Judge: Curtis A. Kin, Case: 22STCV38057, Date: 2023-05-09 Tentative Ruling

Case Number: 22STCV38057    Hearing Date: May 9, 2023    Dept: 72

DEMURRER

  

Date:                5/9/23 (9:30 AM)                   

Case:               New General Market Partners v. BeautyCon Media, et al. (22STCV38057)

 

 TENTATIVE RULING:

 

Defendant BeautyCon Media ABC Trust’s Demurrer to Complaint is SUSTAINED.

 

Defendant’s requests for judicial notice are GRANTED, but only for the existence of the documents, not the truth of the matters asserted therein. (See Evid. Code § 452(d); Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1564-69.)

 

Defendant BeautyCon Media ABC Trust (“Trust”) demurs to the first through third causes of action for declaratory relief on the ground that they pertain to past wrongs.

 

“If there is a controversy that calls for a declaration of rights, it is no objection that past wrongs are also to be redressed; but there is no basis for declaratory relief where only past wrongs are involved.” (Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 366, quoting 5 Witkin, Cal. Procedure (5th ed.2008) Pleading, § 869, p. 284.)

 

Plaintiffs New General Market Partners, LLC and NGM1, LLC allege that counsel for Saccullo Business Consulting, LLC, the Trustee for the Trust, threatened to sue plaintiffs for “breaches of fiduciary duty, breach of contract, and other tort claims related to BeautyCon’s financial demise.” (Compl. ¶ 123.) Plaintiffs allege the existence of the following actual controversies:

 

  1. the scope of any fiduciary duties that plaintiffs owed to BeautyCon Media, Inc. (“BeautyCon”) with respect to the Memorandum of Understanding (“MOU”), the Amended MOU, and the Convertible Note (id. ¶ 126);

 

  1. whether plaintiffs aided and abetted BeautyCon’s Board of Directors in purporting breaching a fiduciary duty in connection with BeautyCon’s entry into the Convertible Note (id. ¶ 130), and;

 

  1. whether plaintiffs breached the MOU and Amended MOU by: (1) failing to invest at least $10 million in additional capital, (2) failing to complete the common share acquisition, and (3) failing to timely establish a long-term commercial partnership with BeautyCon (id. ¶ 134).

 

“[T]here are three possible classifications of actions brought solely under the authority of [CCP] section 1060:(1) actions that must be dismissed by the trial court [“Type 1”]; (2) actions in which a declaratory adjudication is entirely appropriate, and a trial court would therefore abuse its discretion under section 1061 by dismissing the case [“Type 2”]; and (3) actions wherein a trial court has discretion to provide declaratory relief under section 1060, but also has discretion to dismiss the action under [CCP] section 1061 [“Type 3”].” (Osseous, 191 Cal.App.4th at 365.)

 

Arguably, this is a “Type 3” case, as defined in Osseous, because the first through third causes of action are framed in reference to the Trust’s threats of future litigation. Accordingly, actual and current controversies regarding the rights and duties of the parties are alleged. However, the Court exercises its discretion under CCP § 1061 and dismisses the declaratory relief causes of action. (CCP § 1061 [“The court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances”].)

 

Each of the alleged controversies pertains to a past wrong. There is no ongoing contractual or fiduciary relationship. The events giving rise to the alleged controversies occurred before BeautyCon ceased operations. (Compl. ¶ 97.)

 

Further, in a lawsuit before the Delaware Superior Court, the Trust is asserting causes of action for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and breach of contract—claims for which plaintiffs seek declaratory relief here. (RJN Ex. B at Counts I, IV, V.) Although the instant Complaint was filed before the Delaware action, the Court does not find that a declaratory relief action is the appropriate vehicle to dispute the causes of action in the Delaware action. (See Sunset Scavenger Corp. v. Oddou (1936) 11 Cal.App.2d 92, 96 [“A declaratory judgment is not a proper mode of determining the sufficiency of legal defenses to a pending action”].) Moreover, any declaratory relief granted in this action could potentially conflict with the findings in the Delaware action.  Further still, as plaintiffs appear to acknowledge, the Trustee is located in Delaware and this Court “may need to apply Delaware law in resolving the alleged aiding and abetting and breach of fiduciary duties by Plaintiffs.”  (Opp at. 14.)

 

For the foregoing reasons, the demurrer to the first through third causes of action is SUSTAINED.

 

Ten (10) days to amend the first through third causes of action.