Judge: Carolyn M. Caietti, Case: 37-2021-00004285-CU-FR-CTL, Date: 2024-01-30 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - January 18, 2024

01/19/2024  10:30:00 AM  C-70 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Carolyn Caietti

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Civil - Unlimited  Fraud Summary Judgment / Summary Adjudication (Civil) 37-2021-00004285-CU-FR-CTL LICOSATI VS BUCHNER [IMAGED] CAUSAL DOCUMENT/DATE FILED:

Plaintiffs Michael Licosati and Henry W. Winship IV's Motion for Summary Adjudication is DENIED.

Plaintiffs/Cross-Defendants' Motion for Summary Judgment or Adjudication on the Cross-Complaint of Defendant Todd Buchner is DENIED.

Plaintiffs/Cross-Defendants' Motion for Summary Judgment or Adjudication on the Cross-Complaint of Defendant BxC General Partner, LLC is DENIED.

Summary of Allegations This case concerns a business/investment dispute. In 2019, Plaintiffs Licosati and Winship and Defendant Buchner formed BxC General Partner, LLC and entered into an Operating Agreement. These individuals are the three members of BxC and hold an equal 1/3 interest. Together, Licosati and Winship are the 'Majority-in-Interest.' Buchner is the manager of BxC. Each paid contributions to Axxcess Wealth Management, LLC. Following formation and the investment to Axxcess, things fell apart. Generally, Plaintiffs accuse Buchner of failing to act to maximize the investment in Axxcess, violating his duties as manager and member of BxC, acting out of self-interest to BxC's detriment and committing fraud and violations of securities and regulatory laws. Buchner accuses Licosati and Winship of conducting a secret, illicit campaign to oust him from BxC and strip him of his investment interests and proceeds.

Plaintiffs' Motion for Summary Adjudication on Claim No. 9 Preliminary Matters Although the notice of motion moves for adjudication on 'Claims 4, 8 and 9 in the Third Amended complaint,' the motion (and the caption) only addresses 'Claim 9.' The ninth cause of action seeks dissolution of BxC. The parties agree Delaware law controls.

Licosati/Winship's requests for judicial notice (ROA 492) are granted. (Evid. Code, § 452(d).) Notice will be taken to the extent permitted. (Starr v. Ashbrook (2023) 87 Cal.App.5th 999, 1014 (courts can take judicial notice of the truth of facts asserted in documents such as orders, findings of fact and conclusions of law, and judgments); Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882 (courts are free to take judicial notice of the existence of each document in a court file, including the truth of results reached; they may not take judicial notice of the truth of hearsay Calendar No.: Event ID:  TENTATIVE RULINGS

2997680  58 CASE NUMBER: CASE TITLE:  LICOSATI VS BUCHNER [IMAGED]  37-2021-00004285-CU-FR-CTL statements in decisions and court files).) Buchner's objections to the request for judicial notices (ROA 534) are overruled (supra).

Buchner's objections to the Declaration of Michael Licosati (ROA 533, p. 2-5) are overruled as to Nos. 1 and 5. The objections are sustained as to Nos. 2, 3 (as to 'Defendant Buchner further inflated his credentials...') and 4.

Buchner's objections to the Declaration of Charles Pernicka (ROA 533, at p. 5-9) are sustained.

Buchner's objections to the Declaration of Jay Winship (ROA 533, p. 10-13) are overruled as to No. 1.

The objections are sustained as to Nos. 2, 3 (as to 'Defendant Buchner further inflated his credentials...') and 4.

Licosati/Winship's 60 reply objections, including objections to every paragraph to Todd Buchner's declaration, is intemperate. They should have only raised meritorious objections to items of evidence legitimately in dispute and pertinent to the disposition of the motion. (Reid v. Google, Inc. (2010) 50 Cal.4th 512, 532-33; Serri v. Santa Clara University (2014) 226 Cal.App.4th 830, 856; Cohen v. Kabbalah Centre Internat., Inc. (2019) 35 Cal.App.5th 13, 21 ['objecting to every single thing with no display of professional judgment or restraint is an abusive practice'].) Notwithstanding, Licosati/Winship's reply objections (ROA 570, p. 1-13) to the Declaration of Eric Schwartz are overruled. Counsel can authenticate documents produced by opposing counsel in discovery that bear clear indicia that they are what they purport to be. (Hooked Media Group, Inc. v. Apple Inc. (2020) 55 Cal.App.5th 323, 338, publication ordered (Sept. 30, 2020); see also Ambriz v. Kelegian (2007) 146 Cal.App.4th 1519, 1527, as modified on denial of reh'g (Feb. 15, 2007) (ruling objections based on an attorney's failure to attest to personal knowledge of deposition excerpts, lay a foundation or authenticate the excerpts lacked merit and finding raising an objection as to lack of authentication of an excerpt from the same deposition relied on by that party to be disingenuous).) Licosati/Winship's reply objections (ROA 570, p. 14-19) to the Declaration of Ken Joseph are overruled.

Licosati/Winship's relevance objection lacks merit as they raised the issue of the SEC action against Audrey Buchner in their moving papers.

Licosati/Winship's reply objections (ROA 570, p. 19-53) to the Declaration of Todd Buchner are sustained as to Nos. 29, 31 (at 'His wife even told my wife on several occasions that she hoped we would one day work together') and 56. The remainder are overruled.

Discussion A party may move for summary adjudication as to one or more causes of action within an action if the party contends the cause of action has no merit. (C.C.P., § 437c(f)(1).) A motion for summary adjudication shall be granted only if it completely disposes of a cause of action. (Ibid.) Summary adjudication motions are 'procedurally identical' to summary judgment motions. (Serri v. Santa Clara University (2014) 226 Cal.App.4th 830, 859.) A three-step analysis is employed in ruling on motions for summary judgment. (Kline v. Turner (2001) 87 Cal.App.4th 1369, 1373.) First, the court identifies the issues framed by the pleadings. (Pierson v. Helmerich & Payne Internat. Drilling Co. (2016) 4 Cal.App.5th 608, 617.) Second, the court determines whether the moving party has established facts justifying judgment in its favor. (Ibid.) Third, if the moving party carried its initial burden, the court decides whether the opposing party demonstrated the existence of a triable issue of material fact. (Id. at p. 618.) In conducting this analysis, the court must strictly construe the moving party's evidence and liberally construe the opposing party's evidence (Binder v. Aetna Life Ins. Co. (1999) 75 Cal.App.4th 832, 838-39), and may not weigh the evidence or conflicting inferences. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 856.) A triable issue of material fact exists if the evidence would allow a Calendar No.: Event ID:  TENTATIVE RULINGS

2997680  58 CASE NUMBER: CASE TITLE:  LICOSATI VS BUCHNER [IMAGED]  37-2021-00004285-CU-FR-CTL reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof. (Id. at p. 850.) The ninth cause of action seeks to dissolve BxC. (TAC, at ¶¶ 147-155.) BxC's Operating Agreement provides for dissolution. (UMF 29; Licosati Decl., at Ex. 2, § 9.1(d) [The Company shall be dissolved immediately upon the first to occur of the following events...(d) The entry of a decree of judicial dissolution pursuant to the applicable provisions of the Act.].) The parties agree Delaware law applies. (Opp., at p. 12:19.) The 'Act' is the Delaware Limited Liability Company Act, which provides a limited liability company shall be dissolved upon application by a member 'whenever it is not reasonably practicable to carry on the business in conformity with a limited liability company agreement.' (6 Del. C. § 18-802.) The standard is whether 'it is reasonably practicable for [the company] to continue to operate its business in conformity with its LLC Agreement.' (Fisk Ventures, LLC v. Segal, No. CIV. A. 3017-CC, 2009 WL 73957, at *4 (Del. Ch., Jan. 13, 2009) aff'd, 984 A.2d 124 (Del. 2009) (unpublished table decision); see also, Case Financial, Inc. v. Alden (Del. Ch., Aug.

21, 2009, No. CIV. A. 1184-VCP) 2009 WL 2581873, at *6 (unpublished opinions have precedential value in Delaware).) 'The text of § 18-802 does not specify what a court must consider in evaluating the 'reasonably practicable' standard, but several convincing factual circumstances have pervaded the case law: (1) the members' vote is deadlocked at the Board level; (2) the operating agreement gives no means of navigating around the deadlock; and (3) due to the financial condition of the company, there is effectively no business to operate.' (Fisk, supra.) Here, disputed facts exist as to whether it is reasonably practicable for BxC to continue to operate its business in conformity with its Operating Agreement. To start, the parties first dispute the actual purpose of the business. Licosati/Winship maintain it was solely to invest in Axxcess. However, the Operating Agreement does not limit its business purpose to Axxcess and more broadly states the purpose is 'to invest in, own, manage various investments and to engage in any and all activities necessary or incidental thereto.' (Ex. 2, at § 2.5.) There is also evidence the purpose of BxC was to create a fund to make multiple investments. (Declaration of David De Lo, at ¶¶ 4-5; Buchner Decl., at ¶¶ 6-7; Schwartz Decl., at Ex 56 – Winship Depo, at pp. 148-149.) Second, disputed facts exist as to whether there is a deadlock. On the one hand, Licosati/Winship hold a majority interest but Buchner is the sole managing member. (AMF 3.) Third, while Licosati/Winship maintain the only business activity is prosecuting and defending the instant litigation (UMF 76), the Court agrees with Buchner the more equitable (and practical) course is to allow this litigation to resolve first. Even if dissolution were ordered, BxC would still exist for purposes of winding up and resolving claims, including this one. Contrary to Licosati/Winship's position in reply, there are no pending motions for a receiver.

Thus, Buchner demonstrated the existence of a triable, material factual issue, requiring the motion's denial.

Concluding Orders For these reasons, summary adjudication on the ninth cause of action is DENIED.

Plaintiffs/Cross-Defendants' Motion for Summary Judgment or Adjudication on Todd Buchner's Cross-Complaint and on BxC's Cross-Complaint Preliminary Matters Buchner and BxC's cross-complaints are very similar. As the parties acknowledge, the motions, oppositions and evidence cited in support are nearly identical. The Court will address both motions Calendar No.: Event ID:  TENTATIVE RULINGS

2997680  58 CASE NUMBER: CASE TITLE:  LICOSATI VS BUCHNER [IMAGED]  37-2021-00004285-CU-FR-CTL together.

The Court reviewed and considered all briefing filed in support or opposition to these motions, including the Supplemental Declarations of Eric Schwartz/Notices of Errata. (ROA 562-564.) Both Cross-Complaints allege: (1) breach of the implied covenant of good faith and fair dealing; and (2) civil conspiracy. (ROA 26, 36.) Licosati/Winship's requests for judicial notice (ROA 503) are granted. (Evid. Code, § 452(d).) Notice will be taken to the extent permitted. (Starr, supra, 87 Cal.App.5th at p. 1014; Lockley, supra, 91 Cal.App.4th at p. 882.) Buchner's objections to the requests for judicial notice (ROA 547) are overruled.

Buchner's requests for judicial notice (ROA 537) are granted and notice will be taken to the extent permitted.

Buchner's objections to the Declaration of Michael Licosati (ROA 546) are overruled.

Licosati/Winship's 163 reply objections (71 pages) (ROA 573) are abusive. This is just shy of the 175 objections in Reid, supra, that the Supreme Court found to be abusive. (Reid v. Google, Inc., 50 Cal.4th at p. 532-33; Cohen, supra, 35 Cal.App.5th at p. 21.) Notwithstanding, the reply objections to the Declaration of Todd Buchner (ROA 575, p. 2-34) are sustained as to Nos. 9, 10, 11, 14, 34 (as to 'The SEC likely reviewed these statements'), 35, 43 (as to 'which I believe they added due to a business dispute we had over compensation'). The remainder are overruled.

The reply objections to the Declaration of Eric Schwartz (ROA 575, p. 35-66) are overruled.

The reply objections to the Supplemental Declaration of Eric Schwartz (ROA 575, p. 66-68) are overruled.

The reply objections to Request for Judicial Notice (ROA 575, p. 68-71) are overruled and notice will be taken to the extent permitted as discussed above.

Discussion Summary judgment is appropriate 'if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' (C.C.P., § 437c(c).) To prevail on the motion, a defendant must demonstrate the plaintiff's cause of action has no merit. This requirement can be satisfied by showing either one or more elements of the cause of action cannot be established or that a complete defense exists. (C.C.P., § 437c(o), (p); Bardin v. Lockheed Aeronautical Systems Co. (1999) 70 Cal.App.4th 494, 499-500.) In ruling on a summary judgment, the trial court must first identify the issues framed by the pleadings, since the pleadings set the boundaries of the issues to be resolved, and the materiality of disputed facts.

(Conroy v. Regents of University of Cal. (2009) 45 Cal.4th 1244, 1250; Nativi v. Deutsche Bank National Trust Company (2014) 223 Cal.App.4th 261, 289-90; Serri v. Santa Clara University (2014) 226 Cal.App.4th 830, 858.) The court then determines whether the moving party has established facts justifying judgment in its favor, and if the moving party has carried its initial burden, decide whether the opposing party has demonstrated the existence of a triable issue of material fact. (Serri, supra, at p. 858.) The Court must 'liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.' (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.) Calendar No.: Event ID:  TENTATIVE RULINGS

2997680  58 CASE NUMBER: CASE TITLE:  LICOSATI VS BUCHNER [IMAGED]  37-2021-00004285-CU-FR-CTL Implied Covenant of Good Faith and Fair Dealing Again, the parties agree Delaware law applies to the breach of the implied covenant of good faith and fair dealing cause of action. As explained by the Delaware Supreme Court: '...the implied covenant requires 'a party in a contractual relationship to refrain from arbitrary or unreasonable conduct which has the effect of preventing the other party to the contract from receiving the fruits' of the bargain. [fn] Thus, parties are liable for breaching the covenant when their conduct frustrates the 'overarching purpose' of the contract by taking advantage of their position to control implementation of the agreement's terms. [fn] This Court has recognized 'the occasional necessity' of implying contract terms to ensure the parties' 'reasonable expectations' are fulfilled. [fn] This quasi-reformation, however, 'should be [a] rare and fact-intensive' exercise, governed solely by 'issues of compelling fairness.' [fn] Only when it is clear from the writing that the contracting parties 'would have agreed to proscribe the act later complained of ... had they thought to negotiate with respect to that matter' may a party invoke the covenant's protections.' (Dunlap v. State Farm Fire and Cas. Co. (Del. 2005) 878 A.2d 434, 442.) Here, the parties have two completely different versions of the facts. Generally, the Cross-Complaints allege 'the implied covenant of good faith and fair dealing required that the Cross-Defendants take all such actions as were and are reasonably necessary to effect the purposes of the BxC Operating Agreement...' (Cross-Complaint, at ¶ 127.) Licosati/Winship's argument they were not required to 'aid' Buchner lacks credibility, is contrary to Delaware law (supra) that parties must refrain from unreasonable conduct that prevents the other party from receiving the 'fruits of the bargain' and is unsupported by legal authority. Rather and minimally, Section 4.6 required Licosati/Winship to 'devote sufficient time to the management of the Company and/or its investments' or risk a reduction of their Carry Percentage.

(AMF 6 [Operating Agreement, at § 4.6].) Licosati/Winship also do not provide legal authority that any waiver of fiduciary duties (Operating Agreement, at § 11.4) free Cross-Defendants from the acting in good faith and fair dealing.

Further, the additional evidence shows Licosati/Winship worked with Michael Seid of Axxcess and individuals from other entities like, enTrust and Canter Wealth, to support false and misleading allegations against Buchner in order to divest BxC from its first and only investment in Axxcess and to instead obtain individual stakes in Axxcess that were free from the Carry Percentages that were controlled by Buchner. To do this, a trier of fact could find Licosati/Winship started a pressure campaign.

In liberally construing the opposition evidence and resolving any doubts in Buchner/BxC's favor, Licosati/Winship informed Seid and various other individuals of an SEC administrative action against Buchner's wife, supported Axxcess's arbitration to remove BxC, made false statements about the Buchners and interfered in Buchner's relationships with other people. (See, e.g., AMF 36-38, 40-44, 46-48, 64-68, 70-72.) As cited in these AMFs, the evidence that creates these disputes include, but is not limited to: the deposition testimony of Todd Buchner, Michael Licosati (and his deposition exhibits 60, 62, 63, 145, 148, 150, 151, 158), Jay Winship and Michael Seid; Buchner's Ex. 62-63; and the declaration of Ken Joseph.

Licosati/Winship's causation/damages argument also lacks merit. As the Court previously ruled on the demurrer, 'The harm claimed by Defendants is not based on the arbitration award, but on conduct by Plaintiffs that took place since before arbitration was even contemplated. The cross-complaints allege damages in the form of loss of value, return on and benefits of BxC, and reputational harm to Buchner.' (ROA 224 – Minute Order dated July 25, 2022.) Licosati/Winship did not physically render the Second Amended Final Arbitration Award, but the evidence cited above calls into dispute whether they set the wheels in motion for the ultimate end result to happen, i.e, the removal of BxC from Axxcess, by virtue of the arbitration award.

Similarly, Licosati/Winship's litigation privilege argument lacks merit. Statements made during the course Calendar No.: Event ID:  TENTATIVE RULINGS

2997680  58 CASE NUMBER: CASE TITLE:  LICOSATI VS BUCHNER [IMAGED]  37-2021-00004285-CU-FR-CTL of a judicial proceeding may be used for evidentiary purposes. (Oren Royal Oaks Venture v. Greenberg, Bernhard, Weiss & Karma, Inc. (1986) 42 Cal.3d 1157, 1168 ['when allegations of misconduct properly put an individual's intent at issue in a civil action, statements made during the course of a judicial proceeding may be used for evidentiary purposes in determining whether the individual acted with the requisite intent.'].) Conspiracy The elements of liability under conspiracy are: (1) formation and operation of the conspiracy; (2) wrongful conduct in furtherance of the conspiracy; and (3) damages arising from the wrongful conduct.

(Spencer v. Mowat (2020) 46 Cal.App.5th 1024, 1037.) The plaintiff must establish that the conspiring defendants knew of the wrongful plan, and agreed, expressly or tacitly, to achieve it. (Ibid.) Due to the secret nature of conspiracies, their existence is often 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. (Ibid.) Here, Licosati/Winship's have not met their burden and disputed facts exist. Their argument focuses on whether Axxcess committed any wrongdoing. That is not what is alleged. Rather, the Cross-Complaints allege Licosati/Winship agreed to commit tortious acts against BxC and Buchner to, essentially, get out of the Axxcess deal, to use the SEC action against Ms. Buchner as a pretext to remove BxC as a member of Axxcess, to manufacture removal grounds and to work together to seek removal of BxC to allow Licosati/Winship to continue business without Buchner/BxC. (Cross-Complaint, at ¶ 132.) The arbitration was the technical means to have BxC/Buchner removed. Notwithstanding, evidence exists to create a factual dispute. (E.g., AMF 22, 24-25, 27, 29, 30-38, 40-41, 46-48, 53-59.) The evidence that creates this dispute includes, but is not limited to: the deposition testimony of Michael Licosati (and deposition exhibits 4, 40, 43, 44, 46, 50, 51, 52, 53, 54, 55, 58 60, 254), Todd Buchner, Michael Seid, Jay Winship (and deposition exhibit 56); the declarations of Todd Buchner and Ken Joseph; Buchner's Exhibits 64 and 75.

Outstanding Discovery & C.C.P. Section 437c(h) Notwithstanding the above, the motions require denial under C.C.P. section 437c(h). 'If it appears from the affidavits submitted in opposition to a motion for summary judgment or summary adjudication, or both, that facts essential to justify opposition may exist but cannot, for reasons stated, be presented, the court shall deny the motion...' (C.C.P., § 437c(h).) Minimally here, the Court previously ordered an adverse inference instruction against Licosati/Winship. (AMF 83; ROA 476 - Minute Order dated August 15, 2023 [granting Buchner's request for an adverse inference instruction and monetary sanctions against Licosati/Winship].) Discovery disputes are ongoing. Most recently, Licosati claimed documents have been 'inadvertently lost.' (AMF 80.) Per the reply, this is also hotly disputed.

For these reasons, the motions for summary judgment and, alternatively for adjudication, are DENIED.

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