Case No. 18CV327245
Ngo et al vs James Kim et al

Currently before the Court are: (1) the demurrer by plaintiffs and cross-defendants Dan Ngo (“Ngo”) and ATT Recycle, Inc. dba Leo Recycle (“ATT Recycle”) (collectively, “Cross-Defendants”) to the first amended cross-complaint (“FACC”) of cross-complainant Lam Hauling, Inc. (“Lam Hauling”); and (2) the motion by Cross-Defendants to strike portions of the FACC of Lam Hauling.

Factual and Procedural Background

This is an action for breach of contract, fraud, and unfair competition. Cross-Defendants filed the underlying second amended complaint (“SAC”) against Lam Hauling, defendant Tinh Lam, and defendant James T. Kim on July 20, 2018. On January 2, 2019, Lam Hauling filed the operative FACC against Cross-Defendants.

According to the allegations of the FACC, prior to August 19, 2016, Lam Hauling owned and operated Leo Recycle—a recycling and waste dumping business—at 215 Leo Avenue, San Jose, California (“Property”). (FACC, ¶¶ 8-9, 11.) Lam Hauling also conducted a dumpster rental and hauling business. (Id. at ¶ 11.)

Lam Hauling allegedly informed Ngo—the director and manager of ATT Recycle—that “it intended to sell only the recycling and waste dumping portion of [its] business known as Leo Recycle to Cross-Defendants.” (FACC, ¶ 13.) Lam Hauling also informed Cross-Defendants that it intended to continue operation of its dumpster rental and hauling business. (Ibid.) “During the negotiations between [Lam Hauling] and [Ngo] for the sale of Leo Recycle, … Ngo, personally and as agent of ATT Recycle, agreed, promised and made specific representations to [Lam Hauling] that Cross-Defendants would not perform any dumpster rental or waste hauling, other than for 100% wood and green waste material, after the purchase/sale of Leo Recycle, Inc. [Thus], Cross-Defendants agreed to not perform the same type of business as the remaining division of Lam Hauling.” (Id. at ¶ 14.)

“The parties’ agreement and intent that Cross-Defendants would not perform dumpster rental or waste hauling, other than for 100% wood and green waste material only, after the purchase/sale of Leo Recycle, was … documented in a Letter of Intent [(‘LOI’)] executed by [Lam Hauling and] … Ngo on July 26, 2016.” (FACC, ¶ 16 & Ex. 2.) The LOI allegedly “states that ‘This is not a proposal to sell Lam Hauling, Inc. itself or Lam Hauling, Inc’s entire business, but a sale of certain assets belonging to Leo Recycle (DBA) only.’ ” (Ibid.)
On August 19, 2016, in reliance on Cross-Defendants’ alleged promise “not to perform the same dumpster rental and hauling business” as Lam Hauling, Lam Hauling entered into an Asset Purchase Agreement with Ngo. (FACC, ¶¶ 7, 9, 15, & 20, & Ex. 1.) Under the terms of the Asset Purchase Agreement, Lam Hauling sold its recycling and waste dumping business to Ngo. (Ibid.) Lam Hauling allegedly agreed to the sale “on the condition that [Ngo] promise[d] not to engage in a competing rental or hauling business.” (Id. at ¶ 11.) “The parties’ intent and oral agreement that Cross-Defendants …, or any affiliate of Cross-Defendants, direct or indirect, would not perform dumpster rental or waste hauling, other than for 100% wood and green waste material only, after the purchase/sale of Leo Recycle, was … documented in the … Asset Purchase Agreement at Section 5.06 (a) which in part states ‘Buyer acknowledges that Lam Hauling, Inc. is in the business of renting dumpsters, providing hauling services, renting portable toilet, and temporary fence … . Buyer is only allowed to rent dumpster for 100% wood and green waste material only. Buyer is not allowed to rent dumpsters for mixed materials such as C&D, sheetrock, dirt, concrete, bricks, rocks, inert, furniture, residential debris and etc…’ .” (Id. at ¶ 17.)

As part of the Asset Purchase Agreement, Lam Hauling also agreed to sublease the Property to Ngo “for the purpose of continuing the operation of Leo Recycle’s recycling and waste facility.” (FACC, ¶ 12.)

Under the terms of the Asset Purchase Agreement, Cross-Defendants further agreed to allow Lam Hauling “to have priority in dumping at the [Property], including dumping after hours, and agreed to a discounted price rate for the dumping of Construction & Demolition waste, in an unlimited tonnage amount.” (FACC, ¶ 24.)

Finally, the Asset Purchase Agreement prohibited “assignment of rights or obligations under the agreement without the prior written consent of the other party.” (FACC, ¶ 27.)

Pursuant to the terms of the Asset Purchase Agreement, Lam Hauling accepted payment of $4,500,000; vacated the Property; turned over proprietary customer lists and contacts to Cross-Defendants; turned over other physical and intangible assets to Cross-Defendants; ceased business as Leo Recycle; and stopped conducting the recycling and waste dumping business at the Property. (FACC, ¶ 15.) Lam Hauling would not have sold its recycling and waste dumping business to Ngo “and would not have agreed to lease the [Property], if it had known [Ngo] intended to also perform dumpster rental and/or hauling himself or through his employer, ATT Recycle, or any other company directly or indirectly affiliated with him.” (Id. at ¶¶ 11 & 21-22.)

In or around September 2017, Lam Hauling allegedly discovered that Cross-Defendants “breached their agreement … not to perform dumpster rental or waste hauling, other than for 100% wood and green waste material, and was conducting the prohibited business operations of renting dumpsters for mixed materials and providing hauling services, directly or through affiliates of Cross-Defendants.” (FACC, ¶ 18.) Additionally, Lam Hauling allegedly discovered that Cross-Defendants “purposefully lowered their pricing below market for the rental of dumpsters for mixed materials and hauling services, and specifically targeted known customers of [Lam Hauling] to draw those customers away from Lam Hauling … and to Cross-Defendants.” (Id. at ¶ 19.) Moreover, Cross-Defendants failed to “give priority in dumping to Lam Hauling … and have not applied the discounted price rate to [Lam Hauling].” (Id. at ¶ 25.) Lastly, “Ngo wrongfully assigned his interests and obligations under the Asset Purchase Agreement, including under the sublease agreement and purchase payment plan, to … ATT Recycle, without the prior written consent of … Lam Hauling.” (Id. at ¶ 28.)

As a result of Cross-Defendants’ conduct, Lam Hauling lost customers and profits, over paid dumping fees, and had its ability to obtain new customers disrupted. (FACC, ¶¶ 23 & 25.)

Based on the foregoing allegations, Lam Hauling alleges causes of action for: (1) breach of written contract; (2) breach of implied covenant of good faith and fair dealing; (3) breach of oral contract; (4) promissory estoppel; (5) fraud – false promise; (6) fraud – intentional misrepresentation; (7) tortious interference with prospective economic relations; and (8) unfair competition in violation of Business & Professions Code section 17200, et seq. (“UCL”).

On February 5, 2019, Cross-Defendants filed the instant demurrer and motion to strike. Lam Hauling filed papers in opposition to the matters on March 13, 2019. On March 18, 2019, Cross-Defendants filed a reply.

Discussion

I. Cross-Defendants’ Request for Judicial Notice

With their moving papers, Cross-Defendants ask the Court to take judicial notice of the following documents in connection with their demurrer and motion to strike: (1) an inspection notice issued by the City of San Jose; (2) the Asset Purchase Agreement; and (3) the SAC. With their reply papers, Cross-Defendants as the Court to take judicial notice of their original cross-complaint in connection with their demurrer and motion to strike.

In opposition, Lam Hauling objects to Cross-Defendants’ request for judicial notice of the inspection notice issued by the City of San Jose.

As a preliminary matter, the Court may properly take judicial notice of the Asset Purchase Agreement because the Asset Purchase Agreement is an exhibit to the FACC and relevant to material issues raised in connection with the instant demurrer and motion to strike. (See Evid. Code, § 452, subd. (d) [permitting judicial notice of court records]; see also Silverado Modjeska Recreation & Park Dist. v. County of Orange (2011) 197 Cal.App.4th 282, 307, fn. 18 (Silverado) [“ ‘There is … a precondition to the taking of judicial notice in either its mandatory or permissive form—any matter to be judicially noticed must be relevant to a material issue.’ [Citations.] We decline to take judicial notice of the items specified in categories 3 and 5 because those items are not relevant to our discussion or disposition of this matter. [Citation.]”]; Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447 [the reviewing court may take judicial notice of exhibits attached to the complaint].)

Similarly, the Court may properly take judicial notice of the cross-complaint because it is a court record relevant to material issues before the Court. (See Evid. Code, § 452, subd. (d) [permitting judicial notice of court records]; see also Silverado, supra, 197 Cal.App.4th at p. 307, fn. 18.)

Next, the Court declines to take judicial notice of the SAC. Cross-Defendants seek judicial notice of an allegation in their SAC, which provides that they “had to hire a consulting service company and spend about $500,000.00 to cure all of the violations in order to continue to operate Leo Recycle.” (Mtn. Strk. Mem. Ps. & As., p. 5:11-26.) But it would not be proper to judicially notice the truth of any statements of fact reflected in the SAC. (See People v. Woodell (1998) 17 Cal.4th 448, 455 [Evidence Code section 452, subdivision (d) permits the trial court to “take judicial notice of the existence of judicial opinions and court documents, along with the truth of the results reached—in the documents such as orders, statements of decision, and judgments—but [the court] cannot take judicial notice of the truth of hearsay statements in decisions or court files, including pleadings, affidavits, testimony, or statements of fact.”]; see also Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1564-1568 [court cannot take judicial notice of the truth of hearsay statements or facts set forth even in otherwise judicially noticeable documents]; Fremont Indem. Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 114 [“[t]he hearing on demurrer may not be turned into a contested evidentiary hearing through the guise of having the court take judicial notice of documents whose truthfulness or proper interpretation are disputable”].) Thus, Cross-Defendants’ request for judicial notice of the SAC is not well-taken.

Furthermore, the Court cannot properly take judicial notice of the inspection notice issued by the City of San Jose. Cross-Defendants contend that the Court should take judicial notice of the inspection notice because it demonstrates that “Leo Recycle was required to [cease and desist] use of the [Property] from operating as a recycling processing and transfer facility on or before August 28, 2016 unless they submitted a special use permit and submittal required documentation to the City of San Jose Planning Department on or before August 25, 2016.” (Mtn. Strk. Mem. Ps. & As., p. 5:5-26; Dem. Mem. Ps. & As., p. 11:2-8.) However, the inspection notice does not mention Lam Hauling, Cross-Defendants, the Property, or any amount due, owing, or paid by Cross-Defendants in order to operate the recycling and waste dumping business. Thus, Cross-Defendants have not established that the inspection notice is relevant to any material issue before the Court. (See Silverado, supra, 197 Cal.App.4th at p. 307, fn. 18.)

Accordingly, Cross-Defendants’ request for judicial notice is GRANTED IN PART and DENIED IN PART. The request is GRANTED as to the Asset Purchase Agreement and cross-complaint. The request is otherwise DENIED.

II. Meet and Confer

Lam Hauling argues that Cross-Defendants failed to adequately meet and confer.

Code of Civil Procedure sections 430.41 and 435.5 require a party bringing a demurrer or motion to strike to meet and confer with the party who filed the challenged pleading to seek informal resolution of any objections to the pleading. (Code Civ. Proc., §§ 430.41, subd. (a) & 435.5, subd. (a).) The meet and confer must be conducted in person or by telephone, and must address each cause of action, defense, or allegation at issue in the demurrer or motion to strike. (Code Civ. Proc., §§ 430.41, subd. (a)(1) & 435.5, subd. (a)(1).) If these efforts fail, the demurring or moving party must file and serve a declaration regarding the meet and confer process. (Code Civ. Proc., §§ 430.41, subd. (a)(3) & 435.5, subd. (a)(3).) While a court may not overrule a demurrer or deny a motion to strike for insufficient meet and confer efforts (see Code Civ. Proc., §§ 430.41, subd. (a)(4) & 435.5, subd. (a)(4)), it may continue the hearing and order the parties to meet and confer as required (see Assem. Com. on Judiciary, Rep. on Sen. Bill No. 383 (2015-2016 Reg. Sess.), p. 2).

Here, the declaration of Cross-Defendants’ counsel shows that the parties met and conferred regarding some perceived deficiencies in the original cross-complaint. (Tang Dec., ¶¶ 5-8.) However, Cross-Defendants did not meet and confer with Lam Hauling after the FACC was filed regarding perceived deficiencies in the FACC. (See Code Civ. Proc., § 430.41, subd. (a) [“If an amended complaint, cross-complaint, or answer is filed, the responding party shall meet and confer again with the party who filed the amended pleading before filing a demurrer to the amended pleading.”] & 435.5, subd. (a) [“If an amended pleading is filed, the responding party shall meet and confer again with the party who filed the amended pleading before filing a motion to strike the amended pleading.”].) Thus, Cross-Defendants failed to adequately meet and confer.

In the interest of moving the case forward, the Court will overlook—in this instance only—Cross-Defendants’ failure to adequately meet and confer. Cross-Defendants are admonished to comply with the Code of Civil Procedure going forward.

III. Demurrer

Cross-Defendants demur to the third through eighth causes of action of the FACC on the ground of failure to allege sufficient facts to constitute a cause of action. (See Ntc. Dem., p. 2:6-26; see also Code Civ. Proc., 430.10, subd. (e).)

A. Legal Standard

The function of a demurrer is to test the legal sufficiency of a pleading. (Trs. Of Capital Wholesale Elec. Etc. Fund v. Shearson Lehman Bros. (1990) 221 Cal.App.3d 617, 621.) Consequently, “ ‘[a] demurrer reaches only to the contents of the pleading and such matters as may be considered under the doctrine of judicial notice’ [citation].” (Hilltop Properties, Inc. v. State (1965) 233 Cal.App.2d 349, 353; see also Code Civ. Proc., § 430.30, subd. (a).) “ ‘It is not the ordinary function of a demurrer to test the truth of the … allegations [in the challenged pleading] or the accuracy with which [the plaintiff] describes the defendant’s conduct. … .’ [Citation.] Thus, … ‘the facts alleged in the pleading are deemed to be true, however improbable they may be. [Citation.]’ [Citations.]” (Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 958.)

B. Third Cause of Action

Cross-Defendants argue, among other things, that the third cause of action for breach of oral contract fails to allege sufficient facts to state a claim because Lam Hauling cannot “bring an action for a breach of an oral agreement … given that [s]ection 7.05 of the Agreement indicates that the written Agreement supersedes all prior and contemporaneous understandings and agreements.” (Dem. Mem. Ps. & As., p. 6:17-21.)

“ ‘The basic goal of contract interpretation is to give effect to the parties’ mutual intent at the time of contracting. [Citations.] When a contract is reduced to writing, the parties’ intention is determined from the writing alone, if possible. [Citation.]’ [Citation.] ‘The words of a contract are to be understood in their ordinary and popular sense … .’ [Citation.]” [Citation.]

Under state law, the terms of a final, integrated contract “may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement.” [Citation.] But a written instrument “may be explained or supplemented by evidence of consistent additional terms unless the writing is intended also as a complete and exclusive statement of the terms of the agreement.” [Citation.]

The court determines whether the parties intended the contract to be a final and complete expression of their agreement. [Citation.] “The crucial issue in determining whether there has been an integration is whether the parties intended their writing to serve as the exclusive embodiment of their agreement. The instrument itself may help to resolve that issue.” [Citation.]

The existence of an integration clause is a key factor in divining that intent. [Citation.] “This type of clause has been held conclusive on the issue of integration, so that parol evidence to show that the parties did not intend the writing to constitute the sole agreement will be excluded. [Citations.]” [Citation.]

(Grey v. American Management Services (2012) 204 Cal.App.4th 803, 806–807 (Grey).)

When an integration clause expressly states that the contract is the parties’ entire agreement regarding a particular matter and it supersedes all prior and contemporaneous agreements between the parties regarding the subject matter, the contract is the final expression of the parties’ agreement and supersedes all other prior or contemporaneous agreements regarding the subject matter. (See Grey, supra, 204 Cal.App.4th at pp. 806-809.)

Here, the Asset Purchase Agreement was entered into on August 19, 2016, and addresses the sale of Lam Hauling’s recycling and waste dumping business to Ngo, Ngo’s ability to rent and haul dumpsters, and the lease or sublease of the Property to Ngo. (FACC, ¶¶ 7, 9, 15, & 20, & Ex. 1.) Furthermore, section 7.05 of the Asset Purchase Agreement states, “This Agreement and the documents to be delivered hereunder constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter.” (Ibid.)

Construing the clause as a whole, the Court interprets it to mean the Asset Purchase Agreement is the final expression of the parties’ agreement with respect to the sale of Lam Hauling’s recycling and waste dumping business to Ngo, Ngo’s ability to rent and haul dumpsters, and the lease or sublease of the Property to Ngo, and the Asset Purchase Agreement supersedes all prior and contemporaneous agreements regarding that subject matter. (See Grey, supra, 204 Cal.App.4th at pp. 806-809.)

In the third cause of action, Lam Hauling alleges that it and “Ngo entered into an oral agreement and contract on or around the July-August 2016 time period, the material terms were substantially as follows: [it] would sell only the recycling and waste dumping portion of [its] business known as Leo Recycle to Cross-Defendants; Cross-Defendants would not rent dumpsters for mixed materials and provide hauling services, i.e., perform the same type of business [as it] after the sale; [it] would sublease the [Property] to Cross-Defendants; and in consideration for sale of Leo Recycle, Inc, [it] would receive payment of $4.5 million.” (FACC, ¶ 44.) Lam Hauling also confirms in its opposition papers that “the oral contract at issue occurred prior to the parties entering” the Asset Purchase Agreement. (Oppn., p. 5:26-27; see FACC, ¶¶ 13-17 [indicating that the alleged oral agreement was made before the parties executed the Asset Purchase Agreement].)

Because the alleged oral agreement was entered into prior to, or contemporaneous with, the Asset Purchase Agreement and involves the same subject matter, the alleged oral agreement is superseded by the Asset Purchase Agreement. (See Grey, supra, 204 Cal.App.4th at pp. 806-809.)

For these reasons, the demurrer to the third cause of action is SUSTAINED, with 10 days’ leave to amend.

C. Fourth Cause of Action

Cross-Defendants argue, among other things, that the fourth cause of action for promissory estoppel fails to state a claim because the allegations of the FAC reveal that the alleged promises were made with consideration.

“The elements of a cause of action for promissory estoppel are (1) a promise, (2) the reasonable expectation by the promisor that the promise will induce reliance or forbearance, (3) actual reliance or forbearance, and (4) the avoidance of injustice by enforcing the promise.” (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1412.) The very purpose of the equitable doctrine of promissory estoppel is to allow the enforcement of a promise that is not enforceable as a contract in order to prevent an unjust result. (Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc. (2012) 211 Cal.App.4th 230, 242 (Douglas).) When a promise is made without consideration, it may be enforced if the promisor reasonably expected the other party to act in reliance on the promise and if enforcement of the promise is the only means of avoiding injustice. (Ibid.) The fundamental distinction between a claim for breach of contract and promissory estoppel is consideration, not whether there is written proof of the promise in the form of a written lease or agreement. (Ibid.; see US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 904 [“[P]romissory estoppel claims are aimed solely at allowing recovery in equity where a contractual claim fails for a lack of consideration, and in all other respects the claim is akin to one for breach of contract.”].) If actual consideration was given by the promisee, promissory estoppel does not apply. (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1413.)

The fourth cause of action is based on Cross-Defendants’ alleged promises “to [Lam Hauling] that [they] would not engage in the rental of dumpsters for mixed materials and/or provide hauling services, directly or through affiliates of Cross-Defendants, after the purchase/sale of Leo Recycle” and “they would not conduct the same type of business operations as the remaining division of Lam Hauling, Inc., after the sale.” (FAC, ¶ 49.) Lam Hauling alleges that it entered into the Asset Purchase Agreement in reliance on Cross-Defendants’ alleged promises, and but for those promises it would not have agreed to sell its recycling and waste dumping business and lease the Property to Ngo. (Id. at ¶¶ 11-17.)

As Cross-Defendants persuasively argue, the allegations of the FACC establish that there was consideration for Cross-Defendants’ alleged promises. Lam Hauling expressly alleges that but for Cross-Defendants’ promises the Asset Purchase Agreement between the parties would not have been reached, i.e., it would not have agreed to sell its recycling and waste dumping business and lease the Property to Ngo. The exchange of mutual promises, such as the promise to refrain from engaging in a particular type of business in exchange for the promise to sell a business, constitutes consideration. (See Scottsdale Ins. Co. v. Essex Ins. Co. (2002) 98 Cal.App.4th 86, 94–95.) Since the allegations of the FACC demonstrate that Lam Hauling gave actual consideration, promissory estoppel does not apply.

Thus, the demurrer to the fourth cause of action is SUSTAINED, with 10 days’ leave to amend.

D. Fifth Cause of Action

Cross-Defendants argue that the fifth cause of action for fraud – false promise fails to allege sufficient facts to state a claim because Lam Hauling does not allege any facts showing that they did not intend to perform at the time they made the alleged promise.

Intent is an allegation of fact such that a general allegation is sufficient for pleading purposes. (Cf. 5 Witkin (2008) Cal. Proc. 5th Plead § 728 [“Intent, like knowledge, is a fact. Hence, the averment that the representation was made with the intent to deceive the plaintiff, or any other general allegation with similar purport, is sufficient.”]; see Quinn v. Reilly (1926) 198 Cal. 465, 468 [“Ultimate facts only need be pleaded. In the instant case the ultimate fact is the intention of the deceased. Any act or agreement between the parties would be, perhaps, proof of this ultimate fact, but they would not be the ultimate fact itself. In pleading the intention of the deceased, the appellant pleaded an ultimate fact which, if it can be established by competent evidence, will rebut the presumption that the 1921 transaction was in the nature of a gift, advancement, or bounty. The appellant was not obliged to embody his proof, whatever it may amount to, in the allegations of his complaint.”]; see also McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1469-1470 [“Under California law, “[t]he rules of pleading require, with limited exceptions not applicable here, only general allegations of ultimate fact. [Citations.] The plaintiff need not plead evidentiary facts supporting the allegation of ultimate fact. [Citation.]”].)

In the fifth cause of action, Lam Hauling expressly alleges that “Cross-Defendants’ promise was intended to induce [Lam Hauling] to rely upon it and to act or refrain from acting in reliance upon it, and at the time it was made, Cross-Defendants did not intend to perform it, but intended to defraud [Lam Hauling].” (FACC, ¶ 54, italics added.) This allegation is sufficient to establish intent for pleading purposes.

Accordingly, the demurrer to the fifth cause of action is OVERRULED.

E. Sixth Cause of Action

Cross-Defendants argue that the sixth cause of action for fraud – intentional misrepresentation fails to allege sufficient facts to state a claim because Lam Hauling “fails to plead facts … to suggest that [their] representation that they would not compete was false when it was made.” (Dem. Mem. Ps. & As., p. 9:9-10.)

The elements of intentional misrepresentation are: “(1) the defendant made a false representation as to a past or existing material fact; (2) the defendant knew the representation was false at the time it was made; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably relied on the representation; and (5) the plaintiff suffered resulting damages.” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792.)

In the sixth cause of action, Lam Hauling alleges that “Cross-Defendants represented to [it] that [they] would not engage in the rental of dumpsters for mixed materials and/or provide hauling services after the purchase/sale of Leo
Recycle” and their “representation was false and Cross-Defendants knew their representations were false as their true intention was to engage in the same type of business as Lam Hauling, Inc., after securing the purchase of Leo Recycle and the sublease of the [Property].” (FACC, ¶¶ 61-62.) Lam Hauling further alleges that it first discovered that Cross-Defendants were not performing in accordance with their alleged promises in September 2017. (Id. at ¶¶ 18-19.)

These conclusory allegations that Cross-Defendants’ representation was false and Cross-Defendants knew the representation was false do not demonstrate that the alleged representation was false when it was made. (See Davis v. Rite-Lite Sales Co. (1937) 8 Cal.2d 675, 680 [demurrer to fraud claim was well-taken, in part, because there was no allegation that the alleged representation was false when made].)

Consequently, the demurrer to the sixth cause of action is SUSTAINED, with 10 days’ leave to amend.

F. Seventh Cause of Action

Cross-Defendants argue that the seventh cause of action for tortious interference with prospective economic relations fails to state a claim because an essential element of the claim is the existence of a contract between Lam Hauling and a “named third party”; Lam Hauling must state facts to suggest that they knew of the contract; Lam Hauling does not provide the identities of the clients or businesses that it allegedly had commercial relationships with; and “unless [they] can identify each and every client and/or business that [they] allegedly interfered with, [Lam Hauling] has failed to state sufficient facts to suggest that [they] knew of the contractual or business relationship interfered with … .” (Dem. Mem. Ps. & As., pp. 9:23-10:7.)

As an initial matter, the claim, as alleged, appears to be one for intentional interference with prospective economic advantage as opposed to one for intentional interference with contractual relations.

The elements for the tort of intentional interference with prospective economic advantage “are usually stated as follows: (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.)

Because the existence or knowledge of a contract is not an element of a claim for intentional interference with prospective economic advantage, Cross-Defendants’ arguments regarding the absence of allegations relating to the existence or knowledge of third-party contracts lack merit.

Furthermore, Lam Hauling identified with some degree of particularity the identity of the other parties to the economic relationships that were purportedly interfered with. Specifically, Lam Hauling alleges that it had “established commercial relationships with numerous clients and businesses that utilized [its] dumpster rental and hauling services” and Cross-Defendants interfered with Lam Hauling’s relationships with those customers. (FACC, ¶¶ 69-72.) Cross-Defendants cite no legal authority, and the Court is aware of none, providing that Lam Hauling must allege the identity of the third party, or parties, with whom it had an economic relationship with greater specificity in order to adequately plead a claim for intentional interference with prospective economic advantage. (See Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785 [“When [a party] fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived.”]; see also Schaeffer Land Trust v. San Jose City Council (1989) 215 Cal.App.3d 612, 619, fn. 2 [“[A] point which is merely suggested by a party’s counsel, with no supporting argument or authority, is deemed to be without foundation and requires no discussion.”].)

For these reasons, the demurrer to the seventh cause of action is OVERRULED.

G. Eighth Cause of Action

Cross-Defendants argue that the eighth cause of action for unfair competition in violation of the UCL fails to state a claim because Lam Hauling does not allege facts showing that their alleged actions were unfair.

“The UCL prohibits, and provides civil remedies for, unfair competition, which it defines as ‘any unlawful, unfair or fraudulent business act or practice.’ Its purpose ‘is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.’ ” (Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, 320, citations omitted.) “Because … section 17200 is written in the disjunctive, it establishes three varieties of unfair competition-acts or practices which are unlawful, or unfair, or fraudulent. In other words, a practice is prohibited as unfair or deceptive even if not unlawful and vice versa.” (Puentes v. Wells Fargo Home Mortgage, Inc. (2008) 160 Cal.App.4th 638, 644, citations and quotations marks omitted.)

Here, the eighth cause of action is predicated on Cross-Defendants’ purportedly unfair, unlawful, and fraudulent business practices. 9(FACC, ¶¶ 77-80.) However, Cross-Defendants’ argument on demurrer only addresses the unfair prong of the UCL. Consequently, Cross-Defendants’ argument does not dispose of the claim in its entirety and their demurrer to the claim is not well-taken. (See PHII, Inc. v. Super. Ct. (1995) 33 Cal.App.4th 1680, 1682 [a demurrer does not lie to only a portion of a claim].)

Therefore, the demurrer to the eighth cause of action is OVERRULED.

IV. Motion to Strike

Cross-Defendants move to strike: (1) Lam Hauling’s request for exemplary and punitive damages on the ground that Lam Hauling does not allege sufficient facts to establish that they acted with malice, oppression, or fraud; and (2) paragraphs 28, 34, and 41 of the FACC on the ground that the allegations therein are false.

A. Legal Standard

Under Code of Civil Procedure section 436, a court may strike out any irrelevant, false, or improper matter inserted into any pleading or strike out all or part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Code Civ. Proc., § 436.) The grounds for a motion to strike must appear on the face of the challenged pleading or from matters of which the court may take judicial notice. (Code Civ. Proc., § 437, subd. (a).) In ruling on a motion to strike, the court reads the pleading as a whole, all parts in their context, and assuming the truth of all well-pleaded allegations. (See Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 63 (Turman), citing Clauson v. Super. Ct. (1998) 67 Cal.App.4th 1253, 1255.)

B. Request for Exemplary and Punitive Damages

Cross-Defendants argue that the Court should strike Lam Hauling’s request for exemplary and punitive damages because Lam Hauling does not allege sufficient facts establishing that they acted with malice, oppression, or fraud.

For the reasons stated above in connection with Cross-Defendants’ demurrer, Cross-Defendants’ demurrer to the fifth cause of action for fraud – false promise is not well-taken. Because the fraud claim survives Cross-Defendants’ demurrer, it may properly form the basis for Lam Hauling’s request for punitive damages. (See Stevens v. Super. Ct. (1986) 180 Cal.App.3d 605, 610 [stating that a properly pleaded fraud claim will by itself support the recovery of punitive damages].)

The Court need not address Cross-Defendants’ remaining argument regarding the adequacy of the allegations regarding malice and oppression because the fraud claim, alone, supports the request for punitive damages.

Accordingly, the motion to strike the request for exemplary and punitive damages is DENIED.

C. Paragraphs 28, 34, and 41 of the FACC

Cross-Defendants argue that the Court should strike paragraphs 28, 34, and 41 of the FACC because the allegations therein are false. Specifically, Cross-Defendants assert that the allegations in those paragraphs are false because Ngo never assigned his rights or obligations under the Asset Purchase Agreement.

Cross-Defendants’ argument is not well-taken. First, their assertion that the subject allegations are false is wholly unsupported. Cross-Defendants do not cite any allegations in the FACC or judicially noticed materials demonstrating that the subject allegations are false. Second, Cross-Defendants’ assertion that the allegations are false cannot be properly considered because the Court must assume the truth of the allegations on a motion to strike. (See Turman, supra, 191 Cal.App.4th at p. 63.)

Thus, the motion to strike paragraphs 28, 34, and 41 of the FACC is DENIED.

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