Case Name: Wellex Corporation v. NVIDIA Corporation, et al.
Case No.: 16-CV-299320

Defendants (1) NVIDIA Corporation (“NVIDIA”) and (2) Fabrinet USA, Inc. and Fabrinet West, Inc.’s (collectively, “Fabrinet”) each demur to the third amended complaint (“TAC”) filed by plaintiff Wellex Corporation (“Plaintiff” or “Wellex”).

This is an action for breach of contract and intentional interference, among other things, arising out of a failed business relationship. According to the allegations of the TAC, Plaintiff is in the business of electronic manufacturing services. (TAC, ¶ 8.) Part of its business includes new product introduction (“NPI”), whereby Plaintiff is provided with designs of printed circuit boards from its customers and manufactures prototype boards for the customers’ further analysis and testing. (Id.) To place electronic components onto printed circuit boards, Plaintiff uses surface mount technology (“SMT”)- a process utilizing robotic machines. Several SMT machines with different functions are used to form a single production line. (Id.)

Plaintiff has been one of NVIDIA’s NPI vendors since 2008. (TAC, ¶ 9.) NVIDIA is Plaintiff’s primary customer, generating approximately $3,000,000 of gross revenue and $600,000 of profit yearly. (Id.) Plaintiff was primarily working on consignment of NPI production, whereby NVIDIA would supply all electronic components for its prototype builds. (Id.) For its other customers, Plaintiff performs “turnkey” production, meaning that Plaintiff supplies the necessary components. (Id.)

As a condition of performing NPI services, NVIDIA required Plaintiff to reserve two SMT production lines (“NVIDIA Lines”) at all times for their needs, which NVIDIA’s engineering team must certify. (TAC, ¶ 10.) NVIDIA also required Plaintiff to disclose the identities and expertise of all employees working on the NVIDIA Lines. (Id.) Plaintiff agreed to NVIDIA’s conditions in order to secure NVIDIA’s business. (Id.)

From 2011 to 2014, NVIDIA demanded that Plaintiff upgrade the NVIDIA Lines by purchasing new SMT machines with “parts on part” capabilities (“PoP”) and increased precision. (TAC, ¶ 11.) NVIDIA expressly promised to Wellex that if it upgraded the NVIDIA Lines per its request, Wellex would receive continuing NPI business from NVIDIA to make this substantial investment worthwhile. (Id.) More specifically, in June 2011, NVIDIA represented that if the upgrade took place, it would continue providing the same level of business to Wellex for a period of five years after the equipment was purchased, i.e., $300,000 per year of purchase orders (“Initial Upgrade Contract”). (Id., ¶ 12.) Wellex accepted the contract and performed by purchasing the new SMT machine in July 2011 for approximately $230,000. (Id.) NVIDIA and Plaintiff’s engineering teams worked closely together to set up the machine to NVIDIA’s specifications. (Id.)

In January 2013, Plaintiff completed its performance under the Initial Upgrade Contract by purchasing another SMT machine for approximately $690,000 to complete the NVIDIA Line with PoP capability. (TAC, ¶ 14.) However, later in 2013, Plaintiff’s representatives were informed by Talbert Aquilar (“Aquilar”) from NVIDIA that the NVIDIA Line with PoP capability was insufficient for NVIDIA’s needs. (Id., ¶ 15.) Aquilar pressured Plaintiff to make additional machine upgrades. (Id.)

On February 2, 2014, a representative of NVIDIA stated that if Plaintiff made a subsequent upgrade of the NVIDIA Lines to the requested SMT machines, NVIDIA would provide $3,000,000 per year of purchase orders to Plaintiff for five years commencing from the date of equipment delivery (“Subsequent Upgrade Contract”). (TAC, ¶ 16.) This agreement modified and superseded the Initial Upgrade Contract in that the promised business of $3,000,000 per year would end about five years after Plaintiff purchased the new machines. (Id.) The new agreement was accepted by Plaintiff who, between February 2014 and June 2014, fully performed by purchasing the required SMT machine and accessories for over $700,000. (Id.)

During the upgrade period, NVIDIA knew that: (1) the NVIDIA Lines were reserved for NVIDIA’s NPI production; (2) Plaintiff had no other customers requiring PoP capability and the upgrades were performed at the request of and for the sole benefit of NVIDIA; and (3) Plaintiff incurred substantial time and expense in upgrading the NVIDIA Lines. (TAC, ¶ 18.) Plaintiff accepted NVIDIA’s offers and fully performed to the terms agreed between the parties with the expectation that after Plaintiff purchased the requested SMT machines, NVIDIA would provide Plaintiff with the work to fulfill the NVIDIA Lines until June 2019. (Id., ¶ 19.) NVIDIA, however, did not perform as agreed and instead subsequently refused to send its engineers to finalize the upgraded NVIDIA Line and failed to provide the work promised. (Id.) NVIDIA terminated Plaintiff’s NPI services to Plaintiff’s detriment and Plaintiff would not have invested over $1,600,000 plus additional labors costs if the parties’ relationship was merely “at will” and terminable at any time by NVIDIA as it claimed. (Id.)

In August 2015, NVIDIA orally informed Plaintiff that it was terminating its business with Plaintiff “due to cost concerns.” (TAC, ¶ 20.) Plaintiff was forced to lay off approximately one-third of its workface, incurring additional sums for employee severance and other incidental expenses. (Id.) NVIDIA then moved all of its NPI services to Fabrinet. (TAC, ¶ 21.) Fabrinet USA, Inc. set up a new company- Fabrinet West, Inc.- on January 16, 2015, for the primary purpose of diverting NVIDIA’s NPI business away from Plaintiff. (Id.) Plaintiff alleges that the long term friendship between Debra Shoquist (“Shoquist”), Vice President of Manufacturing for NVIDIA, and Tom Mitchel (“Mitchel”), a senior member of the Fabrinet organization, led to the establishment of Fabrinet West as well as the sharing of the scope of manufacturing by Plaintiff and the disclosure of the names and operational positions of Plaintiff’s employees. (Id., ¶¶ 22-23.) This sharing of inside information “ultimately led to the loss of the NPI lines, and the solicitation of employees from Plaintiff [] by Fabrinet West, thus directly interfering with the contract” between Plaintiff and NVIDIA. (Id., ¶ 23.) To date, Fabrinet has recruited 12 former employees of Plaintiff to work at its Santa Clara facility. (Id.)

Based on the foregoing, Plaintiff filed the operative TAC against NVIDIA and Fabrinet, alleging the following causes of action: (1) breach of express contract (against NVIDIA); (2) breach of implied covenant of good faith and fair dealing (against NVIDIA); (3) promissory estoppel (against NVIDIA); (4) promissory fraud (against NVIDIA); (5) intentional interference with contractual relationship/inducing breach of contract (against Fabrinet); (6) intentional interference with prospective economic relations (against Fabrinet); (7) negligent interference with prospective economic relations (against Fabrinet); and (8) unfair business practices in violation of Business and Professions Code section 17200, et seq. (against Fabrinet).

On October 24, 2017, NVIDIA filed the instant demurrer to each of the four claims asserted against it in the TAC on the ground of failure to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).) That same day, Fabrinet filed its own demurrer to the four claims asserted against it on the same grounds. (Id.) Plaintiff opposes both motions in a combined opposition.

I. NVIDIA’s Demurrer

As a preliminary matter, NVIDIA’s request for judicial notice of (1) the initial complaint (Exhibit A), (2) the first amended complaint (“FAC”) (Exhibit B), (3) the second amended complaint (“SAC”) (Exhibit C), (4) the Court’s order on NVIDIA’s demurrer to the original complaint, filed November 15, 2016 (Exhibit D), (5) the Court’s order on NVIDIA’s demurrer to the second amended complaint, filed on September 14, 2017 (Exhibit E), and (6) Plaintiff’s verified Third Amended Responses to Special Interrogatories, Set One (Exhibit F) is GRANTED. The first five items are proper subjects of judicial notice pursuant to Evidence Code section 452, subdivision (d), which provides that the court may properly take judicial notice of the records of “any court of this state.” As for the remaining exhibit, NVIDIA requests that judicial notice of Plaintiff’s interrogatory responses be taken in order to demonstrate the inconsistencies between them and the allegations of the TAC.

While it is generally true that a demurrer is limited to the face of a pleading and facts alleged in that pleading are deemed to be true, however improbable they may be (see Griffith v. Department of Public Works (1956) 141 Cal.App.2d 376), a court “will not close [its] eyes to situations where a complaint contains allegations of fact inconsistent with attached documents, or allegations contrary to facts which are judicially noticed.” (Del E. Webb Corp. v. Structural Materials Co. (1983) 123 Cal.App.3d 593, 604-605.) Thus, a court may properly take judicial notice of items such as answers to interrogatories where they contain statements of the “plaintiff or his agent which are inconsistent with the allegations of the pleading before the court.” (Id.) Consequently, the remaining exhibit in NVIDIA’s request is a proper subject of judicial notice for the purposes of demonstrating any purported inconsistencies. Thus, judicial notice of each of the items in NVIDIA’s request is granted.

Turning to the substance of NVIDIA’s demurrer, NVIDIA first asserts that the allegations of the TAC contradict the contents of Plaintiff’s prior pleadings and responses to interrogatories and thus the pleading is a sham pleading whose new allegations should be disregarded by the Court.

As a general matter, the rules regarding sham pleadings are implicated “where a party files an amended complaint and seeks to avoid the defects of a prior complaint either by omitting the facts that rendered the complaint defective or by pleading facts inconsistent with the allegations of prior pleading.” (Owens v. Kings Supermarket (1988) 198 Cal.App.3d 379, 384; see also Vallejo Dev. Co. v. Beck Dev. Co. (1994) 24 Cal.App.4th 929, 946.) “In these circumstances the policy against sham pleading permits the courts to take judicial notice of the prior pleadings and requires that the pleader explain the inconsistency. If he fails to do so the court may disregard the inconsistent allegations and read into the amended complaint the allegations of the superseded complaint.” (Owens, supra.) The purpose of the sham pleading doctrine is to prevent abuse of process. (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 426.)

Here, NVIDIA maintains that the allegations of the TAC are inconstant with those contained in prior iterations of the complaint. In the SAC, it explains, Plaintiff alleged that “Wellex and NVIDIA entered into an express agreement whereby … NVIDIA expressly offered on numerous occasions that if it upgraded the NVIDIA Lines as per NVIDIA’s specifications, Wellex would receive continuing NPI business from NVIDIA to make its substantial investment worthwhile.” (SAC, ¶ 24.) NVIDIA demurred to the SAC, arguing that the contract as alleged in the foregoing statement was impermissibly vague. This argument was found to be persuasive by the Court, which sustained the demurrer to the breach of contract claim explaining that the alleged contract was “too vague and uncertain to impose contractual liability” because “the conditions of performance of the alleged contract [are] fatally uncertain,” and “[t]he vague and uncertain nature of the obligation asserted provides no rational method for determining breach or computing damages.” (Declaration of Alexander Talarides in Support of Demurrer to TAC (“Talarides Decl.”), Exhibit E at 5-7.) In order to avoid the foregoing issue, NVIDIA contends, Plaintiff has now “fabricated” an entirely new contract under which it allegedly agreed to provide Plaintiff with $3 million per year of purchase orders for five years commencing from the date of equipment, i.e., until June 2019. (TAC, ¶¶ 16, 29.) These specific terms contradict the allegations of the SAC and Plaintiff’s responses to interrogatories, NVIDIA maintains, which did not contain such terms. Thus, it concludes, these allegations are a sham and must be disregarded by the Court.

NVIDIA’s argument is unavailing. As Plaintiff asserts in its opposition, new allegations do not qualify as a sham pleading merely because they deviate from the prior complaint. What must exist to trigger the doctrine is the omission of harmful facts or the inclusion of facts which are inconsistent with prior allegations. (See Owens v. Kings Supermarket, supra, 198 Cal.App.3d at 384.) Neither can be said to have occurred here, as Plaintiff has merely provided further specificity to its complaint so as to address the Court’s conclusion that the contract as pleaded in the SAC was too vague and uncertain to be enforced. Critically, the rule against sham pleading is “not … intended to prevent honest complainants from correcting erroneous allegations of generic terms which may have legal implications but which are also loosely used by laymen to prevent the correction of ambiguous statements of fact.” (Macomber v. State of California (1967) 250 Cal.App.2d 391, 399.) This is what Plaintiff has done here. Therefore, the Court does not agree that the new allegations pertaining to the terms of the alleged agreement between Plaintiff and NVIDIA are a sham.

NVIDIA next contends that Plaintiff’s breach of contract claim is deficient because it is still fatally uncertain. Under basic contract law, “[w]here a contract is so uncertain and indefinite that the intention of the parties in material particulars cannot be ascertained, the contract is void and unenforceable.” (Cal. Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474, 481.) “To be enforceable, a promise must be definite enough that a court can determine the scope of the duty and the limits of performance must be sufficiently definite to provide a rational basis for the assessment of damages.” (Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 761, 770.) The Court previously agreed with NVIDIA that the contract as alleged was fatally uncertain, quoting with approval questions raised by NVIDIA about the numerous uncertainties in the alleged agreement, including how much continuing business was required to be provided by NVIDIA and for what length of time. While answers to these particular questions have been provided with the new allegations of the TAC, NVIDIA still maintains the agreement is so uncertain as to be unenforceable because so many other terms remain unclear, including what it means to provide $3 million of purchase orders per year for five years, what products were to be produced and at what price, what the component costs were and the profit margin agreed to between the parties.

In its opposition, Plaintiff responds that the issues of ambiguity previously identified by the Court have been answered in the TAC and that the price and profit margin were already pre-negotiated and built in between it and NVIDIA pursuant to a price matrix. This price matrix is not pleaded in the TAC, but submitted as Exhibit A attached to the declaration of Plaintiff’s counsel. While the Court will not review this exhibit due to the fact that it is outside the pleadings, Plaintiff’s representation of what is contained within it suggests that further amendment to the TAC is possible to provide greater detail as to the terms of the subject agreement and address any remaining uncertainties therein. While the Court acknowledges that Plaintiff has addressed some of the uncertainties highlighted in its prior order, it agrees with NVIDIA that there still remains too much vagueness in the agreement as pleaded so as to provide the Court with the necessary elements to provide a rational basis for the assessment of damages. In sum, the subject contract is still too uncertain to be enforceable and therefore Plaintiff’s breach of express contract claim is demurrable on this basis. However, based on Plaintiff’s representations regarding a pre-negotiated price and profit margin, the Court is inclined to permit further amendment should NVIDIA’s remaining arguments with respect to this claim prove unsuccessful.

NVIDIA continues that Plaintiff’s breach of express contract claim is deficient for an additional reason: it is barred by the statute of frauds. “The statute of frauds is a collective term describing the various statutory provisions that deny enforcement to certain enumerated classes of contracts unless they are reduced to writing and signed by the party to be charged.” (1 Witkin, Summary of California Law (11th ed. 2017) Contracts, § 343.) As relevant here, one type of contract subject to the statute of frauds is “[a]n agreement that by its terms is not to be performed within a year from the making thereof.” (Civ. Code, § 1624, subd. (a)(1); see Munoz v. Kaiser Steel Corp. (1984) 156 Cal.App.3d 965, 971.) As alleged here, the contract that is the subject of the breach of contract claim, the Subsequent Upgrade Contract, is alleged to have been five years in duration and thus, by its terms, was not to be performed within a year of its making. (TAC, ¶ 16.) Accordingly, on its face the agreement clearly falls within the statute of frauds, but is alleged by Plaintiff to have been oral. This allegation therefore seemingly establishes the validity of NVIDIA’s assertion that the agreement is barred by the statute of frauds.

However, in its opposition, Plaintiff insists that this is not the case because there are numerous exceptions to the statute of frauds which are applicable to the circumstances at bar. First, Plaintiff insists that it fully performed under the agreement, thereby taking NVIDIA’s alleged contractual obligations outside of the statute. As a general matter, “[w]here the contract is unilateral, or, though originally bilateral, has been fully performed by one party, the remaining promise is taken out of the statute [of frauds], and the party who performed may enforce it against the other.” (Secrest v. Security Nat. Mortg. Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 556.) Plaintiff asserts that it has properly triggered this exception by alleging in the TAC that it fully performed by purchasing the required SMT machinery and setting up the NVIDIA Lines. (TAC, ¶¶ 12-16.)

Anticipating Plaintiff’s performance argument in its moving papers, NVIDIA contends that Plaintiff does not- and cannot- allege any facts to support the application of this exception to its breach of contract claim. In particular, NVIDIA focuses on the element of “unconscionable injury,” arguing that the TAC contains no allegations to support the assertion that Plaintiff would suffer such an injury if the purported contract was not enforced. NVIDIA maintains that his element is required of both the partial performance exception to the statute of frauds and the second exception argued by Plaintiff to the statute- equitable estoppel. However, none of the authorities cited by NVIDIA require the allegation of an unconscionable injury by the plaintiff in order to trigger the exception based on full performance by one party, only estoppel. Here, Plaintiff has pleaded that it fully performed under the Subsequent Upgrade Contract. (TAC, ¶¶ 19, 28.) As NVIDIA has not established the insufficiency of this allegation, it had not demonstrated that its performance under the subject agreement has not been removed from the statute of frauds. Thus, NVIDIA’s contention that Plaintiff’s claim is barred by the statute of frauds is unavailing.

NVIDIA is correct, however, that the suffering of an unconscionable injury by the plaintiff must be pleaded in order to estop the defendant from relying on the statute of frauds. (See Ruinello v. Murray (1951) 36 Cal.2d 687, 689 [stating that “there can be no estoppel [of the defendant relying on the statute of frauds] unless plaintiff will suffer unconscionable injury or defendant will be unjustly enriched if the oral contract is not enforced”].) The Court also agrees with NVIDIA that Plaintiff has not sufficiently pleaded that it will suffer such an injury if the contract is not enforced. As NVIDIA notes, by its own admission in the TAC, Plaintiff received approximately $3 million per year in revenue from NVIDIA during the period of 2011 to 2015 and realized a 20% profit margin. (TAC, ¶ 9.) Thus, Plaintiff seemingly recouped the amounts it expended on new equipment on reliance on the purported agreements and while it claims to have lost profits due to NVIDIA’s alleged breach, the loss of the benefit of the bargain, i.e., anticipated profits, does not constitute an unconscionably injury. (See, e.g., C.R. Fedrick, Inc. v. Borg-Warner Corp. (9th Cir. 1977) 552 F.2d 852, 857-858.) However, because Plaintiff has sufficiently pleaded full performance on its end so as to remove NVIDIA’s portion of the subject agreement from the statute of frauds, its failure to plead sufficient facts to establish estoppel of assertion of the statute by NVIDIA is of no consequence.

Although Plaintiff has pleaded sufficient allegations to remove the Subsequent Upgrade Contract from the statute of frauds, the agreement as alleged remains insufficiently specific for the reasons articulated above. Consequently, NVIDIA’s demurrer to the first cause of action for breach of the express contract on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

NVIDIA next contends that Plaintiff’s second cause of action for breach of the implied covenant fails for the following two reasons: (1) Plaintiff fails to allege the existence of an enforceable contract; and (2) the claim does not go beyond the statement of a mere contract breach, seeking the same relief as the breach of contract claim, and is therefore superfluous. Both of these arguments are well taken.

With respect to the first, “[w]ithout a contractual underpinning, there is no independent claim for breach of the implied covenant.” (Fireman’s Fund Ins. Co. v. Maryland Casualty Co. (1994) 21 Cal.App.4th 1586, 1599 [stating that the implied covenant is auxiliary and supplementary to express contractual obligations; it has no existence separate from the contractual obligations] [internal citation omitted].) Because Plaintiff has failed to plead the existence of an enforceable agreement in the first cause of action for the reasons articulated above, the second cause of action fails as well.

As for the second argument, a “breach of the implied covenant of good faith and fair dealing involves something beyond breach of the contractual duty itself ….” (Congleton v. National Union Fire Ins. Co. (1987) 189 Cal.App.3d 51, 59.) “If the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395 [emphasis added].) Plaintiff’s second cause of action is predicated on NVIDIA’s allegedly wrongful termination of the subject agreement. Thus, as currently pleaded, is it simply a duplication of the first cause of action, and Plaintiff fails to articulate how it can amend the TAC to correct this deficiency. Consequently, NVIDIA’s demurrer to the second cause of action for breach of the implied covenant on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

NVIDIA next argues that Plaintiff’s third cause of action for promissory estoppel fails for the same reason that the first cause of action fails- the alleged promise was not sufficiently clear.

The elements of a promissory estoppel claim are (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) the reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance. (Granadino v. Wells Fargo Bank, N.A. (2015) 236 Cal.App.4th 411, 416.) For the reasons set forth above, NVIDIA’s alleged promise to Plaintiff involving the Subsequent Upgrade Contract is not sufficiently clear so as to be enforceable. Furthermore, as NVIDIA contends, the TAC alleges that Plaintiff provided it with consideration by agreeing to make certain upgrades to its production lines. (TAC, ¶¶ 12, 16.) Where a plaintiff alleges consideration for the defendant’s alleged promise, promissory estoppel is inapplicable. (See Avidity Partners, LLC v. State of California (2013) 221 Cal.App.4th 1180, 1209.) Consequently, NVIDIA’s demurrer to the third cause of action for promissory estoppel on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

Finally, NVIDIA contends that Plaintiff’s remaining claim against it for promissory fraud fails for the same reason as the preceding claims- the alleged agreement is too uncertain to be enforceable. Further, it argues, this claim fails because Plaintiff’s own allegations affirmatively negate the element of the existence of an intent not to perform on its part at the time the alleged promises were made.

Promissory fraud occurs when a person makes a promise without the intention to actually perform. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) In an action for promissory fraud, “the complaint must allege (1) the defendant made a representation of intent to perform some future action, i.e., the defendant made a promise, and (2) the defendant did not really have the intent at the time that the promise was made, i.e., the promise was false.” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1060.) “Promises too vague to be enforced will not support a fraud claim any more than they will one in contract.” (Rochlis v. Walt Disney Co. (1993) 19 Cal.App.4th 201, 216.)

Once again, for the reasons set forth above, NVIDIA’s alleged promise to Plaintiff involving the Subsequent Upgrade Contract is not sufficiently clear so as to be enforceable. As for NVIDIA’s second argument, it maintains that Plaintiff’s allegation in the initial complaint, FAC and SAC that “[t[here would be no other reason for NVIDIA to request [the] NVIDIA Lines’ upgrade if NVIDIA did not intend to continue doing business with [Plaintiff]” amounts to an admission that NVIDIA lacked fraudulent intent. While this allegation is no longer present in the TAC, NVIDIA contends that its omission is a sham and therefore it should be read into the pleading by the Court.

Plaintiff responds that the foregoing allegation was not a factual statement known to it, but rather a legal conclusion as to NVIDIA’s intent which was admittedly poorly written. The intent of this allegation, it explains, was to show that the goal of NVIDIA’s promise was to make Plaintiff believe that the upgrades were requested so that NVIDIA would continue its business with Plaintiff. The TAC merely corrects this poorly phrased statement, it explains, as a plaintiff is validly permitted to do.

In its reply (and in fact its moving papers), NIVIDA argues that even if this particular allegation is a legal conclusion as Plaintiff contends, Plaintiff ignores that in all the iterations of its complaint which preceded the TAC, it also alleged that NVIDIA “worked closely” with and “directly assisted [Plaintiff] to set up the upgraded Lines for NVIDIA’s future NPI projects” and “provided technical support of the agreement to ensure that the NVIDIA Lines would be sufficient for the implementation of the work promised to [Plaintiff].” These allegations are factual and also amount to an admission that NVIDIA intended to perform at the time it supposedly made the alleged promises, NVIDIA asserts.

Upon review, the Court agrees with NVIDIA that the aforementioned allegations, which were omitted from the TAC and notably not addressed by Plaintiff in its opposition, are inconsistent with Plaintiff’s allegation that NVIDIA had no intention of performing at the time that it supposedly made the alleged promises. Where a defendant has made efforts to carry out a promise made to the plaintiff, there can be no fraud. (See, e.g., Church of Merciful Savior v. Volunteers of America, Inc. (1960) 184 Cal.App.2d 851, 859.) As alleged previously, NVIDIA made various efforts to perform in accordance with the promises it purportedly made to Plaintiff and thus could not have had no intention to perform when those promises were made. While Plaintiff has generally alleged that NVIDIA lacked such intent, general pleadings are controlled by specific allegations, e.g., “where a plaintiff alleges a permissible conclusion of law … but also avers specific additional facts which either do not support such conclusion, or are inconsistent therewith, such specific allegations will control ….” (Careau & Co. v. Security Pacific Business Credit, Inc., supra, 222 Cal.App.3d at 1390.) These “harmful” allegations of specific actions by NVIDIA to fulfil its promises are read into the TAC by the Court pursuant to the sham pleading doctrine and operate to defeat Plaintiff’s claim for promissory fraud. Accordingly, NVIDIA’s demurrer to the fourth cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

II. Fabrinet’s Demurrer

With its motion, Fabrinet first demurs to the fifth cause of action for intentional interference with contractual relations/inducing breach of contract. The Court previously sustained Fabrinet’s demurrer to this cause of action as pleaded in the SAC based on the fact that Plaintiff had failed to allege the existence of a valid contract between itself and NVIDIA. The existence of such a contract is a necessary element of a claim for intentional interference with contractual relations. (See Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 55 [stating that elements of such a claim are (1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage]; see also Tuchscher Development Enterprises, Inc. v. San Diego Unified Port Dist. (2003) 106 Cal.App.4th 1219, 1239.) Specifically, Fabrinet argues that the alleged contract is both barred by the statute of frauds and too vague and uncertain to be enforceable.

As explained in greater detail above, Fabrinet’s statute of frauds argument is without merit due to Plaintiff’s allegation that it fully performed under its purported agreement with NVIDIA so as to take NVIDIA’s portion of the agreement out of the statute. However, as it did with NVIDIA’s demurrer, the Court finds that there still remains too much vagueness in the subject agreement as pleaded in the TAC so as to provide the Court with the necessary elements to provide a rational basis for the assessment of damages. Accordingly, the fifth cause of action is demurrable on this basis. Fabrinet additionally argues that Plaintiff’s claim is barred by the business competition privilege, but this defense applies to the tort of interference with prospective economic advantage and not a claim for intentional interference with an existing contract.

Based on the foregoing, and given the fact that the Court has provided Plaintiff with a further opportunity to plead the subject contract, Fabrinet’s demurrer to the fifth cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

Fabrinet next asserts that Plaintiff’s claim for intentional interference with prospective economic relations fails because Plaintiff still fails to plead that it committed an independently unlawful act, which is a necessary element of the claim. (See Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153 [stating that the elements of a claim for intentional interference with prospective economic advantage are: (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant].)

As stated in the order on Fabrinet’s demurrer to this claim in the SAC, “a plaintiff seeking to recover from an alleged interference with prospective contractual or economic advantage must plead and prove as part of its case-in-chief that the defendant not only knowingly interfered with the plaintiff’s expectancy, but engaged in conduct that was wrongful by some legal measure other than the fact of interference itself.” (See also Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1152 [“a plaintiff seeking to recover for interference with prospective economic advantage must also plead and prove that the defendant engaged in an independently wrongful act in disrupting the relationship. In this regard, ‘an act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.’ ”]; see also Korea, supra, 29 Cal.4th at pp. 1158-59.) The Court previously agreed with Fabrinet that Plaintiff had failed to plead facts demonstrating that Fabrinet’s interference with the alleged contract was independently wrongful and that Fabrinet’s solicitation of NVIDIA’s business, in and of itself, was not unlawful conduct, i.e., it was protected by the so-called “competition privilege.” (See Gemini Aluminum Corp. v. California Custom Shapes, Inc. (2002) 95 Cal.App.4th 1249, 1256 [“California law has long recognized a ‘competition privilege’ which protects one from liability for inducing a third person not to enter into a prospective contractual relation with a business competitor. The privilege applies where “(a) the relation [between the competitor and third person] concerns a matter involved in the competition between the actor and the competitor, and (b) the actor does not employ improper means, and (c) the actor does not intend thereby to create or continue an illegal restraint of competition, and (d) the actor’s purpose is at least in part to advance his interest in his competition with the other.“ ….’ [Citation.] In short, the competition privilege furthers free enterprise by protecting the right to compete fairly in the marketplace. One may compete for an advantageous economic relationship with a third party as long as one does not act improperly or illegally.”].)

In its opposition, Plaintiff insists that it has alleged independent wrongful conduct by Fabrinet- specifically, its interference with the contract it allegedly had with NVIDIA. However, claims for intentional interference with an existing contract and intentional interference with prospective economic relations are typically pleaded in the alternative because if a contract is found to exist, the former is the appropriate claim, while if it is determined that there is no contract (i.e., contractual relations between the parties have not yet been reduced to contract), the latter is the proper cause of action. Fabrinet’s alleged interference with an existing contract cannot serve as the independently wrongful conduct upon which the sixth cause of action is predicated because if such a contract existed, the relations that were interfered with were not “prospective,” but actually realized and thus no claim for intentional interference with prospective economic relations could be stated. The authority relied on by Plaintiff as purportedly holding to the contrary, Korea Supply Co. v. Lockheed Martin Corp., supra, does not so hold. While the court in that case recognized that a plaintiff might be able to state causes of action for both distinct torts, it did not conclude that the former could serve as the predicate wrongful conduct in the latter. Instead, the court noted that a plaintiff who believes he or she has a contract but recognizes that the trier of fact may conclude otherwise might bring both so it might prevail on a claim for interference with prospective advantage in the alternative. (See Korea Supply Co., 29 Cal.4th at 1157-1158.)

Because Plaintiff has not otherwise corrected this deficiency, Fabrinet’s demurrer to the sixth cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

As Plaintiff’s seventh cause of action for negligent interference with economic relations also requires the pleading of independently wrongful conduct in order to state a claim (see National Medical Transp. Network v. Deloitte & Touche (1998) 62 Cal.App.4th 412, 440) and such conduct has not been pleaded in the TAC (see above), Fabrinet’s demurrer to the seventh cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

The remaining claim at issue in Fabrinet’s motion is the eighth for unfair business practices, which is predicated on the same alleged conduct by Fabrinet that forms the basis of the preceding two causes of action. The Court previously sustained Fabrinet’s demurrer to this claim in the SAC, reasoning that it was incidental to and dependent upon the validity (or invalidity) of the preceding claims for relief, i.e., that the claim stood or fell depending on the fate of the antecedent substantive causes of action. (See Krantz v. BT Visual Images, LLC (2001) 89 Cal.App.4th 164, 178.) Because those claims were deficient, the demurrer was sustained. Here, the antecedent claims are still insufficiently pleaded. Consequently, Fabrinet’s demurrer to the eighth cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.