Judge Daniel M. Crowley, Case Number: 19STCV4931, Date: 2023-12-21 Tentative Ruling

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Plaintiff Right Brothers Management, LLC (“RBM”) (“Plaintiff”) moves for summary adjudication of the 1st, 2nd, 3rd, 5th, and 6th causes of action in its fourth amended complaint (“FAC”) alleged against Defendants BMI Group, Inc. (“BMI”), Mehran Agazaryan aka Mike Agazaryan (“Mike”), Davo Agazaryan aka David Agazaryan (“David”), Ara Baljian aka Eric Baljian (“Baljian”), and Meir Abramov (“Abramov”) (collectively, “MSA Defendants”). (Notice of Motion, pg. 1.)

MSA Defendants’ 12/6/2023 evidentiary objections to the Declaration of Robert Clark (“Clark”) are overruled as to Nos. 3, 4, and 5.

MSA Defendants’ 12/6/2023 evidentiary objections to the Declaration of Douglas “Geordie” Shuurman (“Geordie”) are overruled as to Nos. 4, 6, 7, 8, 9, 11, 12, and 13.

MSA Defendants’ 12/6/2023 evidentiary objections to the Declaration of Minkler are sustained as to the non-existent Exh. H[1], and overruled as to the entire declaration, Nos. 3, 10, 13, and 15.

MSA Defendants’ 12/6/2023 evidentiary objections to the Declaration of Dennis Bozanich (“Bozanich”) are overruled as to Nos. 3, 4, 5, 7, 8, and 9.

MSA Defendants’ 12/6/2023 evidentiary objections to Plaintiff’s Separate Statement of Undisputed Material Facts (“P-SSUMF”) are overruled as to Nos. 1, 2, 3, 5, 6, 9, 14, 15, 16, 19, 20, 21, 22, 23, 24, 25, 27, 28, 31, 36, 37, 38, 41, 42, 43, 44, 45, 46, 49, 53, 54, 55, 56, 57, 59, 62, 63, 64, 65, 66, 67, 69, 70, 73, 78, 79, 80, 83, 84, 85, 86, 87, 88, 91, 95, 96, 97, 98, 99, 101, 104, 105, 106, 107, 108, 112, 113, 114, 116, 117, 118, 119, 121, 122, 125, 129, 131, 132, 133, 134, 135, 136, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 151, 152, 155, 159, 161, 162, 163, 164, 165, 166, 169, 170, 171, 172, 173, 174, and 175.

Plaintiff’s 12/15/2023 evidentiary objections to the Declaration of Baljian are overruled as to Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, and 50.

Plaintiff’s 12/15/2023 evidentiary objections to the Declaration of Austin Tate (“Tate”) are sustained as to Nos. 1, 2, and 4, and overruled as to Nos. 3, 5, and 6.

Plaintiff’s 12/15/2023 evidentiary objections to the Declaration of Jeff Russell (“Russell”) are overruled as to Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, and 10.

Plaintiff’s 12/15/2023 evidentiary objections to the Declaration of Kyle Daley (“Daley”) are overruled as to Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, and 21.

Plaintiff’s 10/6/2023 request for judicial notice of Land Use Development Code Ordinance No. 22: An Ordinance Amending Section 35-1, the Santa Barbara County Land Use And Development Code, Of Chapter 35, Zoning, of the County Code to Implement New Development Standards, Permit Requirements and Procedures Regarding Commercial Cannabis Activities, and Make Other Minor Clarifications, Corrections, and Revisions, is granted. (P-RJN, Exh. 1)

Plaintiff’s 10/6/2023 request for judicial notice of Defendants’ cross-complaint is denied, as this Court does not need to take judicial notice of filings on this case’s docket.

MSA Defendants’ 12/6/2023 request for judicial notice of (1) The State Bar of California License Search for Ms. Nancy Minkler (D-RJN, Exh. P); and (2) Proposition 64 Marijuana Legalization Initiative Statute (D-RJN, Exh. Q), is granted.

MSA Defendants’ 12/6/2023 request for judicial notice of the Complaint, first amended complaint, second amended complaint, third amended complaint, FAC, 8/24/21 request for dismissal, 10/13/22 request for dismissal, 3/21/23 request for dismissal, stipulation and order to continue the FSC and all related trial dates, 4/5/23 Minute Order, notice of case reassignment and order, Plaintiff’s 3/16/23 case management statement, Plaintiff’s ex parte application, notice of motion and motion for separate trial, and 11/27/23 Minute Order is denied, as this Court does not need to take judicial notice of filings on this case’s docket.

Plaintiff’s 12/15/2023 request for judicial notice of (1) Santa Barbara County’s Land Use and Zoning Map (street view) showing 099-330-004 (“the front parcel”) (P-RJN, Exh. B); and (2) Santa Barbara County’s Land Use and Zoning Maps (street view) showing 099-060-006 (“the back parcel”) (P-RJN, Exh. C), is granted.

Plaintiff’s 12/15/2023 request for judicial notice of Defendants’ 3/16/23 case management conference statement is denied, as this Court does not need to take judicial notice of filings on this case’s docket.

On December 20, 2019, Plaintiff filed its initial complaint in the instant action. On August 12, 2020, Plaintiff filed its first amended complaint. On November 18, 2020, Plaintiff filed its second amended complaint. On May 18, 2021, Plaintiff filed its third amended complaint. On April 5, 2023, Plaintiff filed the operative FAC against Defendants Joao Silverstein (“Silverstein”); Mike; Baljian; David; BMI; Ocean Hye, LLC (“Ocean”); and Abramov (collectively, “Defendants”) alleging eight causes of action (1) fraudulent inducement to contract (false promise) [against BMI]; (2) intentional misrepresentation [against BMI]; (3) negligent misrepresentation [against BMI]; (4) conversion [against BMI, Ocean, Silverstein, Mike, and David]; (5) breach of contract [against BMI]; (6) breach of fiduciary duty of loyalty [against BMI, Baljian, David, Mike, and Abramov]; (7) common count (goods and services rendered) [against BMI]; and (8) unfair competition [against Defendants]. (See FAC.)

On October 6, 2023, Plaintiff filed the instant motion for summary adjudication against MSA Defendants. MSA Defendants filed their opposition on December 6, 2023. Plaintiff filed its reply on December 15, 2023.

Plaintiff alleges in early 2018, it sought a permitted cultivation site in California for its operations. (FAC ¶21.) Plaintiff alleges its principals reached out to their network for leads on a new farm site, and ultimately met David and Baljian of BMI. (FAC ¶22.) Plaintiff alleges it and BMI agreed to form a partnership to grow cannabis. (FAC ¶23.) Plaintiff alleges the parties negotiated at length through counsel while Plaintiff began cultivation. (FAC ¶23.) Plaintiff alleges BMI dragged its feet on executing the Agreement. (FAC ¶24.) Plaintiff alleges only upon it threatening to walk away from the farm and the deal that they had already spent money on did BMI sign the contract. (FAC ¶24.) Plaintiff alleges on or about June 19, 2018, Plaintiff and BMI executed a joint venture agreement (“the Agreement”). (FAC ¶24, Third Amended Complaint Exh. 1.) Plaintiff alleges the effective date of the Agreement is May 23, 2018. (FAC ¶24.) Plaintiff alleges it signed through Robert Clark on June 20, 2018. (FAC ¶24.) Plaintiff alleges BMI signed through agents Natalie Baljian and Ara Baljian. (FAC ¶24.)

Plaintiff alleges the agreement provided as follows: BMI would provide the land, security, infrastructure, and the requisite California cannabis cultivation license. (FAC ¶25.) Plaintiff alleges BMI would also cover the costs associated with maintaining the license and give RBM a 20 percent ownership interest in the entity that held the license. (FAC ¶25.) Plaintiff alleges it would develop the land and provide the skill, equipment, and labor necessary to plant and harvest a successful cannabis crop. (FAC ¶25.) Plaintiff alleges from the proceeds of the sale of the cannabis harvest, its expenses were to be reimbursed first, then it would receive 60 percent of the remaining profit and BMI would receive 40 percent. (FAC ¶25.)

Plaintiff alleges BMI leased the land located at 3333 Avena Road, Lompoc, California 93436 (“the Premises”) from an ownership group comprised of Karin Hauenstein, acting as the managing agent for Gary Hauenstein, the Gary Hauenstein Trust, and Gwen Hauenstein. (FAC ¶26.) Plaintiff alleges the Premises consists of Assessor Parcel Numbers 099-330-004, 099-060-006 and 099-060-011. (FAC ¶26.) Plaintiff alleges at the time the parties entered into the Agreement, Defendants were in an active dispute with the Hauensteins regarding money Defendants owed on the lease for the Premises. (FAC ¶26.)

Plaintiff alleges BMI also held multiple licenses, issued by the State of California, to cultivate cannabis for Assessor Parcel Numbers 099-330-004 and 099-060-006 at the Premises. (FAC ¶27.) Plaintiff alleges these licenses were intermittently active from before June 5, 2018, through April 12, 2019 (collectively referred to as the “Cultivation License”). (FAC ¶27.)

Plaintiff alleges during negotiations and in the Agreement, BMI represented to it that cannabis cultivation on the Premises was lawful and would continue to be lawful. (FAC ¶28.) Plaintiff alleges BMI’s representations were false for two reasons. (FAC ¶28.) First, Plaintiff alleges BMI never had proper water rights and had misrepresented on its cultivation license application the source of the water at the cultivation site. (FAC ¶28.) Second, Plaintiff alleges BMI never intended to confer upon it the promised 20 percent interest in the licensed entity. (FAC ¶28.) Plaintiff alleges the whole purpose of Plaintiff entering into the Agreement was to become a part of the regulated cannabis market by acquiring an interest in a licensed entity. (FAC ¶28.)

Plaintiff alleges despite an extensive back-and-forth negotiation process between Plaintiff and BMI’s Chief Executive Officer, Baljian, Baljian claimed in October 2018 that he never signed the Agreement. (FAC ¶29.) Plaintiff alleges upon being presented evidence that he did, in fact, sign the Agreement, Baljian claimed for the first time that he had been pressured into signing under duress. (FAC ¶30.) Plaintiff alleges Baljian admitted to the fact that he signed the Agreement on behalf of BMI, but he alleged that he thought he signed a draft. (FAC ¶31.)

Plaintiff alleges it later learned that it is BMI’s modus operandi to negotiate business relationships orally but later refuse to memorialize the agreed-upon terms in writing. (FAC ¶32.) Plaintiff alleges on information and belief that BMI treated the cannabis farmers it worked with prior to Plaintiff at the Premises in exactly the same malicious manner as it treated Plaintiff. (FAC ¶32.)

A motion for summary adjudication may be made by itself or as an alternative to a motion for summary judgment and shall proceed in all procedural respects as a motion for summary judgment. (C.C.P. §437c(f)(2).) A party may move for summary adjudication as to one or more causes of action within an action if that party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. (C.C.P. §437c(f)(1).)

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

A plaintiff or cross-complainant has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action. (C.C.P. §437c(p)(1).) Once the plaintiff or cross-complainant has met that burden, the burden shifts to the defendant or cross-defendant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. (C.C.P. §437c(p)(1).) The defendant or cross-defendant shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto. (C.C.P. §437c(p)(1).)

To state a cause of action for fraudulent inducement (false promise) a plaintiff must prove the following elements: (1) defendant made a promise to plaintiff; (2) defendant did not intend to perform this promise when it made it; (3) defendant intended that plaintiff rely on this promise; (4) plaintiff reasonably relied on defendant’s promise; (5) defendant did not perform the promised act; (6) plaintiff was harmed; and (7) plaintiff’s reliance on defendant’s promise was a substantial factor in causing plaintiff’s harm. (CACI 1902.)

“[F]raudulent intent is an issue for the trier of fact to decide.” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1061.)

Plaintiff alleges BMI breached the Agreement by refusing to allow Plaintiff to plant another harvest, either outdoor during the fall and spring or in hoops during spring. (FAC ¶69.) Plaintiff alleges BMI claimed that this decision was based on an agreement with the County to trade the cultivation license for a retail license, but no such trading of licenses was permitted. (FAC ¶69.) Plaintiff alleges it estimates that an extra fall harvest and spring harvest at the Premises would have yielded an additional 250 pounds of outdoor-grown cannabis and another 850 pounds of hoop-grown cannabis by May 1, 2019. (FAC ¶69.) Plaintiff alleges the market value for cannabis in May 2019 was over $1,000 per pound. (FAC ¶69.)

Plaintiff alleges BMI promised Plaintiff that it owned a valid Cultivation License to cultivate cannabis crops at the Premises in order to induce Plaintiff s to begin farming cannabis there in May 2018 and to enter into the Agreement on June 19, 2018. (FAC ¶87.) Plaintiff alleges BMI made that promise to Plaintiff’s principals knowing that, in order for Plaintiff to cultivate cannabis at the Premises, Plaintiff would need to illegally siphon water resources from a well on Assessor Parcel Number 099-330-004 and transport the water to Assessor Parcel Number 099-060-006 in violation of the Cebada Oaks Water System agreement, which governed the use of water from the well. (FAC ¶87.) Plaintiff alleges at the time the parties agreed to form a joint venture, BMI also knew that it had misrepresented its water source to the CDFA during the permitting process for the Premises and that the Cultivation License was therefore voidable by the CDFA. (FAC ¶87.) Plaintiff alleges this exposed it to both criminal prosecution and civil penalties under local, state, and federal drug manufacturing and environmental statutes and regulations. (FAC ¶87.)

Plaintiff alleges under Recital E of the Agreement, BMI obligated itself to cover all the Carrying Costs of the joint venture. (FAC ¶88.) Plaintiff alleges in July 2018, Baljian estimated the Carrying Costs to be more than $900,000. (FAC ¶88.) Plaintiff alleges bank records show that at no time did BMI have even close to sufficient funds to cover those costs, but Plaintiff had no way of knowing this at the time. (FAC ¶88.)

Plaintiff alleges BMI also promised Plaintiff, as memorialized in Recital E of the Agreement, that it would keep the Cultivation License active and in good standing. (FAC ¶89.) Plaintiff alleges in the Agreement, BMI also promised that it would: (a) transfer an interest in an entity to Plaintiff so that Plaintiff would be a 20 percent interest holder in BMI’s California cannabis cultivation license; (b) repay a $30,000 loan from Right Brothers; (c) reimburse Plaintiff for the costs incurred to develop the Premises and cultivate the cannabis crops; (d) use its vast network of distributors in the California cannabis industry to sell the cannabis crops at or above market value; and (e) give 60 percent of the profits from lawful sales of the cannabis crops in the regulated California marketplace to Plaintiff. (FAC ¶90.) Plaintiff alleges BMI did not intend to perform these promises when it agreed to them. (FAC ¶90.)

Plaintiff alleges BMI made these promises to Plaintiff’s principals through BMI’s CEO Baljian and principal David. (FAC ¶91.) Plaintiff alleges it reasonably understood that Baljian was authorized to bind BMI because Baljian represented to Angus, Geordie, and Clark, in or about April 2018, that he was BMI’s owner and CEO. (FAC ¶91.) Plaintiff alleges it reasonably understood that David was authorized to bind BMI because David indicated to Angus, Geordie, and Clark, in or about April 2018, that he was one of the original lessees of the Premises, and that he continued to have an ongoing operational and financial interest in the cannabis cultivation because he held the original affidavit from the County of Santa Barbara enabling commercial cannabis cultivation at the Premises. (FAC ¶91.) Plaintiff alleges David also represented BMI’s day-to-day interests at the Premises throughout 2018. (FAC ¶91.)

Plaintiff alleges BMI intended that Plaintiff rely on its promises. (FAC ¶92.) Plaintiff alleges it reasonably relied on BMI’s promises. (FAC ¶93.) Plaintiff alleges it had no reasonable means by which to learn that the COWS settlement agreement prohibited transporting and using water resources from Assessor Parcel Numbers 099-330-004 north to Assessor Parcel Number 099-060-006. (FAC ¶93.) Plaintiff alleges it performed its due diligence prior to entering into the Agreement with BMI by searching public databases to verify that BMI was an entity in good standing with the California Secretary of State, did not have bad press or public reviews, and was licensed to cultivate cannabis at the Premises by the State of California. (FAC ¶93.) Plaintiff alleges it only learned of Defendants’ many misrepresentations, and the voidability of the Cultivation License through PRA requests made in the Fall of 2019. (FAC ¶93.)

Plaintiff alleges it was in a fiduciary relationship with Defendants, making its reliance on BMI’s representations reasonable. (FAC ¶94.) Plaintiff alleges Defendants did not perform the promised acts. (FAC ¶95.) Plaintiff alleges it was harmed. (FAC ¶96.) Plaintiff alleges but for BMI’s promises, Plaintiff would not have labored to cultivate cannabis crops at the Premises nor entered into the Agreement. (FAC ¶97.) Plaintiff alleges its reliance on BMI’s promise was a substantial factor in causing it harm. (FAC ¶97.) Plaintiff alleges During the relevant time period, due to the unfulfilled promises in the Agreement, Defendant BMI exclusively owned the Cultivation License. (FAC ¶98.) Plaintiff alleges this left Plaintiff exposed to criminal and civil liabilities for illicit drug manufacturing and violation of various environmental statutes and regulations. (FAC ¶98.)

Plaintiff argues it has proved each element of the cause of action entitling the party to judgment on the cause of action. Plaintiff submitted evidence that it entered into an agreement with BMI on May 23, 2018 (“Effective Date”). (Plaintiff’s Disputed Separate Statement of Fact [“P-DSSF”] 1; Decl. of Minkler, Exh. A at Exh. 11, Exh. G at IROG 50.1, E.) Plaintiff submitted evidence that in the Agreement, Recital H, BMI “guarantees the cultivation space at the Premises . . . allocated for the Venture for at least one (1) year following the Effective Date,” and “[i]n the event of termination of this Agreement . . . this Agreement shall forthwith become void except: (i) as set forth in Recital H of this Agreement.” (P-DSSF 2; Decl. of Minkler, Exh. A at 110:13-22; Exh. A at Exh. 11 at Recital H and §8.3; Exh. F at 113:10-25.) Plaintiff submitted evidence that maintaining valid cannabis cultivation licenses was one of BMI’s primary duties under the Agreement. (P-DSSF 3; Decl. of Minkler, Exh. A at Exh. 11 at Recital E and §11; Exh. F at 51:25-52:3.) Plaintiff submitted evidence that in early 2018, Bozanich told Baljian that it would be virtually impossible for BMI to survive a CUP Hearing at the Planning Commission and an appeal hearing at the Board of Supervisors to obtain a local permit to continue cultivating at the Premises, and BMI could finish out its grow year (approximately through October 2018), but it would not be able to replant on the Premises in the spring. (P-DSSF 9-10; Decl. of Bozanich ¶7.) Plaintiff submitted evidence that from October 10 to December 10, 2018, BMI did not have a state license to cultivate. (P-DSSF 12; Decl. of Minkler, Exh. D at SROG No. 15 and attachments.) Plaintiff submitted evidence that BMI never applied for the CUP necessary to obtain a permit to continue planting on the Premises past October 2018. (P-DSSF 17; Decl. of Minkler, Exh. F at 57:1-3.) Plaintiff submitted evidence that its spent a significant sum on materials and external labor and Angus and Geordie spent hundreds of hours laboring on the farm. (P-DSSF 20, 21; Decl. of Clark ¶4, Exh. A; Decl. of Angus ¶¶6, 8; Decl. of Geordie ¶¶12, 13.) However, Plaintiff failed to demonstrate intent that plaintiff rely on this promise, harm, and damages. Plaintiff failed to meet its burden to demonstrate all elements of its cause of action for false promise and does not shift the burden to Defendants to demonstrate a triable issue of material fact exists as to the cause of action.

Accordingly, Plaintiff’s motion for summary adjudication is denied as to the 1st cause of action.

To state a cause of action for intentional misrepresentation a plaintiff must prove the following elements: (1) defendant represented to plaintiff that a fact was true; (2) defendant’s representation was false; (3) defendant knew the representation was false when it made it, or defendant made the representation recklessly and without regard for the truth; (4) defendant intended that plaintiff rely on the representation; (5) plaintiff reasonably relied on defendant’s representation; (6) plaintiff was harmed; and (7) plaintiff’s reliance on defendant’s representation was a substantial factor in causing plaintiff’s harm. (CACI 1900.)

To state a cause of action for negligent misrepresentation a plaintiff must prove the following elements: (1) defendant represented to plaintiff that a fact was true; (2) defendant’s representation was not true; (3) although defendant may have honestly believed the representation was true, defendant had no reasonable grounds for believing the representation was true when it made it; (4) defendant intended that plaintiff rely on this representation; (5) plaintiff reasonably relied on this representation; (6) plaintiff was harmed; and (7) plaintiff’s reliance on defendant’s representation was a substantial factor in causing plaintiff’s harm. (CACI 1903.)

“[F]raudulent intent is an issue for the trier of fact to decide.” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1061.)

Plaintiff alleges BMI represented to Plaintiff’s principals through its CEO Baljian and principal David throughout 2018 that the Cultivation License was in active and good standing, and that the Cultivation License could be renewed for the Premises. (FAC ¶102.) Plaintiff alleges BMI made those representations knowing that it had misrepresented its water in order to obtain its license, thus making the license voidable. (FAC ¶102.)

Plaintiff alleges when the County of Santa Barbara informed BMI in or about mid-September 2018 that it would not renew the Cultivation License for the Premises due to neighbor complaints, BMI did not disclose this information to Plaintiff Right Brothers and instead continued to represent to Right Brothers that the Premises would be licensed for cannabis cultivation during October and November 2018. (FAC ¶103.)

Plaintiff alleges BMI represented that BMI would cover the carrying costs of the joint venture, but BMI was never able to cover the costs. (FAC ¶104.) Plaintiff alleges BMI knew that the representations were false when it made them or made them recklessly and without regard for the truth. (FAC ¶104.) Plaintiff alleges Defendant knew that its representations regarding its ability to satisfy its obligations under the Agreement, its intention to continue cultivating on the Premises and its statements regarding water rights were false when it made them or made the representations recklessly and without regard for the truth. (FAC ¶105.)

Plaintiff alleges BMI intended that Plaintiff Right Brothers rely on the representations. (FAC ¶106.) Plaintiff alleges making its misrepresentations, Defendant BMI acted with malice, oppression, or fraud, within the meaning of section 3294 of the Civil Code, and therefore warrant exemplary damages. (FAC ¶107.) Plaintiff alleges it reasonably relied on Defendant BMI’s representations because the Parties were in a fiduciary relationship. (FAC ¶108.)

Plaintiff argues it has proved each element of the cause of action entitling the party to judgment on the cause of action. However, Plaintiff failed to demonstrate the element of intent that plaintiff rely on Defendant’s representations, harm, and damages. (See P-DSSF 24, 25, 28.)

Accordingly, Plaintiff’s motion for summary adjudication of the 2nd and 3rd causes of action is denied.

A cause of action for breach of contract requires a showing of the following elements: (1) plaintiff and defendant entered into a contract; (2) plaintiff did all, or substantially all, of the significant things that the contract required it to do; (3) all conditions required by the contract for defendant’s performance occurred; (4) defendant failed to do something that the contract required it to do; (5) plaintiff was harmed; and (6) defendant’s breach of contract was a substantial factor in causing plaintiff’s harm. (CACI 303.)

Plaintiff alleges Plaintiff and BMI executed a written contract on June 19, 2018. (FAC ¶131, Exh. 1.) Plaintiff alleges even before the signing of the Agreement, Plaintiff and BMI both began operating under the terms of the agreement. (FAC ¶132.) Plaintiff alleges it performed all, or substantially all, of its obligations under the Agreement. (FAC ¶133.) Plaintiff alleges BMI breached the Agreement by: (a) failing to form a separate entity to hold the Cultivation License and failing to transfer a 20 percent interest in that entity to Plaintiff Right Brothers; (b) failing to maintain the Cultivation License in active and good standing; (c) failing to reimburse Plaintiff Right Brothers for its costs incurred pursuant to the Agreement; (d) failing to repay the entire loan amount owed to Right Brothers; (e) failing to reimburse Right Brothers for the costs it advanced; (f) taking possession of 2,553.6 pounds of cannabis crops grown by Right Brothers without giving Right Brothers its 60 percent share of profits from the sale of that crop; (g) selling the confiscated cannabis in undocumented sales; and (h) failing to pay all sales tax owed on the sales of the joint venture’s crops. (FAC ¶134.)

Plaintiff alleges per Section 8.2 of the Agreement, Defendant “BMI [Group Inc.]’s failure to pay RIGHT BROS. any compensation due within thirty (30) days after written demand for payment” constitutes a material breach of the Agreement. (FAC ¶135.) Plaintiff alleges it was harmed by Defendant BMI’s conduct in an amount in to be proven at trial, but easily in excess of $600,000. (FAC ¶136.) Plaintiff alleges BMI’s conduct was a substantial factor in causing the harm suffered by Plaintiff. (FAC ¶137.)

Plaintiff failed to submit evidence of damages and harm. Therefore, Plaintiff failed to prove all elements of its cause of action.

Based on the foregoing, Plaintiff’s motion for summary adjudication as to the 5th cause of action is denied.

A cause of action for breach of duty of undivided loyalty requires the following elements: (1) defendant was in a fiduciary relationship with plaintiff; (2) defendant knowingly acted against plaintiff’s interests in connection with a transaction; (3) plaintiff did not give informed consent to defendant’s conduct; (4) plaintiff was harmed; and (5) defendant’s conduct was a substantial factor in causing plaintiff’s harm. (CACI 4102.)

Partners or joint venturers have a fiduciary duty to act with the highest good faith towards each other regarding affairs of the partnership or joint venture. (Laux v. Freed (1960) 53 Cal.2d 512, 522, citing Nelson v. Abraham (1947) 29 Cal.2d 745, 750.) The rights and liabilities of joint venturers, as between themselves, are governed by the same rules which apply to partnerships. (Boyd v. Bevilacqua (1966) 247 Cal.App.2d 272, 288; citing Zeibak v. Nasser (1938) 12 Cal.2d 1, 12.)

Plaintiff alleges BMI was Plaintiff’s partner under the Agreement. (FAC ¶139.) Plaintiff alleges as a partner, BMI, its officers, agents, and owners, owed fiduciary duties to Plaintiff and its agents and owners. (FAC ¶139.) Plaintiff alleges BMI and its officers, agents, and owners, were acting in their capacity as a partner when they knowingly acted against Plaintiff’s interests in connection with its: (a) failure to reimburse Right Brothers for costs incurred pursuant to the Agreement; (b) failure to share revenues with Right Brothers from sales of the cannabis crops; (c) knowingly exposing Right Brothers and the partnership to criminal and civil liability for failing to maintain the Cultivation License in active and good standing (under local, state and federal drug manufacturing and environmental statutes and regulations) and by making undocumented sales without paying all required taxes; (d) lying to Right Brothers regarding material aspects of the business of the partnership; (e) wrongful taking of the 2,553.6 pounds of cannabis crops; and (f) starting a competing cannabis cultivation business before the partnership terminated. (FAC ¶140.)

Plaintiff alleges it did not give consent of any kind for Defendants’ actions. (FAC ¶141.) Plaintiff alleges it was harmed by Defendants’ conduct. (FAC ¶142.) Plaintiff alleges Defendants’ disregard for their fiduciary duty owed to Plaintiff was a substantial factor in causing Plaintiff’s harm. (FAC ¶143.)

As in the fraud causes of action, Plaintiff fails to demonstrate intent on behalf of BMI to act against Plaintiff’s interests and that Plaintiff was harmed.

Accordingly, Plaintiff’s motion for summary adjudication of the 6th cause of action is denied.

Plaintiff’s motion for summary adjudication is and denied as to the 1st, 2nd, 3rd, 5th, and 6th causes of action.

Hon. Daniel M. Crowley

Judge of the Superior Court

[1] The Court notes the Declaration of Minkler is confusing and the exhibits are mislabeled and incorrectly bookmarked in the electronic version of the Declaration. Exhibit K is erroneously identified as Exhibit H in the Declaration. Exhibit L is erroneously identified as Exhibit K in the Declaration. Counsel for Plaintiff is admonished for creating unnecessary confusion by causing parties and the Court to sort through the exhibits and wasting judicial resources.

The Court will consider the erroneously labeled exhibits to the Declaration of Minkler, referring to Defendant BMI’s 1/24/22 Response to Special Interrogatories (Set 1) as “Exhibit K,” and the 1/15/19 Text from Davo Agazaryan to Right Brothers as “Exhibit L.”