Judge Armen Tamzarian, Case Number: 23STCV23861, Date: 2025-01-14 Tentative Ruling

Judge: Armen Tamzarian, Case: 23STCV23861, Date: 2025-01-14 Tentative Ruling

Case Number: 23STCV23861 Hearing Date: January 14, 2025 Dept: 52

Tentative Ruling:

Defendant Ian Roven’s Demurrer to Third Amended Complaint

Defendant Ian Roven demurs to plaintiffs George Gamble and Nancy Gamble’s third, fifth, sixth, and eighth causes of action.

Summary of Allegations

Plaintiffs’ third amended complaint arises from the production of a movie. Plaintiffs allege defendant Randolph Turrow convinced them to finance the project. (3AC, ¶¶ 15-17.) They further allege that Turrow converted petty cash funds meant for use on the project (¶¶ 41-45) and that Turrow (and others) abandoned the project without securing distribution for the movie, thereby diminishing the value of plaintiffs’ investment in the project (¶¶ 51-58).

Demurring defendant Ian Roven, meanwhile, allegedly acted as the “supervising production attorney for the Film.” (¶ 36.) Plaintiffs allege they “agreed to Defendant Turrow’s request to engage Defendant Roven” for that purpose, “though Roven had no ascertainable prior experience” doing so. (Ibid.) Plaintiffs further allege Roven “represented himself as a neutral third party, while he had an undisclosed and conflicting existing business relationship with Defendant Turrow.” (¶ 37.) “Defendant Roven worked at Defendant Turrow’s direction on the preparation and negotiation of the agreements relating to obtaining the Financing Defendant Turrow had requested from Plaintiffs, benefitting Defendant Turrow to the detriment of Plaintiffs and the financial viability of the Film.” (¶ 38.)

3rd Cause of Action: Fraudulent Concealment

Plaintiffs allege sufficient facts for this cause of action. Fraud by concealment requires: (1) the defendant concealed or suppressed a material fact; (2) defendant had a duty to disclose the fact to plaintiff; (3) defendant intentionally concealed or suppressed the fact with intent to defraud plaintiff; (4) plaintiff must have been unaware of the fact and would have acted otherwise if she had known of the concealed fact; and (5) plaintiff suffered damage as a result of the concealment. (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.) “Fraud allegations must be pled with more detail than other causes of action.” (Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 240.) This specificity requirement, however, does not fully apply to concealment claims because it is difficult to show “how” and “by what means” something did not happen. (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384.)

First, plaintiffs allege Roven concealed the following material facts: “(i) that he had no prior experience providing production counsel legal services in connection with any film; (ii) the nature of Defendant Roven’s ongoing business relationship with Defendant Turrow; and (iii) that because of Defendant Roven’s ongoing business relationship with Defendant Turrow, that Defendant Roven would work at Defendant Turrow’s direction on the preparation and negotiation of the agreements relating to obtaining the Financing Defendant Turrow had requested from Plaintiffs, benefitting Defendant Turrow but to the detriment of Plaintiffs and the financial viability of the Film (the ‘Roven Concealed Facts’), making Defendant Roven’s disclosure deceptive.” (3AC, ¶ 82.) These allegations meet the specificity requirement.

Second, plaintiffs allege defendant owed a duty to disclose. Roven argues he owed no duty to disclose because plaintiffs were not his clients. Roven cites no authority for that proposition. “[A]ttorneys, like anyone else, have an independent duty to avoid” fraud, including to third parties. (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 825.) Generally, for concealment “[a] duty to disclose a material fact can arise if … the defendant makes representations but fails to disclose other facts that materially qualify the facts disclosed or render the disclosure misleading (i.e., partial concealment).” (Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 40.)

Plaintiffs allege partial concealment. They allege Roven “disclosed facts to Plaintiffs about his experience and qualifications to provide legal services as supervising production attorney for the Film but intentionally failed to disclose other facts” regarding his lack of experience in the field and his ongoing relationship with Turrow. (3AC, ¶ 82.)

Third, plaintiffs allege intent to defraud. “[T]he only intent by a defendant necessary to prove a case of fraud is the intent to induce reliance. Moreover, liability is affixed not only where the plaintiff’s reliance is intended by the defendant but also where it is reasonably expected to occur.” (Lovejoy v. AT&T Corp. (2001) 92 Cal.App.4th 85, 93.) “It may be inferred that [defendant] concealed [a material fact] with fraudulent intent, for the purpose of making a profit; it may also be inferred that plaintiff, who was unaware of the [fact], would have acted differently had he known of the suppressed fact.” (Id. p. 96.)

Plaintiffs allege, “Defendant Roven actively concealed the Roven Concealed Facts in order to induce the Plaintiffs to agree to Defendant Turrow’s request to engage Defendant Roven to provide legal services as supervising production attorney for the Film.” (¶ 83.) One can reasonably infer that Roven stood to profit by being hired as an attorney for the project.

Fourth, plaintiffs allege reliance, i.e. they were unaware of the material facts and would have acted differently if they knew. They allege, “As Plaintiffs had no experience transacting business within the motion picture industry, had the omitted information in the Roven Concealed Facts been disclosed by Defendant Roven, Plaintiffs reasonably would have behaved differently.” (¶ 88.) “Upon Defendant Turrow’s recommendation to Plaintiffs and at Defendant Roven’s request, Plaintiffs agreed to allow Defendant Turrow to engage Defendant Roven to provide legal services as supervising production attorney for the Film, even though Defendant Roven had no ascertainable prior experience providing production counsel legal services in connection with any film.” (¶ 89.) Plaintiffs adequately allege they would not have agreed to allow Roven to act as the supervising production attorney if they knew about his lack of experience in that role.

Finally, plaintiffs allege resulting damages in that Roven’s actions as supervising production attorney caused the “loss of a substantial portion of the Financing through the production of the Film and … loss of a portion of the Petty Cash Funds.” (¶ 90.)

5th Cause of Action: Aiding and Abetting Conversion

Plaintiffs allege sufficient facts for this cause of action. “A defendant is liable for aiding and abetting another in the commission of an intentional tort, including a breach of fiduciary duty, if the defendant ‘ “ ‘knows the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act.’ ” ’ ” (Nasrawi v. Buck Consultants LLC (2014) 231 Cal.App.4th 328, 343.)

First, plaintiffs allege Roven knew that other defendants breached a duty to plaintiff. They allege Roven was “aware that the Petty Cash Funds were not authorized for the personal use of Defendants Turrow and Featurepro” and “had advance, specific and direct knowledge that Defendants Turrow and Featurepro intended to make personal use of the Petty Cash Funds, without authorization from Plaintiffs to do so.” (¶¶ 106-107.) Generally, alleging defendant knew something is an ultimate fact sufficient to withstand challenge by demurrer. (See, e.g., Johnson v. Casetta (1961) 197 Cal.App.2d 272, 276 [“an allegation of knowledge of incompetency is an allegation of ultimate fact”].) These allegations suffice on demurrer.

Second, plaintiffs allege Roven substantially assisted other defendants in conversion. “Roven reported to Defendant Turrow, and followed his specific instructions as a condition of his continued engagement as the Film’s supervising production attorney.” (¶ 134.) “As the supervising production attorney for the Film, the active, knowing assistance of Defendant Roven was necessary to disguise the nature of Defendant Turrow’s activities, without which Defendants Turrow and Featurepro would have been unable to continue their tortious appropriation of the Petty Cash Funds.” (¶ 138.) “Defendant Roven continued to exercise full control over the Film’s production legal processes and procedures and continued to knowingly assist Defendants Turrow and Featurepro in their tortious appropriation of the Petty Cash Funds.” (¶ 139.) When liberally construing these allegations in favor of plaintiffs on demurrer, they suffice for this element of aiding and abetting conversion.

Roven again relies on the argument that plaintiffs were not his clients, therefore he owed no duty to them. But “ ‘civil liability for aiding and abetting the commission of a tort … has no overlaid requirement of an independent duty.’ ” (Stueve Bros. Farms, LLC v. Berger Kahn (2013) 222 Cal.App.4th 303, 324.)

6th Cause of Action: Aiding and Abetting Fraudulent Concealment

Plaintiffs allege sufficient facts for this cause of action. Roven’s demurrer largely repeats arguments made regarding the third and fifth causes of action. The court rejects those arguments for the same reasons discussed above.

Plaintiffs allege “the ‘Concealed Material Facts’ ” with sufficient specificity: “The material facts that Defendants Turrow concealed during the Financing Request Call were the material facts that: (i) there existed a substantial risk that financing provided for a motion picture project such as the Film would not be recouped; (ii) there existed a substantial risk that by commencing production of a motion picture project such as the Film without first securing a distribution commitment, that the financing provided for a motion picture project such as the Film would not be recouped; (iii) that audience tastes were difficult determine in advance, creating a substantial risk that financing proved for a motion picture project such as the Film would not be recouped; (iv) that motion picture distributor tastes were difficult determine in advance, creating a substantial risk that financing provided for a motion picture project such as the Film would not be recouped; and (v) there existed a substantial risk that a distribution agreement secured after the production of a motion picture project such as the Film would provide distribution proceeds which would be insufficient for Plaintiffs to be able to recoup the cash financing Defendant Turrow was requesting that Plaintiffs agree to provide for the production of the Film.” (¶ 19.)

Plaintiffs allege Roven knew of and concealed these facts (¶¶ 145-150) and “worked at Defendant Turrow’s direction on the preparation and negotiation of the agreements relating to obtaining the Financing” from plaintiffs “in order to induce Plaintiffs to provide the Financing for the Film” (¶ 145). Plaintiffs thus allege Roven assisted Turrow in deceiving them into financing the film, which resulted in losing a substantial portion of their investment.

8th Cause of Action: Civil Conspiracy

Plaintiffs do not allege sufficient facts for this cause of action. “Conspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510–511; accord IIG Wireless, Inc. v. Yi (2018) 22 Cal.App.5th 630, 652 [“Conspiracy is not a separate tort, but a form of vicarious liability by which one defendant can be held liable for the acts of another”].)

Plaintiffs do not meet their burden of “demonstrat[ing] how the complaint can be amended” (Smith v. State Farm Mutual Automobile Ins. Co.¿(2001) 93 Cal.App.4th 700, 711) to cure this defect in the eighth cause of action. “Leave to amend should be denied where the facts are not in dispute and the nature of the claim is clear, but no liability exists under substantive law.” (Lawrence v. Bank of America¿(1985) 163 Cal.App.3d 431, 436.) As a matter of substantive law, the theory of civil conspiracy is not an independent and separate cause of action.

Disposition

Defendant Ian Roven’s demurrer is sustained without leave to amend as to the eighth cause of action. The demurrer is overruled as to the third, fifth, and sixth causes of action. Defendant Roven shall answer the third amended complaint within 20 days.

Tentative Ruling:

Defendants Jason Schoener and Ten Key Films, Inc.’s Demurrer to Third Amended Complaint

Defendants Jason Schoener and Ten Key Films, Inc. (Ten Key) demur to plaintiffs George Gamble and Nancy Gamble’s fifth and eighth causes of action.

Summary of Allegations

Plaintiffs allege Turrow “engaged Defendants Schoener and Ten Key to provide production accounting services for the Film.” (3AC, ¶ 118.) “Defendants Schoener and Ten Key reported to Defendant Turrow, and followed his specific instructions as a condition of their continued engagement providing production accounting services for the Film.” (¶ 121.) “Contrary to customary and standard motion picture industry production accounting procedures, Defendants Schoener and Ten Key allowed payments to vendors (such as Defendant Featurepro), without requiring invoices and written documentation, making it difficult to determine whether payments made to vendors were valid.” (¶ 123.) Plaintiffs further allege they “followed Defendant Turrow’s instructions” to “falsify the financial records to conceal and disguise the Petty Cash Funds Defendant Turrow” took. (¶ 125.)

5th Cause of Action: Aiding and Abetting Conversion

Plaintiffs do not allege sufficient facts for this cause of action for the same reasons the court stated in sustaining Schoener and Ten Key’s demurrer to the first amended complaint. “[T]here can be no aiding and abetting liability absent the commission of an underlying tort.” (Nasrawi v. Buck Consultants LLC (2014) 231 Cal.App.4th 328, 344, fn. 7.) Plaintiffs do not allege sufficient facts for conversion, so this cause of action fails. Conversion of money requires that the defendant “wrongfully exercised dominion over a specifically identifiable pot of money that already belongs to the” plaintiff. (Voris v. Lampert (2019) 7 Cal.5th 1141, 1152–1153.) The plaintiff must “allege [he or she] is ‘entitled to immediate possession at the time of conversion.’ ” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 452.)

In their first amended complaint, plaintiffs alleged they “formed a special purpose company to produce the Film (the ‘Company’).” (FAC, ¶ 20.) Early in the first amended complaint, they alleged, “Plaintiffs owned and possessed certain petty cash funds which they allowed to be used in connection with the production of the Film.” (¶ 27.) Plaintiffs alleged defendants Turrow and Featurepro, Inc. converted these petty cash funds. (¶¶ 77-81.) Later, they alleged “Defendants Schoener, Ten Key and Roven had advance, specific and direct knowledge that Turrow and Feature Pro were not authorized to make personal use of the Company’s petty cash assets.” (¶ 88, italics added.) They further alleged, “Defendants Schoener and Ten Key nonetheless continued to assist Defendants Turrow and Featurepro in their tortious appropriation of the Film’s petty cash assets.” (¶ 90, italics added.) The first amended complaint also referred to “the Film’s petty cash assets” in two headings on page 14. (P. 14, lines 6, 19.) Finally, plaintiffs alleged defendants “agreed to appropriate the Film’s petty cash assets.” (¶ 134.)

The first amended complaint failed to allege facts showing plaintiffs had any immediate right to possess this petty cash. They alleged they formed a corporation to produce a film and allowed that money to be used to further the production. “It is fundamental that a corporation is a legal entity that is distinct from its shareholders.” (Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1108; accord Curci Investments, LLC v. Baldwin (2017) 14 Cal.App.5th 214, 221 [the law generally recognizes “separation between an individual and a business entity”].) Generally, “an incorporator should be precluded from ignoring his own deliberately chosen corporate form.” (In re Marriage of Imperato (1975) 45 Cal.App.3d 432, 439.) Plaintiffs cannot sue as individuals for conversion of the corporation’s money.

That Turrow and Featurepro allegedly misappropriated the money does not constitute an injury to plaintiffs directly. They were not obligated to return that money to plaintiffs. (See Fischer v. Machado (1996) 50 Cal.App.4th 1069, 1072 [conversion applies where an agent sells principal’s goods and is therefore “ ‘required to turn over to his principal a definite sum received by him on his principal’s account’ ”].) They were supposed to use the money to produce the film—not give it back to plaintiffs. Using the money for the wrong purposes does not constitute conversion of something plaintiffs had the immediate right to possess.

In contrast with the first amended complaint, the third amended complaint omits any reference to forming a company and no longer describes the money as “the Film’s petty cash” or “the Company’s petty cash.”

The sham pleading doctrine prevents plaintiffs from taking advantage of these strategic omissions. “Under the sham pleading doctrine, plaintiffs are precluded from amending complaints to omit harmful allegations, without explanation, from previous complaints to avoid attacks raised in demurrers or motions for summary judgment.” (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425.) “[A]ny inconsistencies with prior pleadings must be explained; if the pleader fails to do so, the court may disregard the inconsistent allegations.” (Vallejo Development Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929, 946.) The doctrine, however, is not “intended to prevent honest complainants from correcting erroneous allegations of generic terms which may have legal implications but which are also loosely used by laymen or to prevent the correction of ambiguous statements of fact.” (Contreras v. Blue Cross of California (1988) 199 Cal.App.3d 945, 950.)

Plaintiffs’ opposition argues the sham pleading doctrine does not apply for three reasons. First, plaintiffs contend the doctrine only applies to verified complaints. (Opp., p. 9.) That some cases apply it to verified complaints does not mean the doctrine is so limited. “The sham pleading doctrine “applies even when a complaint is not verified.” (Hendy v. Losse (1991) 54 Cal.3d 723, 743; accord Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425; see also Womack v. Lovell (2015) 237 Cal.App.4th 772, 787 [unverified “the sham pleading rule encompasses prior pleadings even when made on information and belief”].)

Second, plaintiffs argue: “Plaintiffs have made corrections to inadvertent and erroneous allegations in the superseded pleadings after further review, and have now alleged Defendant Turrow used personally used authority he controlled as the lead producer of the Film to engage the Defendants to provide all production accounting services for the Film.’ (TAC ¶41).” (Opp., p. 9.) This conclusory argument is both not a satisfactory explanation and is not directed to the relevant amendments to the pleadings. That plaintiffs formed a company and that the petty cash belonged to that company is unrelated to Turrow’s authority to hire the other defendants as accountants.

Third, plaintiffs rely on the general rule that an amended complaint supersedes prior complaints. (Opp., pp. 9-10.) The point of the sham pleading doctrine is that it is an exception to that general rule. “Under the sham pleading doctrine, a plaintiff cannot avoid allegations that are determinative to a cause of action simply by filing an amended complaint which omits the problematic facts or pleads facts inconsistent with those alleged in the original complaint. The doctrine precludes a plaintiff from amending a complaint to omit harmful allegations without explanation, from previous complaints to avoid attacks raised in demurrers. Instead, the plaintiff must satisfactorily explain such an omission. Failure to provide such an explanation allows the court to disregard the inconsistent allegations and read into the amended complaint the allegations of the superseded complaint.” (Tindell v. Murphy (2018) 22 Cal.App.5th 1239, 1248, italics added.)

8th Cause of Action: Civil Conspiracy

Plaintiffs do not allege sufficient facts for this cause of action against Schoener and Ten Key Films. “There is no separate tort of civil conspiracy and no action for conspiracy to commit a tort unless the underlying tort is committed and damage results therefrom.” (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1136.) “Conspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510–511; accord IIG Wireless, Inc. v. Yi (2018) 22 Cal.App.5th 630, 652 [“Conspiracy is not a separate tort, but a form of vicarious liability by which one defendant can be held liable for the acts of another”].) `

As against Schoener and Ten Key Films, the underlying tort they allegedly conspired to commit was conversion of the petty cash funds. (3AC, ¶¶ 174-186.) As discussed above, plaintiffs have not adequately alleged the underlying tort of conversion.

Leave to Amend

Plaintiffs do not meet their burden of “demonstrat[ing] how the complaint can be amended” (Smith v. State Farm Mutual Automobile Ins. Co.¿(2001) 93 Cal.App.4th 700, 711) to cure these defects. “Leave to amend should be denied where the facts are not in dispute and the nature of the claim is clear, but no liability exists under substantive law.” (Lawrence v. Bank of America¿(1985) 163 Cal.App.3d 431, 436.)

Regarding the fifth cause of action, plaintiffs have not offered any way they can give explain a legitimate reason for omitting the harmful allegations regarding forming a company that possessed the money allegedly converted. On the eighth cause of action, in addition to the defect in the underlying tort of conversion, the theory of civil conspiracy is not an independent and separate cause of action as a matter of substantive law.

This is the third amended complaint. Plaintiffs do not justify granting leave to amend the complaint a fourth time.

Disposition

Defendants Jason Schoener and Ten Key Films., Inc.’s demurrer to plaintiffs George Gamble and Nancy Gamble’s third amended complaint is sustained without leave to amen T.

Revised Tentative:

Tentative
Ruling:

Defendants Jason Schoener
and Ten Key Films, Inc.’s Demurrer to Third Amended Complaint

Defendants
Jason Schoener and Ten Key Films, Inc. (Ten Key) demur to plaintiffs George
Gamble and Nancy Gamble’s fifth and eighth causes of action.

Summary of Allegations

Plaintiffs’
third amended complaint arises from the production of a movie. Plaintiffs allege defendant Randolph Turrow
convinced them to finance the project.
(3AC, ¶¶ 15-17.) They further
allege that Turrow converted petty cash funds meant for use on the project (¶¶
41-45) and that Turrow (and others) abandoned the project without securing
distribution for the movie, thereby diminishing the value of plaintiffs’
investment in the project (¶¶ 51-58).

Plaintiffs allege Turrow “engaged Defendants
Schoener and Ten Key to provide production accounting services for the Film.” (3AC, ¶ 118.)
“Defendants Schoener and Ten Key reported to Defendant Turrow, and
followed his specific instructions as a condition of their continued engagement
providing production accounting services for the Film.” (¶ 121.)
“Contrary to customary and standard motion picture industry production
accounting procedures, Defendants Schoener and Ten Key allowed payments to
vendors (such as Defendant Featurepro), without requiring invoices and written
documentation, making it difficult to determine whether payments made to
vendors were valid.” (¶ 123.) Plaintiffs further allege they “followed
Defendant Turrow’s instructions” to “falsify the financial records to conceal
and disguise the Petty Cash Funds Defendant Turrow” took. (¶ 125.)

5th Cause of Action: Aiding and Abetting
Conversion

Plaintiffs do not allege sufficient facts for this
cause of action for the same reasons the court stated in sustaining Schoener
and Ten Key’s demurrer to the first amended complaint. “[T]here can be no aiding and abetting
liability absent the commission of an underlying tort.” (Nasrawi v. Buck
Consultants LLC (2014) 231 Cal.App.4th 328, 344, fn. 7.) Plaintiffs do not allege sufficient facts for
conversion, so this cause of action fails. Conversion of money requires that
the defendant “wrongfully exercised dominion over a specifically identifiable
pot of money that already belongs to the” plaintiff. (Voris v. Lampert (2019) 7 Cal.5th
1141, 1152–1153.) The plaintiff must
“allege [he or she] is ‘entitled to immediate possession at the time of
conversion.’ ” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th
445, 452.)

In their first amended complaint, plaintiffs alleged
they “formed a special purpose company to produce the Film (the ‘Company’).”
(FAC, ¶ 20.) Early in the first amended
complaint, they alleged, “Plaintiffs owned and possessed certain petty cash
funds which they allowed to be used in connection with the production of the
Film.” (¶ 27.) Plaintiffs alleged
defendants Turrow and Featurepro, Inc. converted these petty cash funds. (¶¶
77-81.) Later, they alleged “Defendants
Schoener, Ten Key and Roven had advance, specific and direct knowledge that
Turrow and Feature Pro were not authorized to make personal use of the
Company’s petty cash assets.” (¶ 88, italics added.) They further alleged, “Defendants Schoener and
Ten Key nonetheless continued to assist Defendants Turrow and Featurepro in
their tortious appropriation of the Film’s petty cash assets.” (¶ 90,
italics added.) The first amended complaint also referred to “the Film’s petty
cash assets” in two headings on page 14. (P. 14, lines 6, 19.) Finally, plaintiffs alleged defendants “agreed
to appropriate the Film’s petty cash assets.” (¶ 134.)

The first amended complaint failed to allege facts
showing plaintiffs had any immediate right to possess this petty cash. They alleged they formed a corporation to
produce a film and allowed that money to be used to further the production. “It is fundamental that a corporation is a
legal entity that is distinct from its shareholders.” (Grosset v. Wenaas (2008) 42 Cal.4th
1100, 1108; accord Curci Investments, LLC v. Baldwin (2017) 14
Cal.App.5th 214, 221 [the law generally recognizes “separation between an
individual and a business entity”].) Generally,
“an incorporator should be precluded from ignoring his own deliberately chosen
corporate form.” (In re Marriage of
Imperato (1975) 45 Cal.App.3d 432, 439.) Plaintiffs cannot sue as individuals for
conversion of the corporation’s money.

That Turrow and Featurepro allegedly misappropriated
the money does not constitute an injury to plaintiffs directly. They were not obligated to return that money
to plaintiffs. (See Fischer v.
Machado (1996) 50 Cal.App.4th 1069, 1072 [conversion applies where an agent
sells principal’s goods and is therefore “ ‘required to turn over to his
principal a definite sum received by him on his principal’s account’ ”].) They were supposed to use the money to produce
the film—not give it back to plaintiffs. Using the money for the wrong purposes does
not constitute conversion of something plaintiffs had the immediate right to
possess.

In contrast with the first amended complaint, the
third amended complaint omits any reference to forming a company and no longer
describes the money as “the Film’s petty cash” or “the Company’s petty
cash.”

The sham pleading doctrine prevents plaintiffs from taking
advantage of these strategic omissions. “Under
the sham pleading doctrine, plaintiffs are precluded from amending complaints
to omit harmful allegations, without explanation, from previous complaints to
avoid attacks raised in demurrers or motions for summary judgment.” (Deveny v. Entropin, Inc. (2006) 139
Cal.App.4th 408, 425.) “[A]ny
inconsistencies with prior pleadings must be explained; if the pleader fails to
do so, the court may disregard the inconsistent allegations.” (Vallejo
Development Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929, 946.) The doctrine, however, is not “intended to
prevent honest complainants from correcting erroneous allegations of generic
terms which may have legal implications but which are also loosely used by
laymen or to prevent the correction of ambiguous statements of fact.” (Contreras
v. Blue Cross of California (1988) 199 Cal.App.3d 945, 950.)

Plaintiffs’ opposition argues the sham pleading
doctrine does not apply for three reasons.
First, plaintiffs contend the doctrine only applies to verified
complaints. (Opp., p. 9.) That some cases apply it to verified
complaints does not mean the doctrine is so limited. “The sham pleading doctrine
“applies even when a complaint is not verified.” (Hendy v. Losse (1991) 54 Cal.3d 723,
743; accord Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425;
see also Womack v. Lovell (2015) 237 Cal.App.4th 772, 787 [unverified “the
sham pleading rule encompasses prior pleadings even when made on information
and belief”].)

Second, plaintiffs argue: “Plaintiffs have made
corrections to inadvertent and erroneous allegations in the superseded
pleadings after further review, and have now alleged Defendant Turrow used
personally used authority he controlled as the lead producer of the Film to
engage the Defendants to provide all production accounting services for the
Film.’ (TAC ¶41).” (Opp., p. 9.)
This conclusory argument is both not a satisfactory explanation and is
not directed to the relevant amendments to the pleadings. That plaintiffs formed a company and that the
petty cash belonged to that company is unrelated to Turrow’s authority to hire
the other defendants as accountants.

Third, plaintiffs rely on the general rule that an
amended complaint supersedes prior complaints.
(Opp., pp. 9-10.) The point of
the sham pleading doctrine is that it is an exception to that general rule. “Under the sham pleading doctrine, a
plaintiff cannot avoid allegations that are determinative to a cause of action
simply by filing an amended complaint which omits the problematic facts or
pleads facts inconsistent with those alleged in the original complaint. The doctrine precludes a plaintiff from
amending a complaint to omit harmful allegations without explanation, from
previous complaints to avoid attacks raised in demurrers. Instead, the plaintiff must satisfactorily
explain such an omission. Failure to
provide such an explanation allows the court to disregard the inconsistent
allegations and read into the amended complaint the allegations of the superseded
complaint.” (Tindell v. Murphy
(2018) 22 Cal.App.5th 1239, 1248, italics added.)

8th Cause of Action: Civil Conspiracy

Plaintiffs do not allege sufficient facts for this cause
of action against Schoener and Ten Key Films.
“There is no separate tort of civil conspiracy and no action for
conspiracy to commit a tort unless the underlying tort is committed and damage
results therefrom.” (Prakashpalan v. Engstrom, Lipscomb & Lack
(2014) 223 Cal.App.4th 1105, 1136.) “Conspiracy
is not a cause of action, but a legal doctrine that imposes liability on
persons who, although not actually committing a tort themselves, share with the
immediate tortfeasors a common plan or design in its perpetration.” (Applied Equipment Corp. v. Litton Saudi
Arabia Ltd. (1994) 7 Cal.4th 503, 510–511; accord IIG Wireless, Inc. v.
Yi (2018) 22 Cal.App.5th 630, 652 [“Conspiracy is not a separate tort, but
a form of vicarious liability by which one defendant can be held liable for the
acts of another”].) `

As against Schoener and Ten Key Films, the
underlying tort they allegedly conspired to commit was conversion of the petty
cash funds. (3AC, ¶¶ 174-186.) As discussed above, plaintiffs have not adequately
alleged the underlying tort of conversion.

Leave to Amend

Plaintiffs do not meet their burden of
“demonstrat[ing] how the complaint can be amended” (Smith v. State Farm
Mutual Automobile Ins. Co.¿(2001) 93 Cal.App.4th 700, 711) to cure these
defects. “Leave to amend should be denied where the facts are not in
dispute and the nature of the claim is clear, but no liability exists under
substantive law.” (Lawrence v. Bank of America¿(1985) 163
Cal.App.3d 431, 436.)

Regarding the fifth cause of action, plaintiffs have
not offered any way they can give explain a legitimate reason for omitting the
harmful allegations regarding forming a company that possessed the money
allegedly converted. On the eighth cause
of action, in addition to the defect in the underlying tort of conversion, the
theory of civil conspiracy is not an independent and separate cause of action
as a matter of substantive law.

This is the third amended complaint. Plaintiffs do not justify granting leave to
amend the complaint a fourth time.

Disposition

Defendants
Jason Schoener and Ten Key Films., Inc.’s demurrer to plaintiffs George Gamble
and Nancy Gamble’s third amended complaint is sustained
without leave to amend.