Qingyu Liang vs Yu Zhu

A further case management conference is scheduled for June 24, 2026.

Demurrer to the FAC

Defendant argues each cause of action in the FAC is subject to demurrer for failure to state a valid claim and uncertainty. (Code Civ. Proc., § 430.10, subds. (e), (f).)

Request for Judicial Notice

“Judicial notice is the recognition and acceptance by the court, for use by the trier of fact or by the court, of the existence of a matter of law or 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.)

In support of the motion, Defendant requests judicial notice of a website from the U.S Food and Drug Administration (“FDA”) regarding FDA-certified devices. The court however declines to take judicial notice of the website as it is not relevant to resolving issues raised by the demurrer for reasons explained below. (See Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 748, fn. 6 [a court need not take judicial notice of a matter unless it “is necessary, helpful, or relevant”].)

Accordingly, the request for judicial notice is DENIED.

Failure to State a Cause of Action

“ ‘The absence of any allegation essential to a cause of action renders it vulnerable to a general demurrer. A ruling on a general demurrer is thus a method of deciding the merits of the cause of action on assumed facts without a trial.’ [Citation.] ‘Conversely, a general demurrer will be overruled if the complaint contains allegations of every fact essential to the statement of a cause of action, regardless of mistaken theory or imperfections of form that make it subject to special demurrer.’ [Citation.]” (Morris v. JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 291-292 (Morris).)

“A complaint, with certain exceptions, need only contain a ‘statement of the facts constituting the cause of action, in ordinary and concise language’ [citation] and will be upheld ‘ “so long as [it] gives notice of the issues sufficient to enable preparation of a defense.” ’ [Citation.] ‘[T]o withstand a demurrer, a complaint must allege ultimate facts, not evidentiary facts or conclusions of law.’ [Citation.]” (Morris, supra, 78 Cal.App.5th at p. 292.)

First Cause of Action: Fraud (Intentional Misrepresentation)

“The essential elements of a count for intentional misrepresentation are (1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damage.” (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230-231.)

Defendant contends the fraud cause of action is barred by the economic loss rule.

“[U]nder the economic loss rule, tort recovery for breach of a contract duty is generally barred ... unless two conditions are satisfied. A plaintiff must first demonstrate the defendant’s injury-causing conduct violated a duty that is independent of the duties and rights assumed by the parties when they entered the contract. Second, the defendant’s conduct must have caused injury to persons or property that was not reasonably contemplated by the parties when the contract was formed.” (Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 20-21.)

But, the economic loss rule is not applicable where, as here, the fraudulent misrepresentations preceded formation of the subject contract and induced Plaintiff to enter into the agreement. (FAC at ¶¶ 18, 21; see Lazar v. Super. Ct. (1996) 12 Cal.4th 631, 645 [“[F]raudulent inducement of contract—as the very phrase suggests—is not a context where the ‘traditional separation of tort and contract law’ [citation] obtains. To the contrary, this area of the law traditionally has involved both contract and tort principles and procedures.”]; Erlich v.

Menezes (1999) 21 Cal.4th 543, 551-552 [“Tort damages have been permitted in contract cases ... where the contract was fraudulently induced.”]; United Guar. Mortg. Indem. Co. v. Countrywide Fin. Corp. (C.D. Cal. 2009) 660 F.Supp.2d 1163, 1188 [“The economic loss rule poses no barrier to a properly pled fraudulent inducement claim[.]”]; see also Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 843 [“Fraudulent inducement claims fall within an exception to the economic loss rule recognized by our Supreme Court.”].)

Defendant also asserts the fraud claim has not been pled with specificity and fails to allege facts establishing the element of justifiable reliance.

“[T]he allegations in a fraud action need not be liberally construed. Instead, fraud must be specifically pleaded. This means: (1) general pleading of the legal conclusion of fraud is insufficient; and (2) every element of the cause of action for fraud must be alleged in full, factually and specifically, and the policy of liberal construction of pleading will not usually be invoked to sustain a pleading that is defective in any material respect.” (Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1331.)

Courts enforce the specificity requirement in consideration of its two purposes. (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793 (West).) The first purpose is to give notice to the defendant with sufficiently definite charges that the defendant can meet them. (Ibid.) The second is to permit a court to weed out meritless fraud claims on the basis of the pleadings; thus, the pleading should be sufficient to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud. (Ibid.)

Here, the fraud claim does not allege facts to support the element of justifiable reliance and thus fails to state a valid cause of action. (See Hill v. Roll Internat. Corp. (2011) 195 Cal.App.4th 1295, 1307 [“[C]ommon law fraud requires particularity of pleading for all the traditional elements, including not just misrepresentation, but the plaintiff’s justifiable reliance.”]; see also West, supra, 214 Cal.App.4th at p. 794 [justifiable reliance refers to circumstances that make it reasonable for the plaintiff to accept the defendant’s statements without an independent inquiry or investigation].)

As this is the first challenge to the pleading, Plaintiff will be given an opportunity for leave to amend. (See City of Stockton v. Super. Ct. (2007) 42 Cal.4th 730, 747 [if the plaintiff has not had an opportunity to amend the pleading in response to a motion challenging the sufficiency of the allegations, leave to amend is liberally allowed as a matter of fairness, unless the pleading shows on its face that it is incapable of amendment].) Having sustained the demurrer on this ground, the court declines to consider the alternative arguments for lack of a causal connection and damages.

Consequently, the demurrer to the first cause of action is SUSTAINED WITH 15 DAYS LEAVE TO AMEND for failure to state a valid claim.

Second Cause of Action: Negligent Misrepresentation

“The elements of a negligent misrepresentation are ‘(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another’s reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.’ [Citation.]” (Tindell v. Murphy (2018) 22 Cal.App.5th 1239, 1252.) The demurrer to the second cause of action is SUSTAINED WITH 15 DAYS LEAVE TO AMEND for failure to state a valid claim for the same reasons stated above in connection with the court’s ruling on demurrer to the first cause of action. (See Borman v. Brown (2021) 59 Cal.App.5th 1048, 1060 [justifiable reliance is an element of a claim for negligent misrepresentation].)

Third Cause of Action: Breach of Contract

“To establish a cause of action for breach of contract, the plaintiff must plead and prove (1) the existence of the contract, (2) the plaintiff’s performance or excuse for nonperformance, (3) the defendant’s breach, and (4) resulting damages to the plaintiff.” (Maxwell v. Dolezal (2014) 231 Cal.App.4th 93, 97-98.)

Here, the third cause of action alleges Plaintiff and Defendant entered into a valid and enforceable agreement, whether directly or through Defendant’s controlled entity or alter-ego, whereby Defendant agreed to sell, procure, install and support a safe and functional Smart Moxibustion Robot for Plaintiff’s clinical use. (FAC at ¶ 35, Ex. A.) But, despite allegations of the FAC, the document identified as Exhibit A, referring to a “Software/Service/License Order Form” and “Tax Invoice,” does not constitute an agreement between Plaintiff and Defendant as individuals. (See Paul v.

Patton (2015) 235 Cal.App.4th 1088, 1091 [“Facts appearing in exhibits attached to the first amended complaint also are accepted as true and are given precedence, to the extent they contradict the allegations.”].) Instead, Exhibit A shows an order form between a buyer, Oriental Cosmos Health Center, and a supplier, Nefario Technologies Private Limited. While the order form displays Defendant’s name under the supplier, there are no factual allegations indicating that Defendant controlled the entity.

Nor are there sufficient allegations to support an alter-ego or agency theory of liability. (See Leek v. Cooper (2011) 194 Cal.App.4th 399, 415 [“To recover on an alter ego theory, a plaintiff need not use the words ‘alter ego,’ but must allege sufficient facts to show a unity of interest and ownership, and an unjust result if the corporation is treated as the sole actor.”]; Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 235 [plaintiff sufficiently alleged unity of interest by alleging corporate entity was inadequately capitalized, failed to “abide by the formalities of corporate existence,” and was dominated, controlled, and used by defendant as a “mere shell and conduit”]; see also Skopp v.

Weaver (1976) 16 Cal.3d 432 [California Supreme Court addressed allegations necessary to plead agency].) Thus, as there is no valid and enforceable agreement between the parties, there is no claim stated for breach of contract.

Therefore, the demurrer to the third cause of action is SUSTAINED WITH 15 DAYS LEAVE TO AMEND for failure to state a valid claim.

Fourth Cause of Action: Breach of Implied Warranty of Merchantability and Fitness

“Unlike express warranties, which are basically contractual in nature, the implied warranty of merchantability arises by operation of law. [Citation.] It does not ‘impose a general requirement that goods precisely fulfill the expectation of the buyer. Instead, it provides for a minimum level of quality.’ [Citations.]” (American Suzuki Motor Corp. v. Super. Ct. (1995) 37 Cal.App.4th 1291, 1295-1296.) “Thus, a breach of the implied warranty of merchantability means the product did not possess even the most basic degree of fitness for ordinary use.” (Mocek v. Alfa Leisure, Inc. (2003) 114 Cal.App.4th 402, 406.)

The general rule is that privity of contract between the plaintiff and defendant is required in an action for breach of either express or implied warranty. (Windham at Carmel Mountain Ranch Assn. v. Super. Ct. (2003) 109 Cal.App.4th 1162, 1169 (Windham).) “A demurrer is properly sustainable in an action predicated upon a breach of an implied warranty when lack of privity between plaintiff and defendant is disclosed on the face of the complaint. [Citation.]” (Anthony v. Kelsey-Hayes Co. (1972) 25 Cal.App.3d 442, 448.)

As articulated above, there is no contractual privity between Plaintiff and Defendant for purposes of their alleged agreement and thus no viable cause of action for breach of the implied warranty of merchantability and fitness. And, even though there are exceptions to the general privity rule, no such exceptions are applicable here. (See Windham, supra, 109 Cal.App.4th at p. 1169 [“Exceptions to the privity requirement have been established in cases involving foodstuffs, drugs and pesticides.”]; see also Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1201 [“The strict requirement of privity has also been excused when an inherently dangerous instrumentality causes harm to a buyer’s employee.”].) Therefore, the demurrer is sustainable on this ground.

Accordingly, the demurrer to the fourth cause of action is SUSTAINED WITH 15 DAYS LEAVE TO AMEND for failure to state a valid claim.

Fifth Cause of Action: Negligence

“The essential elements of a cause of action for negligence are: (1) the defendant’s legal duty of care toward the plaintiff; (2) the defendant’s breach of duty – the negligent act or omission; (3) injury to the plaintiff as a result of the breach – proximate or legal cause; and (4) damage to the plaintiff.” (Leyva v. Garcia (2018) 20 Cal.App.5th 1095, 1103.)

As an initial matter, Defendant, in reply, contends that Plaintiff fails to allege facts supporting the elements of a negligence claim. (See Reply at pp. 9:10-10:6.) The court however declines to address this argument as it is being raised for the first time in the reply papers. (See American Drug Stores, Inc. v. Stroh (1992) 10 Cal.App.4th 1446, 1453 [“Points raised for the first time in a reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument.”].) Even so, the court finds Plaintiff alleges sufficient facts to establish a negligence claim.

Defendant asserts the negligence claim is also barred by the economic loss rule. The court finds this assertion to be persuasive as the negligence cause of action seeks purely financial harm unaccompanied by physical or property damage. (FAC at ¶ 53; see Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922 [“In general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.”].) Thus, the demurrer is sustainable on this ground.

Consequently, the demurrer to the fifth cause of action is SUSTAINED WITH 15 DAYS LEAVE TO AMEND for failure to state a valid claim.

Uncertainty

“ ‘ “[D]emurrers for uncertainty are disfavored, and are granted only if the pleading is incomprehensible that a defendant cannot reasonably respond.” ’ [Citations.] ‘ “A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” ’ [Citations.]” (A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 695.)

“[U]nder our liberal pleading rules, where the complaint contains substantive factual allegations sufficiently apprising defendant of the issues it is being asked to meet, a demurrer for uncertainty should be overruled or plaintiff given leave to amend. (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.)

Defendant does not offer substantive argument addressing the demurrer on the ground of uncertainty. And, given the arguments raised on general demurrer, it appears Defendant is on notice of the claims being raised in this action. Moreover, to the extent that any ambiguity exists, Defendant can obtain more information through the process of civil discovery. (See Davies v. Super. Ct. (1984) 36 Cal.3d 291, 299 [purpose of civil discovery is to take game element out of trial preparation and assist parties in obtaining facts and evidence necessary for expeditious resolution of their dispute].)

Therefore, the demurrer to the FAC on the ground of uncertainty is OVERRULED.

Motion to Strike Punitive Damages Allegations

Given the court’s ruling on demurrer, the motion to strike punitive damages allegations is MOOT.

Disposition

The demurrer to the first, second, third, fourth, and fifth causes of action in the FAC is SUSTAINED WITH 15 DAYS LEAVE TO AMEND for failure to state a valid claim.

The demurrer to the FAC on the ground of uncertainty is OVERRULED.

The motion to strike punitive damages allegations is MOOT.

The court will prepare the Order.

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