Judge: Wesley L. Hsu, Case: 19PSCV00687, Date: 2023-03-27 Tentative Ruling


Case Number: 19PSCV00687    Hearing Date: March 27, 2023    Dept: L

Defendant/Cross-Complainant and Cross-Defendant Boudreau Pipeline Corporation’s Motion to Strike Portions of Meritage Homes of California, Inc.’s Second Amended Complaint is DENIED.

 

Background   

 

Case No. 18PSCV00026

 

Plaintiff Meritage Homes of California, Inc. (“Meritage”) alleges as follows: Michael Barker International Inc. fka RBF Consulting (“MBI”) failed to properly perform engineering services in connection with the development of the Creekside residential subdivision in La Verne, California (“Creekside”).

 

On October 12, 2018, Plaintiff filed a First Amended Complaint, asserting causes of action against MBI and Does 1-200 for:

 

1.      Breach of Contract

2.      Breach of Implied Covenant of Good Faith and Fair Dealing

3.      Gross Negligence

 

On November 13, 2018, MBI filed a cross-complaint, asserting causes of action against Roes 1-100 for:

 

1.      Equitable Indemnity

2.      Comparative Apportionment of Fault

3.      Declaratory Relief

 

On April 25, 2022, the court related this instant case to Case No. 19PSCV00687; this instant case was deemed to be the lead case.

 

The Final Status Conference is set for July 18, 2023. Trial is set for August 1, 2023.

 

Case No. 19PSCV00687

 

Meritage alleges as follows: Boudreau Pipeline Corporation (“Boudreau”) constructed and installed a sewer lift station and associated improvements (“the System”) in connection with and to service Creekside. The System’s pumps were manufactured with undersized impeller blades, which caused issues with the flow and pressure. Boudreau failed to promptly remedy the operational and performance issues with the System, which resulted in the City of La Verne (“City”) imposing a sales and building moratorium and ultimately resulted in the City’s revocation of permits.

 

On October 22, 2019, Boudreau filed a cross-complaint, asserting causes of action against John Lisee Pumps (“JLP”), Meritage and Roes 1-125 for:

 

1.      Express Contractual Indemnity

2.      Implied Indemnity

3.      Total Equitable Indemnity

4.      Contribution

5.      Declaratory Relief: Duty to Indemnify

6.      Declaratory Relief: Duty to Defend

7.      Breach of Contract

8.      Breach of Express Warranties

9.      Breach of Implied Warranties

10.  Negligence

11.  Quantum Meruit

 

On December 9, 2019, Boudreau dismissed its 1st-10th causes of action against Meritage, with prejudice.

 

On December 10, 2019, JLP filed a cross-complaint, asserting causes of action against Moes 1-20 for:

 

1.      Indemnity

2.      Contribution

3.      Apportionment

4.      Declaratory Relief

 

On February 24, 2020, Boudreau filed an “Amendment to [Cross-]Complaint,” wherein Pentair was substituted in lieu of Roe 101. On April 27, 2020, Meritage filed an “Amendment to Complaint,” wherein MBI was named in lieu of Doe 1.

 

On June 23, 2020, MBI filed a cross-complaint, asserting causes of action against Roes 1-100 for:

 

1.      Equitable Indemnity

2.      Comparative Apportionment of Fault

3.      Declaratory Relief

 

On February 17, 2021, MBI filed an “Amendment to [Cross-]Complaint,” wherein Boudreau was named in lieu of Roe 1, JLP was named in lieu of Roe 2 and Pentair Flow Technologies, LLC was named in lieu of Roe 3.

 

On October 22, 2021, Meritage filed an “Amendment to Complaint,” wherein JLP was named in lieu of Doe 151.

 

On February 10, 2021, Boudreau filed an “Amendment to [Cross-]Complaint,” wherein MBI was named in lieu of Roe 76.

 

On April 25, 2022, the court related this instant case to Case No. 18PSCV00026; Case No. 18PSCV00026 was deemed to be the lead case.

 

On December 7, 2022, Meritage filed a Second Amended Complaint (“SAC”), asserting causes of action against Boudreau, JLP, MBI and Does 1-300 for:

 

1.      Breach of Contract

2.      Express Indemnity

3.      Negligence

4.      Declaratory Relief Re: Duty to Indemnify

5.      Declaratory Relief Re: Duty to Defend

6.      Declaratory Relief Re: Duty to Defend

7.      Breach of Contract—Third Party Beneficiary

8.      Strict Products Liability

9.      Negligence

10.  Breach of Contract

11.  Breach of Implied Covenants of Good Faith and Fair Dealing

12.  Express Indemnity

13.  Declaratory Relief Re: Duty to Indemnify

14.  Declaratory Relief Re: Duty to Defend

15.  Declaratory Relief Re: Duty to Defend

16.  Fraudulent Concealment

17.  Negligent Misrepresentation

On February 1, 2023, Meritage filed an “Amendment to Complaint,” wherein Alan Boudreau was named in lieu of Doe 201.

 

The Final Status Conference is set for July 25, 2023. Trial is set for August 8, 2023.

 

Legal Standard

 

Pursuant to Code of Civil Procedure section 436, “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.” The grounds for a motion to strike must “appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Code Civ. Proc., § 437.)

 

Discussion

 

Boudreau moves the court for an order striking out the following portions of Meritage’s SAC:

 

¿ SAC, ¶ 3, 2:27-4:2 [i.e., “3. Meritage is informed and believes that an individual, Mr. Alan Boudreau, is a legal alter-ego of Boudreau. Meritage bases this allegation on the fact that Mr. Boudreau shares the same name as Boudreau, he was in direct control of Boudreau’s conduct as it relates to the allegations in this complaint, he was the superior officer in charge of Boudreau’s conduct, he made personal references to company actions, Boudreau shares the same mailing address as other business entities that appear to be controlled by Mr. Boudreau, and Meritage is informed and believes that Mr. Boudreau personally chose to withhold material information from Meritage that may have avoided most, if not all, of the damages sought by this Complaint. Additionally, Meritage recently learned that at least one of Mr. Boudreau’s immediate family members holds an executive position at Boudreau but has no duties or other responsibilities that would warrant a paying position with the company. Meritage also recently learned that in January 2019, Mr. Boudreau sold his entire interest in the company, which Meritage believes was the controlling majority shareholder interest, to Boudreau, after being placed on notice of this claim by Meritage in April 2018, and after learning of Boudreau’s considerable exposure in connection therewith. Despite selling his entire interest in the company, and restructuring the business in a manner rendering equity therein far more inaccessible, Mr. Boudreau maintained his paying position, authority, and total control over the company, and based on information and belief, still benefits financially from the profits of the company. Meritage is informed and believes, and based thereon alleges, that Mr. Boudreau transferred assets from the company to himself and other employees of the company, only after Meritage’s claim arose, and that in doing so, Mr. Boudreau treated the company assets as his own, to be disposed of at his discretion and solely to avoid the obligations arising under this claim. As such, Meritage alleges that there is a unity of interest and ownership between Mr. Boudreau and Boudreau such that Mr. Boudreau is liable for the acts of the corporation. Further, not only did Mr. Boudreau manipulate the equity in the Company in a manner that renders it judgment proof or near judgment proof, Boudreau likewise failed to maintain proper insurance or other capitalization to respond to and pay claims, such as the instant case. This allegation is underscored by the recent lawsuit filed by Boudreau’s insurance carrier in which the carrier, Travelers’ Insurance Company, denies and declines that there is any indemnity coverage to fund a judgment or to otherwise respond to and pay this claim. As such and due in large part to the actions taken by Mr. Boudreau, Boudreau remains undercapitalized such that an unjust result will follow if Boudreau is treated as the sole actor and defendant-debtor here. Further facts supporting these alter-ego allegations are being pursued in discovery”].

 

The motion is summarily denied. “A claim against a defendant, based on the alter ego theory, is not itself a claim for substantive relief, e.g., breach of contract or to set aside a fraudulent conveyance, but rather, procedural, i.e., to disregard the corporate entity as a distinct defendant and to hold the alter ego individuals liable on the obligations of the corporation where the corporate form is being used by the individuals to escape personal liability, sanction a fraud, or promote injustice.” (Hennessey’s Tavern, Inc. v. American Air Filter Co. (1988) 204 Cal.App.3d 1351, 1359.)

 

The instant motion has been brought by Boudreau; however the language Boudreau seeks to have stricken involve a theory of liability as to Alan Boudreau, not to the corporation. Alan Boudreau, who was named in lieu of Doe 201 via an “Amendment to Complaint” filed February 1, 2023, would be the party with standing to maintain this motion. Alan Boudreau instead filed an answer to the SAC on March 14, 2023.