Case Name: Mobileframe LLC v. Proctor Productions, Inc.
Case No.: 1-13-CV-255909

On June 27, 2013, plaintiff Mobileframe LLC (“Plaintiff”) entered into a written contract to provide software licenses and professional services on a time and materials basis to defendant Proctor Productions, Inc. (“Defendant”). (See first amended complaint (“FAC”), ¶ 6, exh. A.) According to the contract that is the subject of the FAC, Defendant agreed to pay $17,000 for Plaintiff’s services; however, note 4 of section 2.0 of the contract—entitled “Pricing Proposal”—also provides that:

The license fees quoted for the mobile application is an estimate only based on an assumed 60 hours of labor required to build the application. Actual hours may vary and any additional hours required will increase the license fee at the rate of $200/hour of additional labor required to complete the applications. Reference Section 6.0 below for Scope of Work.

(FAC, exh. A (“Contract”), § 2.0 (“Pricing Proposal), note 4.)

Note 8 of the Contract states:

This is a time and materials based contract. MobileFrame estimates the professional services will require approximately 36 labor hours, excluding training. Any additional hours required will increase the professional services costs at the rate of $200/hour of additional labor require to complete the scope of effort.

(FAC, exh. A (“Contract”), § 2.0 (“Pricing Proposal), note 8.)

The first amended complaint alleges that “Plaintiff has performed an additional 10 hours of professional services billable, pursuant to notes 4 and 8 of the subject contract, that have not been paid, in the amount of $2,000.00 (Two Thousand dollars).” (FAC, ¶ 14.) Defendant apparently paid the $17,000 specified by the Contract, but, on October 28, 2013, Jen Patterson—the manager of the software project—sent an email that stated “we are not willing to pay any more than we already have.” (FAC, ¶ 15.) Plaintiff asserts that they are entitled to contractual and fraud damages in the amount of $28,800.

On February 18, 2014, the Court sustained the demurrer to the second cause of action of the complaint, stating, “Here, there is no factual basis for the amount of the $28,800 of damages or any damages beyond that of the contractual damages of $2000.”

On February 27, 2014, Plaintiff filed a first amended complaint for breach of contract and fraud, newly alleging that “Plaintiff has sustained damages in the amount of $28,800 as follows: $20,000 software licensing discount (¶ 10 herein), $2,000 labor discount (¶ 11 herein), $2,000 unpaid labor (¶ 14 herein), $1,625 sales commissions paid, also incurred $3,175 in out-of-pocket/reliance damages to estimate, prepare, negotiate and administer this contract.” (FAC, ¶ 22.) Defendant again demurs to the second cause of action for fraud.

Here, the FAC adequately alleges facts with sufficient particularity regarding the amount of damages. It lists precisely what Plaintiffs believe to be the basis for the amount of damages. Further, the FAC alleges that Defendant entered into the contract without any intention of performing the portion of the contract that provides for additional work beyond the estimated 60 hours to be provided at $200 per hour, and reasonably relied on the terms of the contract. The demurrer to the second cause of action on the ground that it fails to allege facts with sufficient particularity, a misrepresentation or justifiable reliance is OVERRULED.

As to the demurrer to the second cause of action on the ground that it fails to allege facts supporting damages, the Court agrees with Defendant that most of the alleged $28,800 in damages cannot be recovered in either fraud or contract. The parties agreed to the terms of the Contract and the FAC specifically alleges that Plaintiff reasonably relied on those terms. Plaintiff may not recover any discounts given to Defendant; both parties are held to the terms of the contract as economic damages. Moreover, the sales commissions and the out-of-pocket/reliance damages to estimate, prepare, and negotiate the contract are not resulting damages. As previously stated in the prior order: “a defrauded party… may not recover benefit-of-the-bargain damages (i.e., damages placing him in the economic position he would have occupied had the representation been true), at least where the recovery is not premised on a specific property actually acquired by the defrauded party.” (Kenly v. Ukegawa (1993) 16 Cal.App.4th 49, 54.) That said, Plaintiff is correct that “a party may not demur to a portion of a cause of action [citation], but suggest that in appropriate circumstances a substantive defect which appears on the face of a complaint, but involves only a portion of a cause of action, may be the subject of a motion to strike.” (PH II, Inc. v. Super. Ct. (Ibershof) (1995) 33 Cal.App.4th 1680, 1681.) The FAC does allege damages as a result of the alleged promise without intent to perform: $2,000 of unpaid labor. Thus, the demurrer to the second cause of action on the ground that it fails to allege facts supporting any damages is OVERRULED.