Judge Cynthia A Freeland, Case 37-2021-00035458-CU-BT-NC 2023-09-08 Tentative Ruling

Judge: Cynthia A Freeland, Case: 37-2021-00035458-CU-BT-NC, Date: 2023-09-08 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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SOUTH BUILDING TENTATIVE RULINGS - September 07, 2023

09/08/2023 11:00:00 AM N-27 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Cynthia A. Freeland

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Civil - Unlimited Business Tort Demurrer / Motion to Strike 37-2021-00035458-CU-BT-NC LONIGRO VS RUBIN [IMAGED] CAUSAL DOCUMENT/DATE FILED: Demurrer, 06/09/2023

Plaintiff/Cross-Defendant Mary Lonigro, D.S.W. ('Cross-Defendant')'s demurrer to Defendant/Cross-Complainant Symptom Media, LLC ('Cross-Complainant')'s Cross-Complaint is sustained.

Cross-Defendant's request for judicial notice ('RJN') is granted.

A demurrer tests the legal sufficiency of a pleading. See McKell v. Washington Mutual, Inc. (2006) 142 Cal. App. 4th 1457, 1469. When reviewing a demurrer, the court 'give[s] the complaint a reasonable interpretation, reading it as a whole and its parts in their context.' Blank v. Kirwan (1985) 39 Cal. 3d 311, 318. The court 'treats the demurrer as admitting all material facts properly pleaded. The court does not, however, assume the truth of contentions, deductions or conclusions of law.' Durell v. Sharp Healthcare (2010) 183 Cal. App. 4th 1350, 1358. The court's analysis is limited to the complaint, exhibits attached to the complaint and incorporated by reference, and matters properly subject to judicial notice. See Performance Plastering v. Richmond American Homes of California, Inc. (2007) 153 Cal. App. 4th 659, 665; Thorburn v. Department of Corrections (1998) 66 Cal. App. 4th 1284, 1287-1288; Donabedian v. Mercury Ins. Co. (2004) 116 Cal. App. 4th 968, 994.

The demurrer to the first cause of action for declaratory relief (rescission of Cross-Defendant's membership interest in Cross-Complainant, third cause of action for declaratory relief (expulsion of Cross-Defendant as a member of Cross-Complainant), and fifth cause of action for fraudulent misrepresentation and promissory fraud is sustained. For the following reasons, the court agrees with Cross-Defendant that these causes of action are barred by applicable statutes of limitations.

Initially, the court notes that the first, third, and fifth causes of action sound in fraud. As to the first cause of action, the Cross-Complaint alleges that Cross-Defendant procured the Lonigro Equity Interest through fraud and various misrepresentations, including those defined as the Lonigro Representations.

See Cross-Complaint, ¶ 91. As to the third cause of action, the Cross-Complaint alleges that Cross-Defendant, in addition to obtaining the Lonigro Equity Interest through the Lonigro Representations, made the false Lonigro Initial Promises and Lonigro Concealment Misrepresentations over many years which caused undue expense, lost time, and internal challenges for Cross-Complainant, including as to its strategic direction. Ibid., ¶ 108. Cross-Complainant thus seeks to expel Cross-Defendant as a member under California Corporations Code ('CCC') § 17706.02(e) because she allegedly: (1) engaged in wrongful conduct that has adversely and materially affected, or will adversely and materially affect, Cross-Complainant's business; (2) willfully or persistently committed, or is willfully and persistently committing, a material breach of the operating agreement or her duties and Calendar No.: Event ID: TENTATIVE RULINGS

3008809 CASE NUMBER: CASE TITLE: LONIGRO VS RUBIN [IMAGED] 37-2021-00035458-CU-BT-NC obligations under CCC § 17704.09; or (3) engaged, or is engaging, in conduct relating to Cross-Complainant's activities that renders it not reasonably practicable to carry on its activities with Cross-Defendant as a member. Ibid., ¶ 110(a). As to the fifth cause of action, the Cross-Complaint alleges that Cross-Defendant made intentional misrepresentations of material fact to Cross-Complainant and its owners, including but not limited to the Lonigro Representations, to induce them to enter into the agreement with Cross-Defendant which allowed her to become a member of Cross-Complainant by way of the Lonigro Equity Interest. Ibid., ¶ 122. Moreover, Cross-Defendant made the Lonigro Initial Promises with no intent to perform them and made the Lonigro Concealment Misrepresentations to conceal the Lonigro Representations and the Lonigro Initial Promises and to keep her membership interest in Cross-Complainant. Ibid., ¶¶ 124-125.

Since all three causes of action sound in fraud, the three-year limitations period set forth in California Code of Civil Procedure ('CCP') § 338(d) applies. See Alfaro v. Community Housing Improvement System & Planning Association, Inc. (2009) 171 Cal. App. 4th 1356, 1390. CCP § 338(d) provides a three-year limitations period for '[a]n action for relief on the ground of fraud or mistake. The cause of action in that case is not deemed to have accrued until the discovery by the aggrieved party, of the facts constituting the fraud or mistake.' Cal. Code Civ. P. § 338(d). The Second District Court of Appeal has explained: The statute of limitations of section 338, subdivision (d) provides a limitations period for fraud of three years (§ 338, subd. (d).) This section effectively codifies the delayed discovery rule in connection with actions for fraud, providing that a cause of action for fraud ' 'is not to be deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.' ' (Brandon G. v. Gray, supra, 111 Cal.App.4th at p. 35, 3 Cal.Rptr.3d 330.) The 'date the complaining party learns, or at least is put on notice, that a representation was false' is the date the statute starts running. (Ibid.) Britton v. Girardi (2015) 235 Cal. App. 4th 721, 733-734. '[C]ourts interpret discovery in this context to mean not when the plaintiff became aware of the specific wrong alleged, but when the plaintiff suspected or should have suspected that an injury was caused by wrongdoing. The statute of limitations begins to run when the plaintiff has information which would put a reasonable person on inquiry.' Kline v. Turner (2001) 87 Cal. App. 4th 1369, 1374. Put differently, 'constructive and presumed notice or knowledge are equivalent to knowledge. So, when the plaintiff has notice or information of circumstances to put a reasonable person on inquiry, or has the opportunity to obtain knowledge from sources open to [her] investigation (such as public records or corporation books), the statute commences to run.' (3 Witkin, Cal. Procedure [3d ed. 1985] Actions, § 454, pp. 484-485.)' Parsons v. Tickner (1995) 31 Cal. App. 4th 1513, 1525.

As set forth below, a review of the Cross-Complaint's pertinent allegations reveals that the first, third, and fifth causes of action accrued, at the latest, by August 2016. Consequently, Cross-Complainant needed to have filed its Cross-Complaint by no later than August 2019. It did not do so until April 14, 2023. See ROA No. 144; Cross-Defendant's RJN, Ex. 2.

More specifically, the Cross-Complaint alleges that in 2010, Cross-Defendant and Matthew Rubin engaged in various communications about Cross-Defendant's potential involvement with Cross-Complainant. Cross-Defendant provided Mr. Rubin with information about her experience, skills, background, and how Cross-Complainant could leverage her connections and experience to secure new business opportunities. Cross-Defendant further represented that her husband had key military contacts that she could leverage on Cross-Complainant's behalf. Cross-Defendant also falsely led Cross-Complainant to believe that she was connected to a sophisticated, third-party investor with experience relevant to helping Cross-Complainant grow. See Cross-Complaint, ¶¶ 18-19, 21. The foregoing representations led to Cross-Defendant receiving an ownership interest in Cross-Complainant.

Ibid., ¶¶ 22-23. As Cross-Defendant moved forward, Cross-Complainant learned that Cross-Defendant's investor was her sister, Joyce Kotalik, who Cross-Complainant discovered was neither sophisticated nor involved in the education or healthcare industries. Ibid., ¶¶ 25-26. In 2010 and 2011, Cross-Defendant advocated for certain professionals to be appointed to Cross-Complainant's Board of Advisors which she Calendar No.: Event ID: TENTATIVE RULINGS

3008809 CASE NUMBER: CASE TITLE: LONIGRO VS RUBIN [IMAGED] 37-2021-00035458-CU-BT-NC claimed was essential to Cross-Complainant's business. Ultimately, however, those appointees did not benefit Cross-Complainant or contribute anything of value. Ibid., ¶ 31-33, 37-39, 71, 75. In 2011, Cross-Defendant resigned from her role at Cross-Complainant, at which time she had generated zero sales revenue for the business. Ibid., ¶¶ 45, 47-48. Nor did Cross-Defendant provide services or other value to Cross-Complainant in 2012. Ibid., ¶ 49. In the Spring of 2013, Cross-Defendant returned to Cross-Complainant after representing to Mr. Rubin that she had certain 'prospects' and 'planned efforts.' Ibid., ¶ 51. However, Cross-Defendant made no sales of subscriptions during her tenure as Executive Vice President Business Development and Managing Partner while simultaneously misrepresenting to Mr. Rubin, orally and via e-mail, Cross-Defendant's business development efforts and communications, contact lists, and potential for success. Ibid., ¶ 55. By the end of 2013, however, it was clear to Cross-Complainant that Cross-Defendant had not secured a GSA listing as promised and was becoming less focused on the company's business. Ibid., ¶ 56. From 2014-16, Cross-Defendant 'continued to flounder, doing next to nothing, making no sales but she continued to make affirmative misrepresentations to the Company, and specifically to Matt, orally and via e-mail, about her claimed significant business development efforts and purported communications with key industry contacts, growing contact lists, and the potential for success of her efforts.' Ibid., ¶ 57. In sum, Cross-Complainant alleges that Cross-Defendant, during her tenure, contributed nothing to the development, marketing, or sales success of the company. Ibid., ¶¶ 9, 62, 88-89. Cross-Defendant ceased working for Cross-Complainant in any capacity in August 2016. Ibid., ¶ 63. While Cross-Defendant continued representing to Cross-Complainant that she had 'deals' for the company, Mr. Rubin made it clear to Cross-Defendant in August 2018 that Cross-Complainant would not be doing business with her going forward. Ibid., ¶ 73.

Based on the foregoing, the court finds that the first, third, and fifth causes of action are time-barred. The Cross-Complaint demonstrates that Cross-Complainant had actual knowledge that Cross-Defendant had misrepresented her credentials as early as 2010 or 2011 or, at the latest, August 2016 when she officially ceased working for the company. For example, Cross-Complainant learned in 2010 or 2011 that Cross-Defendant had misrepresented that her sister was a sophisticated investor and that Cross-Defendant was able to get Cross-Complainant on the GSA schedule. Moreover, Cross-Complainant knew by no later than August 2016 that Cross-Defendant had not made any sales or contributed anything of value to Cross-Complainant. In addition, Cross-Complainant had knowledge that Cross-Defendant's contacts, including General Granger and Dr. Stafford, had brought neither the skills nor the results that Cross-Defendant had promised. Cross-Complainant attempts to avoid this result by alleging that it did not discover Cross-Defendant's fraud until 2021 when its representatives reviewed Cross-Defendant's e-mails in connection with her claims against Cross-Complainant. Ibid., ¶ 87. Even if Cross-Complainant did not have actual notice of its fraud-based claims against Cross-Defendant in August 2016, Cross-Complainant's own allegations make clear that it had the ability to obtain this information from sources open to it, i.e., by reviewing corporate e-mail accounts, and that it was on constructive notice of Cross-Defendant's alleged misrepresentations.

In light of the foregoing, the court sustains the demurrer without leave to amend as Cross-Complainant has failed to demonstrate a reasonable possibility that the foregoing deficiencies can be cured by amendment. See Aubry v. Tri-City Hospital Dist. (1992) 2 Cal. 4th 962, 967.

This is the tentative ruling for the hearing at 11:00 a.m. on Friday, September 8, 2023. If no party appears at the hearing, this tentative ruling will become the order of the court as of September 8, 2023.

If the parties are satisfied with the court's tentative ruling or do not otherwise wish to argue the motion, they are encouraged to give notice to the court and each other of their intention not to appear, though this notice is not required.

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