Judge: William A. Crowfoot, Case: 21GDCV00535, Date: 2023-05-23 Tentative Ruling

Case Number: 21GDCV00535    Hearing Date: May 23, 2023    Dept: 3

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - NORTHEAST DISTRICT

I.            INTRODUCTION

On April 20, 2021, plaintiff Derek Lee (“Plaintiff”) filed this action against defendant Ti Yeh (“Defendant”).  On January 10, 2022, Plaintiff filed the operative First Amended Complaint (“FAC”).  Plaintiff alleges that he had a partnership with Defendant to operate a rental car business and asserts causes of action against Defendant for: (1) fraud, (2) constructive or actual termination of partnership agreement, (3) breach of fiduciary duty, (4) unfair competition, (5) unjust enrichment, (6) breach of partnership, (7) accounting, (8) promissory estoppel, (9) abuse of control, and (10) gross mismanagement. 

On February 14, 2023, after having his default set aside, Defendant filed this demurrer to the FAC arguing that the first, third, fourth, eighth, ninth, and tenth causes of action fail to state sufficient facts and are uncertain and ambiguous. 
          Plaintiff filed an opposition brief on March 20, 2023.

Defendant filed a reply brief on March 27, 2023. 

II.          LEGAL STANDARD

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, with a view to substantial justice between the parties.  (Code Civ. Proc. § 452; Stevens v. Superior Court (1999) 75 Cal.App.4th 594, 601.) 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.)  “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.”  (Mitchell v. California Department of Public Health (2016) 1 Cal.App.5th 1000, 1007.)  “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.) “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.” (C.A. v. William S. Hart Union High School District (2012) 53 Cal.4th 861, 872.)    

A demurrer to a pleading lies where the pleading is uncertain.  (Code Civ. Proc., § 430.10(f).) “Uncertain” includes ambiguous and unintelligible. (Id.) “A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.”  (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616; see also Code Civ. Proc. §430.10(e).) Moreover, “[a] special demurrer should be overruled where the allegations of the complaint are sufficiently clear to apprise the defendant of the issues which he is to meet.”  (Gressley v. Williams (1961) 193 Cal.App.2d 636, 643.)  

III.        DISCUSSION

First and Eighth Cause of Action: Fraud and Promissory Estoppel  

Both fraud and promissory estoppel must be pleaded with specificity.  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645 [plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made]; Smith v. City and County of San Francisco (1990) 225 Cal.App.3d 38, 48 [party claiming estoppel must “specifically plead all facts relied on” to establish its elements].)  Defendant argues that Plaintiff fails to plead his fraud and promissory estoppel claims with specificity.  The Court agrees.

The elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud or induce reliance; (4) justifiable reliance; and (5) damages. (See Civ. Code, § 1709.)  There appears to be two clusters of events underlying Plaintiff’s fraud claim: (1) Defendant’s initial representations to Plaintiff which led to the start of their rental car business and (2) Defendant’s later representations to Plaintiff regarding the business’s operations.   Plaintiff fails to allege the specifics of these representations, such as how they were made and when they were made.    

Similar to fraud, “[t]he elements of promissory estoppel are (1) a promise, (2) the promisor should reasonably expect the promise to induce action or forbearance on the part of the promisee or a third person, (3) the promise induces action or forbearance by the promisee or a third person (which we refer to as detrimental reliance), and (4) injustice can be avoided only by enforcement of the promise.”  (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780.)  Here, Plaintiff alleges that Defendant promised that “the Parties would share proportionally all profits of the Business at all times.”  (FAC, ¶ 67.)  As with his fraud claim, Plaintiff does not allege when this promise was made. 

Accordingly, the demurrer to the First and Eighth Causes of Action is SUSTAINED with leave to amend.

Third Cause of Action: Breach of Fiduciary Duty

          Defendant argues that Plaintiff’s allegations supporting his third cause of action for breach of fiduciary duty are too vague and conclusory because they do not state when Plaintiff demanded the accountings or how Plaintiff was denied access to the operations of the business.  (Demurrer, p. 6.)  However, unlike fraud and promissory estoppel, a breach of fiduciary duty does not need to be pleaded with such specificity.   

          Therefore, the demurrer to the Third Cause of Action is OVERRULED.

          Fourth Cause of Action: Unfair Competition

The unfair competition law (UCL) prohibits “any unlawful, unfair, or fraudulent business act or practice.” (Bus. & Prof. Code § 17200; see Clark v. Superior Court (2010) 50 Cal.4th 605, 610.) A UCL plaintiff must plead and prove that the defendant engaged in a business practice that was either unlawful (i.e., is forbidden by law) or unfair (i.e., harm to victim outweighs any benefit) or fraudulent (i.e., is likely to deceive members of the public).  (Albillo v. Intermodal Container Services, Inc. (2003) 114 Cal.App.4th 190, 206.) “Through the UCL a plaintiff may obtain restitution and/or injunctive relief against unfair or unlawful practices. [Citation.]” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1144.) Money damages are not available. (Kaldenbach v. Mutual of Omaha Life Insurance Co. (2009) 178 Cal.App.4th 830, 847.) 

Plaintiff fails to sufficiently allege a claim under the UCL’s “unlawful” prong.  Under its “unlawful” prong, “the UCL borrows violations of other laws … and makes those unlawful practices actionable under the UCL.” (Lazar v. Hertz Corp. (1999) 69 Cal.App.4th 1494, 1505.) Thus, a violation of another law is a predicate for stating a cause of action under the UCL’s unlawful prong.  (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal. App. 4th 1105, 1133.)  Even if Plaintiff were proceeding under the unlawful prong of the UCL, he does not identify the particular law that was allegedly violated and describe “with reasonable particularity the facts supporting the statutory elements of the violation.”  (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 619.)    

Plaintiff also fails to allege a claim under the UCL’s “unfair” and “fraudulent” prongs.  What acts or practices are “unfair” under the UCL depends on whether the plaintiff is a competitor or a consumer.  Plaintiff is neither a competitor of Plaintiff’s nor a consumer.   But even assuming that Plaintiff and Defendant were competitors, the “unfair” prong of the statute “means conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.”  (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 187.) “[A]ny finding of unfairness to competitors under section 17200 [must] be tethered to some legislatively declared policy or proof of some actual or threatened impact on competition.” (Id. at pp. 186-187.)  No such allegations are present in the FAC.

          Last, Plaintiff fails to plead a claim under the “fraudulent” prong of the UCL.  To establish a fraudulent practice under the UCL, the plaintiff must show that members of the public are likely to be deceived. (See West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 806.)  The crux of Plaintiff’s complaint does not involve the deception of the public, but the deception of Plaintiff himself. 

          Accordingly, Defendant’s demurrer to the Fourth Cause of Action is SUSTAINED with leave to amend. 

Ninth and Tenth Causes of Action: Abuse of Control and Gross Mismanagement

Plaintiff provides no authority showing that “abuse of control” and “gross mismanagement” are valid causes of action.  (Opp., p. 12.)  Instead, the Court agrees with Defendant that these allegations support Plaintiff’s claim for breach of fiduciary duty and are not separate causes of action.  Defendant’s demurrer to the Ninth and Tenth Causes of Action is SUSTAINED without leave to amend.  Plaintiff may include these allegations within his Third Cause of Action for breach of fiduciary duty in an amended complaint.  

IV.         CONCLUSION

Defendant’s demurrer to the First, Fourth, and Eighth Causes of Action is SUSTAINED with leave to amend.

Defendant’s demurrer to the Third Cause of Action is OVERRULED.

Defendant’s demurrer to the Ninth and Tenth Causes of Action is SUSTAINED without leave to amend.

Any amended complaint must be filed within 20 days of the date of this hearing.

Moving party to give notice.

Dated this 23rd day of May, 2023

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org.  Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter.  Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue.  If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.