1. Demurrer to Amended Complaint

4th – Intentional Interference with Pros. Econ. Advantage

The 4th c/a is not a model of pleading. However, several points in the demurrer about it are not correct. For example, Lewis complains that it doesn’t say what economic relationship was harmed. The FAC, ¶ 65, states the relationships that were disrupted were plaintiff Davies’ “relationship with his clients and caregivers” and also, the Orange County Franchise’s “existing and potential economic relationships with its clients and care providers.” (FAC ¶ 64, 65 89) MP has not cited to cases that hold that a more specific pleading of the element is required.

Lewis also complains that an intent to disrupt the relationship is not plead, but it is set forth in ¶90. Lewis fails to cite to cases showing that intent has to be plead more specifically than this. Cf. Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1154 (“We conclude that specific intent is not a required element of the tort … While a plaintiff may satisfy the intent requirement by pleading specific intent, i.e., that the defendant desired to interfere with the plaintiff’s prospective economic advantage, a plaintiff may alternately plead that the defendant knew that the interference was certain or substantially certain to occur as a result of its action.”).

The element of probable future economic benefit is not directly plead in the 4th cause of action. Plaintiffs allege their relationships with clients and caregivers were disrupted, but they haven’t expressly stated they would enjoy probable future economic benefits from the alleged relationships. (See ¶88-91) There must be a “reasonable probability that the plaintiff would have entered into a contract or made a profit.” Campbell v. Rayburn (1954) 129 Cal.App.2d 232, 235. “Although varying language has been used to express this threshold requirement, the cases generally agree that it must be reasonably probable the prospective economic advantage would have been realized….” Youst v. Longo (1987) 43 Cal.3d 64, 71; Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1164.

Finally, the element of knowledge is not directly plead. A defendant must have knowledge of the plaintiff’s economic relationships. Korea Supply Co., 29 Cal.4th at 1164. According to Plaintiffs, they’ve sufficiently plead knowledge by alleging that defendant Lewis was a “manager” or “area manager” with the Orange County franchise, but the Court cannot presume that being a manager means she had knowledge of the relationships. Plaintiffs should plead the element directly.

5th – Conspiracy to Intentionally Interfere with Pros. Econ. Advantage

As noted, the underlying tort of intentional interference w/ prospective advantage is not well-plead in the FAC, hence, the conspiracy claim is deficient to the extent it is based on that tort.

If Plaintiffs amend their complaint, they should not allege conspiracy as an independent cause of action, but rather, include allegations of conspiracy within the underlying tort claim for intentional interference with prospective advantage.

6th – Unfair Trade Practice in Violation of B&P Code §17200

B&P §17200 prohibits any unlawful, unfair or fraudulent business act or practice. Puentes v. Wells Fargo, Inc. (2008) 160 Cal.App.4th 638, 643-644. Each prong is actionable, that is, a plaintiff can assert a violation of this statute by alleging either an unlawful, an unfair, or a fraudulent business practice. Cel–Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180

Here, it is impossible to tell which prong Plaintiffs are proceeding under. The whole cause of action is plead in conclusory terms and relies on incorporation of 24 pages of prior allegations. It is difficult to tell what conduct forms the basis of the claim. The plaintiff alleging unfair business practices must state with reasonable particularity the facts supporting the statutory elements of the violation. Khoury v. Maly’s of California, Inc., 14 Cal.App.4th 612, 619 (1993). A statement that defendant’s conduct was “unlawful, unfair or fraudulent” is a bare conclusion, and is not enough to plead the cause of action. Hutton v. Fidelity National Title Company (2013) 213 Cal.App.4th 486, 498.

In Paragraph 102, plaintiffs also bootstrap the ­§17200 claim on their interference with prospective economic advantage claim. The plaintiff can borrow violations of other laws, including common law torts, to state a claim for unlawful business practices under ­§17200. Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 938; CRST Van Expedited, Inc. v. Werner Enterprises, Inc. (9th Cir. 2007) 479 F.3d 1099, 1107. But to the extent the § ­17200 claim here is based on intentional interference with economic advantage, which is defectively plead as noted above, then the §17200 claim is also deficient.

Sustain demurrers to the 4th, 5th and 6th causes of action in the FAC with 10 days leave to amend.

2. Demurrer to Cross-Complaint

Essential Care LLC filed a cross-complaint against all plaintiffs for: (1) Breach of Contract (plf. Davies), (2) Breach of Contract (plfs. Davies and Thompson), (3) Breach of Contract (plfs. Davies and Dillree), (4) Breach of Implied Covenant of GFFD, (5) Breach of Fiduciary Duty (Davies), (6) Negligent Omission (Davies), (7) Unjust Enrichment (Davies), (8) Unfair Competition B&P §17200, (9) Declaratory Relief, and (10) Injunctive Relief.

The cross-complaint alleges that plaintiff Davies was an employee for Essential Care in 2/2011 and signed a Executive Confidentiality Agreement in which he agreed not to compete with Essential Care and maintain confidentiality of proprietary information. He was identified as in a confidential relationship of trust with Essential Care in the written agreement. (¶9-14)

At the same time, he was a franchisee.

Essential Care alleges that he breached their franchise agreement and the separate Executive Non-Compete Agreement inter alia by failing to pay royalties for his franchises, by operating franchises illegally in Los Angeles, by failing to return all confidential and proprietary data of Essential Care after Essential Care terminated its franchise agreements with him, continuing to use proprietary and confidential materials to establish competing businesses in Orange County and Los Angeles, in violation of their agreements.

It is also alleged, Davies was a partner in seven other Essential Care franchises with operations in Alabama, Connecticut, Florida, Idaho and other regions. He allegedly convinced Essential Care to reduce its franchise fees for these businesses, by misrepresenting to Essential Care his partners’ ability to pay the fee, while pocketing the difference for himself and having the partners pay the difference to him directly. As a result, Essential Care terminated those franchise agreements. (¶38-44)

Cross-D Davies now demurs to the 4th and 8th C/As.

4th – Breach of Implied Covenant of Good Faith & Fair Dealing

There are sufficient allegations in the Cross-Complaint to support this claim. There are a number of categories of wrongful conduct alleged which would support, essentially, bad faith, including: (1) that cross-Def. Davies was an employee of Essential Care, and signed a confidentiality and non-compete agreement that stated he was in a relationship of “confidence and trust” (¶9-11); (2) that he operated Essential Care franchises in Los Angeles County without any authorization, generated revenues from them, and did not pay Essential Care franchise fees or royalties (¶20); (3) after Essential Care terminated his franchise agreement for Orange County for alleged misconduct, cross-D Davies continued to provide caregiver services in Orange County in violation of a non-compete agreement (¶30); (4) separately, he allegedly negotiated reduced franchise fees for certain franchisees, by representing to Essential Care their inability to pay a full fee, and then he pocketed the difference, by having the franchisees pay the difference directly to him (¶ 38).

Viewing these allegations as a whole, they support a claim for breach of the implied covenant of GFFD.

8th – Unfair Competition, B&P §17200

The claim is plead in conclusory terms in the 8th cause of action and relies entirely on incorporation of 18 pages of previous allegations. At least, Essential Care specifies that it is proceeding under the “unfair” and “unlawful” prongs. (Cross-Compl. ¶138)

In Cel-Tech, the Supreme Court differentiated between claims for “unfair” acts brought by consumers vs. competing businesses. See also Bardin v. Daimlerchrysler Corp. (2006) 136 Cal.App.4th 1255, 1268. The Court established a stricter test where a competitor alleges “unfair” anticompetitive practices: “We thus adopt the following test: When a plaintiff who claims to have suffered injury from a direct competitor’s ‘unfair’ act or practice invokes section 17200, the word ‘unfair’ in that section means conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.” Cel-Tech Communications, Inc., 20 Cal.4th 163, 187 and n.12.

Does this strict test apply in the present case? On the one hand, Essential Care is not a “consumer” and it describes cross-D, Davies, as having opened competing businesses. But it is not purely a claim by a business against another independent competing business, for Essential Care also alleges that Davies was an employee and a franchisee owing a fiduciary relationship to it. That is not typical of a competitor.

It isn’t clear where the parties fall between the spectrum of consumer vs. competitor and courts have not delineated a test thus far. See, e.g., Drum v. San Fernando Valley Bar Ass’n (2010) 182 Cal.App.4th 247, 253-54; Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 939-40; Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 853.

There is some agreement that Cel-Tech “may signal a narrower interpretation of the prohibition of unfair acts … in all unfair competition actions …” Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 940 (citing Gregory, supra, 104 Cal.App.4th 845, 854).

“Moreover, where a claim of an unfair act or practice is predicated on public policy, we read Cel–Tech to require that the public policy which is a predicate to the action must be ‘tethered’ to specific constitutional, statutory or regulatory provisions.” Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 940. Is Essential Care’s claim predicated on a public policy? It is not clear.

The Court sustains the demurrers to the claim. The conduct on which the “unfair” claim is based is not well identified. Essential Care should describe the acts forming the basis of “unfair” competition within the cause of action.

Overrule demurrers to 4th cause of action.

Sustain demurrers to 8th cause of action with 10 days leave to amend.

3. Motion to Appear Pro Hac Vice 4. Motion to Appear Pro Hac Vice

The applications are not complete:

1) CRC 9.40(d)(2) requires them to state the dates of their admission in the courts to which they have been admitted to practice. Here, they provided only the year of admission.

2) CRC 9.40(e) requires them to serve the California State Bar with copies of the application papers, along with the required fee ($50). Here, there is no proof of service on the State Bar, or indication that the fee was paid for each person.

Deny both applications without prejudice.