Judge: Richard Y. Lee, Case: 2019-01071450, Date: 2022-08-22 Tentative Ruling

Motion for Summary Judgment or in the Alternative, Summary Adjudication

The Motion for Summary Judgment, or in the Alternative, Summary Adjudication of Defendants Ozman Mohiuddin; UB Laboratories, Inc. dba Health360 Labs (sued as Health 360 Labs, Inc.); and Stan Morse is DENIED in its entirety.

Defendants Ozman Mohiuddin; UB Laboratories, Inc. dba Health360 Labs (sued as Health 360 Labs, Inc.); and Stan Morse move for summary judgment or, in the alternative, summary adjudication.

A “party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact . . . .”  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.)  Once the defendant meets their burden, the burden shifts to the plaintiff to show that a triable issue of material fact exists as to that cause of action. (Villacres v. ABM Industries, Inc. (2010) 189 Cal.App.4th 562, 575.)

A court may not make credibility determinations or weigh the evidence on a motion for summary judgment or adjudication, and all evidentiary conflicts are to be resolved against the moving party.  (McCabe v. American Honda Motor Corp. (2002) 100 Cal.App.4th 1111, 1119.) 

Scope of the Motion

Defendants’ motion seeks summary judgment or, in the alternative, summary adjudication “as to each and every cause of action and each and every claim for damages (including all claims for punitive damages) against them.”  However, Defendants’ separate statement lists only some of the causes of action contained in the complaint – the second cause of action for intentional misrepresentation, the third cause of action for negligent misrepresentation, the fourth cause of action for promises made without intention to perform, the fifth cause of action for interference with economic relations, and the sixth cause of action for unfair business practices.  (See Rule of Court Rule 3.1350, subd. (b) [motion for summary adjudication must specifically state in notice of motion “the specific cause of action … [or] claim for damages … and be repeated, verbatim, in the separate statement of undisputed material facts.”

In addition, Defendants’ arguments in their motion papers only address the second, third, fourth, fifth, and sixth causes of action.  Therefore, the court will only rule on the motion as to those causes of action.

Fraud-Based Claims (Second, Third and Fourth Causes of Action)

The second, third, and fourth causes of action all sound in fraud. To state a cause of action for fraud, Plaintiff must allege the following with specificity: (1) a misrepresentation, (2) knowledge of its falsity, (3) intent to defraud, 4) justifiable reliance, and (5) damages.  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645 [specific pleading requirement for fraud necessitates pleading facts that show how, where, when, and who of fraudulent conduct].)  In cases against corporate employers, Plaintiff must also “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 Mutual Automobile Ins. Co. (1991) 2 Cal. App. 4th 153, 157.) 

Plaintiff alleges that between February and March of 2018, Defendants “represented to Plaintiff that Health 360 had the capacity and expertise to draw blood samples; handle the samples from the blood draw to the laboratory; test the samples drawn; and provide accurate test results for the specific menu of cardiometabolic- and vascular inflammation-related blood tests requested by WellnessVIP's physician contacts.  Plaintiff further plead that these representations were made by defendants Morse, Mohiuddin and Dalal, all of whom are officers, directors or managing agents for Health 360.

Defendants Ozman Mohiuddin, UB Laboratories, Inc. dba Health360 Labs (sued as Health 360 Labs, Inc.), and Stan Morse first contend that Plaintiff do not have any evidence that Defendants made a false representation or that they had any fraudulent intent.  These Defendants deny they made any misrepresentations or that they intended to make any misrepresentations.  (UMF 18-29.)

However, Plaintiff have provided evidence that Defendants misrepresented Health 360’s testing infrastructure and capacity.  (Plaintiff’ response to UMF 18-29.)  For instance, Plaintiff provides evidence that the parties agreed that Health 360 could outsource no more than 30% of the tests it was to perform for WellnessVIP providers so long as it performed at least 70% of the tests in-house.  (See, e.g., Plaintiff’ Additional Facts 14-22.)

The moving Defendants also contend that Plaintiff’s President, Frank Ruderman, understood both before and shortly after signing the Consulting Agreement on March 23, 2018 that Health 360 would be outsourcing blood and lab work.  (Morse Decl., ¶¶ 12-19.) However, Defendants’ separate statement does not state outright that Mr. Ruderman knew that Health 360 would be outsourcing blood and lab work prior to entering into the Consulting Agreement.

Defendants also contend that Plaintiff cannot establish fraudulent intent. “A promise of future conduct is actionable as fraud only if made without a present intent to perform. . . . something more than nonperformance is required to prove the defendant’s intent not to perform his promise. … ‘[I]f plaintiff adduces no further evidence of fraudulent intent than proof of nonperformance of an oral promise, he will never reach a jury.’” (Magpali v. Farmers Grp., Inc. (1996) 48 Cal.App.4th 471, 480-481 (promise not to interfere with plaintiff’s business was true when made, as evidenced by its being kept for many years, and so not basis for fraud, even though subsequent events caused defendant to interfere).) 

However, the California Supreme Court has recognized that “fraudulent intent must often be established by circumstantial evidence.”  (Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30-31.)  Plaintiff have provided evidence that Defendants intended for Plaintiff to end its discussions with PHDx and other candidate labs and instead enter into an agreement with Health 360.  (PAF 9-10.) While circumstantial, this is sufficient evidence to create a triable issue of material fact on the issue of fraudulent intent. Defendants have not met their burden of establishing that Plaintiff’ discovery responses are factually devoid.  (See, e.g., Lafferty Decl., Exhs. 1-3.)

Defendants also contend that the Consulting Agreement expressly states that the parties to the Agreement “have not been induced by any representations, statements, warranties or agreements other than those herein expressed. This Agreement embodies the entire understanding of the parties with respect to the subject matter of this Agreement. . . . ”

Health 360, however, is not a party to the Agreement and Defendants have not supported this contention in their separate statement.  (See United Community Church v. Garcin (1991) 231 Cal.App.3d 327, 337 [“This is the Golden Rule of Summary Adjudication: if it is not set forth in the separate statement, it does not exist.”], superseded by statute on other grounds, emphasis in original.)

Finally, while Defendants contend that Plaintiff do not have evidence of damages, they did not support this contention in their separate statement. (See Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854 [“Summary judgment law in this state, however, continues to require a defendant moving for summary judgment to present evidence, and not simply point out that the plaintiff does not possess, and cannot reasonably obtain, needed evidence.”].)  In any case, Plaintiff has provided evidence to create a triable issue of fact as to the issue of damages.  (PAF 38, 45, 48-51.)

Interference with Economic Relations

The fifth cause of action states a claim for interference with economic relations.  “The elements of a claim of interference with economic advantage and prospective economic advantage are: (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional [or negligent] acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.”  (Crown Imports, LLC v. Superior Court (2014) 223 Cal.App.4th 1395, 1404, internal quotation marks omitted.) 

Although Defendants contend that there is no evidence they had any intention to disrupt any of Bayview’s economic relationships, Plaintiff has provided evidence that Defendants knew their acts were substantially certain to cause interference with Plaintiff’s economic relationships.  (PAF 27-50; see Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153.) 

Unfair Business Practices

The sixth cause of action pleads that Defendants committed unfair business practices.  California’s Unfair Competition Law (UCL) creates a cause of action against a defendant whose business practices are unlawful, unfair, or fraudulent. (See Bus. & Prof. Code, § 17200.) “Although remedies under the [UCL] are limited to injunctive relief and restitution, the law’s scope is ‘sweeping.’” (Cel–Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co. (1999) 20 Cal.4th 163, 180.) Moreover, each prong of the UCL provides a separate and distinct theory of liability. (South Bay Chevrolet v. Gen. Motors Acceptance Corp. (1999) 72 Cal.App.4th 861.)

“A claim based upon the fraudulent business practice prong of the UCL is ‘distinct from common law fraud. A [common law] fraudulent deception must be actually false, known to be false by the perpetrator and reasonably relied upon by a victim who incurs damages. None of these elements are required to state a claim for ... relief” under the UCL. [Citations.] This distinction reflects the UCL’s focus on the defendant’s conduct, rather than the plaintiff's damages, in service of the statute’s larger purpose of protecting the general public against unscrupulous business practices.’” (Morgan v. AT & T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1255.)

Plaintiff concedes that it does not seek restitution and that it no longer conducts business with Defendants.  However, Plaintiff contends that it does seek injunctive relief to prohibit Defendants from engaging in unlawful or fraudulent conduct that threatens future injury to the public.  Defendants do not respond to this argument and the motion fails as to the sixth cause of action for this reason.

Joinders

The Joinders of and the Motions for Summary Judgment, or in the Alternative, Summary Adjudication of Defendants Mohammad Mahmood and Shehzad Dalal are DENIED in their entirety.

Defendants Mohammad Mahmood and Shehzad Dalal filed joinders in the Motion for Summary Judgment, or in the Alternative, Summary Adjudication of Defendants Ozman Mohiuddin; UB Laboratories, Inc. dba Health360 Labs (sued as Health 360 Labs, Inc.); and Stan Morse.

The joining Defendants did not submit their own arguments as to why summary judgment or summary adjudication should be granted as to them.  Therefore, the joinders and motions of Defendants Mahmood and Dalal must rest upon and fall with the arguments made by Defendants Ozman Mohiuddin; UB Laboratories, Inc. dba Health360 Labs (sued as Health 360 Labs, Inc.); and Stan Morse.

Further, Plaintiff has provided sufficient evidence to create a triable issue of material fact as to whether Defendant Mahmood misrepresented Rahma Consulting, LLC’s status as a legal entity in good standing and qualified to enter into the Consulting Agreement.  (Plaintiff’s response to UMF 10-11.)  Plaintiff has also provided sufficient evidence that Defendant Dalal made misrepresentations regarding Health 360’s testing infrastructure and capacity.  (Plaintiff’ response to UMF 20-23; PAF 1-51.)

Defendants’ objections to the declaration of Frank Ruderman are overruled.

Plaintiff shall give notice of this ruling.