Sanmina Corporation vs. Gemayel

The court GRANTS Gemayel’s request for judicial notice. (Evid. Code § 452, subds. (d) and (h)).

Statement of Law

A demurrer only tests the sufficiency of the pleadings. (See Satyadi v. West Contra Costa Healthcare District (2014) 232 Cal.App.4th 1022, 1028 [in analyzing a demurrer, the court looks only to the face of the pleadings and to matters judicially noticeable and not to the evidence or other extrinsic matters]).

In reviewing the propriety of the sustaining of a demurrer, the “court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. [Citations.] The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.] The judgment must be affirmed ‘if any one of the several grounds of demurrer is well taken. [Citations.]’ [Citation.] However, it is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. [Citation.]

And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Hale v. Sharp Healthcare (2010) 183 Cal.App.4th 1373, 1379 [citing Aubry v. Tri–City Hospital Dist. (1992) 2 Cal.4th 962, 967].). A court will not consider facts that have not been alleged in the complaint unless they may be reasonably inferred from the matters alleged or are proper subjects of judicial notice. (Hall v.

Great W. Bank (1991) 231 Cal.App.3d 713, 718 fn.7.)

Allegations in Cross-Complaint

Gemayel alleges the following in his cross-complaint:

In June 1998, Gemayel entered into a Purchase and Sale Agreement (“PSA”) with Sanmina pursuant to which Sanmina agreed to sell to Gemayel the real property located at 2215 South Standard Avenue in Santa Ana, California. (CC, ¶ 8). At the time the PSA was executed, Gemayel was led to believe that there was limited contamination at the Subject Property which would cost in the range of $298,000- $424,600 to address. Sanmina and Gemayel therefore agreed that the purchase price of the Subject Property would be reduced by $498,600, making the purchase price $701,600. That’s the amount Gemayel paid. (CC, ¶ 9).

Sanmina fraudulently concealed the following material facts from Gemayel (collectively, “Concealed Material Facts”) that: a. Elexsys was actually one and the same as Diceon. b. Sanmina had acquired Diceon the year before. c. Diceon was known as a polluter, a fact that Sanmina found out during its acquisition of Elexsys/Diceon. d. Diceon had previously been cited by the South Coast Air Quality Management District (SCAQMD) for environmental violations. e. Diceon had contaminated the Subject Property, including with the solvent 1,1,1-TCA (“TCA”). f.

The Subject Property was far more contaminated than what was disclosed by Sanmina and groundwater beneath the property was part of a co-mingled plume generally migrating to the southeast beneath the Subject Property. g. Although the parties agreed to discount the Subject Property’s purchase price, the amount was greatly disproportionate to what it would actually cost in environmental response actions at the Subject Property. h. Sanmina was a “responsible party” under various federal and California environmental laws for causing and contributing to disposals and releases of hazardous substances at the Subject Site which impacted soil and groundwater. (CC, ¶ 12).

In 2008, the Orange County Water District (“OCWD”) filed a lawsuit against Sanmina and others styled Orange County Water District v. Sabic Innovative Plastics US, LLC, OCSC Case No. 30-2008- 00078246 (“Sabic” case). In 2023, OCWD filed a second action, styled Orange County Water District v. Sabic Innovative Plastics US, LLC, OCSC Case No. 30-2023-01363985 (“Sanmina” case). Both cases sought cost recovery and damages related to an alleged comingled groundwater plume in the South Basin of Orange County. (CC, ¶ 14).

In April 2023 the Court issued a 131-page Statement of Decision (“SOD”) finding, among other things, that Sanmina was liable to OCWD for $119,135 under California’s Hazardous Substance Account Act (“HSAA”) and liable for over $1.1 million under the Orange County Water District Act (“OCWD Act”). While no attorneys’ fees are available under the HSAA, liability under the OCWD Act subjected Sanmina to millions of dollars in OCWD attorneys’ fees. (CC, ¶ 16).

Sanmina had knowledge and access to the Concealed Material Facts including that Sanmina caused and contributed to TCA disposals and releases into the subsurface and groundwater at and around the Subject Property. Each such fact was not known or reasonably discoverable by Gemayel, and thus Sanmina owed Gemayel a duty to disclose each fact. Sanmina intended to deceive Gemayel by hiding the Concealed Material Facts. (CC, ¶ 23).

Sanmina represented it had not caused or contributed to various solvent releases in the subsurface or groundwater at the Subject Property, including by TCA. (CC, ¶ 29).

The contaminants (including TCA) Sanmina and Roes 1 through 20 disposed of, released, and/or threatened to release at the Subject Property are “hazardous substances” within the meaning of, inter alia, Health & Safety Code section 68075; 42 U.S.C. § 9602(a); and 40 C.F.R. §§ 302.4(a) and 401.15. (CC, ¶ 39).

During the early period when Gemayel thought the PSA indemnity obligations were legitimate and his to bear, Gemayel performed his obligations under the PSA and in fact paid attorneys’ fees to defend Sanmina – well prior to discovering Sanmina had breached the PSA, including the implied covenant of good faith and fair dealing through concealment and/or the Representations as detailed above. Sanmina further breached its obligations under the PSA as to indemnity during that period by refusing to accept Gemayel’s selection of defense counsel. (CC, ¶¶ 46, 47).

Statute of Limitations

First, Sanmina contends that all causes of action are barred by the statute of limitations. Code Civ. Proc. § 338, subd. (d), provides for a three-year statute of limitations for fraud; § 337, subd. (a) provides for a four-year statute of limitations for breach of contract; and § 338, subd. (b) provides for a three-year statute of limitation for the HSAA claim.

A demurrer based on a statute of limitations will not lie where the action may be, but is not necessarily, barred. (Boy Scouts of America Nat. Foundation v. Superior Court (2012) 206 Cal.App.4th 428, 438.) “In order for the bar to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint.” (Id. at 438-439.)

“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.” (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110).

“In order to rely on the discovery rule for delayed accrual of a cause of action, a plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule 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. . . . [C]onclusory allegations will not withstand demurrer.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808.) Likewise, “[w]hen a plaintiff relies on a theory of fraudulent concealment, delayed accrual, equitable tolling, or estoppel to save a cause of action that otherwise appears on its face to be time-barred, he or she must specifically plead facts which, if proved, would support the theory.” (Mills v. Forestex Co. (2003) 108 Cal.App.4th 625, 641.)

Once properly pleaded, belated discovery is a question of fact and becomes a matter of law only when “reasonable minds can draw only one conclusion from the evidence.” (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1320.)

Finally, under the discovery rule, “[o]nce 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. So long as a suspicion exists, it is clear that the plaintiff must go find the facts; she cannot wait for the facts to find her.” (Jolly, supra, 44 Cal.3d at 1111).

Fraud Claims

Sanmina contends that Gemayel’s fraud claims arise out of acts and events that occurred before he purchased the Property in 1998. Sanmina’s request for judicial notice (as well as Gemayel’s allegations in his cross-complaint) provide that in 2008, the Orange County Water District filed the action styled Orange County Water District v. Sabic Innovative Plastics US, LLC, et al, sued several defendants, including Sanmina, for claims arising out of contamination allegedly emanating from the subject property and several surrounding properties.

The Sabic complaint alleges that “Sanmina-Sci Corporation, individually and successor in interest to Diceon Electronics, Inc. ...manufactured circuit boards on at least one site in the relevant litigation area, a process that involves the use of chemicals containing VOC’s. Sanmina released hazardous wastes containing VOC’s.” (See RJN, Ex. 4 [Sabic Complaint] at ¶ 13).

Sanmina attaches as Exhibit 5 to the request for judicial notice a declaration filed by Gemayel in the action Sanmina-SCI Corporation v. Gemayel, which is dated May 20, 2011, wherein Gemayel declares that Sanmina was sued by OCWD in the Sabic case, and that Sanmina demanded that Gemayel honor the obligation under the indemnification clause of the PSA. (RJN, Ex. 5 [Declaration], at ¶¶ 3-5).

Sanmina also cites to the court of appeal’s published decision in OCWD v. Sabic Innovative Plastics US LLC (2017) 14 Cal.App.5th 343, wherein the appellate court held:

The evidence showed that Sanmina used a VOC solvent, 1,1,1–TCA, in its manufacturing process and that the same solvent was found in the environment at the site. A trier of fact could reasonably infer that Sanmina used substantial quantities of 1,1,1–TCA in at least one degreaser at the site. Based on expert testimony that degreasers are common sources of contamination, as well as the fact that 1,1,1–TCA contamination actually occurred at the site, a trier of fact could reasonably conclude that Sanmina (or some other party) disposed of 1,1,1–TCA during Sanmina's occupancy of the site. Based on the current record, a triable issue of fact exists as to this element, and summary adjudication should not have been granted.

(Id. at 381–382) (citation omitted).

Accordingly, Sanmina asserts that Gemayel was on notice of the potential fraud claim as early as 2008 (and by the appellate court’s decision in 2017, which found Sanmina liable for the very pollutant [TCA] that serves the basis for Gemayel’s current claims).

In his Opposition, Gemayel argues that he has no reason to know that Elexsys and Diceon were “one in the same” as Sanmina, that Gemayel was not put on inquiry at any time before April 2023, had no reason to know about the 2017 Fourth District Court of Appeal opinion, and, finally, that the parties had entered into a tolling agreement which tolls Gemayel’s claims against Sanmina until the conclusion of the Sabic action.

With regards to Gemayel’s discovery argument, however, the limitations period begins once Gemayel “has notice or information of circumstances to put a reasonable person on inquiry. ...” (Bergstein v. Stroock & Stroock & Lavan LLP (2015) 236 Cal.App.4th 793, 818 [citing Jolly supra, 44 Cal.3d at 1110-1111, emphasis in original]).

Gemayel’s concealment cause of action and fraudulent misrepresentation cause of action are based on Sanmina’s concealment that “caused and contributed to TCA disposals and releases into the subsurface and groundwater at and around the Subject Property”, and that it “represented it had not caused or contributed to various solvent releases in the subsurface or groundwater at the Subject Property, including by TCA.” (CC, ¶¶ 23, 29).

Gemayel was put on inquiry once he was made aware of the Sabic action, which specifically alleged that Sanmina was Diceon’s successor and was alleged to be liable for pollutants. Gemayel admitted knowledge of this complaint in his 2011 declaration that he filed in the prior Sanmina v. Gemayel action. “Subjective suspicion is not required. If a person becomes aware of facts which would make a reasonably prudent person suspicious, he or she has a duty to investigate further and is charged with knowledge of matter which would have been revealed by such an investigation.” (McCoy v. Gustafson (2009) 180 Cal.App.4th 56, 108). The appellate court decision in OCWD v. Sabic Innovative Plastics US LLC (2017) 14 Cal.App.5th 343 also demonstrated that OCWD was asserting that Sanmina is liable for TCA pollutants. (See id. at 381).

Finally, Gemayel contends that Gemayel and Sanmina entered into a tolling agreement, which he attaches as Exhibit 1 to his request for judicial notice. However, Gemayel did not allege that his claims were tolled in his cross-complaint.

Furthermore, the tolling agreement applies to “any claim asserted in any pleadings filed in the Sanmina Matter to the extent the defense had not expired prior to the filing of the Sanmina Matter.” (Gemayel RJN, Ex. 1 [tolling agreement] at ¶ 7.). Gemayel does not establish that his claims in the cross-complaint were the claims that were tolled in the prior Sanmina case. In support of its Reply, Sanmina requests judicial notice of Gemayel’s first amended cross-complaint, which provides that Gemayel asserted only one cause of action for violation of Bus. & Prof. Code § 17200 et seq., based on Sanmina’s alleged refusal of counsel provided by Gemayel. (CC, ¶ 21).

Accordingly, the court finds that the first two causes of action for fraud are time-barred.

Breach of Contract

With regards to the fourth cause of action for breach of contract, Gemayel alleges that Sanmina breached the PSA because of the concealment discussed above, and also because Sanmina breached its obligations under the PSA as to indemnity during that period by refusing to accept Gemayel’s selection of defense counsel. As discussed above, the first basis for concealment is time barred.

With regards to the second basis (refusing Gemayel’s selection of defense counsel), Gemayel’s 2011 declaration in the prior Sanmina action, which is attached as Exhibit 4 to Sanmina’s RJN, provides that Sanmina’s rejection of Gemayel’s defense counsel occurred in 2010-2011. (RJN, Ex. 4, at ¶¶ 16, 17). Accordingly, this cause of action is also time-barred, and as with the fraud claims, Gemayel failed to establish that this claim is subject to the tolling agreement.

HSAA

With regards to the third cause of action for HSAA violation, Gemayel alleges that the contaminants (including TCA) Sanmina disposed of, released, and/or threatened to release at the Subject Property are “hazardous substances” within the meaning of, inter alia, Health & Safety Code section 68075; 42 U.S.C. § 9602(a); and 40 C.F.R. §§ 302.4(a) and 401.15. (CC, ¶ 39).

The HSAA provides, in relevant part: “[a] person who has incurred response or corrective action costs in accordance with this chapter, Chapter 6.5 (commencing with Section 25100), or the federal act may seek contribution or indemnity from any person who is liable pursuant to this chapter.” (Health & Safety Code § 25363, subd. (d); see also Orange County Water Dist. v. Alcoa Global Fasteners, Inc. (2017) 12 Cal.App.5th 252, 297). When a plaintiff proves the elements of an HSAA violation, an HSAA defendant is strictly liable for recoverable costs (Health & Saf. Code, § 25363, subd. (c)) unless the defendant establishes an applicable defense. (Id. at 298).

Addressing the statute of limitations argument first, the court in Otay Land Co., LLC v. U.E. Limited, L.P. (2017) 15 Cal.App.5th 806, held: “Here, the court determined the three-year statute of limitations under Code of Civil Procedure section 338, subdivision (b), for ‘action[s] for trespass upon or injury to real property” applied to Plaintiffs' HSAA claim. Plaintiffs do not challenge this aspect of the court's ruling, and we do not address it. The court then found the statutory period ‘commenced when [Plaintiffs] knew or should have known of the facts giving rise to the claim...Plaintiffs contend their claim did not accrue until they paid remedial action costs. We agree.” (Id. at 851). In his Cross-Complaint, Gemayel alleges that his costs “are ongoing.” Accordingly, this cause of action does not appear to be time-barred.

Next, Sanmina argues that the purchase and sale agreement (PSA) entered into by the parties unambiguously allocates all environmental liability to Gemayel. Paragraph 9 of the PSA contains the following release language:

Except with respect to any claims arising out of any breach of covenants, representations or warranties set forth in Section 12 hereof, Buyer, for itself and its agents, affiliates, successors and assigns, hereby releases and forever discharges Seller, its agents, affiliates, successors and assigns from any and all rights, claims and demands at law or in equity, whether known or unknown at the time of this Agreement, which Buyer has or may have in the future, arising out of the physical, environmental, economic or legal condition of the Property. In giving this release, Buyer expressly waives the benefit of any statutory provision or decisional law, if any, that would preclude the extension of this release to claims which Buyer did not know or suspect to exist at the time of execution of this Agreement, which, if known by Buyer, may have materially affected the giving of this release including the provisions of California Civil Code Section 1542 which provide:

"Section 1542. (General Release - Claims Extinguished.) A general release does not extend to claims which the creditor does not know or suspect to exist in this favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor."

Buyer hereby specifically acknowledges that Buyer has carefully reviewed this subsection and discussed its import with legal counsel and that provisions of this subsection are a material part of this Agreement.

(RJN, Ex. 1 [PSA] at ¶ 9).

Paragraph 10 of the PSA provides:

Environmental Disclosure and Indemnity: Buyer acknowledges that Seller will perform environmental testing prior to the Close of Escrow in order to establish a baseline for existing environmental conditions on the Property which information shall be provided to Buyer and that such testing will be performed in accordance with the Scope of Work attached to this Agreement as Exhibit D. Seller agrees that Buyer's consultant shall be notified so that Buyer's consultant can be present and can take split samples of any samples taken by Seller's consultant.

Seller also agrees that Buyer's Consultant may direct Seller's Consultant to complete some pre-identified limited tests at Buyer's cost during the escrow period. Notwithstanding the results of such testing, or Buyer's review of the Environmental Reports, Buyer shall indemnify, defend with counsel reasonably acceptable to Seller, protect, and hold harmless Seller, its employees, agents, contractors, stockholders, officers, directors, successors, subsidiaries, personal representatives, and assigns from and against all claims, actions, suits, proceedings, judgments, losses, costs, personal injuries, damages, liabilities, deficiencies, fines, penalties, damages, attorneys' fees, consultants' fees, investigations, detoxifications, remediations, removals, and expenses of every type and nature, directly or indirectly arising out of or in connection with Contamination present at any time on or about the Property regardless of the source of such Contamination.

This indemnity shall survive the close of escrow. At the closing of the transaction contemplated herein, upon the request of Seller, Buyer shall deliver to Seller a certificate and indemnity of Buyer reaffirming the provisions of Sections 9 and 10 hereof which shall survive the close of escrow hereunder. Buyer acknowledges that the purchase price for the Property set forth in this Agreement represents a discount based on Buyer's and Buyer's environmental consultant's assessment of the risks and liabilities posed by the Contamination on the Property.

This indemnity is being given by Buyer in consideration of that discount regardless of whether such discount is an accurate reflection of the actual risks and liabilities arising out of or relating to such Contamination.

Gemayel argues that the release is void as against public policy because it releases Sanmina from liability for willful injury to the person or property of another. Gemayel cites to Civ. Code § 1668, which provides: “All contracts which have for their object, directly or indirectly, to exempt any one from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.”

However, in SI 59 LLC v. Variel Warner Ventures, LLC (2018) 29 Cal. App. 5th 146, the court of appeal held: “[W]e hold that section 1668 negates a contractual clause exempting a party from responsibility for fraud or a statutory violation only when all or some of the elements of the tort are concurrent or future events at the time the contract is signed. Contrariwise, we hold that section 1668 does not negate such a clause when all the elements are past events. Regarding the element of damages, which is necessary for tort liability, this means that at least some form of economic or physical damage has occurred.” (Id. at 1248).

At the time of the purchase and sale of the real property, any contamination by Sanmina (even if it were willful) would not be negated by Civ. Code § 1668.

Next, Gemayel argues that the PSA does not function to indemnify active negligence by Sanmina. “[A]n indemnity agreement may provide for indemnification against an indemnitee's own negligence, but such an agreement must be clear and explicit and is strictly construed against the indemnitee.” (Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 628). “If an indemnity clause does not address itself to the issue of an indemnitee's negligence, it is referred to as a ‘general’ indemnity clause.” (Id. at 628). “While such clauses may be construed to provide indemnity for a loss resulting in part from an indemnitee's Passive negligence, they will not be interpreted to provide indemnity if an indemnitee has been Actively negligent.” (Id. at 629). “Active negligence, on the other hand, is found if an indemnitee has personally participated in an affirmative act of negligence, was connected with negligent acts or omissions by knowledge or acquiescence, or has failed to perform a precise duty which the indemnitee had agreed to perform.” (Id. at 629).

Setting aside the indemnity portion, however, Gemayel fails to address the release in the PSA. Whether the indemnity provision is enforceable is an issue to be decided on Sanmina’s claims against Gemayel in Sanmina’s complaint, not Gemayel’s claim against Sanmina. Gemayel agreed to release Sanmina for any contamination on the property, regardless of whether the indemnity agreement is enforceable. Gemayel presented no argument suggesting that the release in the PSA is unenforceable.

Accordingly, the court sustains the demurrer to this cause of action.

Declaratory Relief

Finally, Gemayel asserts a fifth cause of action for declaratory relief, alleging as follows: “Gemayel desires a judicial determination of his rights and duties and a declaration that in that Sanmina and Roes 1 through 20 are responsible for the contamination at the Subject Property and are obligated to pay for all past and ongoing Environmental Response Action costs in the amount of at least $2 million and that because of fraud, concealment, and misrepresentation, any alleged release and/or indemnity by Gemayel in the PSA is void, rescinded, and of no legal effect.” (CC, ¶ 52).

Because the declaratory relief cause of action is premised on the same theories as the breach of contract, HSAA and fraud causes of action, the court also sustains the demurrer to this cause of action.

Leave to Amend

Sanmina contends that the demurrer should be sustained without leave to amend, because the defects cannot be cured. However, because this is Gemayel’s first cross-complaint, the court will grant leave to amend. (See Eghtesad v. State Farm General Insurance. Co. (2020) 51 Cal.App.5th 406, 411).

Should Defendant/Cross-Complainant George Gemayel desire to file an amended cross-complaint that addresses the issues in this ruling, the amended cross-complaint shall filed and served within 30 days of service of the notice of ruling.

Plaintiff/Cross-Defendant Sanmina Corporation shall give notice.

8 Code 4 Media OFF CALENDAR Group, Inc. vs. Kim 9 Hingorani vs. TENTATIVE RULING: Dunn Motion to Set Aside Default and Default Judgment

Defendant Dane Carson Dunn Jr. moves to set aside the default entered against him. For the following reasons, the unopposed motion is GRANTED.

Code Civ. Proc. § 473(b) provides in pertinent part,

“The court may, upon any terms as may be just, relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect. Application for this relief shall be accompanied by a copy of the answer or other pleading proposed to be filed therein, otherwise the application shall not be granted, and shall be made within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order, or proceeding was taken. . . .”

A motion seeking relief under Section 473(b) must be brought within 6 months of entry of the judgment. (Civ. Proc. Code § 473(b).)