`
`SAWYER & LABAR LLP
`ADRIAN SAWYER, State Bar No. 203712
` sawyer@sawyerlabar.com
`REBECCA MACLAREN, State Bar No. 211788
` maclaren@sawyerlabar.com
`1700 Montgomery Street, Suite 108
`San Francisco, California 94111
`Telephone: 415.262.3820
`
`Attorneys for Plaintiff/Cross-Defendant
`WOLFGANG OPERATIONS, LLC
`
`
`
`
`ELECTRONICALLY
`F I L E D
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`Superior Court of California,
`County of San Francisco
`09/07/2021
`Clerk of the Court
`BY: SANDRA SCHIRO
`Deputy Clerk
`
`SUPERIOR COURT OF THE STATE OF CALIFORNIA
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`COUNTY OF SAN FRANCISCO
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`
`
`WOLFGANG OPERATIONS, LLC, a
`Pennsylvania limited liability company,
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`Plaintiff,
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` Case No. CGC-21-592997
`
`MEMORANDUM OF POINTS AND
`AUTHORITIES IN SUPPORT OF
`PLAINTIFF/CROSS-DEFENDANT
`WOLFGANG OPERATIONS, LLC’S
`DEMURRER TO DEFENDANT/CROSS-
`COMPLAINANT SMASHMALLOW,
`LLC’S CROSS-COMPLAINT
`
`
`Judge: Hon. Ethan P. Schulman
`Date:
`October 6, 2021
`Time:
`9:30 a.m.
`Dept.: 302
`
`
`Compl. Filed: July 7, 2021
`Cross-Compl. Filed: July 22, 2021
`Trial Date: TBD
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`
`
`
`SMASHMALLOW, LLC, a Delaware limited
`liability company, and DOES 1-10, inclusive,
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`Defendants.
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`Cross-Complainant,
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`v.
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`SMASHMALLOW, LLC, a Delaware limited
`liability company,
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`WOLFGANG OPERATIONS, LLC, a
`Pennsylvania limited liability company, and
`DOES 1-10, inclusive,
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`Cross-Defendants.
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`MEMORANDUM OF POINTS AND AUTHORITIES I/S/O WOLFGANG’S
`DEMURRER TO SMASHMALLOW’S CROSS-COMPLAINT
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`

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`TABLE OF CONTENTS
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`Page
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`I.
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`INTRODUCTION ..................................................................................................................4
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`I.
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`FACTUAL & PROCEDURAL BACKGROUND ................................................................4
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`II.
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`LEGAL STANDARD ............................................................................................................5
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`III.
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`ARGUMENT .........................................................................................................................5
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`A.
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`Smashmallow Lacks Standing To Assert A UCL Claim Either On Its Own
`Or On Behalf Of The Public ......................................................................................5
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`B.
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`Smashmallow Fails To Adequately Plead A UCL Violation .....................................7
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`CONCLUSION ......................................................................................................................8
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`IV.
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`MEMORANDUM OF POINTS AND AUTHORITIES I/S/O WOLFGANG’S
`DEMURRER TO SMASHMALLOW’S CROSS-COMPLAINT
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`

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`
`
`CASES
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`TABLE OF AUTHORITIES
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`Page
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`Belton v. Comcast Cable Holdings, Inc.,
`151 Cal. App. 4th 1224 (2007) .............................................................................................. 8
`
`Brown v. USA Taekwondo,
`40 Cal. App. 5th 1077 (2019) ............................................................................................ 5, 7
`
`Cel-Tech Comm’cns, Inc., v. L.A. Cellular Tel. Co.,
`20 Cal. 4th 163 (1999) ........................................................................................................... 8
`
`ChromaDex, Inc. v. Elysium Health, Inc.,
`301 F. Supp. 3d 963 (C.D. Cal. 2017) ................................................................................... 6
`
`Consumer Cause, Inc. v. Arkopharma, Inc.,
`106 Cal. App. 4th 824 (2003) ................................................................................................ 5
`
`La Serena Properties, LLC v. Weisbach,
`186 Cal. App. 4th 893 (2010) ................................................................................................ 5
`
`Linear Tech. Corp. v. Applied Materials, Inc.,
`152 Cal. App. 4th 115 (2007) ............................................................................................ 5, 6
`
`Open Text, Inc. v. Northwell Health, Inc.,
`No. 2:19-cv-09216-SB-AS, 2021 WL 1235254 (C.D. Cal. Feb. 19, 2021) .......................... 6
`
`Prakashpalan v. Engstrom, Lipscomb & Lack,
`223 Cal. App. 4th 1105 (2014) .............................................................................................. 5
`
`Watson Labs, Inc. v. Rhone-Poulenc Rorer, Inc.,
`178 F. Supp. 2d 1099 (C.D. Cal. 2001) ................................................................................. 8
`
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`MEMORANDUM OF POINTS AND AUTHORITIES I/S/O WOLFGANG’S
`DEMURRER TO SMASHMALLOW’S CROSS-COMPLAINT
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`I.
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`INTRODUCTION
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`Plaintiff Wolfgang Operations, LLC (“Wolfgang” or “Plaintiff”), a confectionary co-
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`manufacturer, initiated this lawsuit against Defendant Smashmallow, LLC (“Smashmallow” or
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`“Defendant”) for breaching and fraudulently inducing Wolfgang to enter into a Co-Manufacturing
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`Agreement (the “Agreement”) under which Wolfgang agreed to produce and package a
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`marshmallow product for Smashmallow and Smashmallow was required to purchase specified
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`minimum amounts of product from Wolfgang each year or pay a specified amount for any
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`shortfall. Smashmallow filed a Cross-Complaint against Wolfgang alleging both violation of
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`California’s Unfair Competition Law, Business and Professions Code § 17200 (the “UCL”) and
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`breach of contract.
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`Wolfgang now demurs to Smashmallow’s First Cause of Action asserting unfair business
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`practices under the UCL. As discussed below, the First Cause of Action fails for the following
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`reasons: (i) Smashmallow lacks standing to bring a UCL claim because this is an economic
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`dispute between commercial entities arising out of a co-manufacturing contract, and the dispute
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`does not involve either the public in general or individual consumers as parties to that contract;
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`and (ii) Smashmallow bases its UCL claim on the unfair practices prong of the law, but its
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`allegations of unfair business practices—all made on information and belief—fail to state a cause
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`of action under that prong.
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`I.
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`FACTUAL & PROCEDURAL BACKGROUND
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`On July 7, 2021, Wolfgang filed its Complaint against Smashmallow alleging that: (i)
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`Smashmallow breached the Co-Manufacturing Agreement between the parties by refusing to pay
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`monies owed to Wolfgang as a result of failing to meet Smashmallow’s minimum purchase
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`requirement for 2020; and (ii) Smashmallow fraudulently concealed from Wolfgang that
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`Smashmallow would not be able to meet its minimum purchase requirements, inducing Wolfgang
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`to enter into the Agreement, make capital improvements to Wolfgang’s factory and incur
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`additional expenses in order to manufacture Smashmallow’s product.
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`In retaliation, Smashmallow filed its Cross-Complaint against Wolfgang on July 22, 2021,
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`asserting that Wolfgang breached the Agreement and engaged in unfair business practices by
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`MEMORANDUM OF POINTS AND AUTHORITIES I/S/O WOLFGANG’S
`DEMURRER TO SMASHMALLOW’S CROSS-COMPLAINT
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`failing to fulfill purchase orders, failing to keep accurate books and records, submitting false
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`invoices, and stopping production of any product for Smashmallow. (Cross-Compl. ¶¶ 21-24.)
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`II.
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`LEGAL STANDARD
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`A complaint is subject to demurrer when it does not allege “facts sufficient to establish
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`every element of each cause of action.” Consumer Cause, Inc. v. Arkopharma, Inc., 106 Cal. App.
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`4th 824, 827 (2003). When considering whether to sustain a demurrer, the court “accept[s] as true
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`the well-pleaded facts in the complaint,” La Serena Properties, LLC v. Weisbach, 186 Cal. App.
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`4th 893 (2010), but does not “assume the truth of the contentions, deductions, or conclusions of
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`law,” Prakashpalan v. Engstrom, Lipscomb & Lack, 223 Cal. App. 4th 1105, 1120 (2014).
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`Moreover, “where factual allegations are based on information and belief, the plaintiff must allege
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`“information that ‘lead[s] [the plaintiff] to believe that the allegations are true.’” Brown v. USA
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`Taekwondo, 40 Cal. App. 5th 1077, 1106 (2019), as modified on denial of reh’g (Nov. 6, 2019),
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`aff’d, 11 Cal. 5th 204, 483 P.3d 159 (2021), reh’g denied (May 12, 2021).
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`III. ARGUMENT
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`A.
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`Smashmallow Lacks Standing To Assert A UCL Claim Either On Its Own Or
`On Behalf Of The Public
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`As a matter of law, Smashmallow does not have standing to assert a UCL claim in this
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`case because Smashmallow is not an individual consumer or competitor but a business customer
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`whose economic dispute arises entirely out of a commercial contractual relationship.
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`In Linear Tech. Corp. v. Applied Materials, Inc., 152 Cal. App. 4th 115 (2007), the
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`California Court of Appeal explained that the UCL was enacted “to protect both consumers and
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`competitors by promoting fair competition in commercial markets for goods and services.” Id. at
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`135. “Where a UCL action is based on contracts not involving either the public in general or
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`individual consumers who are parties to the contract, a corporate plaintiff may not rely on the
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`UCL for the relief it seeks.” Id. The Court of Appeal affirmed dismissal of the plaintiff’s UCL
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`claim because the alleged victims were “neither competitors nor powerless, unwary consumers,”
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`but rather were “corporate customers . . . , ‘each of which presumably ha[d] the resources to seek
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`damages or other relief.’” Id. In addition, “the source of the fraudulent and unfair practices [wa]s
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`DEMURRER TO SMASHMALLOW’S CROSS-COMPLAINT
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`the misrepresentation made in purchase orders between respondent sellers and [the plaintiff],” so
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`the harm suffered resulted directly from the corporate customers’ contracts. Id.
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`Likewise, in this case Smashmallow’s “relationship with [Wolfgang] “is defined by their
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`contractual arrangement,” and “[t]he case does not involve the general public or individual
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`consumers who are parties to a contract,” but, rather, “a dispute between commercial parties over
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`their economic relationship.” ChromaDex, Inc. v. Elysium Health, Inc., 301 F. Supp. 3d 963, 975
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`(C.D. Cal. 2017) (holding that defendant’s UCL counterclaim failed under Linear Tech., and that
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`“[e]ven if plaintiff’s “alleged unfair and unlawful acts reach[ed] other parties, those parties also
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`appear[ed] to be corporate customers who similarly [could not] obtain relief under the UCL”)
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`(citation and internal quotation marks omitted). See also Open Text, Inc. v. Northwell Health,
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`Inc., No. 2:19-cv-09216-SB-AS, 2021 WL 1235254, at *2 (C.D. Cal. Feb. 19, 2021) (holding that
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`“this dispute appear[ed] centered on the economic relationship between two commercial parties
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`and untethered to the protection of competition or the public—i.e., the sort of conflict ‘that the
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`UCL does not contemplate’”) (citation omitted); id. (observing that “[a]pplying Linear Tech.,
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`courts have recognized that it ‘essentially withdraws UCL standing from non-competitor corporate
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`plaintiffs seeking to bring a UCL action based on contracts’ not involving the public or individual
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`consumers,” and noting that “[t]he line of cases so holding is substantial . . . and continues to
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`grow”) (citing various cases).
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`Like Smashmallow, the other customers allegedly impacted by Wolfgang’s “practices” are
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`sophisticated corporate customers (such as Hershey, see Cross-Complaint ¶ 7) who would likewise
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`lack standing. Finally, while Smashmallow may argue that its UCL claim in “the present ‘case is
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`not based [on] [a] contract[ ],’ but rather on [Wolfgang’s] actions outside of th[e] contract[ ],”
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`courts have rejected similar arguments by looking at “the nature of the parties” and their economic
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`relationship, rather than “the nature of their transaction” and “the presence of a traditional contract
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`claim.” Open Text, 2021 WL 1235254, at *3 (citations omitted). Accordingly, Smashmallow
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`lacks standing to pursue a claim against Wolfgang for violating the UCL, and Wolfgang’s
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`demurrer should be sustained.
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`MEMORANDUM OF POINTS AND AUTHORITIES I/S/O WOLFGANG’S
`DEMURRER TO SMASHMALLOW’S CROSS-COMPLAINT
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`B.
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`Smashmallow Fails To Adequately Plead A UCL Violation
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`Even if Smashmallow had standing to bring its UCL claim, the UCL claim would still fail.
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`First, “where factual allegations are based on information and belief, the plaintiff must allege
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`“information that ‘lead[s] [the plaintiff] to believe that the allegations are true.’” Brown, 40 Cal.
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`App. 5th at 1106. Second, Smashmallow relies on the unfairness prong of the UCL, but its
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`allegations do not state a claim under that prong.
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`Smashmallow’s UCL claim relies on allegations made on information and belief, without
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`the requisite description of what information and belief support the allegations. Specifically,
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`Smashmallow “[o]n information and belief”: (i) “Wolfgang regularly misrepresents the number
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`and qualifications of its employees to its customers, when in fact the bulk of the personnel at its
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`facility are temporary or day laborers, resulting in chronic labor shortages and inability to meet
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`production goals”; (ii) “Wolfgang routinely overbills its customers for various material costs and
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`maintains its books and records in a poor or inaccurate condition to cover up this practice”; (iii)
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`“Wolfgang threatens to shut down its customers production (and thus, some or all of their
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`business) in order to collect on its false and fraudulent bills”; and (iv) “Wolfgang misrepresents its
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`experience and expertise in producing confections to its customers.” Cross-Complaint ¶¶ 21-24.
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`These conclusory allegations fail to allege any business practice whatsoever, even at this state of
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`pleading. Brown, 40 Cal. App. 5th at 1106. Smashmallow’s UCL claim fails for this independent
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`reason.
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`Finally, the Cross-Complaint only asserts a claim under the “unfair” practices prong, as
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`opposed to the “unlawful” or “fraudulent” practices prongs. See Cross-Complaint ¶ 25 (alleging
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`that “[t]he acts, omissions, misrepresentations, and non-disclosures of Wolfgang as alleged herein
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`constitute ‘unfair’ business acts and practices because Wolfgang’s conduct is . . . [i]mmoral,
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`unethical, unscrupulous, and offensive to public policy”). Smashmallow’s allegations, however,
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`do not state a claim under the unfair practices prong of the UCL. Even assuming, arguendo, that a
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`non-competing corporate customer could bring a UCL claim, because such a customer is more
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`akin to a competitor than to an unwary consumer, the relevant test would require “the allegedly
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`unfair business practice to be ‘tethered’ to a legislatively declared policy or have some actual or
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`MEMORANDUM OF POINTS AND AUTHORITIES I/S/O WOLFGANG’S
`DEMURRER TO SMASHMALLOW’S CROSS-COMPLAINT
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`threatened impact on competition.” Belton v. Comcast Cable Holdings, Inc., 151 Cal. App. 4th
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`1224, 1239-40 (2007). See Cel-Tech Comm’cns, Inc., v. L.A. Cellular Tel. Co., 20 Cal. 4th 163,
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`187 (1999) (holding that in the context of business competitors, the “unfair” prong applies when
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`the practice at issue allegedly violates “the policy or spirit of [antitrust] laws because its effects are
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`comparable to a violation of the law, or that otherwise significantly threatens or harms
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`competition”). Smashmallow has not alleged facts establishing that Wolfgang had such a practice.
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`See Watson Labs, Inc. v. Rhone-Poulenc Rorer, Inc., 178 F. Supp. 2d 1099, 1121 (C.D. Cal. 2001)
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`(holding that “it is necessary under the ‘unfair’ prong to show harm not merely to the plaintiff-
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`competitor but also to competition”).
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`IV. CONCLUSION
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`For the foregoing reasons, Wolfgang’s demurrer to Smashmallow’s First Cause of Action
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`should be sustained without leave to amend.
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`DATED: September 7, 2021
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`SAWYER & LABAR LLP
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`By:
`
`Adrian Sawyer
`Attorneys for Plaintiff/Cross-Defendant
`WOLFGANG OPERATIONS, LLC
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`MEMORANDUM OF POINTS AND AUTHORITIES I/S/O WOLFGANG’S
`DEMURRER TO SMASHMALLOW’S CROSS-COMPLAINT
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