I-Gem Associates Limited v. Sega of America, Inc.

Defendant Sega of America, Inc.’s (“Defendant”) Demurrer to plaintiff I-Gem Associates Limited’s (“Plaintiff”) First Amended Complaint (“FAC”) is SUSTAINED with leave to amend.

Defendant demurs to the second cause of action for ‘Restitution’ on the basis that it fails to state sufficient facts to support a cause of action. (Civ. Proc. Code § 430.10(e).)

“[T]he elements for a claim of unjust enrichment: receipt of a benefit and unjust retention of the benefit at the expense of another.” (Lectrodryer v. SeoulBank (2000) 77 Cal. App. 4th 723, 726.)

Plaintiff alleges Defendant has been enriched at Plaintiff’s expense as Defendant received the benefit Defendant contracted for under the Contract, which was the referral of a placed candidate made by plaintiff, yet Defendant never paid Plaintiff for having referred Wu. (FAC ¶¶ 36-39.) Instead of making the payment to Plaintiff owed under the contract, Defendant kept the benefit for itself. (FAC ¶ 40.)

“ ‘ “There are several potential bases for a cause of action seeking restitution. For example, 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. [Citations.] Alternatively, restitution may be awarded where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or similar conduct. In such cases, the plaintiff may choose not to sue in tort, but instead to seek restitution on a quasi-contract theory.... [Citations.] In such cases, where appropriate, the law will imply a contract (or rather, a quasi-contract), without regard to the parties’ intent, in order to avoid unjust enrichment.” [Citation.] [¶] “Under the law of restitution, ‘[a]n individual is required to make restitution if he or she is unjustly enriched at the expense of another. [Citations.] A person is enriched if the person receives a benefit at another's expense. [Citation.]’ [Citation.] However, ‘[t]he fact that one person benefits another is not, by itself, sufficient to require restitution. The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals, it is unjust for the person to retain it. [Citation.]’ ” [Citation.] As a matter of law, an unjust enrichment claim does not lie where the parties have an enforceable express contract.” [Emphasis added.] (Durell v. Sharp Healthcare (2010) 183 Cal. App. 4th 1350, 1370 (“Durell”).)

“Restitution of the benefits conferred under a contract may be awarded if the contract is rescinded or determined to be unenforceable.” (Chapman v. Skype Inc. (2013) 220 Cal. App. 4th 217, 233–34.)

Plaintiff has pled the existence of an express contract and breach thereof in the first cause of action. Although Plaintiff has stated the words ‘in the alternative’ under the second cause of action for restitution, Plaintiff has not alleged any alternative or different facts that would support this cause of action being alternatively available, such as the Contract was procured by fraud or is unenforceable or ineffective for some reason. (Durell, supra, 183 Cal. App. 4th at 1370; Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal. App. 4th 221.) “When 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.” (Mendoza v. Cont’l Sales Co. (2006) 140 Cal. App. 4th 1395, 1402.)

“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. Plaintiffs are therefore precluded from asserting a quasi-contract claim under the theory of unjust enrichment.” (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal. App. 4th 1342, 1389–90, as modified on denial of reh’g (Feb. 24, 2012); Sepanossian v. Nat’l Ready Mixed Concrete Co. (2023) 97 Cal. App. 5th 192, 207.)

Plaintiff has pled no alternative facts to support the second cause of action. Instead, Plaintiff has only stated ‘in the alternative,’ with all the same facts as the breach of contract cause of action. As the second cause of action is based on a breach of the express contract, with no other separate or alternative facts, the unjust enrichment cause of action cannot lie where the parties have an enforceable express contract. (Durell, supra, 183 Cal. App. 4th at 1370.)

However, to the extent they exist, Plaintiff should be able to easily add alternative facts or allegations regarding the Contract being unenforceable or ineffective for some reason, which would permit an unjust enrichment cause of action.

The demurrer is SUSTAINED with leave to amend.

Defendant to give notice.