Judge: Daniel M. Crowley, Case: 22STCV41125, Date: 2023-11-29 Tentative Ruling

Case Number: 22STCV41125    Hearing Date: March 28, 2024    Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

Defendants Yoon Chung’s, Yoon Chung Design, Inc.’s, and Ona by Yoon Chung, LLC’s demurrer to Plaintiff Adam Cohen’s second amended complaint is overruled.

Defendants Yoon Chung’s, Yoon Chung Design, Inc.’s, and Ona by Yoon Chung, LLC’s motion to strike Plaintiff’s request for punitive damages is overruled.  Defendants’ motion to strike Plaintiff’s request for attorneys’ fees is granted with 20 days leave to amend.

          Defendants Yoon Chung (“Yoon”), Yoon Chung Design, Inc. (“YCD”), and Ona by Yoon Chung, LLC (“Ona”) (collectively, “Defendants”) demur to the 1st through 6th causes of action in Plaintiff Adam Cohen’s (“Plaintiff”) second amended complaint (“SAC”).  (Notice of Demurrer, pg. 2.)  Defendants also move to strike portions of Plaintiff’s SAC.  (Notice of MTS, pgs. 1-2; C.C.P. §§435, 436.)

Request for Judicial Notice

Defendants’ 2/20/24 request for judicial notice of this Court’s tentative ruling on Defendants’ demurrer to the first amended complaint and the first amended complaint is denied, as the Court does not need to take judicial notice of filings on the instant docket.

Meet and Confer

Before filing a demurrer, the moving party must meet and confer in person, by telephone, or by video conference 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.)

Defendants’ counsel filed a declaration stating she emailed Plaintiff’s counsel to seeking his availability to meet and confer regarding the SAC.  (Decl. of Foti ¶4.)  Defendants’ counsel declares she met and conferred with Plaintiff’s counsel via telephone on February 13, 2024, and the parties were unable to reach an agreement regarding the issues raised in the instant demurrer.  (Decl. of Foti ¶5.) Defendants’ counsel’s declaration is proper under C.C.P. §430.41(a).  Therefore, the Court will consider Defendants’ demurrer.

          Background

          Plaintiff filed his initial Complaint on December 29, 2022.  Plaintiff filed his first amended complaint (“FAC”) on July 27, 2023, against Defendants.  On November 29, 2023, this Court sustained Defendants’ demurrer to all six causes of action alleged in the FAC.  (11/29/24 Minute Order.)  On January 16, 2024, Plaintiff filed the operative SAC alleging six causes of action: (1) fraud – intentional misrepresentation and concealment; (2) breach of contract; (3) intentional interference with prospective economic advantage; (4) breach of fiduciary duty; (5) fraudulent inducement; and (6) accounting.  Plaintiff’s causes of action stem from his entering into a business relationship with Yoon and YCD and forming Ona with them on or about January 2019.  (See SAC ¶1.)

          Defendants filed the instant demurrer on February 20, 2024.  Plaintiff filed his opposition on March 15, 2024.  Defendants filed their reply on March 21, 2024.

A.   Demurrer

Summary of Demurrer

Defendants demur on the basis that Plaintiff’s 1st through 6th causes of action fail to state facts sufficient to constitute causes of action against Defendants, and the 5th cause of action is uncertain.  (Demurrer, pgs. 1-2; C.C.P. §§430.10(e), (f).)

Legal Standard

“[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.)

Failure to State a Claim

Fraud – Intentional Misrepresentation and Concealment (1st COA)

“A complaint for fraud must allege the following elements: (1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages.” (Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1816 [combining misrepresentation and scienter as a single element].)

“In California, fraud must be pled specifically; general and conclusory allegations do not suffice. Thus, the policy of liberal construction of the pleadings . . . will not ordinarily be invoked to sustain a pleading defective in any material respect. This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.”¿ (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184, internal citations and quotations omitted.)¿

Intentional misrepresentation is “[t]he suggestion, as a fact, of that which is not true, by one who does not believe it to be true.”  (Civ. Code §1710(1).)  “[T]he elements of an action for fraud and deceit based on a concealment are:(1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, he plaintiff must have sustained damage.”  (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.) 

Plaintiff alleges in or about August 2018, through e-mail, Yoon (both individually and through YCD) invited Plaintiff to be a business partner and investor in Ona.  (SAC ¶22.)  Plaintiff alleges in or about early January 2019, Plaintiff agreed.  (SAC ¶22.)  Plaintiff alleges on or about January 25, 2019, Plaintiff, Yoon, and YCD entered into the LLC Agreement to establish Ona.  (SAC ¶22, Exh. A.) 

Plaintiff alleges Pursuant to the LLC Agreement, YCD owned sixty-six and two-thirds (66 2/3) percent of Ona, and Plaintiff owned thirty-three and one-third (33 1/3) percent of Ona.  (SAC ¶23.)  Plaintiff alleges Yoon was appointed to serve as president of Ona. (SAC ¶23.)  Plaintiff alleges said agreement was signed by Yoon, in her capacities as an individual, as president of Ona, and as president of YCD.  (SAC ¶23.)  Plaintiff alleges said agreement also set forth the terms through which Ona would be operated.  (SAC ¶23.) 

Plaintiff alleges pursuant to the LLC Agreement, Plaintiff was to provide an initial investment of $300,000.00 to Ona.  (SAC ¶24.)  Plaintiff alleges Yoon and YCD would be responsible for designing the clothing line; developing the customer base exclusively for Ona; dealing with financial matters; and running the design and manufacturing operations of Ona.  (SAC ¶24.)  

Plaintiff alleges Yoon (both individually, through YCD, and on behalf of all Defendants, except Ona) owed a fiduciary duty to Plaintiff (both directly, as a member of Ona, and derivatively on behalf of Ona) because Yoon was sole manager and president of Ona, and Plaintiff was a member of Ona.  (SAC ¶52.). Plaintiff alleges moreover, they were business partners, pursuant to the LLC Agreement.  (SAC ¶52, Exh. A.)

Plaintiff alleges Yoon intentionally failed to disclose that the two loans provided by Plaintiff to Ona (totaling in $360,000.00) would not be used for the benefit of Ona and its business operations, but instead for Yoon’s and YCD’s personal gain and benefit.  (SAC ¶52.)  Plaintiff alleges prior to and at the time when these loans were made, this concealed information was known only to Yoon, and Plaintiff could not have discovered said information.  (SAC ¶53.)  Plaintiff alleges he was unaware of this concealed information prior to and when providing the two loans to Ona.  (SAC ¶54.)  Plaintiff alleges during their communications concerning said loans, Yon never disclosed or made available in any reasonably accessible way said concealed information.  (SAC ¶54.)

Plaintiff alleges Yoon intended to deceive Plaintiff into providing the two loans to Ona by concealing Yoon’s true intent to use the loan funds for her and YCD’s own benefit and personal gain.  (SAC ¶55.)  Plaintiff alleges had this omitted information been disclosed, Plaintiff reasonably would have behaved differently by refusing to loan any money to Ona, and to cease engaging in business with Yoon.  (SAC ¶56.)

Plaintiff alleges Yoon represented to Plaintiff that the two loans provided by Plaintiff to Ona (totaling in $360,000.00) would be used for the benefit of Ona and its business operations.  (SAC ¶57.)  Plaintiff alleges said representation was false.  (SAC ¶58.)  Plaintiff alleges Yoon knew that the representation was false when she made it, as she had intended to use said funds solely for her and YCD’s own personal gain and benefit, and later did.  (SAC ¶59.)

Plaintiff alleges Yoon intended that Plaintiff rely on said representation, so that she could misappropriate these funds from Ona.  (SAC ¶60.)  Plaintiff alleges base upon Yoon’s skills, experience, knowledge, and background in the women’s fashion industry; the many years of personally knowing Yoon; and that Yoon was manager and president of Ona, Plaintiff reasonably and justifiably relied on Yoon’s representation that the $360,000.00 in loan funds to Ona would be used for the benefit of Ona and its operations.  (SAC ¶61.)

Plaintiff alleges as a direct and proximate result of Defendants’ unlawful, fraudulent, and wrongful actions, and Plaintiff’s reasonable reliance on their representation, Plaintiff has suffered and continues to suffer substantial economic and non-economic damages in an amount to be proven at the time of trial, but in excess of $1,500,000.00, in addition to attorneys’ fees and costs.  (SAC ¶62.)

While Plaintiff’s cause of action appears to be two separate causes of action for fraud by concealment and fraud by intentional misrepresentation, Plaintiff sufficiently alleges a cause of action for fraud.  Plaintiff sufficiently alleges YCD is Yoon’s alter ego.  (SAC ¶13.)  Plaintiff sufficiently alleges Yoon and YCD owed a duty to Plaintiff.  (SAC ¶52.)  Plaintiff sufficiently alleges damages as a result of YCD and Yoon’s concealment.  (SAC ¶¶5, 36, 37, 62, 62.)  Defendants do not dispute the other elements of a cause of action for fraud by concealment.

Accordingly, Defendants’ demurrer to Plaintiff’s 1st cause of action for fraud is overruled.

Breach of Contract (2nd COA)

To state a cause of action for breach of contract, Plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.”  (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

If a breach of contract claim “is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.”  (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.)  In some circumstances, a plaintiff may also “plead the legal effect of the contract rather than its precise language.”  (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.)

Plaintiff alleges on or about January 25, 2019, the parties entered into the LLC Agreement to establish Ona.  (SAC ¶67, Exh. A.)  Plaintiff alleges said agreement set forth the terms through which Ona would be operated. (SAC ¶67.) Plaintiff alleges pursuant to the LLC Agreement, Plaintiff was to provide an initial investment of $300,000.00 and finance capital to Ona.  (SAC ¶67.)  Plaintiff alleges Yoon and YCD would be responsible for designing the clothing line; developing the customer base exclusively for Ona; dealing with financial matters; and running the design and manufacturing operations of Ona.  (SAC ¶67.)

Plaintiff alleges the LLC Agreement included a non-compete clause.  (SAC ¶68, Exh. A at pg. 10 §3.3(b).)  Plaintiff alleges pursuant to the LLC Agreement, Yoon and YCD agreed that they “shall be required to manage the Company as [their] sole function, and (i) none of the Manager, YCD, Chung or their respective Affiliates may engage in any other business interest or activity that may directly or indirectly compete with the business and affairs of the Company . . . and (iii) the Manager and Chung shall be obligated to notify the Company and the Members in writing of any and all business interests, opportunities or activities presented or offered to the Manager or Chung which indirectly or indirectly competes with the Company, its business and affairs.”  (SAC ¶68.)

Plaintiff alleges the LLC Agreement provided Plaintiff with inspection rights and access to Ona’s financial and company records, pursuant to §8.1.  (SAC ¶69.)  Plaintiff alleges he performed all, or substantially all, of the significant things that the LLC Agreement required him to do.  (SAC ¶70.)  Plaintiff alleges Defendants, except Ona, breached the LLC Agreement by failing to comply with the LLC Agreement’s non-compete clause when Defendants (except ONA) focused on YCD’s business to the detriment of Ona; and engaged in separate business with Peloton and Carbon38.  (SAC ¶71.)  Plaintiff alleges Defendants (except Ona) refused to comply with Plaintiff’s requests to inspect Ona’s records.  (SAC ¶72.)
          Plaintiff alleges as a direct and proximate result of Defendants’ unlawful and wrongful actions, Plaintiff has suffered and continues to suffer substantial economic and non-economic damages in an amount to be proven at the time of trial, but in excess of $1,500,000.00, in addition to attorneys’ fees and costs.  (SAC ¶73.)  Plaintiff alleges he is entitled to recovery of his reasonable attorneys’ fees and costs pursuant to the attorneys’ fees pursuant to clauses in the above-referenced agreements in addition to other relief awarded by the Court according to proof.  (SAC ¶74.)

Here, Plaintiff sufficiently pleads the existence of the written LLC Agreement where Yoon, YCD, and Plaintiff are parties to the agreement.  (SAC ¶67, Exh. A.)  Plaintiff’s 2nd cause of action in the SAC is not a sham pleading of the FAC because the FAC failed to attach the written agreement on which the cause of action is premised or plead the material terms of the agreement.  (See 11/29/23 Minute Order, pg. 5.)  Plaintiff sufficiently alleges he performed all, or substantially all, of the significant things that the LLC Agreement required him to do.  (SAC ¶70.)  Plaintiff sufficiently alleges Defendants breached the LLC Agreement’s non-compete clause and the inspection rights clause.  (SAC ¶¶68-69.)  Plaintiff sufficiently alleges damages.  (SAC ¶¶36, 37, 73.)

Accordingly, Defendants’ demurrer to Plaintiff’s 2nd cause of action for breach of contract is overruled.

Intentional Interference with Prospective Economic Advantage (3rd COA)

“The elements of a claim of interference with economic advantage and prospective economic advantage are: (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional [or negligent] acts on the part of the defendant designed to disrupt the relationship (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant. [Citations.]”  (Crown Imports, LLC v. Superior Court (2014) 223 Cal.App.4th 1395, 1404, internal quotations and citations omitted.)

“[T]he alleged interference must have been wrong by some measure beyond the fact of the interference itself. [Citation.] For an act to be independently wrongful, it must be ‘unlawful, that is, . . . it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.’ [Citation.] The independently wrongful act must be the act of interference itself, but such act must itself be independently wrongful. That is, ‘[a] plaintiff need not allege the interference and a second act independent of the interference. Instead, the plaintiff must plead and prove that the conduct alleged to constitute interference was independently wrongful, i.e., unlawful for reasons other than that it interfered with a prospective economic advantage. [Citations.]”  (Id.)

Plaintiff alleges during the period of on or about 2019 through on or about 2021, Carbon38 (a luxury women’s activewear and athleisure company) was Ona’s largest customer and client.  (SAC ¶78.)  Plaintiff alleges Carbon38 purchased significant product from Ona and sold said product under its own brand.  (SAC ¶78.)  Plaintiff alleges both directly (as a member of Ona) and derivatively on behalf of Ona, Plaintiff and Carbon38 were in an economic relationship that was enormously profitable during the period of on or about 2019 through on or about 2021, and probably would have continued to have resulted in an economic benefit to Plaintiff.  (SAC ¶79.)

Plaintiff alleges Defendants (except Ona) knew of said relationship, as Yoon (both individually and through YCD) managed said relationship on behalf of Plaintiff and Ona.  (SAC ¶80.)  Plaintiff alleges on or about September 12, 2023, Yoon (both individually, through YCD, and on behalf of all Defendants, except Ona) met with Carbon38’s chief executive officer in order to negotiate a new contract between Carbon38 and YCD only. (SAC ¶81.)  Plaintiff alleges in or about October 2023, YCD and Carbon38 entered into a new contract for the manufacture and purchase of women’s activewear and athleisure, produced by YCD.  (SAC ¶81.) 

Plaintiff alleges by engaging in this conduct, Yoon (both individually, through YCD, and on behalf of all Defendants, except Ona) knew that disruption of the relationship between Plaintiff (both directly (as a member of Ona) and derivatively on behalf of Ona) and Carbon38 was certain or substantially certain to occur.  (SAC ¶82.)  Plaintiff alleges said relationship was actually disrupted.  (SAC ¶83.)  Plaintiff alleges in or about October 2023, Carbon38 ceased all business with Plaintiff (both directly, as a member of Ona, and derivatively on behalf of Ona).  (SAC ¶83.)  Plaintiff alleges as a direct and proximate result of Defendants’ (except Ona) unlawful and wrongful conduct, Plaintiff (both directly, as a member of Ona, and derivatively on behalf of Ona) suffered and continues to suffer substantial economic and non-economic damages, in an amount to be proven at the time of trial, but in excess of $1,500,000.00, in addition to attorneys’ fees and costs.  (SAC ¶84.)

Plaintiff sufficiently alleges the existence of an economic relationship with a third party and that Defendants had knowledge of that pre-existing economic relationship.  (SAC ¶¶79, 80.)  Plaintiff sufficiently pleads the interference of Plaintiff’s alleged relationship with a third party, Carbon38.  (SAC ¶¶81-83.)  With regard to Plaintiff’s sham pleading argument, it is of no consequence that Plaintiff alleged in the FAC that Defendants interfered with his economic relationship with Peloton; such an allegation is not in conflict with the allegation in the operative complaint regarding Carbon38.

Accordingly, Defendants’ demurrer to Plaintiff’s 3rd cause of action for intentional interference with prospective economic advantage is overruled.

Breach of Fiduciary Duty (4th COA)

The elements of a cause of action for breach of fiduciary duty are: (1) existence of a fiduciary relationship; (2) breach of a fiduciary duty; and (3) damages caused by the breach. (Gutierrez v. Girardi (2011) 194 Cal.App.4th 925, 932, citing Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086.).) 

A fiduciary duty under common law may arise “when one person enters into a confidential relationship with another.”  (Hasso v. Hapke (2014) 227 Cal.App.4th 107, 140.)  Fiduciary duties may be imposed as a matter of law or voluntarily assumed by the fiduciary to act on behalf of and for the benefit of another.  (City of Hope National Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 385-386; Cleveland v. Johnson (2012) 209 Cal.App.4th 1315, 1339.)  Generally, a fiduciary’s duties include the duty of good faith, the duty of loyalty and the duty of confidentiality.  (Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, 1160; Gilman v. Dalby (2009) 176 Cal.App.4th 606, 614; Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) 

A shareholder’s derivative suit seeks to recover for the benefit of the corporation and its whole body of shareholders when an injury is caused to the corporation that may not otherwise be redressed because of a failure of the corporation to act.  (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 651.)  Thus, the action is derivative if the gravamen of the complaint is the injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets. (Id.)   

Plaintiff alleges that Yoon and YCD owed Plaintiff a fiduciary duty because Yoon was Cohen’s business partner concerning Ona.  (SAC ¶89.)  Plaintiff alleges as business partners, Yoon and YCD owed a fiduciary duty of good faith and loyalty to Ona and its members.  (SAC ¶89.)  Plaintiff alleges notwithstanding their fiduciary duty, as alleged herein above, Yoon engaged in fraudulent conduct against Plaintiff.  (SAC ¶90.)  Plaintiff alleges Yoon further engaged in separate business deals with Peloton and Carbon38 for the sole benefit of YCD, to the detriment of Ona and Plaintiff.  (SAC ¶91.)

Plaintiff alleges by nature of being Ona’s president and manager, Yoon and YCD owed a fiduciary duty to Ona and its members.  (SAC ¶91.)  Plaintiff alleges Yoon and YCD owed a fiduciary duty of good faith and loyalty to Ona and its members.  (SAC ¶91.)  Plaintiff alleges notwithstanding their fiduciary duty, as alleged herein above, Yoon engaged in fraudulent conduct against Cohen as a member, and misappropriated Ona’s funds and assets for her own personal gain and benefit.  (SAC ¶92.)  Plaintiff alleges Yoon further engaged in separate business deals with Peloton and Carbon38 for the sole benefit of YCD, to the detriment of Ona.  (SAC ¶92.)

Plaintiff alleges as a direct and proximate result of Defendants’ unlawful, fraudulent, and wrongful actions, Plaintiff and Ona have suffered and continue to suffer substantial economic and noneconomic damages in an amount to be proven at the time of trial, but in excess of $1,500,000.00, in addition to attorneys’ fees and costs.  (SAC ¶93.)

Plaintiff sufficiently pleads the existence of a fiduciary relationship.  (SAC ¶¶89, 91.)  Plaintiff sufficiently alleges breach of such fiduciary duties and harm.  (SAC ¶91-93.)

Accordingly, Defendants’ demurrer to Plaintiff’s 4th cause of action for breach of fiduciary duty is overruled.

Fraudulent Inducement (5th COA)

An action for promissory fraud must allege: (1) a knowingly false representation by defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages.  (Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1816.)  Promissory fraud is a subspecies of fraud and deceit. An action for promissory fraud may lie where a defendant fraudulently induces the plaintiff to enter into a contract.  (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 973-974.) However, a promise of future conduct is actionable as fraud only if made without a present intent to perform.  (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 481.)

Plaintiff alleges in or about December 2020, via telephone, Yoon (both individually and through YCD) disclosed to Plaintiff that she developed an account with Peloton and would serve as their consultant for a clothing line.  (SAC ¶98.)  Plaintiff alleges during said telephone conversation, however, Yoon (both individually and through YCD) failed to disclose to Plaintiff that the account was developed between Peloton and YCD only – not Ona.  (SAC ¶98.)  Plaintiff alleges on information and belief that Yoon had developed the Peloton account in as early as early to mid-2020. (SAC ¶98.)  Plaintiff alleges at this time, it was Plaintiff’s understanding that Yoon (both individually and through YCD) had done so on behalf of Ona.   (SAC ¶98.)  Plaintiff alleges in reality, Yoon (both individually and through YCD) had concealed from Plaintiff the fact that she was going to produce clothing and sell directly to Peloton in a manner outside of Ona’s sphere of business and for the exclusive benefit of Yoon and YCD.  (SAC ¶98.)

Plaintiff alleges in or about February 2021, via telephone, Plaintiff confronted Yoon to confirm his suspicion.  (SAC ¶99.)  Plaintiff alleges shortly thereafter, in or about February 2021, via telephone, Yoon (both individually and through YCD) confirmed to Plaintiff that the Peloton account was with YCD, and not Ona.  (SAC ¶99.)  Plaintiff alleges shortly thereafter, in or about February 2021, via telephone, Plaintiff protested against Yoon’s actions and reminded her that she was prohibited from doing so under the LLC Agreement.  (SAC ¶99.) 

Plaintiff alleges shortly thereafter, in or about February 2021, via telephone, Yoon (both individually and through YCD) manipulated this conflict to siphon even more funds from Plaintiff.  (SAC ¶100.)  Plaintiff alleges during this telephone conversation, Yoon (both individually and through YCD) proposed to Plaintiff an amendment to the LLC Agreement:

a.      Plaintiff loans YCD $300,000.00 to assist YCD with fulfilling its order from Peloton;

b.     A third entity “umbrella company” would be formed to own Ona and YCD, wherein Plaintiff would have a one-third ownership interest in said company and Yoon/YCD would have a two-thirds ownership interest in said company;

c.      All future business, inclusive of business with Peloton and all of YCD’s clients, would be performed through the “umbrella company”;

d.     Yoon would no longer receive salary from Ona; and

e.      Yoon and YCD would bring in the business of a lucrative company owned by an acquaintance, which would also be owned by the “umbrella company.” Yoon referred to this as the “Golden Egg.”

(SAC ¶100.) 

Plaintiff alleges during this same telephone conversation, Yoon (both individually and through YCD) explained to Plaintiff that the $300,000.00 loan was necessary to enable YCD to fulfill its enormous outstanding order with Peloton, and further represented that, because of the formation of the “umbrella company,” Plaintiff would directly benefit from YCD fulfilling its order from Peloton.  (SAC ¶101.) 

Plaintiff alleges in or about late February 2021, via telephone, Yoon (both individually and through YCD) falsely promised to Plaintiff that the business of a lucrative company owned by an acquaintance would also be owned by the “umbrella company.”  (SAC ¶102.)  Plaintiff alleges Yoon referred to this as the “Golden Egg.”  (SAC ¶102.)  Plaintiff alleges on or about March 2, 2021, via e-mail, Yoon (both individually and through YCD) confirmed her promise concerning the “Golden Egg.”  (SAC ¶102.) 

Plaintiff alleges based on above-alleged false representations made by Yoon (both individually and through YCD) to Plaintiff in or about February 2021, Plaintiff provided YCD with the $300,000.00 loan in or about March 2021.  (SAC ¶103.)  Plaintiff alleges Yoon knew her representations made in or about February 2021 were false when she made them, as she had no intention of ever fulfilling them.  (SAC ¶104.) 

Plaintiff alleges Yoon intended that Plaintiff rely on said representations, in order to obtain the loan to YCD.  (SAC ¶105.)  Plaintiff alleges based upon Yoon’s skills, experience, knowledge, and background in the women’s fashion industry; the many years of personally knowing Yoon; and that Yoon was manager and president of Ona, Plaintiff reasonably and justifiably relied on Yoon’s representations made in or about February 2021.  (SAC ¶106.) 

Plaintiff alleges notwithstanding YCD receiving the $300,000.00 loan from Plaintiff, YOON and YCD never fulfilled their false promise concerning the formation of the “umbrella company”; sharing the “Golden Egg” investment with COHEN; or any of the other related terms.  (SAC ¶107.)  Plaintiff alleges instead, Yoon and YCD used the March 2021 loan from Plaintiff solely for their own benefit – to enable YCD to fulfill its order from Peloton.  (SAC ¶107.)  Plaintiff alleges he and Ona received no profit from the Peloton deal.  (SAC ¶107.) 

Plaintiff alleges as a direct and proximate result of Defendants’ unlawful, fraudulent, and wrongful actions, and Plaintiff’s reasonable reliance on their representation, Plaintiff has suffered and continues to suffer substantial economic and non-economic damages in an amount to be proven at the time of trial, but in excess of $1,500,000.00, in addition to attorneys’ fees and costs.  (SAC ¶108.)

Plaintiff sufficiently alleges a knowingly false representation by Yoon to him.  (SAC ¶100.)  Plaintiff sufficiently alleges Yoon’s intent to deceive or induce Plaintiff’s reliance.  (SAC ¶101-102, 104-105.)  Plaintiff sufficiently alleges his justifiable reliance.  (SAC ¶106.)  Plaintiff sufficiently alleges resulting damages.  (SAC ¶¶107-108.)

Accordingly, Defendants’ demurrer to Plaintiff’s 5th cause of action is overruled.

Accounting (6th COA)

“A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due to the plaintiff that can only be ascertained by an accounting. An action for accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation.”  (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179, citations and paragraph break omitted.)

Plaintiff alleges Yoon, as the sole president, manager, and executive of Ona, is solely responsible for the stewardship of the corporate business and assets.  (SAC ¶111.)  Plaintiff alleges he is a member of Ona.  (SAC ¶111.) 

Plaintiff alleges the LLC Agreement provided Plaintiff with inspection rights and access to Ona’s financial and company records, pursuant to §8.1.  (SAC ¶112; see Exh. A.)  Plaintiff alleges Yoon owes him a duty to provide an accounting.  (SAC ¶112.)  Plaintiff alleges there is a balance due that Plaintiff can ascertain only through an accounting, given Defendants (except Ona’s) fraudulent actions, omissions, and misappropriation of Ona’s funds and assets.  (SAC ¶113.)

Plaintiff alleges Ona has generated income, including income which appears to have been distributed to Yoon and YCD by way of their conflicted self-dealing contrary to their responsibilities and duties under the LLC Agreement, which is not accounted for or readily apparent in the general ledgers or corporate tax returns.  (SAC ¶114.)  Plaintiff alleges Ona has generated liabilities, including liabilities to Yoon which appear to have not been disclosed nor are accounted for or readily apparent in the profit loss statements, accountings, or tax filings of Ona.  (SAC ¶115.)

Plaintiff sufficiently alleges both the existence of a business and fiduciary relationship between Plaintiff and Defendants, which require an accounting, and that a balance was due, due to Plaintiff and Defendants being business partners, and that Defendants were the manager of Ona.  (SAC ¶¶23, 37, 64-74, 86-94.)

Accordingly, Defendants’ demurrer to Plaintiff’s 6th cause of action for accounting is overruled.

Uncertainty

A demurrer for uncertainty will be sustained only where the complaint is so bad that defendant cannot reasonably respond—i.e., he or she cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her.¿ (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)¿ 

If the complaint contains enough facts to apprise defendant of the issues it is being asked to meet, failure to label each cause of action is not ground for demurrer: “Although inconvenient, annoying and inconsiderate, the lack of labels . . . does not substantially impair [defendant’s] ability to understand the complaint.” (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139 n.2.)¿ 

Where a demurrer is made upon this ground, it must distinctly specify exactly how or why the pleading is uncertain, and where such uncertainty appears (by reference to page and line numbers of the complaint).¿ (See Fenton v. Groveland Community Services District (1982) 135 Cal.App.3d 797, 809.)¿ 

Defendants fail to specify where the uncertainty appears by reference to page line and numbers in the complaint.¿ (See id.)¿ Further, the pleading is not so bad that Defendants cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against them.¿ (Khoury, 14 Cal.App.4th 612, 616.)

Accordingly, Defendants’ demurrer on the basis of uncertainty is overruled.¿

          Conclusion

Defendants’ demurrer to Plaintiff’s 1st, 2nd, 3rd, 4th, 5th, and 6th causes of action in the SAC is overruled.

Moving Party to give notice.

B.    Motion to Strike

Summary of Motion

Defendants move to strike the following portions from the SAC pertaining to attorneys’ fees and punitive damages: (1) ¶62 at 12:23; (2) ¶63 at 12:24-25; (3) ¶73 at 14:7-8; (4) ¶74 at 14:9-11; (5) ¶84 at 15:7; (6) ¶85 at 15:18-19; (7) ¶93 at 16:6-13; (8) ¶94 at 16:19-20; (9) ¶108 at 19:6; (10) ¶109 at 19:7-8; (11) Prayer ¶2 at 20:10-11; and (12) Prayer ¶4 at 20:14.  (MTS, pg. 2.)

Legal Standard

C.C.P. §436 provides that the Court may, upon a motion made pursuant to C.C.P. §435, or at any time within its discretion and upon terms it deems proper, “strike out any irrelevant, false, or improper matter inserted in any pleading,” or any pleading or part thereof “not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.”  (C.C.P. §436.)

Punitive Damages

Punitive damages may be recovered upon a proper showing of malice, fraud, or oppression.  (Civ. Code §3294(a).)  “Malice” is defined as conduct intended to cause injury to a person or despicable conduct carried on with a willful and conscious disregard for the rights or safety of others.  (Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 63.)  “Oppression” means despicable conduct subjecting a person to cruel and unjust hardship, in conscious disregard of the person’s rights.  (Id.)  “Fraud” is an intentional misrepresentation, deceit, or concealment of a material fact known by defendant, with intent to deprive a person of property, rights or otherwise cause injury.  (Id.)  Conclusory allegations, devoid of any factual assertions, are insufficient to support a conclusion that parties acted with oppression, fraud or malice.  (Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1042.)

Plaintiff sufficiently alleges a cause of action for fraud.  Accordingly, Defendants’ motion to strike Plaintiff’s request for punitive damages is denied.

Attorneys’ Fees

An award of attorney’s fees is proper when authorized by contract, statute, or law.  (C.C.P. §§1032(b), 1033.5(a)(10).)

Plaintiff fails to cite to a provision in the LLC Agreement that provides for attorneys’ fees.  Further, Plaintiff fails to cite to an applicable statute that provides for attorneys’ fees.

Accordingly, Defendants’ motion to strike Plaintiff’s request for attorneys’ fees is granted with 20 days leave to amend.

Conclusion

Defendants’ motion to strike Plaintiff’s request for punitive damages is overruled.  Defendants’ motion to strike Plaintiff’s request for attorneys’ fees is granted with 20 days leave to amend.

Moving Party to give notice.

Dated:  March __, 2024