Judge: Walter P. Schwarm, Case: 30-2021-01191524, Date: 2022-10-04 Tentative Ruling
Motion No. 1:
Defendants’ (The Ensign Group, Inc. and Ensign Services, Inc.) Demurrer to Second Amended Complaint (Demurrer), filed on 5-12-22 under ROA No. 194, is SUSTAINED as to the third cause of action and OVERRULED as to the remaining causes of action. The Notice of Demurrer (Notice) was filed on 5-12-22 under ROA No. 222.)
The court DENIES Defendants’ Request for Judicial Notice as immaterial to the court’s decision. (Silverado Modjeska Recreation & Parks District v. County of Orange (2011) 197 Cal.App.4th 282, 307, fn. 18.)
“A demurrer tests the pleading alone, and not the evidence or the facts alleged. . . . To the extent there are factual issues in dispute, however, this court must assume the truth not only of all facts properly pled, but also of those facts that may be implied or inferred from those expressly alleged in the complaint. [Citations.]” (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.) Code of Civil Procedure section 452, states, “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” Perez v. Golden Empire Transportation Transit District (2012) 209 Cal.App.4th 1228, 1238, provides, “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant. [Citations.]” C.A. v. William S. Hart Union High School District (2012) 53 Cal.4th 861, 872 (C.A.), provides, “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. [Citation.]”
The Demurrer challenges the first, second, third, fourth, and fifth causes of action contained in Plaintiffs’ (Aramark Management, LLC and HPSI Purchasing Services LLC) Second Amended Complaint (SAC), filed on 3-14-22 under ROA No. 171, pursuant to Code of Civil Procedure section 430.10, subdivisions (e) and (f). (Notice.)
First Cause of Action (Intentional Interference with Contractual Relations (IICR)):
CACI No. 2201 sets for the elements necessary to establish a cause of action for IICR. Reeves v. Hanlon (2003) 33 Cal.4th 1140, 1148 (Reeves), states, “To prevail on a cause of action for intentional interference with contractual relations, a plaintiff must plead and prove (1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant's knowledge of that contract; (3) the defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage. [Citation.] To establish the claim, the plaintiff need not prove that a defendant acted with the primary purpose of disrupting the contract, but must show the defendant's knowledge that the interference was certain or substantially certain to occur as a result of his or her action. [Citation.]”
Korea Supply Company v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1158-1159 (Korea Supply), states, Thus, while intentionally interfering with an existing contract is ‘a wrong in and of itself’ (Quelimane, supra, 19 Cal.4th at p. 56, 77 Cal.Rptr.2d 709, 960 P.2d 513), intentionally interfering with a plaintiff's prospective economic advantage is not. To establish a claim for interference with prospective economic advantage, therefore, a plaintiff must plead that the defendant engaged in an independently wrongful act. [Citation.] An act is not independently wrongful merely because defendant acted with an improper motive. As we said in Della Penna, ‘the law usually takes care to draw lines of legal liability in a way that maximizes areas of competition free of legal penalties.’ [Citation.] The tort of intentional interference with prospective economic advantage is not intended to punish individuals or commercial entities for their choice commercial relationships or their pursuit of commercial objectives, unless their interference amounts to independently actionable conduct. [Citation.] We conclude, therefore, that an act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard. [Citation.]” (Footnote 11 omitted.)
The Demurrer contends, “All three of Plaintiffs’ interference claims fail because the SAC does not plausibly allege any independently wrongful acts.” (Demurrer; 4:11-12.) Initially, the court notes that it is not necessary to plead an independently wrongful act to plead a cause of action for IICR under Reeves, and Korea Supply.
The SAC pleads the following allegations: (1) “On July 11, 2016, in connection with the acquisition of HPSI by an Aramark affiliate, Steve Borgquist executed a Proprietary Information and Post-Employment Restrictions Agreement with Aramark (the ‘Steve Agreement’).” (SAC, ¶ 33.); (2) “Similarly, on July 19, 2016, in connection with the acquisition of HPSI by an Aramark affiliate, Brent Borgquist executed a Proprietary Information and Post-Employment Restrictions Agreement with Aramark (the ‘Brent Agreement’). (SAC, ¶ 34.); (3) As part of the Borgquist Agreements, Steve and Brent Borgquist both agreed, among other things, that during the course of their employment they would not, without the express written consent of the Company, ‘engage in any employment or business activity that is competitive in any way with the business, or planned business, of the Company or (ii) would conflict with, or otherwise interfere with [their] ability to satisfactorily perform the duties and responsibilities of [their] employment by the Company.’ ” (SAC, ¶ 36.); (4) “The Borgquists further agreed to restrictions on their respective ability to solicit, divert or appropriate or attempt to solicit, divert or appropriate Aramark and/or HPSI customers, for the purpose of selling or providing to those customers any services or products competitive with those available from Aramark and/or HPSI. See Exhibits ‘A’ and ‘B’ at § 3.2 (as modified by § 3.5 so that the restriction in this subsection only applied during the Borgquists’ employment).” (SAC, ¶ 38.); (5) “The Borgquists began planning a competing GPO in 2017. They recognized that in order to make their plan a reality, they would first need to recruit a large customer with numerous affiliates – sometimes referred to as a ‘chain partner’ in the GPO business – that would commit to steering the business of its affiliated entities to the competing GPO in order for the Borgquists to be able to secure discounted pricing from suppliers.” (SAC, ¶ 46.); (6) “By no later than the fall of 2017, the Borgquists identified Ensign Group and the Ensign Affiliates as the customer they would focus on.” (SAC, ¶ 47.); (7) “In order to help get Ensign Group and the Ensign Affiliates ‘on board’ with the business that would become Beacon, the Borgquists recruited as a partner Jacob Christensen, the son of Ensign Group’s then-President and CEO, Christopher Christensen.” (SAC, ¶ 48.); (8) “At the very latest, upon receipt of the Ensign Presentation and the Borgquist Agreements, Ensign Group’s and Ensign Services’ senior leaders knew and understood that: Beacon would compete with HPSI, the GPO then used by the majority of the Ensign Affiliates; the Borgquists were still employees of Aramark; Steve Borgquist was the Managing Director of HPSI, the equivalent of the CEO of the business; the Borgquists owed various duties to Aramark and HPSI, including but not limited to the fiduciary duties to at all times use their best efforts and devote their full business time on behalf of Aramark and HPSI while they were employed by Aramark; the Borgquists were obligated for as long as they were employed by Aramark to refrain from engaging in any employment or business activity competitive in any way with Aramark’s and/or HPSI’s business or that would conflict in any way with their ability to satisfactorily perform their duties and responsibilities; during their employment the Borgquists were obligated not to solicit, induce or encourage any employees of Aramark to leave the company; and during their employment the Borgquists were obligated not to solicit, divert or appropriate or to attempt to solicit, divert or appropriate any of Aramark’s and/or HPSI’s customers.” (SAC, ¶ 58.); (9) “Rather than insisting that the Borgquists resign their employment with Aramark before pursuing a partnership with the Borgquists in Beacon, Ensign Group and Ensign Services, acting through the senior leaders of each company, aided and abetted the Borgquists’ breaches of their fiduciary duties and engaged in the following unlawful, deceptive and unethical affirmative acts designed to damage and sabotage Plaintiffs and divert HPSI’s business to Beacon: . . . .” (SAC, ¶ 59; Italics in SAC.); (10) “At all relevant times, the Borgquists were parties to valid, enforceable contracts with Plaintiffs (the Borgquist Agreements).” (SAC, ¶ 77.)” (11) “At all relevant times, HPSI was a party to valid, enforceable contracts with customers, including but not limited to with those customers identified in the Ensign Presentation (the LOPs).” (SAC, ¶ 78.); (12) “At all relevant times, Ensign Group and Ensign Services had knowledge of the Borgquists Agreements and the LOPs between HPSI and its customers, including but not limited to those customers identified in the Ensign Presentation.” (SAC, ¶ 79.); (13) “Ensign Group and Ensign Services engaged in intentional and independently wrongful acts designed to induce a breach or disruption of sections 2, 3.1, 3.2, 3.3 and 3.4 of the Borgquist Agreements and the LOPs between HPSI and its customers.” (SAC, ¶ 80); and (14) “The intentional and independently wrongful acts engaged in by Ensign Group and Ensign Services, through the senior leaders of both companies, include, but are not limited to, the following: . . . .” (SAC, ¶ 81.)
These allegations plus the allegations in paragraphs 76, 82, and 83 are sufficient to plead a cause of action for IICR. Therefore, the court OVERRULES the Demurrer to the first cause of action.
Second Cause of Action (Intentional Interference with Prospective Economic Advantage (IIPEA)):
CACI No. 2202 sets for the elements necessary to establish a cause of action for Intentional Interference with Prospective Economic Relations. Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2 Cal.5th 505, 512 (Roy Allan), states, “Intentional interference with prospective economic advantage has five elements: (1) the existence, between the plaintiff and some third party, of an economic relationship that contains the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentionally wrongful acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm proximately caused by the defendant's action. [Citation.]”
The allegations identified in the first cause of action also sufficiently plead a cause of action IIPEA. Specifically, the allegations identified in paragraphs 59(g) and 81(g) of the SAC are sufficient to plead an independently wrongful act under Korea Supply. These allegations plus the allegations in paragraphs 85-99 are sufficient to plead a cause of action for IIPEA. Therefore, the court OVERRULES the Demurrer to the second cause of action.
Third Cause of Action (Negligence Interference with Prospective Business Advantage):
CACI No. 2204 sets forth the elements necessary to state a cause of action for Negligent Interference with Prospective Economic Advantage (NIPEA). North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 786 (North American) states, “ The tort of negligent interference with prospective economic advantage is established where a plaintiff demonstrates that (1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such negligence caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected from the relationship. [Citation.]” LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 348 (LiMandri), provides, “ ‘The tort of negligent interference with economic relationship arises only when the defendant owes the plaintiff a duty of care.’ [Citation.]” (Italics in LiMandri.) North American states, “The necessary ‘special relationship’ required by J'Aire was established by consideration of six criteria first articulated by the Biakanja court: (1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to the plaintiff, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant's conduct and the injury suffered, (5) the moral blame attached to the defendant's conduct, and (6) the policy of preventing future harm. [Citations.]” (North American, supra, 59 Cal.App.4th at p. 782.)
Luebke v. Automobile Club of Southern California (2020) 59 Cal.App.5th 694, 707 (Luebke), states, “A special relationship may, in fact, arise out of a contractual duty. [Citations.] ‘ “ ‘The rule which imposes this duty is of universal application as to all persons who by contract undertake professional or other business engagements requiring the exercise of care, skill and knowledge; the obligation is implied by law and need not be stated in the agreement.’ ” ’ [Citation.]”
The Demurrer states, “Plaintiff’s claim for negligent interference is also defective because the SAC lacks factual allegations establishing a duty of care owed by Defendants to Plaintiffs.” (Demurrer; 9:15-16.) The SAC pleads, “Each of the Defendants owed Plaintiffs a duty of care. By virtue of the contractual relationships between the Ensign Affiliates and HPSI, Ensign Group and Ensign Services each knew material facts (namely, the fact that the Ensign Affiliates would be moving their business to Beacon, and the fact that the Borgquists would be leading Beacon’s business) which were not known to Aramark and/or HPSI, and Defendants each knew that Plaintiffs did not know these material facts.” Although a contractual relationship could give rise to a duty of care between Plaintiffs and Defendants, the SAC does not plead the terms of the contractual relationships that support this duty of care. Further, the SAC does not adequately plead a special relationship as described in North American. Therefore, the court SUSTAINS the Demurrer to the third cause of action.
Fourth Cause of Action (Aiding and Abetting Breaches of Fiduciary Duties):
American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1477 (American Master Lease), states, “Thus, there are two different theories pursuant to which a person may be liable for aiding and abetting a breach of fiduciary duty. One theory, like conspiracy to breach a fiduciary duty, requires that the aider and abettor owe a fiduciary duty to the victim and requires only that the aider and abettor provide substantial assistance to the person breaching his or her fiduciary duty. [Citations.] On this theory, California law treats aiding and abetting a breach of fiduciary duty and conspiracy to breach a fiduciary duty similarly. Courts impose liability for concerted action that violates the aider and abettor's fiduciary duty. [Citations.] The second theory for imposing liability for aiding and abetting a breach of fiduciary duty arises when the aider and abettor commits an independent tort. [Citations.] This occurs when the aider and abettor makes ‘ “a conscious decision to participate in tortious activity for the purpose of assisting another in performing a wrongful act.” ’ [Citations.]”
The Demurrer states, “The SAC does not allege any acts the Borgquists committed in breach of their fiduciary duties. Nor does it allege how the Defendants are supposed to have aided or abetted them. . . . Defendants cannot tell—and they will not guess—what the Borgquists are supposed to have done to breach their fiduciary duties, or what Defendants are supposed to have done to assist their acts.” (Demurrer, 7:17-25.) Here, paragraphs 58, 59, 65, 81, 116, and 124 of the SAC adequately plead a cause of action for aiding and abetting. Therefore, the court OVERRULES the Demurrer as to the fourth cause of action.
Fifth Cause of Action (Violation of Unfair Competition Law):
Medical Marijuana, Inc. v. Project CBD.com (2020) 46 Cal.App.5th 869, 896 (Medical Marijuana), states, “Business and Professions Code section 17200 ‘prohibits unfair competition, including unlawful, unfair, and fraudulent business acts. The UCL [unfair competition law] covers a wide range of conduct. It embraces “ ‘ “ ‘anything that can properly be called a business practice and that at the same time is forbidden by law.’ ” ’ [Citations.]” [Citation.] . . . [¶] [Business and Professions Code] section 17200 ‘borrows’ violations from other laws by making them independently actionable as unfair competitive practices. [Citation.]’ [Citation.]) However, ‘a practice may violate the UCL even if it is not prohibited by another statute. Unfair and fraudulent practices are alternate grounds for relief. [Citation.]’ [Citation.]”
The Demurrer states, ““Plaintiffs’ Fifth Cause of Action for violation of the Unfair Competition Law (‘UCL’) is entirely derivative of the first four causes of action, and must stand or fall with the underlying claims. . . . [¶] In addition, the UCL claim fails because it does not authorize any remedy under the alleged circumstances. The UCL permits a person who has suffered injury in fact and has lost money or property as a result of unfair competition to seek (1) restitution and/or (2) an injunction. . . . Plaintiffs’ allegations do not support either an injunction or restitution.” (Demurrer; 8:2-14.)
Since the court has found that the SAC has sufficiently pleads the first and second causes of action, the SAC sufficiently pleads a violation of Business and Professions Code section 17200. The court also finds that that the SAC adequately alleges a restitution remedy under Business and Professions Code section 17203 and Clark v. Superior Court (2010) 50 Cal.4th 605, 614-615 based on paragraph 131 of the SAC. Therefore, the court OVERRULES the Demurrer to the fifth cause of action.
To the extent the Demurrer relies on Code of Civil Procedure section 430.10, subdivision (f), the court OVERRULES this objection because the SAC is not so uncertain as to prevent Defendants from providing an informed response. (A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 695.)
To the extent, the Demurrer relies on the court’s 3-4-22 Minute Order that sustained Defendants’ demurrer to the First Amended Complaint, the court’s order states in part, “Defendants raise a blanket argument that all of the causes of action in the FAC are preempted by the California Uniform Trade Secret Acts . . . Without the allegations of the misappropriation and receipt of plaintiffs’ confidential/trade secret information, none of the causes of action in the FAC would survive independently. [¶] Thus the demurrer is sustained with leave to amend as to the 1st-5th Causes of Action in the FAC.” (3-4-22 Minute Order.) Here, Defendants do not rely on preemption as a basis for the Demurrer.
Defendants’ Reply in Support of Defendants’ Demurrer to Second Amended Complaint (Reply), filed on 9-27-22 under ROA No. 661, states, “Before responding to the arguments asserted in Plaintiffs’ opposition brief, Defendants must first notify the Court that all Plaintiffs’ claims are now moot regardless of whether the allegations in the Second Amended Complaint (‘SAC’) are sufficient to state a claim for relief. Plaintiffs previously sued Steve Borgquist, Brent Borgquist, and Beacon Purchasing, LLC (‘Beacon’) for tortious interference and breach of fiduciary duty in the Borgquist Lawsuit.” (Reply; 2:18-22.) Grappo v. McMills (2017) 11 Cal.App.5th 996, 1009 (Grappo), states, “Regardless, Grappo's argument would not avail him, not in light of the cases that recognize a court has discretion to accept arguments or evidence made for the first time in reply. [Citations.]” Defendants did not raise the issue of double recovery in the Demurrer and Plaintiffs have not had the opportunity to respond to it. Therefore, the court exercises its discretion and declines to accept this contention because Defendants raised this contention in their Reply.
Based on the above, the court SUSTAINS Defendants’ (The Ensign Group, Inc. and Ensign Services, Inc.) Demurrer to Second Amended Complaint (Demurrer), filed on 5-12-22 under ROA No. 194, as to the third cause of action with 14 days leave to amend from the date of service of the notice of the court’s decision. (City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 747.) The court OVERRULES the Demurrer as to the remaining causes of action.
Defendants are to give notice.
Motion No. 2:
Defendants’ (The Ensign Group, Inc. and Ensign Services, Inc.) Motion to Strike Second Amended Complaint (Motion), filed on 5-12-22 under ROA No. 190, is GRANTED in part and DENIED in PART as set forth below. The Notice for this Motion (Notice) was filed on 5-12-22 under ROA No. 209.
Code of Civil Procedure section 436, states, “The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: [¶] (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. [¶] (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” Code of Civil Procedure section 435, subdivision (b)(1), states, “Any party, within the time allowed to respond to a pleading may serve and file, a notice of motion to strike the whole or any part thereof, but this time limitation shall not apply to motions specified in subdivision (e).” Pierson v. Sharp Memorial Hospital, Inc. (1989) 216 Cal.App.3d 340, 342 (Pierson), explains, “Preliminarily, we note a motion to strike is generally used to reach defects in a pleading which are not subject to demurrer. A motion to strike does not lie to attack a complaint for insufficiency of allegations to justify relief; that is a ground for general demurrer. [Citation.]”
The Motion seeks to strike paragraphs 7, 59, 60, 65-67, 72-75, 81, 84, 100, 115, 122, 126, 131-133, and paragraphs 2, 3, 4, and 6 in the Prayer for Relief in Plaintiffs’ (Aramark Management, LLC and HPSI Purchasing Services LLC) Second Amended Complaint (SAC) filed on 3-14-22 under ROA No. 171. (Notice; 2:1-21.)
Paragraphs 59, 60, and 81:
The Motion seeks to strike paragraphs 59, 60, and 81 of the SAC, and states “Paragraphs 59, 60, and 81 of the SAC include allegations the Court already determined insufficient in its minute order sustaining Defendants’ demurrer to the First Amended Complaint (the ‘Minute Order’).” (Motion; 2:3-4.) The court DENIES the Motion to strike paragraphs 59, 60, and 61 because they do not contradict the court’s 3-4-22 Minute Order. The court’s 3-14-22 Minute (discussed above as to Motion No. 1) did not require Plaintiff’s to remove certain allegations. The court’s based its 3-14-22 Minute order on preemption. Further, paragraphs 59, 60, and 81 are relevant to the first and second causes of action. (See Motion No. 1.)
Paragraphs 65-67 and 122:
The Motion states, “In addition to making false allegations, Plaintiffs also inserted in the SAC allegations regarding the Borgquist Lawsuit. In particular, paragraphs 65 through 67 and 122 of the SAC primarily consist of Plaintiffs’ gloss on their lawsuit against the Borgquists. [See SAC ¶¶ 65-67, 122]. These paragraphs should be struck because the allegations are irrelevant and improper. C.C.P. § 436(a).” (Motion; 6:13-16.) Plaintiffs’ Opposition to Defendants’ Motion to Strike Second Amended Complaint (Opposition), filed on 9-20-22 under ROA No. 651, asserts, “At a bare minimum, the allegations are relevant in that the Borgquists were adjudged to have breached their fiduciary duties, and Plaintiffs allege that Defendants in this action aided and abetted the Borgquists in breaching those fiduciary duties. The allegations are also relevant for background purposes.” (Opposition; 4:4-7.) The court DENIES the Motion as to paragraphs 65-67 and 122 because these allegations are relevant to Plaintiffs’ theory of recovery in terms of allegedly aiding and abetting the Borgquists’ breach of fiduciary duty.
Paragraphs 7 and 72-74:
The Motion states, “Unwilling to accept their loss on these issues in the Borgquist Lawsuit, Plaintiffs persist in their allegation that the Borgquists interfered with 16 customer relationships, and they maintain their claim for damages in excess of $25 million. [SAC ¶¶ 7, 72-74]. These allegations are irrelevant and improper; they should be struck. C.C.P. § 436(a).” (Motion; 7:26-8:1.) The Opposition asserts, “Defendants assert that these allegations are ‘irrelevant and improper’ because a jury awarded damages to Plaintiffs in the Borgquist Lawsuit with respect to two customers. Id. Defendants’ argument fails for a number of reasons.” (Opposition; 4:16-18.) Paragraphs 7 and 72-74 are relevant to Defendants’ alleged interference with Plaintiffs’ customers. Therefore, the court DENIES the Motion as to paragraphs 7 and 72-74.
Paragraphs 75, 133, and paragraphs 4 and 6 of the Prayer for Relief:
“Plaintiffs seek reimbursement of the fees and costs they incurred both in this action and in the Borgquist Lawsuit under the ‘tort of another’ doctrine, and they also seek attorneys’ fees incurred in this case pursuant to Section 1021.5 of the Code of Civil Procedure. [SAC ¶¶ 75, 133, Prayer ¶¶ 4, 6]. These allegations are all irrelevant and improper, and should be struck. C.C.P. § 436(a).” (Motion; 8:14-17.)
“There is no requirement that a party plead that it is seeking attorney fees, and there is no requirement that the ground for a fee award be specified in the pleadings. [Citations.]” (Yassin v. Solis (2010) 184 Cal.App.4th 524, 533.) Snatchko v. Westfield LLC (2010) 187 Cal.App.4th 469, 497 (Snatchko), explains, “ ‘There is no requirement that the intent to seek attorney fees under section 1021.5 must be pleaded in the underlying action. [Citation.] Such fees are not part of the underlying cause of action, but are incidents to the cause and are properly awarded after entry of a . . . judgment[.]’ [Citation.] As there was no requirement they be pled at all, the trial court erred in striking Snatchko's prayer for attorney fees based on a failure to adequately plead their basis and Snatchko's failure to reallege his request for fees in his first amended complaint does not waive or forfeit his ability to seek them at the conclusion of this case.” (Italics in Snatchko.)
Prentice v. North Am. Title Guaranty Corp., Alameda Division (1963) 59 Cal.2d 618, 620 (Prentice) states, “. . . A person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney's fees, and other expenditures thereby suffered or incurred. [Citations.]” Paragraph 75 pleads, “Furthermore, Defendants’ actions contributed to causing Plaintiffs to incur significant, seven figure attorneys’ fees and costs in the Borgquist Lawsuit for which Plaintiffs seek reimbursement in this case under the ‘tort of another’ doctrine.” (SAC, ¶ 75.)
Under Prentice, the tort of another doctrine is only applicable if Plaintiffs were required to bring or defend an action against a third party as a result of Defendants’ alleged torts. Here, Plaintiffs plead they are entitled to attorney’s fees based on Defendants’ direct liability to them. Since Plaintiffs’ action is not against a third party and Plaintiffs are not defending against a third party, the SAC does not adequately plead damages based on the tort of another doctrine. Therefore, the court GRANTS the Motion as to paragraph 75.
The court DENIES the Motion as to paragraph 133 and paragraphs 4 and 6 of the Prayer for Relief because it is not improper to plead a request of a fee award under Snatchko.
Paragraphs 84, 100, 115, 126, and paragraph 2 of the Prayer for Relief:
The Motion states, “Plaintiffs are clearly not entitled to seek punitive damages, and their allegations should be struck as irrelevant and improper.” (Motion; 11:20-23.)
Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 63, states, “ ‘In passing on the correctness of a ruling on a motion to strike, judges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth.’ [Citation.] [¶] In order to state a prima facie claim for punitive damages, a complaint must set forth the elements as stated in the general punitive damage statute, Civil Code section 3294. [Citation.] These statutory elements include allegations that the defendant has been guilty of oppression, fraud or malice. (Civ.Code, § 3294, subd. (a).) ‘ “Malice” ’ is defined in the statute as conduct ‘intended by the defendant to cause injury to plaintiff, or despicable conduct that is carried on by the defendant with a willful and conscious disregard for the rights or safety of others.’ [Citations.] ‘ “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.’ [Citation.] ‘ “Fraud” ’ is ‘an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.’ [Citation.]”
Paragraphs 59 and 81 sufficiently plead malice and oppressive conduct. Civil Code Section 3294, subdivision (b), does not apply because the SAC does not seek punitive damages from Defendants based on the actions of an employee. The SAC seeks punitive damages based on Defendants’ actions. Therefore, the court DENIES the Motion as to paragraphs 84, 100, 115, 116, and paragraph 2 of the Prayer for Relief.
Paragraphs 131, 132, and paragraph 3 of the Prayer for Relief:
The Motion states, “Even if Plaintiffs could establish their other claims for damages . . . the allegations seeking restitution and an injunction are irrelevant and improper.” (Motion; 10:18-20.) In Motion No. 1, the court found that the SAC sufficiently pled the fifth cause of action. Thus, the court finds that that the SAC adequately alleges the relief requested in paragraphs 131, 132, and paragraph 3 of the Prayer for Relief under Business and Professions Code section 17203 and Clark v. Superior Court (2010) 50 Cal.4th 605, 614. Therefore, the court DENIES the Motion as to paragraphs 131, 132, and paragraph 3 of the Prayer for Relief.
Based on the above, the court GRANTS Defendants’ (The Ensign Group, Inc. and Ensign Services, Inc.) Motion to Strike Second Amended Complaint, filed on 5-12-22 under ROA No. 190, as to paragraph 75 with 14 days leave to amend from the date of service of the notice of the court’s decision. (CLD Construction, Inc. v. City of San Ramon (2004) 120 Cal.App.4th 1141, 1146-1147.) The court DENIES the Motion as to the remaining items sought to be struck.
Defendants are to give notice.
Motion No. 3:
Defendants’ (The Ensign Group, Inc. and Ensign Services, Inc.) Motion for Sanctions Pursuant to Code of Civil Procedure § 128.7 (b) (Motion), filed on 5-12-22 under ROA No. 196, is DENIED.
Code of Civil Procedure section 128.7 states in part, “. . . (b) By presenting to the court, whether by signing, filing, submitting, or later advocating, a pleading, petition, written notice of motion, or other similar paper, an attorney or unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, all of the following conditions are met: [¶] (1) It is not being presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. [¶] (2) The claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law. [¶] (3) The allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery. [¶] (4) The denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief. [¶] (c) If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation. In determining what sanctions, if any, should be ordered, the court shall consider whether a party seeking sanctions has exercised due diligence [¶] (1) A motion for sanctions under this section shall be made separately from other motions or requests and shall describe the specific conduct alleged to violate subdivision (b). Notice of motion shall be served as provided in Section 1010, but shall not be filed with or presented to the court unless, within 21 days after service of the motion, or any other period as the court may prescribe, the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected. If warranted, the court may award to the party prevailing on the motion the reasonable expenses and attorney's fees incurred in presenting or opposing the motion. Absent exceptional circumstances, a law firm shall be held jointly responsible for violations committed by its partners, associates, and employees. . . .”
Li v. Majestic Industrial Hills LLC (2009) 177 Cal.App.4th 585, 590-591, provides, “Subdivision (c)(1) of section 128.7 contains a safe harbor provision. It requires the party seeking sanctions to serve on the opposing party, without filing or presenting it to the court, a notice of motion specifically describing the sanctionable conduct. Service of the motion initiates a 21–day ‘hold’ or ‘safe harbor’ period. [Citations.] During this time, the offending document may be corrected or withdrawn without penalty. If that occurs, the motion for sanctions ‘shall not be filed. [Citation.]” (Footnotes 3 and 4 omitted.) [¶] By mandating a 21–day safe harbor period to allow correction or withdrawal of an offending document, section 128.7 is designed to be remedial, not punitive. [Citation.] ‘ “The purpose of the safe harbor provisions is to permit an offending party to avoid sanctions by withdrawing the improper pleading during the safe harbor period. [Citation.] This permits a party to withdraw a questionable pleading without penalty, thus saving the court and the parties time and money litigating the pleadings as well as the sanctions request.” ’ [Citations.]” “Because compliance with the safe harbor is a prerequisite to recovering sanctions, the burden is appropriately placed on the party seeking the sanctions to ensure the full safe harbor is provided. [Citation.]” (Id., at p. 594.)
Transcon Financial, Inc. v. Reid & Hellyer, APC (2022) 81 Cal.App.5th 547, 550-551 (Transcon), states, “The ‘21 days is not a notice period. . . . It defines when the target of a sanctions motion can act without penalty and withdraw’ an objectionable document. [Citation.] The moving party must file the motion ‘outside the safe harbor period,’ not ‘on day one of the safe harbor period, day 21 of the safe harbor period, or any day in between.’ [Citation.] In other words, the ‘sanctions motion cannot be filed until the 22nd day after service of the motion, i.e., after the 21-day safe harbor period expires.’ [Citation.] [¶] Moreover, the law requires strict compliance with the safe harbor provisions. [Citation.] Failure to comply with the safe harbor provisions ‘precludes an award of sanctions.’ [Citation.]”
The Notice of Motion (Notice), filed on 5-12-22 under ROA No. 205, states, “Pursuant to subdivision (c)(1) of Section 128.7, Defendants give notice that the motion will not be filed with the court unless, within 21 days after service of this notice, the Second Amended Complaint is not withdrawn or appropriately corrected.” (Notice, 2:9-11.) The declaration of Samuel Brooks, filed on 5-12-22 under ROA No. 198, states, “Because the sanctions motion cannot be filed until 21 days after it is served, I intend to propose to Plaintiffs’ counsel that both sides put all continuing work in the case on hold until the motion is decided.” (Brooks Decl., ¶ 3.)
The court finds that Defendants have not met their burden of showing compliance with the safe harbor provision of Code of Civil Procedure section 128.7, subdivision (c)(1). The Proofs of Service attached to the Notice and Motion reflect that Defendants served the Notice and Motion on 5-12-22. Defendants also filed the Notice and Motion on 5-12-22. Thus, Defendants did not comply with Code of Civil Procedure section 128.7, subdivision (c)(1), and the court does not have the authority to award sanctions.
Therefore, the court DENIES Defendants’ (The Ensign Group, Inc. and Ensign Services, Inc.) Motion for Sanctions Pursuant to Code of Civil Procedure § 128.7 (b).
Plaintiffs (Aramark Management, LLC and HPSI Purchasing Services, LLC) are to give notice.