MOTION —DEMURRER TO SECOND AMENDED COMPLAINT

A demurrer presents an issue of law regarding the sufficiency of the allegations set forth in the complaint. Lambert v. Carneghi (2008) 158 Cal.App.4th 1120, 1126. The challenge is limited to the “four corners” of the pleading (which includes exhibits attached and incorporated therein) or from matters outside the pleading which are judicially noticeable under Evidence Code §§ 451 or 452. The complaint is read as a whole: material facts properly pleaded are assumed true; contentions, deductions or conclusions of fact/law are not. Blank v. Kirwan (1985) 39 Cal.3d 311, 318.

In general, a pleading is adequate if it contains a reasonably precise statement of the ultimate facts, in ordinary and concise language, and with sufficient detail to acquaint a defendant with the nature, source and extent of the claim. The degree of detail required depends on the extent to which the defendant in fairness needs such detail which can be conveniently provided by the plaintiff.

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; Saunders v. Cariss(1990) 224 Cal.App.3d 905, 908 [errors and confusion created by “the inept pleader” are to be forgiven if the pleading contains sufficient facts entitling plaintiff to relief]. Moreover, a demurrer for uncertainty is not intended to reach the failure to incorporate sufficient facts in the pleading, but is directed at the uncertainty existing in the allegations actually made. People v. Lim (1941) 18 Cal.2d 872, 883; Fenton v. Groveland Community Services Dept.(1982) 135 Cal.App.3d 797, 809 [Disapproved on other grounds in Katzberg v. Regents of the University of California (2002) 29 Cal.4th 300]. The test is whether the complaint states any valid claim entitling plaintiff to relief, even if plaintiff’s cause of action is improperly titled, or an improper remedy is stated. Quelimane Co., Inc. v. Stewart Title Guar. Co.(1998) 19 Cal.4th 26, 38, and Town Council, Inc. v. City of Los Angeles (1996) 47 Cal. App. 4th 1547.

If a demurrer is sustained as to any cause of action, it is an abuse of discretion to deny leave to amend if there is any reasonable possibility that plaintiff can state a good cause of action. Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.

  1. 1st c/a for Rescission of Contract and Restitution

Rescission is technically a remedy. Wong v. Stoler (2015) 237 Cal.App.4th 1375, 1385 and is governed by Civil Code § 1689 which allows rescission in the following cases: (1) mistake, duress, fraud or undue influence; (2) failure of consideration; (3) void consideration; (4) illegality; and (5) public interest. Here, Plaintiffs seek rescission based on mistake, fraud, illegality and public interest. Of those claims, only fraud must be specifically pled. Paragraphs 56 and 57 of the SAC and the paragraphs incorporated by reference therein (¶p 16, 18, 21, 22, 23, 24, 25, 26, 27, 33, 34, 35, 36, 37, 38, 39, 410, 41, 42, and 48) sufficiently allege mistake, illegality and fraud. As for the argument that Plaintiffs waited too long to file their complaint, no statute of limitations problem appears on the face of the complaint and the issue of “promptness” is a question of fact.

Defendants’ demurrer to the first cause of action is OVERRULED. To the extent that Defendants seek further clarification as to the claim, California’s discovery statutes provide a wide variety of options. Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.

  1. 2nd c/a for Fraud – Negligent Misrepresentation and 3rd c/a for Fraud – Intentional Misrepresentation

“In California, fraud must be pled specifically; general and conclusory allegations do not suffice. ‘Thus the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect. This particularity requirement necessitates pleading facts which `show how, when, where, to whom, and by what means the representations were tendered.” Lazar v. Superior Court (1996) 12 Cal. 4th631, 645 (all citations and internal quotations omitted); see also Alfaro v. Community Housing Improvement Systems & Planning Assn., Inc. (2009) 171 Cal. App. 4th 1356, 1384. The falsity of a promise may be sufficiently pled with a general allegation the promise was made without an intention of performance. Tyco Industries, Inc. v. Superior Court (1985) 164 Cal. App. 3d 148, 156.

Here, the allegations of ¶ 60 and 62 60-63 allege the “what, how, when, where and to whom” necessary to state a claim for fraud under California law. Defendants’ demurrers to second and third causes of action are OVERRULED.

  1. 7th c/a for Intentional Interference with Prospective Economic Advantage

To state a claim for intentional interference with prospective economic advantage, a plaintiff must allege facts showing: (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant. Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688, 713; Sole Energy Co. v. Petrominerals Corp. (2005) 128 Cal.App.4th 212, 241.

“[A] plaintiff seeking to recover for alleged interference with prospective economic relations has the burden of pleading and proving that the defendant’s interference was wrongful ‘by some measure beyond the fact of the interference itself.’” Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 392-393; Sole Energy Co. v. Petrominerals Corp.(2005) 128 Cal.App.4th 212, 241. This helps distinguish fair competition from wrongful competition. Bed, Bath & Beyond of La Jolla, Inc. v. La Jolla Village Square Venture Partners (1997) 52 Cal.App.4th 867, 881. An act is independently wrongful if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard. Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1159;Lemmer v. Charney (2011) 195 Cal.App.4th 99, 105.

 

In paragraphs 87-88, Plaintiffs allege facts setting forth the elements of a claim of intentional interference with prospective economic advantage. Although Plaintiffs simply refer to “clients” rather than specifying the particular relationships which provided prospective economic advantage, from the context and allegations of the SAC, it is clear that Plaintiffs are referring to Defendants’ clients, who Plaintiffs hoped to “acquire” through their agreements with Defendants. Further, by referring the allegations contained in the 4th, 5th, and 6th causes of action, Plaintiffs allege that Defendants engaged in the independently wrongful conduct in interfering with Plaintiffs’ prospective economic relationships. Defendant’s demurrer to the 7th cause of action is OVERRULED. To the extent Defendants seek further clarification as to the claim, there are a wide variety of available discovery procedures. Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.

  1. 8th c/a for Violation of Business and Professional Code Section 17200 et seq.

 

Section 17200 prohibits any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising. By proscribing “any unlawful business practice,” §17200 borrows violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable. Because § 17200 is written in the disjunctive, it establishes three varieties of unfair competition – acts or practices which are unlawful, or unfair, or fraudulent. Puentes v. Wells Fargo Home Mortgage, Inc.(2008) 160 Cal.App.4th 638, 643-644.

 

If the claim is one of fraudulent conduct, it must be pled with the level of specificity required for a claim of fraud. Quelimane, 19 Cal.4th at 46-47. Further, any unfair competition plaintiff must state with reasonable particularity the facts supporting a § 17200 claim. Khoury, 14 Cal.App.4th at 618-619. As set forth above, Plaintiffs have pled fraud with specificity. However, a demurrer to a § 17200 claim is properly sustained where the complaint “identifies no particular section of the statutory scheme which was violated and fails to describe with any reasonable particularity the facts supporting violation.” Id.

 

Plaintiffs’ eighth cause of action a fails to identify which particular section or sections of the statutory scheme were violated or to identify fact supporting the particular claimed violations. Defendants’ demurrer to the eighth cause of action is SUSTAINED with leave to amend. Plaintiffs have ten days in which to amend this claim.