Judge: Anne Richardson, Case: 23STCV04491, Date: 2023-08-31 Tentative Ruling

Case Number: 23STCV04491    Hearing Date: March 11, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

I. Background

Plaintiffs Hayes B. Hurwitz and Andrew Kyriakatos (Katos) sue Defendants Patrick W. Daniels, Scott Sinnett, Aaron Greene, Mark Greene, Michelle Greene Johnson, Greene Brothers Farm, Inc. (GB Farm), Greene Bros, Inc. (Greene Bros), Lockeford Holdings, Inc. (Lockeford Holdings), Lockeford Holdings Water District, LLC (Lockeford Water), and Does 1 through 50 pursuant to an October 16, 2023, Second Amended Complaint (SAC).

The Court notes that it uses the individual parties’ first names for ease of reference based on most Defendants’ shared surnames. No disrespect is intended.

The SAC alleges:

(1) Breach of Oral Contract, (2) Breach of Implied Contract, (3) Breach of Fiduciary Duty, (4) Constructive Fraud, (7) Violations of Bus. & Prof. Code § 17200, et seq., (8) Quantum Meruit, and (9) Declaratory Relief against all Defendants;

(5) Breach of Written Contract by Plaintiff Katos against Greene Bros, Aaron, Mark, Michelle, and Does 1 through 25;

(6) Intentional Interference with Contract by Plaintiff Katos against Defendants Daniels, Sinnett, and Does 26 through 50; and

(10) Accounting against Defendants Lockeford Holdings, GB Farms, and Lockeford Water.

The allegations are premised on Defendants’ breach of one or both of two contracts or events related to those breaches: (1) breach of an oral joint venture agreement entered for the purpose of pursuing new lawful cannabis cultivation proceedings, manufacturing, and distribution opportunities entered between Plaintiff Katos and Green Bros, which was subsequently entered into by the remaining Defendants and Plaintiff Hurwitz; and (2) a Non-Circumvention and Non-Disclosure (NCND) Agreement between Plaintiff Katos (entered though his dba The Renaissance Company (Renaissance Co.)) and Defendant Greene Bros, which was subsequently entered into by Defendants Aaron and Mark Greene and Michelle Greene, who used Greene Bros as their alter ego.

B. Motions Before the Court

On November 9, 2023, Defendants filed a demurrer to the SAC.

That same day, Defendants filed a motion to strike various portions of the SAC.

On February 22, 2024, Plaintiffs filed oppositions to Defendants’ demurrer and motion to strike.

On March 4, 2024, Defendants filed replies to Plaintiffs’ oppositions.

Defendants’ demurrer and motion to strike are now before the Court.

II. Request for Judicial Notice

Per Defendants’ request, the Court takes judicial notice of (1) Plaintiffs’ opposition to Defendants’ demurrer to the initial Complaint and (2) a PDF printout of the search results for a Fictitious Business Name Search for “The Renaissance Company” as of October 7, 2023. (Demurrer, RJN, Exs. 1-2; Evid. Code, §§ 452, subds. (c), (d), (h), 453, subds. (a)-(b).)

III. Demurrer

A. Legal Standard

1. Sufficiency

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; see Code Civ. Proc., § 430.10, subd. (e).) This device can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) To sufficiently allege a cause of action, a complaint must allege all the ultimate facts—that is, the facts needed to establish each element of the cause of action pleaded. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 212, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) Thus, “[t]o survive a [general] demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) In testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.) A demurrer, however, “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228, disapproved on other grounds, Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162.) The face of the complaint includes exhibits attached to the complaint. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.) If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence. (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447 (Holland), superseded by statute on other grounds as stated in White v. Cridlebaugh (2009) 178 Cal.App.4th 506, 521.)

2. Uncertainty

A demurrer to a pleading lies where the pleading is uncertain, ambiguous, or unintelligible. (Code Civ. Proc. § 430.10, subd. (f).) “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, disapproved on other grounds in Quelimane Co. v. Stewart Title Guar. Co. (1998) 19 Cal.4th 26, 46 [holding claims for unfair business practices need not be pled specifically, impliedly disapproving Khoury].) As a result, a special demurrer for uncertainty is not intended to reach failure to incorporate sufficient facts in the pleading but is directed only at uncertainty existing in the allegations already made. (People v. Taliaferro (1957) 149 Cal.App.2d 822, 825, disapproved on other grounds in Jefferson v. J.E. French Co. (1960) 54 Cal.2d 717, 719-720 [statute of limitations question].) Where a complaint is sufficient to state a cause of action and to apprise defendant of issues he is to meet, it is not properly subject to a special demurrer for uncertainty. (See ibid.; see also Gressley v. Williams (1961) 193 Cal.App.2d 636, 643 [“A special demurrer [for uncertainty] should be overruled where the allegations of the complaint are sufficiently clear to apprise the defendant of the issues which he is to meet”].)

B. Discussion

Defendants challenge the first to tenth causes of action based on lack of sufficiency in pleading and uncertainty in pleading grounds. (Demurrer, Notice, pp. 2-10.)

1.     Demurrer, SAC, First to Tenth Causes of Action: SUSTAINED, with leave to amend.

Based on uncertainty in pleading as to the ascertainability of the type of contract from which Plaintiffs’ claims arise, the Court SUSTAINS Defendants’ demurrer.

The parties’ other arguments are thus not further discussed.

a. Plaintiff Katos

The SAC alleges two grounds for Plaintiffs’ action against Defendants: (1) an alleged oral joint venture agreement (Cannabis Concept); and (2) the subsequent NCND. (See SAC, ¶¶ 167-172 [breach of joint venture agreement based on oral agreement], 173-179 [breach of joint venture agreement based on implied agreement, in the alternative], 180-188 [breach of fiduciary duties in relation to joint venture agreement], 189-199 [constructive fraud related to the joint venture agreement], 200-209 [breach of written contract, the NCND, relating to Plaintiff Katos only], 210-216 [intentional interference with contract, the NCND, as to Plaintiff Katos, and Defendants Daniels, Sinnett, and Does 26 through 50 only], 217-219 [wrongful business conduct based on breach of fiduciary duties and constructive fraud claims arising from the joint venture agreement and intentional interference with the NCND], 220-224 [quantum meruit based on work performed related to the joint venture agreement and NCND], 225-234 [seeking declaration of rights of Plaintiffs in joint venture agreement], 235-238 [accounting of books related to joint venture agreement.)

All these claims involve Plaintiff Katos. (See SAC, ¶¶ 167-238.)

The SAC alleges the NCND and joint venture agreement as different contracts as follows: “The NCND Agreement encompasses the narrow topics of confidentiality, fees for introductions, and KATOS’s role as an intermediary” and “does not address, prevent, prohibit, forestall, confine, preclude, proscribe, forbid, bar, limit, supersede, or take the place of the [preceding] joint venture agreement,” which instead “was a joint venture in operating a lawful cannabis cultivation, processing, manufacturing, and distribution of cannabis and cannabis products business between GREENE BROS and Plaintiff KATOS, with the anticipation and expectation that KATOS would seek other individuals, entities, or parties to be additional co-venturers, as well as locating, investigating, and aid in acquiring real property to grow, cultivate, manufacture, and distribute lawful cannabis and cannabis products” (SAC, ¶¶ 37-38, 41.)

However, a review of the NCND shows that the NCND is much broader than asserted by the SAC, as its terms contemplate that Renaissance Co.—under Plaintiff Katos—would “have the non-exclusive right to seek out financial institutions, growth capital firms, debt lenders, equity investors/funds and other types of business development opportunities and to introduce such parties and business development opportunities to [Greene Bros]” in exchange for a fee set out in a Fee Agreement not attached to the SAC. ((SAC, Ex. 1, p. 1, §§ 2-3.) And the NCND contemplates Renaissance Co. as a dba, which is “merely descriptive of the person or corporation who does business under some other name.” (SAC, Ex. 1, p. 1, Introduction; People v. Eastburn (2010) 189 Cal.App.4th 1501, 1505-1506 (Eastburn), citation omitted.) Thus, the NCND applies to Plaintiff Katos. And a review of the NCND shows that it does not contemplate equity, partnership, or any type of ownership in a joint venture with Defendants, either at the time of execution of pursuant to some temporary fee structure to be set in place pending some condition precedent, e.g., equity distribution, but rather, contemplates payment to Plaintiff Katos for sourcing business opportunities for Defendants. (SAC, Ex. 1, §§ 1-15.) And the attached NCND supersedes the contradictory allegations at paragraphs 37 to 38 and 41 of the SAC, as well as similar allegations made elsewhere in the SAC. (Holland, supra, 86 Cal.App.4th at p. 1447.)

The SAC thus creates confusion as to the contract from which liability springs: an alleged joint venture agreement for equity that is not supported by a written contract; or a fee-for-services agreement that does not contemplate equity, which is in fact attached to the SAC, supersedes allegations in the body of the SAC, and applies to Plaintiff Katos based on Renaissance Co. being his dba. (Demurrer, p. 3 [argument to this effect].)

Moreover, it is unclear why the joint venture agreement should be, as argued by Plaintiff, the umbrella agreement here because even if the SAC’s body alleges that the NCND merely sought to memorialize the joint venture project or some part of it, the NCND shows that the parties only created a fee-for-services agreement. (SAC, Ex. 1, §§ 2-3; see SAC, Ex. 1, §§ 1-15.)

While Plaintiff Katos argues that the contracts are alleged in the alternative, the failure to allege facts from which a defendant can ascertain the type of contract at issue—written, oral, or implied—is a basis for demurrer. (Code Civ. Proc., § 430.10, subd. (g); Opp’n, p. 2 [“Plaintiffs clarified the breach of oral contract and the breach of the implied contract, pleading them in the alternative as to theories of liability regarding the underlying agreement, i.e., the joint venture agreement”].)

A demurrer based on uncertainty is thus proper against Plaintiff Katos’s claims given that the source of liability (agreement) is unclear, circumstances which would have also supported a demurrer based on the unascertainability of the type of contract at issue.

b. Plaintiff Hurwitz

As to Plaintiff Hurwitz, the SAC expressly alleges: “Plaintiff Hurwitz … is not a party to the NCND agreement” and that “Plaintiff Hurwitz … became involved in the [joint venture agreement] in the Fall of 2020.” (SAC, ¶¶ 18, 34, fn. 1.) The terms of that agreement are outlined in paragraph 34 of the SAC, as incorporated by paragraph 42 of the SAC, and involve ownership in a joint cannabis venture based on sweat equity. (SAC, ¶¶ 34-35.) However, the SAC alleges that to memorialize the joint venture agreement, the parties agreed to the NCND, which contemplates a fee-for-services arrangement, not an equity agreement. (SAC, ¶ 36 & Ex. 1, §§ 1-15.) The SAC is thus as uncertain as to Hurwitz as it is against Katos because the nature of the agreement pursuant to which liability is alleged by Plaintiff Hurwitz is unclear.

c. Demurrer Conclusion

Defendants’ demurrer is thus SUSTAINED as to the SAC’s ten claims, with leave to amend as to permit amendment clarifying these uncertainties.

IV. Motion to Strike: MOOT.

A. Legal Standard

The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (a) strike out any irrelevant, false, or improper matter inserted in any pleading; or (b) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (Code Civ. Proc. § 436, subds. (a), (b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].)

For the purposes of a motion to strike pursuant to Sections 435 to 437 of the Code of Civil Procedure, the term “pleading” generally means a demurrer, answer, complaint, or cross-complaint, (Code Civ. Proc., § 435, subd. (a)), and an immaterial allegation or irrelevant matter in a pleading entails (1) an allegation that is not essential to the statement of a claim or defense, (2) an allegation that is neither pertinent to nor supported by an otherwise sufficient claim or defense, or (3) a demand for judgment requesting relief not supported by the allegations of the complaint or cross-complaint (Code Civ. Proc., § 431.10, subds. (b)(1)-(3), (c)).

B. Discussion

Because the Court has sustained Defendants’ demurrer to the entire SAC, the motion to strike is MOOT.

V. Conclusion

Defendants Patrick W. Daniels, Scott Sinnett, Aaron Greene, Mark Greene, Michelle Greene Johnson, Greene Brothers Farm, Inc., Greene Bros, Inc., Lockeford Holdings, Inc., and Lockeford Holdings Water District, LLC’s Demurrer to Second Amended Complaint is SUSTAINED, with leave to amend.

Defendants Patrick W. Daniels, Scott Sinnett, Aaron Greene, Mark Greene, Michelle Greene Johnson, Greene Brothers Farm, Inc., Greene Bros, Inc., Lockeford Holdings, Inc., and Lockeford Holdings Water District, LLC’s Motion to Strike Portions of the Second Amended Complaint is MOOT.