Yahoo! Inc. v. ProMedia, Inc

Case Name: Yahoo! Inc. v. ProMedia, Inc., et al.

Case No.: 2015-1-CV-287296

In the second amended complaint (“SAC”), plaintiff Yahoo! Inc. (“Plaintiff”) asserts causes of action against defendants ProMedia, Inc. (“ProMedia”) and Family Life Design, Inc. (“FLD”) (collectively, “Defendants”) for: (1) breach of contract; (2) common count (open book account); (3) common count (account stated); and (4) common count (work, labor, services, and materials rendered). Plaintiff alleges that ProMedia, acting individually and as FLD’s authorized agent, agreed to pay for its services by executing an insertion order and an amendment thereto (collectively, “Insertion Orders”). (SAC, ¶¶ 9, BC-1, & CC-4. & Attach. BC-1.) Plaintiff allegedly performed as agreed, and Defendants breached the Insertion Orders and became indebted to Plaintiff by failing to pay amounts stated in invoices. (Id., ¶¶ BC-2, BC-3, CC-1, & CC-2.)

Defendants demur to each cause of action asserted against FLD in the SAC on the ground of failure to state a claim, and make a request for judicial notice in support thereof. (See Code Civ. Proc. [“CCP”], § 430.10, subd. (e).) Plaintiff filed an opposition wherein it requests leave to file the proposed third amended complaint (“TAC”).

I. Judicial Notice

Defendants’ request for judicial notice of the first amended complaint (“FAC”), the order on the demurrer to the FAC, and Plaintiff’s counsel’s declaration is GRANTED only as to the existence of each court record. (See Evid. Code, § 452, subd. (d); see also People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2; see also Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882; see also Owens v. Kings Supermarket (1988) 198 Cal.App.3d 379, 384.)

II. Demurrer & Request for Leave to File the TAC

To begin, in opposition, Plaintiff argues that, pursuant to CCP section 472, the Court should take the demurrer off-calendar because it has agreed to file the TAC. Plaintiff’s argument is not well-taken. CCP section 472 merely allows a plaintiff to amend its pleading once as a matter of course without leave of court. (CCP, § 472, subd. (a).) Nothing in that provision authorizes a court to take a demurrer off-calendar by virtue of the fact that the pleader has sought leave to amend. Although a trial court may take a pending demurrer off-calendar after an amended complaint is filed (see Sylmar Air Conditioning v. Pueblo Contracting Services, Inc. (2004) 122 Cal.App.4th 1049, 1054), the fact that Plaintiff seeks leave to amend does not suggest that the demurrer should be taken off-calendar. The Court will therefore consider the merits of the demurrer.

In support of the demurrer, Defendants argue that each cause of action against FLD is predicated on an agency theory of liability, and Plaintiff has not sufficiently alleged agency. Specifically, Defendants contend that, under the sham pleading doctrine, the allegations of agency should be disregarded because they contradict the allegations set forth in the FAC. Under the sham pleading doctrine, plaintiffs are precluded from amending complaints to omit prior harmful allegations or to plead facts that are inconsistent with the prior complaint, without explanation in the amended pleading, to avoid attacks raised in demurrers. (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425-426.) The doctrine allows a court to disregard unexplained inconsistent allegations in an amended complaint. (See Owens v. Kings Supermarket, supra, 198 Cal.App.3d, at pp. 383-384.)

In the FAC, Plaintiff alleged that FLD entered into the Insertion Orders and thereby agreed to pay for its advertising services. (E.g., FAC, ¶ BC-1.) In contrast, in the SAC, Plaintiff omits allegations of FLD’s direct acts and omissions, and instead pleads that ProMedia acted as an agent of FLD when it entered into the Insertion Orders and thereby agreed to pay for services. (SAC, ¶¶ 9, BC-1, BC-2, BC-3, CC-1, CC-2, & CC-4, & Attach. BC-1.) Plaintiff does not attempt to explain the inconsistent allegations in the SAC and, in its opposition, it does not respond to Defendants’ argument. Therefore, the new allegations that ProMedia acted as FLD’s agent (see ibid.) will be disregarded under the sham pleading doctrine.

Defendants further argue that Plaintiff has not sufficiently alleged agency for other reasons. Plaintiff does not respond to those arguments in its opposition. Given that the agency allegations will be disregarded under the sham pleading doctrine, the Court will not deliberate the merits of Defendants’ remaining arguments. Plaintiff does not allege any other facts to support its claims against FLD. Thus, the demurrer to the claims against FLD will be sustained. The remaining issue is whether to grant leave to amend.

Defendants assert that leave to amend the claims asserted against FLD should be denied. In opposition, Plaintiff requests leave to file the TAC. In the TAC, Plaintiff removes FLD as a defendant and only asserts allegations and causes of action against ProMedia. (Heck decl., Ex. A.) “[I]f a demurrer is sustained, the court may grant leave to amend the pleading upon any terms as may be just and shall fix the time within which the amendment or amended pleading shall be filed.” (CCP, § 472a, subd. (c).) Here, since Plaintiff has agreed to remove FLD as a defendant in this action by filing the TAC, the Court finds that an order granting leave to amend to file the TAC is proper.

In light of the foregoing, the demurrer to the causes of action against FLD in the SAC for failure to state a claim is SUSTAINED with 10 days’ leave to amend to file the TAC.

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