Judge Richard L. Fruin, Case Number: 24STCV32173, Date: 2025-03-11 Tentative Ruling

MEET AND CONFER: [OK] Parties’ counsel met and conferred telephonically in compliance with CCP § 430.41. (Lebron Decl., ¶ 3.)

BACKGROUND: Complaint alleges breach of contract arising out of construction project dispute

4/20/2017: Angels Landing Partners, LLC (“ALP”) is formed. TPC Angels Landing DTLA, LLC (“Peebles”) and MacFarlane Development Company (‘MacFarlane”) are the current managing members and controlling interest holders of ALP.

4/2017: The City of Los Angeles (“City”) releases a Request for Qualifications for a site development project. ALP is selected as a finalist.

8/2017: City issues a Request for Proposals from the finalists. ALP proposes to purchase the site for $50 million and develop a mixed-use development for $1.2 billion (the “Project”).

3/28/2018: City and ALP execute an Exclusive Negotiating Agreement (“ENA”) to govern the negotiation period for the Project. (Compl., Exh. A.)

1/18/2019: Peebles, MacFarlane, and Claridge Properties (“Claridge”) execute ALP’s operating agreement.

agreement. The lawsuit was dismissed on 6/1/2023, but resulted in Claridge no longer holding capital interest in ALP.

transfer” and gives notice of termination of the ENA, effective 11/12/2023 (later extended to 12/15/2025 and 2/13/2024). (Compl., Exhs. E, H, I.) ALP responds by arguing that City’s declaration of default constituted a breach of the ENA. (Compl., Exh. F.)

1/23/2025: City files this Demurrer, followed by ALP’s Opposition (2/13/2025), and City’s Reply (2/27/2025).

TENTATIVE RULING: DEMURRER OF DEFENDANT CITY OF LOS ANGELES is OVERRULED in part and SUSTAINED with LEAVE TO AMEND in part.

City demurs to each cause of action in the Complaint on the grounds that ALP fails to allege facts sufficient to constitute the causes of action.

The 1^st cause of action for breach of contract is sufficiently pled. Here, the basis of ALP’s breach of contract claim are its allegations that City breached Section 3.8(a) of the ENA by terminating the agreement while ALP was not in default and failing to reimburse ALP for its related costs.[1] Specifically, ALP alleges the assignment of Claridge’s membership interests was not a “Transfer” under Section 3.10(a) of the ENA (as City contends) and thus, not an incurable default under the ENA. By contrast, City argues this assignment was a “Transfer,” and thus constituted a default by ALP, as discussed below.

A copy of the ENA is attached to the Complaint. The Section 3.10(a) of the ENA defines “Transfer” as an assignment or other transfer of the Developer’s (i.e. ALP’s) interest in the ENA, including, “without limitation, any sale, assignment, transfer, withdrawal, transaction, series of transactions, event, or other circumstance whatsoever which results in any person other than [Peebles], [MacFarlane], and [Claridge], having the direct or indirect controlling ownership and/or voting interest in/of [ALP].” (Compl., Exh. A, at § 3.10(a), emphasis added.) The ENA expressly bars ALP from executing a “Transfer,” whether voluntarily or by operation of law, “without the prior written consent of the City, in its sole and absolute discretion.” (Ibid.) The ENA further states, “[a]ny transfer without City’s consent in accordance with the requirements of this Section 3.10 shall be voidable by the City and shall constitute an immediate and incurable Developer Event of Default under this Agreement.” (Ibid.)

In its Demurrer, City highlights the use of the term “and” within Section 3.10(a) to argue that the assignment of Claridge’s membership interest in ALP to Peebles and MacFarlane constituted a “Transfer” under the ENA. (Compl., Exh. B.) Specifically, City argues that on June 1, 2023, ALP completed an “assignment” that resulted in Claridge no longer holding a “direct or indirect controlling ownership and/or voting interest in/of [ALP],” as reflected by Exhibit B attached to the Complaint. (Id., Exhs. A-B.) City points out that the Complaint does not allege that ALP obtained City’s consent to this assignment, but rather notified City after the fact. (Id., ¶ 37, Exh. D.) As a result, City argues this assignment constituted an improper “Transfer,” thus resulting in “an immediate and incurable Developer Event of Default” under the ENA. (Id., ¶¶ 35, 38, Exhs. C, E.) Additionally, City argues that several other provisions of the ENA can be read to support its conclusion. First, the ENA defines “the Developer” as “a joint venture of” Peebles, MacFarlane, and Claridge. (Id., Exh. A, at Recital G.) Second, the ENA defines “Permitted Transfer” such that ALP “shall be permitted to Transfer its interest in this Agreement to a new entity created by [ALP] for the purpose of developing the Proposed Project (“Successor”), without the need for City consent” provided “MacFarlane, Claridge, and Peebles at all times retain the direct or indirect controlling ownership and/or voting interest in Successor,” among other requirements. (Id., § 3.10(b).)

Even so, construing the Complaint liberally, the Court is not persuaded that the plain meaning of Section 3.10(a) precludes transfer of membership interests between Peebles, MacFarlane, and Claridge without City’s approval. An assignment resulting in “any person other than” Peebles, MacFarlane, and Claridge “having the direct or indirect controlling ownership and/or voting interest in/of” ALP is a Transfer. (Id., Exh. A, at § 3.10(a).) This language may be reasonably interpreted as intending to prohibit third parties from obtaining an interest in ALP or the ENA without prior approval by City, as ALP suggests. (Performance Plastering v. Richmond American Homes of Cal., Inc. (2007) 153 Cal.App.4th 659, 672 (in ruling upon demurrers, courts defer to plaintiffs’ reasonable interpretations of contracts); See also Aragon-Haas v. Family Security Services, Inc. (1991) 231 Cal.App.3d 232, 239; Davies v. Sallie Mae, Inc. (2008) 168 Cal.App.4th 1086, 1091.)) At minimum, the Court finds that ALP has cited sufficient legal authority to support its argument that the meaning of the word “and” when read together with the “any person other than” language, may be construed in favor of ALP’s interpretation— at least for purposes of withstanding this Demurrer. (D. N. & E. Walter & Co. v. Efficient Inv., Inc. (1968) 267 Cal.App.2d 293, 297 (“[T]he terms ‘and’ and ‘or’ may be construed as interchangeable when necessary to effect the apparent meaning of the parties.”); People v. Reynoza (2024) 15 Cal.5th 982, 991 (“[T]he word and is not always to be taken conjunctively. It is sometimes, in a fair and rational construction of a statute, to be read as if it were or, and taken disjunctively…”))

Accordingly, for pleading purposes, ALP has sufficiently alleged that the assignment of Claridge’s interests was not an unpermitted “Transfer” for the purposes of City’s alleged breach of Section 3.8(a). Thus, ALP has sufficiently pled a viable claim against City for breach of the ENA. Therefore, City’s Demurrer to the 1^st cause of action is OVERRULED.

B. 2^nd Cause of Action: Breach of Implied Covenant of Good Faith and Fair Dealing — SUSTAINED with LEAVE TO AMEND

The 2^nd cause of action for breach of the implied covenant of good faith and fair dealing is insufficiently pled. Here, ALP alleges that City “unfairly interfered with [ALP’s] right to receive the benefits of the ENA” by inducing ALP to continue work on the Project and accepting the performance, only to attempt to re-trade the parties’ deal through a “pretextual claim of breach” and by terminating the ENA without justification. (Compl., ¶ 64.) In its Demurrer, City argues the 2^nd cause of action is superfluous, because it relies on the same alleged acts and seeks the same damages as the 1^st cause of action. The Court agrees.

First, it is not clear how the alleged wrongdoing underlying the 2^nd cause of action is distinct from City’s alleged breach of the ENA. ALP is alleging that City allowed ALP to invest significant time and money into the Project for nearly four years, only to terminate the ENA for pretextual and political reasons. (Id., ¶ 31, 36.) As discussed above, City’s “wrongful” termination of the ENA is the exact conduct constituting the alleged breach. Simply alleging a bad faith motive for breaching the contract does not create a second grounds for recovery due to the same breach. More facts are necessary to clarify how City’s alleged “bad faith” conduct is distinguishable from City’s alleged transgression of the express terms of the ENA. (Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1153 (“In essence, the covenant is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party's rights to the benefits of the contract.”)) Second, the 2^nd cause of action expressly alleges that ALP is entitled to the reimbursement of its costs pursuant to Section 3.8 of the ENA— the same damages sought under the 1^st cause of action. (Id., ¶ 65.) ALP does not address this redundancy in its Opposition. Accordingly, as the 2^nd cause of action is based on the same underlying wrongdoing and seeks the same recovery as ALP’s breach of contract claim, the Court finds the claim for breach of the implied covenant is superfluous. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395 (“If the allegations 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. Thus, absent those limited cases where a breach of a consensual contract term is not claimed or alleged, the only justification for asserting a separate cause of action for breach of the implied covenant is to obtain a tort recovery.”); See also Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 327 (“where breach of an actual term is alleged, a separate implied covenant claim, based on the same breach, is superfluous.”)) Therefore, City’s Demurrer to the 2^nd cause of action is SUSTAINED with LEAVE TO AMEND.

C. 3^rd Cause of Action: Unjust Enrichment — SUSTAINED with LEAVE TO AMEND

The 3^rd cause of action for unjust enrichment is insufficiently pled. First, although City argues “unjust enrichment” is not a cause of action in California, it impliedly acknowledges that courts have construed unjust enrichment claims as being causes of action for quasi-contract seeking restitution. (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231; See also City of Oakland v. Oakland Raiders (2022) 83 Cal.App.5th 458, 477 (a claim based on unjust enrichment may also be called “quasi-contract” or “quantum meruit.”)) Accordingly, City contends that a quasi-contract claim cannot be asserted against a public entity, like City, as a matter of law. Generally, “a private party cannot sue a public entity on an implied-in-law or quasi-contract theory, because such a theory is based on quantum meruit or restitution considerations which are outweighed by the need to protect and limit a public entity's contractual obligations.” (Katsura v. City of San Buenaventura (2007) 155 Cal.App.4th 104, 109–110; See also Pasadena Live v. City of Pasadena (2004) 114 Cal.App.4th 1089, 1094 (“A public entity cannot be held liable on an implied-in-law or quasi-contract theory.”) This principle arises from the Government Claims Act. “Government Code section 815 states: ‘Except as otherwise provided by statute: [¶] (a) A public entity is not liable for an injury, whether such injury arises out of an act or omission of the public entity or a public employee or any other person.’ The Legislative Committee Comment to section 815 states: ‘This section abolishes all common law or judicially declared forms of liability for public entities, except for such liability as may be required by the state or federal constitution....’ [Citations.]” (Sheppard v. North Orange County Regional Occupational Program (2010) 191 Cal.App.4th 289, 314.) While there are exceptions to this general rule, such as those related to statutory obligations[2], ALP has not sufficiently identified any relevant exception or other statutory basis to demonstrate that the instant action is proper.

Even if the instant unjust enrichment claim could be brought against a public entity, the remaining issue with this cause of action is that the alleged enforceable express contract between the parties precludes a claim for unjust enrichment. Indeed, “unjust enrichment does not lie where… express binding agreements exist and define the parties’ rights.” (Cal. Medical Ass'n v. Aetna U. S. Healthcare of Cal. (2001) 94 Cal.App.4th 151, 172.) While restitution may be awarded in lieu of contract damages where the parties’ express contract “is unenforceable or ineffective for some reason,” Plaintiff is neither alleging that the ENA is unenforceable or seeking restitution in the alternative to damages for breach of contract. (McBride v. Boughton (2004) 123 Cal.App.4th 379, 388.) Accordingly, the allegations in the Complaint are not sufficient to support a cause of action against City for unjust enrichment as a matter of law. Therefore, City’s Demurrer to the 3^rd cause of action for unjust enrichment is SUSTAINED with LEAVE TO AMEND.

Defendant City of Los Angeles to serve notice of ruling. This tentative ruling (“TR”) shall be the order of the Court unless changed at the hearing and shall by this reference be incorporated into the Minute Order.

[1] Section 3.8(a) states: “If the City terminates this Agreement and the Developer [ALP] is not then in default of its obligations set forth in Section 2.11 or elsewhere in this Agreement, then the Developer [ALP] shall be entitled to reimbursement for its reasonable and allowable costs through the effective date of the termination and those reasonable and necessary costs incurred by the Developer [ALP] to effect such termination.” (Compl., Exh. A, at § 3.8(a).)

[2] (See e.g. County of Santa Clara v. Superior Court (2023) 14 Cal.5th 1034, 1049 (“the Act does not immunize the County from the Hospitals’ quantum meruit claim to enforce a statutory duty of reimbursement.”)