Demurrer to Complaint (Judge Nancy Zeltzer)

Moving Party:  Defendant, Sam Rad

Responding Party:  Plaintiff, Keyvan Fattahi


The demurrer of defendant Sam Rad to the second cause of action for Fraudulent Deceit, third cause of action for Intentional Misrepresentation, and fourth cause of action for Negligent Misrepresentation alleged in plaintiff Keyvan Fattahi’s Complaint is SUSTAINED with 20-days leave to amend.

Defendant demurs to the Complaint pursuant to Code of Civil Procedure section 430.10, subdivisions (e).

Second Cause of Action for Fraudulent Deceit, Third Cause of Action for Intentional Misrepresentation and Fourth Cause of Action for Negligent Misrepresentation:

The elements of fraud that will give rise to a tort action for deceit are: (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974; CACI No. 1900.) Lazar v. Superior Court (Lazar) (1996) 12 Cal.4th 631, 645, explains, “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.’ ” (Italics in Lazar; See also, Robinson Helicopter Co., Inc. v. Dana Corp. (Robinson) (2004) 34 Cal.4th 979, 993.)

“The tort of negligent misrepresentation is similar to fraud, except that it does not require scienter or an intent to defraud.” (Tenet Healthsystem Desert, Inc. v. Blue Cross of California (2016) 245 Cal.App.4th 821, 845.) [T]he same elements of intentional fraud also comprise a cause of action for negligent misrepresentation, with the exception that there is no requirement of intent to induce reliance. . .” (Id.)

Defendant demurs to all three of the tort causes of action on the grounds that tort damages are not available in Plaintiff’s breach of contract case. In support of his contention, Defendant cites to Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 515 which states that: “Conduct amounting to a breach of contract becomes tortious only when it also violates an independent duty arising from principles of tort law. ‘The law imposes the obligation that “every person is bound without contract to abstain from injuring the person or property of another, or infringing upon any of his rights.” (Sec. 1708, Civ. Code.) This duty is independent of the contract. . .” “[A]n omission to perform a contract obligation is never a tort, unless that omission is also an omission of a legal duty.” ’ ” (Id. at 515.)

In Erlich v. Menezes (1999) 21 Cal.4th 543, 551–552, the court stated: “Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury [citations]; for breach of the covenant of good faith and fair dealing in insurance contracts [citations]; for wrongful discharge in violation of fundamental public policy [citations]; or where the contract was fraudulently induced [citations].  In each of these cases, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.  [Citation.]” (Id. at 551–552.)

Here, Plaintiff contends that the Complaint properly alleges tort liability because the tort claims are based on allegations in paragraphs 10, 14-16, 31, 39 and 43 that Defendant intentionally lied to induce Plaintiff to sell him 25% of the Company. (Opp., 4:11-12.) Paragraph 10 of the Complaint alleges that “Defendant is a civil engineer and currently has a fulltime job that he never intended to leave while working at the Company” and “instead, Defendant Rad always intended to benefit from Mr. Fattahi’s own business background, allowing Mr. Fattahi to grow the Company with minimal efforts (if any efforts at all) on Defendant Rad’s behalf, and simply reap the benefits of Mr. Fattahi’s hard work.” (Complaint, ¶ 10.) Paragraph 10 does not allege any intentional lie by Defendant to induce Plaintiff to enter into the Agreement to sell Plaintiff 25% of the Company.

Similarly, paragraphs 14 alleges that Defendant was “unavailable and habitually failed to show up to work altogether” and that “[a]t one point, Defendant Rad suddenly left for Australia but would not work remotely – admitting to Mr. Fattahi that he was looking for work there. When Defendant Rad returned from his trip, apparently unable to find work abroad, Defendant Rad was nevertheless absent from the Company offices.” (Complaint, ¶ 14.) The Complaint further alleges that “even since returning from Australia, Defendant Rad has been hard to reach when decisions have been required at the Company, and his involvement in the running of the business is virtually non-existent” and that Defendant’s “absence required the Company to hire an individual to perform the work that Defendant Rad was to perform pursuant to the terms of the Agreement.” (Complaint, ¶ 15.) Paragraph 16 alleges that “[d]espite his promise and representations that he would be instrumental in expanding the Company business into a new U.S. market, no such efforts ever took place.” (Complaint, ¶ 16.) Paragraphs 14 through 16, again, allege breach of the contract but do not allege any facts to support Plaintiff’s argument that Defendant intentionally lied to induce Plaintiff to sell him 25% of the Company.

Paragraphs 31 alleges that “Defendant Rad induced Mr. Fattahi to enter into the Agreement selling 25% of the interest in the Company by promising that Defendant Rad would make a monetary contribution to the Company pursuant to the terms of the Agreement.” Paragraph 31 expressly alleges a breach of the contract since the Complaint alleges that Defendant promised to make the monetary contribution pursuant to the terms of the Agreement and not any intentional lie to induce Plaintiff to enter into the Agreement. Paragraph 39 alleges harm to Plaintiff and paragraph 41 alleges that Defendant’s representations that he would make monetary contribution to the Company and work at least part time as required by the Agreement were false. (Complaint, ¶¶ 39, 41.) These allegations again simply allege a breach of contract.

Therefore, Plaintiff has not alleged any facts in support of his contention that the contract was fraudulently induced because Defendant intentionally lied to induce Plaintiff to sell him 25% of the Company.

Accordingly, the demurrer to the third, fourth and fifth causes of action is SUSTAINED with 20-days leave to amend.