Kim vs. Jetema USA Inc.

“In general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922.) In other words, “‘[t]here is no liability in tort for economic loss caused by negligence in the performance or negotiation of a contract between the parties.’ (Rest., § 3.)” (Sheen, 12 Cal.5th at 923.) “Quite simply, the economic loss rule ‘prevent[s] the law of contract and the law of tort from dissolving one into the other.’” (Robinson Helicopter, Inc. v. Dana Corp (2004) 34 Cal.4th 979, 988).

“Whereas contract actions are created to enforce the intentions of the parties to the agreement, tort law is primarily designed to vindicate ‘social policy.’” (Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 19). “As a result of this distinction between contract and tort claims, parties injured solely by a contractual breach have a narrower set of remedies compared to those available to litigants who suffered tortious injury.” (Id.) “The economic loss rule requires a [contractual party] to recover in contract for purely economic loss due to disappointed expectations, unless [the party] can demonstrate harm above and beyond a broken contractual promise.” (Id. at 20.)

“Under the economic loss rule, tort recovery for breach of a contract duty is generally barred unless two conditions are satisfied. A plaintiff must first demonstrate the defendant's injury-causing conduct violated a duty that is independent of the duties and rights assumed by the parties when they entered the contract. Second, 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.” (Id. at 20–21.)

Here, the FAXC fails to allege that Kim violated a duty that is independent of the duties set forth in the contract between the parties. Further, the FAXC fails to allege that Kim caused injury to persons or property that was not reasonably contemplated by the parties when the contract was formed. The only damages alleged are attorneys’ fees that Jetema incurred to review/draft the employment agreements with Kim. As such, possible immigration violations (i.e., the source of Jetema’s alleged damages) were foreseen by the parties at the time of the contract. Further, Jetema only alleges economic losses and does not allege any loss to Jetema’s person or property. Jetema’s alleged damages of $2,000 to $2,400 in outside counsel fees to review the employment agreement and immigration compliance appear tenuous, at best, and tethered to foreseeable consequences of the parties’ agreement.

Finally, the only allegation of any fraudulent intention came in March 2025, when Kim already retained counsel and provided Jetema with a spreadsheet of hours and the allegations that Kim made in Kim’s complaint—two years after the parties’ employment agreement. (FAXC, ¶ 18.) There are insufficient specific allegations that, at the time of the employment agreement in 2023, Kim had fraudulent intent.

Accordingly, the first two causes of action are anchored on mere breaches of contract and cannot, as alleged, be transmuted to tortious injury. Tort recovery for a mere breach of contract duty is generally barred by the economic loss rule. Jetema has failed to allege harm above and beyond a broken contractual promise.

For these reasons, the demurrer to the first and second causes of action is SUSTAINED.

“It is an abuse of the trial court's discretion to sustain a demurrer without leave to amend if there is a reasonable possibility the plaintiff can amend the complaint to allege any cause of action.” (Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 711.) “Liberality in permitting amendment is the rule, if a fair opportunity to correct any defect has not been given.” (Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227.)

It is the plaintiff's “burden to establish how the complaint can be amended to state a valid cause of action.” (Sanowicz v. Bacal (2015) 234 Cal.App.4th 1027, 1044.) In order to meet this burden, a plaintiff may submit a proposed amended complaint or enumerate facts and demonstrate how those facts establish a cause of action. (See Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 890.)

The trial court properly sustains a demurrer without leave to amend where plaintiff fails to meet its burden. (Jensen v. Home Depot (2018) 24 Cal.App.5th 92, 97.) “[N]otwithstanding the liberal policy favoring amendment of complaints, upon sustaining a demurrer to a first amended complaint, the court may deny leave to amend when the plaintiff fails to demonstrate the possibility of amendments curing the first amended complaint's defects.” (Hedwall v. PCMV, LLC (2018) 22 Cal.App.5th 564, 579.)

Here, Jetema does not provide any explanation as to how it would amend to state viable claims against Kim. The court has already provided Jetema an opportunity to cure defects in Jetema’s cross-complaint. The court’s prior ruling provided specific detail and legal authority as to the deficiencies of Jetema’s alleged claims against Kim. The crux of Jetema’s claims revolves around the fact that Kim worked more hours than agreed to, which was not a problem for Jetema, until Kim, with prior counsel, presented an excel worksheet, seeking compensation for

actual hours worked. The only source of damages that Jetema alleges are related to attorney’s fees to review an employment agreement and to ensure immigration compliance. To the extent those damages are recoverable (and Jetema provides no allegations to suggest that the American Rule does not apply here), at most, those damages are foreseeable contract damages, but not tort damages that arise from independent duties or circumstances. Jetema’s attempt to cure these defaults by the first amended complaint merely repackages the same underlying theory. The court finds that granting further leave to amend would be futile.

The demurrer to the first amended cross-complaint is, therefore, SUSTAINED without leave to amend.

Moving Cross-Defendant Kim to give notice.

2. Anti-SLAPP Motion

Given the above ruling, Cross-Defendant Kim’s anti-SLAPP motion is DENIED without prejudice as MOOT.

The court declines to rule on Cross-Defendant Kim’s evidentiary objections as unnecessary to the court’s ruling.

Moving Cross-Defendant Kim to give notice.

13 National Funding, Motion for Summary Judgment/Adjudication Inc. vs. Rise Ocean Chef Lee Inc. The court GRANTS Plaintiff NATIONAL FUNDING, INC.’s (“Plaintiff”) motion for summary judgment of Plaintiff’s Complaint against Defendant XIAODONG ZHU (“Zhu”).

Zhu’s Evidentiary Objections: OVERRULED

The Complaint contains two causes of action. Only the second cause of action for breach of guaranty is asserted against Zhu.

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