Judge: Robert B. Broadbelt, Case: 22STCV38484, Date: 2023-08-09 Tentative Ruling

Tentative rulings are sometimes, but not always, posted. The purpose of posting a tentative ruling is to to help focus the argument. The posting of a tentative ruling is not an invitation for the filing of additional papers shortly before the hearing.

Case Number: 22STCV38484    Hearing Date: August 9, 2023    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTY:                 Defendant Maestro Interactive, Inc.  

RESPONDING PARTY:       Plaintiff Loud and Live Entertainment, Inc.  

Demurrer to First Amended Complaint

The court considered the moving, opposition, and reply papers filed in connection with this demurrer.

BACKGROUND

Plaintiff Loud and Live Entertainment, Inc. (“Plaintiff”) filed the operative First Amended Complaint in this action against defendant Maestro Interactive, Inc. (“Defendant”) on February 3, 2023.  Plaintiff alleges four causes of action for (1) breach of contract, (2) breach of express warranty, (3) negligent misrepresentation, and (4) rescission.

Defendant now moves the court for an order sustaining its demurrer to each cause of action alleged in Plaintiff’s First Amended Complaint.

DISCUSSION

The court overrules Defendant’s demurrer to the first cause of action for breach of contract because it states facts sufficient to constitute a cause of action since Plaintiff has sufficiently alleged, for purposes of this demurrer, facts showing that it performed pursuant to the parties’ contract, including by making payment to Defendant, except where performance was excused.  (Code Civ. Proc., § 430.10, subd. (e); Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 402 [setting forth elements of cause of action for breach of contract]; FAC ¶¶ 75, 29, subds. (b), (e), 31.)

The court sustains Defendant’s demurrer to the second cause of action for breach of express warranty because it does not state facts sufficient to constitute a cause of action.  (Code Civ. Proc., § 430.10, subd. (e).)

“An express warranty ‘is a contractual promise from the seller that the goods conform to the promise.’”  (Dagher v. Ford Motor Co. (2015) 238 Cal.App.4th 905, 928.)  “[T]o prevail on a breach of express warranty claim, the plaintiff must prove (1) the seller’s statements constitute ‘ “an affirmation of fact or promise” ’ or a ‘ “description of the goods” ’; (2) the statement was ‘ “part of the basis of the bargain” ’; and (3) the warranty was breached.”  (Weinstat v. Dentsply Internat., Inc. (2010) 180 Cal.App.4th 1213, 1227.)

The parties dispute whether their agreement was for the sale of goods or for the performance of services and, consequently, whether Plaintiff can allege a cause of action for breach of express warranty pursuant to the Commercial Code.  The court finds that the parties’ agreement was for the provision of services.

“‘It is established that where the commercial agreement between the parties involves the performance of services, the [California Uniform] Commercial Code has no application.’”  (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1186.)  Instead, the Commercial Code “applies to transactions in goods . . . .”  (Com. Code, § 2102.)  A “good” is statutorily defined to mean “all things . . . which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities . . . and things in action.”  (Com. Code, § 2105, subd. (a).)  To determine whether an agreement was for the sale of goods or the provision of services, courts “look to the essence of the agreement.  When service predominates, the incidental sale of items of personal property [] does not alter the basic transaction.”  (Wall Street Network, Ltd., supra, 164 Cal.App.4th at p. 1186 [internal quotations omitted].)

In its First Amended Complaint, Plaintiff alleges that (1) the parties entered into the agreement on February 22, 2021, by which Plaintiff “purchased the right to access [Defendant’s] livestreaming Platform and associated data” (FAC ¶ 27 [footnote omitted]), and (2) in purchasing these access rights, Plaintiff purchased the right to use Defendant’s platform and stream a concert thereon (FAC ¶ 28).  Further, Plaintiff alleges that it “wanted to engage [Defendant] to stream” the concert (FAC ¶ 15), and that Defendant represented that it had “previously handled huge events” (FAC ¶ 15), such that Defendant would be able to “handle a livestream capacity of at least 100,000 viewers” (FAC ¶ 23).  Plaintiff also retained a customer support manager employed by Defendant for assistance on the night of the concert.  (FAC ¶ 49.)  However, Defendant’s platform experienced a technological failure that could not be repaired in time to stream the concert to Plaintiff’s viewers.  (FAC ¶¶ 47, 48-59.)

The court finds that the facts alleged show that the “essence” of the parties’ agreement was for the provision of Defendant’s services to stream the concert.  (Wall Street Network, Ltd., supra, 164 Cal.App.4th at p. 1186.)  The court notes that Plaintiff has argued that, in some circumstances, the purchase of a software program may constitute a purchase of goods.  (RRX Industries, Inc. v. Lab-Con, Inc. (9th Cir. 1985) 772 F.2d 543, 545 [stating that the parties entered into an agreement for the purchase of a software system for use in medical laboratories], 546 [finding that the sales aspect of the transaction predominated since “[t]he employee training, repair services, and system upgrading were incidental to sale of the software package”] (“RRX Industries, Inc.”); Gross v. Symantec Corp. (N.D. Cal. 2012) 2012 WL 3116158 at *9 (“Gross”).)  However, in those cases, there were either no maintenance, training, or upgrading services involved (as in Gross), or those services were ancillary to the sale of the software (as in RRX Industries, Inc.).  (RRX Industries, Inc., supra, 772 F.2d at p. 546; Gross, supra, 2012 WL 3116158 at *9.)  Here, Plaintiff has alleged, as set forth above, that it engaged Defendant “to stream” the concert, retained a customer support manager from Defendant for the night of the concert, and, when there were issues, relied on Defendant’s expertise and work regarding the platform.  (FAC ¶¶ 15, 49, 50-59.)  Thus, as pleaded, the crux of the parties’ agreement was for the provision of Defendant’s services, including its platform, to stream the concert.

The court therefore finds that, since the “essence” of the parties’ agreement was for the provision of services and not for the sale of goods, the Commercial Code does not apply and thus does not create a cause of action for breach of express warranty.  (Wall Street Network, Ltd., supra, 164 Cal.App.4th at p. 1186.)

The court overrules Defendant’s demurrer to the third cause of action for negligent misrepresentation because it states facts sufficient to constitute a cause of action since Plaintiff has alleged, with sufficient particularity, facts showing that (1) Defendant knew or should have known that its representation that its platform could automatically scale to customers’ needs was untrue (FAC ¶¶ 95-96, 67, 55), and (2) Defendant made a false assertion of past or existing material fact when it stated that its platform “would automatically scale to accommodate the number of ticketholders” (FAC ¶¶ 7, 26, 70, 94).  (Code Civ. Proc., § 430.10, subd. (e); Borman v. Brown (2021) 59 Cal.App.5th 1048, 1060 [setting forth elements of claim for negligent misrepresentation]; Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 242 [“ ‘“courts should not . . . seek to absolve the defendant from liability on highly technical requirements of form in pleading.  Pleading facts in ordinary and concise language is permissible in fraud cases as in any others, and liberal construction of the pleading is as much a duty of the court in these as in other cases”’”]; Gentry v. eBay, Inc. (2002) 99 Cal.App.4th 816, 835.)

The court overrules Defendant’s demurrer to the fourth cause of action for rescission because it states facts sufficient to constitute a cause of action.  (Code Civ. Proc., § 430.10, subd. (e).)  The court notes that (1) Defendant has cited authority stating that, where “no explanation is given in the complaint for a substantial delay after knowledge of the facts giving rise to the right to rescind, the complaint is demurrable[;]” (2) Plaintiff knew of the facts giving rise to the rescission of the contract as of April 17, 2021 (i.e., the date the concert was supposed to take place but did not due to the technical issues); and (3) Plaintiff filed this action more than a year later, on December 9, 2022.  (Leeper v. Beltrami (1959) 53 Cal.2d 195, 211-212; FAC ¶ 46.)  However, the court finds that (1) on the face of the First Amended Complaint, the facts do not show that there has been “a substantial delay” that would require sustaining the demurrer, and (2) even if Plaintiff had delayed in giving notice of rescission, such relief shall not be denied “unless such delay has been substantially prejudicial to the other party[,]” and Defendant has not shown that the facts alleged establish that any delay was substantially prejudicial.  (Leeper, supra, 53 Cal.2d at pp. 211-212; Civ. Code, § 1693.)

The burden is on the plaintiff “to articulate how it could amend its pleading to render it sufficient.”¿ (Palm Springs Villas II Homeowners Assn., Inc. v. Parth (2016) 248 Cal.App.4th 268, 290.)¿ To satisfy that burden, a plaintiff “must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading.”¿ (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)  The court finds that Plaintiff has not met its burden to articulate how it could amend its second cause of action to render it sufficient against Defendant.  The court therefore sustains the demurrer to that cause of action without leave to amend. 

ORDER

The court overrules defendant Maestro Interactive, Inc.’s demurrer to plaintiff Loud and Live Entertainment, Inc.’s first, third, and fourth causes of action.

The court sustains defendant Maestro Interactive, Inc.’s demurrer to plaintiff Loud and Live Entertainment, Inc.’s second cause of action for breach of express warranty without leave to amend.

The court orders defendant Maestro Interactive, Inc. to file an answer to plaintiff Loud and Live Entertainment, Inc.’s First Amended Complaint no later than 10 days from the date of this ruling.

The court orders defendant Maestro Interactive, Inc. to give notice of this ruling.

IT IS SO ORDERED.

DATED:  August 9, 2023

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court