Case Name: TX Trading v. Jack Xu, et al.
Case No.: 2016-CV-295764

Demurrer and Motion to Strike to the Second Amended Cross-Complaint by cross-defendants Edadoc USA, Inc., Hansheng Ke and Danning Jiang

Factual and Procedural Background

This is an action for fraud and breach of contract. Cross-Complainants Jack Xu (“Xu”) and Susan Teng (“Teng”) were principals of Chuangjia International Co., dba TX Trading & TX Solution (“TX Trading”), a company engaged in semiconductor PCB (printed circuit board) design with a principal place of business in Fremont, California. (See Second Amended Cross-Complaint [“SACC”] at ¶ 18.) TX Trading used to contract out design services to cross-defendant Shenzhen Co., a company located in Shenzhen, China. (Id. at ¶ 19.) Since 2011, Shenzhen Co. had been trying to develop its own business and market share in the United States. (Id. at ¶ 20.) Thus, Shenzhen Co. set up a subsidiary in California and was sending its Chinese employees to work in the United States on B1/B2 visas (visitor for business and tourist visas) without proper visas. (Ibid.)

After cross-defendant Hansheng Ke (“Ke”) received an L-1 visa, he approached Xu to discuss closer cooperation to set up a joint venture with TX Trading so both sides could secure better business. (See SACC at ¶ 23.) As a result, Xu, Teng, and Shenzhen Co. decided to form a joint venture, cross-defendant Edadoc USA, Inc. (“EUSA”). (Id. at ¶ 24.) On October 11, 2013, TX Trading and Shenzhen Co. signed a cooperation agreement (N. TX-EDACOC-001) in Chinese (“JV Agreement One”). (See SACC at ¶ 25, Exhibit A.) Under JV Agreement One, Shenzhen Co. would own 60% of EUSA and TX Trading would own 40%. (Id. at ¶ 26.)

On January 1, 2014, with the intent to defraud Xu and Teng and take control of EUSA, Shenzhen Co. engaged attorney and cross-defendant Danning Jiang (“Jiang”) to prepare a new joint venture agreement to replace JV Agreement One. (See SACC at ¶ 28.) During a meeting in January 2014, Jiang provided a Joint Venture Agreement (“JV Agreement Two”) to Xu and Teng. (Id. at ¶ 29.) Jiang represented that even though JV Agreement Two was written in English, the content of it was exactly the same as JV Agreement One, except that the signing party TX Trading was replaced by Xu and Teng personally. (Id. at ¶ 30.) However, Jiang did not disclose to Xu or Teng that he was not acting as their counsel and did not tell them to seek their own counsel before signing JV Agreement Two. (Id. at ¶ 31.) Relying on Jiang’s representation, Xu and Teng signed JV Agreement Two. (Id. at ¶ 33.) JV Agreement Two stipulated that there would be three shareholders of EUSA: Xu, Teng, and Shenzhen Co. (Id. at ¶ 34.)

On March 31, 2016, Shenzhen Co., through its CEO Changmao Tang (“Tang”), demanded early termination of the joint venture relationship between Shenzhen Co., Xu and Teng, without complying with the 90 day written notice requirement of JV Agreement Two. (See SACC at ¶ 44.) Shenzhen Co., through the advice of Jiang, demanded that Xu and Teng leave EUSA because Tang is the sole board director of EUSA and had absolute control over the corporation. (Id. at ¶ 45.) As a result, Shenzhen Co. refused to pay Xu and Teng the fair market value of their 40% ownership in EUSA and refused to return their original investment of $66,667. (Id. at ¶ 46.)

On March 31, 2016, TX Trading signed another Joint Venture Agreement in Chinese (“JV Agreement Three”), stipulating that TX Trading should withdraw from EUSA and be operated solely by Xu and Teng. (See SACC at ¶ 49, Exhibit D.) JV Agreement Three did not eliminate the ownership of Xu and Teng in EUSA or modify, amend or waive any provision of JV Agreement Two. (Id. at ¶ 50.) Therefore, JV Agreement Two remains a valid and binding contract between Xu, Teng, and Shenzhen Co. (Ibid.) As a result of cross-defendants’ misconduct, Xu and Teng have been wrongfully ousted from EUSA and have lost all the value of their investment in EUSA. (Id. at ¶ 51.)

On August 31, 2016, cross-complainants Xu, Teng, and TX Trading (collectively, “Cross-Complainants”) filed the operative SACC setting forth causes of action for: (1) breach of contract [against Shenzhen Co., Tang, and Ke]; (2) breach of fiduciary duty [against Shenzhen Co., Tang, and Ke]; (3) misrepresentation [against Shenzhen Co., Tang, Ke, and Jiang]; (4) dissolution of joint venture [against EUSA and Shenzhen Co.]; (5) declaratory relief [against Shenzhen Co.]; (6) accounting [against Shenzhen Co.]; and (7) unfair competition in violation of California Business and Professions Code Section 17200 [against Shenzhen Co., EUSA, Tang, Ke, and Jiang].

Currently before the Court is the demurrer and motion to strike to the SACC by cross-defendants EUSA, Ke, and Jiang (collectively, “Cross-Defendants”). Cross-Complainants filed written opposition to the demurrer. Cross-Defendants filed reply papers to both motions.

Demurrer to the SACC

Cross-Defendants argue that the first, second, third, and seventh causes of action fail to state a claim against Ke. (Code Civ. Proc., § 430.10, subd. (e).) Cross-Defendants also contend that the third and seventh causes of action fail to state a claim against Jiang.

Legal Standard

“In reviewing the sufficiency of a complaint against a general demurer, we are guided by long settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. We also consider matters which may be judicially noticed.’” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213–214.)

“The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. The court does not, however, assume the truth of contentions, deductions or conclusions of law. … [I]t is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 850.)

First Cause of Action: Breach of Contract (against cross-defendant Ke)

“To state a cause of action for breach of contract, a party must plead the existence of a contract, his or her performance of the contract or excuse for nonperformance, the defendant’s breach and resulting damage. [Citation.] If the action is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference. [Citation.]” (Harris v. Rudin, Richman & Appel, (1999) 74 Cal. App. 4th 299, 307.)

The first cause of action appears to be a breach of contract claim with respect to JV Agreement Two which was executed by the parties in January 2014. (See SACC at ¶¶ 29, 53.) Cross-Defendants argue that the breach of contract claim fails against cross-defendant Ke as he was not a party to the subject agreement. (See Clemens v. American Warranty Corp. (1987) 193 Cal.App.3d 444, 452 [“Under California law, only a signatory to a contract may be liable for any breach.”].) According to the SACC, Xu, Teng, and cross-defendant Shenzhen Co. were parties to the JV Agreement. (See SACC at ¶ 53.) However, Cross-Complainants attempt to bind Ke to the contract on an alter ego theory of liability as provided in paragraph 55 of the SACC. Cross-Defendants fail to challenge the adequacy of the alter-ego allegations with respect to Ke in support of the motion. In any event, the Court finds that Cross-Complainants have provided sufficient alter ego allegations to state a breach of contract claim against cross-defendant Ke. (Id. at ¶¶ 10-16; see Sonora Diamond Corp. v. Super. Ct. (2000) 83 Cal.App.4th 523, 538-539 [elements for alter ego liability].)

Accordingly, the demurrer to the first cause of action against cross-defendant Ke on the ground that it fails to state a claim is OVERRULED.

Second Cause of Action: Breach of Fiduciary Duty (against cross-defendant Ke)

“The elements of a cause of action for breach of fiduciary duty are; (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach.” (Gutierrez v. Giradi (2011) 194 Cal.App.4th 925, 932.)
Cross-Defendants correctly point out that the second cause of action fails to allege the existence of a fiduciary duty on the part of cross-defendant Ke. Cross-Complainants attempt to hold Ke liable for breach of fiduciary on an alter ego theory of liability for acts committed by Shenzhen Co. (See SACC at ¶ 59.) However, there are no facts to establish the existence of a fiduciary duty on the part of Shenzhen Co. Instead, the second cause of action only vaguely asserts that “[i]n a closely held company and as joint venture partners, the majority shareholder owes a fiduciary duty to the minority shareholder.” (Id. at ¶ 58.) This allegation is insufficient to demonstrate the existence of a fiduciary duty either on the part of Shenzhen Co. or cross-defendant Ke. To the extent that any such fiduciary duty exists on the part of cross-defendant Ke, Cross-Complainants should clarify in an amended pleading.

Therefore, the demurrer to the second cause of action against cross-defendant Ke on the ground that it fails to state a claim is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

Third Cause of Action: Misrepresentation (against cross-defendant Ke)

“The elements of fraud are (1) the defendant made a false representation as to a past or existing material fact; (2) the defendant knew the representation was false at the time it was made; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably relied on the representation; and (5) the plaintiff suffered resulting damages.” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792 [citation omitted].)

“Fraud must be pleaded with specificity rather than with general and conclusory allegations. The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made.” (West v. JPMorgan Chase Bank, N.A., supra, 214 Cal.App.4th at p. 793 [citation and quotation marks omitted].)

Here, Cross-Complainants allege misrepresentations by cross-defendants Jiang and Tang on behalf of Shenzhen Co. (See SACC at ¶¶ 64-65.) Cross-Defendants correctly point out that there are no misrepresentations by cross-defendant Ke to support a fraud claim. Cross-Complainants concede this point in opposition and will be given an opportunity to amend. (See OPP at p. 4:1-2; see also Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [it is an abuse of discretion to sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment].)

Therefore, the demurrer to the third cause of action against cross-defendant Ke on the ground that it fails to state a claim is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.
Seventh Cause of Action: Unfair Competition in Violation of California Business & Professions Code Section 17200 (against cross-defendant Ke)

“The UCL prohibits, and provides civil remedies for, unfair competition, which it defines as ‘any unlawful, unfair or fraudulent business act or practice.’ [Citation.] Its purpose ‘is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.’ [Citations.]” (Kwikset Corp. v. Super. Court (2011) 51 Cal.4th 310, 320.)

According to the SACC, Cross-Complainants allege that cross-defendant Ke and others violated Corporations Code Section 212 by appointing only director as opposed to three directors which is required by statute. (See SACC at ¶¶ 83-84.) Cross-Complainants allege that this constitutes an unfair business practice in violation of section 17200. (Id. at ¶ 85.) Cross-Defendants dispute whether this violation under the Corporations Code constitutes an unfair business practice. This argument lacks merit as the unfair competition law’s scope is broad and its coverage is “sweeping, embracing anything that can be properly be called a business practice and that at the same time is forbidden by law.” (See Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) Finally, to the extent that Cross-Defendants dispute the prayer for monetary damages in the UCL claim, such an argument is procedurally improper as it must be addressed by motion to strike, not demurrer. (See Caliber Bodyworks, Inc. v. Super Ct. (2005) 134 Cal.App.4th 365, 385 [“The appropriate procedural device for challenging a portion of a cause of action seeking an improper remedy is a motion to strike.”].)

Accordingly, the demurrer to the seventh cause of action against cross-defendant Ke on the ground that it fails to state a claim is OVERRULED.

Third Cause of Action: Misrepresentation (against cross-defendant Jiang)

With respect to the third cause of action, Cross-Defendants argue that there is no claim for misrepresentation against cross-defendant Jiang as Cross-Complainants fail to allege actual reliance on any of Jiang’s misrepresentations or that such representations were a substantial factor in causing harm to them. These arguments lack merit as Cross-Complainants allege that Xu and Teng reasonably relied such representations as Jiang was a licensed attorney believed to be competent, honest, and ethical and thereafter were damaged in amount of at least $2 million dollars. (See SACC at ¶¶ 67-68.) Moreover, reasonable reliance is generally a factual issue that cannot be resolved on demurrer. (See Thrifty Payless, Inc. v. Americana at Brand, LLC (2013) 218 Cal.App.4th 1230, 1239 [“Except in the rare case where the undisputed facts leave no room for reasonable difference of opinion, the question of whether a plaintiff’s reliance is reasonable is a question of fact.”].) Also, the fact that Cross-Defendants find the fraud allegations against Jiang to be unlikely or improbable do not provide a basis for demurrer. (See Kerivan v. Title Ins. & Trust Co. (1983) 147 Cal.App.3d 225, 229 [“No matter how unlikely or improbable, plaintiff’s allegations must be accepted as true for the purpose of ruling on the demurrer.”].) Finally, Cross-Defendants refer to the management power given under JV Agreement Two and the number of officer titles. Neither argument appears to adequately challenge the fraud claim for purposes of demurrer.

Accordingly, the demurrer to the seventh cause of action against cross-defendant Jiang on the ground that it fails to state a claim is OVERRULED.

Seventh Cause of Action: Unfair Competition in Violation of California Business & Professions Code Section 17200 (against cross-defendant Jiang)

Cross-Defendants incorporate the same arguments that were raised on demurrer to the seventh cause of action with respect to cross-defendant Ke. For the reasons stated above, the demurrer to the seventh cause of action against cross-defendant Jiang on the ground that it fails to state a claim is OVERRULED.

Motion to Strike Portions of the SACC

Cross-Defendants move to strike the following allegations from the SACC: (1) “As a direct consequence, Xu and Teng have been damaged in an amount of at least $2 million. The exact amount shall be determined according to proof at trial.” (SACC at ¶ 66); (2) “Attorney’s fees” (SACC at p. 16:8); and (3) Exhibits A and D attached to the SACC. No opposition was filed to the motion which appears to be well taken.

Therefore, the motion to strike portions of the SACC is GRANTED WITHOUT LEAVE TO AMEND.

Case Name: Sandra Carbone v. O’Connor Hospital Foundation, et al.
Case No.: 2015-1-CV-281925

I. Background

This is an elder abuse action arising out of a dispute over the termination of annuity payments brought by Sandra Carbone (“Plaintiff”) against O’Connor Hospital Foundation (“Defendant”). On July 1, 1991, the parties created a charitable remainder annuity trust identified as the Eugene H. and Sandra Carbone Irrevocable Annuity Trust. (Compl., ¶¶ 5-6.) Pursuant to the terms of the trust agreement, Plaintiff transferred to Defendant four parcels of real property valued at $1,225,000.00. (Compl., ¶ 7.) In exchange, Defendant agreed to pay Plaintiff $108,696.00 annually for her lifetime. (Compl., ¶ 8.) Upon the later of the death of Mr. Carbone or Plaintiff or the date marking 20 years from the creation of the trust, any remaining trust assets would be distributed to Defendant. (Compl., ¶ 12.) On January 18, 2000, attorney Stanley Weithorn (“Weithorn”), Defendant’s planned giving counsel who drafted the trust agreement, wrote to Plaintiff confirming her entitlement to the annuity payments for her lifetime. (Compl., ¶ 9.) In July 2011, Defendant refused to make any more annuity payments to Plaintiff. (Compl., ¶¶ 13-14.) Plaintiff asserts a sole cause of action for financial elder abuse against Defendant.

Defendant moves for summary judgment on the ground the statute of limitations and doctrine of laches provide a complete defense to Plaintiff’s claim. Defendant’s motion is accompanied by a request for judicial notice. Plaintiff opposes the motion and objects to portions of Defendant’s evidence.

II. Discussion

A. Standard of Review

“A party may move for summary judgment in any action or proceeding if it is contended that the action has no merit. . . .” (Code Civ. Proc., § 437c, subd. (a)(1).) An action has no merit if the defendant can show there is a complete defense to the action. (Code Civ. Proc., § 437c, subd. (o)(2); see also Drake v. Pinkham (2013) 217 Cal.App.4th 400, 402 [summary judgment proper if claim barred by statute of limitations or doctrine of laches].)

A defendant moving for summary judgment bears the initial burden of showing he or she has a complete defense to the action. (Code Civ. Proc., § 437c, subd. (p)(2); see also Raghavan v. Boeing Co. (2005) 133 Cal.App.4th 1120, 1132.) “If the defendant fails to make this initial showing, it is unnecessary to examine the plaintiff’s opposing evidence and the motion must be denied.” (Intrieri v. Superior Court (2004) 117 Cal.App.4th 72, 82.) “However, if the moving papers establish a prima facie showing that justifies a judgment in the defendant’s favor, the burden then shifts to the plaintiff to make a prima facie showing of the existence of a triable material factual issue.” (Ibid.; see also Code Civ. Proc., § 437c, subd. (p)(2).)

B. Evidentiary Matters

1. Defendant’s Request for Judicial Notice

Defendant requests judicial notice of the complaint. The complaint is a court record that is relevant to the pending matter and is therefore the proper subject of judicial notice. (See Evid. Code, § 452, subd. (d) [permitting judicial notice of court records]; see also People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2 [matter must be relevant to be judicially noticed].)

Defendant also requests judicial notice of the obituary of Weithorn, the attorney who drafted the trust agreement. The obituary is a printout from the website of the New York Times. Defendant appears to be requesting judicial notice of this matter as evidence that Weithorn is deceased, which is relevant to its argument that Plaintiff’s claim is barred by the doctrine of laches. Defendant does not, however, articulate a specific statutory basis for its request.

The only conceivable statutory basis for Defendant’s request is Evidence Code section 452, subdivision (h), which states a court may take judicial notice of “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” Even so, courts generally do not take judicial notice of the truth of the contents of websites or public documents. (See Searles Valley Minerals Operations, Inc. v. State Bd. of Equalization (2008) 160 Cal.App.4th 514, 519.) Consequently, even though Plaintiff does not dispute Weithorn is deceased, the Court may not take judicial notice of the truth of the statements in the obituary, including statements as to the date or fact of Weithorn’s death. The Court denies the request for judicial notice of the obituary.

In conclusion, Defendant’s request for judicial notice is GRANTED as to the complaint and DENIED as to the obituary.

2. Plaintiff’s Objections to Evidence

Plaintiff objects to the admissibility of portions of Defendant’s evidence attached to the declaration of Henry M. Su.

As a threshold matter, Plaintiff’s objections are not properly presented. Objections to evidence in connection with a motion for summary judgment must be presented in a separate document and must be properly formatted. (See Cal. Rules of Court, rule 3.1354(b).) This means objections cannot be stated and argued in a separate statement. (Ibid.; see also Hodjat v. State Farm Mutual Automobile Ins. Co. (2012) 211 Cal.App.4th 1, 8-9.) Here, Plaintiff stated her objections in her separate statement; she did not file a separate document setting forth her objections. Consequently, Plaintiff’s objections are not properly presented.

Additionally, in setting forth objections, a party must identify the document and exhibit in which the objectionable material is located, quote or identify the objectionable statement, and state the ground for the objection. (See Cal. Rules of Court, rule 3.1354(b)(1)-(4).) Plaintiff did not include all of the required information in her objections and they are therefore deficient in this regard as well.

It is within a court’s discretion to decline to rule on objections improperly presented in a separate statement. (Hodjat v. State Farm Mutual Automobile Ins. Co., supra, 211 Cal.App.4th at pp. 8-9.) Nonetheless, the Court will exercise its discretion to rule on Plaintiff’s objections, although improperly presented, given their limited scope. Plaintiff shall comply with the California Rules of Court going forward.

Turning to the merits of her objections, Plaintiff objects to the trust agreement attached as part of Exhibit E to the declaration of Henry M. Su on the ground it “is not a copy of the Trust and does not contain the terms of the Trust.” (Pl. Sep. Stat. at p. 2:4-6.) Plaintiff thus appears to be objecting to the authenticity of the trust agreement, but does not otherwise explain her objection.

For context, Plaintiff produced a 19-page document entitled “Irrevocable Annuity Trust Agreement” in response to Defendant’s requests for the production of documents, set one. (Su Decl., Exh. B.) Defendant then served Plaintiff with requests for admissions, set three (“RFA”). (Su Decl., Exh. E.) As relevant here, RFA No. 15 asked Plaintiff to authenticate the trust agreement. (Su Decl., Exh. E.) The document attached to RFA No. 15 consisted of the following pages: (1) the 19-page document produced by Plaintiff; (2) a single page, without a page number, entitled “Schedule A” identifying three parcels of real property; (3) an apparent continuation of “Schedule A” identifying a fourth parcel of real property and bearing the page number 22; and (4) an unpaginated document identified as “Exhibit A-Description of Properties” containing four descriptions of real property including tract and lot numbers. (Su Decl., Exh. E.)

In response to RFA No. 15, Plaintiff admitted the first 19 pages constituted a true and accurate copy of the trust agreement. (Su Decl., Exh. F.) Plaintiff also stated Schedule A appeared to be a true and accurate copy of Schedule A to the trust agreement, but could not confirm whether the document entitled “Exhibit A-Description of Properties” was originally part of the agreement. (Su Decl., Exh. F.) In responding to RFA No. 15, Plaintiff did not raise any issue with respect to the contents of these documents and merely noted an apparent defect in the continuous pagination of Schedule A and Exhibit A, which follow the first 19 pages of the trust agreement. (Su Decl., Exh. F.) To summarize, there was no dispute that the 19 pages culminating in an executed signature page made up the body of the trust agreement. Rather, Plaintiff took issue with the pagination of the property descriptions that followed.

A generic authenticity objection may be overcome by evidence that the objecting party has admitted a document’s authenticity at some point in time or relied upon it as authentic, such as by offering the evidence in support of his or her own motion. (See Ambriz v. Kelegian (2007) 146 Cal.App.4th 1519, 1527.) Here, while Plaintiff took issue with the pagination of the real property descriptions following the body of the trust agreement, she admitted its authenticity. Moreover, she relies upon the 19-page agreement as authentic because she submits it as evidence in support of her opposition to Defendant’s motion. Plaintiff does not further explain her objection and the real property descriptions following the terms of the agreement are not material to the disposition of the motion for summary judgment. Plaintiff’s objection therefore lacks merit and is overruled.

Additionally, Plaintiff objects to 3 letters sent in September, October, and December 2010 on the ground of the Secondary Evidence Rule. (See Su Decl., Exhs. C-D.) Generally, the Secondary Evidence Rule allows a party to prove the contents of a writing by “‘otherwise admissible secondary evidence.’” (People v. Skiles (2011) 51 Cal.4th 1178, 1187, quoting Evid. Code, § 1521, subd. (a).) The Secondary Evidence Rule does not operate to exclude evidence if there is no genuine dispute as to the material terms of the writing. (See In re Kirk (1999) 74 Cal.App.4th 1066, 1073.)

Here, Plaintiff affirmatively states she does not dispute the contents of these letters. Consequently, the applicability of the Secondary Evidence Rule is not immediately apparent. Additionally, to the extent Plaintiff is actually objecting to the authenticity of the letters, the basis for her objections is not obvious given she admitted their authenticity. (See Su Decl., Exh. D.) Plaintiff’s objections therefore lack merit and are overruled.

C. Merits of Motion for Summary Judgment

Defendant moves for summary judgment on the ground Plaintiff’s sole cause of action has no merit because it is barred by the statute of limitations and the doctrine of laches.

1. Defendant’s Initial Burden

i. Statute of Limitations

Defendant argues Plaintiff’s claim is barred by the statute of limitations because she filed her complaint more than four years after discovering its decision to terminate the annuity payments.

Pursuant to Welfare and Institutions Code section 15657.7, a plaintiff must bring an action for financial elder abuse within four years of the accrual of the cause of action. Generally, an elder abuse cause of action accrues when “the plaintiff discovers or, through the exercise of reasonable diligence, should have discovered, the facts constituting the financial abuse.” (Welf. & Inst. Code, § 15657.7.)

Defendant argues Plaintiff’s claim accrued in 2010 because that is when she discovered it planned to stop making annuity payments. In support of this argument, Defendant presents a letter it sent to Plaintiff in September 2010 stating it was “nearing the end of fulfilling [its] obligation to her and would be making three final annuity payments in the reduced amount of $3,992.25. (Su Decl., Exh. C.) Defendant also offers a letter from Plaintiff’s counsel from October 2010 threatening to file an elder abuse action based on the September 2010 letter. (Su Decl., Exh. C.) While these letters show Plaintiff was aware of reduced payments as early as 2010, the financial elder abuse alleged in this case is the failure to make recurring annuity payments; Plaintiff’s claim is not limited to the initial refusal and failure to tender the full annuity payment in 2010.

“‘When an obligation or liability arises on a recurring basis, a cause of action accrues each time a wrongful act occurs, triggering a new limitations period.’” (Aryeh v. Canon Business Solutions, Inc. (“Aryeh”) (2013) 55 Cal.4th 1185, 1199, quoting Hogar Dulce Hogar v. Community Dev. Com. (2003) 110 Cal.App.4th 1288, 1295.) “However, [ ] the theory of continuous accrual supports recovery only for damages arising from those breaches falling within the limitations period.” (Aryeh, supra, 55 Cal.4th at p. 1199 [compiling cases; plaintiff may recover for recurring private obligations, not just public obligations like pension payments].)

Here, Defendant’s own evidence undercuts its argument that Plaintiff’s claim is time-barred. More specifically, Defendant submits the trust agreement, which states annuity payments shall continue “until the last to occur of 1) the date of death of Eugene H. Carbone, 2) the date of death of Sandra Carbone or 3) the date which marks the twentieth (20th) anniversary of the date of execution of this Annuity Trust Agreement.” (Su Decl., Exh. E.) While it has been more than 20 years since the execution of the agreement, the agreement clearly states the payments shall continue until the last to occur of the three triggering events. Defendant offers no evidence that either Plaintiff or her husband are deceased. Consequently, Defendant fails to demonstrate its recurring obligation to make annuity payments terminated. Given Defendant’s continuing obligation to make annuity payments, each withheld payment triggered a new limitations period.

Plaintiff filed her complaint in June 2015. Accordingly, any unpaid annuity payments within the four preceding years fell within the limitations period and are not conclusively barred. While Plaintiff may ultimately be precluded from recovering damages for payments withheld in 2010, Defendant does not demonstrate all of the recurring violations took place outside of the limitations period. Defendant therefore does not carry its burden of showing Plaintiff’s entire claim is barred by the statute of limitations.

ii. Laches

Defendant argues Plaintiff’s claim is barred by the doctrine of laches. “The doctrine of laches bars equitable relief where the party seeking relief has been guilty of excessive, unjustified delay in asserting rights . . . .” (Potter v. Contra Costa Realty Co. (1934) 220 Cal. 31, 34.) Laches is not a defense to an action at law. (Pratali v. Gates (1992) 4 Cal.App.4th 632, 645.) “Whether an action is in law or equity . . . depends in large measure upon the mode of relief to be afforded [citations], is ascertained from the gist of the action as framed by the pleadings and the facts in the case [citations], but is not fixed by the prayer or the title.” (Paularena v. Superior Court (1965) 231 Cal.App.2d 906, 911-12 [discussing distinction between legal and equitable rescission].) “Where an action at law is adequate, relief in equity is not available [citations] and a request for equitable relief therein will not convert it to an action in equity. (Id. at p. 912.) An action to recover damages will not be deemed equitable where any equitable relief afforded the plaintiff is merely ancillary. (Id. at p. 914.)

Here, Plaintiff seeks damages and rescission of the trust agreement in connection with her statutory claim for financial elder abuse. The clear focus of her claim, however, is on damages. While rescission could theoretically be equitable in nature, in this instance it is ancillary. Simply listing rescission in the prayer for relief does not convert her claim into an equitable action.

To this point, Defendant acknowledges laches is limited to equitable actions by stating: “To the extent that this action could be deemed an equitable action, [it] can assert laches as a defense to the equitable claims.” (Mem. of Pts. & Auth. at p. 8:11-12.) Even so, Defendant provides no analysis with respect to the limited applicability of this defense. Defendant makes no attempt to explain and it is not otherwise obvious how the doctrine of laches provides a complete defense to this action. Moreover, other than stating the death of Weithorn is prejudicial, Defendant fails to address the elemental prerequisites of the doctrine of laches, such as how Plaintiff is guilty of unjustified delay. Defendant therefore fails to substantiate its argument and the motion for summary judgment cannot be granted on this basis.

2. Conclusion

In conclusion, Defendant’s motion for summary judgment is DENIED because it fails to carry its initial burden of demonstrating there is a complete defense to the action.

The Court will prepare the order.

Case Name: Sethi v. Kohli, et al.
Case No.: 1-01-CV-801293

According to the allegations of the second amended complaint (“SAC”), plaintiff Ravinder S. Sethi (“Plaintiff”) and defendants Ujjal Kohli (“Kohli”) and Nicholas Mitsakos (“Mitsakos”) agreed to form joint enterprise by jointly using their knowledge, contacts and resources to identify, evaluate and ultimately invest in emerging technology companies. (See SAC, ¶ 13.) On February 10, 1998, the parties formed MKS Ventures, LLC (“MKS Ventures”), and each of them were managing members of the company with a 33⅓ % interest in the company. (See SAC, ¶¶ 14, 33.) At Plaintiff’s suggestion, MKS Ventures invested in an emerging company, Maverick Networks, Inc. (See SAC, ¶ 15.) However, thereafter, Kohli and Mitsakos exerted undue pressure on Plaintiff to temporarily withdraw from MKS Ventures, claiming that Plaintiff’s execution of a Noncompetition Agreement as an employee of FORE Systems, Inc. presented the appearance of a potential conflict with Plaintiff’s investment in Maverick through his ownership interest in MKS Ventures, despite the fact that Plaintiff’s ownership interest in MKS Ventures and its investment in Maverick Networks did not violate the terms of the FORE Systems Noncompetition Agreement, and Plaintiff’s affiliation with FORE Systems and MKS Ventures did not create an actual conflict of interest that required Plaintiff’s withdrawal from MKS Ventures. (See SAC, ¶¶ 16-17.) Kohli and Mitsakos promised that if Plaintiff would agree to temporarily withdraw, Plaintiff would be permitted to rejoin MKS Ventures in 6-12 months after the appearance of the potential conflict waned, and that Plaintiff would share equally in the benefits and proceeds of the Maverick investment as well as in all future investments. (See SAC, ¶¶ 16, 34.)

Shortly after Plaintiff agreed to withdraw from MKS Ventures, Maverick announced that it was being purchased by Broadcom Corporation, and MKS Ventures eventually received 104,000 shares in Broadcom. (See SAC, ¶¶ 18-19, 37.) Kohli and Mitsakos, however, refused to honor their oral agreement to have Plaintiff return to MKS Ventures, and refused to provide Plaintiff with his share in the Broadcom Corporation stock. (See SAC, ¶¶ 19, 43.) Kohli and Mitsakos additionally represented that Plaintiff was entitled to an 80 percent ownership interest in MKS Ventures I-B, LLC (“MKS I-B”) and a tax indemnity for the delay in providing him with his share in the Broadcom stock, representing that such interest would provide him with a $6 million interest. (See SAC, ¶ 37.) However, the MKS I-B investments were never worth that much and Defendants refused to honor the agreement or fully compensate Plaintiff. (See SAC, ¶¶ 42-43.)

On September 29, 2016, Plaintiff filed the SAC, asserting the following causes of action against Kohli and Mitsakos:

1) Breach of oral contract;
2) Breach of written contract;
3) Breach of implied covenant of good faith and fair dealing;
4) Breach of fiduciary duty;
5) Fraud;
6) Accounting;
7) Constructive trust; and,
8) Conversion.

Defendant Kohli demurs to each cause of action of the SAC on the ground that they fail to state facts sufficient to constitute a cause of action.

Despite the Court’s multiple admonitions and orders to Plaintiff’s counsel to timely file any papers, on the late afternoon of December 12, 2016—a mere six court days prior to the hearing—Plaintiff’s counsel filed an opposition to the demurrer in violation of Code of Civil Procedure section 1005, subdivision (b). As a result, the Court disregards Plaintiff’s opposition, but considers this demurrer based solely on the moving papers and the allegations of the SAC.

First cause of action for breach of contract

Kohli demurs to the first cause of action, asserting that it fails to allege that Defendants received any consideration for Sethi’s withdrawal from MKS Ventures or MKS Ventures I-B, and that Sethi has a contractual right to Kohli’s advisory stock. However, “a general demurrer admits the truth of all material factual allegations in the complaint…the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court….” (Alcorn v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 496.) The first cause of action alleges that Plaintiff was not obliged to withdraw from MKS Ventures—even temporarily—but, in consideration for the agreement to do so, Plaintiff was promised the sharing of all proceeds and assets received through the Maverick investment, as well as future investments by the company and the ability to rejoin MKS Ventures within 6-12 months. (See SAC, ¶ 34.) Kohli contends that “the SAC alleges that Sethi would violate his Noncompetition Agreement as an employee of FORE Systems if Sethi invested in Maverick.” (See Def.’s memorandum of points and authorities in support of demurrer to SAC, pp. 5:25-28, 6:1-22.) However, it is clear that this interpretation is contradictory to the explicit allegations of the SAC “that Plaintiff’s ownership interest in MKS Ventures and its investment in Maverick Networks did not violate the terms of the FORE Systems Noncompetition Agreement, and Plaintiff’s affiliation with FORE Systems and MKS Ventures did not create an actual conflict of interest that required Plaintiff’s withdrawal from MKS Ventures.” (SAC, ¶ 17.) Kohli’s argument that the first cause of action fails to state facts sufficient to constitute a cause of action for breach of oral contract for lack of consideration is without merit.

As to Kohli’s argument that the SAC fails to allege that Sethi has a contractual right to Kohli’s advisory stock, the argument is inconsequential. Regardless as to whether Plaintiff has a right to certain shares of Athene, Mirapoint or Nanya stock, the first cause of action alleges that he is entitled to a one-third interest in the total amount of Broadcom stock issued as a result of the Maverick Networks investment. “[A] demurrer cannot rightfully be sustained to part of a cause of action.” (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047.) Accordingly, the demurrer to the first cause of action is OVERRULED in its entirety.
Fifth cause of action for fraud

Kohli demurs to the fifth cause of action for fraud on the ground that it fails to allege facts with sufficient particularity, and fails to allege that Kohli made any false representation or believed that any representation was false, or that Plaintiff justifiably relied on the misrepresentation. The elements of a cause of action for fraud are: (1) a misrepresentation, which includes a concealment or nondisclosure; (2) knowledge of the falsity of the misrepresentation, i.e., scienter; (3) intent to induce reliance on the misrepresentation; (4) justifiable reliance; and (5) resulting damages. (Lazar v. Super. Ct. (Rykoff-Sexton, Inc.) (1996) 12 Cal. 4th 631, 638.) “Fraud actions are subject to strict requirements of particularity in pleading.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) The specificity requirement has two purposes: to apprise the defendant of certain definite accusations against him so that he can intelligently respond to them, and also to weed out nonmeritorious actions on the basis of the pleadings. (Id. at 216-17.) Minimally, a fraud cause of action must “allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Lazar, supra, 12 Cal.4th at 645.) “Less specificity is required when it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy.” (Committee on Children’s Television, Inc., supra, 35 Cal.3d at 217.) If discovery would clear any confusion as to who made the representations and by what means, if the allegations of fraud are otherwise sufficiently detailed, defendant cannot persuasively complain that it misunderstands the fraud claim. (Charpentier v. Los Angeles Rams Football Co. (1999) 75 Cal.App.4th 301, 312.)

As to particularity of the allegations, Kohli contends that the SAC does not allege how, who, what and where the purported allegations were made. However, the SAC alleges that the representations were made orally, by both Kohli and Mitsakos, in August of 1998. The SAC alleges the substance of the misrepresentation. The SAC does not allege where the purported misrepresentations were made, but it is fairly clear that the parties are familiar with the purported facts supporting the allegations such that defendants cannot persuasively complain that it misunderstands the claim. The demurrer cannot be sustained on this ground.

Further, the SAC specifically alleges that Kohli’s representation was “false and misleading at the time they were made, and… that defendants did not intend to pursue a common enterprise for the equal benefit of the parties, but instead intended to usurp the benefits and advantages arising from the parties’ joint effort for themselves to the exclusion and detriment of Plaintiff… [and] that defendants did not intend to share equally in the proceeds and assets arising from the Maverick investment, or the other investments of MKS Ventures, L.L.C.” (SAC, ¶ 69.) The SAC also alleges that “Plaintiff was unaware of the falsity of defendants’ representations at the time they were made, and reasonably relied to his detriment on defendants representations….” (SAC, ¶ 70.) Kohli’s argument that the SAC does not allege such elements is without merit. The demurrer to the fifth cause of action for fraud is OVERRULED in its entirety.
Remaining causes of action

Kohli demurs to the remaining causes of action, asserting that he cannot possibly have had any role in the purported MKS I-B claims since the MKS I-B Operating Agreement states that a “Majority in Interest” requires an affirmative vote of members in which the majority of those voting constitute such a majority in interest. (See Def.’s memo, p.13:1-27.)

As an initial matter, the third, fourth, and seventh through ninth causes of action allege facts other than those pertaining to the MKS I-B agreement, and as “a demurrer cannot rightfully be sustained to part of a cause of action,” the demurrer cannot be sustained as to those causes of action.

As to the remaining causes of action, “[i]f the complaint states a cause of action under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38 (also stating that “[w]e are not limited to plaintiffs’ theory of recovery in testing the sufficiency of their complaint against a demurrer, but instead must determine if the factual allegations of the complaint are adequate to state a cause of action under any legal theory”).) Here, the remaining causes of action allege a scheme or conspiracy to deprive Plaintiff of certain monies and is sufficient to constitute a cause of action such that Plaintiff is entitled to relief. Accordingly, the demurrer to the second cause of action is OVERRULED as to the second through fourth and sixth through ninth causes of action.

The Court will prepare the order.

Case Name: Safakish v. Vanni, et al.
Case No.: 2016-1-CV-294900

According to the allegations of the complaint, Morgan Hill Vineyard Owner’s Association (“Association”) is an association formed by defendants Chris Vanni (“Chris”), and Donald E. Vanni (“Donald”) and Sharon L. Vanni (“Sharon”), in their individual capacity and as trustees of the Donald E. Vanni and Sharon L. Vanni Revocable Inter Vivos Trust (“Trust”) (collectively, “Defendants”). (See complaint, ¶¶ 1-9.) The Association acts as an owners association for the common interest development located at 16170 Vineyard Boulevard in Morgan Hill. (See complaint, ¶ 9.) Plaintiff Amir Safakish (“Plaintiff”) and Trust are owners of a condominium project at the subject property, where Plaintiff is a minority owner. (See complaint, ¶¶ 9-10.) Chris, and Donald and Sharon, in their individual capacity and as trustees of Trust, created the Association in a manner so that they could take advantage of Plaintiff, and did in fact engage in misconduct so as to breach the fiduciary duty owed to Plaintiff. (See complaint, ¶¶ 10-19.)

On May 9, 2016, Plaintiff filed a complaint against Defendants, asserting causes of action for:

1) Breach of fiduciary duty;
2) Declaratory relief;
3) Injunctive relief;
4) Unfair business practices;
5) Conspiracy; and,
6) Rescission.

Defendants demur to the first cause of action for breach of fiduciary duty on the ground that it fails to state facts sufficient to constitute a cause of action as to Sharon, demur to the second through sixth cause of action on the ground that they fail to join the Association as an indispensable or necessary party, demur to the fifth cause of action on the ground that the acts are privileged and thus cannot constitute a cause of action, and demur to the sixth cause of action on the ground that it fails to state facts sufficient to constitute a cause of action.

First cause of action

To plead a cause of action for breach of fiduciary duty, Plaintiff must show the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach. (See Brown v. Cal. Pension Administrators and Consultants, Inc. (1996) 45 Cal.App.4th 333, 347-48.) Defendant Sharon argues that “Plaintiff does not allege that Sharon Vanni is or ever was an officer, director, or shareholder of the Association… [and] there is no other allegation in the Complaint that Sharon Vanni was otherwise a fiduciary or owed a fiduciary duty to Plaintiff, and there is no allegation as to the existence of a special relationship of confidence and trust between Sharon Vanni and Plaintiff giving rise to a fiduciary duty owed by Sharon Vanni to Plaintiff.” (Defs.’ memorandum of points and authorities in support of demurrer (“Defs.’ memo”), p.4:2-21.) The complaint does alleges that Sharon is a trustee of Trust, and that Sharon has engaged in certain specified misconduct as set forth in paragraphs 11 and 19; however, the complaint does not allege that Sharon acted on behalf of the Association. Also, the complaint alleges that only Donald and Chris acted on behalf of the Trust, as well as being officers and directors of the Association. (See complaint, ¶¶ 9, 11.) Moreover, it is unclear as to whether the first cause of action is alleged against Sharon in her individual capacity, and/or as trustee of Trust, and what the basis for liability in Sharon’s individual capacity may be. Sharon’s demurrer to the first cause of action is SUSTAINED with 10 days leave to amend.

Second through sixth causes of action—indispensable or necessary party

Defendants demur to the second through sixth causes of action on the ground that Plaintiff failed to join the Association as a party. (See Defs.’ memo, pp.4:22-28, 5:1-26, 6:1-28, 7:1-28, 8:1-28, 9:1-28, 10:1-28, 11:1-28, 12:1-28, 12:1-14; see also Code Civ. Proc. § 430.10, subd. (d).)

The second cause of action for declaratory relief alleges that “an actual controversy exists between the parties with regard to existence [sic] of the Association and principal purpose of the Association in that Association’s existence is not beneficial to its owners.” (Complaint, ¶ 23.) The third cause of action for injunction alleges that “The VANNIs have scheduled director’s meetings at times that they knew Plaintiff was not available in order to vote and approve their own agenda in Plaintiff’s absence… The VANNIs have caused detriment to the Plaintiff by hiring vendors who… have personal relationships with the VANNIs… [and] substantially overcharge for repairs… [and d]espite Plaintiff’s objections to the higher priced bids, the VANNIs have hired these vendors who they have personal relationships with and with whom they have engaged in self-dealing.” (Complaint, ¶ 26.) The fourth cause of action for unfair business practices alleges “Non payments of costs and expenses paid by plaintiff for the benefit of Association, and keep promising Plaintiff the debt will be paid by the association without any intent to pay to stop plaintiff from taking a legal action… [a]fter the association was formed, defendants unilaterally passed regulation that any party unable to pay the assessments will have a lien placed against its property plus penalty…without the required vote…[a]fter forming the Association, defendants paid for defendants’ attorney’s fees in excess of $6000.00 without Plaintiff’s consent or consultation… [a]fter the Association was formed, defendants represented to Plaintiff that all association related charges and expenses for the property inclusive of pre-association formation expenses should be sent to defendants for payment… [h]owever, defendants did not pay any of the submitted expenses and charges… Defendants passed regulation… [and] passed special assessments for a number of expenses which were not at all necessary… [and] refused to allow Plaintiff to review these assessments and cost items despite Plaintiff’s repeated requests for the same…[and] Defendants have held association meetings [without adequate notice]. (Complaint, ¶ 32.) The fifth cause of action for conspiracy alleges that Defendants “knowingly conspired together to wrongfully freeze-out Plaintiff from the Association to force Plaintiff to agree to all of their demands.” (Complaint, ¶ 35.) The sixth cause of action for rescission seeks to rescind the agreement to form the Association. (See complaint, ¶¶ 39-43.)

In opposition to the demurrer, Plaintiff asserts that “[t]he actual dispute is between Plaintiff and defendants who control the Association. Any judgment or order on the parties in this case will be enforceable against the Association without the necessity of naming the Association as a party to this action.” (Pl.’s opposition to demurrer (“Opposition”), p.3:19-22.) “Contrary to defendants’ assertion at their demurrer, the Court’s ruling in this case will not affect the Association… the focus of the Complaint is not the Association, but rather the alleged wrongful conduct of defendants that have affected Plaintiff’s rights as the owner of the property and a shareholder.” (Id. at p.6:6-10.)

However, the complaint specifically alleges that the alleged actual controversy is “with regard to [the] existence of the Association and [the] principal purpose of the Association.” The complaint seeks to rescind the agreement that formed the Association such that it would “cancel the Association.” The complaint additionally seeks to enjoin the majority shareholders of the Association from acting on behalf of the Association, and seeks damages for conduct in violation of the Association’s best interests. Any judgment by the Court on these allegations would indisputably affect Association. (See Holt v. College of Osteopathic Physicians and Surgeons (1964) 61 Cal.2d 750, 760-761 (stating that COA] is an indispensable party to this action… [s]ince plaintiffs seek to enjoin the performance by COPS of a contract between COPS and COA, the effect of a decree in favor of plaintiffs would be to enjoin COA as well as COPS”); see also Save Our Bay, Inc. v. San Diego Unified Port Dist. (1996) 42 Cal.App.4th 686, 692-693 (stating that “[a] person is an indispensable party if his or her rights must necessarily be affected by the judgment”).) The demurrer to the second through sixth causes of action on the ground that there is a defect or misjoinder of parties is SUSTAINED with 10 days leave to amend.

Fifth cause of action for conspiracy

Defendants also demur to the fifth cause of action for conspiracy on the ground that it is barred by the litigation privilege. As a preliminary matter, the Court notes that “[c]onspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration.” (Moran v. Endres (2006) 135 Cal.App.4th 952, 954.) “A conspiracy cannot be alleged as a tort separate from the underlying wrong it is organized to achieve.” (Id.) Primarily, the fifth cause of action alleges a conspiracy to breach fiduciary duties owed to Plaintiff. However, as previously stated, the first cause of action fails to state facts sufficient to constitute a cause of action. Thus, the dependent fifth cause of action also fails to state facts sufficient to constitute a cause of action. As to the argument that the cause of action is barred by the litigation privilege, it is true that “the litigation privilege attaches to the publication of an assessment lien… regardless of whether malice or intent to harm was involved.” (Wilton v. Mountain Wood Homeowners Assn. (1993) 18 Cal.App.4th 565, 571.) However, the placement of the assessment lien is not an integral allegation of the fifth cause of action such that the cause of action could not be amended. Thus, the demurrer to the fifth cause of action on the ground that it fails to state facts sufficient to constitute a cause of action is SUSTAINED with 10 days leave to amend.

Sixth cause of action for rescission

Defendants demur to the sixth cause of action for rescission on the ground that it fails to state facts sufficient to constitute a cause of action because California law requires a common interest development to have an association. Here, the cause of action seeks to rescind the existing agreement that formed the Association. Even though an association may be required under California law, there is no suggestion that California law requires the subject agreement that governs the Association. The instant subject agreement could be void or voidable, or contains numerous void clauses—and California law would certainly not enforce a void agreement. Accordingly, Defendants’ argument lacks merit. The demurrer to the sixth cause of action for rescission on the ground that it fails to state facts sufficient to constitute a cause of action is OVERRULED.

The Court will prepare the Order.

Case Name: Mirapath, Inc. v. Jessica Ly, et al.
Case No.: 16-CV-296779

I. Background and Discovery Dispute

This is an action for misappropriation of trade secrets brought by plaintiff Mirapath, Inc. (“Plaintiff”) against defendants Rahi Systems, Inc. (“RSI”) and Jessica Ly (“Ly”), Plaintiff’s former employee.

Plaintiff “is a solutions provider for data centers and lab infrastructure.” (Compl., ¶ 7.) Plaintiff provides services including “data center infrastructure design, hardware, software, and installation.” (Compl., ¶ 7.) In August 2011, Plaintiff hired Ly to work in its sales department where she served as an Inside Sales Representative and eventually as a Strategic Account Executive. (Compl., ¶ 8.) Her job duties in both positions involved completing sales, soliciting new business, and maintaining relationships with existing clients. (Compl., ¶ 16.) Upon hiring, Ly signed an agreement to maintain the confidentiality of Plaintiff’s proprietary information, which included: customer and vendor information, business plans, and marketing materials. (Compl., ¶ 9; see also Compl., Exh. A.) Plaintiff alleges, however, that Ly began using this proprietary information to solicit its customers on behalf of her own business, JevarTech LLC (“JevarTech”), and to contact its vendors to fulfill orders placed with JevarTech. (Compl., ¶¶ 17-20.) Ly also attempted to form another competing business with an employee of one of Plaintiff’s competitors. (Compl., ¶¶ 25-28.)

In May 2016, following the events described above, Ly resigned at the prompting of Plaintiff’s Chief Executive Officer. (Compl., ¶¶ 31-32.) Before her last day, Ly downloaded all of her work email, which included Plaintiff’s proprietary information, and forwarded emails to her personal email account. (Compl., ¶¶ 29-30.) Ly also downloaded Plaintiff’s proprietary information to a thumb drive and her personal laptop. (Compl., ¶¶ 36-37.) Ly wiped her work smartphone and laptop prior to returning them to Plaintiff, which it alleges was to cover up her improper retention of its proprietary information. (Compl., ¶¶ 33-35.)

Following her resignation, Ly began working for Plaintiff’s competitor, RSI, as Director of Sales and Business Development. (Compl., ¶ 38.) Ly helped RSI solicit Plaintiff’s customers and employees. (Compl., ¶ 38.) Plaintiff sent cease and desist letters to Ly and RSI. (Compl., ¶¶ 39-41.) Subsequently, Plaintiff commenced this action by filing a complaint asserting causes of action for: (1) fraud (against Ly); (2) constructive fraud (against Ly); (3) negligent misrepresentation (against Ly); (4) intentional interference with prospective economic advantage (against Ly and RSI); (5) negligent interference with prospective economic advantage (against Ly and RSI); (6) breach of fiduciary duty (against Ly); (7) breach of covenant not to compete (against Ly); (8) tortious interference (against RSI); (9) unjust enrichment (against Ly); (10) misappropriation of trade secrets (against Ly and RSI); (11) violation of the Computer Fraud and Abuse Act (against Ly); and (12) unfair competition (against Ly and RSI).

On August 17, 2016, RSI served Plaintiff with special interrogatories, set one (“SI”), Nos. 1-8. (Guggenheim Decl., Exh. A.) SI Nos. 1-8 seek information about the nature, storage, and maintenance of Plaintiff’s trade secrets. (Guggenheim Decl., Exh. A.) On September 21, 2016, Plaintiff served RSI with objection-only responses to all of these requests with the exception of SI Nos. 6-8, to which partial substantive responses were provided. (Guggenheim Decl., Exh. B.) RSI sent Plaintiff a meet and confer letter explaining the purpose of the interrogatories was to obtain its trade secret disclosure pursuant to Code of Civil Procedure section 2019.210. (Guggenheim Decl., Exh. C.) RSI offered to execute a stipulated protective order maintaining the confidentiality of any substantive responses served to supplement the initial objection-only responses and limiting the use of the responses to this case. (Guggenheim Decl., Exh. C.) Plaintiff rejected RSI’s offer stating the proposal provided insufficient protection for its trade secrets. (Guggenheim Decl., Exh. D.)

Plaintiff provided RSI with a proposed protective order with a procedure for designating information as “Attorneys’ Eyes Only.” (Guggenheim Decl., Exh. D.) RSI’s counsel proposed several changes, including the elimination of this particular designation, stating he could not defend his client if he was unable to show discovery materials to employees. (Guggenheim Decl., Exh. E.)

The parties could not reach an agreement as to the protective order, and in turn, SI Nos. 1-8. Consequently, on November 8, 2016, Plaintiff filed a motion for protective order. On November 9, 2016, RSI filed a motion to compel further responses to SI Nos. 1-8.

The Court intends to grant Plaintiff’s motion, as specified below. Also to be heard is RSI’s motion to compel Plaintiff to provide further responses to SI Nos. 1-8 and the accompanying requests for monetary sanctions by both parties.

II. Motion for Protective Order

As noted, Plaintiff seeks a protective order that includes an Attorneys’ Eyes Only category of protection.

Defendant first argues that Plaintiff has not established that is has any trade secrets and the motion should be denied. However, in a trade secrets action, a Plaintiff is presumptively entitled to a protective order before it is required to disclose its trade secrets. (See Code of Civ. Proc. sec. 2019.210 that requires identification of trade secrets, “subject to any orders that may be appropriate under Section 3426.5 of the Civil Code.” Section 3426.5 in turn provides that
“the court shall preserve the secrecy of an alleged trade secret by reasonable means, which may include granting protective orders in connection with discovery proceedings…”)

The Court will grant Plaintiff’s motion and will issue a protective order that will include an Attorneys’ Eyes Only (“AEO”) provision, except that the Defendant may designate up to two employees of the Defendant RHI, who may not be employed in sales or business development, and who shall be entitled to review such information only in the offices of counsel, and who shall not be provided any copies of such material. Before any AEO information is shown to any RHI employee, that employee shall be identified to Plaintiff’s counsel and that individual shall sign the Affidavit attached to the Protective Order. Any dispute over the individual or individuals identified shall be resolved before any AEO information is shown to that individual. This provision shall be mutual.

However, the Court will not sign a form of protective order based on versions adopted for use in Federal Court. The proposed version of the protective order fails to even mention California state law. The Court refers the parties to and directs preparation of a protective order consistent with and based on the Model Confidentiality Order issued by the Santa Clara County Complex Litigation Department, with AEO provisions added. The most recent version of the Order is dated July 30, 2015. The Court can provide the form if counsel cannot locate it.

The order shall also include the following language:
This Stipulated Protective Order creates no right to file Confidential Information under seal. The California Rules of Court set forth procedures that must be followed when a party seeks permission to file material under seal. The procedures for dealing with Confidential Information at trial shall be determined by the trial judge.
Finally, the Court will not sign any order that does not include at least two lines of text on the page that the Court signs. (See Local Rule 10.) As it does not appear that this order will be stipulated (or even if it is), the signature line for the Court should be placed immediately after the final provisions of the order, with at least some text on the signature page. The parties shall meet and confer over the final language of the order, but if agreement is not reached, Plaintiff shall submit a proposed order with any comments or alternate orders received. This is an action for misappropriation of trade secrets brought by plaintiff Mirapath, Inc. (“Plaintiff”) against defendants Rahi Systems, Inc. (“RSI”) and Jessica Ly (“Ly”), Plaintiff’s former employee.

III. Motion to Compel Further Responses

SI No. 1 asks Plaintiff to identify its trade secrets with reasonable particularity as required by Code of Civil Procedure section 2019.210. (Guggenheim Decl., Exh. A.) As related thereto, SI Nos. 2-5 ask Plaintiff to identify the documents and databases where the trade secrets were stored, what information was stored in each document or database, how the trade secret information was compiled, and how the documents or databases were maintained. (Guggenheim Decl., Exh. A.) SI Nos. 6-8 are simple contention interrogatories seeking the facts supporting Plaintiff’s misappropriation claim, the documentary evidence supporting those facts, and witnesses with knowledge of those facts. (Guggenheim Decl., Exh. A.)

Plaintiff objected to every request on the grounds they called for confidential information and an improper legal conclusion. Plaintiff also objected to SI Nos. 2 and 4-7 on the ground of vagueness and ambiguity. Plaintiff objected to SI No. 3 on the ground it is compound and SI Nos. 6-7 on the grounds of undue burden and the attorney-client privilege.

If a party demanding responses to interrogatories maintains that an objection is without merit or too general or an answer is evasive or incomplete, it may move for an order compelling a further response. (Code Civ. Proc., § 2030.300, subd. (a)(1), (3).) The responding party bears the burden of justifying its objections. (Fairmont Ins. Co. v. Superior Court (2000) 22 Cal.4th 245, 255.) Thus, the Court will first address Plaintiff’s objections before considering whether its substantive responses to SI Nos. 6 and 8 are code-compliant.

A. Objections

Plaintiff bears the burden of substantiating its objections. (Coy v. Superior Court (1962) 58 Cal.2d 210, 220-21.) Objections for which no justifications are provided are deemed abandoned. (Ibid.) Plaintiff does not actually attempt to justify any of its objections. Instead, it focuses on the necessity of implementing a protective order in this case. Nonetheless, the Court will briefly address Plaintiff’s undefended objections to forestall gamesmanship, reduce the likelihood of court intervention in the future, and provide a primer on discovery practice and procedure.

1. Improper Legal Conclusion

Plaintiff generically objected to SI Nos. 1-8 on the ground each called for an improper legal conclusion as to what a trade secret is. A party may propound interrogatories asking whether the opposing party “makes a particular contention, either as to the facts or as to the possible issues in the case.” (Burke v. Superior Court (1969) 71 Cal.2d 276, 281.) Thus, “when a party is served with a request [ ] concerning a legal question properly raised in the pleadings he [or she] cannot object simply by asserting that the request calls for a conclusion of law.” (Id. at p. 282.) In other words, the use of a legal term of art or legal definition in an interrogatory does not automatically render an interrogatory objectionable on the ground it calls for a legal conclusion. (Ibid.) While Plaintiff’s objections apparently lack merit because they are based on the use of the term “trade secret,” without more, Plaintiff does not attempt to substantiate its objections on this basis. Plaintiff’s objections to SI Nos. 1-8 on the ground they call for an improper legal conclusion are therefore overruled.

2. Compound

Plaintiff objected to SI No. 2 on the ground it is compound and contains subparts. While SI No. 2 only covers one subject, where the trade secrets were kept, Plaintiff presumably objected because it asks for the “documents and databases” where the trade secrets were kept. (Guggenheim Decl., Exh. A.) First, as a general matter, “objections [ ] to the form of the question are for the protection of a witness on oral examination.” (West Pico Furniture Co. of Los Angeles v. Superior Court (“West Pico”) (1961) 56 Cal.2d 407, 421.) “When [ ] the answer is to be made in writing, after due time for deliberation and consultation with counsel, an answer may be framed which avoids the pitfalls, if any, inherent in the form of the question.” (Ibid.) Consequently, objections to written interrogatories on the ground they are compound are disfavored. Second, while “[n]o specially prepared interrogatory shall contain subparts, or a compound, conjunctive, or disjunctive question,” courts have interpreted this provision as prohibiting a party from propounding special interrogatories that cover more than one subject. (Code Civ. Proc., § 2030.060, subd. (f); see also Clement v. Alegre (2009) 177 Cal.App.4th 1277, 1291.) Thus, courts look to the subject matter of the interrogatory, not grammar and use of conjunctive words such as “and.” (See Clement v. Alegre, supra, 177 Cal.App.4th at p. 1291.) Plaintiff does not argue SI No. 2 covers more than one subject or otherwise attempt to substantiate its objection on this basis. This objection is therefore overruled.

3. Vagueness and Ambiguity

Plaintiff objected to various terms in SI Nos. 2 and 4-7, such as “compiled” and “maintained,” on the ground of vagueness and ambiguity. To justify an objection on the ground of vagueness or ambiguity, a party must demonstrate the discovery request is so vague and ambiguous that it is unintelligible and the party is unable to meaningfully respond. (See Deyo v. Kilbourne (1978) 84 Cal.App.3d 771, 783.) “Indeed, where the question is somewhat ambiguous, but the nature of the information sought is apparent, the proper solution is to provide an appropriate response.” (Ibid.) Here, it is unclear whether Plaintiff selected terms at random as the terms to which it objected do not create any ambiguity. It is obvious RSI is inquiring as to how the proprietary information was compiled as pertinent to whether the information is proprietary at all. Moreover, given Plaintiff asserts claims for misappropriation of trade secrets and violation of the Computer Fraud and Abuse Act, the method it used to store or maintain its proprietary information is germane to whether it will be able to prove, through forensic analysis of its network and employee devices, the manner and extent to which Ly accessed this information. Plaintiff does not attempt to explain how any of the purportedly objectionable terms prevented it from responding to these questions. Plaintiff’s objections to SI Nos. 2 and 4-7 on the ground of vagueness and ambiguity are therefore overruled.

4. Undue Burden

Plaintiff objected to SI Nos. 6-8 on the ground of undue burden; however, “some burden is inherent in all demands for discovery.” (West Pico, supra, 56 Cal.2d at pp. 417-18.) “The objection of burden is valid only when that burden is demonstrated to result in injustice.” (Ibid.) In justifying an objection on the ground of undue burden and oppression, the responding party must articulate specific facts demonstrating the amount of time and effort required to comply with each request are incommensurate with the importance or value of the requested discovery. (Ibid.) Plaintiff does not actually raise the issue of the burden or expense of responding to these two discovery requests. Rather, in making its objections, Plaintiff asserted these interrogatories seeking all documents or facts supporting its misappropriation claim were unduly burdensome because it was still investigating its claim. Plaintiff essentially asserts it cannot completely respond because it does not have all of the requisite information, which does not in any way address whether the interrogatories are unduly burdensome. Consequently, while Plaintiff fails to justify its objections on this basis, its own stated reason for making this objection undermines its position. Plaintiff’s objections on this ground to SI Nos. 6-8 are therefore overruled.

5. Attorney-Client Privilege

Plaintiff objected to SI Nos. 6-7 on the ground of the attorney-client privilege. These interrogatories are basic contention interrogatories that ask Plaintiff to identify all facts that support its contention that Ly and RSI misappropriated trade secrets and all documents evidencing those facts. It is unclear how the attorney-client privilege is in any way implicated. Even so, a boilerplate objection on the ground of the attorney-client privilege does not result in waiver of the privilege. (See Best Products, Inc. v. Superior Court (2004) 119 Cal.App.4th 1181, 1189-90.) Plaintiff’s objections on the ground of the attorney-client privilege, although undefended, are preserved. (Ibid.)

6. Confidential Information

As to SI Nos. 1-8, Plaintiff objected “to the extent [each] interrogatory seeks confidential, proprietary, or trade secret information.” (Guggenheim Decl., Exh. B.) Despite interposing this objection to each discovery request at issue, Plaintiff does not actually attempt to justify its objections on this basis. Bizarrely enough, Plaintiff argues in opposition to the motion that RSI’s discussion “regarding the applicability of the trade secret privilege is a red herring.” (Opp. at p. 6:2-3.) RSI’s discussion of the trade secret privilege in its motion is proper given Plaintiff’s objections on that basis. In any event, Plaintiff does not explain how each interrogatory seeks protected information. Moreover, it does not appear Plaintiff could substantiate its objection on this basis as to SI Nos. 2 and 4-8 as only SI Nos. 1 and 3 could reasonably be interpreted as calling for trade secret information.

It appears Plaintiff’s true objection to SI Nos. 1-8 was the absence of a protective order in this case. Specifically, Plaintiff argues RSI’s “reason [for compelling a further response] is deficient because it ignores the ‘general objection’ [ ] lodged regarding the need for a protective order pursuant to California Civil Code § 3426.5.” (See, e.g. Pl. Sep. Stat. at p. 5:19-21.)

In fact, Plaintiff filed a motion for a protective order; thus, the parties briefed the issues specifically with respect to that motion. Additionally, general objections are improper because objections must be stated separately and must bear the same number and letter as the request to which they are directed. (See Code Civ. Proc., §§ 2030.210, subd. (c), 2030.240, subd. (b); see also Smith v. Superior Court (1961) 189 Cal.App.2d 6, 13.) Because Plaintiff chose to make a general objection rather than clearly stating its objection on this basis to each interrogatory, a motion on the ground its objections lack merit would, as here, necessarily focus on the objections actually made to each individual discovery request.

Turning to the merits of the issue at the heart of Plaintiff’s opposition, as noted above, Civil Code section 3426.5 states “a court shall preserve the secrecy of an alleged trade secret by reasonable means, which may include granting protective orders in connection with discovery proceedings. . . .” Additionally, Code of Civil Procedure section 2019.210 authorizes the pre-discovery disclosure of trade secrets “subject to any orders that may be appropriate under Section 3426.5.” The language of section 2019.210 thus clearly contemplates and presumes the implementation of a protective order prior to the mandatory trade secret disclosure. (See, e.g., Loop AI Labs, Inc. v. Gatti (N.D.Cal. July 6, 2016, No. 15-CV-00798-HSG (DMR)) 2016 WL 3654378, citing Advanced Modular Sputtering, Inc. v. Superior Court (2005) 132 Cal.App.4th 826, 831, fn. 2.)

Although improperly presented, Plaintiff’s objection to disclosing its trade secrets in the absence of a protective order is sound as a matter of law, and it is the Court’s intention to grant its motion. Responses to the interrogatories will not be due until after entry of the protective order.

B. Substantive Responses

Plaintiff provided substantive responses to SI Nos. 6 and 8 only. When providing a substantive response to an interrogatory, the party must give a straightforward answer that contains the information sought. (Code Civ. Proc., § 2030.210, subd. (a); see also Deyo v. Kilbourne, supra, 84 Cal.App.3d at pp. 783-84 [“Answers must be complete and responsive.”])

First, Plaintiff responded to these two interrogatories “subject to and without waiving” its objections. (Guggenheim Decl., Exh. B.) By responding in this manner, Plaintiff fails to provide a straightforward answer because such language obfuscates whether its responses are complete and the extent to which it is withholding information based on an objection.

Second, the actual answers provided are not code-compliant. As to SI No. 6, Plaintiff responded by referring RSI to the allegations in the complaint. “[I]t is not proper to answer by stating ‘see [document.]’” (Deyo v. Kilbourne, supra, 84 Cal.App.3d at p. 783.) “[I]f a question does require the responding party to make reference to a pleading or document, the pleading or document should be identified and summarized so the answer is fully responsive to the question.” (Id. at p. 784.) Moreover, this response appears to be incomplete on its face as Plaintiff does not identify in the FAC, even in general terms, the trade secrets purportedly misappropriated. Consequently, a further response to SI No. 6 is warranted.

As to SI No. 8, Plaintiff identified two individuals with knowledge of facts supporting its misappropriation claim, but did so with the express caveat that its response was not complete. Specifically, Plaintiff stated responsive individuals included but were not limited to the two people it identified. Plaintiff’s incomplete response to SI No. 8 therefore is not code-compliant and a further response thereto is warranted.

As to the remaining interrogatories, further responses are warranted because Plaintiff did not provide any substantive responses.

C. Conclusion

Based on the foregoing, the motion to compel further responses to SI Nos. 1-8 is GRANTED. Plaintiff shall serve RSI with verified, code-compliant further responses to SI Nos. 1-8, without objections (except for objections on the ground of the attorney-client privilege), within 20 calendar days after entry of the protective order referenced above.

III. Requests for Monetary Sanctions

RSI requests an award of monetary sanctions in the amount of $1,060.00, representing the attorney’s fees and costs incurred in bringing the motion. Pursuant to Code of Civil Procedure section 2030.300, subdivision (d): “The court shall impose a monetary sanction [ ] against any party, person, or attorney who unsuccessfully makes or opposes a motion to compel a further responses to interrogatories, unless it finds the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.”

RSI successfully brought this motion and is therefore entitled to sanctions unless Plaintiff was substantially justified in opposing it or circumstances would make the imposition of sanctions unjust. Here, Plaintiff’s decision to seek a protective order prior to responding to some of the interrogatories was defensible. Given there was no protective order in place, however, it would be unjust to sanction Plaintiff for failing to disclose its trade secrets. RSI therefore is not entitled to an award of monetary sanctions and its request is DENIED.

Plaintiff also requests an award of monetary sanctions in the amount of $5,695.00, representing 17 hours of attorney time spent preparing the opposition to the motion. This amount is not reasonable. Moreover, Plaintiff did not successfully oppose the motion, did not seek an award of monetary sanctions on its motion for protective order, and therefore is not entitled to an award of monetary sanctions. Plaintiff’s request for monetary sanctions is therefore DENIED.

The Court will prepare the order.

Case Name: Hiramanek v. Kapadia, et al.

Case No.: 2015-1-CV-278288

Defendant Adil Hiramanek moves “to transfer this case to an impartial judiciary as there is reason to believe that an impartial trial cannot be had herein, the convenience of witnesses and the ends of justice would be promoted by the chance, and there is no impartial judge of the court qualified to act.” (Mtn. to Transfer, p. 1:19-22, emphasis original.)

Mr. Hiramanek previously sought the same relief. On November 4, 2015, plaintiff Roda Hiramanek filed a motion to transfer this case, stating identically in her motion that she sought “to transfer this case to an impartial judiciary as there is reason to believe that an impartial trial cannot be had herein, the convenience of witnesses and the ends of justice would be promoted by the change, and there is no judge of the court qualified to act.” ([First] Mtn. to Transfer, p. 1:18-21.) Mr. Hiramanek filed a joinder in that motion on January 25, 2016, stating he “joins” and “seeks the same affirmative relief as Roda’s Motion.” (Notice of Joinder, p. 1:21-26, emphasis original.). This Court denied the motion in May 2016. As such, the instant motion by Mr. Hiramanek constitutes a renewed motion governed by Code of Civil Procedure section 1008, subdivision (b). (See California Correctional Peace Officers Ass’n v. Virga (2010) 181 Cal.App.4th 30, 43.)

Section 1008, subdivision (b) provides: “A party who originally made an application for an order which was refused in whole or part, … may make a subsequent application for the same order upon new or different facts, circumstances, or law, in which case it shall be shown by affidavit what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.” Mr. Hiramanek neglected to file a code-compliant declaration; he failed to make any mention whatsoever in his moving papers of the prior motion that was denied. For this reason alone, the motion is improper. The motion otherwise lacks substantive merit.

Mr. Hiramanek’s motion is fundamentally predicated upon the existence of a lawsuit he and his mother filed in the United States District Court, Northern District of California, Case No. 3:13-cv-00228-JD, in which the Santa Clara County Superior Court (“Superior Court”) and certain person affiliated with the Superior Court are named as defendants. Mr. Hiramanek contends as follows in his motion: “It is fact that a conflict exists, which requires this Court to recuse itself. This court is in litigation, case#13-0228, titled Adil & Roda Hiramanek v. Superior Court of California, County of Santa Clara [‘SCSC’], L. Michael Clark, et al., before the Federal Court, Northern California District.” (Mtn. to Transfer/Memo. Pts. & Auth., p. 1:19-21.)

The prior motion was similarly based on the existence of that lawsuit. The factual basis in support of the prior motion was recited as follows: “It is indisputable that a conflict exists in this case which requires this Court to recuse itself. This court is in a pending litigation, #13-0228 RMW, case named Adil & Roda Hiramanek v. Superior Court of California, County of Santa Clara, L. Michael Clark, et al., before the Federal Court, Northern California Distirct-Exhibit A. [¶] In the ongoing Federal Court action, every employee of the Santa Clara County Superior Court, including its judges, personnel, et al., are not only the Federal Defendants, but are also disclosed witnesses, or potential witness, subject to deposition and trial testimony.” ([First] Mtn. to Transfer/Memo. Pts. & Auth., p. 1:3-10.) As indicated in this Court’s order on the motion, “the Hiramaneks [ ] mischaracterized the scope of the proceeding.” (Amended Order Re: Mtn. to Transfer, p. 3:11-14.) “Each employee and judge of the Superior Court simply is not a defendant, and naming the Superior Court as a defendant did not equate to suing each and every court employee or judge. The federal district court dismissed the bulk of the Hiramaneks’ claims pursuant to an independent review of their pleadings under 28 U.S.C. §1915(e), and allowed them to proceed against a discrete number of defendants on limited claims. No claims remain against any judicial officer of the Superior Court.” (Ibid. at p. 3:14-19, footnotes omitted.) This Court further found the Hiramaneks’ conflict of interest argument unpersuasive for the reasons articulated in its order.

In a seeming effort to distinguish the instant motion from the former, Mr. Hiramanek states “[a]t a recent Aug. 2016 Fed. Court trial on claim #35, SCSC counsel and his client admitted that it harbors ill will, prejudice and hatred against XCD.” (Mtn. to Transfer/Memo. Pts. & Auth., p. 1:22-23, emphasis original.) As an initial matter, claim #35 in the federal action simply does not involve the Superior Court. A review of the docket in that case reveals the claim pertains to an employee of the Sixth District Court of Appeal allegedly intentionally discriminating against the Hiramaneks by denying them access to a restroom. The jury rendered a verdict in favor of that employee, namely Beth Miller, and the court subsequently entered judgment in her favor. In any event, Mr. Hiramanek fails to present any admissible evidence to substantiate the purported admission made in the federal action.

Next, Mr. Hiramanek points out that the Sixth District Court of Appeal recently recused itself from hearing a number of matters pending before it in which he is an involved party, allegedly due to the existence of the above-referenced federal action. Citing the doctrine of stare decisis, Mr. Hiramanek insists that this Court must recuse itself from the case at bench since the Sixth District Court of Appeal recused itself from matters pending before it involving the Hiramaneks. Mr. Hiramanek’s reliance on that doctrine is misplaced.

“Under the doctrine of stare decisis, all tribunals exercising inferior jurisdiction are required to follow decisions of courts exercising superior jurisdiction.” (Auto Equity Sales, Inc. v. Superior Court of Santa Clara County (1962) 57 Cal.2d 450, 455.) “Decisions of every division of the District Courts of Appeal are binding upon all the justice and municipal courts and upon all the superior courts of this state, and this is so whether or not the superior court is acting as a trial or appellate court. Courts exercising inferior jurisdiction must accept the law declared by courts of superior jurisdiction. It is not their function to attempt to overrule decisions of a higher court.” (Ibid.) The Sixth District Court of Appeal’s determination of self-recusal simply does not qualify as a decision implicating the doctrine of stare decisis, and Mr. Hiramanek cites no legal authority supporting a contrary conclusion.

In sum, Mr. Hiramanek has not identified any new or different facts, circumstances or law warranting the relief sought. As this Court previously determined in connection with the prior motion, there is no basis for concluding that an impartial trial cannot be had before any judge in the Superior Court simply because the Hiramaneks filed a lawsuit against the entity and a limited number of judicial officers and employees.

In consideration of the foregoing, Mr. Hiramanek failed to demonstrate that he cannot obtain a fair and impartial trial in the Superior Court. The motion to transfer this case is therefore DENIED.

Case Name: Manuel Gonzalez Lopez, et al. v. Gilbane Building Company, et al.
Case No.: 2015-1-CV-284269

This is a wrongful death case brought by plaintiffs Manuel Gonzalez Lopez, Leonel Gonzalez Lopez and Angela Gonzalez Bailon (collectively “Plaintiffs”) against defendant Gilbane Building Company (“Gilbane”) and nominal defendants Isidro Nuno, Jr., and Luzia Nuno.

I. Background

This matter arises out of an accident that occurred on the San Jose City College campus. On August 13, 2013, Magda Gonzalez, Plaintiffs’ and nominal defendants’ mother, was struck and killed by a front end loader as it was backing up on the campus. (Def’s opposition, at pp. 1:27-2:3.)At that time, Gilbane supervised all construction on the campus. (Id. at p. 1:27-28.) Plaintiffs seek recovery for Gilbane’s negligence.

II. Discovery Dispute

On September 1, 2016, Plaintiffs served Request for Production of Documents (“RPD”) Set Four on Gilbane. (Dolinski Set Four Decl., ¶ 4 & Exh. C.) The next day, they served RPD Set Five on it. (Dolinski Set Five Decl., ¶ 2 & Exh. A.)
Gilbane served responses to both sets consisting of objections and verified substantive responses. (Dolinksi Set Four Decl, ¶ 5 & Exh. D; Dolinski Set Five Decl., ¶ 3 & Exh. B.) In the substantive responses to RPD Set Four, Gilbane stated it would do a reasonable search for responsive documents it may have with regard to a project identified in the demand and will produce responsive documents if any are found. (Dolinksi Set Four, Decl., Exh. D.) For each of its substantive responses to RPD Set Five, Gilbane responded in one of the following two ways: (1) Gilbane has not located responsive documents for the identified project; or (2) Gilbane will do a reasonable search for the identified project and produce responsive documents if any are found. (Dolinksi Set Five Decl., Exh. B.) In addition to serving responses, Gilbane produced responsive documents on November 2, 2016. On November 8, 2016, a paralegal for Gilbane’s counsel sent a CD to Plaintiffs including additional responsive documents. (Dolinksi Set Five Decl., ¶ 4 & Exh. C.) Gilbane then produced more documents on December 7.

On November 21, 2016, Plaintiffs sent a letter to Gilbane to meet and confer about the responses to Set Four. (Dolinski Set Four Decl., ¶ 9 & Exh. H.) The next day, Plaintiffs sent a similar letter regarding the responses to Set Five. (Dolinski Set Five Decl., ¶ 5 & Exh. D.) The letters identified Plaintiffs’ concerns that Gilbane’s responses did not satisfy the statutory requirements for a statement of compliance. (Dolinski Set Four Decl., Exh H; Dolinski Set Five Decl., Exh. D.) Gilbane responded stating it was continuing its search and would produce additional documents or inform Plaintiffs if no other documents were found. (Dolinksi Set Five Decl., ¶ 6 & Exh. E.) On December 8, 2016, Gilbane served a “Supplemental Response” to RPD, Set Five stating it had located additional documents which may be responsive and would produce them. (Dolinksi Set Five Decl., ¶ 7 & Exh. F.) Plaintiffs responded by stating the responses still were not compliant with the discovery statutes and they also lacked a statement that all documents were produced. (Dolinksi Set Four Decl., ¶ 11 & Exh. I; Dolinksi Set Five Decl., ¶ 8 & Exh. G.) Gilbane replied stating it has produced what it was able to locate, but it would take more time to confirm no other responsive documents existed. (Dolinksi Set Four Decl., ¶ 12 & Exh. J; Dolinski Set Five Decl., ¶ 9 & Exh. H.) In response, Plaintiffs asked for an extension to the deadline to file a motion to compel further responses. (Dolinski Set Four Decl., ¶ 13 & Exh. K; Dolinski Set Five Decl., ¶ 10 & Exh. I.) Gilbane did not respond to this letter. (Dolinksi Set Four Decl., ¶ 14; Dolinksi Set Five Decl., ¶ 11.)

Plaintiffs move to compel Gilbane to provide further responses to RPD Set Four and RPD Set Five and request monetary sanctions. Gilbane opposes the motions and requests monetary sanctions.

III. Motions to Compel Further Responses

Plaintiffs move to compel Gilbane to provide further responses to RPD Set Four, Nos. 18-50. Separately, Plaintiffs move to compel Gilbane to provide further responses to RPD Set Five, Nos. 52-57, 59-64, 66-71, 73-78, 80-85, 87-92, 94-99, 101-106, 108-113, 115-120, and 122-127.

A. Meet and Confer

As an initial matter, Gilbane contends Plaintiffs failed to adequately meet and confer prior to filing their motion because the communications between counsel did not address all the issues Plaintiffs now raise in their motions. Gilbane also argues the meet and confer efforts were not in good faith because some of the deadlines Plaintiffs imposed on it were unreasonable.
Prior to filing a motion to compel further responses for the production of documents, the moving party must meet and confer in a reasonable and good faith attempt to informally resolve each issue presented by the motion and file a declaration stating as much. (Code Civ. Proc., §§ 2016.040, 2031.310, subd. (b)(2).) The purpose of meeting and conferring is to encourage the parties to work out their differences informally and lessen the burden on both the court and the parties. (Townsend v. Superior Ct. (1998) 61 Cal.App.4th 1431, 1435.) The effort necessary to satisfy the “reasonable and good faith attempt” depends on the circumstances of the case. (Obregon v. Superior Ct. (1998) 67 Cal.App.4th 424, 431.)

Here, Plaintiffs’ motions challenge Gilbane’s objections to the discovery responses, the adequacy of the substantive responses pursuant to Code of Civil Procedure sections 2031.220 and 2031.230, and the organization of the documents Gilbane produced pursuant to Code of Civil Procedure section 2031.280. The correspondence between the parties, beginning November 21, 2016, only refers to defects in the substantive responses. It does not address any of the objections raised to the RPD. It also does not indicate any problems with the form the production took. Consequently, Plaintiffs did not attempt to meet and confer over each issue raised in the motion.

Regarding Gilbane’s assertions that Plaintiffs’ deadlines were unreasonable, the initial meet and confer attempt on November 21 and 22 each gave seven days to respond. Gilbane timely responded. The following communication, dated December 15 permitted a single day to respond. The December 16 communication, requesting an extension to the filing deadline, demanded a response that day. The filing deadline was December 22. The initial communications clearly provided time for opposing counsel to consider its position and respond. While it is clear the filing deadline was approaching, necessitating shorter response times, a day or less is typically not enough time to expect a response. Thus, Plaintiffs do not appear to have meaningfully attempted to meet and confer.

Upon a finding that the moving party failed to adequately meet and confer, the court is within its discretion to “specify additional efforts which will be required before [it] will turn to the merits of the discovery dispute.” (Obregon v. Superior Ct., supra, 67 Cal.App.4th at pp. 434-435.) Here, it appears Plaintiff’s need to file the motion when it did was due to Gilbane’s lack of reply to the request for an extension to the filing deadline, precluding further meet and confer efforts. (Plaintiffs’ MPA Set Five, at p. 1:7-8.) The parties are ordered to meet and confer to see if a resolution can be had without further requiring the Court’s intervention.

In meeting and conferring, the parties should explicitly discuss what language is needed to satisfy the statutory requirements of Code of Civil Procedure sections 2031.220 and 2031.230. They should also discuss Gilbane’s supplemental response and what effect, if any, it fulfilled Gilbane’s responsibilities to produce documents.

B. Conclusion

For the reasons set forth above, the motions are CONTINUED until March 9, 2017. The parties are ordered to meet and confer to discuss the issues identified above. The parties are to file supplemental briefs outlining the steps they have taken to meet and confer and narrow down the matters at issue for the motion by February 27, 2017.
The Court will prepare the order.

Case Name: Largo Concrete, Inc. v. SBI Builders
Case No.: 2014-1-CV-271082

After full consideration of the evidence, the separate statements submitted by the parties, and the authorities submitted by each party, the court makes the following rulings:

San Jose 3rd Street Associates was the owner of property on which a construction project (“project”) was constructed, and executed a contract with Pacific West Builders, Inc. dba Idaho Pacific West Builders, Inc. (“Pacific West”) to perform certain work. (See evidence cited by Pl.’s separate statement in opposition, undisputed material facts nos. (“UMFs”) 2-3.) Pacific West entered into a subcontract with defendant SBI Builders, Inc. (“SBI”) with a subcontract price of $2,168,216.00 related to work performed by SBI at the project pursuant to the Pacific West/SBI subcontract. On July 15, 2013, defendant Travelers Casualty and Surety Company of America (“Travelers”) issued a payment and performance bond, under which SBI was designated as the contractor as principal, and the bond related to the Pacific West/SBI subcontract. (See evidence cited by UMFs 5-6).)

According to the allegations of the first amended complaint (“FAC”), plaintiff Largo Concrete, Inc. (“Plaintiff”) entered into a Subcontract Agreement dated October 7, 2013 with defendant SBI, under the terms of which Plaintiff agreed to provide labor, services, equipment and materials at the construction project, including certain concrete podium work. (See FAC, ¶¶ 9-10, exh. A; see also evidence cited by UMF 7.) Plaintiff performed pursuant to the agreement; however, SBI did not pay for the labor, services, equipment, materials on work of improvements on the property under the agreement, in an amount of at least $471,343.68. (See FAC, ¶¶ 11-13, 25.) On July 29, 2014, Plaintiff timely recorded a mechanic’s lien, setting forth the amount due Plaintiff for the labor, services, equipment and/or materials it provided on the work of improvements on the property, listing Plaintiff as the subcontractor, SBI as the party to whom work was provided with a demand of $471.343.68, Pacific West as the owner, SBI as the direct contractor and California Bank and Trust as the construction lender. (See FAC, ¶ 26, exh. B.) On September 26, 2014, SBI recorded a mechanic’s lien on the property claiming that San Jose 3rd Street Associates owed $674,759.53 for work performed on the site, and that that amount included the amount SBI owed Plaintiff for work and materials supplied to the project. (See evidence cited by Pl.’s separate statement in opposition, undisputed material facts nos. (“UMFs”) 19-20.) On November 13, 2014, defendant Hartford Fire Insurance Company (“Hartford”) issued a mechanic’s lien release bond pursuant to Civil Code section 8424, with the principal as Pacific West, and conditioned for the payment in full of the claims of Plaintiff. (See FAC, ¶¶ 27-29, exh. C.) On November 19, 2014, Plaintiff filed its FAC, asserting causes of action for:

1) Breach of contract (against SBI);
2) Reasonable value (against SBI);
3) Recovery on payment (against SBI and Travelers Casualty and Surety Company of America); and,
4) Enforcement against Mechanic’s Lien Release Bond (against SBI and Hartford).

On January 26, 2015, Hartford issued a bond for release of the mechanic’s lien related to SBI’s mechanic’s lien recorded against the property, and the lien release bond was recorded on February 17, 2015. (See evidence cited by UMF 21.) SBI and Plaintiff entered into a Settlement Agreement and Mutual Release related to this litigation dated March 16, 2015, signed on April 16 and 17, 2015, and pursuant to this agreement, SBI agreed to pay Plaintiff the total amount of $560,816 pursuant to an installment payment schedule set forth in the agreement. (See evidence cited by UMFs 22-23.)

The total amount due Plaintiff from SBI under the agreement included Plaintiff’s legal fees and interest, and pursuant to the settlement agreement, upon receipt of the final settlement payment, Plaintiff was required to deliver to SBI an executed, unconditional waiver and release upon final payment for the Project and releases of any and all rights against SBI’s Payment Bond that Plaintiff had pertaining to the project, and agreed to mutually release and discharge each other from all compensation claims, including claims for compensation directly or indirectly arising out of the litigation, the subcontract agreement, and the project. (See evidence cited by UMFs 27-28.) The settlement agreement also provided that Plaintiff was required to assign, transfer, convey to SBI all its claims, rights, title and causes of action of any kind or nature that Plaintiff has or may have against San Jose 3rd Street Associates, LP, Pacific West Builders, Inc. dba Idaho Pacific West Builders, Inc., Travelers Casualty and Surety Company of America, Hartford Fire Insurance Company and any related or successors entities, for compensation for Plaintiff’s services provided to the project, including all the rights alleged in Plaintiff’s FAC. (See evidence cited by UMF 29.) Hartford was not a signatory to the SBI/Largo Settlement Agreement. (See evidence cited by UMF 30.) On April 11, 2016, Plaintiff received the final payment due pursuant to the Settlement Agreement, and on May 17, 2016, Plaintiff filed a request for dismissal of its FAC as to SBI and Travelers, but not Hartford. (See evidence cited by UMFs 31-32.)

Hartford moves for summary judgment on the ground that the fourth cause of action for enforcement against mechanic’s lien release bond lacks merit as a matter of law because Plaintiff’s claims against the lien release bond were extinguished as a matter of law upon payment by SBI; the purported assignment of Plaintiff’s lien claim to SBI is ineffective/void; Hartford, as surety, is exonerated from liability under the bond due to the Settlement Agreement and payments by SBI of amounts Plaintiff agreed to accept thereunder; the dismissal of SBI and Travelers requires dismissal of Hartford; and, SBI did not purchase anything, it paid a debt owed to Plaintiff.

Defendant’s burden on summary adjudication

“A defendant seeking summary judgment must show that at least one element of the plaintiff’s cause of action cannot be established, or that there is a complete defense to the cause of action. … The burden then shifts to the plaintiff to show there is a triable issue of material fact on that issue.” (Alex R. Thomas & Co. v. Mutual Service Casualty Ins. Co. (2002) 98 Cal.App.4th 66, 72; internal citations omitted; emphasis added.)

“The ‘tried and true’ way for defendants to meet their burden of proof on summary judgment motions is to present affirmative evidence (declarations, etc.) negating, as a matter of law, an essential element of plaintiff’s claim.” (Weil et al., Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2007) ¶ 10:241, p.10-91, citing Guz v. Bechtel National Inc. (2000) 24 Cal.4th 317, 334; emphasis original.) “The moving party’s declarations and evidence will be strictly construed in determining whether they negate (disprove) an essential element of plaintiff’s claim ‘in order to avoid unjustly depriving the plaintiff of a trial.’” (Id. at § 10:241.20, p.10-91, citing Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1107.)

“Another way for a defendant to obtain summary judgment is to ‘show’ that an essential element of plaintiff’s claim cannot be established. Defendant does so by presenting evidence that plaintiff ‘does not possess and cannot reasonably obtain, needed evidence’ (because plaintiff must be allowed a reasonable opportunity to oppose the motion.) Such evidence usually consists of admissions by plaintiff following extensive discovery to the effect that he or she has discovered nothing to support an essential element of the cause of action.” (Id. at ¶ 10:242, p.10-92, citing Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854-855.)

Defendant meets its initial burden

Plaintiff’s cause of action against defendant Hartford in Plaintiff’s FAC is for enforcement against mechanic’s lien release bond. Hartford’s motion for summary judgment is as to Plaintiff’s FAC. Here, Hartford presents evidence that on April 11, 2016, Plaintiff was paid $560,816 (see evidence cited by UMF 31; Lewis decl., exh. B) in exchange for the “assign[ment], transfer and convey[ance] to SBI all its claims, rights, title and causes of action of any kind or nature that Largo has or may have against San Jose 3rd Street Associate, LP, Pacific West Builders, Inc. dba Idaho Pacific Builders, Inc., Travelers Casualty and Surety Company of America, Hartford Fire Insurance Company, and any related or successors entities, for compensation for Largo’s services to the Project, including all the rights alleged in Largo’s First Amended Complaint in the Litigation (the ‘Assignment’).” (Lewis decl., exh. C, p.2, § 2.2.) SBI shall have exclusive rights to the assigned Litigation, including sole discretion to settle or dismiss such Litigation upon whatever terms SBI may determine are appropriate.” (Id.)

Hartford meets its burden to demonstrate that Hartford, is not liable as to Plaintiff on a cause of action for any enforcement against the mechanic’s lien release bond, pursuant to the Settlement Agreement and payments by SBI under the Settlement Agreement as Plaintiff transferred all of its rights regarding the fourth cause of action to SBI. Plaintiff therefore lacks any standing to pursue any cause of action against Hartford.

In opposition, Plaintiff fails to demonstrate the existence of a triable issue of material fact

In opposition, Plaintiff asserts that “3rd St/PWB, through their bonding entity Hartford, now seek to have the court deny SBI the benefits of its mitigation efforts while simultaneously reaping the reward of SBI’s efforts.” (Pl.’s opposition to Hartford’s motion for summary judgment (“Opposition”), p.1:18-21.) Plaintiff argues that a mechanic’s lien is assignable. (See Opposition, pp.11:1-28, 12:1-14.) Plaintiff asserts that “[i]f the Court determines that Hartford offered admissible evidence sufficient to meet its initial burden, there nonetheless exists a triable issue of fact as to whether there was an assignment or whether SBI ‘paid’ a debt ‘owing’ to Largo.” (Opposition, pp.12:15-28, 13:1-18.) However, the asserted fact that Plaintiff indeed assigned its rights on the mechanic’s lien does not help Plaintiff; rather, the assignment of its rights on the mechanic’s lien demonstrates that Plaintiff is not the party that has standing to pursue the cause of action. Citing Civil Code section 8434, Plaintiff further argues that “[t]here will not be any double recovery here… [because] the Court is specifically authorized to make proper allocations of the various lien claimants in order to eliminate such an occurrence.” (Opposition, p.15:1-8.) Again, however, Plaintiff lacks standing to enforce a lien after it has assigned all of its rights regarding that lien to a different party. The motion seeks summary judgment on Plaintiff’s complaint, not any other party’s complaint. The Court makes no statement regarding any cause of action by SBI or any other party against San Jose 3rd Street Associates, Pacific West or Hartford regarding any mechanic’s lien or mechanic’s lien release bond. As Plaintiff fails to demonstrate the existence of a triable issue of material fact on this ground, Hartford’s motion for summary judgment of Plaintiff’s FAC is GRANTED. As summary judgment is appropriate on this basis, it is unnecessary to address the remaining bases for the motion—whether Plaintiff’s claims were extinguished upon payment, whether the dismissal of SBI requires dismissal of Hartford, and whether SBI paid a debt owed to Plaintiff.

Plaintiff objects to various UMFs. As a preliminary matter, UMFs are not evidence. Additionally, Plaintiff’s objections do not comply with Rule of Court 3.1354, subdivisions (b) and (c); accordingly, Plaintiff’s objections are OVERRULED.

Hartford submitted certain evidence with its reply brief. The Court did not consider this evidence. (See Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537-38; see also Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 252 (stating that evidence submitted with a reply is not generally allowed); San Diego Watercrafts, Inc. v. Wells Fargo Bank, N.A. (2002) 102 Cal.App.4th 308, 316 (stating that considering evidence in connection with a reply violated the opposing parties due process rights because the opposing party was “not informed what issues it was to meet in order to oppose the motion”).)

Hartford’s objections to evidence are not the basis for the Court’s ruling.

The Court will prepare the order.

Case Name: B. Pho et al v. Eastwest Trading et al
Case No. 16CV300343

Factual Background

Plaintiffs Bic Pho and IDragon LLC filed their lawsuit against defendants Eastwest Trading Co, LLC; Properties & Beyond Partnership, Vy Nguyen, Jiang Kuang, Pro Legal Services Corporation and Properties & Beyond Corporation on September 26, 2016. The complaint alleges causes of action for Breach of Employment Agreement, Termination of Employment in Violation of Public Policy; Wages and Hours Violations and Accounting.

In January, 2016, Mr.Pho entered into a partnership agreement with Eastwest Trading LLC for the primary purpose of “Real Estate Brokerage.” The partnership was to be known as Properties & Beyond. Mr. Pho owned 20% and Eastwest Trading LLC owned 80% of the partnership. Mr. Pho was to be the operating manager and Eastwest was the deputy operating manager. Mr. Pho was to receive $120,000 in salary for the first year. Eastwest contributed $50,000 in capital for the partnership and Mr. Pho did not contribute any money for capital.

Mr. Pho was terminated in June, 2016. He contends he put a substantial amount of costs, time and material into real estate projects for which he was never compensated. He also contends he is owed unpaid salary for 2016. In his complaint, Pho seeks reimbursement of costs advanced in connection with 5 different projects, unpaid salary, various damages and attorney’s fees under the Labor Code, penalties for wrongful stop payment of checks and payment of around $27,500 on those checks. He also seeks an accounting and injunctive relief to prevent dissipation of sale proceeds from two of the five projects and a determination of the parties’ rights and obligations under the partnership.

Attorney Eric Sidebotham, of the Parr Law Group, represents the defendants and filed an answer on their behalf in December, 2016.

On January 23, 2017, Mr. Pho filed a motion to disqualify defense counsel’s law firm, The Parr Law Group, for conflicts of interest based on former representation and to prevent disclosure of confidential information obtained in the course of such representation.

The Parr Law Group is a 3 lawyer firm consisting of attorneys Shawn Parr, Lindsey Pho and Eric Sidebotham. Mr. Pho claims he was a client of the Parr Law Group since the beginning of Shawn Parr’s legal career in 1989 and paid over a million dollars to the firm for numerous personal and business legal matters on which the firm worked from 1989 to 2006. During part of that time, Mr. Pho’s niece, Lindsey Pho, worked for Attorney Parr in an administrative position. She stopped working there when she attended law school but is now an attorney at the firm.

Attorney Parr represented Mr. Pho in his divorce case, an auto repair case, numerous lawsuits- some of which involved real estate disputes of some nature. Additionally, Attorney Parr formed several legal entities designed to protect Mr. Pho’s assets in the event of financial difficulties or failure. Some of these legal entities were apparently tied to mortgage and development enterprises. Attorney Parr further represented Mr. Pho on matters relating to Pho’s real estate license, and for claims against and by Mr. Pho.

Mr. Pho claims to have met with Attorney Parr dozens, if not hundreds, of times over their 16 year attorney-client relationship. Attorney Parr has reviewed Mr. Pho’s financial, accounting, banking, personal and license records and documents. Attorney Parr and his office staff received confidential information about Mr. Pho regarding his investments, intent in investing, assets, income and other finances. According to Mr. Pho, Attorney Parr is versed in his financial accounts, professional background, patterns, practices, and temperament and litigation preferences.

In opposition to the motion to disqualify, attorney Eric Sidebotham contends he has never met plaintiffs and the Parr Law Group’s representation of Mr. Pho ended in 2006 when he had not yet joined the firm. Attorney Sidebotham argues the prior matters on which the Parr firm represented Pho are wholly unrelated to substance of the instant matter. Attorney Sidebotham offers that he alone will represent defendants and he constructed an “ethical wall” to ensure that Mr. Pho’s confidential information is protected.

Legal Analysis

A motion to disqualify counsel brings the client’s right to the attorney of his or her choice into conflict with the need to maintain ethical standards of professional responsibility. People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1145, The overriding concern is to preserve the scrupulous administration of justice and the integrity of the bar. Comden v. Superior Court (1978) 20 Cal.3d 906, 915

Pursuant to Rules of Professional Conduct, Rule 3-310 (E), an attorney must avoid adverse interests and cannot, “without the informed written consent of the client or former client, accept employment adverse to the client or former client where, by reason of the representation of the client or former client, the member has obtained confidential information material to the employment.” (Rules Prof. Conduct, rule 3–310(E).)

Rule 3–310(E) generally applies where the attorney successively represents clients with potential or actual adverse interests and where the attorney simultaneously represents clients with potential or actual adverse interests. (See Flatt v. Superior Court (1994) 9 Cal.4th 275 at pp. 283–284. According to Flatt, when successive representation is at issue the “governing test requires that the client demonstrate a ‘substantial relationship ’ between the subjects of the antecedent and current representations” to obtain the disqualification of the attorney.

Put another way, when a former client opines that his former attorney possesses material confidential information and is therefore disqualified from representing an adversary in another case (which is the situation at issue here), the former client may have difficulty establishing what is, “in the mind of the attorney.” (Western Continental Operating Co. v. Natural Gas Corp. (1989) 212 Cal.App.3d 752, 759–760) Courts have therefore established a test, under which, if the former client can demonstrate a substantial relationship between the subjects of the former and the current representations, it is presumed that the attorney had access to confidential information in the first representation which is relevant to the second representation. (Flatt, supra, 9 Cal.4th at p. 283, 36 Cal.Rptr.2d 537, 885 P.2d 950.) See, Kirk v. First American Title (2010) 183 Cal App 4th 776, 796.

The question whether an attorney should be disqualified in a successive representation case turns on two variables: (1) the relationship between the legal problem involved in the former representation and the legal problem involved in the current representation, and (2) the relationship between the attorney and the former client with respect to the legal problem involved in the former representation. If the relationship between the attorney and the former client is shown to have been direct—that is, where the lawyer was personally involved in providing legal advice and services to the former client—then it must be presumed that confidential information has passed to the attorney and there cannot be any delving into the specifics of the communications between the attorney and the former client in an effort to show that the attorney did or did not receive confidential information during the course of that relationship. As a result, disqualification will depend upon the strength of the similarities between the legal problem involved in the former representation and the legal problem involved in the current representation. This is so because a direct attorney-client relationship is inherently one during which confidential information “would normally have been imparted to the attorney by virtue of the nature of [that sort of] former representation,” and therefore it will be conclusively presumed that the attorney acquired confidential information relevant to the current representation if it is congruent with the former representation. (Ahmanson v, Soloman Brothers Inc., 229 Cal.App.3d 1445, 1454; see also Adams v. Aerojet–General Corp., supra, 86 Cal.App.4th at p. 1332, 104 Cal.Rptr.2d 116.

With respect to the first prong: 1) the relationship between the legal problem involved in the former representation and the legal problem involved in the current representation, it is clear that the Parr Law Group rendered legal services to Mr. Pho on a wide ranging number of personal and business legal issues for a span of 16 years for which Mr. Pho paid over one million dollars in legal fees. Among other things, Attorney Parr represented Mr. Pho in his real estate licensing matters and in litigation involving his real estate practice. Attorney Parr also helped Mr. Pho set up various business entities relating to real estate. Moreover, during this time, Attorney Parr became intimately familiar with Mr. Pho’s personal and financial background, his litigation strategy and other intangibles that can only be developed during a long and active attorney-client relationship. There is no doubt in this Court’s mind that the Parr Law Group acquired confidential information about Mr. Pho as a result of its previous representation that is relevant to the current representation. The current case arose from a partnership agreement between Mr. Pho and EastWest Trading Company to form Properties & Beyond for the purpose of “Real Estate Brokerage.” There appears to be a dispute over the scope of the partnership agreement, the intent of the parties in entering into same and whether the partnership was for a “real estate brokerage” or for some other purpose. Defendants’ answer asserts 43 affirmative defenses and raise issues of estoppel, unilateral and mutual mistake, proper licensing, unclean hands, termination for cause and mechanics liens. Accordingly, Mr. Pho’s past experience in entering into business agreements, his sophistication and history thereon may come into play in this litigation to determine the issues of mistake, estoppel, licensing, and unclean hands. And, of course, this matter involves a dispute concerning real estate/property development-a topic on which Attorney Parr rendered legal assistance to Mr. Pho over the years. Moreover, Attorney Parr has intimate knowledge of Mr. Pho’s personality, his philosophy and history of dealing with litigation matters—ie; whether to immediately resolve the dispute or go full bore in pursuing or defending the dispute.

In evaluating the “subjects” of the previous and current representation, Courts must ascribe a broader definition than the discrete legal and factual issues involved in the compared representations. It must include information material to the evaluation, prosecution, settlement or accomplishment of the litigation or transaction given its specific legal and factual issues. Jessen v. Hartford Cas. Ins. Co. (2003) 111 Cal. App. 4th 698,713. This includes knowledge about the former client’s philosophy on settlement versus litigation and methods and procedures in handling lawsuits. See, Jessen, supra citing numerous other “intangible” factors at p. 712.

Attorney Parr’s intimate knowledge of Mr. Pho’s personal, business and litigation history after representing him for over 16 years qualifies him as an attorney who obtained confidential information about Mr. Pho that may be used against him in the current litigation.

With respect to the second prong, Mr. Sidebotham argues he has never directly represented Mr. Pho and has built an “ethical wall” in this 3 attorney firm so that he will not be privy to any confidential information Mr. Parr may have.

As the Court in Kirk v. First American Title Ins. Company (2010) 183 Cal. App. 4th 776, 809-810 stated: “Once the moving party in a motion for disqualification has established that an attorney is tainted with confidential information, a rebuttable presumption arises that the attorney shared that information with the attorney’s law firm. The burden then shifts to the challenged law firm to establish “that the practical effect of formal screening has been achieved. The showing must satisfy the trial court that the [tainted attorney] has not had and will not have any involvement with the litigation, or any communication with attorneys or employees concerning the litigation, that would support a reasonable inference that the information has been used or disclosed.” (In re Complex Asbestos Litigation, supra, 232 Cal.App.3d at p. 596)

The specific elements of an effective screen will vary from case to case, although two elements are necessary: First, the screen must be timely imposed; a firm must impose screening measures when the conflict first arises. Second, it is not sufficient to simply produce declarations stating that confidential information was not conveyed or that the disqualified attorney did not work on the case; an effective wall involves the imposition of preventive measures to guarantee that information will not be conveyed. (SpeeDee Oil, supra, 20 Cal.4th at pp. 1142, 1151–1152 & fn. 5,) “To avoid inadvertent disclosures and establish an evidentiary record, a memorandum should be circulated warning the legal staff to isolate the [tainted] individual from communications on the matter and to prevent access to the relevant files.” (In re Complex Asbestos Litigation, supra, 232 Cal.App.3d at p. 594, 283 Cal.Rptr. 732.)

“The typical elements of an ethical wall are: [1] physical, geographic, and departmental separation of attorneys; [2] prohibitions against and sanctions for discussing confidential matters; [3] established rules and procedures preventing access to confidential information and files; [4] procedures preventing a disqualified attorney from sharing in the profits from the representation; and [5] continuing education in professional responsibility.” (Henriksen, supra, 11 Cal.App.4th at p. 116, fn. 6.) .

Attorney Sidebotham submitted a declaration indicating he set up an ethical wall and is the firm’s MCLE compliance officer. He also offered information regarding his reputation. The Court has doubt that Mr. Sidebotham is a lawyer in good standing and strives to conduct himself ethically as an officer of the Court. However, his declaration fails to address all of the elements in Kirk, although he cites that case on page 9 of his opposition. The Court is concerned about the close quarters of a three attorney law firm and how easy it might be to inadvertently come into contact with tainted information. No mechanism has been put in place to ward off these concerns as described in elements 1, 2 and 3 above. Moreover, there are no procedures set in place to prevent Mr. Parr from sharing in profits from the Eastwest litigation. Lastly, it does not escape this Court’s notice that neither attorney Parr nor attorney Pho submitted declarations attesting that they have not discussed Mr. Pho with attorney Sidebotham and never revealed any confidential information about Mr. Pho to him.

Based on all of the foregoing, the Court GRANTS plaintiffs’ motion to disqualify the Parr Law Group from representing defendants in this matter.

Case Name: Buckel, et al. v. Jokipii, et al.
Case No.: 2015-1-CV-288148

According to the allegations of the first amended complaint (“FAC”), plaintiffs Linda Buckel (“Buckel”) and Chalet LLC (“Chalet”) (collectively, “Plaintiffs”) and defendant Eron Jokipii (“Jokipii”) entered into an oral agreement relating to real property at 140 Alley Way in Mountain View. On April 1, 2016, Plaintiffs filed the FAC against defendants Jokipii, Red Dot Investments (“Red Dot”), and Ravi Dronamraju (“Dronamraju”) (collectively, “Defendants”), asserting causes of action for:

1) Specific performance (against Jokipii and Red Dot);
2) Breach of contract (against Jokipii and Red Dot);
3) Breach of the covenant of good faith and fair dealing (against Jokipii);
4) Declaratory relief (against Jokipii and Red Dot);
5) Interference with contract (against Dronamraju and Red Dot);
6) Conspiracy to commit fraud and wrongful eviction (against Defendants);
7) Wrongful eviction (against Dronamraju and Red Dot);
8) Conversion and interference with chattels (against Dronamraju and Red Dot); and,
9) Common count (against Jokipii).

Defendants demur to each cause of action on the ground that they fail to state facts sufficient to constitute a cause of action. On February 24, 2017, counsel for Plaintiffs, Lawrence M. Scancarelli, filed a “declaration in response to demurrer to first amended complaint,” asserting that Defendants did not comply with the meet and confer requirements before filing the demurrer, that he disagreed with Defendants’ counsel on most of the issues of the intended demurrer as stated in his December 2, 2016 letter but agreed to amend his complaint to address a few of the issues, and requests that the Court grant leave to amend the FAC if it intends to sustain the demurrer.

The Court finds that Defendants’ meet and confer efforts prior to the filing of the demurrer were adequate. Further, Scancarelli’s declaration is not an opposition, and as it does not address the substance of the demurrer, Plaintiffs fail to demonstrate the FAC is capable of amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (stating that “Plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading”), quoting Cooper v. Leslie Salt Co. (1969) 70 Cal.2d 627, 636; see also Hendy v. Losse (1991) 54 Cal.3d 723, 742 (stating that “the burden is on the plaintiff… to demonstrate the manner in which the complaint might be amended”).)

Plaintiffs’ counsel is admonished that Plaintiffs are not entitled to any leave to amend a FAC as a matter of course (see Code Civ. Proc. § 472), and a failure to file an opposition to a demurrer or a failure to demonstrate how their complaint might be amended will result in the sustaining of the demurrer without leave to amend. However, as this is Defendants’ first demurrer, the demurrer to the FAC is SUSTAINED with 10 days leave to amend.

The Court will prepare the order.

Case Name: Lopez, et al. v. Gilbane Building Company, et al.
Case No.: 2015-1-CV-284269
This is a wrongful death case brought by plaintiffs Manuel Gonzalez Lopez, Leonel Gonzalez Lopez and Angela Gonzalez Bailon (collectively “Plaintiffs”) against defendant Gilbane Building Company (“Gilbane”) and nominal defendants Isidro Nuno, Jr., and Luzia Nuno. On August 13, 2013, Magda Gonzalez, Plaintiffs’ and nominal defendants’ mother, was struck and killed by a front end loader as it was backing up on the San Jose City College campus. (Def’s opposition, at pp. 1:27-2:3.) At that time, Gilbane supervised all construction on the campus. (Id. at p. 1:27-28.) Plaintiffs seek recovery for Gilbane’s negligence.

Plaintiffs move to compel further responses to request for production of documents numbers (“RPDs”) 18-50 of Set Four, RPDs 52-57, 59-64, 66-71, 73-78, 80-85, 87-92, 94-99, 101-106, 108-113, 115-120, and 122-127 of Set Five.

On January 31, 2017, the Court adopted its tentative ruling to continue the hearing on the motions to compel further responses regarding Sets Four and Five. After detailing the communications between parties’ counsel, and the parties’ assertions regarding meet and confer efforts, the Court’s order noted that “Plaintiffs do not appear to have meaningfully attempted to meet and confer.” The Court ordered the parties “to meet and confer to see if a resolution can be had without further requiring the Court’s intervention… [and i]n meeting and conferring, the parties should explicitly discuss what language is needed to satisfy the statutory requirements of Code of Civil procedure sections 2031.220 and 2031.230… [and] should also discuss Gilbane’s supplemental response and what effect, if any, it fulfilled Gilbane’s responsibilities to produce documents.”

On January 31, 2017, Plaintiffs’ counsel sent a letter attaching a proposed stipulation; however, the letter did not discuss the contents of the proposed stipulation. The proposed stipulation sought Gilbane’s concession that Plaintiffs’ motion to compel as to Set Four be granted, and that Gilbane would serve verified, further written responses without objection by February 10, 2017 by overnight delivery including certain language to conform to Code of Civil Procedure sections 2031.220 and 2031.230. On February 2, 2017, Plaintiffs’ counsel sent another letter, appending a nearly identical proposed stipulation regarding Set Five. The February 2, 2017 letter again did not discuss the contents of the proposed stipulation. On February 6, 2017, Gilbane’s counsel replied to both letters, indicating its belief that it has attempted to comply with Plaintiffs’ RPDs, and agreed to serve further supplemental responses to Sets Four and Five. On February 7, 2017, Plaintiffs received the supplemental responses to Sets Four and Five. On February 14, 2017, Plaintiffs’ counsel complained that Gilbane’s counsel had not responded to the proposals, and asserted that the further supplemental responses fail to set forth language to conform to Code of Civil Procedure sections 2031.220 and 2031.230. On February 20, 2017, Gilbane’s counsel sent a letter to Plaintiffs’ counsel addressing each of the points of the prior letter, indicating that its further supplemental responses would moot the motion, and additionally offering “to notate Bates Labels for documents which were responsive to the requests where Gilbane had an ability to respond.” On February 24, 2017, Plaintiffs’ counsel indicated that the responses were not moot, and asserted that Gilbane’s failure to accept their proposed orders to grant their motions to compel somehow violated the Court’s January 31, 2017 order to meet and confer.

Both parties have sought monetary sanctions against each other and their counsel.

The motions to compel further responses to Sets Four and Five are moot.

Plaintiffs move to compel further responses to the initial responses provided on November 4 and November 8, 2016. Plaintiffs received such further responses on February 6, 2017. Plaintiffs complain that the “new Supplemental Responses… still do not comply with Sections 2031.220 and 2031.230.” That is of no import as to whether the motion is moot. Plaintiffs moved to compel further responses; they received further responses. The adequacy of the further responses is not the subject of the instant motions. The motions to compel further responses to RPDs Sets Four and Five are OFF CALENDAR as MOOT.

Propriety of communications between counsel

On January 31, 2017 and February 2, 2017, Plaintiffs attempted to begin the meet and confer process by sending a brief letter to counsel for Gilbane, attaching stipulations for proposed orders to grant the motions. These letters did not themselves make any reasonable and good faith attempt to informally resolve each issue presented by the motions. (See Code Civ. Proc. § 2016.040.) These letters do not demonstrate an adequate attempt to meet and confer.

Regardless, counsel for Gilbane responded on February 6, 2017, indicating that it would provide further responses. Indeed, such further responses were served on February 6, 2017. As counsel for Gilbane suggested, this should have resolved the issues that were the subject of the motions to compel further responses; instead, however, Plaintiffs’ counsel continued to insist on their proposed stipulations on the now moot motions. Plaintiffs concluded their February 14, 2017 letter by requesting the identification of documents by Bates Stamp Numbers and a request for a further response that makes it clear which documents have been produced for which document demands. In response, counsel for Gilbane agreed to amend the responses to notate Bates Labels for documents which were responsive to requests where Gilbane had an ability to respond.

In response to that offer, Plaintiffs’ counsel began the February 24, 2017 letter stating that he was “shocked and dismayed,” asserting that “Gilbane has violated the Civil Discovery Act” and “has followed a deliberate litigation strategy of giving less discovery than is required by the C.C.P, thus forcing Plaintiffs to comply with the mandatory ‘meet and confer’ statute, but during that process, offering less than required by the statute as a purported ‘resolution’ of the Gilbane-created dispute.” Plaintiffs’ counsel also contended that “nothing is ‘moot’ about Plaintiffs’ pending Motions… [and t]he reason my February 14 ‘meet and confer’ letter focused on Gilbane’s Amended Responses is because the Court Order (01/30/2017) told me to do so.” Plaintiffs’ counsel concluded the letter by demanding that Gilbane “explain why you will not stipulate to my proposed Orders.”

Plaintiffs’ counsel should zealously advocate for his client. However, the Santa Clara County Bar Association Code of Professionalism requires that lawyers be civil, courteous, and accurate in communicating with adversaries. (See Santa Clara County Bar Association Code of Professionalism, § 8 (“Communications with Adversaries”); see also Santa Clara County Bar Association Code of Professionalism, § 2 (stating that “[a] lawyer should work to achieve the client’s lawful and meritorious objectives expeditiously and as economically as possible in a civil and professional manner”).) Here, the presented communications do not provide a basis for the hostility and unreasonableness displayed by Plaintiffs’ counsel. Plaintiffs’ counsel is admonished for a lack of civility in interacting with opposing counsel.

Moreover, the Santa Clara County Bar Association Code of Professionalism requires that “[a] lawyer should conduct discovery in a manner designed to ensure the timely, efficient, cost-effective, and just resolution of a dispute.” (Santa Clara County Bar Association Code of Professionalism, § 9 (“Discovery”).) “A lawyer should engage in a meaningful and good faith effort to resolve discovery disputes and should only bring discovery issues to the court for resolution after these efforts have been unsuccessful.” (Id.) Here, the motions were moot; and despite Gilbane’s counsel’s notice to Plaintiffs’ counsel that the motions were moot, and the Court’s January 31, 2017 order that Plaintiffs consider the import of the supplemental responses, Plaintiffs’ counsel nevertheless stubbornly contended that “contrary to Mr. Klauschie’s assertion on Page 2, nothing is ‘moot’ about the Plaintiffs’ pending Motions.” Had Plaintiffs’ counsel been less obstinate and more civil, he perhaps would have realized his error, and not wasted his and his opponent’s time. Plaintiffs’ counsel is thus admonished for not conducting discovery in a manner designed to ensure the efficient and cost-effective resolution of the instant dispute, and for failing to engage in a good faith effort to resolve the instant discovery dispute.

The Court did not authorize the filing of and has not considered the “FURTHER COMBINED SUPPLEMENTAL MEMORANDUM” filed by Plaintiffs on March 7, 2017, and notes that the same hostile accusations are reflected in this document. “A lawyer should avoid degrading the intelligence, ethics, morals, integrity, or personal behavior of the opposing party, [or] counsel … unless such matters are at issue in the proceeding.” (Santa Clara County Bar Association Code of Professionalism, § 7 (“Writings Submitted to the Court”).)

Plaintiffs’ request for monetary sanctions

In light of the above ruling, Plaintiffs’ requests for monetary sanctions in connection with the motions to compel further responses to RPDs Sets Four and Five and the motion to compel initial responses to RPDs Set Seven are DENIED. There are circumstances which make the imposition of the requested sanction unjust.

Gilbane’s request for monetary sanctions

Gilbane requests monetary sanctions in the amount of $3000 total against Plaintiffs and their counsel for their opposition to the two motions. Gilbane’s request for monetary sanctions is code-compliant. Plaintiffs’ counsel failed to reasonably and in good faith attempt to resolve the issues presented by their motions. (See Code Civ. Proc. § 2023.020 (stating that “[n]othwithstanding the outcome of the particular discovery motion, the court shall impose a monetary sanction ordering that any party or attorney who fails to confer as required pay the reasonable attorney’s fees incurred by anyone as a result of that conduct”).) However, inclusive in the costs listed are anticipated time and travel costs; the Court does not award anticipatory costs or travel costs when CourtCall for law and motion hearings is available. Moreover, the Court finds the amount requested as excessive. Gilbane’s request for monetary sanctions is GRANTED in the amount of $1,000 against Plaintiffs’ counsel only, whose conduct solely caused Gilbane to incur certain expenses, including attorney’s fees. Plaintiffs’ counsel shall pay the amount of $1,000.00 to counsel for Gilbane within 20 calendar days of this order.

The Court shall prepare the order.

Case Name: Melva D. Douglas v. Clear Recon Corp., et al.
Case No.: 2016-CV-301615

Motion for Judgment on the Pleadings to the Complaint by Defendants Nationstar Mortgage LLC, Mortgage Electronic Registration Systems, Inc. and HSBC Bank USA, National Association, as Trustee for the Holders of the Ellington Loan Acquisition Trust 2007-1, Mortgage – Pass Through Certificates, Series 2007-1

Factual and Procedural Background

This is a wrongful foreclosure action. Plaintiff Melva D. Douglas (“Plaintiff”) (self-represented) is the owner of real property located at 3610 Safe Haven Court in San Jose, California (“Subject Property”). (Complaint at ¶ 15.) On November 9, 2006, Plaintiff executed a written loan agreement with defendant Fremont Investment & Loan and obtained a loan in the amount of $624,750. (Id. at ¶ 18.) To secure repayment of the mortgage loan, Plaintiff executed a written deed of trust transferring the Subject Property in trust to a trustee. (Ibid.; Exhibit A.)

On September 19, 2011, defendant Mortgage Electronic Registration Systems, Inc. (“MERS”) issued an assignment of deed of trust transferring all beneficial interests under the Note and deed of trust to defendant HSBC Bank USA, National Association, as Trustee of the Holders of the Ellington Loan Acquisition Trust 2007-1, Mortgage-Pass Through Certificates, Series 2007-1 (“HSBC Bank”). (Complaint at ¶ 19; Exhibit B.) Thereafter, on May 5, 2016, defendants HSBC Bank and Nationstar Mortgage LLC (“Nationstar”) issued a substitution of trustee which allegedly unlawfully substituted defendant Clear Recon Corp (“CRC”) as the trustee under the deed of trust. (Id. at ¶ 20.)

On May 13, 2016, CRC recorded a Notice of Default to sell the Subject Property. (Complaint at ¶ 24; Exhibit D.) Plaintiff alleges that the Notice of Default is false as it fails to credit her for payments made towards the mortgage and thus overstates the amount of the default. (Ibid.) Plaintiff further alleges that, prior to recording the Notice of Default, neither the loan servicer nor the lender contacted her in person or by telephone to discuss options for avoiding foreclosure as required by the California Homeowner Bill of Rights (“HBOR”). (Ibid.)

On August 18, 2016, CRC recorded a Notice of Trustee’s Sale. (Complaint at ¶ 25; Exhibit F.) Plaintiff alleges that the Notice of Trustee’s Sale is false as it fails to credit her for payments made towards the mortgage and thus overstates the amount of the default. (Ibid.) Plaintiff further alleges that, prior to recording the Notice of Default, neither the loan servicer nor the lender contacted her in person or by telephone to discuss options of avoiding foreclosure as required by the HBOR. (Ibid.) Plaintiff asserts that defendants cannot show proper receipt, possession, transfer, negotiations, assignment and ownership of the original promissory note and deed of trust, resulting in imperfect security interests and claims. (Id. at ¶ 26.)
On October 25, 2016, Plaintiff filed the operative complaint setting forth causes of action for: (1) violation of the HBOR; (2) violation of Civil Code § 2923.5; (3) negligence; (4) constructive fraud; (5) intentional infliction of emotional distress; (6) slander of title; (7) quiet title; (8) declaratory relief; (9) violation of California Business and Professions Code § 17200 et seq.; and (10) fraud in the concealment.

On December 22, 2016, defendants Nationstar, MERS, and HSBC Bank (collectively, “Defendants”) filed an answer to the complaint alleging various affirmative defenses.

Currently before the Court is Defendants’ motion for judgment on the pleadings to the complaint on the ground that each claim fails to state a cause of action. (Code Civ. Proc., § 438.) Defendants submitted a request for judicial notice in conjunction with the motion. Plaintiff filed written opposition. Defendants filed reply papers. No trial date has been set.

Motion for Judgment on the Pleadings

Defendants argue that the first through tenth causes of action fail to state a claim.

Untimely Opposition

In reply, Defendants argue that the Court should strike Plaintiff’s opposition as it was untimely served. Code of Civil Procedure 1005, subdivision (b) requires all opposing papers to be filed and served at least nine court days before the hearing. No paper may be rejected for filing on the ground that it was untimely submitted for filing. (Cal. Rules of Court, rule 3.1300(d).) If the Court, in its discretion, refuses to consider a late filed paper, the minutes or order must indicate. (Ibid.)

Here, the motion for judgment on the pleadings is scheduled for hearing on April 13, 2017. Thus, any opposition papers must be filed and served no later than March 30, 2017. According to the proof of service, Plaintiff timely served her opposition papers by mail on March 23, 2017. In reply, Defendants contend that the opposition papers were served on April 3, 2017. In support, Defendants attach a photocopy of the front of an envelope marked “Priority Mail” with a postage date of April 3, 2017. (See Exhibit A to the Reply.) However, in reviewing the envelope, the Court cannot determine if it is connected with the service of Plaintiff’s opposition. For example, the envelope does not even identify Plaintiff or include her return address. Thus, based on the proof of service, the Court finds that the opposition was timely served.

Even if the opposition was untimely, Defendants did not suffer any prejudice as they timely filed and served reply papers addressing the opposition. Therefore, the Court will consider the moving papers, the opposition, and the reply brief in addressing the motion for judgment on the pleadings.

Request for Judicial Notice

In support of the motion, Defendants request judicial notice of the following recorded documents: (1) Notice of Default recorded on May 7, 2015 as document number 22943487 (Exhibit 1); (2) Rescission of Notice of Default recorded on November 9, 2015 as document number 2318282 (Exhibit 2); and (3) Notice of Default recorded on May 18, 2016 as document number 23308383 (Exhibit 3).

“Judicial notice is the recognition and acceptance by the court, for use by the trier of fact or by the court, of the existence of a matter of law or fact that is relevant to an issue in the action without requiring formal proof of the matter.” (Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117.) For example, judicial notice may be taken of “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code, § 452, subd. (h).)

“[C]ourts have taken judicial notice of the existence and recordation of real property records, including deeds of trust, when the authenticity of the documents is not challenged. [Citations.] The official act of recordation and the common use of a notary public in the execution of such documents assure their reliability, and the maintenance of the documents in the recorder’s office makes their existence and text capable of ready confirmation, thereby placing such documents beyond reasonable dispute.” (See Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265 [disapproved on other grounds in Yvanova v. New Century Morg. Corp. (2016) 62 Cal.4th 919].) Thus, “a court may take judicial notice of the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document’s legally operative language, assuming there is no genuine dispute regarding the document’s authenticity.” (Id. at p. 265.)

Here, Exhibits 1 through 3 constitute real property documents recorded in Santa Clara County and appear reasonably relevant to issues raised by the motion.

Therefore, the request for judicial notice is GRANTED.

Legal Standard

“Judgment on the pleadings is akin to a demurrer and is properly granted only if the complaint does not state facts sufficient to state a cause of action against that defendant. The grounds for the motion must appear on the face of the complaint, and in any matters subject to judicial notice. The court accepts as true all material factual allegations, giving them a liberal construction, but it does not consider conclusions of fact or law, opinions, speculation, or allegations contrary to law or judicially noticed facts.” (Shea Homes Limited Partnership v. County of Alameda (2003) 110 Cal.App.4th 1246, 1254 [internal citations omitted].)

First Cause of Action: Violation of HBOR

The first cause of action is identified as a violation of the HBOR and appears to be based on violations of Civil Code sections 2923.55 and 2923.5.

Civil Code section 2923.55 requires the foreclosing entity to attempt to contact a borrower to discuss foreclosure prevention alternatives before recording a notice of default. (Civ. Code, § 2923.55, subds. (a)-(b).) If the party pursuing foreclosure thereafter records a notice of default, the notice must be accompanied by a declaration of compliance confirming it first attempted to contact the borrower in compliance with the statute. (Civ. Code, § 2923.55, subd. (c).) Similarly, Civil Code section 2923.5 requires a “mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent” to “contact the borrower in person or by telephone in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure” before recording a notice of default. (Civ. Code, § 2923.5.)

Plaintiff alleges that Defendants violated Civil Code sections 2923.55 and 2923.5 by failing to contact her and discuss foreclosure alternatives prior to filing a Notice of Default. (See Complaint at ¶¶ 1, 2, 9, 10, 24, 25, 29, 31, 33, 34, 35, 36, and 37.) To rebut these allegations, Defendants provide the Notice of Default and accompanying declaration establishing compliance with Civil Code section 2923.55. (See Request for Judicial Notice at Exhibit 3.) Defendants did not submit a declaration showing compliance with Civil Code section 2923.5. Despite these documents, the Court must accept the truth of Plaintiff’s allegations for purposes of this motion. (See Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 515 [“A trial court’s determination of a motion for judgment on the pleadings accepts as true the factual allegations that the plaintiff makes.”].) The allegations here raise a factual issue as to whether Defendants complied with sections 2923.55 and 2923.5 which cannot be resolved on a motion for judgment on the pleadings. (See Skov v. U.S. Bank (2012) 207 Cal.App.4th 690, 696-697 [assuming the truth of the plaintiff’s allegations, a disputed issue of compliance with Civ. Code, § 2923.5 cannot be resolved at the demurrer stage]; see also Barrionuevo v. Chase Bank, N.A. (N.D. Cal. 2012) 885 F.Supp.2d 964, 976-977 [borrower’s allegation that bank did not contact them before filing the notice of default was sufficient to state a violation of Civ. Code, § 2923.5, despite judicial notice taken of declaration in notice of default that asserted statutory compliance]; Argueta v. J.P. Morgan Chase (E.D. Cal. 2011) 787 F.Supp.2d 1099, 1107 [despite judicial notice of Notice of Default including declaration of compliance with Civ. Code, § 2923.5, plaintiff’s allegations were sufficient to preclude dismissal where plaintiffs alleged that they did not receive phone calls, phone messages, or letters before the Notice of Default was recorded].)

Alternatively, Defendants contend that Plaintiff fails to allege that she suffered any prejudice as a result of violations under Civil Code sections 2923.55 and 2923.5. (See Knapp v. Doherty (2004) 123 Cal.App.4th 76, 94 [procedural irregularity in service of the sale notice did not cause any injury to the borrowers]; see also Coburn v. Bank of New York Mellon, N.A. (E.D. Cal. 2011) 2011 WL 1103470 at p. *6 [district court dismissed section 2923.5 claim in part because plaintiff failed to allege prejudice or how foreclosure would have been averted but for alleged deficiencies].) Plaintiff fails to address the merits of this argument and the legal authorities in her opposition.

Therefore, the motion for judgment on the pleadings to the first cause of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND for failure to state a claim. (See Virginia G. v. ABC Unified School Dist. (1993) 15 Cal.App.4th 1848, 1852 [on a motion for judgment on the pleadings, leave to amend should be granted if there is any reasonable possibility that the plaintiff can state a good cause of action].)

Second Cause of Action: Violation of Civil Code § 2923.5

The second cause of action is a claim for violation of Civil Code section 2923.5. The Court already considered this claim in addressing the first cause of action for violation of the HBOR. For the reasons stated above, the motion for judgment on the pleadings to the second cause of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND for failure to state a claim.

Third Cause of Action: Negligence

With respect to the third cause of action, Defendants argue that Plaintiff fails to allege a duty of care, causation, or damages to support negligence.

“To state a cause of action for negligence, a plaintiff must allege (1) the defendant owed the plaintiff a duty of care, (2) the defendant breached that duty, and (3) the breach proximately caused the plaintiff’s damages or injuries. [Citation.] Whether a duty of care exists is a question of law to be determined on a case-by-case basis.” (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 62.) “[A]s a general rule, a financial institution owes no duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money.” (Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1096 (Nymark).) “The principle that a financial institution owes no duty to a borrower has been extended to loan servicers as well.” (Griffin v. Green Tree Servicing, LLC (C.D. Cal. 2015) 166 F.Supp.3d 1030, 1049.)

Here, Plaintiff alleges that Defendants, acting as Plaintiff’s lender/or loan servicers, had a duty to exercise reasonable care and skill to maintain proper and accurate loan records and to discharge and fulfill the other incidents attendant to the maintenance, accounting and servicing of loan records, including, but not limited to, accurate crediting of payments made by Plaintiff. (Complaint at ¶ 50.) These activities are sufficiently connected with money lending that they do not give rise to a duty of care. (See Nymark, supra, 231 Cal.App.3d at p. 1096; see also Wagner v. Benson (1980) 101 Cal.App.3d 27, 34-35 [lender’s liability to a borrower for negligence arises only when the lender actively participates in the financed enterprise beyond the domain of the usual money lender].) Even if there was a duty of care, Defendants claim that there are no allegations establishing causation or damages. Plaintiff fails to substantively address the merits of these arguments in her opposition.

Therefore, the motion for judgment on the pleadings to the third cause of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND for failure to state a claim.

Fourth Cause of Action: Constructive Fraud

The fourth cause of action is a claim for constructive fraud. “The elements of the cause of action for constructive fraud are: (1) fiduciary relationship; (2) nondisclosure (breach of fiduciary duty); (3) intent to deceive, and (4) reliance and resulting injury (causation).” (Younan v. Equifax Inc. (1980) 111 Cal.App.3d 498, 516, fn. 14.) Constructive fraud depends on the existence of a fiduciary relationship of some kind, and this must be alleged. (Id. at pp. 516-517.)

“Fraud must be pleaded with specificity rather than with general and conclusory allegations. The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made.” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793 [citation and quotation marks omitted] (West).)

Courts enforce the specificity requirement in consideration of its two purposes. (West, supra, 214 Cal.App.4th at p. 793.) The first purpose is to give notice to the defendant with sufficiently definite charges that the defendant can meet them. (Ibid.) The second is to permit a court to weed out meritless fraud claims on the basis of the pleadings; thus, the pleading should be sufficient to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud. (Ibid.) “Constructive fraud, like actual fraud, must be pleaded with specificity.” (Knox v. Dean (2012) 205 Cal.App.4th 417, 434.)

As a threshold matter, the Court notes that Plaintiff has not alleged facts establishing a fiduciary relationship with Defendants to support constructive fraud. Furthermore, Defendants correctly point out that Plaintiff has not pled constructive fraud with the required specificity to state a cause of action. Instead, Plaintiff vaguely alleges that Defendants made false representations, concealments, and non-disclosures which Plaintiff relied upon causing her to suffer damage. (Complaint at ¶ 49.) Such allegations do not satisfy the heightened pleading standard for a fraud claim. Nor does Plaintiff address the specificity argument in her opposition to the motion.

Accordingly, the motion for judgment on the pleadings to the fourth cause of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND for failure to state a claim.

Fifth Cause of Action: Intentional Infliction of Emotional Distress

The fifth cause of action is a claim for intentional infliction of emotional distress (“IIED”). To state a claim for IIED, a plaintiff must allege: (1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff’s suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant’s outrageous conduct. (Hughes v. Pair (2009) 46 Cal.4th 1035, 1050.)

Defendants argue that Plaintiff fails to allege facts showing that they caused her extreme and outrageous conduct. Recovery for emotional distress requires a showing of outrageous conduct which is so extreme as to exceed all bounds of that usually tolerated in a civilized community. (Yu v. Signet Bank/Virginia (1999) 69 Cal.App.4th 1377, 1397-1398 (Yu).) The defendant must have engaged in ‘conduct intended to inflict injury or engaged in with the realization that injury will result.’ [Citation.]” (Christensen v. Super. Ct. (1991) 54 Cal.3d 868, 903.) While the outrageousness of a defendant’s conduct normally presents an issue of fact to be determined by the trier of fact, the court may determine in the first instance, whether the defendant’s conduct may reasonably be regarded as so extreme and outrageous as to permit recovery. (Trerice v. Blue Cross of California (1989) 209 Cal.App.3d 878, 883 (Trerice).)

Here, Plaintiff alleges that Defendants’ allegedly fraudulent attempt to foreclose on the Subject Property was “so outrageous and extreme that it exceeds all bounds which is usually tolerated in a civilized society.” (Complaint at ¶ 58.) Yet, Plaintiff alleges no facts, aside from the foreclosure itself, as the basis for this claim. The act of foreclosure, absent other circumstances, is not the kind of extreme conduct that supports an intentional infliction of emotional distress claim. (Quinteros v. Aurora Loan Services (E.D. Cal. 2010) 740 F.Supp.2d 1163, 1172.) Also, as the moving papers point out, Defendants cannot be subject to liability when they have merely pursued their own economic interests in the context of asserting their rights. (Yu, supra, at p. 1398; Trerice, supra, 209 Cal.App.3d at p. 885.) Furthermore, Plaintiff does not allege Defendants threatened, insulted or harassed her. (See Kruse v. Bank of America (1988) 201 Cal.App.3d 38, 67-68 [collecting examples of outrageous conduct].) Plaintiff fails to address this argument in opposition and thus fails to state a viable claim for IIED.

Therefore, the motion for judgment on the pleadings to the fifth cause of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND for failure to state a claim.

Sixth Cause of Action: Slander of Title

The sixth cause of action is a claim for slander of title. Slander of title occurs when there is an unprivileged publication of a false statement which disparages title to the property and causes pecuniary loss. (Stalberg v. Western Title Ins. Co. (1994) 27 Cal.App.4th 925, 929.) Elements of slander of title are: (1) a publication, (2) which is without privilege or justification, (3) which is false, and (4) which causes direct and immediate pecuniary loss. (Manhattan Loft, LLC v. Mercury Liquors, Inc. (2009) 173 Cal.App.4th 1040, 1051.)

Defendants argue that the slander of title claim is barred by the common interest privilege. Civil Code section 2924, subdivision (d) provides in pertinent part: “All of the following shall constitute privileged communications pursuant to Section 47: [¶] (1) The mailing, publication, and delivery of notices as required by this section. [¶] (2) Performance of the procedures set forth in this article.” The privilege afforded under Civil Code section 2924 is the qualified common interest privilege of Civil Code section 47, subdivision (c), and applies to “the statutorily required mailing, publication, and delivery of notices in nonjudicial foreclosure, and the performance of statutory nonjudicial foreclosure procedures…” (Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 333.) The common interest privilege does not apply if the defendant acted with actual malice, i.e., motivated by hatred or ill will, or in reckless disregard of the plaintiff’s rights. (Id. at p. 336.) The privilege applies to all torts except malicious prosecution. (Ibid.)

Here, Plaintiff’s slander of title claim is based in part on the recording of foreclosure notices including the Notice of Default, Notice of Trustee’s Sale, and Trustee’s Deed. (Complaint at ¶ 62.) Such notices are subject to the common interest privilege unless Plaintiff can allege facts establishing actual malice. Plaintiff has alleged only conclusions but not facts demonstrating actual malice to overcome the privilege.

Plaintiff also alleges that Defendants have not perfected any claim of title or security interest in the Subject Property. (Complaint at ¶ 60.) However, this allegation is immaterial as it fails to establish the elements for a slander of title cause of action.

Accordingly, the motion for judgment on the pleadings to the sixth cause of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND for failure to state a claim.

Seventh Cause of Action: Quiet Title

The seventh cause of action is a claim for quiet title. Quiet title claims are governed by California Code of Civil Procedure § 761.020, which states that a plaintiff must set forth the following five elements in a “verified complaint:” (1) a description of the property, both legal description and street address; (2) the title of the plaintiff, and the basis for that title; (3) the adverse claims to the plaintiff’s title; (4) the date as of which the determination is sought; and (5) a prayer for the determination of the plaintiff’s title against the adverse claims. (Code Civ. Proc., § 761.020(a)-(e).)

Here, Plaintiff has not filed a verified complaint nor has she alleged sufficient facts addressing the elements of a quiet title claim. Furthermore, “[i]t is settled in California that a mortgagor cannot quiet his title against the mortgagee without paying the debt secured.” (Shimpones v. Stickney (1934) 219 Cal. 637, 649; see also Karlsen v. American Savings & Loan Assn. (1971) 15 Cal.App.3d 112, 117 [stating that “[a] valid and viable tender of payment of the indebtedness owing is essential to an action to cancel a voidable sale under a deed of trust”]; Arnolds Management Corp. v. Eischen (1984) 158 Cal.App.3d 575, 577-582; see also FPCI Re-Hab 01 v. E & G Investments, Ltd. (1989) 207 Cal.App.3d 1018, 1021 [requiring “tender [of] the full amount owing”].) Plaintiff has not alleged facts showing that she tendered the amount due on her loan.

Consequently, the motion for judgment on the pleadings to the seventh cause of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND for failure to state a claim.

Eighth Cause of Action: Declaratory Relief

The eighth cause of action is a claim for declaratory relief. “Any person…who desires a declaration of his rights or duties with respect to another…may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action in the superior court…” (Code Civ. Proc., § 1060.) “Thus, declaratory relief is appropriate only where there is an actual controversy, not simply an abstract or academic dispute.” (Newland v. Kizer (1989) 209 Cal.App.3d 647, 657.) For purposes of declaratory relief, an actual controversy is one which admits of definitive and conclusive relief by judgment within the field of judicial administration, as distinguished from an advisory opinion upon a particular or hypothetical state of facts. (Ibid.) The judgment must decree, not suggest, what the parties may or may not do. (Ibid.)

Defendants argue that Plaintiff’s claim for declaratory relief is not cognizable because it is wholly derivative of her other claims, which are defective. If a plaintiff fails to state sufficient facts with respect to a claim in his or her pleading and a request for declaratory relief is wholly derivative of that claim, a court may properly sustain a demurrer to the cause of action for declaratory relief. (See Ball v. FleetBoston Financial Corp. (2008) 164 Cal.App.4th 794, 800 [citing Ochs v. PacifiCare of California (2004) 115 Cal.App.4th 782, 794].)

Here, Plaintiff alleges that an actual controversy exists between herself and Defendants concerning their respective rights and duties under the Note and Trust Deed. (Complaint at ¶ 79.) Thus, Plaintiff seeks a determination of the validity of the Trust Deed and Notice of Default and whether any defendant has authority to foreclose on the Subject Property. (Id. at ¶¶ 83-85.) These allegations are incorporated in Plaintiff’s prior claims which fail to state a cause of action to overcome demurrer. Therefore, the claim for declaratory relief is wholly derivative of these prior claims and thus fails to state a cause of action.

Therefore, the motion for judgment on the pleadings to the eighth cause of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND for failure to state a claim.

Ninth Cause of Action: Violation of Business and Professions Code § 17200 et seq.

The motion for judgment on the pleadings to the ninth cause of action [violation of Business and Professions Code § 17200 et seq.] is GRANTED WITH 30 DAYS’ LEAVE TO AMEND for failure to state a claim. The UCL claim is based on Defendants’ alleged misconduct in the prior causes of action. (See Complaint at ¶ 92.) Since Plaintiff’s other claims fail to state a cause of action, the UCL claim also fails. (See Krantz v. BT Visual Images, LLC (2001) 89 Cal.App.4th 164, 178 [the viability of a UCL claim stands or falls with the antecedent substantive causes of action].)

Tenth Cause of Action: Fraudulent Concealment

The tenth cause of action is a claim for fraudulent concealment. “The required elements for fraudulent concealment are: (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would not have acted as he or she did if he or she had known of the concealed or suppressed fact; and (5) plaintiff sustained damage as a result of the concealment or suppression of the fact.” (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 606.)

“To state a cause of action for fraudulent concealment, the defendant must have been under a duty to disclose some fact to the plaintiff.” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 745.) Defendants persuasively argue that Plaintiff fails to allege facts showing that they owed her a duty to disclose to support a claim for fraudulent concealment. Plaintiff fails to address this argument in her opposition.

Therefore, the motion for judgment on the pleadings to the tenth cause of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND for failure to state a claim.

The Court will prepare the Order.

Case Name: Jennifer Blomquist and Michael Blomquist v. Santa Clara County, et al.
Case No.: 2016-CV-304201

Demurrers to the First Amended Verified Petition for Writ of Mandate by Respondents Santa Clara County, Larry Stone, Kirk Girard, Mike Wasserman, Robert Eastwood, Bill Shoe, Darrell Wong, Carolyn Walsh, Mac Bala, Mark Ruffing, Michael Rossi, Shelly Theis, and Darrin Lee and Real Party In Interest San Jose Water Company

Factual and Procedural Background

This action arises from the installation of a new water tank located adjacent to the property of petitioners Jennifer Blomquist and Micheal Blomquist (collectively, “Petitioners”). Petitioners allege that approval of the new water tank constitutes a takings per se and has diminished the value of their property. (See First Amended Verified Petition for Writ of Mandate [“First Amended Petition”] at p. 2.) Petitioners claim that respondents failed to follow Constitutional due process or basic ministerial tasks in approving the new water tank and other projects impacting their property. (Id. at p. 18.)

On January 30, 2017, Petitioners filed a First Amended Petition, now the operative pleading.

The following motions are presently before the Court: (1) a demurrer to the First Amended Petition by respondents Santa Clara County, Larry Stone, Kirk Girard, Mike Wasserman, Robert Eastwood, Bill Shoe, Darrell Wong, Carolyn Walsh, Mac Bala, Mark Ruffing, Michael Rossi, Shelly Theis, and Darrin Lee (collectively, “Respondents”); and (2) a demurrer to the First Amended Petition by real party in interest San Jose Water Company (“SJW”).

Respondents’ Demurrer to the First Amended Petition

Untimely Opposition

Petitioners filed written opposition and a request for judicial notice, on April 4, 2017. The opposition to the demurrers was untimely. Code of Civil Procedure 1005, subdivision (b) requires all opposing papers to be filed and served at least nine court days before the hearing. No paper may be rejected for filing on the ground that it was untimely submitted for filing. (Cal. Rules of Court, rule 3.1300(d).) If the Court, in its discretion, refuses to consider a late filed paper, the minutes or order must indicate. (Ibid.)

Here, the demurrers are scheduled for hearing on April 13, 2017. Thus, any opposition papers must be filed and served no later than March 30, 2017. Petitioners untimely filed and served their opposition on April 4, 2017. Nevertheless, the moving parties did not suffer any prejudice from this untimely opposition as they were able to timely file and serve reply papers addressing the opposition. Thus, the Court will consider the merits of the April 4, 2017 opposition. Petitioners are admonished to comply court rules and procedures with respect to future filings.

SJW filed reply papers. Thereafter, on April 7, 2017 Petitioners filed a sur-reply. The Court declines to consider the sur-reply as Petitioners were not authorized to file it.

However, on April 11, 2017, Petitioners filed yet another pleading in opposition, an opposing memorandum to the demurrers. As noted above, Code of Civil Procedure section 1005, subdivision (b) requires all opposing papers to be filed and served at least nine court days before the hearing. Thus, any opposition was required to be filed and served no later than March 30, 2017. Here, Petitioners filed and served another untimely opposing memorandum a mere two days before the hearing on the motions. Furthermore, Petitioners are not exempt from compliance with the Code of Civil Procedure by virtue of their self-representation status. Under the law, a party may choose to act as his or her own attorney. (Paradise v. Nowlin (1948) 86 Cal.App.2d 897, 898; Gray v. Justice’s Court (1937) 18 Cal.App.2d 420, 423.) “[S]uch a party is to be treated like any other party and is entitled to the same, but no greater consideration than other litigants and attorneys. [Citation.]” (Barton v. New United Motor Manufacturing, Inc. (1996) 43 Cal.App.4th 1200, 1210.) Thus, as is the case with attorneys, self-represented litigants must follow correct rules of procedure. (Kabbe v. Miller (1990) 226 Cal.App.3d 93, 98; Bistawros v. Greenberg (1987) 189 Cal.App.3d 189, 193 [self-represented party “held to the same restrictive procedural rules as an attorney”].)

Therefore, the Court in its discretion declines to consider the second untimely opposing memorandum filed April 11, 2017 in addressing the demurrers. The Court finds that Respondents are prejudiced by this late filing, as they have had no reasonable opportunity to reply to these papers.

Request for Judicial Notice

In opposition, Petitioners request judicial notice of a number of documents including declarations, emails, and complaints from other actions. (See Exhibits A through M.) “Judicial notice is the recognition and acceptance by the court, for use by the trier of fact or by the court, of the existence of a matter of law or fact that is relevant to an issue in the action without requiring formal proof of the matter.” (Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117.)
Here, Petitioners fail to explain how any of these exhibits are relevant to addressing issues raised by the demurrers. (See Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063 [a court may decline to judicially notice material that has no bearing on the limited legal question at hand], overruled on other grounds in In re Tobacco Cases II (2007) 41 Cal.4th 1257, 1273-1276.)

Therefore, the request for judicial notice is DENIED.

Legal Standard

“In reviewing the sufficiency of a complaint against a general demurer, we are guided by long settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. We also consider matters which may be judicially noticed.’” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 (Blank).) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213–214.)

“The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. The court does not, however, assume the truth of contentions, deductions or conclusions of law. … [I]t is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 850.)

Analysis

Respondents demur to the First Amended Petition on the grounds of uncertainty and failure to state a cause of action. (See Code Civ. Proc., § 430.10, subds. (e), (f). More specifically, Respondents argue that: (1) the First Amended Petition is uncertain and violates California Rules of Court, rule 2.112 ; (2) public entities and their employees are immune from liability for injuries caused by the issuance, denial, suspension, or revocation of any permit, and the decision to or refusal to prosecute a public nuisance action; (3) Petitioners fail to state a claim against Respondents’ counsel; and (4) Petitioners fail to comply with the Government Claims Act (see J.J. v. County of San Diego (2014) 223 Cal.App.4th 1214, 1219 [the failure to timely present a claim to the public entity bars the claimant from filing a lawsuit against the public entity]).

In opposition, Petitioners did not file a written memorandum of points and authorities addressing the arguments raised on demurrer. Rather, petitioner Michael Blomquist submitted his own declaration under penalty of perjury. However, courts cannot accept declarations on demurrer which consider only the pleaded facts of the complaint and any judicially noticed documents. (See Blank, supra, 39 Cal.3d at p. 318; see also Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 [court cannot consider substance of declarations for purposes of demurrer].) Even if the Court were to consider the declaration, it fails to address any of the arguments or legal authorities raised on demurrer. Instead, the declaration refers to a meet and confer conference call with counsel for Respondents and SJW as well as statements made by Respondents’ counsel to the Court. None of these points are sufficient to overcome the arguments raised on demurrer which appear to be well-taken.

Therefore, Respondents’ demurrer to the First Amended Petition is SUSTAINED WITHOUT LEAVE TO AMEND on the grounds of uncertainty and failure to state a cause of action. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (Goodman) [plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading]; see also Hendy v. Losse (1991) 54 Cal.3d 723, 742 (Hendy) [“the burden is on the plaintiff… to demonstrate the manner in which the complaint might be amended”].)

SJW’s Demurrer to the First Amended Petition

SJW demurs to the First Amended Petition on the ground that it is uncertain. (Code Civ. Proc., § 430.10, subd. (f).) As stated above, the declaration filed in opposition fails to substantively address the arguments raised on demurrer which appear to be well-taken.

Therefore, SJW’s demurrer to the First Amended Petition is SUSTAINED WITHOUT LEAVE TO AMEND on the ground of uncertainty. (See Goodman, supra, 18 Cal.3d at p. 349 [plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading]; see also Hendy, supra, 54 Cal.3d at p. 742 [“the burden is on the plaintiff… to demonstrate the manner in which the complaint might be amended”].)

After Respondents have served notice of entry of the written order on the Petitioners, Respondents shall submit a proposed judgment either approved as to form or with a showing of compliance with Rules of Court, Rule 3.1312.

The Court will prepare the Order.

Case Name: Actian Corporation vs Enziime, LLC, et al.
Case No.: 16CV292128

Plaintiff filed a motion for terminating sanctions against Defendant Enziime, LLC following the Court’s grant of orders to compel responses to discovery, on the grounds that Plaintiffs did not serve responses to the discovery within the time period ordered.
The Court ordered that Plaintiffs serve responses to discovery within fifteen days after the hearing. However, the order was not served on Defendant until December 30, 2016, and was not served at the address of record found in the Court file for Defendant, but instead on the Corporate agent for service of process. Pleadings must be served on the party at the address of record, in this case as listed on the substitution of attorneys. (CCP 1013(a).) The motion was served properly on the address of record for Defendant, but not the notice of order which was critical for a party that did not appear at the hearing. The failure to properly serve the order alone is fatal to this motion.

Two facts are prerequisite to the imposition of non-monetary sanctions: (1) there must be a failure to comply with a court order; and (2) the failure must be willful. (See Liberty Mutual Fire Ins. Co. v. LcL Administrators, Inc. (2008) 163 Cal.App.4th 1093, 1102). Even where these facts are present, however, the trial court has broad discretion in imposing discovery sanctions. (See Reedy v. Bussell (2007) 148 Cal.App.4th 1272, 1293). In exercising this discretion, the court should consider both the conduct being sanctioned and its effect on the party seeking discovery. (See Doppes v. Bentley Motors, Inc. (2009) 174 Cal.App.4th 967, 992).

The trial court should “attempt to tailor the sanction to the harm caused by the withheld discovery.” Id. The Court’s discretionary authority in determining the appropriate sanction is limited by the principle that discovery sanctions are meant to be remedial rather than punitive. (See Kahn v. Kahn (1977) 68 Cal.App.3d 372, 381). The discretionary imposition of a sanction is proper when it is suitable and necessary to enable the party seeking discovery to obtain the objects of the discovery sought, but not when it places the prevailing party in a better position than if discovery had been obtained. (See Wilson v. Jefferson (1985) 163 Cal.App.3d 952, 958).

Finally, non-monetary sanctions are imposed upon incremental bases depending upon the severity of the violation. (See Doppes, supra, 174 Cal.App.4th at 992). “If a lesser sanction fails to curb misuse, a greater sanction is warranted: continuing misuses of the discovery process warrant incrementally harsher sanctions until the sanction is reached that will curb the abuse.” Id. Here, Plaintiff went straight to terminating sanctions, without otherwise establishing or considering whether other sanctions would first be appropriate.

Ordering terminating sanctions is not an action this Court can undertake without careful consideration; and only in circumstances where a violation is willful, preceded by a history of abuse and the evidence shows that a less severe sanction would not produce compliance with the discovery rules. (See Van Sickle v. Gilbert (2011) 196 Cal. App. 4th 1495, 1516; Sec. Pac. Nat. Bank v. Bradley (1992) 4 Cal. App. 4th 89 (Overturning trial court on error for granting terminating sanctions where defendant’s failure to file separate responsive statement was not willful)). “[T]erminating sanctions are to be used sparingly, only when the trial court concludes that lesser sanctions would not bring about the compliance of the offending party.” (R.S. Creative, Inc. v. Creative Cotton, Ltd. (1999) 75 Cal.App.4th 486, 496.)

Accordingly, the motion for terminating sanctions is DENIED. Although Plaintiff also seeks issue or evidence sanctions, such a motion must specify the issues, facts or evidence that should be determined against the party. (CCP 2023.030(b).) Plaintiff’s motion fails to do that, and so is DENIED.

Case Name: Jesus Chavez v. Guess? Retail, Inc., et al.
Case No.: 16-CV-300341

This is a putative wage and hour class action by an employee of defendant Guess? Retail, Inc. Before the Court is defendant’s petition to compel arbitration and stay the action, which plaintiff opposes.

I. Factual and Procedural Background

According to the complaint, plaintiff was a non-exempt employee at defendant’s Gilroy store until December of 2015. (Complaint, ¶ 8.) He alleges that defendant had a policy of failing to pay minimum and overtime wages and provide required meal and rest breaks, as well as payroll documents, to its employees. (Id. at ¶ 20.) On September 26, 2016, plaintiff filed his complaint, asserting five causes of action for Labor Code violations (the first through fifth causes of action), a claim under the Private Attorneys General Act (“PAGA”) (the sixth cause of action), and a claim for violation of Business & Professions Code section 17200 (the seventh cause of action). As described in his opposition papers, plaintiff claims that defendant improperly required employees to undergo security checks while off the clock.

II. Legal Standard

Code of Civil Procedure section 1281.2 provides that a court must grant a petition to compel arbitration “if it determines that an agreement to arbitrate … exists, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement [or] (c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party … and there is a possibility of conflicting rulings ….” (Code Civ. Proc., § 1281.2; see also 9 U.S.C. § 3 [the court must grant a motion to compel arbitration if any suit is brought upon “any issue referable to arbitration under an agreement for such arbitration”].)

The moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. (See Cruise v. Kroger Co. (2015) 233 Cal.App.4th 390, 396 [under both federal and state law, “the threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate”]; Rosenthal v. Great Western Fin’l Securities Corp. (1996) 14 Cal.4th 394, 413 [moving party’s burden is a preponderance of the evidence].) The burden then shifts to the resisting party to prove a ground for denial. (Rosenthal v. Great Western Fin’l Securities Corp., supra, 14 Cal.4th at p. 413.)

If the court orders arbitration “of a controversy which is an issue involved in [the] action or proceeding pending before [it], the court … shall, upon motion of a party …, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.) “If the issue which is the controversy subject to arbitration is severable, the stay may be with respect to that issue only.” (Ibid.)

III. Arbitration Agreement

Here, it is undisputed that plaintiff signed an arbitration agreement in connection with his employment that covers plaintiff’s claim in this action, other than his PAGA claim (which is discussed below). (See Decl. of Thomas Andreasen ISO Petition, Ex. A, p. 1 [agreement encompasses any claim related to “(a) any contract of employment between the parties; or (b) the termination of the employment relationship between the parties; or (c) any allegation of unlawful discrimination, retaliation or harassment,” including specified claims such as “[c]laims for wages or other compensation due”].) However, plaintiff argues that the agreement is an illusory contract. Plaintiff also contends that the agreement is both substantively and procedurally unconscionable.

A. Existence of Agreement to Arbitrate

Because arbitration is a contractual matter, a party who has not agreed to arbitrate a controversy cannot be compelled to do so. (Harris v. Tap Worldwide, LLC (2016) 248 Cal.App.4th 373, 380.) While there is a strong public policy favoring contractual arbitration, that policy does not extend to parties who have not agreed to arbitrate; absent “a clear agreement” to do so, courts will not infer that the right to a jury trial has been waived. (Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 787, 790.) An agreement to arbitrate may be express or implied so long as it is written. (Harris v. Tap Worldwide, LLC, supra, 248 Cal.App.4th at p. 383.)

Here, it is undisputed that plaintiff executed a specific, written “Agreement to Arbitrate” any employment-related disputes at JAMS, which includes a class action waiver. (See Andreasen Decl., Ex. A, p. 2.)

Plaintiff contends that the agreement is illusory because it states that it is “not a contract of employment, and shall not be construed to create any right to continued employment of Associate with the Company ….” But this disclaimer has no bearing on whether the parties entered a contract with respect to arbitration, and other language found throughout the agreement makes it abundantly clear they did. (See Sanchez v. Carmax Auto Superstores, LLC (2014) 224. Cal.App.4th 298, 401 [rejecting an argument identical to plaintiff’s].) Unlike in the cases plaintiff cites, the agreement here took the form of a standalone contract rather than a provision in an employee handbook and was clearly consented to by plaintiff.

In addition, plaintiff argues that there was no consideration for the agreement because it states that “Associate acknowledges and represents that this Agreement is not in consideration of Associate’s employment with the Company, and that execution of this Agreement is not and was not a condition of Associate’s employment ….” Again, this separation of the arbitration agreement from the underlying employment agreement does not invalidate the arbitration agreement. “[T]he mutual promises of the parties” comprise adequate consideration for the agreement. (Fireman’s Fund Ins. Co. v. Sizzler USA Real Property, Inc. (2008) 169 Cal.App.4th 415, 421, citing 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 212, p. 247.)
Defendant accordingly meets its burden to show there is an agreement to arbitrate plaintiff’s non-PAGA claims.

B. Unconscionability

In Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, the California Supreme Court summarized the rules applicable to the unconscionability defense in a case involving an automobile sales contract. The Court described the general principles of the doctrine as follows:

One common formulation of unconscionability is that it refers to an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. As that formulation implicitly recognizes, the doctrine of unconscionability has both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh and one-sided results. The prevailing view is that procedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. But they need not be present in the same degree. Essentially a sliding scale is invoked [where] the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable and vice versa.
(Sanchez, supra, 61 Cal.4th at p. 910, internal citations and quotations omitted, italics original.)
Plaintiff contends that the agreement at issue is both substantively and procedurally unconscionable. With respect to substantive unconscionability, plaintiff contends that the agreement applies only to claims typically brought by the employee, “exposes” him to arbitration costs, and limits discovery.

In support of his first argument, plaintiff cites Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, which held that a “modicum of bilaterality” is required in an arbitration agreement. (At p. 117.) Armendariz explained that “[g]iven the disadvantages that may exist for plaintiffs arbitrating disputes, it is unfairly one-sided for an employer with superior bargaining power to impose arbitration on the employee as plaintiff but not to accept such limitations when it seeks to prosecute a claim against the employee ….” (Ibid.) Applying this standard, Amendariz invalidated an agreement that “requires the arbitration of employee-but not employer-claims arising out of a wrongful termination.” (Id. at p. 120.)

Contrary to the agreement in Amendariz, the agreement here encompasses a wide range of employment disputes and expressly binds both parties. Plaintiff complains that the agreement exempts claims for provisional relief and for worker’s compensation and unemployment benefits. However, both of these “exemptions” are imposed by law and do not render the agreement unconscionable. (See Mercuro v. Superior Court (Countrywide Securities Corp.) (2002) 96 Cal.App.4th 167, 176 [“Workers’ compensation and unemployment benefits are governed by their own adjudicatory systems; neither is a proper subject matter for arbitration.”]; Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1247 [“the provisional relief clause does no more than recite the procedural protections already secured by section 1281.8(b) [of the California Arbitration Act], which expressly permits parties to an arbitration to seek preliminary injunctive relief during the pendency of the arbitration”].)

With regard to arbitration costs, the agreement provides that the Company shall pay all costs attributable to arbitration “[t]o the extent required by applicable law, and only to this extent. … Otherwise, the costs of arbitration will be paid equally by Associate and the Company. Each party shall pay for its own reasonable costs (filing fees or other administrative expenses) and attorneys’ fees, if any.” Under California law, the employer is required to pay costs “unique to the arbitral forum.” (Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 661.) The agreement clearly provides that Guess will do so here. Contrary to plaintiff’s argument, the reference to plaintiff’s “own … administrative expenses” does not render the agreement ambiguous in this respect. Nor does the fact that the JAMS rules “do[] not preclude an employee from contributing to administrative and Arbitrator fees and expenses” and provide for joint and several liability for such costs by default. The parties’ agreement expressly provides that it will control over the JAMS rules, and that defendant will pay the costs of arbitration.

Finally, plaintiff argues that the agreement improperly limits discovery. The agreement provides that “[t]he arbitrator shall have the authority to order such discovery by way of deposition, interrogatory, document production, or otherwise, as the arbitrator considers necessary to a full and fair exploration of the issues in dispute, consistent with the Federal Rules of Civil Procedure and the expedited nature of arbitration.” Unlike in the cases plaintiff cites, this is not a situation where “the permitted amount of discovery is so low while the burden for showing a need for more discovery is so high that plaintiff’s ability to prove her claims would be unlawfully thwarted by the discovery provision in the agreement.” (Ontiveros v. DHL Exp. (USA), Inc. (2008) 164 Cal.App.4th 494, 512-513 [agreement permitting only one deposition without a showing of “substantial need” was unconscionable], citing Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702 [agreement limited discovery to two sworn deposition statements absent a “compelling need” to allow other discovery].) Courts have found that the limits imposed by the parties’ agreement, which mirror those in the American Arbitration Association’s rules, are permissible. (See Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1130, fn. 21 [“the AAA rules governing discovery … are fair to claimants”].)

As plaintiff fails to identify any substantive issue with the arbitration agreement, his opposition must fail. In addition, the Court notes that neither the fact that plaintiff was not directly provided with the JAMS arbitration rules nor the agreement’s lack of an express reference the Labor Code renders the agreement procedurally unconscionable. (See Baltazar v. Forever 21, Inc., supra, 62 Cal.4th at p. 1246 [incorporation of arbitration rules by reference is only relevant to unconscionability where specific provisions of the rules are challenged as substantively unconscionable] Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 686; [the “assertion that an arbitration agreement must specifically name the Labor Code provisions in order to bring those statutory labor claims within the scope of the arbitration agreement has no support in California law”]; compare Renteria v. Prudential Ins. Co. of America (9th Cir. 1997) 113 F.3d 1104, 1106 [discussing “knowing waiver” requirement applicable to Title VII claims under federal law].)

The Court consequently finds that there is an enforceable agreement to arbitrate plaintiff’s non-PAGA claims.

IV. Remaining Issues

While the agreement also purports to waive any PAGA claims “unless prohibited by applicable law” (Andreasen Decl., Ex. A, p. 2), the parties agree that the waiver is unenforceable in this respect. (See Iskanian v. CLS Transp. Los Angeles, LLC (2014) 59 Cal.4th 348.) Defendant contends that, since the agreement contains a severability provision, the Court must sever the PAGA waiver, order the non-PAGA claims to arbitration, and stay the PAGA claim. In support of this outcome, it cites Franco v. Arakelian Enterprises, Inc. (2015) 234 Cal.App.4th 947, which appears to be the only published authority addressing circumstances where employment claims subject to an arbitration agreement are asserted together with a PAGA claim in a single action. Franco held that “[b]ecause the issues subject to litigation under the PAGA might overlap those that are subject to arbitration of Franco’s individual claims, the trial court must order an appropriate stay of trial court proceedings.” (At p. 966; compare Hernandez v. Ross Stores, Inc. (2016) 7 Cal.App.5th 171 [single-count PAGA claims may not be “split” and referred to arbitration to determine whether plaintiff is an “aggrieved employee”].)

Plaintiff does not squarely address the appropriate treatment of his PAGA claim in the event the Court finds his other claims are subject to arbitration. Rather, he simply repeats his argument that the entire agreement should not be enforced because it is “rife with unconscionability.” For the reasons already discussed, the Court disagrees. Following Franco, the Court will stay the entire action and order the non-PAGA claims to arbitration.

Finally, defendant asks the Court to strike plaintiff’s class allegations, but its request does not comply with the requirements of a motion to strike. (Cal. Rules of Court, rule 3.1322(a) [“A notice of motion to strike a portion of a pleading must quote in full the portions sought to be stricken except where the motion is to strike an entire paragraph, cause of action, count, or defense.”].) Perhaps for this reason, plaintiff does not address defendant’s request in his opposition papers. Under the circumstances, the Court will not strike any language from the complaint at this time.

V. Conclusion and Order

Defendant’s petition to compel arbitration is GRANTED as to the first through fifth and seventh causes of action. The entire action is stayed pending completion of arbitration. The Court will not strike any language from plaintiff’s complaint at this time.

The Court will prepare the order.

Case Name: Juan Barocio v. Lanz Cabinet Shop, Inc., et al.
Case No.: 16-CV-301636

This is a putative wage and hour class action by an employee of defendant Lanz Cabinet Shop, Inc. Before the Court is defendant’s motion to stay the case pending resolution of an earlier-filed action, Victor Ballesteros v. Lanz Cabinet Shop, Inc. (Super. Ct. Sacramento County, No. 34-2015-00174854) (hereinafter, “Ballesteros”). Plaintiff opposes Lanz’s motion.

The parties’ requests for judicial notice of filings in this and the Ballesteros action are GRANTED. (Evid Code, § 452, subd. (d).)

I. Factual and Procedural Background

According to the operative first amended complaint (“FAC”), plaintiff worked for defendant as a non-exempt cabinet installer. (FAC, ¶¶ 1-2.) He alleges that Lanz had a consistent policy of failing to provide second meal periods to employees who worked over ten hours in a day. (Id. at ¶ 3.) The FAC asserts the following claims arising from this policy: (1) failure to provide meal periods, (2) waiting time penalties, (3) violation of Business & Professions Code section 17200, and (4) penalties under the Private Attorneys General Act (“PAGA”).

Plaintiff filed the original complaint in this action on October 25, 2016. Meanwhile, his counsel had been prosecuting another employment action against defendant, Ballesteros, since 2015. Ballesteros alleged claims arising from wage statement violations and failure to pay overtime. The original and first amended complaints in that action did not include class allegations, but did allege a representative PAGA claim based on technical wage statement violations, along with individual claims by the plaintiff. After Lanz successfully moved to strike the PAGA claim, the plaintiff filed a second amended complaint (“the Ballesteros SAC”) that included class allegations. The parties engaged in discovery and an unsuccessful private mediation.

In August of 2016, Lanz moved to deny class certification and/or to strike the class allegations in the SAC. Defendant argued that the Ballesteros plaintiff was an inadequate class representative and the commonality and typicality requirements of class certification were not satisfied in that case. Before his opposition to Lanz’s motion was due, the Ballesteros plaintiff moved for leave to file a third amended complaint (“the Ballesteros TAC”). The TAC would abandon the plaintiff’s class claim for double time wages and add a class claim for failure to provide second meal periods like the one before this Court. As described in her declaration supporting the motion for leave to amend, plaintiff’s counsel determined that there was likely a defense to the Ballesteros classwide overtime claim based on a review of confidential records produced during mediation; however, she also learned that there was a likely classwide meal period violation and indicated at the mediation that she would seek leave to bring such a claim. (See Defendant’s Request for Judicial Notice, Ex. E.)

On October 17, 2016, the Ballesteros court issued an order granting Lanz’s motion to deny class certification and denying the plaintiff’s motion for leave to file the TAC. The court found that the Ballesteros plaintiff was an inadequate class representative because his deposition revealed he was “totally unfamiliar with his duties” as such. (See Request for Judicial Notice, Ex. F, p. 2.) It struck the class allegations from the SAC. (Id. at p. 3.) The court denied the motion for leave to file a TAC adding a new classwide claim because there was no adequate class representative. (Id. at p. 2) However, it rejected Lanz’s argument that the plaintiff was barred from alleging a meal period claim in light of the mediation privilege. (Id. at pp. 2-3.) The court denied without prejudice the plaintiff’s request for leave to conduct discovery to identify a suitable class representative, on the ground that the parties failed to address the standard governing such a request in their briefing. (Id. at p. 3.)

On November 10, 2016, the Ballesteros plaintiff filed a notice of appeal regarding the court’s “Orders Dismissing Class & PAGA Claims (Death Knell Doctrine).” (Request for Judicial Notice, Ex. G, p. 1.) Plaintiff filed the FAC in this action on November 18, and Lanz answered on March 3, 2017. Defendant asserts affirmative defenses for abatement based on an earlier-filed action (the twenty-seventh affirmative defense), preclusion by the rule of concurrent jurisdiction (the twenty-eighth affirmative defense), and preclusion by the rule against claim splitting (the twenty-ninth affirmative defense).

On March 17, 2017, the Ballesteros plaintiff filed his opening brief in the appeal in that action. The brief raises the single issue of whether the Ballesteros court properly struck the plaintiff’s PAGA claim.

On March 30, 2017, Lanz filed the instant motion to stay.

II. Legal Standard

“The pendency of another earlier action growing out of the same transaction and between the same parties is a ground for abatement of the second action.” (Leadford v. Leadford (1992) 6 Cal.App.4th 571, 574.) A defendant may assert the pending action as a bar either by demurrer, or where fact issues must be resolved, by answer and subsequent motion pursuant to Code of Civil Procedure section 597. (Ibid.) In either case, if the court determines a pending action raises substantially the same issues between the same parties, it must enter the interlocutory judgment specified in Code of Civil Procedure section 597. (Ibid.) “In determining whether the causes of action are the same for purposes of pleas in abatement, the rule is that such a plea may be maintained only where a judgment in the first action would be a complete bar to the second action.” (Plant Insulation Co. v. Fibreboard Corp. (1990) 224 Cal.App.3d 781, 787-788.)

Related to the statutory plea in abatement is the rule of exclusive concurrent jurisdiction, which “has been interpreted and applied more expansively, and therefore may apply where the narrow grounds required for a statutory plea of abatement do not exist.” (Plant Insulation Co. v. Fibreboard Corp., supra, 224 Cal.App.3d at p. 788.) “Unlike the statutory plea of abatement, the rule of exclusive concurrent jurisdiction does not require absolute identity of parties, causes of action or remedies.” (Ibid.) “If the court exercising original jurisdiction has the power to bring before it all the necessary parties … [and] to litigate all the issues and grant all the relief to which any of the parties might be entitled under the pleadings,” the court should stay the second action pending resolution of the first. (Ibid.) Nevertheless, while complete identity between the parties and remedies sought is not required, “the issues in the two proceedings must be substantially the same and the individual suits must have the potential to result in conflicting judgments” for the rule to apply. (County of Siskiyou v. Superior Court (Environmental Law Foundation) (2013) 217 Cal.App.4th 83, 91.)
Under either doctrine, “[a]n order of abatement issues as a matter of right[,] not as a matter of discretion[,] where the conditions for its issuance exist.” (Lawyers Title Ins. Corp. v. Superior Court (Harrigfeld) (1984) 151 Cal.App.3d 455, 460.)

III. Analysis

The circumstances here do not support a statutory plea in abatement given that the Ballesteros court has addressed only whether different claims were properly asserted by a different potential class representative. As plaintiff’s meal period claims were never actually at issue in Ballesteros, a judgment in that action would not bar the present action. (See Bridgeford v. Pacific Health Corp. (2012) 202 Cal.App.4th 1034, 1043 (hereinafter, “Bridgeford”) [order denying class certification does not have collateral estoppel effect; “if no class was certified by the court in the prior proceeding, the interests of absent putative class members were not represented”]; Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1204 [new class representative’s proposal of “a class that on its face attempts to correct flaws identified in [a prior putative class action] resulting in denial of certification” was not subject to issue preclusion].)

In its reply papers, defendant cites for the first time the opinion in Alvarez v. May Dept. Stores Co. (2006) 143 Cal.App.4th 1223 (hereinafter, “Alvarez”). In that case, the Court of Appeal for the Second District held—contrary to that court’s more recent opinion in Bridgeford—that an order denying class certification does have collateral estoppel effect. The Court finds Bridgeford to be the better-reasoned case, particularly since Bridgeford adopted the reasoning of the United States Supreme Court in Smith v. Bayer Corp. (2011) 564 U.S. 299 (an opinion issued after Alvarez was decided). Smith abrogated In re Bridgestone/Firestone, Inc., Tires Products Liability Litigation (7th Cir. 2003) 333 F.3d 763, a federal appellate decision upon which Alvarez relied.

A closer question than the statutory plea in abatement is whether exclusive concurrent jurisdiction applies. “Unlike the statutory plea of abatement, the rule of exclusive concurrent jurisdiction does not require absolute identity of parties, causes of action or remedies.” (Plant Insulation Co. v. Fibreboard Corp., supra, 224 Cal.App.3d at p. 788.) Still, “the issues in the two proceedings must be substantially the same and the individual suits must have the potential to result in conflicting judgments” for the rule to apply. (County of Siskiyou v. Superior Court, supra, 217 Cal.App.4th at p. 91.)

Given how the Ballesteros case has developed, these requirements are not satisfied here. Even assuming that the appellate court agrees with the Ballesteros plaintiff and revives his PAGA wage statement claim, the class claims have been struck from the operative complaint in that action, and class claims asserting meal period violations were never part of any operative pleading therein. The issues raised by the Ballesteros PAGA claim, which involve asserted technical defects in defendant’s wage statements, are distinct from those raised in this action, and the potential for conflicting judgments is minimal.

The Court is unaware of any published authorities addressing the application of the rule of exclusive concurrent jurisdiction to putative class actions. While it is sensitive to defendant’s concerns about forum-shopping and harassment, these concerns do not, standing alone, warrant barring the plaintiff and putative class members in this action from proceeding with their claims. (See Smith v. Bayer Corp., supra, 564 U.S. at pp. 316-317 [recognizing “policy concerns relating to use of the class action device” to relitigate issues “by the simple expedient of changing the named plaintiff in the caption of the complaint,” but concluding that “our legal system generally relies on principles of stare decisis and comity among courts to mitigate the sometimes substantial costs of similar litigation brought by different plaintiffs” rather than binding nonparties to a decision in the first case].) The Court agrees with Bridgeford that, where no class has been certified, the interests of the plaintiff in this action and of the other putative class members were never represented by the Ballesteros plaintiff and cannot be held hostage to the resolution of an unrelated appeal in that case. This result would be expected if the plaintiffs were represented by different counsel; the Court finds no basis to reach a different result simply because they have the same counsel here.

IV. Conclusion and Order

In light of the above, the motion to stay is DENIED.

The Court will prepare the order.

HAYLEY DILLER f/k/a HAYLEY BALL, as an individual and on behalf of all others similarly situated,

Plaintiffs,

vs.

UNDER ARMOUR RETAIL, INC.; UNDER ARMOUR, INC.; UNDER ARMOUR RETAIL OF CALIFORNIA, LLC; and DOES 1 through 50, inclusive,

Defendants.
Case No. 2014-1-CV-265729

TENTATIVE RULING RE: MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT

The above-entitled action is set for hearing before the Honorable Thomas E. Kuhnle on May 19, 2017, at 9:00 a.m. in Department 5. Having reviewed the submissions of the parties, the Court issues its tentative ruling as follows:

I. INTRODUCTION

This is a class action lawsuit arising out of various alleged Labor Code violations. Plaintiff Hayley Diller (“Plaintiff”) was hired by defendants Under Armour Retail, Inc. and Under Armour, Inc. (collectively, “Defendants”) to work as a non-exempt employee at Defendants’ store located in Gilroy, CA. (First Amended Class Action Complaint (“FAC”), ¶ 8.) Plaintiff alleges Defendants violated various Labor Code sections because employees were required to submit to security checks after they had already clocked-out at the end of their shifts. (FAC, ¶¶ 33, 37, 40, 47, and 51.)

The FAC, filed on April 10, 2017, sets forth the following causes of action: (1) Violation of Labor Code §§ 1194 and 1197; (2) Violation of Labor Code §§ 510 and 1194; (3) Violation of Labor Code §§ 226.7 and 512; (4) Violation of Labor Code §§ 201-203; (5) Violations of the UCL, Business & Professions Code § 17200, et seq.; and (6) Violation of Labor Code § 2698, et seq. The parties have reached a settlement. Plaintiff now moves for preliminary approval of the settlement.

II. LEGAL STANDARD

Generally, “questions whether a settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion.” (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234-235, citing Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794.)
In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as “the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.”

(Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at pp. 244-245, citing Dunk, supra, 48 Cal.App.4th at p. 1801 and Officers for Justice v. Civil Service Com’n, etc. (9th Cir. 1982) 688 F.2d 615, 624.)

“The list of factors is not exclusive and the court is free to engage in a balancing and weighing of factors depending on the circumstances of each case.” (Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 245.) The court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” (Ibid., quoting Dunk, supra, 48 Cal.App.4th at p. 1801 and Officers for Justice v. Civil Service Com’n, etc., supra, 688 F.2d at p. 625, internal quotation marks omitted.)

The burden is on the proponent of the settlement to show that it is fair and reasonable. However “a presumption of fairness exists where: (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.”

(Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 245, citing Dunk, supra, 48 Cal.App.4th at p. 1802.)

III. ANALYSIS

A. Provisions of the Settlement

The case has been settled on behalf of “all current and former non-exempt California retail store employees of Defendants Under Armour Retail, Inc. and Under Armour, Inc. who were employed at any time from May 23, 2010 through December 31, 2016.” (Class Action Settlement Agreement and Release of Claims (“Settlement Agreement”), p. 3:6-9.) Pursuant to the settlement, Defendants will pay a total of $1,050,000. (Settlement Agreement”, ¶ 1.1.) The settlement is made on a non-claims made basis and is non-reversionary. (Ibid.) Out of the settlement payments will be made of $250,000 for attorneys’ fees (1/3 of the gross settlement amount), costs up to $50,000, $20,000 for a release of all Private Attorneys General Act claims ($15,000 paid to the California Labor and Workforce Development Agency and $5,000 to the net settlement fund), $10,000 for an enhancement award to Plaintiff, and up to $15,000 for settlement administration costs. (Settlement Agreement, ¶¶ 1.1, 1.5, 1.6, 1.7.) Based on a class size of approximately 1,988 class members, each class member will receive an average of approximately $306.84.

B. Fairness of the Settlement

Plaintiff contends the settlement is fair. Plaintiff states her counsel conducted extensive discovery and investigation and the settlement was reached following mediation and continued arm’s-length negotiations. Plaintiff also asserts Defendants planned to invoke the “de minimis” defense, a federal doctrine providing that small increments of unpaid time worked need not be paid if certain elements are met. Plaintiff states it is unclear whether this doctrine applies to California Labor Code claims, but if it is ultimately found to apply, Plaintiff and the class would have significant difficulty in prevailing on the merits. Plaintiff has sought to obtain a concrete monetary remedy for class members in light of this uncertainty.

Plaintiff contends the potential recovery for the class is approximately $3,500,000. The Court finds a settlement of a little less than a third of that amount is a reasonable recovery for the class. The settlement reduces the expense of litigation and eliminates the risks to Plaintiff and the class of continuing litigation.

Plaintiff will seek a class representative incentive award of $10,000.

The rationale for making enhancement or incentive awards to named plaintiffs is that they should be compensated for the expense or risk they have incurred in conferring a benefit on other members of the class. An incentive award is appropriate if it is necessary to induce an individual to participate in the suit. Criteria courts may consider in determining whether to make an incentive award include: 1) the risk to the class representative in commencing suit, both financial and otherwise; 2) the notoriety and personal difficulties encountered by the class representative; 3) the amount of time and effort spent by the class representative; 4) the duration of the litigation and; 5) the personal benefit (or lack thereof) enjoyed by the class representative as a result of the litigation. These “incentive awards” to class representatives must not be disproportionate to the amount of time and energy expended in pursuit of the lawsuit.

(Cellphone Termination Fee Cases (2010) 186 Cal. App. 4th 1380, 1394-1395, quotation marks, brackets, ellipses, and citations omitted.)
Plaintiff has filed a declaration in which she states she spent approximately 50 hours meeting and/or conferring with her attorneys. (Declaration of Hayley Diller in Support of Plaintiff’s Motion for Preliminary Approval of Class Action Settlement, ¶ 4.) She asserts she provided information and various documents and traveled to her attorney’s office, as well as preparing for and attending her deposition. (Ibid.) In light of Plaintiff’s participation in the lawsuit and the recovery obtained for the class, the Court finds the incentive award is justified and it is approved.

The Court also has an independent right and responsibility to review the requested attorneys’ fees and only award so much as it determines reasonable. (See Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 127-128.) Plaintiff’s counsel will seek attorneys’ fees of $250,000 (1/3 of the total settlement fund) (plus costs and expenses not to exceed $50,000). While 1/3 of the common fund for attorneys’ fees is generally considered reasonable, Plaintiff’s counsel should submit lodestar information (including hourly rates and hours worked) prior to the final approval hearing in this matter so the Court can compare the lodestar information with the requested fees.

C. Class Notice

The content of a class notice is subject to court approval. “If the court has certified the action as a class action, notice of the final approval hearing must be given to the class members in the manner specified by the court.” (Cal. Rules of Court, rule 3.769(f).)
The notice generally complies with the requirements for class notice. (See Settlement Agreement, Exhibit A.) It provides basic information about the settlement, including the settlement terms, and procedures to object or request exclusion. However, the notice states that class members who wish to object to the settlement must submit a written objection to the Court, class counsel and defense counsel, and the settlement administrator by a certain date. (Id. at p. 5.) It states that the objection must include the name, address, telephone number, and last four digits of the class member’s social security number and must state the basis for the objection as well as any intention to appear at the final approval hearing. (Ibid.) The language of the section of the notice explaining how to object to the settlement must be changed to state that class members who wish to object can appear and speak at the final approval hearing without submitting any written objection or providing any advance notice.

Subject to the above modification, the motion for preliminary approval of the class action settlement is GRANTED. The Court approves Phoenix Class Administrators to serve as administrator for the settlement. The final approval hearing is set for August 18, 2017 at 9:00 a.m. in Department 5.

The Court will prepare the final order if this tentative ruling is not contested.

Case Name: Dhiraj Bora v. Corwil Technology Corporation, et al.
Case No.: 2016-CV-298720

Demurrer to the Second Amended Complaint by Defendants Corwil Technology Corporation and Matt Bergeron

Factual and Procedural Background

This is an employment case involving alleged retaliation. In February 2015, plaintiff Dhiraj Bora (“Plaintiff”) was hired by defendant Corwil Technology Corporation (“Corwil”) to be the Vice-President of Sales and Marketing. (Second Amended Complaint [“SAC”] at ¶ 10.) Plaintiff also agreed to become a shareholder in the corporation and invested $40,000 of his own personal income. (Id. at ¶ 9.) Defendant Matt Bergeron (“Bergeron”) is the CEO, corporate officer and shareholder of Corwil and Plaintiff’s “direct report.” (Id. at ¶ 11.) In late 2015, Plaintiff discovered that Corwil and Bergeron (collectively, “Defendants”) were engaged in pervasive unethical and unlawful business practices internally, and in relation to the company’s day-to-day business contracts with ongoing, well-respected customers. (Ibid.) Such unlawful business practices included invoicing customers for goods that were not shipped, falsely representing that certain products passed industry approved tests when they did not, and false accounting within the corporation’s internal financial records. (Ibid.)

In November 2015, Plaintiff immediately reported this activity to Bergeron, who failed to take action to correct the misconduct. (SAC at ¶ 12.) Instead, Defendants retaliated against Plaintiff by increasing his work responsibilities without increasing his compensation while decreasing his monthly sales incentives and undermining the effectiveness of other well-performing sales people. (Ibid.) When Bergeron failed to take action, Plaintiff met with Steve Soderling, Corwil’s Chairman of the Board, to discuss these issues. (Id. at ¶ 13.) Shortly thereafter, Corwil terminated Plaintiff “for cause.” (Id. at ¶¶ 13-14.) Following his termination, Plaintiff alleges that Corwil has still not paid him the amounts due under the employment agreement, including bonus and severance payments. (Id. at ¶ 15.)

On November 1, 2016, Plaintiff filed a first amended complaint (“FAC”) setting forth causes of action for: (1) Retaliation for Whistleblowing in Violation of Labor Code § 1102.5(b); (2) Retaliation for Refusing to Participate in Illegal Activity in Violation of Labor Code § 1102.5(c); (3) Wrongful Termination in Violation of Public Policy; (4) Breach of Fiduciary Duty; (5) Breach of Written Contract; (6) Breach of the Covenant of Good Faith and Fair Dealing; (7) Nonpayment of Wages; and (8) Unjust Enrichment.

On December 5, 2016, Defendants filed a demurrer to the first, second, fourth, and eighth causes of action on the ground that they failed to state a claim. Following oral argument on the motion, the Court took the matter under submission and issued a written decision. The Court sustained the demurrer to the fourth cause of action with leave to amend and overruled the demurrer as to the other claims.

On March 10, 2017, Plaintiff filed the operative SAC setting forth causes of action for: (1) Retaliation for Whistleblowing in Violation of Labor Code § 1102.5(b); (2) Retaliation for Refusing to Participate in Illegal Activity in Violation of Labor Code § 1102.5(c); (3) Wrongful Termination in Violation of Public Policy; (4) Breach of Fiduciary Duty; (5) Breach of Written Contract; (6) Breach of the Covenant of Good Faith and Fair Dealing; (7) Nonpayment of Wages; and (8) Unjust Enrichment.

Demurrer to the SAC

Currently before the Court is Defendants’ demurrer to the fourth cause of action on the ground that it fails to state a claim. (Code Civ. Proc., § 430.10, subd. (e).) Defendants filed a request for judicial notice in conjunction with the motion. Plaintiff filed written opposition. Defendants filed reply papers.

Request for Judicial Notice

In support of the motion, Defendants request judicial notice of the following: (1) Court’s Order Sustaining the Demurrer to the FAC, in part, filed on February 28, 2017 (Exhibit A); and (2) Plaintiff’s Verified Responses to Special Interrogatories, Set One, served on March 2, 2017 (Exhibit B).

“Judicial notice is the recognition and acceptance by the court, for use by the trier of fact or by the court, of the existence of a matter of law or fact that is relevant to an issue in the action without requiring formal proof of the matter.” (Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117.)

With respect to Exhibit A, the Court takes judicial notice of its Order on Demurrer to the FAC pursuant to Evidence Code section 452, subdivision (d) as a record of the superior court. (See Stepan v. Garcia (1974) 43 Cal.App.3d 497, 500 [the court may take judicial notice of its own file].) With respect to Exhibit B, a court may take judicial notice of a plaintiff’s own discovery responses to the extent that they contradict the complaint. (See Bockrath v. Aldrich Chem. Co., Inc. (1999) 21 Cal.4th 71, 83 [the California Supreme Court acknowledged that “a complaint’s allegations may be disregarded when they conflict with judicially noticed discovery responses.”].) For reasons stated below, the Court finds that Plaintiff’s discovery responses do not contradict the SAC and thus the request for judicial notice is improper.

Therefore, the request for judicial notice is GRANTED IN PART and DENIED IN PART. The request is granted as to Exhibit A. The request is denied as to Exhibit B.

Legal Standard

“In reviewing the sufficiency of a complaint against a general demurer, we are guided by long settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. We also consider matters which may be judicially noticed.’” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213–214.)

“The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. The court does not, however, assume the truth of contentions, deductions or conclusions of law. … [I]t is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 850.)

Fourth Cause of Action: Breach of Fiduciary Duty

The fourth cause of action is a claim for breach of fiduciary duty. “In order to plead a cause of action for breach of fiduciary duty, there must be shown the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach. The absence of any of one of these elements is fatal to the cause of action.” (Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1101.)

Defendants argue that Plaintiff fails to plead facts necessary to sustain a direct action against Bergeron for breach of fiduciary duty. Instead, Defendants contend that such a claim must be brought as a derivative action.

“An action is derivative if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock or property without any severance of distribution among individual holders, or if it seeks to recover assets for the corporation or to prevent the dissipation of its assets. Shareholders may bring a derivative suit to, for example, enjoin or recover damages for breaches of fiduciary duty directors and officers owe the corporation. An individual cause of action exists only if damages to the shareholders were not incidental to damages to the corporation. Examples of direct shareholder actions include suits brought to compel the declaration of a dividend, or the payment of lawfully declared or mandatory dividends, or to enjoin a threatened ultra vires act or enforce shareholder voting rights.” (Schuster v. Gardner (2005) 127 Cal.App.4th 305, 313 [internal quotations and citations omitted].)

The Court previously sustained the demurrer to the breach of fiduciary duty claim in the FAC, in part, because Plaintiff was only seeking recovery for harm done to the corporation. (See FAC at ¶ 34.) Thus, Plaintiff failed to state a direct action for breach of fiduciary duty against defendant Bergeron. In the SAC, Plaintiff now alleges that he is not seeking to recover for any damage to the corporation but only damage caused by Bergeron’s actions. (See SAC at ¶ 34.) Such conduct includes diverting compensation intended for Plaintiff over to Bergeron in violation of his fiduciary duty to Plaintiff. (Ibid.) Given these allegations, which must be accepted as true for purposes of demurrer, the Court finds that Plaintiff has stated a direct claim for breach of fiduciary duty against Bergeron.

Even if Plaintiff has alleged a direct claim against Bergeron, Defendants argue that such an allegation should be disregarded as it is contradicted by Plaintiff’s sworn discovery responses. (See Request for Judicial Notice at Exhibit B.) In particular, Defendants attach Plaintiff’s response to Special Interrogatory No. 76 which asks Plaintiff to state all facts which support his breach of fiduciary claim at paragraph 34 of the SAC. (Ibid.) In response, Plaintiff provides in part, that Bergeron increased his own compensation and took retaliatory steps against Plaintiff by decreasing his compensation. (Ibid.) This response does not contradict the SAC which, as stated above, alleges that Bergeron diverted compensation over to himself in violation of his fiduciary duty to the Plaintiff. Thus, the demurrer on this ground is not sustainable.

Also, Defendants contend that there is no legal authority for holding an employer or supervisor liable for breach of fiduciary duty. However, as the opposition points out, Plaintiff also seeks to hold Bergeron liable for breach of fiduciary duty in his role as a shareholder, CEO, senior manager, and board member of the corporation. (SAC at ¶¶ 11, 33, 34; see Meister v. Mensinger (2014) 230 Cal.App.4th 381, 395 [“There is a ‘strong public interest in assuring that corporate officer, directors, majority shareholders and others are faithful to their fiduciary obligations to minority shareholders.’”]; see also PH II, Inc. v. Super. Court (1995) 33 Cal.App.4th 1680, 1682 [“A demurrer does not lie to a portion of a cause of action.”].)

Finally, to the extent that Plaintiff alleges his compensation was reduced in retaliation for whistleblowing, the moving parties assert that this allegation is the subject of the first cause of action and thus cannot support a claim for breach of fiduciary duty. This contention lacks merit as it is not supported by any citation to legal authority. (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852 [issues do not have a life of their own and if they are not raised or supported by argument or citation to authority, they are waived].) Furthermore, to the extent that Defendants argue that this claim is duplicative of the first cause of action, redundancy is simply not a ground for demurrer. (See McDonell v. American Trust Co. (1955) 130 Cal.App.2d 296, 303.)

Therefore, the demurrer to the fourth cause of action on the ground that it fails to state a claim is OVERRULED.

The Court will prepare the Order.

Case Name: Dyer v. Cummings, et al.
Case No.: 2016-1-CV-304132

This is an action for breach of contract on a promissory note. On December 22, 2008, defendant Roger D. Cummings (“Cummings”) as president of defendant Network Funding Associates, Inc. (“NFA”), signed a promissory note in the amount of $150,000 plus interest to plaintiff Marie-Jeanne Dyer (“Plaintiff”). (See complaint, exh. A.) Defendant NFA failed to pay Plaintiff as promised (see complaint, ¶ BC-2), and on December 16, 2016, Plaintiff filed a complaint against Cummings and NFA (collectively, “Defendants”), asserting causes of action for breach of contract and common counts. The agreement is attached to the complaint. Defendant Cummings demurs to each cause of action of the complaint on the ground that he is not a party to the contract.

Indeed, the contract is between NFA and Plaintiff, and “[c]ontract law exists to enforce legally binding agreements between parties….” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 514.) Plaintiff contends that she alleges that she entered into a contract with Cummings, and thus, she has properly alleged a breach of contract cause of action against him. (See Pl.’s opposition to demurrer, p.3:18-21.) However, although on demurrer, the court admits all material facts properly pleaded by Plaintiff, “[i]f facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence.” (Holland v. Morse Diesel International, Inc. (2001) 86 Cal.App.4th 1443, 1447, citing Mead v. Sanwa Bank Cal. (1998) 61 Cal.App.4th 561, 567-568.) As Plaintiff has attached the contract to her complaint, the facts appearing in the contract take precedence.

As stated previously, the contract is between NFA and Plaintiff. Plaintiff has not alleged that NFA is the alter ego of Cummings, or facts supporting such a theory of liability. (See Sonora Diamond Corp. v. Super. Ct. (Sonora Union High School Dist.) (2000) 83 Cal.App.4th 523, 538-539 (stating that “[o]rdinarily, a corporation is regarded as a legal entity, separate and distinct from its stockholders, officers and directors, with separate and distinct liabilities and obligations… [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… [u]nder the alter ego doctrine, then, when the corporate form is used to perpetrate 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… [t]he alter ego doctrine prevents individuals or other corporations from misusing the corporate laws by the device of a sham corporate entity formed for the purpose of committing fraud or other misdeeds”; also stating that “[i]n California, two conditions must be met before the alter ego doctrine will be invoked… [f]irst, 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… [s]econd, there must be an inequitable result if the acts in question are treated as those of the corporation alone… [a]mong the factors to be considered in applying the doctrine are commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other… [o]ther factors which have been described in the case law include inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers”).) Accordingly, Cummings’ demurrer to the complaint is SUSTAINED with 10 days leave to amend.

The Court shall prepare the Order.

Case Name: Nunez v. West Coast Wings Fremont, Inc., et al.
Case No.: 2016-1-CV-294599

This is a dispute as to the investment in a limited liability company. As alleged in the complaint, Plaintiff Sukanya Nunez (“Plaintiff”) is the surviving spouse and sole beneficiary of the estate of Benigno Nunez (“Benigno”). (See complaint, ¶ 2.) Benigno made capital investments in 2005 to West Coast Wings, LLC (“LLC”), with Tam Vu and Tony Lam and others. (See complaint, ¶ 19.) Two years later, the LLC formed and assigned its franchisee interest to WCW Union City. (Id.) The LLC later formed the other WCW entities named as defendants and distributed its assets among them. (Id.) In late 2009, Benigno Nunez stopped receiving dividend payments and in April 2010, he died. (See complaint, ¶ 21.) Plaintiff sought counsel to obtain the dividend payments since 2009, and the attorney for the West Coast Wings entities requested a probate court order in order for Plaintiff to receive the payments. In September 2013, Plaintiff obtained the court order to transfer all shares owned by Benigno to Plaintiff. Plaintiff began receiving some dividend checks, but the attorney for the West Coast entities stated that there were no other distribution checks after December 2014. In 2015, Plaintiff was elected as director of the LLC; however, in spite of her position, she has been unable to inspect the financial documents. (See complaint, ¶¶ 22-26.) Plaintiff contends that Lam, Vu and LaVigne are dominating the LLC, thereby preventing her from access to the records. (See complaint, ¶ 19.)

The Court has recently dealt with discovery matters regarding the production of documents. Specifically, in the Court’s May 19, 2017 order regarding Plaintiff’s motion to compel compliance with the agreement to produce documents, the Court specifically overruled objections on the ground that the request was compound, noting that it appeared that neither party understood what the term “compound” meant. With regards to the motion to compel further responses to RPDs, the Court also specifically overruled the defendants’ objections based on relevancy and privacy, noting that the defendants’ view on relevance was without merit as the documents sought were directly relevant.

Plaintiff now moves to compel further responses to requests for admission (“RFAs”) by defendant Tony Lam (“Lam”), special interrogatories (“SIs”) by defendant Robert LaVigne (“LaVigne”) and requests for production of documents (“RPDs”) by defendant West Coast Wings Milpitas, Inc. (“WCW Milpitas”) Plaintiff also requests monetary sanctions.

Defendants’ request for judicial notice

Defendants request judicial notice of objections filed on May 4, 2017 and declarations filed on May 4, 2017. The Court does not take judicial notice of hearsay statements in documents filed with the Court. The request for judicial notice is DENIED.

Motion to compel Tony Lam’s further responses to RFAs

RFAs 7-9 seeks the admission by defendant Lam that there was no annual shareholder meeting between 2010 and 2014 for WCW Milpitas, San Jose and Story entities. In response, Lam objected to the RFAs on the ground that “Plaintiff has no ownership interest in [the WCW entities] as demonstrated in the bond motion and thus, this request violates Defendant’s and other third parties’ constitutionally protected privacy rights and pecuniary information and trade secrets… [and m]oreover, this request is not relevant or reasonably calculated to the discovery of admissible evidence since Plaintiff enjoys no ownership interest in [the entities].”

These identical objections were raised in the prior motion and discussed in the May 19, 2017 order. The subject is directly relevant to Plaintiff’s causes of action and her allegation that the WCW entities are alter egos of each other that disregard corporate formalities or fail to segregate corporate records. (See Sonora Diamond Corp. v. Super. Ct. (Sonora Union High School Dist.) (2000) 83 Cal.App.4th 523, 538-539 (stating that “[u]nder the alter ego doctrine, then, when the corporate form is used to perpetrate 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… [a]mong the factors to be considered in applying the doctrine are commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other… [o]ther factors which have been described in the case law include inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers”).)

As articulated in the prior order, there is no possibility of any serious invasion of a privacy right with regards to the existence or non-existence of an annual shareholder meeting. (See Pioneer Electronics (USA), Inc. v. Super. Ct. (Olmstead) (2007) 40 Cal.4th 360, 370 (stating that the right of privacy established by the California Constitution “protects the individual’s reasonable expectation of privacy against a serious invasion”).) Moreover, even if the existence of a shareholder meeting had any privacy implications, as previously stated, the existence of any right of privacy regarding such a meeting belongs to the corporate entity, and [a] corporation has a lesser expectation of privacy relative to that of an individual. (See SCC Acquisitions, Inc. v. Super. Ct. (Western Albuquerque Land Holdings, LLC) (2015) 243 Cal.App.4th 741, 754 (stating that “[w]e conclude corporations do not have a right of privacy protected by the California Constitution… [t]he corporate right to privacy is a lesser right than that held by human beings and is not considered a fundamental right”).) As the Court has already stated with regards to identical objections raised by defendants, these objections on the ground of privacy and relevance are wholly without merit. Finally, there are no trade secrets or pecuniary interests involved with a failure to conduct an annual shareholder meeting. Lam’s objections are OVERRULED. Plaintiff’s motion to compel further responses to RFAs 7-9 is GRANTED. Defendant Lam shall provide verified code-compliant further responses without objections within 15 days of service of written notice of the Court’s order.

Motion to compel LaVigne’s further responses to SIs 25-29, 32-40, 43-51, 54-58 and 60

SIs 25-29, 32-40, 43-51, 54-58 and 60 seek information regarding the officer and director positions LaVigne held in the WCW entities, assets and funds received from the WCW entities by LaVigne, the people responsible for the accounting, bookkeeping, and filing of tax returns of the WCW entities, persons in possession of the WCW entities’ corporate documents, the shareholders and interests of the WCW entities, documents supporting the shareholders and percentage interests of the WCW entities, and agreements to which LaVigne was a party in connection with the WCW entities. Each of LaVigne’s responses consist of identical objections that the interrogatory is compound, violates his and third parties’ privacy rights, “Plaintiff enjoys no ownership interest in [the WCW entities] as already proven to Plaintiff through the Motion for a Bond and thus, such information is not relevant and/or reasonably-calculated to the discovery of any admissible evidence”, and that this information represents pecuniary information and/or trade secrets that are protected and thus disclosure would damage the WCW entities.

As already stated in the Court’s prior order, defendants’ counsel fails to understand what the term “compound” means. Regardless, the objection is not justified and is without merit. The objection based on the ground that the SIs are compound is OVERRULED.

As also stated above and in the Court’s prior order, defendants’ counsel also misunderstands the scope of relevance. Discovery is allowed for any matters that are not privileged, relevant to the subject matter involved in the action, and reasonably calculated to lead to the discovery of admissible evidence. (Code Civ. Proc. § 2017.010.) The “relevance to the subject matter” and “reasonably calculated to lead to discovery of admissible evidence” standards are applied liberally with any doubt generally resolved in favor of discovery. (See Colonial Life & Acc. Ins. Co. v. Super. Ct. (Perry) (1982) 31 Cal.3d 785, 790.) Moreover, for discovery purposes, information is “relevant to the subject matter” if it might reasonably assist a party in evaluating the case, preparing for trial, or facilitating settlement thereof. (See Gonzalez v. Super. Ct. (City of San Fernando) (1995) 33 Cal.App.4th 1539, 1546.) Here, the information sought is clearly relevant as they clearly relate to Plaintiff’s causes of action and allegations that the WCW entities are alter egos of each other, or are otherwise improperly transferring assets to and from each other. The objection on the ground of relevance is without merit and is OVERRULED.

Additionally, as to the objection on the ground of privacy, as already stated in the prior order and above, the right of privacy established by the California Constitution “protects the individual’s reasonable expectation of privacy against a serious invasion.” (Pioneer Electronics (USA), Inc. v. Super. Ct. (Olmstead) (2007) 40 Cal.4th 360, 370.) “Assuming that a claimant has met the foregoing Hill criteria for invasion of a privacy interest, that interest must be measured against other competing or countervailing interests in a ‘balancing test.’” (Id.) “Conduct alleged to be an invasion of privacy is to be evaluated based on the extent to which it furthers legitimate and important competing interests.” (Id.) “Protective measures, safeguards and other alternatives may minimize the privacy intrusion.” (Id.) “For example, if intrusion is limited and confidential information is carefully shielded from disclosure except to those who have a legitimate need to know, privacy concerns are assuaged.” (Id.) Regardless, the party seeking discovery of private information must demonstrate direct relevance of a particular cause of action or defense. (See Britt v. Super. Ct. (San Diego Unified Port Dist.) (1978) 20 Cal.3d 844, 859-862.) A corporation has a lesser expectation of privacy relative to that of an individual. (See SCC Acquisitions, Inc. v. Super. Ct. (Western Albuquerque Land Holdings, LLC) (2015) 243 Cal.App.4th 741, 754 (stating that “[w]e conclude corporations do not have a right of privacy protected by the California Constitution… [t]he corporate right to privacy is a lesser right than that held by human beings and is not considered a fundamental right”).) The information sought is directly relevant to Plaintiff’s causes of action and allegations. Accordingly, the objection on the ground of privacy is OVERRULED.

Moreover, the fact that the SIs seek pecuniary information is not a basis for withholding discovery. This objection, to the extent that it is separate and apart from the already overruled privacy objection, is likewise OVERRULED.

Finally, LaVigne utterly fails to justify his objection on the ground that a response might contain any trade secret and it is difficult to see how any such response might contain such a trade secret. This objection is without merit and OVERRULED.

Plaintiff’s motion to compel further responses to SIs 25-29, 32-40, 43-51, 54-58 and 60 is GRANTED. Defendant Lam shall provide verified code-compliant further responses to SIs 25-29, 32-40, 43-51, 54-58 and 60 within 15 days of service of written notice of the Court’s order.

Motion to compel WCW Milpitas’ further responses to RPDs 2, 5-8, 11, 16-19, 27-36

RPDs 2, 5-8, 11, 16-19, and 27-36 seek: WCW Milpitas’ by-laws and amendments; documents relating to the election of its board of directors and officers; documents relating to the financial relationship between it and its shareholders; WCW Milpitas’ annual and quarterly financial reports; WCW Milpitas’ bank account statements; documents relating profit sharing and distribution of dividends of WCW Milpitas; contracts and agreements in which WCW Milpitas is a party; documents concerning assets loaned or transferred from the LLC to WCW Milpitas; documents concerning assets loaned or transferred between WCW entities; and, all documents identified in its responses to the SIs. WCW Milpitas provides identical responses to these RPDs, stating:

Objection, this requests [sic] are not only relevant and/or reasonably-calculated to the discovery of admissible evidence, but these requests violate Defendant’s constitutionally protected privacy rights as well as trade secrets and pecuniary information and those of its shareholders since Plaintiff enjoys no ownership interest as demonstrated by the bond motion and thus, Plaintiff is not entitled to know anything related to the election of the Board or officers. Thus, Defendant will not comply with request. [sic]

As stated in multiple prior orders, these documents “might help or disprove Plaintiff’s claims relating to mismanagement or improper distributions.” Thus, Plaintiff has demonstrated good cause for these documents. (See Digital Music News LLC v. Super. Ct. (Escape Media Group, LLC) (2014) 226 Cal.App.4th 216, 224 (stating that “[t]o establish good cause, a discovery proponent must identify a disputed fact that is of consequence in the action and explain how the discovery sought will tend in reason to prove or disprove that fact or lead to other evidence that will tend to prove or disprove the fact”).) Moreover, these documents are directly relevant to the causes of action that are asserted by Plaintiff and her allegation that the WCW entities are alter egos of each other, or are otherwise improperly transferring assets to and from each other.

As to the now repetitious objections on the ground of relevance and privacy rights, these objections are plainly without merit. The documents sought are directly relevant to Plaintiff’s causes of action and allegations. The right of privacy established by the California Constitution “protects the individual’s reasonable expectation of privacy against a serious invasion.” (Pioneer Electronics (USA), Inc. v. Super. Ct. (Olmstead) (2007) 40 Cal.4th 360, 370.) Defendants’ counsel plainly misunderstands not only the broad scope of what is considered relevant, but also what constitutes a serious invasion. Moreover, a corporation has a lesser expectation of privacy relative to that of an individual. (See SCC Acquisitions, Inc. v. Super. Ct. (Western Albuquerque Land Holdings, LLC) (2015) 243 Cal.App.4th 741, 754 (stating that “[w]e conclude corporations do not have a right of privacy protected by the California Constitution… [t]he corporate right to privacy is a lesser right than that held by human beings and is not considered a fundamental right”).) As these documents are directly relevant to Plaintiff’s causes of action, the objections on the ground of privacy and relevance are OVERRULED.

Moreover, the fact that the RPDs seek pecuniary information is not a basis for withholding discovery. This objection, to the extent that it is separate and apart from the already overruled privacy objection, is likewise OVERRULED.

Finally, WCW Milpitas utterly fails to justify its objection on the ground that a response might contain any trade secret and it is difficult to see how financial documents regarding transfer of assets, financial reports or corporate documents such as by-laws might contain such a trade secret. This objection is without merit and OVERRULED.

Plaintiff’s motion to compel a further response to RPDs 2, 5-8, 11, 16-19, and 27-36 is GRANTED. Defendant WCW Milpitas shall provide a further code-compliant response without objections and shall produce all responsive documents within 15 days of service of written notice of the Court’s signed order as to RPDs 2, 5-8, 11, 16-19, and 27-36.

Requests for monetary sanctions

In connection with his opposition to the motion to compel Lam’s further responses to RFAs, Lam requests monetary sanctions in the amount of $812 against Plaintiff. Lam did not substantially prevail in opposing the motion. Lam’s request for monetary sanctions is DENIED.

In connection with his opposition to the motion to compel LaVigne’s further responses to SIs, LaVigne requests monetary sanctions in the amount of $1,950 against Plaintiff. LaVigne did not substantially prevail in opposing the motion. LaVigne’s request for monetary sanctions is DENIED.

In connection with its opposition to the motion to compel WCW Milpitas’ further responses to RPDs, WCW Milpitas requests monetary sanctions in the amount of $1,950 against Plaintiff. WCW Milpitas did not substantially prevail in opposing the motion. WCW Milpitas’ request for monetary sanctions is DENIED.

Plaintiff requests monetary sanctions in the amount of $625 against Lam, Vu and LaVigne and their counsel each in connection with the motion to compel further responses to RFAs. Plaintiff also requests monetary sanctions in the amount of $3,670 against Lam, Vu and LaVigne and their counsel each in connection with the motion to compel further responses to SIs. Plaintiff also requests monetary sanctions in the amount of $2,060 against WCW Milpitas and its counsel each in connection with the motion to compel further responses to RPDs. The requests are code compliant. Plaintiff has substantially prevailed on each of its motions. The defendants and their counsel did not act with substantial justification in opposing the motion and there are no other circumstances that make the imposition of the sanction unjust—particularly since the Court has addressed the same objections multiple times previously. However, the Court will not award the monetary sanctions for the defendants that are not named as a responding party on the motion. Further, considering that the Court has already ruled on the propriety of similar or identical objections, and has urged the parties to work things out regarding its meritless objections, it is clear that Defendants’ counsel has engaged in tactics that needlessly delay discovery from proceeding. As the issues are not new, however, the Court will award less than the amount of monetary sanctions sought. Accordingly, Plaintiff’s request for monetary sanctions is GRANTED in the amount of $5,000 against counsel for defendants Lam, LaVigne and WCW Milpitas, Bao-Quan P. Pham. Defendants Lam, LaVigne and WCW Milpitas’ counsel, Bao-Quan P. Pham, shall pay counsel for Plaintiff $5,000 within 10 days of this Order.

The Court shall prepare the Order.