Judge: Stephen P. Pfahler, Case: 23STCV20372, Date: 2025-06-10 Tentative Ruling

Case Number: 23STCV20372    Hearing Date: June 10, 2025    Dept: 68

Dept. 68

Date: 6-10-25 c/f 5-20-25

Case #23STCV20372

Trial Date: Not Set

DEMURRER TO THE THIRD AMENDED COMPLAINT

MOVING PARTY: Defendant, City of Los Angeles

RESPONDING PARTY: Plaintiff, Abet Security Services, Inc.

RELIEF REQUESTED

Demurrer to the Third Amended Complaint

·         1^st Cause of Action: Breach of Contract

Motion to Strike

SUMMARY OF ACTION

Plaintiff Abet Security Services, Inc. alleges the existence of a contract with defendant City of Los Angeles, including the Los Angeles Police Department, for the provision of security services beginning on February 21, 2017. Plaintiff claims non-payment for services rendered totaling $803,537.92 based on 24,284 hours of labor from 2017 through August 31, 2022.

On August 24, 2023, Plaintiff filed a complaint for Breach of Contract, Breach of Implied Covenant of Good Faith and Fair Dealing, and Negligent Interference with Prospective Economic Advantage. On November 13, 2023, Plaintiff filed its first amended complaint for Breach of Contract. On December 29, 2023, the court denied Plaintiff’s motion for relief.

On February 14, 2024, the court sustained the demurrer to the first amended complaint with 30 days leave to amend. On March 18, 2024, Plaintiff filed a second amended complaint for Breach of Contract. On August 7, 2024, the court sustained the demurrer to the second amended complaint with 20 days leave to amend. On August 27, 2024, Plaintiff filed its third amended complaint for “Breach of Contract (including Reformation).”

RULING

Demurrer: OVERRULED.

Request for Judicial Notice: Granted in Part (numbers 1-5, 8-9)/Denied in Part (numbers 6-7)

Defendant City of Los Angeles (City) brings the subject demurrer to the third amended complaint on grounds previously determined invalid in the prior iterations of the complaint: Plaintiff Abet Security Services, Inc. (Abet) cannot recover for services not agreed upon in the 2017 contract. City additionally challenges any claim of reformation based on failure to allege facts and estoppel. Allowing reformation would violate the City charter. Abet in opposition contends the operative complaint sufficiently alleges the claim for breach of contract in that Plaintiff now articulates ratification of terms in the 2022 agreement, which now includes the “Armed Security Field Supervisor” admittedly left out from the 2017 contract fee schedule. City in reply reiterates the lack of a valid claim under the 2017 contract, lack of entitlement to reformation of the contract with the 2022 provisions and fee schedules, and denial of any further leave to amend.

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . . .” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated. (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

“To state a cause of action for breach of contract, [a plaintiff] must plead the contract, his performance of the contract or excuse for nonperformance, [defendant’s] breach and the resulting damage. (Citation.) Further, the complaint must indicate on its face whether the contract is written, oral, or implied by conduct. (Citation.)” (Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 458–59.) In examining a breach of contract claim, the court is required to examine the terms, or at least the legal effect of the contract. (Blank v. Kirwan, supra, 39 Cal.3d at p. 318 [“we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context”]; Otworth v. Southern Pac. Transportation Co., supra, 166 Cal.App.3d at p. 459 [“If the action is based on an alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written instrument must be attached and incorporated by reference”]; Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198–199 [“In an action based on a written contract, a plaintiff may plead the legal effect of the contract rather than its precise language”].)

In ruling on the two prior demurrers, the court noted Plaintiff’s opposition position, yet the lack of any actually pled allegations or exhibits supporting any and all of said represented bases of the claim. Upon the threat of potential final review on the basis of a finding that Plaintiff remains unable to plead a valid cause of action, Plaintiff elected to both articulate the basis of sought after recovery, also attach new, supporting exhibits rather than simply represent said existence in opposition.

The court reviews the allegations and exhibits. The existence of the $10,000,000 February 21, 2017, to February 20, 2020, written contract remains undisputed for purposes of the demurrer. [Third Amend. Comp., ¶ 11, Ex. 1.] Plaintiff additionally alleges an extension of said contract through “February of 2022.” The first extension only provides an extension through February 20, 2020. [Third Amend. Comp., ¶ 12, Ex. 1A.] A September 12, 2019, “Contract Summary Sheet” identifies “amendment number 3” (the court was unable to locate any “amendment number 2” within the operative complaint exhibits) providing for a “Living Wage Increase of 7.55% ... effective July 1, 2019 through June 30, 2020.” [Id.] Amendment number 4 extends the contract period from February 21, 2020, to February 20, 2022. [Id.] Amendment number five allows for a $0.75/hour wage increase for July 1, 2020, through June 30, 2021. [Id.] The operative complaint also includes additional exhibits under the 1A tab: Amendment number 6 extended the contract from February 21, 2022 through May 20, 2022; Amendment number 7 extends through August 20, 2022; Amendment number 8 through Number 20, 2022. [Id.] Plaintiff references a “new agreement” “relating to services beginning in 2022,” whereby the “Field Supervisor” was specifically addressed, and identifies Exhibit 1A, but it remains unclear which if any or all of the attached additional “amendments” Plaintiff intends to constitute said “new agreement.” [Id., ¶ 24.]

Plaintiff also alleges said agreement(s) include a “ratification clause for prior services” as part of the “Extension Agreement.” [Id., ¶ 24.] The operative complaint continues that Plaintiff executed the original agreement with the understanding that payment was required for all provided personnel though Plaintiff concedes to the lack of language regarding “Field Supervisors.” [Id., ¶ 25.] The omitted provision is additionally or alternatively now characterized as a “mutual mistake” in that the Request for Proposal (RFP) required supervision, yet the contractual schedule omitted said position. [Id., ¶¶ 25-26.] The mistake constitutes the foundation for the sought after reformation in the underlying breach of contract action. [Id., ¶¶ 28-29.]

Consistent with both prior positions and court rulings, City again challenges the claim on grounds that the terms of the contract and amendments bar any additional compensation for the schedule omitted “Field Supervisor” position. Plaintiff also lacks a basis for stating mistake and reformation in that Plaintiff knowingly entered into the contract with the lack of “Field Supervisor” category inclusion.

“2.2 Statement of Work to be Performed

A. During the term of this Agreement, Contractor shall provide the Services, and implement the tasks identified herein and in Attachment B, Statement of Work (“SOW”), and Attachment

C, Fee Schedule.

B. All work and tasks are subject to City approval in accordance with the SOW. Failure to receive approval may result in the withholding of compensation for such work pursuant to Section 3, Compensation and Method of Payment, of this Agreement.

C. Notwithstanding any other provision of this Agreement, the Contractor shall perform such other work within the SOW as necessary to ensure that the work provided under this Agreement meets the requirements set forth in this Agreement and all Attachments.

D. In the event that City requires services in addition to those specified in this Agreement, Contractor agrees to provide such services in accordance with Section 6, Amendments, of this Agreement. Prior to performance of additional work, this Agreement will be amended to include the additional work and payment therefor.” [Third Amend. Comp., Ex. 1: Professional Services Agreement.]

The contract identifies a number of potential employees, which includes the disputed field supervisor position: “3.1 Security Officer Types and Qualifications [¶] Unarmed Security Officer ... Armed Security Officer ... Armed Security Shift Supervisor ... Professional Security Officer ... Post Commander ... Field Supervisor.” [Id., Attachment B: Statement of Work.] It remains undisputed that the 2017 agreement lacks a provision for payment of field/patrol supervisor. “11.3 Fees [¶] The Contractor shall submit invoices as described herein for the services performed for which payment is requested. Said services shall be billed in the amounts set forth in fee schedule identified as Attachment C and attached hereto and incorporated herein by this referral. The total dollar amount that the City will pay the Contractor for satisfactory services rendered under the terms of this contract may be up to, but not exceed, ten million dollars ($10,000,000) annually.” [Id., Attachment B.] The fee schedule specifically identifies the following authorized personnel: “Unarmed Security Officer ... Armed Security Officer ... Armed Security Shift Supervisor ... Armed Security Officer ... Post Commander ... Professional Security Officer.” [Id., Attachment C.]

Similar to the prior versions, the latest iteration of the complaint seeks $800,000 in compensation for the “Field Supervisors” (as opposed to the previously alleged “Patrol Supervisors.” [Third Amend. Comp, ¶¶ 14-20, 28.] The operative complaint also now cites to various sections where “Field Supervisor” duties are both defined and a failure to meet obligations would lead to $100 penalty payments for each incident. [Id., ¶¶ 13-18, 20.] City accepted the services of said Field Supervisors as demonstrated in the submission of the logs and inclusion in the invoices. [Id., ¶¶ 19, 21.]

Again, the issue regarding the non-existing field supervisor position in the schedule is not in dispute. City seeks to extend the impact of said omission in its challenge of the ratification clause, in order to block retroactive justification of the sought after payment for said Field Supervisors services provided since 2017 yet based on the latest included 2020 contract/amendment. (City of Brentwood v. Department of Finance (2020) 54 Cal.App.5th 418, 437-438.) While City correctly cites to the court’s prior rejection of ratification, again, the court rejected the position on grounds of lack of any actual terms and language. The court never made any contractual interpretation finding as a matter of law. Now that Plaintiff appears to finally at least incorporate the presumed basis into the operative pleading, the court addresses the legal merits of the ratification clause.

Plaintiff in opposition again offers no apparently legally supported opposition to this position, and instead only reiterates the “intent” of the parties to “ratify the services” provided in the 2017 contract from the 2020/2022 term extension amendment(s). In addition to the lack of any legal citation other than the City support enforcing its position, the argument lacks any specific citation as to which of the seven of eight amendments incorporated into the third amended complaint Plaintiff refers. Notwithstanding, the court assume Plaintiff refers to amendment number one from February 21, 2017, to February 20, 2020.

“[T]he effect of ratification is limited to the terms of the documents ratified. Ratification does not alter the terms of a contract or make a contract with different terms.” (City of Brentwood v. Department of Finance, supra, 54 Cal.App.5th at p. 437.) Section three (3) of Amendment 1 states: “Ratification. Due to the need for the Contractor’s services to be provided continuously, the Contractor may have provided services prior to the execution of this First Amendment. To the extent that said services were performed in accordance with the terms and conditions of the Original Agreement, those services are hereby ratified.”

Consistent with the law on ratification, the ratification clause specifically depends on the terms of the agreement itself.  Again, both parties admit to the omission of any reference to the Field Supervisor position regardless of services provided. The court therefore finds the ratification clause in no way establishes any legal obligation against City for Field Supervisor services even if accepted by City as part of the RFP requirements. (Id. at pp. 437-438.)

This leaves Plaintiff’s alternative position as the last basis for successfully pleading a claim against City—reformation of contract. City challenges the position on grounds of failure to state a basis for relief on ground of mistake in that Plaintiff was responsible for considering all terms and a failure to read all terms will not constitute a sufficient basis. City also challenges any finding of reasonable expectation and therefore basis of unconscionability in that the contract strictly limited services to $10,000,000 per year, thus the sought after $803,537.92 in additional costs from 2017 to 2022 would exceed the limit.

Plaintiff denies any challenge to f reformation on grounds of not reading the contract, and instead relies on a claim of “omission” in failing to account for the Field Supervisor requirements. Plaintiff also challenges any reliance by City on extrinsic inference or considerations beyond the pled claim of reformation due to mistake. Plaintiff denies the $10,000,000 cap as any basis of denial of the claim for reformation.

The operative complaint alleges the basis of reformation under Civil Code section 3399. [Third Amend. Comp., ¶ 29.] “When, through fraud or a mutual mistake of the parties, or a mistake of one party, which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised on the application of a party aggrieved, so as to express that intention, so far as it can be done without prejudice to rights acquired by third persons, in good faith and for value.” (Civ. Code, § 3399.) “The purpose of reformation is to correct a written instrument in order to effectuate a common intention of both parties which was incorrectly reduced to writing. (Citation.) In order for plaintiff to obtain this relief there must have been an understanding between the parties on all essential terms, otherwise there would be no standard to which the writing could be reformed.” [¶] “Reformation may be had for a mutual mistake or for the mistake of one party which the other knew or suspected, but in either situation the purpose of the remedy is to make the written contract truly express the intention of the parties. Where the failure of the written contract to express the intention of the parties is due to the inadvertence of both of them, the mistake is mutual and the contract may be revised on the application of the party aggrieved. (Citation.) When only one party to the contract is mistaken as to its provisions and his mistake is known or suspected by the other, the contract may be reformed to express a single intention entertained by both parties. Although a court of equity may revise a written instrument to make it conform to the real agreement, it has no power to make a new contract for the parties, whether the mistake be mutual or unilateral.” (Lemoge Elec. v. San Mateo County (1956) 46 Cal.2d 659, 663.)

The complaint includes reference to a case regarding recission of contract on grounds of mistake which the City seizes upon in defense of the action. “A factual mistake by one party to a contract, or unilateral mistake, affords a ground for rescission in some circumstances. Civil Code section 1577 states in relevant part: “‘Mistake of fact is a mistake, not caused by the neglect of a legal duty on the part of the person making the mistake, and consisting in: [¶] 1. An unconscious ignorance or forgetfulness of a fact past or present, material to the contract ....’” (Donovan v. RRL Corp. (2001) 26 Cal.4th 261, 278.) “Where the plaintiff has no reason to know of and does not cause the defendant's unilateral mistake of fact, the defendant must establish the following facts to obtain rescission of the contract: (1) the defendant made a mistake regarding a basic assumption upon which the defendant made the contract; (2) the mistake has a material effect upon the agreed exchange of performances that is adverse to the defendant; (3) the defendant does not bear the risk of the mistake; and (4) the effect of the mistake is such that enforcement of the contract would be unconscionable.” (Id. at p. 282.)

The court notes that Plaintiff seeks reformation not recission. As for reformation, the third amended complaint sufficiently articulates the basis of the claim. The court finds the position of City regarding assumptions of Plaintiff’s fault in reading the contract or other inferences regarding the assumptions of the parties beyond the scope of consideration under the demurrer review standard. This includes any position regarding payment beyond $10,000,000. Plaintiff makes no such allegations as the basis of the purported mistake in entry, and therefore provides no introduction for consideration of this aspect. Plaintiff only alleges a mistake in not verifying/discovering the omission regarding inclusion into the payment schedule for Field Supervisors, while such service was a required condition of the RFP. The court finds the existence of said terms in the RFP and language within the agreement is not proposing a rewritten agreement, but a correction of terms to make performance economically feasible. Again, the court considers the demurrer within the scope of the pleading itself and in no way considers any potential issues such as Plaintiff potentially leaving out items to win the contract then later seeking retroactive collection of fees.

Assuming a successful reformation claim, City alternatively challenges any right to allege reform on the basis of estoppel. The position depends on a rejection of the right to seek reformation based on the undisputed entry into the written contract and failure to read the terms. (Fields v. Blue Shield of California (1985) 163 Cal.App.3d 570, 579.) Again the issue is extrinsic and not considered.

For the reasons addressed above, the court finds no legally supported basis for this position. The demurrer is therefore OVERRULED.

Motion to Strike: DENIED.

City moves to strike multiple paragraphs and the claim for relief on grounds of failure to include said reformation claim within the government claim. Any claim preceding 2021 is time barred. Plaintiff in opposition denies any time bar. City in reply emphasizes that because any and all alleged non-payment occurred more than one year before the claim filing time, said claims are time barred. City also again challenges the reformation claims.

To the extent the court overruled the demurrer to the breach of contract claim, the court DENIES the motion to strike the motion to strike the “reformation” claims.

On the scope and timing of the government claim position, the court takes judicial notice of the government claims. The claims begin with a presumably rejected May 28, 2019, filed claim. [Req. Jud. Not., Ex. B.] A second claim was apparently filed on July 12, 2022. [Id. Ex. C.] The claims are included in the request for judicial notice, with City indicating the purpose of comparison for determining the bases of the respective claims (e.g. the July 2022 claim lacked any allegation regarding sought after Field Supervisor compensation). On November 9, 2022, Rosa Perez, born on a represented date of January 1, 2021, submitted the latest claim. [Req. Jud. Not., Ex. A.] The claim alleges damages accrued on November 1, 2022, and states multiple breaches of contract provisions, including $803,537.92 for unpaid supervisory work “billed October 2022.”  

The last two filed claims were both filed in conjunction with the October 21, 2022, United States District Court complaint, subsequently dismissed without prejudice on May 12, 2023. [Third Amend. Comp., ¶ 9.]

City contends the latest claim bars any recovery prior to November 2021, in that any relief is barred more than one year preceding the accrued damages. “‘Claims for personal injury must be presented not later than six months after the accrual of the cause of action, and claims relating to any other cause of action must be filed within one year of the accrual of the cause of action.’ (Citation.) Accrual for purposes of the Act is the date of accrual that would pertain under the statute of limitations applicable to a dispute between private litigants.” (Willis v. City of Carlsbad (2020) 48 Cal.App.5th 1104, 1118.)

City maintains that any and all claims for payment based on the breach of contract accrued each month payment was due. Thus, the last month covered by the November 2022 claim was November 2021. Plaintiff relies on recitation of the operative complaint including the allegations regarding the right to submit billing statements and lack of dispute over the unpaid invoices. Plaintiff falls back on the “ratification” clause in the 2022 amendment as the basis for apparent revival of all non-payment dating back to 2017.

Plaintiff otherwise concedes to the one year claim requirement. (“A claim for breach of contract must be presented to the public entity within one year of accrual of the cause of action. (Gov.Code, § 911.2.)” (Westcon Construction Corp. v. County of Sacramento (2007) 152 Cal.App.4th 183, 190.) Plaintiff continues with a challenge to any finding of accrual of the actual cutoff date, including potential delayed discovery.

The court finds the ratification clause invalid, and therefore will not consider any retroactive extension of the claim based on said clause, even if Plaintiff presented legal support for such a possibility. (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784–785 [“When [a party] fails to raise a point or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived”].) Nevertheless, the operative complaint and intermixed allegations prevent precise delineation and distinction. The court declines to bluntly strike sections and potentially strike out or limit the potentially valid claim for recovery of unpaid expenses from 2021 to 2022. Even if City makes an effort to more pinpoint the language, the court declines further consideration in that the delayed discovery suggestion constitutes position that requires consideration beyond the scope of the pleadings for purposes of the motion to strike.

The motion to strike is therefore DENIED in its entirety.

In summary the demurrer is overruled and the motion to strike is denied. City to answer the third amended complaint within 10 days of this order.

City of Los Angeles to give notice.