Moving Party: Defendants Emporio Ferrarini LLC; Ferrarini Gourmet Emporio LLC; Ferrarini USA Inc.; Ferrarini Food Inc.; and Grant Linebach (“defendants”)

Resp. Party: Plaintiffs Enrico Soltani and ItalGourmet (“plaintiffs”)

Defendants’ demurrer to the FAC is SUSTAINED, with leave to amend.

The motion to strike is MOOT.

BACKGROUND:

Plaintiff commenced this action on 10/25/13. On 11/14/13, plaintiff filed a first amended complaint against defendants for: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; and (3) intentional interference of prospective economic advantage.

Plaintiff Soltani, the president of plaintiff ItalGourmet, has been in the business of the sale and distribution of food products since 1988. (FAC ¶ 9.) In April 2010, plaintiffs and defendant Ferrarini Gourmet Emporio entered into a written agreement for the acquisition of ItalGourmet’s inventory and for services of Soltani. (Id., ¶ 10.) Pursuant to this agreement, Ferrarini would purchase the inventory for $100,000.00 and would pay plaintiff a commission rate based on annual net sales as well as bonuses. (Id., ¶ 12.) After signing the agreement, the parties verbally agreed that defendants would pay plaintiffs $500,000.00 in monthly payments over the course of five years as renumeration for the goodwill that plaintiffs had built with the client base brought to Ferrarini. (Id., ¶ 13.) The payments would be made so long as Soltani netted annual sales of $ 5 million or more. (Ibid.) Plaintiff alleges that defendants made these payments, but failed to pay plaintiff’s commissions for sales transactions. (Id., ¶¶ 13-14.) Plaintiff alleges that defendants have engaged in deliberate conduct in an effort to discredit Soltani’s professional reputation and to make performance of plaintiffs’ duties more difficult. (Id., ¶¶ 15-17.) In November 2013, plaintiffs were informed that they were no longer working with defendants and defendants unilaterally terminated the agreement. (Id., ¶ 18.)

ANALYSIS:

Demurrer

Defendants demur to the FAC and the three causes of action contained therein on the grounds that the FAC fails to allege sufficient facts, that it cannot be determined whether the purported contract was written or oral, and that the FAC is uncertain.

Whether the contract is written or oral

A demurrer may be sustained in a contract action where “it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct.” (Code Civ. Proc., § 430.10(g).) This is not the case with the FAC. Plaintiffs allege that they entered into a written agreement with Ferrarini Gourmet Emporio, and that the parties entered into a subsequent verbal agreement. (See FAC ¶¶ 10, 13.)

Statute of frauds

Defendants argue that the purported oral agreement violates the statute of frauds. “The following contracts are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party’s agent . . . An agreement that by its terms is not to be performed within a year from the making thereof.” (Civ. Code, § 1624(a)(1).) Plaintiffs allege that the oral agreement, by its terms, would not be performed within one year because the purported payments would occur over the course of five years. (See FAC ¶ 13.) However, plaintiffs also allege that defendants performed under the oral agreement. (See ibid.) The statute of frauds is inapplicable where the party seeking to enforce the contract has fully performed. “Where … there has been full performance upon the part of the party seeking to enforce the contract, the doctrine of estoppel arises, and when it does arise no writing is required because the courts will not permit a litigant to use the statute of frauds as an instrument with which to perpetrate fraud or oppression.” (Marr v. Postal Union Life Ins. Co. (1940) 40 Cal.App.2d 673, 679. See also Raedeke v. Gibraltar Sav. & Loan Assoc. (1974) 10 Cal.3d 665, 673.)

Allegations Against Defendants Ferrarini USA Inc., Ferrarini Food Inc., and Emporio Ferrarini

Defendants argue that the causes of action against these defendants fail because they were not parties to the alleged agreement. Plaintiffs allege that they entered into the written agreement with Ferrarini Gourmet Emporio LLC. (See FAC ¶ 11.) Plaintiffs argue that these defendants are liable under the alter ego theory of liability. “Under the alter ego doctrine . . . when the corporate form is used to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts will ignore the corporate entity and deem the corporation’s acts to be those of the persons or organizations actually controlling the corporation, in most instances the equitable owners.” (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538.) There are two elements to an alter ego claim: (1) a unity of interest and ownership between the corporation and its owner such that the separate personalities of the corporation and the shareholder do not in reality exist; and (2) an inequitable result if the alleged acts are treated as solely those of the corporation. (Ibid.)

Among the factors that may be considered in order to apply the alter ego doctrine include, but are not limited to:

“[1] [c]ommingling of funds and other assets, failure to segregate funds of the separate entities, and the unauthorized diversion of corporate funds or assets to other than corporate uses; [2] the treatment by an individual of the assets of the corporation as his own; [3] the failure to obtain authority to issue stock or to subscribe to or issue the same; [4] the holding out by an individual that he is personally liable for the debts of the corporation; the failure to maintain minutes or adequate corporate records, and the confusion of the records of the separate entities; [5] the identical equitable ownership in the two entities; the identification of the equitable owners thereof with the domination and control of the two entities; identification of the directors and officers of the two entities in the responsible supervision and management; sole ownership of all of the stock in a corporation by one individual or the members of a family; [6] the use of the same office or business location; the employment of the same employees and/or attorney; [7] the failure to adequately capitalize a corporation; the total absence of corporate assets, and undercapitalization; [8] the use of a corporation as a mere shell, instrumentality or conduit for a single venture or the business of an individual or another corporation; [9] the concealment and misrepresentation of the identity of the responsible ownership, management and financial interest, or concealment of personal business activities; [10] the disregard of legal formalities and the failure to maintain arm’s length relationships among related entities; [11] the use of the corporate entity to procure labor, services or merchandise for another person or entity; [12] the diversion of assets from a corporation by or to a stockholder or other person or entity, to the detriment of creditors, or the manipulation of assets and liabilities between entities so as to concentrate the assets in one and the liabilities in another; [13] the contracting with another with intent to avoid performance by use of a corporate entity as a shield against personal liability, or the use of a corporation as a subterfuge of illegal transactions; [14] and the formation and use of a corporation to transfer to it the existing liability of another person or entity.” [Citation.]

(Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft, LLP (1999) 69 Cal.App.4th 223, 249-250.) Importantly, “no single factor is determinative” and whether the alter ego doctrine applies is a question of fact. (Leek v. Cooper (2011) 194 Cal.App.4th 399, 418 [citing Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 811, 812].)

Plaintiffs sufficiently allege alter ego liability. Plaintiffs allege that “Ferrarini Gourmet Emporio was a single-purpose entity solely created for purposes of doing business with plaintiffs, as evidenced by its dissolution. Furthermore, plaintiffs had dealings with each of the Ferrarini Defendants with respect to performance the agreement in one shape or form. For example, Ferrarini Food, Inc. issued commission checks to plaintiffs, yet invoices were asked to be sent to Ferrarini USA.” (FAC, ¶ 11.)

Also relevant to the Court’s determination is the fact that Ferrarini Gourmet Emporio, Ferrarini USA, Inc. and Ferrarini Food, Inc. have all cross-complained against plaintiffs for Breach of Contract. It appears that defendants themselves believe that these three defendants were all parties to the contract with plaintiffs.

First Cause of Action for Breach of Contract and Second Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing

Defendants demur to these causes of action on the grounds that plaintiffs fail to allege sufficient facts and because the causes of action are uncertain.

Defendants’ demurrer to the first cause of action on the ground of uncertainty is well taken because it is not clear which agreement has been breached. Plaintiffs allege that they entered into a written agreement with Ferrarini Gourmet Emporio in April 2010 wherein Ferrarini Gourmet Emporio agreed that Soltani would be paid a certain commission based on annual net sales. (FAC ¶¶ 10, 12.) Plaintiffs also allege that defendants entered into an oral agreement wherein it was agreed that plaintiffs would receive monthly payments so long as Soltani net annual sales of $ 5 million or more. (Id., ¶ 13.) Plaintiffs allege that Ferrarini Gourmet Emporio breached an agreement by failing to pay the commission pursuant to the schedule as indicated in the agreement. (Id., ¶¶ 14, 21.) However, plaintiffs also allege that their orders did not drop below $ 5 million. (Id., ¶ 21.) Therefore, it is unclear if plaintiffs are alleging that the failure to pay the commissions breached the written agreement because defendants did not comply with the commission schedules, or if it breached the oral agreement regarding payments to be made so long as plaintiffs’ sales did not fall below $ 5 million. Therefore, the first cause of action is uncertain because it cannot be determined upon which alleged agreement the first cause of action is based. The second cause of action is likewise uncertain because a claim for breach of the implied covenant of good faith and fair dealing requires an existing contract, and it cannot be determined upon which contract the second cause of action is based. (See Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1032.)

Accordingly, the demurrer to the first and second causes of action is SUSTAINED with leave to amend.

Third cause of action for intentional interference with prospective advantage

The essential elements of a claim for intentional interference with prospective advantage are: “(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.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153 [internal quotes omitted].) To satisfy the third element, an act must be “wrongful apart from the interference itself” or “independently wrongful.” (See id. at 1154, 1158-1159.)

Plaintiffs fail to sufficiently allege that defendants engaged in independently wrongful acts to disrupt an economic relationship with Il Fornaio. The facts alleged in the FAC appear to indicate that Il Fornaio was a customer of defendants after plaintiffs agreed to sell ItalGourmet’s customer lists to defendants. (See FAC ¶¶ 10, 41-41 [Il Fornaio placed orders with defendants through plaintiffs], Exh. A, ¶ 1.) It appears that the economic advantage that was disrupted was defendants’ payment of commissions to plaintiffs, and not direct economic benefits from Il Fornaio to plaintiffs. (See id., ¶¶ 39, 42-44.) Indeed, plaintiffs appear to concede in their opposition that the allegations as to this cause of action are not sufficient. (See Opp., pp. 8-9.)

Accordingly, defendants’ demurrer to the third cause of action is SUSTAINED with leave to amend.

Motion to strike

The motion to strike is MOOT because the Court sustains defendants’ demurrer to the causes of action in the FAC.

Plaintiffs have 20 days to file a Second Amended Complaint.