Judge: Daniel S. Murphy, Case: 23STCV06271, Date: 2023-11-01 Tentative Ruling

Case Number: 23STCV06271    Hearing Date: November 1, 2023    Dept: 32

BACKGROUND

            On March 21, 2023, Plaintiff Anton Toutov filed this action against Defendants Curative Labs Inc., Curative Inc., Jonathan Martin, and Paul Scott, asserting causes of action for (1) violation of Penal Code section 496 and (2) conversion.

            Plaintiff is a researcher, entrepreneur, and chemist who in 2015 was recruited by Defendants Martin and Scott to join Curative Labs Inc. (CLI) as one of the three founders. (Compl. ¶ 1.) Plaintiff allegedly had an agreement with CLI wherein instead of a salary, Plaintiff would receive 20% ownership and cash compensation once the company began earning more revenue. (Id., ¶ 2.) Plaintiff worked to build every aspect of CLI’s business and was critical to the company’s growth and success. (Id., ¶ 3.) However, Martin and Scott were allegedly secretly depriving Plaintiff of his payouts and resisted Plaintiff’s requests for information and transparency. (Id., ¶¶ 5-6.) Plaintiff was allegedly ousted after he continued demanding to be included in the company’s decision-making. (Id., ¶ 7.) Thereafter, Martin and Scott sold CLI to Curative Inc. for millions of dollars, which Plaintiff alleges he is entitled to. (Id., ¶ 8.) CLI is currently a successful leader in the COVID testing business, allegedly on the back of Plaintiff’s efforts. (Id., ¶ 11.) Martin and Scott continue to deny Plaintiff’s interest in CLI and have refused to pay Plaintiff his alleged share of profits. (Id., ¶ 12.)   

            On September 29, 2023, Martin and Scott filed the instant demurrer to the complaint. Plaintiff filed his opposition on October 19, 2023. Defendants filed their reply on October 25, 2023.

LEGAL STANDARD

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.) A complaint will survive demurrer if it sufficiently apprises the defendant of the issues, and specificity is not required where discovery will clarify the ambiguities. (See Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 608.) All reasonable inferences are drawn in favor of the complaint. (Kruss v. Booth (2010) 185 Cal.App.4th 699, 713.)

MEET AND CONFER

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 Defendants have complied with the meet and confer requirement. (See Ruocco Decl.)

DISCUSSION

            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).) “In such a case, the defendant must show that the parties, cause of action, and issues are identical, and the same evidence would support the judgment in each case.” (California Union Ins. Co. v. Trinity River Land Co. (1980) 105 Cal.App.3d 104, 108.) “The identity of two causes of action is determined by a comparison of the facts alleged which show the nature of the invasion of plaintiff's primary right.” (Bush v. Superior Court (1992) 10 Cal.App.4th 1374, 1384.)

            On December 15, 2020, Plaintiff filed an action in federal court titled Anton Toutov v. Curative Labs Inc., et al. (Case No. 2:20-cv-11284). (Def.’s RJN, Ex. 1.) The federal action asserted (1) violation of California Corporations Code section 1600 et seq., (2) breach of fiduciary duty, (3) accounting, and (4) breach of contract. (Ibid.) Martin and Scott are listed as defendants under the fiduciary duty and accounting claims. The federal action alleged the same facts as the instant action, i.e., Defendants refused to acknowledge Plaintiff’s interest in CLI and withheld his proper share of revenues. (Ibid.)

            Defendants argue that Plaintiff cannot maintain this action in light of the federal action. Defendants contend that both lawsuits arise from the same primary right because Plaintiff asserts the same injury based on the same alleged wrongdoing. Defendants point out that asserting different legal theories and seeking a different form of damages in this action does not change the identity of the primary right involved. (See Plotnik v. Meihaus (2012) 208 Cal.App.4th 1590, 1612 [“Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief”].)

            Plaintiff argues that the causes of action are not identical because the breach of fiduciary duty asserted in the federal action concerned the primary right “to be free of unfair, unjust, or inequitable conduct in the running of the corporation, including with respect to recognition of Dr. Toutov’s equity.” (Opp. 10:26-28.) By contrast, according to Plaintiff, the two causes of action asserted here concern the primary right “to be free from criminal theft, including fraud by false or fraudulent representation or pretense.” (Opp. 11:14-15.)

            However, “the primary right is simply the plaintiff's right to be free from the particular injury suffered.” (Plotnik, supra, 208 Cal.App.4th at p. 1612.) Here, the particular injury suffered is the deprivation of Plaintiff’s interest in CLI and the corresponding share of revenue. Whether this constitutes a breach of fiduciary duty (as asserted in the federal complaint), or theft (as asserted in this complaint), is merely a distinction in “the legal theory on which liability for that injury is premised.” (Ibid; see also Slater v. Blackwood (1975) 15 Cal.3d 791, 794-95 [holding that plaintiff’s first action based on statute invoked the same primary right as second action based on common law].) Although Penal Code section 496 provides for treble damages which are unavailable in common law breach of fiduciary duty claims, “the relief is no part of the cause of action.” (Branson v. Sun-Diamond Growers (1994) 24 Cal.App.4th 327, 341.) A plaintiff seeking redress for one injury has one cause of action “no matter how many forms or kinds of relief he may claim that he is entitled to.” (Ibid.) “Multiple remedies may be available to vindicate a single primary right.” (Anderson v. Ford Motor Co. (2022) 74 Cal.App.5th 946, 969.)

In denying Plaintiff’s motion to amend the federal complaint to add the Penal Code section 496 claim, the district court acknowledged that the new claim was merely “a new legal theory based on the existing allegations.” (Def.’s RJN, Ex. 3 at 4:6-10.) Asserting the claim in a different forum, as Plaintiff does now, does not change this. The Penal Code and conversion claims in this complaint are merely different legal theories based on the same harm asserted in the federal complaint. Plaintiff does not dispute Defendants’ analysis of the identical operative facts alleged in the two complaints. (See Dem. 3:15-5:12.) Therefore, “[t]here is another action pending between the same parties on the same cause of action.” (Code Civ. Proc., § 430.10(c).)

CONCLUSION

            Defendant’s demurrer is SUSTAINED without leave to amend.