Judge Armen Tamzarian, Case Number: 24STCV14973, Date: 2024-10-28 Tentative Ruling

Judge: Armen Tamzarian, Case: 24STCV14973, Date: 2024-10-28 Tentative Ruling

Case Number: 24STCV14973 Hearing Date: October 28, 2024 Dept: 52

Defendant Danny Chan’s Demurrer to First Amended Complaint

Defendant Danny Chan demurs to the first amended complaint by plaintiffs SMC Specialty Finance, LLC, Gary Raskin, and Alastair Burlingham.

1. Attempted Extortion

Plaintiffs do not allege sufficient facts to constitute a cause of action for attempted extortion. A cause of action for extortion seeks “recovery of money obtained by the wrongful threat of criminal or civil prosecution.” (Fuhrman v. California Satellite Systems (1986) 179 Cal.App.3d 408, 426 (Fuhrman) overruled on other grounds by Silberg v. Anderson (1990) 50 Cal.3d 205.) “It is essentially a cause of action for moneys obtained by duress, a form of fraud.” (Ibid.) A cause of action for extortion requires that the plaintiffs “actually paid the money demanded by the defendants.” (Id. at p. 428.)

Plaintiffs do not allege they paid the money defendants demanded. They seek to hold defendants civilly liable for attempting to commit extortion. The Penal Code prohibits attempted extortion. (Pen. Code, § 523, subd. (a) & § 524.) But no binding authority permits a direct civil action for attempted extortion. Plaintiffs cite various forms of non-binding authority. The court does not find that authority persuasive. As Fuhrman put it, “The fatal flaw in plaintiff’s action is that she apparently never paid the money defendants demanded in their letters.” (Fuhrman, supra, 179 Cal.App.3d at p. 426.) Plaintiffs’ cause of action for attempted extortion has the same fatal flaw.

Plaintiffs also argue they suffered damages resulting from the attempted extortion because they had “to respond to Defendants’ threats and take precautionary measures to protect themselves, their families, and their business, including SMC’s expenditure of countless personnel hours in responding to Defendants’ threats and intimidation.” (FAC, ¶ 40.) Plaintiffs provide no binding authority that such damages can be recovered via a cause of action for attempted extortion.

2. Intentional Infliction of Emotional Distress

Plaintiffs allege sufficient facts to constitute a cause of action for intentional infliction of emotional distress. The elements of this cause of action are: “(1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff’s suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant’s outrageous conduct.” (Hughes v. Pair (2009) 46 Cal.4th 1035, 1050 (Hughes).)

Chan argues plaintiff has not alleged sufficiently outrageous conduct. This cause of action requires “outrageous conduct beyond the bounds of human decency.” (Janken v. GM Hughes Electronics (1996) 46 Cal.App.4th 55, 80.) Generally, “[l]iability for intentional infliction of emotional distress ‘ “does not extend to mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities.” ’ ” (Hughes, supra, 46 Cal.4th at p. 1051.) But threats of harm or death to the plaintiff or his family may be sufficient to support an intentional infliction of emotional distress cause of action. (Kiseskey v. Carptenters’ Trust for So. California (1983) 144 Cal.App.3d 222, 229-230 (Kiesekey); accord Hughes, at p. 1051, citing Kiseskey.)

Plaintiffs allege, “[W]ithin the past few months and while claiming to be ‘experienced’ and ‘deep-pocketed’ business-people who simply wanted to ‘negotiate’ an overdue debt, Defendants instead threatened the lives and safety of the individual Plaintiffs, threatened to make false and defamatory statements about Plaintiffs to third parties with whom Plaintiffs have existing business relationships, and more broadly threatened to ‘destroy’ Plaintiffs’ business and market reputation through defamation and other tortious misconduct. Defendants also threatened to assert false criminal and regulatory claims about the individual Plaintiffs to various governmental, regulatory and administrative agencies under the threat that Plaintiffs would be subject to criminal and other sanctions if Defendants made those false reports. Defendants then characterized these blatant and malicious threats as ‘warnings’, informed the Plaintiffs that this is how they resolved ‘business disputes’, and stated that they ‘know where [Plaintiffs] and [their] families live.’ ” (FAC, ¶ 1.) Plaintiffs further allege defendants engaged in “a campaign of physical, verbal, and written threats … to physically harm” plaintiffs. (¶ 32.)

In ruling on a demurrer, the court must construe the complaint liberally “by drawing reasonable inferences from the facts pleaded.” (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) Based on the allegations of ultimate facts in the complaint, the court can make the inference that defendants made veiled threats of harm plaintiffs and their families that were more than a triviality. The court cannot conclude that, as a matter of law, these allegations are not severe or outrageous enough to support a claim for intentional infliction of emotional distress.

Chan’s papers focus on the allegations that specifically refer to him by name. (FAC, ¶¶ 37-39.) Based on the same allegations, Chan also argues only plaintiff Burlingham, who directly received those communications, could have any claim against him. The allegations cited above from paragraphs 1 and 32 (among others) use the plural “defendants” and “plaintiffs.” The first amended complaint thus alleges all defendants took those actions against all plaintiffs. At this stage, the court must accept those allegations as true. Plaintiffs adequately allege the ultimate facts for this cause of action against Chan.

3. Unfair Competition

Plaintiffs allege sufficient facts for this cause of action. The unfair competition law, Business and Professions Code section 17200, prohibits “unlawful, unfair, or fraudulent” acts, which are three separate varieties of violation. (Drum v. San Fernando Valley Bar Assn. (2010) 182 Cal.App.4th 247, 253.) The unlawful prong of the unfair competition law “ ‘borrows’ violations from other laws by making them independently actionable as unfair competitive practices.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1143 (Korea Supply).) “Unlawful practices are practices ‘forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made.’ ” (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1133.)

As discussed above, plaintiffs allege defendants attempted to extort them with threats of harm. That is unlawful under Penal Code section 524, which provides, “Every person who attempts, by means of any threat … to extort property or other consideration from another is punishable by imprisonment … or by fine.” Though the court concludes there is no cause of action for attempted extortion, “[i]t is not necessary that the predicate law provide for private civil enforcement.” (Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 839.) Plaintiffs thus allege sufficient facts to constitute an unlawful business practice.

Chan argues plaintiffs do not allege an economic injury. For this cause of action, “standing is limited to any ‘person who has suffered injury in fact and has lost money or property’ as a result of unfair competition.” (Clayworth v. Pfizer, Inc. (2010) 49 Cal.4th 758, 788.) “There are innumerable ways in which economic injury from unfair competition may be shown. A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary.” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 323.)

Plaintiffs allege they “suffered monetary damages in having to respond to Defendants’ threats and take precautionary measures to protect themselves, their families, and their business, including SMC’s expenditure of countless personnel hours in responding to Defendants’ threats and intimidation.” (FAC, ¶ 40.) That is analogous to entering a transaction costing money that would otherwise have been unnecessary. On demurrer, this allegation suffices to show an economic injury.

Chan also argues plaintiffs did not allege he “is in competition with Plaintiffs’ business.” (Reply, p. 6.) Despite its name, the unfair competition law is not limited to business competitors. “The statute has been found to prohibit ‘wrongful business conduct in whatever context such activity might occur.’ ” (Massachusetts Mutual Life Ins. Co. v. Superior Court (2002) 97 Cal.App.4th 1282, 1288.) The law “covers a wide range of conduct” and “embraces anything that can properly be called a business practice and that at the same time is forbidden by law.” (Korea Supply, supra, 29 Cal.4th at p. 1143, internal quotes and citations omitted.) Plaintiffs allege defendants’ conduct is part of a dispute over a loan from one business to another. (FAC, ¶¶ 3, 24, 30-31.) Allegedly attempting to extort money from the lender constitutes a business practice forbidden by law.

Disposition

Defendant Danny Chan’s demurrer to plaintiffs’ first cause of action is sustained with 20 days’ leave to amend. Chan’s demurrer to plaintiffs’ second and third causes of action is overruled.