Case Number: BC495871 Hearing Date: June 05, 2014 Dept: 46

Posted 6-3-2014

Case Number: BC495871
BUSINESS MACHINES CONSULTANTS INC VS EAST WEST BANK
Filing Date: 11/19/2012
Case Type: Contractual Fraud (General Jurisdiction)
Status: Pending

06/05/2014 at 08:31 am in department 46 at 111 North Hill Street, Los Angeles, CA 90012
Conference-Case Management/Demurrer to Fourth Amended Complaint

1. Fourth Amended Complaint

East West Bank demurs to Business Machines Consultants, Inc.’s Fourth Amended Complaint. On 3/18/14, the parties filed their “Stipulation re Filing of Fourth Amended Complaint [hereinafter, “4AC”];” the 4AC contains Causes of Action (“COAs”) for (1) Breach of Express Oral Contract; (2) Breach of Implied-In-Fact Contract (“First Opportunities Agreement”); (3) Breach of Express Oral Contract (Oral Contract #2); (4) Breach of Implied-In-Fact Contract (Oral Contract #2); (5) Fraud; and, (6) Negligent Misrepresentation against Defendant East West Bank (hereinafter, “D”) and DOES 1-100.

2. Summary of Ruling

The demurrers are sustained without leave to amend pursuant to CCP 430.10(e) as the causes of action are barred by the applicable statutes of limitation and Plaintiff is unable to state facts that would permit the court to conclude that any material amendment to the pleading could successfully state a timely cause of action. CMC is ordered off calendar. Moving party to prepare order of dismissal.

3. Requests for Judicial Notice

Defendant’s Request for Judicial Notice (“RJN”) are granted and denied as follows:

(1) GRANT as to Exhibit “1” (i.e., P’s original complaint filed 11/19/12);
(2) DENY as to Exhibit “2” (i.e., non-conformed copy of FAC; with that said, this court should take judicial notice of the conformed copy on CourtNet);
(3) DENY as to Exhibit “3” (i.e., non-conformed copy of SAC; with that said, this court should take judicial notice of the conformed copy on CourtNet);
(4) GRANT as to Exhibit “4” (i.e., 5/21/13 reporter’s transcript);
(5) GRANT as to Exhibit “5” (i.e., 11/13/13 reporter’s transcript);
(6) DENY as to Exhibit “6” (i.e., red-lined copy of 4AC); DENY as to Exhibit “7” (i.e., red-lined copy of SAC);
(7) DENY as to Exhibit “8” (i.e., red-lined copy of FAC).

Plaintiff’s RJN is GRANTED as to the 5/21/13 and 11/13/13 transcripts.

4. 1st COA: Breach of Express Oral contract (“First Opportunities” Agreement – hereinafter, “FOA”])

A. “Where the dates alleged in the complaint show the action is barred by the statute of limitations, a general demurrer lies…” Weil & Brown, supra, ¶ 7:50, p. 7(I)-29. “Under the statute of limitations, a plaintiff must bring a cause of action within the limitations period applicable thereto after accrual of the cause of action…The general rule for defining the accrual of a cause of action sets the date as the time ‘when, under the substantive law, the wrongful act is done,’ or the wrongful result occurs, and the consequent ‘liability arises. In other words, it sets the date as the time when the cause of action is complete with all of its elements.” Norgart v. Upjohn Co. (1999) 21 C.4th 383, 397 (citations omitted)

B. An action for breach of an oral contract must be commenced within 2 years after accrual of the cause of action under CCP 339(1).

C. Plaintiff’s allegations reflect accrual of the cause of action no later than 09/03/2008.

D. Plaintiff has alleged in the Fourth Amended Complaint, in relevant part, that on November 27, 2006 EW Bank sent a letter to BMC confirming its agreement with BMC’s request and forming the framework for the express terms of the agreement which would subsequently be known as the ‘First Opportunities Agreement’ (Paragraph 16). Further the 4AC stated that while this letter memorialized for the parties’ the framework of the ‘First opportunities’ Agreement, the letter did not memorialize the essential terms of how the contract would operate. The subsequent agreements included a further agreement that whenever EW Bank had an equipment or service need, it was obligated to enter into good faith negotiations with BMC to purchase such equipment or services before negotiating with other parties. Moreover, it was mutually agreed that if EW Bank solicited offers from others, BMC would be given the opportunity to match any other offer that the bank was willing to accept…” (4AC, ¶¶ 16-20, 5:21-6:21).

The allegations indicate that Plaintiff was consistently upset for years about receiving only the following sums per year: $43,951.50 in 2007 (4AC, ¶ 32(a); FAC, ¶ 39(a)); $8,355.38 in 2008 (FAC, ¶ 61; allegation deleted from SAC); $22,237.42 in 2009 (4AC, ¶ 80; FAC, ¶ 74); $23,911.11 in 2010 (FAC, ¶ 79; allegation deleted from SAC) and $23,539.18 in 2011 (4AC, ¶ 111; FAC, ¶ 92).

Plaintiff alleged that on 7/3/08, Defendant’s Vice-President, White, and Eichenbaum met about replacing Staples as Defendant’s office equipment supplier under an HP “Purchase Edge” program. (4AC, ¶ 51). White provided Staples pricing information to Eisenbaum. (Id.). Eisenbaum provided confidential pricing information to White that was superior to Staples. (Id., ¶ 54).

Plaintiff further alleges that Defendant improperly disclosed Plaintiff’s confidential pricing information to Staples, Staples used this information to match Plaintiff’s proposal, “and the bank awarded the business to Staples.” (Id., ¶ 55).

Plaintiff also alleges: “[i]n an email to Chen dated September 3, 2008, Eichenbaum again voiced his concern that EW Bank was not living up to its promises and performing its obligations under the ‘First Opportunities’ Agreement. Eichenbaum stated that BMC’s proposal was superior to what Staples was offering in terms of both overall cost and the quality of the supplies and service. Eichenbaum also expressed his dissatisfaction that EW Bank utilized the confidential information derived from Eichenbaum’s hard work to get a better offer from Staples.” (Id., ¶ 56, 15:16-21).

It is further alleged that “[i]n late 4/09, Eichenbaum worked to get EW Bank great pricing on HP printers. In so doing, Eichenbaum first arranged for HP to assign Jacque Rosales (‘Rosales’) as EW Bank’s dedicated printer sales representative. He then worked directly with Rosales to create Big Deal pricing on printers…” (Id., ¶ 66, 17:27-18:2). Plaintiff complains that, “after BMC secured the special pricing, EW Bank neglected to award BMC the printer business and instead utilized the pricing secured by Eichenbaum’s efforts to get HP to provide CDW (a competitor of BMC) with the same Big Deal pricing.” (Id., ¶ 67, 18:5-7).

Additionally, Plaintiff further alleges that it made the Managed Print Proposal on/about 12/8/09 (4AC, ¶ 80), but that “[d]espite EW Bank’s renewed promises and representations, [it] never received EW’s Managed Print business, was not assigned to any bank branches to provide service for, and by the end of 2010, the business awarded to [it] that year was only $23,911.11.” (FAC, ¶ 79 [deleted from SAC]).

E. Plaintiff’s contention that the limitations period should be tolled is a sham argument which directly contradicts allegations in prior versions of the complaint. Plaintiff contends that the applicable Statute of Limitations was tolled until at least 8/19/11 (4AC, ¶ 110, 129 and 130), based on Defendant’s repeated “assurances” of future performance that “successfully lulled [it] into a false sense of security.”

“Before an estoppel to assert an applicable statute of limitations may be said to exist, certain conditions must be present: “[T]he party to be estopped must be apprised of the facts; the other party must be ignorant of the true state of facts, the party to be estopped must have intended that its conduct be acted upon, or so act that the other party had a right to believe that it was so intended; and the other party must rely on the conduct to its prejudice.” (California Cigarette Concessions, Inc. v. City of Los Angeles [(1960)] 53 C.2d 865, 869; citing Safway Steel Products, Inc. v. Lefever [(1953)] 117 C.A.2d 489, 491).’ (Sumrall v. City of Cypress (1968) 258 C.A.2d 565, 569).” Muraoka v. Budget Rent-A-Car, Inc. (1984) 160 C.A.3d 107, 116.

Plaintiff has not met these requirements. Although Plaintiff argues that it relied on Defendant’s assurances of future performance directly after the Staples breach (SAC, ¶ 57), Defendant is held to the language admitted in the prior version of the complaint, the First Amended Complaint, where it is alleged (concerning Defendant’s response to its email on 9/3/08) that: “[h]owever, nothing was done to rectify the situation, and in year two of the ‘First Opportunities’ Agreement, BMC had only been awarded $8,355.38 in business.” (FAC, ¶ 61; emphasis added). Again, Plaintiff also deleted out ¶ 79 of its FAC, which stated that “[d]espite EW Bank’s renewed promises and representations, BMC never received EW Bank’s Managed Print business, was not assigned any bank branches to provide service for, and by the end of 2010, the business awarded to BMC that year was only $23,911.11.” It appears clear from Plaintiff’s own admissions in the pleadings that the delay in filing this action was not based upon Defendant’s repeated “assurances” of future performance that “successfully lulled [it] into a false sense of security.”

The 4AC allegations and allegations of Plaintiff’s prior pleadings, then, reflect that this Cause of Action accrued no later than 9/3/08, more than 4 years before Plaintiff filed this case (i.e., on 11/19/12).

F. Plaintiff’s allegations regarding tolling due to “partial performance” are likewise contradicted by the pleadings.

The further claim that because Defendant made “part performance” it had hope of future performance and therefore did not bring suit earlier is contradicted by other allegations. Plaintiff alleged in the FAC that “[t]he delivery of this business to BMC was anticipated by the parties to generate millions of dollars in revenue for BMC.” (FAC, ¶ 1). Plaintiff has now alleged that it expected the business to “generate substantial revenue for BMC…” (4AC, ¶ 1).

As Defendant points out, “[t]his amendment is intended to obscure the huge gap between the ‘anticipated…millions’ and the negligible business allegedly received, which BMC now recharacterizes as ‘part performance’ upon which BMC ‘relied.’” (Demurrer, 6:20-22).

Additionally, whether or not Defendant “partially” performed over the years, Plaintiff’s allegations that Defendant repeatedly breached its “first opportunities” obligations render any alleged part performance irrelevant for purposes of calculating the Statute of Limitations.

5. 2nd COA: Breach of Implied-in-Fact K (FOA)

Plaintiff’s claim for breach of the implied-in-fact contract also accrued no later than 9/3/08. A claim for breach of an implied-in-fact contract is governed by a 2 year limitations period of CCP § 339 and is therefore also barred..

6. 3rd & 4th COAs: Breach of Express Oral K (Oral K #2) and Breach of Implied-In-Fact K (Oral K #2), Respectively

P has alleged, in relevant part, as follows:

“81. On or about January 15, 2010, Eichenbaum met with Chen to further
discuss the Managed Print business, as well as the overall lack of
business awarded to BMC since the First Opportunities Agreement was
entered into. Eichenbaum expressed a desire to terminate the agreement
and withdraw all of his funds from the bank.

82. During the meeting, Chen appeared sincerely distressed that BMC
had not been awarded more business. Chen told Eichenbaum that he
was angry that White had not done a better job fulfilling the bank’s
obligations under the First Opportunities Agreement, and threatened to
terminate Ashton for her insubordinate refusal to involve BMC in
purchasing requests. Chen then told Eichenbaum that he would make
sure that EW Bank, pursuant to the terms and conditions of the First Opportunities Agreement, would honor its contractual obligations, and
promised that the bank would perform under the terms of said agreement.
Chen discussed how pleased he was with BMC’s Managed Print Proposal,
and committed to awarding BMC the business. He then promised that
White and Wada would start ordering from BMC. Chen’ s
acknowledgement of EW Bank’s contractual obligations and assurance
of EW Bank’s intent to award BMC more business pursuant to it
contractual obligations convinced Eichenbaum that EW Bank would
finally honor its obligations, and resulted in Eichenbaum relying upon EW
Bank’s representations yet again. Eichenbaum took these statements at
their face value and in good faith relied on Chen’s assurances and representations that the bank’s intent and ability to provide BMC
business as required under the contract was sincere…

86. The conversation between Chen and Eichenbaum constituted not only
an assurance of forthcoming performance but also can be seen
alternatively to create a new contract between the parties such that in the
event that Chen’s acknowledgement of EW Bank’s contractual obligations
and assurance of EW Bank’s intent to award BMC business does not
operate as a matter of law to estop EW Bank from relying on a purported
statute of limitations defense, Chen’s acknowledgement and assurance constitutes a new oral contract (‘Oral Contract No. 2’). In entering into
Oral Contract No. 2, the parties agreed upon the following essential
contract terms:
1. BMC would not close its accounts but would continue to keep all of
its business bank accounts, in addition to Eichenbaum’s personal bank
accounts at EW Bank, and thereafter, to maintain account balances of
no less than $2,000,000.
2. In consideration of this, and for as long as BMC maintained the
required account balances, EW Bank was obligated to provide BMC with,
among other things, a permanent account fee waiver and the first
opportunity to sell Office Equipment, Supplies, and Services to EW Bank whenever the bank had a need for such products and services.
Specifically, whenever EW Bank had an equipment or service need, it
was obligated to enter into good faith negotiations with BMC to purchase
such equipment or services before negotiating with other parties.
Moreover, it was mutually understood that if EW Bank solicited offers
from others, BMC would be given the opportunity to match any other
offer that the bank was willing to accept.” (4AC, ¶¶ 81, 82 and 86,
22:4-21 and 23:28-24:17).

These two “new” alternative contracts were allegedly breached on 8/19/11 when Defendant did not give Plaintiff the opportunity to bid on a “multimillion dollar agreement with Canon.” (SAC, ¶¶ 100, 146 and 156). However, these contracts are based on “identical terms and conditions” as the original contracts. Plaintiff’s alleged threat to withdraw its money and terminate the original contracts, without doing so, cannot create new contracts with new statutes of limitations.

These new contracts also fails for a lack of consideration, as Defendant allegedly promised nothing more than to continue performing its original “first opportunities” obligations. “[P]ast consideration given for a promise under an existing contract cannot support a separate promise in excess of the promisor’s existing contractual obligations.” In re Insurance Installment Fee Cases (2012) 211 C.A.4th 1395, 1415.

7. 5th & 6th COAs: Fraud & Deceit and Negligent Misrepresentation, Respectively

“In a promissory fraud action, ‘the essence of the fraud is the existence of an intent at the time of the promise not to perform it.’ (Benson v. Hamilton (1932) 126 C.A.331, 334, italics in original.) ‘To maintain an action for deceit based on a false promise, one must specifically allege and prove, among other things, that the promisor did not intend to perform at the time he or she made the promise and that it was intended to deceive or induce the promisee to do or not do a particular thing.’ (Tarmann v. State Farm Mutual Auto. Ins. Co. (1991) 2 C.A.4th 153, 159). ‘The mere failure to perform a promise made in good faith does not constitute fraud.’ (Merciful Saviour v. Volunteers of America, Inc. (1960) 184 C.A.2d 851, 859).” Building Permit Consultants, Inc. v. Mazur (2004) 122 C.A.4th 1400, 1414.

The elements of a cause of action for negligent misrepresentation are: (1) the standard elements of negligence, duty of care, and breach; (2) the negligent misrepresentation of a material fact; (3) made with the intent to induce reliance by plaintiff; (4) reasonable actual reliance by the plaintiff on the misrepresentation; and (5) damages proximately (legally) caused by the misrepresentation and reliance. Cicone v. URS Corp. (1986) 183 Cal.App.3d 194, 211.

“Each element in a cause of action for…negligent misrepresentation must be factually and specifically alleged. (Small[ v. Fritz Companies, Inc. (2003)] 30 C.4th [167,] at p. 184).” Cadlo v. Owens-Illinois, Inc. (2004) 125 C.A.4th 513, 519.

A promissory fraud Cause of Action is governed by a 3-year SOL. CCP § 338(d).

“However, such action is not deemed accrued ‘until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.’ (Code Civ. Proc., § 338, subd. (d).) The courts interpret discovery in this context to mean not when the plaintiff became aware of the specific wrong alleged, but when the plaintiff suspected or should have suspected that an injury was caused by wrongdoing. The statute of limitations begins to run when the plaintiff has information which would put a reasonable person on inquiry. A plaintiff need not be aware of the specific facts necessary to establish a claim since they can be developed in pretrial discovery. Wrong and wrongdoing in this context are understood in their lay and not legal senses. (Jolly v. Eli Lilly & Co. (1988) 44 C.3d 1103, 1110-1111).” Kline v. Turner (2001) 87 C.A.4th 1369, 1373-1374.

“[A] cause of action for negligent misrepresentation typically is subject to a two-year limitations period. (See Code Civ.Proc., § 339; Ventura County Nat. Bank v. Macker (1996) 49 C.A.4th 1528, 1530-1531…).” E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 C.A.4th 1308, 1316.

The complaint, FAC, SAC and 4AC reflect that Plaintiff discovered the grounds for promissory fraud and negligent misrepresentation no later than 5/09. (4AC, ¶ 68).

P and D entered into a “First Opportunities” Agreement (hereinafter, the “FOA”) which provided that whenever D purchased the types of products and services that P provides in its day to day business operations, D was required to provide P with the first opportunity to sell such products and services to it. P contends that D failed to honor its obligations under the FOA and breached P’s Confidentiality and Non-Disclosure Agreement.