Allan Krebs, et al. v. Serious Energy, Inc., et al.

Case Number

20CV03288

Case Type

Hearing Date / Time

Wed, 02/26/2025 - 10:00

Nature of Proceedings

Defendants Pabco Building Products, LLC, and Pacific Coast Companies, Inc.’s, Motion For Summary Judgment Or, In The Alternative, Summary Adjudication

Tentative Ruling

For Plaintiffs Allan Krebs and Jayme Lee Misfeldt: James B. Devine, Law Offices of James B. Devine, APC

For Defendants and Cross-Defendants Pabco Building Products, LLC, and Pacific Coast Companies, Inc., and Cross-Complainant Pabco Building Products LLC: Carlos K. Poza, Lauren A. Pagan, Manning Gross Massenburg, LLP, Daniel S. Yanagihara, Jr., Pacific Coast Companies, Inc. Legal Department, Jacob L. Ouzts, Yaniv Newman, Fennemore LLP

RULING

For all reasons discussed herein, the motion of defendants for summary judgment or, in the alternative, summary adjudication, is denied.

The Trial Date of 7/30/25 is confirmed.

Background

On October 8, 2020, plaintiffs Allan Krebs (Krebs) and Jayme Lee Misfeldt (Misfeldt) (collectively, plaintiffs) filed their complaint against defendants Serious Energy, Inc. (Serious Energy), Pacific Coast Companies, Inc. (PCC), Pabco Building Products, LLC (Pabco), Chatsworth Area Building Materials, LP doing business as Westside Building Materials Chatsworth (Westside), and Scott Morgan (Morgan), alleging four causes of action: (1) latent defects in the construction of residential real property (against Serious Energy, PCC, and Pabco); (2) strict product liability (against Serious Energy, PCC, Pabco, and Westside); (3) fraud (against Pabco and Morgan); and (4) concealment (against Pabco and Morgan). As alleged in the complaint:

Plaintiffs own residential real property (the residence) commonly known as 135 La Vuelta Road in Montecito, California. (Compl., ¶ 14.) In 2011 and 2012, plaintiffs purchased from Westside an acoustical drywall product manufactured by Serious Energy and known as “QuietRock”, which was installed along the exterior walls and ceilings of the residence and painted with primer. (Id. at ¶¶ 15-18.) On August 1, 2013, Serious Energy sold its QuietRock business to Pabco. (Id. at ¶ 22.)

Beginning in mid-2013, plaintiffs noticed issues with the drywall mud used to install the QuietRock, drywall tape, and rusting or corrosion in every area where the QuietRock was installed. (Compl., ¶¶ 19(a)-(d) & 20.) Plaintiffs retained a licensed drywall contractor to perform an inspection and provided recommendations to repair areas where the QuietRock was installed. (Id. at ¶¶ 23-24.) Though plaintiffs followed the drywall contractor’s recommendations, by late 2014 and early 2015, plaintiffs began observing the same issues in various parts of the residence where the QuietRock was installed. (Id. at ¶¶ 23-25.)

On February 10, 2015, a sales representative for Pabco performed an inspection of the QuietRock and non-QuietRock drywall installed at the residence. (Compl., ¶ 26.) On March 13, 2015, Morgan sent to plaintiffs a document entitled “Documentation of Wall Conditions at 135 La Vuelta, Montecito, CA” in which Morgan represented, among other things, that the issues with the QuietRock were caused by the efficacy of the primer and an unconditioned environment which were creating variations in moisture content, and that the issues could be remedied by installing certain custom finishes. (Id. at ¶ 27.) Plaintiffs followed Morgan’s recommendations and proceeded with the construction of the residence. (Id. at ¶¶ 27(e) & 29-30.)

After plaintiffs installed the custom finishes recommended by Morgan, they began experiencing the same issues and, in 2018, retained the same drywall contractor to inspect the QuietRock. (Compl., ¶¶ 31-32 & 46.) The drywall contractor advised plaintiffs that the QuietRock was defective. (Id. at ¶ 32-33.) As a result, plaintiffs were required to remove the QuietRock. (Id. at ¶ 34.)

On December 4, 2020, Pabco, PCC, and Morgan answered the complaint, generally denying its allegations and asserting thirty-four affirmative defenses.

On January 13, 2021, Serious Energy answered the complaint, generally denying its allegations and asserting fifteen affirmative defenses.

January 28, 2021, Westside filed its answer to the complaint, generally denying its allegations and asserting twenty-seven affirmative defenses, and a cross-complaint (the Westside cross-complaint) against Serious Energy, PCC, and Pabco, alleging causes of action for total equitable and implied indemnity, comparative contribution, and declaratory relief.

Serious Energy answered the Westside cross-complaint on February 23, 2021. Pabco and PCC filed an answer to the Westside cross-complaint on February 26, 2021.

On July 14, 2021, Pabco filed a cross-complaint (the Pabco cross-complaint) against Serious Energy alleging causes of action for breach of contract, equitable indemnity, contribution, apportionment, and declaratory relief, which Serious Energy answered on August 13, 2021.

On April 12, 2022, the Court entered a Minute Order granting the motion of Serious Entergy for summary judgment or, in the alternative, summary adjudication, and the motion of Westside for summary judgment, finding that each of these defendants were entitled to judgment as a matter of law. (See also Apr. 19 & 21, 2022, Orders.)

On April 28, 2022, Pabco and PCC (collectively, the Pabco defendants) filed a motion for summary judgment or, alternatively, adjudication, on the grounds that each cause of action alleged in the complaint are barred by the statute of limitations and lack evidentiary support. The motion was originally set for hearing on July 20, 2022.

On June 30, 2022, the Court entered an order vacating all dates on the Court’s calendar due to the incapacitation of plaintiffs and their inability to participate in this matter.

On September 23, 2024, plaintiffs filed a motion for an order setting a case management conference and a hearing date on the Pabco defendants’ motion.  

On November 13, 2024, the Court entered a minute order granting the September 23, 2024, motion of plaintiffs, and setting a case management conference for December 4, 2024. At the December 4, 2024, case management conference, the Court set the hearing on the Pabco defendants’ motion for February 26, 2025.

On December 18, 2024, plaintiffs filed a motion for leave to file a first amended complaint to remove defendants who are no longer in the action, and to clarify when plaintiffs discovered damage to the framing members in the residence. That motion is set for hearing on March 12, 2025.

The motion of the Pabco defendants

On February 5, 2025, plaintiffs filed an opposition to the motion of the Pabco defendants. In their reply, the Pabco defendants state that they withdraw, without prejudice, the motion as to the first and second causes of action alleged in the complaint, and that they “continue to request … adjudication of Plaintiffs’ Third (Fraud) and Fourth (Concealment) Causes of Action, and Plaintiffs’ claims for punitive damages.” (Reply at p. 1, ll. 5-10 & 14-16.)

As the Pabco defendants have withdrawn their motion as to the first and second causes of action, the Court will refer only to those facts which the Pabco defendants contend are material to the disposition of the third and fourth causes of action, and plaintiffs’ prayer for punitive damages. These material facts are set forth in the moving separate statement under issue nos. 3 through 7, in which the Pabco defendants contend, respectively, that the third cause of action is barred by the statute of limitations, that the third cause of action lacks sufficient evidence to establish a claim for fraud, that the fourth cause of action is barred by the statute of limitations, that the fourth (mistakenly referred to as the third) cause of action lacks sufficient evidence to establish a claim for concealment, and that plaintiffs’ punitive damages claim lacks sufficient evidence. (Pabco Defendants’ Separate Statement [“Sep. Stmt.”] at pp. 25 [Issue No. 3], 37 [Issue No. 4], 48 [Issue No. 5], 59 [Issue No. 6] & 69 [Issue No. 7].)

The Court further notes that in their moving separate statement, the Pabco defendants set forth facts which these defendants contend are material to issue no. 3 in paragraphs numbered 41 through 80. The Pabco defendants include the same facts as to issue nos. 4 through 7 in differently numbered paragraphs 1 through 37. (See Sep. Stmt. at pp. 25-80.) The inclusion of the same facts in different numbered paragraphs makes it confusing and difficult for the Court to refer to these facts by paragraph number and issue. The Court will therefore refer to each paragraph setting forth each fact material to issue nos. 3 through 7 in the order in which they appear in the Pabco defendants’ separate statement.

Relevant here, it is undisputed that plaintiffs own the residence. (Plaintiffs’ Opposing Separate Statement [“Opp. Sep. Stmt.”], UMF nos. 41, 1 & evidence cited therein [not reasonably disputed on this point].) Between April 11, 2011 and February 1, 2012, plaintiffs purchased from Westside approximately 240 sheets of “QuietRock 527” (which the Court will also refer to as “QuietRock”) for use at the residence. (Id. at UMF nos. 42, 2 & evidence cited therein [not reasonably disputed on this point].)

In mid-2013, plaintiffs began to notice: (a) the drywall mud used in the installation of the QuietRock had become soft such that plaintiffs could dig into the topping with their fingernails; (b) the drywall tape on the joints between the QuietRock became delaminated; (c) at each screwhead attaching the QuietRock to the framing studs, there was some type of liquid bleeding through the primer; and (d) in areas where the “L metal” corners came in contact with the QuietRock, the metal was rusting or corroding. (Opp. Sep. Stmt., UMF nos. 43, 3 & evidence cited therein [not reasonably disputed on this point].) These issues occurred throughout the residence in every area where the QuietRock was installed and in contact with screws and “L metal”, and impacted every sheet of QuietRock in the residence. (Ibid.) None of these issues were found in any areas where standard drywall had been installed in the residence. (Id. at UMF nos. 44, 4 & evidence cited therein [not reasonably disputed on this point].)

When the problems arose in 2013, Krebs made a file regarding the QuietRock and only saved documents related to the problematic drywall. (Opp. Sep. Stmt., UMF Nos. 48, 8 & evidence cited therein [not reasonably disputed on this point].)

In 2013, plaintiffs retained the services of Bill Davis Drywall (BDD), a licensed drywall contractor, to inspect the QuietRock, its installation, and the issues plaintiffs had observed. (Opp. Sep. Stmt., UMF Nos. 45-46, 5-6 & evidence cited therein [not reasonably disputed on this point].) Plaintiffs and BDD observed that there was some form of liquid moisture and cracks in the QuietRock but not in the abutting non-QuietRock drywall, and which did not appear elsewhere in the residence. (Id. at UMF Nos. 45, 5 & evidence cited therein [not reasonably disputed on this point].) Krebs testified that he initially contacted BDD because of the experience of Bill Davis in helping with the issues plaintiffs were experiencing with the QuietRock. (Id. at UMF Nos. 46, 6 & evidence cited therein [not reasonably disputed on this point].)

Plaintiffs were told by BDD that BDD had never before seen anything like what plaintiffs were experiencing with the QuietRock. (Opp. Sep. Stmt., UMF Nos. 47, 7 & evidence cited therein [not reasonably disputed on this point].) Plaintiffs followed the recommendation of BDD to remove the joint tape and to scrape joints and all topping and walls, and all areas with QuietRock were refinished to project specifications. (Ibid.)

In late 2014 and early 2015, plaintiffs began observing the same issues with the QuietRock as had been discovered in 2013 in various parts of the residence where the QuietRock was installed. (Opp. Sep. Stmt., UMF Nos. 49, 9 & evidence cited therein [not reasonably disputed on this point].) Because the issues with the QuietRock were persisting, plaintiffs contacted Pabco, who purchased the QuietRock product line from Serious Energy in 2013. (Id. at UMF Nos. 51, 11 & evidence cited therein [not reasonably disputed on this point].)

On February 10, 2015, Thomas Kotiranta, a sales representative for Pabco, met with Krebs and BDD at the residence to inspect and conduct destructive testing of the QuietRock and non-QuietRock drywall. (Opp. Sep. Stmt., UMF Nos. 52, 12 & evidence cited therein [not reasonably disputed on this point].) On February 26, 2015, Morgan, a Pabco employee who is now deceased, wrote a letter to Krebs advising Krebs that the QuietRock had the “appropriate chemical makeup” and that Krebs should review Pabco’s product specifications for magnesium oxide wall panel. (Id. at UMF Nos. 53, 13 & evidence cited therein.)

On March 13, 2015, Morgan sent plaintiffs a document entitled “Documentation of Wall Conditions at 135 La Vuelta, Montecito, CA” (the Morgan Letter), which answered three questions posed by Krebs: “(i) Why is the QuietRock wall system spotting and the [Pabco] system board not spotting?; (ii) Why does the spotting occur after 10 to 11 months after primer application?; (iii) Why did the QuietRock system experience cracks, while the [Pabco] system did not?” (Opp. Sep. Stmt., UMF Nos. 54-55, 14-15 & evidence cited therein [not disputed or reasonably disputed on these points].)

The Morgan Letter also stated that “during the site visit, ‘the relative humidity was measured at 61.7% with interior temperature of 70 degrees (the space is not conditioned and the interior is equalizing the exterior relative humidity and temperature)”, that the ceiling surfaces had been treated with primer but not top coated with paint, and that “‘the efficacy of the surface primer and the unconditioned environment are creating variability in the moisture content of both boards.’” (Opp. Sep. Stmt., UMF Nos. 56, 16 & evidence cited therein.)

The Morgan Letter concluded: “‘As far as maintaining the integrity of your wall/ceiling system, we advise: [¶] Condition the interior of your building[;] [¶] Prepare the wall/ceiling surfaces and prime with an oil-based primer[;] [¶] Decorate (paint/seal) the primed surface within 30 days of primer application. The job schedule for this building will present significant challenges regarding conditioning and topcoating the ceilings/walls. The quicker the walls are finished and in a conditioned environment, the more likely the current issues will not reappear.’” (Opp. Sep. Stmt., UMF Nos. 57, 17 & evidence cited therein.)

Krebs testified that, before and after Morgan visited the residence, Krebs read through what he believed to be the specifications for finishing the QuietRock, and that Morgan’s recommendation to use an oil-based primer did not make sense to him. (Opp. Sep. Stmt., UMF Nos. 58, 18 & evidence cited therein [not reasonably disputed on this point].) Plaintiffs became more and more frustrated and confused on how to proceed since Pabco, as the expert in the industry, was denying that the QuietRock was the cause of the problems they were experiencing. (Id. at UMF Nos. 59, 19 & evidence cited therein [not reasonably disputed on this point].) This caused plaintiffs significant stress and many sleepless nights, which evolved into a prolonged serious sleep issue for several years for Krebs in particular. (Ibid.)

Krebs also testified that, after receiving the Morgan Letter, Krebs slowed down the pace of construction and decided to finish only those areas that did not have QuietRock because he was not confident in Morgan’s analysis of what was taking place. (Opp. Sep. Stmt., UMF No. 60, 20 & evidence cited therein [not reasonably disputed on this point].) Krebs further testified that from 2015 to 2018, plaintiffs did not bring any new contractors on board other than BDD because plaintiffs were dealing with the QuietRock situation. (Id. at UMF Nos. 61, 21 & evidence cited therein [not reasonably disputed on this point].) In addition, Krebs testified that between 2015 and 2018, interior finishes, moldings, floors and some cabinets were completed, and clarified that Krebs did move forward with finishing the areas with QuietRock, just at a slower pace. (Id. at UMF Nos. 62, 22 & evidence cited therein.)

Misfeldt testified that she does not know how long it took for Krebs to implement the recommendations, including bringing fans and using an oil-based primer, but that Krebs was really “leery” of Morgan’s recommendations. (Opp. Sep. Stmt., UMF Nos. 63, 23 & evidence cited therein [not reasonably disputed on this point].)

Upon completion of the custom finishes recommended by Morgan, the same problems reappeared. (Opp. Sep. Stmt., UMF Nos. 64, 24 & evidence cited therein [not reasonably disputed on this point].) In 2018, plaintiffs retained BDD who recommended complete removal of the QuietRock. (Id. at UMF Nos. 65, 25 & evidence cited therein [not reasonably disputed on this point].)

Krebs testified that in 2013, he learned that the QuietRock product contains magnesium oxide by conducting a lot of research and talking to people who had experienced problems with wallboard using magnesium oxide because of the chemical reaction that would be caused with any level of humidity in the air, and “it creates a corrosive product, which is not water –it’s a chemical – and so, he knows quite a bit about it.” (Opp. Sep. Stmt., UMF Nos. 68, 28 & evidence cited therein.)

On September 18, 2020, Krebs sent an email to Fernando Ardilla of RADCO. Inc., stating that Krebs has “done extensive research on degradation of Magnesium Oxide in drywall material”, that discovered that “if humidity levels are high enough, [the QuietRock] material will absorb moisture from the air, and later release moisture as condensed water, high in dissolved salts”, and requested facts via testing to confirm Krebs’ assessments. (Opp. Sep. Stmt., UMF Nos. 69, 29 & evidence cited therein.) Krebs enclosed the Material Safety Data Sheet for the QuietRock, which states that the product contains magnesium oxide and magnesium chloride (among other materials). (Id. at UMF Nos. 70, 30 & evidence cited therein.)

Krebs contemplated filing a lawsuit sometime in 2020. (Opp. Sep. Stmt., UMF Nos. 71, 31 & evidence cited therein.) The Pabco defendants never requested that plaintiffs not file a lawsuit, did not promise to repair the QuietRock installed in the residence, and did not offer to reimburse plaintiffs for costs plaintiffs incurred as a result of the QuietRock. (Id. at UMF Nos. 72-74, 32-34 & evidence cited therein [not disputed or reasonably disputed on these points].)

Pabco and PCC are separate entities in different sectors and do not have an ownership interest in one another or share any management. (Opp. Sep. Stmt., UMF No. 78 & evidence cited therein [not reasonably disputed on this point].) PCC performs some of Pabco’s administrative services including payroll, legal services, accounting, internal audits, and treasury functions. (Id. at UMF No. 79 & evidence cited therein.) PCC does not perform any services for Pabco for which Pabco generates any revenue such as manufacturing wallboard, acquiring raw materials, sales or marketing. (Id. at UMF No. 80 & evidence cited therein [not reasonably disputed on this point].)

The above summary is not intended to be exhaustive, and the Court considers all admissible evidence submitted in support of and in opposition to the motion.

Analysis

A party moving for summary judgment “bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact ….” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar).) “When the moving party is a defendant, it must show that the plaintiff cannot establish at least one element of the cause of action.” (Martin v. Board of Trustees of California State University (2023) 97 Cal.App.5th 149, 160.) To meet its burden, the defendant must support the motion with evidence that “conclusively negates an element of the plaintiff’s cause of action” or which shows that “the plaintiff does not possess, and cannot reasonably obtain, needed evidence—as through admissions by the plaintiff following extensive discovery to the effect that he has discovered nothing.” (Aguilar, supra, 25 Cal.4th at p. 855, fn. omitted.)

If a moving defendant carries its burden of production, this “causes a shift” and the plaintiff “is then subjected to a burden of production of his own to make a prima facie showing of the existence of a genuine issue of material fact.” (Aguilar, supra, 25 Cal.4th at p. 845.) The court “liberally construe[s] the evidence in support of the party opposing summary judgment and resolve[s] doubts concerning the evidence in favor of that party.” (Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037.) “[F]rom commencement to conclusion, the party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law.” (Aguilar, supra, 25 Cal.4th at p. 850.)

As the Pabco defendants have withdrawn the motion as to the first and second causes of action alleged in the complaint, the only matter remaining for the Court to determine is whether summary adjudication of the third and fourth causes of action, and the claim for punitive damages, alleged in the complaint is appropriate. Motions for summary adjudication “proceed in all procedural respects as a motion for summary judgment.” (Code Civ. Proc., § 437c, subd. (f)(2); see also DeCastro West Chodorow & Burns, Inc. v. Superior Court (1996) 47 Cal.App.4th 410, 421 [claim for punitive damages is a proper subject of a motion for summary adjudication].)

(1) Issue Nos. 3 and 5

As to issue nos. 3 and 5, the Pabco defendants assert that the undisputed material facts show that plaintiffs were aware of issues affecting the QuietRock in 2013 and 2015. In addition, the Pabco defendants argue, the fact that the QuietRock contains magnesium oxide was publicly available, known to Krebs through his own research, and specifically pointed out to Krebs by Morgan on February 26, 2015.

The Pabco defendants further assert that plaintiffs were suspicious of wrongdoing following receipt of the Morgan Letter, which prompted Krebs to conduct additional research into Morgan’s representations and to slow down construction. For these reasons, Pabco argues, a reasonably prudent person would have been suspicious of fraud in 2015. Therefore, the Pabco defendants further argue, the fraud and concealment claims alleged in the third and fourth causes of action are each barred by the three year limitations period prescribed in Code of Civil Procedure section 338, subdivision (d).

“ ‘The pleadings delimit the issues to be considered on a motion for summary judgment. [Citation.]’ [Citation.]” (Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1253.) The third and fourth causes of action for, respectively, fraud and concealment arise from purportedly false representations, or concealment of material facts regarding the QuietRock, made by Morgan in the Morgan Letter. (Compl., ¶¶ 61-65 & 72-75.)

A cause of action on the ground of fraud “is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” (Code Civ. Proc., § 338, subd. (d).) “The courts interpret discovery in this context to mean not when the plaintiff became aware of the specific wrong alleged, but when the plaintiff suspected or should have suspected that an injury was caused by wrongdoing. The statute of limitations begins to run when the plaintiff has information which would put a reasonable person on inquiry.” (Kline v. Turner (2001) 87 Cal.App.4th 1369, 1374.)

Reading the material facts and evidence submitted by Pabco in support of issue nos. 3 and 5 favorably to plaintiffs, Pabco has failed to meet its burden to produce evidence showing that plaintiffs had reason to suspect that their injuries resulted from defective QuietRock more than three years prior to the date plaintiffs filed their complaint.

For example, the relevant material facts offered by the Pabco defendants show that plaintiffs applied the custom finishes recommended by Morgan in the Morgan Letter. (Sep. Stmt. & Opp. Sep. Stmt., UMF Nos. 60 & 64 & evidenced cited therein.) Plaintiffs also submit evidence to show that construction of the residence was slowed to implement the recommendations provided in the Morgan Letter. (Opp. Sep. Stmt., UMF No. 34 [Krebs Decl., ¶ 31].)

Notably absent from the separate statement of the Pabco defendants are any facts showing the date when plaintiffs applied, or completed the application of, the custom finishes recommended in the Morgan Letter to the QuietRock. For this reason, fact set forth in the moving separate statement showing that plaintiffs implemented the recommendations set forth in the Morgan Letter are, for present purposes, sufficient to support an inference that, at the time they installed the custom finishes, plaintiffs were ignorant of any wrongdoing by Pabco or Morgan with respect to any defects in the QuietRock notwithstanding whether Krebs was leery of the recommendations or slowed the pace of construction with respect to finishing areas with QuietRock. (Clark v. Baxter Healthcare Corp. (2000) 83 Cal.App.4th 1048, 1060 [discussion of “wrongfulness” component with respect to a product’s defect].)

The material facts set forth in the Pabco defendants’ separate statement also show that, after plaintiffs installed the custom finishes recommended in the Morgan Letter, the same issues reappeared prompting plaintiffs to retain BDD in 2018. As the Pabco defendants offer no facts to show when the issues reappeared following plaintiffs’ installation of the custom finishes recommended by Morgan, these facts are sufficient to support an inference that plaintiffs did not become aware of any wrongdoing with respect to the representations made in the Morgan Letter until sometime in 2018 or after, when BCC recommended that plaintiffs remove the QuietRock. To the extent plaintiffs did not become aware of any wrongdoing until they were told to remove the QuietRock in 2018, the claims alleged in the third and fourth causes of action would not be barred by the three-year limitations period set forth in Code of Civil Procedure section 338, subdivision (d).

In addition, though the Pabco defendants offer evidence to show that Krebs learned in 2013 that the QuietRock contains magnesium oxide, plaintiffs offer evidence to show that Krebs believes the QuietRock is defective due to the inclusion of magnesium chloride, and that Krebs did not conduct research into magnesium oxide panels until 2020. (Opp. Sep. Stmt., UMF No. 66 & evidence cited therein; Krebs Decl., ¶ 32.) For this reason, the record is sufficient to show the existence of a triable issue of material fact.

For all reasons discussed above, there exist competing inferences which are reasonably deducible from the evidence presented in this proceeding regarding when plaintiffs became aware that their injuries were “caused by wrongdoing, that someone has done something wrong to [them].” (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110.) Therefore, the Pabco defendants have failed to meet their burden to show that there exist no triable issue of material fact as to whether the third and fourth causes of action are barred by the limitations period set forth in Code of Civil Procedure section 338, subdivision (d).

(2) Issue Nos. 4 and 6

As to issue nos. 4 and 6, the Pabco defendants assert that plaintiffs have not sufficiently pleaded, and cannot establish evidence of, a fraudulent intent by Pabco, that Pabco owed a duty to disclose material facts to plaintiffs, or causation.

The third cause of action for fraud alleged in the complaint is directed to Pabco and Morgan, who plaintiffs allege was an employee of Pabco. (Compl., ¶ 65.) In that cause of action, plaintiffs allege that the representations made by Morgan in the Morgan Letter were false, and that “the true facts were that (a) the QuietRock … did not perform as safely as an ordinary consumer would have expected it to perform when used or misused in an intended or reasonably foreseeable way, (b) the problems that [plaintiffs] were experiencing were a direct result of the defects in the QuietRock materials, and (c) [Morgan’s] recommendations would not address the underlying defects in the QuietRock ….” (Id. at ¶¶ 61-62.) Plaintiffs further allege that when Morgan made the representations in the Morgan Letter, Morgan knew they were false and intended that plaintiffs rely on them. (Id. at ¶ 63.)

In the fourth cause of action, plaintiffs allege that Morgan and Pabco intentionally concealed or suppressed the material facts in the Morgan Letter regarding the QuietRock, and that when the representations in the Morgan Letter were made, Pabco and Morgan were under a duty to disclose these material facts to plaintiffs “as result of (a) [Pabco’s] acquisition of the QuietRock soundproof drywall business from [Serious Energy], (b) [Morgan] and [Pabco] voluntarily assuming such duty, and (c) the incident of the relationship between [plaintiffs], [Morgan], and [Pabco].” (Compl., ¶¶ 73-75.) Plaintiffs further allege that they would not have proceeded with the representations made in the Morgan Letter, or installed any additional QuietRock, if they knew of these concealed or suppressed facts. (Id. at ¶ 75.)

Plaintiffs also allege that they relied on the representations in the Morgan Letter because “(a) [Pabco’s] public announcement of the QuietRock soundproof drywall business from [Serious Energy] indicated that [Pabco] had a long-standing ‘industry partner’ relationship with [Serious Energy], (b) [Morgan] held himself out to [plaintiffs] as having superior knowledge regarding the issues, and (c) [Morgan’s] recommendations seemed reasonable on their face.” (Compl., ¶ 64.) In addition, plaintiffs allege that Morgan and Pabco “knew of the serious potential danger to [plaintiffs] by having them continue to install the defective QuietRock … into the [r]esidence,” but intentionally misled plaintiffs, and concealed or suppressed material facts from plaintiffs “regarding such risk in order to advance their own pecuniary interests avoiding having to pay for [plaintiffs’] damages ….” (Id. at ¶¶ 67 & 77.)

As a result of their reliance on the representations made by Morgan in the Morgan Letter, and the concealment or suppression of material facts by Morgan and Pabco, plaintiffs incurred costs to “investigate, remove, and replace the defective QuietRock” and related building materials impacted by the defective QuietRock, among other things. (Compl., ¶ 66.)

For reasons further discussed above, the evidence in the record before the Court is sufficient to give rise to a competing inference that plaintiffs relied on the representations contained in the Morgan Letter by implementing Morgan’s recommendation to install the custom finishes described in that letter.

Moreover, a defendant may not “simply point out that the plaintiff does not possess, and cannot reasonably obtain, needed evidence.” (Aguilar, supra, 25 Cal.4th at p. 854, fn. omitted.) Here, the Pabco defendants offer no evidence, such as admissions following discovery, other discovery responses, or matters of which judicial notice is proper, which would be probative of whether plaintiffs do not have, or cannot reasonably obtain, necessary evidence, and have failed to show that plaintiffs have “discovered nothing”. (Id. at p. 855.)

The Pabco defendants also rely on the allegations of the complaint to show that plaintiffs cannot establish a cause of action for fraudulent concealment based on the absence of a transactional relationship between the parties.

“ ‘ “A defendant’s motion for summary judgment necessarily includes a test of the sufficiency of the complaint. [Citation.] When a motion for summary judgment is used to test whether the complaint states a cause of action, the court will apply the rule applicable to demurrers and accept the allegations of the complaint as true. [Citation.]” ’ [Citation.] When considering a motion for summary judgment as a motion for judgment on the pleadings because the time for filing a demurrer has passed, we must determine whether the facts alleged in the complaint provide a basis for a cause of action under any theory. [Citations.] In so doing, we treat the properly pleaded allegations of the complaint as true and liberally construe those allegations with a view to attaining substantial justice between the parties. [Citations.] ‘A party is entitled to any and all relief which may be appropriate under the scope of his [or her] pleadings and within the facts alleged and proved, irrespective of the theory upon which the facts were pleaded, [or] the title of the pleading. ...’ [Citations.] Because one of the purposes of a complaint is to apprise the defendant of the basis on which the plaintiff seeks recovery, the complaint should set forth the ultimate facts constituting the cause of action and need not set forth the evidence by which the plaintiff proposes to prove those facts. [Citation.] Accordingly, a complaint ‘is adequate so long as it apprises the defendant of the factual basis for the claim.’ [Citation.] Alternatively stated, a complaint must set forth the essential facts of the plaintiff’s case with reasonable precision and with particularity sufficient to acquaint the defendant with the nature, source, and extent of the plaintiff's claim.” (Prue v. Brady Co./San Diego, Inc. (2015) 242 Cal.App.4th 1367, 1375-1376.)

“The required elements for fraudulent concealment are (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would have acted differently if the concealed or suppressed fact was known; and (5) plaintiff sustained damage as a result of the concealment or suppression of the material fact.” (Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 40.).

“A fraud claim based upon the suppression or concealment of a material fact must involve a defendant who had a legal duty to disclose the fact.” (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1186 (Hoffman).) There exist “ ‘four circumstances in which nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts. [Citation.]’ [Citation.]” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336 (LiMandri).)

Under circumstances where a fiduciary relationship is not alleged, “ ‘a cause of action for non-disclosure of material facts may arise in at least three instances: (1) the defendant makes representations but does not disclose facts which materially qualify the facts disclosed, or which render his disclosure likely to mislead; (2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff; [or] (3) the defendant actively conceals discovery from the plaintiff.” [Citation.]’” (Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal.App.4th 115, 132.) Each of these circumstances “presupposes the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise …. [which] can only come into being as a result of some sort of transaction between the parties…. Thus, a duty to disclose may arise from the relationship between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement.” (LiMandri, supra, 52 Cal.App.4th at pp. 336-337, original italics; see also Hoffman, supra, 228 Cal.App.4th at p. 1187 [to the extent a defendant denies the existence of a transactional relationship, the factfinder must determine if such a relationship existed].)

The Pabco defendants fail to sufficiently explain why a reasonable trier of fact could not determine from the evidence, or inferences which are reasonably deducible from the evidence, that a sufficient transactional relationship exists under the circumstances present here, considering that the Pabco defendants offer facts to show that Pabco inspected and tested the QuietRock and rendered its opinions, conclusions, and recommendations regarding the issues experienced by plaintiffs. (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 312; Bader v. Johnson & Johnson (2022) 86 Cal.App.5th 1094, 1132.)

Plaintiffs also describe in the complaint the nature of the material facts allegedly known to and intentionally concealed by Pabco and Morgan, and not included in the Morgan Letter, which are themselves sufficient to allege the element of intent. (See, e.g., Hall v. Mitchell (1922) 59 Cal.App. 743, 749 [intent may be set forth with a “simple and direct” allegation].) As further discussed above, the Pabco defendants offer no evidence to show why plaintiffs cannot establish this element of their claim.

For all reasons further discussed above, the Pabco defendants have failed to meet their burden to show that plaintiffs cannot establish one or more elements of their fraud or concealment causes of action or that there exists evidence which conclusively negates an element of these causes of action. For this reason, and all reasons further discussed above, the Court will deny the motion as to the third and fourth causes of action alleged in the complaint.

(3) Issue No. 7

As to issue no. 7, the Pabco defendants contend that because plaintiffs cannot establish the essential factual elements of their claim for punitive damages, which the Pabco defendants concede arises from and is based on the causes of action for fraud and concealment further discussed above, summary adjudication of this claim is appropriate.

“The standard for a motion for summary adjudication on a claim for punitive damages is whether clear and convincing evidence exists to support that claim. [Citations.] While a plaintiff need not prove his or her case for punitive damages to defeat summary adjudication, ‘[i]n ruling on a summary judgment or summary adjudication motion, ‘the judge must view the evidence presented through the prism of the substantive [clear and convincing] evidentiary burden....’ [Citations.]” (Szarowicz v. Birenbaum (2020) 58 Cal.App.5th 146, 171.)

The Pabco defendants offer no evidence to dispute that Morgan’s conduct in making the representations contained in the Morgan Letter was intentional. Further, and for all reasons discussed above, the Pabco defendants have failed to meet their burden to show that summary adjudication of the third and fourth causes of action is warranted. (Catalano v. Superior Court (2000) 82 Cal.App.4th 91, 97 [summary adjudication of a claim for punitive damages must “cover the entire claim”].) For these reasons, the Court will deny the motion as to the claim for punitive damages alleged in the complaint.

(4) Evidentiary Objections

In support of their reply, the Pabco defendants assert objections to evidence and materials submitted in support of plaintiffs’ opposition to the present motion. The Court rules only on objections to evidence that are material to its disposition of the motion. (Code Civ. Proc., § 437c, subd. (q).) As the Pabco defendants have failed to shift the burden to plaintiffs, it is not necessary for the Court to rule on their objections to plaintiffs’ evidence.

Furthermore, the California Rules of Court requires that written objections to evidence “[q]uote or set forth the objectionable statement or material[.]” (Cal. Rules of Court, rule 3.1354(b)(3).) Though the written objections of the Pabco defendants cite the general location of each of the matters to which an objection is asserted, the Pabco defendants have failed to quote or set forth the objectional material itself. The failure to quote the objectionable material forces the Court to locate each statement and to effectively guess whether the Pabco defendants object to the cited matters in whole or in part. As the Pabco defendants have failed to comply with the formatting rules set forth in California Rules of Court, rule 3.1354(b)(3), there exist sufficient additional grounds on which the Court may disregard the objections raised by the Pabco defendants. (Hodjat v. State Farm Mutual Automobile Ins. Co. (2012) 211 Cal.App.4th 1, 8 [a trial court may decline ruling on improperly formatted objections].)

Plaintiffs assert an objection to the matters set forth in paragraph 38 of the Pabco defendants’ separate statement. A party who wishes to raise objections to evidence in the papers on a motion for summary judgment must either submit the objections in writing under California Rules of Court, rule 3.1354, or arrange for a court reporter to be present at the hearing. (Cal. Rules of Court, rule 3.1352(1)-(2).) As the objection of plaintiffs fails to comply with the formatting requirements set forth in California Rules of Court, rule 3.1354(b), the Court declines to consider this objection.

(5) The Pabco Defendants’ Request for Judicial Notice

The Pabco defendants request that the Court take judicial notice of the Court’s April 12, 2022, Minute Order (the Minute Order), in which the Court granted the motions of Serious Energy and Westside for summary judgment or adjudication.

The Minute Order is not relevant to the issues presented in the Pabco defendants’ motion, which addresses different causes of action arising from or related to the contents of the Morgan Letter. (See Evid. Code, § 350; Mangini v. R. J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063, overruled on other grounds in In re Tobacco Cases II (2007) 41 Cal.4th 1257, 1276.) Furthermore, though judicial notice of results reached in court orders is proper, judicial notice of the truth of hearsay statements in judicially noticeable court records is improper. (Williams v. Wraxall (1995) 33 Cal.App.4th 120, 130.) For these reasons, the Court will deny the Pabco defendants’ request for judicial notice of the Minute Order.

Even if the Minute Order was a proper subject of judicial notice, the Court’s ruling as set forth in the Minute Order was first raised in reply and not included in the moving papers. For this reason, further grounds exist to deny the Pabco defendants’ request. (Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537 [“new evidence is not permitted with reply papers”]; see also San Diego Watercrafts, Inc. v. Wells Fargo Bank, N.A. (2002) 102 Cal.App.4th 308, 316 [“[w]here a remedy as drastic as summary judgment is involved, due process requires a party be fully advised of the issues to be addressed and be given adequate notice of what facts it must rebut in order to prevail”].)

(6) Procedural Issues

“In a summary judgment or summary adjudication motion, no … responding memorandum may exceed 20 pages.” (Cal. Rules of Court, rule 3.1113(d).) Plaintiffs’ opposing memorandum is 25 pages in length, in violation of court rules. Further, plaintiffs have not filed an appropriate application with the Court for permission to file a longer memorandum. (Cal. Rules of Court, rule 3.1113(e).)

In their reply, the Pabco defendants request that the Court strike the last five pages of plaintiffs’ opposing memorandum, and remove these pages from the Court’s consideration. “A memorandum that exceeds the page limits of these rules must be filed and considered in the same manner as a late-filed paper.” (Cal. Rules of Court, rule 3.1113(g).) California Rules of Court, rule 3.1300(d), permits the Court, in its discretion, to refuse to consider a late-filed paper.

As plaintiffs have, for reasons further discussed above, filed an overlength opposing memorandum without leave of court, the Court will exercise its discretion and refuse to consider pages 26 through 30 of plaintiffs’ opposing memorandum.

There exist additional procedural deficiencies in plaintiffs’ opposing papers. An opposing party’s response to a separate statement submitted in support of a motion for summary judgment or adjudication “must be in good faith, responsive, and material. Responses should directly address the fact stated, and if that fact is not in dispute, the opposing party must so admit. It is completely unhelpful to evade the stated fact in an attempt to create a dispute where none exists.” (Beltran v. Hard Rock Hotel Licensing, Inc. (2023) 97 Cal.App.5th 865, 875.)

“Separate statements serve a laudable purpose….[T]hese documents are ‘intended to permit the judge to determine quickly whether the motion is supported by sufficient undisputed facts. If the opposing statement disputes an essential fact alleged in support of the motion, the judge merely has to review the evidence cited in support of that fact. This saves the judge from having to review all the evidentiary materials filed in support of and in opposition to the motion.’ [Citation.]” (Kulesa v. Castleberry (1996) 47 Cal.App.4th 103, 113.)

Substantial portions of plaintiffs’ response to the Pabco defendants’ separate statement are not responsive or material. For example, plaintiffs repeatedly attempt to create disputes where none exist, by stating that they dispute facts “to the extent [the Pabco defendants] rely on” plaintiffs’ complaint and based on plaintiffs’ ability to amend the complaint. (See, e.g., Opp. Sep. Stmt., UMF Nos. 41-45; 47-52; 54; 59; 61; 64-66.) The facts as to which plaintiffs attempt to create a dispute include facts relating to plaintiffs’ ownership of the residence, the location of the residence, and plaintiffs’ purchase of the QuietRock. (Id. at UMF Nos. 41-42.)

Plaintiffs’ attempts to create disputes as to essential facts which are ostensibly not in dispute are unhelpful, and caused the Court to expend more time reviewing the papers than would normally be required. In addition, as the allegations of the complaint delimit the scope of the issues, plaintiffs’ responses appear to lack good faith. Though the Court will deny the motion for reasons more fully discussed herein, plaintiffs and their counsel are requested to note these deficiencies.