frauds, an oral
agreement to loan money in any amount greater than $100,000 is unenforceable.
(Civ. Code 1624, subd. (a)(7).) However, a party’s part performance of an oral
contract otherwise in violation of the Statute of Frauds may allow for its enforcement
if application of the Statute would “cause unconscionable injury. … [T]o
constitute part performance, the relevant acts either must ‘unequivocally
refer’ to the contract … or ‘clearly relate’ to its terms. … In addition to
having partially performed, the party seeking to enforce the contract must have
changed position in reliance on the oral contract to such an extent that
application of the statute of frauds would result in an unjust or
unconscionable loss, amounting in effect to a fraud.” (Secrest v. Security
National Mortgage Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 555.)
Here, the SAC states the terms of the BPG
Agreement as follows: “(1) $150,000 in capital; and a (2) $500,000,
interest-free loan in exchange for JBS and Bolding agreeing to enter into
an incubation relationship with B-Perris Grow and D-Perris Grow, thus allowing
those entities to receive benefits as a Tier 1 Applicant Sponsor under the
DCR’s Social Equity Program.” (SAC ¶
15 [emphasis added].) Therefore, if the agreement was oral in nature, as asserted
by Plaintiffs in their opposition, it would be invalid under the Statute of
Frauds. (Civ.
Code 1624, subd. (a)(7).)
Plaintiffs argue that the facts alleged in
the SAC show that they “either performed or partially performed their
obligations under the agreements.” (Pls.’ Opp. 17–18.) Specifically, Plaintiffs
cite to the portions of the complaint alleging that Bolding applied for the
SEP, for which he was approved as a Social Equity Individual Applicant, and
that he submitted a Tier 1 Social Equity Application for a cannabis license
based on representations made by Levy and APG. (Ibid., citing SAC at ¶¶ 27–29 and 35.)
Plaintiffs’ argument lacks merit because
these portions of the SAC are wholly unrelated to their second cause of action,
which is against BPG and DPG only. The sole additional portion of the SAC cited
to by Plaintiffs which relates to the BPG Agreement conclusorily states: “Plaintiffs
have performed all conditions, covenants, and promises required on their part
to be performed in accordance with the BPG Agreement as alleged herein above.”
(Ibid., citing SAC ¶
52.) Without any further factual allegations as to Plaintiffs’ performance
obligations and subsequent conduct, the SAC fails to sufficiently support
Plaintiffs’ argument that its allegedly oral agreement for a loan in excess of
$100,000 is nevertheless enforceable due to Plaintiffs’ part performance of
their obligations thereunder.
Material Terms of the Contract
Moving Defendants further argue that the SAC fails to state
the material terms of the alleged contract. (Dem. 6:3.) Moving Defendants argue
that the cause of action for breach of contract fails without such “material”
terms as: “(i) how much of the ‘$150,000 in capital’ would be invested
by BPG vs. how much by DPG; (ii) how much equity BPG and DPG would earn through
that significant investment; (iii) the conditions that would make those capital
contributions due; (iv) whether Plaintiff JBS Enterprises, LLC or Plaintiff
Jason Bolding was the borrower of the supposed $500,000 loan; (v) the funding
date for the loan; and (vi) the repayment date for the alleged loan.” (Defs.’
Reply, 6:6–10.)
In opposition, Plaintiffs argue that “Defendants overstate
what a pleading requires.” (Pls.’ Opp. 1:7.) The Court agrees with Plaintiff,
as a demurrer hearing tests only whether the facts alleged in operative
pleading state a cause of action. (Hahn, 147 Cal.App.4th at
747.) Therefore, in a breach of contract cause of action, a plaintiff need
only plead facts sufficient to support each element of the claim.
However, as set forth in the above
Statute of Frauds discussion, Plaintiffs’ SAC nevertheless fails to
sufficiently plead that an enforceable agreement existed between the parties,
which is the first element needed in a cause of action for breach of contract. Accordingly,
Plaintiffs have failed to allege facts sufficient to support their second cause
of action.
//
//
2.
Breach of Implied Covenant of Good Faith and
Fair Dealing
Plaintiffs’ fourth cause of action
alleges against BPG and DPG a breach of the implied covenant of good faith and
fair dealing with respect to the BPG Agreement. Every contract contains an
implied covenant of good faith and fair dealing that neither party will do
anything to interfere with the other party's right to receive the benefits of
the agreement. (Howard v. American Nat'l Fire Ins. Co. (2010) 187 Cal.App.4th
498, 528.) The precise nature and extent of the duty depends on the nature and
purpose of the underlying contract and the parties' legitimate expectations
arising from the contract. (Ibid.)
Here, the parties do not dispute
that a cause of action for the alleged breach of the implied covenant of good
faith and fair dealing requires the preliminary finding that a valid contract
exists. (Racine & Laramie, Ltd. v. Department of Parks & Recreation
(1992) 11 Cal.App.4th 1026, 1031.) Accordingly, given the above finding that Plaintiffs have
failed to allege facts sufficient to support a finding that an enforceable
contract exists between the parties, their second cause of action necessarily
fails.
3.
Fraud/Intentional Misrepresentation
Plaintiffs’ fifth cause of action
alleges Fraud – Intentional Misrepresentation against all Moving Defendants. “One
who willfully deceives another with intent to induce him to alter his position
to his injury or risk, is liable for any damage which he thereby suffers.”
(Civ. Code § 1709.)
Such deceit includes “a promise, made without any intention of performing it.”
(Civ. Code § 1710.)
The elements that must be pleaded in a cause of action for fraud are: (1) a misrepresentation
(false representation, concealment or nondisclosure); (2) knowledge of its falsity
(or “scienter”); (3) intent to defraud (i.e., to induce reliance); (4)
justifiable reliance; and (5) resulting damage. (Philipson & Simon v.
Gulsvig (2007) 154 Cal.App.4th 347, 363.)
Fairness requires that allegations
of fraud be pled “with particularity” so that the court can weed out
nonmeritorious actions before a defendant is required to answer. (Small v.
Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The particularity
requirement necessitates pleading facts that “show how, when, where, to whom,
and by what means the representations were tendered.” (Lazar v. Superior
Court (1996) 12 Cal.4th 631, 645.)
Here, Moving Defendants argue that
Plaintiffs fail to meet the particularity standard because they fail to “allege
the substance of any misrepresentations, who made the representations, when
these supposed misrepresentations were made, or whether they were written or
verbal.” (Dem. 12:13–15.) However, in the SAC, Plaintiffs allege that “Levy
represented to Plaintiffs that A-Perris Grow, B-Perris Grow and D-Perris Grow
(‘Perris Grow Entities’) would provide certain capital, material and financial
support to Plaintiffs.” (SAC ¶
66.) This “support” included, as to Moving Defendants, $150,000 in up-front
capital and a $500,000 interest-free loan. (Id. at ¶¶ 43, 51.)
Therefore, the Court finds that Plaintiffs have sufficiently pled the substance
of the alleged misrepresentations, and that they were allegedly made by
defendant Levy.
However, as Moving Defendants observe, Plaintiffs fail to
allege any additional facts about the alleged misrepresentations “with
particularity,” as required under Lazar. (12 Cal.4th at 645.)
Contrary to Plaintiffs’ opposing argument, there are no “specific facts, dates
and actions taken by the parties in the SAC” which meet the particularity
standard. (Pls.’ Opp., 4:14–15.)
Moreover, Plaintiffs’ allegations
relating to the remaining elements of a fraud cause of action are either
conclusory or ambiguous. (SAC ¶¶
68–71.) Plaintiffs use such vague phrases as “sustained period of time;” “an
enormous amount of time and energy;” and “spent time, money and resources” to
plead this cause of action. (Ibid.) Therefore, without any additional
specific factual allegations, Plaintiffs have failed to meet the heightened
pleading standard for a fraud cause of action.
Past/Existing Material Fact
The alleged misrepresentation must
have been made about past or existing facts. (Neu-Visions Sports, Inc. v. Soren/McAdam/Bartells
(2000) 86 Cal.App.4th 303, 309–310.) Moving Defendants argue that Plaintiffs
fail to allege any actionable fraud about an existing material fact, and only
allege misrepresentations as to future promises. (Dem. 12:16–13:3.) Specifically,
Moving Defendants point to the allegation in the SAC that states that Levy “would
provide certain capital, material and financial support to Plaintiffs.” (SAC ¶ 66 [emphasis added].)
In opposition, Plaintiffs observe that “promissory fraud”
may be actionable under a theory of fraud and deceit. (Pls.’ Opp., 4:26–27,
citing Lazar, 12 Cal.4th at 638.) “A promise to do something necessarily implies the
intention to perform; hence, where a promise is made without such intention,
there is an implied misrepresentation of fact that may be actionable fraud.” (Ibid.)
Under this standard, Plaintiffs have sufficiently pled that the alleged
misrepresentation was made by Levy as to his then-existing intention to perform.
Economic Loss Doctrine
Moving Defendants argue that
Plaintiffs’ fraud claim is barred by the economic loss doctrine, which
“precludes recovery in tort when a plaintiff's damages consist solely of
alleged economic losses.” (Dem. 13:6, citing Seely v. White Motor Co.
(1965) 63 Cal.2d 9, 18.) Here, Moving Defendants contend that “the alleged
failure to comply with a business agreement cannot qualify as an actionable
misrepresentation,” and that recovery for such an allegation must be limited to
a cause of action for breach of contract. (Dem. 6:24–25.)
Plaintiffs argue in opposition that
their causes of action for breach of contract and breach of implied covenant of
good faith and fair dealing are distinct and independent from their cause of
action for fraud. (Pls.’ Opp., 5:10–13.) “Plaintiffs sue Defendants for breach
… arising out of Defendants' failure to perform. Plaintiffs also sue Defendants
for fraud.” (Ibid.) The Court finds merit to Plaintiffs’ argument,
particularly in light of the above discussion establishing that the
misrepresentation at issue in this cause of action pertains to Levy’s
then-existing intention to perform, not Defendants’ alleged nonperformance
itself.
Therefore, the economic loss
doctrine does not apply to bar Plaintiffs’ fraud/intentional misrepresentation
cause of action.
Nevertheless, Plaintiffs have
failed to meet the heightened pleading standard required in a cause of action
for fraud by failing to allege facts “with particularity.” (Small, 30
Cal.4th at 184.) Accordingly, Plaintiffs have failed to allege facts sufficient
to support its fifth cause of action.
4.
Promissory Estoppel
Plaintiffs’ sixth cause of action
alleges promissory estoppel against BPG and DPG. “The elements of a promissory
estoppel claim are (1) a promise clear and unambiguous in its terms, (2)
reliance by the party to whom the promise is made, (3) the reliance must be
both reasonable and foreseeable, and (4) the party asserting the estoppel must
be injured by his reliance.” (Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935,
945.)
Here, Moving Defendants argue that
Plaintiffs fail to sufficiently allege a clear and ambiguous promise, for the
same reasons as argued in the above section discussing Plaintiffs’ cause of
action for breach of contract. (Dem., 14:14–17.) However, as Plaintiffs
observe, the SAC sufficiently alleges that the Moving Defendants promised to
provide Plaintiffs with material support in the form of “(1)
$150,000 in capital; and a (2) $500,000, interest-free loan.” (SAC ¶ 15.) Therefore,
Plaintiffs have successfully pled this element of promissory estoppel.
Moving Defendants further argue
that Plaintiffs have failed to allege any reasonable and foreseeable reliance
with particularity. (Dem. 14:18–15:4.) Plaintiffs allege that they “actually
relied on Defendants’ promises by foregoing other social equity agreement
opportunities. Believing that Defendants intended to provide the requisite
funding and warehouse space, Bolding spent considerable time looking for
suitable warehouse options.” (SAC ¶
77.) The Court finds that Plaintiffs have alleged conduct taken in reliance on
Defendants’ representations which a trier of fact may find reasonable and
foreseeable. These facts need not be pled pursuant to a heightened standard, as
Moving Defendants contend.
Plaintiffs allege that they suffered harm in the form of the
denial of a cannabis license, for which they applied under the SEP in reliance
on Defendants’ promises. (Ibid.) Accordingly, the Court finds that
Plaintiffs have sufficiently alleged facts to support their sixth cause of
action.
5.
Violation of Business and Professions Code
section 17200 et seq.
Plaintiffs’ seventh cause of action
alleges that BPG and DPG violated Business and Professions Code section 17200
et seq. (the “UCL”). To set forth a claim for unfair business practices in
violation of the UCL, a plaintiff must establish that the defendant was engaged
in an “unlawful, unfair or fraudulent business act or practice and unfair,
deceptive, untrue or misleading advertising” and certain specific acts. (Bus.
& Prof. Code, § 17200.)
“In essence, an action based on Business
and Professions Code section 17200 to redress an unlawful business practice
‘borrows’ violations of other laws and treats these violations, when committed
pursuant to business activity, as unlawful practices independently actionable
under section 17200 et seq. and subject to the distinct remedies provided
thereunder.” (People ex rel. Bill Lockyer v. Fremont Life Ins. Co.
(2002) 104 Cal.App.4th 508, 515.) “The test of whether a business practice is
‘unfair’ for purposes of the Act involves an examination of [that practice's]
impact on its alleged victim, balanced against the reasons, justifications and
motives of the alleged wrongdoer. In brief, the court must weigh the utility of
the defendant's conduct against the gravity of the harm to the alleged victim.”
(People v. Duz-Mor Diagnostic
Lab. (1998) 68
Cal.App.4th 654, 662.) “‘Fraudulent,’ as used in the statute, does not refer to
the common law tort of fraud but only requires a showing members of the public ‘are likely to be deceived.’” (Olsen
v. Breeze, Inc. (1996) 48 Cal.App.4th 608, 618.)
Moving Defendants argue that Plaintiffs
fail to allege facts that support this cause of action under any of the three
prongs. (Dem. 15:9.) Plaintiffs do not dispute that there are no allegations as
to Moving Defendants’ unlawful conduct under the UCL.
The parties rely on their arguments regarding
Plaintiffs’ cause of action for fraud to dispute whether Plaintiffs have stated
a cause of action under the “fraudulent” prong of the UCL. As stated above, the “fraudulent” prong of
the UCL is distinct from a tort cause of action for “fraud.” (Olsen, 48 Cal.App.4th
at 618.) Under
the UCL, whether a business practice is “fraudulent” or “unfair” is “a question
of fact, the essential test being whether the public is likely to be deceived.”
(People v. Toomey (1984) 157 Cal.App.3d 1, 16 [emphasis added].) Therefore,
as Plaintiffs note, it is well settled that a determination under these prongs
requires consideration and weighing of evidence from both parties, which
usually cannot be made at the demurrer stage. (Pls.’ Opp., 7:8–11; see, e.g.,
Klein v. Chevron USA, Inc. (2011) 202 Cal.App.4th 1342, 1376; Community
Assisting Recovery, Inc. v. Aegies Security Ins. Co. (2001) 92 Cal.App.4th
886, 894–895.)
Here, Plaintiffs allege that due to Moving
Defendants’ representations, they suffered injuries “including, but not limited
to, loss of revenue and licensing opportunities.” (Pls.’ Opp. 7:6–7.) The Court
finds that this allegation most aptly relates to the “unfair” prong of the UCL,
which weighs the alleged harm to a victim against the justifications by the
alleged wrongdoer. (Duz-Mor, 68 Cal.App.4th at 662.)
However, Plaintiffs have not alleged any
harm to the public implicating the “fraudulent” prong under the UCL. (Olsen, 48 Cal.App.4th
at 618.) The
only mention the SAC makes to the general public is in reference to “important
rights affecting the public interest within the meaning of Code of Civil
Procedure section 1021.5.” (SAC, ¶ 80.) This statute, known as the private
attorney general doctrine, applies to a Court’s discretion to award attorney
fees to a successful party in an action which has resulted in public benefit.
(Code Civ. Proc. § 1021.5.) Here, without any further allegations as to
which “important rights affecting the public interest” are implicated by Moving
Defendants’ conduct, Code of Civil Procedure section 1021.5 is inapplicable to
this action.
Accordingly, the Court finds that
Plaintiffs have sufficiently alleged facts to support a cause of action for a
violation of the UCL under its “unfair” prong, but not its “unlawful” or
“fraudulent” prongs.
Restitutionary Damages
Moving Defendants argue that
Plaintiffs’ UCL claim nevertheless fails as a matter of law because the statute
only provides for restitutionary or injunctive relief, neither of which
Plaintiffs seek. (Dem. 16:14–20.) “A UCL action is equitable in nature; damages
cannot be recovered. … We have stated that under the UCL, ‘[p]revailing
plaintiffs are generally limited to injunctive relief and restitution.’” (Korea
Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1144.) “The
object of restitution is to restore the status quo by returning to the
plaintiff funds in which he or she has an ownership interest.” (Id. at
1149.) While restitution applies to funds in which a plaintiff had actual prior
possession, or a vested interest, it does not apply when the plaintiff had a
mere “expectancy” in the funds. (Id. at 1149–1150.)
Here, Plaintiffs request
“restitution of all monies and profits from Defendants’ unfair business
practices.” (SAC ¶
84.) However, as Moving Defendants observe, Plaintiffs have not alleged that
they transferred any funds to Defendants, or that Defendants are otherwise in
possession of funds belonging to Plaintiffs. (Dem. 17:6–7.) Plaintiffs argue in
opposition that “restitution does not require a plaintiff to have had actual
physical possession of money lost but prevents unjust enrichment by allowing
the plaintiff to recover money or property acquired by the defendant ‘belonging
in good conscience to the plaintiff.’” (Pls.’ Opp., 7:23–25.)
Even in accepting Plaintiffs’
argument regarding the legal standard for restitutionary relief, Plaintiffs
point to no allegation stated in the SAC that Moving Defendants acquired any
such money or property “belonging in good conscience to the plaintiff” or in
which Plaintiffs would otherwise have a vested interest. As such, Plaintiffs
have failed to allege facts supporting a request for restitutionary relief.
Plaintiffs make no request for injunctive relief, which the parties do not
dispute.
Therefore, as Plaintiffs fail to
allege facts to support a request for either injunctive or restitutionary
relief, they have failed to sufficiently state a cause of action for violation
of Business and Professions Code section 17200 et seq.
Accordingly, Moving Defendants’
demurrer to the second, fourth, fifth, and seventh causes of action in the SAC
are sustained, because Plaintiffs fail to allege facts sufficient to support
this cause of action. The demurrer is overruled as to Plaintiffs’ sixth
cause of action.
Generally speaking, “demurrers for
uncertainty are disfavored and thus are strictly construed because ambiguities
can reasonably be clarified under modern rules of discovery. Such demurrers are
granted only if the pleading is so incomprehensible that defendant cannot
reasonably respond.” (Cal.Jur.3d § 137.) “Where the complaint contains
substantive factual allegations sufficiently apprising defendant of the issues
it is being asked to meet, a demurrer for uncertainty should be overruled or
plaintiff given leave to amend.” (Williams v. Beechnut Nutrition Corp.
(2011) 185 Cal.App.3d 135, 139 fn.2.)
Here, Moving Defendants argue that the
second, fourth, fifth, sixth and seventh causes of action in the SAC are
uncertain pursuant to Code of Civil Procedure section 430.10, subdivision (f). In
applying the stringent standard for demurrers filed on this ground, the Court
finds that the SAC is not “so incomprehensible” that Moving Defendants cannot
respond, especially given the extensive analyses they have offered in attacking
the pleading. Accordingly, the demurrer is overruled on this ground.
The court may, upon a motion, or at any
time in its discretion, and upon terms it deems proper, strike any irrelevant,
false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436,
subd. (a).) The court may also strike all or any part of any pleading not drawn
or filed in conformity with the laws of this state, a court rule, or an order
of the court. (Id., §
436, subd.
(b).) The grounds for moving to strike must appear on the face of
the pleading or by way of judicial notice. (Id., § 437.)
An award of attorney fees is proper when
authorized by contract, statute, or law. (Code Civ. Proc. §§ 1032, subd. (b);
1033.5, subd. (a)(10).) Here, Plaintiffs do not assert any contractual,
statutory, or legal basis for their prayer to recover attorney fees. As stated
above, Plaintiffs have likewise failed to allege facts entitling them to
attorney fees under Code of Civil Procedure section 1021.5. Accordingly, Moving
Defendants’ request to strike page 11, line 18, paragraph 5 of the complaint
pertaining to attorney fees is granted.
IV.
LEAVE TO AMEND
Where a demurrer is sustained,
leave to amend must be allowed where there is a reasonable possibility of
successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)
The burden is on the plaintiff to show the court that a pleading can be amended
successfully. (Id.; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118,
226.) However, “[i]f there is any reasonable possibility that the plaintiff can
state a good cause of action, it is error to sustain a demurrer without leave
to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240,
245).
Here, the Court notes that while
Plaintiffs have previously amended their complaint twice, this is the first
demurrer brought in this action. Plaintiffs also make a specific request for
leave to amend in the event that any portion of the demurrer is sustained.
(Pls.’ Opp., 8:14–15.) Accordingly, under the Court’s liberal policy of
granting leave to amend, the Court grants Plaintiffs 20 days leave to amend the
SAC to cure the defects set forth above.
CONCLUSION
The demurrer is SUSTAINED as to the second, fourth, fifth,
and seventh causes of action in Plaintiffs’ SAC, with 20 days leave to amend.
The demurrer is OVERRULED as to Plaintiffs’ sixth cause of action. Moving
Defendants’ motion to strike is GRANTED.