Judge Daniel M. Crowley, Case Number: 20STCV33809, Date: 2023-10-12 Tentative Ruling

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Defendant David Aschkenasy (“Aschkenasy”) (“Defendant”) demurs to the 1st, 2nd, 3rd, and 6th causes of action in Plaintiffs Metro Entertainment, Inc.’s (“Metro”) and Gold Star Hospitality, LLC’s (“Gold Star”) (collectively, “Plaintiffs”) second amended complaint (“SAC”). (Notice of Demurrer, pgs. 1-2; C.C.P. §430.10(e).)

Before filing a demurrer, the moving party must meet and confer in person or by telephone with the party who filed the pleading to attempt to reach an agreement that would resolve the objections to the pleading and obviate the need for filing the demurrer. (C.C.P. §430.41.)

Plaintiffs filed their initial complaint on September 3, 2020. Plaintiffs filed their first amended complaint (“FAC”) on August 4, 2023. Plaintiffs filed the operative SAC on August 4, 2023, against Defendants Ratner Riverside Investment, LLC (“Ratner Riverside”), Shaya Stauber (“Stauber”), and Aschkenasy (collectively, “Defendants”) alleging six causes of action: (1) breach of contract; (2) breach of implied warranty of good faith and fair dealing; (3) fraud; (4) declaratory relief; (5) breach of fiduciary duty; and (6) intentional interference with contractual relations, arising from Metro’s lease of real property located at 171 N. Maple Drive, Suite A, Burbank, California 91505 (“Metro Property”) from Ratner Riverside. (SAC ¶1, Exh. A.)[1]

Defendants filed the instant demurrer and accompanying motion to strike on October 12, 2023. Plaintiffs filed their oppositions on November 29, 2023. As of the date of this hearing no reply has been filed.

Defendant demurs on the basis that Plaintiffs’ 1st, 2nd, 3rd, and 6th causes of action fail to state facts sufficient to constitute causes of action against Aschkenasy. (Demurrer, pgs. 3-9; C.C.P. §430.10(e).)

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Insurance Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hospital District (1992) 2 Cal.4th 962, 967.)

A plaintiff must allege the following elements to state a breach of contract: (1) existence of contract; (2) plaintiffs’ performance or excuse for nonperformance; (3) defendants’ breach (or anticipatory breach); and (4) resulting damage to plaintiff. (Reichert v. General Insurance Co. (1968) 68 Cal.2d 822, 830; Hale v. Sharp Healthcare (2010) 183 Cal.App.4th 1373, 1387.) Although a written contract is usually pleaded by alleging its making and attaching a copy which is incorporated by reference, a written contract can also be pleaded by alleging the making and the substance of the relevant terms. (Construction Protective Services, Inc. v. TIG Specialty Insurance Co. (2002) 29 Cal.4th 189, 198-199; Perry v. Robertson (1988) 201 Cal.App.3d 333, 341.)

Plaintiffs allege Aschkenasy (real estate license # 01876070) operated as the seller’s agent and buyer’s agent for the lease transactions described herein. (SAC ¶27.) Plaintiffs allege he is also an owner of the properties identified herein. (SAC ¶27.) Plaintiffs allege Aschkenasy failed to provide Plaintiffs with a Disclosure Regarding Real Estate Agency Relationship at any time prior to the lease of the properties at issue. (SAC ¶28.) Plaintiffs allege On May 23, 2016, Gold Star leased the real property located at 4001 Riverside Drive, Suite E, Burbank, California 91505 from Ratner Riverside. (SAC ¶29.) Plaintiffs allege Gold Star uses the Leased Property to operate a restaurant known as Red Maple Café that specializes in the sale of sandwiches and salads. (SAC ¶30.) Plaintiffs allege Section 58 of the Gold Star Lease entitled “Exclusive Lease” states that Ratner Riverside “will not lease any space in the Project for the sale of sandwiches or salads in excess of nine percent (9%) of either food type or their total gross sale, . . .” (SAC ¶31.)

Plaintiffs allege from 2018 through August 2020, Ratner Riverside leased the Adjoining Property to Soup Goddess that had a menu that included fifteen sandwiches and salads. (SAC ¶32.) Plaintiffs allege the lease of the Adjoining Property to Soup Goddess resulted in a loss of business to Gold Star. (SAC ¶33.)

Plaintiffs allege on May 27, 2016, Metro leased the real property located at 171 N. Maple Drive, Suite A, Burbank, California 91505 from Ratner Riverside. (SAC ¶34.) Plaintiffs allege Section 58 of the Metro Lease entitled “Exclusive Lease” states that Ratner Riverside shall not lease the Adjoining Property to another “for the sale of sandwiches, salads, gelato, yogurt, or ice cream in excess of nine percent (9%) of either food type or their total gross sale, . . .” (SAC ¶35.) Plaintiffs allege originally Metro used the Leased Property to operate a gelato and coffee shop. (SAC ¶36.)

Plaintiffs allege in May 2018, various conversations took place between Metro representatives and Ratner representatives regarding the transition of the space from gelato and coffee to a poke business. (SAC ¶37.) Plaintiffs allege this was memorialized by an email from Metro to Ratner Riverside dated May 11, 2018. (SAC ¶37.) Plaintiffs allege Ratner Riverside had an obligation to revise the Metro Lease to reflect the change of business, but failed to do so. (SAC ¶38.) Plaintiffs allege in August 2020, Ratner Riverside leased the Adjoining Property to Metro’s direct competitor, Sweetfin that also operates a poke business. (SAC ¶39.)

Plaintiffs allege Sweetfin has a competitive advantage over Plaintiff due its name recognition from having ten locations across Southern California. (SAC ¶40.) Plaintiffs allege as a larger business, Sweetfin has significant buying power with its vendors and much wider marketing reach. (SAC ¶40.) Plaintiffs allege on information and belief that Aschkenasy has a personal relationship with Seth Cohen, the co-founder of Sweetfin and has placed his interests ahead of those of Plaintiffs. (SAC ¶41.) Plaintiffs allege the lease of the Adjoining Property to Sweetfin has and continues to result in a loss of business to Gold Star and Metro. (SAC ¶42.) Plaintiffs allege during the approximate first three years of the Metro Lease, Ratner Riverside arranged for the Corner Poke sign to be illuminated at night. (SAC ¶43.) Plaintiffs allege the switch for the electricity for the sign is located on the Adjoining Property. (SAC ¶43.)

Plaintiffs allege since the lease of the Adjoining Property to Sweetfin, Ratner Riverside refused to illuminate the Corner Poke sign. (SAC ¶44.). Plaintiffs allege on August 26, 2020, Ratner Riverside sent correspondence to Metro and Gold Star identifying purported violation of the Lease that did not exist. (SAC ¶45.) Plaintiffs allege Ratner Riverside’s recent conduct constitutes retaliation for Metro and Gold Star demanding that Ratner comply with its contractual obligations. (SAC ¶46.)

Plaintiffs allege Section 58 of the Metro Lease entitled “Exclusive Lease” states that Ratner “will not lease any space in the Project for the sale of sandwiches, salads, gelato, yogurt, or ice cream in excess of nine percent (9%) of either food type or their total gross sale, . . .” (SAC ¶49.) Plaintiffs allege Section 58 of the Gold Star Lease entitled “Exclusive Lease” states that Ratner shall not lease the Adjoining Property to another “for the sale of sandwiches or salads in excess of nine percent (9%) of either food type or their total gross sale, . . .” (SAC ¶50.) Plaintiffs allege as shown, the mutual intent of the exclusivity provision of the Lease was to prohibit leasing the Adjoining Property to a competitor (at the time a gelato shop and now a poke business). (SAC ¶51.)

Plaintiffs allege throughout 2018, Ratner Riverside leased the Adjoining Property to Soup Goddess that specialized in the sale of sandwiches and salads. By so doing, defendants violated the exclusivity provisions of the Metro and Gold Star Leases. (SAC ¶52.) Plaintiffs allege beginning August 2020, Ratner Riverside leased the Adjoining Property to Sweetfin that specializes in the sale of poke. (SAC ¶53.) Plaintiffs allege by so doing, defendants violated the exclusivity provisions of the Metro and Gold Star Leases. (SAC ¶53.) Plaintiffs allege Section 58 expressly precludes any business that sells “salads.” (SAC ¶54.) Plaintiffs allege the bowls sold by Sweetfin are filled with various greens and vegetables and constitute salads. (SAC ¶54.)

Plaintiffs allege Ratner Riverside leasing the Adjoining Space to Sweetfin violates both the intention and the letter of the exclusivity provisions in the Gold Star and Metro Leases. (SAC ¶55.) Plaintiffs allege they did all, or substantially all, of the significant things that the contracts required them to do. (SAC ¶56.) Plaintiffs allege all conditions required by the Metro Lease and Golds Star Lease for Ratner Riverside’s performance have occurred. (SAC ¶57.) Plaintiffs allege Defendants failed to do something that the contract required them to do. (SAC ¶58.) Plaintiffs allege Defendants leased the Adjoining Property to direct competitors. (SAC ¶59.) Plaintiffs allege they were harmed by Defendants’ failure to comply with their contractual obligations and sustained loss of business. (SAC ¶60.)

Plaintiffs fail to allege a cause of action for breach of contract because Plaintiffs failed to attach the two leases as exhibits to the SAC. Plaintiffs’ argument on opposition that they cured this issue to which the demurrer was sustained with leave to amend on the initial complaint because they attached the exhibits to the FAC is unavailing. Plaintiffs amended their FAC with the instant SAC, which is treated as a pleading independent of the FAC. Plaintiffs cannot excuse their failure to properly allege a cause of action for breach of contract by directing the Court and Aschkenasy to a pleading that is no longer the operative pleading.

“The implied covenant of good faith and fair dealing rests upon the existence of some specific contractual obligation. ‘The covenant of good faith is read into contracts in order to protect the express covenants or promises of the contract, not to protect some general public policy interest not directly tied to the contract’s purpose.’ … ‘In essence, the covenant is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract.’” (Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031-1032, internal citations omitted; CACI 325.)

For the same reasons as explained with regard to Plaintiffs’ 1st cause of action, Plaintiffs fail to sufficiently allege their 2nd cause of action.

Accordingly, Defendant’s demurrer to Plaintiffs’ 2nd cause of action for breach the implied covenant of good faith and fair dealing is sustained with 20 days leave to amend.

Fraud actions are subject to strict requirements of particularity in pleading. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) Fraud must be pleaded with specificity rather than with general and conclusory allegations. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645; West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.)

Plaintiffs allege during the process of deciding whether to lease the Metro Property and Gold Star Property, Plaintiffs were informed by Stauber and Aschkenasy that the Adjoining Property would not be leased to any Metro or Gold Star competitor. (SAC ¶73.) Plaintiffs allege in May 2016, Aschkenasy spoke to Plaintiffs’ representative, Brian Vezkosky and informed him that the adjoining properties would not be leased to a direct competitor. (SAC ¶75.) Plaintiffs allege Aschkenasy knew this representation was false when he made it. (SAC ¶75.)

Plaintiffs allege in the years that followed, Aschkenasy attempted and did in fact lease the Adjoining Space to Plaintiff’s largest competitor. (SAC ¶76.) Plaintiffs allege Defendants made the false representation with the express intention of inducing action by the Plaintiffs including leasing the properties from Ratner Riverside. (SAC ¶77.) Plaintiffs allege they reasonably relied upon Defendants’ statements and made the decision to lease the subject properties from Ratner Riverside. (SAC ¶78.) Plaintiffs allege their reliance on Defendants’ representations was a substantial factor in causing its harm. (SAC ¶79.)

Plaintiffs allege in July 2020, Aschkenasy showed the Adjoining Property to Sweetfin in an attempt to lease it to them. (SAC ¶80.) Plaintiffs allege on July 10, 2020, as evidenced by e-mails, Aschkenasy falsely told Sweetfin’s owners that Plaintiffs were going to “reconceptualize the corner or sell it.” (SAC ¶81.) Plaintiffs allege Aschkenasy knew from prior conversations with Ratner Riverside personnel and Vezkosky that Plaintiffs had no intention of changing the concept or selling the location. (SAC ¶82.) Plaintiffs allege based on these false representations, Sweetfin leased the Adjoining Space next to Corner Poke. (SAC ¶83.) Plaintiffs allege by making these false representations, Aschkenasy placed Corner Poke’s largest competitor in the space immediately next to them. (SAC ¶84.) Plaintiffs allege as a result of Defendants’ conduct set forth herein, Plaintiffs have incurred damages as set forth herein. (SAC ¶85.)

Plaintiffs sufficiently allege how, when, where, to whom, and by what means the representations were made. (SAC ¶¶75, 76, 80, 83; Lazar, 12 Cal.4th at pg. 645; West, 214 Cal.App.4th at pg. 793.)

“The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126, internal citations omitted.)

Plaintiffs allege on May 27, 2016, Metro leased the real property located at 171 N. Maple Drive, Suite A, Burbank, California 91505 from Ratner. (SAC ¶104.) Plaintiffs allege based on his conversations with Plaintiff and visits to the properties, Aschkenasy knew that Metro operated a poke business from the location. (SAC ¶105.) Plaintiffs allege in July 2020, Aschkenasy showed the Adjoining Property to Sweetfin in an attempt to lease it to them. (SAC ¶106.) Plaintiffs allege based on numerous conversations with Sweetfin’s owners, Aschkenasy knew that Sweetfin operated a poke business. (SAC ¶107.)

Plaintiffs allege on July 10, 2020, as evidenced by e-mails, Aschkenasy falsely told Sweetfin’s owners that plaintiffs were going to “reconceptualize the corner or sell it.” (SAC ¶108.) Plaintiffs allege Aschkenasy knew from prior conversations with Ratner Riverside personnel and Vezkosky that Plaintiffs had no intention of changing the concept or selling the location. (SAC ¶109.) Plaintiffs allege based on these false representations, Sweetfin leased the Adjoining Space next to Corner Poke. (SAC ¶110.) Plaintiffs allege by making these false representations, Aschkenasy placed Corner Poke’s largest competitor in the space immediately next to them. (SAC ¶111.) Plaintiffs allege Aschkenasy knew that the disruption of Metro’s business was certain or substantially certain to occur. (SAC ¶112.) Plaintiffs allege as a result of Defendants’ conduct set forth herein, Plaintiffs have incurred damages as set forth herein. (SAC ¶113.)

Plaintiffs fail to allege a valid contract between Plaintiffs and a third party, as Plaintiffs allege Aschkenasy is a party to the contract between Metro and Ratner Riverside by virtue of alleging Ratner Riverside and Aschkenasy are alter egos. (SAC ¶¶23, 104.)

Accordingly, Defendants’ demurrer to Plaintiff’s 6th of action for intentional interference with contractual relations is sustained without leave to amend. Plaintiffs were not granted leave to amend their FAC to include this cause of action, which would otherwise be stricken sua sponte by this Court.

Defendant’s demurrer to Plaintiffs’ 6th cause of action is sustained without leave to amend.

In light of this Court’s ruling on the demurrer, Defendant’s motion to strike is denied as moot.

Hon. Daniel M. Crowley

Judge of the Superior Court

[1] The Court notes Plaintiffs failed to attach Exhibit A to the SAC.