Case Number: BC604431 Hearing Date: April 27, 2016 Dept: 32
CALIFORNIA DEPARTMENT OF RESOURCES RECYCLING AND RECOVERY,
GLOBAL SURPLUS SOLUTIONS, et al.,
Case No.: BC604431
Hearing Date: April 27, 2016
[TENTATIVE] ORDER RE:
DEMURRER OF DEFENDANT VERONICA YUEN TO COMPLAINT
Plaintiff California Department of Resources Recycling and Recovery (“Plaintiff”) brings this action to recover damages for payments made on invalid claims under the Electronic Waste Recycling Act of 2003 (the “Act”). The Act provides a system for disposing of covered electronic devices (“CEDs”) and the collection and recycling of covered electronic waste (“CEWs”). Plaintiff administers the CEW Program’s (“Program”) payment system. Under the Program, approved CEW recyclers may submit payment claims to Plaintiff. Prior to submitting a claim, the approved recycler must ship “treatment residuals” resulting from the dismantling of a CEW to an “end-use destination” authorized to receive and further treat, or legally dispose of, the materials.
Plaintiff alleges that Defendant Global Surplus Solutions (“GSS”) acted as an approved recycler under the program, and that Defendant Dow Management (“Dow”) represented itself as an “end-use destination” business. Plaintiff alleges that in April 2012, GSS began submitting CEW payment claims that identified Dow as one of its downstream processors. In July 2013, the Arizona Department of Environmental Quality informed Plaintiff that Dow had abandoned its facility, leaving it stockpiled with treatment residuals. Plaintiff alleges that GSS refused to relocate the materials shipped to Dow’s Arizona facility. Plaintiff alleges that it audited the Dow claims and determined that it had overpaid GSS by $499,182.72. Plaintiff asserts causes of action for (1) violations of the Electronic Waste Recycling Act; (2) negligent misrepresentation; (3) intentional misrepresentation; (4) restitution; and (5) money had and received.
A demurrer challenges only the legal sufficiency of the complaint, not the truth of its factual allegations or the plaintiff’s ability to prove those allegations. (Picton v. Anderson Union High Sch. Dist. (1996) 50 Cal. App. 4th 726, 732.) The court must treat as true all of the complaint’s material factual allegations, but not contentions, deductions or conclusions of fact or law. (Id. at 732–33.) The complaint is to be construed liberally to determine whether a cause of action has been stated. (Id. at 733.)
To state a cause of action for fraud, a plaintiff must allege: (1) misrepresentation; (2) knowledge of falsity (or “scienter”); (3) intent to defraud (induce reliance); (4) justifiable reliance; and (5) resulting damage. (Charnay v. Cobert (2006) 145 Cal. App. 4th 170, 184.) The plaintiff must plead facts which “show how, when, where, to whom, and by what means the representations were tendered.” (Hills Transportation Co. v. Southwest (1968) 266 Cal. App. 2d 702, 707.) “Each element in a cause of action for fraud or negligent misrepresentation must be factually and specifically alleged.” (Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal. App. 4th 513, 519.)
Defendant Veronica Yuen (“Yuen”)—alleged to be the manager of Dow—demurs to the second and third causes of action for negligent and intentional misrepresentation. Yuen’s demurrer is brought on the grounds that the complaint fails to allege fraud with specificity, and that the complaint lacks allegations that indicate Yuen made any misrepresentations.
Plaintiff sufficiently alleges a fraud claim against Dow. Plaintiff alleges that Dow represented itself as an “end-use destination” business, (Compl. ¶ 25), said representations were made through solicitations to approved recyclers and documentation submitted to Plaintiff in support of payment claims, the misrepresentations occurred between 2011 and 2013, and the misrepresentations were received by approved recyclers and Plaintiff in California. (Id. ¶¶ 25–29, 44–45, 52–53.) These allegations sufficiently apprise Dow of how, when, where, to whom, and by what means the purported misrepresentations were tendered.
However, the complaint fails to allege how these purported misrepresentations can be imputed to Yuen. Plaintiff contends that “[b]ecause Yuen actively directed or was otherwise legally responsible for directing DOW’s tortious misrepresentations, she is individual liable for DOW’s tortious conduct.” (Oppo. at 11.) The Court disagrees. “[A] corporation is regarded as a legal entity, separate and distinct from its stockholders, officers and directors, with separate and distinct liabilities and obligations.” (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal. App. 4th 523, 538 [emphasis added].) As such, Yuen cannot be held individually liable for fraud unless Yuen herself made a fraudulent statement, or Yuen is found to be the alter-ego of Dow. (See ibid.) While the complaint alleges that Yuen “was DOW’s member, manager, and agent for service of process. . . actively directed or was otherwise legally responsible for directing all activity by DOW. . . and operated DOW without adhering to administrative requirements applicable to [LLCs],” these are merely conclusory statements unsupported by factual allegations. Plaintiff does not sufficiently allege alter-ego liability, or allege that Yuen herself made fraudulent statements. As such, Yuen cannot be held individually liable for Dow’s purported misrepresentations.
The demurrer to the second and third causes of action is SUSTAINED without leave to amend.