Somasoft Solutions, Inc. v. DRS Management, Inc

Defendant Ab Ovo, Inc. (“Ab Ovo”) demurs to the first amended complaint (“FAC”) filed by plaintiff Somasoft Solutions, Inc. (“Plaintiff”).

On December 13, 2012, Plaintiff entered into a written Professional Services Master Service Agreement with defendant DSR Management, Inc. (“DSR”) (the “Professional Services Agreement”) pursuant to which DSR agreed to provide to Plaintiff the consulting services of defendant Yogesh Pawar (“Yogesh”). (FAC at ¶ 9 and Exhibit 1.) As a condition of the Professional Services Agreement, Yogesh signed a non-compete, non-solicitation and confidentiality agreement. (Id. at ¶ 10 and Exhibit 1 (attached to the Agreement as Exhibit B).)

On January 2, 2012, Ab Ovo entered into a Master Consulting Agreement with Plaintiff (“Master Consulting Agreement”) pursuant to which Plaintiff would furnish programming consulting services to defendant McAfee, Inc. (“McAfee”), a client of Ab Ovo, for one year. (FAC at ¶ 11.) In short, DSR provided Yogesh to Plaintiff, who then provided the services of Yogesh to McAfee through Ab Ovo. (Id.) DSR was to send Yogesh’s timeslips from McAfee to Plaintiff so that Plaintiff in turn could produce invoices to Ab Ovo for payment of the services provided by Yogesh to McAfee. (Id. and Exhibit 2.)

On June 26, 2012, Plaintiff discovered a discrepancy in the hourly rate paid by Ab Ovo; consequently, Plaintiff sent invoices to Ab Ovo requesting payment of the difference. (FAC at ¶ 12.) Ab Ovo has refused to pay Plaintiff the foregoing amounts. (Id.)

Plaintiff further alleges, on information and belief, that it recently discovered that DSR directly contracted with Ab Ovo and conspired with it to eliminate Plaintiff from the chain providing Yogesh’s services to McAfee. (FAC at ¶ 13.) This directly violates the Master Consulting Agreement, which provides that during the duration of the agreement and one year after its termination, Ab Ovo may not solicit Plaintiff’s employees. (Id.) Ab Ovo continued to employ Yogesh through DSR without informing Plaintiff or compensating them for such services. (Id.)

On January 6, 2014, Plaintiff filed the FAC asserting the following causes of action: (1) Breach of Contract; (2) Contractual Breach of Implied Covenant of Good Faith and Fair Dealing; (3) Intentional Interference with Contractual Relations; (4) Intentional Interference with Prospective Economic Advantage; (5) Unjust Enrichment; (6) Violation of Business & Professions Code § 17200; and (7) Fraud.

On February 6, 2014, Ab Ovo filed the instant demurrer to each of the seven causes of action asserted in the FAC on the ground that they fail to state facts sufficient to constitute a cause of action and to the fifth and seventh causes of action on the ground of uncertainty. (Code Civ. Proc., § 430.10, subds. (e) and (f).)

Ab Ovo’s demurrer to the fifth and seventh causes of action on the ground of uncertainty is OVERRULED. A demurrer for uncertainty is disfavored and will be sustained only where the allegations of the complaint are so unintelligible that the defendant cannot respond to them. (See khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Ab Ovo does not articulate how Plaintiff’s claims for unjust enrichment and fraud are uncertain (see Coons v. Thompson (1946) 75 Cal.App.2d 687, 690 [failure to specify uncertain aspects of complaint will defeat demurrer based on the grounds of uncertainty]) and the allegations which comprise those causes of action are not “unintelligible.”

In demurring to the seven causes of action asserted in the FAC on the grounds of failure to state facts sufficient to constitute a cause of action, Ab Ovo asserts that Plaintiff’s claims are time-barred pursuant to the statute of limitations provided in the Master Consulting Agreement. Specifically, the agreement provides that:

Either party may bring no action, regardless of form, arising out of the services under this Agreement, more than one year after the cause of action has accrued.

(FAC, Exhibit 2 at ¶ 8.)

Ab Ovo is correct that where “reasonable” in length, California courts have enforced contractual statutes of limitations (see e.g., C & H Foods, Co. v. Hartford Ins. Co. (1984) 163 Cal.App.3d 1055, 1064) and that based on the allegations of the FAC it is clear that Plaintiff was aware in of a breach of the Master Consulting Agreement in June 2012 based on Ab Ovo’s refusal to pay amounts owed for the services provided by Yogesh. The instant action was first filed on November 1, 2013. However, Plaintiff’s claims, excluding the breach of contract claim, are predicated on more than just the foregoing; Plaintiff also alleges that it only recently learned that Ab Ovo conspired with DSR to eliminate Plaintiff from the arrangement which provided Yogesh’s services to McAfee and that Ab Ovo continued to employ Yogesh through DSR in the year after the Master Consulting Agreement’s termination despite its obligation not to do so. Based on the foregoing, it does not appear “clearly and affirmatively” from the FAC that the statute of limitations has necessarily run on all of Plaintiff’s claims. (See Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403 [demurrer based on statute of limitations will not be sustained unless the running of the statute appears “clearly and affirmatively” from the dates alleged; it is not enough that the complaint might be barred].)

The breach of contract claim is predicated only on the events comprising the initial breach in June 2012; consequently, the statute of limitations argument with respect to this claim is persuasive.

Ab Ovo also asserts that Plaintiff’s fraud claim is defective because it has not been pleaded with the requisite specificity. This assertion is well-taken. The elements of fraud are (1) misrepresentation (false representation, concealment, or nondisclosure), (2) knowledge of falsity (or scienter), (3) intent to defraud, i.e., to induce reliance, (4) justifiable reliance, and (5) resulting damage. (See Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) It is well-settled that fraud claims must be pleaded with particularity; this necessitates pleading facts showing how, when, where, to whom and by what means the alleged misrepresentations were tendered. (Id. at 645.) Moreover, in actions for fraud against a corporation, a plaintiff must allege the names of the persons who made the misrepresentations and their authority to speak for the corporation. (Id.; see also Tarmann v. State Farm Mut. Auto Ins. Co. (1991) 2 Cal.App.4th 153, 157.)] The allegations of the seventh cause of action fail to conform to the foregoing requirements, as Plaintiff has failed to plead what specific misrepresentations were made to it, when, by what means and by whom.

In accordance with the foregoing, Ab Ovo’s demurrer on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND as to the first (Breach of Contract) and seventh (Fraud) causes of action and OVERRULED as to the second (Contractual Breach of Implied Covenant of Good Faith and Fair Dealing), third (Intentional Interference with Contractual Relations), fourth (Intentional Interference with Prospective Economic Advantage), fifth (Unjust Enrichment) and sixth (Violation of Bus. & Prof. Code § 17200) causes of action.

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