Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from an order of the Superior Court of Los Angeles County No. BC359795, Terry A. Green, Judge. Affirmed.
Abelson Herron, Vincent H. Herron and Stephanie R. Lewis for Plaintiffs and Appellants.
Rockard J. Delgadillo, City Attorney, Alan L. Manning, Assistant City Attorney, and Mary Jo Curwen, Deputy City Attorney for Defendant and Respondent.
CHAVEZ, J.
Dr. John C. Shih (Shih), Jean C. Shih, SY Technology, Inc. (SY Technology) and JCS Investments, LLC (collectively “appellants”) appeal from an order sustaining the demurrer of respondent City of Los Angeles Safety Members Pension Fund (respondent) to appellants’ first amended complaint. Respondent’s demurrer was sustained on the ground that appellants failed to satisfy the Government Claims Act (Gov. Code, §§ 900 et seq.), which sets forth requirements that must be satisfied before litigation may be instigated against a governmental entity. We affirm.
Respondent is a defined benefit single-employer pension plan covering all active full time sworn firefighters and police officers of the City of Los Angeles. The pension fund operates under the City of Los Angeles Charter and Administrative Code (Charter).
All further statutory references are to the Government Code unless otherwise indicated.
CONTENTIONS
Appellants contend that (1) a letter sent to respondent in October 2005 substantially complied with the claims presentation requirements of the Government Claims Act; (2) if the October 2005 letter did not substantially comply with the claims presentation requirements of the Government Claims Act, respondent waived its defense of sufficiency of claim by failing to notify appellants of any defects in the October 2005 letter; and (3) the trial court abused its discretion in failing to grant appellants leave to amend their complaint to allege facts relating to respondent’s subjective understanding that appellants were trying to assert a claim.
FACTUAL BACKGROUND
1. The invalid tax shelter
This case arises out of appellants’ use of a tax shelter that was found by the United States government to be fraudulent. At the direction of KPMG, appellants entered into a series of contracts with respondent which provided for the “donation” and subsequent repurchase of SY Technology stock. Appellants alleged that respondent “knew” that appellants’ “purpose for making the donation and entering into the donation-related contracts was to reduce [appellants’] tax burden and . . . believed that [appellants’] tax burden would be reduced as a result.”
KPMG is a company which provides audit, tax and advisory services. KPMG is not a party to this lawsuit.
All facts are taken from appellants’ pleadings and attached exhibits and therefore have not been established in this case.
Specifically, on or about May 17, 2000, Shih executed a written assignment under which he made a charitable gift of 2,700,000 nonvoting shares of SY Technology (the gifted stock) to respondent. According to an appraisal, the fair market value of the gifted stock at that time was $369,000.
On December 5, 2001, respondent allowed SY Technology to repurchase the stock for $900,000. At Shih’s request, respondent agreed to permit the repurchase transaction earlier than provided in the repurchase agreement so that SY Technology’s assets could be sold for approximately $50 million.
The repurchase agreement specified that respondent had the right to permit repurchase “no earlier than May 17, 2002.”
In 2004, the Internal Revenue Service (IRS) issued IRS Notice 2004-30, identifying the type of strategy used by appellants (known as a Subchapter S Corporation Charitable Contribution Strategy or “SC2”) as an improper and “abusive” tax avoidance strategy. As a result, appellants entered into a settlement with the IRS and the Franchise Tax Board. The settlement required appellants to make a substantial tax payment, plus interest; disallowed any tax benefit for the donation of SY Technology stock to respondent; and imposed other restrictions on the deductibility of professional fees and related expenses.
2. October 2005 communication regarding the transaction
On October 17, 2005, appellants’ attorneys sent a letter to respondent’s Chief Investment Officer (CIO), Tom Lopez. The letter stated, in pertinent part:
“We represent Dr. John Shih and SY Technology, Incorporated who, records reflect, made $900,000 in payments to [respondent] in connection with the donation and subsequent redemption of 2,700,000 non voting shares of stock of SY Technology. . . .
“As matters stand, Dr. Shih and SY Technology are preparing to commence suit against KPMG and others for contractual and tortious breaches arising out of KPMG’s tax strategy more commonly known as SC2. . . .
“The purpose of this letter is not to pick a fight. Rather, it seeks to obviate conflict with [respondent]. This is especially important because Dr. Shih and SY Technology continue to have the utmost respect for the hard work and community service of the men and women whom [respondent] serves.
“With this said, the reality of Dr. Shih’s position is that, in addition to disallowing the allocation of any of SY Technology’s taxable income to [respondent], the IRS has also taken the harsh step of disallowing any type of charitable deduction for the $900,000 contributed to [respondent] in connection with the SC2 transaction. The disallowance of the charitable contribution deduction is, of course, entirely inconsistent with the charitable intent evidenced by Dr. Shih at the time the stock of SY Technology was transferred and redeemed. Nevertheless, [respondent] received a clear benefit from Dr. Shih’s transfer, while Dr. Shih received none by way of tax savings or otherwise.
“Given this imbalance, we believe it would be beneficial for [respondent’s] representatives to meet with us to discuss ways for the parties to come together to avoid conflict and to ameliorate the harsh economic result imposed on Dr. Shih. Indeed, it is not Dr. Shih’s immediate desire to commence suit against [respondent], especially if common ground can be found. Accordingly, we invite you to call us to discuss this situation and its possible resolution.
“Because of our need to move matters forward on other fronts, it is important that we hear back from [respondent] no later than the close of business, next Tuesday, October 25, 2005. After that time, Dr. Shih will have no choice but to go ahead without [respondent’s] input. As such, time is of the essence.”
Tom Lopez referred appellants’ letter to the division of the office of the Los Angeles City Attorney that represents respondent. Assistant City Attorney Alan L. Manning sent a response to appellants’ attorney on October 19, 2005. The letter stated, in pertinent part:
“After having reviewed your letter, I am unclear as to what your client’s position is and what he would like from [respondent]. As you know, KPMG approached [respondent] on your client’s behalf with a proposal to donate, and later repurchase, shares of SY Technology, Inc. [Respondent] agreed to the proposal and entered into the contract . . . [t]hereafter, [respondent] not only fully performed its obligations under the contract, but, further, acquiesced to your client’s request that he be allowed to repurchase the shares earlier than provided under the contract, to enable him to sell his company to a third party for approximately $50 million.
“[¶] . . . [¶]
“[Respondent] is not responsible for any advice that KPMG or others may have given to your client regarding his donation. [Respondent] did not provide your client with any tax or other advice, nor did [respondent] provide your client with any guarantees or assurances of any kind regarding tax benefits that your client apparently sought from the donation and subsequent repurchase.
“Please send me any information you have, and your legal theories, that you believe makes [respondent] liable for any losses that Dr. Shih may have incurred. I look forward to receiving any information you would like to share.
“This letter does not constitute a waiver by [respondent] or the City of Los Angeles of any objection to any claim your client might make, on the grounds of failure to file a timely claim under Government Code Section 911.2.”
PROCEDURAL BACKGROUND
On October 4, 2006, appellants filed suit against respondent and others. Appellants’ first amended complaint (FAC), filed on February 27, 2007, alleged two causes of action against respondent: a cause of action for rescission/cancellation of the assignment and repurchase agreement (the thirteenth cause of action), and a cause of action for money had and received (the seventeenth cause of action). The FAC alleged that the letter sent by appellants’ attorney to respondent’s CIO in October 2005 satisfied the statutory governmental claim requirements.
On April 3, 2007, respondent demurred to the FAC on the ground that the October 2005 letter did not substantially comply with the governmental claims requirements nor did it qualify as a “claim as presented.” Appellants opposed the demurrer.
The hearing on respondent’s demurrer took place on May 8, 2007. The court stated its position that the October 2005 letter could not be considered to be a claim under the Government Claims Act. The court noted that the letter was “very conciliatory,” stating specifically, that appellants were “not interested in fighting with [respondent].” Further, the court noted, “it doesn’t mention an amount, doesn’t give the City reasonable time to investigate it, and it was sent to the wrong person.” After hearing argument, the court sustained respondent’s demurrer without leave to amend. The court set forth its rationale in full in a three-page written ruling. The ruling explained that the court did not find the October 17, 2005 letter to be a “claim as presented” because “it does not put the City on notice of an actionable claim, and that litigation will follow if not resolved.” Furthermore, the court noted, the letter was not treated as a claim. And, despite respondent’s indication that its response did not constitute a waiver of any objection to “any claim [appellants] might make,” the court noted that “inexplicably,” appellants did nothing else regarding the alleged claim “until the filing of the instant action, on October 4, 2006.” The court indicated that appellants were not given leave to amend because “[appellants] cannot likely cure this defect.”
On July 5, 2007, the trial court entered judgment in favor of respondent. On July 6, 2007, appellants timely appealed.
DISCUSSION
I. Standard of Review
When reviewing a ruling on a demurrer, we independently determine whether the complaint states a cause of action. (Satten v. Webb (2002) 99 Cal.App.4th 365, 374-375.) We “‘treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.]’” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Further, “we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.]” (Ibid.)
When a demurrer is sustained without leave to amend, we must decide whether there is a reasonable possibility that the defect can be cured by amendment. If it can be, the trial court has abused its discretion; if not, there has been no abuse of discretion. (Blank v. Kirwan, supra, 39 Cal.3d at p. 318.) The burden of proving such a reasonable possibility is squarely on the plaintiff. (Ibid.)
II. The Government Claims Act
Under the Government Claims Act, “no suit for money or damages may be brought against a public entity on a cause of action for which a claim is required to be presented . . . until a written claim therefor has been presented to the public entity and has been acted upon . . . or has been deemed to have been rejected . . . .” (§ 945.4.) Section 905 requires the presentation of “all claims for money or damages against local public entities,” subject to certain irrelevant exceptions. (§ 905.) “Thus, under these statutes, failure to timely present a claim for money or damages to a public entity bars a plaintiff from filing a lawsuit against that entity.” (State of California v. Superior Court (Bodde) (2004) 32 Cal.4th 1234, 1239, fn. omitted.)
“The purpose of the claims statutes is not to prevent surprise, but ‘to provide the public entity sufficient information to enable it to adequately investigate claims and to settle them, if appropriate, without the expense of litigation. [Citations]. It is well-settled that claims statutes must be satisfied even in face of the public entity’s actual knowledge of the circumstances surrounding the claim.’ [Citation.]” (City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 738.) “The claims statutes also ‘enable the public entity to engage in fiscal planning for potential liabilities and to avoid similar liabilities in the future.’ [Citations.]” (Ibid.)
To achieve these purposes, “section 911.2 requires a claimant to present a claim to the public entity within a specified time after accrual of the cause of action.” (Phillips v. Desert Hosp. Dist. (1989) 49 Cal.3d 699, 705, fn. omitted (Phillips).) “Section 910 identifies the information a proper notice of claim should include to enable a public entity to investigate and evaluate the claim to determine whether settlement is appropriate.” (Id. at p. 706.) According to that statute, such a claim “shall show” all of the following:
“(a) The name and post office address of the claimant.
“(b) The post office address to which the person presenting the claim desires notices to be sent.
“(c) The date, place and other circumstances of the occurrence or transaction which gave rise to the claim asserted.
“(d) A general description of the indebtedness, obligation, injury, damage or loss incurred so far as it may be known at the time of presentation of the claim.
“(e) The name or names of the public employee or employees causing the injury, damage, or loss, if known.
“(f) The amount claimed if it totals less then ten thousand dollars . . . . If the amount claimed exceeds ten thousand dollars . . ., no dollar amount shall be included in the claim. However, it shall indicate whether the claim would be a limited civil case.” (§ 910.)
Section 915 describes the proper means of presentation of a claim to a public entity. The presentation may be accomplished by: “(1) [d]elivering it to the clerk, secretary or auditor thereof”; or (2) “[m]ailing it to the clerk, secretary, auditor, or to the governing body at its principal office.” (§ 915, subd. (a).) However, the statute specifies that “[a] claim . . . shall be deemed to have been presented in compliance with this section even though it is not delivered or mailed as provided in this section if it is actually received by the clerk, secretary, auditor or board of the local public entity.” (§ 915, subd. (d).)
If a public entity receives a claim which fails to comply with these requirements of the Government Claims Act, and is therefore defective, the public entity may either “give written notice of [the claim’s] insufficiency, stating with particularity the defects or omissions therein” within 20 days (§ 910.8), or waive any defense “as to the sufficiency of the claim based upon a defect or omission in the claim as presented.” (§ 911.) Whether or not it decides to provide a notice of insufficiency, the public entity must notify the claimant within 45 days after the claim is presented whether the claim, defective or otherwise, was timely filed. (Phillips, supra, 49 Cal.3d at p. 705.)
“When a public entity receives a document which contains the information required by section 910 and is signed by the claimant or her agent as required by section 910.2, the public entity has been presented with a ‘claim’ under the act, and must act within 45 days or the claim is deemed to have been denied. (§ 912.4.) Once a claims is denied or deemed to have been denied, the claimant may then proceed to file a lawsuit. (§ 945.4.)” (Phillips, supra, 49 Cal.3d at p. 706.)
Having reviewed the relevant statutory requirements, we now turn to the question of whether appellants’ letter of October 17, 2005, to Tom Lopez satisfied those requirements.
III. Presentation of Claim to the Public Entity as Required by Section 915
Prior to addressing appellants’ arguments concerning the content of the October 2005 letter, we address a threshold issue raised by respondent: whether appellants presented the letter to respondent by any of the permissible means provided in section 915.
Under section 915, appellants were permitted to file a claim by “delivering” it to the “clerk, secretary, or auditor” of respondent. Alternatively, the claim could be mailed to the “clerk, secretary, auditor, or to the governing body at its principal office.” (§ 915, subds. (a)(1) & (a)(2).)
Appellants’ October 2005 letter was personally addressed to Tom Lopez, CIO of respondent, and was delivered to him by facsimile. Respondent points out that, appellants do not allege that Tom Lopez was the clerk, secretary or auditor of respondent, or that he had authority to accept claims on behalf of respondent. In addition, there was no allegation that the letter was actually received by the clerk, secretary, auditor, or governing board of respondent, as described under section 915, subdivision (d). Thus, respondent argues, regardless of the content of the letter, it was never properly presented to respondent.
Charter section 350(a) provides that all claims against the City or any City board must be filed with the City Clerk. Pursuant to Charter section 273, the Pension Board has exclusive authority to approve or reject settlements concerning the funds at issue. Thus, if the alleged claim had been properly filed with the City Clerk, respondent argues, it would have been referred to the Pension Board for disposition.
Respondent cites several cases in support of its position. In the first, Westcon Construction Corp. v. County of Sacramento (2007) 152 Cal.App.4th 183, the court found that documents sent to a county employee overseeing a construction project were insufficient to comply with section 915 because the employee was not the clerk, secretary, or auditor of the county. The court reasoned that: “As is often the case, the individual known to the claimant may be the very person who committed the wrongdoing that is the subject of the claim. This may be the last person who would want to pass a claim on to his or her employer.” (Westcon, at pp. 200-201.) That court also rejected the plaintiff’s argument that the county had actual notice of the claim. (Id. at p. 201.) Similarly, in Schaefer Dixon Assocs. v. Santa Ana Watershed Project Auth. (1996) 48 Cal.App.4th 524, 534 (Schaefer), the court held that a contractor’s correspondence with the public agency’s general manager did not constitute a claim because it “was not ‘presented’ as required to the proper person, but rather was directed to the personal attention of the general manager for purposes of ‘enlisting your help in resolving’ the payment issue.” Similarly, here, appellants’ letter was directed to the personal attention of the CIO of respondent, for the purpose of “com[ing] together to avoid conflict and to ameliorate the harsh economic result imposed on Dr. Shih.”
In reply, appellants argue that, despite the misdirection of the October 2005 letter, respondent had actual notice of the letter. In support of its position, appellants cite Peters v. San Francisco (1953) 41 Cal.2d 419. Appellants argue that, under Peters, actual notice to the city attorney is sufficient to satisfy section 915. We do not read Peters to stand for this proposition. Instead, we note that in Peters, the plaintiff’s attorney filed a signed and notarized original of the claim with the city controller’s office, then presented the clerk of the board of supervisors with two carbon copies of the claim and informed him that the original had been filed with the controller. (Id. at pp. 425-426.) The issue in Peters was whether the requirements of the statute were satisfied by presentation of the original claim to the city controller and the filing of an unsigned copy with the board of supervisors. Under the circumstances, the court concluded that “while plaintiff should have filed the signed original of the claim with the clerk of the board of supervisors, her failure to do so does not defeat her right to recover” because the filing of the carbon copy fulfilled the statutory purpose of giving “the appropriate municipal body timely notice of the accident and an opportunity to investigate it.” (Id. at p. 426.) We find no support in the case law for appellants’ position that actual notice to the city attorney satisfies the requirements of section 915.
Insolo v. Imperial Irrigation Dist. (1956) 147 Cal.App.2d 172, and Elias v. San Bernardino County Flood Control Dist. (1977) 68 Cal.App.3d 70, are not helpful to appellants. In Insolo, there was evidence that appellants’ claim, which was sent by registered mail to the Imperial Irrigation District, was eventually given to the secretary of the district, as required by statute. And in Elias, the plaintiff lodged a claim with the Board of Supervisors of San Bernardino County. Although the Flood Control District was eventually discovered to be the proper defendant, the court found that the entity to which the claim was addressed also served as the board of supervisors of the District, therefore the claim properly apprised the District of the plaintiff’s cause of action. Here, in contrast, there were no allegations that the alleged claim was ever passed on to an entity or individual that was statutorily authorized to receive it.
Life v. County of Los Angeles (1991) 227 Cal.App.3d 894 is instructive. There, the court determined that the “filing of a claim with a County hospital’s ‘legal department’ did not amount to substantial compliance.” (Id. at p. 897.) The court explained that “Life’s presentation of a claim to the Medical Center’s legal department would have constituted substantial compliance with section 915 only if the misdirected claim were ‘actually received by the clerk, secretary, auditor or board of the local public entity.” (Id. at p. 900.) Because there was no evidence that the claim actually reached the appropriate officials or board, the court affirmed summary judgment in favor of the defendant. (Ibid.)
Appellants argue that the city attorney’s instruction to appellants to “direct all future communication about this matter to my attention” somehow excused appellants’ compliance with section 915. Appellants have cited no authority in support of this position, nor did they ever send any further communication on the subject, therefore this argument has no merit.
In sum, appellants failed to substantially comply with section 915 because they did not direct their letter to the clerk, secretary, auditor, or governing body of respondent. Further, appellants have failed to allege that the letter was actually received by any person or persons holding these positions. Thus, regardless of the content of the letter, appellants failed to properly present a claim, and therefore may not sue respondent.
IV. Substantial Compliance
We have determined that appellants failed to comply with section 915 and thus failed to properly present their alleged claim. We further find, as set forth below, that even if appellants’ letter had been directed to the appropriate entity, it did not substantially comply with section 910’s requirements regarding the content of a claim.
While implicitly admitting that the October 2005 letter did not strictly comply with the requirements of section 910, appellants argue that “it is well settled that parties need only demonstrate ‘substantial’ compliance with the claims presentation requirements.”
“Under the substantial compliance doctrine, a court may conclude that a claim is valid if it substantially complies with all of the statutory requirements for a valid claim even though it is technically deficient in one or more particulars. [Citation.]” (Becerra v. Gonzales (1995) 32 Cal.App.4th 584, 593.) In City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 456-457 (San Jose), the Supreme Court concluded that in order to determine whether a claimant has substantially complied with the Government Claims Act, “two tests shall be applied: Is there some compliance with all of the statutory requirements; and, if so, is this compliance sufficient to constitute substantial compliance?” Our review of the October 2005 letter leads us to conclude that it did not constitute substantial compliance under this test.
First, we review whether the letter presented some compliance with all of the statutory requirements. We find that the letter completely failed to comply with section 910, subdivisions (c), (d), (e), and (f).
Section 910, subdivision (c) requires that the claimant specify the “date, place, and other circumstances of the occurrence or transaction which gave rise to the claim asserted.” Appellants argue that they fulfilled this requirement by describing the dates of the SC2 transactions at issue, as well as the transactions themselves. However, as respondent pointed out in its response to the October 2005 letter, the transactions were not initiated or recommended to appellants by respondent, nor did respondent provide any legal or tax advice to appellants in connection with the transactions. Appellants fail to point to any specific occurrences or actions on the part of respondent which gave rise to any liability. Simply put, appellants’ references to the transactions, for which they specified their intent to sue “KPMG and others,” did not put respondent on notice as to any claim against it, much less any specific circumstances or occurrences which might give rise to respondent’s liability.
Appellants failed to meet the requirements of section 910, subdivision (d) for similar reasons. This section requires “[a] general description of the indebtedness, obligation, injury, damage or loss incurred.” Appellants argue that they described the $900,000 that respondent received from appellants, and that this should satisfy section 910, subdivision (d). However, appellants failed entirely to describe this amount as an indebtedness or obligation owed to appellants by respondent. Initially, appellants stated that they “made $900,000 in payments to [respondent] in connection with the donation and subsequent redemption of 2,700,000 non voting shares of stock of SY Technology.” Appellants further stated that “the reality of Dr. Shih’s position is that, in addition to disallowing the allocation of any of SY Technology’s taxable income to [respondent], the IRS has also taken the harsh step of disallowing any type of charitable deduction for the $900,000 contributed to [respondent] in connection with the SC2 transaction.” There is no claim that the money should rightfully be returned to appellants, nor is there any legal basis for such a claim. Appellants describe an “imbalance,” and invite respondent to meet with them to discuss ways to come together, avoid conflict and ameliorate the harsh economic result imposed on Shih. However, no specific legal obligation or damage resulting from respondent’s actions is set forth.
We reject appellants’ assertion that the October 2005 letter was sufficient to be considered a claim because “the facts constituting the causes of action pleaded in the complaint [substantially corresponded] with the circumstances described in the claim as the basis of the plaintiff’s injury.” (Loehr v. Ventura County Cmty College Dist. (1983) 147 Cal.App.3d 1071, 1082-1083.) Not only did appellants’ October 2005 letter fail to describe a specific injury caused by respondent, the letter further gave no indication that appellants were seeking to rescind the agreement on the basis of mutual mistake of fact, nor did it detail any wrongs on the part of the fund that would form the basis for their restitution claim. In other words, “the document . . . fails to state in detail the circumstances or occurrence that would give rise to certain of the wrongs which constitute the basis of plaintiff’s causes of action.” (Id. at p. 1083.)
Section 910, subdivision (e) requires appellants to state “[t]he name or names of the public employee or employees causing the injury, damage, or loss, if known.” Appellants’ letter made no indication that any of respondent’s employees engaged in action which caused appellants injury, damage, or loss.
Section 910, subdivision (f) states that the claimant must state the amount claimed if it totals less than $10,000 or indicate whether the claim would be a limited civil case. Appellants’ letter also failed to fulfill this requirement.
Because the letter fails to meet the first test set forth in San Jose (some compliance with all of the statutory requirements), it cannot meet the second test. (See San Jose, supra, 12 Cal.3d at pp. 456-457 [setting forth the appropriate inquiries as: first, is “there some compliance with all of the statutory requirements; and, if so, is this compliance sufficient to constitute substantial compliance?”].) We therefore find that the October 2005 letter did not substantially comply with section 910.
V. Claim as Presented
Appellants next argue that the letter constituted a “claim as presented,” thus triggering respondent’s obligation to notify appellants of the perceived defects in the October 2005 notice. (§ 910.8.) Under the Government Claims Act, if a claim as presented fails to comply substantially with the claims presentation requirements, the public entity (or its designee) has 20 days after the claim is presented to give written notice of any perceived insufficiencies. (§ 910.8) “Any defense as to the sufficiency of the claim based upon a defect or omission in the claim as presented is waived by failure to give notice of insufficiency with respect to the defect or omission . . . .” (§ 911.)
The Supreme Court discussed the notice and defense-waiver provisions of the Government Claims Act in Phillips, supra, 49 Cal.3d 699. The plaintiff in a medical malpractice action against a public hospital sent a notice of intention to commence an action against a health care provider pursuant to the requirements of Code of Civil Procedure section 364, subdivision (a) (364 notice). In response to the hospital’s argument that the 364 notice was insufficient under section 910, the plaintiff argued that the hospital’s receipt of the 364 notice activated sections 910.8, 911, and 911.3, thus requiring the hospital to notify the plaintiffs in writing as to what additional section 910 information was necessary to allow the hospital to initiate an investigation into the incident. (Phillips, at p. 708.) The high court agreed with the plaintiff, finding that “a notice, such as plaintiff’s 364 notice, which discloses the existence of a claim that if not paid or otherwise resolved will result in litigation, must be treated as a defective ‘claim’ activating the notice and defense-waiver provisions of the act.” (Id. at pp. 707-708.) As explained by the Court of Appeal in Alliance Financial v. City and County of San Francisco (1998) 64 Cal.App.4th 635, 648 (Alliance), “[t]he focus of the court in Phillips . . . was not on the exact wording of the notice . . . but on the notification to the public entity that the claimant was asserting an actionable right to money or damages and that a failure to settle the dispute would lead to court action.” Thus, in order to trigger the notice and defense-waiver provisions of the Government Claims Act, a notice must communicate “a basis for a lawsuit and . . . an intent to sue -- at some time -- if the claim is not resolved.” (Ibid.)
Preliminarily, as we have discussed, appellants’ letter failed to provide “notification to the public entity” (Alliance, supra, 64 Cal.App.4th at p. 648) as it was addressed to a specific employee and was never forwarded to the clerk, secretary, auditor, or governing body of respondent. Further, appellants’ letter communicated neither a basis for a lawsuit nor an intent to sue. While the letter made reference to the SC2 transactions, it stated no “actionable right” against respondent. (Ibid.) As respondent pointed out in its responsive letter, appellants’ letter failed to advance any legal theories as to liability on the part of respondent. In addition, the October 2005 letter specified that its purpose was “not to pick a fight. Rather, it seeks to obviate conflict with [respondent].” While the letter indicated that appellants were “preparing to commence suit against KPMG and others,” it specified that, in contrast, “it is not Dr. Shih’s immediate desire to commence suit against [respondent].” Thus, appellants’ letter does not qualify as a “claim as presented,” and did not trigger the notice and defense-waiver provisions found in sections 910.8 and 911. As set forth in Schaefer, supra, 48 Cal.App.4th at page 534, “the plain import of the letter was merely to provide information and to request negotiation . . . not to advise of imminent litigation over a ‘claim.’”
In addition, respondent points out that appellants’ October 2005 letter demanded an immediate response. The letter was dated October 17, 2005, and stated: “Because of our need to move matters forward on other fronts, it is important that we hear back from [respondent] no later than the close of business, next Tuesday, October 25, 2005.” Thus, appellants only granted respondent eight days to respond to their letter. A claim must allow the public entity 20 days to point out deficiencies and 45 days to conduct an investigation and properly accept or reject the claim. (§§ 910.8, 912.4; Schaefer, supra, 48 Cal.App.4th at p. 537 [letters demanding immediate responses cannot be considered claims].)
Appellants argue that, despite the short response time, respondent actually conducted an investigation. In support of their position, appellants note that respondent’s letter to appellants of October 19, 2005, “included several background facts about the transactions which were not included in the October 2005 notice.” This does not show that respondent was given the opportunity to “adequately investigate” the alleged claim (City of Stockton v. Superior Court, supra, 42 Cal.4th at p. 738), especially because appellants provided no specific facts giving rise to liability on the part of respondent, no request for money or damages, and no legal theories supporting any such request.
Appellants rely heavily on Foster v. McFadden (1973) 30 Cal.App.3d 943, in support of their position that respondent’s notice obligations were triggered by the October 2005 letter. In Foster, the letter at issue described the date and location of the accident in question and stated:
“Please be advised that this firm has been retained to represent the interests of the above-named client in connection with the above accident.
“Please forward this letter to your insurance carrier and have them contact the undersigned immediately. If you carry no insurance, please call this office at once and advise what disposition you wish to make of this matter.
“Trusting we may hear from you shortly, and thus eliminate the necessity for initiating formal proceedings and inconvenience to all parties.” (Id. at p. 945.)
Appellants argue that if this brief letter was sufficient to invoke section 910.8, then the two-page October 2005 notice should be held to be sufficient.
We disagree. The letter at issue in Foster made it clear that the claimant was seeking damages in connection with an accident, and that formal proceedings would be initiated if no response was forthcoming. In contrast, the October 2005 letter failed to cite any legal grounds for a claim of injury or damage; specifically noted that its purpose was “not to pick a fight”; and stated that appellant did not intend to commence suit against respondent. It is not the length of the claim that triggers a public entity’s obligation under sections 910.8 and 911, but the content. The claim must assert “the existence of a right to damages and an intention to pursue that right.” (Alliance, supra, 64 Cal.App.4th at p. 648.) The October 2005 letter failed to articulate either of these criteria.
In addition, we note that the language of respondent’s October 19, 2005 letter indicating that “[t]his letter does not constitute a waiver by [respondent] or the City of Los Angeles of any objection to any claim your client might make, on the grounds of failure to file a timely claim under [s]ection 911.2” gave appellants notice that respondent did not consider their October 2005 letter to constitute a claim or a claim as presented.
VI. Leave to Amend
Appellants assert that they should have been granted leave to amend their complaint in order to allege “additional facts relating to the [CIO’s] subjective knowledge of the SC2 transactions, the IRS investigations, and the vast civil litigation resulting from the invalidated transactions, so that [respondent] understood [a]ppellants were trying to assert a claim.” Appellants also requested that they “be allowed to take the deposition of [CIO] Tom Lopez, to obtain evidence that Mr. Lopez understood the notice was legal in nature.”
Leave to amend is properly granted where “resolution of the legal issues does not foreclose the possibility that the plaintiff may supply necessary factual allegations. [Citation.]” (City of Stockton v. Superior Court, supra, 42 Cal.4th at p. 747.) However, the factual allegations which appellants propose to add to their pleading cannot cure its legal deficiency. Additional facts relating to Tom Lopez’s knowledge of the SC2 transactions and subsequent related litigation cannot substitute for appellants’ failure to properly present a claim to respondent. Further, “[c]ompliance with the filing requirements . . . may not be excused simply because the defendant public entity has full knowledge of the facts constituting the basis of the claim. [Citation.]” (Loehr v. Ventura County Cmty College Dist., supra, 147 Cal.App.3d at p. 1084.) Thus, even if appellants could show that respondent had knowledge regarding the SC2 transactions and the fallout following the issuance of IRS Notice 2004-30, appellants’ claim still could not survive. We find that the trial court did not abuse its discretion in denying leave to amend because appellants cannot cure their failure to comply with the Government Claims Act.
DISPOSITION
The order is affirmed. Appellants to bear the costs of appeal.
We concur: BOREN, P. J., DOI TODD, J.