Judge: Gail Killefer, Case: 19STCV05246, Date: 2023-04-20 Tentative Ruling
Case Number: 19STCV05246 Hearing Date: April 20, 2023 Dept: 37
HEARING DATE: April 20, 2023
CASE NUMBER: 19STCV05246
CASE NAME: Alexandria Real Estate Equities
and Joel Marcus v. Steven Marcus and Bugsby Property, LLC
TRIAL DATE: October 3, 2023
PROOF OF SERVICE: OK
MOTION Plaintiffs’ Demurrer as to the Affirmative Defenses in the First
Amended Answer
MOVING PARTIES: Plaintiffs, Alexandria Real Estate
Equities, Inc. and Joel S. Marcus
OPPOSING PARTY: Defendant, Steven Marcus
OPPOSITION: April 7, 2023
REPLY: April 13, 2023
TENTATIVE: Plaintiffs’
demurrer is sustained without leave to amend. Plaintiffs are to give notice.
Background
This is an action for declaratory relief arising out of
Plaintiffs Alexandria Real Estate Equities (“Alexandria”) and Joel S. Marcus’
(“Joel”) business ventures with Defendants Steven Marcus (“Steven”) and Bugsby
Property, LLC (“Bugsby”).
Plaintiffs’ Complaint for declaratory relief filed February
13, 2019, alleges that in November 2013, Joel, in his capacity as Alexandria’s
CEO, asked Steven for “some suggestions” regarding Alexandria’s joint venture
financing. Steven and Joel allegedly agreed that Steven would not receive
monetary compensation but would be entitled to advertise the fact that he had
advised Alexandria. On December 27, 2013, Alexandria and Steven alleged entered
into a “Confidential Information and Nondisclosure Agreement” (“CNDA”) which
memorialized the terms of their agreement. The CNDA allegedly provided that
Steven would receive no compensation and allegedly included a merger clause
which provided that it would be the final and exclusive agreement between the
parties.
Steven allegedly completed his work advising Alexandria by
January 2014 and allegedly provided the work under the name of his corporation,
Bugsby. However, the Complaint alleges that Bugsby is an alter ego of Steven.
The Complaint alleges that over the years, Steven’s relationship with Joel
deteriorated and that in January 2019, Steven demanded $12 million in payment
for his advice contradictory to the terms of the CNDA. Joel and Alexandria seek
an order from the Court declaring that Steven and Bugsby are not owed
compensation under the CNDA.
On February 28, 2020, the court denied Steven’s motion to
quash service of summons. Bugsby’s motion to quash service of summons was
granted.
On April 9, 2020, Plaintiffs filed their First Amended
Complaint (“FAC”). The FAC now alleges five causes of action, as follows: (1)
fraud: intentional misrepresentation; (2) fraud: concealment, (3) breach of
contract, (5) breach of the implied covenant of good faith and fair dealing,
(5) declaratory relief.
On September 19, 2020, Steven filed a Cross-Complaint
against Alexandria, Joel and Barbara Marcus (“Barbara”). Steven’s
Cross-Complaint alleges the following causes of action: (1) breach of contract
against Joel and Barbara, (2) breach of contract against Joel and Barbara, (3)
breach of contract against Alexandria, (4) breach of the covenant of good faith
and fair dealing against Alexandria, (5) extortion against Joel and Alexandria,
(6) intentional misrepresentation against Joel and Alexandria, (7) fraudulent
concealment against Joel and Alexandria, (8) declaratory relief against Joel
and Barbara, (9) declaratory relief against Alexandria, (10) unfair
competition against Joel and Alexandria.
On January 6, 2021, Cross-Defendants’ demurrer to the Cross
Complaint was sustained. On February 5, 2021, Steven filed the operative First
Amended Cross-Complaint. (“FACC”) The FACC alleges the following causes of
action: (1) breach of contract against Joel/Barbara.
On June 17, 2021, Joel and Barbara’s demurrer to the FACC
was sustained without leave to amend.
On August 25,
2021, Steven’s motion for summary judgment as to the FAC was denied in its
entirety.
On February 14,
2023, the court granted Plaintiffs’ judgment on the pleadings as to Defendants’
affirmative defenses. (“February 14 Order”)
On March 16,
2023, Defendant filed the First Amended Answer (“Amended Answer”).
Plaintiffs now
demur as to the Affirmative Defenses of the Amended Answer again. Defendant
opposes the motion.
Request for
Judicial Notice
Plaintiffs request that the court take judicial notice of
the following in support of their demurrer:
1.
Plaintiffs’ Complaint for Declaratory Relief, filed
February 3, 2019 (Exhibit 1);
2.
Plaintiffs’ First Amended Complaint, filed April 4,
2020 (Exhibit 2);
3.
Plaintiffs’ Demurrer to Defendant’s Cross-Complaint in
this matter, filed October 13, 2020 (Exhibit 3);
4. Notice
of Ruling on Demurrers to Cross-Complaint in this matter, issued January 6,
2021 (Exhibit 4);
5. Defendant
Steven Marcus’s Amended Crossclaims, filed February 5, 2021 (Exhibit 5);
6. Plaintiffs’
and Cross-Defendants’ Notice of Demurrers and Demurrers to Defendant’s
Cross-Complaint, filed October 13, 2020 (Exhibit 7);
7. Memorandum
of Points and Authorities in Support of Plaintiff’s and Cross-Defendants’
Demurrer to Defendant’s First Amended Cross-Complaint, filed March 8, 2021 (Exhibit
7);
8. Notice
of Entry Ordering Dismissal [sic] of Defendants’ Cross-Complaint Without
Leave to Amend, filed June 21, 2021 (Exhibit 8);
9. Notice
of Entry of Order Denying Defendant’s Motion for Summary Judgment, issued
August 25, 2021 (Exhibit 9);
10. Order
Granting Plaintiff’ Motion for Judgment on the Pleadings, dated Feb. 14, 2023
(Exhibit 10);
11. Defendant
Steven Marcus’s Amended Answer, filed March 16, 2023 (Exhibit 11);
12. Defendant
Steven Marcus’s Notice of Demurrer to First Amended Complaint; Demurrer; and
Memorandum of Points and Authorities, filed April 20, 2020 (Exhibit 12);
13. Complaint
for Fraud, Fraudulent Concealment, and Declaratory Relief, Case. No.
2:21-cv-08088-SB-SK, filed in the Central District of California by Defendant
Steven Marcus on October 12, 2021 (Exhibit A);
14. Order of
Dismissal and Order to Show Cause re: Rule 11 Sanctions entered in No.
2:21-cv-08088-SB-SK, Central District of California, dated March 11, 2022
(Exhibit B);
15. Order
Imposing Sanctions entered in No. 2:21-cv-08088-SB-SK, Central District of
California, dated May 3, 2022 (Exhibit C);
16. Order
Dismissing Appeal entered by the Ninth Circuit Court of Appeal on October 12,
2022 (No. 22-55553) (Exhibit D).
Plaintiffs’ request is granted. The existence and legal
significance of these documents are proper matters for judicial notice. (Evid. Code
§ 452(d), (h).)
Meet and
Confer Efforts
Plaintiffs submit
the declaration of their counsel, John M. Sandoval (“Sandoval”) to show
compliance with CCP § 430.41. Sandoval attests the parties conferred on March
23, 2023 regarding the issues raised in this demurrer and were unable to reach
a resolution. (Sandoval Decl. ¶¶2-4.) The Sandoval Declaration is sufficient
for purposes of CCP § 430.41.
Discussion
I.
Legal Standard
A party against whom an answer has been filed may object by
demurrer.¿Unlike a demurrer to a complaint or cross-complaint, a demurrer to an
answer is limited to three grounds:¿
(a) The
answer does not state facts sufficient to constitute a defense;¿
(b) The
answer is uncertain; or¿
(c) Where
the answer pleads a contract, it cannot be ascertained from the answer whether
the contract is written or oral.¿
(CCP § 430.20.)¿¿¿
A general demurrer may be made on the ground that an answer
does not state facts sufficient to constitute a defense.¿¿(Timberidge¿Enterprises,
Inc. v. City of Santa Rosa¿(1978)¿86 Cal.App.3d 873, 880; CCP §
430.20.)¿¿“Generally speaking, the determination whether an answer states a
defense is governed by the same principles which are applicable in determining
if a complaint states a cause of action.”¿¿(South Shore Land Co. v. Petersen¿(1964)
226 Cal.App.2d 725, 732;¿In re Quantification Settlement Agreement Cases¿(2011)¿201
Cal.App.4th 758, 813 (Quantification)
[“affirmative defenses cannot be pled as mere legal
conclusions, but must instead be alleged with as much factual detail as the
allegations of a complaint.”].)¿¿
“Generally speaking, the determination whether an answer
states a defense is governed by the same principles which are applicable in
determining if a complaint states a cause of action.” (South Shore Land Co. v. Petersen¿(1964)
226 Cal.App.2d 725, 732;¿In re Quantification Settlement Agreement Cases¿(2011)¿201
Cal.App.4th 758, 813¿(Quantification)¿[“affirmative defenses cannot be
pled as mere legal conclusions, but must instead be alleged with as much
factual detail as the allegations of a complaint.”].)¿¿
Affirmative defenses are¿pled¿based upon facts
demonstrating that no cause of action exists, notwithstanding the truth of the
complaint’s allegations.¿¿(Walsh v. W. Valley Mission¿Cmty. College Dist.¿(1998)¿66
Cal.App.4th 1532, 1542 n.3.)¿ “The phrase ‘new matter’¿refers to something
relied on by a defendant which is not put in issue by the plaintiff.¿¿Thus,
where matters are not responsive to essential allegations of the complaint,
they must be raised¿in the answer as new matter.¿¿Where, however, the answer
sets forth facts showing some essential allegation of the complaint is not
true, such facts are¿not new matter,¿but only a traverse.”¿ (State Farm Mut.
Auto. Ins. Co. v. Superior Court¿(1991) 228 Cal.App.3d 721, 725¿(State
Farm).)¿
The¿same pleading of ultimate facts in support of such new
matter, rather than legal conclusions, is required as in pleading the
complaint.¿¿As
a general rule, the answer must allege facts constituting the affirmative
defense in the same manner as a complaint must do for a cause of action.¿¿(FPI
Development, Inc. v. Nakashima¿(1991) 231 Cal.App.3d 367, 384.)¿¿“Generally
it is an abuse of discretion to sustain a demurrer without leave to amend if
there is any reasonable possibility that the defect can be cured by
amendment.”¿ (Goodman v. Kennedy¿(1976) 18 Cal.3d 335, 349.)¿
II.
Analysis
For purposes of res judicata, a voluntary dismissal with
prejudice is the equivalent to a judgment on the merits in favor of the
defendant who was dismissed. (Long Beach Grand Prix Ass’n v. Hunt (1994)
25 Cal.App.4th 1195, 1197, 1203; accord Alpha Mechanical,
Heating & Air Conditioning, Inc. v. Travelers Casualty & Surety Co. of
Amer. (2005) 133 Cal.App.4th 1319, 1330.) “A retraxit arising from a
dismissal with prejudice thus operates as a legal fiction, and it is given the
same finality as if the matter were adjudicated and proceeded to a final
judgment on the merits.” (Id., at p. 1331.) The dismissal of a complaint
with prejudice operates as a retraxit, giving the same finality as a final
judgment. (See Alpha Mechanical Heating & Air Conditioning, Inc. v.
Travelers Casualty & Surety Co. of America (2005) 133 Cal.App.4th 1319,
1330-32. (“Alpha Mechanical”)).
Plaintiffs here, much like the judgment on the pleadings
considered by this court in the February 14 Order, contend Defendant Steven’s
affirmative defenses in the Amended Answer are insufficiently pled still and
fail as a matter of law because of Steven’s abandonment of those claims.
(Motion, 4-10.) Plaintiffs contend the Amended Answer’s affirmative defenses
only re-plead the same allegations which this court has already found to fail
as a matter of law pursuant to retraxit, and to be insufficiently pled.
(Motion, 12-15.) Therefore, Plaintiffs yet again contend Steven’s retraxit of
these claims as cross-claims also work to prohibit Steven from relitigating
these claims as affirmative defenses. (Id.)
In support, Plaintiffs again have cited Alpha Mechanical
to correctly explain a relitigating of “the same subject matter” which were
finally resolved in a cross-complaint via retraxit is prohibited. (Id.;
Alpha Mechanical, supra, 133 Cal.App.4th at 1331-2; citing Torrey Pines
Bank v. Sup. Ct., (1989) 216 Cal.App.3d 814.) Lastly, Plaintiffs again
repeat no new factual allegations have been pled to support these affirmative
defenses, beyond those where retraxit exists already. (Id.) Plaintiffs
therefore again contend in order to promote judicial economy, the court should
apply retraxit to Steven’s claims. (Motion, 15.)
In opposition, Defendant Steven again reiterates his
contentions that the claims of the Amended Answer do not rely on the same
subject manner as the claims of the cross-complaint where retraxit has taken
hold. (9-11.) However, Defendant again fails to address any arguments of
retraxit, or otherwise abandonment of claims originally pled in the
cross-complaint and FACC. Pointedly, Defendant fails to address at all
Plaintiffs’ reliance on Alpha Mechanical. Defendant again further fails
to point to any supporting authority to suggest the preclusive prior rulings of
a court cannot be enforced in the same action, as Plaintiffs here request.
Therefore, the
court finds again that retraxit applies here.
As part of the
February 14 Order, this court found:
“Here, Plaintiffs have made a
sufficient showing that retraxit applies to the cross-claims alleged in
Defendant’s Answer, as binding precedent shows Defendant has clearly abandoned
those claims after they were sustained on demurrer. As Plaintiffs correctly
point out, the lack of ‘unique facts’ pled to support the affirmative defenses
infers that the allegations of the cross-complaint are made to support the
affirmative defenses. As the relitigation of the cross-claims are now
prohibited through retraxit, the lack of factual allegations shows the
affirmative defenses to be insufficiently pled. The affirmative defenses plead
only legal contentions, devoid of any allegations of fact which can be taken as
true by this court at this stage. Instead, the affirmative defenses plead only
conclusory claims and fail to incorporate other factual allegations made in the
Answer. (FPI Development, Inc. v. Nakashima¿(1991)
231 Cal.App.3d 367, 384; Quantification.) Therefore, the court
finds the affirmative defenses to be defective on their face.” (February 14
Order, 6-7.)
Defendant’s
Amended Answer has done little to remedy the issues considered and deliberated
by this court in the February 14 Order. Therefore, the court again finds the
Amended Answer to be insufficiently pled and to fail as a matter of law as to
the affirmative defenses.
For these
reasons, Plaintiffs’ demurrer is sustained.
Conclusion
Plaintiffs’ demurrer
is sustained without leave to amend. Plaintiffs are to give notice.