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Tentative Ruling
Judge Donna Geck
Department 4 SB-Anacapa
1100 Anacapa Street P.O. Box 21107 Santa Barbara, CA 93121-1107

CIVIL LAW & MOTION

SIMA Paseo Camarillo LP vs Kennedy/Jenks Consultants Inc

Case No: 17CV02077
Hearing Date: Fri Mar 09, 2018 9:30

Nature of Proceedings: Demurrer and Motion to Strike

Tentative Ruling: The court sustains defendant Kennedy/Jenks Consultants, Inc.’s demurrer to the fourth cause of action in plaintiff SIMA Paseo Camarillo, LP’s second amended complaint without leave to amend. The court overrules the demurrer to the second and third causes of action. Defendant shall file its answer to the first, second, and third causes of action in the second amended complaint on or before March 19, 2018.

The court denies defendant Kennedy/Jenks Consultants, Inc.’s motion to strike portions of plaintiff SIMA Paseo Camarillo, LP’s second amended complaint.

 

Background: In its second amended complaint (“SAC”), plaintiff SIMA Paseo Camarillo, LP (SIMA) pleads: SIMA is the owner of the Paseo Camarillo Shopping Center (Paseo Camarillo) located in Camarillo, California, which consists of 39 commercial units, of which Unit 17 is the Thrifty Cleaners dry cleaning operation. [SAC ¶8]

In 2002, SIMA retained defendant Kennedy/Jenks Consultants, Inc. (Kennedy/Jenks) to evaluate and advise SIMA on the status of perchloroethylene (“PCE”) contamination under the dry cleaner and the adjacent parking lot (the “Site”) and to ultimately carry out cleanup and remediation efforts. [SAC ¶ 9] In 2005, after completion of several rounds of field investigations, Kennedy/Jenks reported to SIMA that the soil, soil vapor, and groundwater were all contaminated, not only under the dry cleaner but also under the parking lot. Kennedy/Jenks estimated that the probable cost to clean up and remediate the Site would be $1.2 million with regulatory closure achievable in three to five years. [SAC ¶10, first of two paragraphs numbered 10]

By 2005, Kennedy/Jenks had collected soil vapor data under the Site which indicated PCE contamination. Despite this information, Kennedy/Jenks designed a soil vapor extraction remediation program that focused solely on the parking lot area, causing the risk of vapor intrusion under the dry-cleaning operation to persist for years. [SAC ¶13] Kennedy/Jenks ignored the hot spot under the building and concluded that soil and soil vapor remediation efforts should be focused solely on the parking lot and not the building. Levels of soil vapor under the building are so high that vapor intrusion is a serious problem. The single highest priority for the cleanup and remediation effort was to protect occupants of the Site from the risk of vapor intrusion. Kennedy/Jenks did not recognize this risk and never protected against it. [SAC ¶11] In December 2014, vapor mitigation systems had to be installed under the Site to reduce the vapor intrusion risk. This occurred long after Kennedy/Jenks’s remediation effort had been suspended because they incorrectly believed the vadose zone portion of the Site had been adequately cleaned up. [SAC ¶12]

Shallow soil vapor data available in 2005 indicated at least two hot spots of contamination in the vadose zone: one under the building in the immediate vicinity of the dry-cleaning machine; and a second hot spot north of the building, associated with a storm water drain. The highest levels of PCE in soil vapor were detected in deep samples under the parking lot (collected from depths just above the water table: providing the first good evidence that a principal source of soil vapor was off-gassing from the underlying groundwater, not contaminated soil). Kennedy/Jenks appears to have focused on the highest detected levels to conclude that the northern hot spot was the only one requiring active remediation. This led them to design, build and operate a soil vapor extraction system focused on treating soil under the parking lot and neglecting to treat contamination under the building. [SAC ¶13]

Kennedy/Jenks conducted an exceedingly expensive in-situ chemical reduction (“ISCR”) pilot test on the groundwater beneath the parking lot area and conducted the test improperly. [SAC ¶14] PCE concentrations in the monitoring well in the center of the treatment zone (“MW-15”) was trending upward in 2009, suggesting that any positive effect of the pilot test was transient. Thereafter, Kennedy/Jenks suspended testing of MW-15 in 2009, which Plaintiffs believes was to conceal the disappointing performance of the pilot test. Kennedy/Jenks’s own description of test performance changed over time. In 2010, they concurred with the assessment by the Regional Water Quality Control Board (“RWQCB”) that ISCR did not work and a new groundwater remediation work plan was needed. Yet, in 2014, Kennedy/Jenks described the ISCR pilot test in this way: “The technology was found to be very effective.” $364,000 expended on pilot testing activities was unnecessary. [SAC ¶15]

PCE was detected in soil samples all across the property. However, not a single sample was detected with PCE above cleanup levels typically required by California regulatory agencies. Even so, Kenney-Jenks charged SIMA for cleaning soils containing PCE, when such an effort was unnecessary. Kennedy/Jenks failed to recognize that the principal source of soil vapor under parking lot was offgassing from the groundwater, not soil. [SAC ¶16] After suspending the soil cleanup effort, Kennedy/Jenks began a lengthy and ultimately futile effort seeking site closure from the RWQCB for the soil component of the project. [SAC ¶17]

In 2009. Kennedy/Jenks collected three rounds of subslab vapor from the four suites nearest Thrifty Cleaners but, inexplicably, did not collect vapor samples from under the dry cleaner itself. The results indicated unacceptably high levels of PCE in subslab vapor, but Kennedy/Jenks repeatedly advised SIMA in letters that the concentrations were not problematic, which was not true. In 2012, the RWQCB quickly discovered Kennedy/Jenks’s concealment and informed SIMA that subslab vapor concentrations were significantly above risk standards. Actual concentrations measured by Kennedy/Jenks ranged up to 1,000 ug/m3: more than 70 times higher than the commercial target screening level and over 120 times higher than the residential target screening level. [SAC ¶18]

Kennedy/Jenks’s actions and inactions led to SIMA being overcharged for work unnecessarily and improperly performed. [SAC ¶¶19, 23, 24, 25, 26]

On May 11, 2017, SIMA filed its initial complaint in this action. On July 11, 2017, Kennedy/Jenks filed its demurrer to the initial complaint. On August 21, 2017, without a hearing on the demurrer to the original complaint, SIMA filed its first amended complaint (“FAC”). In the FAC, SIMA asserted four causes of action against Kennedy/Jenks: (1) negligence; (2) breach of fiduciary duty; (3) breach of contract; and, (4) fraudulent concealment. Kennedy/Jenks demurred to the second and fourth causes of action in the FAC. The court sustained the demurrer to the fraudulent concealment cause of action for failure to adequately plead it, with leave to amend. SIMA filed its SAC on December 18, 2017, asserting the same four causes of action.

A CMC is scheduled for April 27, 2018.

Demurrer: Defendant demurs to the second, third, and fourth causes of action in the SAC on the ground that they are barred by the applicable statutes of limitation and to the fourth cause of action for failure to plead with the required specificity. Kennedy/Jenks opposes the motion.

Preliminarily, the court notes that the pleadings do not conform to the California Rules of Court. CRC 2.109 provides that the page numbering of papers filed in trial court “must begin with the first page and use only Arabic numerals (e.g., 1, 2, 3).” Both parties violate this rule by not counting the first page and by numbering tables with Roman numerals.

1. Demurrer Standards: The court’s only task in ruling on a demurrer is to determine whether the complaint states a cause of action. Moore v. Regents of University of California, 51 Cal.3d 120, 125 (1990). The court assumes the truth of allegations in the SAC that have been properly pleaded and give it a reasonable interpretation by reading it as a whole and with all its parts in their context. Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal.4th 553, 558 (1998). The court assumes the truth of the reasonable inferences that may be drawn from the properly pleaded material facts. Reynolds v. Bement, 36 Cal.4th 1075, 1083 (2005). However, the assumption of truth does not apply to contentions, deductions, or conclusions of law and fact. People ex rel. Lungren v. Superior Court, 14 Cal.4th 294, 300–301 (1996).

2. Statutes of Limitation: Kennedy/Jenks contends that SIMA’s allegations reflect that SIMA was on inquiry notice of its claims in 2010 or, at the latest, November 2012. SIMA filed its original complaint on May 11, 2017, beyond all applicable statutes of limitation.

“A complaint disclosing on its face that the limitations period has expired in connection with one or more counts is subject to demurrer.” Fuller v. First Franklin Fin. Corp., 216 Cal.App.4th 955, 962 (2013). The applicable statutes of limitation here are: 1) for breach of fiduciary duty, two years, if the action amounts to a claim of professional negligence, Hydro-Mill Co. v. Hayward, Tilton & Rolapp Ins. Assocs., Inc., 115 Cal.App.4th 1145, 1159 (2004); three years, if the gravamen of the claim is deceit, Fuller v. First Franklin Fin. Corp., 216 Cal.App.4th 955, 963 (2013); 2) for breach of written contract, four years, CCP § 337; and 3) for fraudulent concealment, three years, CCP § 338(d).

The statute of limitation begins to run when the “cause of action accrues,” which is “‘when the cause of action is complete with all of its elements.’” Fox v. Ethicon Endo-Surgery, Inc., 35 Cal.4th 797, 806 (2005). When “damages are an element of a cause of action, the cause of action does not accrue until the damages have been sustained. [Citation.] ‘Mere threat of future harm, not yet realized, is not enough.’” Thomson v. Canyon, 198 Cal.App.4th 594, 604 (2011). SIMA alleges that Kennedy/Jenks negligently undertook a costly ISCR pilot test that did not work and misinterpreted sub-slab vapor concentrations, believing the concentrations were within risk standards when they exceeded those standards. In 2009, Kennedy/Jenks discovered that PCE concentrations were trending upward, taking steps to conceal those facts, resulting in unnecessary work. [SAC ¶¶14-16, 45b)]

SIMA pleads that it did not discover these wrongs until July 2015 and could not have discovered them earlier because it lacked the sophistication and knowledge and Kennedy/Jenks actively concealed these wrongs. [SAC ¶¶35, 47]

“The discovery rule provides that the accrual date of a cause of action is delayed until the plaintiff is aware of her injury and its negligent cause.” Jolly v. Eli Lilly & Co., 44 Cal.3d 1103, 1109 (1988). “Under the discovery rule, the statute of limitations begins to run when the plaintiff suspects or should suspect that her injury was caused by wrongdoing, that someone has done something wrong to her.” Id. at 1110. “Once the plaintiff has a suspicion of wrongdoing, and therefore an incentive to sue, she must decide whether to file suit or sit on her rights.” Id. at 1111.

“The ‘discovery rule’ assumes that all conditions of accrual of the action -- including harm -- exist, but nevertheless postpones commencement of the limitation period until ‘the plaintiff discovers or should have discovered all facts essential to his cause of action.’” CAMSI IV v. Hunter Technology Corp., 230 Cal.App.3d 1525, 1536 (1991) [citations omitted].

The word discovery as used in the statute is not synonymous with knowledge. And the court must determine, as a matter of law, when, under the facts pleaded, there was a discovery by the plaintiff, in the legal sense of that term. Consequently, an averment of lack of knowledge within the statutory period is not sufficient; a plaintiff must also show that he had no means of knowledge or notice which followed by inquiry would have shown the circumstances upon which the cause of action is founded.

Bainbridge v. Stoner, 16 Cal.2d 423, 430 (1940).

The discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action. The discovery rule does not encourage dilatory tactics because plaintiffs are charged with presumptive knowledge of an injury if they have “ ‘ “information of circumstances to put [them] on inquiry” ’ ” or if they have “ ‘ “the opportunity to obtain knowledge from sources open to [their] investigation.” ’ ” [citation] In other words, plaintiffs are required to conduct a reasonable investigation after becoming aware of an injury, and are charged with knowledge of the information that would have been revealed by such an investigation.

Fox v. Ethicon Endo-Surgery, Inc., 35 Cal.4th 797, 807-808 (2005). The plaintiffs “must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.” Id. at 808.

“A close cousin of the discovery rule is the ‘well accepted principle ... of fraudulent concealment.’ ‘It has long been established that the defendant’s fraud in concealing a cause of action against him tolls the applicable statute of limitations, but only for that period during which the claim is undiscovered by plaintiff or until such time as plaintiff, by the exercise of reasonable diligence, should have discovered it.’” Bernson v. Browning-Ferris Indus., 7 Cal.4th 926, 931 (1994) [citations omitted].

SIMA pleads that, in 2010, Kennedy/Jenks concurred with the assessment by the RWQCB that the ISCR did not work and a new groundwater remediation work plan was needed. [SAC ¶15] In November 2012, the RWQCB discovered Kennedy/Jenks’s concealment and informed SIMA that subslab vapor concentrations were significantly above risk standards. [SAC ¶¶18, 21] “This significant error resulted in misdirected remediation work at the time.” [SAC ¶21] This information put SIMA on inquiry notice about the alleged deficiencies in Kennedy/Jenks’s performance and its alleged concealment.

SIMA alleges that it could not and did not discover the wrongs until July 2015, but does not say how it learned of the wrongs. As discussed above, actual knowledge is not the test. SIMA must plead it had no means of knowledge or notice which followed by inquiry would have shown the circumstances upon which the cause of action is founded. And the allegations of information in 2010 and 2012 demonstrate that SIMA had knowledge which, followed by reasonable inquiry, would have shown the circumstances upon which the causes of action are founded.

SIMA counters that the demurrer is directed at only part of the causes of action. “A demurrer does not lie to a portion of a cause of action.” PH II, Inc. v. Superior Court, 33 Cal.App.4th 1680, 1682 (1995).

SIMA says that Kennedy/Jenks disregards SIMA’s allegations that, in 2014, in order to conceal the effectiveness of the ISCR pilot test, Kennedy-Jenks misrepresented to SIMA regarding the ISCR pilot test: “The technology was found to be very effective.” [SAC ¶15] The court does not know the context of this statement. But it appears to be a statement about the pilot test, on which SIMA was already on inquiry notice regarding misrepresentations. It is not a new concealment.

Still, the court finds that Kennedy/Jenks has demurred only to portions of the breach of fiduciary duty and breach of contract causes of action. SIMA pleads that Kennedy/Jenks performed unnecessary work and overcharged for work unnecessarily and improperly performed. [SAC ¶¶34(a) and (b), 41] Nothing on the face of the complaint indicates that the work and charges ceased within two or four years of the date SIMA commenced this case. The court will not sustain the demurrer to the second and third causes of action.

SIMA has not alleged facts giving rise to its fraudulent concealment cause of action that occurred within the three year statute of limitation. Therefore, the court sustains the demurrer to the fourth cause of action on the ground that the statute of limitation expired before SIMA commenced this action. Because of this ruling, it is unnecessary to address the additional ground for demurring to the fourth cause of action.

SIMA asks for leave to amend. “If there is a reasonable possibility that the defect in a complaint can be cured by amendment, it is an abuse of discretion to sustain a demurrer without leave to amend. [Citation.] The burden is on the plaintiff, however, to demonstrate the manner in which the complaint might be amended. [Citation.]” Hendy v. Losse, 54 Cal.3d 723, 742 (1991). “It is not up to the judge to figure that out.” Lee v. Los Angeles County Metropolitan Transportation Authority, 107 Cal.App.4th 848, 854 (2003). The plaintiff has the burden “to show what facts he or she could plead to cure the existing defects in the complaint.” McClain v. Octagon Plaza, LLC, 159 Cal.App.4th 784, 792 (2008). “The assertion of an abstract right to amend does not satisfy this burden. The plaintiff must clearly and specifically set forth the ‘applicable substantive law’ and the legal basis for amendment, i.e., the elements of the cause of action and authority for it. Further, the plaintiff must set forth factual allegations that sufficiently state all required elements of that cause of action. Allegations must be factual and specific, not vague or conclusionary.” Rossberg v. Bank of Am., N.A., 219 Cal.App.4th 1481, 1491 (2013) [internal quotations and citations omitted].

SIMA does not suggest how it could amend the fourth cause of action to plead around the statute of limitation. Given the allegations the court has found fatal to the cause of action on this ground, it does not appear SIMA can successfully amend the SAC.

Therefore, the court sustains defendant Kennedy/Jenks Consultants, Inc.’s demurrer to the fourth cause of action in plaintiff SIMA Paseo Camarillo, LP’s second amended complaint without leave to amend. The court overrules the demurrer to the second and third causes of action. Defendant shall file its answer to the first, second, and third causes of action in the second amended complaint on or before March 19, 2018.

Motion to Strike: Kennedy/Jenks moves to strike allegations regarding and prayers for punitive damages with respect to the second and fourth causes of action. Since the court is sustaining the demurrer to the fourth cause of action, the motion is moot as to the allegation in that cause of action at ¶48.

1. Authority and Standard for a Motion to Strike: “The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike 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.” CCP § 436. “A motion to strike, like a demurrer, challenges the legal sufficiency of the complaint’s allegations, which are assumed to be true.” Blakemore v. Superior Court, 129 Cal.App.4th 36, 53 (2005).

“A motion to strike can also be used to attack claims for damages that are not supported by the cause of action pleaded.” Cal. Prac. Guide Civ. Pro. Before Trial, ¶7.182 (Rutter Group 2017). “In order to survive a motion to strike an allegation of punitive damages, the ultimate facts showing an entitlement to such relief must be pled by a plaintiff. In passing on the correctness of a ruling on a motion to strike, judges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth. In ruling on a motion to strike, courts do not read allegations in isolation.” Clauson v. Superior Court, 67 Cal.App.4th 1253, 1255 (1998) [citations omitted].

2. Analysis: Civil Code § 3294(a) provides that a plaintiff may recover punitive damages if he proves by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice. “‘Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” Civil Code § 3294(c)(1). “‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” Civil Code § 3294(c)(2). ‘Fraud’ means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” Civil Code § 3294(c)(3).

“Despicable conduct” refers to circumstances that are “base,” “vile,” or “contemptible.” College Hospital v. Superior Court, 8 Cal.4th 704, 725 (1994). Conduct must be “so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people.” American Airlines v. Sheppard, Mullin, Richter & Hampton, 96 Cal.App.4th 1017, 1050 (2002).

A pleading devoid of any factual assertions supporting a conclusion that defendants acted with oppression, fraud or malice is insufficient to state a claim for punitive damages. Smith v. Superior Court, 10 Cal.App.4th 1033, 1042 (1992). Defendant relies on G. D. Searle & Co. v. Superior Court, 49 Cal.App.3d 22 (1975), in which the plaintiff failed to allege that the defendant “acted in conscious disregard of … safety.” Id. at 32. While a general allegation of malice or oppression is not sufficient, a general allegation of the intent or despicable conduct constituting malice is sufficient. Cyrus v. Haveson (1976) 65 Cal.App.3d 306, 317. Pleading conclusions of law is not sufficient, but the “distinction between conclusions of law and ultimate facts is not at all clear and involves at most a matter of degree.” Perkins v. Superior Court, 117 Cal.App.3d 1, 6 (1981). “What is important is that the complaint as a whole contain sufficient facts to apprise the defendant of the basis upon which the plaintiff is seeking relief.” Id.

Civil Code § 3294(b) provides: “An employer shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.”

Kennedy/Jenks first contends that SIMA must identify the individual(s) involved. But the cases it cites for that proposition are cases analyzing causes of action for fraud, not claims for punitive damages. E.g., Lazar v. Superior Court, 12 Cal.4th 631, 645 (1996). The basis for the claim for punitive damages in the second cause of action is not just fraud. SIMA alleges that by performing unnecessary work and overcharging for work unnecessarily and improperly performed, Kennedy/Jenks intended to injure SIMA. [SAC ¶¶34(a), (b); 37]

SIMA alleges: “To the extent that such acts by Defendants were conducted through their employees,, those employees were either its officers, directors or managing agents of Defendants, or such officers, directors or managing agents were aware in advance that such conduct would occur, exhibited conscious disregard for the rights of others in employing the employee, or directed or ratified such conduct by its employee(s).” [SAC ¶37]

In opposing the demurrer, SIMA improperly submits evidence consisting of copies of letters it mentions in SAC ¶45(b). That allegation is not incorporated into the second cause of action. Still, the court will consider the all allegations of the SAC as a whole, all parts in their context, and not in isolation.” Clauson v. Superior Court, supra, 67 Cal.App.4th at 1255.

Pleading conclusions of law is not sufficient, but the “distinction between conclusions of law and ultimate facts is not at all clear and involves at most a matter of degree.” Perkins v. Superior Court, supra, 117 Cal.App.3d at 6. “What is important is that the complaint as a whole contain sufficient facts to apprise the defendant of the basis upon which the plaintiff is seeking relief.” Id. A plaintiff must allege ultimate facts of the defendant’s oppression or malice. Cyrus v. Haveson, supra, 65 Cal.App.3d at 316-317; Spinks v. Equity Residential Briarwood Apartments, 171 Cal.App.4th 1004, 1055 (2009).

The court concludes that SIMA has alleged sufficient ultimate facts to support its claim for punitive damages. The court denies defendant Kennedy/Jenks Consultants, Inc.’s motion to strike portions of plaintiff SIMA Paseo Camarillo, LP’s second amended complaint.

 
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