AppFolio Inc vs Tides Equities LLC et al

Case Number

24CV03410

Case Type

Hearing Date / Time

Mon, 02/03/2025 - 10:00

Nature of Proceedings

CMC; Demurrer

Tentative Ruling

AppFolio Inc v. Tides Equities, LLC, et al.

Case No. 24CV03410 

Hearing Date:         2/3/2025                                             

HEARING:    Demurrer by Tides Equities, LLC, Brien Kelley, Sean Kia, Ryan Andrade, and Melissa Bartolucci Delgado to complaint.

           

ATTORNEYS:          Jared M. Katz of Mullen & Henzell LLP for plaintiff AppFolio, Inc.

                                    Justin H. Sanders / Thomas J. Eastmond of Sanders Roberts, LLP for defendants Tides Equities, LLC, Brien Kelley, Sean Kia, Ryan Andrade, and Melissa Bartolucci Delgado

                                    Tyler R. Dowdall / Renata A. Guidry of Tarter Krinsky & Drogin LLP for defendants PMG Property Management, LLC and Jarrod Robinson

                       

TENTATIVE RULING:

1.         The Court will sustain the demurrers to the fifth cause of action (intentional misrepresentation), sixth cause of action (negligent misrepresentation), seventh cause of action (fraudulent concealment), and ninth cause of action (negligent interference with prospective economic advantage), with leave to amend.

2.         The Court will overrule the demurrers to the first cause of action (breach of written contract), second cause of action (breach of oral contract), third cause of action (breach of implied contract), fourth cause of action (breach of the implied covenant of good faith and fair dealing), and eighth cause of action (intentional interference with contract)

3.         The Court will deem waived defendants’ purported demurrer to the tenth cause of action (conspiracy), based upon the failure to identify it in the demurrer which was filed, as opposed to only referencing it in the memorandum of points and authorities filed in support of the demurrer. In any event, the demurrer to the claim is moot, because the Court previously sustained PMG’s demurrer to the cause of action, and plaintiff has indicated its intent to properly allege the conspiracy allegations in its amended pleading.

4.         AppFolio is granted leave to file a First Amended Complaint on or before March 3, 2025, or such other date as this Court may specify at the hearing on the demurrer.

BACKGROUND: Plaintiff AppFolio, Inc. (AppFolio) filed its complaint on June 18, 2024, naming as defendants Tides Equities, LLC (Tides), PMG Property Management, LLC (PMG), and individual defendants affiliated with those entities. With respect to Tides’ personnel, Brien Kelley (Kelley) is alleged to be the Managing Director and General Counsel of Tides (¶ 34, 36, and 46); Melissa Bartolucci Delgado (Delgado) is alleged to be the Managing Director of Operations of Tides (¶¶ 22, 34, and 36); Sean Kia (Kia) is alleged to be a cofounder and principal of Tides (¶ 133); and Ryan Andrade (Andrade) is alleged to be a co-founder and principal of Tides (¶ 133).  

The complaint alleges causes of action for (1) breach of written contract; (2) breach of oral contract; (3) breach of implied contract; (4) breach of the implied covenant of good faith and fair dealing; (5) intentional misrepresentation; (6) negligent misrepresentation; (7) concealment; (8) intentional interference with contract, (9) negligent interference with prospective economic advantage, (10) civil conspiracy to commit tort; (11) alter ego liability; and (12) declaratory judgment. All twelve causes of action are alleged against Tides. The 5th through 9th causes of action are also alleged against Kelley and Delgado. The 10th and 11th causes of action are also alleged against Kia and Andrade.

The complaint alleges that on September 14, 2022, an agent for Robinson Family Group, LLC dba The Robinson Group executed a written Order Form for the use of AppFolio’s services for a 24-month term beginning November 1, 2022, and ending November 1, 2024 (the Order Form is attached to and incorporated into the Complaint). The Order Form provided for monthly service fees of $45,540.00, in exchange for use of the AppFolio Property Manager Plus, Residential proprietary software. The Order Form provides that in the event AppFolio is unable to collect sums due, the user agrees to pay such sums, including costs incurred in collecting them, including attorneys’ fees, and interest at the lower of 1.5% per month or the highest rate permitted by law.

The Order Form incorporates AppFolio’s Terms of Service (TOS), which provide, among other things, that (1) subscribing to or using the services creates a legally binding agreement; (2) use of the services after any revision to the TOS constitutes an acceptance of any revisions; (3) upon termination for convenience, the user agrees to pay an early termination fee equal to 50% of the service fees payable for the remaining period of the subscription, and the user acknowledges that AppFolio has the right to charge the Early Termination Fee to the payment methods associated with the account; (4) AppFolio may collect late fees and charges, as well as court and related costs, attorneys’ or collection agencies fees plus interest in an amount equal to the lesser of 1% per month or the maximum rate permitted by law; (5) the user agrees to defend, indemnity, and hold AppFolio harmless from any claims, judgments, awards, demands, suits, proceedings, investigations, damages, costs, expenses, losses, and any other liabilities, including attorneys’ fees, court costs, and expenses, arising out of or relating to use of the service in violation of the TOS an excluded claim, any breach of any representation, warranty, covenant or obligation under the TOS, or user’s gross negligence or willful misconduct; (6) the TOS will bind the parties’ respective successors and assigns; and (7) that the TOS and any dispute arising out of or related to the services or the TOS will be interpreted in accordance with the laws of the State of California, and that all disputes out of or related to the TOS are subject to the exclusive jurisdiction and venue of the California state courts located in Santa Barbara, California, and federal courts of the Central District of California, unless the parties agreed to some other location, and that the user expressly consented to the personal and exclusive jurisdiction of these courts. [Underlining used solely to assist the reader in identifying the topic of the provision discussed.]

On September 27, 2022 (thirteen days after entering into the agreement with AppFolio, and more than a month prior to the commencement of its 2-year term), the Robinson Family Group, LLC changed its name to PMG in filings with the Arizona Secretary of State, also filing a Member Structure Attachment for PMG that listed Tides Equities, LLC as the sole member of the PMG Member-Managed LLC.

On May 24, 2023, PMG initially gave notice that it intended to terminate the agreement and dissolve as a result of a merger. At that time, PMG was acting as property manager and agent for Tides in connection with various residential properties that were owned by Tides, and had been utilizing AppFolio’s software in the course of its performance of those duties. After receiving the notice, AppFolio on May 30, 2023 advised PMG that its merger would not relieve it of its legal duties, and that card services would be disabled as a result of PMG having exceeded Visa’s Early Warning chargeback threshold for multiple months. PMG directed Tides’ Managing Director of Operations, defendant Melissa Bartolucci Delgado (Delgado) to communicate with AppFolio on a resolution, and Delgado then asked AppFolio what they could do to prevent card processing from being disabled on June 2. On June 1, 2023, AppFolio informed Tides that because PMG and Tides both had stated that neither would pay the remainder of the contract term, there was no way to prevent card services from being disabled.

On June 7, 2023, Robinson, the CEO of PMG, sent a letter to Janice Akins at AppFolio that PMG would be dissolving, and intended to cancel its services effective June 30, 2023. Robinson asked AppFolio to cease all ongoing services as of that date, and finalize all outstanding invoices or payments due, including any prorated amounts or fees related to the cancellation. Had that notice remained in place, AppFolio would have treated it as notice of termination, and billed PMG for the Early Termination Fee, which it could have collected from the not-yet-dissolved PMG and ceased providing software access as of June 30, 2023. Instead, PMG, Tides, and their officers and representatives are alleged to have “manipulated” AppFolio into maintaining services so that Tides would have access to data it needed for its operations, leading AppFolio to believe contractual obligations would be paid. Without such conduct, AppFolio would not have maintained services for Tides.

On June 13, 2023, there was a phone call between PMG and AppFolio, following which PMG’s President, defendant Jessica Fern-Kirkland (Fern-Kirkland), wrote to AppFolio stating that PMG was rescinding its notice to terminate services, anticipated needing a few more months, and that AppFolio would be formally notified at a later date when termination of services would occur by Tides or Robinson. She provided a list of Tides properties for which access to the software was still needed for the orderly transition of the management of the properties. Since PMG served as property management company solely for Tides and had no other clients, the maintenance of access to AppFolio’s software was solely for Tides’ benefit.

After being informed of the imminent suspension of card services, PMG confirmed on June 16, 2023, that it was prepared to pay all fees owed under the Agreement in connection with the cancellation. At Tides’ request, PMG revoked its notice so that Tides would continue to have access to the AppFolio software. AppFolio alleges that it made clear it would continue to provide services for Tides only on the condition that it was paid all amounts owed under the agreement, and the parties agreed and proceeded based upon this understanding. But for the understanding and agreement, AppFolio would not have continued to provide services, and would have offered PMG the ability to pay an early termination fee rather than to pay all service fees for the remainder of the agreement, or would have pursued collection of all amounts owed for the contract term.

On June 16, 2023, AppFolio wrote to Robinson and others to confirm that PMG rescinded its request to termination, and stated that AppFolio needed to confirm that PMG would continue to pay subscription services on a monthly basis during that time, and to confirm that ultimate termination would fall under the provision of the TOS that would provide the option to terminate for convenience and pay only 1/2 of the remaining service fees, which it would then calculate. The communication requested confirmation that they would be responsible for all such amounts when due. Also on that date, Fern-Kirkland responded confirming agreement to the terms, copying Delgado of Tides, and Robinson and others from PMG, on the email.

On June 26, 2023, a call took place between AppFolio and Tides, to which Robinson was invited but declined to participate, during which the parties expressed the need for Tides to maintain access to the AppFolio system to access information critical to its operations, notwithstanding that PMG was dissolving, and asked to extend the termination date to July 31, 2024. On June 27, 2023, Akins forwarded the June 16 email thread to Robinson, copying Tides’ officers, requesting confirmation of PMG’s understanding it would be responsible for all amounts due. Robinson responded on June 29, 2023, stating that they were going to pay as normal, and “if we decide to cancel the service I will reach out at that time to discuss.”

AppFolio was advised on August 23, 2023, that PMG had dissolved. Tides continued to access the software and services and paid service fees owed to AppFolio from July 2023, into early 2024. AppFolio consented because of Tides’ agreement to pay, and Tides continued its access long beyond the initially agreed July 31, 2023 termination date. AppFolio alleges that this, expressly or implied, constituted an assignment of the contract from PMG to Tides.

On January 22, 2024, Robinson emailed AppFolio to advise that PMG had shut its doors in June 2023 since it was no longer going to be managing the Tides portfolio, had kept the AppFolio operational after the transition so that they could ensure all data was saved considering the large number of properties transitioning, and that since that process was fully completed and they no longer needed access to AppFolio, they needed to shut down access and end the agreement.

On January 25, 2024, a representative of Tides, defendant Sean Kia (Kia), wrote to Akins and advised that Tides was confirming that effective February 1, it would no longer be paying for AppFolio. These were intentionally not notices of termination for convenience, as defined in the TOS, but were repudiations of the contract and its payment obligations.

On January 26, 2024, Akins responded via email to Robinson, Kia and Delgado, copying others at Tides, confirming PMG’s request to terminate its AppFolio subscription prior to the end of its term. It noted that the early termination fee for the subscription would total $182,160 (50% of the total of the monthly fees for the remainder of the contract term, the effective date of which would be 30 days following the notification). Akin requested that the parties confirm the January 22 email as 30-day notice for early termination, and acknowledge the early termination fee which was due under the contract. Defendant Brien Kelley, Tides’ Managing Director and General Counsel, responded via email that Tides was not a party to the contract and would not pay the early termination fee, since it no longer needed access to AppFolio. Also on January 26, Robinson responded via email stating that he had no intention of paying, and did not want to exercise the contractual right of termination for convenience, saying that PMG was out of business, had dissolved, had no assets, and there was nothing more to do since the contract was not personally guaranteed.

Based upon these allegations, AppFolio alleged all causes of action against Tides, the 5th through 9th causes of action against Kelley and Delgado, and the 10th and 11th causes of action against Kia and Andrade.

On October 14, 2024, the Tides-related defendants filed a general demurrer to the complaint’s 1st through 9th causes of action, setting the hearing for January 6, 2025.

On November 18, 2024, this Court heard the demurrer and motion to strike filed by PMG with respect to this same complaint. It overruled the demurrer as to the first (breach of written contract), second (breach of oral contract), third (breach of implied contract), fourth (breach of the implied covenant of good faith and fair dealing), fifth (intentional misrepresentation), and sixth (negligent misrepresentation), and seventh (concealment) causes of action. It sustained the demurrer to the tenth (conspiracy) cause of action, with leave to amend to properly allege conspiracy allegations other than as a separate cause of action. It further sustained the demurrer to the twelfth (declaratory relief) cause of action, with leave to amend.

On December 20, 2024, AppFolio filed its opposition to the Tides demurrer. Although the conspiracy and declaratory relief causes of action are not at issue in the Tides demurrer, AppFolio indicated in its opposition papers that it intended to omit the declaratory relief cause of action entirely from its future amended complaint, and to omit the separate conspiracy cause of action and instead include conspiracy allegations within the tort causes of action

Tides filed reply papers on December 27, 2024, limited to the breach of contract and fraud-based claims.

Prior to the January 6, 2025, hearing date, the Court continued the hearing on the demurrer to February 3, 2025.

ANALYSIS:  For the reasons more fully articulated below:

1.         The Court will sustain the demurrers to the fifth cause of action (intentional misrepresentation), sixth cause of action (negligent misrepresentation), seventh cause of action (fraudulent concealment), and ninth cause of action (negligent interference with prospective economic advantage), with leave to amend.

2.         The Court will overrule the demurrers to the first cause of action (breach of written contract), second cause of action (breach of oral contract), third cause of action (breach of implied contract), fourth cause of action (breach of the implied covenant of good faith and fair dealing), and eighth cause of action (intentional interference with contract)

3.         The Court will deem waived defendants’ purported demurrer to the tenth cause of action (conspiracy), based upon the failure to identify it in the demurrer which was filed, as opposed to only referencing it in the memorandum of points and authorities filed in support of the demurrer. In any event, the demurrer to the claim is moot, because the Court previously sustained PMG’s demurrer to the cause of action, and plaintiff has indicated its intent to properly allege the conspiracy allegations in its amended pleading.

4.         AppFolio is granted leave to file a First Amended Complaint on or before March 3, 2025, or such other date as this Court may specify at the hearing on the demurrer.

1.         Standards on demurrer.

The court’s task in ruling on a demurrer is to determine whether the complaint states a cause of action. (People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 300.) A demurrer admits the truth of all material facts properly pleaded (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 966-967), no matter how unlikely or improbable they may be (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604), or how unlikely it will be that plaintiff will be able to prove the claim (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214). The court also assumes the truth of all reasonable inferences that may be drawn from the properly pleaded facts. (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1083.) The assumption of truth does not apply, however, to contentions, deductions, or conclusions of law or fact. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters, and therefore lies only where the defects appear on the face of the pleading or are judicially noticed. (Id.)

2.         Contract-based claims.

            A.        Allegations and arguments.

Based upon its lengthy recitation of facts, AppFolio’s complaint alleges separate and distinct  causes of action against Tides for breach of written contract, breach of oral contract, and breach of implied contract—as opposed to any cause of action alleging a hybrid theory of breach of a contract that was in part written, in part oral, and/or in part implied by conduct—as well as a cause of action for breach of the implied covenant of good faith and fair dealing. 

The breach of written contract cause of action alleges that when PMG entered into the written contract with AppFolio, it was acting not only on its own behalf but as duly authorized agent of its principal, Tides, and/or that the agreement was assumed by and/or assigned to Tides in 2023, when PMG revoked its notice of termination and the parties agreed that plaintiff’s services would continue to be made available directly to Tides under the same terms previously agreed to by PMG, on condition that AppFolio was paid all amounts owed under the agreement, and that Tides then proceeded to use the services subject to the agreement, and breached the agreement by failing to pay the amounts due to AppFolio.

The breach of oral contract cause of action alleges that the parties entered into an oral contract under the same terms and conditions described above, as set forth in the agreements, and as memorialized in the various oral, telephone, and email exchanges. In initially entering into the agreement PMG was acting on its own behalf and also as the duly authorized agent of its principal, Tides. Additionally or alternatively, Tides directly entered into an oral agreement with plaintiff in 2023, when PMG revoked its notice of termination and the parties agreed that the services would continue to be made available directly to Tides under the same terms previously agreed by PMG on condition that AppFolio would be paid all amounts due under that agreement. Tides then proceeded to use the services subject to the agreement, and breached it by failing to pay the amounts due to AppFolio.

The breach of implied contract cause of action alleges that, in the alternative to the doctrine of express contract, the parties entered into an implied contract for plaintiff to provide property management software to defendants, and that having induced plaintiff to provide services and accepted the benefits of those services and used them according to the agreement, Tides is estopped from disclaiming the burdens of that use, including the amounts owed to plaintiff for the remainder of the contract term. Defendants breached the contract by failing to pay the amounts owed to plaintiff under the contract.

The cause of action for breach of the implied covenant of good faith and fair dealing alleges that defendants beached the covenant “in engaging in the acts alleged above,” including inducing plaintiff to permit PMG to revoke its termination and instead continue to provide services to Tides, “with promises and half-truths” that plaintiff would be paid everything it was owed in exchange for making such arrangements. Defendants further breached the covenant by operating in bad faith in that once Tides determined that services were no longer needed, it advised plaintiff it would discontinue paying the amounts owed to plaintiff, while coordinating with PMG who claimed it was out of business and could make no payments.

While Tides separately addressed each of the breach of contract causes of action, its arguments were basically the same, in arguing that the allegations do not manifest its consent to a contract, under any of the breach of contract theories. It asserts that plaintiff attempts to plead around this absence by alleging two alternatives (1) that when PMG executed the Contract, it was doing so “as the duly authorized agent of its principal Tides,” or (2) that the contract was assumed by and/or assigned by Tides in 2023.

Tides argues that the allegations of agency are conclusory and can be discarded, citing Moore v. Regents of Univ. of Calif. (1990) 51 Cal.3d 120, 134; and Amiodarone Cases (2022) 84 Cal.App.5th 1091, 1114-1115. As for the allegation that Tides assumed the contract, Tides contends that the argument fails for multiple reasons, including that (1) specific facts prevail over conclusions, and the communications do not reflect a manifestation of Tides’ consent to assume the entirety of PMG’s obligations under the contract, or to accept an assignment of the entire contract, and only make clear that Tides agreed to a limited arrangement whereby it would pay the monthly fee until such time that plaintiff was notified that it no longer needed access to “our data” within the software; and (2) the contract provides that any assignment not approved in writing by plaintiff would be invalid. 

AppFolio opposed the demurrer arguments collectively in a single “breach of contract” argument, in which it first articulated the allegations which it contends show a breach of contract by Tides, including first alleging the contract between PMG and AppFolio and its terms, its allegations that PMG was the duly authorized property manager and agent for Tides for the Tides-owned properties for which the software was used; its allegations that after PMG revoked its termination notice, Tides requested that AppFolio maintain services for Tides’ benefit to July 31, 2024, and that continued access was necessary for Tides to retrieve the data necessary for its operations; the email exchange involving key officers of Tides in which the parties expressed their understanding that AppFolio would be paid all contract fees owed upon termination of services; its allegation that Tides was on notice and tacitly or expressly agreed that its direct use of the software services was subject to payment of all contract fees owed to AppFolio, in exchange for its acceptance of PMG’s rescission of its termination notice; Tides continued use of AppFolio’s software services for about 6 months, undertaking the obligation to pay the service fees and all other fees owed upon termination; that the agreement was assigned to and assumed by Tides; that Tides paid monthly service fees with its own credit card and that its use of AppFolio’s services was subject to the Terms of Service; PMG’s entry into the agreement as Tides’ duly authorized agent; and, in the alternative, that Tides entered into a new agreement with AppFolio that its direct use of the software would be subject to the same Terms of Services as stated in the agreement. It notes it is entitled to plead alternative and consistent theories of recovery for breach of written, oral, and implied contract.

With respect to Tides’ argument that the complaint’s agency allegations are conclusory, AppFolio responds that specific fact pleading of agency is not required, citing Skopp v. Weaver (1976) 16 Cal.3d 432, 437. Further, the allegations are not conclusory, since the complaint alleges that PMG was authorized property manager for particular properties for which the software was used, and under California law, a property manager acts as the agent and fiduciary of the owner. As a result, as principal, Tides is equally liable for the breach of contract obligations committed by its agent, PMG.

With respect to Tides’ argument that there was insufficient pleading of an assignment or assumption, AppFolio contends that the court’s ruling on PMG’s demurrer addressed that issue. It discussed the law with respect to assignees of contractual obligations, that Civil Code section 1457 is for the protection of the party entitled to the benefit, and discussed Civil Code section 1589, under which a voluntary acceptance of the benefit of a transaction is equivalent to a consent to all obligations arising from it. AppFolio further discussed the manner in which assignments or transfers of contract rise can legally be effected, and concludes that whether the circumstances show that Tides assumed the contract, or whether that assumption included the obligation to pay all fees due under the contract, are questions of fact for trial, and cannot be resolved on demurrer.

AppFolio further contends that the cause of action for breach of implied contract is adequately alleged, and that because the breach of contract causes of action are sufficiently alleged, the cause of action for breach of the implied covenant of good faith and fair dealing also survives.

In reply, Tides does not address the issue of the manner in which agency is pleaded, and focuses on its argument that it cannot be inferred from the allegations that it agreed to pay for anything beyond the value of ongoing services, which it paid.

            B.        Analysis.

The Court will overrule the demurrers to the breach of contract causes of action. As discussed above, Tides’ main basis for its demurrer is that under the allegations in the complaint, it never manifested its consent to enter into any contract with AppFolio, on any of the theories alleged. It argued that AppFolio attempted to plead around the absence of consent to contract by alleging two alternatives, the first of which was that PMG was acting as the duly authorized agent of its principal, Tides, at the time it entered into the agreement with AppFolio. It then simply dismissed the theory, stating that the allegations of agency were conclusory and should be disregarded, citing Moore v. Regents of the University of California (1990) 51 Cal.3d 120, 134, and Amiodarone Cases (2022) 84 Cal.App.5th 1091, 1114-1115, for the proposition that a conclusory boilerplate allegation of agency that fails to allege the requisites of mutual consent and control does not suffice.

The problem with this argument is that neither Moore nor Amiodarone actually says any such thing, nor does either case cite or address the California Supreme Court’s decision in Skopp v. Weaver (1976) 16 Cal.3d 432, 437-438, wherein the court held that the general allegation of agency is a sufficient averment of ultimate fact, and not a conclusion that is not admitted on demurrer.

The cited page in Moore states no principles of law at all, noting that the underlying trial court had not had occasion to address the sufficiency of an allegation of agency with respect to two defendants, but had found it insufficient with respect to two other defendants, and that the underlying Court of Appeal decision had not held that the secondary-liability allegations were sufficient against any defendant, but had simply held that each defendant was primarily liable. Since no court had yet addressed the secondary (i.e. agency) liability of two of the defendants, the Supreme Court noted that there was no need for it to address the issues at that time. With respect to the other two defendants, the Court of Appeal had reversed only for failure to grant leave to amend, and had never addressed the sufficiency of the secondary liability allegations. Nowhere in the decision does the court make any statement even close to the principle for which Tides cited it.

The Amiodarone case was filed by plaintiffs who alleged that they suffered serious side effects as a result of taking the prescription drug amiodarone “off-label,” i.e. for uses not approved by the FDA. Amiodarone had been approved by the FDA in 1985, as a drug of last resort for patients suffering from documented recurring life-threatening ventricular fibrillation and ventricular tachycardia, when those conditions would not respond to other drugs and therapies; the approval was a “special needs” approval, issued without clinical trials of the drug. The plaintiffs sued the companies that promoted, distributed, and sold the drug, alleging a failure to warn them about the dangers of the drug, contending that it was promoted aggressively and unlawfully for unapproved uses.

The pages cited by Tides related to these plaintiffs’ attempt to hold Wyeth Pharmaceuticals, Inc. liable for its allegedly unlawful promotion of the drug as a first-line treatment for atrial fibrillation without disclosing the dangers of the drugs. The plaintiffs contended they would not have taken the drug had the received a medication guide containing warnings. Because the most recent alleged misrepresentations by Wyeth in promotional materials were made more than a decade before the drug was prescribed for any of the plaintiffs, the Court found that the necessary justifiable reliance on the misrepresentations, as well as causation, could not be established as a matter of law. The plaintiffs further attempted to establish Wyeth’s liability by referring to articles that were published in medical journals by third parties, which advocated for the use of the drug in the treatment of atrial fibrillation, including an article by a doctor allegedly supported in part by a grant from Wyeth, an article by a doctor who had once been hired as a speaker by Wyeth, an article authored in part by a doctor whose efforts were supported by unrestricted grants from Wyeth who had acted in an advisory capacity and as a speaker for Wyeth, and an article where one of the authors was a doctor who had received research grants from Wyeth. Plaintiff also referred to an American College of Cardiology website which included a false representation about use of the drug for atrial fibrillation as recently as 2020, that the website cited guidelines published for patients with atrial fibrillation, and that one of the peer reviewers and authors of the guidelines containing the misleading information was a doctor who listed Wyeth as one of the companies for which he worked as a “consultant/advisory member.” Plaintiffs argued that Wyeth was responsible for the representations in the articles, because its agents wrote the articles.

The Amiodarone court then discussed that agency is a relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act. If found that since the plaintiffs did not allege any facts to support a nonspeculative inference that any of the authors who made the statements did so as an agent of Wyeth, and since allegations that funding might have had an impact on the subjects and conclusions of the researchers is not sufficient to make their statements attributable to Wyeth under the law of agency, the pleading were not sufficient to support a reasonable inference that Wyeth controlled the articles’ content.

Amiodarone never discusses Skopp and, at most, stands for the proposition that a general allegation of agency may be insufficient to survive demurrer where the factual circumstances underlying the case are themselves insufficient to support a nonspeculative inference of agency. That is certainly not the circumstance which exists in the current case. Here, a mere thirteen days after executing the Order Form for AppFolio’s services, and well prior to the commencement of the contract term, the entity seeking the services—Robinson Family Group, LLC dba The Robinson Group, changed its name to PMG in filings with the Arizona Secretary of State, listing Tide Equities, LLC as the sole member of PMG, as a member-managed LLC.  (¶ 16) The complaint further alleges that Tides was PMG’s only property management client, i.e., PMG only managed properties owned or controlled by Tides, and its use of the AppFolio property management system was solely for Tides’ benefit. (¶ 28) The breach of written contract cause of action then expressly alleges that “[d]efendant PMG (formerly, the Robinson Family Group) initially entered into the contract by executing the Agreement. In doing so, PMG was acting no only on behalf of itself but as the duly authorized agent of its principal Tides.” (¶ 50) That allegation is incorporated by reference into the remaining contract-related causes of action. (¶¶ 58, 66, and 73)

Liberally interpreting the allegations of the complaint, as a court is bound to do in evaluating their adequacy in the face of a demurrer (Code Civ. Proc., § 452), the Court can permissibly infer that the Robinson/PMG entity was, at the time it initiated the order for AppFolio’s services, largely or entirely owned and/or controlled by Tides, that Robinson/PMG used AppFolio’s software only for Tides’ benefit, and potentially at Tides’ request. Under those circumstances, the general allegation that Robinson/PMG entered into the agreement with AppFolio not only on its own behalf but as “the duly authorized agent of its principal Tides,” is more than sufficient allegation of an agency relationship between PMG and Tides, to permit the breach of contract causes of action to survive demurrer.

Since Tides’ demurrer acknowledged that the agency argument was but one of two alternative theories under which AppFolio could establish Tides’ consent to the contract, and since the Court has found that the agency has been sufficiently alleged, the Court need not address Tides’ alternative arguments.

Additionally, because the breach of contract causes of action survive demurrer, so does the cause of action for breach of the implied covenant of good faith and fair dealing. For these reasons, the Court will overrule Tides’ demurrer to the first (breach of written contract), second (breach of oral contract), third (breach of implied contract), and fourth (breach of the implied covenant of good faith and fair dealing) causes of action.

 

3.         Fraud-based claims (5th through 7th causes of action).

            A.        Pleading a fraud claim

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) “In California, fraud must be pled specifically; general and conclusory allegations do not suffice. [Citations.] … [¶] This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’ [Citation.] A plaintiff’s burden in asserting a fraud claim against a corporate employer is even greater. In such a case, the plaintiff must ‘allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.’ [Citation.]” (Id. at p. 645, internal quotation marks omitted.)

A cause of action for fraudulent concealment is based upon the suppression of a fact, by one who has a duty to disclose it, or by one who gives information of other facts which are likely to mislead for want of communication of the concealed fact. (Civ. Code, § 1710, subd. (3).) For liability to exist, it is necessary to show that the party was under a legal duty to disclose the concealed facts, either as a result of a fiduciary or confidential relationship, privity of contract, or other special circumstances. (Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294.) In transactions which do not involve fiduciary or confidential relations, 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. (Ibid.)

            B.        Party arguments.

Intentional and negligent misrepresentation claims (5th and 6th causes of action) Tides’ demurrer contends that the complaint contains no specific allegations that Tides or its representatives made any representation that Tides—as opposed to PMG—would pay the early termination fee, and because the complaint fails to particularly allege any actual communications that were false, the causes of action fail.  

In opposition, AppFolio argues that the complaint states facts to demonstrate affirmative misrepresentations made by Tides personnel, specifically with respect to affirmative statements made by and on behalf of Tides and its officers to induce PMG’s request to rescind its termination notice. It refers to its allegations that PMG, while acting as Tides’ duly authorized agent, represented to AppFolio that it was rescinding its notice of termination, and that AppFolio would be formally notified by either Tides or Jarrod Robinson (of PMG) when termination of services would occur; that Ms. Fern-Kirkland of Tides made representations about Tides’ properties for which it needed continued access to AppFolio’s software services, explaining why Tides wanted AppFolio to accept PMG’s rescission of the contract termination notice; that PMG revoked its notice of termination at Tides’ request and for Tides’ benefit, and AppFolio agreed on condition that it would be paid in full under its contract by either PMG or Tides; that AppFolio sent a writing regarding its understanding, and that the PMG President replied affirmatively, specifically identifying that Ms. Bartolucci Delgado was copied to confirm the agreement on Tides’ behalf; that in a phone call between AppFolio, and Kelly and Bartolucci Delgado of Tides, they made statements to AppFolio to induce them to continue to provide access to AppFolio’s services; that AppFolio emailed PMG along with Kelly and Bartolucci Delgado, confirming their agreement that AppFolio would continue to provide services provided there was an express understanding that all contract amounts owed to AppFolio would be paid; and PMG, as agent of Tides, responded in the affirmative, copying those Tides’ officers. AppFolio contends that these allegations are sufficient to demonstrate affirmative representations made by and on behalf of Tides and its officers, and that they were co-conspirators in the fraudulent scheme.

In its reply, Tides again contends that it did not make any false representations. While the opposition listed seven “statements” made by or on behalf of its officers to induce AppFolio to accept PMG’s request to rescind its termination notice, there is no allegation or explanation how the representations were false, which they must be for actionable fraud. Tides never promised to assume liability for the Early Termination Fee. Tides contends that on multiple occasions AppFolio asked PMG for a confirmation that PMG would be liable, but that is not the same thing. It made no representations other than that it would pay the monthly service fees for the services it used, which it did.

Concealment (7th cause of action) Tides’ demurrer contends that the allegations make clear that it did not conceal any intent to avoid paying the amounts due under the contract, and made clear that they were only agreeing to pay the software subscription fees to keep the subscription active long enough for it to transition its operations away from PMG to another property manager. “Nothing they said could be reasonably interpreted to imply otherwise.” It asserts that nothing that AppFolio’s representatives said indicated that they expected Tides to assume any obligations by PMG, other than paying the monthly service fees. It concludes by stating that the only thing which was concealed was AppFolio’s unexpressed intent to surprise Tides with a claim for PMG’s early termination fee.

In opposition, AppFolio contends that it properly alleged, in the alternative, that when PMG was making affirmative, fraudulent representations to AppFolio to induce reliance to benefit Tides, Tides’ officers were copied, acquiesced, ratified them, and remained silent—failing to correct AppFolio’s understanding that either PMG or Tides would pay all contract fees owed upon termination of services. It cites Bidler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 310-312, in support of its conclusion that such circumstances give rise to a duty to disclose. In Bidler-Engler, the court found that in transactions not involving fiduciary or confidential relations, a cause of action for non-disclosure may arise in three instances: (1) defendant makes representations but does not disclose facts which materially qualify the facts disclosed, or which render the 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 to defendant; and (3) the defendant actively conceals discovery from the plaintiff. AppFolio notes that the Court previously overruled the demurrer made by co-conspirator PMG on the same grounds.

In reply, Tides again contends that there are no allegations to show any active concealment or suppression. There is no explanation of how anything Tides did not say rendered what it did say likely to misled, or any facts known to Tides and not to plaintiff that Tides knew plaintiff didn’t know. It asserts that the quoted communications do not show that AppFolio ever asked Tides (as opposed to PMG) to be responsible for the early termination fee, much less that Tides said or did anything to induce AppFolio to believe it would.

            C.        Analysis.

Misrepresentation claims. AppFolio named demurring defendants Tides, Kelley, and Delgado as defendants in the causes of action for intentional and negligent misrepresentation. AppFolio’s complaint certainly alleged a plethora of specific facts. The question before the Court at this time is whether those facts are sufficient to separately allege a cause of action for intentional or negligent misrepresentation against each of these demurring defendants.

With respect to defendant Delgado, Tides’ Managing Director of Operations, the answer is definitively “no.” In the long recitation of facts, after AppFolio advised PMG on May 30, 2023, that its merger would not relieve it of its legal duties, and that card services would be disabled as a result of PMG having exceeded Visa’s Early Warning chargeback threshold for multiple months, PMG asked Delgado to work with AppFolio on a resolution, and Delgado is alleged to have asked AppFolio what Tides could do to prevent card processing from being disabled, and was advised by AppFolio that because PMG and Tides both had stated that neither would pay the remainder of the contract term, there was no way to prevent card services from being disabled. (¶¶ 21-23.) There is a generic allegation that Tides “officers” manipulated AppFolio into maintaining services so that Tides would have access to data it needed for its operations. (¶ 26) On June 16, 2023, Delgado was copied on an email from Jessica Fern-Kirkland of PMG, which confirmed PMG’s understanding that PMG would remain responsible for subscription fees, early termination fee, and any unrecouped chargeback amounts, as of the termination date. (¶¶31-32.) She is alleged to have participated in a call with Kelley and AppFolio, in which “Tides” expressed the need to maintain access to the AppFolio system to access information and data critical to its operations, notwithstanding that PMG was dissolving, and asked to extend the termination date to July 31, 2024. (¶ 34.) She was copied on a June 27, 2023, email from Janice Akins at AppFolio to Robinson of PMG, which noted that confirmation of his understanding of PMG’s contractual obligations was outstanding, and AppFolio needed PMG’s understanding that it would be responsible for all amounts due. (¶ 35.) After Robinson advised AppFolio in January, 2024, that no further services would be needed, and Kia of Tides confirmed that Tides would no longer pay for services effective February 2, 2024, Akins of AppFolio emailed Delgado and others to give the right to terminate for convenience and pay only 1/2 of the remaining fee owed. (¶ 45.)

There are no further allegations of any conduct by defendant Delgado. The allegations reflect only that Delgado was copied on relevant emails, and participated in a conference call with others. However, the only statement attributed to her is a request for what Tides could do to prevent card processing from being disabled. The allegations are insufficient to state any cause of action based upon any misrepresentation, whether intentionally or negligently made, requiring that her demurrer to the eighth and ninth causes of action be sustained.

With respect to defendant Kelley, Tides’ Managing Director and General Counsel, the answer is also “no.” He is alleged to have been a participant in the June 26, 2023, telephone call, along with Delgado, with “AppFolio,” in which “the parties” expressed the need for Tides to maintain access to the AppFolio system in order to be able to access information and data critical to its operations, notwithstanding that PMG was dissolving, and that the termination date be extended to July 31, 2024. (¶ 34) In a footnote to that seme paragraph, he is alleged to have admitted in a February 7, 2024, email that Tides needed to continue to have access so it could retrieve information critical to its operations, and informed AppFolio that they did not know how long they would need that access, but would let AppFolio know when it had retrieved the necessary information. He was copied on the June 27, 2023, email from Akins to Robinson, which noted that confirmation of Robinson’s understanding of PMG’s contractual obligations was outstanding, and AppFolio needed PMG’s understanding that it would be responsible for all amounts due. (¶ 35.) After Akins emailed Delgado “copying others at Tides” on January 26, 2024, to give them the right to terminate for convenience and pay only 1/2 of the remaining fee owed, Kelley is alleged to have emailed back that Tides was not a party to a contract with AppFolio and therefore would not pay the Early Termination Fee, and that Tides no longer needed access to AppFolio. (¶¶ 45-46.) In a footnote to ¶ 46, it is alleged that Kelley had admitted during the June 26, 2023 call that “Tides agreed that, even though it was not a party to the PMG/Appfolio contract, we would nevertheless agree to pay the monthly service fee, beginning August 1, 2023, until such time as Appfolio was notified that we no longer needed access to our data within Appfolio.” Finally, there are allegations of “several more” email exchanges between Kelley and AppFolio in January and February 2024, in which Tides continued to reject the Early Termination Fee. (¶ 48.)

There are no further allegations of any conduct by Kelley. The only statements attributed to Kelley either only related to the need to have continued access to AppFolio’s software, or were made after-the-fact in refusing to assume any responsibility for paying the early termination fee once Tides’ need for AppFolio’s services were no longer needed and Tides had canceled its access to the services. The allegations are insufficient to support a direct cause of action for intentional or negligent misrepresentation against him, aimed toward leading AppFolio to believe that it would be paid what was due under its contract with PMG if it continued to provide the services it had previously provided to PMG under the PMG contract to Tides. As a result, Kelley’s demurrer to the eighth and ninth causes of action must be sustained.

With respect to defendant Tides, the analysis is a bit more complex, since the statements attributable to all of its representatives (Delgado, Kelley, Kia, and Andrade) can all be attributed to it. Certainly, AppFolio’s theory that PMG (whose sole member at all relevant times was Tides) and Tides were working together to manipulate AppFolio to continue to provide services to Tides pursuant to the PMG contract which would be terminated prior to the end of the contract term, while contriving to avoid legal liability by either entity for the early termination fee or contract term fees to which AppFolio was entitled under the terms of the contract, appears considerably more than plausible. However, most of the affirmative misrepresentations in support of any allegedly fraudulent scheme were made by PMG personnel, not by Tides or its officers. Further, given the manner in which the complaint was drafted—with conspiracy allegations only made in support of the separate cause of action for conspiracy to commit a tort, and without their incorporation into the direct causes of action for intentional and negligent misrepresentation alleged against Tides, Kelley, and Delgado—such conspiracy allegations were wholly insufficient to support the conclusion that PMG and Tides were engaged in a greater fraudulent conspiracy to continue to receive service pursuant to the PMG/AppFolio contract for a period less than the entire contract term, while attempting to create circumstances that would evade contractual liability for the early termination fee.

The Court will therefore sustain Tides’ demurrer to the eighth and ninth causes of action for intentional and negligent misrepresentation, with leave to amend.

Concealment As noted above, concealment is a variation on a fraud claim, under which liability can be imposed against a defendant, under some circumstances, where the defendant conceals a material fact which is unknown to the plaintiff which, had it been known to plaintiff would have caused plaintiff to act differently and avoid the harm incurred from its lack of knowledge of the material fact.

AppFolio has alleged a direct cause of action for concealment against defendant Tides, defendant Kelley, and defendant Delgado, to which they have demurred, contending that they only agreed to pay the subscription fees to keep the subscription active long enough for Tides to transition operations away from PMG to another property manager, and that nothing they said could be reasonably interpreted to imply otherwise. Of course, that is the nature of a concealment claim—concealing from the plaintiff a fact which, if known by plaintiff, would have altered plaintiff’s conduct.

Even so, the allegations with respect to Tides, Kelley, and Delgado alone do not appear to the Court to be sufficient to allege a separate and direct fraudulent concealment cause of action against them. Given the absence of any fiduciary or confidential relationship, much more is needed to establish any direct duty by these defendants to disclose that they did not intend to pay to AppFolio all of the amounts to which it would be entitled under the terms of the contract it executed with PMG, sufficient to support the allegation of a direct cause of action for fraudulent concealment against them. While properly made allegations of a fraudulent conspiracy with PMG-related parties to conceal that fact could potentially be sufficient to support the cause of action as against the Tides-related parties, they do not exist in the context of the complaint as it is currently alleged, and the Court therefore does not currently have the opportunity to evaluate their adequacy.

The Court will therefore sustain the demurrers to the fraudulent concealment cause of action made by defendants Tides, Kelley, and Delgado, with leave to amend.

4.         Business-interference claims (8th and 9th causes of action)

            A.        Elements of the relevant claims.

California has traditionally recognized two economic relations torts: interference with the performance of a contract, and interference with a prospective economic relationship.

Intention interference with contractual relations is a tort, the elements of which include: (1) the existence of a valid contract between the plaintiff and a third party, (2) the defendant’s knowledge of that contract, (3) the defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship, (4) actual breach or disruption of the contractual relationship, and (5) resulting damage. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.)

Tortious interference with prospective economic advantage—which can be either intentional or negligent—does not depend on the existence of a legally binding contract, and a plaintiff asserting the tort must show that the defendant knowingly interfered with an economic relationship between the plaintiff and some third party, carrying with it the probability of future economic benefit to the plaintiff. (Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th 1130, 1141, citing Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153.) The elements of a claim for negligent interference with prospective economic advantage include (1) an economic relationship existed between plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff; (2) defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part probable future economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such negligence caused damage to the plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected from the relationship. (Venhaus v. Shultz (2007) 155 Cal.App.4th 1072, 1078.)

With a claim for interference with contract, it is not necessary that the defendant’s conduct be wrongful apart from the interference with the contract itself. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 55.) This is because courts provide a damage remedy against third party conduct intended to disrupt an existing contract because the exchange of promises resulting in a formally cemented economic relationship is deemed worthy of protection from interference by a stranger to the agreement. Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 365, 392.)

Consequently, while intentional interfering with an existing contract is generally a wrong in and of itself, intentionally interfering with prospective economic advantage requires pleading that the defendant committed an independently wrongful act. (Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th 1130, 1142.) An act is independently wrongful if it is unlawful, i.e., proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1159.)

            B.        Party arguments

Intentional interference with contract (8th cause of action) Tides’ demurrer asserts that the complaint does not allege that the Tides defendants induced PMG to breach the contract. Rather, it alleges only that Tides, Kelly and Delgado prevented PMG’s performance by persuading AppFolio to permit PMG to revoke its initial notice of termination of the contract, without which AppFolio would have discontinued service and immediately sought collection of the early termination fee. Tides argues that is not an allegation of prevention of performance, or of conduct which rendered performance more difficult, but only that Tides acts delayed AppFolio’s pursuant of a remedy for non-performance, which is insufficient to constitute a claim for interference with contract.

In opposition, AppFolio asserts that Tides and its officer defendants knew of PMG’s contractual obligations, including that it owed service fees or could exercise the right to a termination fee. After PMG gave its initial notice in June 2023, Tides personnel intervened so AppFolio would continue to provide services, and asked to maintain services until 2024, after PMG was dissolved. At that time, Tides repudiated any further payment obligations, and PMG said it had dissolved and was insolvent and judgment proof, thereby disrupting AppFolio’s ability to recover the service fees or the early termination fee to which it would have been entitled under the contract. Tides and its representatives are therefore jointly and severally liable for participating in the tortious interference with contract rights.

Negligent interference with prospective economic advantage (9th cause of action). The cause of action is alleged as an alternative to interference with contract cause of action, and contends that in the event that PMG is not determined to be the agent of Tides for purposes of contracting with plaintiff, defendants knew of an interfered with the economic relationship between plaintiff and PMG that would probably have resulted in an economic benefit to plaintiff, and behaved in a manner to disrupt that relationship, by leading plaintiff to believe that it would be paid all amounts due it under the agreement if plaintiff would permit PMG to revoke its termination of the agreement and provide services to Tides. By the time Tides ceased using the services and stated it did not intend to pay the remainder of the fees due to plaintiff, PMG had dissolved and had no assets or ability to pay. Defendants are alleged to have known that this economic relationship would be disrupted if they failed to act with due care.

In its demurrer, Tides argues while the claim is entitled one for negligent interference, its allegations appear to be an attempt to assert a claim for intentional interference, the elements of which require that the interfering conduct be wrongful by some legal measure other than the fact of interference itself. Tides argues that, as pleaded, the claim is essentially identical to the 8th cause of action, fails both for the same reason that claim fails, and fails because there is no independently wrongful conduct alleged, given that the fraud claims are insufficiently alleged. The complaint never alleges that the Tides defendants did anything to lead AppFolio to believe Tides would pay the contract amounts owed to AppFolio, including the early termination fee.

In opposition to the Ninth Cause of Action for interference with prospective economic advantage, AppFolio notes that Tides argued there was no such claim because there was a contract in place, and because there was no independently wrongful conduct. However, the complaint does allege wrongful conduct, i.e., common law fraud and concealment, which is independently wrongful. AppFolio further noted that in filing separate demurrers and setting them on different hearing dates, PMG and Tides are attempting to “whipsaw” AppFolio, together arguing that AppFolio did not have a contract with either one of them. PMG says AppFolio cannot sue in contract because the contract was assigned to Tides, and Tides says AppFolio cannot sue in contract because the contracting party was PMG. AppFolio contends both are co-conspirators acting together to avoid liability through inconsistent arguments.

            C.        Resolution

Intentional interference with contract The Court will overrule the demurrer to the 8th cause of action for interference with contractual relations. The complaint sufficiently alleges that Tides was aware of the contract between PMG and AppFolio and PMG’s obligations under that contract. PMG notified AppFolio that it was terminating the contract, and was prepared to pay all amounts due under the contract, including the early termination fee. Tides then intervened in order to prevent termination of AppFolio’s contract with PMG and, by inference, to avoid both the necessity of entering into its own contract with AppFolio, and PMG’s actual payment of all fees it would owe under the contract from such termination, which it has expressed a willingness to pay. Had Tides not acted in that manner, AppFolio would have recovered the amounts due under its contract with PMG, including the early termination fee. Instead, Tides acted in a manner to convince AppFolio not to do so, and to permit it to pay the monthly service fees due under the contract, until after such time as PMG had dissolved and had no assets, at which time it terminated the service. The allegations are sufficient to permit the Court to conclude that Tides intentionally interfered with the contract which AppFolio had with PMG, in a manner that precluded AppFolio from getting all of the benefits due to it under the terms of the contract, and that the elements of intentional interference with contract are adequately alleged.

In making its demurrer arguments, Tides only made the generic contention that the facts which were alleged were insufficient to constitute an interference with contract claim. It made no attempt to differentiate the argument as it pertained to each of the Tides-related defendants. Consequently, the Court will overrule the generically-interposed demurrer to the intentional interference with contract cause of action in its entirety.

Negligent interference with prospective economic advantage. The Court will sustain the demurrer to this cause of action. While the Court understands AppFolio’s contention that Tides and PMG are attempting to “whipsaw” it, with PMG contending it has no contractual liability because Tides assumed the contract, and with Tides contending it has no contractual liability because it was not a party to the contract, it does not understand how this circumstance relates to the attempt to state a cause of action against Tides’ personnel for negligent interference with prospective economic advantage. There certainly was an express contract with PMG, and the Court understands AppFolio’s contentions with respect to how conduct by both Tides and PMG acted to interfere with that contract and preclude AppFolio from obtaining the full benefits of that contract. It does not understand how or why the contractual relationship is somehow reduced or diminished to become merely a relationship with a probability of economic advantage, because of events which took place subsequent to execution of the contract. Additionally, because the Court has found that the fraud-related causes of action against Tides are—at least for the time being—insufficiently stated, it cannot find that the conduct was wrongful by some measure other than its interference. As a result, the requirements for a cause of action for negligent interference with prospective economic advantage have not been adequately alleged, requiring that the demurrer to the ninth cause of action be sustained, with leave to amend.

5.         Conspiracy.

While Tides’ memorandum of points and authorities in support of its demurrer included an argument based upon the tenth cause of action for conspiracy, its actual demurrer was not directed to the conspiracy cause of action, in violation of the mandate of California Rules of Court, Rule 3.1320(a). (See Demurrer papers @ pp. 2-3.) As a result, the Tides defendants waived any ability to challenge the conspiracy claim. However, the issue is moot in any event, since the Court has already sustained PMG’s demurrer to the conspiracy cause of action, and AppFolio has indicated its intention to amend its pleading to include conspiracy allegations other than as a separate cause of action.

6.         Leave to amend.

For those causes of action for which either the Tides demurrer or the PMG demurrer has been sustained, the Court will grant AppFolio leave to file a First Amended Complaint on or before March 3, 2025.

Should the Tides defendants and the PMG defendants both file demurrers to any First Amended Complaint which AppFolio may subsequently file, the Court will hear both/all such demurrers on the same hearing date—regardless of the days on which the parties might separately schedule their hearings. The parties should therefore coordinate any future hearing dates. If they do not, the Court will continue any earlier scheduled demurrer to be heard with the later-scheduled demurrer.