Judge: Cynthia A Freeland, Case: 37-2022-00020503-CU-FR-NC, Date: 2024-05-31 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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SOUTH BUILDING TENTATIVE RULINGS - May 30, 2024

05/31/2024  01:30:00 PM  N-27 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Cynthia A. Freeland

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Civil - Unlimited  Fraud Motion Hearing (Civil) 37-2022-00020503-CU-FR-NC CAKE ENTERPRISES INC VS WISE [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion to Consolidate Cases, 03/14/2024

Plaintiff/Cross-Defendants Cake Enterprises, Inc. ('Cake') and Community Veterans of Malibu, LLC ('CVOM') and Cross-Complainant/Cross-Defendant Saad S. Pattah ('Geo Pattah' and, together with Cake and CVOM, the 'Cake Parties')'s motion to consolidate Cake Enterprises, Inc. et al. v. Wise et al.

(San Diego County Superior Court Case No. 37-2022-00020503-CU-FR-NC) (the 'Present Action') with BSD Management, LLC et al. v. Wildomar Enterprises, Inc. et al. (San Diego County Superior Court Case No. 37-2023-00044041-CU-MC-NC) (the 'BSD Action') or, in the alternative, to consolidate the

Present Action and the BSD Action for the purposes of discovery and trial, is granted.

California Code of Civil Procedure ('CCP') § 1048(a) provides that: When actions involving a common question of law or fact are pending before the court, it may order a joint hearing or trial of any or all the matters in issue in the actions; it may order all the actions consolidated and it may make such orders concerning proceedings therein as may tend to avoid unnecessary costs or delay.

Cal. Code Civ. P. § 1048(a). The purpose of consolidation is to avoid: (1) unnecessary costs or delays; (2) procedural duplication (particularly in proving issues common to both actions); and (3) inconsistent rulings. See Estate of Baker (1982) 131 Cal. App. 3d 471, 485. In determining whether to order consolidation, courts generally consider: (1) the timeliness of the motion; (2) whether joining the actions would make the trial too confusing or complex for a jury; and (3) whether consolidation would adversely affect the rights of any party. See State Farm Mut. Auto. Ins. Co. v. Sup. Ct., In and For the City and County of San Francisco (1956) 47 Cal. 2d 428, 430-431. Courts should weigh whether: (1) common

issues predominate over individual issues, and (2) any risks of jury confusion or prejudice to the parties outweigh the reduction in time and expense that consolidation would occasion. See Todd-Stenberg v. Dalkon Shield Claimants Trust (1996) 48 Cal. App. 4th 976, 978. The court has broad discretion to consolidate actions. Ibid. at 978-979.

CCP § 1048(b) allows the court to order a separate trial on any cause of action, any separate issue, or any number of causes of action or issues 'in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy . . . .' Cal. Code Civ. P. § 1048(b). 'As the cases explain, the objective of bifurcation of the issues is avoidance of waste of time and money caused by the trial of issues which may be rendered moot . . . .' Bedolla v. Logan & Frazer (1975) 52 Cal. App. 3d 118, 135.

The court finds that the Cake Parties have demonstrated good cause for an order consolidating the Calendar No.: Event ID:  TENTATIVE RULINGS

3103845 CASE NUMBER: CASE TITLE:  CAKE ENTERPRISES INC VS WISE [IMAGED]  37-2022-00020503-CU-FR-NC Present Action with the BSD Action. The Sixth District Court of Appeal has noted: There are two types of consolidation: a complete consolidation resulting in a single action, and a consolidation of separate actions for trial. Under the former procedure, which may be utilized where the parties are identical and the causes could have been joined, the pleadings are regarded as merged, one set of findings is made, and one judgment is rendered. In a consolidation for trial, the pleadings, verdicts, findings and judgments are kept separate; the actions are simply tried together for the sake of convenience and judicial economy. (See generally 4 Witkin Cal. Procedure (3d ed. 1985) Pleading, § 298 ff.) Sanchez v. Sup. Ct. (1988) 203 Cal. App. 3d 1391, 1396.

In this case, the court finds that complete consolidation, i.e., a merging of the pleadings with one set of factual findings and a single judgment, is not appropriate given that the parties to the actions are not identical. In the Present Action, on May 27, 2022, Cake and CVOM filed a Complaint against Daniel Wise, Michael Mellano individually and doing business as Oceanside Craft Cannabis, and John Montgomery individually and doing business as Montgomery Enterprise for (1) fraud; (2) two counts of breach of fiduciary duty; (3) aiding and abetting breach of fiduciary duty; (4) conversion; (5) damages under California Penal Code § 496(c); (6) violation of California's Comprehensive Data Access and Fraud Act (California Penal Code § 502(c)); (7) unfair business practices under California Business & Professions Code §§ 17200 et seq.; and (8) an accounting. On December 27, 2022, Mr. Wise filed a Second Amended Cross-Complaint against Geo Pattah, Saad P. Pattah, Charlena Berry, Ryan Anderson, CVOM, and Cake as a nominal defendant for: (1) breach of fiduciary duty; (2) conversion; and (3) an accounting. On September 11, 2023, Mr. Mellano filed a Third Amended Cross-Complaint against the Cake Parties for: (1) fraud – misrepresentation; (2) an accounting; (3) sale of a security in violation of California Corporations Code § 25401; (4) sale of a security in violation of California Corporations Code §§ 25110 and 25503; and (5) violation of California Penal Code § 496. Mr. Mellano has since named Mr. Wise as a Roe Cross-Defendant and indicated his intent to do the same as to Mr.

Pattah. On December 14, 2023, Geo Pattah filed a Cross-Complaint against Mr. Mellano individually and doing business as Oceanside Craft Cannabis, BSD Management, LLC ('BSD'), and Richard Schaper for: (1) declaratory relief; (2) aiding and abetting breach of fiduciary duty; (3) conversion; (4) damages under California Penal Code § 496(c); (5) breach of promissory note; (6) breach of fiduciary duty; (7) a judicial order for shareholder meeting (California Corporations Code § 600(c)); (8) a judicial order for inspection of records (California Corporations Code § 1603); (9) unfair business practices under California Business & Professions Code §§ 17200 et seq.; and (10) an accounting.

In the BSD Action, on October 9, 2023, BSD and Currnt Cannabis, Inc. ('Currnt') filed a Complaint against Wildomar Enterprises Inc. ('Wildomar'), Mr. Wise, Geo Pattah, Mr. Pattah Sr., and Cake for: (1) breach of fiduciary duty; (2) an accounting; (3) fraud; (4) declaratory relief, temporary restraining order, and a preliminary and/or permanent injunction; and (5) violation of California Penal Code §§ 496(a) and (c) and 532(a).

Based on the foregoing, it is clear, while significant overlap exists, that the parties to the Present and BSD Actions are not identical. More specifically: (1) CVOM is a plaintiff and cross-defendant in the Present Action but not a named party in the BSD Action; (2) Mr. Schaper is cross-defendant in the Present Action but not a named party in the BSD Action; and (3) Wildomar is a defendant in the BSD Action but not a named party in the Present Action. Consequently, complete consolidation is not warranted.

That being said, the court finds that the Cake Parties have demonstrated sufficient cause to consolidate the Present and BSD Actions. There are significant factual and legal overlays such that consolidation is appropriate. The Complaint in the Present Action involves Cake's and CVOM's attempts to acquire a medical marijuana dispensary in Malibu, California (the 'Malibu Dispensary'). In July 2021, CVOM was formed in anticipation of a deal whereby Saad Pattah and Mr. Wise would become members and directors of Malibu Community Collective ('MCC'), CVOM would pay MCC's sole member and director, Calendar No.: Event ID:  TENTATIVE RULINGS

3103845 CASE NUMBER: CASE TITLE:  CAKE ENTERPRISES INC VS WISE [IMAGED]  37-2022-00020503-CU-FR-NC Michael Sutton, a sum of money and indemnify Mr. Sutton against a secured Promissory Note he personally guaranteed, and would pay money in escrow to the holder of the Promissory Note and MCC's other creditors. CVOM collected $2.5 million from several investors in exchange for membership interests in CVOM. Mr. Wise initially provided Geo Pattah and Cake shareholder Charlena Berry with draft copies of the deal documents reflecting the anticipated Malibu deal. However, Mr. Wise abruptly stopped providing such information. Unbeknownst to the remaining Cake directors and other CVOM members, Mr. Wise and Mr. Mellano allegedly conspired to take/convert the investment funds as well as seize the MCC opportunity for themselves. Such conduct included efforts to cancel and/or cause the cancellation of the Malibu deal, refusing to turn over the books and access to financial accounts to Cake and/or Cake's subsidiaries/affiliates, encumbering assets and/or membership interests of various Cake subsidiaries without prior authorization, and making payments in escrow different than what was anticipated under the Malibu deal.

Mr. Wise, for his part, alleges in his Second Amended Cross-Complaint that Mr. Pattah slowly took control of Cake's assets and finances while Mr. Wise maintained all the company's liability. Moreover, it was Geo Pattah who refused Mr. Wise's requests for Cake's financial information. Mr. Wise, in essence, alleges a business scheme between Mr. Pattah and Geo Pattah whereby Geo Pattah acted as Mr.

Pattah's strawman for his various business dealings. Moreover, it was the Pattahs who misappropriated and converted Cake's funds for their personal use. Mr. Wise's Second Amended Cross-Complaint, in essence, is a derivate action brought on Cake's behalf.

Mr. Mellano, for his part, alleges in his Third Amended Cross-Complaint that in July 2021, he was approached with Geo Pattah and Mr. Wise regarding an investment opportunity under which Mr. Mellano would invest $1,750,000.00 in exchange for a 24% membership interests in CVOM. Geo Pattah allegedly represented to Mr. Mellano that Mr. Mellano's investment would be used by CVOM to acquire MCC and to bring MCC's past due rent current and to make improvements to the dispensary. However, Mr. Mellano soon learned, despite Geo Pattah's and Mr. Wise's representations, Mr. Mellano's investment went to other companies and individuals, including Antoine Alti, Bash Green Malibu Escrow, Jushi Inc., Montgomery Enterprises, IRC ECO-Sustainable Hub LLC, and COAH LLC. Mr. Mellano alleges that these transfers were performed without his prior approval or knowledge and that Cake and CVOM had entered into a series of side agreements for their self-benefit. Moreover, Geo Pattah and Cake fraudulently obtained Mr. Mellano's investment to pay other creditors and engage in conduct unrelated to CVOM's business.

Geo Pattah, for his part, alleges in his Cross-Complaint that Mr. Wise asked Geo Pattah to pay certain licensing expenditures for Currnt subsidiaries as well as for the purchase and improvement of certain real property in exchange for 250 shares of Currnt's stock. Mr. Wise allegedly attempted to abscond with Geo Pattah's investment via various unilateral actions designed to dilute Geo Pattah's ownership in Currnt. Mr. Mellano, Mr. Schaper, and BSD allegedly conspired with Mr. Wise, among other things, to appoint Mr. Mellano to the board of directors via a special shareholder meeting, to issue 9,000 shares of stock to BSD without consideration, to withhold Currnt's books and records from Geo Pattah, to siphon money and assets from Currnt and its subsidiaries for their own benefit, and to falsely hold themselves out to state and local authorities as owners and/or financial interest holders in Currnt and its subsidiaries.

In the BSD Action, BSD and Currnt allege in their Complaint that Wildomar South is a subsidiary of Currnt. Currnt is the sole owner of Wildomar South, and Mr. Wise and Geo Pattah are Currnt's owners.

In late 2021, Mr. Wise and Geo Pattah offered to sell 500 shares of Currnt to BSD in exchange for BSD agreeing to manage Wildomar South. Needing additional capital, Mr. Wise and Geo Pattah proposed that if BSD agreed to provide operating capital, it could acquire 90% of Currnt for $1,000,000.00. Mr.

Wise subsequently terminated Wildomar's services; however, Wildomar failed and refused to release its control of Wildomar South's operations and bank accounts. It later became apparent that funds generated by Wildomar South's operations were not being used for the operation of its cannabis dispensary. After being confronted with this information, Geo Pattah filed various actions against Currnt and BSD. BSD and Currnt allege that Wildomar, in concert with Geo Pattah and Mr. Pattah, have Calendar No.: Event ID:  TENTATIVE RULINGS

3103845 CASE NUMBER: CASE TITLE:  CAKE ENTERPRISES INC VS WISE [IMAGED]  37-2022-00020503-CU-FR-NC routinely made unauthorized payments from Wildomar South accounts to Mr. Pattah. Cake allegedly was in a conspiracy with the other defendants to breach fiduciary duties owed by Wildomar to Currnt.

BSD and Currnt, among other things, seek a judicial determination as to the parties' respective rights, ownership, liabilities, and duties with respect to Wildomar South.

That being said, the court agrees with Mr. Mellano and BSD that the issues involved with the various pleadings in the Present and BSD Actions are not identical – however, that is not the standard.

Consolidation is warranted provided that the issues are overlapping. See Spector v. Sup. Ct. (1961) 55 Cal. 2d 839, 844. In this instance, the court, having independently reviewed the various pleadings, must agree with the Cake Parties that sufficient overlap exists such that consolidation would be conducive to judicial expedition and economy. Mr. Mellano and BSD attempt to characterize the parties' disputes as: (1) a business opportunity involving a Malibu cannabis dispensary (the Present Action), and (2) ownership and control of Currnt and its subsidiaries (the BSD Action). However, Mr. Mellano and BSD fail to recognize that they have asserted affirmative defenses in the Present Action, which defenses include offset, fraud, and unclean hands, that will require an adjudication of the causes of action set forth in the BSD Action. Moreover, the parties' unclean hands defense requires adjudication within the Present Action of the alleged wrongdoing BSD attributes to Geo Pattah in the BSD Action.

Furthermore, Mr. Mellano's and BSD's argument concerning the applicability of the preliminary injunction the court issued in the Present Action misses the mark. The court issued the preliminary injunction based on the facts and evidence it had before it and thus is best positioned to determine what impact, if any, the preliminary injunction has/will have on the BSD Action. Doing so will also avoid the potential of inconsistent rulings in the two actions.

Additionally, the parties do not dispute, and the court agrees, that the issues in the Present and BSD Actions concern separate cannabis dispensaries. However, most of the actors are the same, and there appears to be an intricate, related web of financial transactions and dealings that will occasion, at minimum, duplicative discovery and added expenditures should the matters proceed to trial in two separate actions.

Notably, BSD and Mr. Mellano fail to identify any prejudice that will flow from a consolidation of the Present and BSD Actions. Indeed, the Register of Actions reveals that the BSD Action is in its early stages with the parties yet to serve discovery or engage in motion practice. Moreover, while certain written discovery has been propounded in the Present Action, the case is not yet at issue and a trial date has not been set. Finally, while the court agrees with Mr. Mellano and BSD that the details of the two cases are complex, there is no evidence that a jury will be unable to comprehend the facts and apply the law correctly.

In light of the foregoing, the court grants the motion and orders that the Present Action and the BSD Action be consolidated for all purposes. The court will sign the Cake Parties' proposed order. The Cake Parties are directed to file a copy of the signed order in the BSD Action. See Cal. R. Ct. 3.350(c).

This is the tentative ruling for the hearing at 1:30 p.m. on Friday, May 31, 2024. If no party appears at the hearing, this tentative ruling will become the order of the court as of May 31, 2024. 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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