SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al.

A Stipulation and Appointment of Official Reporter Pro Tempore (CV/E-206) is required to be signed by each party, the private court reporter, and the Judge prior to the hearing, if not using a reporter from the Court’s Approved Official Reporter Pro Tempore list.

Once the form is signed it must be filed with the clerk. If a litigant has been granted a fee waiver and requests a court reporter, the party must submit a Request for Court Reporter by a Party with

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 06/05/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

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

Defendants American Family Physicians, Inc., and Sarah Alarabi, DO’s (“Defendants”) Demurrer to Plaintiff Spaans Cookie Company, Inc.’s (“Plaintiff”) First Amended Complaint (“FAC”) is ruled upon as follows.

Factual Background

This matter arises out of a real estate transaction between Plaintiff and Defendants. In March of 2020, Defendant American Family Physicians, Inc. (“AFP”) leased property commonly known as C Street, Galt, CA 95632 from Plaintiff for a period of five years. In November of 2020, Defendant Sarah Alarabi purchased an ownership interest in AFP.

On or around December 5, 2023, counsel for Defendants informed Plaintiff that the Defendants intended to vacate the subject premises. Defendants vacated on or around December 29, 2023, and ceased paying rent and fees required under the lease agreement.

Plaintiff’s FAC alleges causes of action for breach of contract, civil conspiracy, common counts, and violation of California Business & Professions Code section 17200.

Defendants demur to the second, third, and fourth causes of action on the grounds that each fails to state sufficient facts to constitute a cause of action.

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, 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

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 06/05/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

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.) A general demurrer does not admit contentions, deductions, or conclusions of fact or law alleged in the complaint; facts impossible in law; or allegations contrary to facts of which a court may take judicial notice. (Blank, supra, 39 Cal.3d at p. 318; William S. Hart Union High School Dist. v. Regional Planning Com. (1991) 226 Cal.App.3d 1612, 1616, fn. 2.)

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.)

Discussion

Second Cause of Action for Civil Conspiracy

Defendants argue that the FAC fails to state a claim for civil conspiracy mainly on grounds that (1) AFP as the contracting party owed no tort duty to refrain from interference with its own performance and thus, Plaintiff has not sufficiently alleged a conspiracy between AFP and Alarabi; (2) Plaintiff alleges no duty owed by Alarabi at all or by AFP (outside of its contractual duties) so as to form an underlying tort supporting conspiracy; and (3) AFP and Alarabi as its CEO cannot be alleged to have conspired because a corporation cannot conspire with itself or its employees or agents. (Citing to Kerr v.

Rose (1990) 216 Cal.App.3d 1551, 1564.) Defendants argue that the FAC fails to allege sufficient facts that each member of the conspiracy acted in concert and with mutual understanding, or any separate tort giving rise to conspiracy liability. Plaintiff argues, among other points, that certain exceptions apply to the intracorporate

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 06/05/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

conspiracy doctrine, including where conduct is “pervasive and coordinated,” and that Plaintiff has alleged that Alarabi’s actions go “well beyond the scope of her actions as a CEO of AFP.”

As explained in Applied Equipment Corporation v. Litton Saudi Arabia Limited (1994) 7 Cal.4th 503, “The elements of an action for 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.... In such an action the major significance of the conspiracy lies in the fact that it renders each participant in the wrongful act responsible as a joint tortfeasor for all damages ensuing from the wrong, irrespective of whether or not he was a direct actor and regardless of the degree of his activity.” (Id., at p. 511.) Further, “Standing alone, a conspiracy does no harm and engenders no tort liability. It must be activated by the commission of an actual tort.” (Ibid.)

The rule with regard to conspiracy is that a “corporation cannot conspire with itself any more than a private individual can,” including conspiracy with its agents. (Kerr v. Rose, supra, 216 Cal.App.3d at p. 1564.) As noted by Plaintiff, individual directors and officers of a corporation may be personally liable for tortious conduct if they “directly ordered, authorized or participated in the tortious conduct.” (Citing Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 785.) Such liability “if otherwise justified, may rest upon a “conspiracy” among the officers and directors to injure third parties through the corporation.” (Ibid.)

Here, Plaintiff alleges that Defendant Alarabi purchased AFP with “no intention of continuing the Lease with Plaintiff upon purchasing the ownership interest.” (FAC, ¶ 10.) The FAC further alleges:

Plaintiff is informed and believes and thereon alleges that, as early as December 5, 2023, Defendants, and each of them, knowingly and willfully conspired and agreed amongst themselves to intentionally hinder, delay and/or defraud Plaintiff in the collection of its claim against Defendants for their breach of the Lease so as to avoid payment for liabilities incurred as a result of their breach of the Lease.

Plaintiff is informed and believes and thereon alleges that Dr. Alarabi, as third party to the Lease, purchased all stock of AFP to become sole owner pursuant to, and in furtherance of, the conspiracy to defraud Plaintiff. The conduct of Dr. Alarabi, as a third party to the Lease, conspiring with AFP to defraud Plaintiff and breach the terms of the Lease after acquiring sole ownership of the company displays intentional, willful and malicious conduct towards Plaintiff. Dr. Alarabi’s actions to conspire with AFP to defraud Plaintiff go well beyond the scope of her

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 06/05/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

actions as a CEO of AFP after the acquisition of stock. (FAC, ¶¶ 40, 41.)

The Court finds that Plaintiff has not sufficiently alleged civil conspiracy in the FAC. First, Plaintiff has not sufficiently alleged facts demonstrating the existence of duties in tort owed to Plaintiff by AFP and by Alarabi. Prior to the paragraphs cited above, Plaintiff alleges that the Lease was entered into by AFP in March 2000. (FAC, ¶ 8.) Plaintiff alleges that subsequent to AFP’s entry into the Lease, Alarabi, in November 2020, “purchased an ownership interest in AFP.” (FAC, ¶ 9.) Plaintiff alleges that when Alarabi purchased her ownership interest (i.e., after AFP had already entered into the Lease), it was Alarabi, who via her new ownership interest in AFP, did not intend on AFP continuing the Lease through its full term. (FAC, ¶ 10.)

Plaintiff alleges that over than three-and-a-half years later, in December 2023, AFP and Alarabi (who was AFP’s CEO) knew that AFP would no longer perform under the Lease and would abandon the premises, but had not earlier informed Plaintiff such as through emails and telephone messages which occurred in October and November 2023. (FAC, ¶¶ 11-15.) Plaintiff alleges that AFP notified Plaintiff of its intention to vacate the Premises on December 5, 2023. (FAC, ¶ 16.) Plaintiff alleges that these facts depict “Alarabi’s actions to conspire with AFP to defraud Plaintiff.” (FAC, ¶ 41.)

The Court agrees with Defendants that the facts as alleged in the FAC do not sufficiently constitute fraud so as to serve as the basis of Plaintiff’s cause of action for conspiracy. Plaintiff fails to allege facts demonstrating AFP’s duty in tort (separate from its contractual duty) or Alarabi’s duty to Plaintiff and how such duties were breached. Plaintiff does not allege any underlying cause of action for fraud, nor does Plaintiff allege any misrepresentation or concealment and how such acts constitute actionable fraud.

Additionally, Plaintiff does not allege a conspiracy “among the officers and directors” of AFP, but rather that Plaintiff Alarabi individually conspired with AFP. “[I]t is basic in the law of conspiracy that you must have two persons or entities to have a conspiracy.” (Kerr v. Rose, supra, 216 Cal.App.3d at p 1564.) Plaintiff relies upon Wyatt v. Union Mortgage for the proposition that an agent may conspire with its corporation, however, the court states in Wyatt that a conspiracy may exist between officers and directors to injure a third party through the corporation. This is not what occurred here.

Further, the Court agrees with Defendants’ arguments that the FAC lacks allegations that Defendants acted in concert and with mutual understanding, (Citing IIG Wireless, Inc. v. Yi (2018) 22 Cal.App.5th 630, 652), or allegations of any separate tort giving rise to conspiracy liability. (Citing Jones v. Kelly (1929) 208 Cal. 251, 255.) There can be no conspiracy without the commission of an actual tort, which each member of the conspiracy acted towards in concert and mutual understanding. Plaintiffs allegations are

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 06/05/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

insufficient to demonstrate such facts.

Therefore, Defendants’ demurrer to the second cause of action for conspiracy is SUSTAINED.

Third Cause of Action for Common Counts

Defendants demur to Plaintiff’s claim for “common counts” on the grounds that the claim is based on the same facts as Plaintiff’s claim for breach of contract. In opposition, Plaintiff argues that common count is a valid ground for alternative theory of recovery.

The Court agrees with Defendant that Plaintiff’s cause of action for “common counts” is deficiently pled. Defendant cites to Vaughn v. Certified Life Ins. Co. (1965) 238 Cal.App.2d 277, 181, for the general proposition that “a common count, to be sufficiently pleaded, must state not only the indebtedness of the defendant but also directly or impliedly the relationship or the express or implied legal principle upon which a promise to plaintiff is predicated.” First, Plaintiff does not specify what type of “common count” it alleges or the express or implied legal principle upon which a promise was made to Plaintiff.

Plaintiff does not allege whether its claim, for instance, is based upon money had and received, unjust enrichment, restitution, etc. Second, to the extent Plaintiff intended to allege an alternative basis for recovery to breach of contract, its “common count” does not so allege. Rather, the only basis that Plaintiff appears to allege is based upon expressed contract, that is, the Lease itself, as Plaintiff alleges the common count is “as a result of the Lease of the Premises and the services provided by Plaintiff in accordance therewith.” (FAC, ¶ 48.)

As alleged, Plaintiff’s cause of action does not appear to state an alternative basis for recovery.

Thus, Defendants’ demurrer to this cause of action is SUSTAINED.

Fourth Cause of Action for Violation of California Business & Professions Code § 17200

Defendants argue that Plaintiff fails to state a proper ground for breach of California Business & Professions Code section 17200, because breach of contract is not a valid basis for a section 17200 claim. Plaintiff opposes, arguing that the FAC properly states a claim for violation of section 17200, as “states several causes of action that, if proven, would violate multiple laws, including fraud statutes (by making material misrepresentations about lease compliance) and fiduciary duty laws.” (Opposition, p. 6:24-26.)

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 06/05/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

“[A] breach of contract may ... form the predicate for Section 17200 claims, provided it also constitutes conduct that is 'unlawful, or unfair, or fraudulent.' ” (Puentes v. Wells Fargo Home Mortgage, Inc. (2008) 160 Cal.App.4th 638, 645, quoting Watson Laboratories, Inc. v. Rhone–Poulenc Rorer, Inc. (2001) 178 F.Supp.2d 1099, 1117, fn. 12; Albillo v. Intermodal Container Services, Inc. (2003) 114 Cal.App.4th 190, 206.) A claimant alleging an unfair business practice must state with reasonably particularity the facts supporting the statutory elements of a violation. (Khoury v. Maly's of California, Inc. (1993) 14 Cal. App.4th 612, 619.)

Plaintiff’s claim for breach of section 17200 states:

The acts and practices of Defendants, and each of them, as alleged herein constitute unlawful, unfair and/or fraudulent business acts or practices within the meaning of Cal. Bus. & Prof. Code § 17200, et seq. Defendants have engaged in “unlawful,” “unfair” and/or “fraudulent” business acts or practices in an effort to defraud their creditors, including, without limitation, Plaintiff. In particular, Defendants have, among other things, conspired to defraud Plaintiff, transferred all or substantially all of AFP’s assets in an effort to avoid and evade payments to Plaintiff, and/or hinder or delay Plaintiff’s ability to collect those sums due and owing to it.

Plaintiff is informed and believes and thereon alleges that Defendants’ unlawful, unfair and/or fraudulent business acts or practices continue to this day as AFP has failed and refused and continues to fail and refuse to comply with the terms of the Lease. AFP and Dr. Alarabi have conspired to defraud Plaintiff through Dr. Alarabi’s acquisition of AFP as their sole owner before breaching the terms of the lease and continuing to refuse compliance. Plaintiff therefore seeks an order of this Court for appropriate available remedies under Cal. Bus. & Prof. Code § 17203.

As indicated above, the Court has sustained Defendant’s demurrer to Plaintiff’s second cause of action for conspiracy, finding that Plaintiff has not sufficiently alleged underlying tort duties or liability against either AFP or Alarabi. As such (and given the Court’s sustaining of the demurrer to the “common counts”), Plaintiff’s only other remaining cause of action is its first cause of action for breach of contract, i.e., the Lease. By Plaintiff’s own admission, its cause of action under Business and Professions Code section 17200 is premised upon its allegations that Defendants have “conspired to defraud Plaintiff . . evade payments to Plaintiff,” etc. Because the Court finds those allegations to be themselves deficient to support liability upon which a conspiracy claim may be based, the Court similarly finds that Plaintiff’s cause of action

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 06/05/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

under Business and Professions Code section 17200 is deficient. Plaintiff has not sufficiently alleged conduct that is “unlawful, or unfair, or fraudulent.”

Defendants' demurrer as to cause of action four is SUSTAINED.

Leave to Amend

This appears to be Defendants first challenge to Plaintiff’s pleading in this case. “If the plaintiff has not had an opportunity to amend the complaint in response to the demurrer, leave to amend is liberally allowed as a matter of fairness, unless the complaint shows on its face that it is incapable of amendment.” (City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 747.) The Court does not find at this juncture that the FAC is incapable of amendment and thus, leave to amend is granted.

Plaintiff may file and serve an amended complaint no later than May 19, 2025. Although not required by statute or court rule, Plaintiff is directed to present the clerk a copy of this ruling at the time of filing the Second Amended Complaint. Defendant may file and serve a response within 30 days of service of the Second Amended Complaint, 35 days if served by mail.

The minute order is effective immediately. No formal order pursuant to California Rules of Court, rule 3.1312 or further notice is required.