Demurrer of Laboratory Practice, Inc. and Parviz and Mansooreh Bahadori to the 1st Amended Cross-complaint of United Reference Laboratory LLC

The demurrer of Laboratory Practice, Inc. and Parviz and Mansooreh Bahadori to the 1st Amended Cross-complaint of United Reference Laboratory LLC is OVERRULED.  20 days to answer.  Cross-complainant is to give notice.

Discussion: In this discussion, Mr. and Ms. Bahadori will be referred to by their first names for the sake of clarity, meaning no disrespect.

2d cause of action: Promise without intent to perform

7th cause of action: Rescission and restitution.

Cross-defendants claim the 2d cause of action lacks specificity regarding the representations (promises) at issue but it is clear they were in the contract, including the amendment signed by Parviz. [Ex. B]


Cross-defendants claim the contract doesn’t have the terms that the cause of action is based on.  But it does have a provision requiring the parties to execute anything necessary to perform the contract, included filings with governmental agencies.  Ex. A, ¶13.  Also, the amendment states that if the 20% option is exercised, Parviz shall stay employed for a year.  This could imply an agreement that if he doesn’t, he can be terminated.  A merger clause does not prevent additional evidence to explain the meaning of an ambiguous term.  Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 240.


Whether the license remained with Lab Practices until payment in full or whether that payment was excused is not an issue for demurrer.


Cross-defendants claim fraud cannot be based on breach of contract, citing Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30-31.  But it can be based on lack of intent to perform at the time of contracting; evidence of lack of intent can be failure to attempt performance.  Id. at 30.  The duty to perform did not accrue until Parviz chose not to exercise the option; there was no attempt to perform at that time.  Also, Tenzer concerned summary judgment.  Universal By-Products Inc. v. City of Modesto (1974) 43 Cal.App.3d 145, 151, holds the only pleading requirements are that the promise was false and known by the Defendant to be false when made; the rest are evidentiary matters that needn’t be pled.


The only attack on the 7th cause of action is that there has to be fraud to support it.  As the 2d cause of action survives, so does the 7th.


3d cause of action: Interference with economic relations. Cross-defendants cite no authority requiring a plaintiff to identify which clients were diverted in the complaint.  This is a matter for discovery.


There must be wrongdoing by some legal measure other than the interference itself., Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688, 713.  The cross-complaint alleges that clients were diverted by Minoo in conspiracy with Parviz while she was still employed by United.  Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 414, held that a duty of loyalty is breached when an employee “takes action which is inimical to the best interests of the employer.”  This has been alleged.


Cross-defendants’ cite no authority that the cause of action must be based on misrepresentation.  Also, telling clients a company had been sold is an implied representation that it is no longer in business.


Whether the clients were assets sold with the company is not an issue for demurrer.  Even if they were not, there could have been prospective business relationships with clients who had used the laboratory in the past.


Demurrer of Amid T. Bahadori and Bahadori & Thomas LLP to the 1st Amended Cross-complaint


The demurrer of Amid T. Bahadori and Bahadori & Thomas LLP to the 1st Amended Cross-complaint is OVERRULED.  Cross-defendants have 20 days to answer.  Cross-complainant [United] is to give notice.


Discussion:  The 1st Amended Cross-complaint alleges that the demurring parties [Escrow] were acting as escrow agents for the contracting parties.  The alleged wrongdoing is that Escrow failed to transfer all the assets to United, failed to provide a valid Bill of Sale and failed to provide a closing statement itemizing deposits and disbursements at close of escrow.


The demurrer is not based on the statute of limitations applicable to escrow agents and escrow companies but that applicable to lawyers, CCP §340.6.  None of Escrow’s cases are on point. Kracht v. Perrin, Gartland & Doyle (1990) 219 Cal.App.3d 1019 concerned whether malpractice claims are assignable.  Jackson v. Rogers & Wells (1989) 210 Cal.App.3d 336 involved negligent representation in a lawsuit.  Pompilio v. Kosmo, Cho & Brown (1995) 39 Cal.App.4th 1324 involved representation at an arbitration.


Here, the Escrow was representing both parties and providing services that a non-attorney could provide.  In fact, the escrow instructions [Ex. C to the 1st Amended Cross-complaint) state that the duties are limited to following the escrow instructions.


Under Amen v. Merced County Title Co. (1962) 58 Cal.2d 528, 532-533, if escrow instructions are written, the four year statute of limitations for breach of contract applies to breach of those instructions.  As Cross-defendants admit, it is the gravamen of the cause of action, not the title, that governs the statute of limitations.  The gravamen of both causes of action are violations of Cross-defendants’ duties as escrow agent.  Even if failing to provide a proper Bill of Sale could arguably be legal malpractice, disbursing proceeds and providing a closing statement are normal duties of an escrow agent and require no legal training or expertise.


The fact that the original cross-complaint alleged both legal malpractice and escrow negligence does not establish as a matter of law that the gravamen of the causes of action is legal malpractice, at least at the pleading stage.  The Court expresses no opinion on whether some of the claims in the causes of action constitute legal malpractice or whether any such claims are time-barred.