Judge: Frank M. Tavelman, Case: 21GDCV00283, Date: 2025-01-24 Tentative Ruling

REQUESTING ORAL ARGUMENT PER CRC 3.1308

The Court will attempt to post all Tentative Rulings at least the day prior to the hearing by 3:00 p.m.; however, the Court does not post Tentative Rulings for all matters.  

The Court will indicate in the Tentative Ruling whether the Court is requesting oral argument.  For cases where the Court is not requesting argument, then the Court is guided by California Rules of Court, Rule 3.1308(a)(1) where the Court requests notice of intent to appear.  Unless the Court directs argument in the Tentative Ruling, a party seeking argument should notify all other parties and the court by 4:00 p.m. on the court day before the hearing of the party’s intention to appear and argue.  The tentative ruling will become the ruling of the court if no argument is received.   

Notice may be given either by email at BurDeptA@LACourt.org or by telephone at (818) 260-8412.

Notice of the ruling must be served as indicated in the tentative.  Remote appearances are permitted for all law and motion unless otherwise indicated by the Court.  

Case Number: 21GDCV00283    Hearing Date: January 24, 2025    Dept: A

DEMURRER & MOTION TO STRIKE

NOTICE:

The Court is not requesting oral argument on this matter.  The Court is guided by California Rules of Court, Rule 3.1308(a)(1) whereby notice of intent to appear is requested.  Unless the Court directs argument in the Tentative Ruling, no argument is required and any party seeking argument should notify all other parties and the court by 4:00 p.m. on the court day before the hearing of the party’s intention to appear and argue.  The tentative ruling will become the ruling of the court if no argument is received.  

Notice may be given either by email at BurDeptA@LACourt.org or by telephone at (818) 260-8412.

ALLEGATIONS: 

Ross Felix (Felix) brings this action against Medversant Technologies, LLC (Medversant) and Matthew Haddad (Haddad). Plaintiff alleges he was employed by Medversant from January of 2014 to April of 2020, when Medversant terminated Felix. Plaintiff alleges that Medversant, with Haddad as the sole manager and CEO, committed numerous labor violations against him and other employees during this time.

Medversant has cross-complained alleging causes of action for: (1) Breach of Fiduciary Duty, (2) Misappropriation of Trade Secrets (Uniform Trade Secrets Act), (3) Violation of Computer Fraud and Abuse Act 18 U.S.C. § 1030 et seq., (4) Breach of Non-Disclosure Agreement, (5) Interference with Prospective Advantage, and (6) Civil Recovery of Stolen Property Received in Violation of Penal Code § 496.

In addition to Felix, Medversant also names Janardh Bantupalli, Oksana Denesiuk, Maria Han, and Tara Srinivasan Shrinivasa as Cross-Defendants. These Cross-Defendants are individuals who participated with Felix in a group MBA thesis project at the University of California Los Angeles (UCLA). These Cross-Defendants are hereinafter referred to as Students for purposes of this ruling.

Before the Court is Students’ demur to Medversant’s fifth and sixth cause of action on grounds that the First Amended Cross-Complaint (FACC) fails to allege sufficient facts. Students also move to strike Medversant’s FACC paragraphs 65 and 66 and paragraph 4 of Medversant’s prayer for relief, arguing they impermissibly seeks to recover punitive damages. Medversant opposes and Students reply.

ANALYSIS: 

I.                    LEGAL STANDARD 

Demurrer

The grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. (C.C.P. § 430.30(a); Blank v. Kirwan (1985) 39 Cal. 3d 311, 318.) A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) The only issue involved in a demurrer hearing is whether the complaint states a cause of action. (Id.)

A demurrer assumes the truth of all factual, material allegations properly pled in the challenged pleading. (Blank v. Kirwan, supra, 39 Cal. 3d at p. 318.) No matter how unlikely or improbable, the plaintiff’s allegations must be accepted as true for the purpose of ruling on the demurrer. (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.  App. 3d 593, 604.) But this does not include contentions; deductions; conclusions of fact or law alleged in the complaint; facts impossible in law; or allegations contrary to facts of which a court may take judicial notice.  (Blank, supra, 39 Cal. 3d at 318.)

Pursuant to C.C.P. §§ 430.10(e) and (f), the party against whom a complaint has been filed may demur to the pleading on the grounds that the pleading does not state facts sufficient to constitute a cause of action, or that the pleading is uncertain, ambiguous and/or unintelligible. It is an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable probability that the defect can be cured by amendment. (Schifando v. City of Los Angeles (2003) 31 Cal. 4th 1074, 1082.)

Motion to Strike

Motions to strike are used to reach defects or objections to pleadings that are not challengeable by demurrer, such as words, phrases, and prayers for damages. (See C.C.P. §§ 435, 436, and 437.) The proper procedure to attack false allegations in a pleading is a motion to strike. (C.C.P. § 436(a).) In granting a motion to strike made under C.C.P. § 435, “[t]he court may, upon a motion made pursuant to Section 435 [notice of motion to strike whole or part of complaint], or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading.” (C.C.P. § 436(a).) Irrelevant matters include immaterial allegations that are not essential to the claim or those not pertinent to or supported by an otherwise sufficient claim. (C.C.P. § 431.10.)

The court may also “[s]trike out 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.” (C.C.P. § 436 (b).)

II.                 MERITS

Meet and Confer

C.C.P. §§ 430.41(a) and 435.5(a) requires that the moving party meet and confer with the party who filed the pleading that is subject to the demurrer and/or motion to strike. Upon review the Court finds the meet and confer requirements were met here. (Dowdall Decl. ¶¶ 2-7.)

Judicial Notice

Students request the Court take judicial notice of the FACC and the two stipulations filed with the Court extending Students time to file a responsive pleading. Given these documents are part of the Court’s file, the Court finds they are the proper subject of notice under Evid. Code § 452(c) and Students’ request is GRANTED.

Relevant Allegations

Relevant to the determination of this demurrer are allegations in the FACC addressing Felix’s alleged theft of Medversant’s property. The FACC does not cleanly delineate which of Felix’s actions constitute theft, rather it presents a variety of actions which Medversant appears to allege constitute theft in the aggregate.

The FACC alleges that Felix, “…used confidential information, trade secrets and [Medversant’s] resources to further his personal financial and professional interests.” (FACC ¶ 14.) The FACC appears to use the phrases “confidential information,” “trade secrets,” “intellectual property,” and “resources” interchangeably, despite those phrases refer to discreet concepts. Medversant is not required to describe the allegedly stolen property in detail, as to do so would jeopardize its confidential business advantage. Regardless, Medversant’s use of amorphous terms throughout the FACC presents substantial difficulty in parsing out what property is alleged to have been stolen.

What is clear is that Medversant alleges Felix used its confidential information (1) to develop his MBA thesis at UCLA and (2) to make a business presentation to venture capital groups. The Court examines the factual allegations as to each of these below.

As concerns the MBA thesis, Medversant alleges that Felix “used fraud and deceit” to solicit their consent to use “confidential information and intellectual property” to develop his MBA thesis while he was employed with them. (FACC ¶ 14G, H.) It is entirely unclear from the FACC what the parameters of this consent were. The FACC does not state that Medversant gave consent to use only some information, it simply states they gave consent to use Medversant’s confidential information and intellectual property. It is also unclear whether Felix’s employment with Medversant was terminated before Felix completed the MBA thesis.

Medversant further alleges that at some point Felix made a presentation to venture capital firms in an attempt to interfere with Medversant’s business and benefit himself. (FACC ¶ 14 I.) The FACC contains no allegation as to when this presentation occurred. It cannot be ascertained from the pleadings whether this presentation was made before/during/after Felix’s employment at Medversant and the development of his MBA thesis.

In short, Medversant alleges that Felix stole their property in exceedingly vague terms. The allegations of the FACC are not clear as to what property Medversant alleges Felix stole and at which point in their relationship he was alleged to have done so. As will be seen in the Court’s analysis below, this has serious impact on the sufficiency of Medversant’s claims against Students.

Janssen Declaration

Before beginning its analysis in earnest, the Court addresses the opposition declaration of Medversant’s counsel, Todd Janssen. This declaration attaches several documents obtained in discovery pertaining to Felix’s development of the MBA thesis and appears to be offered as evidence of Students’ knowledge that they improperly utilized Medversant’s property. For example, Medversant argues that Students and Felix interviewed potential clients, business partners, and investors as part of their MBA thesis. (Janssen Decl. ¶ 4.) The Court finds consideration of this declaration and its exhibits are improper on demurrer, as their contents do not appear on the face of the pleadings and have not been judicially noticed. While these new facts may supports Medversant’s ability to amend the pleadings, they have no bearing on the sufficiency of the FACC at current.

Fifth Cause of Action – Interference with Prospective Economic Advantage

The elements of a claim for interference with prospective economic advantage include “(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional or negligent acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.” (Crown Imports, LLC v. Superior Court (2014) 223 Cal.App.4th 1395, 1404 [citations, brackets, and quotation marks omitted].)

Here, Medversant alleges that it maintained a prospective economic relationship with its investors, and that Students knew or should have known of this relationship. (FACC ¶¶ 51, 53.) Medversant further alleges that Students interfered with this relationship when they failed, “…to act with reasonable care due to [Students’] wrongful conduct in using [Medversant’s] confidential and proprietary information for their own benefit and disclosing trade secrets and other proprietary information to third parties.” (FACC ¶ 54.)

The Court finds the allegations as to Students’ knowledge and actions to be conclusory. These allegations contain no facts speaking to why Students were or should have been aware of the relationship and the threat their actions posed. Instead, the FACC simply restates the elements of this cause of action.

Further, the FACC contains no factual allegations as to acts by the Students which either intentionally or negligently interfered with Medversant’s relationship. The FACC only alleges Students’ actions in conclusory terms and contains no facts as to how they utilized Medversant’s confidential and proprietary information. This concern is heightened by the fact that the FACC explicitly alleges that Medversant, at least in some part, consented to Felix using this information to develop his MBA thesis. The FACC alleges no facts that Students had reason to believe their using this information was beyond the scope of that consent or that Felix intended to later utilize the MBA thesis to compete against Medversant.

Accordingly, the demurrer to this cause of action is SUSTAINED with  leave to amend. Leave to amend is granted insofar as the Court finds Medversant has demonstrated through the Janssen declaration that additional facts might cure the deficiency upon amendment.

Sixth Cause of Action – Violation of Penal Code § 496(c) – Sustained with Leave to Amend

Penal Code § 496(a) provides in relevant part:

Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained, shall be punished...

A principal in the actual theft of the property may be convicted pursuant to this section. However, no person may be convicted both pursuant to this section and of the theft of the same property.

Penal Code § 496(c) provides:

Any person who has been injured by a violation of subdivision (a) or (b) may bring an action for three times the amount of actual damages, if any, sustained by the plaintiff, costs of suit, and reasonable attorney's fees.

The definition of theft within this context is found in Penal Code § 484(a), which is as follows:

Every person who shall feloniously steal, take, carry, lead, or drive away the personal property of another, or who shall fraudulently appropriate property which has been entrusted to him or her, or who shall knowingly and designedly, by any false or fraudulent representation or pretense, defraud any other person of money, labor or real or personal property, or who causes or procures others to report falsely of his or her wealth or mercantile character and by thus imposing upon any person, obtains credit and thereby fraudulently gets or obtains possession of money, or property or obtains the labor or service of another, is guilty of theft. 

To properly state this cause of action against Students, Medversant must plead facts alleging (1) Felix’s use of Medversant’s property constituted theft and (2) Students knew such property was stolen. For reasons set forth below, the Court finds the FACC in its current form contains sufficient allegations as to Felix’s theft but insufficient allegations as to Students’ knowledge.

As previously stated, Medversant explicitly alleges that it provided at least partial consent for Felix to use its information in developing his MBA thesis. (FACC ¶ 14G.) The Court reads these allegations as stating that Medversant consented to Felix’s use of its information for the MBA thesis upon his representation that the information would not be used to compete against them. The FACC appears to allege that Felix always intended to use the information to compete against Medversant, in which case his use of the information would qualify as theft via false pretense under Penal Code § 484(a). By alleging false pretense, Medversant has sufficiently alleged Felix’s use of its information was at all times theft.

Regardless, the FACC contains no facts alleging that Students’ knew that the information was stolen. To properly allege that Students knew the property was stolen, Medversant must also allege either (1) that Students were involved in Felix’s plot in some way that exceeded their innocent participation in the MBA thesis or (2) that Students knew Felix intended to use Medversant’s property to compete against them at the time the MBA thesis was being developed.  The FACC currently contains no factual allegations speaking to either of these possibilities.

Accordingly, the demurrer to this cause of action is SUSTAINED with leave to amend. Leave to amend is granted insofar as the Court finds Medversant has demonstrated through the Janssen declaration that additional facts might cure the deficiency upon amendment.

Motion to Strike

As the Court has sustained the demurrer to the Sixth cause of action with leave to amend, the Court finds Students’ motion to strike portions of that cause of action (and the related portion of the Prayer for Relief) is MOOT.

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RULING:

In the event the parties submit on this tentative ruling, or a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records. 

ORDER 

Janardh Bantupalli, Oksana Denesiuk, Maria Han, and Tara Srinivasan Shrinivasa’s Demurrer and Motion to Strike came on regularly for hearing on January 24, 2025, with appearances/submissions as noted in the minute order for said hearing, and the court, being fully advised in the premises, did then and there rule as follows: 

THE DEMURRER TO FIFTH AND SIXTH CAUSES OF ACTION IS SUSTAINED WITH 20 DAYS’ LEAVE TO AMEND.

THE MOTION TO STRIKE IS MOOT.

MOVING PARTIES TO GIVE NOTICE.   

IT IS SO ORDERED.