Cam-Carson, LLC v. Carson Reclamation Authority
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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 that derailed the project, causing damages to Plaintiff of over $80 million. Plaintiff sought to hold the City liable in equity under alter ego principles for the CRA’s breach of a contract between Plaintiff and the CRA.
The Second Appellate District reversed the trial court’s judgment of dismissal and remanded the cause to the trial court to vacate its order sustaining the City’s demurrer and to enter a new order overruling the demurrer. The court held 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. The court held it could not be said that, 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.
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