Judge: Barbara M. Scheper, Case: 21STCV033631, Date: 2023-02-07 Tentative Ruling
Case Number: 21STCV033631 Hearing Date: February 7, 2023 Dept: 30
Dept.
30
Calendar
No.
Ikspan,
Inc. vs. Ruben, et. al., Case No. 21STCV03363
Tentative
Ruling re: Defendant’s Demurrer to
Second Amended Complaint
Defendant TSG Consumer Partners, LP (TSG) demurs to the
first, third, eighth, and eleventh causes of action in the Second Amended
Complaint (SAC) of Plaintiff Ikspan, Inc. (Ikspan). The demurrer is sustained
as to the first cause of action and otherwise overruled.
In reviewing the legal sufficiency of a complaint against a
demurrer, a court will treat the demurrer as admitting all material facts
properly pleaded, but not contentions, deductions, or conclusions of law. (Blank
v. Kirwan (1985) 39 Cal.3d 311, 318 (Blank); C & H Foods Co.
v. Hartford Ins. Co. (1984) 163 Cal.App.3d 1055, 1062.) It is well settled
that a “demurrer lies only for defects appearing on the face of the
complaint[.]” (Stevens v. Superior Court (1999) 75 Cal.App.4th 594,
601.) “The rules by which the sufficiency of a complaint is tested against a
general demurrer are well settled. We not only treat the demurrer as admitting
all material facts properly pleaded, but also give the complaint a reasonable
interpretation, reading it as a whole and its parts in their context.” (Guclimane Co. v.
Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38 (internal quotes
omitted).) For purposes of ruling on a demurrer, the complaint must be
construed liberally by drawing reasonable inferences from the facts pleaded. (Wilner
v. Sunset Life Ins. Co. (2000) 78 Cal.App.4th 952, 958.)
When ruling on a demurrer, the Court may only consider the
complaint’s allegations or matters which may be judicially noticed. (Blank,
supra, 39 Cal.3d at p. 318.) The Court may not consider any other extrinsic
evidence or judge the credibility of the allegations plead or the difficulty a
plaintiff may have in proving his allegations. (Ion Equip. Corp. v. Nelson
(1980) 110 Cal.App.3d 868, 881.) A demurrer is properly sustained only when the
complaint, liberally construed, fails to state facts sufficient to constitute
any cause of action. (Kramer v. Intuit Inc. (2004) 121 Cal.App.4th 574,
578.)
Ikspan’s
claims arise out of an alleged March 2019 agreement (the Licensing Agreement)
with Privé Goods, LLC (PG), an eyewear company, to market, promote,
advertise, distribute, and sell PG products in fifteen European Union
countries. (SAC ¶ 2.) Plaintiff, acting under the
Licensing Agreement as a “middle-man” for the covered countries, entered into a
contract with GrandVision (the GV Contract), an optical retailer, for the
exclusive rights to distribute PG products to GrandVision.
(SAC ¶ 3.)
Ikspan
alleges that PG’s approved manufacturers failed to meet product standards,
deliver goods in a timely manner, and comply with European standards of
quality, jeopardizing the GV Contract. (SAC ¶ 4.) After Ikspan notified PG
of the poor state of its manufacturing facilities, PG allegedly did nothing to
address those failures, harming Ikspan’s relations with GrandVision. (SAC ¶ 4.) PG
then “sought to facilitate the termination of the GV Contract in a fraudulent
bid to cut out Ikspan and seize the opportunity to transact with Grandvision
directly.” (SAC ¶ 26.) PG did so by “coaxing Ikspan to forfeit its exclusive
distribution rights,” while owner David Schottenstein, working with GrandVision
and Laurent Ruben, an Ikspan insider, “hammered out a secret side deal” to undermine
Ikspan’s interests in the GV Contract. (SAC ¶ 26.) Ikspan, at the advice of
Ruben, executed a confidential settlement agreement and accompanying release
under which “Ikspan relinquished its exclusive right to market, promote,
advertise distribute and sell Prive eyewear in the Territory and promptly shut
down.” (SAC ¶ 8.)
Defendant
TSG Consumer Partners, LP is a Delaware limited partnership with its principal
place of business in California, and is alleged to be a “stakeholder” in PG.
(SAC ¶¶ 7, 19.) Plaintiff alleges that TSG worked with PG, Schottenstein, and others
to undermine the GV Contract. (SAC ¶¶ 24, 26.) Plaintiff asserts four causes of
action against TSG, for fraudulent concealment, civil conspiracy (fraud),
intentional interference with prospective economic relations, and intentional
interference with contract.
First Cause of Action for Fraudulent Concealment
The required elements
for fraudulent concealment are: “(1) concealment or suppression of a material
fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3)
the defendant intended to defraud the plaintiff by intentionally concealing or
suppressing the fact; (4) the plaintiff was unaware of the fact and would not
have acted as he or she did if he or she had known of the concealed or
suppressed fact; and (5) plaintiff sustained damage as a result of the
concealment or suppression of the fact.” (Graham v. Bank of America, N.A.
(2014) 226 Cal.App.4th 594, 606.)
“In considering a fraudulent concealment
claim, ‘we begin with the threshold question of duty. [Citation.]’ ” (Hoffman
v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1193.) “There are ‘four
circumstances in which nondisclosure or concealment may constitute actionable
fraud: (1) when the defendant is in a fiduciary relationship with the
plaintiff; (2) when the defendant had exclusive knowledge of material facts not
known to the plaintiff; (3) when the defendant actively conceals a material
fact from the plaintiff; and (4) when the defendant makes partial
representations but also suppresses some material facts. [Citation.]’
[Citation.]” (Id. at 1186.)
Where there is no fiduciary relationship,
“[e]ach of the other three circumstances in which nondisclosure may be
actionable presupposes the existence of some other relationship between the
plaintiff and defendant in which a duty to disclose can arise.... [¶] ...
[S]uch a relationship can only come into being as a result of some sort of
transaction between the parties.... Thus, a duty to disclose may arise from the
relationship between seller and buyer, employer and prospective employee,
doctor and patient, or parties entering into any kind of contractual agreement.
[Citation.]” (Wilkins v. National Broadcasting Co., Inc. (1999) 71
Cal.App.4th 1066, 1082.)
Under the
cause of action for fraudulent concealment, Plaintiff alleges that Defendants “knowingly
and intentionally
failed to disclose material facts pertinent to the
Settlement Agreement with the intent to induce Plaintiff’s reliance.” (SAC ¶ 34.) Regarding TSG, Plaintiff
alleges that TSG participated in discussions with Schottenstein and the Safilo
Group concerning PG’s acquisition, and that it was involved in securing the
side deal between PG and GrandVision to exclude Ikspan. (SAC ¶ 35.)
Ikspan fails to state a cause of
action for fraudulent concealment against TSG, because the facts pled do not show
that TSG owed a duty to disclose to Ikspan. There are no allegations suggesting
that TSG and Ikspan were in a fiduciary relationship, nor any showing of “the existence of some other relationship between [TSG] and
[Ikspan] in which a duty to disclose can arise,” such
as “any kind of contractual agreement” between the parties. (Wilkins, 71 Cal.App.4th at 1082.) While Plaintiff argues in its Opposition that TSG was a
party to the Settlement Agreement, that fact is not pled in the SAC and so may
not be considered for purposes of this demurrer. The demurrer is sustained as
to the first cause of action.
Third Cause of Action for Civil Conspiracy to Commit Fraud
“Civil conspiracy is not an
independent tort. Instead, it is ‘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.
[Citation.] By participation in a civil conspiracy, a coconspirator
effectively adopts as his or her own the torts of other coconspirators within
the ambit of the conspiracy. [Citation.] In this way, a coconspirator
incurs tort liability co-equal with the immediate tortfeasors.’ [Citation.]” (City
of Industry v. City of Filmore (2011) 198 Cal.App.4th 191, 211-212.)
“The elements of a
civil conspiracy are (1) the formation of a group of two or more persons who
agreed to a common plan or design to commit a tortious act; (2) a wrongful act
committed pursuant to the agreement; and (3) resulting damages.” (City of
Industry, supra, 198 Cal.App.4th at p. 212.) “[F]acts must be alleged” as to each element. (117 Sales
Corp. v. Olsen (1978) 80 Cal.App.3d 645, 649.) “[B]are legal conclusions,
inferences, generalities, presumptions, and conclusions are insufficient.” (Nicholson
v. McClatchy Newspapers (1986) 177 Cal.App.3d 509, 521.) “The conspiring
defendants must also have actual knowledge that a tort is planned and concur in
the tortious scheme with knowledge of its unlawful purpose.” (Kidron v.
Movie Acquisition Corp. (1995) 40 Cal.App.4th 1571, 1582.) Even “actual
knowledge of the planned tort, without more, is insufficient to serve as the
basis for a conspiracy claim. Knowledge
of the planned tort must be combined with intent to aid in its commission.” (Ibid.)
“It must be recognized . . . that because of
the very nature of a conspiracy, ‘its existence must often be inferentially and
circumstantially derived from the character of the acts done, the relations of
the parties and other facts and circumstances suggestive of concerted action.’
[Citation.] While a complaint must contain more than a bare allegation the
defendants conspired, a complaint is sufficient if it apprises the defendant of
the ‘character and type of facts and circumstances upon which she was relying
to establish the conspiracy.’” (AREI II Cases (2013) 216 Cal.App.4th
1004, 1022.)
Here, the
SAC alleges that TSG “work[ed] in concert” with Schottenstein, Ruben, and
GrandVision to secure the side deal (SAC ¶ 26); that the conspirators “knowingly
exploited Ikspan’s know-how, expertise and proprietary knowledge from Ruben to position
PG for acquisition” (SAC ¶ 27); that TSG participated in negotiations with the
conspirators “to expand PG’s European foothold to the exclusion of Ikspan while simultaneously pressuring Ikspan
to terminate the GV Contract”; and that TSG, with the other conspirators,
fraudulently induced Ikspan to enter into the Settlement Agreement. (SAC ¶ 32.)
The
Court finds these allegations sufficient to state a cause of action against TSG
for civil conspiracy to defraud. Ikspan “ha[s]
pleaded facts and circumstances that permit a reasonable inference” that TSG
was aware of and aided the alleged conspiracy to exclude Ikspan (AREI II
Cases, 216 Cal.App.4th at 1022-23), namely, that TSG was a participant in
the discussions and negotiations surrounding the side deal and acquisition by
the Safilo Group. TSG’s alleged involvement in those discussions is sufficient to
support the civil conspiracy cause of action, for purposes of pleading.
Accordingly, the demurrer is overruled as to the third cause of action.
Eighth Cause of Action for Intentional Interference with
Prospective Economic Advantage; Eleventh Cause of Action for Intentional
Interference with Contract
The
elements for the tort of intentional interference with prospective economic
advantage are: “(1) an economic relationship between the plaintiff and some
third party, with the probability of future economic benefit to the plaintiff;
(2) the defendant’s knowledge of the relationship; (3) intentional acts on the
part of the defendant designed to disrupt the relationship; (4) actual
disruption of the relationship; and (5) economic harm to the plaintiff proximately
caused by the acts of the defendant.” (Korea Supply Co. v. Lockheed Martin
Corp. (2003) 29 Cal.4th 1134, 1153.)
In order to establish intentional interference with
prospective economic advantage, a plaintiff must show that the
defendant engaged in an independently wrongful act. (See Korea Supply Co.,
supra, 29 Cal.4th at 1158.) “An act is not independently wrongful merely
because defendant acted with an improper motive.” (Ibid.) “[A]n
act is independently wrongful if it is unlawful, that is, if it is proscribed
by some constitutional, statutory, regulatory, common law, or other
determinable legal standard.” (Id. at 1159.)
“To prevail on a cause of action for
intentional interference with contractual relations, a plaintiff must plead and
prove (1) the existence of a valid contract between the plaintiff and a third
party; (2) the defendant's knowledge of that contract; (3) the defendant's
intentional acts designed to induce a breach or disruption of the contractual
relationship; (4) actual breach or disruption of the contractual relationship;
and (5) resulting damage.” (Reeves v. Hanlon (2004) 33 Cal.4th 1140,
1148.)
Ikspan’s eighth cause of action for
Intentional Interference with Prospective Economic Advantage alleges that TSG
intentionally interfered with the economic relationship between Plaintiff and
GrandVision, by “engag[ing] in a fraudulent scheme to expropriate Plaintiff for
their own financial benefit.” (SAC ¶¶ 75-77.) The eleventh cause of action for
Intentional Interference with Contract similarly alleges that TSG intentionally
interfered with the GV Contract between Ikspan and GrandVision by fraudulently
inducing Plaintiff to relinquish its rights under the GV Contract, pressuring
Plaintiff to settle its claims with PG, and failing to disclose facts material
to Plaintiff’s position with respect to the GV Contract. (SAC ¶ 98.)
TSG first demurs to the eighth and eleventh
causes of action on the basis that Ikspan has not alleged an “independently
wrongful act” by TSG. As discussed above, Ikspan has pled a cause of action for
civil conspiracy to defraud against TSG; that claim is sufficient to constitute
“independently wrongful conduct” that may predicate the interference claims.
TSG also argues that Ikspan has failed to
allege the breach or disruption of an economic relationship between Ikspan and
GV with probable future economic benefit, because TSG’s alleged conduct took
place only after GV delivered notice that it would terminate the agreement, on
May 27, 2019. In making this argument, TSG relies on excerpts from the
purported Release Agreement between Ikspan and Defendants, which TSG has
requested for judicial notice. (RJN, Ex. A.) As with prior demurrers, the Court
declines to take judicial notice of those documents. The claimed date of GV’s
delivery of notice of termination does not appear on the face of the SAC, and
so cannot be considered here.
The demurrer is overruled to the eighth and
eleventh causes of action.