Case Number: BC511511 Hearing Date: April 17, 2014 Dept: 58

JUDGE ROLF M. TREU
DEPARTMENT 58
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Hearing Date: Thursday, April 17, 2014
Calendar No: 6
Case Name: Sood v. Industrial Service Oil Company, Inc., et al.
Case No.: BC511511
Motion: (1) Demurrer
(2) Motion to Compel Further Discovery Responses
Moving Party: Defendants Industrial Service Oil Company, Inc.; John Shubin; and David Shubin
Responding Party: Plaintiff Anurag Sood dba EP Consultants
Notice: OK

Tentative Ruling: (1) Demurrer is overruled. Defendants Industrial Service Oil Company, Inc.; John Shubin; and David Shubin to answer within 10 days.

(2) Motion to compel further discovery responses is granted. Sanctions are awarded in Defendants’ favor against Plaintiff, and Plaintiff’s counsel of record, jointly and severally, in the total reduced amount of $6,600 to be paid within 30 days.
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Background –
On 6/7/13, Plaintiff Anurag Sood dba EP Consultants filed this action against Defendants Industrial Service Oil Company, Inc. (“ISOCI”); John Shubin; Pete Kotoff; and David Shubin arising out of the alleged failure to pay for consulting services provided to ISOCI. On 10/8/13, in response but prior to a demurrer and motion to strike filed by Defendants, Plaintiff filed a First Amended Complaint asserting causes of action for (1) account stated, (2) quantum meruit, and (3) indebitatus assumpsit. On 2/5/14, the Court ruled on a demurrer and motion to strike filed by ISOCI and the Shubins. On 2/20/14, Plaintiff filed a Second Amended Complaint asserting a single cause of action for account stated. Kotoff remains self-represented.

Factual Allegations of the SAC –
In March 2001, Plaintiff began providing a variety of environmental and engineering consulting services to ISOCI at ISOCI’s request, sending periodic invoices. ¶ 11. On 3/21/01 and 12/20/08, Plaintiff provided written work proposal contracts which included general terms and conditions indicating that unpaid balances are subject to interest or a late fee of 1.5% per month 30 days from the invoice date (¶¶ 12-13): Defendants failed to object to the 1.5% late fee (¶ 14).

ISOCI failed to pay three invoices in 2006 and failed to pay invoices from March 2007 to June 2009 totaling $595,484.30. ¶ 11. When questioned about the failure to pay invoices, the individual Defendants induced Plaintiff to continue to provide services by representing that ISOCI intended to pay all invoices. ¶ 16.

John Shubin is the CEO and owner of ISOCI (¶ 3); Kotoff is a plant manager of ISOCI from 2001-2007 (¶ 4); and David Shubin is a vice president of ISOCI from 2006-2009 and plant manger from 2008-2009 (¶ 5). ISOCI was inadequately capitalized to conduct its business; and the individual defendants knew that ISOCI could not make timely payments as promised. ¶ 20.

Demurrer –
ISOCI and the Shubins (“Moving Parties”) demur to the SAC.

1. Alter Ego Liability
First, Moving Parties argue that Plaintiff fails to allege sufficient facts against the Shubins for alter ego liability. The Court previously sustained the demurrer on this ground finding that Plaintiff only alleged the conclusion of alter ego liability. In the SAC, Plaintiff now alleges that ISOCI was inadequately capitalized to conduct its business; and the individual defendants knew that ISOCI could not make timely payments as promised. SAC ¶ 20. In addition to the allegations as to the individual defendants’ relationship to ISOCI (SAC ¶¶ 3-5), this is sufficient at the pleading stage to allege facts to support alter ego liability (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1285; Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300) based on a unity of interest and ownership (see First Western Bank & Trust Co. v. Bookasta (1968) 267 Cal.App.2d 910, 914-15). Therefore, the demurrer is overruled on this ground.

2. Account Stated
Second, Moving Parties argue that Plaintiff failed to allege facts to support an account stated. An account stated requires a statement of indebtedness existing between the parties as agreed by the parties. See, e.g., Truestone, Inc. v. Simi West Industrial Park II (1984) 163 Cal.App.3d 715, 725. Moving Parties argue that Plaintiff’s account stated claim is really breach of contract claims based on unpaid invoices (see SAC ¶ 11). See, e.g., Filmservice Laboratories, Inc. v. Harvey Bernhard Enterprises, Inc. (1989) 208 Cal.App.3d 1297, 1307-8. However, this improperly attempts to dispute the allegations of the SAC. Notably, Plaintiff alleges that Defendants agreed to pay all invoices submitted (id. ¶ 16) and that an account was stated in writing on 6/22/09 for the total balance of the invoices (id. ¶ 23). At the pleading stage, this is sufficient to allege facts to support an account stated claim.

3. Late Fees
The Court notes that Moving Parties also argue that Plaintiff’s clam of late fees (SAC ¶ 25) are improper. Moving Parties argue that Plaintiff’s estoppel allegations concerning the late charges (SAC ¶¶ 12-14) are insufficient. See, e.g., Transport Ins. Co. v. TIG Ins. Co. (2012) 202 Cal.App.4th 984, 1013. Additionally, Moving Parties argue that the claim of late fees seeks to recover an amount in excess of the alleged agreed upon definite amount. See H. Russell Taylor’s Fire Prevention Service, Inc. v. Coca Cola Bottling Corp. (1979) 99 Cal.App.3d 711, 727. However, these arguments are not properly the subject of a demurrer because Plaintiff’s claim of late fees is only part of the account stated claim. See Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047 (stating that a demurrer cannot be directed to part of a cause of action).

4. Ruling
Therefore, the demurrer is overruled. Moving Parties to answer within 10 days.

Motion to Compel Further Responses –
Moving Parties seek further responses to form interrogatories, request for production of documents, and special interrogatories. These discovery requests sought information related to the alleged invoices (concerning Plaintiff’s services) supporting the alleged account stated. In opposition, Plaintiff argues that such information is irrelevant on an account stated claim. See Distefano v. Hall (1963) 218 Cal.App.2d 657, 677 (noting the holding of Ahlbin v. Crescent Commercial Corp. (1950) 100 Cal.App.2d 646, 648).

Moving Parties have the better argument. Plaintiff alleges an account stated. Even if Moving Parties had agreed to a statement of a balance, this does not preclude Moving Parties from challenging the balance as having been incorrectly fixed based on mistake, fraud, or undue advantage. See Western Talc Co. v. Blaufuss (1938) 25 Cal.App.2d 270, 278. Therefore, the motion to compel further discovery responses is granted.

Moving Parties request monetary sanctions of $6,900 plus an additional $600-$900 if oral argument is required. Brody Decl. ¶ 29; Trutanich Decl. ¶ 8. The Court finds sanctions are warranted under the circumstances. See CCP §§ 2030.300(d), 2031.310(h). The Court notes that the parties have engaged in informal and formal meet and confer efforts with respect to discovery. Brody Decl. ¶¶ 4-27. While Plaintiff’s argument as to why the discovery requests are irrelevant was not frivolous, the Court notes that this argument does not appear to have been asserted in the parties’ meet and confer efforts. See, e.g., Brody Decl. Exs. L-P. Notably, Plaintiff’s counsel appears to have indicated that information responsive to Moving Parties’ discovery requests would be provided and that this motion is unnecessary. See Brody Decl. Ex. M (email dated 3/5/14), Ex. P (email dated 3/7/14). Under these circumstances, the Court finds Moving Parties’ request for monetary sanctions to be reasonable.

However, because this motion is set for hearing on the same date as the CMC and Moving Parties’ demurrer, the Court declines to award any additional monetary sanctions for preparing for the hearing on this motion. Therefore, monetary sanctions are awarded in Moving Parties’ favor against Plaintiff and Plaintiff’s counsel of record, jointly and severally, in the total reduced amount of $6,600. See Brody Decl. ¶ 29 (12 hours at the hourly rate of $300); Trutanich Decl. ¶ 8 (10 hours at the hourly rate of $300).