2012-00133750-CU-NP

Phyllis Calibo vs. Incline Energy

Nature of Proceeding: Hearing on Demurrer to Cross-Complaint

Filed By: Callaham, William C.

Cross-Defendants Phyllis Calibo (“Calibo”), Karen Seiler (“Seiler”), and Wilcoxen
Callaham, LLP (“Wilcoxen”) (collectively, “Cross-Defendants”) demur to Cross-
Complainant Incline Energy LLC’s (“Incline”) Cross-Complaint and move to strike the
Cross-Complaint’s prayer for punitive damages. Incline opposed both motions. Cross
-Defendants’ demurrer is OVERRULED in its entirety. Cross-Defendants’ motion to
strike is DENIED. In its Cross-Complaint Incline alleges that Wilcoxen and Huber, California law firms,
fraudulently induced Incline to purchase a contingent share of the potential “proceeds”
in a civil lawsuit for $46,350. (Cross Compl. ¶¶ 4-5, 29-37, 53a.) That civil lawsuit (the
alleged “Underlying Litigation”) was a case brought by Calibo and Seiler against
Stephanie Ann Veteran, et al., wherein Huber was the attorney for Calibo and Seiler. (
Id. ¶¶ 8-10.) Incline alleges that Huber fraudulently induced Incline to enter into a
Purchase Agreement by representing that, if Calibo and Seiler won the Underlying
Litigation, he would pay Incline not only its “purchase” price but also additional
“proceeds” from the funds his clients recovered in that lawsuit. (Id. ¶¶ 10, 31-35.)
Incline alleges that the Underlying Lawsuit settled and that Calibo and Seiler received
funds in connection with the settlement, but that Incline never received its share of the
“proceeds” under the Purchase Agreement. (Id. ¶ 12.) Incline also alleges that
Wilcoxen and/or Huber converted Incline’s money by wrongfully withholding it or
wrongfully distributing it to Seiler and Calibo. (Id. ¶¶ 46-51, 53b.)

Demurrer
A demurrer challenges only the legal sufficiency of a complaint, not the truth or the
accuracy of its factual allegations or the plaintiff’s ability to prove those allegations. (
Ball v. GTE Mobilnet of California (2000) 81 Cal.App.4th 529, 534-35.)

Incline’s Cross-Complaint includes causes of action for declaratory relief, breach of
written contract, unjust enrichment, fraud, negligent misrepresentation, conversion,
and violation of Business and Professions Code § 17200. Cross-Defendants’
demurrer challenges the sufficiency of the Section 17200 cause of action only.

Cross-Defendants demur generally to the cause of action for violation of Business &
Professions Code § 17200 (“Section 17200”) on grounds that it fails to state facts
sufficient to constitute a cause of action under Code of Civil Procedure § 430.10(e).
Cross-Defendants argue that Incline’s pleading fails to “identify a specific violation of
California law, or an unfair or fraudulent practice subject to implicating Business &
Professions Code § 17200.” (Cross-Defs.’ Ps & As at 3.) Cross-Defendants argue
that a Section 17200 claim cannot be supported by allegations of common law fraud,
yet they do not cite any supporting authorities suggesting that, as a matter of law, the
tort of fraud cannot serve as the alleged “unfair or fraudulent practice” underlying a
Section 17200 claim. (Id. at 4-5.) Indeed, courts have held otherwise. (See, e.g.,
Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 253 (“Based on our
analysis of plaintiffs’ common law fraud claim, we conclude plaintiffs have adequately
pleaded a section 17200 claim under the unlawful and fraudulent prongs.”).)
Accordingly, the demurrer is OVERRULED in this regard, and Cross-Defendants have
not shown that the Section 17200 claim is deficient under Code of Civil Procedure §
430.10.

Cross-Defendants’ memorandum of points and authorities also suggests that “it is
uncertain and unintelligible from the face of” the pleading “what specific violation of
California law is implicated or what specific act is purported to be ‘unfair.’” (Cross-
Defs.’ Ps & As at 5.) Yet the general demurrer does not purport to challenge the
pleading on grounds that it is uncertain or unintelligible, so those issues are not
properly before the Court. (Code Civ. Proc. § 430.60; Cal. Rule of Court 3.1320.)
Moreover, Cross-Defendants’ passing “uncertainty” argument has not persuaded the
Court, given that demurrers for uncertainty are disfavored and are only granted where
the complaint is so muddled that the defendant cannot reasonably respond. The
favored approach is to clarify theories in the complaint through discovery. (See Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616; 1 Weil & Brown, Civil
Procedure Before Trial (Rutter 2008), sec. 7:84, p. 7(l)-37.) Accordingly, the demurrer
is OVERRULED in this regard.

Cross-Defendants also argue that a Section 17200 is intended to protect consumers,
not corporations like Incline. (Cross-Defs.’ Ps & As at 5-6.) Yet Cross-Defendants do
not cite to any authorities stating that, as a matter of law, a corporation cannot bring a
claim under Section 17200 (id.), and for this reason alone Cross-Defendants’
argument is unpersuasive. Moreover, the Business & Professions Code includes
“corporations” within the definition of “persons” that may bring suit for injuries under the
statute. (Bus. & Prof. Code §§ 17201, 17204.) Accordingly, the demurrer is
OVERRULED in this regard.

For all the foregoing reasons, the demurrer is OVERRULED in its entirety.

Motion to Strike Punitive Damages
Under Code of Civil Procedure § 437, “[t]he grounds for a motion to strike shall appear
on the face of the challenged pleading or from any matter of which the court is required
to take judicial notice.”

Cross-Defendants move to strike the Cross-Complaint’s prayer for punitive damages
on grounds that Incline “is not entitled to punitive damages based on Cross-
Defendants’ alleged fraud,” and on grounds that Incline “is not entitled to punitive
damages based on Cross-Defendants’ alleged conversion.” (Mot. to Strike at 2.)
Cross-Defendants argue that “Incline fails to plead specific facts supporting a finding of
wrongful, willful, or despicable conduct on the part of Cross-Defendants such that it is
entitled to punitive damages.” (Cross-Defs.’ Ps & As at 5.)

The motion to strike punitive damages is DENIED. Punitive damages are available
upon fraud claims. (Civil Code § 3294.) “[F]raud alone is an adequate basis for
awarding punitive damages.” ( Walker v. Signal Companies, Inc. (1978) 84 Cal.App.3d
982, 996 (punitive damages may be awarded “where a defendant fraudulently induces
the plaintiff to enter into a contract.”).) Cross-Defendants did not demur to Incline’s
fraud cause of action or argue that it is not supported with factual allegations of the
requisite particularity. Moreover, Incline has alleged that Cross-Defendants knowingly
falsely represented that Incline would be paid “proceeds” from the Underlying Lawsuit
to induce Incline to enter into the Purchase Agreement, when Cross-Defendants
allegedly never actually intended to pay such proceeds. (Cross Compl. ¶¶ 8-9, 29-37.)

While Cross-Defendants argue that punitive damages are unavailable as a remedy for
alleged conversion, they did not cite authorities on this point. (Cross-Defs.’ Ps & As at
6-7.) Incline has alleged that Cross-Defendants wrongfully withheld funds that were
due and owing to Incline under the Purchase Agreement, and did so knowing that such
funds were properly Incline’s. (Cross Compl. ¶¶ 12, 46-51.) Cross-Defendants have
not persuaded the Court that such allegations, which are taken as true at the pleading
stage, cannot support a punitive damages remedy.

Accordingly, the motion to strike punitive damages is DENIED in its entirety.

This minute order is effective immediately. No formal order or other notice is required.
(Code Civ. Proc. § 1019.5; California Rule of Court 3.1312.)