Judge: Wesley L. Hsu, Case: 22PSCV01043, Date: 2023-05-02 Tentative Ruling

Case Number: 22PSCV01043    Hearing Date: May 2, 2023    Dept: L

Plaintiff/Cross-Defendant Encore Labs, LLC’s Demurrer to First Amended Cross-Complaint is OVERRULED in part (i.e., as to the first cause of action) and SUSTAINED in part (i.e., as to the second and third causes of action). The court will hear from counsel for Cross-Complainant as to whether leave to amend is requested, and as to which cause(s) of action, and will require an offer of proof if so.

 

Background   

 

Plaintiff Encore Labs, LLC (“Encore”) alleges as follows: Encore is an accredited cannabis testing lab; Defendant Baldwin Park Tale Corporation dba Aureum Labs (“Aureum”) is a cannabis company that produces concentrate products. Between approximately March 2022-July 2022, Aureum brought several samples of its product to Encore for testing. Encore performed the testing and then invoiced Aureum for its services. Aureum has failed to pay numerous invoices.

 

On September 13, 2022, Encore filed a complaint, asserting causes of action against Aureum and Does 1-20 for:

 

1.      Breach of Contact

2.      Quantum Meruit

3.      Open Book Account

4.      Account Stated

 

On January 25, 2023, Aureum filed a First Amended Cross-Complaint (“FACC”), asserting causes of action against Encore and Roes 1-20 for:

 

1.      Negligence

2.      Breach of Contract

3.      Fraud

 

A Case Management Conference is set for May 2, 2023.

 

Legal Standard

 

A demurrer may be made on the grounds that the pleading, inter alia, does not state facts sufficient to constitute a cause of action and/or is uncertain. (Code Civ. Proc., § 430.10, subds. (e)&(f).)

 

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. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905 [citations omitted].) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) “[A] demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction placed on an instrument pleaded therein, or facts impossible in law, or allegations contrary to facts of which a court may take judicial knowledge.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 [citations omitted].)

 

Discussion

 

Encore demurs, per Code of Civil Procedure § 430.10, subdivisions (e) and (f), to the first through third causes of action in Aureum’s FACC, on the basis that they fail to state facts sufficient to constitute causes of action and are uncertain.

 

First Cause of Action (i.e., Negligence)

 

Encore first argues that Aureum has failed to allege any duty. Aureum, however, has alleged that Encore owed a contractual duty in Paragraph 15. Encore next asserts that Aureum’s negligence claim is barred by the economic loss doctrine. However, the “economic loss” rule does not apply in cases involving the negligent performance of services that results in foreseeable economic loss. (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 777.) Aureum has alleged that Encore negligently performed sample testing which resulted in economic loss.

 

Encore’s demurrer to the first cause of action is overruled.

 

Second Cause of Action (i.e., Breach of Contract)

 

“The elements of a cause of action for breach of contract are: (1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages

 

to plaintiff.” (Coles v. Glaser (2016) 2 Cal.App.5th 384, 391 [quotation marks and citation omitted].)

 

At the outset, the court notes that Encore demurs, in part, to this cause of action on the basis that Aureum fails to adequately allege whether the contract is written or oral. The foregoing ground is a special demurrer under subdivision (g), which Encore did not raise in its notice of motion. Regardless, it is clear from Aureum’s opposition that Aureum received adequate notice of this argument. Here, Aureum has failed to adequately allege whether the contract is written or oral and the terms of the contract that are alleged to have been breached. Further, Aureum has failed to allege performance or excuse for nonperformance.

 

Encore’s demurrer to the second cause of action, then, is sustained.

 

Third Cause of Action (i.e., Fraud)

 

“The essential allegations of an action for fraud are a misrepresentation, knowledge of its falsity, intent to defraud, justifiable reliance, and resulting damage.” (Roberts v. Ball, Hunt, Hart, Brown & Baerwitz (1976) 57 Cal.App.3d 104, 109.) “To withstand a demurrer, the facts constituting every element of the fraud must be alleged with particularity, and the claim cannot be salvaged by references to the general policy favoring the liberal construction of pleadings.” (Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782 [emphasis in original].) This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’” (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73 (emphasis in original), quoting Hills Trans. Co. v. Southwest (1968) 266 Cal.App.2d 702, 707.)

 

Aureum has alleged that Encore “knowingly and intentionally provided invalid, erroneous, and inaccurate test results to Cross-Complainant.” (FAC, ¶ 33). Aureum, however, has failed to adequately allege with particularity the misrepresentations that form the basis of this cause of action. Aureum fails to allege specific facts showing how, when, where, to whom and my what means these representations were made.

 

With regard to knowledge of falsity, Aureum has alleged that Encore “did not test the cannabis at all and instead was providing false reports of the cannabis testing.” (Id., ¶ 34.) There are no allegations, though, that unidentified persons from Encore alleged to have made representations to Aureum had any knowledge that no testing was being conducted and that false reports were being provided.

 

Encore’s demurrer to the third cause of action is sustained.