MCINTYRE vs CITY OF SACRAMENTO, A CALIFORNIA CHARTER CITY, et al.

24CV013308: MCINTYRE vs CITY OF SACRAMENTO, A CALIFORNIA CHARTER CITY, et al. 09/03/2025 Hearing on Demurrer to First Amended Cross-Complaint in Department 53

Tentative Ruling

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24CV013308: MCINTYRE vs CITY OF SACRAMENTO, A CALIFORNIA CHARTER CITY, et al. 09/03/2025 Hearing on Demurrer to First Amended Cross-Complaint in Department 53

Reporter by a Party with a Fee Waiver (CV/E-211) and it must be filed with the clerk at least 10 days prior to the hearing or at the time the proceeding is scheduled if less than 10 days away. Once approved, the clerk will be forward the form to the Court Reporter’s Office and an official reporter will be provided.

TENTATIVE RULING:

The demurrer of Defendant Universal Protection Service, LP dba Allied Universal Security Services (“Allied”) to the first amended cross-complaint (“1AXC”) of Defendant and Cross-Complainant City of Sacramento (“the City”) is ruled upon as follows.

Background

This is an employment action. On July 3, 2024, Plaintiff Barbara McIntyre (“Plaintiff”) filed her complaint naming numerous defendants, including Allied and the City. On June 25, 2025, Plaintiff filed the operative second amended complaint alleging six causes of action which include whistleblower retaliation, discrimination, and hostile work environment harassment. Pertinent here, the City filed its operative 1AXC on October 28, 2024. In its 1AXC, the City alleges the following causes of action against Allied: (1) Express Contractual Indemnity – Breach of Contract; (2) Duty to Defend – Breach of Contract; (3) Total and Partial Equitable Indemnity and Contribution; (4) Negligence; (5) Implied Contract Indemnity; (6) Declaratory Relief.

Among other things, the City alleges that on August 24, 2020, the City and Allied entered into a Nonprofessional Services Agreement, contract no. PRC000953, for Allied to provide Unarmed Uniformed Security Guard Services at City facilities, including City Hall located at 915 “I” Street, Sacramento, California 95814. (1AXC, ¶ 4.) Plaintiff alleges in her complaint that the City and Allied have committed FEHA violations, Civil Code violations, and Labor Code violations; specifically, Plaintiff alleges that Allied employees, contractors, and/or agents repeatedly and intentionally entered the women’s restroom in City Hall when Plaintiff was in the restroom, causing Plaintiff harm. (Id., at ¶ 8.) The City contends that Allied are “legally responsible and liable in some manner for the events and happenings” alleged in Plaintiff’s complaint. (Id., at ¶9.)

On February 5, 2025, Allied filed its demurrer to the City’s 1AXC. Allied demurs on the following grounds:

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV013308: MCINTYRE vs CITY OF SACRAMENTO, A CALIFORNIA CHARTER CITY, et al. 09/03/2025 Hearing on Demurrer to First Amended Cross-Complaint in Department 53

(1) Allied demurs to the City’s third, fourth, and fifth causes of action in its First Amended Cross-Complaint under Cal. Code Civ. Proc. § 430.10(e) because the City’s First Amended Cross-Complaint fails to state facts sufficient to constitute a cause of action against Allied.

(2) Allied demurs to the City’s fourth cause of action under Code of Civil Procedure § 430.10(e) because the City’s allegations contained therein are barred as a matter of law. Specifically, the City’s fourth cause of action for negligence in connection with Allied’s performance of the Security Contract is barred by the economic loss rule.

(3) Allied demurs to the City’s third, and fifth causes of action under Cal. Code Civ. Proc. § 430.10(e) because the City’s allegations contained therein are barred as a matter of law. Specifically, the City’s third and fifth causes of action based in equitable and/or implied indemnity and contribution are barred by California law due to the existence of the express contractual indemnification clause in the Nonprofessional Services Agreement (“Security Contract”) between Allied and the City.

(Demurrer, p. 4:1-15.)

The parties met and conferred prior to the filing of this motion, but despite their efforts, they were unable to reach a resolution regarding the perceived deficiencies. (See Shelest Decl., ¶¶ 5-12, Exhs. C, D, E.) Since filing this demurrer, it appears the parties continued their meet and confer efforts, and the City has voluntarily dismissed its third and fifth causes of action. (Reply, p. 2:9-11; see Collins Decl., ¶¶ 2-3; see also Request for Dismissal, filed on 6/24/25.) Allied explains that “the sole claim that remains at issue in Allied’s demurrer is the City’s Fourth Cause of Action for Negligence.” (Reply, p. 2:9- 11.) Accordingly, the Court need not address any arguments relating to the third and fifth causes of action. The parties are commended for their ability to resolve certain issues informally without the need for court intervention.

However, as there remains one unresolved issue, the Court will address the merits regarding the cause of action for negligence.

Legal Standard

The function of a demurrer is to test the sufficiency of the pleading it challenges by raising questions of law. (Salimi v. State Comp. Ins. Fund (1997) 54 Cal.App.4th 216,

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV013308: MCINTYRE vs CITY OF SACRAMENTO, A CALIFORNIA CHARTER CITY, et al. 09/03/2025 Hearing on Demurrer to First Amended Cross-Complaint in Department 53

219; Nordlinger v. Lynch (1990) 225 Cal.App.3d 1259, 1271.)

A demurrer “tests the pleadings alone and not the evidence or other extrinsic matters.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) The purpose of a demurrer is to test the legal sufficiency of a claim. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) For the purpose of determining the effect of a complaint, its allegations are liberally construed, with a view toward substantial justice. (Code Civ. Proc., §452; Amarel v. Connell (1988) 202 Cal.App.3d 137, 140-141; Quelimane Co. v.

Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 43, fn. 7.) In this respect, the Court treats the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law, and considers matters which may be judicially noticed. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1111- 1112.) Extrinsic evidence may not properly be considered on demurrer or on a motion to strike. (Ion Equipment Corp. v.

Nelson (1980) 110 Cal.App.3d 868, 881; Hibernia Savings & Loan Soc. v. Thornton (1897) 117 Cal. 481, 482.)

A demurrer may be sustained only if the complaint lacks any sufficient allegations to entitle the plaintiff to relief. (Financial Corp. of America v. Wilburn (1987) 189 Cal.App.3d 764, 778.) “Plaintiff need only plead facts showing that he may be entitled to some relief we are not concerned with plaintiff's possible inability or difficulty in proving the allegations of the complaint.” (Highlanders, Inc. v. Olsan (1978) 77 Cal.App.3d 690, 696-697.) “[Courts] are required to construe the complaint liberally to determine whether a cause of action has been stated, given the assumed truth of the facts pleaded.” (Picton v.

Anderson Union High School Dist. (1996) 50 Cal.App.4th 726.) A demurrer admits the truth of all material facts properly pled and the sole issue raised by a general demurrer is whether the facts pled state a valid cause of action – not whether they are true. (Serrano v. Priest (1971) 5 Cal.3d 584, 591.)

Failure to State a Cause of Action – Negligence (Fourth Cause of Action)

Allied contends that the City fails to state a cause of action for negligence as it would be barred by the economic loss rule. Allied argues that under the economic loss rule, tort recovery for breach of contractual duty is barred unless two conditions are met: (1) claimant must first demonstrate the defendant’s injury causing conduct violated a duty independent of the duties and rights assumed by the parties when they entered the contract, and (2) the defendant’s conduct must have caused injury to persons or property that was not reasonably contemplated by the parties when the contract was formed. (Mov. P&A, p. 5:25-6:3, citing Rattagan v. Uber Technologies, Inc. (2024) 17

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV013308: MCINTYRE vs CITY OF SACRAMENTO, A CALIFORNIA CHARTER CITY, et al. 09/03/2025 Hearing on Demurrer to First Amended Cross-Complaint in Department 53

Cal. 5th 1, 21.)

Here, according to Allied, the City seeks recovery in tort for a loss which is “purely economic”; while the City couches its allegations as a negligence cause of action, it is truly one for equitable and/or implied indemnity. (Mov. P&A, p. 6:4-7, citing 1AXC, ¶¶ 29-32.) Allied argues that the City does not allege any facts showing that Allied negligently or intentionally violated any duty it had to the City, independent from the duties associated with performing the Security Contract. (Id., at p. 6:13-15.) Allied also contends that the parties reasonably contemplated any injuries that Allied’s alleged negligence might cause to others at the time the contract was formed. (Id., at p. 6:22- 24.) As such, Allied concludes that the City’s claim for negligence based on performance of the security contract is barred by the economic loss rule.

In opposition, the City argues that “the economic loss rule has not been applied in California to limit a plaintiff’s tort damages in all cases.” (Oppos., p. 3:9-11, citing North American Chemical Co. v. Superior Court (North American Chemical) (1997) 59 Cal.App.4th 764.) The City argues that because the contract involves the performance of services, the negligent performance of those services may give rise to tort liability. (Id., at p. 3:16-20, citing North American Chemical, supra, 59 Cal.App.4th at p. 776- 770.) Further, the City argues that it would be of no consequence whether the City contemplated Allied’s negligence at the time the contract was executed, rather, the relevant inquiry is whether the City pled facts establishing that Allied owed it a duty of care under the services contract. (Id., at p. 4:10-14.)

In reply, Allied argues that North American Chemical, a case which the City relies upon heavily in its opposition, is no longer “good law.” (Reply, p. 2:25-3:2.) Regardless, according to Allied, the City’s reliance on North American Chemical is misplaced as that case stated that the economic loss rule has been applied to bar a plaintiff’s tort recovery of economic damages unless such damages are accompanied by some form of physical harm. (Id., at p. 3:4-5, citing North American Chemical, supra, 59 Cal.App.4th at p. 777; Robinson Helicopter Co., Inc. v. Dana Corp. (Robinson Helicopter) (2004) 34 Cal.4th 979, 984.)

First, while the City asserts that North American Chemical established an exception to the economic loss rule where a contract involves the performance of services, the Court does not agree that the holding is so broad. (See North American Chemical, supra, 59 Cal.App.4th at p. 785.) Rather, the Court in North American Chemical held that, where the contract is for the performance of services, a “special relationship” between the contracting parties may create an independent duty of care permitting the plaintiff to

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV013308: MCINTYRE vs CITY OF SACRAMENTO, A CALIFORNIA CHARTER CITY, et al. 09/03/2025 Hearing on Demurrer to First Amended Cross-Complaint in Department 53

recover economic losses in tort. (Ibid.) Indeed, the Court applied the six-factor “special relationship” test as announced by the California Supreme Court in J'Aire Corp. v. Gregory, (1979) 24 Cal.3d 799, 804. (Id. at 782 [“The necessary ‘special relationship’ required by J’Aire was established by consideration of six criteria first articulated by the Biakanja court: (1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to the plaintiff, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant's conduct and the injury suffered, (5) the moral blame attached to the defendant's conduct, and (6) the policy of preventing future harm.”].)

Subsequent to the appellate court’s decision in North American Chemical, the California Supreme Court has not explicitly overruled it, but has found negligence claims barred by the economic loss rule when the contract was one for services. (See Aas v. Superior Court (2000) 24 Cal. 4th 627, 643, superseded by statute on other grounds, Cal. Civ. Code, §§ 895–945.5, as recognized in Rosen v. State Farm General Ins. Co. (2003) 30 Cal. 4th 1070, 1079; Erlich v. Menezes, 21 Cal. 4th 543, 552 (1999) [rejecting the argument that the negligent performance of a construction contract, without more, justified an award of tort damages]).

In Aas, the California Supreme Court specifically found that an argument relying on the North American Chemical holding was “not persuasive,” and reiterated that “[a] person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations.” (Aas, supra, 24 Cal. 4th at p. 643.) “Instead, courts will generally enforce the breach of a contractual promise through contract law, except when the actions that constitute the breach violate a social policy that merits the imposition of tort remedies.” (Ibid. [internal quotations and citations omitted].)

As such, the Court does not find that case law – including North American Chemical -- supports application of a “blanket rule” that provides that contracts for services are an exception to the economic loss rule.

The City’s opposition fails to set forth any arguments regarding whether there are allegations supporting a special relationship in this case or regarding any of the other arguments set forth in Allied’s memorandum of points and authorities, including Allied’s assertions that the City fails to allege an independent tort committed by Allied and that the parties reasonably contemplated any injuries from Allied’s alleged negligence at the time the contract was formed. The Court construes the failure to oppose on these issues, as a concession on the merits with regard to these specific grounds for this demurrer. (See D.I. Chadbourne, Inc. v. Superior Court (1964) 60 Cal.2d 723, 728, n.4.)

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV013308: MCINTYRE vs CITY OF SACRAMENTO, A CALIFORNIA CHARTER CITY, et al. 09/03/2025 Hearing on Demurrer to First Amended Cross-Complaint in Department 53

Based on the arguments raised by the parties, and for the foregoing reasons, Allied’s demurrer to the 1AXC is SUSTAINED with leave to amend.

Disposition

Based on the foregoing, Allied’s demurrer to the Fourth Cause of Action is sustained.

As this is Allied’s first challenge to the City’s pleadings, the Court will allow leave to amend.

The City may file and serve an amended cross complaint no later than September 19, 2025. Although not required by statute or court rule, the City is directed to present the clerk a copy of this ruling at the time of filing any Second Amended Cross-Complaint.

This minute order is effective immediately. No formal order or other notice is required. (Code Civ. Proc. §1019.5; CRC Rule 3.1312.)