Order Submitted Matter

Cal. Super. - 6th Dist.April 30, 2020

Order issued 3n Submitted Matte!" SUPERIOR COURT, STATE OF CALIFORNIA COUNTY OF SANTA CLARA DEPARTMENT 20 161 North First Street, San Jose, CA 95113 d 408.882.2320 ' 408.882.2296 (fax) « smanoukian©scscourtorg Cb ’c httpflwwwscscourtorg Bf'nle-“arg? (Elia maqygfigfi Gm J27: Dem- CASE NO.: 20CV366428 ' Pacific Office Automation, Inc. v. The Health Trust DATE: 20 January 2022 TIME: 9:00 am LINE NUMBER: 6 Order on Submitted Matter. ---oooOooo--- Order on Demurrer to the Cross-Complaint by Cross-Defendants Pacific Office Automation, Inc. and Garret Definer. l. Statement of Facts. This is an action for unlawful and deceptive ”Bait & Switch" behavior and theft. According to the cross-complaint, crossmmplainant The Health Trust (“THT“) is a California non-profit, located in San Jose, and a health care services facilitatorto people in need throughout the region. (Cross-Complaint at 1T 3.) It aligns its roles as a funder, provider, and advocate t0 create lasting change for the people it serves to the systems and policies affecting their health. (|bid.) Cross-Defendant Pacific Office Automation, Inc. (“POA”). located in Beavenon, Oregon, is an interstate lessor, suppfierand maintenance providerof commercial office equipment, including copiers, accessories and software. (Cross-Compiaint atfl4.) Cross-Defendant Garret Dettner(“Dettner") is a POA representative. (Id. atfl 16.) Cross-Complainant THT leased office equipment and was responsible for making monthly payments 0n leased equipment for the duratjon 0f the lease term. (Cross-Complaint at 1m 9-10.) ln July 2019, THT announced to members of the commercial office equipment supply industly its request for_ bids to replace its office equipment lease (“Request“). (Cross-Complaint atfl 11.) The Request was for bidders to offer THT existing lease buy-out proposals, and futfill THT's need for a single vendor's comprehensive, five year / supply and maintenance agreement for a full complement (suite) of competitively priced office equipment and software that met minimum performance metrics. (|bid.) A key requirement 0f the Request was that each bidder‘s offer provide a single monthly contractual payment amount forthe suite of equipment being offered. plus disclosed rates for other specified items not capable of quantification at the time of bidding. (Cross-Complaint atfl 12.) To efficiently centralize its office equipment costs and providers, THT wanted comprehensive offers from individual suppliers, at competitive prices, to fulfill its need for office equipment at known and predictable monthly rates. (Ibid.) THT required an understanding of the prospective monthly "spend" on the office equipment it was getting, and then having maintained by the bidderforfive years. (|bid.) Four office equipment vendors submitted offers/bids to THT in August 2019. (Cross-Complaint at1] 13.) Around that time, cross-defendant POA submitted information to THT in support of its offer to lease THT a suite of office eq uipment and software, which POA wouid maintain for a pen‘od of 60 months, subject to other agreements. (Id. atfl 15.) 0n 3O August 2019, cross-defendant POA submitted its “Bait Offel" to induce a winning bid announcement. (Cross-Complaint at 11 18.) The Bait Offer represented in wn'ting that POA ordered, for its lease, supply, and 20 January 2022 Order on Demurrer to the Cross-Complajnt Page 1 of 8 ,h" by Cross-Defendants Pacific Office Automation, Inc. and Garret Dettner. .f' maintenance t0 THT, a specific suite 0f office equipment and software. (Id. at Tl 19.) This offer was in the context of competitive bidding, for a pn’ce of $3,610.00 monthly, plus additional monthly charges disclosed in the Bait Offer. (|bid.) The Bait Offer explained that the equipment POA ordered is accompanied by POA warranties, and the consumer will not incur any charges other than those expressly Identified in the Bait Offers. (lbid.) The Bait Offer conveyed a payoff promise for THT‘s existing lease and promised n0 changes without a bilaterally signed wn‘tten agreement. (lbid.) On the same day, having received and relied on the Bait Offer, cross-complainant THT closed its Request and selected POA as the winning bidder. (Id. at 11 20.) _ On 8 October 2019, cross-defendant Dettner sent an email to THT stating that POA would not comply with the lease pay off obligation In the Bait Offer until THT signs POA's Lease Contract that Dettner promised and possessed, but refused to disclose. (Cross-Complaint at1] 24.) On 14 October 2019, cross-defendant POA began attempting partial delivery of the suit of equipment. (Cross-Complaint at {I 26.) One of the two pieces howeverwas different from the list. (|bid.) Cross-Defendant Definer represented that THT should trust him as delivery would be made later in October. (lbid.) lt was not. (lbid.) Thereafter, cross-defendant Dettner delayed six weeks in trying to deliver anything. (Cross-Complaint at 11 27.) In addition, Dettner’s attempted incomplete, partial deliveries went t0 the wrong locations. (|bid.) By November 201 9, he claimed he could not rememberwhat he agreed to in the bidding stage in terms of what equipment he promised, orwhere deliveries needed to go. (Ibid.) By mid-December 2019. cross-defendant Dettner had not delivered the suite of equipment, had admitted lying about ordering what he promised and admitted he concealed changes he made to the equipment ordered, had not delivered the Contract, had not paid off the previous leases, had not set dates to deliver a suite of any nine units of equipment 0r promised software, and had otherwise not done any1hing competently. (Id. at 1] 9.) Following a demand from THT forthe Contract, cross-defendant Definersent POA's Contract for its five year lease, supply, and maintenance 0f office equipment and software (the “Switch Contract”) on 11 December 2019. (Cross-Complaint at 1H] 34-35.) The Switch Contract is the contract that THT needed to sign before POA would fuifiil its promises made on 30 August 2019. (Id. at‘flfl 36-37.) But, the Switch Contract looked nothing like the Bait Offer given to induce the winning bid announcement and dismissal of other competitors. (id. at 1] 36.) In fact, the Switch Contract retracted and excluded the lease pay-off promise and did not incorporate the promised suite of equipment. (Id. at 1T 38.) It offered n0 delivery or installation dates and the Switch Contract declined to supply any software. (Ibid.) The Switch Contract also included a fut] disclaimer of all POA warranties that were in the Bait Offer. (Ibid.) On 11 December 2019, cross-complainant THT decided it was never going to agree to the Switch Contract following the Bait Offer and Dettner's behavior. (Cross-Complaint at 1140.) Around that same time, THT began evaluating submissions of other bidders who responded to the Request. (Id. atfl40.) On 26 December 2019, cross-complainant THT communicated to POA that it was not going to sign the Switch Offeror use POA as its office equipmentvendor. (Cross-Complaint at 1] 42.) Thus, THT demanded return of its stolen leased equipment, and that POA pick up any panial. non-conforming equipment it had delivered. (Ibid.) On 3 January 2020, cross-defendant POA sent a cease and desist letter to THT, demanding that THT not do business with any office equipment vendor otherthan POA. (Cross-Complaint at 1143.) POA also refused THT's request for return of equipment and threatened suit t0 force a signature on the Switch Contract. (Id. at 1T 44.) As a consequence of POA's fraudulent offers, advenisements, promotions, and Bait & Switch behavior, along with its theft and refusal to return equipment, THT has been forced to incur expenses, damages, loss of use damages and replacement costs. (Cross-Complaint at fl 47.) On 30 Apn‘l 20201, POA filed a complaint against THT alleging causes of action for: (1) Declaratory Judgment 1 This Department intends to comply with the time requirements of lhe Tria1 Court Delay Reduction Act (Government Code, §§ 68600-68620). The Ca1ifomia Rules of Coun state that the goal of each trial court should be to manage limited and unlimited civil cases from filing so that 100 percent are disposed of within 24 months. (Ca. St. Civil Rules of Court, Rule 3.714(b)(1)(C) and (b)(2)(C). 20 January 2022 Order 0n Demurrer t0 the Cross-Complaint Page 2 of 8 by Cross-Defendants Pacific Office Automation, Inc. and Garret Dettner. Breach of Contract Anticipatory Breach of Contract ) ) ) Breach of Implied Covenant of Good Faith and Fair Dealing ) Business and Professions Code, § 17200 ) Intentional Interference with Contractual Relations ) Inducing Breach of Contract 8) Intentional Interference with Prospective Economic Relations. On 1 September 2020, after argument 0n the matter, the court issued an ordersustaining defendant THT‘s demurrer with leave to amend. On 18 September 2020, POA filed a First Amended Complaint (“FAG“) asserting the same causes of action as the prior pIeading. On 3 May 2021, following argument on the matter, the court issued an order overruling defendant THT’s demurrer to the FAC and directing THT to file an answer within 20 days. On 23 June 2021, defendant THT filed an answer to the FAC aileging a general denial and various affirmative defenses. On the same day, THT filed the operative cross-complaint against POA and Definer (collectively, “Cross- Defendants") setting fonh causes 0f action for: (1) False Promise - Misrepresentation (2) Concealment - Fraud (3) Intentional Fraud (4) Conversion (5) Intentional Interference with Contract (6) Violation 0f Business & Professions Code, § 17500, et seq. Currently before the court is Cross-Defendants' demurrer to the cross-complaint. Cross-Defendants filed a request forjudicial notice in conjunction with the demurrer. Cross-Complainant THT filed written opposition. Cross- Defendants filed reply papers. A tn'al setting conference is scheduled for1 March 2022. ll. Request for Judicial Notice. In support of the motion, Cross-Defendants requestjudicial notice of the FAC in this action. (See Request forJudicial Notice at Ex. A.) “Judicial notice is the recognition and acceptance by the court, for use by the trier of fact 0r by the court, of the existence of a matter of law 0r fact that is relevant to an issue in the action without requiring formal proof of the matter.“ (Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal‘App.4th 1106, 1117.) The court may take judicial notice of the FAC as it constitutes a record of the superior court under Evidence Code section 452, subdivision (d). (See Stepan v. Garcia (1974) 43 Cal.App.3d 497, 500 [the coun may take judicial notice of its own file].) Accordingly, the request forjudicia1 notice is GRANTED. III. Demurrers in General. 20 January 2022 Order on Demurrer to the Cross-Complaint Page 3 of 8 by Cross-Defendants Pacific Office Automation, Inc. and Garret Definer. A compiaint must contain substantive factual atlegations sufficiently apprising the defendant of the issues to be addressed. (See Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.) A demurrer tests the IegaI sufficiency of a complaint. It is properly sustained where the complaint or an individual cause of action fails to “state facts sufficient to constitute a cause of action.“ (Code of Civil Procedure, § 430.10, subd. (e).) “[Clonclusionary allegations . . . without facts to support them” are insufficient on demurrer. (Ankeny v. Lockheed Missiles and Space Co. (1979) 88 Cal.App.3d 531. 537.) “It is fundamental that a demurrer is an attack against the complaint on its face, it should not be sustained unless the complaint shows that the action may not be pursued." (Yolo County Dept. ofSocial Services v. Municipal Court (1980) 107 Cal.App.3d 842, 846- 847.) "lt is not the ordinary function of a demurrer t0 test the truth 0f the plaintist allegations or the accuracy with which he describes the defendant‘s conduct. A demurrer tests only the legal sufficiency of the pleading." (Committee on Children‘s Television, Inc. v. General Foods Corp. (1983) 35 Ca|.3d 197, 21 3.) “It 'admits the truth of all material factual atlegations in the complaint . . .; the question of plaintiffs ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.’ [Citation.]” (Id. at pp. 213-214; see Cook v. De La Guerra (1864) 24 Cal. 237, 239: ”[llt is not the office of a demurrer t0 state facts, but to raise an issue of law upon the facts stated in the pleading demurred to.”) IV. Analysis. A. Grounds for Demurrer. Cross-Defendants raise the following arguments on demurrer: (1) the cross-complaint is barred by the economic loss rule; and (2) each cause 0f action fails t0 state a valid claim. (Code of Civil Procedure, § 430.10, subdivision (e).) B. Economic Loss Rule. “The economic loss rule generally bars tort claims for contract breaches. thereby limiting contracting parties to contract damages." (United Guar. Mortg. Indem. Co. v. Countrywide Fin. Corp. (CD. Cat. 2009) 660 F.Supp.2d 1163, 1180; see Aas v. Super. Ct. (2000) 24 Cal.4th 627, 643 ["A person may not ordinarily recover in tort for the breach 0f duties that merely restate contractual obligations."].) The economic loss rule provides that “where a purchaser’s expectations in a sale are frustrated because the product he brought is not working properly, his remedy is said to be in contract alone, for he has suffered only economic losses.” (Robinson Helicopter Company v. Dana Corporation (2004) 34 Cal.4th 979, 988 (Robinson).) This doctrine hinges on a “distinction drawn between transactions involving the sales of goods for commercial purposes where economic expectations are protected by commercial and contract law, and those involving the sale of defective products to individual consumers who are injured in a mannerwhich has traditionally been remedied by resort to the law of torts." (Ibid) The rule requires a purchaser to recover solely in contract for purely economic loss due to disappointed expectations. unless the purchaser can demonstrate harm above and beyond a broken contractual promise. (Ibid) "Quite simply, the economic loss rule ‘prevent[s] the law 0f contract and the law of tort from dissolving one into the other.‘ [Citation.]" (lbid.) Economic loss includes damages for inadequate value, costs of repair and replacement of the defective product 0r consequent loss 0f profits, without any claim of personal injury or damages to other property. (Robinson, supra, 34 Cal.4th at p. 988.) Cross-Defendants argue the tort claims fall within the economic loss rule as they arise from the Bait Offer submitted by POA on 30 August 2019. (See Cross-Cornplaint at Tl 18.) But, the crossmmplaint does not characterize the Bait Offer as a wn'tten contract. In fact, the only contract referenced in the cross-complaint is the Switch Contract, which, as THT alleges, it never entered into. (Id. at fl 40.) Furthermore, the cross-complaint, at least in part, an'ses from oral and written promises on or before 30 August 2019 by cross-defendant Dettner. (Id. atfl 50.) Such allegations, which must be accepted as true on demurrer. are sufficient t0 preclude application of the economic loss rule for pleading purposes. 20 January 2022 Order on Demurrer t0 the Cross-Complajnt Page 4 of 8 by Cross-Defendants Pacific Office Automation, Inc. and Garret Dettner. In reply, Cross-Defendants, in connection with the economic loss ruIe, contend that THT fails to a1lege damages in support of the tort claims. (See Reply at pp. 3:15-415.) The court howeverdeclines to address this argument as it is being raised for the first time in the reply papers. (See Reichardt v. Hoffman (1997) 52 Cal.AppAth 754, 764 ["Points raised for the first time in a reply bfief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument."].) Therefore, the demurrer to the cross-complaint on the ground that it is barred by the economic loss rule Es OVERRULED. C. First, Second, Third, and Sixth Causes of Action. Cross-Defendants argue the first, second, and third causes of action [false promise -misrepresentati0n. concealment, intentional fraud] and sixth cause of action [violation of Business & Professions Code, § 17500, et seq.] fail to allege a valid claim. “The essentiai elements of a count for intentional misrepreéentation are (1) a misrepresentation, (2) knowIedge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damage." (Port Medica! Wellness, Inc. v. Connecticut General Life Ins. Co. (2018) 24 Cai.App.5th 153, 178.) ”The elements of a claim for fraudulent conceaIment require the plaintiff to show that: '(1) the defendant concealed or suppressed a material fact, (2) the defendant [was] under a duty to disclose the fact to the plaintiff, (3) the defendant intentionally concealed or suppressed the fact with the intent t0 defraud the plaintiff, (4) the plaintiff [was] unaware of the fact and would not have acted as he did if he had known of the concealed orsuppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.‘ [Citation.]“ (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1130.) California's false advertising law bars “any advertising device which is untrue or misleading.” (Business 8. Professions Code, § 17500.) To prevail 0n a claim under the false advertising law, a plaintiff must show that members of the public are likely to be deceived and must d0 so adjudged through the eyes of the reasonable consumer. (Shaeffer v. Califia Farms, LLC (2020) 44 Cal.App.5th 1125, 1136.) Cross-Defendants argue the fraud claims fail to allege any false statements or omissions 0f maten’at fact and damages. And, to the extent the fraud causes of action are defective, they contend there are no false or misleading statements to support the claim under section 17500. The court however does not find these arguments to be persuasive as cross-complainant THT alleges sufficient facts establishing false statements, omissions, and damages to state valid fraud claims and overcome a pleading challenge on demurrer. (See Cross-Complaint at 1m 50, 51, 57, 58, 62, 63, 65, 67, 68, 71, 73, 78.) Having done 50, the claim for relief under section 17500 also states a cause of action. Accordingly, the demurrer to the first, second, third, and sixth causes 0f action on the ground that they fail to state a claim is OVERRULED. D. Fourth Cause of Action. “Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion are the plaintiffs ownership or right to possession 0f the property at the time of the conversion; the defendant’s conversion by a wrongful act or disposition of property rights; and damages. It is not necessary that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to his own use.” (Oakdale Village Group v. Fong (1 996) 43 Cal.App.4th 539, 543-544.) Cross-Defendants argue there is no wrongful act to support the conversion claim. But, cross-complainant THT aileges POA knowingly and intentionally took possession of THT's equipment, prevented THT from accessing the equipment, and refused to return the equipment following THT's demand. (See Cross-Complaint at 1] 84.) Even though Cross-Defendants dispute the accuracy of these allegations, the court must accept these facts as true for purposes of demurrer. ‘ Consequently, the demurrer to the fourth cause of action on the ground that it fails to state a claim is OVERRULED. 20 January 2022 Order on Demurrer to the Cross-Complaint Page 5 of 8 by Cross-Defendants Pacific Office Automation, Inc. and Garret Detfner. E. Fifth Cause of Action. “In order to state a cause of action for intentional interference with contract, a plaintiff must show: '(1) a valid contract between plaintiff and a third party; (2) defendant‘s knowledge 0f this contract; (3) defendant's intentional acts designed to Induce a breach ordisruption of the contractual relationship; (4) actual breach 0r disruption of the contractual relationship; and (5) resulting damage.‘ [Citations.]" (Winchester Mystery House, LLC v. Global Asylum, Inc. (2012) 210 Cal.App.4th 579, 596.) Cross-Defendants raise the following arguments with respect t0 the fifth cause of action: (1) the interference claim fails as POA, a non-contracting pany, has a legitimate interest in the performance of the underlying agreement and thus is not a “stranger” to the contractual relationship between THT and its pn'or lessor. (See Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 514 (Applied Equipment) [“The ton duty not to interfere with the contract falls onIy on strangers-interlopers who have no legitimate interest in the scope or course of the contract's performance.”].); and (2) there are n0 facts t0 support interference by Cross-Defendants. 1. Leqitimate Interest in Performance 0f Underivinq Aqreement. The Caiifomia Supreme Court in Applied Equipment held a party to a contract cannot be liable in tort fora conspiracy t0 interfere with its own contract. (Applied Equipment, supra, 7 Cal.4th at p. 514.) There, the plaintiff (Applied Equipment Corporation) had procured spare pans for a military contractor (Litton). Under the terms of a subcontract between plaintiff and the contractor, the plaintiff was entitled to a commission based on the purchase price. Afterthe plaintiff Issued a purchase orderfor 11 electron tubes to a third party (Varian), the contractor purchased six tubes directly from the supplier without paying any commission and renegotiated the plaintiffs purchase order, reducing the number of tubes in the purchase orderfrom 11 t0 six, resulting in a reduction in the total commission paid to the plaintiff. (Id. at p. 508.) Following ajury trial, the court entered judgment in favor of plaintiff and against both the contractor and supplier 0n causes 0f action in contract and tort, including conspiracy to Interfere with contracts (both the subcontract and the purchase order). (Id. at pp. 508-509.) The oniy issue before the California Supreme Court was whether the third party supplier could be liable for conspiring with the contractor to interfere with its own contract with the plaintiff. (Applied Equipment, supra, 7 Cal.4th at p. 509.) [n reversing the Court of Appeal, the Supreme Court explained: "One contracting patty owes no general tort duty t0 another not to interfere with performance of the contract; its duty is simply to perform the contract according to its terms. The tort duty notto interfere with the contract falls only on strangers-interlopers who have no legitimate interest in the scope 0r course of the contract's performance.” (Id. at p. 514.) The Supreme Court continued, quoting a law review commentator: “ “While the imposition of liability in ton upon the non-party interferer may be justified in all oases for his intentional disruption of the contractual relation, the party who merely breaches his contract should in all cases be exposed only t0 contractual liability as he.has not assumed the role of an intentional interferer. To impose tort liability upon the contract breaker because of the involvement 0f a third person (when liability is limited to contract damages when the contract breaker is acting alone) undermines the policies which have developed limited contractual |iability.‘ ” (Id. at p. 517.) While the holding oprplied Equipmentwas [imited to liability for conspiracy to interfere with a party's own contract, the Supreme Court stated liability for intentionally interfering with the performance 0f a contract was properly recognized only for an “outsider” or ”stranger to a contract", which the court appeared to define as one with "no legitimate social or economic interest in the contractual relationship." (Applied Equipment, supra, T Cal.4th at pp. 513-514.) At the same time, the Court clarified that nothing in its opinion was intended to suggest the contractor could not be liable for direct interference with the purchase order between its subcontractor and the third party supplier or that the supplier could not be liabie for direct interference with the subcontract, “provided that each of the elements of the ton of interference with contract is satisfied.” (Id. at p. 521 .) ln PM Group, Inc. v. Stewart (2007) 154 Cal.App.4th 55 (PM Group), the Court 0f Appeal relied on Applied Equipment's broad definition of “a stranger to a contract." PM Group involved a lawsuit by a concert promoter doing business as PM Group, fnc., and two subpromoters against singer Rod Stewed (“Stewart“) and 20 January 2022 Order 0n Demurrer to the Cross-Complaint Page 6 of 8 by Cross-Defendants Pacific Office Automation, Inc. and Garret Dettner. Stewart‘s company, manager, attorney and agent. (PM Group, supra, 154 Cal.App.4th at p. 57.) Stewart‘s agent and the conceit promoter had engaged in extended negotiations for a nineeity concert tour, and the promoter entered into subcontracts with parties in each of the cities the propOsed tour wouId visit. As negotiations continued, the plaintiffs advanced $780,000 to Stewart's representatives based on various assurances the tour would take place. No agreement however was reached and Stewart did not proceed with the concens. (Id. at pp. 58-60.) Thereafter, the promoter and two of the subpromoters sued for return of the $780,000 on counts of unjust enrichment, money had and received and negligent misrepresentation. The plaintiffs also brought a claim for interference with the subpromoter contracts. Ajury found in favor of the plaintiffs with respect t0 the $780,000 advance and determined that Stewart's agent and attorney had knowingly and intentionally disrupted the performance of six subpromoter contracts involved in the transaction, awarding $1 .6 million in damages. (PM Group, supra, 154 Cal.AppAth at p. 61 .) The Coun of Appeal reversed the judgment in favor of the plaintiffs on the cause of action for intentiona] interference with contract and affirmed the judgment in all other respects. (PM Group, supra, 154 Cal.App.4th at p. 70.) The appellate court concluded in pan that, “Because the subcontracts at issue here provided for Stewart's performance, neither Stewart nor his agents can be liable for the tort 0f interfering with the subcontracts." (Id. at p. 65.) Thus, the court held, if a contract expressly contemplated and depended upon a noncontracting party's performance, the noncontracting party had an economic interest in that contract and could not be liable for Interference with, or disruption of, its execution. (Id. at pp. 58, 65.) But, other California appellate courts have not read Applied Equipment as broadly as PM Group and have distinguished it based 0n its panicufarfacts. Forexample, in Woods v. Fox Broadcasting Sub., Inc. (2005) 129 Cal.App.4th 344 (Woods), two employees of a joint venture (“Fox Family") sued Fox Family's majority shareholder for interference with a stock option contract the employees had with Fox Family. The defendant demurred on the basis that It was not a stranger to the contract, in light of its majority stake. The tn'al court agreed, but the Court of Appeal reversed. (Woods, supra, 129 Cal.App.4th at pp. 347-349.) The Woods court noted that Applied Equipment involved a party t0 the contract and “the court's analysis never considered the immunity of someone who was not a party t0 the contract." (Woods, supra, 129 Cal.App.4th at p. 352.) Therefore. it rejected the notion thatApph'ed Equipment stood for the proposition that “an ownership Interest in a business entity's contract confers immunity from tort liability for interfering with the entity's contracts..." and that Appfied Equipment”can be stretched so far that it now protects a defendant who has n0 more than an economic interest orconnection t0 the plaintiff‘s contract with some other entity." (Id. at p. 355.) The appellate court concluded that the Apph'ed Equipmenrdefinition of “strangef' was “dicta at best.“ (Id. atp. 352.) Furthermore, it concluded: “[W]e find it highly unlikely that Applied Equipment intended t0 hold, or should be construed as holding, that persons or entities with an ownership interest in a corporation are automatically immune from liability for interfering with their corporation's contractuai obligations. [Citation.]“ (Id. at p. 353.) Also, in Powerhouse Motorsports Group, Inc. v. Yamaha Motor Corp., U.S.A. 221 Cal.App.4th 867 (Powerhouse), the Court of Appeal refused to apply the “stranger to the contract” rationale to reverse a jury verdict in favor 0f the plaintiff on its cause of action for intentional interference with contractual relations, holding, notwithstanding its legitimate economic interest in its franchisees‘ business activities, a motorcycle distributor was not immune to a tort claim based on its interference with a contract for the sale of a dealership by a franchisee to a third party. (Powerhouse, supra, 221 Cal.App.4th at pp. 883-884.) The appellate court declined to expand the scope of Applied Equipment in orderto protect a noncontracting party who had “some general economic interest" in the contract. (Ibid.) Shortly thereafter, in Asahi Kasei Pharma Corp. v. Actelion Ltd. (2013) 222 Cal.App.4th 945 (Asahi), the Court 0f Appeal held a corporate defendant that had acquired as a subsidiary an entity with an existing license agreement was not immune from suit for interference with the agreement on the ground it was not a strangerto the agreement: “ '[A] stranger,‘ as used in Applied Equipment, means one who is not a party to the contract 0r an agent of a party t0 the contract.” (Asahi, supra, 222 Ca1.App.4th at pp. 963-964.) Distinguishing PM Group, the Asahi court explained, “Unlike in PM Group, Defendants‘ performance was neither contemplated nor necessary to the License Agreement." (Id. at p. 965, fn. 14.) 20 January 2022 Order on Demurrer to the Cross-Complaint Page 7 of 8 by Cross-Defendants Pacific Office Automation, Inc. and Garret Dettner. More recently, in Popescu v. Apple Inc. (2016) 1 Cal.App.5th 39 (Popescu), the Sixth District Court of Appeal reversed ajudgment dismissing the plaintiff‘s complaint against Apple for intentional interference with contractual relations and intentional interference with prospective economic advantage based on his claim thatAppie had taken affirmative steps t0 convince his employer, which had a research and development agreement with Apple, to terminate him in retaliation for his resistance to Apple's alleged anticompetitive conduct. 1n doing so, the appellate court held, “[a]n extension of Applied Equipment's holding to immunize a third party from tortious interference claims simply because the third party asserts some economic or other interest in a contract would significantly undercut the tort itself and the public policy undedying it.” (Popescu, supra, 1 Cal.App.5th at p. 53.) Citing a Ninth Circuit decision, the Popescu court stated: “T0 shield parties with an economic interest in the contract from potential liability would create an undesirable lacuna in the law between the respective domains of tort and contract. A party with an economic interest in a contractual relationship could Interfere without risk of facing either ton or contract liability. This result is particulariy perverse as it is those parties with some type of economic interest in a contract whom [sic] would have the greatest Incentive to interfere with It. Such a result would hardly serve the established goal of protecting ‘a formally cemented economic relationship from interference by a strangerxto the agreement.” [Citation.]“ (Id. at pp. 53-54.) While Applied Equipment remains good law, the Supreme Court has yet to resolve the conflict that exists among so many appellate court decisions like the ones cited above. That said, this court, consistentwith decisions like Woods, Powerhouse, Asahi, and Popescu, Is inclined t0 limit Applied Equipment to its facts as it addresses onIy liability for conspiracy t0 interfere with a party‘s own contract. As stated above, the Supreme Court‘s analysis in Applied Equipment never considered the immunity of someone who was not a party t0 the contract. (Woods, supra, 129 Cal.App.4th at p. 352.) Nor do Cross-Defendants offer any explanation for extending the holding in Applied Equipmentto the circumstances of this case. Based 0n the foregoing, the demurrer is not sustainable 0n this ground. 2. Facts to Sugport Interference. Cross-Defendants also contend there are no facts demonstrating that POA actually interfered with THT'S existing lease relationships. But, the atleged interference is based on prior claims of the cross-complaint incorporated within the fifth cause of action. (See Cross-Complaint at 1m 88, 91 .) Those cfaims have survived demurrer for reasons stated above and thus the pleading alleges sufficient facts t0 suppon a claim for interference. Finally, in reply, Cross~Defendants assert that THT has not pled sufficient facts to establish damages in support of the interference claim. (See Reply at p. 7:14-26.) The court declines to consider this argument as it is being raised for the first time in the reply papers. Accordingiy, the demurrer t0 the fifth cause of action on the ground that It fails to state a claim is OVERRULED. IV. Tentative Ruling. The tentative ruiing was duly posted. Defendant properly challenged the tentative rufing. Messrs. Freed and Day appeared for the plaintiff and defendant, respectively, both on the Zoom vifiual platform. V. Conclusion and Order. The demurrerto the cross-complaint is OVERRULED in its entirety. Cross-Defendantsmitl. ave 20 days within which to ANSWER. ‘ fudge 0f the County 0f 20 January 2022 Order on Demun'er to the Cross-Complaintw 0 R?“ Page 8 of 8 by Cross-Defendants Pacific Office Automation, Inc. and Garret Definer. SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA DOWNTOWN COURTHOUSE Fro 191 NORTH FIRSTSTREET E [q 1m SAN JOSE, CALIFORNIA 951 I3 a Ear: CIVIL DIVISION FEE; g. 1f 2022 - 4 RE: Paclfic Office Automatlon, Inc. vs The Health Trust et a! Clefk :3 “(29.15": mm I 5 ‘ ' l)" ‘ ualCase Number. 200V366428 BY A DEPUTY PROOF 0F SERVICE ‘ ORDER 0N DEMURRER TO THE CROSS-COMPLAINT BY CROSS-DEFENDANTS PACIFIC OFFICE AUTOMATION, INC. AND GARRETT DETTNER was detivered to the parties listed below the above entitled case as set fonh in the sworn declaration below. l! you, a party represented by you, or a witness to be called on behalf of that party need an accommodation under the American with Disabilities Act, please contact the Court Administrator‘s office at (408) 882-2700. or use the Coun‘s TDD line (405) 882-2690 or the Voicefl'DD California Relay Service (800) 735-2922. DECLARATION 0F SERVICE BY MAIL: l declare that | served this notice by enclosing a true copy in a sealed envelope, addressed to each person whose name is shown below. and by depositing the envelope with postage fully prepaid. in the United States Mail at San Jose. CA on February 14. 2022. CLERK OF THE COURT, by Hientrang Tramhien, Deputy. cc: Everett W Jack Davis Wright Tremaine LLP 505 Montgomery Street Suite 800 SAN FRANCISCO CA 941 11 Thomas A Woods Stoel Rives LLP 500 Capitol Man Suite 1800 Sacramento CA 95814 John D Freed Davis Wright Trremaine LLP 505 Montgomery St Suite 800 San Francisco CA 941 11 cw-9027 REV 12/03/16 PROOF 0F SERVICE