Judge: Barbara M. Scheper, Case: 20STCV09515, Date: 2022-08-16 Tentative Ruling
Case Number: 20STCV09515 Hearing Date: August 16, 2022 Dept: 30
Dept.
30
Calendar No.
Roy
vs. Wilcox, et. al., Case No. 20STCV09515
Tentative Ruling re: Plaintiff’s Motion to Compel Further
Discovery Responses
Plaintiff Somesh Roy (Plaintiff) moves for an order permitting
discovery into the financial condition of Defendant John Wilcox (Wilcox). The
motion is granted.
While pretrial discovery of a
defendant’s financial condition is generally not permitted, “[u]pon motion by
the plaintiff supported by appropriate affidavits and after a hearing, if the court
deems a hearing to be necessary, the court may at any time enter an order
permitting the discovery otherwise prohibited by this subdivision if the court
finds, on the basis of the supporting and opposing affidavits presented, that
the plaintiff has established that there is a substantial probability that the
plaintiff will prevail on the claim pursuant to Section 3294.” (Civ. Code, §
3295(c); see Jabro v. Superior Court (2002) 95 Cal.App.4th 754, 756.) “Such
order shall not be considered to be a determination on the merits of the claim
or any defense thereto and shall not be given in evidence or referred to at the
trial.” (Ibid.)
“[B]efore
a court may enter an order permitting discovery of a defendant’s financial
condition, it must (1) weigh the evidence submitted in favor of and in
opposition to the motion for discovery, and (2) make a finding that it is very
likely the plaintiff will prevail on his claim for punitive damages.” (Jabro,
supra, 95 Cal.App.4th at 758.) “In this context, a ‘substantial probability’
of prevailing on a claim for punitive damages means that it is ‘very likely’
that the plaintiff will prevail on such a claim or there is a ‘strong
likelihood’ that the plaintiff will prevail on such a claim.” (I-CA
Enterprises, Inc. v. Palram Americas, Inc. (2015) 235 Cal.App.4th 257, 283.)
Plaintiff has asserted a cause of action for fraud against
Wilcox and seeks punitive damages pursuant to that cause of action. (Comp. ¶¶
31-37, Prayer 3.) The parties agree that Plaintiff should be entitled to
pretrial discovery of Wilcox’s financial condition if Plaintiff establishes a
substantial probability of prevailing on this claim.
Plaintiff alleges that, in November 2018, Wilcox
represented to Plaintiff that if Plaintiff helped Wilcox and the other
Defendants structure a corporate reorganization wherein Defendants would
exchange shares in Livofum Fertility Management (Livofum) for shares of Jinxin
Fertility Group Limited (Jinxin), Plaintiff would receive 2% of the Jinxin
stock either from Jinxin or from the Defendants following Jinxin’s IPO. (Comp.
¶ 32.) Plaintiff alleges that these representations were false, made without
intent to perform and with the intent to induce Plaintiff’s reliance. (Comp. ¶¶
33-34.) Wilcox failed to transfer the stock as promised and encouraged the
other Defendants to not transfer their promised shares. (Comp. ¶ 35.)
As an initial matter, Wilcox argues that Plaintiff cannot
show a substantial probability of success, first, because he is legally barred
from recovery for lack of licensure as a securities broker-dealer. Defendants failed to allege this defense in their Answer to
Plaintiff’s Complaint. “An affirmative defense
must be alleged
in the answer or it is waived.” (Green v. Healthcare Services, Inc.
(2021) 68 Cal.App.5th 407, 415.) Accordingly, this defense is waived by
Defendants and so is unavailing here.
Even if not waive, the Court finds the argument specious.
“The
elements of fraud, which give rise to the tort action for deceit, are (a)
misrepresentation (false representation, concealment, or nondisclosure); (b)
knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce
reliance; (d) justifiable reliance; and (e) resulting damage. [Citations.]” (Lazar
v. Superior Court (1996) 12 Cal.4th 631, 638.)
Plaintiff presents evidence of emails sent from Wilcox to
Plaintiff and the other Defendants on November 14, 2018, in which Wilcox
suggested that “Somesh gets stock options worth 2% of our shares or we put up
2% of our own shares for Somesh,” asked the Defendants to confirm their support
for the proposal, and stated that “the package for Somesh is contingent on a
successful IPO.” (Roy Decl., Ex. A-Ex. D.) After collecting the support of the
other Defendants, Wilcox emailed, “Congratulations. Somesh, you get to
negotiate for 2% stock options or we will provide 2% of the stock from the
partners if you can get an IPO done.” (Roy Decl., Ex. E.)
Plaintiff also presents an email chain between Wilcox and
Defendant Michael Feinman from November 14, 2018, discussing Wilcox’s share
proposal to Plaintiff. (Shephard Decl. ¶ 3, Ex. B [30].) Wilcox wrote to
Feinman, “I am recommending this for [Plaintiff] because he will not perform
for us without it. . .. We can fire him later, but need his alliance to get the
deal done.” (Ibid.) At his deposition, Wilcox stated that Defendants
“never entertained giving [Plaintiff] a bonus just to reorganize the company,”
given that Plaintiff was already being paid as CEO of Lifovum. (Shepard Decl. ¶
2, Ex. A 124:3-7, 253:3-7.) When Wilcox was asked whether he intended to pay
Plaintiff the shares in exchange for his work on the reorganization, Wilcox responded,
“That was not my - - objective when I proposed the 2 percent.” (Id.
152:18-22.) When asked whether he intended to give Plaintiff “2 percent of your
shares in exchange for his working on the corporate reorganization,” Wilcox
stated, “There were always going to be additional requirements for us to give
him 2% of our shares.” (Shephard Decl., Ex. A 151:17-21.)
In opposition, Wilcox states that he did have the
intention of paying the shares, but “as part of an overall incentive program to
retain Mr. Roy as an executive of HRC Fertility to grow the business after
Defendants sold the remaining 49% of the practice.” (Wilcox Decl. ¶ 27.) Wilcox
also states that he did intend to pay the shares to Plaintiff but could not
because Jinxin refused to allow Defendants to transfer any portion of their
shares to him, and that he had difficulties working out the practical
implications of the transfer. (Wilcox Decl. ¶¶ 29-31.)
The Court
finds that Plaintiff has demonstrated a substantial probability of prevailing
on his cause of action for fraud against Wilcox. The evidence presented shows
that Wilcox represented to Plaintiff that Plaintiff would receive 2% of the
shares if he could “get an IPO done” (Roy Decl., Ex.
E), that Wilcox intended Plaintiff to rely on this promise “because he will not
perform for us without it” (Shephard Decl. ¶ 3, Ex. B [30]), and that
Wilcox did not actually intend to grant Plaintiff the shares merely for his
work on the IPO - “There were always going to be additional requirements for us
to give him 2% of our shares.” (Shephard Decl., Ex. A 151:17-21.) Wilcox’s statement
that he intended to pay the shares as part of an overall incentive program is
unsupported by the attached exhibits. The evidence that Jinxin did not allow
the transfer and that there were practical difficulties involved does not negate
the elements of Plaintiff’s claim.
Because Plaintiff has established a substantial
probability of prevailing on his claim, he is entitled to an order permitting
pretrial discovery into Defendant’s financial condition. (Civ. Code, § 3295,
subd. (c).) Accordingly, the motion is granted