Judge: Teresa A. Beaudet, Case: 22STCV16482, Date: 2023-02-24 Tentative Ruling

Case Number: 22STCV16482    Hearing Date: February 24, 2023    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

             Plaintiff D/R Welch Attorneys at Law, a Professional Corporation (“Plaintiff”) filed this action on May 17, 2022 against Defendants Ian Borella (“Borella”) and Frank Borella (“Borella”) (jointly, “Defendants”), asserting causes of action for (1) fraud – intentional misrepresentation; (2) fraud – false promise; (3) negligent misrepresentation; and (4) violation of Business and Professions Code section 17200.

Defendants demur to each of the causes of action of the Complaint. No opposition to the demurrer was filed.

            On November 18, 2022, the Court issued an Order on the instant demurrer, which provides, inter alia, “Defendants did not file a meet and confer declaration showing that the parties met and conferred regarding the instant demurrer…Defendants are ordered to meet and confer with Plaintiff within 10 days of the date of this order. If the parties are unable to resolve the pleading issues or if the parties are otherwise unable to meet and confer in good faith, Defendants are to thereafter file and serve a declaration setting forth the efforts to meet and confer in compliance with Code of Civil Procedure section 430.41, subdivision (a)(3) within 15 days of this Order.” On November 28, 2022, Defendants’ counsel filed a declaration setting forth the parties meet and confer efforts. On January 3, 2023, the Court scheduled a hearing on Defendants’ demurrer for February 24, 2023.

Discussion

A.    Procedural Issues

As a threshold matter, on November 18, 2022, Plaintiff filed a First Amended Complaint (“FAC”), and on February 14, 2023, Plaintiff filed a notice of the filing of the FAC, which requests that the FAC become the operative complaint.   

Defendants object to Plaintiff ‘snotice of filing of the FAC and request that the Court strike the FAC as untimely. As Defendants note, pursuant to Code of Civil Procedure section 472, subdivision (a), “[a] party may amend its pleading once without leave of the court at any time before the answer, demurrer, or motion to strike is filed, or after a demurrer or motion to strike is filed but before the demurrer or motion to strike is heard if the amended pleading is filed and served no later than the date for filing an opposition to the demurrer or motion to strike. A party may amend the pleading after the date for filing an opposition to the demurrer or motion to strike, upon stipulation by the parties...” Pursuant to Code of Civil Procedure section 1005, subdivision (b), “[a]ll papers opposing a motion so noticed shall be filed with the court and a copy served on each party at least nine court days…before the hearing.”
            Defendants’ demurrer to the Complaint was filed on August 8, 2022, and noticed the demurrer for hearing on November 18, 2022. Plaintiff did not file the FAC nine court days prior to the November 18, 2022 hearing. Rather, Plaintiff filed the FAC on November 18, 2022, the date of the initial noticed hearing date for the demurrer. Plaintiff has not provided any evidence demonstrating that the parties stipulated that Plaintiff could file the FAC. In addition, as Defendants note, the Court never ordered that Plaintiff’s deadline to file an opposition to the demurrer was reset after the parties received a new hearing date on the demurrer.

Based on the foregoing, the Court sustains Defendants’ objection to the FAC and strikes the FAC.

B.    Legal Standard

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

C.    Allegations of the Complaint

In the Complaint, Plaintiff alleges that Impact LA, LLC provides information technology (“IT”) services and equipment leasing services throughout the Los Angeles and Orange County area; and that Impact Networking, LLC provides IT services and equipment leasing services throughout the United States directly and through its subsidiaries and/or affiliates, including Impact LA. (Compl., ¶¶ 2-3.) Plaintiff refers to Impact LA, LLC and Impact Networking, LLC jointly in the Complaint as “Impact.” (Compl., ¶ 3.)

In March of 2019, Plaintiff and Impact agreed to enter into an IT services agreement and equipment lease agreement. (Compl., ¶ 13.) Borella served as Impact’s primary point of contact with Plaintiff to establish an account. (Compl., ¶ 12.) The parties negotiated the terms of the agreement, and on March 19, 2019, Plaintiff’s representative, Mr. Muramoto, emailed Borella three separate addenda which corresponded with the three contracts Impact required for the deal. (Compl., ¶¶ 15-18.) Among other changes, Plaintiff sought to change the litigation forum from state court in Illinois to mediation and arbitration in Los Angeles, California. (Compl., ¶ 15.)

On March 21, 2019, Borella informed Mr. Muramoto that Impact agreed to all of Plaintiff’s revisions in the three addenda. (Compl., ¶ 20.) Borella also indicated in a March 21, 2019 email that, inter alia, “[a]fter our conversation earlier, we are all good to go. I only removed the ‘5. Explanation of Fees’ per our conversation…” (Compl., ¶ 21.) On March 25, 2019, Mr. Byer (Plaintiff’s then Chief Financial Officer) emailed Borella a document including the original form contracts, a quote of equipment to be rented, and the negotiated and agreed upon addenda, all executed by Plaintiff’s Principal, David Welch. (Compl., ¶ 24.) Plaintiff then immediately paid all amounts due under the agreements, and Impact began to provide services and equipment in April of 2019. (Compl., ¶ 25.)

Plaintiff alleges that from the inception of the agreement until December of 2019, Impact was unable to properly service Plaintiff’s account as promised because there were constant IT service interruptions and equipment breakdowns. (Compl., ¶ 29.) In October of 2019, Impact’s primary customer service manager for Plaintiff’s account, Eric Meyer, admitted to Plaintiff that Impact had installed the wrong equipment. (Compl., ¶ 30.) As a result of Impact’s mistake,     Mr. Meyer advised, Plaintiff would not need to pay for Impact’s services until Impact fixed its issues. (Compl., ¶ 30.) Impact’s services ultimately did not improve, and on December 24, 2019, Plaintiff terminated the agreements with Impact. (Compl., ¶ 31.)

            Plaintiff alleges that on May 21, 2020, Cucco sent a letter to Mr. Welch claiming that Plaintiff was in default under its agreements with Impact. (Compl., ¶ 32.) Plaintiff alleges that “[i]n the letter, Mr. Cucco purported to attach the ‘agreements.’ Instead, however, Mr. Cucco knowing [sic] alternated the agreements to remove the signed addenda. This was critical, because the addenda contained, among other material provisions, required mediation and arbitration, removal of the acceleration clause, etc.” (Compl., ¶ 32.) Plaintiff alleges that “[i]n attaching only the adhesion contracts without the negotiated and agreed to addenda to his letter, Mr. Cucco essentially committed fraud by forgery and fraudulently misrepresented the true Impact agreements.” (Compl., ¶ 33.) Impact then filed suit on June 5, 2020 in Cook County, Illinois. (Compl., ¶ 34.)

D.     Res Judicata and Collateral Estoppel

Defendants first assert that each of Plaintiff’s causes of action are barred under the doctrines of res judicata and collateral estoppel.

“The doctrine of res judicata consists of two different aspects. First, it precludes parties or their privies from relitigating a cause of action that has been finally determined by a court of competent jurisdiction. This aspect of res judicata has traditionally been referred to as res judicata or claim preclusion. Second, [a]ny issue necessarily decided in such litigation is conclusively determined as to the parties or their privies if it is involved in a subsequent lawsuit as to the parties on a different cause of action. This latter aspect of res judicata is known as collateral estoppel or issue preclusion.” (Rice v. Crow (2000) 81 Cal.App.4th 725, 734 [internal quotations, citations, and emphasis omitted].) “Res judicata is applicable only to the same causes of action between the same parties or their privies…In its primary aspect, res judicata operates as a bar to the maintenance of a second suit between the same parties or parties in privity with them on the same cause of action.” (Id. at p. 734 [emphasis omitted].)

Defendants submit the Declaration of Joseph L. Kish in connection with the demurrer. Mr. Kish indicates that Impact Networking, LLC and Impact LA, LLC filed a Complaint on June 5, 2020 against Plaintiff in the Circuit Court of Cook County, Illinois, Case No. 2020L006046

(the “Illinois Action”). (Kish Decl., ¶ 2, Ex. 1.) Defendants state that Exhibits 1-5 attached to  Mr. Kish’s Declaration are copies of pleadings filed in the Illinois Action. (Kish Decl., ¶¶ 2-6.)  

As an initial matter, the Court notes that “a demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2022) ¶ 7:8; see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [“[i]n reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules…We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law…We also consider matters which may be judicially noticed.”].) Defendants have not requested that the Court take judicial notice of any matters in connection with the instant demurrer.

            The Court notes that pursuant to Evidence Code section 455, subdivision (a), “[w]ith respect to any matter specified in Section 452 or in subdivision (f) of Section 451 that is of substantial consequence to the determination of the action: (a) If the trial court has been requested to take or has taken or proposes to take judicial notice of such matter, the court shall afford each party reasonable opportunity, before the jury is instructed or before the cause is submitted for decision by the court, to present to the court information relevant to (1) the propriety of taking judicial notice of the matter and (2) the tenor of the matter to be noticed.”

            The Court proposes to take judicial notice of Exhibits 1-6 attached to the Declaration of Joseph L. Kish filed by Defendants in support of the instant demurrer. The Court notes that pursuant to Evidence Code section 452, “[j]udicial notice may be taken of the following matters to the extent that they are not embraced within Section 451:…(d) Records of (1) any court of this state or (2) any court of record of the United States or of any state of the United States.” (Evid. Code, § 452, subd. (d).)

            As set forth above, pursuant to Evidence Code section 455, subdivision (a), the Court must provide “each party reasonable opportunity…before the cause is submitted for decision by the court, to present to the court information relevant to (1) the propriety of taking judicial notice of the matter and (2) the tenor of the matter to be noticed.” (Evid. Code, § 455, subd. (a); see also People v. Alvarado (2011) 193 Cal.App.4th Supp. 13, 18, fn. 3, [“[u]nder Evidence Code section 452, subdivision (g), these sorts of geographical features are a proper subject of judicial notice…Nevertheless, there is an important procedural aspect to such notice, such as notice to the parties and an opportunity to respond, which was not provided here. (Evid. Code, § 455.)”] Thus, the Court will provide the parties with an opportunity to present information relevant to the propriety of taking judicial notice of Exhibits 1-6 to Mr. Kish’s Declaration.

            Defendants also assert in the demurrer that Plaintiff’s causes of action for fraud - intentional misrepresentation, fraud - negligent misrepresentation, fraud - false promise, and violation of Business and Professions Code section 17200 fail to meet California’s heightened pleadings standard for fraud-based claims.

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or scienter); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage. In California, fraud must be pled specifically; general and conclusory allegations do not suffice. Thus the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect. This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Tenet Healthsystem Desert, Inc. v. Blue Cross of California (2016) 245 Cal.App.4th 821, 837-838 [internal quotations, citations, and emphasis omitted].) In addition, “[t]he tort of negligent misrepresentation does not require scienter or intent to defraud. It encompasses [t]he assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true, and [t]he positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true.” (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 173-174 [internal quotations omitted].)

Defendants assert that “Plaintiff does not know enough facts to establish the how, when, where to whom and by what means alleged, fraudulent actions were committed.” (Demurrer at  p. 10:2-3.) To the extent Defendants are relying on evidence in support of this assertion, the argument raises a factual issue that is not appropriate for demurrer. To the extent Defendants are asserting that the allegations on the face of the Complaint are insufficient, the Court notes that in support of the first cause of action for intentional misrepresentation, Plaintiff alleges that “[o]n or about March 21, 2019, and subsequently, Mr. Borella, on behalf of each Defendant, represented in writing to DRW that Impact had agreed to materially amend the terms of their form adhesion contracts. Mr. Borella and DRW negotiated and circulated addendums to the contracts, which all parties agreed to use as the agreements.” (Compl., ¶ 36.) Plaintiff alleges that “Mr. Borella’s representation was false.” (Compl., ¶ 37.)[1] In support of the third cause of action for negligent misrepresentation, Plaintiff alleges that “[o]n or about March of 2019, Mr. Borella, on behalf of each of the Impact Defendants, represented in writing to D/R Welch that Impact agreed to the addenda, which included material provisions to the agreement. The Impact Defendants also presented to D/R Welch a copy of the agreed Addenda.” (Compl., ¶ 50.) Plaintiff alleges that these representations were not true. (Compl., ¶ 51.)

In support of the second cause of action for false promise, Plaintiff alleges that “[o]n or about March 2, 2019, Mr. Borella, on behalf of each Defendant, promised to DRW that Impact had agreed to all the terms of the negotiated addenda and that those addenda would be part of the contract.” (Compl., ¶ 43.) Plaintiff alleges that “Mr. Borella and the Defendants did not intend to perform this promise when they made it.” (Compl., ¶ 44.) Plaintiff further alleges that “[o]n May 21, 2020, Mr. Cucco, in furtherance of the fraud, sent a letter to DRW, claiming that it was in breach of the CompleteCare Agreement and Lease Agreement which Mr. Cucco attached to his letter. Both Agreements attached to his letter were forged documents that were altered in failing to attach the addenda, which included material provisions negotiated by the parties. Mr. Cucco intentionally and willfully included altered and forged documents in order to gain an

advantage in business and, in conjunction with Mr. Borella, to complete the fraud on DRW.” (Compl., ¶ 46.)

The Court does not find that Defendants have demonstrated that Plaintiff has failed to allege facts in the Complaint demonstrating “how, when, where, to whom, and by what means the representations were tendered” in these causes of action. (Tenet Healthsystem Desert, Inc. v. Blue Cross of California, supra, 245 Cal.App.4th 821, 838.)

Lastly, Defendants do not explain why they contend the fourth cause of action for violation of Business and Professions Code section 17200 is insufficiently pled.

Conclusion 

Based on the foregoing, the Court continues the hearing on the demurrer to ___________, 2023 at 10:00 a.m. in Dept. 50. The parties may present to the Court information relevant to “(1) the propriety of taking judicial notice of [Exhibits 1-6 to Mr. Kish’s Declaration in support of Defendants’ demurrer], and (2) the tenor of the matter to be noticed.” (Evid. Code, § 455, subd. (a).) Any such briefs must be filed and served on or before ___________, 2023 and may not include arguments pertaining to any other matters.

Defendants are ordered to give notice of this ruling.

DATED:  February 24, 2023                         ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court