AVNET, INC. et.al. vs. Ampere Computing

II. Discussion

a. First Cause of Action: Breach of Contract

The court OVERRULES Ampere’s demurrer to the complaint’s first cause of action. To state a breach of contract cause of action, a plaintiff must allege: (1) the existence of a contract; (2) the plaintiff’s performance or excuse for nonperformance; (3) the defendant’s breach; and (4) damage to the plaintiff resulting from that breach. (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 228 (Rutherford).) The complaint alleges that Ampere breached the following agreements: (1) a Sales Distributor Agreement (the “SDA”) between Avnet and Ampere; (2) a “Backstop Agreement” between Avnet and Ampere; and (3) an agreement between Avnet and Ampere to negotiate, in good faith, this Backstop Agreement. (Complaint, ¶¶ 77-82.)

The court agrees with several of Ampere’s arguments as to the Backstop Agreement.1 A complaint “must indicate on its face whether the contract is written, oral, or implied by conduct.” (Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 458-459, citing Code Civ. Proc., § 430.10, subd. (g).) Avnet’s opposition discusses three versions of the Backstop Agreement that Avnet argues the complaint sufficiently alleges: (1) a written agreement with alleged terms that are described in paragraphs 47 and 48 of the complaint and written confirmation of this agreement alleged in in paragraphs 49, 52, and 55; (2) an oral agreement with terms alleged in paragraphs 47 and 48 and oral confirmation of this agreement alleged in paragraphs 49, 56, and 62; and (3) an agreement indicated through implied conduct as demonstrated by the allegations in paragraphs 46 through 62. (Opposition, pp. 4:24-5:17.)

The court agrees with Ampere that it is difficult from the “face of the complaint” to ascertain any of this. (See Code Civ. Proc., § 430.10, subd. (g).) The complaint’s breach of contract allegations do not allege which version of this agreement Ampere allegedly breached. (Complaint, ¶¶ 77- 84.) As such, the court is inclined to agree with Ampere that the allegations underlying the

1 The court is less persuaded by Ampere’s statute of frauds argument. (Memorandum of Points and Authorities in Support of Demurrer (“MPA”), p. 13:11-16.) The court finds Avnet’s equitable estoppel argument persuasive, and the court notes that Ampere does not address this argument on reply. (Opposition to Demurrer (“Opposition”), p. 7:10-21.) “Whether the doctrine of equitable estoppel should be applied in a given case is generally a question of fact,” and the complaint alleges that Avnet incurred $4,016,085 in reliance upon Ampere’s representations and “written confirmation” of the Backstop Agreement. (Complaint, ¶ 56; Byrne v.

Laura (1997) 52 Cal.App.4th 1054, 1068, internal citations omitted; Monarco v. Lo Greco (1950) 35 Cal.2d 621, 623-624 [“Such fraud may inhere in the unconscionable injury that would result from denying enforcement of the contract after one party has been induced by the other seriously to change his position in reliance on the contract . . .”], internal citations omitted.)

complaint’s first cause of action do not indicate on their face whether the Backstop Agreement is written, oral, or based upon implied conduct. (MPA, p. 11:16-21.)

The court is also persuaded by Ampere’s argument that the complaint does not plead the parties’ mutual assent to the Backstop Agreement. (MPA, pp. 11:22-13:10.) Mutual assent is necessary for the formation of a contract. (Civ. Code, §§ 1550, 1565.) For a meeting of the minds to exist, the parties must agree on all material contract terms. (Elyaoudayan v. Hoffman (2003) 104 Cal.App.4th 1421, 1430 [“California law is clear that there is no contract until there has been a meeting of the minds on all material points.”], internal citation and quotation marks omitted; see also DeLeon v.

Verizon Wireless, LLC (2012) 207 Cal.App.4th 800, 813 [“There is no contract until there is mutual consent of the parties.”], citing Civ. Code, §§ 1550, 1565.) Avnet directs the court to paragraphs 47 and 48 of the complaint to argue that the complaint alleges the terms of the Backstop Agreement. (Opposition, p. 4:24-26; see also Complaint, ¶¶ 47-48.) Avnet then notes that the complaint alleges that Ampere, through Kit Ho Chee, Sujan Kamran, and Bob Hoogenboom, confirmed both orally and in writing that Ampere agreed to these terms in April and May 2021. (Opposition, pp. 4:26-5:6; see also Complaint, ¶ 49.)

However, the complaint then alleges that the parties engaged in a “proposal” and “counterproposal” as to the Backstop Agreement, the terms of which Ampere allegedly agreed to in June 2021. (Complaint, ¶¶ 53-55.) Given this, it is unclear to the court what specific contract terms the parties actually mutually assented to, and, relatedly, which of these terms Ampere allegedly breached—the terms discussed in paragraphs 47 and 48 of the complaint or some unspecified terms in a proposal and counterproposal discussed in paragraphs 53 and 55. (See MPA, p. 12:16-19 [“Avnet cannot contend that mutual assent occurred in April 2021 and/or May 2021, since Avnet alleges that the parties subsequently continued to negotiate the ‘Backstop proposal’ in June 2021.”], internal citations omitted.)

Despite these issues, the court notes that a demurrer does not lie to a portion of a cause of action, and the complaint’s first cause of action also alleges that Ampere breached the SDA. (Complaint, ¶ 81; PH II v. Superior Court (1995) 33 Cal.App.4th 1680, 1682 [“A demurrer does not lie to a portion of a cause of action.”], internal citation omitted.) Ampere argues that the complaint’s allegations regarding Ampere’s breach of the SDA are “contradicted by an exhibit incorporated by reference” to the complaint. (MPA, pp. 15:16-16:6.)

The court is not persuaded by this argument. The court cannot consider extrinsic evidence on a demurrer, and the exhibits attached to the declaration of Charles A. Talpas (the “Talpas Declaration”) constitute extrinsic evidence. (Nealy v. County of Orange (2020) 54 Cal.App.5th 594, 597, fn. 1 [on demurrer, court’s focus is limited to the facts alleged on the face of the pleading and its exhibits, and any facts subject to judicial notice].)2

Ampere argues that the court can incorporate by reference the exhibits Ampere has attached to the Talpas Declaration. (See MPA, p. 10:20, fn. 9, citing City of Pomona v. Superior Court (2001) 89 Cal.App.4th 793, 800 (Pomona); Reply, p. 2:2, fn. 1, citing Genis v. Schainbaum (2021) 66 Cal.App.5th 1007, 1015 (Genis).) Neither Pomona nor Genis is helpful to Ampere. In Pomona, the Court of Appeal held that where “written documents are the foundation of an action and are attached to the complaint and incorporated therein by reference, they become a part of the complaint and may be considered on demurrer.” (Pomona, supra, 89 Cal.App.4th at p. 800, internal citations omitted, emphasis added.)

In Genis, the Court of Appeal held that where “facts appearing in attached exhibits or judicially noticed documents contradict, or are inconsistent with, the complaint’s allegations, we must rely on the facts in the exhibits and

2 The court declines to consider Avnet’s evidentiary objections. A demurrer is not an evidentiary hearing. As the court discusses, however, these objections raise a valid point regarding Ampere’s reliance on extrinsic evidence.

judicially noticed documents.” (Genis, supra, 66 Cal.App.5th at p. 1015, internal citation omitted, emphasis added.) The exhibits attached to the Talpas Declaration are not documents attached to the complaint. Nor has Ampere filed any request for judicial notice.

The court concludes that the declaration and exhibits submitted by Ampere’s counsel consist of almost entirely extrinsic evidence that the court cannot consider on demurrer. Therefore, the court only considers the Talpas Declaration to the extent that it addresses meetand-confer efforts required by statute.3 Ultimately, then, Ampere’s argument as to the complaint’s failure to sufficiently allege a breach of the SDA relies entirely upon extrinsic evidence that the court declines to consider, and given that a demurrer does not lie to a portion of a cause of action, the court overrules Ampere’s demurrer to the first cause of action. (MPA, pp. 15:16-16:6.)

b. Second Cause of Action: Breach of Implied Covenant of Good Faith and Fair Dealing

The court SUSTAINS Avnet’s demurrer to the complaint’s second cause of action with 20 days’ leave to amend. If the allegations underlying a cause of action for breach of the implied covenant of good faith and fair dealing “do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.) The complaint’s second cause of action alleges that

3 For this reason, the court is not persuaded by Ampere’s argument that the “subject matter of the purported Backstop falls within the exclusive scope of the SDA, which is a fully integrated agreement that could not be modified or amended except by written consent of the parties.” (MPA, pp. 13:17-14:7.) Again, Ampere supports this argument by referencing purported language in an exhibit attached to the Talpas Declaration. (Id. at p. 13:17-23.)

Ampere breached the implied covenant of good faith and fair dealing by “making bad-faith attempts to formulate product price decreases in a manner to avoid Avnet’s price protection, by continuing to induce Avnet to make POs while also attempting to avoid the already agreed-upon Backstop, by pretending a future additional formal agreement was forthcoming . . .” (Complaint, ¶ 87.) These are the same allegations underlying the complaint’s first cause of action for breach of contract, as the complaint alleges Ampere breached three agreements by failing to make payments under the SDA and Backstop Agreement and breached its agreement to negotiate the Backstop agreement in good faith by “acting and communicating in conformity with the Backstop agreement” and “promising to send an additional formal writing . . .” (Id. at ¶¶ 81-82.)

c. Third Cause of Action: Unjust Enrichment

The court SUSTAINS Ampere’s demurrer to the complaint’s third cause of action with 20 days’ leave to amend. The court disagrees with Ampere that a complaint cannot simultaneously allege the existence of an express contract while bringing a cause of action based on a quasi-contract theory. (MPA, p. 20:8-12.) Nevertheless, the court finds that the complaint’s third cause of action is insufficiently pled. An “action based on an implied-in-fact or quasicontract cannot lie where there exists between the parties a valid express contract covering the same subject matter.

However, restitution may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason. Thus, a party to an express contract can assert a claim for restitution based on unjust enrichment by alleg[ing in that cause of action] that the express contract is void or was rescinded.” (Rutherford, supra, 223 Cal.App.4th at p. 231, internal citations and quotation marks omitted; see also ibid. [“A claim for restitution is permitted even if the party inconsistently pleads a breach of contract claim that alleges the existence of an enforceable agreement.”], internal citation omitted; Klein v.

Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1388-1389 (Klein) [“A plaintiff may not, however, pursue or recover on a quasi-contract claim if the parties have an enforceable agreement regarding a particular subject matter. . . . Although a plaintiff may plead inconsistent claims that allege both the existence of an

enforceable agreement and the absence of an enforceable agreement, that is not what occurred here. Instead, plaintiffs’ breach of contract claim pleaded the existence of an enforceable agreement and their unjust enrichment claim did not deny the existence or enforceability of that agreement.”].) Here, the complaint’s third cause of action does not allege any facts denying the “existence or enforceability” of any alleged contract described in the complaint. (Complaint, ¶¶ 89-92.)

d. Fourth and Fifth Causes of Action: Fraud and Negligent Misrepresentation

The court SUSTAINS Ampere’s demurrer to the complaint’s fourth and fifth causes of action with 20 days’ leave to amend. “The elements of fraud are (1) the defendant made a false representation as to a past or existing material fact; (2) the defendant knew the representation was false at the time it was made; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably relied on the representation; and (5) the plaintiff suffered resulting damages.” (West v.

JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792 (West), internal citation omitted.) “Fraud must be pleaded with specificity rather than with general and conclusory allegations. The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made.” (Id. at p. 793, internal citation omitted; see also Foster v.

Sexton (2021) 61 Cal.App.5th 998, 1028 [“For policy reasons . . . fraud and negligent misrepresentation[] must be pleaded with particularity—that is, the pleading must set forth how, when, where, to whom, and by what means the representations were made.”].)

First, the court is not persuaded by Ampere’s economic loss rule argument. (MPA, pp. 18:24-19:8.) The complaint’s fraud and negligent misrepresentation causes of action are premised upon a theory of fraudulent inducement. (Complaint, ¶¶ 93-105.) Fraudulent

inducement is not barred by the economic loss rule. (Erlich v. Menezes (1999) 21 Cal.4th 543, 552-553 [“Tort damages have been permitted in contract cases . . . where the contract was fraudulently induced. In each of these cases, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.”], internal citations omitted; Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 833 [“We conclude that, under California law, the economic loss rule does not bar plaintiffs’ fraudulent inducement claim.”].)

The court is persuaded by Ampere’s statute of limitations argument. (MPA, p. 19:9-21.) Under Code of Civil Procedure section 338, subdivision (d), a three-year statute of limitations period applies to causes of action for fraud.4 (Code Civ. Proc., § 338, subd. (d).) A claim for fraud accrues on the date of “discovery, by the aggrieved party, of the facts constituting the fraud . . .” (Ibid.) A “plaintiff must affirmatively excuse his [or her] failure to discover the fraud within three years after it took place, by establishing facts showing that he [or she] was not negligent in failing to make the discovery sooner and that he [or she] had no actual or presumptive knowledge of facts sufficient to put him [or her] on inquiry.” (Krolikowski v. San Diego City Employees’ Retirement System (2018) 24 Cal.App.5th 537, 561-562 (Krolikowski),

4 The court notes that claims for negligent misrepresentation may be subject to a two-year or three-year limitations period. To determine which period applies, courts consider the nature of the right sued upon, not the form of action or the relief demanded. (Ventura County Nat. Bank v. Macker (1996) 49 Cal.App.4th 1528, 1530.) Where the essence of the claim is negligence, a two-year limitations period applies. (Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1155 [“A cause of action for negligent misrepresentation is barred by the two-year statute of limitations [citation] where the allegations amount to a claim of professional negligence.”].) But, where the cause of action sounds in fraud, like the one here, a three-year statute of limitation applies. (Broberg v. The Guardian Life Ins. Co. of America (2009) 171 Cal.App.4th 912, 920.)

internal citation and quotation marks omitted; see also Mills v. Forestex Co. (2003) 108 Cal.App.4th 625, 642-643 (Mills) [“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. . . .”], internal citation and quotation marks omitted.) Avnet’s opposition identifies a series of alleged misrepresentations and all appear to have occurred in 2021. (Opposition, pp. 11:20-12:14; see also Complaint, ¶¶ 49, 52, 55, 94, 100.)

Avnet filed its complaint in 2025, more than three years after 2021, and the complaint does not appear to allege any facts or provide any reason as to why Avnet did not “discover the fraud within three years after it took place.” (Krolikowski, supra, 24 Cal.App.5th at pp. 561-562.) Avnet also argues that the doctrine of equitable tolling has tolled the statute of limitations for its fraud causes of action because Avnet asserted identical claims in a federal action. (Opposition, p. 15:9-18.) However, a plaintiff relying on a theory of equitable tolling to “save a cause of action . . . must specifically plead facts which, if proved, would support the theory.” (Mills, supra, 108 Cal.App.4th at p. 641, internal citation omitted.)

The complaint does not invoke the equitable tolling doctrine, let alone plead facts supporting it. Nor does Avnet’s opposition direct the court to facts alleged in the complaint supporting its equitable tolling argument.

The court is also persuaded by Ampere’s arguments regarding the alleged misrepresentations themselves. The complaint’s fraud cause of action alleges that “Ampere made numerous representations . . .” (Complaint, ¶ 94.) The complaint’s negligent misrepresentation cause of action relies upon similar allegations. (Id. at ¶ 100.) These allegations are insufficient as they do not allege the how, when, where, to whom, and by what means any specific representations were made, let alone the additional requirement for corporate defendants of the names of who made any representations, their authority to speak, to whom they spoke, what they said or wrote, and when any alleged misrepresentation was made. (See West, supra, 214 Cal.App.4th at p. 793.)

In opposition, Avnet directs the court to alleged misrepresentations in paragraphs 49, 52, and 55 of the complaint. (Opposition, pp. 11:19-12:14, citing Complaint, ¶¶ 30, 31, 49, 50-51, 52, 55.) The alleged misrepresentations in paragraphs 52

and 55 are insufficient in that the complaint does not describe who these misrepresentations were specifically made to or the authority of those who made the representations. (Complaint, ¶¶ 52, 55.) Paragraph 49 does not actually describe, with particularity, any alleged misrepresentation. (Id. at ¶ 49 [“In April and May 2021, through Kit Ho Chee, Sujan Kamran, and Bob Hoogenboom, Ampere repeatedly confirmed both orally and in writing that Ampere agreed to the Backstop for Phoenics’ POs to Gigabyte.”].)

The court also agrees with Ampere that the complaint fails to allege an “actionable mental state.”5 (MPA, p, 18:2-10.) In Reeder v. Specialized Loan Servicing LLC (2020) 52 Cal.App.5th 795 (Reeder), the Court of Appeal found the following allegations to be the “very sort of general and conclusory allegations that are insufficient to state a fraud” cause of action: “the complaint alleges . . . [defendants] had no intention of allowing Plaintiff to reamoritize or re-finance . . . [defendants] made their false promises with the intent to induce Plaintiff to enter into 2005 [line of credit] . . .” (Reeder, supra, 52 Cal.App.5th at pp. 803-804, internal quotation marks omitted.)

The complaint in Reeder alleged “no facts or circumstances suggesting defendants’ intent not to perform . . .” (Id. at p. 804; see also Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1615 [“These conclusory allegations are far from specific enough to state a claim for fraud. Plaintiffs . . . allege no facts showing defendants’ ‘real intention’ was to defraud them . . .”].)

5 The court is less persuaded by Ampere’s justifiable reliance argument. The complaint sufficiently pleads justifiable reliance. (See Opposition, p. 13:4-20, citing Complaint ¶¶ 9, 10, 28-36, 40-44, 49-52, 55-60, 62, 97, 104.) “Except in the rare case where the undisputed facts leave no room for a reasonable difference of opinion, the question of whether a plaintiff’s reliance is reasonable is a question of fact.” (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239, internal quotation marks and citations omitted.)

In opposition to Ampere’s demurrer, Avnet directs the court to no allegations “suggesting” intent, instead arguing that intent and scienter may be generally pled. (Opposition, p. 12:20-25, citing Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1060-1062 (Beckwith).) The Court of Appeal in Beckwith found that the complaint sufficiently pled intent with the following allegations: “the complaint stated Dahl intended that [Beckwith] rely on [her] promise by refraining from delivering to [MacGinnis] his will for [MacGinnis] to sign before his scheduled surgery.

The complaint also alleged Dahl made the promise to delay [MacGinnis’s] execution of his will and to convince [Beckwith] to refrain from presenting [MacGinnis’s] will to him for execution before the scheduled surgery.” (Beckwith, supra, 205 Cal.App.4th at p. 1062, internal quotation marks omitted.) In other words, the Court of Appeal discussed alleged facts pled by the plaintiff to support the complaint’s intent allegations. (Ibid.) Again, Avent directs the court to no such facts in opposition, and the court further notes that the Court of Appeal in Beckwith reiterated the general principle that each element of a fraud cause of action “must be alleged with particularity.” (Id. at p. 1060, internal citation omitted.)

e. Sixth Cause of Action: Promissory Estoppel

The court OVERRULES Ampere’s demurrer to the sixth cause of action. Although “a cause of action for promissory estoppel is inconsistent with a cause of action for breach of contract based on the same facts, [w]hen a pleader is in doubt about what actually occurred or what can be established by the evidence, the modern practice allows that party to plead in the alternative and make inconsistent allegations.” (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1413 (Fleet), internal quotation marks and citations omitted; see also ibid. [“The Fleets have alleged facts that could support a cause of action for promissory estoppel against BofA in the event that they cannot establish a cause of action for breach of contract.

Whether they can prove this cause of action awaits further development.”].) Ampere does not argue that the complaint’s sixth cause of action is insufficiently pled, only that it is “foreclosed by the existence of an express agreement between the parties.” (MPA, p. 20:13-17.) Given the Court of Appeal’s holding in Fleet, the court is not persuaded by this argument. On reply,

Ampere argues for the first time that the SDA precludes Avnet’s promissory estoppel cause of action because where adequate consideration exists for an express contract, a cause of action for promissory estoppel would be superfluous. (Reply, p. 11:16-19.) The court declines to consider this new argument. (Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764 [points raised for the first time in a reply brief will not ordinarily be considered].)

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