Judge: Colin Leis, Case: 22STCV09985, Date: 2024-07-18 Tentative Ruling
Case Number: 22STCV09985 Hearing Date: July 18, 2024 Dept: 74
Edwin F.
Mcpherson v. Matthew Callahan et al.
Plaintiff Edwin F. McPherson’s
Motion for Summary Adjudication
BACKGROUND
In
or about September 2017, Defendant Matthew Callahan approached Plaintiff Edwin
McPherson and made representations to induce him to invest in Janus, including,
but not limited to, that the company was in the process of creating an
application and a system/process in the dental space, using augmented reality
(the “Process”). (UMF No.1.) On or about October 18, 2017, Plaintiff and
Callahan (along with Eddie Jones and Zevin Clark) executed and became parties
to the Operating Agreement of Janus Health AR LLC, with the respective membership
interests at: Callahan 27.00%; McPherson 10.00%; Clark 40.00%; and Jones
23.00%. (UMF No. 2.)
Plaintiff
executed the Operating Agreement and became a 10% Member of Janus (not subject
to dilution as provided for in that agreement). (UMF No. 3.) Plaintiff’s
interest in Janus increased to about 25.99%, due to further investment in, and
loans made, to Janus as well as changes in its membership and membership
interests, which changes were reflected by amendments to the Operating
Agreement. (UMF No. 4.) Plaintiff
invested in Janus in order to benefit from Janus’s development and commercial
exploitation of the Process. (UMF No. 5.) Plaintiff did not invest in Janus as an investment in
Callahan personally or for Callahan to use Plaintiff’s or Janus’s funds to
support his life (or his wife) and pay himself a salary. (UMF No. 6.)
Plaintiff
made his initial $100,000.00 contribution on December 11, 2017. (UMF No.14.) Plaintiff
made further investments in Janus in the amount of $80,000.00 on or about
September 24, 2018, and $25,000.00 on February 5, 2019. (UMF No. 15.) At the
request of Callahan, Plaintiff loaned Janus $7,000.00 on or about May 21, 2019,
and $25,000.00 on or about November 6, 2019. (UMF No. 16.) From the moment
Plaintiff made his initial $100,00.00 investment, Callahan began breaching the
Operating Agreement and continued to do so. (UMF Nos. 21-27, 29-35.)
On
March 22, 2022, Plaintiff Edwin F. McPherson (“McPherson” or “Plaintiff”) filed
the complaint against Defendants Matthew Callahan (“Callahan” or “Defendant”),
Janus Health AR LLC, and Does 1 through 100. On July 22, 2022, Plaintiff filed
his First Amended Complaint alleging six causes of action for (1) breach of
contract, (2) fraud, (3) breach of fiduciary duty, (4) conversion, (5)
securities fraud, and (6) Violation of Penal Code Section 496(c).
Plaintiff
McPherson moves for summary adjudication of the First Cause of Action for
Breach of Contract and Third Cause of Action for Breach of Fiduciary Duties.
Defendant
has not filed an opposition.
DISCUSSION
First
Cause of Action - Breach of Contract
Plaintiff
has met his burden in showing there are no triable issues of material fact for
this cause of action. First, Plaintiff submits the Janus Health AR LLC
Operating Agreement to show that a contract exists. (McPherson Decl. at ¶ 5;
Compendium of Evidence, Ex. A.) Plaintiff also submits his own declaration to
show that he performed all of his obligations by making the $100,000.00 capital
contribution investment and later investments to the company. (Id. at ¶¶ 6-7, 13-14; Compendium of
Evidence, Ex. B.) Plaintiff made further investments in Janus in the amount of
$80,000.00 on or about September 24, 2018, and $25,000.00 on February 5, 2019. (UMF
No. 15.) At the request of Callahan, Plaintiff loaned Janus $7,000.00 on or
about May 21, 2019, and $25,000.00 on or about November 6, 2019. (UMF No. 16.) Callahan
breached Section 5.5 (ix) of the Operating Agreement repeatedly by taking, at
least $209,076.00 as salary from Janus, through Consulting and Saxon, without
Threshold Member approval. (UMF No. 22; Compendium of Evidence, Ex. C.) Moreover,
Plaintiff provides that he suffered the following damages: (1) $205,000 invested as equity in Janus; (2)
$32,000 loaned to Janus; (3) Interest accrued since the date of each amount
invested in or loaned to Janus at the legal rate of 10% per annum (and at the
rate of 16.99% per annum on the $25,000.00 that Plaintiff loaned on November 7,
2019 ); (3) attorneys’ fees; and (4) costs. (McPherson Decl., ¶¶ 5, 20, 32-34,
Ex. A-C, L-T.) Defendant failed to file an opposition and thus failed to show a
triable issue of material fact exists.
Third
Cause of Action - Breach of Fiduciary Duty
To
establish a cause of action for breach of fiduciary duty, plaintiff must plead
“(1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3)
damage proximately caused by the breach.” (Gutierrez v. Girardi
(2011) 194 Cal. App. 4th 925, 932.) A fiduciary relationship requires that
a relation existing between parties to a transaction wherein one of the parties
is duty bound to act with the utmost good faith for the benefit of the other
party. (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 29
[internal citations omitted].) A relationship ordinarily exists when “a
con¿dence is reposed by one person in the integrity of another, and . . . the
party in whom the con¿dence is reposed, if he voluntarily accepts or assumes to
accept the con¿dence, can take no advantage from his acts relating to the
interest of the other party without the latter’s knowledge or consent.’” (Ibid.)
Plaintiff
submitted evidence showing that Callahan had full control, as manager and CEO,
over the affairs of Janus and the money in its account. (UMF No. 36-39.) Therefore,
Callahan owed fiduciary duties to Plaintiff. Plaintiff filed the declarations
of board members Edwin McPherson, Eddie Jones, Zevin Clark, and Paul Prindle to
show that they never approved Callahan’s use of the funds and Callahan had full
control over the funds. (Clark Decl. ¶ 7; Jones Decl. ¶ 5; Prindle Decl. ¶ 9.) Additionally,
as explained above, Defendant Callahan breached his fiduciary duty to Plaintiff
which caused Plaintiff’s damages when he took a salary, loan, or any other
money from the company without permission or a board member vote. (Id. at ¶¶ 5-6.) Defendant failed to
file an opposition and thus failed to show a triable issue of material fact
exists.
CONCLUSION
The
court grants Plaintiff’s unopposed motion for summary adjudication of the First
and Third Causes of Action.
Plaintiff
shall give notice.