DEPARTMENT C31 - LAW AND MOTION CALENDAR
Judge Martha K. Gooding
March 27, 2023
LAW AND MOTION IS HEARD ON MONDAYS AT 1:30 P.M.
Court Reporters: Official court reporters (i.e. court reporters employed by the Court) are NOT typically provided for law and motion matters in this Department. If a party desires a record of a law and motion proceeding, it must provide a court reporter. Parties must comply with the Court’s policy on the use of privately-retained court reporters, which can be found at:
· Civil Court Reporter Pooling;
· Please see the Court’s website at Court Reporter Interpreter Services for additional information regarding the availability of court reporters.
Tentative Rulings: The Court endeavors to post tentative rulings on the Court’s website by 5 p.m. on the preceding Friday. Do NOT call the Department for a tentative ruling if none is posted. Tentative rulings may not be posted on every case – or may be posted the morning of the hearing – due to the Court’s other commitments or the nature of a particular motion. The Court will NOT entertain a request for continuance or the filing of further documents once a tentative ruling has been posted.
Submitting on tentative rulings: If all counsel intend to submit on the tentative ruling and do not desire oral argument, please advise the Courtroom Clerk or Courtroom Attendant by calling (657) 622-5231. Please do not call the Department unless all parties submit on the tentative ruling. If all sides submit on the tentative ruling and so advise the Court, the tentative ruling shall become the Court’s final ruling and the prevailing party shall give notice of the ruling and prepare an order for the Court’s signature, if appropriate under Cal. R. Ct. 3.1312.
Non-appearances: If no one appears for the hearing and the Court has not been notified that all parties submit on the tentative ruling, the Court shall determine whether the matter is taken off calendar or the tentative ruling becomes the final ruling. The Court also might make a different order at the hearing. (Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, 442, fn. 1.)
Appearances: Remote and In-Person Proceedings. Parties are referred to the Court’s “Appearance Procedures and Information – Civil Unlimited and Complex” and “Guidelines for Remote Appearances” available on the Public Website.
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2022-01275636
Benson v. Ayala
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Demurrer to Complaint -- CONTINUED
Defendants Ebrahim and Maryam Karimi’s Demurrer to Plaintiff David Benson’s Complaint is continued to May 15, 2023 at 1:30 p.m. in Department C31.
Defendants served their Demurrer on Plaintiff by email. In the absence of express consent by an unrepresented party, service by email is not authorized. Code Civ. Proc. § 1010.6(c)(1). Plaintiff has not consented to service by email in this case.
For this reason, the hearing on Defendants’ Demurrer is continued for Defendants to serve Plaintiff by authorized means and file proof of valid service.
Defendant is ordered to give notice.
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2021-01202155
Century Recovery LLC v. Gregory’s Care Residence, Inc.
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Motion to Compel Production
Plaintiff Century Recovery, LLC’s unopposed motion to compel third-party LoanMe Inc. to produce documents in compliance with Plaintiff’s business records subpoena is GRANTED. LoanMe, Inc. is ordered to produce the responsive records within 20 days of notice of this ruling.
Code Civ. Proc., § 1987.1(a) provides:
If a subpoena requires the attendance of a witness or the production of books, documents, electronically stored information, or other things before a court, or at the trial of an issue therein, or at the taking of a deposition, the court, upon motion reasonably made by any person described in subdivision (b), or upon the court's own motion after giving counsel notice and an opportunity to be heard, may make an order quashing the subpoena entirely, modifying it, or directing compliance with it upon those terms or conditions as the court shall declare, including protective orders. In addition, the court may make any other order as may be appropriate to protect the person from unreasonable or oppressive demands, including unreasonable violations of the right of privacy of the person.
If a nonparty fails to comply with a deposition subpoena, the subpoenaing party may seek a court order compelling the nonparty to comply with the subpoena within 60 days after completion of the deposition record. (Code Civ. Proc., § 2025.480(b); see Unzipped Apparel, LLC v. Bader (2007) 156 Cal.App.4th 123, 127.)
Plaintiff issued a Deposition Subpoena for Production of Business Records to LoanMe, Inc. on December 13, 2022 (Sayyar Decl., Ex. 1.) Responses were due on January 9, 2023. None were forthcoming. (Sayyar Decl., ¶ 6.)
Plaintiff demonstrates good cause to compel the production of the documents. In order to perfect the application for default judgment, Plaintiff requires authenticated copies of the loan-related documents (including document showing the amounts owed) directly from the source, LoanMe, Inc.
Defendant has not filed a motion to quash. Further, no one has served an objection to the subpoena.
Accordingly, the Motion is GRANTED.
Plaintiff’s request for monetary sanctions is denied. The Notice of Motion does not request sanctions. (See Code Civ. Proc., § 2023.040.)
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2022-01290329
Gleason v. Xtraction, Inc.
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Demurrer to Complaint
Defendants Robert Gurnee (“Gurnee”), Larry Gehl (“Gehl”), Scott Dunlop (“Dunlop”), and Xtraction, Inc. (“Xtraction”) demur generally and specially to the ten causes of action alleged in the complaint filed by Plaintiff James P. Gleason (“Plaintiff”).
For the reasons set forth below, the demurrer for failure to state a claim is overruled in part and sustained in part. To the extent it is sustained, it is with 15 days leave to amend.
The demurrer for uncertainty is overruled.
First Cause of Action for breach of partnership agreement
The elements of a cause of action for breach of a partnership agreement are: (1) the partnership agreement; (2) plaintiff's performance or excuse for nonperformance; (3) defendant’s breach; and (4) the resulting damages to plaintiff. (Jones v. Goodman (2020) 57 Cal.App.5th 521, 527, fn. 2.)
In general, “the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership.” (Corp. Code, § 16202, subd. (a).) With certain exceptions, “[a] person who receives a share of the profits of a business is presumed to be a partner in the business....” (Id., subd. (c)(3).) But “[t]he sharing of gross returns does not by itself establish a partnership, even if the persons sharing them have a joint or common right or interest in property from which the returns are derived.” (Id., subd. (c)(2).)
“The question of the existence of a partnership depends primarily upon the intention of the parties ascertained from the terms of the agreement and from the surrounding circumstances. [Citations.] Ordinarily the existence of a partnership is evidenced by the right of the respective parties to participate in the profits and losses and in the management of the business. [Citations.] In ascertaining the intention of the parties, where they have entered into a written agreement, such intention should be determined chiefly from the terms of the writing. [Citation.] While the question of whether a partnership exists is to be determined from the nature of the relation agreed upon rather than the name which the parties have given to it, some weight must be given to the language of the parties themselves. [Citations.] It is the intention as evidenced by the terms of the agreement, and not the subjective or undisclosed intention of the parties that controls.” (Eng v. Brown (2018) 21 Cal.App.5th 675, 694, quoting Constans v. Ross (1951) 106 Cal.App.2d 381, 386-387.)
Defendants contend the incorporation of Xtraction terminated the alleged partnership between Plaintiff and Gurnee.
Generally, “incorporation terminates the partnership relationship.” (Eng v. Brown, 21 Cal.App.5th at 704; see, Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, 1157.) “The authorities recognize limited exceptions to the principle that partnership obligations cease to exist after the formation of a corporation. Partners may, by agreement, continue their relations as copartners in conjunction with their relationship as stockholders of a corporation, and ‘the law would take cognizance of such dual relationship and deal with ‘the parties in the light of their agreement[s between themselves], independently of their incorporation.’” (Persson v. Smart Inventions, Inc., 125 Cal.App.4th at 1158.) Courts “will enforce preincorporation agreements among partners or joint venturers who have incorporated in order to carry out the agreement between or among the partners or joint venturers.” (Id., 125 Cal.App.4th at 1159.) The Court will recognize the partnership if the corporation that was formed is a mere agency for more conveniently carrying out the agreements between the partners and substantial justice can be administered by treating the parties in the light of their agreements between themselves. (Id., at 1158; see, Eng v. Brown, 21 Cal.App.5th at 696, citing Elsbach v. Mulligan (1943) 58 Cal.App.2d 354, 368-369.)
The Complaint sufficiently alleges facts to show an exception to the general rule that incorporation terminates the partnership, more specifically, that Xtraction was just an agency to carry out the partnership agreement. (Complaint, ¶¶ 23-24.)
The Court concludes Plaintiff alleged sufficient facts to state this cause of action (Complaint, ¶¶ 2-5, 20-22, 54, 55, 59-66) – with one exception: the allegations of the Complaint do not indicate whether the partnership agreement is written or oral. Although the caption of the Complaint indicates the agreement is an oral one, the caption is not part of the charging allegations.
Accordingly, the demurrer to the First Cause of Action is sustained with leave to amend.
Second Cause of Action for breach of fiduciary duty
As discussed above, Plaintiff pled sufficient facts to show an exception to the general rule that incorporation terminated the partnership. (Complaint, ¶¶ 23-24.)
“The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach.” (Knox v. Dean (2012) 205 Cal.App.4th 417, 432.)
“[B]efore a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which imposes that undertaking as a matter of law.” (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 632.)
A fiduciary relationship is “any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party. Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts relating to the interest of the other party without the latter’s knowledge or consent.” (Wolf v. Superior Court (2003) 106 Cal.App.4th 625, 29.) Examples of fiduciary relationships include: principal and agent; real estate broker/agent and client; stockbroker and customer; attorney and client; partners; joint venturers; corporate officers and directors, on the one hand, and the corporation and its shareholders, on the other hand; husband and wife, with respect to the couple’s community property; controlling shareholders and minority shareholders; trustee and trust beneficiary; guardian and ward; pension fund trustee and pensioner beneficiary; executor and decedent's estate; and trustee and trust beneficiaries. (Oakland Raiders, 131 Cal.App.4th at 632-633.)
Plaintiff has sufficiently alleged this cause of action; accordingly, the demurrer to the Second Cause of Action is overruled.
Third Cause of Action for fraud
“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)
The essential elements for intentional misrepresentation are (1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damage. (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230-231.)
The elements for a cause of action for deceit by concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage. (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.)
“A duty to speak may arise in four ways: it may be directly imposed by statute or other prescriptive law; it may be voluntarily assumed by contractual undertaking; it may arise as an incident of a relationship between the defendant and the plaintiff; and it may arise as a result of other conduct by the defendant that makes it wrongful for him to remain silent.” (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 867.)
The elements of promissory fraud or fraud in the inducement are (1) the defendant made a promise to the plaintiff, (2) at the time the promise was made, the defendant did not intend to perform the promise; (3) the defendant intended to cause the plaintiff to rely on the promise; (4) the plaintiff reasonably relied on the promise; and (5) the plaintiff was harmed as a result. (Lazar v. Sup. Court (1996) 12 Cal.4th 631, 638-639; Muraoka v. Budget Rent-A-Car, Inc. (1984) 160 Cal.App.3d 107, 119.)
Promissory fraud (aka false promise) is sometimes referred to as a claim of “fraudulent inducement”. (Food Safety Net Services v. Eco Safe Systems USA, Inc. (2012) 209 Cal.App.4th 1118, 1131.) To establish a claim of fraudulent inducement, one must show that the defendant did not intend to honor its contractual promises when they were made.” (Agosta v. Astor (2004) 120 Cal.App.4th 596, 603.)
A promise of future conduct is actionable as fraud only if made without a present intent to perform. A declaration of intention, although in the nature of a promise, made in good faith, without intention to deceive, and in the honest expectation that it will be fulfilled, even though it is not carried out, does not constitute a fraud. Moreover, something more than nonperformance is required to prove the defendant’s intent not to perform his promise. If plaintiff adduces no further evidence of fraudulent intent than proof of nonperformance of an oral promise, he will never reach a jury. (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 481; 5 Witkin, Summary 10th (2005) Torts, § 781, p. 1131.)
Every
element of fraud must be pleaded with specificity. The particularity
requirement for fraud requires the pleading of facts showing how, when,
where, to whom, and by what means the representations were made. (Stansfield
v. Starkey (1990) 220 Cal. App. 3d 59, 73.) This is to provide the
defendant with notice and to give the court enough information to assess
whether there is a foundation for the charge of fraud. (Committee on
Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197,
216.) The requirement of specificity in a fraud action against a corporation
requires the plaintiff to 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. (Tarmann
v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)
Nonetheless, “[l]ess 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, 35 Cal. 3d at 216 (citation and internal quote
marks omitted).)
In addition, Plaintiff does not allege facts to show why Gehl and Gurnee are personally liable for representations made through the employment agreement, which was between Plaintiff and Xtraction, and in Xtraction’s Second Amended and Restated Bylaws.
Accordingly, the demurrer to this cause of action is sustained with leave to amend.
Fourth Cause of Action for intentional interference with contractual relations
The elements a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.)
“Shareholders may bring two types of actions, ‘a direct action filed by the shareholder individually (or on behalf of a class of shareholders to which he or she belongs) for injury to his or her interest as a shareholder,’ or a ‘derivative action filed on behalf of the corporation for injury to the corporation for which it has failed or refused to sue.’ (Friedman, Cal. Practice Guide: Corporations (The Rutter Group 2004) ¶ 6:598, p. 6–127.) ‘The two actions are mutually exclusive: i.e., the right of action and recovery belongs either to the shareholders (direct action) or to the corporation (derivative action).’ (Ibid.) When the claim is derivative, the ‘shareholder is merely a nominal plaintiff.... Even though the corporation is joined as a nominal defendant ..., it is the real party in interest to which any recovery usually belongs.’ (Friedman, supra, ¶ 6:602, pp. 6–128.1 to 6–128.2.)” (Schuster v. Gardner (2005) 127 Cal.App.4th 305, 311-312.)
Plaintiff’s Fourth Cause of Action does not seek recovery on behalf of Xtraction. The cause of action, as pled, is not a derivative claim. Plaintiff’s action is directed at an employment agreement between Plaintiff and Xtraction (an individual claim) and Xtraction’s bylaws (a direct claim by Plaintiff as a shareholder).
The Court concludes Plaintiff alleged sufficient facts to state this cause of action. (Complaint, ¶¶ 28-30, 47-49, 54, 82-89, Exhibit 1.)
Accordingly, the demurrer to the Fourth Cause of Action is overruled.
Fifth Cause of Action for intentional interference with prospective economic advantage
As with the fourth cause of action, Plaintiff’s Fifth Cause of Actioni is not seeking recovery on Xtraction’s behalf. Accordingly, this is not a derivative suit.
The elements of a cause of action for intentional interference with prospective economic advantage are: (1) an economic relationship between the plaintiff and some third party, with a reasonable probability of future economic benefit or advantage to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153; Plummer v. Day/Eisenberg (2010) 184 Cal.App.4th 38, 51.)
To recover for interference with prospective economic advantage, a plaintiff must plead and prove the defendant’s interference was wrongful by some measure beyond the fact of the interference itself. (Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 392-393; National Medical Transportation Network v. Deloitte & Touche (1998) 62 Cal.App.4th 412, 440.) Wrongful conduct is insufficient if it is merely unfair or immoral or the product of an improper but lawful purpose. Rather, an act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard. (Korea Supply Co., 29 Cal.4th at 1159.)
As to the economic advantage interfered with, “a plaintiff that wishes to state a cause of action for this tort must allege the existence of an economic relationship with some third party that contains the probability of future economic benefit to the plaintiff. This tort therefore ‘protects the expectation that the relationship eventually will yield the desired benefit, not necessarily the more speculative expectation that a potentially beneficial relationship will arise.’” (Korea Supply Co., 29 Cal.4th at 1164, citing Westside Center Associates v. Safeway Stores 23, Inc., 42 Cal.App.4th 507, 524.)
Plaintiff did not allege sufficient facts to state this cause of action. Plaintiff did not allege the relationship between Plaintiff and Xtraction had a reasonable probability of future economic benefit to Plaintiff. Plaintiff alleges Gehl, Gurnee, and Dunlop used Xtraction’s property, contacts, business model, and goodwill to create a competing business for themselves that was solely created to cut out Plaintiff. Plaintiff alleges in a conclusory fashion that this conduct was intended to disrupt Plaintiff’s relationship with Xtraction, but these allegations do not show how Gehl, Gurnee, and Dunlop purportedly breaching their fiduciary duties to Xtraction would disrupt Plaintiff’s relationship with Xtraction.
Accordingly, the demurrer to the Fifth Cause of Action is sustained with leave to amend.
Sixth Cause of Action for violation of Business & Professions Code section 17200
Business & Professions Code section 17200 prohibits “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” Under the unlawful prong, a violation of law may be actionable as unfair competition under Business & Professions Code section 17200. (Lueras v. BAC Home Loans Servicing, LP, 221 Cal.App.4th 49, 81.) “An unfair business practice occurs when that practice offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers…An unfair business practice also means the public policy which is a predicate to the action must be tethered to specific constitutional, statutory or regulatory provisions.” (Id. (internal citations omitted).) A fraudulent practice “require[s] only a showing that members of the public are likely to be deceived and can be shown even without allegations of actual deception, reasonable reliance and damage.” (Id. (internal citations omitted).)
The Court concludes Plaintiff alleged sufficient facts to show an unlawful, unfair, and/or fraudulent practice pursuant to section 17200.
Accordingly, the demurrer to the Sixth Cause of Action is overruled.
Seventh Cause of Action for breach of contract
“[T]he elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)
Plaintiff alleged sufficient facts to state this cause of action. (Complaint, ¶¶ 34-36, 50, and 107-114, Exhibit 2.) Accordingly, the demurrer to this cause of action is overruled.
Eighth Cause of Action for unjust enrichment
There is no standalone cause of action for unjust enrichment. The Court of Appeal for the First District, Second Division, has held that “[u]njust enrichment is not a cause of action, however, or even a remedy, but rather a general principle, underlying various legal doctrines and remedies. It is synonymous with restitution…. Unjust enrichment has also been characterized as describing the result of a failure to make restitution….” (McBride v. Boughton (2004) 123 Cal.App.4th 379, 387.)
A party to an express contract can assert a claim for restitution based on unjust enrichment by alleging in that cause of action that the express contract is void (because it was procured by fraud or is unenforceable or ineffective for some reason) or was rescinded. (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231.)
Under the law of restitution, “an individual is required to make restitution if he or she is unjustly enriched at the expense of another. A person is enriched if the person receives a benefit at another’s expense. Benefit means any type of advantage.… The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals, it is unjust for the person to retain it.” (First Nationwide Savings v. Perry (1992) 11 Cal.App.4th 1657, 1662-1663.)
The Demurrer to this cause of action is sustained with leave to amend.
Ninth Cause of Action for violation of Labor Code § 2802
“An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.” (Lab. Code, § 2802, subd. (a).)
If an employer requires an employee to travel on company business, the employer must reimburse the employee for the cost of that travel under Section 2802. (Oliver v. Konica Minolta Business Solutions U.S.A., Inc. (2020) 51 Cal.App.5th 1, 30.)
Plaintiff alleged sufficient facts to state this cause of action. (Complaint, ¶¶ 50, 119, and 121-122.)
Accordingly, the demurrer to the Ninth Cause of Action is overruled.
Tenth Cause of Action for itemized wage statements
This cause of action is governed by a one-year statute of limitations. (Code Civ. Proc., § 340, subd. (a); Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1108.)
Plaintiff’s employment was terminated on 9/30/2021. (Complaint, ¶¶ 29 and 48.) Plaintiff commenced this action on 11/4/2022, more than one year after his termination. Although Plaintiff alleges facts to attempt to overcome any statute of limitations contention, the facts alleged do not support tolling the statute of limitations for this statutory claim. (See, Complaint, ¶¶ 15-16.) The facts Defendants allegedly concealed involved engaging in business with Xtraction without letting Plaintiff know, and misrepresentations regarding Plaintiff being compensated more if Xtraction performed well. But those misrepresentations and/or concealed facts do not support rolling the statute of limitations for a Labor Code section 266 claim for failure to provide a proper wage statement.
Accordingly, the Demurrer to the Tenth Cause of Action is sustained. Although it is not clear if or how Plaintiff could cure this problem in an amended complaint, the Court will permit him an opportunity to do so if he believes he can do so in good faith.
Uncertainty
A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.) Errors and confusion created by “the inept pleader” are to be forgiven if the pleading contains sufficient facts entitling plaintiff to relief. (Saunders v. Cariss (1990) 224 Cal.App.3d 905, 908.) A demurrer for uncertainty should be overruled if the facts are presumptively within defendant’s knowledge. (Khoury, 14 Cal.App.4th at 616.) A party attacking a pleading on “uncertainty” grounds must specify how and why the pleading is uncertain, and where that uncertainty can be found in the challenged pleading. (Fenton v. Groveland Community Services Dept. (1982) 135 Cal.App.3d 797, 809, disapproved on other grounds in Katzberg v. Regents of the University of California (2002) 29 Cal.4th 300.) Here, the first through tenth causes of action are not so unintelligible that Defendants cannot reasonably respond. Any ambiguities can be clarified through discovery. (Lickiss v. Financial Industry Regulatory Authority (2012) 208 Cal.App.4th 1125, 1135; Khoury, 14 Cal.App.4th at 616.)
Accordingly, the demurrer on this ground is overruled.
Defendants are ordered to give notice.
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2019-01070788
Infoshare Systems, Inc. v. LA Teluga, LLC
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Motion to Strike or Tax Costs
The unopposed Motion by Cross-Complainant Kiran Muppavarapu (“Cross-Complainant”) to Strike the memorandum of costs filed by Cross-Defendant Vijayakumar Vattikuti (“Cross-Defendant”) is DENIED.
Cross-Complainant’s motion to tax specified costs is GRANTED. From the total costs of $20,036.77 sought by Cross-Defendant, the Court taxes $8,131.92.
The prevailing party in any civil action is entitled to recover costs as a matter of right. Code Civ. Proc. §1032. To claim them, the prevailing party must file and serve a memorandum of costs within 15 days from the date the clerk (or any party) mails notice of dismissal or entry of judgment. CRC 3.1700; Daniels v. Robbins (2010) 182 Cal. App. 4th 204, 228. The memorandum must include a supporting declaration affirming that the costs were reasonable and necessarily incurred. CRC 3.1700(a)(1). No proposed judgment is required in order to perfect the memo of costs. Fries v. Rite Aid Corp. (2009) 173 Cal. App. 4th 182, 185.
If the items in the cost bill appear on their face to be proper (by comparing the cost bill to the list of recoverable costs in CCP §1033.5), the verified memorandum of costs is prima facie evidence of their propriety. The burden then rests with the party seeking to tax costs to show they were improper, unreasonable, or unnecessary. Benach v. County of Los Angeles (2007) 149 Cal. App. 4th 836, 856. If the party seeking to tax costs makes a proper objection to an item in the cost bill (as determined after the trial court reviews the submissions), the burden then shifts back to the party claiming them as costs. Acosta v. SI Corp. (2005) 129 Cal. App. 4th 1370, 1380. The propriety of costs is a question of fact to be determined by the trial court. Jones v. Dumrichob (1998) 63 Cal. App. 4th 1258, 1266. An order denying a motion to tax costs, in whole or in part, means that the moving party must pay the costs allowed. Krikorian Premiere Theatres, LLC v. Westminster Central, LLC (2011) 193 Cal. App. 4th 1075, 1084.
Cross-Defendant’s Memorandum of Costs Was Timely Filed
Cross-Defendant’s memorandum of costs was filed within 15 days of entry and notice of judgment. It was therefore timely and not subject to being stricken on that basis. Cross-Complainant does not raise any other objection that would apply to the entire memorandum of costs.
Accordingly, the motion to strike the cost memorandum is denied.
Specific Costs
Cross-Complainant also asks the Court to tax certain of Cross-Defendant’s costs.
Item 1 – Filing Fees
Under the judgment, Cross-Defendant was the prevailing party on the Cross-Complaint. He therefore is entitled to recover his costs incurred in connection with the Cross-Complaint. Code Civ. Proc. § 1032.
Of the $1,423.24 in filing fees sought by Cross-Defendant, however, $635.32 were for filings connected with Infoshare’s Complaint, rather than Cross-Complainant’s Cross-Complaint. [See Memorandum, attachment 1g; Motion MPA at 3.]
The motion to tax is granted as to these costs, in the sum of $635.32.
Item 4 – Deposition Costs
Cross-Defendant seeks $2,107.75 for the costs of deposing Cross-Complainant. [Memorandum of Costs at attachment 4e.]
Cross-Complainant objects that it only cost him $1,273.00 for a copy of the deposition transcript.
But more than just the cost of a deposition transcript is recoverable. Recoverable costs include:
Taking, video recording, and transcribing necessary depositions,
including an original and one copy of those taken by the claimant and one
copy of depositions taken by the party against whom costs are allowed. Code Civ. Proc. § 1033.5(3)(A).
Still, according to Cross-Complainant, it was not Cross-Defendant who noticed the deposition. In the absence of any opposition by Cross-Defendant to the motion to tax, the motion is granted as to $834.37.
Item 5 – Service of Process
Recoverable costs for “service of process” are the fees for service of process, as opposed to providing notice during litigation. See Code Civ. Proc. § 1033.5(a)(4)(A)-(C).
These are not the costs in Cross-Defendant’s memorandum. [See Memorandum at attachment 5d; Motion MPA at 4.]
The motion to tax these costs of $260 is granted.
Item 16a
Fed Ex Costs
Cross-Defendant seeks to recover $34.76 in overnight federal express charges. [Memorandum at attachment 16a.]
Cross-Complainant objects that such costs are not recoverable.
Section 1033.5, subdivision (b) provides that the following
costs are not recoverable “except when expressly authorized by law: [¶] ...
[¶] (3) Postage, telephone, and photocopying charges, except for exhibits.”
Interpreting this statute, Ladas, supra, 19 Cal.App.4th 761, 23
Cal.Rptr.2d 810 concluded that it also precludes recovery for faxing
documents. (Id. at p.
775, 23 Cal.Rptr.2d 810; cf. Ripley v. Pappadopoulos (1994) 23 Cal.App.4th 1616,
1628, 28 Cal.Rptr.2d 878 [“the expenses of copying documents, Federal Express
and postage charges, and telecopy/fax charges” “are expressly disallowed as
costs unless expressly permitted by law”].) On the other hand, overnight
messenger fees may be recoverable if reasonable and necessary. (Foothill–De Anza Community College
Dist. v. Emerich, supra, 158 Cal.App.4th 11, 30, 69 Cal.Rptr.3d
678.) Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44, 74–75 (emphasis added).
In the absence of any opposition to the motion to tax and any showing that the overnight costs were reasonable and necessary, the motion to tax these costs is granted.
Lexis/Nexis & Westlaw Costs
Cross-Defendant seeks to recover $3,371.02 in costs for computer legal research on Lexis/Nexis and Westlaw. [Memorandum at attachment 16a.]
These costs are not recoverable.
Subdivision (b)(2) precludes recovery of investigation expenses
and attorney's fees are not compensable as costs in the absence of an
agreement of the parties or statutory authority. (Code Civ.Proc., § 1021.)
Fees for legal research, computer or otherwise, may not be recovered under
section 1033.5. Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 761, 776.
The motion to tax is granted as to these costs.
War Room & Copies
Cross-Defendant has requested costs $2,860.30 in the “other” category that it describes as “War Room & Copies.” [Memorandum at attachment 16a.]
Section 1033.5, subdivision (a)(12) explicitly allows a prevailing party to recover the cost of “photocopies of exhibits ... if they were reasonably helpful to aid the trier of fact.” Chaaban v. Wet Seal, Inc. (2012) 203 Cal.App.4th 49, 59.
But Cross-Defendant’s description clearly encompasses more than just photocopies.
Given the lack of information, there is an insufficient showing that these are recoverable costs. The motion to tax is granted as to these costs.
Meals
Cross-Defendant seeks to recover $136.15 for meals. [Memorandum at attachment 16a.] The cost of meals is not recoverable. Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44, 72.
The motion to tax is granted as to these costs.
Cross-Complainant is ordered to give notice.
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5 |
2022-01259325
Jamal
v. Thill |
1)
Motion to Quash Service of Summons 2) Case Management Conference
The unopposed motion by Specially Appearing Defendant Robert A. Thill (“Defendant”) to quash service of summons of the Complaint filed by Plaintiff Patrika Jamal (“Plaintiff”) is GRANTED.
Defendant’s request for judicial notice is granted.
Plaintiff’s proof of service indicates she served the Summons and Complaint on Defendant via overnight mail. (ROA 9; see also request for judicial notice.)
Overnight mail is not an authorized method for service of summons, which generally must be accomplished by either personal service (Code Civ. Proc., § 417.10(a)), substitute service (Code Civ. Proc., § 415.20), mail with acknowledgment of receipt Code Civ. Proc., § 415.30), or publication (Code Civ. Proc., § 417.10(b).
Defendant confirms he has never been personally served, served via substitute service, or served via mail with notice of acknowledgment. (Thill Decl., ¶¶ 3-6.)
“When a defendant challenges the court's personal jurisdiction on the ground of improper service of process the burden is on the plaintiff to prove … the facts requisite to an effective service.” (Summers v. McClanahan (2006) 140 Cal.App.4th 403, 413 [internal quotes omitted]; see Lebel v. Mai (2012) 210 Cal.App.4th 1154, 1163.)
Here, there is no opposition; thus, Plaintiff fails to meet her burden. As a result, the Motion is granted.
Defendant is ordered to give notice.
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6 |
2022-1260060
Moustafa v. Starbucks Coffee Company
|
Motion to Compel Production
OFF CALENDAR – withdrawn by moving party |
|
7 |
2022-01253918
Nava v. Nissan North America, Inc.
|
1) Motion to Compel Deposition (Oral or Written)
2) Motion to Compel Further Responses to Form Interrogatories
3) Motion to Compel Further Responses to Special Interrogatories
4) Motion to Compel Production
5) Motion to Compel Response to Requests for Admissions
OFF CALENDAR – Notice of Appeal filed.
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8 |
2022-01257215
Rivera v. Naheim Vineyards Owner LLC
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Motion to be Relieved as Counsel of Record
The Motion by DAG Law Firm APC, by Rachel Fishenfeld, attorneys of record for Plaintiff Myla Rivera, for an order to be relieved as counsel for Plaintiff is GRANTED.
Defendant shall provide the Court a proposed form of order, completely filled in with all the required information, including every future date currently set in the case.
The order relieving counsel will not be effective until the filing of proof of service of the signed order upon all parties, including Plaintiff.
Moving party is ordered to give notice.
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9 |
2022-01276746
Sheridan v. Beacon Hill Court Homeowners Association
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1) Demurrer to Complaint
2) Case Management Conference
Before the Court is a Demurrer by Defendant Beacon Hill Court Homeowners Association (“Defendant” or the “Association”) to the Third, Fourth, Fifth and Sixth Causes of Action in the Complaint filed by Plaintiff Keli Sheridan (“Plaintiff”). The Demurrer is sustained as to all four causes of action, all with 20 days leave to amend.
Facts
Plaintiff’s Complaint alleges the following six causes of action against Defendant: 1) Breach of Declaration, 2) Violation of Civil Code §4775(a), 3) Violation of the covenant of good faith and fair dealing, 4) Breach of fiduciary duty, 5) Negligence, and 6) Declaratory relief.
At issue on this Demurrer are the Third through Sixth causes of action.
Plaintiff alleges she owns property within the Association. Complaint ¶¶1, 2. Defendant and Plaintiff “are subject to a certain First Amended and Restated Declaration of Annexation of Townhome Project into Beacon Beach Hill Planned Community and Establishment of Delegate District No. 4 recorded in the office of the Orange County Record on 8-18-81 (‘Declaration’).” Id. ¶ 7. The Declaration establishes the association as the governing body for the management administration and operation of the Association. Id. ¶ 13. Moreover, the Declaration “sets forth the general powers and duties of the Association for management and control of the affairs and the business of the Association including, but not limited to, maintaining, repairing and replacing the common areas.” Id. ¶ 14.
Plaintiff further alleges that, pursuant to Sections 1.12 and 5.1(d) of the Declaration, “the Association is responsible to maintain, repair and replace the common areas, which includes subterranean soil, and drainage, which has caused and will continue to cause movement and property damage to the Plaintiff’s Property.” Id. ¶15.
During the past three years, the Plaintiff has repeatedly reported to the Association the extensive property damage to the Plaintiff’s Property caused by the expansive movement of the subterranean common area soil and the common area drainage which causes rainwater and surface water to travel to rather than away from the Plaintiff’s Property. Complaint ¶ 16. The Association took no effective corrective action, even though the Association is responsible for these common areas. Id. Over time, the water intrusion and property damage have become worse and will continue to worsen causing damage to Plaintiff’s home. Id.
1. The Court sustains the Demurrer to the Third Cause of Action for violation of the covenant of good faith and fair dealing.
“ ‘ “Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” ’ [] The covenant of good faith finds particular application in situations where one party is invested with a discretionary power affecting the rights of another. Such power must be exercised in good faith.” (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 371–372, internal citations omitted; CACI 325.)
Covenants, conditions, and restrictions comprise a contract between the association and individual owners. (See Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 240.)
Here, Plaintiff alleges the Declaration constitutes a contract between her and the Defendant. Plaintiff alleges that “Defendant Association breached its duty of good faith and fair dealing established in the Declaration by failing to properly maintain, repair and replace the common areas, as described herein.” Complaint ¶ 25.
Defendant argues this claim fails to state a claim because it alleges only a breach of the express terms of the Declaration, citing Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395. Plaintiff argues Careau is not instructive because it is not a homeowners’ association case.
Although a duty of good faith and fair dealing is implied into every contract, including the Declaration here, Plaintiff has not alleged facts that go beyond a breach of the express terms of the Declaration.
Plaintiff therefore has not properly stated a claim for breach of the covenant of good faith and fair dealing.
The Demurrer to the Third Cause of Action is sustained with leave to amend.
2. The Court sustains the Demurrer to the Fourth Cause of Action for breach of fiduciary duty.
The three elements of this cause of action are: existence of a fiduciary relationship, breach of fiduciary duty, and damages. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820.)
A homeowners association such as Defendant is a fiduciary that must act for the benefit of the corporation and its members. (Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 513; Cohen v. S & S Construction Co. (1983) 151 Cal.App.3d 941, 945.)
A homeowners' association has a fiduciary duty to treat the homeowners fairly. “[I]n recognition of the increasingly important role played by private homeowners’ associations in such public-service functions as maintenance and repair of public areas and utilities, street and common area lighting, sanitation and the regulation and enforcement of zoning ordinances, the courts have recognized that such associations owe a fiduciary duty to their members. [Citation.]” (Cohen v. Kite Hill Community Assn. (1983) 142 Cal.App.3d 642, 650-651.) Membership in a homeowners’ association is mandatory, and the association has the power to levy assessments, make rules and deny certain uses of the property. “Therefore, the Association must be held to a high standard of responsibility: ‘The business and governmental aspects of the association and the association's relationship to its members clearly give rise to a special sense of responsibility upon the officers and directors.... This special responsibility is manifested in the requirements of fiduciary duties and the requirements of due process, equal protection, and fair dealing.’ [Citations.]” (Id. at p. 651.)
As a fiduciary, a homeowners association cannot act arbitrarily in making enforcement decisions, but instead must proceed in good faith. (Cohen v. Kite Hill Community Assn. (1983) 142 Cal.App.3d 642, 651–652; see Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 265 [association's board must act reasonably and in good faith in making routine maintenance and repair decisions].)
Here, however, there is no allegation that Defendant acted arbitrarily. Rather, Plaintiff simply alleges a breach of the express terms of the Declaration: Plaintiff alleges that “The Association’s failure to comply with the Declaration’s requirement that the Association maintain, repair and replace the common areas, as described herein, and promptly repair any damage to the Plaintiff’s Property caused by Defendant Association’s failure to do so, constitutes a breach of the Defendant Association’s fiduciary duty to the Plaintiff.”
The Court concludes that Plaintiff has not alleged this claim, and the Demurrer to this cause of action is sustained with leave to amend.
3. The Court sustains the Demurrer to the Fifth Cause of Action for negligence.
Defendant argues that Plaintiff is alleging only a claim for breach of contract, citing Sands v. Walnut Gardens Condominium Assn. Inc. (2019) 35 Cal.App.5th 174. Where the issue involves the negligent failure of an owners’ association to perform its duties under a declaration of covenants, conditions, and restrictions, the action is for breach of contract, and there is no tort cause of action. (Id. at p. 177.) This is consistent with the general principle that such a declaration is a contract between the owners and an association, and the usual rule against “tortifying” a breach of contract. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal. 4th 223, 240; Erlich v. Menezes (1999) 21 Cal. 4th 543, 554).
Plaintiff argues in opposition that there is an independent statutory duty to maintain the common areas – specifically, Civil Code section 4775, which states in part: “Unless otherwise provided in the declaration of a common interest development, the association is responsible for repairing, replacing or maintaining the common area, other than exclusive use common area, and the owner of each separate interest is responsible for maintaining that separate interest and any exclusive use common area appurtenant to the separate interest.”
Plaintiff argues that her Fifth Cause of Action for negligence is based on section 4775. She argues that “… since the second cause of action for violation of Civil Code section 4775 is incorporated by reference into the fifth cause of action for negligence, the fifth cause of action for negligence states facts sufficient to constitute a cause of action.” Opp., p. 6:2-4.
But Plaintiff’s Complaint alleges only that the “The Association has a duty to exercise reasonable care in its work on the Association common area, including, but not limited to, the common areas described herein”, and that the Association breached this duty. Complaint ¶¶ 33-34. Thus, as alleged, Plaintiff’s Complaint does not make clear that she is alleging a violation of a statute as the basis of the alleged negligence.
Moreover, Plaintiff argues in opposition that the violation of this statute is negligence per se.
Where a statute establishes a party's duty, “ ‘proof of the [party's] violation of a statutory standard of conduct raises a presumption of negligence that may be rebutted only by evidence establishing a justification or excuse for the statutory violation.’ ” (Ramirez v. Plough, Inc. (1993) 6 Cal.4th 539, 547.) This rule, generally known as the doctrine of negligence per se, means that where the court has adopted the conduct prescribed by statute as the standard of care for a reasonable person, a violation of the statute is presumed to be negligence. (Casey v. Russell (1982) 138 Cal.App.3d 379, 383.)
The negligence per se doctrine, as codified in Evidence Code section 669, creates a presumption of negligence if four elements are established: (1) the party opposing a finding of negligence per se violated a statute, ordinance, or regulation of a public entity; (2) the violation proximately caused death or injury to person or property; (3) the death or injury resulted from an occurrence of the nature of which the statute, ordinance, or regulation was designed to prevent; and (4) the person suffering the death or the injury to his person or property was one of the class of persons for whose protection the statute, ordinance, or regulation was adopted.
Plaintiff’s Complaint also fails to allege these facts or that Section 4775 sets forth the alleged standard of care.
Accordingly, the Demurrer to this cause of action is sustained with leave to amend.
4. The Court sustains the Demurrer to the Sixth Cause of Action for declaratory relief.
Any person who desires a declaration of rights or duties with respect to property may, in case of an actual controversy relating to rights and duties of respective parties under a written instrument, bring an action or cross-complaint in an appropriate court for a declaration of rights and duties, including a determination of construction, interpretation, or validity of the written instrument. The court may make a binding declaration of rights or duties. The determination may be had before there has been a breach of the obligation. (Code Civ. Proc. § 1060.)
Plaintiff alleges that “[a]n actual controversy has arisen and now exists between Plaintiff and Defendant Association concerning their respective rights and duties in that Plaintiff contends that the Association breached its obligations to Plaintiff by failing to maintain, repair, and replace the common areas, which includes the subterranean expansive soil and the common area drainage that directs rainwater and surface water toward rather than away from the Plaintiff’s Property. The Association disputes these contentions.” Complaint ¶ 37. Accordingly, “Plaintiff desires a judicial determination of her rights and duties and a declaration as to the obligations of Defendant Association.” Id. ¶ 38.
Declaratory relief will not lie to determine an issue that can be determined in the other causes of action in the action. (Cal. Ins. Guar. Ass’n v. Super. Ct. (1991) 231 Cal.App.3d 1617, 1623.)
Here, Plaintiff’s Sixth Cause of Action raises the same issue that will be determined in her other causes of action. Thus, her claim for “declaratory relief” is duplicative and superfluous.
In opposition, Plaintiff cites several cases that are inapposite. For example, Plaintiff argues her claim is permitted by Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal. App. 4th 965, 974 and Ekstrom v. Marquesa at Monarch Beach Homeowners Assn. (2008) 168 Cal. App. 4th 1111, 1114. But in each of these cases, the only cause of action was for declaratory relief. That is not the case here.
Plaintiff also cites Hess v. Country Club Park (1931) 213 Cal. 613, which was an action to annul certain building restrictions, where there had been no breach of the restrictions at the time the suit was filed. It was a true declaratory relief claim.
The Court finds this cause of action duplicative of the others and sustains the Demurrer. Although it is difficult to see how Plaintiff can amend this claim in a way that will make it not redundant/duplicative of the others, the Court will give her an opportunity to do so.
Defendant is ordered to serve notice.
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10 |
2021-01205045
Yoo v. Reynolds
|
Motion to Set Aside/Vacate
Defendant Jason Reynolds (“Defendant” or “Reynolds”) moves to set aside a Settlement Agreement and Stipulated Judgment he entered into with Plaintiff Ryan Kim (“Plaintiff” or “Kim”).
Defendant asks the Court to set aside the Settlement Agreement and Stipulated Judgment based on inadvertence, surprise, mistake, or excusable neglect under section 473(b) of the Code of Civil Procedure (“CCP); based on the policy that “controversies should be heard and disposed of on their merits”; and because Defendant contends both agreements are unconscionable, oppressive and unlawful.
For the reasons set forth below, the Motion is DENIED.
As an initial matter, the Court notes that judgment in this case has not yet been entered in favor of Plaintiff Ryan Kim. On 6/29/22, the Court granted Plaintiff’s Motion to enter judgment against Defendant under CCP section 664.6 based on the Stipulated Judgment. See ROA #101. However, the Proposed Judgment submitted thereafter by Plaintiff was rejected by the Clerk’s office and was never filed. See ROA # 117. Accordingly, no judgment has been entered.
The Settlement Agreement and Stipulated Judgment
Plaintiffs Kasie Yoo and Ryan Kim (collectively, “Plaintiffs”) initiated this action against Defendants Jason Reynolds and Anchor Bay Group by filing their Complaint on June 10, 2021. Plaintiffs alleged that Defendant Reynolds is a licensed real estate broker and that Defendant Anchor Bay Group is a suspended California corporation. Complaint at ¶¶ 1, 2. The gravamen of the Complaint is that Defendants offered Plaintiffs an “opportunity to become lenders by lending money to various third parties which [Defendant] promised and assured would be secured by promissory notes secured by deeds of trust recorded against real property, in effect making Plaintiffs lenders to various third parties which Defendants promised they would manage and all plaintiffs had to do was provide the capital to them.” Id. ¶ 7. Plaintiffs allege they gave Defendants a total of $350,000 for the purposes of making such loans, but Defendants never used the funds to make loans; instead, “Defendants just pocketed [Plaintiffs’] money.” Id. ¶¶ 9-12.
Plaintiffs allege that, upon being confronted with “this fraud, Defendants signed a promissory note in favor of Kasie Yoo in the principal amount of $250,000” and a “promissory note in favor of Ryan Kim in the principal amount of $100,000 due by July 14, 2020.” Id. ¶¶ 11-12. Defendants did not pay either promissory note. Id.
About five months after the Complaint was filed, Defendant Reynolds and Defendant Anchor Bay Group (along with Nina Hanna and Global Bancorp) entered into a written Settlement Agreement and Mutual Release (the “Settlement Agreement”) with Plaintiff Ryan Kim. See Reynolds Decl. Exh. 3. (Plaintiff Kasie Yoo was not a party to the Settlement Agreement.)
In the Settlement Agreement, Defendants agreed to pay Plaintiff Ryan Kim a total of $115,000 over a period of several months. See Reynolds Decl. Exh. 3 ¶ 1. They also agreed to “a stipulated judgment on all causes of action in the Lawsuit, including fraud and breach of fiduciary duty (the ‘Judgment’) in the amount of $250,000, representing the total amount claimed by Plaintiff to be due, including interest, attorney’s fees and a reasonable amount of punitive damages, less credit against the amount of $250,000 for an amount equal to any payments received prior to default . . . “ Id. ¶ 2.
The “Stipulation for Entry of Judgment for Fraud and Breach of Fiduciary Duty Against Defendant Jason Reynolds” set forth, in Paragraph 1, that “Judgment herein may be entered in favor of PLAINTIFF [Ryan Kim] and against DEFENDANT [Jason Reynolds] for the sum of $250,000, which includes principal, interest, attorney’s fees, costs and punitive damages (‘JUDGMENT AMOUNT’). The judgment is expressly for fraud and breach of fiduciary duty.” Id. ¶ 1.
Paragraph 2 of the Stipulation for Entry of Judgment provides that “PLAINTIFF has agreed to accept the reduced sum of $115,000 (‘SETTLEMENT AMOUNT’) to be paid in specified installments at specified times. Id. ¶ 2 (emphasis added)
Significantly, the Stipulated Judgment also provides:
“IT IS FURTHER STIPULATED that each and all of the allegations, claims and conditions of PLAINTIFF alleged in the Complaint on file herein are true and the foregoing shall be deemed to have the force and effect as though embodied in formal findings of fact and conclusions of law, and that the DEFENDANT admits liability to PLAINTIFF in the amount set forth in paragraph 1 above. The SETTLEMENT AMOUNT, conditioned on timely installment payments, is part of the original debt that DEFENDANT admits it owes, resulting in an agreement to forebear on the immediate collection of the debt in full.”
(Ex. 4, ¶5, emphases added.) As noted above, the amount “set forth in paragraph 1” of the Stipulated Judgment, for which Defendant admitted liability, is $250,000.
The Merits of The Motion
Defendant Reynolds seeks to set aside the Settlement Agreement and Stipulated Judgment on the on a number of grounds. None of them have merit. Defendant argues the Court should set aside the Settlement Agreement and Stipulated Judgment on the ground of mistake, inadvertence, surprise or excusable neglect under CCP section 473. Defendant did not meet his burden under the
statute. There are no grounds for relief shown here. The fact that an
admission of fraud precludes discharge of a claim in bankruptcy is not
unsettled law or law that is complex or debatable.
(State Farm Fire & Cas. Co. v. Pietak (2001) 90
Cal.App.4th 600, 611; McCormick v. Board of Supervisors
(1988) 198 Cal.App.3d 352, 360.) Defendant chose to appear in this case in
propria persona and then chose to settle this case a few months later,
with admissions that the allegations of the Complaint were true and that he
in fact owed the full $250,000 sought by Plaintiff against him. Further, the
Bankruptcy Court has issued an order allowing this case to proceed to
judgment. Defendant also argues the Court should set aside the Settlement Agreement and Stipulated Judgment because he was “coerced” into signing them. This, too, has no merit. Defendant has not shown the Settlement Agreement and Stipulated Judgment were the product of coercion.
A stipulated judgment, like other contracts, may be avoided on grounds of physical coercion, undue influence, or blackmail. (Philippine Export & Foreign Loan Guarantee Corp. v. Chuidian (1990) 218 Cal.App.3d 1058.) But none of that is proven here. Defendant says he “felt coerced into signing a stipulated judgment and settlement agreement in favor of Kim” because he thought if he did not, Plaintiff would pursue claims against another individual, Nina Hanna. Reynolds Decl., ¶¶9, 11. Threatening to assert claims against another individual – or to add that individual as a defendant in the action if the claims are not resolved – does not amount to physical coercion. (The Court notes that Reynold’s claim that he only entered into the Settlement Agreement/Stipulated Judgment because he was trying to protect Nina Hanna from legal exposure rings hollow in light of the fact that Nina Hanna was a party to the Settlement Agreement.)
Further, the fact that Defendant chose to proceed without counsel does not mean he was subjected to unlawful coercion.
Defendant argues that the Stipulated Judgment is unconscionable and unlawful under CCP section 726, which provides “[t]here can be but one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property, or an estate for years therein.” Defendant has not shown this statute has any application here, much less that section 726 makes the Stipulated Judgment unlawful and unenforceable.
Nor has Defendant shown any facts establishing that the Settlement Agreement and Stipulated Judgment are both procedurally and substantively unconscionable.
Finally, contrary to Defendant’s argument, the Court finds the Stipulated Judgment does not constitute or include a liquidated damages clause that is void as a violation of public policy.
In light of Defendant Reynold’s written admission that the allegations of Plaintiff’s Complaint are true, and his further written admission that he owed Plaintiff the full sum of $250,000, the Court finds this case more like Jade Fashion & Co., Inc. v. Harkham Industries, Inc. (2014) 229 Cal.App.4th 635, than Graylee v. Castro (2020) 52 Cal.App.5th 1107 or Vitatech International, Inc. v. Sporn (2017) 16 Cal. App. 5th 796. Here, as in Jade Fashion, the parties’ Stipulated Judgment “was not an agreement to settle or compromise a disputed claim. Rather, it was an agreement to forbear on the collection of a debt that was admittedly owed . . . (Id. at 648 (emphasis added).)
In sum, the $250,000 amount of the Stipulated Judgment does not represent an unenforceable penalty. It represents the amount that Defendant Reynolds expressly acknowledged he owed to Plaintiff Kim for his breaches of their agreements and for his fraud.
The Motion is denied. Plaintiff is ordered to give notice.
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11 |
2022-01284820
Barrios v. Irish
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1) Demurrer to Complaint
2) Motion to Strike Portions of Complaint
3) Case Management Conference
A. Demurrer
Before the Court is a Demurrer by Defendants Jodi Irish and David Barclift (collectively, “Defendants”) to the Complaint filed by Plaintiff Biridiana Barrios (“Plaintiff”), as well as a Motion by Defendants to strike portions of the Complaint.
As explained below, the Demurrer is SUSTAINED IN PART and DENIED IN PART; the Motion to Strike is DENIED in its entirety.
B. Demurrer
The Court sustains Defendants’ Demurrer to the first and third causes of action – for negligence and false imprisonment – in Plaintiff’s Complaint. The Demurrer is overruled as to the second cause of action for battery.
As an initial matter, Plaintiff filed her Opposition brief just four court days before the hearing. This violates Code of Civil Procedure (“CCP”) section1005(b), which provides that all opposition papers “shall be filed with the court and a copy served on each party at least nine court days” before the hearing. Plaintiff offered no explanation for the tardy filing and did not attempt to show excusable neglect or otherwise seek relief for the untimely filing.
The Court declines to consider the extremely tardy Opposition. (Kapitanski v. Von's Grocery Co., Inc. (1983) 146 CA3d 29, 32-33; CRC 3.1300(d).)
For purposes of the demurrer, the Court accepts (as it must) the truth of the following facts alleged in the Complaint:
On October 10, 2020, at approximately 9:35 a.m. plaintiff was delivering packages for On-Trac delivery service. Plaintiff was wearing an On-Trac delivery shirt. Plaintiff mistakenly left a package at Defendant’s address at 6327 Morgan Way. Plaintiff returned to retrieve the mistakenly-delivered package and was returning to her vehicle. (Compl., ¶8.)
Plaintiff was then confronted by the Defendants who apparently (and unreasonably) believed that the Plaintiff was stealing a package that belonged to Defendants. (Compl., ¶8.)
Plaintiff attempted to explain that she was retrieving a package that was addressed for 6327 Hancock that had been mistakenly left at Defendants’ door. Plaintiff even showed defendant the package addressed to the Hancock address in an attempt to defuse the situation and calm the Defendants. Defendants were not calmed. Instead, Defendants forcibly took the keys to Plaintiff’s vehicle so she could not leave. (Compl., ¶8.)
Defendants then assaulted Plaintiff by grabbing Plaintiff's arms and neck. In an effort to get away, Plaintiff struggled against Defendants. Defendants then grabbed Plaintiff’s hair and tried to throw her to the ground. Despite Plaintiff’s efforts to try to get away from Defendants, Defendants held onto her. In a further effort to defend herself, Plaintiff tried to bite defendant who then started punching her multiple times. (Compl., ¶8.)
These events were recorded on a cell phone by a neighbor, which the responding police officer viewed on- scene and described in the police report. (Compl., ¶8.)
1. The Court sustains the Demurrer to the first cause of action for negligence.
“ ‘The elements of a cause of action for negligence are well established. They are “(a) a legal duty to use due care; (b) a breach of such legal duty; [and] (c) the breach as the proximate or legal cause of the resulting injury.” ’ ” (Ladd v. County of San Mateo (1996) 12 Cal.4th 913, 917.)
“The first element, duty, ‘may be imposed by law, be assumed by the defendant, or exist by virtue of a special relationship.’ ” (Doe v. United States Youth Soccer Assn., Inc. (2017) 8 Cal.App.5th 1118, 1128.) “[T]he existence of a duty is a question of law for the court.” (Ky. Fried Chicken of Cal. v. Superior Court (1997) 14 Cal.4th 814, 819.)
Plaintiff alleges that the Defendants “had a duty to act reasonably with respect their mistaken belief that Plaintiff was somehow stealing a package from Defendants’ property.” (Compl., ¶10.) Plaintiff alleges that there is a duty to “act in a reasonable manner when interacting with other people”. (Id.)
The Court finds that Plaintiff has not alleged facts to show such duties.
Moreover, Plaintiff has not alleged that breach of this purported duty is what caused Plaintiff’s alleged damages, as opposed to the alleged intentional acts of violence.
The Demurrer to this cause of action is SUSTAINED. The Court will hear from Plaintiff at the hearing re whether she wishes leave to amend and, if so, what additional facts Plaintiffs would allege.
2. The Court overrules the Demurrer to the second cause of action for battery.
“The essential elements of a cause of action for battery are: (1) defendant touched plaintiff, or caused plaintiff to be touched, with the intent to harm or offend plaintiff; (2) plaintiff did not consent to the touching; (3) plaintiff was harmed or offended by defendant's conduct; and (4) a reasonable person in plaintiff's position would have been offended by the touching.” (So v. Shin (2013) 212 Cal.App.4th 652, 669; CACI 1300.)
Here, Plaintiff alleges Defendants touched Plaintiff repeatedly, punching, kicking, grabbing, restraining her with the intent to harm or offend her. Plaintiff did not consent to the touching at any time. Plaintiff was harmed by Defendants’ harmful and offensive conduct. (Compl., ¶16.)
Plaintiff has plainly sufficiently alleged this cause of action.
Defendants argue “[t]he complaint is not plead with sufficient facts to determine what specific acts each defendant committed that was a battery.” The Court disagrees. A plain reading of the Complaint shows that both moving Defendants are alleged to have battered Plaintiff.
Defendant also argues that Plaintiff fails to allege that their actions were not lawful at the time.
To the extent Defendants are suggesting they were defending themselves, that is an affirmative defense. (Bartosh v. Banning (1967) 251 Cal.App.2d 378, 386, “Self-defense being an affirmative defense, it must, in a civil action, be established by the defendant by a preponderance of the evidence.”; CACI 1304.)
The Demurrer to this cause of action is OVERRULED.
3. The Court sustains the Demurrer to the third cause of action for false imprisonment without leave to amend.
Defendants argue that this claim is time-barred on the face of the Complaint. The Court agrees.
Pursuant to CCP section 340(c), the statute of limitations for false imprisonment is one year. The cause of action accrues when the confinement ends. (Scannell v. County of Riverside (1984) 152 CA3d 596, 614.)
The incident at issue here occurred on October 10, 2020. (Compl., ¶8.) The Complaint was filed on October 5, 2022, well over one year after accrual. (ROA 2.)
Accordingly, the Demurrer is sustained without leave to amend as to this cause of action, as it does not appear there is any way for Plaintiff to remedy this legal deficiency. To the extent Plaintiff disagrees, the Court will hear from Plaintiff’s counsel on this issue at the hearing.
C. Motion to Strike
The Court DENIES Defendants’ Motion to Strike.
As set forth in Defendant’s Notice of Motion and Motion to Strike, they ask the Court to strike the following:
“1. From Plaintiff’s prayer on Page 13 of the Complaint: ‘13. For punitive damages according to proof.’
“2. All references to the terms and derivative of ‘malice’, ‘oppression’, and ‘fraud’ on the grounds that Plaintiff has failed to properly plead claims for Negligence, Battery and False Imprisonment, and these allegations are without basis or factual support and are uncertain. “
Notice of Motion and Motion at 3.
Defendants argue that “Plaintiff fails to allege with the requisite specificity any facts to support her claims for punitive damages against Defendants.”
Civil Code section 3294 authorizes punitive damages only where it is proven by clear and convincing evidence that a defendant is guilty of “oppression, fraud, or malice.” The terms “oppression,” “fraud,” and “malice” are expressly defined by the statute for the purposes of determining the viability of the claim for punitive damages. “Oppression” is defined as “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.” (Civ. Code, § 3294, subd. (c)(2).)
Here, as the Court finds above, Plaintiff has properly alleged a claim against Defendants for battery. The court reads allegations of a pleading as a whole, all parts in their context, and assumes their truth. (Courtesy Ambulance Service v. Superior Court (1992) 8 Cal. App. 4th 1504, 1519; Clauson v. Superior Court (1998) 67 Cal. App. 4th 1253, 1255).
Based on the facts alleged, and accepting them as true, the Court concludes Plaintiff has alleged despicable conduct sufficient to state a claim for punitive damages.
Accordingly, the Court denies Defendants’ request to strike punitive damages from the prayer for relief.
The Court also denies Defendants’ request to strike “[a]ll references to the terms and derivative of ‘malice,’ ‘oppression,’ and ‘fraud.’” Motion to Strike at 3.
First, the Notice of Motion is improper as it does not point to specific paragraphs or quote the specific language that Defendants seek to strike. (CRC 3.1322, “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.”) The importance of this requirement is underscored here, given that it is entirely unclear what Defendants are referring to when they ask the Court to strike “[a] ll references to the terms and derivative of . . . .” (Notice of Motion and Motion at 3 (emphasis added).)
Second, in any event, given that Plaintiff has sufficiently alleged a cause of action for battery against Defendants, there is no basis to strike these allegations.
Thus, the Motion to Strike is denied in its entirety.
Moving Defendants are ordered to give notice.
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2022-01299141
Abe Financial Services Inc v. Orrick, Herrington & Sutcliffe LLP
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Motion to Compel Arbitration
Before the Court is a Motion by Defendants Orrick, Herrington & Sutcliff LLP (“Orrick”) and Khai LeQuang (“LeQuang”) (collectively, “Defendants”) to compel Plaintiffs Abe Financial Services Inc. and Abraham Khader (collectively, “Plaintiffs”) to arbitrate their claims against Defendant and to stay the action pending conclusion of the arbitration proceedings.
For the reasons set forth below, the Motion is GRANTED; the action is stayed pending conclusion of the arbitration proceedings; and an ADR Review hearing is set for October 30, 2023, at 9:00 a.m. in Department C31.
Section 1281.2 of the Code of Civil Procedure (“CCP”) provides, inter alia:
“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy 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. (c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. …”
(Emphasis added.)
CRC 3.1330 requires that a petition to compel arbitration or to stay proceedings pursuant to Code Civ. Proc. §1281.2 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be attached to the petition and incorporated by reference
“‘[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable. Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence. If the party opposing the petition raises a defense to enforcement--either fraud in the execution voiding the agreement, or a statutory defense of waiver or revocation (see § 1281.2, subds. (a), (b))--that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.’” Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal. App. 4th 754, 761, quoting Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal. 4th 394, 413.
Defendants have presented two retainer agreements – one dated 2/3/2020 and the other dated 9/11/2020 – each of which contains an arbitration provision, concededly signed by Plaintiffs.
Focusing on the 9/11/2020 engagement letter, the letter sets out the “engagement of Orrick, Herrington & Sutcliffe LLP ("Orrick") as counsel to represent [Plaintiffs] in connection with the litigation KKMB, LLC v. Abraham Mattar Khader, et al.”
The included arbitration provision covers any dispute “relating to any aspect of the engagement and [Defendants’] representation of [Plaintiffs].” [Khader Decl. (ROA #36), Ex. B at Standard Terms § 11.] On its face, this description covers Plaintiffs’ claims here. Plaintiffs allege that during the engagement Defendants misled Plaintiffs about the fee structure that would apply to Defendants’ representation of Plaintiffs in the matter they were engaged for, and that as a result Plaintiffs continued the engagement only to be hit with a demand for an excessive amount of fees. [Complaint, ¶¶ 14-16 and Ex. A.]
Plaintiffs argue that the arbitration agreement does not cover their claims here because they are not suing on the engagement letters but on a separate alleged fee agreement. But this does not dispense with the arbitration provision, as it is broad enough to cover any dispute connected to the engagement and Defendants’ representation of Plaintiffs in the identified litigation, and it expressly survives termination of the agreement. [Khader Decl. (ROA #36), Ex. B at Standard Terms § 11, first sentence of second paragraph.]
By its terms, the arbitration agreement covers disputes arising out of the attorney-client relationship created by the engagement letter – including fee disputes and claims of fraud. Plaintiffs’ current claims fall squarely within this scope.
Plaintiffs also argue that no arbitration agreement exists because they were induced to enter into the agreement by fraud – i.e., Defendants did not warn them that there was an arbitration provision in the written agreement Plaintiffs received and signed. Khader declares he did not know there was an arbitration provision in the retainer agreement and not intend to – and did not – agree to arbitration.
A party can resist arbitration on the ground he or she never agreed to the underlying contract containing the arbitration clause, but failure to read or understand the arbitration clause is generally no defense. (Rutter ADR §5:90, citing e.g. Madden v. Kaiser Found. Hosps. (1976) 17 C3d 699, 710.) “When a person with the capacity of reading and understanding an instrument signs it, he may not, in the absence of fraud, coercion or excusable neglect, avoid its terms on the ground he failed to read it before signing it.” (Id., quoting from Bolanos v. Khalatian (1991) 231 CA3d 1586, 1590.)
Plaintiffs cite to a State Bar Opinion stating that an attorney has an ethical duty to disclose to an existing client the terms and consequence of an arbitration agreement. [Opp. at 13.]
But this obligation does not require a lawyer to do more than set the arbitration agreement out clearly and identifiably in a written agreement. “The State Bar opinion therefore does not support the notion that a client need not read a new retainer agreement because an attorney's fiduciary duty inherently requires additional, direct communication ‘explaining’ it.” Desert Outdoor Advertising v. Superior Court (2011) 196 Cal.App.4th 866, 876 (finding sufficient – and enforceable – a law firm’s retainer agreement with clearly stated arbitration provision). A client cannot claim fraud because they did not read the agreement before signing it. Id. at 875.
[N]either the State Bar opinion nor Powers, which discusses the opinion, provide any support for the assertion that the scope of Murphy's fiduciary duties was so broad it excused petitioners from reading the Luce Forward retainer agreement, making their failure to read the agreement “reasonable,” a proposition essential to their claim of fraud in the execution.
Desert Outdoor Advertising v. Superior Court (2011) 196 Cal.App.4th 866, 875.
To the extent that Plaintiffs’ argument is broader than this -- that is, that the entire engagement agreement was induced by fraud so the whole engagement agreement is voidable – that is an issue for the arbitrator.
As contrasted with fraud in the inception, fraud in the inducement occurs when the promisor knows what he or she is signing, but that person's consent is obtained by fraudulent misrepresentation. Mutual assent is present, and a contract is formed, but that contract is voidable and subject to rescission.9 Because an agreement to arbitrate is separable from the other portions of a contract, under California law, claims of fraud in the inducement of the contract generally, and not going specifically to the agreement to arbitrate, are to be decided by the arbitrator, rather than the court.
12 Cal. Real Est. § 45:31 and n. 10 (4th ed.) (citing, among other cases, Saint Agnes Medical Center v. PacifiCare of California, 31 Cal. 4th 1187, 1198–1199, 8 Cal. Rptr. 3d 517, 82 P.3d 727 (2003); Rosenthal v. Great Western Fin. Securities Corp., 14 Cal. 4th 394, 415, 58 Cal. Rptr. 2d 875, 926 P.2d 1061 (1996); Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street, 35 Cal. 3d 312, 322–323, 197 Cal. Rptr. 581, 673 P.2d 251 (1983). See also 6 Witkin, Ca. Proc., PWT §§630-32 (2022).
Further, Defendant LeQuang is a party to and/or covered by this agreement. Plaintiffs’ argument appears to be based on the assumption that LeQuang is not covered by the arbitration provision because he signed the engagement agreement as a partner of Orrick and not individually. [Opp. at 7:9-12, 11:11-26.]
But LeQuang is a partner of Orrick, and Plaintiffs’ claims against him are based on the same agreement and same relationship and are thoroughly entwined with their claims against Orrick Herrington. See Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal. App. 4th 696, 715 (“the claims against the nonsignatory were dependent upon, or inextricably bound up with, the obligations imposed by the contract … Under the doctrine of equitable estoppel, if a plaintiff relies on the terms of an agreement to assert his or her claims against a nonsignatory defendant, the plaintiff may be equitably estopped from repudiating the arbitration clause of that very agreement”); Segal v. Silberstein (2007) 156 Cal. App. 4th 627, 636 (finding business partners to be sufficiently identified); Westra v. Marcus & Millichap Real Estate (2005) 129 Cal. App. 4th 759, 766 (real estate broker); Norcal Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 76 (“the common thread … is the existence of an agency or similar relationship between the nonsignatory and one of the parties to the arbitration agreement”); County of Contra Costa v. Kaiser Foundation Health Plan, Inc. (1996) 47 Cal.App.4th 237, 242 (“A nonsignatory to an agreement to arbitrate may be required to arbitrate, and may invoke arbitration against a party, if a preexisting confidential relationship, such as an agency relationship between the nonsignatory and one of the parties to the arbitration agreement, makes it equitable to impose the duty to arbitrate upon the nonsignatory”).
Plaintiffs’ remaining arguments go to whether there is a defense to enforcement of that agreement.
Defenses to Enforcement
Possibility of Inconsistent Rulings
Plaintiffs argue arbitration should be denied due to the risk of inconsistent results.
Under California law, when a
party to an arbitration agreement is also a party to a pending court action
with a third party, and there is a possibility of conflicting rulings on a
common issue of law or fact, the court has several options. It may refuse to
compel arbitration, or it may stay either the arbitration or the court
proceeding pending completion of the proceedings in the other forum. (Code of Civ. Proc., § 1281.2, subd. (c)) (section 1281.2(c).) Under the Federal Arbitration Act, 9 U.S.C. section 1 et seq. (FAA), the court's
only option in these circumstances is to stay the court proceeding and compel
the arbitration. Rodriguez v. American Technologies, Inc. (2006) 136 Cal. App. 4th 1110, 1114, 1117 (emphasis added). There is no contention that the FAA applies here and no reference to it in the arbitration provision.
But Plaintiffs’ argument is based on their presumption that their claims against Defendant LeQuang will remain in court and only their claims against Orrick are subject to arbitration. As discussed above, all the claims are subject to arbitration so there is no risk of inconsistent results from two separate proceedings.
Rescission
Plaintiffs also argue the 9/11/2020 engagement letter agreement was rescinded by the parties’ purported agreement in 2021 for a flat fee payment structure. [Opp. (ROA #33) at 10-11; Khader Decl. (ROA #36), Ex. C.]
Again, however, arguments that go to the rescission or voiding of the entire agreement are heard by the arbitrator, not the court. 12 Cal. Real Est. § 45:31 and n. 10 (4th ed.) (citing, among other cases, Saint Agnes Medical Center v. PacifiCare of California, 31 Cal. 4th 1187, 1198–1199, 8 Cal. Rptr. 3d 517, 82 P.3d 727 (2003); Rosenthal v. Great Western Fin. Securities Corp., 14 Cal. 4th 394, 415, 58 Cal. Rptr. 2d 875, 926 P.2d 1061 (1996); Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street, 35 Cal. 3d 312, 322–323, 197 Cal. Rptr. 581, 673 P.2d 251 (1983). See also 6 Witkin, Ca. Proc., PWT §§630-32 (2022).
Waiver
Plaintiffs also rely on their alleged 2021 agreement to argue Defendants waived their right to arbitrate – essentially by drafting a new agreement. [Opp. at 10:13-16.] This is simply Plaintiffs’ rescission argument recast as a “waiver” argument.
In any event, Defendants have not acted contrary to arbitration by litigating this case in court or by delaying in asserting their right to arbitration. St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195-96.
Unconscionability
Finally, Plaintiffs assert the arbitration provision is unconscionable. They argue (1) they were “surprised” to find an arbitration provision in the engagement letter agreement; and (2) Orrick will have an advantage before JAMS (the arbitrator identified in the arbitration provision) because it is a repeat client at JAMS. [Opp. at 14-16.]
The core concern of unconscionability doctrine is the absence of meaningful choice on the part of one of the parties, together with contract terms which are unreasonably favorable to the other party. Sonic Calabasas A, Inc. v. Moreno, (2013) 57 Cal.4th 1109, 1145. “If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.” Civ. Code §1670.5(a); Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 122. The absence of severability clause is irrelevant to the determination whether the offensive provisions are “severable” for purposes of unconscionability analysis. Severability is decided as a matter of state law. Terminix Int’l Co., LP v. Palmer Ranch Ltd. Partnership (11th Cir. 2005) 532 F.3d 1327, 1331.
Unconscionability has both a procedural and a substantive element: the procedural element focuses on the existence of oppression or surprise and the substantive element focuses on overly harsh or one-sided results. Armendariz, 24 Cal.4th at 114.
To be unenforceable, a contract must be both procedurally and substantively unconscionable, but the elements need not be present in the same degree. The analysis employs a sliding scale: “…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.” Armendariz, 24 Cal.4th at 114; Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 174-75.
As explained below, Plaintiffs have not shown either procedural or substantive unconscionability, much less both.
Procedural Unconscionability
Procedural unconscionability concerns the manner in which the contract was negotiated and the parties’ circumstances at that time. It focuses on the factors of oppression or surprise. Kinney v. United HealthCare Services, Inc. (1999) 70 Cal. App.4th 1322, 1329.
Plaintiffs do not identify any procedural unconscionability beyond their professed “surprise.” Plaintiffs were surprised, apparently, because they did not read the entire agreement.
Surprise usually involves supposedly agreed-upon terms buried in complex documentation. Armendariz, 24 Cal. 4th at 114.
Plaintiffs do not contend, much less provide evidence, that they were prevented from reading the entire agreement, including the terms they signed, e.g., by Defendants limiting their time to review the document or insisting that Plaintiffs sign multiple agreements at once with insufficient time to review.
Nor was the arbitration provision hidden or in unusually small type. It is a separate, enumerated section with a title, underlined and in bold, of “Arbitration.”
Nor have Plaintiffs contended or shown the agreement was adhesive. There is no showing Plaintiffs were in an unequal position or not able to negotiate. Armendariz, 24 Cal.4th at 113.
Plaintiffs have not shown procedural unconscionability.
Substantive Unconscionability
To be substantively unconscionable, contract terms must be “unduly harsh, oppressive, or one-sided.” Sanchez v. Carmax Auto Superstores California, LLC (2014) 224 Cal.App.4th 398, 403.
Here, Plaintiffs rely on their supposition that Orrick is a repeat client of sufficient monetary value to JAMS that Orrick will have an undue advantage in any arbitration administered by JAMS. [Opp. at 16.] Plaintiffs offer no evidence to support this speculation.
Plaintiff’s citation to the unpublished case of Shekarchi v. Fischbach, 2022 WL 2314551, is in violation of CRC 8.1115(a).Plaintiffs have not shown substantive unconscionability.
As noted above, the Motion is GRANTED; the action is STAYED pending conclusion of the arbitration proceedings; and an ADR Review hearing is set for October 30, 2023, at 9:00 a.m. in Department C31, at which counsel for the parties shall appear and advise the Court of the status of the arbitration proceedings.
Defendants are ordered to give notice.
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