Judge: Barbara M. Scheper, Case: 21STCV04854, Date: 2022-08-30 Tentative Ruling

Case Number: 21STCV04854    Hearing Date: August 30, 2022    Dept: 30

Dept. 30

Calendar No.

Perera vs. Acclivity West, LLC, et. al., Case No. 21STCV04854

Tentative Ruling re:  Defendant’s Motion for Summary Judgment, or in the alternative, Summary Adjudication of Issues

            Defendant Acclivity West, LLC (Defendant) moves for summary judgment, or, in the alternative, summary adjudication against Plaintiff Swarna Perera (Plaintiff). Summary judgment is granted in favor of Defendant.

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party can show evidentiary support for a pleading or claim and if not to enable an order of summary dismissal without the need for trial. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843 (Atlantic Richfield).) Code of Civil Procedure Section 437c, subdivision (c) “requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)

Once the moving party has met that burden, the burden shifts to the opposing party to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto. To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.)

Plaintiff’s Second Amended Complaint (SAC) asserts four causes of action against Defendant for (1) Intentional and Negligent Misrepresentation, (2) Violations of Corporations Code sections 25400 and 25500, (3) Violations of Corporations Code sections 25401 and 25501, and (4) Breach of Fiduciary Duty.

            Defendant is a company that purchased life insurance policies in the secondary market and engaged in the sale of “Life Settlement Interests” (Interests). Investors who purchased the Interests received the contractual right to receive a fixed sum after the life insurance company paid the death benefit due under certain policies to the beneficiary, in exchange for the investor’s payment of premiums for the policies. (UMF 1-2.)

            In 2017, Plaintiff invested $300,000 in Interests managed by Defendant relating to four life insurance policies. (UMF 14; Defendant’s Exhibits (DE), Tab 1 ¶ 7.) The interests related to Policy Nos. 181926, 93545390, VF51582740 and 7224263. (Ibid.) Plaintiff purchased the Interests through her broker, Max Hechtman. (UMF 15.) Plaintiff testified that the only reason that she invested with Defendant was “[b]ecause I trusted my broker [Hechtman].” (DE, Tab 3, Ex. A, p. 159.)

            Purchasers of Interests from Defendant enter into purchase agreements which incorporate the “Confidential Term Sheet Offer of Life Settlement Interests” (the Term Sheet). (UMF 19; DE Tab 1 ¶ 17, Ex. C.) The Term Sheets included a section highlighting “Risk Factors” for the Interests, including a warning regarding “Premium Increases and Failures to Pay Premiums.” (UMF 23; DE Tab 1, Ex. C, p. 12.) Plaintiff entered into two “Multi-Policy Portfolio Application and Purchase Agreements” (the Purchase Agreements) with Defendant, dated October 24, 2017, and November 27, 2017. (UMF 20; DE Tab 1 ¶ 7, Ex. A, Ex. B.) Hechtman did not provide Plaintiff with the Term Sheet before she signed the Purchase Agreements and did not provide her with the full versions of the Purchase Agreements. (PE Tab 2, Ex. E, p. 36, 50-51, 55 [99].) Plaintiff did not have any communications with Defendant or its employees regarding the Purchase Agreements prior to her signing them. (PE Tab 2, Ex. E, p. 60 [105].)

In 2020, Life Opportunity Fund, LP (LOF) extended an offer of its limited partnership interests to Defendant. (UMF 35.) Defendant advised its investors, including Plaintiff, that if they tendered their Interests to Defendant in exchange for membership interests in Defendant, Defendant would in turn contribute those interests to LOF along with certain life insurance policies; Defendant would then become a limited partner of LOF. (UMF 38.) Defendant sent the offer to Plaintiff via email on October 19, 2020, offering her $52,694.59 for her interest in at least three of the four policies. (Plaintiff’s Exhibits (PE), Perera Decl. ¶ 5.)

Defendant’s investors were not required to accept this “swap” offer, and Plaintiff opted not to accept the offer. (UMF 39.) Plaintiff’s obligations under the Interest contracts remained unchanged after declining the swap offer. (UMF 40.)

            On December 13, 2020, Defendant sent a premium call notice to Plaintiff and other investors, for premiums for the period between December 1, 2020 and November 30, 2021, for Policy Nos. VF51582740 and 7724263. (UMF 33; DE Tab 1 ¶ 24, Ex. G.) Defendant sent another notice for the premiums on December 29, 2020, extending the time for payment of the premiums to January 29, 2021. (UMF 34.) The notices stated that Plaintiff’s Interests would be cancelled if she did not pay the required premiums. (UMF 51.)

First Cause of Action for Intentional and Negligent Misrepresentation.

“The essential elements of a count for intentional misrepresentation are (1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damage. [Citations.] The essential elements of a count for negligent misrepresentation are the same except that it does not require knowledge of falsity but instead requires a misrepresentation of fact by a person who has no reasonable grounds for believing it to be true.” (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230-31; see Anderson v. Deloitte & Touche (1997) 56 Cal.App.4th 1468, 1476.)

“Reliance exists when the misrepresentation or nondisclosure was an immediate cause of the plaintiff's conduct which altered his or her legal relations, and when without such misrepresentation or nondisclosure he or she would not, in all reasonable probability, have entered into the contract or other transaction. [Citations.] ‘Except in the rare case where the undisputed facts leave no room for a reasonable difference of opinion, the question of whether a plaintiff's reliance is reasonable is a question of fact.’ [Citations.] ‘However, whether a party's reliance was justified may be decided as a matter of law if reasonable minds can come to only one conclusion based on the facts.’” (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.)

            Defendant argues that Plaintiff has failed to produce evidence showing a misrepresentation by Defendant relied upon by Plaintiff. The Court agrees.

In response to a Request for Admission asking that Plaintiff “[a]dmit that YOU did not rely on any oral communication from anyone representing ACCLIVITY to invest in the LIFE SETTLEMENT INVESTMENT” Plaintiff admitted that she “did not rely on communications from [Defendant] circa October 2017.” (DE Tab 2, Ex. B p. 4 [193].) Plaintiff also testified during her deposition that the only reason that she invested with Defendant was “[b]ecause I trusted my broker [Hechtman].” (DE, Tab 3, Ex. A, p. 159.) Plaintiff further testified that Hechtman did not act wrongfully in relation to the investment, and that “there was no one else involved.” (UMF 54; DE Tab 3, Ex. A p. 153.) Based on this evidence showing no misrepresentation by Defendant or reliance by Plaintiff, Defendant has met its burden to show that it is entitled to judgment as a matter of law on this cause of action.

Plaintiff has not met her burden to show a triable issue of material fact as to this cause of action. Plaintiff argues that a triable issue exists based on her deposition testimony that Hechtman did not provide her any written materials relating to the investment, including the Term Sheet, before she signed the purchase agreements. (PE Tab 2, Ex. E, p. 36, 50-51, 55 [99].) Plaintiff also testified that Hechtman did not provide her with the opportunity to review the documents before signing it, and that Hechtman did not provide her with a full version of the Purchase Agreement when she signed it. (Ibid.) The evidence that Hechtman, Plaintiff’s investment broker, did not provide Plaintiff with information does not show any misrepresentation or omission by Defendant. As Plaintiff later testified, the only conversation she had with Defendant’s employees regarding the Purchase Agreements took place after those agreements were already signed. (PE Tab 2, Ex. E, p. 60 [105].) Furthermore, evidence of the fund swap does not present a triable issue of material fact, as Plaintiff did not accept the offer and so did not rely on any related misrepresentations. (UMF 39; DE, Tab 3, Ex. A, p. 63 [176].)

Second and Third Causes of Action for Violations of Corporations Code

            Plaintiff’s second and third causes of action against Defendant are respectively for Violations of Corporations Code sections 25400 and 25500, and Violations of Corporations Code sections 25401 and 25501.

Corporations Code section 25400 makes it unlawful for sellers or buyers of securities to make, for the purpose of inducing a sale or purchase, “any statement which was . . . false or misleading with respect to any material fact, or which omitted to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and which he knew or had reasonable ground to believe was so false or misleading.” (Corp. Code, § 25400, subd. (d).) Corporations Code section 25500 provides that if an individual “willfully participates in any act or transaction in violation of Section 25400,” then they “shall be liable to any other person who purchases or sells any security at a price which was affected by such act or transaction[.]” “[C]ivil liability pursuant to Corporations Code section 25500 applies only to a defendant who is either a person selling or offering to sell or buying or offering to buy a security.” (Kamen v. Lindly (2001) 94 Cal. App. 4th 197, 206.)

Under Corporations Code section 24501, “[i]t is unlawful for any person to offer or sell a security in this state, or to buy or offer to buy a security in this state, by means of any written or oral communication that includes an untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in the light of the circumstances under which the statements were made, not misleading.” Section 25501 provides that “[a]ny person who violates Section 25401 shall be liable to the person who purchases a security from him or sells a security to him.” “To incur liability as a ‘seller’ under [section 25401], an individual must ‘successfully solicit [ ] the purchase, motivated at least in part by a desire to serve his own financial interests or those of the securities owner.’” (Wanetick v. Mel’s of Modesto, Inc. (N.D. Cal. 1992) 811 F.Supp. 1402, 1406 [quoting Pinter v. Dahl (1988) 486 U.S. 622, 647].)

Defendant has met its burden to show no triable issue of material fact as to these two causes of action, based on the same evidence justifying summary adjudication on Plaintiff’s misrepresentation claim. Plaintiff’s initial purchases of the Interests do not support the alleged violations, because there is no evidence that Defendant made false or misleading statements of material fact to Plaintiff in relation to those sales. As noted above, Plaintiff stated in discovery responses and during her deposition that she did not communicate with Defendant at all prior to purchasing the Interests, and that she made the purchases based solely on the advice of her broker. (DE, Tab 2, Ex. B p. 4 [193]; Tab 3, Ex. A, pp. 153, 159.) The fund swap offer from Defendant to Plaintiff also cannot form the basis of Plaintiff’s claims here; Plaintiff did not accept the offer and so did not rely on the misrepresentations nor purchase from or sell any security to Defendant.

Fourth Cause of Action for Breach of Fiduciary Duty

“The elements of a cause of action for breach of fiduciary duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach.” (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086.) ‘[B]efore a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which imposes that undertaking as a matter of law.” [Citations].’ (City of Hope National Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 386.) A fiduciary relationship ordinarily arises “when one party reposes a confidence in the integrity of the other, and the other voluntarily accepts that confidence.” (Brown v. Wells Fargo Bank, N.A. (2008) 168 Cal.App.4th 938, 960.) “The essence of a fiduciary or confidential relationship is that the parties do not deal on equal terms because the person in whom trust and confidence is reposed and who accepts that trust and confidence is in a superior position to exert unique influence over the dependent party.” (Id. at 960.)

Defendant argues that this cause of action fails because no fiduciary relationship existed between Plaintiff and Defendant. The Court agrees.

There is no evidence that Defendant entered into the Purchase Agreements with Plaintiff “with the view of acting primarily for the benefit of [Plaintiff],” or that Defendant “through its conduct ‘knowingly’ undertook the obligations of a fiduciary.” (City of Hope, 43 Cal.4th at 386.) Again, Plaintiff did not communicate at all with Defendant prior to her initial purchase of the Interests. (DE, Tab 2, Ex. B p. 4 [193]; Tab 3, Ex. A, pp. 153, 159.) Nor is there any evidence that the parties did not deal on equal terms, or that Defendant was situated to exert unique influence over Plaintiff.

            In support of the existence of a fiduciary relationship, Plaintiff cites to provisions of the Purchase Agreements under which Defendant agreed to perform certain duties for Plaintiff, such as administration and oversight. (DE Tab 1, Ex. A, Ex. B.) However, a contractual relationship is not equivalent to a fiduciary relationship, and a fiduciary relationship is not created merely because a party reposes “trust and confidence” in another to perform its contractual obligation. (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 31; City of Hope, 43 Cal.4th at 388.) The duties imposed on Defendant by the Purchase Agreements do not present a triable issue as to the existence of a fiduciary relationship between the parties.