Filed 8/23/22

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

CAM-CARSON, LLC,

 Plaintiff and Appellant,

v.

CARSON RECLAMATION 

AUTHORITY et al.,

 Defendants and Respondents.

B312729

Los Angeles County

Super. Ct. No. 20STCV16461

 

APPEAL from a judgment of the Superior Court of Los 

Angeles County, Maureen Duffy-Lewis, Judge. Reversed and 

remanded.

Latham & Watkins, Richard P. Bress, Daniel S. Schecter, 

Robert J. Ellison and Nima H. Mohebbi for Plaintiff and Appellant.

Aleshire & Wynder, Sunny K. Soltani and June S. Ailin for 

Defendants and Respondents City of Carson and the Successor 

Agency to the Carson Redevelopment Agency.

____________________________________
2

SUMMARY

Plaintiff CAM-Carson, LLC sued the City of Carson (City), 

the Carson Reclamation Authority (CRA) and others for breach of 

contract and breach of the covenant of good faith and fair dealing. 

Plaintiff is a commercial real estate developer. Plaintiff entered 

contracts with the City and CRA to develop a 40-acre site after the 

City and CRA remediated soil and groundwater contamination, 

installed infrastructure, and built roads. Plaintiff alleged the City 

and CRA engaged in gross mismanagement and malfeasance that 

created a massive funding deficit which derailed the project,

causing damages to plaintiff of over $80 million.

Plaintiff seeks to hold the City liable in equity under alter 

ego principles for the CRA’s breach of a contract between plaintiff 

and the CRA. We hold the alter ego doctrine may be applied to 

government entities where the facts justify an equitable finding of 

liability. Here, the allegations in plaintiff’s second amended 

complaint are sufficient to survive the City’s demurrer. We cannot 

say, as a matter of law, the City cannot be held the alter ego of the 

CRA if plaintiff is able to prove the facts alleged. Accordingly, the 

trial court erred in sustaining the City’s demurrer to plaintiff’s 

breach of contract claim.

For the same reason, the trial court erred in sustaining the 

City’s demurrer to plaintiff’s breach of implied covenant claim. 

Apart from alter ego liability, the court failed to consider plaintiff’s 

allegations that the City breached the implied covenant in 

connection with a development agreement to which the City was a 

party.

Accordingly, the judgment of dismissal is reversed.
3

FACTS

We recite the facts as alleged in the operative complaint.

1. The Parties and the Background

This case involves an undeveloped site the parties call the 

“157 Acre Site” in Carson. It was operated as a landfill in the 

1950’s until its closure in 1965. It has sat vacant since then. The 

site has soil and groundwater contamination that requires 

environmental remediation before it can be developed. It is subject 

to a State remedial action plan.

The plaintiff is a joint venture of subsidiaries of two major 

U.S. commercial real estate developers. The defendants are the 

City; the CRA, which is a joint powers authority that was “created 

by the City solely to oversee environmental remediation on the 

157 Acre Site”; the Successor Agency to the now-dissolved Carson 

Redevelopment Authority; and RE | Solutions, LLC (RES), the 

CRA’s primary contractor. (The first three are sometimes referred 

to collectively as the city defendants. The CRA and RES are not 

parties to this appeal.) 

Over the years, ownership of the 157 Acre Site changed 

hands between a number of private entities and developers, but 

none was able to complete the extensive remediation required. In 

2006, the site was sold to Carson Marketplace LLC, which entered 

into an agreement with the Carson Redevelopment Agency to

effectuate a redevelopment plan under the State remedial action 

plan. But that project could not be completed either. 

In 2012, the Carson Redevelopment Agency was dissolved in 

accordance with state law. The Carson city council passed a 

resolution creating the Successor Agency to serve as successor to 

the redevelopment agency, and “ ‘the City became the Successor 
4

Agency of the former redevelopment agency by operation of law.’ ”

1

The Successor Agency assumed the redevelopment agency’s 

enforceable obligations, including the obligation to fund the 

remediation work, “an obligation which the City and Successor 

Agency admit still exists today.” (Boldface & italics omitted.) 

By 2015, the City determined that a governmental entity 

would have to acquire the 157 Acre Site and complete the 

remediation and basic infrastructure before a private developer 

would agree to build. Early that year, the City created the CRA to 

acquire the site and complete the remediation. In May 2015, 

Carson Marketplace transferred its interest in the 157 Acre Site to 

the CRA, in consideration for, “among other things, the Successor 

Agency’s obligation to ensure the completion of the remediation 

work and other infrastructure improvements.” The City and the 

Successor Agency “have admitted that, in the context of [plaintiff’s]

claims, ‘the Successor Agency is directly liable . . . for competently 

undertaking the Remediation Work and alleviating the Hazardous 

Substances upon the 157 Acre Site.’ ” 

From 2016 through 2018, the City and the CRA negotiated 

with plaintiff, leading to a series of interconnected agreements (the 

“project agreements”) for the development of 40 acres of the 

157 Acre Site, called the “Cell 2 Site.” The project was to be “a 

state-of-the-art, first-class, regional fashion outlet and retail mall.” 

For plaintiff to develop the Cell 2 Site, it was critical that the CRA 

1 The dissolution law “transfers control of redevelopment 

agency assets to successor agencies, which are contemplated to be 

the city or county that created the redevelopment agency

[citations]. [The law] requires successor agencies to continue to 

make payments and perform existing obligations.” (California 

Redevelopment Assn. v. Matosantos (2011) 53 Cal.4th 231, 251.)
5

and the City first remediate the Cell 2 Site, install infrastructure 

in the subsurface, construct roads, and much more. 

The “project agreements” were executed in September 2018. 

They included a conveyancing agreement between plaintiff and the 

CRA (exhibit A to plaintiff’s operative complaint); a cooperation 

agreement between the CRA and the City; and a development 

agreement between plaintiff and the City. 

Under the conveyancing agreement, the CRA must construct 

the remedial systems at its sole cost. The parties acknowledged 

development would be financially infeasible without remediation, 

and the CRA “has substantial funds to do so.” The CRA 

represented it had $75,873,000 as of December 31, 2017. The CRA 

and the City advised plaintiff the Cell 2 Site remediation would 

cost $26,888,698. 

The CRA was also responsible under the conveyancing 

agreement to fund and construct, on behalf of the City, certain 

offsite improvements to serve the 157 Acre Site, such as roadway 

improvements, water and other utilities, that were prerequisites 

for building out the project’s infrastructure.

Some of the offsite and site development improvements were 

subject to advances of funds from plaintiff. Plaintiff was entitled 

to recoup its advances from future tax revenues generated by the 

project and paid to the City. The CRA could not use plaintiff’s 

advances to fund any remediation work. Plaintiff had the right to 

approve the CRA’s plan for offsite improvements and site 

development improvements, including any improvement changes. 

The cooperation agreement between the CRA and the City 

required the CRA to report to the City any change orders over a de 

minimis amount, and in certain cases to obtain plaintiff’s approval. 
6

Plaintiff is identified as a third party beneficiary in connection 

with the project. 

The CRA retained RES as its primary contractor. RES was 

tasked with managing the subcontractors. After completion of 

remediation of the Cell 2 Site and development improvements, 

plaintiff would be entitled to develop the site in accordance with 

rights granted by the City to plaintiff under the development 

agreement. 

2. Mismanagement of the Project

The operative complaint describes at length gross 

mismanagement of the project by the City, the CRA and RES, 

resulting in the creation of a massive funding deficit and causing 

damages to plaintiff of over $80 million.

Before work began on the project, plaintiff deposited 

$4 million with the CRA, a deposit intended “to secure 

performance under the Conveyancing Agreement.” Without 

plaintiff’s knowledge, the City held these funds in its own account. 

“In connection with the negotiations, and over the next year,” 

plaintiff invested “more than $80 million in connection with the 

Project.” 

In October 2019, just a year after the project agreements 

were signed, the CRA and RES disclosed they did not have the 

funding to complete the work the CRA was required to complete 

for the Cell 2 Site. Plaintiff then learned the CRA had not only

spent all the funds available for the remediation but also had 

developed a huge deficit. The City and Successor Agency had 

failed to provide the necessary funding to cover or cure the 

shortfall and had taken no action to properly supervise the CRA. 

Unbeknownst to plaintiff, the City and the CRA failed to 

employ a sufficient project management and financial control 
7

process. The assistant city manager in charge of the project had no 

experience managing a major remediation and construction 

project. The CRA executive director failed to oversee spending on 

the project. The City and CRA representatives failed to review, 

scrutinize and approve millions of dollars in change orders. There 

were no budget forecasts or reports of variances from budget or 

notification of a significant budget shortfall until it was too late. 

These failures “led to massive, unmonitored spending 

increases with no attention by RES or the City Defendants to 

baseline cost estimates, a budget, or an analysis to determine if 

sufficient funds were available.” The City and the CRA “have used 

[plaintiff’s] advances to pay for remediation work,” contrary to the 

conveyancing agreement. “As the City Attorney recognized, in 

writing, there was a ‘total and utter failure to manage’ by RES,” a 

failure that happened on the CRA’s watch. 

The CRA did not even know how many tens of millions of 

dollars were needed to complete the project, “though their numbers 

have ranged from $40 million to $57 million.” 

3. The Concealment Allegations

The City, the CRA and RES “admit they became aware of an

enormous funding shortfall they created as early as February 

2019,” but concealed the shortfall from plaintiff. The City and the 

CRA “continued to incur substantial additional costs (including 

millions of dollars in costs invoiced to and advanced by [plaintiff]

under the Project Agreements) even though they knew they would 

not be able to complete their remediation and infrastructure 

obligations.” “The City and the CRA did nothing to correct the 

funding issues or lack of Project oversight, and instead continued 

to allow RES to mismanage the Project and waste millions of 

dollars.” Defendants “elected to completely deplete available funds 
8

for remediation of the Cell 2 Site without notifying [plaintiff] that 

they were rapidly running out of money.” 

“Throughout the remainder of 2019,” defendants 

intentionally concealed their funding deficit and “made numerous 

representations to continue to induce [plaintiff] to advance 

additional funds,” even though they knew they could not complete 

their obligations under the project agreements. For example, 

month after month through November 2019, the City’s treasurer 

(also treasurer of the CRA and Successor Agency) represented to 

the public and the CRA board “that the CRA had enough money to 

fund its obligations for the next six months,” representations that, 

“[a]s it turns out, . . . were patently false.” “There was no advance 

warning to [plaintiff] or the public of this financial malfeasance.”

The complaint alleges the city manager, the mayor, the city 

attorney, the CRA and RES knew the CRA was running out of 

money and the City and Successor Agency would not provide the 

required funding, but they did not disclose that information to

plaintiff and the public.

On September 25, 2019, RES told the assistant city manager

the funding deficit “no longer only precluded the remediation of the 

entire 157 Acre Site, but was so severe that it even precluded the 

remediation of the Cell 2 Site.” (Italics omitted.) But RES did not 

tell plaintiff, and neither did the CRA until weeks later. Despite

the CRA’s “awareness of issues since at least February 2019, it 

failed to ‘take over direct management of the primary contractors’ 

until November 2019.” (Italics omitted.) 

On October 17, 2019, the CRA began to disclose the truth 

about its massive financial deficit to plaintiff, but at the same 

time, “the City Attorney, the CRA, and RES conspired about how 

to continue to conceal the dire facts from [plaintiff].” On 
9

October 31, 2019, the city attorney “brainstormed with RES ‘how

[to] present the number to [plaintiff].’ ” (Second brackets added.) 

The City “tried to find a way to pin the blame on [plaintiff] to ‘get 

[plaintiff] on the defensive.’ ” 

4. Events After the CRA’s Disclosure

The complaint alleges that on January 30, 2020, plaintiff 

gave formal notice to the CRA and the City of their material 

breaches of contract. The CRA failed to cure the defaults, with the 

city defendants “all repeatedly admitt[ing] . . . that the CRA has no 

ability to cover the funding shortfall they caused or ‘to deliver the 

remedial work.’ ” The city defendants have admitted plaintiff has 

been damaged “to the tune of more than $80 million” and must 

necessarily turn to the Successor Agency and the City for recovery 

“because the CRA ‘has no assets or financial resources’ to cover 

their obligations.” The City’s mayor “apologized in writing to a 

senior representative of [plaintiff] for the CRA’s failing on the 

Project.” The city defendants, “including the Successor Agency 

itself, have repeatedly admitted that the Successor Agency has a 

duty to [plaintiff] to fund the completion of the remedial work, and 

that Successor Agency breached that duty.” (Boldface & italics 

omitted.) 

Plaintiff filed this lawsuit in April 2020 and filed the 

operative second amended complaint in November 2020. As 

relevant here, the operative complaint alleges causes of action 

(1) for breach of contract against the CRA, and against the City 

and Successor Agency as alter egos of the CRA; and (2) breach of 

the implied covenant of good faith and fair dealing against the City 

and the CRA, and against all the city defendants as alter egos.

The claim for breach of the covenant of good faith referred to both 
10

the conveyancing agreement between plaintiff and the CRA and 

the development agreement between plaintiff and the City. 

5. The Alter Ego Allegations

The complaint summarizes the alter ego relationship among 

the City, the CRA and the Successor Agency as follows: “These 

entities failed to: (a) observe appropriate formalities; (b) maintain 

separate records; (c) properly demarcate between when individuals 

were acting for the City and when those same individuals were 

acting for the CRA or the Successor Agency; (d) properly 

memorialize meetings between the CRA, the Successor Agency, 

City Council, and Project contractors and subcontractors; or 

(e) properly capitalize the CRA. Moreover, in light of the City’s 

extensive managerial and administrative control over the CRA and 

the Successor Agency, their commingling of resources and 

operations, and the fact that both the CRA and Successor Agency 

operate exclusively for the benefit of the City, the three entities 

constitute a single enterprise. The CRA and the Successor Agency 

exist largely to complete the remediation work such that the 

Project can move forward and the City can reap massive financial 

and societal gains.” We recite the more detailed alter ego 

allegations below.

a. Disregard of formalities separating the City, the 

CRA, and the Successor Agency; commingling 

funds

The City created and retains direct control over the CRA and 

operates the Successor Agency. “Formalities are not respected 

among the three entities, and the City has the power to, and does, 

make decisions for all three entities.” 

The City “has contributed financial resources to [the CRA 

and the Successor Agency] in connection with the Project and 
11

otherwise.” In the development agreement between the City and 

plaintiff, “the parties acknowledge that the ‘City caused [the CRA] 

to be formed and is providing funding to [the CRA].’ ” (Brackets in 

original.) Plaintiff’s “$4 million deposit under the Conveyancing 

Agreement was also held by the City, despite the fact that the

Conveyancing Agreement provided that the money belonged to the 

CRA.” (Boldface & italics omitted.) 

The complaint alleges the three entities’ finances “are 

managed by the same City employee and involve common funds,” 

and the “CRA consults with the City Treasurer regarding where 

and how to move funds.” At the CRA’s meetings, which key 

members of the City attend, “important ‘budget’ and financial 

issues on the agendas are routinely passed without any discussion 

or debate,” and “these meetings are not properly memorialized.” 

“The CRA’s and the City’s finances are so intertwined that 

the City’s auditors require the City to include the CRA in the 

City’s own consolidated financial statements.” The auditors have 

explained it would be misleading to exclude the CRA from the 

City’s financial statements. The City’s assistant city manager “has 

also admitted, in writing, that ‘[a]ll of the Successor Agency 

funding . . . is in the accounts of the CRA.’ ” The City has 

“confirmed its historical financial involvement in developing the 

Site,” acknowledging in February 2020 that the City, through its 

developers including the Successor Agency and the CRA, “ ‘has 

caused over $200M to be spent on the Remediation Work.’ ”

The complaint alleges the City has direct control over the 

“ultimate decisions related to the Project,” such as in the City’s 

development agreement with plaintiff, which states the City’s legal 

authority to regulate the zoning of the site and to approve and 

modify the general plan and specific plans. Further, the 
12

cooperation agreement between the City and the CRA gives the 

City the right to receive reports of certain change orders and 

“exercise other oversight over the CRA’s actions,” and the CRA “is 

obligated ‘to obtain City[] approval of the construction terms and 

costs.’ ” A city employee with no formal role at the CRA was 

“intimately involved in tracking the progress of the Project.” The 

city attorney admitted that “ ‘nothing gets done going forward on 

this project without the express consent of the City Attorney’s 

office.’ ” “City representatives frequently referred to their 

extensive involvement in the project indicating that ‘the City and 

CRA continued to actively pursue the development of the Site.’ ” 

The complaint alleges the City is an intended beneficiary of 

the relationship between the CRA and plaintiff, and of the 

Successor Agency’s obligations. The City “was a primary 

beneficiary of the Project from its inception,” and City 

representatives “frequently discussed the ‘substantial benefits’ the 

Project would yield specifically for the City. For that reason, the 

Conveyancing Agreement expressly provided that ‘[t]he City is a 

third party beneficiary of this Agreement with the rights of 

enforcement.” “[T]he City operates the CRA and the Successor 

Agency as though they are part of one single enterprise designed to 

promote the City’s interests and fulfill one common purpose—the

remediation of the 157 Acre Site.” 

b. Identical officers and managers

The complaint alleges the three city defendants “use the 

same individuals, employees, members, and officers to manage and 

control the activities for all three entities.” The mayor is the chair 

of the Successor Agency and the CRA board. The mayor pro tem is 

the Successor Agency vice chairman. Under governing CRA 

documents, the city manager “is appointed to be the Executive 
13

Director of the CRA,” but has “improperly abdicated that role to 

the Assistant City Manager . . . without following any appreciable 

legal formalities.” (Italics omitted.) 

Members of the city council also serve as members of the 

Successor Agency. The city manager is executive director of the 

Successor Agency. The city attorney is also counsel to the 

Successor Agency and the CRA. The city clerk is secretary for the 

Successor Agency and CRA. The deputy city clerk is also deputy 

secretary for the CRA. The city treasurer is also treasurer of the 

CRA and Successor Agency.

Individuals from the city treasurer’s office that had no 

formal role for the CRA were “intimately involved in managing the 

finances of the CRA.” The City’s finance staff “conduct accounting 

services for the CRA.” The employees and officers for the city 

defendants “routinely have operated with little to no demarcation 

between when they are acting for the CRA, when they are acting 

for the Successor Agency, and when they are acting for the City.” 

Meetings of the city defendants “are often held in the same place 

and on the same day.” 

c. City use of CRA and Successor Agency as a 

conduit for the affairs of the City

The complaint alleges that the CRA is insolvent and 

undercapitalized. “Despite that the City and the Successor Agency 

are admittedly responsible for ensuring the CRA remains 

capitalized (further demonstrating the clear control exerted by the 

City), the Assistant City Manager has admitted in writing that the

CRA ‘has no assets or financial resources’ to cover the massive 

funding shortfall and concomitant obligations to [plaintiff] and has 

conceded that [plaintiff] must ‘of necessity turn to the Successor 

Agency and the City’ for recovery.” “The City and Successor 
14

Agency continue to admit that the CRA is undercapitalized and 

that they are liable for funding the CRA; despite that, the CRA 

remains in jeopardy.” 

The complaint alleges the city “exercised intimate and 

substantial control over the CRA and the Successor Agency and 

continues to do so. In particular, the City contributed significant 

financial resources to the CRA in connection with the Project and 

otherwise, despite the fact that, due to the CRA’s gross 

mismanagement, the CRA has remained undercapitalized to the 

point that it was unable to adhere to a standard of care.” 

Further, “the City created the CRA in an attempt to shield 

itself from liability while still receiving the primary benefits of the 

Project, but then failed to properly capitalize or supervise the CRA 

at all. On information and belief, the City did this specifically so 

that it could afford to be derelict in its duties and push all liability 

to the CRA despite the fact that the CRA was managed and 

operated by the City’s own officials.” 

6. The Demurrers and the Trial Court’s Ruling

The City and Successor Agency demurred to the complaint. 

(The court overruled a demurrer by the CRA to the breach of 

implied covenant claim.) The trial court sustained the demurrer of 

the City and Successor Agency as to all causes of action without 

leave to amend, stating: “There are insufficient allegations for 

alter ego liability. The City is not party to the contract and cannot 

be liable for Breach of Implied Covenant.” The court entered 

judgment of dismissal as to the City and the Successor Agency on 

March 18, 2021.

Plaintiff filed a timely notice of appeal from the court’s 

judgment of dismissal. Plaintiff tells the court that its appeal is 

“only as to the City.”
15

DISCUSSION

1. The Standard of Review

A demurrer tests the legal sufficiency of the complaint. We 

review the complaint de novo to determine whether it alleges facts 

sufficient to state a cause of action. For purposes of review, we 

accept as true all material facts alleged in the complaint, but not 

contentions, deductions or conclusions of fact or law. We also 

consider matters that may be judicially noticed. (Blank v. Kirwan 

(1985) 39 Cal.3d 311, 318.)

2. The Issues and the Precedents

The first issue we decide is that the alter ego doctrine may 

be applied to a government entity in a case where the facts justify 

an equitable finding of liability. As we will explain, our review of 

the precedents (see pts. d. & e., post) reveals that some California 

appellate courts have stated that one government entity is the 

alter ego of another. Other courts have declined to apply the 

doctrine to governmental entities based on the facts of the case. 

But we have seen no California decision, nor any sister state or 

federal court decision applying the law of another state, that held 

the alter ego doctrine may never be applied to government entities 

as a matter of law. 

The second question is the one presented by every demurrer: 

whether the facts alleged fail to state a claim as a matter of law. 

Here, our holding is limited to this: Accepting as true all the 

material allegations of the second amended complaint, we cannot 

say as a matter of law that plaintiff will be unable to prove the 

City is the alter ego of the CRA.

We begin with a summary of alter ego principles as 

established in corporate law. Then we turn to the application of 

those principles to government entities, and to the cases applying 
16

(or declining to apply) them to government entities. In so doing, 

we also explain how the circumstances in cases declining to apply 

alter ego liability to government entities differ from the facts 

alleged in this case.

a. Traditional alter ego doctrine

The Supreme Court tells us that “[t]he essence of the alter 

ego doctrine is that justice be done. ‘What the formula comes down 

to, once shorn of verbiage about control, instrumentality, agency, 

and corporate entity, is that liability is imposed to reach an 

equitable result.’ ” (Mesler v. Bragg Management Co. (1985) 

39 Cal.3d 290, 301.)

Another court explains: “The ‘single enterprise,’ or alter ego, 

doctrine is an equitable doctrine: ‘A corporate identity may be 

disregarded—the “corporate veil” pierced—where an abuse of the 

corporate privilege justifies holding the equitable ownership of a 

corporation liable for the actions of the corporation. [Citation.] 

Under the alter ego doctrine, then, when the corporate form is 

used to perpetuate a fraud, circumvent a statute, or accomplish 

some other wrongful or inequitable purpose, the courts will ignore 

the corporate entity and deem the corporation’s acts to be those of 

the persons or organizations actually controlling the corporation, 

in most instances the equitable owners.’ ” (Troyk v. Farmers 

Group, Inc. (2009) 171 Cal.App.4th 1305, 1341 (Troyk).)

“ ‘In California, two conditions must be met before the alter 

ego doctrine will be invoked. First, there must be such a unity of 

interest and ownership between the corporation and its equitable 

owner that the separate personalities of the corporation and the 

shareholder do not in reality exist. Second, there must be an 

inequitable result if the acts in question are treated as those of the 

corporation alone.’ ” (Troyk, supra, 171 Cal.App.4th at p. 1341.) 
17

Alter ego liability “is not limited to the parent-subsidiary corporate 

relationship; rather, ‘under the single-enterprise rule, liability can 

[also] be found between sister [or affiliated] companies.’ ” (Ibid.)

“Factors for the trial court to consider include the 

commingling of funds and assets of the two entities, identical 

equitable ownership in the two entities, use of the same offices and 

employees, disregard of corporate formalities, identical 

directors and officers, and use of one as a mere shell or conduit for 

the affairs of the other. [Citation.] ‘No one characteristic governs, 

but the courts must look at all the circumstances to determine 

whether the doctrine should be applied.’ ” (Troyk, supra, 

171 Cal.App.4th at p. 1342.)

b. Alter ego doctrine and government entities

Of course, government entities are not privately held 

corporations. One government entity is not ordinarily “owned” by 

another, or by anyone. But as long ago as 1931, one treatise on 

disregarding the corporate entity observed that the principle “is by 

no means hampered in its application, or confined in its operation 

to private corporations but will apply with equal force and vigor in 

proper cases to municipal corporations.” (Anderson, Limitations of 

the Corporate Entity: A Treatise of the Law Relating to the 

Overriding of the Corporate Fiction (1931) § 68, p. 79.) We agree 

with that observation. Government entities regularly engage in

commercial activities with the private sector, and a government 

entity may create another government entity to perform certain 

activities for the purpose of avoiding liability in the creating entity, 

just as in the private sector. (Here, the conveyancing agreement 

states the CRA was formed “to take and pursue remediation of the 

157 Acre Site,” and one of the goals was to protect the City from 

“any liability which would arise to the landowner.”) 
18

Under such circumstances, it seems to us that the equivalent

of “a unity of interest and ownership” may well exist between two 

or more government entities. The precedents tell us that if private 

corporations are “operated with integrated resources in pursuit of 

a single business purpose,” and one of them “so dominated the 

finances, policies and practices of” the other that the latter “had no 

separate ‘mind, will or existence’ of [its] own, but [was] merely [a] 

conduit[]” through which the former conducted its business, then 

alter ego liability may exist if an inequitable result would 

otherwise follow. (Toho-Towa Co., Ltd. v. Morgan Creek 

Productions, Inc. (2013) 217 Cal.App.4th 1096, 1109 (Toho-Towa).) 

We are unable to see why the same principle should not apply to 

government entities, if comparable facts are established. It is the 

“unity of interest” that is significant, and indistinguishable from 

ownership in any practical way, when public entities are involved.

c. The City’s contentions

The City contends no California court has held one public 

agency liable for a contractual or financial obligation of another 

public agency, and the alter ego/single enterprise theory “is a 

common law doctrine that does not apply to public agencies.” 

Further, the City contends that disclosures made in the recitals in 

the conveyancing agreement and development agreement, together 

with the statutory immunity of public agencies in California from 

liability for fraud, “inexorably lead to the conclusion” that the alter 

ego theory cannot apply here.

Our review of the authorities the parties cite, discussed post, 

reveals no cases that have held the alter ego doctrine does not 

apply as a matter of law to governmental entities, without regard 

to the facts. And the City’s claim that the disclosures in the 
19

recitals prevent the application of alter ego liability does not 

withstand analysis either, as we now show.

The City first points out the recitals in the conveyancing 

agreement (attached to plaintiff’s complaint) show plaintiff knew 

the amount of funds available to CRA as of December 31, 2017;

knew the CRA was formed to remediate the site because the City 

was unwilling to put its general fund at risk for environmental 

cleanup costs then exceeding $100 million; knew the Successor 

Agency committed to provide $50.5 million in additional required 

funding to the CRA; knew the City would contract with the CRA to 

perform the City’s infrastructure obligations “to avoid any City 

liability for the remediation”; and knew the CRA’s “resources are 

insufficient to undertake the Project,” and “the [CRA] does not 

have sufficient funds to pay for the Offsite Improvements and Site 

Development Improvements” for which it was responsible, 

resulting in the agreement that plaintiff would advance funds that 

were to be repaid though sales tax revenues for up to 25 years. 

We agree with the City that the recitals do indeed show all 

this was known to plaintiff when it executed the conveyancing 

agreement. But we do not agree with the City’s contention that 

these recitals show “[t]here were no surprises here, no 

concealment, and therefore no basis for holding the City and the 

Successor Agency liable on an alter ego/single enterprise theory, 

because the element of fraud, concealment, bad faith or injustice is 

completely absent.” We disagree with the City on this point for 

multiple reasons.

First, the question is not confined to what plaintiff knew 

when it executed the agreement; the more pertinent point is what 

the City and the CRA did thereafter. The complaint clearly alleges

failure to observe appropriate formalities and maintain separate 
20

records, failure to properly capitalize the CRA, and so on, as well 

as that “[t]hroughout the remainder of 2019,” defendants 

intentionally concealed their funding deficit and “made numerous 

representations to continue to induce [plaintiff] to advance 

additional funds,” even though they knew they could not complete 

their obligations under the project agreements.

Second, plaintiff need not allege a claim for fraud in order to 

establish alter ego liability. “The alter ego doctrine does not 

require proof of fraud, and can be satisfied by evidence that 

adherence to the fiction of the separate existence of the corporation 

would promote injustice.” (Misik v. D’Arco (2011) 197 Cal.App.4th 

1065, 1069, 1074; accord, Claremont Press Publishing Co., Inc. v. 

Barksdale (1960) 187 Cal.App.2d 813, 817 [“actual fraud need not 

be shown. It is sufficient that refusal to recognize unity of 

corporation and individual ‘will bring about inequitable results’ ”].)

Third, on the allegations of the complaint, we cannot agree 

that “concealment, bad faith or injustice is completely absent.” 

The complaint alleges the City created the CRA for its own benefit, 

was derelict in its oversight of the project, and concealed the 

project’s mismanagement and undercapitalization from plaintiff

for the better part of a year, all while plaintiff was investing tens 

of millions of dollars in connection with the project. The complaint 

alleges that, “despite awareness of the CRA’s insolvency, the City 

defendants continued to make commitments to [plaintiff] that the 

CRA could complete its contractual duties, despite knowing full 

well that the CRA lacked the funds to be able to do so.” If those 

allegations are proved, a court might conclude an “inequitable 

result” would follow if the CRA is treated as a separate entity.

Fourth, the City argues that judicially noticeable documents 

demonstrate the city defendants “are separate entities existing 
21

under different bodies of law with different powers and duties.” 

The City recites information from the city charter, the law creating 

and governing successor agencies, and the documents establishing 

the CRA as a joint powers authority. Of course it is true that the 

City exists as a separate legal entity from the CRA. But in every

single enterprise alter ego case, there are always two or more 

formally separate defendants who the plaintiff alleges should be 

deemed one and the same under equitable principles, not under 

statutory law. We see no reason these principles should be 

different when government entities are involved.

The City insists that not all legal concepts apply to public 

agencies in the same way they apply to private entities, “in order 

to protect the public fisc,” citing differences in the application of 

the law on oral contracts, quantum meruit, and other areas of law. 

The City argues that a judgment for tens of millions of dollars 

would cripple the City financially, stripping its residents of 

necessary services affecting public health and safety, and these 

potential risks “warrant rejection of alter ego/single enterprise 

liability.” We are not persuaded that potential risks to the public 

fisc weigh so heavily in balancing the equities as to justify 

categorically barring municipal liability if plaintiff can prove 

malfeasance of the kind and in the circumstances alleged in the 

complaint.

That brings us to the precedents. 

d. The precedents: California

As we have observed, several cases have stated that one 

government agency is the alter ego of another, albeit without 

analysis of the alter ego doctrine. For example, in Nolan v. 

Redevelopment Agency (1981) 117 Cal.App.3d 494, 499–501, a 

redevelopment agency was named as the defendant, while the city, 
22

which had declared itself to be the redevelopment agency as 

authorized by statute (and which was an indispensable party), was 

not named as a defendant. The Court of Appeal reversed the trial 

court’s dismissal of the case, observing that “the problem of parties 

. . . turns out to be only a phantom. The city council is the 

redevelopment agency. . . . The council, albeit referred to by its 

other title, has been a party defendant in this action from the 

beginning.” (Id. at p. 501.) Similarly, in Oceanside Marina Towers 

Assn. v. Oceanside Community Development Com. (1986) 

187 Cal.App.3d 735, a case involving the filing of a notice that 

started the statute of limitation, the court stated that a community 

development commission “is the Oceanside City Council and acts 

as the alter ego of the City.” (Id. at p. 741; id. at p. 738 [the city 

council itself constituted the commission, which used city 

personnel and staff services exclusively; “[i]n essence, then, the 

Commission is the alter ego of the City for redevelopment 

purposes”].)

Plaintiff cites other cases that have disagreed with Nolan, 

particularly relying on Pacific States Enterprises v. City of 

Coachella (1993) 13 Cal.App.4th 1414 (Pacific States Enterprises). 

But these cases do not help plaintiff, because they are based on the 

principle that “the mere fact that the same body of officers acts as 

the legislative body of two different governmental entities 

does not mean that the two different governmental entities are, in 

actuality, one and the same.” (Id. at p. 1424.) We recognize that 

principle, and that it applies in this case. But the complaint in 

this case alleges a great deal more than “the mere fact” that the 

same body of officers acts as the legislative body for two different 

agencies. (See pt. 5 of the Facts, ante.)
23

Pacific States Enterprises involved breach of an oral contract, 

where the plaintiff argued the city and the redevelopment agency 

were “one and the same governmental entity” so that the 

“allegations as to one have full force and effect as to the other.” 

(Pacific States Enterprises, supra, 13 Cal.App.4th at pp. 1422–

1423.) The Court of Appeal observed that “[w]hen a ‘dual capacity 

legislative body’ acts as the governing board of a redevelopment 

agency, it is the redevelopment agency which is acting by and 

through that legislative body; and when that same legislative body 

acts as the governing body of the ‘community’ (i.e., city) over which 

it exercises local governmental powers, it is the ‘community’ which 

is acting by and through that legislative body. The redevelopment 

agency and the ‘community’ are not one and the same 

governmental entity.” (Id. at p. 1425.)

The City contends plaintiff here “seeks to do . . . precisely 

what the Court of Appeal in Pacific States Enterprises rejected.” 

That is plainly not so. For one thing, plaintiff does not claim the 

City and the CRA are “one and the same government entity.” 

Plaintiff specifically alleges the formal distinctions among the City, 

the CRA and the Successor Agency and recites at length facts 

which, if proven, might justify a court ignoring their legal 

separateness on equitable grounds. 

Other cases the City cites are similar. Macy v. City of 

Fontana (2016) 244 Cal.App.4th 1421 merely held that a 

redevelopment agency and a municipality “may, as here, have the 

same governing body; however, given their separate identities and 

liabilities, the statutory duties imposed on the [redevelopment 

agency] may not be ascribed to the municipality.” (Id. at p. 1430.) 

Macy does not even discuss alter ego doctrine.
24

The same is true of Vanoni v. County of Sonoma (1974) 

40 Cal.App.3d 743, where the plaintiffs argued that a flood district 

was indistinguishable from the County of Sonoma for purposes of 

the constitutional debt limitation. (Id. at p. 748.) The court held 

the fact that the same individuals were members of both governing 

boards was insufficient to show the county exercised actual control 

over the actions of the district. (Id. at p. 750.) The constitutional 

limitation on county indebtedness did not apply to the 

indebtedness of the district because the county “neither assumed 

any obligation for the district’s contractual obligation to the United 

States nor controlled the district’s decision to incur that 

obligation.” (Id. at pp. 750–751.) Again, we fail to see how the 

Vanoni circumstances are in any way “similar[]” to the allegations 

in this case (where, for one thing, the City’s control of the CRA is 

extensively alleged). 

San Diegans for Open Government v. City of San Diego 

(2015) 242 Cal.App.4th 416 is another debt limitation case, where 

the court found debt limitation provisions applicable to the city did 

not apply to a separate public financing authority that was formed 

under a joint powers agreement. (Id. at p. 424.) The court rejected 

the argument that the financing authority was a “ ‘subordinate 

agency’ ” of the city, with the same governing boards and other 

officers (id. at p. 436), and emphasized the financing authority’s 

“ ‘genuine separate existence’ ” from the city, as established in 

various statutes (id. at p. 438). Again, San Diegans involves no 

analysis of the alter ego doctrine. And plaintiff here alleges much 

more than just overlap of governing boards and officers. Again,

the issue here is whether formally separate defendants should be 

deemed one and the same under equitable principles, not under 

statutory law.
25

Still other cases discuss alter ego doctrine but find it does 

not apply on the particular facts of the case. For example, in Rider 

v. County of San Diego (1992) 11 Cal.App.4th 1410, the court 

rejected a claim that a regional justice facility financing agency 

was the alter ego of the county, justifying holding the county liable 

for the agency’s debts. (Id. at pp. 1424–1425.) But the reason for 

the court’s rejection was the absence of any inequity. Both county 

and agency acted in good faith, and neither the county nor the 

agency engaged in an abuse or a perversion of legislative privilege. 

(Id. at p. 1425.) “Consequently, equity does not demand that the 

County be held derivatively liable for the Agency’s debts and 

liabilities.” (Ibid.) 

Likewise, in Tucker Land Co. v. State of California (2001) 

94 Cal.App.4th 1191, the court held the members of a joint powers 

agency were not liable as alter egos for the agency’s contractual 

obligations. (Id. at p. 1201.) The court found “no evidence of abuse 

of organizational formalities, or of any diversion of funds. There is 

no evidence that any fraud was perpetrated on [the plaintiff].” (Id. 

at p. 1202.) Again, although plaintiff here does not allege fraud, 

the complaint alleges organizational formalities were ignored, CRA 

funds were placed in city accounts, failure to properly capitalize 

CRA, concealment of the massive deficit, and more.

Finally, the City tries to distinguish a federal district court 

case in California that found alter ego allegations were sufficient 

to survive a motion to dismiss. In Axon Solutions, Inc. v. San 

Diego Data Processing Corp. (S.D.Cal. May 4, 2010, No. 09 CV 

2543 JM (RBB)) 2010 U.S. Dist. Lexis 43390 (Axon), the court 

found, as relevant here, that the plaintiff—who sued on a contract 

with a nonprofit corporation wholly owned by the city—sufficiently
26

pled that the city was the alter ego of the nonprofit corporation. 

(Id. at pp. *2, 8.)

After describing factors to be considered in applying alter ego 

doctrine under California law, the Axon court said: “[The 

plaintiff’s] complaint contains factual allegations directed at these 

factors. Specifically, [the plaintiff] alleges the City deliberately 

undercapitalized SDDPC [the publicly owned nonprofit], the City 

and SDDPC commingle funds, and the City has represented that it 

is liable for SDDPCs’ debts. . . . Furthermore, [the plaintiff]

alleges that the City intends to dissolve SDDPC so that the City 

can ‘wrongfully avoid liability for the monies owed to [the 

plaintiff].’ . . . . Difficulty in enforcing a judgment or collecting a 

debt does not satisfy[] the requirement of an inequitable 

act. [Citation.] Here, however, the City would have the power to 

destroy any remedy available to [the plaintiff], from either the City 

or SDDPC, if it dissolved SDDPC. This rises to the level of an 

inequitable act for purposes of alter ego doctrine at the pleading 

stage. Therefore, [the plaintiff’s] alter ego allegations are 

sufficient to survive the City’s motion to dismiss.” (Axon, supra, 

2010 U.S. Dist. Lexis 43390, at pp. *7–8.)

The City tries to distinguish Axon by pointing to facts that 

are different from the facts alleged in this case (such as that there 

“is no ‘corporation’ involved for the City to threaten to dissolve”). 

But the facts of cases are always different, and the absence of any 

corporation in this case is a distinction without a difference. Many 

of the allegations in Axon are comparable to the allegations in this 

case, and the point is that the court applied California law and the 

alter ego doctrine to a case involving two government entities.
27

e. The precedents: other jurisdictions

The City tells us that “[e]very jurisdiction in the United 

States that has considered . . . application [of the alter ego/single 

enterprise doctrine] to public agencies has rejected it.” But the 

City fails to mention significant differences in the allegations and 

the rationales in the cases it cites.

The City relies principally on Foster Wheeler Energy Corp. v. 

Metropolitan Knox Solid Waste Authority, Inc. (6th Cir. 1992) 

970 F.2d 199. There, the Sixth Circuit ordered the dismissal of a 

complaint alleging a Tennessee city and county were liable for 

contractual obligations of the Waste Authority, a nonprofit 

corporation created by the city and county. (Id. at p. 200.) The 

court reasoned that the city and county “were not equity owners in 

the Waste Authority, as the project was financed with revenue 

bonds,” and the fact that the city and county placed directors on 

the Waste Authority’s board, “and agreed to cooperate and use 

their best efforts to make the Waste Authority succeed, does not, in 

our view, create a sufficient nexus between the city, the county and 

the Waste Authority on which to predicate liability.” (Id. at 

p. 203.) The court expressed its reluctance “to extend the 

corporate veil theory to the present set of facts absent more specific 

guidance from the Tennessee courts.” (Ibid.) Further, the court 

understood the corporate veil theory, under Tennessee law, “to 

apply primarily to prevent fraud or other tortious 

wrongdoing,” and there were no such allegations. (Ibid.)

Foster Wheeler does not help the City for the simple reason 

that, unlike this case, in Foster Wheeler there were no allegations 

of wrongdoing or an inequitable or unjust result—a fundamental 

requirement for the application of alter ego doctrine. There are 
28

such allegations here, as we have described above. The City 

simply downplays or ignores those allegations. 

The same reasons, among others, distinguish McDaniel v. 

Board of Education (N.D.Ill. 2013) 956 F.Supp.2d 887, where the 

plaintiffs sought to hold the city responsible for school closings by 

the board of education under alter ego principles (id. at pp. 895–

896), and the court found the doctrine “ill-suited to these 

circumstances” (id. at p. 897). In McDaniel, again, there were no 

allegations of an inequitable result if alter ego doctrine were not 

applied. There were no allegations “that the Board and the City 

are commingling funds or failing to maintain corporate formalities, 

or that the City is attempting to use the Board to perpetrate a 

fraud upon Plaintiffs (or why it would even try to do so).” (Id. at p. 

898.) The court also referred to the “general reluctance of Illinois 

courts to engage in veil piercing” (ibid.). In California, while 

“[a]lter ego is an extreme remedy, sparingly used” (Sonora 

Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 539), 

we see no reluctance by California courts to invoke the doctrine 

where the allegations, if true, would support it.

Finally, the City cites a Pennsylvania case where the 

Commonwealth Court found the doctrine of piercing the corporate 

veil was “wholly inapplicable” to the relationship between 

redevelopment authorities and municipalities. (Newcrete Products 

v. City of Wilkes-Barre (Pa. Cmwlth. Ct. 2012) 37 A.3d 7, 13.) This 

was because “a redevelopment authority is not authorized to sell 

ownership interests, [so] City is not capable of being an equity 

interest holder in Authority, and thus, City cannot be liable for 

Authority’s debts by veil piercing.” (Id. at pp. 13–14.) As we have 

already stated, the ownership principle is inapt in the context of 

public entities, and we do not consider that a legal bar to 
29

application of the alter ego doctrine. (See ante, at pp. 17–18.) 

Moreover, California courts have stated, in other factual 

circumstances, that “the ‘ownership’ element of the alter ego 

doctrine is not applicable in this context.” (Tran v. Farmers Group, 

Inc. (2002) 104 Cal.App.4th 1202, 1219, fn. 7 [an interinsurance 

exchange]; see also Troyk, supra, 171 Cal.App.4th at p. 1343 & 

fn. 27 [defendant insurer “did not need to own [defendant 

insurance exchange] for application of the alter ego or single 

enterprise doctrine,” citing Tran].)

To summarize, none of the cases just described supports the 

notion that the alter ego doctrine may not be applied to a public 

agency as a matter of law. The City returns again and again to the 

fact that the city defendants “all exist by virtue of different bodies 

of law,” and that their separate roles and obligations were 

disclosed to plaintiff in the project agreements. What the City does 

not do is explain, in light of the allegations in the complaint, why 

that supports its conclusion plaintiff “cannot claim . . . that it 

would be unjust to recognize the separateness of the public 

agencies.” 

The complaint alleges facts that, if proved, would allow a 

court to conclude that, so far as the development of the site was 

concerned, the City and the CRA “were operated with integrated 

resources in pursuit of a single business purpose” and that the City 

“so dominated the finances, policies and practices” of the CRA that 

the CRA “had no separate ‘mind, will or existence’ of [its] own, but 

[was] merely [a] conduit[] through which” the City conducted its 

business. (See Toho-Towa, supra, 217 Cal.App.4th at p. 1109.)

The complaint likewise alleges facts that, if proved, would allow a 

court to conclude an inequitable result would follow if the acts in 

question are treated as those of the CRA alone. We find the 
30

allegations in plaintiff’s complaint sufficient to survive the City’s 

demurrer.

3. The Breach of Implied Covenant Claim

The covenant of good faith and fair dealing “ ‘not only 

imposes upon each contracting party the duty to refrain from doing 

anything which would render performance of the contract 

impossible by any act of his own, but also the duty to do everything 

that the contract presupposes that he will do to accomplish its 

purpose.’ ” (Pasadena Live, LLC v. City of Pasadena (2004) 

114 Cal.App.4th 1089, 1093.)

Here, the trial court sustained the City’s demurrer to 

plaintiff’s claim for breach of the implied covenant of good faith 

and fair dealing, stating the City was “not party to the contract”

and therefore could not be liable for breach of the implied 

covenant. Because we find plaintiff has sufficiently alleged a 

breach of contract claim under the alter ego doctrine, it follows 

that the City could be liable for breach of the implied covenant on 

the same basis. 

In addition, plaintiff contends that one of the contracts 

underlying its cause of action for breach of the implied covenant is 

the development agreement between plaintiff and the City. The 

complaint alleges that after the CRA’s remediation of the site, the 

parties agreed plaintiff would be entitled to develop the site “in 

accordance with the rights granted by the City under the 

Development Agreement,” and alleges the City’s exercise of direct 

control over the project pursuant to the development agreement. 

The development agreement is described in the conveyancing 

agreement as “granting and vesting the Entitlements for the 

Project and setting forth certain agreements between [plaintiff] 

and the City regarding project development.” 
31

In its cause of action for breach of the implied covenant, 

plaintiff alleges that “[t]hrough the Development Agreement, . . . 

the City granted rights to [plaintiff] to develop the Cell 2 Site and 

provided [plaintiff] with the ‘assurance’ it could ‘complete and 

utilize the Project.’ ” The complaint alleges the development 

agreement obligates the city “ ‘to perform the Infrastructure 

Obligations,’ ” and that the City’s duties under the development 

agreement include financial obligations to pay sales tax revenues 

to the CRA that were in turn to be provided to plaintiff to repay it 

for the millions of dollars plaintiff advanced to the CRA. “Because 

of the City’s failure to properly capitalize the CRA, thus making 

the Project impossible to complete, [plaintiff] is unable to develop 

the Cell 2 Site and recoup its investments as it is plainly entitled 

under the Development Agreement. The City’s misconduct has 

prohibited [plaintiff] from taking advantage of the rights it 

bargained for under the Development Agreement.”

The complaint alleges the CRA and the City “each breached 

the implied covenant of good faith and fair dealing inherent in the 

Project Agreements”—which include the development agreement—

in several specified respects, all of which have already been recited 

in this opinion in connection with the conveyancing agreement. 

When the trial court stated the City was “not a party to the 

contract,” it apparently failed to consider plaintiff’s allegations 

concerning the development agreement, to which the City is a 

party. For this additional reason, the trial court erred in 

sustaining the City’s demurrer to plaintiff’s claim for breach of the 

implied covenant.
32

DISPOSITION

The judgment of dismissal is reversed, and the cause is 

remanded to the trial court with directions to vacate its order 

sustaining the City’s demurrer and to enter a new order overruling 

the demurrer. Plaintiff shall recover its costs on appeal.

GRIMES, Acting P. J.

WE CONCUR:

WILEY, J. 

HARUTUNIAN, J.*

*

 

 Judge of the San Diego Superior Court, assigned by the 

Chief Justice pursuant to article VI, section 6 of the California 

Constitution.