Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_15-cv-01402/USCOURTS-casd-3_15-cv-01402-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF CALIFORNIA 

HDR ENVIRONMENTAL, 

OPERATIONS AND CONSTRUCTION, 

INC.,

Plaintiff, 

v. 

DARWIN DEASON; and DOES 1-100 

inclusive 

Defendant. 

Case No.: 15cv1402 JAH (NLS) 

ORDER GRANTING IN PART AND 

DENYING IN PART DEFENDANT’S 

MOTION TO DISMISS [DOC. NO 30] 

INTRODUCTION

Pending before the Court is Defendant Darwin Deason’s (“Defendant” or “Deason”) 

Motion to Dismiss Plaintiff HDR Environmental Operations and Contruction, Inc,’s 

(“HDR” or “Plaintiff”) Second Amended Complaint (“SAC”) for failure to state a claim 

pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. [Doc. No. 30]. HDR’s 

SAC alleges four causes of action: (1) breach of contract, (2) money due and owing on an

open book account, (3) a quantum meruit claim for work, labor and services provided, and 

(4) promissory fraud. After a careful review of the pleadings, relevant law, and reasons 

set forth below, Defendant’s motion to dismiss is GRANTED IN PART and DENIED

IN PART. 

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BACKGROUND 

This matter arises from a contract dispute. The following facts are taken from 

Plaintiff’s SAC, the written agreement between the parties, including amendments and 

modifications, as well as documents in the form of written communications incorporated 

by reference, integral to, or explicitly relied upon in the Complaint. 

I. FACTUAL BACKGROUND

In 2011, Deason began the demolition and reconstruction of his residence located at 

1900 and 1912 Spindrift Drive (hereinafter the “Spindrift Sites”) along the La Jolla coast 

in the City of San Diego, California. Doc. No. 29, p2; SAC ¶ 6. HDR and Deason entered 

into an agreement for HDR to perform work at both sites, including the excavation, 

recovery and monitoring of soils containing Native American artifacts (including human 

remains). Id. To comply with regulations implemented by the City of San Diego, HDR 

proposed an Alternative Archaeological Data Recovery Mitigation Monitoring and 

Reporting Program (“Alternative MMRP Program”) for the excavation and analysis of a 

Native American habitation and burial site where the potential to encounter intact human 

remains was high. Doc.No.29, p20; SAC Ex 1. The Alternative MMRP Program included 

three main components: (1) the Archeological Data Recovery Program (ADRP), (2) a 

Cultural Materials Inventory Program (CMIP) and Mitigation Monitoring. Id. 

In the original proposal, dated November 14, 2011, HDR outlined work to be done 

under each component, identifying a project area of approximately 230 square meters of 

the Spendthrift Site at 1912 Spindrift Drive. Id. at 20-22. The Archeological Data Recovery 

(“ADR”) consisted of the excavation of 30 square meters of the approximately 206 square 

meters of deposits to be impacted. Id. at 20. In addition, for the portions of the site that 

were disturbed [by construction] or the portions that were intact and not subject to the 

ADRP, HDR recommended a Cultural Material Inventory Program (CMIP) be 

implemented. Id. at 21 .Within the project area, HDR “estimated 326m3

 of sediment would 

be processed, either by hand or mechanically excavated. Doc.No.30-3, p10; Def’s. Ex 1. 

Finally, HDR offered monitoring of any remaining ground disturbing construction and 

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landscaping activities after the completion of the ADRP and CMIP phases. Doc.No.29, 

p22; SAC Ex 1.

Estimating a total cost of $451,864.76, HDR listed thirteen assumptions in which 

the estimated cost was based – namely: 

8. ...[A] total of 206 square meters of Site CA SDI-39 will be impacted by the 

proposed development... [o]f the ...176 square meters that were subject to CMIP 

treatment, half (88 square meters) would require excavation to a maximum depth 

of 2 meters and the other half would require a maximum depth of 1 meter within 

the project area0F

1

. Id. at 24; SAC Ex 1. 

The proposal also estimated 688 man hours of fieldwork. Id.

The parties added the “1900 Spindrift Drive Scope of Work (“SOW”) Addendum” 

in which HDR assumed responsibility for CMIP treatment of 143 square meters (55.8 m3 

of sediment), with compensation not-to-exceed $64,046.20. Doc. No. 29, p.4-5; SAC ¶19-

20; Doc. No 30-3, p.6; Def’s.Ex: 1. This resulted in total compensation for time and 

materials not-to-exceed $515,910.96 for both sites. Doc. No. 29, p.4-5; SAC ¶19-20. 

The Short Form Agreement (“Agreement”), attachments and addendum included, 

and/or referenced by incorporation, the following pertinent provisions: 

SECTION II: TERMS AND CONDITIONS OF ENGINEERING SERVICES 

PROVISION 12: CHANGES

The parties agree that no change or modification to the Agreement, or any 

attachments hereto, shall have any force or affect unless the change is reduced to 

writing, dated, and made part of this Agreement. The execution of the change shall 

be signed in the same manner as the Agreement. Adjustments in the period of 

services and in compensation shall be in accordance with applicable paragraphs and 

sections in this Agreement... In any event, as the project progresses, the facts 

developed may dictate a change in the services to be performed, which may alter the 

scope. ENGINEER will inform OWNER of such situations so that changes in scope 

and adjustments to the time of performance and compensation can be made as 

required. If such change, additional services, or suspension of services results in an 

                                               

1

 The total amount of ground soil disturbance based on surface area was provided to HDR by 

Defendant’s general contractor and architect. HDR relied on the representations of Plaintiff’s agents to 

determine the work to be performed and calculate the “not-to-exceed” price quote. 

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increase or decrease in the cost of or time required for performance of the services, 

an equitable adjustment shall be made, and the Agreement modified accordingly. 

PROVISION 13: CONTROLLING AGREEMENT 

These Terms and Conditions shall take precedence over any inconsistent or 

contradictory provisions contained in any proposal, contract, purchase order, 

requisition, notice-to-proceed, or like document. 

SECTION IV: COMPENSATION 

Compensation for Engineer’s services under this Agreement shall be on the basis 

of Time and Materials not to exceed.... $515,910.96. 

SECTION V: PERIOD OF SERVICE 1F

2

... If any specified dates for the completion of Engineer’s services are exceeded 

through no fault of the Engineer, the time for performance of those services shall 

be automatically extended... and all rates, measures and amounts of Engineer’s 

compensation shall be equitably adjusted. 

On May 15, 2012, HDR submitted the 1900 and 1912 Spindrift Drive Modification 

Request (“Modification Request”) as a result of “changes in the construction work 

plan...the amount of disturbance to culturally-bearing soils...cultural data uncovered, 

...[and] changes in the landscape plans.” Doc 30-3, p.2; Def’s. Ex: 1. HDR discusses the 

challenging nature of treating cultural resources and the unknown factors that can be (and 

were) exposed during demolition. Id. HDR noted impacts to cultural resources due to the 

landscaping improvements, demolition, and tree stump removal. Id. at 3-5; Def’s.Ex: 1. 

HDR indicated that “substantial additional landscaping was undertaken” impacting and 

extending beyond the original expected scope requiring “unanticipated monitoring and 

screening... [and] result[ing] in the need for CMIP excavations, significantly increasing 

                                               

2

 Handwritten revision initialed “DW” and dated December 7, 2011 amends this provision to read in 

pertinent part: “[I]if any specified dates for the Completion of ENGINEER’s services are exceeded... 

yet the scope of services for the project remain unchanged, then the ENGINEER’s compensation as 

described under Section IV of this Agreement will remain the same.” 

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the cost of the overall project. ” Id. Additionally, it notes that such “improvements for the 

1900 Spindrift Drive property are ongoing and may continue to change.” 

The Modification Request states that the original proposal greatly underestimated 

the anticipated depth of intact cultural materials and midden soils on site. Id. at 7; Def’s. 

Ex: 1. The original 1912 Spindrift Drive SOW stipulated to the excavation of 36 cassions. 

However, in the Modification Request, HDR placed the number of proposed caissons at 

50, with the CMIP Treatment Plan resulting in greater levels of examination and an 

increase of labor to 835 man hours. Id. In sum, to meet the conditions of the contracted 

scope of work and to recover expenses related to “out-of-scope” efforts, HDR outlined an 

additional cost of $66,191.96 for treatment of an additional 24m3

 at 1912 Spendrift and 

$93,701.12 for examination of an additional 41.7m3 at 1900 Spindrift.. Doc 30-3, p.6,10; 

Def’s. Ex: 1. The new combined total compensation was “not to exceed” $675,804.04 as 

confirmed by Jeff Hokanson, Vice President HDR EOC on or about May 21, 2012. Id. at 

14-15; Def’s. Ex: 2. 

The Modification Request concluded with the following: 

 Assumptions for 1900 and 1912 Construction and Cost 

In order for HDR EOC to successfully complete the cultural resource recovery 

program for 1900 and 1912 Spindrift, it is imperative that we are able to effectively 

communicate landscape issues and demolition problems that have a significant 

impact to the existing cost structure. We believe that in order to prevent such 

significant changes in the future, the following assumptions/ stipulations need to be 

understood between both parties. If the modifications listed above are accepted, no 

additional changes or modification requests will be made unless: 

a) Intact human remains or intact cultural features are found, and/or 

b) It is determined by the regulators that the landscaping proposed for 1912 requires 

CMIP treatment. 

Further, HDR agreed: 

[T]o not, under any circumstance, complete additional out-of-scope work without 

written approval from the client or the client's representative. If additional outof-scope work is identified, HDR EOC will wait until a clear understanding between 

HDR EOC and the client is reached. Finally, HDR EOC understands that Bruce 

Mezan is our designated point person for vetting and approving any additional 

change orders. 

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Doc 30-3, p.12; Def’s. Ex: 2.

In late 2012, Plaintiff alleges Defendant’s contractor, Sharratt Construction, 

disturbed significantly more soil than that outlined in the permit application and approved 

by the City’s Planning Department in the July 2011 Final Mitigated Negative Declaration. 

Doc. No. 29, p.3,4; SAC ¶¶9, 14. The volume of material to be excavated nearly doubled 

the amount covered by the Modification Request due to the disturbance of a much larger 

surface area. Id. at 5-6; SAC ¶24. HDR requested a second contract modification. 

Although the parties agreed during negotiation of the first modification request that HDR 

would not charge for additional work due to increase in depth, no agreement was reached 

for additional disturbed soil outside of the agreed surface area. Id. at 5; SAC ¶23. The 

parties were unable to reach an agreement as to the terms of the second contract 

modification and HDR ceased all work. Id. at 6; SAC ¶26. 

 HDR returned to the Project around December 26, 2012, after being threatened with 

a lawsuit for delay damages, replacement costs, and punitive damages. Doc. No. 29, p.6; 

SAC ¶27. On February 9, 2013, Defendant’s son, Doug Deason (“Doug”), spoke with 

Brian Hoppy (“Hoppy”), the director and Senior Vice President of HDR’s Environmental 

Sciences and planning division. Id. at 10; SAC ¶53(c). Plaintiff alleges during the phone 

conversation, Doug agreed HDR should receive a second contract modification for material 

processed over and beyond the 290m3

 identified in the original contract and stipulated 

modification. Id. Plaintiff further alleges that at an in-person meeting on February 19, 2013, 

Doug agreed to execute a second modification to process an additional 300m3

. Id. at 11; 

SAC ¶53(b)-(d). On February 27, 2013, HDR sent a “scope and cost modification 

proposal” to process an additional 300m3

 of soil at the 1912 Spindrift property. Doc. 30-3, 

p.31;Def’s Ex: 7. As the terms were being negotiated, Doug urged HDR to expedite the 

completion of project and get them to “the finish line.” Id. at 23; Def’s. Ex: 5. While 

HDR’s second modification request was being reviewed, HDR expressed a commitment 

to completing the job and agreed to remain on-site. Id. at 34; Def’s Ex: 8. In response, 

Doug replied “We are committed as well. We will get it done, I am confident.” Id. 

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By March 24, 2013, still no written agreement had been executed. HDR informed 

Defendant, through Doug, that their “cost is simply a function of the amount of soil to be 

excavated...we process the soil to keep you in compliance with your permit and associated 

regulations. The less soil removed, the lower the cost...the data provided by [Deason’s 

general contractor] has been consistently incorrect and understated with respect to the area 

to be disturbed – the area we based our soil calculation on....We will only invoice up to 

the amount of soil we process and nothing further.” Id. at 39; Def’s Ex: 10.

Negotiations continued into April, 2013. The parties agreed that between February 

and April 5, 2013, 185.71 m/ 242.9 cy of soil had been excavated, with an estimated 48.66 

m/63.65 cy remaining, totaling 234.37 m/306.55 cy. Doc. No.30-3, p.44-45; Def’s Ex: 12. 

On April 17, Doug requested, a revised “cost plus not to exceed price” proposal for his 

father’s review based on the specific volumes laid out above, with a provision for change 

orders to be drafted by HDR and approved by Deason before any additional work 

commenced. By April 23rd, the parties agreed that the second modified proposal should 

reflect an additional volume of 220m3

, of which 84% had already been processed. Id. at 

47; Def’s Ex: 13. HDR warned, however, that the 220m3

 would ultimately be exceeded 

due the last minute addition of a new wall on the property. Id. The next day, HDR agreed 

that any amount over the 220m3

 could be added to a later modification, but expressed a 

need to have the second proposal executed promptly in an effort to recoup costs. Id. 

Follow-up emails were sent by Hoppy on April 29th, May 1st, and May 7th. Id. at p.49; 

Def’s Ex: 14. 

On May 7th, Doug replied relaying Defendant’s position that the original contract 

was a “gross maximum price” contract for HDR to provide services at a capped price and 

Defendant would not be signing the second modification proposal as presented. Id. at 53; 

Def’s Ex: 15. According to Doug, this was “obviously... [a] position [they had] been in 

for some time now. Id. Admitting that there was some extra work created when intact 

human remains were found, Doug communicated a belief that Defendant would make 

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payments for the work performed by HDR per the original contract and “some kind of 

compromise on the additional work” HDR did not anticipate2F

3

. Id. 

In response, Hoppy advised that the “not-to exceed” cost was based on a “well 

defined amount of soil to be processed,” stating: 

The identification of human remains is one way that the project would have deviated 

from our agreement. Surpassing the maximum amount of soil to be processed is 

another. We do not control the construction process or the amount of soil removed 

for the project. That is 100% controlled by your design and construction contractors. 

Doc. No. 30-3, p.51-52; Def’s Ex: 15 

 Another week passed without an agreement. On May 14th, Doug emailed, “I am 

working on a compromise response now. I will send it over to dad tonight for approval and 

then send it to you in the morning.” Id. at 55; Def’s Ex: 16. No compromise or counter 

proposal was sent. On May 16th, HDR indicated its intent to reengage its attorneys and 

place a lien on the property. Id. Doug reiterated Deason’s legal stance on the issue and 

concluded by indicating a belief that Defendant would be willing to pay $100,000 after the 

completion of the project and receipt of the final report, accepted and agreed to by the City 

of San Diego and Red Tail Monitoring per MMRP requirements. Id. at p.60; Def’s Ex: 17.

HDR completed all fieldwork on June 28, 2013, which included examination of 

625m3

 of soil, identification of 25,766 artifacts, and processing of 1,188 human remains. 

Doc. No. 29; SAC ¶ 29-30. HDR’s report was submitted and accepted by the City of San 

Diego on December 23, 2014. HDR asserts a balance due and owing of $1,125, 485.163F

4

, 

not including interest, as a result of services performed from December 26, 2012 through 

March 17, 2015. Doc. No. 29; SAC ¶ 44; SAC Ex:3. On June 22, 2015, Defendant tendered 

                                               

3

 Prior to the parties opening a dialogue, HDR billed Defendant $31,761.60 for “the 1900 extra 

plantings” (invoice 33328-B) and 36,961.21 for “the 1912 Features” (invoice 43593-B), totaling 

$68,722.81, covering both in-scope and out of scope work. 

4

 The FAC indicates a $576.85 decrease in the principal sum owed from that which was plead in the 

original Complaint. 

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$58,621.27, representing the balance remaining of the total “not-to exceed” amount quoted 

in the modified contract. Doc. No. 30-2, p.3; Def’s Decl. 

II. PROCEDURAL BACKGROUND

HDR initiated the instant action on June 25, 2015. On September 14, 2015, it filed 

an Amended Complaint (“FAC”). Defendant then filed a counterclaim and a motion to 

dismiss the FAC. This Court granted Defendant’s motion to dismiss as to the quantum 

meriut and promissory fraud claims with leave to amend. Plaintiff filed the SAC on July 

21, 2016. Defendant’s fully briefed Motion to Dismiss Plaintiff’s SAC is now before the 

Court. 

DISCUSSION 

Plaintiff’s SAC alleges four causes of action: a claim for breach of contract, two 

common counts including money due on an open book account and a quantum meruit 

claim, and a cause of action for promissory fraud. Defendant again moves to dismiss each 

cause of action under Rule 12(b)(6) for failure to state a claim upon which relief may be 

granted. The Court will reexamine the sufficiency of the Complaint as to each cause of 

action in light of newly submitted documents attached to Defendant’s second motion to 

dismiss and referred to or relied on by Plaintiff in its Complaint. 

I. LEGAL STANDARD 

Rule 12(b)(6) tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 

729, 732 (9th Cir. 2001). Dismissal is warranted under Rule 12(b)(6) where the 

complaint lacks a cognizable legal theory. Robertson v. Dean Witter Reynolds, Inc., 749 

F.2d 530, 534 (9th Cir. 1984); see Neitzke v. Williams, 490 U.S. 319, 326 (1989) (“Rule 

12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law.”). 

Alternatively, a complaint may be dismissed where it presents a cognizable legal theory 

yet fails to plead essential facts under that theory. Robertson, 749 F.2d at 534. While a 

plaintiff need not give “detailed factual allegations,” he must plead sufficient facts that, if 

true, “raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 

550 U.S. 544, 545 (2007). 

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“To survive a motion to dismiss, a complaint must contain sufficient factual 

matter, accepted as true, to “state a claim to relief that is plausible on its face.” Ashcroft 

v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 547). A claim is 

facially plausible when the factual allegations permit “the court to draw reasonable 

inference that the defendant is liable for the misconduct alleged.” Id. In other words, “the 

non-conclusory ‘factual content,’ and reasonable inferences from that content, must be 

plausibly suggestive of a claim entitling the plaintiff to relief. Moss v. U.S. Secret 

Service, 572 F.3d 962, 969 (9th Cir. 2009). “Determining whether a complaint states a 

plausible claim for relief will...be a context-specific task that requires the reviewing 

court to draw on its judicial experience and common sense.” Iqbal, 129 S.Ct. at 1950. 

In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the 

truth of all factual allegations and must construe all inferences from them in the light 

most favorable to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir. 

2002); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). However, the 

court need not accept as true legal conclusions cast in the form of factual allegations, nor 

factual allegations that contradict matters properly before the court as exhibits. Ileto v. 

Glock, Inc., 349 F.3d 1191, 1200 (9th Cir. 2003); Western Mining Council v. Watt, 643 

F.2d 618, 624 (9th Cir. 1981); Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th 

Cir.), opinion amended on denial of reh'g, 275 F.3d 1187 (9th Cir. 2001). 

When ruling on a motion to dismiss, the Court may consider the facts alleged in 

the complaint, documents attached to the complaint, documents relied upon but not 

attached to the complaint when authenticity is not contested, and matter of which the 

Court takes judicial notice. Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 

2001). If a court determines that a complaint fails to state a claim, the court should grant 

leave to amend unless it determines that the pleading could not possibly be cured by the 

allegation of other facts. See Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995). 

 

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II. ANALYSIS 

A. FIRST CAUSE OF ACTION: BREACH OF CONTRACT

To establish a prima facie case for breach of contract, a plaintiff must plead and 

prove four elements: “1) [A valid] contract, 2) plaintiff’s performance or excuse for 

nonperformance, 3) defendant’s breach and 4) damage to the plaintiff therefrom.” Wall St. 

Network, Ltd. v. N.Y. Times Co., 164 Cal. App. 4th 1171, 1178 (2008). A breach is an 

unjustified, defenseless, or unexcused failure to perform an absolute duty which is 

promised in a contract. See Rest.2d, Contracts § 235(2). Before an absolute duty to preform 

arises, all conditions must be either satisfied or excused. Platt Pac., Inc. v. Andelson, 6 Cal. 

4th 307, 313 (1993). 

Neither party disputes the formation of a valid contract. However, Plaintiff alleges 

that Defendant breached the terms of their written agreement, including the amended Short 

Form Agreement, terms and conditions as incorporated therein, and HDR’s Modification 

Request (collectively referred to as “the operative contract”) by refusing to pay a principal 

balance of 1,125,484.16 for services rendered. Defendant contends that HDR seeks 

payment in excess of the clear “not-to-exceed” ceiling, did not have written approval or a 

clear understanding between the parties for a second contract modification, and has not 

alleged any legitimate exception under the operative contract to increase the maximum 

payment obligation. The Court first addresses the conditions and requirements as outlined 

in the Modification Request. 

1. Modification Request 

a. Underlying Assumptions 

First, it is important to note that the Modification Request is an amendment to the 

“Scope of Services” and “Compensation” provisions of the Short Form Agreement. 

Therefore, it is to be read in conjunction with the original underlying contractual 

assumptions and provisions. Defendant asserts the written contract does not limit the 

maximum horizontal or “surficial area.” However, all estimated costs, whether outlined in 

the original contract or the Modification Request were based on an underlying assumption 

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that the surficial ground area to be impacted by the development and subject to excavation 

was fixed. The defined surface area was identified in the “Scope of Services” provision. 

Viewing the facts in the light most favorable to Plaintiff, HDR did not have reason to 

assume that the area of ground disturbance would increase to more than double that listed 

by Defendant in the City permit application. Further any ambiguity in the underlying 

assumptions of the contract is dispelled by the parties’ stipulated modification, which states 

“HDR ECO estimated [and devised a budget for] 326m3

 plus an additional 24 m3 of 

sediment at the 1912 Spindrift site and 55.8 m3 plus an additional 41.7m3 at the 1900 

Spindrift site. See Doc 30-3, p. 6,10; Def’s. Ex: 1. 

Altering the underlying assumption, on which an agreement is based, may 

significantly affect costs. See Commissioner v. Standard Life & Accident Ins. Co., 433 U.S. 

148 (1977) (discussing favorably the NAIC accounting system which recognizes the 

difference between routine adjustments to reserves and extraordinary increases or 

decreases resulting from a change in the underlying assumptions); Cummins-Allison Corp. 

v. SBM Co., 669 F. Supp. 2d 774, 777 (E.D. Tex. 2009), aff'd, 484 F. App'x 499 (Fed. Cir. 

2012) (It is self-evident that changing the assumptions of an economic analysis will change 

the results). Consequently, the three exceptions detailed in the conclusion of the 

Modification Request were not the only factors that could result in a price/cost increase. 

b. Conditions: Understanding and Prior Written Approval 

Second, Defendant argues that a prior understanding and written approval was 

required to trigger the obligation for payment in excess of the contractual maximum. By 

its “very nature - a guaranteed maximum price contract - discloses an objective intent to 

require preapproval of all costs exceeding the maximum price.” Lauth Grp., Inc. v. Sygma 

Network, Inc., No. CV 07-07808 GAF(AGRx), 2009 WL 10669362, at *7 (C.D. Cal. Mar. 

5, 2009). The “prior written approval” and “clear understanding” conditions for completing 

additional “out of scope” work were set forth in the Modification Request. 

This Court, construing facts in the light most favorable to the non-moving party, 

previously found that Doug, Defendant’s son, made oral and written representations that 

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Plaintiff would be compensated for the additional work performed on the project. Doc. 

No. 28, p.6 The Court revisits this finding now having before it the email communications 

upon which Plaintiff bases its allegations. The written representations by Doug indicate 

an intent to agree or an agreement to finalize a second modification, and communicated a 

belief that Defendant would make payments for the work performed by HDR under the 

original contract and “some kind of compromise on the additional work” HDR did not 

anticipate. Doc. No. 30-3, p.53; Def’s Ex 15. Although agreeing to a modification and 

compromise implicitly assumes an increase in compensation, no clear, direct, or definite 

terms were represented with any certainty. “To enforce a [written agreement] at law, the 

offer must be sufficiently definite or must call for such definite terms in the acceptance, 

that the performance required is reasonably certain.” Spellman v. Dixon, 256 Cal. App. 2d 

1, 3, (1967) (an agreement must not only contain all the material terms but also express 

each in a reasonably definite manner”). On review of the facts, the Court finds Defendant’s 

son’s written representations were insufficient to create an enforceable written agreement 

for a breach of contract claim. 

Instead, HDR and Defendant’s son, “agree[d] to agree” to a second modification at 

some date in the future. In such situations, the California Supreme Court has held: 

[T]hat the enforceability of a contract leaving some of its terms to future 

determination depends on the relative importance of the unsettled term. (Ibid.) 

Where “the indefinite promise is so essential to the bargain” that an inability to 

enforce it renders enforcement of the remainder of the contract unfair, the contract 

may be abandoned. 

Ted Jacob Eng'g Grp., Inc. v. The Ratcliff Architects, 187 Cal. App. 4th 945, 965, (2010) 

(quoting Coleman Engineering Co. v. North American Aviation, Inc. 65 Cal.2d 396, 405 

(1966)). 

As discussions ensued, Doug urged HDR to complete the project. Plaintiff alleges 

that prior to Doug’s representations and assurances, Defendant’s attorney stepped in on 

behalf of Defendant, threatening to bring suit against HDR when it terminated performance 

and refused to “complete the additional out-of-scope work without written approval.” As 

a result of the attorney’s threat and Doug’s insistence on completion, Plaintiff returned to 

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work to mitigate any potential damages claims for delay and to comply with city regulatory 

requirements. The Complaint alleges HDR agreed, “to complet[e] [the] job for [Doug] and 

[Defendant]...and continue to work as [they]...work through the details of the [second] 

contract modification.” Whether expressly through his Doug’s oral and written 

representations, his attorney’s affirmative and allegedly coercive actions, and/or implicitly 

through his own omissions, the Court, assuming the truth of all factual allegations, finds 

Defendant compelled or coerced HDR to proceed “to the finish line” without first having 

a “clear understanding” of the out-of-scope work to be completed. 

Nonetheless, Defendant asserts that the provisions laid out in the Modification 

Request supersede the general terms of the original agreement and to find otherwise would 

be inconsistent with the purpose of the modification to insure a predictable maximum fee. 

This argument is unpersuasive in light of the language within provision 13 of Section II of 

the Short Form agreement (i.e. the original contract). Provision 13, entitled “Controlling 

Agreement,” states that “these Terms and Conditions [i.e. provision 12] shall take 

precedence over any inconsistent or contradictory provisions contained in any proposal, 

contract, purchase order, requisition, notice-to-proceed, or like document.” (emphasis 

added). 

2. Provision 12: CHANGES 

The Changes provision allows for an adjustment to compensation if circumstances 

arise which “alter the scope” of services to be performed. The Changes provision required 

all “change[s] [be] reduced to writing” and the agreement be revised - whether before or 

after any additional work commenced - if circumstances required a modification in the 

services to be performed. Plaintiff was to inform Defendant “of such situations so that 

changes in scope and adjustments to the time of performance and compensation [could] be 

made as required,” at which point an equitable adjustment would be made and the contract 

modified accordingly. The parties abided by this provision when they executed the May 

21, 2015 Modification Request due to a change in circumstances. Viewing the evidence 

in a light most favorable to the non-moving party, the Court finds that the Modification 

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Request did not expressly supersede the general terms of the original agreement. Once the 

additional out-of-scope work was identified by Plaintiff and communicated to Defendant, 

the terms called for a writing to memorialize the change, including any adjustment to 

compensation, despite any contrary terms or conditions within the Modification Request. 

The parties’ original agreement included the prediction of situational changes resulting in 

equitable adjustments, which constituted a material aspect of the bargain. 

Plaintiff alleges after May 21, 2015, when the first Modification Request was 

executed, significant changes to the scope of work surfaced as the project progressed and 

the construction plan continued to change. Again the parties attempted to negotiate under 

Changes Provision 12 of Section II, which encompassed the original terms and conditions. 

Despite the attention drawn to this provision, the Complaint does not allege a breach 

due to a cardinal change or a fundamental alteration, nor does it assert an equitable cause 

of action under the constructive change doctrine4F

5

. Instead, Plaintiff elects to allege a breach 

for failure to pay for services that it concedes were not “reflected in the executed 

agreements.” The terms of a proposed second modification were neither “made part of the 

agreement” nor “signed in the same manner as the agreement” as required by the Changes 

provision. “There is no binding [agreement] when ‘it is clear... from a provision that the 

proposed written [agreement] would become operative only when signed by the parties as 

well as from ... other evidence ... that both parties contemplated...acceptance of the 

[agreement’s] terms would be signified by signing it[.]’” Vita Planning & Landscape 

Architecture, Inc. v. HKS Architects, Inc., 240 Cal. App. 4th 763, 773 (2015) (quoting 

Banner Entertainment, Inc. v. Superior Court, 62 Cal.App.4th 348, 358 (1998)). A written 

agreement as to the “out of scope” work may have been executed by the parties at any time. 

Undeniably, Plaintiff vigorously sought, and defendant entertained, a new written 

                                               

5

 “The doctrine of ‘constructive change’ is a legal fiction created “by the federal judiciary and federal 

boards of contract appeal to (1) remediate contractor claims for extra work, and (2) permit contractors to 

perform disputed work without having to risk abandonment of their contracts to preserve their claims.” 

1A Bruner & O'Connor Construction Law § 4:25. 

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agreement under the Changes provision, despite their inability to reach a meeting of the 

minds. 

Without alleging sufficient facts to show compliance with provision 12 of the 

operative contract or asserting a claim for breach under an alternate theory, Plaintiff’s cause 

of action for breach of contract due to defendant’s failure to pay for the out of scope work 

cannot be maintained. The Court GRANTS Defendant’s motion to dismiss the breach of 

contract claim with leave to amend. 

B. SECOND CAUSE OF ACTION: OPEN BOOK ACCOUNT 

An open book account is a detailed ledger that serves as a record for transactions 

between two parties that arise out of a contractual or fiduciary relationship. Cal. Code Civ. 

Pro. § 337a. 

To prevail on an open book account claim, a plaintiff must show that: (1) Plaintiff 

and Defendant had financial transactions; (2) that Plaintiff kept an account of the 

debits and credits involved in the transactions; (3) that Defendant owes money on 

the account; and (4) the amount of money that Defendant owes Plaintiff. Under 

California law, money due under an express contract cannot be recovered in an 

action claiming an open book account unless there is a contrary agreement by the 

parties. [C]ourts require that the parties expressly intend to be bound because 

accruing debts under an express contract are not normally considered the subject of 

an open book account. The mere incidental keeping of accounts does not alone create 

a book account. (Internal citations and quotation marks omitted). 

Eclipse Grp. LLP v. Fortune Mfg., No. 14CV0441-GPC-WVG, 2015 WL 1511033, at *5 

(S.D. Cal. Mar. 4, 2015). 

In support of the open book account claim, Plaintiff submits an invoice dated July 

18, 2016. Plaintiff alleges Defendant became indebted to Plaintiff in the amount of 

$1,125,485.16 on an open book account for services performed at Defendant’s request 

and Defendant has not paid any part of the outstanding monies owed. SAC ¶ 39, 40. 

Defendant moves to dismiss the open book claim, contending that the binding 

written contract limits further billing by HDR. Defendant also asserts that Plaintiff cannot 

seek recovery under an equitable claim for open book because there is an express contract 

in place. The Modification Request indicates the operative contract and guaranteed 

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maximum price covered work up to a fixed volume of sediment to be processed. The terms 

of the proposed second modification were never agreed upon, and therefore any debt 

accruing for the “out of scope” work did not fall under an express contract. Nonetheless, 

in order to assert a claim for an open book account, Plaintiff’s pleading must meet certain 

requirements. 

Defendant argues that Plaintiff’s simple invoice does not meet the requisite detailed 

statement required to support an open book claim. According to Defendant, the single 

invoice dated July 18, 2016, does not reflect an ongoing account of debits and credits 

entered in the regular course of business. See Tsemetzkin v. Coast Federal Savings & Loan 

Assn., 57 Cal.App.4th 1334, 1343 (1997). 

The Complaint alleges: (1) Plaintiff and Defendant engaged in financial transactions, 

(2) for which Plaintiff maintained an account of debits and credits, and (3) Defendant owes 

a specified amount on the account. Plaintiff also alleges it continued work based upon an 

oral understanding or agreement with Doug and was advised by Defendant’s attorney it 

had a duty to complete performance, creating a contractual or fiduciary relationship. In 

light of the Court’s finding that the “out of scope” work did not fall under an express 

contract, accruing debts for such work may properly be considered the subject of an open 

book account. The extent of the detail of Plaintiff’s accounting records is a matter for 

summary judgment or trial, not a motion to dismiss - as currently before the Court. 

Plaintiff’s allegations of an agreement and the specific conduct of the parties are legally 

sufficient to advance its Open Book Account claim. See Maggio, Inc. v. Neal, 196 Cal. 

App. 3d 745, 752 (Ct. App. 1987). Accordingly, the Court DENIES Defendant’s motion 

to dismiss Plaintiff’s Open Book Account claim. 

C. THIRD CAUSE OF ACTION: QUANTUM MERIUT 

Plaintiff asserts a claim under quantum meriut as an alternative to the breach of 

contract claim. The SAC alleges Defendant received the benefit of additional work beyond 

that which was agreed to in the operative contract. Plaintiff further contends the City of 

San Diego permits would not have been approved, nor would construction have progressed, 

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without HDR’s services and Defendant was unjustly enriched by the value of those 

services. Defendant maintains that all work, except work triggered by one of three 

exceptions, was covered under the Modification Request. He claims that to the extent a 

valid contract exists, the parties are entitled to the benefit of the bargain and HDR is not 

entitled to compensation for additional work under the theory of quantum meruit. 

A plaintiff may plead inconsistent claims based upon allegations of the existence 

and absence of an enforceable agreement. Klein v. Chevron U.S.A. Inc., 202 Cal.App. 4th 

1342, 1388 (2012). The theory of “quantum meruit (or quasi-contract) is an equitable 

remedy implied by the law under which a plaintiff who has rendered services benefiting 

the defendant may recover the reasonable value of those services when necessary to prevent 

unjust enrichment of the defendant.” In re De Laurentiis Entertainment Group, Inc., 963 

F.2d 1269, 1272 (9th Cir. 1992). To meet the demands of justice, “quantum meruit 

...supplies, by implication and in furtherance of equity ... missing contractual terms” and 

implies by law a contract to pay for services rendered.” Hedging Concepts, Inc. v. First 

Alliance Mortgage Co., 41 Cal.App.4th 1410, 1419 (Ct. App. 1996). 

The original contract’s underlying assumptions, the Modification Request and the 

parties ongoing email communications make it clear that the operative contract covered a 

specified volume of soil to be processed based on the surficial area and depth of the ground 

to be disturbed or impacted by the construction. Any services rendered beyond these 

specifications were outside of the terms of the contract and the scope of work bargained 

for by the parties. When a contracting party continues to demand performance outside the 

scope of work agreed upon, “the contractor may continue to work after unsuccessful 

negotiations and subsequently recover the value of that work.” Ted Jacob Eng'g Grp., Inc., 

187 Cal. App. 4th 945, 966 (2010) (agreeing with the trial court that a contractor faced with 

a substantial change in its originally contracted scope of work, who is unable to 

successfully negotiate a price for that additional work, may elect to continue to work and 

reserve its right to subsequently obtain a judicial determination as to the value of the 

changes.) Plaintiff’s SAC alleges a sufficient factual basis to support a claim for an 

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equitable remedy and therefore, the Court DENIES Defendant’s motion to dismiss 

Plaintiff’s quantum meriut claim. 

D. FOURTH CAUSE OF ACTION: PROMISSORY FRAUD

A claim for Promissory fraud requires “(1) misrepresentation; (2) knowledge of 

falsity; (3) intent to defraud, i.e., induce reliance; (4) justifiable reliance; and (5) resulting 

damage.” Bell Gardens Bicycle Casino v. Great Am. Ins. Co., 124 F. App'x 551, 553 (9th 

Cir. 2005). Rule 9(b) requires that the circumstances of fraud be plead with particularity 

except “conditions of a person’s mind [which] may be alleged generally.” Fed.R.Civ.P. 

9(b). Describing promissory fraud as “a subspecies of the action for fraud and deceit,” the 

California Supreme Court stated: 

An action for promissory fraud may lie where a defendant fraudulently induces the 

plaintiff to enter into a contract. (citations omitted). In such cases, the plaintiff's 

claim does not depend upon whether the defendant's promise is ultimately 

enforceable as a contract. ‘If it is enforceable, the [plaintiff] ... has a cause of action 

in tort as an alternative at least, and perhaps in some instances in addition to his 

cause of action on the contract.’ 

Lazar v. Superior Court, 12 Cal. 4th 631, 638 (1996). 

 Defendant contends Plaintiff’s promissory fraud claim fails because Doug Deason 

was not Defendant’s agent and because HDR fails to adequately allege: (1) actionable 

misrepresentation; (2) reasonable reliance on representations made; and (3) Defendant’s 

intention not to perform at the time the representations were made. 

1. Sufficiency of Plaintiff’s Agency Allegations 

It is well known that “[a] principal is liable for an agent's misrepresentations that 

cause pecuniary loss to a third party, when the agent acts within the scope of his apparent 

authority.” Am. Soc. of Mech. Engineers, Inc. v. Hydrolevel Corp., 456 U.S. 556, 566, 

(1982). Generally, an agent is one who is authorized to act for or in the place of another. 

Black's Law Dictionary (10th ed. 2014). A person may have either actual or apparent 

authority to act on behalf of another when a principal: (1) expressly delegates authority or 

tells the agent what to do, (2) knowingly acquiesces to the agent’s actions, or (3) implicitly 

appoints one to a position that ordinarily possesses certain powers. Hawaiian Paradise 

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Park Corp. v. Friendly Broad. Co., 414 F.2d 750, 756 (9th Cir. 1969); Salyers v. 

Metropolitan Life Insurance Co., 871 F.3d 934, 939 (9th Cir. 2017). Actual authority may 

also be implied when a relationship exists between the principal and the agent that justifies 

a finding that the agent was authorized to perform certain acts. 

Relying on emails referenced by Plaintiff, and attached as exhibits in support of its 

Motion to Dismiss, Defendant argues that the agency allegations are inconsistent with the 

documentary evidence. Defendant reasons that the email exchanges show Doug advised 

HDR that Deason had to approve any proposed contract modification. Nonetheless, an 

agent may be authorized to perform a multitude of tasks (i.e. negotiation of terms or liaison 

between parties). The agency relationship need not be based on one’s approval authority 

alone. Plaintiff alleges (1) it had no direct contact with Defendant, (2) Defendant requested 

that HDR communicate with Doug, and (3) Defendant attempted to negotiate contract 

terms through Doug5F

6

. Plaintiff also alleges, and email communications reflect, that 

Defendant was aware of Doug’s ongoing interactions with Plaintiff. Inaction by a principal 

creates apparent authority “when it provides a basis for a third party reasonably to believe 

the principal intentionally acquiesces in the agent’s representations or actions.” Salyers, 

871 F.3d at 939 (9th Cir. 2017) (quoting Restatement (Third) of Agency § 3.03 (2006)). 

Plaintiff’s complaint alleges facts sufficient to support a reasonable inference that 

Defendant and his son had an agency relationship. 

2. Actionable Misrepresentation 

Defendant contends Doug’s opinions and expressions of “belief” regarding future 

action by some third party are not actionable misrepresentations. HDR alleges that Doug, 

through phone conversations and an in-person meeting, told HDR that it would be 

compensated for its work outside the scope of the Agreement and Modification Request. 

Plaintiffs’ SAC alleges Defendant’s son assured HDR of their [Darwin and Doug 

                                               

6

 Plaintiff highlights that Doug was President of Defendant’s Texas LLC and that correspondence with 

Doug was done via Defendant’s company email address. 

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Deason’s] commitment to getting a contract modification done, that HDR would be 

compensated for additional work, set a deadline by which to accomplish an executed 

agreement, and promised to send a compromise back to HDR after getting Defendant’s 

approval. Doc. No 29, p.11, 13; SAC ¶¶ 51 (f), (g), (o). These alleged misrepresentations 

are specific, definite, unequivocal, and plead with sufficient particularity to be actionable 

under Rule 8(a) and 9(b) for a claim of promissory fraud. 

3. Justifiable Reliance

Plaintiffs offer that these misrepresentations were made by Defendant’s son on 

behalf of Defendant to induce HDR to continue providing services. However, Defendant 

contends since Doug made it clear his father’s approval was required, any reliance on 

Doug’s representations was not justified. Finding that Plaintiff’s pleadings are sufficient 

to allege Doug acted as an agent for his father, the Court also finds the element of justifiable 

reliance sufficiently plead. “It is ... for the ultimate interest of persons employing agents, 

as well as for the benefit of the public, that persons dealing with agents should be able to 

rely upon apparently true statements by agents who are purporting to act and are apparently 

acting in the interests of the principal.” Am. Soc. of Mech. Engineers, Inc., 456 U.S. at 567 

(quoting favorably Restatement § 262, Comment a, p. 572.). 

 Defendant also argues that HDR fails to allege reasonable reliance because HDR 

returned to work prior to any alleged broken promises or misrepresentation’s being made. 

Although HDR returned to the site prior to communicating with Doug, its allegation that it 

continued to perform due to Doug’s representation that it would receive pay for the 

additional work performed is reasonable. HDR alleges they relied on Defendant’s 

representations to their detriment and suffered harm in the principal sum of $1,125,486.16. 

The Court finds Plaintiff’s allegations sufficient to assert justifiable reliance. 

4. Intent to Defraud or Induce Reliance 

Promissory fraud requires the “intent to defraud or induce reliance.” Defendant 

contends the alleged promises or representations made by Doug reflect a genuine intent to 

engage in discussion aimed at settlement. Plaintiff asserts, however, that the statements 

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were false, Defendant had knowledge of the falsity and, at the time the statements were 

made, he had no intent to execute a second modification or pay additional monies - only to 

induce HDR to continue providing services. Doc. No 29, p. 13; SAC ¶¶ 51-52. Plaintiff 

further alleges Defendant’s misrepresentations were made in an effort to ensure completion 

of the construction project and maintain compliance with the City’s permit requirements. 

Plaintiff’s assertion that Defendant first notified HDR of its unwillingness to provide any 

additional compensation when HDR’s work was almost complete provides support for its 

allegation of fraudulent intent sufficient to survive a motion to dismiss. See Stocco v. 

Gemological Inst. of Am., Inc., No. 12-CV-1291 WQH DHB, 2015 WL 472143, at *17

(S.D. Cal. Feb. 5, 2015) (“something more than nonperformance is required to prove the 

defendant’s intent not to perform his promise (citations omitted)). Whether Defendant 

harbored fraudulent intent is an issue of fact. At this stage in the pleadings the Court must 

construe all facts in the light most favorable to Plaintiff. The Court finds Plaintiffs 

allegations as to Defendant’s intent are sufficiently plead to state a claim for relief for 

Promissory fraud. Defendant’s motion to dismiss is DENIED. 

III. LEAVE TO AMEND 

Defendant seeks dismissal of the claims without leave to amend. The Court finds that 

the allegation of other facts could cure the deficiencies detailed herein and determines it 

appropriate to provide Plaintiff an opportunity to amend. 

CONCLUSION AND ORDER 

Based on the foregoing, IT IS HEREBY ORDERED: 

1. Defendant’s Motion to Dismiss is GRANTED IN PART and DENIED IN PART. 

a. The motion is GRANTED as to Plaintiff’s claim for Breach of Contract. 

b. The motion is DENIED as to Plaintiff’s claims for Open Book Account, 

Quantum Meruit, and Promissory Fraud. 

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2. If Plaintiff wishes to amend the complaint to cure the deficiencies noted, Plaintiff 

shall file a Third Amended Complaint no later than 30 days from the filing date of 

this order. 

 IT IS SO ORDERED. 

DATED: March 28, 2018 

 _________________________________ 

 Hon. JOHN A. HOUSTON

 UNITED STATES DISTRICT JUDGE

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