Judge: Teresa A. Beaudet, Case: 22STCV34754, Date: 2023-12-20 Tentative Ruling

Case Number: 22STCV34754    Hearing Date: December 20, 2023    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

Plaintiff The Testing Company, LLC (“Plaintiff”) filed this action on October 31, 2022 against Defendant Enigma Management Corp. dba Alliance Laboratories (“Defendant”).

Plaintiff filed the operative Second Amended Complaint (“SAC”) on August 7, 2023, alleging causes of action for (1) breach of contract, (2) common count for services rendered, (3) promissory estoppel, (4) breach of covenant of good faith and fair dealing, (5) fraud – intentional misrepresentation, (6) fraudulent inducement, (7) negligent misrepresentation, (8) concealment, and (9) unjust enrichment.

Defendant now moves for judgment on the pleadings as to the first, fourth, fifth, sixth, seventh, eighth, and ninth causes of action of the SAC. Plaintiff opposes.

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 SAC

In the SAC, Plaintiff alleges that it is a “laboratory that, inter alia, performs logistics for Covid-19 (‘Covid’) testing events including, but not limited to, collecting samples from individuals to be tested for Covid.” (SAC, ¶ 6.) “[Defendant] is a company engaged in Covid testing services in the State of New York.” (SAC, ¶ 7.)

“In 2021, [Plaintiff] and [Defendant] exchanged a draft written Independent Laboratory

Sales and Marketing Agreement (the ‘Draft Agreement’).” (SAC, ¶ 8.) Plaintiff and Defendant did not end up signing the Draft Agreement. (Compl., ¶ 10.) “Instead, the Parties agreed that [Plaintiff] would identify Covid testing opportunities and events, and perform all the logistics involved therein including, but not limited to, collecting swabs and/or samples from individuals and doing so the correct way such that the samples were in the correct condition to undergo lab testing, collecting and verifying the individual’s information, providing the testing staff to run the testing event and collect the samples, providing the tablets and WiFi costs to collect required signatures from such individuals, providing transportation services, shipping, testing supplies, and set up of testing tents and equipment.” (SAC, ¶ 11.) “The Parties further agreed that [Defendant] would receive and run the samples that [Plaintiff] collected and provide the results to the individuals tested within 48-72 hours.” (SAC, ¶ 12.)

            “The Parties further agreed on itemized prices for [Plaintiff’s] services and costs,” and “[Defendant] agreed to pay [Plaintiff] these amounts for its services.” (SAC, ¶ 14.) “[Plaintiff] sent to [Defendant] three invoices: Invoice No. 10128, Invoice No. 10139, and Invoice No. 10184…” (SAC, ¶ 15.) “However, no one at [Defendant] ever responded.” (SAC, ¶ 15.)

            “[Defendant] never objected to the Invoices, nor did [Defendant] ever pay [Plaintiff] the amounts due on the Invoices.” (SAC, ¶ 15.) Plaintiff alleges that “[a]s of the date of filing [the] Complaint, [Defendant] has failed to pay the Invoices which collectively total $1,703,950.94 for services rendered under the Parties’ agreement.” (SAC, ¶ 17.)

C.     First Cause of Action for Breach of Contract

Defendant asserts that the first cause of action does not state facts sufficient to constitute a cause of action. Defendant cites to Code of Civil Procedure section 430.10, subdivision (g), which provides in pertinent part that “[t]he party against whom a complaint…has been filed may object, by demurrer…to the pleading on any one or more of the following grounds:…In an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct.” Defendant asserts that here, Plaintiff “doesn’t allege whether the supposed contract was written, oral, implied, or otherwise.” (Mot. at p. 5:13-14.)

In the opposition, Plaintiff asserts that it “pleads an oral contract, parts of which were memorialized in writing in the form of invoices.” (Opp’n at iii:7-8.) Plaintiff points to paragraphs 11 and 12 of the SAC, which as set forth above, allege that “the Parties agreed that [Plaintiff] would identify Covid testing opportunities and events, and perform all the logistics involved therein…The Parties further agreed that [Defendant] would receive and run the samples that [Paintiff] collected and provide the results to the individuals tested within 48-72 hours.” (TAC, ¶¶ 11-12.) But Plaintiff does not appear to allege in the SAC that such purported agreement was oral. It is unclear from the SAC whether the purported contract at issue “is written, is oral, or is implied by conduct.” (Code Civ. Proc., § 430.10, subd. (g).)

Based on the foregoing, the Court grants the motion as to the first cause of action, with leave to amend.  

D.    Fourth Cause of Action for Breach of Covenant of Good Faith and Fair Dealing 

Defendant asserts that the fourth cause of action also fails to state facts sufficient to constitute a cause of action. Defendant asserts that “[s]ince the parties had no written or oral contract, there could not be any implied covenant in a nonexistent contract.” (Mot. at p. 6:7-8.) Defendant cites to Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349-350, where the California Supreme Court noted that “[t]he covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made. The covenant thus cannot be endowed with an existence independent of its contractual underpinnings. It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.” (Internal quotations, citations, and emphasis omitted.) 

As set forth above, the Court grants Defendant’s motion as to the first cause of action for breach of contract. As discussed, Plaintiff does not appear to allege whether the purported contract at issue “is written, is oral, or is implied by conduct.” (Code Civ. Proc., § 430.10, subd. (g).) Thus, the Court also grants the motion as to the fourth cause of action, with leave to amend.

E.     Fifth Cause of Action for Fraud – Intentional Misrepresentation and Sixth Cause of Action for Fraudulent Inducement

Defendant asserts that the fifth and sixth causes of action do not state facts sufficient to constitute a cause of action. Defendant cites to Lazar v. Superior Court (1996) 12 Cal.4th 631, 645, where the California Supreme Court noted that “[i]n 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. A plaintiff’s burden in asserting a fraud claim against a corporate employer is even greater. In such a case, the plaintiff must 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.” (Internal quotations and citations omitted, emphasis in original)

Defendant asserts that here, “Plaintiff hasn’t alleged its claim for fraud with specificity; Plaintiff has only repeated the same allegations that it made in its claim for breach. Plaintiff hasn’t said when and where [Defendant] made any misrepresentations; who on behalf of [Defendant] made them; the person’s authority on behalf of [Defendant]; in what form [Defendant] made them; or by what means [Defendant] made them.” (Mot. at p. 7:12-16.)

In the fifth cause of action for fraud-intentional misrepresentation, Plaintiff alleges, inter alia, that “[Defendant], by and through its principal Richard Abrazzi, made a number of false, untrue, and fraudulent representations of material fact to [Plaintiff], and did so intentionally. Specifically, [Defendant] represented to [Plaintiff] that it had the ability to pay [Plaintiff] for the services it performed under the Agreement, that it could produce test results of the samples it received within 48-72 hours, and that it had the capacity to handle the amount of volume of samples that [Plaintiff] was going to send [Defendant]. Additionally, [Defendant] represented to [Plaintiff] that it would pay all invoices on numerous occasions.” (SAC, ¶ 47.) Plaintiff alleges that “[c]ontrary to the false, untrue, and fraudulent misrepresentations that were made by [Defendant], in fact, it had no intention of paying [Plaintiff], it could not produce test results from the samples it received within 48-72 hours, and it did not have the capacity to handle the volume of samples that it received from [Plaintiff].” (SAC, ¶ 49.) However, Plaintiff does not appear to allege “when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court, supra, 12 Cal.4th at p. 645 [internal quotations omitted].) Plaintiff also does not appear to allege the authority of Richard Abrazzi to speak on behalf of Defendant. (Ibid.)

In the sixth cause of action for fraudulent inducement, Plaintiff alleges, inter alia, that “[Defendant], by and through its principal Richard Abrazzi, made a number of false, untrue, and fraudulent representations of material fact to [Plaintiff], and did so intentionally. Specifically, [Defendant] represented to [Plaintiff] that it had the ability to pay and would pay [Plaintiff] for the services it performed under the Parties’ agreement, that it had the capacity to test the volume of sampled that [Plaintiff] would send it and produce test results within 48-72 hours.” (SAC, ¶ 57.) Plaintiff alleges that “[Defendant] made the above-articulated misrepresentations to induce [Plaintiff] to enter into the Parties’ agreement so that it would receive samples from [Plaintiff], test them, and then collect money from the government and insurance companies.” (SAC, ¶ 58.) Plaintiff alleges that “[Defendant] knew that its above-articulated misrepresentations were false at the time [Defendant] made them…” (SAC, ¶ 59.)

However, Plaintiff also does not appear to allege “when, where, to whom, and by what means the representations were tendered” with regard to the sixth cause of action. (Lazar v. Superior Court, supra, 12 Cal.4th at p. 645 [internal quotations omitted].) Plaintiff also does not appear to allege the authority of Richard Abrazzi to speak on behalf of Defendant as to this cause of action. (Ibid.)

Based on the foregoing, the Court grants the motion as to the fifth and sixth causes of action, with leave to amend.

F.      Claim for Punitive Damages

In connection with the fifth cause of action for fraud-intentional misrepresentation and the sixth cause of action for fraudulent inducement, Plaintiff seeks punitive damages. (SAC, ¶¶ 54, 63.) Defendant argues that “[e]ven if Plaintiff had any basis to sue [Defendant] for fraud, Plaintiff has no basis to seek punitive damages against [Defendant].” (Mot. at p. 8:7-8.)

As set forth above, the Court grants Defendant’s motion as to the fifth and sixth causes of action. Thus, the Court finds that Defendant’s motion is moot as to Plaintiff’s claim for punitive damages sought in connection with these causes of action. 

In addition, Plaintiff asserts that Defendant’s motion for judgment on the pleadings concerning Plaintiff’s prayer for punitive damages is procedurally improper. Indeed, in Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 163-164, cited by Plaintiff, the Court of Appeal found that “[s]ince a demurrer does not lie to a part of a cause of action, petitioners’ punitive damage allegations were not subject to real parties’ demurrers. There is no cause of action for punitive damages. Punitive or exemplary damages are remedies available to a party who can plead and prove the facts and circumstances…set forth in Civil Code section 3294…Punitive damages are merely incident to a cause of action, and can never constitute the basis thereof. Consequently, the trial court’s ruling could have pertained only to the demurrers made on the ground the sixth cause of action failed to state a cause of action for battery. The adequacy of the punitive damage allegations could, however, have been tested by motion to strike.” (Internal quotations, citations, and emphasis omitted.)

In light of the foregoing, the Court denies Defendant’s motion as to Plaintiff’s claim for punitive damages.

G.    Seventh Cause of Action for Negligent Misrepresentation

Defendant also asserts that the seventh cause of action fails. In the seventh cause of action, Plaintiff alleges, inter alia, that “[a]s set forth throughout this Second Amended Complaint, [Defendant], by and through its principal Richard Abrazzi, made a [sic] Untrue Statements of material fact to [Plaintiff] as if they were true facts. However, they were not true,” and that “[t]hough [Defendant] may have honestly believed that the Untrue Statement were true, [Defendant] had no reasonable grounds for believing that the Untrue Statements were true when it made them to [Plaintiff].” (SAC, ¶¶ 65-66.)

In Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154, cited by Plaintiff, the Court of Appeal noted that “[t]he elements of negligent misrepresentation are well established. A plaintiff must prove the following in order to recover. [M]isrepresentation of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another’s reliance on the fact misrepresented; ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed; and resulting damage.” (Internal quotations omitted.)

In the motion, Defendant asserts, inter alia, that “Plaintiff alleges that [Defendant], through its principal, negligently made unspecified ‘Untrue Statements.’ Plaintiff never says what these statements were or how Plaintiff relied on them.” (Mot. at p. 8:21-22.) However, the alleged “Untrue Statements” are defined in paragraph 47 of the SAC. Plaintiff also alleges in the seventh cause of action that “[Defendant] intended that [Plaintiff] rely on these Untrue Statements, and [Plaintiff] did reasonable [sic] rely on the Untrue Statements.” (SAC, ¶ 67.) But as noted by Defendant, Plaintiff does not appear to allege facts showing how Plaintiff relied on the alleged “Untrue Statements.” As set forth above, in order to recover on a cause of action for negligent misrepresentation, a plaintiff must prove, inter alia, “ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed…” (Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc., supra, 115 Cal.App.4th at p. 1154.)
            Based on the foregoing, the Court grants the motion as to the seventh cause of action, with leave to amend.

H.    Eighth Cause of Action for Concealment

Defendant also asserts that the eighth cause of action does not state facts sufficient to constitute a cause of action. In the eighth cause of action for concealment, Plaintiff alleges, inter alia, that “[Defendant] and [Plaintiff] were joint venturers and as such were in a fiduciary relationship. [Defendant], however, intentionally failed to disclose certain facts to [Plaintiff].” (SAC, ¶ 70.) Plaintiff alleges that “[Defendant] intended to deceive [Plaintiff] by concealing the fact that it did not have the capacity to test the amount of volume of samples that [Plaintiff] gave to [Defendant] and by concealing the fact that it did not have the ability to provide test results within 48-72 hours…” (SAC, ¶ 71.)

In the motion, Defendant does not appear to discuss the elements of a cause of action for concealment. Rather, Defendant asserts that “[t]he parties were arms-length businesses; they weren’t carrying out any joint enterprise. They weren’t sharing profits and losses; each was shouldering its own profits and losses. Neither party had the right to control what the other was doing.” (Mot. at p. 9:5-7.) The Court finds that this is a factual argument that is not appropriate on a motion for judgment on the pleadings. As set forth above, Code of Civil Procedure section 438, subdivision (d) provides that “[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.”

Based on the foregoing, the Court denies the motion as to the eighth cause of action.

I.        Ninth Cause of Action for Unjust Enrichment

Defendant asserts that the ninth cause of action fails because unjust enrichment is not a cause of action. Defendant cites to Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 793, where the Court of Appeal noted that “as the trial court observed, there is no cause of action in California for unjust enrichment. The phrase Unjust Enrichment does not describe a theory of recovery, but an effect: the result of a failure to make restitution under circumstances where it is equitable to do so. Unjust enrichment is a general principle, underlying various legal doctrines and remedies, rather than a remedy itself.” (Internal quotations and citations omitted.)

In the opposition, Plaintiff asserts that California courts allow unjust enrichment claims. Plaintiff cites to Hernandez v. Lopez (2009) 180 Cal.App.4th 932, 935, where the Court of Appeal held that “[f]ollowing a one-day bench trial, the trial court found defendants Jose Antonio Lopez and his wife, Irma Taira, sold a business they did not own, but the court declined to order disgorgement or other relief in favor of the rightful owners, plaintiffs Leonor and Jose De Jesus Hernandez. The court allowed Lopez and Taira to keep the proceeds of the sale, concluding the Hernandezes’ first amended complaint failed to plead adequately claims for unjust enrichment, conversion, or trespass. We reverse and remand for a new trial that resolves plaintiffs’ claims under these quasi-contract and tort theories, which, fairly read, fell within the scope of the pleadings and within the facts alleged and proved at trial.” In addition, in Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1132, the Court of Appeal noted that “[t]he elements for a claim of unjust enrichment are receipt of a benefit and unjust retention of the benefit at the expense of another. The theory of unjust enrichment requires one who acquires a benefit which may not justly be retained, to return either the thing or its equivalent to the aggrieved party so as not to be unjustly enriched.” (Internal quotations and citation omitted.)[1]

In light of the foregoing, the Court denies the motion as to the ninth cause of action.

Conclusion

Based on the foregoing, the Court grants Defendant’s motion for judgment on the pleadings as to the first, fourth, fifth, sixth, and seventh causes of action, with leave to amend. The Court denies the motion as to the eighth and ninth causes of action, and Plaintiff’s claim for punitive damages.

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

Defendant is ordered to give notice of this Order.

DATED:  December 20, 2023                        ________________________________

Hon. Rolf M. Treu

Judge, Los Angeles Superior Court