Judge Thomas Falls, Case 22PSCV00406 2022-09-12 Tentative Ruling

DEFENDANT’S DEMURRER TO PLAINTIFF’S FIRST AMENDED COMPLAINT is SUSTAINED in part WITHOUT LEAVE TO AMEND (i.e., 1^st cause of action) and OVERRULED in part (i.e., as to 2^nd and 3^rd causes of actions).

This is a contracts case. Plaintiff ERNEST BALTIERRA alleges the following against Defendant E.D. PRODUCE, INC: In 2012, PLAINTIFF brought DEFENDANT a wholesale produce customer by the name of Restaurant Depot. DEFENDANT, orally agreed to compensate PLAINTIFF for his efforts in bringing Restaurant Depot to Defendant at the rate of not less than $2,800.00 in commissions per week. April 24, 2019, DEFENDANT ceased compensating PLAINTIFF.

1. Violation of the Independent Wholesale Representatives Contractual Relations Act Civil Code 1738.10, et seq.[1]

A demurrer tests the legal sufficiency of the pleadings and will be sustained only where the pleading is defective on its face. (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.) “We treat the demurrer as admitting all material facts properly pleaded but not contentions, deductions or conclusions of fact or law. We accept the factual allegations of the complaint as true and also consider matters which may be judicially noticed. [Citation.]” (Mitchell v. California Department of Public Health (2016) 1 Cal.App.5th 1000, 1007; Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604 [“the facts alleged in the pleading are deemed to be true, however improbable they may be”].) Allegations are to be liberally construed. (Code Civ. Proc., § 452.) In construing the allegations, the court is to give effect to specific factual allegations that may modify or limit inconsistent general or conclusory allegations. (Financial Corporation of America v. Wilburn (1987) 189 Cal.App.3rd 764, 769.)

2. Complaint is ambiguous and unintelligible (Code Civ. Proc. §§ 430.l0(e), (f), (g))

The Independent Wholesale Representatives Contractual Relations Act (“Act”) was enacted to provide security to and clarify the contractual relations between manufacturers and their nonemployee sales representatives. The purpose of the Act is to protect wholesale “middlemen” who facilitate the relationship between manufacturers and buyers of wholesale products. (Reilly v. Inquest Technology, Inc. (2013) 218 Cal.App.4th 536, 546.) The Act requires manufacturers who do business with independent sales representatives to enter into a written contract that defines the assigned territory and specifies how commissions will be paid. (Civil Code § 1738.13, subd. (b).)

Defendant argues that the statute of limitations is four years. (Demurrer p. 4, citing Ruppert Sales & Eng'g v. Amphenol Corp. (N.D.Cal. Aug. 29, 2016, No. 16-cv-01044 NC) 2016 U.S.Dist.LEXIS 189013.).

In Opposition, Plaintiff argues the statute of limitations is three years or two years.

A review of the Act indicates that it does not specify a limitation period and no cases have yet addressed the proper statute of limitations.[2] On one hand, it could be argued that the four year statute of limitations of CCP section 337 subdivision (a) applies because the section applies to written contract and the Act requires written contracts. On the other hand, it could be argued that a three-year statutory period applies pursuant to CCP section 338 because the Act is meant to provide unique protection beyond contract law. (Code Civ. Proc. § 338, subd., (a) [Three-year statute of limitations for “[a]n action upon a liability created by statute.”].) What is indisputable, however, is that the two-year statutory period for oral contracts prescribed by CCP section 339 subdivision (1), as is here, should not apply because the central feature of the Act requires a written contract.

Here, the court applies a three-year statute of limitations as there is no written contract between the Parties, rendering CCP section 337 inapplicable. Moreover, the court reasons CCP section 338 applies as it explicitly references statutory liability, which falls within the purview of the Act. Accordingly, taking the three-year statute of limitations, the action must have been filed by April 24, 2022 because that is three years from the date of the breach, which occurred on April 24, 2021. However, the action was filed on April 25, 2022, which is one day too late.

In fact, the court finds that Plaintiff’s opposition supports the court’s analysis. Plaintiff avers “[t]he accrual of the cause, and the running of the statute, are therefore deferred until damage occurs.” (Opp. p. 7.) Consequently, “Plaintiff was not damaged until Defendant ED ceased making the weekly $2,800 commission payments to Plaintiff.” (Opp. p. 7) (emphasis added). By way of Plaintiff’s very own allegations, the date that Defendant ceased making those payments was on April 24, 2022. Thus, Plaintiff was damaged on April 24, 2022.

Therefore, the court finds the 1^st cause of action is time barred. As such, as there is no reasonable probability of curing such defect, the demurrer is SUSTAINED without leave to amend.

B. Whether Plaintiff’s Claim for Violation of Business and Professions Code 17200 is Time Barred?

An unlawful business practice under Business & Professions Code § 17200 is an act or practice, committed pursuant to business activity, that is at the same time forbidden by law. (Progressive West Insurance Company v. Superior Court, 2005 Cal. App. LEXIS 1979; 2005 Cal. Daily Op. Service 10923, at 46.) So, the statutory elements of the alleged violation must be supported by facts stated with reasonable particularity by the plaintiff alleging unfair business practices. (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 619.) Under the California’s Unfair Competition Law statute of limitations provision, "[a]ny action to enforce any cause of action pursuant to [California’s Unfair Competition Law] shall be commenced within four years after the cause of action accrued." (Cal. Bus. & Prof. Code § 17208) (emphasis added).

Defendant avers that the claim is time barred because Plaintiff alleges that the unlawful act occurred “‘in or about 2012’ when Defendant allegedly ‘failed to provide a written contract setting forth all necessary details as set forth in the Act and failed to provide at all times the written information and documentation required by the Act.’” (Demurrer p. 5.)

Here, however, a review of the FAC indicates that Plaintiff brings forth this cause of action based on the following allegation that “Defendants have held and continue to hold money unlawfully converted from Plaintiff without any right thereto.” (FAC ¶20) (emphasis added).[3]

Therefore, as four years from the cessation of payments has not yet passed (four years from April 24, 2019 is April 24, 2023), the demurrer is OVERRULED as to the 2^nd cause of action.

There is a split of authority as to whether unjust enrichment is a valid cause of action. Courts of Appeal in the Second and Forth Districts appear to disagree on whether unjust enrichment is a valid claim under California law. (See Lectrodryer v. SeoulBank (2000) 77 Cal.App.4th 723, 726 (2nd District stating unjust enrichment is a claim) and Melchior v. New Line Prods., Inc. (2003) 106 Cal.App.4th 779, 793 (2nd District stating unjust enrichment is not claim); see also, Peterson v. Cellco (2008) 164 Cal.App.4th 1583, 1593 (4th District, stating elements of unjust enrichment) and Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370 (4th District stating unjust enrichment is not a claim).) In addition to the cases cited by the parties, the court notes that the First District has recently stated the elements for unjust enrichment. In Elder v. Pacific Bell Telephone Co. (2012) 205 Cal. App. 4th 841, 857 the First District stated that “[t]his allegation satisfies ‘the elements for a claim of unjust enrichment: receipt of a benefit and unjust retention of the benefit at the expense of another. [Citation.]’ (Lectrodryer v. SeoulBank (2000) 77 Cal.App.4th 723, 726; see Ghirardo v. Antonioli (1996) 14 Cal.4th 39, 50 [in accord].)”

Here, as the parties merely dispute whether unjust enrichment is a cause of action or not, the court will follow those courts that have found that unjust enrichment is a claim under California Law.

Therefore, the demurrer is OVERRULED as to the 3^rd cause of action for unjust enrichment.

Based on the foregoing, the demurrer is SUSTAINED in part without leave to amend and OVERRULED in part.

[1] Plaintiff asserts this cause of action based upon the following allegation: “Plaintiff demanded payment of the commissions owed to him after ED violated the provisions of the Act but Defendants have refused, and continue to refuse to compensate Plaintiff in compliance of the Act.” (FAC ¶17.)

[2] Ruppert is inapplicable as the parties there had a written contract.

[3] Defendant’s reliance on other allegations in the complaint is misplaced. Though a plaintiff may incorporate by reference each and all allegations contained in other paragraphs, generally the allegations within a cause of action (i.e., the allegations that proceed the cause of action) form the basis of the cause of action.