Judge Daniel M. Crowley, Case Number: 23STCV06207, Date: 2023-09-27 Tentative Ruling

Defendant Gregory Peck (“Peck”) (“Defendant”) demurs to the 1st, 2nd, and 3rd causes of action in the first amended complaint (“FAC”) of Plaintiff Sitrick Group, LLC (“Sitrick”) (“Plaintiff”). (Notice of Demurrer, pg. 2; C.C.P. §§430.10(d), (e).)

Defendant’s 11/13/24 request for judicial notice of the letter fee agreement of Sitrick and Company, a unit of Sitrick Group, LLC, addressed to attorney Marc Kasowitz, and signed by Michael Sitrick, Marc Kasowitz, and Peck, dated May 2, 2019, is granted. (D-RJN, Exh. A.)

On March 21, 2023, Plaintiff filed its initial Complaint against Defendant and Non-moving Defendant Otis Investments LLC (“Otis”) (collectively, “Defendants”). On September 13, 2023, Plaintiff filed the operative FAC, alleging three causes of action: (1) intentional misrepresentation [against Peck]; (2) negligent misrepresentation [against Peck]; and (3) breach of fiduciary duty [against Defendants].

Plaintiff alleges Peck is, directly or indirectly, a member of Woodstock 50 LLC (“Woodstock 50”). (FAC ¶6.) Plaintiff alleges Woodstock 50 was formed to produce a music festival marking the fifty-year anniversary of the Woodstock Music Festival held in Woodstock, New York. (FAC ¶6.) Plaintiff alleges Woodstock 50 and Dentsu, a Japanese advertising company, teamed up to produce the festival. (FAC ¶6.)

Plaintiff alleges disputes arose between Woodstock 50 and Dentsu concerning the production of the music festival. (FAC ¶7.) Plaintiff alleges Dentsu withdrew from the production and claimed that the music festival had been cancelled. (FAC ¶7.) Plaintiff alleges litigation ensued in the State of New York between Woodstock 50 and Dentsu. (FAC ¶7.)

Plaintiff alleges Sitrick is one of the premiere public relations/crisis management firms in America. (FAC ¶8.) Plaintiff alleges in order to manage public relations issues and the crisis arising from the purported cancellation of

the festival and the litigation with Dentsu, Woodstock 50 engaged Sitrick. (FAC ¶8.) Plaintiff alleges on May 2, 2019, Peck signed Sitrick’s engagement agreement as the managing member of Woodstock 50. (FAC ¶8, Exh. 1.)

Plaintiff alleges prior to and at the time Peck signed the engagement agreement on behalf of Woodstock 50, Peck represented to Sitrick principals Michael Sitrick (“M. Sitrick”) and Sallie Hofmeister (“Hofmeister”) the following: (1) Peck was the managing member of the LLC and authorized to act on its behalf; (2) Woodstock 50 had sufficient funds to produce the music festival; indeed, Peck instructed Hofmeister to prepare and disseminate a press release on May 17, 2019,

announcing that the LLC had financing to produce the festival (Exh. 2); (3) Woodstock 50 had sufficient funds to pay for Sitrick’s services pursuant to the terms of the engagement agreement; and (4) Woodstock 50 would pay Sitrick’s invoices for services rendered. (FAC ¶9.)

Plaintiff alleges Sitrick relied upon Peck’s representations and immediately began providing extensive public relations/crisis management services to Woodstock 50, including at Peck’s request, having one of its executives travel from Los Angeles to Upstate New York to work onsite at a location near what he believed would be the new location of the festival. (FAC ¶10.) Plaintiff alleges Sitrick provided such services from May 3, 2019, through August 3, 2019. (FAC ¶10.) Plaintiff alleges prior to, during and after the engagement of Sitrick, Peck repeatedly told M. Sitrick and Hofmeister that Sitrick’s invoices would be paid. (FAC ¶10.) Plaintiff alleges Woodstock 50 did not pay for Sitrick’s services which, at the conclusion of the engagement, totaled $360,145.11. (FAC ¶10.)

Plaintiff alleges Sitrick commenced an arbitration against Woodstock 50 and judgment on an Arbitrator’s award was entered in favor of Sitrick and against Woodstock 50 on November 22, 2022, in Los Angeles Superior Court Case No. 22STCP02422, for the full amount of Sitrick’s invoices, interest, attorney’s fees, and arbitration expenses. (FAC ¶11.) Plaintiff alleges as entered the judgment totaled $520,317.06. (FAC ¶11, Exh. 3.)

Plaintiff alleges following entry of judgment, Sitrick obtained an order for the debtor examination of Peck as the managing member of Woodstock 50. (FAC ¶12.) Plaintiff alleges the exam took place on February 21, 2023, on the 9th floor (cafeteria) of the Stanley Mosk Courthouse. (FAC ¶12.) Plaintiff alleges Peck testified at the debtor exam as follows: (1) he was never the managing member of Woodstock 50; (2) at the time he signed Sitrick’s engagement agreement Woodstock 50 had no cash available to pay any expenses or any creditors, including for Sitrick’s services; (3) Woodstock 50’s lawsuit against Dentsu was settled for $7 million and that on December 15, 2020, Woodstock 50 received $3,689,000.00 from the settlement proceeds; (4) the $3,689,000.00 in settlement proceeds was used to repay investors, including Otis Investments, an entity owned by Peck and a business partner, Susan Cronin (his ex-wife); and (5) none of the $3,689,000.00 in settlement proceeds was used to pay any trade creditors, and no allocation of any of the settlement proceeds was intended for or paid to Sitrick. (FAC ¶12.)

Plaintiff alleges Sitrick did not know of, suspect, or could have discovered Peck’s misrepresentations as alleged in ¶9 above prior to the February 21, 2023, debtor examination of Peck. (FAC ¶13.)

Peck filed the instant demurrer on November 11, 2023. Plaintiff filed its opposition on February 13, 2024. Peck filed his reply on February 20, 2024.

Peck demurs to Plaintiff’s 1st, 2nd, and 3rd causes of action on the basis they fail to state facts sufficient to constitute causes of action against him. (Notice of Demurrer pg. 2; C.C.P. §430.10(e).) Peck also demurs to the 3rd cause of action on the basis there exists a misjoinder of parties. (Notice of Demurrer pg. 2; C.C.P. §430.10(d).)

Before filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person, by telephone, or by video conference with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer. (C.C.P. §430.41(a), emphasis added.) A declaration must be filed with a demurrer regarding the results of the meet and confer process. (C.C.P. §430.41(a)(3).)

“[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.)

“The elements of fraud that will give rise to a tort action for deceit are: ‘(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.’” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974, internal quotation marks omitted.)

“In California, fraud must be pled specifically; general and conclusory allegations do not suffice. [Citations.] Thus, the policy of liberal construction of the pleadings . . . will not ordinarily be invoked to sustain a pleading defective in any material respect. [Citation.] [¶] This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645, internal quotations omitted.)

“[A] cause of action for misrepresentation requires an affirmative statement, not an implied assertion.” (RSB Vineyards, LLC v. Orsi (2017) 15 Cal.App.5th 1089, 1102.)

Plaintiff alleges each of Peck’s representations as alleged in FAC ¶9 was materially false. (FAC ¶15.) Plaintiff alleges Peck knew, as he admitted at his February 21, 2023, debtor examination, that the representations were false. (FAC ¶15.) Plaintiff alleges the representations were made with the intent to induce Sitrick to provide the public relations/crisis management services to Woodstock 50. (FAC ¶15.) Plaintiff alleges Sitrick was unaware of the falsity of Peck’s representations and justifiably relied thereon. (FAC ¶15.) Plaintiff alleges Sitrick would not have provided the valuable and extensive public relations/crisis management services to Woodstock 50 had it known that Peck’s representations were false. (FAC ¶15.) Plaintiff alleges Sitrick did not learn of the falsity of Peck’s representations until Peck’s February 21, 2023, debtor examination, and Sitrick did not have any reason to suspect or discover that those representations were false prior to February 21, 2023. (FAC ¶15.)

Plaintiff alleges Peck’s misrepresentations to Sitrick were made by Peck for his own personal financial benefit (including as referenced in FAC ¶12) and were made by Peck to induce Sitrick to provide valuable public relations/crisis management services that Sitrick would otherwise not have provided. (FAC ¶16.) Plaintiff alleges as a result of Peck’s misrepresentations, Sitrick has been damaged in a sum within the jurisdiction of this court and according to proof. (FAC ¶17.)

Plaintiff fails to the alleged representations with the requisite specificity. (Lazar, 12 Cal.4th at pg. 645.) Plaintiff sufficiently alleges Peck made the misrepresentations to Sitrick’s principals, M. Sitrick and Salle Hofmeister and that some of the misrepresentations were “repeatedly told” to them. (FAC ¶¶9, 10.) Plaintiff lists the alleged misrepresentations. (FAC ¶9.)

However, Plaintiff fails to allege when and where Peck made the misrepresentations, and that such misrepresentations were affirmative statements and not implied assertions. Plaintiff merely alleges prior to and at the time Peck signed the engagement agreement on behalf of Woodstock 50, he made the representations. Further, Plaintiff fails to allege by what means the affirmative statements were tendered.

Accordingly, Defendant’s demurrer to Plaintiff’s 1st cause of action is sustained with 20 days leave to amend.

“Negligent misrepresentation requires an assertion of fact, falsity of that assertion, and the tortfeasor’s lack of reasonable grounds for believing the assertion to be true. It also requires the tortfeasor’s intent to induce reliance, justifiable reliance by the person to whom the false assertion of fact was made, and damages to that person. An implied assertion of fact is ‘not enough’ to support liability.” (SI 59 LLC v. Variel Warner Ventures, LLC (2018) 29 Cal.App.5th 146, 154, internal citation omitted.)

Plaintiff alleges each of Peck’s representations as alleged in FAC ¶9 was materially false. (FAC ¶20.) Plaintiff alleges Peck had no reasonable grounds for believing that the representations were true. (FAC ¶20.) Plaintiff alleges the representations were made with the intent to induce Sitrick to provide the public relations/crisis management services in order to benefit Peck financially. (FAC ¶20.) Plaintiff alleges Sitrick was unaware of the falsity of Peck’s representations and justifiably relied thereon. (FAC ¶20.) Plaintiff alleges had Sitrick known that Peck’s representations were false, Sitrick would not have rendered the valuable and extensive public relations/crisis management services to the LLC. (FAC ¶20.) Plaintiff alleges Sitrick did not learn of the falsity of Peck’s representations until Peck’s February 21, 2023, debtor examination, and Sitrick did not have any reason to suspect or discover that those representations were false prior to February 21, 2023. (FAC ¶20.)

Plaintiff alleges as a result Peck’s negligent misrepresentations, Sitrick has been damaged in the sum within the jurisdiction this court and according to proof. (FAC ¶21.)

Plaintiff fails to allege its justifiable reliance on the alleged misrepresentations beyond mere conclusory statements. Plaintiff also fails to allege Peck’s misrepresentations proximately caused Plaintiff’s damages. Further, an implied assertion of facts is not enough to support liability. Plaintiff fails to allege an assertion of fact.

Accordingly, Peck’s demurrer to Plaintiff’s 2nd cause of action is sustained with 20 days leave to amend.

“A fiduciary relationship is ‘“any relation existing between parties to a transaction wherein one of the parties is . . . duty bound to act with the utmost good faith for the benefit of the other party. Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts relating to the interest of the other party without the latter’s knowledge or consent.”’” (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 29.)

“It is settled that a director or officer of a corporation may not enter into a competing enterprise which cripples or injures the business of the corporation of which he is an officer or director. An officer or director may not seize for himself, to the detriment of his company, business opportunities in the company’s line of activities which his company has an interest and prior claim to obtain. In the event that he does seize such opportunities in violation of his fiduciary duty, the corporation may claim for itself all benefits so obtained.” (Xum Speegle, Inc. v. Fields (1963) 216 Cal.App.2d 546, 554, internal citations omitted.)

Plaintiff alleges at all times material hereto, Peck and Otis were and are a single business enterprise and lack identities separate from each other. (FAC ¶23.) Plaintiff alleges therefore, Otis is liable for Peck’s breach of fiduciary duty as hereinafter alleged. (FAC ¶23.) Plaintiff alleges at the time Woodstock 50 entered into the engagement with Sitrick on May 2, 2019, Woodstock 50 was insolvent and unable to pay creditors, as admitted by Peck in his February 21, 2023, debtor examination. (FAC ¶24.)

Plaintiff alleges at all relevant times, Peck, as a de facto managing member of Woodstock 50, owed a fiduciary duty to the Woodstock 50’s creditors consistent with the trust fund doctrine, i.e., a duty to avoid actions that diverted, dissipated or unduly put assets at risk that might be otherwise used to pay creditors, including, but not limited to, self-dealing or the preferential treatment of creditors. (FAC ¶25.)

Plaintiff alleges Peck breached this fiduciary duty by using all of the $3,689,000.00 in settlement proceeds to pay favored creditors including Otis, which he owns and controls. (FAC ¶26.)

Plaintiff alleges as a result of Peck’s breach of fiduciary duty, Sitrick has been damaged in a sum within jurisdiction of this court and according to proof. (FAC ¶27.) Plaintiff alleges further, Otis much disgorge to Sitrick all monies received from the Dentsu settlement. (FAC ¶27.)

The Court is not convinced by Peck’s argument that Woodstock 50 is an indispensable party to Plaintiff’s claim since Plaintiff alleges the funds flowed through Woodstock 50 pursuant to Woodstock 50’s claims against Dentsu. (FAC ¶12.)

Nonetheless, Plaintiff fails to plead a cause of action against Peck because the relief it seeks is disgorgement of money paid to Otis by Woodstock 50. The only allegation regarding Peck is that he was a principal of both entities, not that he personally obtained any money. While Plaintiff alleges Peck and Otis are alter egos, (see FAC ¶¶9, 23 [“Otis Investments is liable for Peck’s breach”]), Plaintiff fails to allege any relief against Peck.

Accordingly, Peck’s demurrer to Plaintiff’s 3rd cause of action is sustained with 20 days leave to amend.,

Hon. Daniel M. Crowley

Judge of the Superior Court