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January 2015

Los Angeles Team Wins Demurrer Without Leave to Amend in Pension Benefit Services Agreement

On January 21, 2015, Gordon & Rees partner Ronald K. Alberts and senior counsel Michelle L. Steinhardt and Susan L. Meter successfully obtained an order sustaining demurrer to a second amended complaint without leave to amend in favor of Gordon & Rees’s client, a third party retirement services administrator.

Plaintiffs, two former owners and officers of a, now dissolved, California corporation, alleged they were third party beneficiaries to the contract between the dissolved corporation and Defendant and brought claims of breach of contract and professional negligence.

After two attempts to cure the defects in the complaint to allege third party beneficiary status, the court sustained the demurrer without leave to amend. The contract, having been attached as an exhibit to the complaint, revealed that Plaintiffs were not named and there was no express provision requiring Defendant to perform any obligation to Plaintiffs. Because it was Plaintiffs’ third attempt to plead their claim and Plaintiffs did not show in their opposition how they could amend to cure the defects of their pleading, the court sustained the demurrer without leave to amend.

The court also sustained the demurrer without leave to amend as to Plaintiffs’ second claim for professional negligence in performance of the services set forth in the contract. The court found the allegations of Defendants’ acts were identical to those set forth in the breach of contract claim and, therefore, arose under the contract between the Corporation and Defendant. The court explained that a breach of contract only becomes tortious when it violates a duty independent of the contract itself, giving examples of breach of contract that causes physical injuries, breach of covenant of good faith and fair dealing and fraudulent inducement. Plaintiffs’ claims were based solely on the failure to perform the contract obligations and, therefore, did not give rise to an independent duty absent the contract. Again, because Plaintiffs’ opposition did not show they could cure the defect after three attempts and the court did not grant leave to amend.

Ronald K. Alberts
Michelle L. Steinhardt


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