Case Number: BC599697 Hearing Date: May 09, 2016 Dept: 73

5/9/16
Dept. 73
Rafael Ongkeko, Judge presiding

LUNT, et al. v. WIEDERMAN, et al. (BC599697)

Counsel for plaintiffs/opposing parties: Michael Justice; Alec Simpson (L.O. Justice)
Counsel for defendant/moving party Wiederman: Penelope Deihl; Ryan McKim (Morris, etc.)

Defendant’s demurrer and motion to strike re first amended complaint

TENTATIVE RULING

Defendant Arthur Widerman’s request for judicial notice is granted. The demurrer is overruled in part and sustained in part, with leave to amend. See instructions and order below re leave to amend.

The motion to strike is granted, with leave to amend.

DISCUSSION (Please note: Unfortunately, the court’s tentative ruling website, which is the source of this version, is not able to show certain formatting contained in the original, such as the court’s use of footnotes, boldface, italics, or the underscoring of case citations.)

Demurrer
This is Wiederman’s first demurrer in this case. Wiederman demurs to the first cause of action for professional negligence on the grounds that this claim is barred by the statute of limitations and Plaintiffs fail to plead facts implicating the discovery rule. As to the second cause of action for breach of contract, Wiederman demurs on the basis that (1) the corporation was not formed until 2004 and, therefore, was not a party to the contract, (2) this cause of action is uncertain, and (3) it is not alleged whether the contract is oral or written. Via the motion to strike, Wiederman argues that punitive damages are not warranted and that Plaintiffs improperly seek emotional distress for a breach of contract claim.

On April 26, 2016 Plaintiffs filed their opposition. First, Plaintiffs argue that the first cause of action is not time-barred due to the continuing violations rule and the discovery rule. Second, as to the breach of contract claim, Plaintiffs contend that the corporation was formed at Wiederman’s suggestion and that the contract did not change in substance. Further, Plaintiffs assert that any issues regarding uncertainty can be easily remedied by adding additional facts.

On 5/2/16 Defendant filed his reply.

Request for Judicial Notice

Wiederman seeks judicial notice of a printout from the California Secretary of State’s website indicating that David P. Lunt, D.D.S., Inc. was not incorporated until 2004. Plaintiffs oppose this request on the grounds that this website page is not judicially noticeable and was not properly authenticated.

“A court may take judicial notice of the acts and records of the Secretary of State and it is not necessary to submit proof that a document has been filed with him to establish such fact.” Gigax v. Ralston Purina Co. (1982) 136 Cal.App.3d 591, 603 fn. 6 (citing People v. Haugh (1963) 216 Cal.App.2d 603, 606.)

Here, the court is requested to take judicial notice of the date of incorporation for David P. Lunt, D.D.S., Inc. Based on Evidence Code § 452(c) and Gigax, it would appear to be proper for the court to take judicial notice of this fact. Does plaintiff, who is in a better position to know, have a genuine dispute with the factual information in this document?

Pending plaintiff’s response, the request for judicial notice is granted.

First Cause of Action – Professional Negligence

The operative complaint alleges delayed discovery and continuing violation theories with bare factual support to cover the entire period, and, in their opposition, plaintiffs now rely on a continuing accrual theory, potentially covering only discrete claims during a much-shorter limitations period. It is a question of fact whether the obvious nature of the embezzlement would be apparent only to a CPA but not necessarily his non-expert client. Depending on the allegations, the action could be timely over the entire 7-year period of Lepe’s conduct (2008-2015) based on plaintiffs’ claimed late discovery (Feb. 2015) and reliance on defendant’s assurances during his annual inquiries or only as to specific and discrete claims of Lepe’s embezzlement for a two-year (oral agreement) or four-year (written contract) period before 10/30/15 (complaint filing date) under the Aryeh case. These are all questions of fact and the court finds that a statute of limitations defense is not apparent on the face of the FAC. The demurrer to the first cause of action on a statute of limitations ground is OVERRULED.

Second Cause of Action – Breach of Contract

Defendant demurs to this cause of action on three separate grounds: (1) the corporation was not formed until 2004 and, therefore, was not a party to the contract, (2) this cause of action is uncertain, and (3) it is not alleged whether the contract is oral or written.

With respect to the first argument, it is well-taken that because the Lunt incorporation did not occur until 2004, it could not have been a party to a contract formed in 1988. While plaintiffs will have to prove how and when David P. Lunt, D.D.S., Inc. became a party to the contract, it is undisputed that any cause of action would have accrued after 2004 in any event. The demurrer on this ground is overruled.

Finally, with respect to uncertainty and whether the contract is oral or written, the grounds expressed in the demurrer are well-taken and require an amended complaint, which plaintiff concedes. These are the kinds of elementary defects that should have been easily handled at the meet and confer level.

Based on the foregoing, the demurrer to the second cause of action is SUSTAINED with leave to amend.

Motion to Strike

A motion to strike punitive damages from a complaint is appropriate where the facts alleged are insufficient to warrant imposition of punitive damages. See Turman v. Turning Point of Cent. California, Inc. (2010) 191 Cal.App.4th 53, 64. Punitive damages are appropriate if the defendant’s acts are reprehensible, fraudulent or in blatant violation of law or policy. American Airlines, Inc. v. Sheppard, Mullin, Richter & Hampton (2002) 96 Cal.App.4th 1017.

Civil Code section 3294, subdivision (a) authorizes the recovery of punitive damages in non-contract cases “where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.”

Malice is defined as “conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” Civ. Code, § 3294, subd. (c)(1). “[T]o establish malice, it is not sufficient to show only that the defendant’s conduct was negligent, grossly negligent or even reckless. There must be evidence that defendant acted with knowledge of the probable dangerous consequences to plaintiff’s interests and deliberately failed to avoid these consequences.” Flyer’s Body Shop Profit Sharing Plan v. Ticor Title Ins. Co. (1986) 185 Cal.App.3d 1149, 1155 (emphasis added).

“Something more than the mere commission of a tort is always required for punitive damages. There must be circumstances of aggravation or outrage, such as spite or ‘malice,’ or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that his conduct may be called willful or wanton.” Taylor v. Superior Court (1979) 24 Cal. 3d 890, 894; see also Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 166.

Here, Plaintiffs’ FAC generally alleges that “Wiederman’s acts and omissions constituted gross negligence and were performed with a conscious disregard of Plaintiff’s rights. In committing the acts and omissions set forth above, Weiderman has been guilty of fraud, oppression, and malice toward Plaintiffs.” Such allegations are far too conclusory to support the imposition of punitive damages. Plaintiffs must allege specific facts indicating how Wiederman’s alleged professional negligence was sufficiently egregious so as to constitute fraudulent, oppressive, or malicious conduct.

As to the allegations of emotional distress found in Paragraph 25 within the cause of action for breach of contract, Plaintiffs concede that such damages are not recoverable for such a claim. As such, this paragraph should be stricken.

The motion to strike is GRANTED, with leave to amend. See instructions/order below.

Instructions/order re leave to amend and red-line version:
NEW AND AMENDED LEGISLATION REGARDING DEMURRERS AND AMENDED PLEADINGS (EFFECTIVE 1/1/16 THROUGH 1/1/21): All parties and counsel are referred to Code of Civil Procedure §§ 430.41; 472; and 472a regarding, but not limited to, the following areas: pre-demurrer timely meet and confer efforts; declaration re same; limit on the number of amendments permitted; prohibited grounds for demurrer; and the deadline to file an amended pleading without stipulation or leave of court.
Subject to the meet and confer requirement below: Plaintiffs are granted leave either to file and serve a writing by MAY 19, 2016 indicating no intent to amend the complaint or to file and serve a SECOND AMENDED COMPLAINT by that date. If plaintiffs elect the former, defendant’s answer shall be filed and served within 10 days of that date. If plaintiffs elect the latter, a red-line copy of the amended complaint showing the changes from the previous complaint is to be concurrently provided to defendant(s). If any defendant intends to file a demurrer to the amended complaint, that defendant must file and serve its demurer within 10 days of plaintiffs’ service date and demurring defendant must lodge directly in Dept. 73 the red-line copy of the amended complaint with its demurrer.

Meet and confer requirement (effective 1/1/16 through 1/1/21): The court orders the parties to meet and confer before the amended complaint (or cross-complaint) or demurrer to the amended complaint (or cross-complaint) is filed.
Any failure to comply with this order by any party may result in an order to show cause why monetary and/or other sanctions should not be imposed.

Unless waived, notice of ruling by moving party.