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1 BUCHALTER A Professional Corporation 2 GABRIEL G. GREEN (SBN: 222445) GORDON STUART (SBN: 294321) 3 SHIR DAVIDOVICZ (SBN: 321042) 1000 Wilshire Boulevard, Suite 1500 4 Los Angeles, CA 90017-1730 Telephone: 213.891.0700 5 Email: ggreen@buchalter.com gstuart@buchalter.com 6 sdavidovicz@buchalter.com 7 Attorneys for Plaintiffs Jonathan Martin and Paul Scott 8 SUPERIOR COURT OF THE STATE OF CALIFORNIA 9 COUNTY OF LOS ANGELES 10 11 JONATHAN MARTIN, an individual; PAUL CASE NO. SCOTT, an individual, 12 COMPLAINT FOR: Plaintiff, 13 (1) BREACH OF CONTRACT; vs. 14 (2) BREACH OF IMPLIED COVENANT CURATIVE, INC., a Delaware Corporation; and OF GOOD FAITH AND FAIR 15 DOES 1-25 inclusive, DEALING; 16 Defendant. (3) UNJUST ENRICHMENT; 17 (4) BREACH OF FIDUCIARY DUTY; 18 (5) FRAUDULENT MISREPRESENTATION; AND 19 (6) CONVERSION 20 21 22 Plaintiffs Jonathan Martin (“Mr. Martin”) and Paul Scott (“Mr. Scott”) (collectively, 23 “Plaintiffs”) bring this Complaint against Defendant CURATIVE, INC. (“Curative” or 24 “Defendant”), and DOES 1-25, inclusive, and hereby avers, complains, and alleges as follows: 25 INTRODUCTION 26 1. This is an action for breach of contract, breach of implied covenant of good faith 27 and fair dealing, unjust enrichment, breach of fiduciary duty, fraudulent misrepresentation, and 28 conversion stemming from Defendant Curative’s wrongful conduct. BUCHALTERA P R O F E S S I ON A L C OR P OR A T I O N 1 L O S A N G E LE S COMPLAINT BN 78497945v6 1 2. After working together to create and distribute COVID-19 tests in early 2020, 2 Curative acquired every issued and outstanding share of capital stock of KorvaLabs, Inc. As part 3 of the Stock Purchase Agreement (PSA), Curative represented that Plaintiffs would have stock 4 options or shares issued in Curative. Curative eventually issued stock options, however, Curative 5 did not make those options available until after the Curative-imposed (and never discussed) 6 deadline to exercise the options had already passed. Curative had no intention of following through 7 on this aspect of the agreement. 8 3. Curative’s wrongful conduct locked Mr. Martin and Mr. Scott out of the opportunity 9 to own a piece of the work that they were instrumental in developing during one of the most difficult 10 times in recent human history. Their work helped save lives and keep the world moving when 11 almost everything had come to a standstill. 12 THE PARTIES 13 4. Plaintiff Jonathan Martin is a California resident. Mr. Martin founded KorvaLabs, 14 Inc. with Plaintiff Paul Scott. 15 5. Plaintiff Paul Scott is a California resident. Mr. Scott is a chemist known for his 16 development of groundbreaking tests. 17 6. Defendant Curative, Inc. is a Delaware Corporation with its principal place of 18 business in Austin, Texas. 19 JURISDICTION AND VENUE 20 7. Jurisdiction is proper in the Superior Court of California for County of Los Angeles 21 pursuant to section 410.10 of the California Code of Civil Procedure. 22 8. Venue in this Court is proper pursuant to Code of Civil Procedure Sections 393, as 23 this is the county where the actions arose. Further, the agreement underlying this action provides 24 that the state court in Los Angeles County is the exclusive venue for any action between the parties. 25 FACTUAL BACKGROUND 26 9. In early 2020, as it became clear there was an urgent need for quick and easy-to-use 27 COVID-19 tests, Defendant began looking to partner with an established laboratory that had the 28 technical capability and infrastructure to develop and manufacture COVID-19 tests. KorvaLabs, BUCHALTERA P R O F E S S I ON A L C OR P OR A T I O N 2 L O S A N G E LE S COMPLAINT BN 78497945v6 1 Inc. (“KorvaLabs”), a well-known California-based laboratory, fit this description. Curative 2 approached KorvaLabs, to develop and distribute COVID-19 tests in March 2020. 3 10. Plaintiffs, as well as Robert Tsai, owned KorvaLabs. 4 11. In March 2020, KorvaLabs and Defendant created Curative-Korva LLC in pursuit 5 of their shared goal to develop and distribute COVID-19 tests. 6 12. By mid-April 2020, Curative-Korva LLC had not only developed fast, easy-to-use 7 COVID-19 tests, but had also developed tests that were safer for healthcare workers to administer 8 than nasopharyngeal swab-based tests. The development of safe, reliable, and easy-to-use COVID- 9 19 tests was essential during the first few months of the global pandemic. Thousands of these tests 10 were administered within the County of Los Angeles soon after their development. 11 13. On or around May 8, 2020, Curative acquired all of the issued and outstanding 12 shares of capital stock of KorvaLabs, Inc. for several million dollars. The Stock Purchase 13 Agreement (“SPA”) indicated that the payment would occur over several months and included a 14 clause regarding stock options, indicating that a stock option agreement would be provided at a 15 later date, implying the agreement would be provided at some time in 2020. A true and correct copy 16 of the SPA is attached hereto as Exhibit 1. 17 14. The SPA includes a clause that the Delaware law would govern over the contractual 18 claims. (See Exhibit 1, Section 8.8). Choice of law principles indicate, therefore, that California 19 law applies to all non-contract claims. 20 15. Once the SPA was signed, Mr. Martin and Mr. Scott were no longer considered 21 Service Providers. (See Exhibit 1, Resignation Letter of Jonathan Martin and Resignation Letter 22 of Paul Scott). 23 16. In October 2020, Defendant made claims that it had overpaid Plaintiffs and 24 unilaterally decided to withhold the last payment it owed Plaintiffs. Plaintiffs voiced their 25 disagreement with Defendant’s claim regarding overpayment. 26 17. In the same letter package in which Defendant made claims it had overpaid 27 Plaintiffs, Defendant also provided the Stock Option Agreement (“SOA”). 28 BUCHALTERA P R O F E S S I ON A L C OR P OR A T I O N 3 L O S A N G E LE S COMPLAINT BN 78497945v6 1 18. The SOA indicated that the option would terminate three months after Mr. Martin 2 and Mr. Scott were Service Providers. The proposed termination date in the SOA, which had not 3 been previously discussed, would have fallen on August 8, 2020 – two months before the SOA had 4 been provided to Mr. Martin and Mr. Scott. Neither Mr. Scott nor Mr. Martin signed the SOA, in 5 part because of the inclusion of the termination dates. Given the timing of the SOA, and the fact 6 that it was impossible to comply with, it is clear that Curative had no intention of providing the 7 stock options. True and correct copies of the letters sent to Mr. Martin and Mr. Scott, respectively, 8 are attached hereto as Exhibit 2 and Exhibit 3. 9 19. Additionally, the SOA indicates that the Options were granted on September 22, 10 2020. Even if the SOA were to be interpreted as three months after the grant, the Option would 11 have to be exercised by December 22, 2020. 12 20. The October 2020 communication indicated that the stock option would be available 13 in a “few weeks.” 14 21. Curative did not make the options available until December 31, 2020 – via a portal 15 called “Shareworks.” This date was too late for it to have been possible for Mr. Martin and Mr. 16 Scott to comply with the dates Defendant had inexplicably set. 17 22. Not only did Curative unilaterally set termination dates for the stock options making 18 it impossible to exercise the options, Curative did not send out information about the options portal 19 until New Year’s Eve – a day typically reserved for personal events. 20 23. Mr. Scott responded to the email regarding the options on that same day, indicating 21 that the portal required an employee number and, therefore, he could not access the portal. Ms. 22 Tami Wilson-Ciranna, Curative’s Chief Financial Officer, responded to Mr. Scott with an employee 23 number he could use. 24 24. Mr. Scott followed up immediately informing Ms. Wilson-Ciranna that his “Stock 25 Option grant appears to terminate 3 months after [he] cease[s] being a Service Provider, which 26 period has already passed . . . but in my case, the right to exercise the option should never 27 terminate.” Defendant did not respond. 28 BUCHALTERA P R O F E S S I ON A L C OR P OR A T I O N 4 L O S A N G E LE S COMPLAINT BN 78497945v6 1 25. On or around September 2, 2021, Mr. Scott again followed up with Defendant to 2 exercise his stock options, indicating that Mr. Martin would likely want to exercise his options as 3 well. Shortly thereafter, Defendant responded claiming that “[t]he terms and conditions and 4 expiration/termination periods were made very clear in the documents you signed, including the 5 stock option agreement, and were reflected in Shareworks as you noted in your December email.” 6 Mr. Scott had to remind Defendant that he had specifically objected to the unilaterally-set 7 termination date in his December email and that he had not signed the SOA because of the terms 8 therein. 9 26. On or around September 3, 2023, Mr. Martin also sent Defendant correspondence 10 to exercise his stock options. His request was also rejected, with Defendant claiming that his options 11 had expired. 12 27. Mr. Scott and Mr. Martin continued getting emails from the Shareworks portal with 13 the information about options for several years, including up to June 2022. However, Plaintiffs 14 have never been able to access the portal to exercise their options. 15 28. Curative purchased KorvaLabs, Inc. stock at a time when the need for the 16 laboratory’s specialized expertise was exceptionally high. Stock options were part of the 17 consideration. Curative received all of KorvaLabs, Inc.’s issued and outstanding stocks but refused 18 to provide stock options that could be exercised. It is clear that Curative never had the intention to 19 provide stock options and that Curative fraudulently induced Plaintiffs into the SPA. 20 29. Thus, Mr. Martin and Mr. Scott never had the opportunity to exercise the stock 21 option –consideration they had agreed to – and were locked out of the chance to keep a piece of 22 what they had helped build and the monetary returns associated therewith. 23 30. On August 10, 2022, Plaintiffs and Curative entered into a tolling agreement, a true 24 and correct copy of which is attached hereto as Exhibit 4. 25 FIRST CAUSE OF ACTION 26 (BREACH OF CONTRACT) 27 31. Plaintiffs incorporate by reference each and every allegation set forth above in 28 Paragraphs 1 through 30, inclusive, as though fully stated herein. BUCHALTERA P R O F E S S I ON A L C OR P OR A T I O N 5 L O S A N G E LE S COMPLAINT BN 78497945v6 1 32. On May 8, 2020, Plaintiffs and Defendant entered into the SPA. Plaintiffs agreed 2 to sell of their stock in KorvaLabs and Defendant agreed to pay Plaintiffs cash on a scheduled basis. 3 The consideration also included that Defendant would move forward with stock or stock options 4 that could be exercised by Plaintiffs; the clause did not indicate that the options would terminate at 5 any specific time. (See Exhibit 1, 5.9.) In fact, the clause indicated that 50% of the options would 6 vest immediately and the other 50% would vest by June 15, 2020. (Id.). 7 33. Under the SPA, Defendant possessed all of the issued and outstanding stocks of a 8 groundbreaking laboratory that had developed a novel product that was urgently in demand on a 9 global scale. In return, Plaintiffs were promised the opportunity to exercise stock options so that 10 they could, in essence, recoup some of their ownership interest in the company that was successful 11 due to their determination to create safe and easy COVID-19 tests that could, and were, distributed 12 on a large scale. Defendant did not uphold their end of the bargain. 13 34. Plaintiff has performed all conditions, covenants, and promises required on its part 14 to be performed in accordance with the terms and conditions of the SPA. They provided all of their 15 stocks to Defendant – giving up all of their ownership interests. 16 35. Defendant, after having received all of the issued and outstanding stocks, did not 17 upheld its end of the bargain. Defendant materially breached the SPA by failing to provide Plaintiffs 18 with the opportunity to exercise the promised stock options. 19 36. While Defendant did technically present a SOA, it was moot. The SOA included a 20 termination date that had passed before Plaintiff could exercise those options. 21 37. As a direct and proximate cause of Defendant’s breach Plaintiffs have suffered 22 damages in an amount to be proven at trial. 23 SECOND CAUSE OF ACTION 24 (BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING) 25 38. Plaintiffs incorporate by reference each and every allegation set forth above in 26 Paragraphs 1 through 37, inclusive, as though fully stated herein. 27 39. Under Delaware law, the covenant of good faith and fair dealing is implied in all 28 contracts. (Dunlap v. State Farm Fire and Cas. Co. (Del. 2005) 878 A.2d 434, 444.) BUCHALTERA P R O F E S S I ON A L C OR P OR A T I O N 6 L O S A N G E LE S COMPLAINT BN 78497945v6 1 40. Defendant was required to act in a reasonable manner to ensure that Plaintiffs could 2 benefit from the bargain that Plaintiffs had agreed to when signing the SPA and Defendant was 3 required to refrain from any conduct preventing Plaintiffs from receiving any benefits the parties 4 included in the SPA. (Kuroda v. SPJS Holdings, L.L.C. (Del. Ch. 2009) 971 A.2d 872, 888.) 5 41. When Plaintiffs signed the SPA, they had a reasonable expectation that they would 6 be able to exercise stock options. Defendant made it impossible for Plaintiffs to do so. Defendant 7 did not present the SOA to Plaintiffs until October 2020, and once Plaintiffs reviewed the SOA, it 8 became clear that they did not, in fact, have the opportunity to exercise the options based on the 9 SOA’s terms. The SOA included a termination date for the stock options that had technically 10 already passed by the time Plaintiffs were provided with the document. Further, Defendant did not 11 make the stock options available until December 31, 2020 – more than two months after the SOA 12 was presented to Plaintiffs. Defendants undoubtedly acted in an unreasonable manner that was 13 designed to frustrate Plaintiffs’ ability to receive the full fruits of the SPA. 14 42. Plaintiffs have suffered damages as a result of Defendant’s breach. As a direct and 15 proximate result of Defendant’s breach of the covenants of good faith and fair dealing, Plaintiffs 16 hereby seek damages equal to the amount of the value of the stock options Plaintiff could not 17 exercise. 18 THIRD CAUSE OF ACTION 19 (UNJUST ENRICHMENT) 20 43. Plaintiffs incorporate by reference each and every allegation set forth above in 21 Paragraphs 1 through 42, inclusive, as though fully stated herein. 22 44. Defendant has refused to provide those stock options promised to Plaintiff, though 23 Plaintiff provided Defendant with all of the issued and outstanding stock in KorvaLabs. The 24 KorvaLabs stocks were exceptionally valuable, as the Curative-Korva LLC laboratory was 25 developing a necessary, new and in-demand product. 26 45. Additionally, Defendant failed to provide those stock options, at time where the 27 stocks for a company creating and distributing COVID-19 tests were highly valuable. 28 46. Plaintiffs gave up possession of valuable stocks in reliance on Defendants’ promise BUCHALTERA P R O F E S S I ON A L C OR P OR A T I O N 7 L O S A N G E LE S COMPLAINT BN 78497945v6 1 to provide the stock options that were valuable in large part because of Plaintiffs’ contributions to 2 the product underlying the value of the stocks. 3 47. Defendant was unjustly enriched by receiving all of the highly valuable issued and 4 outstanding stock in KorvaLabs without having provided the opportunity for Plaintiffs to exercise 5 stock options that Defendant promised to provide in consideration for acquiring all of the 6 aforementioned KorvaLabs stock. 7 48. Plaintiffs have been damaged as a direct and proximate result of Defendant’s refusal 8 to make the stock options available. 9 FOURTH CAUSE OF ACTION 10 (BREACH OF FIDUCIARY DUTY) 11 49. Plaintiffs incorporate by reference each and every allegation set forth above in 12 Paragraphs 1 through 48, inclusive, as though fully stated herein. 13 50. At all relevant times, Defendant owed Plaintiffs fiduciary duties. Plaintiffs and 14 Defendant had, at the very least, an implied fiduciary relationship. California courts have found 15 that special circ*mstances convert a business relationship into a fiduciary relationship. This can 16 occur when a buyer and seller have a close and trusting relationship, creating a sense of reliance 17 between the parties. (See Comm. on Children's Television, Inc. v. Gen. Foods Corp., 35 Cal. 3d 18 197, 222 n.22 (1983), superseded by statute on other grounds, Cal. Bus. & Prof. Code §§ 17204 19 and 17535, as recognized in Branick v. Downey Sav. & Loan Ass'n, 39 Cal. 4th 235, 242 (2006)). 20 Plaintiffs’ and Defendant’s relationship had been close and trusting prior to October 2020. Plaintiffs 21 and Defendant began working together in March 2020, and almost immediately formed an LLC. 22 Within a few months, Defendant and Plaintiffs entered into the SPA, and the clauses included the 23 promise of future performance evidencing the level of trust and reliance between Plaintiffs and 24 Defendant. Plaintiffs had relied on the promise to stock options; Plaintiffs should have been 25 stockholders. 26 51. Defendant owed Plaintiffs a duty of care and a duty of loyalty on the basis of the 27 implied fiduciary relationship. In refusing to provide a SOA that included stock options that could 28 be exercised, Defendant acted with malice and oppression when breaching both of those duties. As BUCHALTERA P R O F E S S I ON A L C OR P OR A T I O N 8 L O S A N G E LE S COMPLAINT BN 78497945v6 1 a result, Plaintiffs were directly harmed; to date, they have been unable to exercise their stock 2 options, which should have never been terminated. 3 52. Additionally, Plaintiff is entitled to punitive damages as a result of Defendant's 4 fraudulent conduct. Punitive damages are appropriate to deter Defendant from engaging in the same 5 or similar fraudulent behavior in the future. 6 FIFTH CAUSE OF ACTION 7 (FRAUDULENT MISREPRESENTATION) 8 53. Plaintiffs incorporate by reference each and every allegation set forth above in 9 Paragraphs 1 through 51, inclusive, as though fully stated herein. 10 54. Defendant misrepresented that it would provide a stock option that Plaintiffs could 11 exercise. The SPA made clear that Defendant would make those options available soon, as the 12 clause indicated that the options would vest by June 15, 2020 – about a month after the SPA was 13 signed. 14 55. Plaintiffs were induced to sign the SPA in part because of the agreement regarding 15 options. 16 56. Defendant represented that Plaintiffs would have stock options in the context of 17 Plaintiffs having just sold their stock in a company that they had built and that had been extremely 18 successful; Defendant’s offer to Plaintiffs to purchase stock was clearly an attempt to persuade 19 Plaintiffs to make the sale of their laboratory without reservations regarding their ability to own a 20 piece of what they had built at a time that it was extremely valuable. 21 57. Defendant’s representation that it would provide stock options to Plaintiffs is 22 materially false and misleading because Defendant had no intention of providing those stock 23 options and, to date, it has not done so. 24 58. Plaintiffs are informed and believe and on that basis allege that Defendant knew that 25 it the representations were false when it had made those promises to provide stock options. The 26 clause is purposefully written with enough flexibility so that Defendant could argue that stock 27 options were not a consideration: the clause indicates that the stock options are subject to the 28 Defendant’s Board of Directors, however, the Board of Directors were involved in the drafting of BUCHALTERA P R O F E S S I ON A L C OR P OR A T I O N 9 L O S A N G E LE S COMPLAINT BN 78497945v6 1 the agreement and, therefore, Plaintiffs were led to believe that they would be given the opportunity 2 to exercise the stock options. Plaintiffs were in constant communication with Curative’s CEO and 3 CFO and had no reason to believe that Defendant was not being truthful when it made these 4 representations. 5 59. Plaintiffs are informed and believe and on that basis allege that Defendant 6 deliberately misrepresented that it would provide a stock option agreement to induce Plaintiffs to 7 agree to sell their KorvaLabs stocks. 8 60. As a result of Defendant’s fraud, Plaintiffs are entitled to an award of damages in an 9 amount to be proved at trial. 10 61. Additionally, Plaintiff is entitled to punitive damages as a result of Defendant's 11 fraudulent conduct. Punitive damages are appropriate to deter Defendant from engaging in the same 12 or similar fraudulent behavior in the future. 13 SIXTH CAUSE OF ACTION 14 (CONVERSION) 15 62. Plaintiffs incorporate by reference each and every allegation set forth in Paragraphs 16 1 through 61, inclusive, as though fully stated herein. 17 63. Plaintiffs had a right to possess the stocks at issue. They provided consideration, and 18 as a result, had a right to possess what had been promised in the SPA. 19 64. Defendant intentionally blocked Plaintiffs from accessing their stocks by refusing 20 to make them available to Plaintiffs and ignoring Plaintiffs’ demands for access. 21 65. Plaintiffs have been injured by Defendant’s actions; they have not been able to 22 realize the full bargain they had agreed to and this is a direct result of Defendant’s actions. 23 PRAYER FOR RELIEF 24 ON THE FIRST CAUSE OF ACTION: 25 1. For general and specific damages in an amount according to proof at trial; 26 2. For prejudgment interest at the maximum amount allowed by law; 27 3. For costs of suit; 28 4. For attorney’s fees and costs incurred herein; BUCHALTERA P R O F E S S I ON A L C OR P OR A T I O N 10 L O S A N G E LE S COMPLAINT BN 78497945v6 1 5. For such further relief as the Court deems just and proper. 2 ON THE SECOND CAUSE OF ACTION” 3 1. For general and specific damages in an amount according to proof at trial; 4 2. For prejudgment interest at the maximum amount allowed by law; 5 3. For costs of suit; 6 4. For attorney’s fees and costs incurred herein; 7 5. For such further relief as the Court deems just and proper. 8 ON THE THIRD CAUSE OF ACTION: 9 1. For general and specific damages in an amount according to proof at trial; 10 2. For prejudgment interest at the maximum amount allowed by law; 11 3. For costs of suit; 12 4. For such further relief as the Court deems just and proper. 13 ON THE FOURTH CAUSE OF ACTION: 14 1. For general and specific damages in an amount according to proof at trial; 15 2. For punitive damages according to proof; 16 3. For prejudgment interest at the maximum amount allowed by law; 17 4. For costs of suit; 18 5. For attorney’s fees and costs incurred herein; 19 6. For such further relief as the Court deems just and proper. 20 ON THE FIFTH CAUSE OF ACTION 21 1. For general and specific damages in an amount according to proof at trial; 22 2. For punitive damages according to proof; 23 3. For prejudgment interest at the maximum amount allowed by law; 24 4. For costs of suit; 25 5. For such further relief as the Court deems just and proper. 26 ON THE SIXTH CAUSE OF ACTION 27 1. For general and specific damages in an amount according to proof at trial; 28 2. For prejudgment interest at the maximum amount allowed by law; BUCHALTERA P R O F E S S I ON A L C OR P OR A T I O N 11 L O S A N G E LE S COMPLAINT BN 78497945v6 1 3. For costs of suit; 2 4. For such further relief as the Court deems just and proper. 3 4 DATED: September 18, 2023 BUCHALTER A Professional Corporation 5 6 By: 7 GABRIEL G. GREEN GORDON STUART 8 SHIR DAVIDOVICZ 9 Attorneys for Plaintiffs Jonathan Martin and Paul Scott 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BUCHALTERA P R O F E S S I ON A L C OR P OR A T I O N 12 L O S A N G E LE S COMPLAINT BN 78497945v6EXHIBIT 1 STRICTLY CONFIDENTIAL STOCK PURCHASE AGREEMENT BY AND AMONG PAUL SCOTT, JONATHAN MARTIN, ROBERT TSAI,PAUL SCOTT, as the Stockholder Representative AND CURATIVE INC. Dated as of May __, 8 2020 TABLE OF CONTENTS Page ---ARTICLE I PURCHASE AND SALE ................................................................................................................ 1 1.1 Purchase and Sale of Company Shares ...................................................................................... 1 1.2 Action by Buyer and Stockholders ............................................................................................ 2 1.3 Withholding Taxes ..................................................................................................................... 2 1.4 Deliveries of Stockholders ......................................................................................................... 2 1.5 Closing Consideration Spreadsheet ........................................................................................... 2 1.6 Subsequent Consideration.......................................................................................................... 3ARTICLE II REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY ..................... 4 2.1 Organization, Good Standing, Corporate Power and Qualification .......................................... 4 2.2 Capitalization ............................................................................................................................. 4 2.3 Subsidiaries ................................................................................................................................ 6 2.4 Authorization ............................................................................................................................. 6 2.5 Governmental Consents and Filings .......................................................................................... 6 2.6 Litigation .................................................................................................................................... 6 2.7 Intellectual Property ................................................................................................................... 6 2.8 Compliance with Other Instruments .......................................................................................... 7 2.9 Agreements; Actions.................................................................................................................. 8 2.10 Certain Transactions ..............................................................
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Case Number: 23STCV28887 Hearing Date: July 18, 2024 Dept: 61 ARTUR ELIZAROV, et al. vs 1250 NORTH FAIRFFAX AVENUE, LLC, et al. TENTATIVE Defendants 1250 North Fairfax Avenue, LLC and Sares Regis Management Company, LPs Demurrer to the Complaint is OVERRULED. Plaintiff to give notice. DISCUSSIONA demurrer should be sustained only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§ 430.30, et seq.) In particular, as is relevant here, a court should sustain a demurrer if a complaint does not allege facts that are legally sufficient to constitute a cause of action. (See id. § 430.10, subd. (e).) As the Supreme Court held in Blank v. Kirwan (1985) 39 Cal.3d 311: We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . . Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. (Id. at p. 318; see also Hahn. v. Mirda (2007) 147 Cal.App.4th 740, 747 [A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. [Citation.]) In determining whether the complaint is sufficient as against the demurrer & if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated. (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.) 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. Malys of Cal., Inc. (1993) 14 Cal.App.4th 612, 616.) Such demurrers are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond. (Mahan v. Charles W. Chan Insurance Agency, Inc. (2017) 14 Cal.App.5th 841, 848.) A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) The demurrer also may be sustained without leave to amend where the nature of the defects and previous unsuccessful attempts to plead render it probable plaintiff cannot state a cause of action. (Krawitz v. Rusch (1989) 209 Cal.App.3d 957, 967.) Defendants 1250 North Fairfax Avenue, LLC and Sares Regis Management Company, LP (Defendants) offer two arguments as to the claims asserted in Plaintiffs Artur Elizarov and Ilya Alekseyeffs (Plaintiffs) Complaint. First, they argue that the claims are barred by the doctrine of res judicata and the release signed by Plaintiffs in the underlying landlord-tenant litigation on which Plaintiffs claims are based. (Demurrer at pp. 710.) Second, Defendants argue that the first cause of action for fraud is not pleaded with adequate specificity. (Demurrer at pp. 1014.) The tenets of res judicata prescribe the preclusive effect of a prior final judgment on the merits. The doctrine has two distinct aspects: claim preclusion and issue preclusion. Claim preclusion, often referred to as res judicata, provides that a valid, final judgment on the merits precludes parties or their privies from relitigating the same cause of action in a subsequent suit. Issue preclusion, or collateral estoppel, precludes re-litigation of issues argued and decided in prior proceedings. Application of the doctrine of res judicata is intended to preserve the integrity of the judicial system, promote judicial economy, and protect litigants from harassment by vexatious litigation. It rests upon the sound policy of limiting litigation by preventing a party who has had one fair adversary hearing on an issue from again drawing it into controversy and subjecting the other party to further expense in its reexamination. Whether the doctrine of res judicata applies in a particular case is a question of law which we review de novo. (City of Oakland v. Oakland Police & Fire Retirement System (2014) 224 Cal.App.4th 210, 227228, internal quotation marks and citations omitted.) Claim preclusion has three elements: First, the second lawsuit must involve the same cause of action as the first lawsuit. Second, there must have been a final judgment on the merits in the prior litigation. Third, the parties in the second lawsuit must be the same (or in privity with) the parties to the first lawsuit. (Id. at p. 228., internal quotation marks and citations omitted.) Defendants have shown the existence of a final judgment on the merits a dismissal with prejudice entered by Plaintiffs in a prior action against Defendants on April 19, 2023, LASC Case No. 22STCV12808 and the identity of parties between that first action and the present. (RJN Exh. 3.) However, Defendants have not shown that the present action concerns the same cause of action as the first. For res judicata purposes, [t]he cause of action is the right to obtain redress for a harm suffered, regardless of the specific remedy sought or the legal theory (common law or statutory) advanced. (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 798.) In the prior action, Plaintiffs claims were based on certain wrongs: the alleged misrepresentations made by Defendants regarding the condition of leased premises prior to renting it, and claims for nuisance conditions on the premises in breach of the lease agreement. (RJN Exh. 1.) The claims here, however, do not rest upon any promise contained in the lease, or any duty related to the condition of the property rented. The present claims arise from Defendants covenants contained in the settlement agreement and its alleged breach thereof. (Complaint ¶¶ 918.) The prior litigation did not arise out of the settlement agreement that ended the prior litigation. Defendants note that the settlement agreement contains a release of known and unknown claims then existing between the parties. (Demurrer at pp. 910.) But a claim for fraud in the inducement of a contract does not exist before the contract is signed: Undeniably, fraudulent inducement occurs before a contract is signed. But the reliance is not a past event; the reliance is the signing of the contract and the changing of legal positions, which is concurrent with the exemption clauses. Moreover, the damages are either concurrent or prospective. (SI 59 LLC v. Variel Warner Ventures, LLC (2018) 29 Cal.App.5th 146, 152153.) By the same token, Defendants cannot claim that the release in the settlement agreement absolves them of liability for the subsequent breach of that settlement agreement, as is alleged here. (Complaint ¶¶ 3641.) Defendants argument as to the lack of specificity in the fraud claim fares little better. [F]raud must be pled specifically; general and conclusory allegations do not suffice. (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 993.) The elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud or induce reliance; (4) justifiable reliance; and (5) damages. (See Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) Here, the alleged fraud is the misrepresentation contained in the settlement agreement, signed by Defendants, that Defendants agreed to waive and discharge any debts owed by Plaintiffs, when in fact Defendants had reported that such debts were unpaid and written-off. (Complaint ¶¶ 3135.) Plaintiffs allege harm in their surrender of rights under the settlement, and in the denial of subsequent rental applications based on Defendants report. (Complaint ¶¶ 1718.) This suffices to allege a claim of fraud. The demurrer is therefore OVERRULED.
Ruling
STARS RESTORATION ENTERPRISES, INC. VS ISABEL DUCHARME, ET AL.
Jul 19, 2024 |23BBCV02709
Case Number: 23BBCV02709 Hearing Date: July 19, 2024 Dept: NCB Superior Court of California County of Los Angeles North Central District Department B stars restoration enterprises, inc. dba servpro of monrovia, Plaintiff, v. isabel ducharme, et al., Defendants. Case No.: 23BBCV02709 Hearing Date: July 19, 2024 [TENTATIVE] order RE: motions for an order that the truth of any matters specified in Plaintiffs requests for admission, set one be deemed admitted There are two motions on calendar. On June 6, 2024, Plaintiff Stars Restoration Enterprises, Inc. dba Servpro of Monrovia (Plaintiff) filed a motion for order deeming Requests for Admissions (RFA), set one, admitted against Defendant Isabel Ducharme (Defendant). On June 11, 2024, Plaintiff filed another motion for order deeming RFA, set one, admitted against Defendant. It appears that the motions were filed twice. On March 21, 2024, Plaintiff served on Defendant the RFA requests, such that responses were due by April 25, 2024. As of the filing of the motions, Plaintiff states that it has not received responses from Defendant. Plaintiffs unopposed motions for an order deeming the RFAs admitted is granted, pursuant to CCP § 2033.280. Plaintiff requests sanctions against Defendant in the amount of $1,279.15 (= $300/hour x 3 hours spent on the motion and 1 anticipated hour for the hearing, plus $79.15 in filing fees). The request is granted in the reasonable sum of $500, plus $79.15 in filing fees. The Court will award sanctions once as it appears that the two motions against Defendant are identical. Defendant is ordered to pay monetary sanctions in the amount of $579.15 to Plaintiff, by and through counsel, within 20 days of notice of this order. Plaintiff shall provide notice of this order. DATED: July 19, 2024 ___________________________ John J. Kralik Judge of the Superior Court
Ruling
JUNKERS2JEWELS LLC, ET AL. VS LA-DORIS MCCLANEY, TRUSTEE OF THE LA-DORIS MCCLANEY FAMILY TRUST, ET AL.
Jul 17, 2024 |24STCV06042
Case Number: 24STCV06042 Hearing Date: July 17, 2024 Dept: 47 Tentative Ruling Judge Theresa M. Traber, Department 47 HEARING DATE: July 17, 2024 TRIAL DATE: NOT SET CASE: Junkers2Jewels LLC, et al. v. La-Doris McClaney, Trustee of the La-Doris McClaney Family Trust, et al. CASE NO.: 24STCV06042 MOTION FOR SANCTIONS PURSUANT TO CODE OF CIVIL PROCEDURE SECTION 128.5 MOVING PARTY: Defendant La-Doris McClaney, Trustee of the La-Doris McClaney Family Trust RESPONDING PARTY(S): Plaintiffs Junkers2Jewels, LLC and Matthew Pelanne. CASE HISTORY: · 03/11/24: Complaint filed. · 03/25/24: Cross-Complaint filed. STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS: This is an action for breach of contract. Plaintiffs allege that Defendants breached a purchase agreement for a parcel of real property by unilaterally cancelling escrow. Defendant moves for sanctions against Plaintiffs and their counsel pursuant to Code of Civil Procedure section 128.5 for the filing of Plaintiffs Motion for Specific Performance. TENTATIVE RULING: Defendants Motion for Sanctions is DENIED. DISCUSSION: Defendant moves for sanctions against Plaintiffs and their counsel pursuant to Code of Civil Procedure section 128.5 for the filing of Plaintiffs Motion for Specific Performance. Compliance with the Safe Harbor Provisions of Code of Civil Procedure § 128.5(f)(1)(B) Defendant seeks sanctions under Code of Civil Procedure section 128.5. The safe-harbor provision of section 128.5 provides: If the alleged action or tactic is the making or opposing of a written motion or the filing and service of a complaint, cross-complaint, answer, or other responsive pleading that can be withdrawn or appropriately corrected, a notice of motion shall be served as provided in Section 1010, but shall not be filed with or presented to the court, unless 21 days after service of the motion or any other period as the court may prescribe, the challenged action or tactic is not withdrawn or appropriately corrected. (Code Civ. Proc. § 128.5(f)(1)(B) (bold emphasis added).) Defendants moving papers did not address the safe-harbor provision, and Plaintiffs object to the motion as improper for failure to comply with this requirement. In reply, Defendant argues that the safe harbor provision is not applicable in this instance because compliance with the 21-day requirement was not possible. Defendant principally relies on Changsha Metro Group Co. Ltd. v. Peng Xufeng (2020) 57 Cal.App.5th 1, in support of her position. In Changsha, the Court of Appeal confronted the issue of whether the safe harbor provision of section 128.5 applies to a request for attorneys fees based on the contention that a special motion to strike under Code of Civil Procedure section 425.16 is frivolous. (Changsha, supra, 57 Cal.App.5th at 6-7.) The Changsha court attempted to reconcile the safe harbor provision with subdivisions (a) and (c) of section 128.5, which state that a party may seek attorneys fees under this section only after a court order awarding expenses for actions or tactics, made in bad faith, that are frivolous or solely intended to cause unnecessary delay. (Code Civ. Proc. § 128.5 (a), (c), (f); Changsha, supra, 57 Cal.App.5th at 7-11.) After reviewing the plain language and legislative history, the Court of Appeal concluded that it was not possible to reconcile all three subdivisions of the statute as written. (Changsha, supra, 57 Cal. App.5th at 11-18.) The Court of Appeal found that it was not possible to reconcile the statute as written, and, upon reviewing the legislative history, determined that the intent of the Legislature was if one is attempting to obtain attorneys fees under section 128.5, then one should use the procedures of subdivision (f) (minus the prerequisite for an order under subdivision (a)) if at all possible. (Id. at 18.) Applying this construction to section 425.16, the Court of Appeal concluded that compliance with the safe harbor and separate motion requirements was not possible in the context of the strict filing and hearing deadlines for a special motion to strike under subdivision (f) of section 425.16. (Changsha, supra, 57 Cal.App.5th at 19-21.) Defendant analogizes this case to Changsha, asserting that compliance with the safe harbor provision was not possible because Plaintiffs set the Motion for Specific Performance to be heard 22 days after service of the motion. This analogy is not well-taken. In Changsha, the Court of Appeal reasoned that the safe harbor provision was not workable in the context of a special motion to strike because its enforcement would either require continuance of the motion to strike, which is contrary to the express purpose of section 425.16 or would require a party to seek an order shortening the safe-harbor period any time they sought to pursue sanctions. (Changsha, supra, 57 Cal.App.5th at 19-21.) Here, however, the motion at issue was a regularly noticed motion pursuant to Code of Civil Procedure section 1005(b) which cited no specific authorizing provision and thus was not subject to any abbreviated briefing and hearing schedule. Moreover, Defendants approach essentially renders the safe-harbor provision a dead letter, since any party who seeks sanctions for a motion filed within the ordinary notice period could equally argue that it is not practical to provide a 21-day safe harbor to withdraw a motion within the 16 court days plus time for service allotted by section 1005. The Court declines to read Changshas holding so broadly, and, indeed, Changsha expressly states that the safe harbor provision should be enforced if at all possible. (Changsha, supra, 57 Cal.App.5th at 18.) The Court is therefore not persuaded that Changshas exception to the safe harbor provision is applicable in the context of Plaintiffs motion. Because Defendant freely concedes that she did not comply with the safe harbor requirements of Code of Civil Procedure section 128.5, the Court declines to award sanctions against Plaintiffs and their counsel for their Motion for Specific Performance. CONCLUSION: Accordingly, Defendants Motion for Sanctions is DENIED. Moving Party to give notice. IT IS SO ORDERED. Dated: July 17, 2024 ___________________________________ Theresa M. Traber Judge of the Superior Court Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.
Ruling
HARRY T E WODEHOUSE VS GENERAL MOTORS LLC
Jul 16, 2024 |24STCV01080
Case Number: 24STCV01080 Hearing Date: July 16, 2024 Dept: 50 Superior Court of California County of Los Angeles Department 50 HARRY T E WODEHOUSE, Plaintiff(s), v. GENERAL MOTORS, LLC., et al , Defendant(s). Case No.: 24STCV01080 DISCLOSURE AND ORDER Judge Beaudet hereby discloses that approximately 24 years ago, she and her husband purchased a pickup truck for her husbands use that he recalled was either a Dodge or Chrysler pickup; Judge Beaudet does not remember the maker of the pickup. The pickup developed electrical problems. Judge Beaudets husband took the pickup in to the dealer many times for the same electrical problem. The pickup was tested with some device while it was operating, and eventually, the manufacturer and the dealer agreed to take the pickup back and refund the purchase price. No litigation was involved. Judge Beaudet does not believe that her experience will cause her to be biased for or against either party. However, if you believe differently, you will have until July 31, 2024, to file and serve a verified statement of disqualification per section CCP 170.3(c)(1) (the Statement). If you do not file and serve a Statement, grounds for recusal will be deemed waived. The hearing on the status conference re completion of mediation or ADR will be continued to September 5, 2024, at 10:00 a.m. in Department 50 unless both parties waive the right to file the Statement. Plaintiff is ordered to give notice of this Disclosure to any new parties who are added to the case and to file proof of service of same promptly after service, witha courtesy copy delivered to Department 50. Any new party has 14 calendar days from the date of service to file and serve the Statement per section CCP 170.3. DATED: July 16, 2024 _____________________________ Honorable Teresa A. Beaudet Judge, Los Angeles Superior Court
Ruling
DEBORAH K. OGAWA VS AMERICAN HONDA MOTOR CO., INC, ET AL.
Jul 17, 2024 |21STCV11734
Case Number: 21STCV11734 Hearing Date: July 17, 2024 Dept: 58 Judge Bruce Iwasaki Department 58 Hearing Date: July 17, 2024 Case Name: Deborah K. Ogawa v. American Honda Motor Co., Inc. Case No.: 21STCV11734 Motion: Motion for Attorneys Fees and Costs Moving Party: Plaintiff Deborah K. Ogawa Responding Party: Defendant American Honda Motor Co., Inc. Tentative Ruling: Plaintiffs Motion for Attorneys Fees and Costs is GRANTED in the amount of $70,212. As to Plaintiffs costs, Plaintiff must file a memorandum of costs pursuant to California Rules of Court, rule 3.1700. I. Background Plaintiff purchased a 2018 Honda Odyssey manufactured and distributed by Defendant American Honda Motor Co., Inc. Plaintiff alleges that the vehicle contained or developed defects during the warranty period. Plaintiff alleges that shepresented the vehicle to Defendant for repairs and Defendant was unable to repair the vehicle within a reasonable number of attempts. Plaintiff alleges Defendant failed to provide her with restitution pursuant to Song-Beverly Consumer Warranty Act. Plaintiff filed the operative Second Amended Complaint on November 8, 2021. Plaintiff filed a Notice of Conditional Settlement on May 3, 2024. II. Legal Standard A prevailing buyer in an action under Song-Beverly shall be allowed by the court to recover as part of the judgment a sum equal to the aggregate amount of costs and expenses, including attorneys fees based on actual time expended, determined by the Court to have been reasonably incurred by the buyer in connection with the commencement and prosecution of such action.¿¿(Civ. Code, § 1794,¿subd. (d).) The prevailing party has the burden of showing that the requested attorney fees were reasonably necessary to the conduct of the litigation, and were reasonable in amount. (Robertson v. Fleetwood Travel Trailers of California Inc.¿(2006) 144 Cal.App.4th 785, 817.) The party seeking attorney fees is not necessarily entitled to compensation for the value of attorney services according to [his] own notion or to the full extent claimed by [him]. (Levy v. Toyota Motor Sales, USA, Inc.¿(1992) 4 Cal.App.4th 807, 816.)¿¿Therefore, if the time expended or the monetary charge being made for the time expended are not reasonable under all the circ*mstances, then the court must take this into account and award attorney fees in a lesser amount. (Nightingale v. Hyundai Motor America¿(1994) 31 Cal.App.4th 99, 104.)¿¿ ¿¿ A court may reduce a fee award based on its reasonable determination that a routine, noncomplex case was overstaffed to a degree that significant inefficiencies and inflated fees resulted.¿¿(Morris v. Hyundai Motor America¿(2019) 41 Cal.App.5th 24, 39.)¿¿It is also appropriate to reduce an award based on inefficient or duplicative efforts. (Id.¿at p. 38.) However, the analysis must be reasonably specific and cannot rely on general notions of fairness. (Kerkeles¿v. City of San Jose¿(2015) 243 Cal.App.4th 88,¿102.)¿¿Moreover, in conducting the analysis, courts are not permitted to tie any reductions in the fee award to some proportion of the buyers damages recovery. (Warren v. Kia Motors America, Inc.¿(2018) 30 Cal.App.5th 24, 39.) III. Request for Judicial Notice Plaintiff and Defendant request judicial notice of court opinions in other Song Beverly cases discussing counsels rates. The request for RJN is granted. IV. Evidentiary Objections Defendants Objections to Shahians Declaration are overruled. Defendants Objections to Castros Declaration are sustained. Plaintiffs Objections to Stuhlbergs Declaration are overruled. IV. Discussion Plaintiff moves for attorneys fees as prevailing party under Civil Code §1794(d) and the parties settlement agreement. Plaintiff obtained a settlement of $82,500 from Defendant after three years of litigation wherein Defendant agreed that Plaintiff would be prevailing party for purposes of a fee motion. (Castro Dec., ¶78, Ex. 4.) Plaintiff argues she is clearly the prevailing party under Civil Code §1794(d) and is entitled to a mandatory fee award in the amount of $129,110.59 based on (1) $84,751.50 in attorneys fees for Strategic Legal Practices, APC (SLP); (2) a 1.35 multiplier enhancement; (3) $11,196.06 in costs and expenses for SLP; and (4) an additional $3,500 for Plaintiffs counsel to review the Opposition, draft the Reply and attend the hearing on the Motion. Plaintiffs attorneys fees are based on 164.6 hours of attorney time. Plaintiffs counsel identifies no fewer than nineteen attorneys who worked on this case. The hourly rates of these attorneys ranged from $350 to $650. Defendant does not dispute that Plaintiff is entitled to attorneys fees as prevailing party under Civil Code §1794(d). Defendant argues, however, that when the parties were negotiating settlement, Plaintiff represented that the attorneys fees would range from $40,000 to $50,000. Defendant argues Plaintiffs request for $129,110.59 in fees is excessive. Defendant argues Plaintiff is, at most, entitled to $21,000 for this cookie cutter litigation. Defendant objects to the hourly rate and number of attorneys assigned to the case as excessive. Defendant argues the hourly rate should be set at no more than $350/hr for all attorneys. Defendant objects to the number of hours as excessive given the cookie-cutter nature of Song Beverly litigation. Defendant attached as Exhibit A to the Opposition a table addressing each of the time entries submitted by Plaintiff. Defendant also objects to the costs requested and requests a reduction of $6,023. Number of hours excessive and improper time entries submitted Plaintiff counsel expended 164.6 hours on this litigation, which was pending for approximately three years and was litigated up to the eve of trial. Parties submitted motions in limine and engaged in a last minute mediation before Judge Stern. (Minute Order dated January 4, 2024.) · Improper redactions. Based on a review of Plaintiffs time entries, the entries on the following dates are so heavily redacted that the court cannot determine their reasonableness or the nature of the task performed: (1) 3/15/22, Avelino, .5 hours @ $595/hr for a total of $297.50; (2) 9/29/22, Mkrdech, 7.6 hours @ $350/hr for a total of $2,660; (3) 11/9/22, Carvalho, .7 hours @ $550/hr for a total of $385; (4) 11/10/22, Mkrdech, 1.4 @ $350/hr for a total of $490; (5) 6/28/23, Carvalho and .7 hours @ $570/hr for a total of $399. As such, the requested fee award is reduced by $4,231.50 for failure to provide sufficient detail regarding the work performed. (Shahian Dec., Ex. 20, pp. 1 and 2.) · Unreasonably excessive time entries. Counsel Deleon spent (1) 2.4 hours on 5/10/23 preparing for deposition of Defendants PMQ; (2) 3.4 hours on 5/11/23 preparing for deposition of Defendants PMQ; and (3) 7.8 hours on 5/12/23 preparing and taking the deposition of Defendants PMQ. The billable rate for the task was $575/hr. Counsels entry on 5/12/23 also improperly block billed multiple tasks. (Shahian Dec., Ex. 20, p. 2.) The amount billed for the PMQ deposition totaled $7,820. The amount of billable time for both preparation and taking the deposition is reduced from 13.6 hours @ $575/hr to 8 hours @ $575/hr for a total of $4600, a reduction of $3,220. Counsel Miller indicates that he spent 10 hours preparing for, travel to and attend continued FSC on January 5, 2024. (Shahian Dec., Ex. 20, p. 3.) The Jury Trial/FSC began at 9 a.m. and the settlement was put on the record. (Minute Order dated 1/8/24.) There is nothing indicating that preparation for and attendance at the FSC on 1/5/24 would have required 10 hours. The 1/5/24 entry by Miller for 10 hours @ $595/hr for a total of $5,950 is reduced to 5 hours @ $595/hr for a total $2,975, a reduction of $2,975. · Estimated time for reply prep and hearing attendance. Plaintiffs counsel estimates $3,500 for preparation of the reply and hearing attendance. Counsel does not provide an hourly rate for this estimate. However, using the maximum rate allowed as discussed below ($575/hr), the number of hours spent would be 6 hours @ $575/hr for a total of $3,500. Given the reply, including objections and additional evidence, six hours for opposition review, reply prep and hearing attendance is reasonable. In total, the requested fees are reduced by $10,426.50 due to excessive hours or improperly redacted time entries. This leaves a balance of $72,073.50. Hourly rates The hourly rates to be used in computing the lodestar must be within the range of reasonable rates charged by and judicially awarded comparable attorneys for comparable work. (Children's Hospital & Medical Center v. Bonta ́ (2002) 97 Cal.App.4th 740, 783; PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095 (The reasonable hourly rate is that prevailing in the community for similar work). Particularly where it is difficult to obtain evidence of market based rates for the same type of work, the courts look at fees charged for cases requiring similar skills. (The Utility Reform Network v. Public Utilities Com. (2008) 166 Cal.App.4th 522, 536537; Prison Legal News v. Schwarzenegger (9th Cir.2010) 608 F.3d 446, 454455 (all attorneys in the community engaged in equally complex Federal litigation, no matter the subject matter). In determining the reasonable rate and reasonable hours, the Court looks to that prevailing in the community for similar work. (PLCM Group, Inc., supra, 22 Cal.4th at 1095; Ketchum, supra, 24 Cal.4th at 1132 (the lodestar is the basic fee for comparable legal services in the community). A reasonable trial court might determine that the similar workor comparable legal services related to insurance defense litigation, rather than to civil litigation in general. Were the court to so conclude, it could view the relevant market to be that of insurance defense litigation and litigators, rather than general civil litigation. The market rate for such services might be limited accordingly. Again, we emphasize that such determinations lie within the broad discretion of the trial court. (Syers Properties III, Inc. v. Rankin (2014) 226 Cal.App.4th 691, 702703.) The burden is on the fee applicant to produce evidence that the requested rates are in line with those prevailing in the community for similar work. (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1019.) Affidavits of the plaintiffs' attorney and other attorneys regarding prevailing fees in the community, and rate determinations in other cases, particularly those setting a rate for the plaintiffs' attorney, are satisfactory evidence of the prevailing market rate. (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 1009.) The trial court is not required to adopt counsels opinion as to the market rate for services of the type performed. (Syers Properties III, supra, 226 Cal.App.4th at 702.) The trial court may accept the actual rate charged as the reasonable rate. (Id.) Plaintiffs counsel consisted of nineteen attorneys who performed work at hourly rates of $350, $385, $400, $450, $460, $475, $495, $550, $570, $575, $595, $610, $620 and $650. (Shahian Dec., Ex. 20, p. 5.) Counsel Shahian testifies as to his extensive experience in Song Beverly litigation, but he does not seek recovery for his time supervising this matter. (Id. at ¶¶1-45, 86.) The experience and background of the remaining attorneys is set forth in Shahians declaration. (Id. at ¶¶46-84.) Based on a review of the attorneys profiles and the market rate charged for similar services based on the courts own experience, the hourly rates charged above $575 are excessive. Those hours billed at $595, $610, $620 and $650 are recalculated at the hourly rate of $575. · Avelino. 7.8 hours @ $595 for a total of $4,641 reduced to $4,485, for total reduction of $156. · Carvalho. .9 hours @ $595 for a total of $535 reduced to $517, for total reduction of $18. · Lunn. 4.9 hours @ $620 and 9.8 @ $650 for a total of $9,408 reduced to $8,452.50, for a total reduction of $955.50. · McCallister and Miller. 34.5 hours @ $595 for a total of $20,527.50 reduced to $19,837.50, for a total reduction of $690. · Vaziri. 1.2 hours @ $610 for a total of $732 reduced to $690, for a total reduction of $42. The adjustment of hourly rates claimed by six of the nineteen attorneys will also address the overstaffing issue raised by Defendant. In total, the requested fee award is reduced by $1,861.50 for excessive hourly rates. Applying this further reduction to the balance of $72,073.50, the total remaining attorneys fees total $70,212. Multiplier Relevant factors to determine whether an enhancement is appropriate include (1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, (4) the contingent nature of the fee award. (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1132.) The purpose of such adjustment is to fix a fee at the fair market value for the particular action. In effect, the court determines, retrospectively, whether the litigation involved a contingent risk or required extraordinary legal skill justifying augmentation of the unadorned lodestar in order to approximate the fair market rate for such services. (Santana v. FCA US, LLC (2020) 56 Cal.App.5th 334, 351.) Perhaps the most common multiplier applied, at least where a plaintiff prevails, is a modifier for the contingent nature of the representation. (Id.) The court may not consider the contingent nature of the representation in both setting the lodestar and applying a modifier. (Id.) Another factor considered by a court in applying a multiplier is the result obtained. The results obtained factor can properly be used to enhance a lodestar calculation where an exceptional effort produced an exceptional benefit. (Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553, 582.) The purpose of such adjustment is to fix a fee at the fair market value for the particular action. In effect, the court determines, retrospectively, whether the litigation involved a contingent risk or required extraordinary legal skill justifying augmentation of the unadorned lodestar in order to approximate the fair market rate for such services. (Thayer v. Wells Fargo Bank, N.A. (2001) 92 Cal.App.4th 819, 833.) Plaintiff fails to present any facts that would require a multiplier to compensate counsel for their services at fair market value. The lodestar presented by counsel, as adjusted by the Court, fixes the fee at fair market value. The cases did not involve any novel legal issues. There is no justification to apply a multiplier. Costs Plaintiff includes a request for an award of costs in the amount of $11,196.06. (Shahian, Dec., Ex. 20, pp. 4-5.) Defendant objects to the costs on grounds that no supporting documentation is provided, several entries associated with the demurrer provide no explanation as to the nature of the $896.95 in costs, the basis for $2,837.89 in deposition costs when the deposition only lasted a few hours and $4,614 in unnecessary reporter fees on 1/3/24, 1/8/24 and 1/10/24. Parties stipulated that Defendant would pay Plaintiffs reasonable fees and costs. (Castro Dec., Exs. 2 and 4, ¶2.) Parties also referenced a Motion for Attorneys Fees and Costs and stipulated that Plaintiff would be prevailing party for purposes of such a motion. However, there is nothing explicitly stating that Plaintiff would not be required to file a memorandum of costs under California Rules of Court, rule 3.1700. Based on the mandatory language of California Rules of Court, rule 3.1700, Plaintiff must comply with the procedure for recovery of costs under California Rules of Court, rule 3.1700, which requires submission of a verified memorandum of costs within 15 days of mailing of notice of entry of judgment. Submission of a memorandum of costs would organize the requested costs into categories under Code of Civil Procedure section 1033.5. A memorandum of costs would also trigger Defendants right to tax those costs by noticed motion, with an opportunity to reply to any opposition. Plaintiffs request for fees by noticed motion is denied. Plaintiff must file a memorandum of costs pursuant to California Rules of Court, rule 3.1700. Conclusion Plaintiffs Motion for Attorneys Fees and Costs is GRANTED as to the request for attorneys fees in the amount of $70,212. As to Plaintiffs costs, Plaintiff must file a memorandum of costs pursuant to California Rules of Court, rule 3.1700.
Ruling
SONNY'S CAR WASH SERVICES OF CALIFORNIA, LLC., A CALIFORNIA LIMITED LIABILITY COMPANY VS MICHAEL MCGUINNESS, ET AL.
Jul 16, 2024 |22STCV15997
Case Number: 22STCV15997 Hearing Date: July 16, 2024 Dept: 19 RULING After consideration of the briefing filed and oral argument at the hearing, Plaintiff Sonnys Car Wash Services of California, LLCs unopposed Motion for Leave to File Second Amended Complaint is GRANTED. Although the Court grants Plaintiffs motion for leave to file the [Proposed] Second Amended Complaint, the Court denies Plaintiffs motion for an order that the [Proposed] Second Amended Complaint be deemed filed. The Court signs the proposed order filed on May 7, 2024 as modified Counsel for Plaintiff to give notice. STATEMENT OF FACTS This case arises out of alleged breach of contract and fraud. Plaintiff Sonnys Car Wash Services of California, LLC (Plaintiff) brings suit against Defendants Michael McGuinness, MC Group, LLC, McGuinness VWS, and MEP Services, Inc. (collectively, Defendants) alleging the following causes of action in the First Amended Complaint (FAC): 1. Breach of Contract; 2. Fraud; 3. Unjust Enrichment; and 4. Misappropriation of Trade Secrets. In the Third Amended Cross-Complaint (the TACC), Cross-Complainants Michael McGuinness, McGuinness VWS (VWS), and McGroup, LLC (McG) (hereafter, Cross-Complainants) bring suit against Plaintiff (hereafter, Cross-Defendant) alleging the following causes of action: 1. Breach Of Contract; 2. Third-Party Breach of Contract; 3. Fraudulent Inducement; 4. Business And Professions Code 17200; 5. Breach Of Covenant of Good Faith and Fair Dealing; 6. Conversion; and 7. Labor Code Violations. Plaintiff filed the instant Motion for Leave to File Second Amended Complaint (the Motion). GROUNDS FOR MOTION Pursuant to Code of Civil Procedure sections 473 and 576, Plaintiff moves for an order granting leave to file the [Proposed] Second Amended Complaint that makes the following amendments: (1) ¿adds claims for Fraud in the Contract Formation based on Concealment, Intentional Misrepresentation, and Negligent Misrepresentation; (2) separates the claim for Breach of Contract into separate claims for each of the ¿separate breaches, and (3) adds a claim for interference with a contractual relationship against MEP Services, Inc., and Doe Defendants Shannon McLaughlin and MOM Investments. DISCUSSION As an initial matter, Defendants do not oppose the instant Motion, effectively consenting to the Court granting it. (See Cal. R. Ct., 8.54(c) [A failure to oppose a motion may be deemed a consent to the granting of the motion.].) A. Procedural Requirements Under California Rules of Court Rule, rule 3.1324, subdivision (a), a motion to amend a pleading shall: (1) Include a copy of the proposed amendment or amended pleading, which must be serially numbered to differentiate it from previous pleadings or amendments; (2) State what allegations in the previous pleading are proposed to be deleted, if any, and where, by page, paragraph, and line number, the deleted allegations are located; and (3) State what allegations are proposed to be added to the previous pleading, if any, and where, by page, paragraph, and line number, the additional allegations are located. (Cal. Rules Ct., rule 3.1324(a).) Under California Rule of Court, rule 3.1324, subdivision (b), a separate declaration must accompany the motion and must specify: (1) The effect of the amendment; (2) Why the amendment is necessary and proper; (3) When the facts giving rise to the amended allegations were discovered; and (4) The reasons why the request for amendment was not made earlier. (Cal. Rules Ct., rule 3.1324(b).) The Court finds that Plaintiff complies with California Rules of Court Rule, rule 3.1324, subdivisions (a) and (b). (See Brandon D.B. Howard Decl., ¶¶ 3, 5-33, Exs. A-B.) B. Analysis The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading or proceeding by adding or striking out the name of any party, or by correcting a mistake in the name of a party, or a mistake in any other respect; and may, upon like terms, enlarge the time for answer or demurrer. The court may likewise, in its discretion, after notice to the adverse party, allow, upon any terms as may be just, an amendment to any pleading or proceeding in other particulars; and may upon like terms allow an answer to be made after the time limited by this code. (Code Civ. Proc., § 473(a)(1).) Any judge, at any time before or after commencement of trial, in the furtherance of justice, and upon such terms as may be proper, may allow the amendment of any pleading or pretrial conference order. (Code Civ. Proc., § 576.) The policy in California is that leave to amend is to be granted liberally, to accomplish substantial justice for both parties. (Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 488-89.) If the motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend. (Morgan v. Sup. Ct. (1959) 172 Cal.App.2d 527, 531.) Generally, leave to amend must be liberally granted provided there is no statute of limitations concern, nor any prejudice to the opposing party, such as delay in trial, loss of critical evidence, or added costs of preparation. (Solit v. Tokai Bank, Ltd. New York Branch (1999) 68 Cal.App.4th 1435, 1448.) Here, Plaintiff moves for leave to file the [Proposed] Second Amended Complaint on the grounds that, since the Court sustained Defendants demurrer to the Second Cause of Action [Fraud] and Third Cause of Action [Unjust Enrichment] without leave to amend on the basis of the economic loss rule, Plaintiff has conducted discovery and determined ¿numerous factual issues and violations that were unknown to Sonnys at the time that relate back to the allegations and claims set forth in the FAC. (Motion, p. 2.) Plaintiff contends that the case has progressed very little. Defendants have not served written discovery on Plaintiff or taken any deposition, and the Third Amended Cross-Complaint is still not at issue. (Id.) The Court does not find that granting Plaintiff leave to file the [Proposed] Second Amended Complaint would prejudice Defendants, particularly in light of Defendants lack of opposition. The Court agrees with Plaintiff that Cross-Complainants TACC, which was just filed on July 8, 2024, is not yet at issue. Thus, the Motion is GRANTED.
Ruling
AJ PLASTERING CORPORATION VS BURRELL CONSTRUCTION, INC, A CALIFORNIA CORPORATION, ET AL.
Jul 19, 2024 |23AHCV02843
Case Number: 23AHCV02843 Hearing Date: July 19, 2024 Dept: P [TENTATIVE] ORDER RE: DEFENDANT LANAI PROPERTY LLCS DEMURRER TO COMPLAINT INTRODUCTION This action arises from an agreement to develop a multi-unit and multi-story apartment complex located at 1120 E. Valley Blvd., San Gabriel, CA, County of Los Angeles, 91776. On December 8, 2023, Plaintiff AJ Plastering Corporation (Plaintiff) initiated this action suing Defendants Burrell Construction, Inc., a California corporation; Burrell Builders d/b/a Burrell Construction, a California corporation; Lanai Property, LLC, a California limited liability company (Defendant); The Connected Companies Corporation, a California limited liability company; North River Insurance Company, a New Jersey corporation; DOES 1-40 pursuant to a Complaint alleging claims of (1) breach of contract, (2) goods and services rendered, (3) open book account, (4) breach of contract-third party beneficiary, (5) breach of the implied covenant of good faith and fair dealing, (6) unjust enrichment, (7) conversion, and (8) recovery of contactors bond. On April 15, 2024, Defendant Lanai Property, LLC, demurred to the Complaints second, third, fourth, sixth, seventh, and eighth causes of action for common count-goods and services rendered, common count-open book account, breach of contract-third party beneficiary, unjust enrichment, conversion, and negligence,. (Motion, p. 2.) The demurrer is now before the Court. II. LEGAL STANDARD "A party may amend its pleading once without leave of the court at any time before the answer, demurrer, or motion to strike is filed, or after a demurrer or motion to strike is filed but before the demurrer or motion to strike is heard if the amended pleading is filed and served no later than the date for filing an opposition to the demurrer or motion to strike. A party may amend the pleading after the date for filing an opposition to the demurrer or motion to strike, upon stipulation by the parties." (Code Civ. Proc., § 472, subd. (a).) "All papers opposing a motion so noticed shall be filed with the court and a copy served on each party at least nine court days ... before the hearing." (Code Civ. Proc., § 1005, subd. (b).) "[T]he filing of an amended complaint moots a motion directed to a prior complaint." (JKC3H8 v. Colton (2013) 221 Cal.App.4th 468, 477; see also Sylmar Air Conditioning v. Pueblo Contracting Services, Inc. (2004) 122 Cal.App.4th 1049, 1054 ["[t]he filing of [a] first amended complaint render[s] [a movant's] demurrer moot since "'an amendatory pleading supersedes the original one, which ceases to perform any function as a pleading"'" (citations omitted)].) Accordingly, a "demurrer [directed to the original pleading] should [be] taken off calendar" when an amended complaint is filed. (People ex rel. Strathmann v. Acacia Research Corp. (2012) 210 Cal.App.4th 487, 506.) However, this right is limited to the amendment of a complaint initiating an action into a first amended complaint; otherwise stated, a party cannot amend an already amended complaint as a matter of course even though a demurrer has been directed to the operative and already amended pleading. (Hedwall v. PCMV, LLC (2018) 22 Cal.App.5th 564, 572-579.) III. ANALYSIS The demurrer filed by Defendant Lanai Property, LLC against Plaintiffs original December 8, 2023 complaint is MOOT. The hearing on the demurrer was set for July 19, 2024. Nine court days before the hearing, on July 8, 2024, Plaintiffs filed a First Amended Complaint. Such a filing was made as a matter of course. (Code Civ. Proc., § 472, subd. (a).) The FAC superseded the original December 8, 2023, Complaint and mooted the instant demurrer. (Sylmar Air Conditioning v. Pueblo Contracting Services, Inc., supra, 122 Cal.App.4th at p. 1054.) IV. ORDER Defendants Demurrer to the complaint is MOOT due to Plaintiff filing the July 8, 2024 First Amended Complaint. Dated: July 19, 2024 JARED D. MOSESJUDGE OF THE SUPERIOR COURT [TENTATIVE] ORDER RE: DEFENDANT THE CONNECTED COMPANY CORPORATIONS DEMURRER TO THE COMPLAINT INTRODUCTION This action arises from an agreement to develop a multi-unit and multi-story apartment complex located at 1120 E. Valley Blvd., San Gabriel, CA, County of Los Angeles, 91776. On December 8, 2023, Plaintiff AJ Plastering Corporation (Plaintiff) initiated this action suing Defendants Burrell Construction, Inc., a California corporation; Burrell Builders d/b/a Burrell Construction, a California corporation; Lanai Property, LLC, a California limited liability company; The Connected Companies Corporation, a California limited liability company (Defendant); North River Insurance Company, a New Jersey corporation; DOES 1-40 pursuant to a Complaint alleging claims of (1) breach of contract, (2) goods and services rendered, (3) open book account, (4) breach of contract-third party beneficiary, (5) breach of the implied covenant of good faith and fair dealing, (6) unjust enrichment, (7) conversion, and (8) recovery of contactors bond. On April 15, 2024, Defendant The Connected Companies Corporation demurred to the Complaints second, third, fourth, sixth, seventh, and eighth causes of action for common count-goods and services rendered, common count-open book account, breach of contract-third party beneficiary, unjust enrichment, conversion, and negligence,. (Motion, p. 2.) The demurrer is now before the Court. II. LEGAL STANDARD "A party may amend its pleading once without leave of the court at any time before the answer, demurrer, or motion to strike is filed, or after a demurrer or motion to strike is filed but before the demurrer or motion to strike is heard if the amended pleading is filed and served no later than the date for filing an opposition to the demurrer or motion to strike. A party may amend the pleading after the date for filing an opposition to the demurrer or motion to strike, upon stipulation by the parties." (Code Civ. Proc., § 472, subd. (a).) "All papers opposing a motion so noticed shall be filed with the court and a copy served on each party at least nine court days ... before the hearing." (Code Civ. Proc., § 1005, subd. (b).) "[T]he filing of an amended complaint moots a motion directed to a prior complaint." (JKC3H8 v. Colton (2013) 221 Cal.App.4th 468, 477; see also Sylmar Air Conditioning v. Pueblo Contracting Services, Inc. (2004) 122 Cal.App.4th 1049, 1054 ["[t]he filing of [a] first amended complaint render[s] [a movant's] demurrer moot since "'an amendatory pleading supersedes the original one, which ceases to perform any function as a pleading"'" (citations omitted)].) Accordingly, a "demurrer [directed to the original pleading] should [be] taken off calendar" when an amended complaint is filed. (People ex rel. Strathmann v. Acacia Research Corp. (2012) 210 Cal.App.4th 487, 506.) However, this right is limited to the amendment of a complaint initiating an action into a first amended complaint; otherwise stated, a party cannot amend an already amended complaint as a matter of course even though a demurrer has been directed to the operative and already amended pleading. (Hedwall v. PCMV, LLC (2018) 22 Cal.App.5th 564, 572-579.) III. ANALYSIS The demurrer filed by Defendant against Plaintiffs December 8, 2023 complaint is MOOT. The hearing on the demurrer was set for July 19, 2024. Nine court days before the hearing, on July 8, 2024, Plaintiffs filed a First Amended Complaint. This filing was made as a matter of course. (Code Civ. Proc., § 472, subd. (a).) The FAC superseded the original complaint and mooted the instant demurrer. (Sylmar Air Conditioning v. Pueblo Contracting Services, Inc., supra, 122 Cal.App.4th at p. 1054.) IV. CONCLUSION Defendant's Demurrer to the Complaint is MOOT due to Plaintiff filing the July 8, 2024 First Amended Complaint. Dated: July 19, 2024 JARED D. MOSESJUDGE OF THE SUPERIOR COURT
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