Judge: Barbara M. Scheper, Case: 22STCV14601, Date: 2023-03-28 Tentative Ruling
Case Number: 22STCV14601 Hearing Date: March 28, 2023 Dept: 30
Dept.
30
Calendar
No.
Care
Plus Medical Group, Inc., et. al. vs. Law Offices of Michael E. Reznick, et.
al., Case No. 22STCV14601
Tentative
Ruling re: Defendants’ Demurrer to First
Amended Complaint; Motion to Strike
Defendants Law Offices of Michael E. Reznick and Michael E.
Reznick (collectively, the Reznick Defendants) demur to the first through eighth
causes of action in Plaintiffs’ First Amended Complaint
(FAC) and move to strike portions of the FAC. The demurrer is sustained as to
the first, second, fifth, and seventh causes of action, and otherwise
overruled. The motion to strike is granted in part.
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.)
As an
initial matter, the Court rejects Plaintiffs’ argument that Defendants’
demurrer to the third, fourth, and sixth cause of action is sanctionable. While
the Court previously overruled Defendants’ demurrer to those causes of action
in the Complaint, “a party is within its rights to
successively demur to a cause of action in an amended pleading notwithstanding
a prior unsuccessful demurrer to that same cause of action.” (Carlton v. Dr.
Pepper Snapple Group, Inc. (2014) 228 Cal.App.4th 1200, 1211.)
Prefiling
requirement (Civil Code § 1714.10)
Reznick
Defendants first argue that Plaintiffs’ claims against them are all subject to
the prefiling requirement under Civil Code § 1714.10. The Court disagrees.
Section
1714.10 provides, “No cause of action against an attorney for a civil
conspiracy with his or her client arising from any attempt to contest or
compromise a claim or dispute, and which is based upon the attorney’s
representation of the client, shall be included in a complaint or other
pleading unless the court enters an order allowing the pleading that includes
the claim for civil conspiracy to be filed after the court determines that the
party seeking to file the pleading has established that there is a reasonable
probability that the party will prevail in the action.” (Civil Code § 1714.10,
subd. (a).) Failure to obtain the court order in these circumstances “shall be
a defense to any action for civil conspiracy filed in violation thereof.” (Civ.
Code § 1714.10, subd. (b).) “Applying section 1714.10
. . . requires the court to initially determine whether the pleading falls
either within the coverage of the statute or, instead, within one of its stated
exceptions.” (Stueve v. Berger Kahn (2013) 222 Cal.App.4th 327, 331.)
Here, except for the Abuse of Process claim
barred by the litigation privilege, Plaintiffs’ claims against the Reznick
Defendants do not “aris[e] from any attempt to contest or compromise a claim or
dispute.” Rather, Plaintiffs’ claims are largely based on allegations that the
Reznick Defendants “intentionally gathered confidential information pertaining
to the business plans and operations of Plaintiffs” and passed that information
to Co-Defendants, who used the information to usurp Plaintiffs’ business
identities and assets. (FAC ¶ 41.) The Reznick Defendants’ alleged sharing of
Plaintiffs’ confidential financial information did not “aris[e] from any
attempt to contest or compromise a claim or dispute.” (Civil Code § 1714.10,
subd. (a).) By the plain language of Section 1714.10, Plaintiffs’ claims based
on that conduct do not fall within the scope of the prefiling requirement. (See
Stueve, 222 Cal.App.4th at 332 [finding section 1714.10 does not apply
where claims against attorney arose “from transactional activities,” including
“siphoning off of assets” and “the diversion of [plaintiffs’] assets to
entities created and controlled by the defendants”].)
First
Cause of Action for Preliminary Injunction, Permanent Injunction, and
Damages
“An injunction is a remedy, not a cause of action.
Therefore, it may not be issued if the underlying causes of action are not
established.” (Venice Coalition to Preserve Unique Community Character v.
City of Los Angeles (2019) 31 Cal.App.5th 42, 54.) Courts have permitted a
request for injunctive relief framed as a cause of action to proceed when other
claims provide a basis for such relief. (Ortiz v. Dameron Hospital Assn.
(2019) 37 Cal.App.5th 568, 585 [denying summary adjudication of “claim for
injunctive relief” after holding that other causes of action may be
established]; compare Allen v. City of Sacramento (2015) 234 Cal.App.4th
41, 65-66 [“Although the order sustaining the demurrer was proper because an
injunction is not a cause of action, plaintiffs may still obtain injunctive
relief if they prevail on a cause of action”].)
Under the first cause of action, Plaintiffs seek to enjoin
the Reznick Defendants “from filing and maintaining any action as attorney of
record any [sic] legal action against any Plaintiff herein,” and from
“continuing in the performance of” any of the alleged misconduct. (FAC ¶
46(i).) As Defendants point out
that the LASC action in which Defendants were representing Plaintiffs
(21STCV39991) has been dismissed, and so the request for injunctive relief is
moot.
Second
Cause of Action for Unfair Competition (Bus. & Prof. Code § 17200)
California’s
Unfair Competition Law (UCL) prohibits unlawful, unfair, or fraudulent business
acts or practices. (Bus. & Prof. Code, § 17200 et seq.) “An
‘unlawful business activity’ includes ‘anything that can properly be called a
business practice and that at the same time is forbidden by law.’” (People
v. McKale (1979) 25 Cal.3d 626, 632 [quoting Barquis v. Merchants
Collection Assn. (1972) 7 Cal.3d 94, 113].) “Virtually
any law or regulation—federal or state, statutory or common law, can serve as a
predicate for a Business and Professions Code section 17200 ‘unlawful’
violation. [Citation.]” (Paulus v. Bob Lynch Ford, Inc. (2006) 139
Cal.App.4th 659, 681 [internal quotations omitted].)
“While the scope of conduct covered by the UCL is broad,
its remedies are limited. [Citation.] A UCL action is equitable in nature;
damages cannot be recovered. [Citation.] . . . [U]nder the UCL,
‘[p]revailing plaintiffs are generally limited to injunctive relief and restitution.’
” (Korea Supply Co. v. Lockheed Martin Corp.
(2003) 29 Cal.4th 1134, 1144.)
As discussed below, Plaintiffs have
pled unlawful conduct by the Reznick Defendants under their third, fourth,
sixth, and eighth causes of action, which are sufficient to predicate
Plaintiffs’ cause of action under the UCL. However, Plaintiffs have not pled
any grounds for injunctive relief or restitution, and so the UCL claim fails.
Third
Cause of Action for Intentional Interference with Prospective Economic Relations
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.) “[T]o satisfy the intent requirement for this tort, it is
sufficient to plead
that the defendant knew that the interference was certain or substantially
certain to occur as a result of its action.” (Id. at 1153.)
Here, Plaintiffs allege that
the Reznick Defendants, while serving as Plaintiffs’ general counsel,
“intentionally gathered confidential information pertaining to the business
plans and operations of Plaintiffs,” then passed that information to
Co-Defendants, who used the information to usurp Plaintiffs’ business
identities and assets. (FAC ¶ 60.) Defendants’ conduct intentionally interfered
with Plaintiffs’ “economic relationship
with their patients, with referral clinics, with doctors, hospitals, nurses and
other health care providers and vendors.” (FAC ¶¶ 61, 64.) As a result,
“Plaintiffs lost all access to financial and commercial banking institutions
due to the fraudulent filings of Defendants and had their accounts stolen by
Defendants and/or frozen by their bankers; lost contracts for the provision of
medical services; lost patients and medical staff; and suffered reputational
losses…” (FAC ¶ 65.)
The Court
finds these allegations sufficient to state the intentional interference claim
against the Reznick Defendants. The cause of action
may be premised on the Reznick Defendants’ alleged disclosure and dissemination
of Plaintiffs’ confidential financial and business information, obtained during
the Reznick Defendants’ representation of Plaintiffs. (FAC ¶ 60.) The alleged
disclosures constitute intentional conduct on the part of the Reznick
Defendants amounting to an independently wrongful act. The Reznick Defendants’
knowledge of Plaintiffs’ economic relationships and of the resulting
interference is sufficiently shown by their alleged representation of
Plaintiffs and their access to the confidential information disseminated. (FAC
¶ 41.) The demurrer is overruled as to the third cause of action.
Fourth Cause of Action for Conversion
To plead a cause of
action for conversion, one must allege (1) the plaintiff’s ownership or right
to possession of personal property; (2) defendant’s disposition of the property
inconsistent with plaintiff’s rights; and (3) resulting damages. (Fremont
Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97,
119.) “To maintain a conversion action ‘it is not essential
that plaintiff shall be the absolute owner of the property converted but she
must show that she was entitled to immediate possession at the time of conversion.’ ”
(Hartford Financial Corp. v. Burns (1979) 96 Cal.App.3d 591, 598.)
The fourth cause of action is based on
Defendants’ alleged conversion of Plaintiffs’ bank accounts, physical office
equipment, personnel records, patient files, confidential information regarding
business plans and strategy, corporate records, and corporate identities. (FAC ¶
68.) It is alleged that “Defendants, and each of them, intentionally took
possession and control of said assets of Plaintiffs and/or otherwise prevented
Plaintiff from having access thereto, with the intention on the part of Defendants
to permanently deprive Plaintiffs of same.” (FAC ¶ 69.) Plaintiffs seek to
assert this claim against the Reznick Defendants based on a theory of
conspiracy liability.
“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, citing Applied Equipment Corp. V. Litton
Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510-511.)
“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.) 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.)
The Court finds the allegations in the FAC
sufficient to support conspiracy liability against the Reznick Defendants under
this cause of action. The Reznick Defendants’ alleged dissemination of
Plaintiffs’ financial and business information to the co-defendants constitutes
a wrongful act committed pursuant to Defendants’ tortious scheme to convert
Plaintiffs’ property (including that confidential information), performed with
actual knowledge of the scheme and intent to aid in its commission. (FAC ¶ 41.)
Plaintiffs allege that the Reznick Defendants’ unauthorized sharing of
Plaintiffs’ confidential information “was and is a part of a scheme and
conspiracy on the part of all Defendants to gain the trade secrets and
operational secrets of Plaintiffs, to identify the assets of Plaintiffs, to
gain custody and control of said assets, and to take over and usurp the medical
clinics of Plaintiffs.” (FAC ¶ 32.) The allegations are sufficient to apprise
the Reznick Defendants of the “character and type of facts and circumstances
upon which [Plaintiffs are] relying to establish the conspiracy.” (AREI II
Cases, 216 Cal.App.4th at 1022.) The demurrer is therefore overruled as to
the fourth cause of action.
Fifth Cause of Action for Fraud
The elements of fraud are:
(1) misrepresentation (false representation, concealment, or nondisclosure);
(2) knowledge of falsity (scienter); (3) intent to defraud or induce reliance;
(4) justifiable reliance; and (5) damages. (See Civil Code §1709.) Fraud
actions are subject to strict requirements of particularity in pleading. (Committee
on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197,
216.)
The liberal construction of pleadings does not apply to a
fraud claim. Instead, a fraud claim must be pled with specificity. (Tenet
Healthsystem Desert, Inc. v. Blue Cross of California¿(2016) 245
Cal.App.4th 821, 837.) “The particularity requirement demands that a plaintiff
plead facts which show how, when, where, to whom, and by what means the
representations were tendered.” (Cansino v. Bank of America (2014) 224
Cal.App.4th 1462, 1469.)
Plaintiffs
allege that Defendants fraudulently represented that they were the authorized
owners, officers, directors, and managing agents of the corporate Plaintiffs in
communications “to the Secretary of State of the State of California, to
Defendant, JPMorgan Chase Bank, dba Chase Bank and Does 111-120, and each of
them, to the United States District Court for the Central District of
California, to the Superior Court of the State of California, and to health
care providers with whom Plaintiffs have contractual and financial
relationships, as well as to customers and patients of Plaintiffs.” (FAC ¶ 75.)
Plaintiffs also allege that the Reznick Defendants furthered the Co-Defendants
fraud through their improper dissemination of Plaintiffs’ confidential
information. (FAC ¶ 80.)
As the Court previously found, the Reznick Defendants’ alleged
litigation in the Superior Court and Bankruptcy Court are protected by the
litigation privilege, and Plaintiffs have also failed to plead any
misrepresentation made by the Reznick Defendants with specificity.
Accordingly, the
demurrer is sustained as to the fifth cause of action.
Sixth Cause of Action for Slander of Title
“The elements of a cause of action for slander
of title are (1) a publication, which is (2) without privilege or
justification, (3) false, and (4) causes pecuniary loss.” (La Jolla Group II
v. Bruce (2012) 211 Cal.App.4th 461, 472 [emphasis in original].)
Plaintiffs allege “[t]hat Defendants and each
of them made statements to, among other persons, the Secretary of State of the
State of California, Defendants, JPMorgan Chase Bank, and Does 11-120, and to
vendors, health care providers, customers, patients and others which statements
cast doubt about the ownership and management of Plaintiffs and their assets.”
(FAC ¶ 86.) As with the third cause of action, the allegations that the Reznick
Defendants shared Plaintiffs’ confidential financial and business information
with other defendants to enable the false publications are sufficient to state
grounds for conspiracy liability against the Reznick Defendants. Accordingly,
the demurrer is overruled as to the sixth cause of action.
Seventh Cause of Action for Abuse of Process
“To establish a cause of action for abuse of
process, a plaintiff must plead two essential elements: that the defendant (1) entertained
an ulterior motive in using the process and (2) committed a willful act in a
wrongful manner.” (Coleman v. Gulf Ins. Group (1986) 41 Cal.3d 782, 792.)
“The gist of the action for abuse of process lies in the improper use of
process after it is issued. To show that regularly issued process was perverted
to the accomplishment of an improper purpose is enough.” (Clark Equipment
Co. v. Wheat (1979) 92 Cal.App.3d 503, 525–526.)
The Court previously sustained the Reznick
Defendants’ demurrer to this cause of action without leave to amend, and so Plaintiffs
may not reassert the claim in the FAC.
Eighth 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.)
Under the
eighth cause of action, Plaintiffs allege that the Reznick Defendants
represented them as general counsel and in a debt collection defense manner.
(FAC ¶ 99.) The Reznick Defendants requested confidential information from
Plaintiffs, including “corporate documents and records, tax payer
identification numbers, financial information pertaining to banking accounts .
. . customer and patient information and other confidential trade secrets.”
(FAC ¶ 100.) After Plaintiffs provided this information, Defendants copied
co-Defendants on correspondence involving the confidential information; used
the information gathered to prosecute legal actions against Plaintiffs, while
simultaneously representing Plaintiffs in the matters they were originally
retained for; and provided the information to co-Defendants to further their
efforts to steal Plaintiffs’ identities. (FAC ¶ 102.)
The Reznick Defendants demur to this claim solely on the basis that
it is barred by the litigation privilege. As discussed above, Defendants’
alleged dissemination of Plaintiffs’ confidential information is not subject to
the litigation privilege. Accordingly, the demurrer is overruled as to the
eighth cause of action.
Motion
to Strike
The
Reznick Defendants move to strike allegations in the Complaint related to
Defendants filing of litigation in Los Angeles Superior Court and Bankruptcy
Court. (FAC ¶¶ 33, 38, 40, 41(b), (d), (h), 44(c), (e), 46(i), 75, 93, 102,
Prayer ¶ 2(e), (i).) These allegations are largely identical to those in the
Complaint that were subject to the previous motion to strike, and remain
improper under the litigation privilege. (See Rusheen, supra, 37
Cal.4th at 1058; Navellier v.
Sletten (2003) 106 Cal.App.4th 763, 770
[“Pleadings and process in a case are generally viewed as privileged
communications”]; Rubin v. Green (1993) 4 Cal.4th 1187, 1195 [“we can imagine few communicative acts more clearly
within the scope of the privilege than those alleged [including] filing the
complaint and subsequent pleadings in the litigation”].)
The only exceptions are the allegations
seeking injunctive relief against the Reznick Defendants. (FAC ¶ 44(c), Prayer
2(i).) The litigation privilege does not limit the nature of injunctive relief
that a plaintiff may obtain.
The motion to strike is granted as to all allegations
except Paragraph 44(c) and Prayer (2)(i).