Case Number: EC060781    Hearing Date: August 08, 2014    Dept: NCB

13. EC060781
VISSIONSHOCK ENTERTAINMENT v. ERIC YOUNG
Demurrer to Cross Complaint
Case Management Conference

The Cross-Complaint alleges that Cross-Defendant, Visionshock Entertainment, LLC, is a limited liability company that provides event promotion services. The Cross-Complainant and the Cross-Defendants, Paul Phan, Harry Yu, and Kerry Lam, were the founders of Visionshock Entertainment, LLC.
It is alleges that the parties entered into a contract under which the Cross-Complainant provided services and the Cross-Defendants agreed to pay his expenses plus 35% of the profits. The Cross-Defendants breached this contract by failing to pay his expenses. Further, the Cross-Defendants converted the Cross-Complainant’s membership interest. In addition, the Cross-Defendants made false statements that they would keep accurate books and would pay additional compensation. Finally, the Cross-Defendants have engaged in libel by making false statements about the Cross-Complainant within the promotions industry.

The Causes of Action in the Cross-Complaint are for:
1) Breach of Contract
2) Breach of Implied Covenant of Good Faith and Fair Dealing
3) Conversion
4) Common Counts
5) Fraud
6) Conspiracy
7) Libel

This hearing concerns the Cross-Defendants’ demurrer to each cause of action in the Cross-Complaint. The Defendant’s demurrer is based on the failure to state sufficient facts.
The failure to state sufficient facts to constitute a cause of action is a ground for a demurrer under CCP section 430.10(e). In order to determine whether there are grounds for the demurrer, the Court examines the allegations in order to determine whether they contain the essential facts necessary to plead a valid cause of action. Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal. 4th 26, 38-39. The Court assumes the truth of all material facts properly pleaded and gives the complaint a reasonable interpretation, reading it as a whole and its parts in their context. Id.

1. First Cause of Action for Breach of Contract
The Cross-Defendants argue that the cause of action fails to identify the material terms of the agreement and fails to plead that the individuals, Paul Phan, Harry Yu, and Kerry Lam, were parties to the contract.
The essential elements of a cause of action for breach of contract are the following:

1) the contract,
2) plaintiff’s performance or excuse for nonperformance,
3) defendant’s breach, and
4) the resulting damages to plaintiff.
Reichert v. General Ins. Co. (1968) 68 Cal. 2d 822, 830.

An oral contract may be pleaded generally as to its effect because it is rarely possible to allege the exact words. Scolinos v. Kolts (1995) 37 Cal. App. 4th 635, 640.

The Cross-Complainant alleges in paragraph 29 that the Cross-Complainant entered into an oral agreement with Paul Phan, Harry Yu, and Kerry Lam. This allegation is assumed true and the Cross-Complainant’s ability to prove the allegation is of no concern for the purposes of ruling on the demurrer. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214. Accordingly, the Cross-Complainant pleads sufficient facts to demonstrate that the Cross-Defendants were parties to the oral contract.
Further, the Cross-Complainant alleges in paragraph 29 that the parties agreed that the Cross-Complainant would work full time to grow the company into a successful promotions company and that the Cross-Defendants would pay some of the Cross-Complainant’s expenses plus a 35% share of the profits. This allegation is sufficient to plead the oral contract because it identifies, generally, that it was a contract under which the Cross-Defendant would provide services in exchange for payment of his expenses and a share of the profits.

Therefore, the Court overrules the demurrer to the first cause of action.

2. Second Cause of Action for Breach of Implied Covenant of Good Faith and Fair Dealing and Fourth Cause of Action for Common Counts

The Cross-Defendants argue that that the second and fourth causes of action fail because the Cross-Complainant did not plead the existence of a valid contract between the parties in the first cause of action. As discussed above in the analysis of the demurrer to the first cause of action for breach of contract, the Cross-Complainant has alleged sufficient facts to plead the existence of an oral contract between the parties. Since the Cross-Complainant has pleaded the existence of a valid contract, this is not a basis for a demurrer to the second or fourth causes of action.

In addition, the Cross-Defendants argue that the second cause of action for breach of the implied covenant is duplicative and a mere restatement of the first cause of action. However, a comparison of the two causes of action reveals that they are based on different breaches.
The first cause of action pleads in paragraph 31 that the Cross-Defendants breached the contract by failing to pay anything beyond the share of profits. The second cause of action pleads in paragraph 36 that the Cross-Defendants breached the implied covenant by failing to maintain adequately the company’s books and records. This indicates that the two causes of action are based on different breaches, i.e., the first is based on the failure to pay anything beyond a share of the profits and the second is based on the failure to maintain the company’s books and records. Since the two causes of action are based on different breaches, the second cause of action is not duplicative of the first.

Therefore, the Court overrules the demurrers to the second and fourth causes of action.

3. Third Cause of Action for Conversion

The Cross-Defendants argue that this cause of action does not plead any facts to demonstrate that Visionshock Entertainment, LLC, Paul Phan, Harry Yu, and Kerry Lam converted any property.
A claim for conversion must allege the following elements:

1) Plaintiff had the right of ownership and possession to the property converted;
2) Defendant unlawfully took the property, and
3) the value of the property converted.
Taylor v. S & M Lamp Co. (1961) 190 Cal. App. 2d 700, 705.

The Cross-Complainant alleges in paragraph 43 that on October 5, 2012, Cross-Defendants, Visionshock Entertainment, LLC, Paul Phan, Harry Yu, and Kerry Lam, took the membership interest of the Cross-Complainant in Visionshock. This allegation pleads that the Cross-Defendants unlawfully took the Cross-Complainant’s property, i.e., his membership interest. This allegation is assumed true and the Cross-Complainant’s ability to prove the allegation is of no concern for the purposes of ruling on the demurrer. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214. Accordingly, the Cross-Complainant pleads sufficient facts to demonstrate that the Cross-Defendants converted his property.

Therefore, the Court overrules the demurrer to the second cause of action.

4. Fifth Cause of Action for Fraud
The Cross-Defendants argue that the fraud claim lacks the particular allegations necessary to plead fraud. The fraud cause of action must include the following elements:

1) a representation, usually of fact, which is false;
2) knowledge of its falsity;
3) intent to defraud;
4) justifiable reliance upon the misrepresentation; and
5) damage resulting from that justifiable reliance
Stansfield v. Starkey (1990) 220 Cal. App. 3d 59, 72-73.

Facts constituting each element of fraud must be alleged with particularity; the claim cannot be saved by referring to the policy favoring liberal construction of pleadings. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216. Since fraud must be pleaded with particularity, the complaint must allege facts showing how, when, where, to whom, and by what means the representations were tendered. Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73. In addition, fraud pleadings against a corporation must allege the names of the persons who made the misrepresentations, their authority to speak for the corporation, to whom they spoke, what they said or wrote, and when it was said or written. Tarmann v. State Farm Mutual Automobile Insurance Co. (1991) 2 Cal.App.4th 153, 157.

A review of the fifth cause of action reveals that it lacks the necessary particularity. The Cross-Complainant alleges in paragraph 53 that throughout the course of the relationship, the Cross-Defendants made false representations of material fact that they would accurately maintain the books and that the Cross-Complainant’s efforts would be compensated. This is insufficient because there are no allegations identifying the particular, false representation made by each of the four, separate Cross-Defendants. There are no allegations identifying how, when, where, to whom, or by what means the representations were tendered. There are no allegations identifying the person who spoke on behalf of Visionshock and the person’s authority to speak on behalf of Visionshock. The cause of action lacks the required particularity.

Therefore, the Court sustains the demurrer to the fifth cause of action with 10 days leave to amend.

5. Sixth Cause of Action for Conspiracy
The Cross-Defendants argue that this is not a cause of action. Under California law, conspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration. Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 784.

Therefore, the Court sustains the demurrer to the sixth cause of action because conspiracy is not a cause of action. Further, the Court does not grant leave to amend because it is not possible to correct this defect by amendment.

Summary of Ruling:
1. Overrule demurrers to first, second, third, and fourth causes of action.
2. Sustain demurrer to fifth cause of action with leave to amend.
3. Sustain demurrer to sixth cause of action without leave to amend