TONG LUO, ET AL. VS. COGNITION AI, INC.

September 1, 2026 Law and Motion Calendar PAGE 20 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________

2:00 PM LINE 6 25-CIV-06742 TONG LUO, ET AL. VS. COGNITION AI, INC.

TONG LUO ELIZABETH PIPKIN COGNITION AI, INC. JOHN D. PERNICK

PLAINTIFFS AND CROSS-DEFENDANTS TONG LUO’S AND MIN HUIS’ MOTION TO STRIKE THE PUNITIVE DAMAGES PRAYER IN DEFENDANT AND CROSS-COMPLAINANT COGNITION AI’S CROSS-COMPLAINT

TENTATIVE RULING:

Plaintiffs/Cross-Defendants, Tong Luo’s and Min Hui’s motion to strike the prayer for punitive damages in the cross-complaint filed by Defendant and Cross-Complainant, Cognition AI, Inc., on April 30, 2026, is GRANTED.

Leave to amend is GRANTED. Cross-Complaint Cognition AI, Inc. (“Cognition”) has ten (10) days from service of written notice of entry of order to file and serve an amended Cross-Complaint. (Cal. Rules of Court, rule 3.1320(g); Code Civ. Proc., § 472b.)

Background

Defendant/Cross-Complainant Cognition is a Bay Area artificial intelligence company. In March 2024, Cognition leased plaintiffs’ one-acre gated Atherton home and property (hereinafter “subject property”).

Cognition’s cross-complaint alleges that plaintiffs/cross-defendants knew or should have known the property suffered from the following undisclosed defects, safety hazards, and code violations: - inoperable carbon monoxide detectors; - defective swimming pool lighting that a technician determined posed a serious risk of harm; - the entry gate failed four times in four weeks, repeatedly sticking open and leaving the property exposed, which forced Cognition to hire outside security; - plumbing failed beneath the driveway, cutting off water service for days and requiring the driveway to be excavated at a cost of roughly $27,000, due to alleged ineffective installation; and - the HVAC system failed across much of the house.

Cross-Defendants allegedly disclosed none of this before tendering possession to Cognition, and they refused to remediate or reimburse for these expenses after Cognition gave them notice. The cross-complaint raises four causes of action: breach of contract; breach of implied warranty of habitability; reimbursement; and unjust enrichment and requests compensatory, exemplary and punitive damages. (Declaration of James O’Donnell iso mtn to strike, Ex. A [Cross-Compl.] p.9.)

September 1, 2026 Law and Motion Calendar PAGE 21 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________

Cross-defendants filed the instant motion to strike the prayer for exemplary and punitive damages pursuant to Code of Civil Procedure sections 435 and 436 because the operative cross-complaint does not sufficiently allege the requisite oppressive, malicious or fraudulent conduct as defined by Civil Code section Civil Code section 3294, subdivision (a) which necessary to support an award for punitive damages.

Additionally, the request is barred by the economic loss rule which precludes recovery in tort (exemplary damages) for a breach of contractual duty(s).

Cross-complainant opposes, contending it is well settled California law that a tenant may sue its landlord in tort for breach of the implied warranty of habitability, and where, as here, the landlord acts in conscious disregard of the tenant’s safety, punitive damages are available under Civil Code section 3294.

Moreover, the cross-complaint does not only allege contract claims and is supported by Stoiber v. Honeychuck (1980) 101 Cal.App.3d 903. Because a motion to strike tests the pleading, not the proof, and the Court must accept as true the allegations in the Cross Complaint, construe them liberally, and read them as a whole, the cross-complaint pleads a basis for punitive damages.

Legal Standard

A motion to strike is used to address defects that appear on the face of a pleading or from judicially noticed matter but that are not grounds for a demurrer. (Code Civ. Proc. § 437; Pierson v Sharp Memorial Hospital (1989) 216 Cal.App.3d 340, 342.)

Code of Civil Procedure section 435 is “specifically applicable to cross-complaints.” (Code Civ. Proc § 435, Law Revision Commission Comments.)

Under this chapter, a court may, upon motion or in its discretion, “[s]trike out any irrelevant, false, or improper matter inserted in any pleading” and “all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” (Code Civ. Proc, § 436, subds. (a)-(b).)

An “irrelevant matter” is an allegation that “is not essential to the statement of a claim or defense,” “is neither pertinent to nor supported by an otherwise sufficient claim or defense,” or “a demand for judgment requesting relief not supported by the allegations of the complaint or cross-complaint.” (Code Civ. Proc., § 431.10, subds. (b)-(c).)

Specifically, “a motion to strike may lie where the facts alleged do not rise to the level of ‘malice, fraud or oppression’ required to support a punitive damages award. [See Turman v. Turning Point of Central Calif., Inc. (2010) 191 CA4th 53, 63, 119 CR3d 166, 175—allegations of gender discrimination did not show defendant acted with requisite state of mind for punitive damages]” (Cal. Prac. Guide Civ. Pro. Before Trial, § 7:186 (TRG June 2026 update.)

Discussion

In order to state a prima facie claim for punitive damages, a pleading complaint must set forth the elements as stated in the general punitive damage statute, Civil Code section 3294. (College Hospital, Inc. v. Superior Court (1994) 8 Cal.4th 704, 721.)

These statutory elements include allegations that the defendant has been guilty of oppression, fraud or malice. (Civ. Code, § 3294, subd. (a).)

“‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.” (Civ. Code, § 3294, subd. (c)(2).)

“Malice is defined in the statute as conduct intended by the defendant to cause injury to the

September 1, 2026 Law and Motion Calendar PAGE 22 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________

plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (College Hospital, Inc., supra, 8 Cal.4th at 725.)

To demonstrate malice, a proponent “must establish that the defendant was aware of the probable dangerous consequences of his conduct, and that he willfully and deliberately failed to avoid those consequences.” (Taylor v. Superior Court (1979) 24 Cal.3d 890, 895-896.)

After Taylor, the Legislature amended the “malice” standard to add the requirement that malicious conduct under section 3294 be shown to be “despicable” and “willful.” (Lackner v. North (2006) 135 Cal.App.4th 1188, 1211.)

Consequently, a punitive damages request must be supported by facts that show both a willful disregard for the probable consequences of one’s actions and despicable conduct.

Despicable conduct is ...conduct which is so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people. ... mere carelessness or ignorance of the defendant does not justify the imposition of punitive damages.... Punitive damages are proper only when the tortious conduct rises to levels of extreme indifference to the plaintiff's rights, a level which decent citizens should not have to tolerate. (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1287 [quoting Taylor, supra, and Flyer's Body Shop Profit Sharing Plan v. Ticor Title Ins. Co. (1986) 185 Cal.App.3d 1149, 1154.].)

The allegations supporting a request for punitive damages must be alleged with specificity; conclusory allegations without sufficient facts are not enough. (Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1041-1042.)

“Mere negligence, even gross negligence, is not sufficient to justify such an award” for punitive damages.” (Kendall Yacht Corp. v. United California Bank (1975) 50 Cal.App.3d 949, 958 [“At root, both malice and oppression have to do with an ‘evil motive, the Animus malus, shown by malice in fact or by its allied malign traits and characteristics evidenced by fraud or ‘oppression.’ An award of exemplary damages cannot be based on mere speculation; it depends instead on a definite showing of a willingness to vex, harass, or injure consistent with a wrongful intent to injure.’” quoting Roth v. Shell Oil Co., 185 Cal.App.2d 676, 681—682.].)

Here, the basis for punitive damages is set forth in the cross-complaint’s third cause of action for breach of implied warranty of habitability, enumerated as follows: “(a) failing to provide functioning carbon monoxide detectors as required by law; (b) tendering and maintaining a defective electric entry gate that compromised the security of the premises; (c) tendering and maintaining defective electrical systems, including dangerous swimming-pool lighting; (d) tendering and maintaining defective plumbing, including pipes and equipment installed in a defective manner that resulted in a major underground leak; (e) tendering and maintaining a defective HVAC system that failed to provide adequate climate control to substantial portions of the Property; and (f) failing to make timely and adequate repairs after notice of these conditions.” (See O’Donnell Decl. ¶ 7; Ex.

A, ¶ 34, and Ex. B [meet and confer correspondence regarding the

September 1, 2026 Law and Motion Calendar PAGE 23 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________

basis for punitive damages].)

Paragraph two of the cross-complaint lists the fact that crossdefendants had not packed their belongings or moved, all of which Cognition had to do at their own expense and paragraph 3 of the cross-complaint states what is restated in paragraph 34, in nearly identical form: “the Property suffered from numerous undisclosed defects and code violations, including missing carbon monoxide detectors (which are required by California law), a defective entry gate that repeatedly failed and exposed the Property to security risks, an electrical defect in the swimming-pool lighting that posed a safety hazard, a major plumbing failure beneath the driveway caused by defective original construction, recurring HVAC failures, and a host of additional structural and mechanical issues that required Cognition to incur tens of thousands of dollars in unbudgeted repairs that were Cross Defendants’ responsibility.” (O’Donnell Decl.

Ex. A ¶ 3.)

These bald allegations, without further factual information, do not support a prayer for punitive damages because they do not demonstrate facts showing both a willful disregard for the probable consequences of one’s actions and intolerable conduct to the point of it being despicable, oppressive, fraudulent, or done with malice.

Lastly, the Court finds Stoiber v. Honeychuck (1980) 101 Cal.App.3d 903, an authority relied upon by cross-complainants for their ability to seek punitive damages, is factually distinguishable from the case at bar.

In Stoibner, a tenant sued his former landlord and rental agents for damages allegedly resulting from dilapidated and unsafe condition of rented premise which included (but not limited to) leaking sewage, defective dangerous electrical wiring [in the residence], structural weaknesses in the walls, deteriorated flooring, falling ceiling, leaking roof, dilapidated doors, broken windows. (Id. at 912.)

There was also a notice to vacate and demolish from the county health department attached to the complaint which listed “heavy cockroach infestation, broken interior walls, broken deteriorated flooring on front porch, falling ceiling, deteriorated, overfused electrical wiring, lack of proper plumbing connection to sewage system in bathroom, sewage under bathroom floor, leaking roof, broken windows, and fire hazard.” (Ibid.)

While the case demonstrates that punitive damages may in the appropriate circumstances be recovered under a breach of habitability claim based upon a proper showing of fraud, oppression and/or malice, the conclusory facts alleged here do not meet the pleading standard required to state a punitive damage claim.

Accordingly, plaintiffs/cross-defendants’ motion to strike the request for punitive and exemplary damages is GRANTED WITH LEAVE TO AMEND.

If the tentative ruling is uncontested, it shall become the order of the Court. Thereafter, counsel for prevailing party shall prepare a written order consistent with this ruling for the Court’s signature, pursuant to California Rules of Court, rule 3.1312, and provide written notice of the ruling to all parties who have appeared in the action, as required by law and the California Rules of Court.