A demurrer presents an issue of law regarding the sufficiency of the allegations set forth in the complaint. Lambert v. Carneghi (2008) 158 Cal.App.4th 1120, 1126. The challenge is limited to the “four corners” of the pleading (which includes exhibits attached and incorporated therein) or from matters outside the pleading which are judicially noticeable under Evidence Code §§ 451 or 452. The complaint is read as a whole: material facts properly pleaded are assumed true; contentions, deductions or conclusions of fact/law are not. Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Jenkins v. JP Morgan Chase Bank, NA (2013) 216 Cal.App.4th 497, 506. In general, a pleading is adequate if it contains a reasonably precise statement of the ultimate facts, in ordinary and concise language, and with sufficient detail to acquaint a defendant with the nature, source and extent of the claim. The degree of detail required depends on the extent to which the defendant in fairness needs such detail which can be conveniently provided by the plaintiff. Less particularity is required when the defendant ought to have co-extensive or superior knowledge of the facts. Leek v. Cooper (2011) 194 Cal.App.4th 399, 413.

4th Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing

A surety bond is a written instrument executed by the principal and surety in which the surety agrees to answer for the debt, default, or miscarriage of the principal. In suretyship, the risk of loss remains with the principal, while the surety merely lends its credit so as to guarantee payment or performance in the event that the principal defaults. The surety relationship is a tripartite one, in which the obligee, rather than the principal, is protected by the surety’s promise to pay if the principal does not, in exchange for which promise the principal pays the premium for the bond. In general, a surety bond is interpreted by the same rules as other contracts: where is incorporates another contract by an express reference thereto, the bond and the contract should be read together and construed fairly and reasonably as a whole according to the intention of the parties. Nissho of California, Inc. v. Bond Safeguard Insurance Company (2013) 220 Cal.App.4th 974, 983-984; Fort Bragg Unified School Dist. v. Solano County Roofing, Inc. (2011) 194 Cal.App.4th 891, 910; First Nat. Ins. Co. v. Cam Painting, Inc. (2009) 173 Cal.App.4th 1355, 1364-1365.

GAIC contends that its demurrer must be sustained since California does not permit liability for breach of the implied covenant of good faith and fair dealing outside of the insured-insurer relationship. GAIC oversimplifies the inquiry. Just like every other contract, a surety agreement (such as the performance and payment bonds at issue here) contains an implied covenant of good faith of fair dealing, to wit: an understanding that neither party will do anything which will injure the right of the other to receive the benefits of the agreement. The implied covenant of good faith is read into all contracts to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract. Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 400; Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co. (1996) 47 Cal.App.4th 464, 483.

The question presented by GAIC’s demurrer is not whether a surety contract contains an implied covenant of good faith and fair dealing (it most assuredly does), but really (1) does California permit tort recovery for breach of the implied covenant of good faith and fair dealing in a surety contract; and (2) if not, does California recognize a stand-alone cause of action for contractual breach of the implied covenant (rather than a count within a breach of contract cause of action).

As for the first part, the decision in Cates Construction Inc. v. Talbot Partners (1999) 21 Cal.4th 28, appears to put to rest any notion of tort recovery in the surety context. In Cates, the developer and lender for a condominium construction project sued the commercial surety on a performance bond for tort damages based on a breach of the implied covenant of good faith and fair dealing (aka “bad faith” claim). Both the trial court and 2nd DCA approved the award of tort damages. The California Supreme Court, in a narrow 4-3 decision, reversed, holding that tort damages are not recoverable for a breach of the implied covenant of good faith and fair dealing in the context of a suretyship contract. The Court reasoned that although suretyship is listed in the Insurance Code as a class of insurance, it does not follow that a surety bond equates to a policy of insurance under common law liability. Id. at 52. The Court distinguished insurance contracts from construction performance contracts, observing that “tort remedies are appropriate for breaches in the insurance policy context because insureds generally do not seek commercial advantage by purchasing policies; rather they seek protection against calamity.” Id. at 53. Further, the Court noted that an insurance policy is distinct in nature because it is characterized by elements of adhesion, public interest, and fiduciary responsibility. Id. at 44. For example, performance bonds typically incorporate the underlying construction contract, the terms and conditions of which have been negotiated by the principal and the obligee without any input from the surety. Because the nature and extent of a surety’s obligations under a performance bond are determined with reference to such terms and conditions, bonds do not reflect the adhesion and unequal bargaining power that are “typically” inherent in insurance policies. Id. at 52-53. Additionally, the Court observed that an insured cannot typically seek recourse in the marketplace in the event of a breach, whereas an obligee in the same predicament can in theory pass the cost along to consumers. Id. In summary, the Cates majority held that tort damages for “bad faith” only apply in traditional insurance contracts because (1) in the context of a construction performance bond, obligees often have significant bargaining power; (2) construction performance bond obligees generally purchase bonds for commercial advantage, rather than protection against calamity; (3) the obligee of a construction performance bond generally has a right of recovery against the principal; (4) the construction bond obligee generally may look to the marketplace to obtain completion of its project; (5) the relationship between a construction performance bond surety and its obligee generally is not fiduciary in nature; and (6) permitting tort recovery gives the obligee more leverage over the surety than even the principal would have. Id. at 53-60.

The dissent, authored by Justice Mosk and joined by Justices Kennard and Werdegar, took issue with most of the assumptions made the majority, and concluded that the harm caused by surety gamesmanship is just as real and devastating as that caused by insurers in the traditional “bad faith” rubric. The minority found no reason to treat sureties different from insurers.

Wal-Mart contends that Cates has been impliedly superseded by Legislative changes to the Fair Claims Settlement Practices Act (Cal. Code Regs. Title 10 §2695.10) in 2006. Neither side has cited, nor has this Court found, any California authority – state or federal, published or unpublished – in which a court has directly considered Cates’ viability in the face of the 2006 Legislative changes. It is something to note, however, that amongst the post-2006 opinions discussing Cates, all seem content to treat it as good law. See, e.g., Ragland v. U.S. Bank Nat. Assn. (2012) 209 Cal.App.4th 182, 206; Travelers Cas. and Sur. Co. of America v. Highland Partnership, Inc., WL 5928139 at *6 (S.D. 2012); Fort Bragg Unified School Dist. v. Solano County Roofing, Inc. (2011) 194 Cal.App.4th 891, 910; Travelers Cas. and Sur. Co. of America v. Dunmore, WL 5200940 at *5-6 (E.D. Cal 2010); Griffin Dewatering Corp. v. Northern Ins. Co. of New York (2009) 176 Cal.App.4th 172, 195; Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1054; Schwartz v. Liberty Mutual Ins. Co., 539 F.3d 135, 149-150 (2nd Cir. 2008).

Nonetheless, the contention – which is novel and creative – warrants analysis.

Title 10 §2695.10 is titled “Additional Standards Applicable to Surety Insurance,” and has been a part of California’s Regulations since 1992 – well before the Cates decision was rendered. The 2006 amendments altered subsection (b), and added new subsections (b)(1)-(2) and (g)-(h)(4).

Subsection (b) requires the surety to accept or reject a claim within 40 days, and to explain why a claim is being denied, with the following two provisos:
(1) A principal’s absence, non-cooperation, or failure to meet the bonded obligation shall not excuse unreasonable delay by the insurer in determining whether a claim should be accepted or denied.
(2) While an insurer may consider all information provided by a principal, absent reasonable factual and/or legal bases for denying a claim, no insurer shall deny a claim based solely upon a principal’s protest of a claim or denial of liability for a claim.

Subsection (g) requires the surety to inform the claimant about any applicable statute of limitations.

Subsection (h) prohibits sureties from making “low ball” settlement offers, based on various criteria.

Wal-Mart contends that the 2006 changes show the Legislature no longer wants to treat sureties different from normal insurance companies, and was intending to communicate disapproval of Cates. Wal-Mart may have a point. Although there were a number of grounds offered by the Cates majority for treating sureties different from insurers, the majority did find significant the softer regulations in the pre-2006 version of §2695.10 (in pertinent part, internal cites omitted, at 49 and 56):

“In recognition of the distinctions between suretyship and traditional insurance, the regulations exempt sureties from the set of standards promoting the prompt, fair and equitable settlement of claims by insurers and instead provide that sureties are governed by a separate set of claims handling and settlement standards. While some of the standards relevant to sureties are identical or similar to those applicable to insurers, sureties have been excepted from many of those standards. For instance, since a surety typically must sort through the conflicting claims of the principal and the obligee, regulatory standards do not hold a surety to the same 40–day period applicable to insurers for accepting or denying claims but recognize that substantially more time may be appropriate. More significantly, a surety is not subject to the standard prohibiting insurers from attempting to settle a claim by making a settlement offer that is ‘unreasonably low.’ In addition, a surety is not subject to the standard requiring insurers to provide written notice to unrepresented claimants of any statute of limitation or other time period requirement that may be used to defeat a claim … The fact that insurance regulations exempt sureties from many of the fair claims settlement standards applicable to issuers of insurance policies is consistent with and supports the conclusion that a surety does not stand in a fiduciary or quasi-fiduciary position with respect to an obligee.”

The 2006 changes nullify the Court’s concern about the Legislature treating sureties differently, and the absence of fiduciary burdens on sureties. In fact, most of the regulations imposed on insurers now apply to sureties either through the Unfair Practices Act (Ins. Code §790 et seq) or the Fair Claims Settlement Practices Regulations (10 Cal. Code Reg. §2695.1(c)). See also First Nat’l Ins. Co. v. Cam Painting, Inc. (2009) 173 Cal.App.4th 1355, 1366 [sureties must diligently investigate all claims]. This is certainly telling evidence that the Legislature read Cates and responded.

The 2006 changes do not address other grounds offered by the majority: financial sharing; unfair leverage; and bargaining strength. However, these other grounds–roundly criticized by the Cates dissent–have been rejected by the majority of other states facing the same question about sureties and bad faith tort claims. See, e.g., Alaska [Loyal Order of Moose, Lodge 1392 v. International Fidelity Ins. Co., 797 P.2d 622 (1990)]; Arizona [Dodge v. Fidelity & Deposit Co. of Maryland, 778 P.2d 1240 (1989)]; Colorado [Transamerica Premier Ins. Co. v. Brighton School Dist. 27J, 940 P.2d 348 (1997)]; Delaware [International Fidelity Ins. Co. v. Delmarva Systems Corp., WL541469 (Del.Supr.Ct.2001)]; Florida [Dadeland Depot, Inc. v. St. Paul Fire and Marine Ins. Co., 945 So.2d 1216 (2006)]; Hawaii [Board of Dirs. of the Ass’n of Apartment Owners of Discovery Bay Condo. v. United Pac. Ins. Co., 884 P.2d 1134 (1994)]; Illinois [Windowmaster Corp. v. Morse/Diesel, Inc., 722 F.Supp. 1532 (N.D.Ill.1988)]; Montana [K-W Indus. v. Nat’l Sur. Corp., 754 P.2d 502 (1988)]; New Jersey [U.S. ex rel. Don Siegel Const. Co., Inc. v. Atul Const. Co., 85 F.Supp.2d 414 (D.N.J. 2000)]; North Dakota [Szarkowski v. Reliance Ins. Co., 404 N.W.2d 502 (1987)]; Ohio [Suver v. Personal Service Ins. Co., 462 N.E.2d 415 (1984)]; Oklahoma [Worldlogics Corp. v. Chatham Reinsurance Corp., 108 P.3d 5 (Okla.Civ.App.2004)]; Oregon [City of Portland v. George D. Ward & Assocs., 750 P.2d 171 (Or.App.1988)]. Only Texas [Great American Ins. Co. v. North Austin Mun. Utility Dist. No. 1, 908 S.W.2d 415 (1995)] and South Carolina [Masterclean, Inc. v. Star Ins. Co., 556 S.E.2d 371 (2001)] are still clearly on the Cates train.

Business realities and Legislative amendments now expose Cates to reassessment. The changes to §2695.10 mark a different landscape, suggest that sureties do indeed owe fiduciary duties to obligees, and puts them on relatively equal footing with insurers. In fact, without tort exposure, sureties have little if any incentive to comply with the new 2006 requirements. There are still differences between sureties and insurers, but those differences do not – in this Court’s opinion – warrant a different rule on tort liability.

However, it is technically not necessary to make this proclamation at this time. Even if Cates is to be followed, the demurrer cannot be sustained for this very simple reason: a demurrer cannot be used to attack only a portion of a cause of action (Pointe San Diego Residential Community, LP v. Procopio, Cory, Hargreaves & Savitch, LLP (2011) 195 Cal.App.4th 265, 274; Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 384-385), and “the implied covenant of good faith and fair dealing applies to surety contracts, albeit in the same fashion the covenant applies to ordinary contracts outside of the insurance arena.” Travelers Cas. and Sur. Co. of America v. Highland Partnership, Inc., WL 5928139 at *6 (S.D. 2012). Wal-Mart clearly has a right to proceed on a contractual basis based on breach of an implied covenant of good faith and fair dealing. While it may not be necessary to plead it as a separate cause of action (since it effectively overlaps with the 2nd and 3rd and 5th causes of action), it is nonetheless a viable theory as is.

Demurrer overruled.

5th Cause of Action for Express Indemnity

The demurrer to the 5th cause of action for express indemnity is overruled. GAIC concedes that it owes Wal-Mart contractual indemnity benefits arising out of the performance and payment bonds for the Jones’ project at the Brea store, and this is all Wal-Mart alleges (see FAXC ¶91).

GAIC is correct that the complaint filed by Chino Commercial Bank on 08/17/12 makes no reference whatsoever to the Brea store, which makes this express indemnity cause of action technically outside the scope of CCP §428.10 – which limits cross-claims to those which (1) arise out of the same transaction, occurrence, or series of transactions or occurrences or (2) relate to the same property or controversy. The problem is compounded by the fact that on 01/09/13 Chino Bank filed a Notice of Settlement for the “entire” action – which begs the question why are Wal-Mart and GAIC fighting their surety issues as a cross-claim when the primary action (1) has nothing to do with their surety dispute and (2) is apparently settled. Clearly Wal-Mart should have filed its own lawsuit against GAIC and Jones and not proceeded down the cross-complaint path in a case involving a bank loan for a project in Northern California. However, sustaining the demurrer at this juncture would exalt form over substance since Wal-Mart can still file a separate lawsuit against GAIC for express indemnity. Better the claim should remain here as is, despite the anomaly.

6th and 7th Causes of Action for Equitable Indemnity and Apportionment

The right to indemnity flows from payment of a joint legal obligation on another’s behalf. The elements of a cause of action for indemnity are (1) a showing of fault on the part of the indemnitor and (2) resulting damages to the indemnitee for which the indemnitor is equitably responsible. Bailey v. Safeway, Inc. (2011) 199 Cal.App.4th 206, 212. In an indemnity action, the trier of fact must determine whether the indemnitee was held legally responsible for damages to a third party, whether the indemnitor’s conduct was a substantial factor in causing the harm, and if so, the indemnitee’s and indemnitor’s percentages of responsibility. Great Western Drywall, Inc. v. Interstate Fire & Cas. Co. (2008) 161 Cal.App.4th 1033, 1041.

The doctrine of comparative equitable indemnity is designed to do equity among defendants. The purpose of equitable indemnification is to avoid the unfairness, under the theory of joint and several liability, of holding one defendant liable for the plaintiff’s entire loss while allowing another potentially liable defendant to escape any financial responsibility for the loss. Bailey v. Safeway, Inc. (2011) 199 Cal.App.4th 206, 212. Equitable indemnity is not available absent the existence of a joint legal obligation to the injured party. Jocer Enters., Inc. v. Price (2010) 183 Cal.App.4th 559, 573. Stated another way, there can be no indemnity where the party from whom indemnity is sought owes no duty to the plaintiff. Wells Fargo Bank, NA v. Renz, 795 F.Supp.2d 898, 927 (N.D. Cal. 2011). “A fundamental prerequisite to an action for partial or total equitable indemnity is an actual monetary loss through payment of a judgment or settlement.” Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital (1994) 8 Cal.4th 100, 110. “A plaintiff may not recover damages for an unpaid liability to a third party, unless the plaintiff proves to a reasonable certainty that the liability could and would be enforced by the third party against the plaintiff or that the plaintiff otherwise could and would satisfy the obligation … The facts that a third party has demanded payment by the plaintiff of a particular liability and plaintiff has admitted such liability are not, by themselves, sufficient to support an award of damages for that liability, because that third party may never attempt to force the plaintiff to satisfy the alleged obligation, and plaintiff may never pay the obligation.” Green Wood Indust. Co. v. Forceman Internat. Development Group, Inc. (2007) 156 Cal.App.4th 766, 776.

The complication posed by Wal-Mart’s decision to pursue claims against GAIC as a cross-action in the Chino Bank case is no place more evident than with the 6th and 7th causes of action. If Wal-Mart is truly seeking equitable indemnity and apportionment for any judgment rendered against it for the Northern California property, it must first establish some basis for liability against GAIC on that claim. However, the only “claim” against Wal-Mart in the Chino Bank action is one for equitable lien – which is in fact not a real claim against Wal-Mart at all (meaning Wal-Mart is only in because of the nuance involved with real property liens and not for any alleged wrongdoing). Since there is no “damage” sought from Wal-Mart, there seems to be no risk that Wal-Mart will “pay damages” which ought to have been paid by GAIC.

Separately, if Wal-Mart is really seeking equitable indemnity and apportionment for harm relating to the Brea store, then there is an issue of scope. Where parties have expressly contracted with respect some indemnification rights (which seems to be where Wal-Mart is going), the extent of that duty must be determined from the contract and not by reliance on the independent doctrine of equitable indemnity. Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 628; Peter Culley & Associates v. Superior Court (1992) 10 Cal.App.4th 1484, 1492. In fact, it may be said that express indemnity clauses are accorded “a certain preemptive effect, displacing any implied rights which might otherwise arise.” E. L. White, Inc. v. City of Huntington Beach (1978) 21 Cal.3d 497, 507. See also, Maryland Cas. Co. v. Bailey & Sons, Inc. (1995) 35 Cal.App.4th 856, 864–873 (holding that equitable indemnity claims were “barred by the express indemnity provisions in the parties’ contracts”). This is not to say that Wal-Mart must make an election of remedies between express vs. equitable indemnity, and neither side has actually briefed this issue (including whether the aforementioned rule applies at all in the surety context). However, it is an area of confusion making the claims uncertain. Had Wal-Mart filed its own action against GAIC, much of this confusion would likely have been avoided.

Demurrer sustained, 20 days leave to amend.

11th Cause of Action for Unfair Business Practices

Business & Professions Code §17200 prohibits any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising. Puentes v. Wells Fargo, Inc. (2008) 160 Cal.App.4th 638, 643-644. To state a claim under §17200, Wal-Mart must at a minimum properly allege an act or practice, committed pursuant to business activity, that is at the same time forbidden by law or tethered to some express public policy. Hale v. Sharp Healthcare (2010) 183 Cal.App.4th 1373, 1382-1383. Under the ‘fraud’ prong of §17200 it must also be likely to deceive members of the general public. Daugherty v. American Honda Motor Co. (2006) 144 Cal.App.4th 824, 838.

Although the charging allegations in the FAXC are imprecise to say the least, Wal-Mart explains in its opposition brief that the cause of action is intended to capture Jones’ alleged failure to pay subcontractors, a violation of B&P §7108.5. This is a tremendous leap given that GAIC has no statutory obligation to pay subcontractors, and Wal-Mart is not itself a subcontractor with standing to pursue a private right of action under §7108.5. It would appear that Wal-Mart has included this theory because §7108.5 contains a prevailing party attorney fee clause. This Court fails to see the connection. As a practical matter, Wal-Mart can state an unfair practices claim based on GAIC’s alleged failure to comply with Reg. §2695.10 – discussed in detail supra – but seems to have overlooked this in its zest for an attorney fee provision.

This cause of action needs to be clarified. Demurrer sustained, 20 days leave to amend.

Strike Punitive Damages

GAIC moves to strike the prayer for punitive damages attached to the 4th and 11th causes of action. The latter position is easily resolved in GAIC’s favor, as punitive damages are not recoverable as a matter of law for §17200 claims. Clark v. Superior Court (2010) 50 Cal.4th 605, 610. As to the former, given this Court’s discussion regarding the changed landscape since Cates was rendered, striking the prayer for punitive damages as a matter of law is not warranted at this time. However, separate and apart from that, this Court concludes on its own that Wal-Mart has not alleged sufficient facts to support a prayer for punitive damages.

First, the gravamen of the claims asserted against GAIC are all contractual in nature. Punitive damages are not recoverable in an action based upon a contractual obligation, even though the breach of contract is wilful or malicious. Freedman v. Rector, Wardens & Vestrymen of St. Mathias Parich (1951) 37 Cal.2d 16, 21-22; Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 960. If, on the other hand, the action is one in tort, exemplary damages may be recovered – but only upon a proper showing of malice, fraud or oppression. Chelini v. Nieri (1948) 32 Cal.2d 480, 486-487; in accord, Spinks v. Equity Residential Brianwood Apartments (2009) 171 Cal.App.4th 1004, 1055 [covenant of good faith and fair dealing not sufficient for punitives].

As for any tort version of the 4th cause of action, nothing in the allegations suggests malice, fraud or oppression. See Monge v. Superior Court (1986) 176 Cal.App.3d 503, 510 [“In determining whether a complaint states facts sufficient to sustain punitive damages, the challenged allegations must be read in context with the other facts alleged in the complaint].

Fraud means “intentional misrepresentation, deceit or concealment of a material fact with the intention of depriving a person of property or legal rights or otherwise causing injury.” CC §3294(c)(3); Warren v. Merrill (2006) 143 Cal.App.4th 96; Bardis v. Oates (2004) 119 Cal.App.4th 1. Wal-Mart has not alleged anything fraudulent – at least not with the requisite particularity needed for any theory based on fraud.

Malice means “despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” CC §3294(c)(1). As such, to adequately plead a claim for punitive damages under the malice rubric, one must plead with specificity facts demonstrating:

(1) Defendant’s conduct was “despicable,” and that
(2) Defendant acted with a willful and conscious disregard for the safety of another in the commission of said conduct.

Despicable conduct is conduct that is “so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people [and] having the character of outrage frequently associated with crime.” Scott v. Phoenix Schools, Inc. (2009) 175 Cal.App.4th 702, 716. To establish conscious disregard, the plaintiff must show “that the defendant was aware of the probable dangerous consequences of his conduct, and that he wilfully and deliberately failed to avoid those consequences.” Hoch v. Allied-Signal, Inc. (1994) 24 Cal.App.4th 48, 61. The distinction may best be explained as follows: “nonintentional conduct comes within the definition of malicious acts [only] when a party intentionally performs an act from which he knows, or should know, it is highly probable harm will result.” SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 907.

Wal-Mart describes GAIC’s decision not to pay as worthy of punitive damages, but negligence, even gross negligence, will not support an award of punitive damages. Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 828; Food Pro International, Inc. v. Farmers Ins. Exchange (2008) 169 Cal.App.4th 976, 994; in accord, Berkley v. Dowds (2007) 152 Cal.App.4th 518, 529; Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1288 n. 14; Jackson v. Johnson (1992) 5 Cal.App.4th 1350, 1354; Dawes v. Superior Court (1980) 111 Cal.App.3d 82, 88; Kendall Yacht Corp. v. United California Bank (1975) 50 Cal.App.3d 949, 958.

Wal-Mart has not alleged facts to support an award of punitive damages at this time. Rather than grant leave to amend now, the motion to strike is granted without prejudice to later motion for leave to amend if/when the evidence warrants such.