This case was last updated from Los Angeles County Superior Courts on 10/28/2020 at 10:54:39 (UTC).

K SWISS INTERNATIONAL LTD VS CARTER INTERNATIONAL S A

Case Summary

On 06/04/2018 K SWISS INTERNATIONAL LTD filed a Contract - Other Contract lawsuit against CARTER INTERNATIONAL S A. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judge overseeing this case is HOLLY J. FUJIE. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****8915

  • Filing Date:

    06/04/2018

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Other Contract

  • Court:

    Los Angeles County Superior Courts

  • Courthouse:

    Stanley Mosk Courthouse

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judge

HOLLY J. FUJIE

 

Party Details

Plaintiffs, Petitioners and Cross Defendants

K-SWISS INTERNATIONAL LTD.

K-SWISS INC.

E-LAND USA HOLDINGS INC.

E-LAND WORLD COMPANY LTD.

Defendants, Respondents and Cross Plaintiffs

CARTER INTERNATIONAL S.A.

DOES 1-50

Attorney/Law Firm Details

Plaintiff and Petitioner Attorneys

MARSHALL JOHN B ESQ.

MARSHALL JOHN B. ESQ.

Attorney at Lewitt, Hackman, Et Al

16633 Ventura Boulevard, Suite 1100

Encino, CA 91436-1865

MALINGAGIO PAUL SEBASTIAN

Defendant and Cross Plaintiff Attorney

VIVOLI MICHAEL

Plaintiff and Cross Defendant Attorneys

MARSHALL JOHN B. ESQ.

Attorney at Lewitt, Hackman, Et Al

16633 Ventura Boulevard, Suite 1100

Encino, CA 91436-1865

MACARR MADALYN

SUWATANAPONGCHED JUTHAMAS

 

Court Documents

Request - REQUEST FOR INFORMAL DISCOVERY CONFERENCE

10/9/2020: Request - REQUEST FOR INFORMAL DISCOVERY CONFERENCE

Reply - REPLY IN SUPPORT OF K-SWISS INTERNATIONAL LTD.'S AND K=SWISS INC.'S DEMURRER TO THE THIRD AMENDED CROSS-COMPLAINT

9/21/2020: Reply - REPLY IN SUPPORT OF K-SWISS INTERNATIONAL LTD.'S AND K=SWISS INC.'S DEMURRER TO THE THIRD AMENDED CROSS-COMPLAINT

Declaration - DECLARATION OF JUTHAMAS J. SUWATANAPONGCHED IN SUPPORT OF K-SWISS INTERNATIONAL LTD.S AND K-SWISS INC.S DEMURRER TO AND MOTION TO STRIKE THE THIRD AMENDED CROSS-COMPLAINT

8/18/2020: Declaration - DECLARATION OF JUTHAMAS J. SUWATANAPONGCHED IN SUPPORT OF K-SWISS INTERNATIONAL LTD.S AND K-SWISS INC.S DEMURRER TO AND MOTION TO STRIKE THE THIRD AMENDED CROSS-COMPLAINT

Demurrer - with Motion to Strike (CCP 430.10)

8/18/2020: Demurrer - with Motion to Strike (CCP 430.10)

Stipulation and Order - STIPULATION AND ORDER JOINT STIPULATION AND ORDER CONTINUING TRIAL AND CORRESPONDING DATES

6/24/2020: Stipulation and Order - STIPULATION AND ORDER JOINT STIPULATION AND ORDER CONTINUING TRIAL AND CORRESPONDING DATES

Certificate of Mailing for - CERTIFICATE OF MAILING FOR (HEARING ON DEMURRER - WITH MOTION TO STRIKE (CCP 430.10) TO T...) OF 06/26/2020

6/26/2020: Certificate of Mailing for - CERTIFICATE OF MAILING FOR (HEARING ON DEMURRER - WITH MOTION TO STRIKE (CCP 430.10) TO T...) OF 06/26/2020

NOTICE OF LODGING [PROPOSED] SECOND AMENDED COMPLAINT

10/2/2018: NOTICE OF LODGING [PROPOSED] SECOND AMENDED COMPLAINT

Reply - REPLY IN SUPPORT OF DEMURRER TO THE SECOND AMENDED CROSS-COMPLAINT

3/16/2020: Reply - REPLY IN SUPPORT OF DEMURRER TO THE SECOND AMENDED CROSS-COMPLAINT

FIRST AMENDED COMPLAINT FOR: 1. BREACH OF CONTRACT (2012 AMERICAN AGREEMENT); ETC.

6/8/2018: FIRST AMENDED COMPLAINT FOR: 1. BREACH OF CONTRACT (2012 AMERICAN AGREEMENT); ETC.

SUMMONS ON FIRST AMENDED COMPLAINT

6/8/2018: SUMMONS ON FIRST AMENDED COMPLAINT

NOTICE OF CASE MANAGEMENT CONFERENCE

6/11/2018: NOTICE OF CASE MANAGEMENT CONFERENCE

Motion to Strike (not initial pleading)

2/11/2020: Motion to Strike (not initial pleading)

Demurrer - with Motion to Strike (CCP 430.10)

10/18/2019: Demurrer - with Motion to Strike (CCP 430.10)

Amended Complaint - AMENDED COMPLAINT - 1ST

9/18/2019: Amended Complaint - AMENDED COMPLAINT - 1ST

Minute Order - MINUTE ORDER (CASE MANAGEMENT CONFERENCE)

3/20/2019: Minute Order - MINUTE ORDER (CASE MANAGEMENT CONFERENCE)

Case Management Statement

2/11/2019: Case Management Statement

Complaint - (Amended)

11/20/2018: Complaint - (Amended)

95 More Documents Available

 

Docket Entries

  • 03/22/2021
  • Hearing03/22/2021 at 09:30 AM in Department 56 at 111 North Hill Street, Los Angeles, CA 90012; Jury Trial

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  • 03/08/2021
  • Hearing03/08/2021 at 08:30 AM in Department 56 at 111 North Hill Street, Los Angeles, CA 90012; Final Status Conference

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  • 01/20/2021
  • Hearing01/20/2021 at 09:30 AM in Department 56 at 111 North Hill Street, Los Angeles, CA 90012; Status Conference

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  • 12/01/2020
  • Hearing12/01/2020 at 09:00 AM in Department 56 at 111 North Hill Street, Los Angeles, CA 90012; Informal Discovery Conference (IDC)

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  • 10/09/2020
  • DocketRequest (for Informal Discovery Conference); Filed by K-Swiss International Ltd. (Plaintiff); K-Swiss Inc. (Plaintiff)

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  • 10/07/2020
  • DocketAnswer; Filed by K-Swiss International Ltd. (Cross-Defendant); K-Swiss Inc. (Cross-Defendant)

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  • 10/01/2020
  • DocketNotice of Ruling; Filed by K-Swiss International Ltd. (Cross-Defendant); K-Swiss Inc. (Cross-Defendant)

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  • 09/28/2020
  • Docketat 08:30 AM in Department 56; Hearing on Demurrer - with Motion to Strike (CCP 430.10) - Held

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  • 09/28/2020
  • DocketMinute Order ( (Hearing on Demurrer - with Motion to Strike (CCP 430.10))); Filed by Clerk

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  • 09/21/2020
  • Docketat 09:30 AM in Department 56; Jury Trial - Not Held - Continued - Stipulation

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117 More Docket Entries
  • 06/11/2018
  • DocketOSC-Failure to File Proof of Serv; Filed by Clerk

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  • 06/11/2018
  • DocketNotice of Case Management Conference; Filed by Clerk

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  • 06/11/2018
  • DocketNOTICE OF CASE MANAGEMENT CONFERENCE

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  • 06/08/2018
  • DocketFIRST AMENDED COMPLAINT FOR: 1. BREACH OF CONTRACT (2012 AMERICAN AGREEMENT); ETC.

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  • 06/08/2018
  • DocketSummons; Filed by K-Swiss International Ltd. (Plaintiff)

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  • 06/08/2018
  • DocketSUMMONS ON FIRST AMENDED COMPLAINT

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  • 06/08/2018
  • DocketFirst Amended Complaint; Filed by K-Swiss International Ltd. (Plaintiff)

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  • 06/04/2018
  • DocketComplaint; Filed by K-Swiss International Ltd. (Plaintiff)

    Read MoreRead Less
  • 06/04/2018
  • DocketCOMPLAINT FOR: 1. BREACH OF CONTRACT (AMERICAN AGREEMENT);ETC

    Read MoreRead Less
  • 06/04/2018
  • DocketSUMMONS

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Tentative Rulings

Case Number: BC708915    Hearing Date: September 28, 2020    Dept: 56

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

K-SWISS INTERNATIONAL LTD., etc., et al.,

Plaintiffs,

vs.

CARTER INTERNACIONAL, S.A., etc., et al.

Defendants.

AND RELATED CROSS ACTION

CASE NO.: BC708915

[TENTATIVE] ORDER RE: DEMURRER TO THIRD AMENDED CROSS-COMPLAINT; MOTION TO STRIKE

Date: September 28, 2020

Time: 8:30 a.m.

Dept. 56

MOVING PARTIES: Cross-Defendants K-Swiss International Ltd. (“KSIL”) and K-Swiss Inc. (“KSI”)

RESPONDING PARTY: Cross-Complainant Carter Internacional, S.A.

The Court has considered the moving, opposition, and reply papers.

BACKGROUND

Cross-Complainant filed a Second Amended Cross-Complaint (“SAXC”) against Cross-Defendants alleging causes of action for: (1) breach of written contracts; (2) breach of the implied covenant of good faith and fair dealing; (3) breach of implied warranty of merchantability; (4) breach of implied warranty of fitness; (5) fraud; (6) unfair competition; (7) intentional interference with contractual relations; and (8) negligent interference with prospective business advantage. The SAXC arises from the alleged breach of contracts in connection with Cross-Complainant serving as a distributor for Cross-Defendants’ products.

Cross-Defendants filed a demurrer to the second, third, fourth, fifth, and seventh causes of action in the SAXC. Cross-Defendants also filed a motion to strike portions of the SAXC. On June 26, 2020, the Court: (1) sustained without leave to amend the demurrer of Cross-Defendants to the second through fifth causes of action in the SAXC; (2) sustained the demurrer of Cross-Defendants to the seventh cause of action in the SAXC with leave to amend; and (3) granted Cross-Defendants’ motion to strike without leave to amend.

On July 29, 2020, Cross-Complainant filed the operative Third Amended Cross-Complaint (“TAXC”) against Cross-Defendants alleging causes of action for: (1) breach of written contracts; (2) breach of the implied covenant of good faith and fair dealing; (3) breach of implied warranty of merchantability; (4) breach of implied warranty of fitness; (5) fraud; (6) unfair competition; (7) intentional interference with contractual relations; and (8) negligent interference with prospective business advantage.

Cross-Defendants filed a demurrer to the seventh cause of action in the TAXC, on the ground that it fails to state facts sufficient to constitute a cause of action. Additionally, Cross-Defendants seek to remove the claims from the TAXC that the Court sustained without leave to amend pursuant to its order on the demurrer and motion to strike as to the SAXC.

MEET AND CONFER

The meet and confer requirement has been met.

DEMURRER

“A demurrer tests the sufficiency of a complaint as a matter of law.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.) “[T]he court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded.” (Id.) “The court accepts as true all material factual allegations, giving them a liberal construction, but it does not consider conclusions of fact or law, opinions, speculation, or allegations contrary to law or judicially noticed facts.” (Shea Homes Limited Partnership v. County of Alameda (2003) 110 Cal.App.4th 1246, 1254.) With respect to a demurrer “[t]he complaint must be construed liberally by drawing reasonable inferences from the facts pleaded.” (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) “On demurrer, all material facts properly pleaded and all reasonable inferences which can be drawn therefrom are deemed admitted.” (Bush v. California Conservation Corps (1982) 136 Cal.App.3d 194, 198.) A court will sustain a demurrer without leave to amend if a plaintiff does not meet his or her burden in showing that “there is a reasonable possibility that the defect can be cured by amendment.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Issue No.1: Seventh Cause of Action

To state a cause of action for intentional interference with contractual relations, a cross-complainant must plead: (1) a valid contract between cross-complainant and third party; (2) cross-defendant’s knowledge of this contract; (3) cross-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. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.) “If the actor had no knowledge of the existence of the contract or his actions were not intended to induce a breach, he cannot be held liable though an actual breach results from his lawful and proper acts.” (Imperial Ice Co. v. Rossier (1941) 18 Cal.2d 33, 37.)

In connection with its ruling on the demurrer to the seventh cause of action in the SAXC, the Court stated that “Cross-Complainant has failed to plead that Cross-Defendants knew of the alleged contracts with vendors, retailers, and others, all of which provided the probability of future economic benefit to [Cross-Complainant].”

Here, the allegations of the seventh cause of action in the TAXC are sufficient to state a cause of action for intentional interference with contractual relations. The allegations of the TAXC show the element of knowledge because the TAXC alleges that “Cross-Defendants were aware of the existence of these contracts between [Cross-Complainant] and its vendors, retailers and others—indeed, Cross-Defendants actually requested and/or encouraged Carter to enter into various of these contracts, with knowledge that its own wrongful actions would interfere with these contract.” (TAXC at ¶ 58.) Cross-Defendants’ citations to Acculmage[1] and Go Daddy[2] are inapposite. Cross-Defendants cite to no legal authority that stands for the proposition that a cause of action for intentional interference with contractual relations is subject to a particularity requirement.

Cross-Complainant has cured the defect identified in the Court’s ruling on the demurrer to the SAXC in connection with the seventh cause of action set forth therein. Therefore, the demurrer of Cross-Defendants to the seventh cause of action in the TAXC is OVERRULED.

Issue No.2: Inclusion of Causes of Action Sustained without Leave to Amend

An order sustaining a demurrer without leave to amend is subject to appellate review. (Perego v. Seltzer (1968) 260 Cal.App.2d 825, 828.) “Although an appellate court will not consider the allegations of a superseded complaint . . . that rule does not apply when the trial court denied plaintiffs leave to include those allegations in an amended complaint.” (Stansfeld v. Starkey (1990) 220 Cal.App.3d 59, 72.)

The Court finds that the inclusion, in the TAXC, of the causes of action to which this court sustained the demurrer without leave to amend is improper. Under Stansfeld, Cross-Complainant did not need to include the second, third, fourth, and fifth causes of action in the TAXC solely to preserve a right to such claims for appellate purposes. The demurrer to those causes of action was sustained without leave to amend. Moreover, Cross-Complainant agrees in its opposition to the instant demurrer and motion to strike that it “certainly has no objection to the Court issuing an order confirming that the provisions stricken before no longer remain.” (Opposition at 9:9-12.)

The Court orders stricken from the TAXC the Second, Third, Fourth and Fifth Causes of Action on this ground.

MOTION TO STRIKE

Cross-Defendants filed a motion to strike portions of the TAXC. Cross-Defendants seek to strike the following allegations from the TAXC: (1) allegations for failure to police against counterfeit or unauthorized goods; and (2) claims that were dismissed or stricken from the SAXC pursuant to the Court’s June 26, 2020 order without leave to amend.

Legal Standard

California Code of Civil Procedure, Section 436(a) allows a court to “[s]trike out any irrelevant, false, or improper matter inserted in any pleading.” California Code of Civil Procedure, Section 436(b) allows a court to “[s]trike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.”

Issue No. 1: Failure to Police Against Counterfeit or Unauthorized Goods

The Court’s June 26, 2020 order with respect to Cross-Defendants’ motion to strike granted Cross-Defendants’ motion to strike damages with respect to the alleged failure to police against counterfeit or unauthorized goods without leave to amend. The Court stated that Cross-Complainant could not claim damages for an obligation in which there was never an express agreement between the parties.

Cross-Complainant presents no argument to rebut Cross-Defendants’ argument that allegations with respect to counterfeit or unauthorized goods should be stricken from the TAXC. “Contentions are waived when a party fails to support them with reasoned argument and citations to authority.” (Moulton Niguel Water Dist. v. Colombo (2003) 111 Cal.App.4th 1210, 1215.) Thus, the Court finds that Cross-Complainant has conceded on this point of argument.

Issue No.2: The Removal of Claims

Cross-Defendants seek to strike claims included in the TAXC that were dismissed or stricken from the SAXC—without leave to amend— pursuant to the Court’s June 26, 2020 order.

As stated above in connection with the Court’s ruling on the instant demurrer, the inclusion of claims and allegations in the TAXC that were subject the Court’s ruling on the demurrer and motion to strike in connection with the SAXC is improper.

The Court finds it proper to strike such claims.

Cross-Defendants’ motion to strike is thus GRANTED in its entirety without leave to amend.

Moving parties are ordered to give notice of this ruling.

In consideration of the current COVID-19 pandemic situation, the Court strongly encourages that appearances on all proceedings, including this one, be made by LACourtConnect if the parties do not submit on the tentative.  If you instead intend to make an appearance in person at Court on this matter, you must send an email by 2 p.m. on the last Court day before the scheduled date of the hearing to SMC_DEPT56@lacourt.org

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Dated this 28th day of September 2020

Hon. Holly J. Fujie

Judge of the Superior Court


[1] Acculmage Diagnostics Corp. v. Terarecon, Inc. (N.D. Cal. 2003) 260 F.Supp.2d 941, 656.

[2] Go Daddy Operating Company, LLC v. Ghaznavi (N.D. Cal.2018) 2018 WL 1091257.

Case Number: BC708915    Hearing Date: April 27, 2020    Dept: 56

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

K-SWISS INTERNATIONAL LTD., etc., et al.,

Plaintiffs,

vs.

CARTER INTERNACIONAL, S.A., etc., et al.

Defendants.

AND RELATED CROSS ACTION

CASE NO.: BC708915

[TENTATIVE] ORDER RE: DEMURRER TO SECOND AMENDED CROSS-COMPLAINT; MOTION TO STRIKE

Date: April 27, 2020

Time: 8:30 a.m.

Dept. 56

MOVING PARTIES: Cross-Defendants K-Swiss International Ltd. (“KSIL”) and K-Swiss Inc. (“KSI”)

RESPONDING PARTY: Cross-Complainant Carter Internacional, S.A.

The Court has considered the moving, opposition, and reply papers.

BACKGROUND

Plaintiffs filed the operative Second Amended Complaint (“SAC”) against Defendants alleging causes of action for: (1) breach of written contract; (2) breach of written contract; (3) breach of written contract; (4) breach of written contract; (5) account stated; and (6) open book account. Plaintiffs’ SAC arises from the alleged breach of agreements in connection with distributing Plaintiffs’ products.

Cross-Complainant filed the operative Second Amended Cross-Complaint (“SAXC”) against Cross-Defendants alleging causes of action for: (1) breach of written contracts; (2) breach of the implied covenant of good faith and fair dealing; (3) breach of implied warranty of merchantability; (4) breach of implied warranty of fitness; (5) fraud; (6) unfair competition; (7) intentional interference with contractual relations; and (8) negligent interference with prospective business advantage. The SAXC arises from the alleged breach of contracts in connection with Cross-Complainant serving as a distributor for Cross-Defendants’ products.

Cross-Defendants filed a demurrer to the second, third, fourth, fifth, and seventh causes of action in the SAXC. Cross-Defendants also filed a motion to strike portions of the SAXC.

MEET AND CONFER

The meet and confer requirement has been met.

JUDICIAL NOTICE

Cross-Defendants’ request for judicial notice is DENIED.

DEMURRER

“A demurrer tests the sufficiency of a complaint as a matter of law.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.) “[T]he court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded.” (Id.) “The court accepts as true all material factual allegations, giving them a liberal construction, but it does not consider conclusions of fact or law, opinions, speculation, or allegations contrary to law or judicially noticed facts.” (Shea Homes Limited Partnership v. County of Alameda (2003) 110 Cal.App.4th 1246, 1254.) With respect to a demurrer “[t]he complaint must be construed liberally by drawing reasonable inferences from the facts pleaded.” (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) “On demurrer, all material facts properly pleaded and all reasonable inferences which can be drawn therefrom are deemed admitted.” (Bush v. California Conservation Corps (1982) 136 Cal.App.3d 194, 198.) In the context of a demurrer, a court may “take notice of exhibits attached to the complaints.” (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447.) “If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence.” (Id.) A court will sustain a demurrer without leave to amend if a plaintiff does not meet his or her burden in showing that “there is a reasonable possibility that the defect can be cured by amendment.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Issue No.1: Second Cause of Action

“The implied promise [of good faith and fair dealing] requires each contracting party to refrain from doing anything to injure the right of the other to receive the benefits of the agreement.” (Avidity Partners, LLC v. State of California (2013) 221 Cal.App.4th 1180, 1204.) “The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.” (Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 349.) “The covenant thus cannot be endowed with an existence independent of its contractual underpinnings.” (Id.) “It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.” (Id. at 349-350.) “[I]t is universally recognized the scope of conduct prohibited by the covenant of good faith is circumscribed by the purposes and express terms of the contract.” (Avidity Partners, LLC v. State of California (2013) 221 Cal.App.4th 1180, 1204.) “The covenant of good faith is read into contracts in order to protect the express covenants or promises of the contract.” (Id.) “The implied covenant of good faith and fair dealing does not impose substantive terms and conditions beyond those to which the parties actually agreed.” (Id.) To state a cause of action for breach of the implied covenant of good faith and fair dealing, a plaintiff must plead that: (1) plaintiff and defendant entered into a contract; (2) plaintiff did all, or substantially all of the significant things that the contract required plaintiff to do or that plaintiff was excused from having to do those things; (3) that all conditions required for defendant’s performance had occurred or were excused; (4) defendant unfairly interfered with plaintiff’s right to receive the benefits of the contract; and (5) plaintiff was harmed by Defendant’s conduct. (CACI 325.)

In the second cause of action, the SAXC alleges that Cross-Defendants: (1) mismanaged their own business and the brands at issue in the Contracts; (2) permitted counterfeit goods to be widely distributed, including within Cross-Complainant’s territories, which degraded their own brands, thus interfering with Cross-Complainant’s ability to profitably re-sell the products supplied by Cross-Defendants; (3) delivered massive quantities of defective goods to Cross-Complainant; (4) failed and refused to rectify the mounting damages sustained by Cross-Complainant as a result of each of the foregoing actions; and (5) deliberately engaged in acts that were designed to interfere with Cross-Complainant’s entitlement to the benefits of the contracts, including degradation of the very product lines contemplated by the contracts and the delivery of product with massive defects despite the representation in the contracts that the defective product would not exceed 0.025% of all products ordered by Cross-Complainant. (SAXC at ¶ 27.)

A review of the contracts at issue (SAC at Exhibits 1-4) shows that Cross-Defendants were not expressly prohibited from: (1) mismanaging their own business; (2) allowing the wide distribution of counterfeit goods; (3) delivering massive quantities of defective goods or degradation of the product lines; and (4) not rectifying the mounting damages sustained by Cross-Complainant. As such, the above-alleged actions of Cross-Defendants cannot serve as a basis for the breach of the implied covenant of good faith and fair dealing. Under Guz, Cross-Complainant cannot impose additional duties on Cross-Defendants beyond those that were expressly incorporated into the agreements between the parties. Moreover, despite Cross-Complainant’s argument to the contrary, the contracts do not indicate that defective product would not exceed 0.025% of all products ordered by Cross-Complainant. (SAC at Exhibits 1-4.)

Also, Cross-Complainant fails to respond with any legal authority to Cross-Defendants’ argument that its second cause of action relies on the same allegations as its first cause of action for breach of contract. (Opp. at 6:2-9.) The Court finds that Cross-Complainant has conceded on this point. (Heglin v. F.C.B.A. Market (1945) 70 Cal.App.2d 803, 806.)

Cross-Defendants’ demurrer to the second cause of action in the SAXC is therefore SUSTAINED WITHOUT LEAVE TO AMEND pursuant to Blank. Cross-Complainant has had multiple opportunities to state a sufficient cause of action with respect to the cause of action for breach of the implied covenant of good faith and fair dealing. This is Cross-Complainant’s third iteration of its cross-complaint as, prior to the operative SAXC, Cross-Complainant filed its initial cross-complaint and First Amended Cross-Complaint.

Issue No.2: Third Cause of Action

“No warranty, express or implied, can be modified or disclaimed unless a seller clearly limits his liability.” (Hauter v. Zogarts (1975) 14 Cal.3d 104, 119.) “[W]ord of disclaimer or modification give way to words of warranty unless some clear agreement between the parties dictates the contrary relationship.” (Id.) “At the very least, section 2316 [of the California Commercial Code] allows limitation of warranties only by means of words that clearly communicate that a particular risk falls on the buyer.” (Id.)

The third and fourth causes of action are premised on Cross-Complainant’s being delivered alleged defective products. The contracts attached to the SAC explicitly state that in consideration of all possible defects, KSIL would twice a year rebate to Cross-Complainant an amount equal to 0.025% of all purchases of products by Cross-Complainant, and that the rebate would fully and finally compensate Cross-Complainant for all defective product claims. (SAC at Exhibits 1, 2, and 4.) The twice-yearly rebate was clearly intended to compensate Cross-Complainant for any defective products and that was clearly indicated to be the sole remedy for defective products. The rebate clause is visible and is not inconspicuous as it was bolded “Defective Products” in all caps font.

Therefore, the Court SUSTAINS WITHOUT LEAVE TO AMEND the demurrer of Cross-Defendants to the third cause of action in the SAXC pursuant to Blank.

Issue No.3: Fourth Cause of Action

The Court applies its reasoning with respect to the third cause of action above and applies that reasoning to the fourth cause of action in the SAXC.

Therefore, the demurrer of Cross-Defendants to the fourth cause of action in the SAXC is SUSTAINED WITHOUT LEAVE TO AMEND pursuant to Blank.

Issue No.4: Fifth Cause of Action

“A complaint for fraud must allege the following elements: (1) knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages.” (Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1816.) Every element of fraud “must be specifically pleaded.” (Id.) To state a fraud-based cause of action a plaintiff must plead “facts which show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) “[F]raud must be pled specifically; general and conclusory allegations do not suffice.” (Id.) “A [cross-complainant’s] burden in asserting a fraud claim against a corporate employer is even greater. In such a case, the plaintiff must allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Id.) “Each element in a cause of action for fraud . . . must be factually and specifically alleged.” (Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4th 513, 519.) “Besides actual reliance, [a] plaintiff must also show justifiable reliance, i.e., circumstances were such to make it reasonable for [the] plaintiff to accept [the] defendant’s statements without an independent inquiry or investigation.” (OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 856.) “[T]he distinction between tort and contract is well grounded in common law, and divergent objectives underlie the remedies created in the two areas.” (Erlich v. Menezes (1999) 21 Cal.4th 543, 550.) [C]onduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from the principles of tort law.” (Id. at 551.) “An omission to perform a contract obligation is never a tort, unless that omission is also an omission of a legal duty.” (Id.)

Cross-Complainant has failed to rebut or even address Cross-Defendants’ argument that the fifth cause of action is an improper attempt to convert obligations from a contract into a fraud claim. As such, Cross-Complainant has conceded on this point. (Heglin v. F.C.B.A. Market (1945) 70 Cal.App.2d 803, 806.)

Cross-Defendants’ demurrer to the fifth cause of action in the SAXC is SUSTAINED WITHOUT LEAVE TO AMEND under Blank.

Issue No.5: Seventh Cause of Action

To state a cause of action for intentional interference with contractual relations, a cross-complainant must plead: (1) a valid contract between cross-complainant and third party; (2) cross-defendant’s knowledge of this contract; (3) cross-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. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.) “If the actor had no knowledge of the existence of the contract or his actions were not intended to induce a breach, he cannot be held liable though an actual breach results from his lawful and proper acts.” (Imperial Ice Co. v. Rossier (1941) 18 Cal.2d 33, 37.)

Cross-Complainant has not stated a cause of action for intentional interference with contractual relations. (SAXC at ¶¶ 57-61.) Cross-Complainant has failed to plead that Cross-Defendants knew of the alleged contracts with “vendors, retailers, and others, all of which provided the probability of future economic benefit to [Cross-Complainant].” (Id. at ¶¶ 58-59.)

Therefore, the demurrer of Cross-Defendants to the seventh cause of action in the SAXC is SUSTAINED WITHOUT LEAVE TO AMEND under Blank.

MOTION TO STRIKE

Cross-Defendants filed a motion to strike portions of the SAXC. Cross-Defendants seek to strike allegations from the SAXC with respect to three categories of claimed damages by Cross-Complainant: (1) damages relating to the alleged defective or damaged products; (2) damages for failure to police against counterfeit or unauthorized goods; and (3) other damages for inventory, accounts, receivable, and good will.

Legal Standard

California Code of Civil Procedure, Section 436(a) allows a court to “[s]trike out any irrelevant, false, or improper matter inserted in any pleading.” California Code of Civil Procedure, Section 436(b) allows a court to “[s]trike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” It is well established that “[w]here a written instrument is unambiguous and incorporated by reference into a [cross] complaint, any allegations in the pleading inconsistent with the incorporated writing may be stricken.” (Pacific States Enterprises, Inc. v. City of Coachella (1993) 13 Cal.App.4th 1414, 1426, fn.8.)

Issue No.1: Damages for Defective Goods

Cross-Defendants assert that Cross-Complainant’s claim for any damaged or defective goods is expressly limited by the bi-annual rebate contained in the contracts. (SAC, Exhibit 1, 3, and 4 at ¶ 7.)

“Contract damages are generally limited to those within the contemplation of the parties when the contract was entered into or at least reasonably foreseeable by them at the time.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 506.) “[T]he question whether a [party’s] . . . damages were foreseeable . . . is one of fact to be determined by the trier of fact.” (Sun-Maid Raisin Growers v. Victor Packing Co. (1983) 146 Cal.App.3d 787, 790.)

The Court agrees with Cross-Defendants. The above clauses with respect to defective products state that the twice-yearly rebates—equal to 0.025% of all purchases of products made by Cross-Complainant— that KSIL would “fully and finally compensate [Cross-Complainant] for all defective product claims.” (Id.) Thus, damages for defective goods are inconsistent with the express language contained in the contracts. The twice-yearly rebate is clearly and unequivocally intended to be compensation for any defective products and the damages for defective products that are alleged in the SAXC are clearly inconsistent with the express terms of the contracts under Pacific States. Cross-Complainant asserts in its opposition that the 0.025% rebate provision is a penalty and cites to California Civil Code, 1671(b) which provides that “a provision in a contract liquidating the damages for the breach of contract is valid unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made.” The Court finds, however, that Cross-Complainant alleged in the SAXC that “[Cross-Complainant] is informed and believes that 0.025% was a reasonable rate” at the time the contracts were executed. (SAXC at ¶ 8.)

The Court therefore GRANTS Cross-Defendants’ request to strike damages claims with respect to defective products WITHOUT LEAVE TO AMEND.

Issue No. 2: Failure to Police Against Counterfeit or Unauthorized Goods

Cross-Defendants contend that Cross-Complainant cannot claim any damages for an alleged failure to police against counterfeit or unauthorized goods because the contracts place no such obligation on Cross-Defendants.

The Court references its discussion above in connection with Cross-Defendants’ demurrer to the second cause of action for breach of the implied covenant of good faith and fair dealing in the SAXC, which the Court found to be insufficient to state a cause of action. The contracts placed no obligation on Cross-Defendants to prevent third-parties from selling counterfeit or other unauthorized products. (SAC at Exhibits 1-4.) A party cannot “impose substantive duties or limits on [a] contracting [party] beyond those incorporated into the specific terms of their agreement.” (Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 349.) Thus, Cross-Complainant cannot claim damages for an obligation as to which there was never an express agreement between the parties.

Therefore, the Court GRANTS Cross-Defendants’ request to strike the claims for damages from the SAXC with respect to failure to police against counterfeit or unauthorized goods WITHOUT LEAVE TO AMEND.

Issue No. 3: Damages Claims for Inventory, Accounts Receivable, and Good Will

Cross-Defendants assert that Cross-Complainant’s damage claims for inventory, accounts receivable, and good will have no basis in contract.

The Court incorporates its reasoning from above with respect to the obligations of Cross-Defendants to police against counterfeit or unauthorized goods and applies it to Cross-Complainant’s claims for inventory, accounts receivable, and good will. The contracts do not impose the burden on Cross-Defendants to be liable for inventory, accounts receivable, and good will and Cross-Complainant cannot impose these obligations on Cross-Defendants under Avidity.

Therefore, the Court GRANTS Cross-Defendants’ request to strike damages claims from the SAXC WITHOUT LEAVE TO AMEND with respect to inventory, accounts receivable, and good will.

Issue No. 4: Vague and Ambiguous Claims for Damages

Cross-Defendants contend that throughout the SAXC: (1) Cross-Complainant makes vague and ambiguous claims for damages; (2) does not state the actual damages suffered in several paragraphs of the SAXC; and (3) appears to miscalculate its actual alleged damages.

California Code of Civil Procedure, Section 425.10(a)(1) says that a cross-complaint must contain “[a] statement of the facts constituting the cause of action, in ordinary and concise language.” Where a cross-complaint demands “the recovery of money or damages” then “the amount demanded shall be stated.” (Code Civ. Proc. § 425.10(a)(2). “[A] defendant must be given notice of what judgment may be taken against him [or her].” (Petty v. Manpower, Inc. (1979) 94 Cal.App.3d 794, 798.)

Cross-Complainant’s opposition merely alleges that Cross-Defendants know how to propound discovery aimed and discovering Cross-Complainant’s basis for damages. (Opposition at 4:22-27.) Cross-Complainant also fails to provide a citation to any legal authority rebutting Cross-Defendants’ argument. Cross-Complainant has conceded to Cross-Defendants’ argument on this point due to its failure to offer any supporting legal authority. (Heglin v. F.C.B.A. Market (1945) 70 Cal.App.2d 803, 806.) There are multiple instances where the SAXC fails to adequately alleged damages whatsoever.

Therefore, the Court GRANTS Cross-Defendants’ motion to strike vague and ambiguous damages claims from the SAXC WITHOUT LEAVE TO AMEND.

Cross-Defendants’ motion to strike is thus GRANTED in its entirety without leave to amend.

Moving parties are ordered to give notice of this ruling.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Dated this 27th day of April 2020

Hon. Holly J. Fujie

Judge of the Superior Court

Case Number: BC708915    Hearing Date: December 18, 2019    Dept: 56

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

K-SWISS INTERNATIONAL LTD., etc., et al.,

Plaintiffs,

vs.

CARTER INTERNACIONAL, S.A., etc., et al.

Defendants.

AND RELATED CROSS ACTION

CASE NO.: BC708915

[TENTATIVE] ORDER RE: DEMURRER TO FIRST AMENDED CROSS-COMPLAINT; MOTION TO STRIKE

Date: December 18, 2019

Time: 8:30 a.m.

Dept. 56

MOVING PARTIES: Cross-Defendants K-Swiss International Ltd. (“KSIL”) and K-Swiss Inc. (“KSI”)

RESPONDING PARTY: Cross-Complainant Carter Internacional, S.A.

The Court has considered the moving, opposition, and reply papers.

BACKGROUND

Plaintiffs filed the operative Second Amended Complaint (“SAC”) against Defendants alleging causes of action for: (1) breach of written contract; (2) breach of written contract; (3) breach of written contract; (4) breach of written contract; (5) account stated; and (6) open book account. Plaintiffs’ SAC arises from the alleged breach of agreements in connection with distributing Plaintiffs’ products.

Cross-Complainant filed the operative First Amended Cross-Complaint (“FAXC”) against Cross-Defendants alleging causes of action for: (1) breach of written contracts; (2) breach of the implied covenant of good faith and fair dealing; (3) breach of implied warranty of merchantability; (4) breach of implied warranty of fitness; (5) fraud; (6) unfair competition; (7) negligent interference with contractual relations; and (8) negligent interference with prospective business advantage. The FAXC arises from the alleged breach of contracts in connection with Cross-Complainant serving as a distributor for Cross-Defendants’ products.

Cross-Defendants filed a demurrer to the first through eighth causes of action in the FAXC. Cross-Defendants also filed a motion to strike portions of the FAXC.

MEET AND CONFER

The meet and confer requirement has been met.

JUDICIAL NOTICE

Cross-Defendants’ request for judicial notice is DENIED.

DEMURRER

“A demurrer tests the sufficiency of a complaint as a matter of law.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.) “[T]he court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded.” (Id.) “The court accepts as true all material factual allegations, giving them a liberal construction, but it does not consider conclusions of fact or law, opinions, speculation, or allegations contrary to law or judicially noticed facts.” (Shea Homes Limited Partnership v. County of Alameda (2003) 110 Cal.App.4th 1246, 1254.) With respect to a demurrer “[t]he complaint must be construed liberally by drawing reasonable inferences from the facts pleaded.” (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) “Demurrers for uncertainty . . . are disfavored.” (Chen v. Berenjian (2019) 33 Cal.App.5th 811, 822.) “A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Id.) “A demurrer for uncertainty should be overruled when the facts as to which the complaint is uncertain are presumptively within the defendant’s knowledge.” (Id.) “On demurrer, all material facts properly pleaded and all reasonable inferences which can be drawn therefrom are deemed admitted.” (Bush v. California Conservation Corps (1982) 136 Cal.App.3d 194, 198.) In the context of a demurrer, a court may “take notice of exhibits attached to the complaints.” (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447.) “If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence.” (Id.)

Issue No. 1: First Cause of Action

Cross-Defendants assert that Cross-Complainant cannot allege a cause of action for breach of contract because Cross-Complainant does not and cannot allege any breach.

“[T]he elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

The FAXC incorporates by reference the exhibits—in the form of the contracts alleged to have been signed by the parties—attached to the SAC. (FAXC at ¶¶ 7, 9.) The FAXC alleges that Cross-Defendants breached the contracts by: (1) delivering defective goods; (2) allowing substantial volumes of counterfeit and other unauthorized goods to be sold in breach of the contracts; and (3) interfering with Cross-Complainant’s performance of the contracts. (Id. at ¶ 19.) One of the agreements between Cross-Complainant and Cross-Defendants indicated that Cross-Complainant was to be “KSIL’s exclusive distributor of the Products in the Territory.” (SAC, Exhibit 1, 3, and 4 at ¶ 2.1.) The FAXC clearly states that “despite [Cross-Complainant’s] right to control its markets, Cross-Defendants permitted its product to flood e-commerce markets, including Amazon and Zappos, which circumvented [Cross-Complainant] altogether.” (FAXC at ¶ 14.) Pursuant to the first cause of action, Cross-Complainant has sufficiently pled all the elements for a breach of contract cause of action. (FAXC at ¶¶ 17-23.)

Therefore, the demurrer of Cross-Defendants to the first cause of action in the FAXC is OVERRULED.

Issue No.2: Second Cause of Action

“The implied promise [of good faith and fair dealing] requires each contracting party to refrain from doing anything to injure the right of the other to receive the benefits of the agreement.” (Avidity Partners, LLC v. State of California (2013) 221 Cal.App.4th 1180, 1204.) “The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.” (Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 349.) “The covenant thus cannot be endowed with an existence independent of its contractual underpinnings.” (Id.) “It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.” (Id. at 349-350.) “[I]t is universally recognized the scope of conduct prohibited by the covenant of good faith is circumscribed by the purposes and express terms of the contract.” (Avidity Partners, LLC v. State of California (2013) 221 Cal.App.4th 1180, 1204.) “The covenant of good faith is read into contracts in order to protect the express covenants or promises of the contract.” (Id.) “The implied covenant of good faith and fair dealing does not impose substantive terms and conditions beyond those to which the parties actually agreed.” (Id.) To state a cause of action for breach of the implied covenant of good faith and fair dealing, a plaintiff must plead that: (1) plaintiff and defendant entered into a contract; (2) plaintiff did all, or substantially all of the significant things that the contract required plaintiff to do or that plaintiff was excused from having to do those things; (3) that all conditions required for defendant’s performance had occurred or were excused; (4) defendant unfairly interfered with plaintiff’s right to receive the benefits of the contract; and (5) plaintiff was harmed by Defendant’s conduct. (CACI 325.)

Pursuant to the second cause of action, the FAXC alleges that Cross-Defendants: (1) mismanaged their own business and the brands at issue in the Contracts; (2) permitted counterfeit goods to be widely distributed, including within Cross-Complainant’s territories, which degraded their own brands, thus interfering with Cross-Complainant’s ability to profitably re-sell the products supplied by Cross-Defendants; (3) delivered massive quantities of defective goods to Cross-Complainant; and (4) failed and refused to rectify the mounting damages sustained by Cross-Complainant as a result of each of the foregoing actions. (FAXC at ¶ 27.) A review of the contracts at issue (SAC at Exhibits 1-4) does not indicate that Cross-Defendants were expressly prohibited from: (1) mismanaging their own business; (2) allowing the wide distribution of counterfeit goods; or (3) delivering massive quantities of defective goods. As such, the above actions cannot serve as a basis for the breach of the implied covenant of good faith and fair dealing.

Cross-Defendants’ demurrer to the second cause of action in the FAXC is therefore SUSTAINED with 20 days leave to amend.

Issue No.3: Third Cause of Action

Cross-Defendants contend that Cross-Complainant’s third and fourth causes of action fail because: (1) KSI has no vertical privity with Cross-Complainant; and (2) both causes of action are excluded by contract.

“Vertical privity is a prerequisite in California for recovery on a theory of breach of the implied warranties of fitness and merchantability.” (U.S. Roofing, Inc. v. Credit Alliance Corp. (1991) 228 Cal.App.3d 1431, 1441.)

Cross-Complainant’s opposition fails to respond to Cross-Defendants’ argument advanced in their moving papers that: (1) vertical privity is required to state causes of action for breach of the implied warranty of merchantability and breach of implied warranty of fitness; and (2) there is a lack of a direct relationship between Cross-Complainant and KSI and as such both causes of action fail. The Court finds that due to Cross-Complainant’s lack of rebuttal argument on the above points, Cross-Complainant has conceded to Cross-Defendants’ argument on this point. (Heglin v. F.C.B.A. Market (1945) 70 Cal.App.2d 803, 806.)

Therefore, the Court SUSTAINS with 20 days leave to amend the demurrer of Cross-Defendants to the third cause of action in the FAXC.

Issue No.4: Fourth Cause of Action

The Court applies its reasoning with respect to the third cause of action above and applies that reasoning to the fourth cause of action in the FAXC.

Therefore, the demurrer of Cross-Defendants to the fourth cause of action in the FAXC is SUSTAINED with 20 days leave to amend.

Issue No.5: Fifth Cause of Action

“A complaint for fraud must allege the following elements: (1) knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages.” (Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1816.) Every element of fraud “must be specifically pleaded.” (Id.) To state a fraud-based cause of action a plaintiff must plead “facts which show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) “[F]raud must be pled specifically; general and conclusory allegations do not suffice.” (Id.) “Each element in a cause of action for fraud . . . must be factually and specifically alleged.” (Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4th 513, 519.) “Besides actual reliance, [a] plaintiff must also show justifiable reliance, i.e., circumstances were such to make it reasonable for [the] plaintiff to accept [the] defendant’s statements without an independent inquiry or investigation.” (OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 856.)

Cross-Complainant has failed to plead the fifth cause of action with the required specificity. Cross-Complainant has failed to plead how Cross-Complainant justifiably relied on the alleged misrepresentations of Cross-Defendants. Cross-Complainant has also failed to plead that Cross-Defendants intended to deceive or induce reliance. Also, while the FAXC does allege some misrepresentations made by Cross-Defendants, the FAXC does not allege by what means those misrepresentations were tendered.

Cross-Defendants’ demurrer to the fifth cause of action in the FAXC is SUSTAINED with 20 days leave to amend.

Issue No. 6: Sixth Cause of Action

“The UCL’s scope is broad. By defining unfair competition to include any unlawful . . . business act or practice . . . the UCL permits violations of other laws to be treated as unfair competition that is independently actionable.” (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949.) “[T]he UCL sweeps within its scope acts and practices not specifically proscribed by any other law.” (Id.)

Here, Cross-Complainant has sufficiently stated a cause of action for breaches of contract as indicated above. As such, the sixth cause of action states a cause of action.

Cross-Defendants’ demurrer to the sixth cause of action in the FAXC is OVERRULED.

Issue No.7: Seventh Cause of Action

“[C]ourts have quite consistently refused to recognize a cause of action based on negligent, as opposed to intentional, conduct which interferes with the performance of a contract between third parties or renders its performance more expensive or burdensome.” (Fifield Manor v. Finston (1960) 54 Cal.2d 632, 636.)

Cross-Complainant concedes in its opposition that it will stipulate that its claim for contractual interference be based on Cross-Defendants’ intentional rather than negligent conduct. (Opposition at 14:19-24.) Cross-Complainant’s opposition, however, does not rebut or even address Cross-Defendants’ argument advanced that negligent interference with contractual relations is not a recognized cause of action in California as indicated by the Fifield case from the Supreme Court of California. Cross-Complainant has conceded on this point of argument. (Heglin v. F.C.B.A. Market (1945) 70 Cal.App.2d 803, 806.) Cross-Complainant has not stated a cause of action for negligent interference with contractual relations.

Cross-Defendants’ demurrer to the seventh cause of action in the FAXC is SUSTAINED WITHOUT LEAVE TO AMEND.

Issue No.8: Eighth Cause of Action

“The difference between intentional interference and negligent interference with prospective economic advantage relates to the defendant’s intent.” (Redfearn v. Trader Joe’s Co. (2018) 20 Cal.App.5th 989, 1006.) For the tort of negligent interference with prospective business advantage there must be “the existence of a business relationship with which the tortfeasor interfered.” (Roth v. Rhodes (1994) 25 Cal.App.4th 530, 546.) “The tort of interference with a prospective business relationship or advantage imposes liability for improper methods of diverting or taking business from another. The methods used are those that are not within the privilege of fair competition.” (Baldwin v. Marina City Properties, Inc. (1978) 79 Cal.App.3d 393, 406.) “The tort of interference with a prospective economic advantage includes the narrower tort of interference with a contractual relationship.” (Id.) “In order to plead a cause of action for this tort, plaintiffs must allege the existence of either a contractual relationship or a prospective business relationship advantageous to them, that defendants had knowledge of the advantageous relationship, that defendants intentionally or negligently induced the breach of the relationship, that the acts or conduct of the defendants were wrongful, and proximately caused plaintiffs’ injury and damage by interfering with the relationship causing a business loss.” (Id. at 407.)

Cross-Complainant has sufficiently stated a cause of action for negligent interference with prospective business advantage. The FAXC alleges that: (1) Cross-Complainant had economic relationships with vendors, retailers, and others which provided the probability of future economic benefit to Cross-Complainant (FAXC at ¶ 61); (2) Cross-Defendants knew or should have known of the relationships between Cross-Complainant and its vendors, retailers, and others (Id. at ¶ 62); (3) Cross-Defendants interfered with and disrupted Cross-Complainant’s relationships with others with whom Cross-Complainant had a probable future economic relationship (Id. at ¶ 63); (4) Cross-Defendants’ wrongful conduct did interfere with an disrupt Cross-Complainant’s economic relationships with others (Id. at ¶ 65); and (5) Cross-Defendants’ wrongful conduct was the direct and proximate cause of Cross-Complainant’s damages. (Id. at ¶ 66.)

Therefore, the demurrer of Cross-Defendants to the eighth cause of action in the FAXC is OVERRULED.

Issue No.9: Alter Ego Claims

Cross-Defendants assert that all eight causes of action fail as to KSI because Cross-Complainant has failed to allege that KSI is the alter ego of KSIL. The Court rejects Cross-Defendants’ argument in connection with the alter ego theory because alter ego need not be pled in a complaint specifically in order for alter ego to remain a remedy. (See Auer v. Frank (1964) 227 Cal.App.2d 396, 403; see also Pan Pac. Sash & Door Co. v. Greendale Park, Inc. (1958) 652, 654-655).)

MOTION TO STRIKE

Cross-Defendants filed a motion to strike portions of the FAXC. Generally, Cross-Defendants seek to strike allegations from the FAXC with respect to four categories of claimed damages by Cross-Complainant: (1) investment and publicity costs to promote and build its sales platform; (2) damages relating to the alleged defective products; (3) damages for failure to prevent counterfeit or unauthorized goods; and (4) other damages for inventory, accounts, receivable, and good will.

Legal Standard

California Code of Civil Procedure, Section 436(a) allows a court to “[s]trike out any irrelevant, false, or improper matter inserted in any pleading.” California Code of Civil Procedure, Section 436(b) allows a court to “[s]trike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” It is well established that “[w]here a written instrument is unambiguous and incorporated by reference into a [cross] complaint, any allegations in the pleading inconsistent with the incorporated writing may be stricken.” (Pacific States Enterprises, Inc. v. City of Coachella (1993) 13 Cal.App.4th 1414, 1426, fn.8.)

Issue No. 1: Investment or Publicity Damages

Cross-Defendants assert that Cross-Complainant cannot claim any investment or publicity damages because each of the agreements incorporated into the FAXC required Cross-Complainant to bear those costs at its own expense.

“Contract damages are generally limited to those within the contemplation of the parties when the contract was entered into or at least reasonably foreseeable by them at the time.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 506.) “[T]he question whether a [party’s] . . . damages were foreseeable . . . is one of fact to be determined by the trier of fact.” (Sun-Maid Raisin Growers v. Victor Packing Co. (1983) 146 Cal.App.3d 787, 790.)

While a review of the agreements at issue indicate that Cross-Complainant was to bear expenses with respect to establishing and expanding the sale of products, promotion, advertising, and quality control (SAC at Exhibits 1-4), the Court finds that none of the agreements expressly excluded Cross-Complainant from recovering damages arising from Cross-Complainant’s bearing of such expenses in the event of a breach. As indicated above in connection with Cross-Defendant’s demurrer to the first cause of action in the FAXC, Cross-Complainant has stated sufficient facts to plead a breach of contract cause of action. The Avidity case cited by Cross-Defendants in their reply is unpersuasive because that case involved summary judgment and not a motion to strike; moreover, in Avidity, there was an indication that the parties had rejected a ground for recovery of damage during negotiations. (Avidity Partners, LLC v. State of California (2013) 221 Cal.App.4th 1180, 1193.) The CAZA case cited in Cross-Defendants’ reply is also unpersuasive because in that case an exculpatory clause was present in the contract that limited liability. (CAZA Drilling (California), Inc. v. TEG Oil & Gas U.S.A., Inc. (2006) 142 Cal.App.4th 453, 466.) Here, there is no explicit exculpatory clause in any of the contracts that states that Cross-Complainant cannot recover damages for investment or publicity.

Therefore, the Court DENIES Cross-Defendants’ request to strike damages claims with respect to investment and publicity from the FAXC.

Issue No.2: Damages for Defective Goods

Cross-Defendants assert that Cross-Complainant’s claim for any damaged or defective goods is expressly limited by the bi-annual rebate contained in the contracts. (SAC, Exhibit 1, 3, and 4 at ¶ 7.)

Here, the Court agrees with Cross-Defendants. The above clauses with respect to defective products states that the twice-yearly rebates—equal to 0.025% of all purchases of products made by Cross-Complainant— that KSIL would provide to Cross-Complainant would “fully and finally compensate [Cross-Complainant} for all defective product claims.” (Id.) Thus, the damages for defective goods are inconsistent with the express language contained in the contracts. The twice-yearly rebate is clearly intended to be compensation for any defective products and the damages for defective products that are alleged in the FAXC are clearly inconsistent with the express terms of the contracts under Pacific States.

The Court therefore GRANTS Cross-Defendants’ request to strike damages claims with respect to defective products with 20 days leave to amend.

Issue No. 3: Failure to Police Against Counterfeit or Unauthorized Goods

Cross-Defendants contend that Cross-Complainant cannot claim any damages for an alleged failure to police against counterfeit or unauthorized goods because the contracts place no obligation on behalf of Cross-Defendants to engage in such activity.

The Court references its discussion above in connection with Cross-Defendants’ demurrer to the second cause of action for breach of the implied covenant of good faith and fair dealing in the FAXC which the Court found to insufficient to state a cause of action. Cross-Defendants had no affirmative obligation to prevent third-parties from selling counterfeit or other unauthorized products. (SAC at Exhibits 1-4.) A party cannot “impose substantive duties or limits on [a] contracting [party] beyond those incorporated into the specific terms of their agreement.” (Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 349.) Thus, Cross-Complainant cannot claim damages for an obligation in which there was never an express agreement between the parties.

Therefore, the Court GRANTS Cross-Defendants’ request to strike the claims for damages from the FAXC with respect to failure to police against counterfeit or unauthorized goods with 20 days leave to amend.

Issue No. 4: Damages Claims for Inventory, Accounts Receivable, and Good Will

Cross-Defendants assert that Cross-Complainant’s damage claims for inventory, accounts receivable, and good will have no basis in contract.

The Court incorporates its reasoning from above with respect to the obligations of Cross-Defendants to police against counterfeit or unauthorized goods and applies it to Cross-Complainant’s claims for inventory, accounts receivable, and good will. The contracts do not impose the burden on Cross-Defendants to be liable for inventory, accounts receivable, and good will and Cross-Complainant cannot impose these obligations on Cross-Defendants under Avidity.

Therefore, the Court GRANTS Cross-Defendants’ request to strike damages claims from the FAXC with respect to inventory, accounts receivable, and good will.

Issue No. 5: Vague and Ambiguous Claims for Damages

Cross-Defendants contend that throughout the FAXC: (1) Cross-Complainant makes vague and ambiguous claims for damages; (2) does not state the actual damages suffered in several paragraphs of the FAXC; and (3) appears to miscalculate its actual alleged damages.

California Code of Civil Procedure, Section 425.10(a)(1) says that a cross-complaint must contain “[a] statement of the facts constituting the cause of action, in ordinary and concise language.” Where a cross-complaint demands “the recovery of money or damages” then “the amount demanded shall be stated.” (Code Civ. Proc. § 425.10(a)(2). “[A] defendant must be given notice of what judgment may be taken against him [or her].” (Petty v. Manpower, Inc. (1979) 94 Cal.App.3d 794, 798.)

Cross-Complainant’s opposition merely alleges that Cross-Defendants’ claims to its asserted damages on this point fails without citing to any legal authority. Cross-Complainant also fails to rebut the argument that it miscalculated its actual damages. Cross-Complainant has conceded to Cross-Defendants’ argument on this point due to its failure to offer any supporting legal authority. (Heglin v. F.C.B.A. Market (1945) 70 Cal.App.2d 803, 806.)

Therefore, the Court GRANTS Cross-Defendants’ motion to strike vague and ambiguous damages claims from the FAXC with 20 days leave to amend.

Issue No. 6: Alter Ego Allegations

Cross-Defendants assert that Cross-Complainant’s alter ego allegations against KSI should be stricken because they are not supported based on facts.

The Court references its discussion of alter ego in connection with the demurrer above with respect to KSI and applies it to Cross-Defendants’ request to strike alter ego allegations and claims against KSI in connection with the motion to strike.

The Court therefore DENIES Cross-Defendants’ request to strike alter ego allegations and claims against KSI from the FAXC.

Cross-Defendants’ motion to strike is GRANTED IN PART.

Moving parties are ordered to give notice of this ruling.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Dated this 18th day of December 2019

Hon. Holly J. Fujie

Judge of the Superior Court