Judge: Teresa A. Beaudet, Case: 22STCV25889, Date: 2023-04-26 Tentative Ruling

Case Number: 22STCV25889    Hearing Date: November 28, 2023    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

Plaintiff Pacific Escrow, Inc. (“Plaintiff”) filed this action against Defendant Citibank, N.A. (“Defendant”) on August 10, 2022. The Complaint asserts causes of action for (1) tortious interference with contract, (2) unfair business practices, and (3) tortious interference with prospective advantage.

Defendant demurred to each of the causes of action of the Complaint. On April 26, 2023, the Court issued an Order sustaining Defendant’s demurrer to the third cause of action of the Complaint, with leave to amend. The Court overruled the demurrer to the first and second causes of action. The Court’s April 26, 2023 Order provides that “[t]he Court orders Plaintiff to file and serve an amended complaint, if any, within 20 days of this Order. If no amended complaint is filed within 20 days of this Order, Defendant is ordered to file and serve its answer within 30 days of this Order.”

Plaintiff did not file an amended complaint, and on May 25, 2023, Defendant filed an answer to the Complaint.

Defendant now moves for judgment on the pleadings as to Plaintiff’s second cause of action. Plaintiff opposes.

Request for Judicial Notice

The Court grants Defendant’s request for judicial notice.

Discussion

A.    Legal Standard

A motion for judgment on the pleadings has the same function as a general demurrer but is made after the time for demurrer has expired. Except as provided by ¿Code of Civil Procedure section 438¿, the rules governing demurrers apply. (¿Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999¿.) A motion by a defendant can be made on the ground that the complaint (or any cause of action therein) “¿does not state facts sufficient to constitute a cause of action against that defendant.¿” (¿Code Civ. Proc., § 438, subd. (c)(1)(B)(ii)¿.) Pursuant to Code of Civil Procedure section 438, subdivision (d), “[t]he grounds for motion provided for in this section shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.”

¿“¿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¿.)

B.     Allegations of the Complaint

In the Complaint, Plaintiff alleges that it handles escrows for residential sales and refinances. (Compl., ¶ 9.) On or about February 2, 2022, Plaintiff was selected as the escrow holder for the purchase of real property commonly known as 70806 Halper Lake Drive, Rancho Mirage, California 92270 (the “Property”). (Compl., ¶ 10.) Plaintiff sent seller Ali Amiri (“Seller”) and buyer Samuel Einhorn (“Buyer”) escrow instructions. (Compl., ¶ 11.)

Defendant was Buyer’s lender in the transaction. (Compl., ¶ 12.) On or about February 2, 2022, Defendant requested from Plaintiff and Plaintiff provided to Defendant proof of errors and omissions insurance, fidelity bond, and liability insurance. (Compl., ¶ 13.) Defendant also requested Plaintiff’s license number with the California Department of Financial Protection and Innovation, which Plaintiff provided. (Compl., ¶ 13.)

On or about February 2, 2022, Defendant’s “Dedicated Lending Associate” Diana Lazar advised Buyer that Plaintiff was ineligible to serve as the escrow holder and that Seller would have to select another escrow company. (Compl., ¶ 14.) On February 3, 2022, Plaintiff contacted Ms. Lazar and requested that Defendant provide an explanation for its decision. (Compl., ¶ 15.) Plaintiff was advised by Max Sander Byfuglin, Jr. at Defendant that he was only allowed to disclose that Plaintiff was ineligible. (Compl., ¶ 16.)

Plaintiff was never provided any explanation for Defendant’s determination that Plaintiff was ineligible to handle the Buyer’s transaction. (Compl., ¶ 17.) In the four to five years prior to the escrow for the subject Property, Defendant customarily refused to allow Plaintiff to act as an escrow holder such that Plaintiff sometimes warned agents and parties in advance that they would have to get a different escrow holder if Defendant was the lender. (Compl., ¶ 18.) However, in 2021, Plaintiff acted as escrow holder for one transaction that closed where Defendant was the lender. (Compl., ¶ 19.)

C.     Second Cause of Action for Violation of Unfair Competition Law

“The UCL is codified in Business and Professions Code section 17200 et seq. The UCL prohibits any unlawful, unfair or fraudulent business act or practice.” (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1554 [internal quotations omitted].)

            In the instant motion, Defendant first asserts that Plaintiff has not pleaded a viable remedy against Defendant. Defendant notes that “only two remedies are available to redress violations of the UCL: injunctive relief and restitution.” (Feitelberg v. Credit Suisse First Boston, LLC (2005) 134 Cal.App.4th 997, 1012.) Defendant also cites to Madrid v. Perot Systems Corp. (2005) 130 Cal.App.4th 440, 445, where the “Plaintiff appeal[ed] from a judgment of dismissal following the sustaining of demurrers to his complaint against defendants Perot Systems Corporation (Perot), California Independent System Operator (ISO), Terry Winter (president and corporate executive officer of ISO), and Paul Gribik, a Perot associate. Plaintiff argue[d] he alleged viable UCL claims.” The Court of Appeal disagreed, noting that “damages are not recoverable under the UCL, and plaintiff has alleged no viable theory upon which he could obtain restitution or injunctive relief. We shall therefore affirm the judgment.” (Ibid.)  

            Defendant asserts that here, Plaintiff has not alleged that it is entitled to restitution. As noted by Defendant, in the prayer for relief on the second cause of action, Plaintiff alleges that it seeks “injunctive relief barring [Defendant] from refusing to allow [Plaintiff] to be escrow holder for transactions where [Plaintiff] is the selected escrow holder…” (Compl., Prayer for Relief, ¶ 4.) Plaintiff also alleges in the second cause of action that it “requests that the court grant injunctive relief prohibiting [Defendant] from refusing to permit loan applicants from doing business with [Plaintiff].” (Compl., ¶ 34.) Defendant asserts that “[p]ut differently, there is no allegation that [Defendant] received any money that was obtained through an unfair business practice.” (Mot. at p. 9:18-19.) In Madrid v. Perot Systems Corp., supra, at page 453, the Court of Appeal noted that “the California Supreme Court has defined a UCL order for restitution as one compelling a UCL defendant to return money obtained through an unfair business practice to those persons in interest from whom the property was taken, that is, to persons who had an ownership interest in the property or those claiming through that person….” (Internal quotations omitted.)

            In the opposition, Plaintiff asserts that “[Defendant’s] claim that [Plaintiff] cannot have an action under the UCL without a claim for restitution against [Defendant] is wrong.” (Opp’n at p. 2:3-4.) Plaintiff cites to Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 336-337, where the California Supreme Court held as follows:

“[T]o interpret standing as dependent on eligibility for restitution would narrow section 17204 in a way unsupported by its text. Restitution under section 17203 is confined to restoration of any interest in ‘money or property, real or personal, which may have been acquired by means of such unfair competition.’ (Italics added.) A restitution order against a defendant thus requires both that money or property have been lost by a plaintiff, on the one hand, and that it have been acquired by a defendant, on the other…But the economic injury that an unfair business practice occasions may often involve a loss by the plaintiff without any corresponding gain by the defendant, such as, for example, a diminishment in the value of some asset a plaintiff possesses…Such injuries satisfy the plain meaning of section 17204’s ‘lost money or property’ requirement, qualify as injury in fact, and would permit a plaintiff to seek an injunction against the offending business practice even in the absence of any basis for restitution. (See Clayworth v. Pfizer, Inc., supra, 49 Cal.4th at pp. 789–790 [parties may seek an injunction under the UCL whether or not restitution is also available]; ABC Internat. Traders, Inc. v. Matsushita Electric Corp., supra, 14 Cal.4th at p. 1268 [§ 17203 ‘contains … no language of condition linking injunctive and restitutionary relief’].)”

Defendant also asserts that Plaintiff has not alleged any entitlement to injunctive relief.  The Madrid Court noted that “[i]njunctive relief is appropriate only when there is a threat of continuing misconduct.” (Madrid v. Perot Systems Corp., supra, 130 Cal.App.4th at p. 463.) “[T]he general rule is that an injunction may not issue unless the alleged misconduct is ongoing or likely to recur.” (Id. at p. 464.) The Madrid Court “conclude[d] the current UCL has not altered the nature of injunctive relief, which requires a threat that the misconduct to be enjoined is likely to be repeated in the future.” (Ibid.)

            Defendant argues that “[h]ere, as in Madrid, Plaintiff has failed to allege any facts supporting that the alleged misconduct will reoccur—and thus Plaintiff is not entitled to injunctive relief…Based on the allegations in the Complaint, this action rests on [Defendant’s] alleged refusal to allow Plaintiff to serve as an escrow officer in connection with the sale of a residential property in February of 2022…That is, there are no facts indicating, among other things, that (1) Plaintiff will be precluded from serving as an escrow officer in future transactions involving [Defendant]; (2) Plaintiff will even be chosen to serve as an escrow officer in connection with future transactions involving [Defendant]; or (3) there is any threat of repeat actionable injury to Plaintiff or the public on account of an unfair business practice.” (Mot. at p. 10:7-15.)

            In the opposition, Plaintiff asserts that it alleged facts that support a finding that Defendant’s conduct is likely to reoccur. Plaintiff notes that the Complaint alleges that “[o]n or about February 2, 2022, [Defendant] through its ‘Dedicated Lending Associate’ named Diana Lazar advised buyer Samuel Einhorn that [Plaintiff] was ineligible to serve as escrow holder and that buyer would have to select another escrow company.” (Compl., ¶ 14.) Plaintiff further alleges that “[i]n the four to five years prior to the escrow for 70806 Halper Lake Drive, Rancho Mirage, California 92270, [Defendant] customarily refused to allow [Plaintiff] to act as escrow holder such that [Plaintiff] sometimes warned agents and parties in advance that they will have to get a different escrow holder if Citibank is the lender.” (Compl., ¶ 18.) Plaintiff further notes that the Complaint alleged that “[Plaintiff] earns about $3,400.00 as escrow fee for each escrow file. [Plaintiff] believes it would handle about five (5) escrows a year with [Defendant] as lender if [Defendant] did not object.” (Compl., ¶ 42.)

            Plaintiff asserts that its “allegation that in the four to five years prior to the escrow that gives rise to this action [Defendant] customarily refused to do business with [Plaintiff] is clear statement that [Defendant’s] refusal to do business with escrow is a reoccurring event. The allegation that [Plaintiff] expects it would handle about four or five escrows a year with [Defendant] as lender but for [Defendant’s] conduct fairly infers that this conduct will reoccur in the future.” (Opp’n at p. 5:19-23.) But Plaintiff’s allegation that Plaintiff “believes it would handle about five (5) escrows a year with [Defendant] as lender if [Defendant] did not object” (Compl., ¶ 42) is contained in the third cause of action for tortious interference with prospective economic relations. As set forth above, on April 26, 2023, the Court issued an Order, inter alia, sustaining Defendant’s demurrer to the third cause of action of the Complaint, with leave to amend. The Court’s April 26, 2023 Order provides that “[t]he Court orders Plaintiff to file and serve an amended complaint, if any, within 20 days of this Order. If no amended complaint is filed within 20 days of this Order, Defendant is ordered to file and serve its answer within 30 days of this Order.” Plaintiff did not file an amended complaint.  

Defendant also argues in the motion that Plaintiff has not pleaded an “unlawful” claim under the UCL. Defendant cites to Gaab, et al., Cal. Prac. Guide Civ. Pro. Trial Claims and Def. Ch. 14(I)-B (The Rutter Group 2023) ¶ 14:58, which provides, inter alia, that “[t]o state a claim based on an ‘unlawful’ business act or practice, plaintiff must allege:…the specific unlawful conduct;…that the unlawful conduct is a ‘business practice’ of defendant’s; and…that as a result of this practice defendant has received ill-gotten gains, including plaintiff’s money or property.” (Citing Bus. & Prof. Code, §§ 17200 and 17204.)

Defendant asserts that here, “there are no allegations that [Defendant] has ‘received ill-gotten gains, including plaintiff’s money or property,’…as a result of any alleged unfair business practice.” (Mot. at p. 12:15-17.) Plaintiff does not appear to address this point in its opposition or its supplemental opposition.[1]

Defendant also asserts that Plaintiff has not pleaded an “unfair” claim under the UCL. Defendant cites to Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 939, where the Court of Appeal noted that “Business and Professions Code, section 17200 does not define the term ‘unfair.’ One commonly used definition of an unfair practice is a practice that ‘offends an established public policy or . . . is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.’” Defendant argues that here, “Plaintiff references no public policy provisions that would provide a predicate for establishing wrongful conduct under the ‘unfair’ prong…Plaintiff also does not and cannot allege facts that, if true, would support a finding that [Defendant’s] conduct was ‘immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.’” (Mot. at p. 13:3-6.) Plaintiff does not appear to dispute this point in the opposition.

Rather, Plaintiff asserts that “‘unfair’ should be determined by balancing the impact of the particular business practice on the alleged victim against the reasons, justifications and motives of the alleged wrongdoer.” (Opp’n at p. 7:19-21.) Plaintiff cites to Motors, Inc. v. Times Mirror Co. (1980) 102 Cal.App.3d 735, 740, where the Court of Appeal noted that “the determination of whether a particular business practice is unfair necessarily involves an examination of its impact on its alleged victim, balanced against the reasons, justifications and motives of the alleged wrongdoer. In brief, the court must weigh the utility of the defendant’s conduct against the gravity of the harm to the alleged victim.” Plaintiff argues that “[i]n this case there is no justification for [Defendant’s] conduct; therefore, it is unfair.” (Opp’n at p. 7:23.) Plaintiff alleges in the second cause of action that “[Defendant’s] act of arbitrarily and without reason barring [Plaintiff] from being an escrow holder for any transactions where [Defendant] is the lender is unfair.” (Compl., ¶ 30.)

In the reply, Defendant asserts that “the test from Motors should be rejected as it articulates only the ‘old test for consumer cases’ that is inapplicable here.” (Reply at p. 6:16-17.) In Buller v. Sutter Health (2008) 160 Cal.App.4th 981, 991, cited by Defendant, the Court of Appeal noted that “Appellant claims his complaint satisfies the old test for consumer cases articulated in Motors, Inc. v. Times Mirror Co. (1980) 102 Cal. App. 3d 735 [162 Cal.Rptr. 543], viz., ‘the utility of the defendant’s conduct [is weighed] against the gravity of the harm to the alleged victim … .’…However, as we have noted in prior opinions, ‘[t]his court … has followed the line of authority that … requires the allegedly unfair business practice be ‘tethered’ to a legislatively declared policy or has some actual or threatened impact on competition.’” As set forth above, Plaintiff does not appear to dispute Defendant’s assertion that “Plaintiff references no public policy provisions that would provide a predicate for establishing wrongful conduct under the ‘unfair’ prong…Plaintiff also does not and cannot allege facts that, if true, would support a finding that Citibank’s conduct was ‘immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” (Mot. at p. 13:3-6.)

            Based on the foregoing, the Court grants Defendant’s motion as to the second cause of action for violation of the UCL, with leave to amend.

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Conclusion

Based on the foregoing, the Court grants Defendant’s motion for judgment on the pleadings as to the second cause of action of the Complaint, with leave to amend.

The Court orders Plaintiff to file and serve an amended complaint, if any, within 20 days of this Order.

Defendant is ordered to give notice of this Order.

DATED:  November 28, 2023                                                                                   

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Hon. Rolf M. Treu

Judge, Los Angeles Superior Court