Judge Daniel S. Murphy, Case Number: 22STCP03994, Date: 2023-05-26 Tentative Ruling

Plaintiffs Ohannes Georgian and Aziza Georgian initiated this action on November 7, 2022. The operative First Amended Complaint was filed on January 31, 2023. The action stems from a business investment deal related to the operation of a restaurant. The FAC asserts claims for dissolution, accounting, unlawful business practice, negligence, fiduciary duty, fraud, and conversion against various corporate and individual defendants.

On November 28, 2023, default was entered against Defendants US GC Investment LP, Fu & Sons Investment Capital LLC, and New Prosperity LLC. However, the Court has concurrently granted Defendants’ motion to vacate the default.

On December 12, 2023, Plaintiffs filed the instant application for prejudgment writ of attachment. Defendant Fu & Sons Investment Capital LLC filed its opposition on the same day.

“Except as otherwise provided by statute, an attachment may be issued only in an action on a claim or claims for money, each of which is based upon a contract, express or implied, where the total amount of the claim or claims is a fixed or readily ascertainable amount not less than five hundred dollars ($500) exclusive of costs, interest, and attorney’s fees.” (Code Civ. Proc., § 483.010(a).)

“Upon the filing of the complaint or at any time thereafter, the plaintiff may apply pursuant to this article for a right to attach order and a writ of attachment by filing an application for the order and writ with the court in which the action is brought.” (Code Civ. Proc., § 484.010.) “The application shall be supported by an affidavit showing that the plaintiff on the facts presented would be entitled to a judgment on the claim upon which the attachment is based.” (Id., § 484.030.) The court shall issue the right to attach order if it finds all of the following: (1) the claim upon which the attachment is based is one upon which an attachment may be issued; (2) the plaintiff has established the probable validity of the claim upon which the attachment is based; (3) the attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based; and (4) the amount to be secured by the attachment is greater than zero. (Id., § 484.090(a).)

The Court does not find that “the plaintiff has established the probable validity of the claim upon which the attachment is based.” (See Code Civ. Proc., § 484.090(a)(2).) There is a bona fide dispute as to liability, and the Court has in fact sustained Defendant Fu & Sons Investment Capital LLC’s demurrer. As discussed in that ruling, Plaintiff Ohannes Georgian has improperly asserted claims identical to or arising from the same facts as the claims asserted in Department 30. Plaintiff Aziza Georgian has failed to allege her standing. Therefore, Plaintiffs cannot show that they are entitled to judgment for purposes of obtaining an attachment.

On November 28, 2023, default was entered against Defendants US GC Investment LP, Fu & Sons Investment Capital LLC, and New Prosperity LLC.

On December 28, 2023, US GC and New Prosperity filed the instant motion to set aside default.

“The court may, upon any terms as may be just, relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect.” (Code Civ. Proc., § 473(b).) Because the law favors resolution on the merits, doubts are resolved in favor of the party requesting relief, and only “slight evidence” is needed to justify relief. (Caldwell v. Methodist Hospital (1994) 24 Cal.App.4th 1521, 1524.) “[C]ourts have often granted relief pursuant to the discretionary relief provision of section 473 if no prejudice to the opposing party will ensue.” (Comunidad en Accion v. Los Angeles City Council (2013) 219 Cal.App.4th 1116, 1132-1133.) Section 473(b) also provides for mandatory relief in instances of attorney mistake, “unless the court finds that the default or dismissal was not in fact caused by the attorney’s mistake, inadvertence, surprise, or neglect.”

Defendants have sufficiently established that the delay in filing their answer was caused by their counsel’s inadvertence or mistake. Specifically, due to the abrupt departure of the attorney previously handling the case, current defense counsel overlooked the fact that Defendants had not appeared or filed a responsive pleading. (Zhou Decl. ¶ 13.) Counsel avers that Defendants did not contribute to this oversight. (Ibid.) Therefore, relief is warranted under Section 473(b).

On November 28, 2023, default was entered against Defendants US GC Investment LP, Fu & Sons Investment Capital LLC, and New Prosperity LLC. However, the Court is concurrently granting Defendants’ motion to vacate the default.

On December 11, 2023, Defendant Fu & Sons Investment Capital LLC filed the instant demurrer and motion to strike against the FAC. Plaintiffs filed their opposition on December 22, 2023.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (Code Civ. Proc., § 430.30, subd. (a).) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Ibid.) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, supra, 147 Cal.App.4th at 747.)

Any party, within the time allowed to respond to a pleading, may serve and file a notice of motion to strike the whole or any part of that pleading. (Code Civ. Proc., § 435, subd. (b).) The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike (1) any irrelevant, false, or improper matter inserted in any pleading and (2) all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Id., § 436.) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Id., § 437.)

Before filing a demurrer or a motion to strike, the demurring or moving party is required to meet and confer with the party who filed the pleading demurred to or the pleading that is subject to the motion to strike for the purposes of determining whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer. (Code Civ. Proc., §§ 430.41, 435.5.) The Court notes that Defendant has complied with the meet and confer requirement. (See Shumake Decl.)

Defendant argues that the FAC is invalid because the same claims that Ohannes Georgian asserts here have already been compelled to arbitration in a prior case. Defendant also points out that Plaintiffs’ attorney, Noah Green, was disqualified in that prior case. Lastly, Defendant argues that Aziza Georgian has not alleged enough facts to establish her standing.

The prior case is US GC Investment, LP v. Fu & Sons Investment Capital, LLC, et al. (20STCV09036) in Department 30. The case was initiated on March 4, 2020. On October 30, 2020, Fu & Sons and Frank Fu filed a cross-complaint against US GC and Ohannes Georgian. On March 3, 2021, Ohannes Georgian filed a cross-complaint against Fu & Sons and Frank Fu.

On August 12, 2021, Judge Barbara Scheper in Department 30 ordered Georgian’s cross-complaint to arbitration. On February 16, 2023, Judge Scheper ordered the cross-claims asserted by Fu & Sons and Fu to arbitration. On April 14, 2023, Judge Scheper ordered arbitration of the complaint filed by various Plaintiffs-in-Intervention. Judge Scheper ordered the entire case stayed pending arbitration. A post-arbitration status conference is scheduled for April 11, 2024 in Department 30.

A demurrer lies where “[t]here is another action pending between the same parties on the same cause of action.” (Code Civ. Proc., § 430.10(c).) Furthermore, “if a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded.” (Id., § 426.30.)¹ “Thus, a party cannot by negligence or design withhold issues and litigate them in successive actions; he may not split his demands or defenses; he may not submit

¹ “Complaint” means a complaint or cross-complaint. “Plaintiff” means a person who files a complaint or cross-complaint. (Code Civ. Proc., § 426.10.)

his case in piecemeal fashion.” (Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 959.) A compulsory cross-claim is one that “arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause of action which the plaintiff alleges in his complaint.” (Id. at p. 960.)

Ohannes Georgian’s complaint in this action is identical to the cross-complaint he filed in Department 30, save for the causes of action for dissolution and accounting. Despite the different legal theories asserted, the claims arise from the same facts and transactions. Therefore, the claims should have been asserted as a compulsory cross-claim in Department 30, not as a separate action in this Court.

On July 19, 2022, Judge Scheper granted the Intervenors’ motion to disqualify Noah Green, finding that “Green’s simultaneous representation of Georgian and US GC is grounds for automatic disqualification.” (July 19, 2022 Minute Order, p. 2.) Judge Scheper explained that “once a conflict has arisen between a corporation and one or more of its officers, directors or shareholders, corporate counsel may not simultaneously represent the corporation and the adverse officer, director or shareholder.” (Ibid.)

Plaintiffs argue that “Department 30’s decision to disqualify Green in the USGC case was wrong and should not be extended to this case for multiple reasons.” (Opp. 7:21-22.) However, the parties litigated the disqualification issue before Judge Scheper. The merits of that ruling are not reviewable by this Court. Ultimately, there exists an order disqualifying Green which has not been set aside or reversed. Green does not dispute being disqualified despite disagreeing with the order. This appears to be the law of the case which this Court must follow.

Nevertheless, a demurrer is not the correct procedural mechanism for seeking the disqualification of counsel. Green’s disqualification has no bearing on the sufficiency of the complaint.

Plaintiffs have no response to Defendant’s argument that as to Aziza Georgian, “no facts were alleged showing an ownership, partnership, or any interest of any kind in US GC Investment, L.P., or New Prosperity, LLC, and therefore, she has no standing to assert any claims in the FAC.” (See Dem. 10:1-5.)

Defendant Fu & Sons Investment Capital LLC’s demurrer is SUSTAINED without leave to amend as to all claims asserted by Ohannes Georgian. The demurrer is SUSTAINED with leave to amend as to Aziza Georgian.