Judge: Craig Griffin, Case: McMahan v. Margaretis, Date: 2022-12-05 Tentative Ruling

Defendant, Emanuel Margaretis’ (“Margaretis”) Motion for Summary Judgment, or in the alternative, Summary Adjudication as to Plaintiff, Brent McMahon’s (“Plaintiff”) First Amended Complaint (“FAC”) is DENIED.

The party moving for summary judgment or adjudication “bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact.”  Food Safety Net Services v. Eco Safe Systems USA, Inc. (2012) 209 Cal.App.4th 1118, 1124.

“There is no obligation on the opposing party … to establish anything by affidavit unless and until the moving party has by affidavit stated facts establishing every element … necessary to sustain a judgment in his favor.”  Consumer Cause, Inc. v. SmileCare (2001) 91 Cal.App.4th 454, 468 (emphasis in original; internal quotes omitted).

A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim of damages, or an issue of duty.  C.C.P. § 437c(f)(1).

Breach of Fiduciary Duty: Assuming Margaretis properly brought a motion for summary adjudication, the motion is defective because it is not directed to the breach of fiduciary duty cause of action in its entirety.  Margaretis seeks summary adjudication solely on the issue of Plaintiff’s standing to pursue derivative claims against Margaretis.  However, as Plaintiff notes and Margaretis appears to acknowledge in the motion (see Mtn at 18:7-8) the FAC also brings individual claims for injury personal to Plaintiff – including that he is owed a certificate for 20 million shares (FAC ¶17) and he is owed reimbursement of money to himself (FAC ¶18).  See Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 106-107; Denevi v. LGCC, LLC (2004) 121 Cal.App.4th 1211, 1222 [A direct claim asserts a right against the corporation which a shareholder possesses as an individual separate from the corporate entity.].

Although Plaintiff labels the FAC a “derivative action” in the FAC (see FAC, p. 3, heading) his “label” is not controlling.  The substance of the allegations control.  See, e.g., Adelman v. Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 352, 359 (“Irrespective of the labels attached by the pleader to any alleged cause of action, we examine the factual allegations of the complaint, “to determine whether they state a cause of action on any available legal theory.”)  Here, the substance of the allegations demonstrate that direct claims are also being made.  FAC ¶17, 18; Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 106-107; Denevi v. LGCC, LLC (2004) 121 Cal.App.4th 1211, 1222.

Further, Plaintiff is permitted to bring both derivative and individual claims in one cause of action.  A single cause of action by a shareholder can give rise to derivative claims, individual claims, or both.  Goles v. Sawhney (2016) 5 Cal.App.5th 1014, 1018 fn 3.

Thus, because Margaretis only challenges one issue within the breach of fiduciary duty cause of action, namely, that Plaintiff lacks standing to bring derivative claims against Margaretis, and fails to challenge the entire cause of action (including Plaintiff’s individual claims), the motion is procedurally improper and is thus DENIED.  See, e.g., Belio v. Panorama Optics, Inc. (1995) 33 Cal.App.4th 1096, 1102-1103; see also, C.C.P. § 437c(f)(1).

Declaratory Relief: Margaretis also failed to meet his burden on the motion for summary adjudication as to the declaratory relief cause of action.  He argues that the second cause of action for declaratory relief fails because it is based on the other causes of action, which are not viable.  However, as discussed above, summary adjudication of the breach of fiduciary duty claim is not warranted.  Thus, said claim remains viable.  Accordingly, Margaretis failed to meet his burden on the breach of fiduciary duty cause of action and the motion is DENIED as to this claim as well.

Injunctive Relief: Similarly, the Court finds that Margaretis failed to meet his burden as to the third cause of action.  Margaretis devotes two very brief sentences in the motion to the injunctive relief claim, arguing that injunction is a remedy, not a cause of action.  See Mtn at 28:18-20.  He makes no mention whatsoever of this cause of action in the Separate Statement.  See ROA 194.  While Margaretis is correct that injunctive relief is a remedy, not a cause of action (see Guessous v. Chrome Hearts, LLC (2009) 179 Cal.App.4th 1177, 1187), the case he cites does not support granting summary adjudication of Plaintiff’s injunctive relief claim.  He cites Marlin v. Aimco Venezia, LLC (2007) 154 Cal.App.4th 154, 162, which dealt with a prayer for injunctive relief in the context of a SLAPP motion.  The court held that the prayer for injunctive relief was not a “cause of action,” to which a SLAPP motion could be applied.  Id.  The case did not address whether summary adjudication is properly granted as to a cause of action for injunctive relief.

Accordingly, the motion as to the third cause of action is DENIED.

On a motion for summary judgment, the presence of any triable issue requires denial of the motion.  CCP § 437c(c).  As Margaretis’ motion is directed only to the issue of standing to bring the derivative claims and fails to address any of Plaintiff’s individual claims, he has necessarily failed to demonstrate the nonexistence of any triable issue of material fact.  Summary judgment lies only where the opponent has no case at all (not merely a weak case).  24 Hour Fitness, Inc. v. Sup.Ct. (Munshaw) (1998) 66 CA4th 1199, 1215.  Accordingly, the motion for summary judgment is DENIED.

Margaretis request for judicial notice (ROA 198) is GRANTED as to Exhibits A and B.  Evid. Code §§ 452(c), (d) and (h).  The request for judicial notice is DENIED as to Exhibits C and D.  California law does not allow the court to take judicial notice of the factual content of a website.  Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 889; see also, Searles Valley Minerals Operations, Inc. v. State Bd. Of Equalization (2008) 160 Cal.App.4th 514, 519.

Plaintiff’s request for judicial notice (ROA 215) is GRANTED.  Evid. Code §452(d).

Counsel for Plaintiff to give notice.