Judge: David Sotelo, Case: 20STCV13703, Date: 2022-10-13 Tentative Ruling
Case Number: 20STCV13703 Hearing Date: October 13, 2022 Dept: 40
MOVING PARTY: Defendants Kevin Cohee
and
OneUnited Bank.
Defendants Cohee and OneUnited Bank bring an opposed Motion for
Summary Judgment or, in the Alternative, Summary Adjudication arguing that the Defendants
can meet their burden of showing a lack of triable issues of material fact as to
the operative First Amended Complaint’s (“FAC”) six causes of action and that Plaintiff
cannot make a rebuttal showing.
The Sixth Cause of Action is Dismissed upon request of
Plaintiff Danny Bakewell.
After review and as explained below, the Court DENIES the Defendants’
Motion as all of the to Causes of Action because: Defendants have failed to show
that triable issues of material fact do not remain as to these claims.
The Court DECLINES to take Judicial Notice of the HistoryMakers
biography and separate Los Angeles Times article on Plaintiff Bakewell because,
despite their best arguments regarding sophistication, the Defendants have failed
to provide adequate grounds for this Court to judicially note these documents. (See
Mot., RJN, Exs. 1-2; Opp’n, Opposition to Defendant’s [sic] Request for Judicial
Notice, 1-2; see also Evid. Code, §§ 452, subds. (g), (h), 453.)
Plaintiff’s Objections to Defendants’ Exhibits
Objection Nos. 1-7: No Ruling, as Not Relevant to Disposition
of Instant Motion.
Defendants Cohee and OneUnited Bank’s Objections to Plaintiff’s
Exhibits
Objection Nos. 14: OVERRULED.
Remaining Objections: No Ruling, as not Relevant to Disposition
of Instant Motion.
Bakewell sues both Defendants OneUnited Bank, Kevin Cohee
(Chairman and CEO of OneUnited Bank) with claims of:
(1) Breach of Contract,
(2) Fraud and Deceit,
(3) Declaratory Relief,
(4) Unfair Competition, and
(5) Breach of Fiduciary Duty, and
(6) Fraudulent Sale of Securities.
First Cause of Action, Breach of Contract: DENIED.
The FAC’s First Cause of Action for Breach of Contract alleges
that the Defendants breached an oral promise made by OneUnited Bank’s CEO, Kevin
Cohee, after Cohee orally promised Bakewell that Bakewell could, upon request, redeem
his $250,000 of Preferred Stock shares together with accumulated dividends. When
Bakewell to made such a request [in July 2019 Defendants denied it, contending (allegedly
falsely) that Bakewell had no right to redeem his preferred shares. (FAC, ¶¶ 6-7,
8-10.)
“A contract is a voluntary and lawful agreement, by competent
parties, for a good consideration, to do or not to do a specified thing.” (Robinson
v. Magee (1858) 9 Cal. 81, 83.) “To prevail on a cause of action for breach
of contract, the plaintiff must prove (1) the contract, (2) the plaintiff’s performance
of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4)
the resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th
1182, 1186.)
On summary adjudication, Defendants Cohee and OneUnited Bank
first argue that no triable issue of material fact exist as to Bakewell’s Breach
of Contract claim because the parties’ 2005 written agreements for the “sale” of
$250,000 worth of OneUnited Preferred Stock to Bakewell—i.e., the April 2005 (not
2000 as stated in the Complaint) Cover Letter and adjoining Statement of Preferences
and Powers and the September 2005 Subscription Agreement—are fully integrated, for
which reason the parol evidence rules prohibits the addition of Cohee’s alleged
oral promise to Bakewell as a term to that same contract. (Mot., 7:1-8:20.)
Defendants fail to carry their burden on summary adjudication.
The 2005 agreement memorializing OneUnited Bank’s “sale” of $250,000 of Preferred
Stock to Bakewell is the September 2005 Subscription Agreement. (Mot., Exhibits,
Ex. I.) This document two page document provides terms for the subscription of $250,000
of Preferred Stock by Bakewell. (See Mot., Exhibits, Ex. I, pp. 1-2) and does
not contain an integration clause (see Mot., Exhibits, Ex. I generally), something
acknowledged by the Defendants. (see Mot., 7:26-27)
This weighs against the finding of a fully integrated contract
between the parties. (Wallis v. Farmers Group, Inc. (1990) 220 Cal.App.3d
718, 730, disapproved on other grounds in Dore v. Arnold Worldwide, Inc.
(2006) 39 Cal.App.4th 384, 389, 394 [absence of an integration clause may indicate
the agreement was not fully integrated].)
The central question in determining integration is “whether the
parties intended their writing to serve as the exclusive embodiment of their agreement.”
(Wagner v. Glendale Adventist Med. Ctr. (1989) 216 Cal.App.3d 1379, 1386.)
On Motion, the Defendants argue that the complete embodiment of the parties’ agreement
consist of several pieces, i.e., not just the September 2005 Subscription Agreement,
but also the April 2005 Cover Letter and Statement of Preferences and Powers. (See
Mot., 7:26-8:3.) However, the September 2005 Subscription Agreement in no way explicitly
incorporates to the April 2005 Cover Letter and Statement of Preferences and Powers.
(See Mot., Exhibits, Ex. I.) Neither do all three documents—the Cover Letter, Statement,
and Subscription Agreement—show to this Court on summary adjudication the existence
of writings intended to “serve as the exclusive embodiment of the[] [parties’] agreement.”
(See Mot., Exhibits, Exs. F [Cover Letter], G [Statement of Preferences and Powers],
I [Subscription Agreement]; see also Wagner, supra, 216 Cal.App.3d
at p. 1386.) Further, the Court cannot reconcile the Defendants’ request that the
April 2005 Cover Letter and Statement of Preferences and Powers be merged into the
September 2005 Subscription Agreement but not the alleged oral promise from Cohee
to Bakewell. (See Mot., 7:1-8:20.) All three involve dealings outside of the scope
of the September 2005 Subscription Agreement. Yet, the Defendants ask that the Court
include the April 2005 writings in the September 2005 Subscription Agreement and
lock the analysis there without considering any oral promises between the parties.
Such a position is not tenable on summary adjudication as presented to this Court.
For these reasons, the Defendants’ first point on summary adjudication against the
Breach of Contract claim fails.
The Defendants second position on summary adjudication against
the Breach of Contract claim is that Bakewell has failed to suffer damages as a
result of OneUnited Bank’s failure to honor the terms of the alleged oral promise
from Cohee to Bakewell—i.e., promising Bakewell he could cash his $250,000 of Preferred
Stock and dividends upon request—because Bakewell’s Preferred Stock was converted
into Common Stock per the terms of the April 2005 Statement of Powers and Preferences
and because Bakewell has not attempted to assess the monetary value of such Common
Stock. (Mot., 8:21-9:2.) In other words, the Defendants appear to argue that because
Bakewell’s Common Stock has some unknown value, Bakewell cannot be damaged by the
inability to obtain a buyback of the $250,000 Preferred Stock and cash out on dividends
at request.
The Court finds this position fails on summary adjudication out
of hand. Indeed, the argument is rather disingenuous. It argues that if the Stock
owned by Bakewell has any value at all, any broken promises to Bakewell are irrelevant
because Bakewell is still earning some kind of return from his investment, even
if the return is not the stock buyback and cash out of dividends promised to Bakewell.
Further, even if the Defendants carried their burden on summary adjudication as
no to damages to Bakewell with respect to Breach of Contract as a result of OneUnited
Bank’s refusal to honor the oral Cohee-Bakewell promise, this Court finds merit
to Bakewell’s position that Exhibit 14 to the Ivie Declaration—a Schedule of Damages
drafted by Plaintiff’s proposed expert, Christian Tregillis, pursuant to Civil Code
section 3287—would create a triable issue of material fact as to damages on Breach
of Contract. (Opp’n, 9:12-17; Opp’n, Ivie Decl., Ex. 14 [Damages Schedule]; cf.
Reply 4:1-15.)
Second Cause of Action, Fraud and Deceit: DENIED.
The Fraud and Deceit claim alleges that Defendants made a promise
to Bakewell—i.e., Cohee’s oral promise that Bakewell could sell back his $250,000
of Preferred Stock upon request and cash out any corresponding dividends upon
request—with no intention of performing on this promise, as to induce Bakewell to
give the Defendants $250,000, all without Bakewell’s knowledge that the Defendants
never intended to perform, under circumstances where Bakewell would have never invested
in OneUnited Bank’s Preferred Stock if he had known the Defendants would not make
good on Cohee’s promise, and where OneUnited Bank failed to turn over documents
and any stock certificates for the $250,000 transaction to Bakewell and his 2019
request to cash out his Preferred Stock and dividends, thus resulting in alleged
general and special damages of $1 million and punitive damages of $5 million, as
ratified by OneUnited Bank’s Board of Directors, who were informed of the alleged
fraud and deceit, but failed to stop or otherwise remedy the Defendants’ actions—i.e.,
the denial of Bakewell’s request to sell back his stock and dividends in 2019. (FAC,
¶¶ 6-7, 11-17.)
“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; see also Odorizzi v. Bloomfield
School Dist. (1966) 246 Cal.App.2d 123, 128; Wilhelm v. Pray, Price, Williams
& Russell (1986) 186 Cal.App.3d 1324, 1332.)
Defendants first argue that Bakewell’s Fraud and Deceit claim
fails on summary adjudication because the statute of limitations—three years—ran
on this cause of action as early as September 2008, i.e., three years after Bakewell
signed the September 2005 Subscription Agreement for the $250,000 of Preferred Stock
in OneUnited Bank. (Mot., 9:11-10:10.)
This line of reasoning also fails on summary adjudication. Under
California’s discovery rule, “the statute of limitations begins to run when the
plaintiff suspects or should suspect that her injury was caused by wrongdoing.”
(Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110, superseded by
rule as stated in Hernandez v. Whitman Corp. (2006) 2006 WL 331205 *1,
*7 [clarifying that California law prescribes that the limitations period
begins on inquiry notice, not knowledge].) Once a plaintiff “has a suspicion of
wrongdoing, and therefore an incentive to sue,” the plaintiff must decide whether
to file suit or essentially waive his or her rights. (Id. at p. 1111.) If
suspicion exists, a plaintiff “must go find the facts” and cannot wait for the facts
to find the plaintiff. (Ibid.) Suspicion encompasses not just the suspicion
that a defendant’s product, or actions caused harm; there must also be the suspicion
that a defendant’s wrongdoing caused the injuries giving rise to the suit. (See
Clark v. Baxter Healthcare Corp. (2000) 83 Cal.App.4th 1048, 1059.)
The Defendants’ argument that Bakewell should have realized as
soon as he read the September 2005 Subscription Agreement that this agreement and
the April 2005 Cover Letter and Statement of Preferences and Powers comprised a
fully integrated contract to the exclusion of the alleged oral promised from Cohee
to Bakewell. (See Mot., 9:11-10:10.) However, triable issues of material fact exist
as to whether the parties’ agreement was fully integrated. Such a finding leaves
the door open for the alleged Cohee-Bakewell promise to enter the contract between
OneUnited Bank and Bakewell. Under those circumstances, the Court cannot find that
Bakewell’s simple receipt and reading of the September 2005 Subscription Agreement
alongside or separate to the April 2005 documents would create grounds for Bakewell
to suspect that Cohee had lied to Bakewell.
Defendants’ second point similarly fails. The argument is essentially
that because Bakewell is a “sophisticated investor,” Bakewell cannot have relied
solely on Cohee’s oral promise relating to the redemption of Bakewell’s $250,000
in Preferred Stock, particularly where the September 2005 Subscription Agreement
indicates that Bakewell had “relied solely upon the advice of his or her counsel,
accountant and other advisors, with regard to the legal, investment, tax and other
considerations regarding th[e] [$250,000] investment.” (Mot., 10:11-11:27; Mot.,
Exhibits, Ex. I, p. 2 [quoted language].)
This position is untenable because it is rooted, again, in the
parol evidence rule and the idea that the April 2005 Cover Letter and Statement
of Preferences and Powers and the September 2005 Subscription Agreement comprised
a fully integrated contract between the parties, for which reason even a “reasonably
prudent person with no experience in securities investing would conclude these written
terms directly contradict Cohee’s alleged fraudulent promises.” (Mot., 11:22-24.)
Whether or not Bakewell was a sophisticated investor is immaterial
insofar as Bakewell understood the contract between the parties to include the Cohee-Bakewell
Preferred Stock buyback and dividend cash out promise AND the April 2005 Cover Letter
and Statement of Preferences and Powers and the September 2005 Subscription Agreement.
If this Court has found that these three documents fail to show a fully integrated
contract for summary adjudication purposes, then triable issues of material fact
remain as to whether Bakewell had grounds to believe that the Cohee-Bakewell promise
was baked into his contract with OneUnited Bank and thus, triable issues of material
fact as to whether this misconception was a result of reliance on Cohee’s alleged
misrepresentation as to whether the buyback and dividend cash out provisions would
be included in the Bakewell-OneUnited Bank contract, regardless of the language
of the September 2005 Subscription Agreement. Last, the proposition that the Subscription
Agreement’s ‘reliance’ language absolves OneUnited Bank of any misrepresentation
it made to Bakewell because Bakewell was advised to consult independent counsel
appears to be against public policy and is undercut by the non-fully integrated
appearance of the parties’ contract on summary adjudication. (See Mot., Exhibits.,
Exs. F-I.)
Third Cause of Action, Declaratory Relief: DENIED.
The Cause of Action for Declaratory Relief alleges that a controversy
exists between Plaintiff Defendants: “Plaintiff contends that he has the right to
rescind and/or void this agreement on the grounds, including but not limited to,
material breach of contract, fraud in the inducement, and failure to comply with
the rules and regulations governing securities sales and transfers” and that “Defendants
contend that they have the right to keep the Plaintiff[’]s $250,000.00 and that
they are not acting in contravention to their agreement with the Plaintiff nor the
rules and regulations governing security sales and transactions.” (FAC, ¶¶ 6-7,
18-21.)
The fundamental basis of declaratory relief is a present and
actual controversy between the parties over a proper subject. (City of Cotati
v. Cashman (2002) 29 Cal.4th 69, 80.) “In a declaratory relief action, the defendant’s
burden is to establish the plaintiff is not entitled to a declaration in its favor.
It may do this by establishing (1) the sought-after declaration is legally incorrect;
(2) undisputed facts do not support the premise for the sought-after declaration;
or (3) the issue is otherwise not one that is appropriate for declaratory relief.”
(Gafcon, Inc. v. Ponsor & Assocs. (2002) 98 Cal.App.4th 1388, 1401-02.)
Fourth Cause of Action, Unfair Competition – Bus. & Prof.
Code § 17200: DENIED.
The FAC’s Fourth Cause of Action for Unfair Competition in Violation
of the Business and Professions Code section 17200, et seq. alleges that the Defendants
broke California law related to unfair competition when the Defendants, inter alia,
“induc[ed] the sale of [$250,000 of] preferred stock [to Plaintiff Bakewell] by
making materially false representations” to Bakewell regarding his ability to redeem
those stocks and corresponding dividends. (FAC, ¶¶ 6-7, 22-23; see also FAC generally
[not alleging other substantive grounds for Unfair Competition than Cohee’s alleged
oral promise to Bakewell].)
Unfair competition is any unlawful, unfair, or fraudulent business
practice or act and unfair, deceptive, untrue, or misleading advertising. (Bus.
& Prof. Code, § 17200.) “An unlawful business practice or act within the meaning
of the [Unfair Competition Law (“UCL”)] is an act or practice, committed pursuant
to business activity, that is at the same time forbidden by law.” (Bernardo v.
Planned Parenthood Federation of America (2004) 115 Cal.App.4th 322, 351 [internal
quotations omitted].) A plaintiff needs to identify statutory, regulatory, or decisional
law that the defendant has violated. (Id. at 352.) Unfair competition “borrows”
violations of other laws and authorizes a separate action pursuant to unfair competition.
(See Farmers Ins. Exch. v. Superior Court (1992) 2 Cal.4th 377, 383.) Unfair
conduct in unfair competition actions must be violative of public policy and “tethered
to specific constitutional, statutory, or regulatory provisions.” (Scripps Clinic
v. Superior Court (2003) 108 Cal.App.4th 917, 940.)
Without touching on the merits of the case, the inducement of
an investment into a bank’s preferred stock through material misrepresentations
constitutes a clearly unfair and fraudulent business practice because such statements
are undoubtedly likely to deceive members of the public—i.e., the purpose of the
UCL law—thus easily satisfying the lower standard of an unfair competition claim.
(See Bochsma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 252-53
[“A claim based upon the fraudulent business practice prong of the UCL is distinct
from common law fraud … [insofar as common law fraud involves statements] actually
false, known to be false by the perpetrator and reasonably relied upon by a victim
who incurs damages … [whereas a] fraudulent business practice may be accurate on
some level, but will nonetheless tend to mislead or deceive … [such that a] perfectly
true statement couched in such a manner that it is likely to mislead or deceive
the consumer, such as by failure to disclose other relevant information, is actionable
under the UCL” (citations and quotations omitted)].)
Fifth Cause of Action, Breach of Fiduciary Duty: DENIED.
The FAC’s Fifth Cause of Action for Breach of Fiduciary Duty
alleges without significant detail that OneUnited Bank’s “[d]irectors and officers
such as the Defendants … owed a fiduciary duty to Plaintiff … a stockholder in OneUnited
[Bank]” and intentionally breached this duty by engaging in acts previously alleged
in the FAC, i.e., Cohee’s alleged oral promise to Bakewell that Bakewell could redeem
his $250,000 of Preferred Stock in OneUnited Bank, along with corresponding dividends,
upon request, thus entitling Plaintiff Bakewell to punitive damages. (FAC, ¶¶ 6-7,
28-30.)
The elements of a claim for breach of fiduciary duty are (1)
the existence of a fiduciary duty, (2) breach, and (3) damages proximately caused
by the breach. (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086.) As
to the first element, the basic fiduciary obligations are twofold: undivided loyalty
and confidentiality. (Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1102, superseded
by statute on different issue, as stated in Pavicich v. Santucci (2000) 85
Cal.App.4th 382, 396.) A fiduciary or confidential obligation or relationship can
arise when confidence is reposed by persons in the integrity of others, and if the
latter voluntarily accepts or assumes to accept the confidence, he or she may not
act to take advantage of the other’s interest without that person’s knowledge or
consent. (Oates v. Lincoln (2001) 93 Cal.App.4th 25, 35.) Because of the
vagueness of the common law definition of the confidential relation that gives rise
to a fiduciary duty, and the range of the relationships that can potentially be
characterized as fiduciary, the “essential elements” have been distilled as follows:
(1) the vulnerability of one party to the other which (2) results in the empowerment
of the stronger party by the weaker which (3) empowerment has been solicited or
accepted by the stronger party and (4) prevents the weaker party from effectively
protecting itself. (Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th
1141, 1161.) Vulnerability, in short, is the necessary predicate of a confidential
relation, and the law treats it as essential. (Ibid.)
Defendant’s argumentappears to only apply to Defendant Cohee
and argues that (1) Cohee as an individual (as sued in this action) was never a
fiduciary to Bakewell because he at all times acted as Chairman and CEO of OneUnited
Bank and (2) even if Cohee was individually as fiduciary to Bakewell, because the
Breach of Contract and Fraud and Deceit claims fail on summary adjudication, so
must this claim. (Mot., 13:5-15; see Mot., 12:16-13:15 generally; see also Opp’n,
13:28-14:11 [Bakewell’s conclusory and unconvincing argument on Opposition].)
The Court finds neither position prevails on summary adjudication.
The latter position fails for the clear reason that this Court made findings through
which the Breach of Contract and Fraud and Deceit claims survived summary adjudication.
(See Breach of Contract, Fraud and Deceit discussions supra.) The
former position fails because Bakewell’s vulnerability to Cohee’s alleged fraud
and deception related to whether Bakewell could have his Preferred Stock bought
back and dividends cashed out by OneUnited Bank, sufficiently if weakly connoting
a fiduciary relationship for the purposes of summary adjudication. (Persson,
supra, 125 Cal.App.4th at p. 1161.)
Sixth Cause of Action, Fraudulent Sale of Securities (Calif.
Corp. Code § 25401): DISMISSED WITHOUT PREJUDICE.
Plaintiff withdrew the Sixth Cause of Action in his
Opposition. (Opp’n, 14:12-14.)
therefore, the
Court thus DISMISSES WITHOUT PREJUDICE the Fraudulent Sale of
Securities claim from the FAC. (Code Civ. Proc., § 581, subd. (c) [“A plaintiff
may dismiss his or her complaint, or any cause of action asserted in it, in its
entirety, or as to any defendant or defendants, with or without prejudice prior
to the actual commencement of trial”].)
Defendants Kevin Cohee and OneUnited Bank’s Motion for Summary
Judgment or, in the Alternative, Summary Adjudication is DENIED as to Plaintiff
Danny Bakewell, Sr.’s First Amended Complaint’s First through Fifth Causes of Action
because the Defendants have failed to show on summary adjudication that triable
issues of material fact do not remain as to these claims.