Judge: David Sotelo, Case: 22STCV03943, Date: 2022-10-13 Tentative Ruling
Case Number: 22STCV03943 Hearing Date: October 13, 2022 Dept: 40
MOVING PARTY: Defendants Emmett Furla
Oasis Films, LLC,
Emmett Furla Films Holdings, LLC and
George Furla.
Plaintiff Shiny River, Ltd.—as assignee of The Fuzz Facility
Limited—sues Defendants Defendants Emmett Furla Oasis Films, LLC (“EFO”), Emmett
Furla Films Holdings, LLC (“EFFH”), Randall Emmett, George Furla, and Georgia Film
Funds 38, 42, 50, 51, 54, and 58, LLC (all separate LLCs) on the grounds that The
Fuzz Facility Limited lent nearly three million dollars to the Defendants—all sourced
from Plaintiff Shiny River—for the purpose of producing theatrical films only for
the Defendants to fail repay the vast majority of the loans and interest, resulting
in $2,250,793 worth of damages to Shiny River, as assignee of The Fuzz Facility
Limited.
Defendants EFO, EFFH,
and George Furla now bring an opposed Demurrer to the operative First Amended Complaint’s
(“FAC”) Fourth through Sixth Causes of Action for Promissory Fraud, Fraud
(Intentional Misrepresentation), and Negligent Misrepresentation on the grounds
that these claims are not sufficiently pleaded or are uncertainly pleaded
within the meaning of Code of Civil Procedure section 430.10, subdivisions (e)
and (f) respectively—though the Court notes that the Demurrer fails to
elaborate on uncertainty grounds.
After review and as elaborated on infra, the Court OVERRULES
these Defendants’ Demurrer in its entirety because the FAC’s Fourth to Sixth
Causes of Action are pleaded sufficiently and in no uncertain terms.
Fourth Cause of Action, Promissory Fraud: OVERRULED.
“The elements of promissory fraud … are: (1) a promise made regarding
a material fact without any intention of performing it; (2) the existence of the
intent not to perform at the time the promise was made; (3) intent to deceive or
induce the promise to enter into a transaction; (4) reasonable reliance by the promisee;
(5) nonperformance by the party making the promise; and (6) resulting damage to
the promise.” (Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481,
1498.) Promissory fraud must be alleged with particularity. (Ibid.) “The
particularity demands that a plaintiff plead facts which show how, when, where,
to whom, and by what means the representations were tendered.” (Cansino v. Bank
of America (2014) 224 Cal.App.4th 1462, 1469.)
Promissory Fraud is directed solely at Defendants Randall Emmett
and George Furla and alleges that: (1) in lieu of past debts owed by the Defendants
generally to The Fuzz Facility Limited and then Shiny River (the assignee), Defendants
Emmett and Furla individually promised to Shiny River that these Defendants would
pay Shiny River all “individual” and “corporate” producer and executive producer
fees to which Emmett and Furla were entitled and that Emmett and Furla would completely
forgo executive or producer fees for themselves individually, either directly or
through another entity, an agreement memorialized in writing and referred to the
in the FAC as the Corporate Guarantees (FAC, ¶¶ 15-21, 80-81); (2) Emmett and Furla
never intended to perform on this promise at the time it was made because Emmett
and Furla relied on the corporate or producer fees for their “extravagant” living
expenses and because Emmett and Furla took producer and other fees from the Producer
Films managed by these Defendants, i.e., fees from “any and all productions to be
produced by or to be under the control of the Borrowers, Hedge Fund Film Partners,
LLC, Randall Emmett/ Gorge [sic] Furla Productions, LLC, George Furla, Randall Emmett
or their affiliates (together the Relevant Parties)” (FAC, ¶¶ 28(h), 80, 82); (3)
Emmett and Furla separately intended that Shiny River rely on their promises regarding
the individual and corporate producer and executive producer fees to enter into
Individual Loan Agreements that caused millions of dollars to be loaned to these
Defendants and their affiliates so that Emmett and Furla could continue their business
of producing motion pictures (FAC, ¶ 83); (4) Shiny River reasonably relied on these
promises from Emmett and Furla in making the Individual Loans to the Defendants
and/or their affiliates (the remaining Defendants) (FAC, ¶ 84); (5) Emmett and Furla
breached the Corporate Guarantees by failing to forward producer fees to Shiny River
through EFO and EFFH and instead keeping producer fees in their individual capacities
in excess of $1 million each (FAC, ¶ 85); and (6) Shiny River was substantially
harmed by this conduct because neither Emmett and Furla nor the Corporate Guarantors
(the GFF Entities) have sufficient assets to pay the outstanding balances owed on
the Individual Loans (FAC, ¶ 86).
The FAC also alleges that “it was not until September 23, 2021
that a third-party (who had extensive dealings with Emmett, Furla, EFO and EFFH
as a lender and financier with respect to many of the pictures that are at issue
in this litigation), informed Plaintiff that Emmett and Furla were receiving producer
and other fees directly on these films in violation of the guarantees.” (FAC, ¶
87.)
Defendants EFO, EFFH, and George Furla argue that this claim
fails on demurrer because (1) Plaintiff Shiny River knew that the Defendants had
breached their obligations to Shiny River as of December 31, 2018, and because this
action was first filed on February 1, 2022, i.e., more than three years after the
date of discovery, the statute of limitations has run on this cause of action and
(2) as stated in conclusory fashion, “[t]he First Amended Complaint fails to allege
sufficient facts to demonstrate that the[] elements [for Promissory Fraud] exist
and therefore, the demurrer to this cause of action should be sustained without
leave to amend.” (Demurrer, 4:7-24, 5:1-11.) The Court finds neither point availing.
The latter point fails because the Court finds that the above
summary of the FAC’s allegations regarding Promissory Fraud and the paragraphs referenced
in the FAC sufficiently allege the elements of Promissory Fraud against Randall
Emmett and George Furla—even if only Furla challenges the claim. (See Opp’n, 7:9-8:26.)
The former point fails because EFO, EFFH, and George Furla misconstrue
the date of discovery pleaded in the FAC. (See Opp’n, 7:3-8.) The statute of limitations
for any Fraud claim is three years. (Code Civ. Proc., § 338, subd. (d).) Unless
a complaint affirmatively discloses on its face that the statute of limitations
has run, the general demurrer on these grounds must be overruled. (See Lockley
v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th
875, 881 [“It must appear clearly and affirmatively that, upon the face of the complaint,
the right of action is necessarily barred”].) Instead, “[t]he proper remedy ‘is
to ascertain the factual basis of the contention through discovery and, if necessary,
file a motion for summary judgment ….’ [Citation.]” (Roman v. County of Los Angeles
(2000) 85 Cal.App.4th 316, 325.) Generally, a “statute of limitations begins to
run when the plaintiff suspects or should suspect that her injury was caused by
wrongdoing, that someone has done something wrong to her’” (the “discovery rule”).
(Bernson v. Browning–Ferris Industries (1994) 7 Cal.4th 926, 932.) “[A] cause
of action accrues at ‘the time when the cause of action is complete with all of
its elements.’” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797,
806-07.) However, if the complaint alleges wrongful conduct commencing at a time
now barred by the statute of limitations, but continuing until a date not barred,
the last over act supporting the tort controls the trigger date for the statute
of limitations. (See Wyatt v. Union Mortg. Co. (1979) 24 Cal.3d 773, 786
[holding that the statute of limitations on continuing tort cause of action does
not begin to run until commission of last overt act].)
The FAC alleges that Plaintiff Shiny River did not discover the
fifth element of Promissory Fraud—breach of promise by Defendants—until September
23, 2021, when a third party informed Plaintiff Shiny River that despite the Corporate
Guarantees, Defendants Randall Emmett and George Furla were pocketing producer
and other fees to which Shiny River was contractually entitled. (FAC, ¶ 87; see
Opp’n, 7:3-8.) These pleadings place the expiration of the statute of limitations
on September 23, 2024, well after the February 1, 2022 filing of this action by
Plaintiff Shiny River and nearly two years after this hearing, i.e., in the future.
(FAC, 1:1.)
Defendants EFO, EFFH, and George Furla nevertheless argue that
December 31, 2018 should be the date of discovery because “in December, 2018 Plaintiff
entered into the Prior Trade Agreement (‘PTA’) because th[e] [producer fees to which
Emmett and Furla were entitled] had not yet been paid” to Shiny River. (Demurrer,
4:16-19.) This argument is altogether unconvincing because it equates non-payment
of a debt owed to Shiny River, as restructured in 2018 through the Prior Trade Agreement,
as the same thing as inquiry notice that Randall Emmett or George Furla had received
and failed to forward to EFO or EFFH producer and other fees meant for payment to
Shiny River. (See FAC, ¶¶ 41-44, 65-77 [paragraphs referenced by demurring defendants
at Demurrer, 4:16-19].) Further, if the complaint alleges wrongful conduct commencing
at a time now barred by the statute of limitations, but continuing until a date
not barred, the last over act supporting the tort controls the trigger date for
the statute of limitations. (See Wyatt v. Union Mortg. Co., supra,
24 Cal.3d at p. 786.) Here, the latest date of possible non-payment under the Corporate
Guarantees, as restructured by the PTA, was on or around September 23, 2021, placing
the FAC’s allegations squarely within the statute of limitations for a fraud claim.
(See Opp’n, 7:3-8.)
Fifth Cause of Action, Fraud [Intentional Misrepresentation]:
OVERRULED.
“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.)
Allegations of fraud “must be pled with more detail than other
causes of action.” (Apollo Capital Fund, LLC v. Roth Capital Partners, LLC
(2007) 158 Cal.App.4th 226, 240.) “Every element of the cause of action for fraud
must be alleged … factually and specifically[,] and the policy of liberal construction
of the pleadings … will not ordinarily be invoked to sustain a pleading defective
in any material respect. [Citations.]” (Committee on Children’s Television, Inc.
v. General Foods Corp. (1983) 35 Cal.3d 197, 216, superseded by Statute as stated
in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.)
“[G]eneral and conclusory allegations do not suffice.” (Small v. Fritz Cos.,
Inc. (2003) 30 Cal.4th 167, 184 [citations omitted].) Fittingly, a plaintiff
pleading fraud must plead facts showing “how, when, where, to whom, and by what
means” the allegedly fraudulent representations were tendered. (Lazar v. Superior
Court (1996) 12 Cal.4th 631, 645.)
The FAC’s Fifth Cause of Action for Fraud (Intentional Misrepresentation)
is directed at Defendants EFO, EFFH, and George Furla and alleges that: (1) in or
about April 2018 and later in June 2018, during discussions regarding the restructuring
of debt owed by Randall Emmett, George Furla, and their affiliated entities (the
remaining Defendants) to Shiny River, George Furla, on behalf of EFO and EFFH, orally
represented to Fyzz representatives that the value of Randall Emmett and George
Furla’s film library had a substantial value of at least $9.6 million (FAC, ¶¶ 25,
90-92); (2) George Furla knew or should have known that his representations
regarding the value of Emmett and Furla’s film library were false at the time
they were made because “Furla held himself out as being specially qualified to
value the film library given his specific familiarity with the titles, which he
and/or his companies produced, and his expertise in the film industry” (FAC, ¶¶
95-96; see also FAC, ¶ 94 [Shiny River hires expert and discovers value of film
library is $2.1 million, not $9.6 million]); (3) George Furla intended to
defraud Shiny River because Furla’s misrepresentations induced Shiny River not
to foreclose on its security interest in Randall Emmett and George Furla’s
collateral with respect to the relevant Individual Loans between the parties,
to waive past interest on the Individual Loans, and to accept partial payments
on an ongoing basis for outstanding debts in lieu of suing on the defaulted
loans (FAC, ¶ 95); (4) Plaintiff Shiny River justifiably relied on George
Furla’s valuation of the Emmett and Furla film library in entering the Prior
Trade Agreements, which restructured the debt owed to Plaintiff in favor of
Emmett, Furla, and their affiliated entities (the remaining Defendants) (FAC,
¶¶ 26(a)-(t), 97); and (5) alleged damages to Plaintiff Shiny River exceeding
$10 million (FAC, ¶ 98).
Defendants EFO, EFFH, and George Furla challenge the Fifth
Cause of Action on demurrer on the grounds that: (1) the FAC fails to properly
plead reliance (Demurrer, 6:4-8 [using allegations in FAC to challenge
reliance], 6:8-9 [referring to PTA allegations in the FAC to show alleged
misrepresentations took place several months before the PTA was executed]); (2)
the FAC insufficiently pleads scienter, intent to defraud, and reliance
(Demurrer, 6:9-10 [conclusions of fact without further explanation]); (3) the
FAC fails to plead damages (Demurrer, 6:10-12 [challenging damages on the grounds
that because Shiny River still “has rights” to payment at some undisclosed
point in time, no damages are pleaded in the FAC]); (4) the representations
allegedly made by Furla were “opinions” and thus are not actionable as
misrepresentations for the purposes of a Fraud (Intentional Misrepresentation)
claim (Demurrer, 6:14-19); and (5) any fraud claim based on Furla’s valuation
expired on February 1, 2022 because the FAC alleges that the misrepresentations
took place in 2018 (with fraud claims having a three-year statute of
limitations pursuant to Code of Civil Procedure section 338, subdivision (d))
(Demurrer, 6:19-23).
The first three points on demurrer fail because the Court
finds that its summary of the FAC’s allegations regarding the Fraud (Intentional
Misrepresentation) claim are sufficiently pleaded for the purposes of a general
sufficiency demurrer. (See Opp’n, 9:9-12:2)
The fourth point fails because the Court finds that the
allegations regarding Furla’s valuation of his and Randall Emmett’s film
library was, as pleaded, not a mere opinion or even puffery, but rather, a
representation made by Furla in order to stave off litigation against him,
Emmett, and their companies, particularly where the FAC pleads that “[d]uring
the June 18th [2018] meeting, Mr. Lannic informed Furla that the Fyzz and Shiny
River (who had funded these loans through the Fyzz), were expressly relying on
this representation in evaluating whether to enter into the PTA.” (FAC, ¶ 91;
see Opp’n, 12:3-6.)
The fifth point fails because the date of discovery for this
cause of action, as alleged in the FAC, is some time in August 2021 (FAC, ¶ 94
[date of discovery when expert informed Shiny River that film library only
worth approximated $2.1 million]), thus placing this claim squarely within its
statute of limitations of three years since this action was filed on February
1, 2022. (Code Civ. Proc., § 338, subd. (d); see Opp’n, 12:7-8.)
Sixth Cause of Action, Negligent Misrepresentation: OVERRULED.
A defendant “may be liable for negligent misrepresentation,”
“a species of the tort of deceit,” “‘[w]here the defendant makes false statements,
honestly believing that they are true, but without reasonable ground for such belief.’”
(Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 407 [citations omitted].)
“‘To be actionable deceit, the [1] representation [2] need not be made with knowledge
of actual falsity, but need only be an “assertion, as a fact, of that which is not
true, by one who has no reasonable ground for believing it to be true” and made
“[3] with intent to induce [the recipient] to alter his position to his injury or
his risk ….”’ The elements of negligent misrepresentation also include [4] justifiable
reliance on the representation and [5] resulting damage.” (B.L.M. v. Sabo &
Deitsch (1997) 55 Cal.App.4th 823, 834 [citations 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. [Citation.]”
(Small, supra, 30 Cal.4th at p. 184 [citations omitted].)
“As is true of negligence, responsibility for negligent
misrepresentation rests upon the existence of a legal duty, imposed by
contract, statute or otherwise, owed by a defendant to the injured person. The
determination of whether a duty exists is primarily a question of law.” (Eddy
v. Sharp (1988) 199 Cal.App.3d 858, 864 [citations omitted].)
The FAC’s Sixth Cause of Action alleges Negligent
Misrepresentation against EFO, EFFH, and George Furla on the same grounds as
the Fraud (Intentional Misrepresentation) claim—i.e., Furla’s April and June
2018 misrepresentations as to the value of Randall Emmett and Furla’s film
library, valued at $9.6 million by Furla but at $2.1 million by an expert—with two
differences: framing Furla’s misrepresentations as arising from negligence
rather than intentional conduct and intent to induce swapped in for intent to
defraud. (Compare FAC, ¶¶ 25, 90-92 [Fraud (Intentional Misrepresentation)
claim’s misrepresentation], 95-96 [scienter (knowledge of falsity)], 95 [intent
to defraud], 97 [justifiable reliance], 98 [damages of $10 million], with FAC,
¶¶ 100 [Negligent Misrepresentation’s incorporation of prior allegations,
including overlapping elements of the Fraud (Intentional Misrepresentation)
claim, i.e., misrepresentation, intent to defraud (swapped for intent to
induce], justifiable reliance, and damages], 101 [misrepresentation], 102-03
[lack of reasonable grounds for representation], 104 [intent to induce], 105
[justifiable reliance], 106, 108 [damages].)
The Negligent Misrepresentation claim also pleads duty
insofar as it pleads that because the Defendants “were contemplating a business
transaction with Plaintiff, (that is, entering into the PTA), [George Furla] was
under a duty to exercise reasonable care to disclose accurate facts to
Plaintiff before the transaction was consummated, because he knew, and was
indeed specifically informed, that Plaintiff would and was taking specific
action in reliance upon the facts represented by Furla regarding the value of
the film library.” (FAC, ¶ 102.)
Defendants EFO, EFFH, and George Furla challenge the Sixth
Cause of Action on demurrer on the grounds that: (1) duty is not sufficiently
pleaded in paragraph 102 of the FAC (Demurrer, 7:6-14); (2) the
misrepresentation alleged was but an opinion by Furla as to the valuation of
Emmett and Furla’s film library (Demurrer, 7:16-8:7); (3) the Negligent
Misrepresentation claim, unlike the Fraud (Intentional Misrepresentation) claim,
does not plead when the misrepresentations took place (Demurrer, 8:8-17); and
(4) if the 2018 misrepresentations are used as anchor, the statute of
limitations ran on the Negligent Misrepresentation claim no later than the end
of 2021, i.e., two months before this action was filed in February 2022 (see Demurrer,
8:18-9:1).
Because the Negligent Misrepresentation claim incorporates
prior allegations—including the Fraud (Intentional Misrepresentation) claim (FAC,
¶ 100)—the second, third, and fourth points raised by EFO, EFFH, and George
Furla on demurrer fail on the same grounds that similar arguments posed against
the Fifth Cause of Action for Fraud (Intentional Misrepresentation) failed.
(See Fraud (Intentional Misrepresentation) discussion supra; see also
Opp’n, 12:12-18.)
Further, because “liability [for negligent
misrepresentations] [may be] imposed … on those who supply information for
business purposes in the course of a business or profession” (Garcia v.
Superior Court (1990) 50 Cal.3d 728, 735; see also Johnson v. State of
California (1968) 69 Cal.2d 782, 800 [“‘misrepresentation,‘ as a tort
distinct from the general milieu of negligent and intentional wrongs, applies
to interferences with financial or commercial interest”]; Opp’n, 12:19-13:13
[citing both cases in support of a duty argument]), the Court finds that the
FAC sufficiently pleads duty in a commercial setting, where duty arises from
Defendant Furla furnishing representations as to the valuation of his and
Randall Emmett’s film library within a transaction in which Shiny River
restructured debt in favor of Emmett and Furla, i.e., the execution of the
Prior Trade Agreement (PTA). (FAC, ¶¶ 25, 100-06.)
Nothing in the demurring defendants’ Reply convinces the
Court that its conclusions ante are erroneous.
Defendants Emmett Furla Oasis Films, LLC, Emmett Furla Films
Holdings, LLC and George Furla’s Demurrer to Plaintiff’s First Amended Complaint’s
Fourth to Sixth Causes of Action is OVERRULED.