AppFolio, Inc. v. Tides Equities, LLC
AppFolio, Inc. v. Tides Equities, LLC
Case Number
24CV03410
Case Type
Hearing Date / Time
Mon, 07/07/2025 - 10:00
Nature of Proceedings
Notice of Demurrer and Demurrer of Tides Equities, LLC, Brien Kelley, Sean Kia, Ryan Andrade, and Melissa Bartolucci Delgado to the First Amended Complaint
Tentative Ruling
AppFolio, Inc. v. Tides Equities, LLC
Case No. 24CV03410
Hearing Date: July 7, 2025
HEARING: Notice of Demurrer and Demurrer of Tides Equities, LLC,
Brien Kelley, Sean Kia, Ryan Andrade, and Melissa Bartolucci
Delgado to the First Amended Complaint
ATTORNEYS: For AppFolio, Inc.: Jared M. Katz and Jemma Parker
Saunders, Mullen & Henzell, LLP
For Defendants Tides Equities, LLC, Brien Kelley, Sean Kia,
Ryan Andrade, and Melissa Bartolucci Delgado: Justin H.
Sanders and Thomas J. Eastmond, Sanders Roberts, LLP
TENTATIVE RULING: The demurrer of defendants Tides Equities, LLC, Brien Kelley, Sean Kia, Ryan Andrade, and Melissa Bartolucci Delgado to the first amended complaint is overruled in its entirety. These defendants are ordered to file and serve their answer to the first amended complaint on or before July 28, 2025.
Background:
Plaintiff AppFolio, Inc. alleges that on September 14, 2022, Robinson Family Group, LLC (which thirteen days later changed its name to PMG Property Management, LLC [PMG]) executed a written order form (the Agreement) for the use of AppFolio’s property management proprietary software. (First Amended Complaint [FAC], ¶¶ 16, 17.) The Agreement contains a 24-month term, beginning November 1, 2022, and ending November 1, 2024. (Id., ¶ 16.) The stated monthly service fee is $45,540, and AppFolio’s terms of service are incorporated into the Agreement. (Id., ¶¶ 16, 19, 20.) AppFolio further alleges that defendant Tides Equities, LLC, is the sole member of PMG, that PMG served as the property management company solely for Tides’s properties and did not have any other clients, and that PMG’s access to AppFolio’s software and services was solely for Tides’ benefit. (FAC, ¶¶ 17, 29.)
The Agreement also contains an early termination fee which is assessed following a termination of the subscription to AppFolio’s services. (FAC, ¶ 20.) AppFolio alleges that despite agreeing to the early termination fee, as well as other clauses within the Agreement, the defendants in this case conspired to deceive AppFolio and have refused to pay all contractual fees which are due. (FAC, ¶¶ 58-61.)
Specifically, AppFolio alleges that on June 7, 2023, defendant Jarrod Robinson, PMG’s chief executive officer, sent a letter to Janice Akins at AppFolio’s offices, providing written notice that PMG would be dissolving and that PMG intended to cancel its services effective June 30, 2023. (FAC, ¶¶ 8, 25.) Robinson asked AppFolio to cease all services as of June 30, 2023, and to finalize all outstanding invoices for payments due, including any prorated amounts or fees related to the cancellation. (FAC, ¶ 25.) AppFolio alleges that had this initial notice remained in place, it would have promptly billed PMG for all payments due under the Agreement, including the early termination fee, and ceased providing access to its software. (FAC, ¶ 26.)
However, AppFolio alleges, PMG, Tides and their respective officers and representatives proceeded to engage in a scheme designed to “manipulate[] AppFolio into maintaining services, so that Tides would have access to critical data that it needed for its operations, leading AppFolio to believe that the contractual payment obligations would be paid.” (FAC, ¶ 27.) In this regard, AppFolio alleges that following a June 13, 2023, a telephone conversation involving individuals from PMG and AppFolio, defendant Jessica Fern-Kirkland, PMG’s president, sent an email to AppFolio which stated:
“Per our conversation, PMG will be rescinding our notice to terminate services. We anticipate needing a few more months, however AppFolio will be formally notified at a later date when termination of services would occur by Tides Equities or by Jarrod Robinson (included here).” (FAC, ¶ 28.)
In the same email Fern-Kirkland provided a lengthy list of Tides’s properties which still needed to be accessible in AppFolio’s software so that PMG and Tides could effectuate an orderly transition of management over the properties. (FAC, ¶ 29.)
After being informed of an imminent suspension of AppFolio’s services, on June 16, 2023, PMG confirmed that it was prepared to pay all of the fees that were owed under the Agreement in connection with its early cancellation. (FAC, ¶ 30.) At Tides’s request, PMG then revoked its notice to enable Tides to continue to have access to AppFolio’s software. (Ibid.) AppFolio claims it made it abundantly clear to everyone that AppFolio would continue to provide services under the Agreement only on the condition that AppFolio would be paid all monies owed to it under the Agreement—whether by PMG or Tides. (Ibid.) AppFolio alleges that the parties agreed, and proceeded based upon this understanding. (Ibid.) According to AppFolio, it would not have continued to provide services to Tides or PMG absent the parties’ agreement. (FAC, ¶ 31.) Rather, AppFolio alleges that it would have (a) offered PMG the ability to pay an early termination fee and exercise early termination of the Agreement rather than pay all service fees for the remainder of the 24-month term of the Agreement, or (b) immediately pursued collection of all contractual amounts owed through the remainder of the contract term. (Ibid.) AppFolio alleges that “[i]n making the foregoing representations to AppFolio, . . . Fern-Kir[k]land was acting in her capacity as an officer of PMG and, because PMG was the property manager and agent of Tides, also . . . as an agent of Tides.” (Ibid.)
On June 16, 2023, at 10:45 a.m., Katelyn Graumann, writing on AppFolio’s behalf,, sent an email to Robinson and others which stated:
“It is our understanding following our conversation and your follow-up email on Tuesday, June 12, 2023, that PMG is rescinding its request to terminate as it anticipates needing a few more months with database access.
“We need to verify that PMG will continue to pay the subscription services on a monthly basis when due during this time. We also need to confirm that per our earlier conversation, when PMG terminates at a future date, that termination will fall under Section 6.4 of the AppFolio Property Manager Terms of Service . . . which provides the option to terminate for convenience and pay only 50% of the remaining service fees. We will calculate the early termination fee at that time and invoice
you.
“We need confirmation of your understanding that you will be responsible for all of these amounts when due (the subscription fees, the early termination fee and any unrecouped chargeback amounts as of your termination date). Should any amounts become delinquent, AppFolio will take any and all appropriate actions to collect those amounts along with available interest, fees, and costs associated with its collection efforts (including without limitation reasonable legal fees and costs) . . . and hereby reserves all of its rights in that regard.
“Please confirm your understanding of the above, and let me know how else we can with questions or offboarding support [sic].” (FAC, ¶ 32, capitalizations altered.)
Fern-Kirkland responded on June 16, 2023, stating:
“Thank you, Katelyn!
“I am also tagging in @Melissa Bartolucci Delgado [Tides’ managing director of operations] to confirm your understandings :-)[.]” (FAC, ¶¶ 33-34.)
AppFolio alleges that Fern-Kirkland was once again acting as both PMG’s and Tides’s agent at the time she replied to Graumann. (FAC, ¶ 34.)
On June 26, 2023, a telephone conversation took place between representatives from AppFolio and Tides, including defendants Kelley, Tides’s managing director and general counsel (AppFolio inconsistently refers to this defendant as either Kelley or Kelly throughout the FAC), and Delgado. (FAC, ¶ 35.) During that call, it was expressed that Tides’s continued access to AppFolio’s system was critical to its operations, and that the termination date should therefore be extended. (Ibid.)
On June 27, 2023, AppFolio’s agent, Janice Akins, forwarded the June 16 email thread to Robinson and stated:
“Hi Jarrod,
“I just wanted to follow upon the email thread below. After our discussion with Tide Equities yesterday, they have requested the termination date be extended to July 31, 2023. Outstanding, however, is confirmation of your understanding of PMG’s contractual obligations, as called out in the email from Katelyn Graumann on June 16, 2023. We need confirmation of PMG’s understanding that you will be responsible for all of these amounts when due (the subscription fees, the early termination fee and any unrecouped chargeback amounts as of your termination date).
“Please let me know of your understanding of the below and how else we can help with questions or offboarding support.” (FAC, ¶ 36.)
As Tides’ officers, including Kelley and Delgado, were copied on this email, AppFolio alleges that “Tides was fully on notice and tacitly if not expressly accepted that its continued use of the services was subject to payment of all fees owed under the Agreement.” (FAC, ¶ 37.) Kelley and Delgado did not say anything in response to this email to signify that PMG would claim that it was unable to pay the amounts owed under the Agreement, or that Tides would not guarantee or assume the payment obligations under the Agreement. (FAC, ¶ 38.) In fact, AppFolio alleges, Kelley and Delgado were aware that PMG did not intend to pay all sums due under the Agreement, and that Tides intended to later claim that it was not responsible for payment. (Ibid.) As a result of this concealment of fact, AppFolio claims that it continued to provide services to Tides. (Ibid.)
Meanwhile, Robinson responded to Akins’ email on June 29, 2023, stating:
“Hi Janice
“We are going to continue to pay as normal and if we decide to cancel the service I will reach out at that time to discuss.” (FAC, ¶ 39.)
AppFolio alleges that “[b]ased upon Mr. Robinson’s use of the word ‘we’ in this communication, particularly (i) in the context of all the prior communications that occurred and (ii) based on the fact that Mr. Robinson was the principal officer at PMG which in turn was the agent of Tides, AppFolio could reasonably understand this email to be a representation on behalf of both PMG and Tides that ‘we’
--meaning PMG and/or Tides-- was committed to paying all obligations under the Agreement.” (FAC, ¶ 40.)
On August 23, 2023, AppFolio learned that PMG had been dissolved. (FAC, ¶ 41.) Tides, however, continued to use and pay for AppFolio’s software and services for the remainder of 2023, well beyond the initially agreed upon July 31, 2023, termination date. (FAC, ¶¶ 41, 42.) According to AppFolio, it continued to provide services for Tides because Tides had agreed to pay all sums due pursuant to the Agreement, including chargebacks and the monthly service fees. (Id., ¶ 42.)
Subsequently, on January 22, 2024, Robinson sent an email to Akins which stated:
“Hi Janice
“I wanted to reach out to you as you know P[MG] shut its doors back in June 2023 as we were no longer going to be managing The Tides Portfolio.
“We had decided to keep AppFolio operational for months after the transition so that we could insure [sic] all data got saved down and nothing got missed being the large amount of properties transitioning.
“As of now that process has been fully completed and we no longer need our access to AppFolio and need to shut down access and end the agreement as P[MG] is [sic] now been fully dissolved.” (FAC, ¶ 45.)
On January 25, 2024, defendant Sean Kia, one of Tides’s principals, wrote to Akins stating “… want to confirm that effective Feb 1st we [Tides] will no longer be paying for AppFolio.” (FAC, ¶ 46.)
On January 26, 2024, Akins responded to Robinson, Kia and Delgado, giving the parties a chance to exercise the right to terminate for convenience and pay only the early termination fee:
“Hi Jarrod, Sean & Melissa,
“Thank you for your January 22, 2024[,] email regarding PMG’s request to terminate its AppFolio subscription prior to the end of its term. Your letter does not identify a basis for the early termination of the subscription agreement or an effective termination date. Section 6.4 of AppFolio’s terms of service allows for early termination of the subscription agreement following 30 days’ prior written notice. Also, as was previously discussed and communicated in our June 16, 2023[,] email, the option to terminate for convenience requires an early termination fee equal to fifty percent (50%) of the remaining service fees.
“Given that your request was received on January 22, 2024, the effective early termination date would be February 22, 2024 (30 days post written notification). As of that date, your subscription agreement will have eight months remaining on the term. The service fees set forth on your order form are $45,540 and the subscription term ends October 31, 2024. Thus, the total remaining service fees for your subscription agreement are $364,320, and the early termination fee is equal to 50% of that amount. Accordingly, the early termination fee for your subscription will be $182,160. Please confirm that your January 22 email serves as PMG’s 30-day notice for the early termination of its subscription agreement, effective January 22, 2024, and acknowledgment of the early termination fee due under Section 6.4 of AppFolio’s Terms of Service.” (FAC, ¶ 48, capitalizations altered.)
Tides responded the same day with Kelley stating that Tides was not a party to the Agreement and that it otherwise “no longer needs access to AppFolio.” (FAC, ¶ 49.) Minutes later, Robinson wrote: “P[MG] is out of business and the company has been dissolved so it won’t be paying any fee etc. The company has zero assets and the contract is not personally guaranteed so there is nothing more to do here.” (FAC,
¶ 50.)
Based on these factual allegations, AppFolio claims that defendants conspired to induce it to accept the revocation and to provide continued services to Tides, all the while knowing that PMG itself intended to claim that it could not continue to pay fees following dissolution, and that Tides would ultimately disclaim liability on the basis that it was not a party to the contract and fault rested with PMG which had no funds. (FAC, ¶ 59).
AppFolio asserts ten causes of action in the FAC: (1) breach of written contract against Tides and PMG; (2) breach of oral contract against Tides and PMG; (3) breach of implied contract against Tides and PMG; (4) breach of implied covenant of good faith and fair dealing against Tides and PMG; (5) intentional misrepresentation against all defendants; (6) negligent misrepresentation against all defendants; (7) concealment against all defendants; (8) intentional interference with contract against Tides, Kelley, Delgado, Kia, and Andrade, (9) negligent interference with prospective economic advantage against Tides, Kelley, Delgado, Kia and Andrade, and (10) alter ego liability against Tides, Robinson, Kia and Andrade.
Tides, as well as individual defendants Kelley, Kia, Andrade, and Delgado (the Tides-related parties), demur to the fifth, sixth, seventh, and ninth causes of action.
Analysis:
(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. (Bach v. McNelis (1989) 207 Cal.App.3d 852, 864.)
(2) Intentional and Negligent Misrepresentation
The elements of fraud, which give rise to the tort action for deceit, are misrepresentation (false representation, concealment, or nondisclosure),
knowledge of falsity (or scienter), an intent to defraud, i.e., to induce reliance,
justifiable reliance, and resulting damage. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)
Fraud must be pleaded with particularity. (Lauckhart v. El Macero Homeowners Assn. (2023) 92 Cal.App.5th 889, 903.) General and conclusory allegations are inadequate. (Ibid.) This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered. (Lauckhart, supra, at p. p. 904.)
Negligent misrepresentation, meanwhile, consists of (1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another’s reliance on the fact misrepresented,
(4) justifiable reliance on the misrepresentation, and (5) resulting damage. (National Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc. (2009) 171 Cal.App.4th 35, 50.)
AppFolio fails to sufficiently allege that the Tides-related parties (Kelley, Kia, Andrade, and Delgado) personally made any intentional or negligent misrepresentations. As to defendants Kelley and Delgado, AppFolio alleges that during a January 26, 2023, telephone call with someone from AppFolio, these two defendants stated that Tides needed to maintain its access to AppFolio’s system in order to be able to access information and data which was critical to its operations despite the fact that PMG was dissolving. (FAC, ¶ 35.) According to AppFolio, when Kelley and Delgado asked to extend the termination date to July 31, 2024, to accommodate Tides’s needs, the reasonable inference was that Tides was standing behind and guaranteeing payment of all contractual obligations under the Agreement. (Ibid.)
AppFolio also alleges that Kelley 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 that Kelley further informed AppFolio that while it was not known how long Tides would need such access, he would let AppFolio know when it had retrieved the necessary information. (FAC, ¶ 35, fn. 1.) AppFolio further alleges that Kelley and Delgado were 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 that AppFolio needed PMG to confirm that it would be responsible for all amounts due. (FAC, ¶¶ 36, 37.) Kelly and Delgado did not say anything in response to this email to alert AppFolio that PMG would later claim that it was unable to pay the amounts owed under the Agreement, or that Tides would not guarantee or assume the payment obligations set forth in the Agreement. (Id., ¶ 38.) AppFolio alleges that Kelley and Delgado were in fact aware that PMG did not intend to pay the contractual obligations, that Tides intended to later claim that it was not responsible, and that they – Kelley and Delgado – remained silent when in fact they had a duty to disclose this information to AppFolio. (Ibid.)
Further, AppFolio alleges that on January 26 2024, after giving the parties the opportunity to requesting to exercise the right to terminate AppFolio’s services and pay only one-half of the remaining fees owed, Kelley responded that Tides was not a party to the Agreement, no longer needed AppFolio’s services, and would not be paying any early termination fee. (FAC, 49.)
AppFolio’s allegations fall short of stating any actionable misrepresentations on Kelley’s part. The statements attributed to Kelley only relate to the need to have continued access to AppFolio's software, or were made after-the-fact when he expressed Tides’s refusal to assume any responsibility for paying the early termination fee. The allegations are insufficient to support a direct cause of action for intentional or negligent misrepresentation against him.
Similarly, and with respect to Delgado, plaintiff’s allegations continue to reflect only that she was copied on relevant emails and participated in a conference call with others. The only statements attributed to her are (1) a request for what Tides could do to prevent card processing from being disabled (FAC, ¶ 23), and (2) those statements which AppFolio claims Kelley and Delgado made during the June 26, 2023, telephone conference wherein they expressed Tides’s need to maintain access to AppFolio’s software and requested an extension of the termination date. (Id., ¶ 35.) The allegations are insufficient to state any direct cause of action based upon intentional or negligent misrepresentation as to Delgado.
AppFolio’s allegations fare no better with respect to Kia and Andrade, Tides’s principals. (FAC, ¶¶ 5, 6.) AppFolio alleges that on January 25, 2024, Kia wrote Akins stating: “ ‘Hi Janice – want to confirm that effective Feb 1st we will no longer be paying for [A]ppfolio.’ ” (FAC, ¶ 46.) AppFolio does not allege that Kia made any other specific statements to anyone from AppFolio. AppFolio also does not allege that any specific representations were made on the part of Andrade. The allegations are therefore insufficient to state a direct cause of action based upon intentional or negligent misrepresentation against these individual defendants.
AppFolio fails to sufficiently allege a direct claim for intentional or negligent misrepresentation against Tides for essentially the same reasons as those set forth in connection with the individual defendants. Tides can only act through its individual members and, as shown above, the FAC fails to allege that any actionable misrepresentations were directly made by them here.
This does not end the inquiry, however. AppFolio argues that the FAC states facts showing a conspiracy among the defendants to commit fraud. (Opposition, p. 12.)
The elements of civil conspiracy are the formation and operation of the conspiracy and damage resulting to plaintiff from an act or acts done in furtherance of the common design. (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 511.) A conspiracy to commit fraud must specifically plead “the ‘how, when, where, to whom, and by what means’ of the misrepresentation. [Citation]” (Favila v. Katten Muchin Rosenman LLP (2010) 188 Cal.App.4th 189, 211-212.) All coconspirators “are responsible for all acts done as part of the conspiracy if they knowingly agreed to commit fraud and intended to aid its commission.” (Id. at
p. 212.)
The Court finds that AppFolio sufficiently states a claim that fraud was the object of a conspiracy in which Tides and the Tides-related parties participated, and that the operation of the conspiracy caused AppFolio harm. Among other things, AppFolio alleges that all defendants “agreed and planned with one another to cooperate to induce AppFolio to accept the revocation and to provide continued services to Tides, all the while knowing that PMG itself intended to claim that it could not continue to pay fees following dissolution and Tides would ultimately disclaim liability contending it was not a party to the contract, rather that fault rested with PMG which had no funds.” (FAC, ¶ 59.) Further, AppFolio alleges, each defendant “acted in concert and came to a mutual understanding to accomplish a common and unlawful plan, and Tides, PMG, Kelly, . . . Delgado, and Fern-Kir[k]land committed overt acts in furtherance the conspiracy and wrongful plan.” (Id., ¶ 61.)
Further, AppFolio alleges specific misrepresentations which PMG made in furtherance of the conspiracy (FAC, ¶¶ 30, 32, 33, 34, 39), and various facts from which the existence of the conspiracy can be inferred. (Favila v. Katten Muchin Rosenman LLP, supra, 188 Cal.App.4th 189, 206 [knowledge and intent may be inferred from the nature of the acts done, the relationship of the parties, the interests of the alleged conspirators, and other circumstances].) The latter are found in AppFolio’s allegations that Tides was the sole member of PMG (FAC, ¶ 17), PMG’s president, Fern-Kirkland, represented to AppFolio in an email which was also sent to Delgado that AppFolio would be paid what is owed under the Agreement (FAC, ¶¶ 32, 33, 34), and that Tides alone accessed AppFolio’s services from July 2023 through the beginning of 2024. (FAC, ¶¶ 41, 42, 43.).
AppFolio’s conspiracy allegations are incorporated into the fifth and sixth causes of action for intentional misrepresentation and negligent misrepresentation, respectively. (FAC, ¶¶ 92, 101)
In sum, AppFolio has alleged the formation and operation of a conspiracy, the wrongful act or acts done pursuant thereto, and the damage resulting from such acts. The demurrer to the fifth cause of action for intentional misrepresentation is overruled.
Insofar as the negligent misrepresentation claim is concerned, it is unclear from AppFolio’s allegations how the parties in this case conspired to commit the type of negligent or unintentional acts which are alleged here. Nevertheless, AppFolio does allege that PMG officers Robinson and Kirkland were at all times acting as the agents of the other defendants, including Tides and the Tides-related parties, when they made the various representations to AppFolio. (FAC, ¶ 13, 21, 31, 34, 40.) As such, the FAC states a claim for negligent misrepresentation as against Tides and the Tides-related parties based upon those negligent misrepresentations alleged to have been made by the PMG-related parties. “[A] principal may become liable for the fraud and/or misrepresentation of an agent or employee.” (Garton v. Title Ins. & Trust Co. (1980) 106 Cal.App.3d 365, 376-377.)
(3) Concealment
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 (2024) 17 Cal.5th 1, 40.) A duty to disclose a material fact can arise if (1) it is imposed by statute, (2) the defendant is acting as plaintiff’s fiduciary or is in some other confidential relationship with plaintiff that imposes a disclosure duty under the circumstances, (3) the material facts are known or accessible only to defendant, and defendant knows those facts are not known or reasonably discoverable by plaintiff, (4) the defendant makes representations but does not disclose other facts that materially qualify the facts disclosed or render the disclosure misleading, or (5) defendant actively conceals discovery of material fact from plaintiff. (Ibid.)
The same specificity standard applies when evaluating the factual underpinnings of a fraudulent concealment claim at the pleading stage, even though the focus of inquiry shifts to the unique elements of the claim. (Rattagan v. Uber Technologies, supra, 17 Cal.5th at p. 43.) “ ‘[M]ere conclusionary allegations that the omissions were intentional and for the purpose of defrauding and deceiving plaintiff[ ] . . . are insufficient for the foregoing purposes.’ [Citation].” (Id., at p. 44.)
Defendants argue that AppFolio has failed to allege any facts which were concealed. According to defendants: “Tides and its representatives were perfectly clear about what they were agreeing to do: to pay PMG’s software subscription fees, and only those fees, to keep the subscription active long enough for Tides to transition its operations away from the dissolving PMG to another property manager.” (Demurrer, p. 8.) Defendants, however, ignore those allegations set forth in paragraph 38 of the FAC. These allegations include the claim that Kelley and Delgado “were in fact aware that PMG did not intend to pay the contractual obligations and that Tides intended to later claim that it was not responsible, but they remained silent when in fact they had a duty to disclose this information to AppFolio, wrongfully inducing AppFolio into a false sense of security so that AppFolio would continue to provide its services to Tides when it was in critical need of them.” (FAC, ¶ 38.)
Moreover, the FAC identifies information concealed by PMG, which AppFolio alleges it did not know and which, if known, would have caused it to act differently to prevent the harm it ultimately sustained. (FAC, ¶¶ 33-40.) Properly made allegations of a fraudulent conspiracy with PMG-related parties to conceal material facts is, as set forth above, sufficient to sufficient to support the cause of action as against Tides and the Tides-related parties.
The demurrer to the seventh cause of action is therefore overruled.
(4) Negligent Interference with Prospective Economic Advantage
“The tort of intentional or negligent interference with prospective economic advantage imposes liability for improper methods of disrupting or diverting the business relationship of another which fall outside the boundaries of fair competition. [citation omitted]” (Settimo Associates v. Environ Systems, Inc. (1993) 14 Cal.App.4th 842, 845.)
Negligent interference with prospective economic advantage is established where a plaintiff demonstrates that (1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff, (2) the 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 the probable future economic benefit or advantage of the relationship, (3) the defendant was negligent, and (4) such negligence caused damage to 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. (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 786.)
Defendants argue that AppFolio “appears to be trying to allege a claim for intentional interference with prospective economic advantage” in the ninth cause of action (as distinguished from negligent interference with prospective economic advantage) and that regardless of such mislabeling, AppFolio’s “attempts to plead conspiracy liability . . . for fraud or concealment fail because “there is no independently wrongful conduct that could support a claim for negligent interference with prospective economic interest.” (Demurrer, p. 9.)
The Court finds that the FAC states a claim for negligent interference with prospective economic advantage. AppFolio alleges in the ninth cause of action that “if PMG is not determined to be the agent of Tides for purposes of contracting with AppFolio, and to the extent a question is raised about whether the contract between AppFolio and PMG continued to have a binding contract after Tides assumed the performance obligations, [d]efendants Tides, Kelly and Delgado knew of and interfered with the economic relationship between AppFolio and PMG that probably would have resulted in an economic benefit to AppFolio.” (FAC, ¶ 131, capitalization altered.) AppFolio also alleges that in order to induce it to permit PMG to revoke its termination of the Agreement and to continue to provide services, defendants promised and lead AppFolio to believe that it would be paid all amounts owed to it under the Agreement, including payment for the duration of the contract term or alternatively an early termination fee. (Id., ¶ 132.) AppFolio alleges that but for these actions, it would have discontinued providing services to PMG and
immediately sought collection of the early termination fee or any other amounts owed.” (Ibid.)
In addition, AppFolio alleges that defendants Kia and Andrade were co-conspirators as the principals, founders, officers, and/or members of Tides, and they agreed on behalf of Tides and in conjunction with Kelley and Delgado to engage in such acts.” (FAC, ¶ 137.)
Further, because the Court has found that the fraud-related causes of action against Tides, Kelley, Kia, Andrade and Delgado are sufficiently stated, it also finds that the defendants’ interference was wrongful by some measure other
than the interference itself. Accordingly, the demurrer to the ninth cause of action for negligent interference with prospective economic advantage is overruled.