Board of Trustees of the California State University v. Schools Excess Liability Fund

Case Number

25CV03707

Case Type

Hearing Date / Time

Wed, 11/26/2025 - 10:00

Nature of Proceedings

Demurrer to First Amended Complaint

Tentative Ruling

For Plaintiff Board of Trustees of the California State University: James E. Curry, Loeb & Loeb LLP

For Defendant Schools Excess Liability Fund: James P. Wagoner, Lejf E. Knutson, Robert K. Landen, Maria E. Valencia, McCormick, Barstow, Sheppard, Wayte & Carruth LLP

RULING

For all reasons discussed herein, the demurrer of Defendant to Plaintiff’s first amended complaint is sustained, in part as to the fourth and fifth causes of action only, with leave to amend. Except as herein sustained, the demurrer is otherwise overruled. Plaintiff shall, on or before December 10, 2025, file and serve its second amended complaint, if any.

Background

On February 10, 2025, Plaintiff Board of Trustees of the California State University (CSU) filed, as Superior Court of Los Angeles County case number 25STCV03775, a complaint against Defendant Schools Excess Liability Fund (SELF), alleging three causes of action: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; and (3) for an accounting.

Court records reflect that on February 27, 2025, the Los Angeles County Superior Court entered an order finding that the present action and case number 21LBCV00335 (the Related Action) are related, with this action designated as the lead case.

On May 15, 2025, ostensibly without any response to the original complaint having been filed by SELF, CSU filed a first amended complaint (FAC) against SELF, alleging the same three causes of action described above, and adding a fourth cause of action for promissory estoppel, a fifth cause of action for promissory fraud, and a sixth cause of action for writ of mandate pursuant to Code of Civil Procedure section 1085.

Court records further reflect that on May 27, 2025, ostensibly upon a stipulation by the parties, the Los Angeles County Superior Court entered an order that the action be transferred to this Court for all further proceedings. The action was subsequently received and filed in this Court on June 16, 2025, and assigned a new case number.

Briefly, as alleged in the FAC:

SELF was created in 1986 as a member-owned, statewide partnership of public educational agencies, or a joint powers authority, that provides risk pooling services to its member entities pursuant to a Memorandum of Coverage (the MOC). (FAC, ¶¶ 1 & 5-6.) SELF collects contributions from its members and provides excess liability and workers compensation coverage from those contributions. (FAC, ¶ 7.) Each member’s coverage is outlined annually in an MOC setting out the terms, conditions, coverage, and limits of liability for that plan year. (FAC, ¶ 7.)

CSU is a public entity that joined SELF and its Workers Compensation Program (the WC Program) in 1995. (FAC, ¶¶ 3-4 & 16.) The WC Program provides workers compensation risk sharing to members for coverage which began on July 1, 1995. (FAC, ¶ 17.)

SELF is governed by Joint Exercise of Powers Agreements (JPAs or, in the singular, JPA) and bylaws implemented pursuant to those JPAs which together outline the rights and obligations of SELF and its members. (FAC, ¶¶ 2 & 8.) The JPA in effect when CSU joined SELF was the 1995 JPA, and the bylaws in effect were the 1995 Bylaws. (FAC, ¶¶ 9-10.) SELF amended its JPAs and bylaws in April 2001 (the 2001 JPA). (FAC, ¶ 13.)

Prior to the end of 2002, CSU notified SELF of its intention to withdraw from the WC Program effective June 30, 2003, in accordance with the withdrawal procedures set out in the 2001 JPA, because the claims of members other than CSU were causing massive cost overruns on non-CSU claims. (FAC, ¶¶ 18 & 21.) CSU later withdrew as a member of SELF, including from SELF’s excess liability program, effective July 1, 2010. (FAC, ¶ 18.) When CSU formally withdrew and terminated its membership in SELF on June 30, 2010, the 2001 JPA and a 2008 version of the bylaws (the 2008 Bylaws) were in effect. (FAC, ¶¶ 3 & 13.)

SELF terminated the WC Program in 2010 because of cost overruns. (FAC, ¶ 21.) In early 2011, eight years after CSU left the WC Program, SELF notified CSU and other former members that its Board had determined an additional assessment (the Additional Assessments) would be required to account for unfunded liabilities expected to impact the pool. (FAC, ¶ 26.) SELF promised its former members, in documents associated with the Additional Assessments, that SELF would discontinue the Additional Assessments if SELF determined it had collected enough money to pay for the cost of known and unknown claims arising under the WC Program. (FAC, ¶ 27.)

Invoices and correspondence to CSU regarding the Additional Assessments also included a copy of a Workers’ Compensation Shared Risk Layer Plan Fund Adjustment Policy (the WC Adjustment Policy), which details SELF’s policy of reviewing the financial position of the WC Program annually to determine if an assessment or refund is appropriate, and the obligations of SELF concerning member eligibility for a refund. (FAC, ¶¶ 28 & 43.)

On February 4, 2011, SELF assessed CSU, and CSU paid, Additional Assessments in the amount of $18,032,940, which was split into annual payments. (FAC, ¶ 26.)

As required by the JPA, each SELF program commissioned an annual actuarial study to estimate the cost of known and unknown claims. (FAC, ¶ 33.) The actuarial report for 2018 commissioned by SELF estimated the cost of known and unknown claims for the WC Program to be $69,994,000. (FAC, ¶¶ 34.) The WC Program had $89,120,000 in total assets according to SELF’s audit report for the year ending June 30, 2018, demonstrating a total net position of $19,249,000. (FAC, ¶ 34.) Thus, in 2018, according to actuarial projections, SELF already had enough assets to fund present and future liabilities in connection with the WC Program. (FAC, ¶ 34.) The WC Program having been terminated in 2010, the estimated cost of known and unknown claims by the actuary had decreased every year since 2011 and SELF had every expectation that it would not need additional funds. (FAC, ¶ 34.)

During the five years following SELF’s 2018 actuarial report described above, and despite having sufficient assets to fund projected future liabilities, SELF collected $6,817,850.00 in further assessments from CSU after SELF should have discontinued the Additional Assessments. (FAC, ¶ 36.)

In a letter to CSU dated May 12, 2023, from SELF’s Chief Executive Officer Dave George, SELF stated, among other things, “‘[i]n 2012, SELF [c]alculated the amount of the assessment needed to fully fund all of the outstanding workers’ compensation claims in the program. To ease volatility, a plan was created that would assess participating members at a flat rate over a 10-year period. A mid-term review in 2018 determined that the program was performing well and no adjustment would be necessary for the remaining years.’” (FAC, ¶ 38.) SELF further stated that “‘an evaluation of the program was conducted by SELF’s actuary following the collection of the 10th round of annual payments and it was determined that the program is now sufficiently funded to pay all remaining outstanding claims. The [WC Program] has a current net position of $29M as of 6/30/22). The [WC Program] remains in runoff.” (FAC, ¶ 38.)

As of the most recent actuarial report of the WC Program for 2024, and the last audit commissioned by SELF, the total estimated cost of known and unknown claims for the WC Program is $42,287,000. (FAC, ¶ 40.) Since the total assets of the WC Program are $80,200,000, this leaves a balance of net assets of $37,913,000. (FAC, ¶ 40.) Based on the ratio of CSU’s payments for additional assessments to the total assessments levied on former members, SELF owes CSU a refund of $10,615,640. (FAC, ¶ 40.)

The above is not intended to be an exhaustive summary of allegations of the FAC.

On July 3, 2025, SELF filed a demurrer to each cause of action alleged in the FAC, which is opposed by CSU.

Analysis

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.) “In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.’ [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) A demurrer tests the pleadings alone and not the evidence or extrinsic matters, and therefore lies only where the defects appear on the face of the pleading or from matters which are the proper subject of judicial notice. (Ibid.)

Request for judicial notice:

In support of the demurrer, SELF requests that the Court take judicial notice of: (1) of a “cover email” dated March 27, 2025, and trial list submitted in the Related Action; (2) an email exchange between counsel for the parties confirming exhibits admitted in the Related Action; (3) the 1995 JPA, which SELF asserts was admitted into evidence in the Related Action as trial exhibit no. 21; and (4) the 2001 JPA, which SELF asserts was admitted into evidence in the Related Action as trial exhibit no. 105. (SELF RJN, ¶¶ 1-4 & Exhs. A-D.)

The 1995 JPA and the 2001 JPA, each of which are alleged in the FAC, each state that these agreements are “entered into among those public educational agencies as defined in [the 1995 JPA], which are or may hereafter become, parties to [the 1995 JPA] for the purpose of operating [SELF].” (SELF RJN, Exh. A at pdf p. 147 & Exh. B at pdf p. 157.)

Though the 1995 JPA and the 2001 JPA are not attached to the FAC, the FAC quotes and summarizes parts of these documents in some detail. (See Ingram v. Flippo (1999) 74 Cal.App.4th 1280, 1285, fn. 3, disapproved on another ground in Leon v. County of Riverside (2023) 14 Cal.5th 910, 1106 [granting judicial notice of documents summarized in complaint].) Furthermore, these documents, together with facts alleged in the FAC, show or suggest, expressly and by inference, that the parties to the 1995 JPA and the 2001 JPA are public entities. (See, e.g., FAC, ¶¶ 1-6.) Courts take judicial notice of “[o]fficial acts of the legislative, executive, and judicial departments of the United States and of any state of the United States.” (Evid. Code, § 452, subd. (c); see also Save Lafayette Trees v. City of Lafayette (2019) 32 Cal.App.5th 148, 153, fn. 2 [granting judicial notice of contract between a city and a public utility].

For all reasons discussed above, the Court will grant the request of SELF for judicial notice of the 1995 JPA and the 2001 JPA. Though, for present purposes, the Court may consider the existence of these agreements, will “read the [FAC] as if the [the 1995 JPA and the 2001 JPA] were set out in full therein...” (Mendez v. Pacific Gas & Elec. Co. (1953) 115 Cal.App.2d 192, 195), and may notice the “legal consequences” of the 1995 JPA and the 2001 JPA (Julian Volunteer Fire Co. Assn. v. Julian-Cuyamaca Fire Protection Dist. (2021) 62 Cal.App.5th 583, 600), judicial notice of these documents does not extend to their truthfulness, enforceability, or proper interpretation or meaning (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113-114 (Fremont).).

As to the cover email and email exchange further described above, SELF fails to explain why these documents are relevant to the issues presented on demurrer in regard to whether the FAC states facts sufficient to constitute a cause of action. (Evid. Code, § 350; Mangini v. R. J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063, overruled on other grounds in In re Tobacco Cases II (2007) 41 Cal.4th 1257, 1276.) For these reasons, the Court will deny SELF’s request for judicial notice of the cover email and email exchange further described above.

Demurrer to the first cause of action:

SELF asserts that the central contention underlying the first cause of action for breach of contract, and all causes of action alleged in the FAC, is that SELF breached its contractual obligations to CSU under the operative JPA by failing to refund any of CSU’s past contributions after the WC Program was terminated. As grounds for its demurrer to that cause of action, SELF contends that the FAC fails to “ ‘set out’ ‘verbatim’ all of the operative terms of the 1995 and 2001 JPAs or Bylaws which allegedly contractually obligate SELF to make such a refund[]”,that the “closest” the FAC comes to doing so is by quoting what SELF describes as an out of context portion of the 2001 JPA, that the FAC quotes only portions of the JPAs and bylaws at issue, and that the purported contractual obligations of SELF alleged in the FAC are without any textual support from the 1995 JPA, the 2001 JPA, or bylaws cited in the FAC. (Demurrer at p. 10, ll. 20-21, fn. 1.) For these reasons, SELF argues, allegations that CSU is contractually owed a refund constitute legal conclusions unsupported by complete provisions of the JPAs or bylaws.

SELF also contends that, under the circumstances present here, the Court should require CSU to attach to any amended pleading, complete copies of any JPAs which CSU asserts were breached and any bylaws which were allegedly unfulfilled.

“A breach of contract is ‘[t]he wrongful, i.e., the unjustified or unexcused, failure to perform’ the terms of a contract. [Citation.]” (Chen v. PayPal, Inc. (2021) 61 Cal.App.5th 559, 570.) “A cause of action for breach of contract requires pleading of a contract, Plaintiff’s performance or excuse for failure to perform, Defendant’s breach and damage to Plaintiff resulting therefrom. [Citation.] A written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect. [Citation.]” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.)

SELF does not appear to dispute that the first cause of action arise from purported breaches by SELF of the 2001 JPA. A reasonable interpretation of the FAC shows that CSU alleges that the failure of SELF to, among other things, refund the amount described above to CSU, constitutes a breach of section III(G), III(U)(2), section III(U)(3), and section III(U)(7) of the 2001 JPA. (FAC, ¶ 46.)

In the FAC, CSU alleges that section III(U)(2) of the 2001 JPA is detailed through the WC Adjustment Policy, which purportedly states that “‘SELF shall annually review the Workers’ Compensation financial position for each open program year based on SELF’s actuarial study and evaluate the claims payment pattern to determine if the current assets and projected payments are sufficient to maintain program liquidity,’ and that such review ‘will evaluate the appropriateness of declaring a refund or an assessment to members.’” (FAC, ¶ 42.)

The FAC also alleges that the WC Adjustment Policy states, verbatim, that “’a [m]ember shall be eligible for a refund’” upon “’[p]articipation in the plan for three years’” if the “’[a]pplicable program year results in a positive outstanding adjustment balance[,]’” and that when a member qualifies for a refund, “‘[t]he amount refunded shall be a certain percentage of the “outstanding adjustment balance” as determined by the Board of Directors.’” (FAC, ¶ 43.)

The FAC also recites, verbatim, the provisions of section III(U)(3) of the 2001 JPA, which purportedly state that “‘[t]he Board shall, either directly or by contract... [p]rovide a strict accountability of all funds for each program and an [sic] report of all receipts and disbursements.’” (FAC, ¶ 15.) The FAC also recites provisions of the 2001 JPA in which the term “program” is defined. (Ibid.)

The FAC also alleges, expressly and by inference, that section III(G) of the 2001 JPA requires SELF to comply with Government Code section 54950 et seq., and that section III(U)(7) requires SELF to provide management reports, actuarial analyses, claims audits, and special reports. (FAC, ¶ 46.)

The FAC further alleges that SELF breached contractual obligations owed to CSU pursuant to the 2008 bylaws, which are also quoted or summarized in the FAC. (See FAC, ¶ 47.)

A general demurrer to a complaint based on a written contract “admits not only the contents of the instrument but also any pleaded meaning to which the instrument is reasonably susceptible. [Citation.] While Plaintiff's interpretation of the contract ultimately may prove invalid, it [is] improper to resolve the issue against [the Plaintiff] solely on [the Plaintiff’s] own pleading. ‘In ruling on a demurrer, the likelihood that the pleader will be able to prove his allegations is not the question.’ [Citation.]” (Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239.)

As the demurrer admits the pleaded meaning of the provisions of the 2001 JPA, and the 2008 bylaws alleged in the FAC, and as SELF does not appear to dispute that the quoted portions further described above are not accurate, the Court will, for present purposes, accept as true the meaning offered by CSU. Giving the FAC a reasonable interpretation and accepting as true those facts which are alleged expressly and by inference, the FAC sufficiently alleges the essential terms of the 2001 JPA which CSU contends were breached by SELF, and their legal effect. (Miles v. Deutsche Bank Nat’l Trust Co. (2015) 236 Cal.App.4th 394, 401-402 (Miles).) Moreover, to the extent there exist ambiguities, the terms of the 2001 JPA described above appear reasonably susceptible to the meaning attributed by CSU in the FAC. (Connell v. Zaid (1969) 268 Cal.App.2d 788, 794-795.) The Court does not, for present purposes, consider whether or not CSU can prove these allegations. (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1034.)

For all reasons discussed above, CSU has, for pleading purposes, sufficiently alleged its construction of the provisions of the 2001 JPA allegedly breached by SELF, and their legal effect.  “Accordingly, [CSU’s] failure either to attach or to set out verbatim the terms of the contract [is] not fatal to [the] breach of contract cause of action.” (Miles, supra, 236 Cal.App.4th at p. 402.)

SELF also disputes CSU’s interpretation of the JPAs at issue. For example, SELF contends that, “contrary to CSU’s contentions,” the JPA agreements governing the rights and obligations between it and SELF do not obligate SELF to refund any excess money to former members; that the JPAs provide only that withdrawing parties may be entitled to a refund; that the terms of the JPAs expressly grant SELF’s board the discretion to determine whether to provide a refund to withdrawing members such as CSU; that these provisions are enforceable as written; and that the provisions of the JPAs “clearly mean” that the only contractual requirement of a refund of excess reserves arises when the entire agreement is terminated which the FAC does not allege.. (Demurrer at pp. 11-14.)

To support the contentions described above, SELF relies on provisions appearing in the 1995 JPA and the 2001 JPA, which SELF effectively concedes are not, with one exception, set forth in the FAC. (Demurrer at p. 12, ll. 1-4 & 13-16; p. 14, ll. 10-13 [also citing RJN].)

“The hearing on demurrer may not be turned into a contested evidentiary hearing through the guise of having the Court take judicial notice of documents whose truthfulness or proper interpretation are disputable.” (Fremont, supra, 148 Cal.App.4th at p. 114.) As the contentions of SELF described above dispute the proper interpretation of the JPA provisions alleged or at issue in the FAC, the demurrer cannot be sustained on these grounds. To the extent SELF disputes the proper interpretation of these provisions, SELF may file an appropriate motion at a procedurally appropriate time.

For all reasons discussed above, the Court will overrule the demurrer to the first cause of action for breach of contract on the grounds stated.

Demurrer to the second cause of action:

In its demurrer to the second cause of action for breach of the implied covenant of good faith and fair dealing, SELF advances the same points further discussed above and contends that, for these same reasons, SELF’s actions are authorized by the express terms of the JPAs, and are not inconsistent with any of SELF’s obligations because the JPAs provide SELF’s board with the discretion to impose additional assessments on withdrawn members, which CSU remains contractually obligated to pay, and with the discretion to determine whether to issue refunds. For these reasons, SELF contends, as a matter of law these acts cannot constitute a breach of the implied covenant.

As the grounds for the demurrer to the second cause of action are effectively the same grounds asserted as to the first cause of action further discussed above, the same reasoning and analysis apply here. For all reasons further discussed above, the Court will overrule the demurrer to the second cause of action on the grounds stated.

Demurrer to the third cause of action:

To the extent the demurrer to the third cause of action for an accounting is made on the same grounds further discussed above, the Court will overrule the demurrer as to those grounds.

As to the third cause of action, SELF further contends that, because the FAC alleges the specific amount of the refund purportedly due to CSU, the cause of action for an accounting is subject to demurrer.

“An action for an accounting has two elements: (1) ‘that a relationship exists between the Plaintiff and Defendant that requires an accounting’ and (2) ‘that some balance is due the Plaintiff that can only be ascertained by an accounting.’ [Citations.] The action carries with it an inherent limitation; an accounting action ‘is not available where the Plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation.’ [Citation.]

“An action for an accounting has been characterized as ‘a means of discovery.’ [Citation]. This characterization is consistent with the idea that a Plaintiff seeking an accounting cannot ‘allege[ ] the right to recover a sum certain’ because he or she lacks the information necessary to determine the precise amount that may be due. [Citation.] The Plaintiff’s lack of knowledge drives the need for discovery; and the fact that the gap can be filled via discovery implies the information is within the control of the Defendant. In other words, the Defendant in an accounting action possesses information unknown to the Plaintiff that is relevant for the computation of money owed.” (Sass v. Cohen (2020) 10 Cal.5th 861, 869 (Sass).)

The FAC expressly alleges that the amount of the refund as stated, is “[b]ased on the ratio of CSU’s payments for additional assessments to the total assessments levied on former members....” (FAC, ¶ 40.) Furthermore, the third cause of action for an accounting is alleged “[i]n the alternative to the breach of contract and implied covenant causes of action” (FAC, ¶ 59.) As to that cause of action, the FAC also alleges that, to the extent SELF disputes CSU’s calculations, information regarding CSU’s portion of the Additional Assessments and payments by CSU compared to other members is within the possession and control of SELF and “relevant to compute and determine the amount of money SELF owes to CSU.” (Ibid.)

It can be reasonably inferred from the allegations described above that the amount of the refund stated in the FAC is not “absolute” and instead sets forth an “an estimate of the amount of money due the complaining party....” (Ely v. Gray (1990) 224 Cal.App.3d 1257, 1262 [also noting that accounting actions “often” include an estimate]; see also Sass, supra, 10 Cal.5th at p. 879 [a Plaintiff seeking an accounting is not precluded from alleging an estimate].) For these and all further reasons discussed above, and as it can be inferred from the express allegations described above, that CSU is or may be unable to state the precise amount of the refund purportedly owed by SELF (Sass, supra, at p. 879), the Court will overrule the demurrer to the third cause of action on the grounds stated.

Demurrer to the fourth cause of action:

As grounds for its demurrer to the fourth cause of action for promissory estoppel, SELF asserts that the FAC alleges, or effectively alleges, that both SELF and CSU’s rights and obligations are governed by the parties’ contractual arrangements which consist of the JPAs, and which, according to SELF, grant SELF’s Board the authority to declare equity distributions or credits. For these reasons, SELF argues, the breach of contract and promissory estoppel claims are mutually exclusive, and CSU cannot, and has failed to, allege that it relied to its detriment on a separate promise by SELF.

SELF also asserts that the FAC fails to allege a clear and unambiguous promise that SELF would issue a refund to CSU under any specific set of circumstances, or that CSU reasonably relied on any purported promise considering the express terms of the JPAs. Further, SELF contends, applying promissory estoppel against SELF under the circumstances present here would violate public policy to the extent CSU’s claim necessarily relies on any advance agreement or promise as to how SELF will vote or exercise its discretion regarding any refunds to be provided to CSU or other members.

The doctrine of promissory estoppel is equitable in nature, and arises from the principle that “ ‘ “he who by his language or conduct leads another to do what he would not otherwise have done shall not subject such person to loss or injury by disappointing the expectations upon which he acted.” ’ [Citations.] ” (Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031, 1041; Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935, 944-945.) “The elements of a promissory estoppel claim are ‘(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.’ [Citation.]” (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 901.)

In the fourth cause of action, CSU alleges that “[a]lthough the WC Program had been terminated in 2003, SELF made a clear promise through invoicing and other communications with CSU on at least February 4, 7 2011, January 5, 2012, December 21, 2012, and July 8, 2013, to abide by the WC Adjustment Policy with respect to the Additional Assessments, including by deeming CSU eligible for a refund upon participation in the plan for three years and recognition of a positive outstanding adjustment balance. Further, SELF made a clear promise to CSU that the SELF Board would, after the fifth year of the Additional Assessments, ‘review the status of the program assessment at that point for any further adjustment[.]’” (FAC, ¶¶ 28 & 62.) CSU also alleges that in 2023, the Chief Executive Officer of SELF reaffirmed SELF’s “prior” promises by stating the Additional Assessments continued to be associated with the WC program. (FAC, ¶ 62.)

The FAC further alleges that the WC Adjustment Policy details the obligations of SELF under the 2001 JPA, and was approved by SELF’s Board on December 6, 2022. (FAC, ¶¶ 29 & 42.)

“ ‘Promissory estoppel is “a doctrine which employs equitable principles to satisfy the requirement that consideration must be given in exchange for the promise sought to be enforced.” ’ [Citation.] ‘The purpose of this doctrine is to make a promise binding, under certain circumstances, without consideration in the usual sense of something bargained for and given in exchange.’ [Citation.] Such consideration, however, ‘is essential to the existence of a contract.’ [Citation.] Hence, ‘promissory estoppel is distinct from contract in that the promisee’s justifiable and detrimental reliance on the promise is regarded as a substitute for the consideration required as an element of an enforceable contract.’ [Citation.]” (Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc. (2012) 211 Cal.App.4th 230, 242, original italics.) For these reasons, “where the promisee’s reliance was bargained for, the law of consideration applies; and it is only where the reliance was unbargained for that there is room for application of the doctrine of promissory estoppel.” (Healy v. Brewster (1963) 59 Cal.2d 455, 463.)

Considering the allegations of the FAC described above, which are not a model of clarity, it can be inferred from the FAC that the WC Adjustment Policy, which sets forth the purported promises giving rise to the cause of action for promissory estoppel, restates, and does not in any manner modify, the obligations of SELF under the 2001 JPA. (Bushell v. JPMorgan Chase Bank, N.A. (2013) 220 Cal.App.4th 915, 930 (Bushell) [general discussion of promissory estoppel arising from a promise to modify a contract].) Though CSU appears to argue in its opposition to the demurrer that the WC Adjustment Policy modified the JPAs, CSU fails to explain, with reasoned argument, why the FAC alleges facts showing how or why the 2001 JPA was modified by the WC Adjustment Policy.

As CSU’s reliance on the 2001 JPA was bargained for under the facts alleged in the FAC, and as the obligations of SELF contained in the 2001 JPA are alleged to be restated and included in the WC Adjustment Policy, the FAC fails, for all reasons discussed above, to state facts sufficient to constitute a cause of action for promissory estoppel. For these and all further reasons discussed above, the Court will sustain the demurrer to the fourth cause of action alleged in the FAC on the grounds further discussed above. As the Court will sustain the demurrer to the fourth cause of action on these grounds, it need not address the remaining grounds asserted by SELF.

Demurrer to the fifth cause of action:

As to the fifth cause of action for promissory fraud alleged in the FAC, SELF contends that the FAC alleges no facts showing that SELF made any false promises or representations to CSU, failed to perform its promise of providing pooled workers compensation shared benefits, failed to provide adequate claims handling services to CSU, fraudulently induced CSU to pay the Additional Assessments, or falsely promised that refunds would be issued. SELF also contends that it is immune from liability for any negligent or intentional misrepresentations under Government Code sections 815.2, 818.8, and 822.2. For these reasons, SELF argues, the FAC fails to state facts sufficient to constitute a cause of action for promissory fraud.

Alternatively, SELF contends that the fifth cause of action fails to plead who, when, where, to whom, or by what means SELF falsely promised to issue a refund to CSU.

“Under Civil Code section 1709, one is liable for fraudulent deceit if he ‘deceives another with intent to induce him to alter his position to his injury or risk... .’ [Citation.] Section 1710 of the Civil Code defines deceit for the purposes of Civil Code section 1709 as, inter alia, ‘[a] promise, made without any intention of performing it.’ [Citation.] ‘ “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.” [Citations.]’ [Citation.] Each element must be alleged with particularity.” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1059-1060 (Beckwith).)

“ ‘A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud. [Citations.]’ [Citation.] Thus, in a promissory fraud action, to sufficiently alleges [sic] Defendant made a misrepresentation, the complaint must allege (1) the Defendant made a representation of intent to perform some future action, i.e., the Defendant made a promise, and (2) the Defendant did not really have that intent at the time that the promise was made, i.e., the promise was false.

“To sufficiently plead the first requirement, that the Defendant made a promise, the complaint must state ‘ “facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’ ” [Citation.]’ [Citation.] As for the second requirement, the falsity of that promise is sufficiently pled with a general allegation the promise was made without an intention of performance. [Citation.] ‘The representation (implied) is that of the intention to perform [citation]; the truth is the lack of that intention. Purely evidentiary matters—usually circumstantial evidence or admissions showing lack of that intention—should not be pleaded. Hence, the only necessary averment is the general statement that the promise was made without the intention to perform it, or that the Defendant did not intend to perform it.’ [Citation.]” (Beckwith, supra, 205 Cal.App.4th at p. 1060, original italics.)

“ ‘ “[A]ctual reliance occurs when a misrepresentation is ‘ “an immediate cause of [a Plaintiff’s] conduct, which alters his legal relations,” ’ and when, absent such representation,” the Plaintiff “ ‘ “would not, in all reasonable probability, have entered into the contract or other transaction.” ’ ” ’ [Citation.] To allege actual reliance with the requisite specificity, ‘[t]he Plaintiff must plead that he believed the representations to be true ... and that in reliance thereon (or induced thereby) he entered into the transaction. [Citation.]’ [Citation.]” (Beckwith, supra, 205 Cal.App.4th at pp. 1062-1063.)

The FAC alleges that the purportedly false promise by SELF was made “through invoicing communications with CSU in 2011 and 2014”, and include that SELF would “abide by the WC Adjustment Policy with respect to the Additional Assessments, including by deeming CSU eligible for a refund upon participation in the plan for three years and recognition of a positive outstanding adjustment balance.” (FAC, ¶ 69.)

The FAC also alleges a false promise by SELF “that the SELF Board would, after the fifth year of the Additional Assessments, ‘review the status of the program assessment at that point for any further adjustment’”, and that in 2023, SELF’s Chief Executive Officer reaffirmed these promises by stating the Additional Assessments continued to be associated with the WC Program and that surplus funds remain the assets of the members. (FAC, ¶ 69.)

The same or similar reasoning and analysis apply. As further discussed above, the allegations of the FAC show or suggest that the WC Adjustment Policy did not modify the obligations of SELF under the operative JPA. For these reasons, the FAC gives rise to an inference that, at most, SELF promised to take steps to ensure its continued performance of the operate JPA or bylaws.

Further, allegations that CSU paid the Additional Assessments after CSU left the WC Program suggest or indicate that these assessments were made under the JPA then in effect, and that CSU remained bound by that agreement after it left the WC Program. Under these circumstances as alleged in the FAC, CSU fails to explain why any purportedly false promise to perform, or continue performing, any obligations required under the 2001 JPA, or any other JPA or bylaw in effect during relevant times, induced CSU to make any payment it would not have otherwise been obligated to make, notwithstanding that the FAC alleges that CSU is due a refund of some portion of that payment. (See, e.g., Bushell, supra, 220 Cal.App.4th at pp. 930-931.) For these same reasons, the FAC fails to sufficiently allege CSU’s reliance on a false promise by SELF.

Moreover, “something more than nonperformance is required to prove the Defendant’s intent not to perform his promise.” (People v. Ashley (1954) 42 Cal.2d 246, 263.) The allegations of the FAC further described above are also insufficient to show what, if any, promise SELF made in regard to the Additional Assessments at the time CSU joined SELF, enrolled in the WC Program, or became bound by the operative JPA or bylaws.

For all reasons discussed above, the Court will sustain the demurrer to the sixth cause of action on the grounds described above. Though, in the interests of judicial efficiency, the Court declines to reach the additional grounds asserted in the demurrer, including as to whether SELF is immune from liability for any purported fraud under any particular provision of the Government Code, the Court notes generally that, to the extent a Plaintiff alleges a claim arising from purported false representations by a government entity which were made or intended to deceive and induce that Plaintiff to enter into a contract, the “doctrine of governmental immunity encompassed by Government Code section 818.8 does not apply and is no bar....” (Arthur L. Sachs, Inc. v. City of Oceanside (1984) 151 Cal.App.3d 315, 323.)

Demurrer to the sixth cause of action:

The arguments advanced by SELF in support of its demurrer to the sixth cause of action for writ of mandate are the same or similar as those further discussed above, in regard to whether the operative terms of the JPAs grant SELF’s board the discretion to evaluate whether it is appropriate to issue a refund to a withdrawing member. The same reasoning and analysis apply here.

SELF further contends that, to the extent CSU’s claims for damages are incorporated into the sixth cause of action, these damages are not recoverable in an action for writ of mandate. Notwithstanding whether the allegations of the FAC are sufficient to state a cause of action for promissory estoppel or promissory fraud, “a demurrer cannot rightfully be sustained ... to a particular type of damage or remedy. “ (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047.) For these and all reasons further discussed above, the Court will overrule the demurrer to the sixth cause of action alleged in the FAC.

Leave to amend:

In its opposition to the demurrer, CSU states that, to the extent the Court sustains the demurrer as to any cause of action alleged in the FAC, it can amend the FAC to state that cause of action. (Opp. at p. 24.) Apart from this general and conclusory statement, CSU offers no reasoned argument showing “what facts could be pleaded to cure defects in the complaint and how they state a cause of action.” (Eghtesad v. State Farm General Ins. Co. (2020) 51 Cal.App.5th 406, 411.) Though CSU has failed to show how the FAC can be amended, as this is effectively an original pleading which does not conclusively show on its face that it is incapable of amendment as to the fourth and fifth causes of action further discussed herein, the Court will grant CSU leave to amend. (Id. at pp. 411-412.)