Judge: H. Jay Ford, III, Case: 22SMCV00132, Date: 2023-02-21 Tentative Ruling

Case Number: 22SMCV00132    Hearing Date: February 21, 2023    Dept: O

  Case Name:  Perdana Group, LLC v. Mad Science Laboratories, LLC, et al.

SUBJECT:                 (1) DEMURRER TO SECOND AMENDED COMPLAINT

                                    (2) MOTION TO STRIKE PORTIONS OF SECOND AMENDED COMPLAINT

MOVING PARTY:   Defendant Mad Science Laboratories, LLC  

RESP. PARTY:         Plaintiff Perdana Group, LLC

TENTATIVE RULING

            Defendant Mad Science Laboratories, LLC’s Demurrer to Second Amended Complaint is OVERRULED.  Defendant Mad Science Laboratories, LLC’s Motion to Strike is GRANTED as to Paragraphs 20-24, 27-30, 33 and 40-43 of the SAC.  Defendant Mad Science Laboratories, LLC to answer in 20 days. 

I.  Demurrer to 1^st cause of action for accounting and dissolution per Corporations Code §17707.03—OVERRULE

            Defendant Mad Science Laboratories demurs to the 1^st cause of action for dissolution and accounting pursuant to Corporations Code §17707.03, et seq. on grounds that it “may” resurrect and relitigate Napitupulu’s Labor Code claims in Napitupulu v. Mad Science Laboratories, LLC, et al. (SC129321).  Plaintiff Perdana Group, LLC is not Napitupulu, nor is it suing for any Labor Code or employment claims.  Plaintiff Perdana is not suing as an employee of Mad Science.  Plaintiff Perdana is suing to enforce its rights as a 5% member of Mad Science. Defendant Mad Science fails to establish that Perdana’s action for LLC dissolution and accounting as a minority member of Mad Science Laboratories, LLC improperly resurrects or relitigates Napitupulu’s Labor Code claims. 

            Defendant Mad Science Laboratories also demurs to the 1^st cause of action on grounds that Plaintiff’s allegations of fraud, mismanagement and wrongdoing are not alleged with specificity.  Defendant fails to cite any authority holding that a claim for dissolution under Corporations Code §17707.03 is subject to the same heightened specificity requirement applied to a common law fraud claim, e.g. the nature of the misrepresentation, who made it, when it was made, the authority by which the speaker acted on behalf of the defendant and how it was made (verbally or in writing). 

            Corporations Code §17707.03(a) provides, “[p]ursuant to an action filed by any manager or by any member or members of a limited liability company, a court of competent jurisdiction may decree the dissolution of a limited liability company whenever any of the events specified in subdivision (b) occurs.”  Corporations Code §17707.03(b) allows for dissolution where:

(1) It is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.

(2) Dissolution is reasonably necessary for the protection of the rights or interests of the complaining members.

(3) The business of the limited liability company has been abandoned.

(4) The management of the limited liability company is deadlocked or subject to internal dissension.

(5) Those in control of the limited liability company have been guilty of, or have knowingly countenanced, persistent and pervasive fraud, mismanagement, or abuse of authority.  Corp. C. §17707.03(b). 

Plaintiff alleges it is a 5% member of Mad Science.  See SAC, ¶8.  Plaintiff alleges Defendants froze him out of Mad Science in various ways, e.g. holding meetings without notifying him, unilaterally cancelling a minority shareholder meeting called by Plaintiff, reporting distributions to Plaintiff on K1 schedules that were never made to Plaintiff. Id. at ¶¶34, 36, 39, 49.  Plaintiff alleges Defendant Welch started a competing business and began diverting Mad Science’s business to the competing business venture without disclosure or consent from other members of Mad Science.  Id. at ¶44.  Plaintiff alleges numerous intercompany loans were made from Mad Science to individual members and their business venture without the knowledge or approval of all members.  Id. at ¶48.  Plaintiff alleges that member Defendants Leonard Judken Trust dated November 23, 2015, Attila Management, Kal El, LLC and L.T.D. Solution, LLC have diverted company revenues and contracts from Defendant Mad Science.  Id at ¶64.  Plaintiff alleges member Defendants have committed fraud, mismanagement and abuse of authority subjecting Defendant Mad Science to judicial dissolution under Corporations Code §17707.30. Id. at ¶65.

Plaintiff alleges sufficient facts to state a claim for judicial dissolution of Mad Science Laboratories, LLC pursuant to Corporations Code §17707.30(a) and (b)(1)-(3) and (5).  Defendant Mad Science Laboratories, LLC’s demurrer to the 1^st cause of action for dissolution and accounting per Corporations Code §17707.30 is OVERRULED.  

II.  Motion to Strike Paragraphs 20-24, 27-30, 33 and 40-43 from the 1^st cause of action—GRANT

Defendant Mad Science Laboratories, LLC also moves to strike paragraphs 20-24, 27-30, 33 and 40-43 from the complaint on grounds that these allegations were previously litigated and are irrelevant to the dissolution cause of action.  “Irrelevant matter” under CCP §436 includes allegations that is not essential to statement of a claim or defense, an allegation that is neither pertinent to nor supported by an otherwise sufficient claim or defense or a demand for judgment requesting relief not supported by the allegations of the complaint or cross complaint.  CCP §430.10(b). 

Paragraphs 20-24, 27-30, 33 and 40-43 are irrelevant to Plaintiff’s first cause of action against Defendant Mad Science Laboratories, LLC for involuntary dissolution.  The allegations pertain to Napitupulu’s employment with Defendant Mad Science, his initial acquisition of a 5% membership interest, the creation of Plaintiff Perdana Group, LLC and the transfer of Napitupulu’s 5% membership interest to Plaintiff Perdana Group, LLC.  None of these allegations are essential to Plaintiff’s claim for involuntary dissolution, nor are they pertinent to those essential allegations.  How Plaintiff Perdana came to acquire its 5% membership interest is not pertinent or essential to Plaintiff’s cause of action for dissolution.  Based on Plaitnff’s SAC and its opposition to the motion to strike, Plaintiff Perdana does not seek dissolution based on Defendants’ mistreatment of Napitupulu as an employee.  Moreover, Corporations Code §17707.30 pertains to fraud, mismanagement and abuse of authority in the management of Mad Science Laboratories, LLC.  As such, Paragraphs 20-24, 27-30, 33 and 40-43 are stricken from the 1^st cause of action for dissolution and accounting under Corporations Code §17707.30.