Judge: William D. Claster, Case: 30-2022-01241461-CU-IC-CXC, Date: 2022-08-05 Tentative Ruling
Defendant Canadian Dental Association's Notice of Demurrer and Demurrer to Plaintiff's Complaint ROA 113
Defendant Canadian Dental Association (“CDA”) demurs to all causes of action brought against it in the complaint of Plaintiff Robert S. Wright: the second (breach of implied contract), third (breach of fiduciary duty), fourth (fraud and deceit), fifth (fraudulent concealment), sixth (constructive fraud), seventh (breach of the implied covenant of good faith and fair dealing), eighth (professional negligence), eleventh (intentional infliction of emotional distress), twelfth (unjust enrichment), thirteenth (unfair insurance practices), fourteenth (declaratory relief), and fifteenth (punitive damages). CDA contends (1) Wright fails to state facts sufficient to constitute a cause of action (CCP § 430.10(e)), and (2) Wright’s complaint is uncertain, ambiguous, or unintelligible (CCP § 430.10(f)).
For the reasons set forth below, the demurrer is SUSTAINED. Leave to amend is GRANTED as to the second, third, fourth, fifth, sixth, seventh, eighth, eleventh, twelfth, and fourteenth causes of action. Leave to amend is DENIED as to the thirteenth and fifteenth causes of action; however, the ruling on the fifteenth cause of action shall not bar the potential recovery of punitive damages in this matter.
Wright shall have until September 6, 2022 to file an amended complaint that addresses the defects noted below. Should Wright choose to file an amended complaint, he is ordered to also file a redline of the amended complaint against the current complaint.
I. Relevant Factual Background
A. Wright’s Relationship With CDA
This matter arises from Wright’s attempt to collect benefits allegedly due under a long-term disability policy (“Policy”) following his skiing accident in December 1993. Prior to this accident, Wright, a Canadian citizen, had practiced general dentistry in British Columbia since 1978. (Compl. ¶ 55.)
CDA is a nonprofit corporation serving members of the dental profession in Canada. (Compl. ¶ 20.) Wright further alleges CDA is an alter ego of since-dismissed defendant CDSPI, and his complaint often refers to the two corporations as a single enterprise called “CanDent.” (See Compl. ¶¶ 19, 24, 117; see also ROA 164 [order granting CDSPI’s motion to quash service of summons].)
Wright had been a member of CDA since 1978, the same year he started his dentistry practice. (Compl. ¶ 44 [noting CDA membership since 15 years before accident].) Wright alleges he relied on CDA and CDSPI for financial planning, investments, insurance, and similar advice, and that they held themselves out as insurance brokers and financial planners for member dentists. (Compl. ¶ 46.)
Wright purchased the Policy through CDSPI. (Compl. ¶ 117.) It had an effective date of January 1, 1992. (Ibid.) In December 1993, he was injured in a skiing accident. He contends the accident left him totally disabled for the career of general dentistry, but he believed he could retrain as a dental specialist and work mainly as an educator with limited hours at a dental practice. (Compl., ¶ 70.)
B. Claims Process and Litigation
What followed was a years-long claims process that eventually culminated in lengthy litigation in British Columbia, and following that, lawsuits in Los Angeles County and this Court. In late January 1994, about a month after the accident, Wright contacted CDSPI to inquire about filing a claim under the Policy. (Compl. ¶ 67.) CDSPI purportedly wrongly informed him that under the terms of his policy, he would have to wait until three months after he sold his practice and stopped practicing general dentistry to file a claim. (Compl. ¶ 68.) Wright originally arranged for the sale of his practice in July 1994, but the sale fell through. He was unable to sell the practice and move to California until March 1995. (Compl. ¶¶ 130-131.) Three months after he sold the practice, Wright requested a claim submission form from CDSPI. The claim submission package did not arrive until October 1995. (Compl. ¶¶ 131-132.)
As discussed in more detail in the order on the Sun Life defendants’ demurrer, Sun Life (the insurer) started paying Wright’s claim in November 1996, but stopped soon thereafter. Wright filed an insurance coverage suit in the Supreme Court of British Columbia. Sun Life resumed payments, and Wright recovered some, but not all, of the claimed arrearage. (Compl. ¶¶ 141-142.) Wright contends this partial denial of benefits was wrongful, and that CDA conspired with Sun Life in the denial. (Compl. ¶ 143.)
Then, in November 2001, Sun Life terminated benefits under the policy. It concluded Wright had returned to his former regular occupation, i.e., general dentistry. Wright alleges benefits were terminated without any specific supporting explanation, and that he was never asked to provide a medical examination or a financial statement. (Compl. ¶ 144.) CDA and CDSPI never provided assistance to Wright, a paying member, following the termination of benefits. (Compl. ¶ 54.) After termination, Wright’s British Columbia coverage litigation dramatically changed. He filed an amended complaint in 2004, and the case was finally tried in March 2015.
Wright alleges he finally uncovered more detail about the 2001 termination of benefits in the January 2013 deposition of Robert Kling, a claims investigator retained by Sun Life. (Compl. ¶ 53.) Kling testified that the decision to terminate Wright’s benefits wasn’t based on medical grounds (i.e., an expert’s medical determination that Wright was no longer disabled) or Wright’s failure to be under the regular care of a physician. Rather, Kling retained a California private detective, Thomas Sheridan, to investigate Wright’s dental practice in Newport Beach and see whether he was practicing prosthodontics (as Wright claimed) or general dentistry (as Kling and Sun Life suspected). Sheridan presented at Wright’s office posing as a patient in immediate pain and distress and with limited funds for treatment, requesting both a treatment letter and an estimate. Wright, taking Sheridan’s claims at face value, provided him a treatment letter and an estimate. Based on Sheridan’s subsequent report to Kling, Kling concluded Wright had in fact returned to general dentistry practice. As such, Kling concluded Wright was no longer disabled under the policy, and the insurer terminated benefits. (Compl. ¶¶ 85-86.) Wright alleges, “Sun Life and CanDent worked together on this claim.” (Compl. ¶ 53.)
Wright also alleges that sometime before trial in 2015, he learned Sun Life’s law firm in the British Columbia action also represented CDA and CDSPI at the time he sought advice from them on how to recover benefits on the Policy. (Compl. ¶ 27.) Again, Wright maintains CanDent owed him duties as an insurance broker and financial advisor. Wright alleges two conflicts of interest from this dual representation. First, the law firm had a conflict of interest by representing both Sun Life and Wright’s insurance broker/financial advisor. (Ibid.) Second, and more importantly here, the law firm’s dual representation shows that CanDent was actually acting as a “double agent,” conspiring with Sun Life in the wrongful denial of benefits. (Compl. ¶ 47.)
The trial judge in British Columbia found in favor of Sun Life (in a proceeding Wright claims was rife with due process violations), and the provincial appellate court affirmed (in a decision Wright claims also was rife with errors). Wright chose not to seek review in the Supreme Court of Canada. (Compl. ¶ 761.) Wright filed suit in Los Angeles County Superior Court not long thereafter. He voluntarily dismissed the Los Angeles suit in March 2021. This action followed in January 2022.
II. Timing of Demurrer
Wright argues CDA missed its deadline to respond to the complaint, and the Court should refuse to consider its demurrer for that reason. Assuming for the sake of argument that CDA’s demurrer was untimely, Wright identifies no authority that would permit the Court to disregard a demurrer simply because it was untimely filed. Furthermore, because Wright has filed an opposition brief that squarely addresses the demurrer on the merits, the Court finds Wright will not be prejudiced if the demurrer is considered.
III. Merits Discussion
A. Standard of Review
In reviewing the sufficiency of a complaint against a demurrer for failure to state facts sufficient to state a cause of action, the Court is guided by long-settled rules. The Court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Serrano v. Priest (1971) 5 Cal.3d 584, 591.) “The complaint must be construed liberally by drawing reasonable inferences from the facts pleaded.” (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) “Further, [the Court] gives the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “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 Dist. (2012) 53 Cal.4th 861, 872.)
“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.)
B. Uncertainty
Even under the demanding Khoury standard, Wright’s complaint is uncertain and unintelligible as to CDA. He simultaneously alleges the following regarding CDA and CDSPI:
If one entity is another’s alter ego, then even if the two entities are legally distinct, one is held liable for the other’s wrongdoing by operation of law. If one entity is a division of another, the division may be a separate entity from the parent that cannot be disregarded unless certain doctrines (such as alter ego) apply, or it may have no legal existence separate from the parent, depending on the structure of the company. If two entities form a single enterprise, yet another set of rules about imputed liability applies. As currently pled, the Complaint is too uncertain to give notice of exactly how CDA may be allegedly liable for CDSPI’s acts. The problem is compounded by the allegations themselves, which (largely, but not entirely) charge only CDSPI with acts and omissions, not CDA itself, or refer to “CanDent” generally.
Contrary to Wright’s assertions, CDA has no burden to support its claims of a legal distinction between CDA and CDSPI. If Wright believes they are either actually a single entity or should be treated as a single entity despite being legally distinct, he has the burden of eventually proving that contention. More to the point, at the demurrer stage, he bears the burden of intelligibly alleging how he contends they should be treated.
Absent clearer allegations about (1) CDA’s own acts and omissions, and (2) the legal basis for holding CDA liable for CDSPI’s acts, the complaint is too uncertain to withstand demurrer. The demurrer is therefore sustained on uncertainty grounds, but Wright will be given leave to amend to address these deficiencies.
C. Statute of Limitations Analysis
Wright suggests Canada has no statute of limitations, which the Court assumes is an argument that Canadian law (with no limitations) should apply. Assuming Wright is correct about Canadian statues of limitations—CDA, in reply, suggests he is not—the Court concludes California law applies. Wright expressly invokes the protection of multiple California statutes. (See, e.g., Compl. ¶¶ 706 [referring to Ins. Code § 790 et seq.], 711 [referring to Civ. Code §§ 3345 and 3294].) He also alleges that all causes of action “took place in Orange County, California.” (Compl. ¶ 4.) The Court will therefore apply California limitations law.
“In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint.” (Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403.) As set forth at pages 11-13 of CDA’s opening memorandum, Wright’s claims against CDA have statutes of limitations ranging from two to four years. CDA argues his claims are time-barred based on the face of the complaint.
“Generally speaking, a cause of action accrues at ‘the time when the cause of action is complete with all of its elements.’ [Citation.]” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806.) Here, Wright’s causes of action accrued by no later than shortly after Sun Life terminated Policy benefits in November 2001. At that time, Wright alleges a harm—the loss of benefits—and CDA’s wrongful act—never providing assistance to a paying member whose benefits were wrongly terminated. At the very latest, the causes of action accrued sometime in 2004, when he filed his amended complaint in British Columbia. By that time, it was clear that no assistance would be forthcoming from CDA, and Wright would have to sue Sun Life to get the benefits he believed he was owed.
Wright argues at page 10 of his opposition that no cause of action against CDA accrued until the date he filed this case, or January 18, 2022. This argument cannot be reconciled with the allegations of his complaint which describe alleged wrongdoing by “CanDent” and CDSPI (and perhaps CDA) back into the 1990s.
Therefore, unless an exception to the statute of limitations applies, the limitations period has run on all of Wright’s claims. Wright appears to argue for two potential exceptions.
First, he alleges the statute of limitations “does not apply to this complaint because this is not a new complaint but a continuation of an existing complaint further clarified with the discovery of fresh evidence and knowledge.” (Compl. ¶ 760.) The Court is aware of no “continuation of an existing complaint” rule, and Wright points to none in his opposition. In any event, this case is not a mere continuation of the British Columbia action. That case was litigated to conclusion, with Wright losing on appeal, and final judgment entered against him.
Second, he makes numerous allegations that he didn’t uncover CDA’s wrongdoing until a later date. “An important exception to the general rule of accrual is the ‘discovery rule,’ which postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.” (Fox, supra, 35 Cal.4th at p. 807.) However, the discovery rule “allows accrual of the cause of action even if the plaintiff does not have reason to suspect the defendant’s identity,” and it “only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action.” (Id., at pp. 807, 808.)
From the Court’s review of the complaint, the latest the discovery rule could delay accrual is sometime in 2015. At this point, Wright learned the same law firm that represented Sun Life in his British Columbia case had also represented CDSPI when he asked CDSPI for advice on dealing with Sun Life. In fact, CDSPI had advised Plaintiff to speak with that very law firm about his questions. (Compl. ¶ 27.) The law firm’s dual representation of Sun Life and CDSPI/CDA/CanDent is the basis for Wright’s allegation, at ¶ 47 of the complaint, that CanDent was a “double agent” for Sun Life. As alleged in the complaint, by no later than 2015, Wright was on inquiry notice of his claims against CDA. Accordingly, the statute of limitations has run, based on the face of his complaint.
That said, Wright asserts in his opposition that he was unable to “connect the dots” about the alleged conspiracy until the spring of 2021. (Opp. at p. 3.) If adequately alleged in an amended complaint, this assertion potentially could make Wright’s claims timely. California’s liberal policy toward amendment requires that he be given an opportunity to try, so the demurrer on statute of limitations grounds is sustained with leave to amend.
D. Merits of Individual Claims
1. Breach of Implied Contract (2nd COA)
CDA argues Wright has not even alleged the existence of a contract, to say nothing of the remaining elements of a breach of contract claim. Wright states in his opposition, “Plaintiff acknowledges that he omitted to elaborate on his cause of action against CDA for Breach of Implied Contract. . . . . Plaintiff has already informed the Case Management Judge through his subsequent pleadings that he wishes to amend his Complaint to add more information, correct typographical and grammatic errors, which will include information with respect to CanDent’s Breach of Implied Contract. The amendment will address the issues in detail.” (Opp. at pp. 10-11.) The Court treats this as a concession that the demurrer to the implied contract claim should be sustained. Wright will be given leave to amend as requested.
2. Breach of Fiduciary Duty (3rd COA)
Wright does not adequately allege the existence of a fiduciary duty running to him from CDA. Insofar as he alleges CDSPI is an insurance broker, it is possible he adequately alleges CDSPI owed him a fiduciary duty. (See Hydro-Mill Co. v Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1156 [“it is unclear whether a fiduciary relationship exists between an insurance broker and an insured”].) But the allegations against CDA itself appear to simply be bare legal conclusions that a fiduciary duty exists. Absent additional facts giving rise to a fiduciary relationship between Wright and CDA, or additional clarity about the relationship alleged between CDA and CDSPI, the demurrer must be sustained. The Court will grant leave to amend to correct this defect.
3. Fraud Claims (4th-6th COA)
“In California, fraud must be pled specifically; general and conclusory allegations do not suffice. [Citations.] ‘Thus “ ‘the policy of liberal construction of the pleadings ... will not ordinarily be invoked to sustain a pleading defective in any material respect.’ ” [Citation.] This particularity requirement necessitates pleading facts which “show how, when, where, to whom, and by what means the representations were tendered.” ’ A plaintiff’s burden in asserting a fraud claim against a [corporation] is even greater. In such a case, the plaintiff must ‘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.’ [Citation].” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)
Wright’s complaint does not meet these standards. It does not matter, as Wright argues in opposition, that he has a file filled with letters, or that Margaret Rutherford of CDSPI allegedly has knowledge of the relevant facts. His burden at this stage is to plead fraud with specificity—both as to fraud generally and as to fraud against a corporate defendant specifically. The demurrer is sustained with leave to amend.
4. Breach of the Implied Covenant of Good Faith (7th COA)
The implied covenant of good faith is implied in contracts. It is not a free-floating duty. (See Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 684 [“the covenant is a contract term”].) As noted above, CDA contends Wright has not adequately alleged the existence of a contract, and in response, Wright offered to amend his complaint. This is a concession that Wright has not adequately pled a contract. Because he has not done so, his claim for breach of the implied covenant of good faith fails. The demurrer is sustained with leave to amend.
5. Professional Negligence (8th COA)
CDA argues Wright fails to plead the existence of a negligence duty running from CDA to Wright. The Court agrees. In opposition, Wright argues CDA owes a “duty of professionalism to [its] members,” who “would not have a membership” if no such duty existed. (Opp. at p. 11.) But the duties an association owes to its members are defined by the association’s rules, by membership agreements, etc. They are not negligence duties defined by tort law. Accordingly, the demurrer is sustained with leave to amend.
6. IIED (11th COA)
“A cause of action for intentional infliction of emotional distress exists when there is (1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff’s suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant’s outrageous conduct. A defendant's conduct is ‘outrageous’ when it is so extreme as to exceed all bounds of that usually tolerated in a civilized community.” (Hughes v. Pair (2009) 46 Cal.4th 1035, 1050-1051 [internal quotations omitted].)
Wright has not adequately pled “outrageous” conduct. For example, Hughes cites “threats of harm or death to plaintiff and his family” and “sexual harassment” as examples of outrageous conduct that can support an IIED claim. (Id., at p. 1051.) Nothing alleged in the complaint approaches these examples. Nor has Wright adequately pled CDA’s intent to cause emotional distress (or reckless disregard). That CDA supposedly feels no remorse now (as Wright claims in his opposition) says nothing about CDA’s state of mind then. The demurrer is sustained with leave to amend.
7. Unjust Enrichment (12th COA)
CDA cites Levine v. Blue Shield of California (2010) 189 Cal.App.4th 1117 for the proposition that there is no such thing as a cause of action for unjust enrichment. In reaching this conclusion, Levine disagreed with Peterson v. Cellco Partnership (2008) 164 Cal.App.4th 1583, which held that a claim for unjust enrichment exists. (See Levine, supra, 189 Cal.App.4th at p. 1138.) Peterson is a decision from the Fourth District Court of Appeal, Division Three, which is the reviewing court for decisions from this Court. The Court will follow the reasoning of Peterson and conclude that a cause of action for unjust enrichment exists. (See Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456.)
“The elements of an unjust enrichment claim are the ‘receipt of a benefit and [the] unjust retention of the benefit at the expense of another.’ [Citation.]” (Peterson, supra, 164 Cal.App.4th at p. 1593.) Wright’s allegations of receipt and unjust retention of benefits at his expense are found at paragraphs 692 and 693 of the complaint. These are insufficient to state a claim for unjust enrichment against CDA. Instead, Wright alleges that CanDent conspired with Sun Life to delay payment on his claim, deny his FIGO increases, and ultimately terminate benefits. As pled, if anyone was unjustly enriched at Wright’s expense, it was Sun Life (the insurer), which retained his premiums without paying his claim. Because Wright has not adequately alleged a benefit received and retained by CDA at his expense, the demurrer is sustained with leave to amend.
8. Unfair Insurance Practices (13th COA)
Wright’s thirteenth cause of action alleges violations of the Unfair Insurance Practices Act, Ins. Code § 790 et seq. This law does not create a private right of action; rather, it is enforced by the Insurance Commissioner. (Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287, 304.) If the Insurance Commissioner is interested in this case (as Wright claims in opposition), he is free to bring an enforcement action. Wright, on the other hand, cannot. Because no private right of action exists, the demurrer to this cause of action is sustained without leave to amend.
9. Declaratory Relief (14th COA)
CDA argues Wright fails to allege a proper subject of declaratory relief. The Court agrees. Rather than seeking a forward-looking declaration of the parties’ rights and duties, Wright’s declaratory relief allegations simply restate his backward-looking claims for damages. “Declaratory relief generally operates prospectively to declare future rights, rather than to redress past wrongs.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909.) The demurrer is therefore sustained with leave to amend.
10. Punitive Damages (15th COA)
“There is no cause of action for punitive damages.” (Hilliard v. A.H. Robins Co. (1983) 148 Cal.App.3d 374, 391.) The demurrer to this cause of action is therefore sustained without leave to amend. However, the nonexistence of a punitive damages cause of action does not mean Wright cannot recover punitive damages in this action. Regardless of whether he can maintain a separate cause of action for punitive damages, his complaint nonetheless contains punitive damages allegations (i.e., that CDA’s actions constituted malice, oppression, and/or fraud). The Court has not been asked to rule upon the sufficiency of those allegations at this time.