(1-2) Demurrers to Complaint (3) CMC

Ruling: (1-3) Off Calendar – no hearing will be held. (1) The Demurrer to the Complaint filed by Defendant Feng Zheng is OVERRULED in its entirety. Initially, the Court finds Plaintiff has sufficiently stated claims for Fraud, pursuant to the allegations included within ¶15, ¶21, ¶31 and ¶39 of the Complaint. These allegations are sufficient to place Defendants on notice of the charges against them. (Tarmann v. State Farm Mut. Auto Ins. Co. (1991) 2 Cal.App.4th 153, 157.) Moreover, the Court finds the Complaint clearly alleges the “ultimate fact” of agency, which is sufficient to establish a “fiduciary relationship.” (¶46 of Complaint; (Skopp v. Weaver (1976) 16 Cal.3d 432, 439.) Further, the Complaint alleges fraudulent conduct, likely to deceive the public, within ¶54 and ¶55 (allegations which are not addressed by Defendant).

Last, as the Complaint does not assert a claim arising from contract, the failure to indicate whether a mentioned contract is written or oral is immaterial. (Fanucchi v. Coberly-West Co. (1957) 151 Cal.App.2d 72, 83.) Defendant Feng Zheng shall file his Answer within 10 days of this order.

(2) The Demurrer to the Complaint filed by Defendant Western Fragrant Products Corp. is OVERRULED, in its entirety, for the same reasons stated as to the Demurrer brought by Defendant Feng Zheng.
Defendant Western Fragrant Products Corp. shall file its Answer within 10 days of this order.

(3) CMC is continued to 7-8-14, Dept. C13, at 8:45 am. MPs are to give notice of these orders.

First through Third COAs (Fraud): “The elements of fraud, which give rise to the tort action for deceit, are (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (or ‘scienter’); (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) Every element of the cause of action for fraud must be pleaded with “sufficient specificity to allow Defendant to understand fully the nature of the charges made.” (Tarmann v. State Farm Mut. Auto Ins. Co. (1991) 2 Cal.App.4th 153, 157.) Further, a Plaintiff’s burden in asserting a fraud claim against a corporate employer is even greater. In such cases, the Plaintiff must “allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote and when it was said or written.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

Here, Defendants generally demur to the Complaint on the basis Plaintiff’s claims for fraud lack the required specificity; however, Defendants’ Demurrer focuses on details not directly related to the alleged fraudulent statements. For example, Defendants assert the Complaint: “does not provide facts with particular specificity of the type of confidential information given to Defendant; when specific confidential information was given to Defendant; or how the confidential information was given to Defendant.” (Demurrer: 7:8-10.) Thus, Defendants request further specificity, regarding the confidential information at issue and how it was allegedly obtained; however: (1) this information is not clearly connected to the elements of Fraud; and (2) sufficient details are provided in the Complaint.

The Complaint alleges that in mid-July 2006, Defendants, through Zheng, represented to August Doppes, the principal of California Scents, via a telephone call, that “Defendants would safeguard the Confidential Information provided to them, for the purposes of assisting in the manufacturing of California Scents’ products….” (¶21 of Complaint.) The Complaint additionally states Defendants represented they “would not, develop, market, and sell their own products through the misuse of the Confidential Information provided.” (Id.) Further, the Complaint defines “Competitive Information” as “products composition and qualities, marketing information, distribution information, corporate strategy and packaging specifications, among other things.” (¶15 of Complaint; the Court notes the Complaint later switches references to “Competitive Information” to “Confidential Information.”)
These allegations are sufficient to place Defendants on notice of the charges against them. (Tarmann, supra, 2 Cal.App.4th at 157.) Additionally and significantly, Defendants do not demur to these claims based on any alleged failures in the remaining elements of Fraud.

However, the Court notes each of Plaintiff’s claims for Fraud state only an alleged False Promise. Pursuant to Moncada v. West Coast Quartz Corp. (2013) 221 Cal.App.4th 768, an action for fraud requires “false representation as to a past or existing material fact.” (Id. at 804.) Here, as Plaintiff alleges the misrepresentation was that Defendants would safeguard confidential information and/or would not misuse the information (see ¶15 and ¶21 of Complaint), the Complaint references only future performances. Also, the claim for Concealment merely alleges “Defendants failed to disclose to California Scents that they intended to break their word….” (¶31 of Complaint.) Within each of these claims, Plaintiff describes a “false promise,” which is a type of intentional misrepresentation. (Moncada v. West Coast Quartz Corp. (2013) 221 Cal.App.4th 768, 804.)

Pursuant to Building Permit Consultants, Inc. v. Mazur (2004) 122 Cal.App.4th 1400, where a false promise is alleged, the Plaintiff must specifically allege the promisor did not intend to perform at the time he or she made the promise. (Id. at 1415.) Additionally, “the falsity of [a] promise is sufficiently pled with a general allegation the promise was made without intention of performance.” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1060.) Here, Plaintiff sufficiently alleges “Defendants did not intend to perform their promises when made…” (¶39 of Complaint.) Thus, Plaintiff adequately alleges a claim for Fraud, but unnecessarily does so over the course of three causes of action.

However, as the Court in Blickman Turkus, LP v. MP Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, held that a “duplicative” claim is “not a ground on which a demurrer may be sustained,” the Court will simply OVERRULE the Demurrers to all three claims. (Id. at 890.) The Court also notes Defendants did not Demur or attack the Complaint on the basis that Plaintiff’s claims are duplicative.

Fourth COA (Breach of Fiduciary Duty): The elements of a COA for breach of fiduciary duty are the existence of a fiduciary relationship, its breach, and damage proximately caused by the breach. (Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1583, 1599.) Traditional examples of fiduciary relationships include those of trustee/beneficiary, corporate directors and majority shareholders, business partners, joint adventurers, and agent/principal. (Gilman v. Dalby (2009) 176 Cal.App.4th 606, 614.) Additionally, “an allegation of agency…is a statement of ultimate fact.” (Skopp v. Weaver (1976) 16 Cal.3d 432, 439.) “Consequently, further allegations explaining how this fact of agency originated become unnecessary.” (Id.)

Here, the Complaint alleges: “Defendants and California Scents were engaged in a business relationship regarding manufacture of California Scents’ products, from 2006 to 2012, and in that capacity Defendants were California Scents’ agents, trusted with the manufacturing task alleged herein…” (¶46 of Complaint, emphasis added.) Thus, the Complaint clearly alleges the “ultimate fact” of agency, which is sufficient to establish a “fiduciary relationship.”

Further, the authority relied on by Defendants is unavailing. Most significantly, Defendants rely on Rickel v. Schwinn Bicycle Co. (1983) 144 Cal.App.3d 648, however this case is distinguishable as: (1) Rickel was decided on summary judgment, wherein the Court found “no evidence” of a fiduciary relationship; and (2) the manufacturer-distributer relationship described within Rickel does not align with the allegations in this action. In Rickel, the Rickels owned a bicycle shop where they sold Schwinn products. Thus, the question of a fiduciary relationship was limited to review of the relationship “between a manufacturer and his authorized dealers.” (Id. at 653, emphasis added.)

Similarly, Recorded Picture Co. v. Nelson Entertainment, Inc. (1997) 53 Cal.App.4th 350, involved the relationship between a movie producer and distributor. (Id. at 370.) Relying on Rickel, the Court in Recorded Picture stated: “[T]he typical distribution contract, negotiated at arm’s length, does not create a fiduciary relationship between the owner of a product and the distributor.” (Id. at 370, emphasis added.) In contrast to this situation, there are no allegations Defendants were engaged in the distribution of Plaintiff’s products; rather, Plaintiff alleges Defendants were engaged in the manufacture of their products and, thus, responsible for creating the products according to Plaintiff’s specification and design (to later be sold and distributed). As a result, the relationship described in the Complaint differs from the relationships addressed in the authority provided by Defendants. This fact, combined with the general allegations of agency, requires an order OVERRULING the Demurrers.

Fifth COA (Violation of BPC §17200): “The UCL does not proscribe specific activities, but broadly prohibits any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” (Puentes v. Wells Fargo Home Mortg., Inc. (2008) 160 Cal. App. 4th 638, 643-644.) With respect to “unfair” business acts, “any finding of unfairness to competitors under section 17200 [must] be tethered to some legislatively declared policy or proof of some actual or threatened impact on competition.” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 186-187.) As the Court in Cel-Tech clarified: “When a plaintiff who claims to have suffered injury from a direct competitor’s ‘unfair’ act or practice invokes section 17200, the word ‘unfair’ in that section means conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.” (Id.)

The term “fraudulent” as used in section 17200 does not refer to the common law tort of fraud but only requires a showing that members of the public are likely to be deceived. Unless the challenged conduct targets a particular disadvantaged or vulnerable group, it is judged by the effect it would have on a reasonable consumer. (Puentes v. Wells Fargo Home Mortg., Inc. (2008) 160 Cal. App. 4th 638, 645.)

Here, Defendants demur on the grounds Plaintiff fails to allege “unlawful” or “fraudulent” conduct; however, Defendants fail to acknowledge the “unfair prong.” A review of the allegations in the Complaint demonstrates conduct sufficiently likely to deceive the public, to support a claim under the “fraudulent” prong of the UCL. Plaintiff alleges: “Defendants intentionally made, or caused to be made, untrue or misleading representations in the advertisement and marketing of the eXtrair products….for the purpose of creating the false impression among retailers and consumers of a relationship between the California Scents and eXtrair products….” (¶54.) Additionally, Plaintiff alleges: “Defendants’ business practice of representing its eXtrair product as ‘the same as’ or associated with California Scents’ products is likely to deceive retailers…” (¶55.) Based on these allegations, not addressed by Defendants, the Court OVERRULES the Demurrers to this claim.

Note re: Contract: Last, “[t]he failure to allege whether a contract was written or oral is not a ground for demurrer where, as here, the action is not founded upon a contract.” (Fanucchi v. Coberly-West Co. (1957) 151 Cal.App.2d 72, 83.) Here, Plaintiff has not asserted a claim for Breach of Contract and, while a contract is occasionally referenced, nothing demonstrates any claims arise directly therefrom. Accordingly, this portion of Defendants’ Demurrers fails.