Judge: Upinder S. Kalra, Case: 24STCV09584, Date: 2025-01-21 Tentative Ruling
1. If you wish to submit on the tentative ruling, please email the clerk at SMCdept51@lacourt.org (and “cc” all other parties in the same email) and notify all other parties in advance that you will not be appearing at the hearing. Include the word "SUBMISSION" in all caps in the subject line and include your name, contact information, the case number, and the party you represent in the body of the email. If you do not have access to the internet, you may call the clerk at (213) 633-0351.
If you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear and argue the motion, and the Court may decide not to adopt the tentative ruling. Please note that the tentative ruling is not an invitation, nor an opportunity, to file any further documents relative to the hearing in question which are not authorized by statute or Rule of Court.
2. For any motion where no parties submit to the tentative ruling in advance, and no parties appear at the motion hearing, the Court may elect to either adopt the tentative ruling or take the motion off calendar, in its discretion.
3. DO NOT USE THE ABOVE EMAIL FOR ANY PURPOSE OTHER THAN TO SUBMIT TO A TENTATIVE RULING. The Court will not read or respond to emails sent to this address for any other purpose.
Case Number: 24STCV09584 Hearing Date: January 21, 2025 Dept: 51
Tentative Ruling
Judge Upinder S.
Kalra, Department 51
HEARING DATE: January
21, 2025
CASE NAME: Pants
Worldwide LLC v. Outdoor Voices Inc., et al.
CASE NO.: 24STCV09584
DEMURRER
MOVING PARTY: Defendant
Ashley Merrill
RESPONDING PARTY(S): Plaintiff Pants Worldwide LLC
REQUESTED RELIEF:
1. Demurrer
to Alter Ego Allegations, Second, and Third Causes of Action in the Complaint
for failure to state sufficient facts to constitute a cause of action and
uncertainty.
TENTATIVE RULING:
1. Demurrer
to the Complaint is OVERRULED in its entirety;
2. Defendant
Merrill to file an Answer within 14 days of this ruling.
STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:
On April 16, 2024, Plaintiff Pants Worldwide LLC (Plaintiff)
filed a Complaint against Defendants Outdoor Voices Inc., Ashley Merrill, and
Thomas Cooper (Defendants) with three causes of action for: (1) Breach of
Written Settlement Agreement, (2) Negligent Misrepresentation, and (3) Fraud.
According to the Complaint, Plaintiff and Defendant Outdoor
Voices entered a contract for Plaintiff to provide consulting services.
Plaintiff alleges that Defendant Outdoor Voices failed to pay the consulting
fee and eventually entered a Settlement Agreement concerning the owed monies.
Plaintiff further alleges that Defendant Outdoor Voices is in breach of the
Settlement Agreement by failing to pay the second installment payment.
On June 3, 2024, Plaintiff sought, and obtained, entry of
default against Defendant Outdoor Voices Inc.
On November 27, 2024, Defendant Ashley Merrill (Merrill)
filed the instant Demurrer.
On December 4, 2024, Plaintiff filed a Notice of Settlement
with Defendant Thomas Cooper.
On December 23, 2024, Defendant Cooper filed an Application
for Determination of Good Faith Settlement.
On January 7, 2025, Plaintiff filed an Opposition to
Merrill’s Demurrer.
On January 14, 2025, Plaintiff filed a Reply.
LEGAL STANDARD:
Meet and Confer
Prior to filing a demurrer, the demurring party is required
to satisfy their meet and confer obligations pursuant to Code of Civ. Proc.
(CCP) §430.41 and demonstrate that they so satisfied their meet and confer
obligation by submitting a declaration pursuant to CCP §430.41(a)(2) & (3).
Here, the parties met and conferred telephonically on November 26, 2024. (Liu
Decl. ¶ 3.) Accordingly, this requirement is met.
Demurrer
A demurrer for sufficiency tests whether the complaint
states a cause of action.¿(Hahn v. Mirda¿(2007)
147 Cal.App.4th 740, 747.) When considering demurrers, courts read the
allegations liberally and in context.¿In a demurrer proceeding, the defects
must be apparent on the face of the pleading or via proper judicial notice.¿(Donabedian v. Mercury Ins. Co. (2004)
116 Cal.App.4th 968, 994.)¿“A demurrer tests the pleadings alone and not the
evidence or other extrinsic matters. …. The only issue involved in a demurrer
hearing is whether the complaint, as it stands, unconnected with extraneous
matters, states a cause of action.”¿(Hahn¿147
Cal.App.4th at 747.)¿¿¿
ANALYSIS:
Request for
Judicial Notice
The court GRANTS Defendant Merrill’s request for judicial
notice. (Evid. Code § 452(d), (h); See Kalnoki
v. First American Trustee Servicing Solutions, LLC (2017) 8 Cal.App.5th
23,37.) However, the court only takes judicial notice of the foregoing
documents only as to “the existence, content and authenticity of public records
and other specified documents”; it does not take judicial notice of the truth
of the factual matters asserted in those documents. (Dominguez v. Bonta (2022) 87 Cal. App. 5th 389, 400.)¿¿
Demurrer
Alter Ego
Merrill contends Plaintiff failed to sufficiently allege
facts supporting alter ego liability. Specifically, Merrill contends that
Plaintiff’s theory of liability is that Merrill should be liable for Defendant
Outdoor Voices’ liabilities because it cannot pay and that Plaintiff’s
remaining allegations are boilerplate legal conclusions. Plaintiff argues that
they sufficiently alleged ultimate facts supporting alter ego liability and
that less particularity is required where, as here, Merrill will possess knowledge
of the facts superior to Plaintiff.
To plead alter ego, there must be factual allegations that
would establish a unity of interest, such as commingling of funds and other
assets, the holding out of the entities as liable for the debts of the
principal, use of the same offices and employees, use of one another as a mere
shell or conduit for the affairs of the other, inadequate capitalization and
failure to adhere to corporate formalities. (Automotriz Del Golfo De California
SA de CV v. Resnicke (1957) 47 Cal.2d 792, 796; Sonora Diamond Corp. v. Sup. Ct (2000) 83 Cal.App.4th 523, 538.) A plaintiff must also allege an
unjust result if the corporation is treated as the sole actor. (Leek v. Cooper (2011) 194 Cal.App.4th
399, 415.) A plaintiff need only allege ultimate facts to plead alter ego and
survive demurrer. (Rutherford Holdings,
LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 236.) Additionally, “less
particularity . . . is required where the defendant may be assumed to possess
knowledge of the facts at least equal, if not superior, to that possessed by
the plaintiff.” (Id. at p.
236.)
Here, Plaintiff sufficiently alleged alter ego liability to
survive demurrer. First, Plaintiffs allege “unity of interest” between
Defendant Outdoor Voices and Merrill “such that any individuality and
separateness has ceased” and that Merril “control[s] or controlled the business
and activities of Outdoor Voices.” (Complaint ¶ 6.) Second, Plaintiff alleges
that Defendant Outdoor Voices “was and remains a mere shell” without any
separateness between it and Merrill. (Complaint ¶ 7.) Third, Plaintiff alleges
that Merrill comingled funds and treats Defendant Outdoor Voices’ assets as
their own, that Outdoor Voices cannot satisfy any judgment against it, and
adhering to the corporate fiction would sanction fraud and promote injustice.
(Complaint ¶¶ 8-10.)
Accordingly, the court OVERRULES the demurrer to the
alter ego allegations.
Second & Third Causes
of Action – Negligent Misrepresentation & Fraud
Merrill contends that Plaintiff’s claims for negligent
misrepresentation and fraud fail because they lack the requisite particularity,
lack elements, and pertain to future events which are not actionable. Merrill
further contends that the negligent misrepresentation claim fails because it is
based on omissions, not assertions. Plaintiff argues they sufficiently alleged
claims for negligent misrepresentation and fraud.
“The essential¿elements¿of a count
for¿intentional¿misrepresentation¿are (1) a¿misrepresentation, (2) knowledge of
falsity, (3)¿intent¿to induce reliance,¿(4) actual and justifiable reliance,
and (5) resulting damage. [Citation.] (Chapman
v. Skype, Inc. (2013) 220 Cal.App.4th 217, 230-31.) “ ‘ “The elements of
negligent misrepresentation are similar to intentional fraud except for the
requirement of scienter; in a claim for negligent misrepresentation, the
plaintiff need not allege that the defendant made an intentionally false
statement, but simply one as to which he or she lacked any reasonable ground
for believing the statement to be true.” [Citations.] [Citation.]’ ” (Bains v. Moores (2009) 172 Cal.App.4th
445, 454.) “Causes of action for intentional and negligent misrepresentation
sound in fraud and, therefore, each element must be pleaded with specificity.
[Citations.]” (Daniels v. Select
Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166, disapproved of
on other grounds by Sheen v. Wells Fargo
Bank, N.A. (2022) 12 Cal.5th 905.)¿¿
¿
A cause of action for fraud must be alleged with specificity
such that Plaintiff pleads facts that “show how, when, where, to whom, and by
what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) Similarly,
“[t]he requirement of specificity in a fraud action against a corporation
requires the plaintiff to 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.” (Tarmann v. State Farm Mutual Automobile
Insurance Co. (1991) 2 Cal.App.4th 153, 157.)¿
Here, Plaintiff sufficiently alleged a claim for negligent
misrepresentation or fraud. First, Plaintiff alleges “in or around January
2024” which satisfies the when. (Complaint ¶ 24.) Second, Plaintiff alleged
that both “Defendants Merrill and Cooper” made “numerous representations and
assurances” that “Outdoor Voices was fully solvent and in sound financial
condition and was able to meet all its debts and obligations as they come due”
and that they “were not aware of any facts or circumstances whatsoever that
would in any manner impair Defendant Outdoor Voices’ ability to pay the
Settlement Sum in full in accordance with the terms of the Settlement
Agreement.” (Complaint ¶¶ 24, 41.) Third, Plaintiffs allege that they relied on
those representations to enter into the Settlement Agreement, release Merrill
from liability in the Settlement Agreement, and forego pursuing immediate legal
action. (Complaint ¶¶ 43, 46, 47.) Fourth, Plaintiff alleges that Merrill knew
those representations were false. (Complaint ¶ 45.) Fifth, Plaintiff alleges
resulting damages. (Complaint ¶ 47.) Read in the context of the entire
Complaint, “as they come due” does not mean some future event. Rather, it
refers to the negotiated payment installment plan of the Settlement Agreement.
The court therefore disregards that argument as unpersuasive.
Accordingly, the court OVERRULES the demurrer as to the
Second and Third Causes of Action.
CONCLUSION:
For
the foregoing reasons, the Court decides the pending motion as follows:
1. Demurrer
to the Complaint is OVERRULED in its entirety;
2. Defendant
Merrill to file an Answer within 14 days of this ruling.
Moving party is to give notice.
IT IS SO ORDERED.
Dated: MONTH DAY, 2025 __________________________________ Upinder
S. Kalra
Judge
of the Superior Court