Judge: H. Jay Ford, III, Case: 22SMCV02055, Date: 2023-03-21 Tentative Ruling

Case Number: 22SMCV02055    Hearing Date: March 21, 2023    Dept: O

  Case Name:  nZania, LLC v. Kapor, et al.

SUBJECT:                 (1)  DEMURRER TO COMPLAINT

                                    (2)  MOTION TO STRIKE

MOVING PARTY:   Defendants Jeffrey H. Kapor and Buchalter, a Professional Corporation

RESP. PARTY:         Plaintiff nZania, LLC

TENTATIVE RULING

            Defendants Jeffrey H. Kapor and Buchalter, a Professional Corporation’s Demurrer to to the second causes of action for fraud (misrepresentation), third cause of action for negligent misrepresentation and fourth cause of action for fraud (conspiracy / aiding and abetting) of Complaint is OVERRULED.  Defendants’ Motion to Strike is DENIED.  Defendants to answer in 20 days. 

            Defendants’ Request for Judicial Notice is GRANTED pursuant to Evidence Code §452(d), not Evidence Code §452(h).  The Court is entitled to take judicial notice of Plaintiff’s admissions or inconsistent statements in other pleadings. 

I.  Defendants’ demurrer improperly attacks Plaintiff’s ability to prove or establish Plaintiff’s allegations

            Defendants’ demurrer is improperly based on Plaintiff’s ability to “establish” the element of justifiable reliance in Plaintiff’s fraud and negligent misrepresentation causes of action and its ability to present evidence of conspiracy or aiding and abetting.  See Demurrer, 9:23-24, 26, 15:17, 16:14, 19:16-17.  On demurrer, “we accept as true even improbable alleged facts, and we do not concern ourselves with the plaintiff’s ability to prove the factual allegations.”  Marina Pacific Hotel and Suites, LLC v. Fireman’s Fund Insurance Company (2022) 81 Cal.App.5^th 96, 104-105. 

II.  The judicially noticeable allegations and deposition testimony do not contradict Plaintiff’s allegations of justifiable reliance 

             “Justifiable reliance is ordinarily a question of fact that is not properly determined on demurrer, but whether a party's reliance was justified may be decided as a matter of law if reasonable minds can come to only one conclusion based on the facts.”  Amiodarone Cases (2022) 84 Cal.App.5th 1091, 1111.

            The judicially noticed allegations and testimony from the Brandes Action do not contradict Plaintiff’s allegations of justifiable reliance in this action. Plaintiff sufficiently alleges justifiable reliance in a fraudulent omission and/or misrepresentation. Defendants fail to establish that reasonable minds could only find lack of justifiable reliance if these allegations were accepted as true. 

III.  For purposes of negligent misrepresentation, a duty to disclose does not require a confidential or fiduciary relationship the negligent misrepresentation cause of action

In transactions that do not involve fiduciary or confidential relations, a duty to disclose material facts may arise in at least three instances: (1) the defendant makes representations but does not disclose facts that materially qualify the facts disclosed, or that render his disclosure likely to mislead; (2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff; (3) the defendant actively conceals discovery from the plaintiff.  See Warner Constr. Corp. v. L.A. (1970) 2 Cal.3d 285, 294. 

            Defendants argue they did not owe Plaintiff any duty of disclosure, because they were not representing Plaintiff when Kapor texted Koral.  See Demurrer, p. 17, fn 2.  However, Plaintiff alleges that Koral affirmatively asked Kapor, “do u know if Gloria from BB Dakota is in the process of selling her business.”  See Complaint, ¶24.  Kapor chose to text back a substantive response to the question, stating “I do general corporate work for her and I know she was doing some estate planning transfers.  She has over the years received offers to buy the company.  Nothing positive as of yet.”  Id. at ¶28.  When Kapor texted Koral back, Plaintiff alleges Kapor was representing the Brandes Parties in the Madden Transaction and knew that the Brandes Parties and Steven Madden had already executed a Letter of Intent, agreed on the material terms of the Madden Transaction, conducted extensive due diligence and exchanged drafts of a proposed Stock Purchase Agreement.  See Complaint, ¶¶15, 44, 46. Defendants do not address whether a duty to disclose was stated absent a fiduciary relationship. Defendants’ demurrer to the negligent misrepresentation claim based on lack of duty is OVERRULED. 

IV.  Plaintiff sufficiently alleges facts to state a claim for conspiracy to commit fraud and aiding abetting fraud against Defendants

Plaintiff alleges a conspiracy to commit fraud existed between Gloria and Kapor/Buchalter. Plaintiff alleges that Kapor/Buchalter were “aware” that the Brandes parties were defrauding Plaintiff by “not disclosing material facts regarding the Madden Transaction and lying to Spiers as to whether BB Dakota was being sold.”  See Complaint, ¶59.  Plaintiff alleges that “after receiving Koral’s text, Kapor consulted with Brandes and agreed upon a response designed to assist and promote Brandes’ fraud on nZania.”  Id. 

Plaintiff sufficiently alleges the elements of conspiracy.  In ¶59, Plaintiff alleges (1) Defendants’ actual knowledge of the Brandes parties’ alleged fraud against Plaintiff; (2) Defendants consultation and agreement with the Brandes Defendants to defraud Plaintiff; (3) Brandes Defendants’ acts of fraud against Plaintiff; and (4) Defendant Kapor’s text, which was sent pursuant to Defendants’ agreement with Brandes Defendants to defraud Plaintiff. 

Plaintiff alleges aiding and abetting liability based on Defendants’ acts of assisting the Brandes Defendants in their alleged fraud. Plaintiff sufficiently alleges aiding and abetting liability against Defendants based on an independent tort.  Plaintiff alleges Defendants committed an independent tort to assist the Brandes Defendants in defrauding Plaintiff.  See Complaint, ¶60.  Plaintiff alleges Defendants knowingly and intentionally omitted material facts and/or provided a deceitful, fraudulent and misleading response to Koral’s and took additional actions to ensure the fraud was not discovered until after the Madden Transaction close.  Id.  Plaintiff alleges Defendant Kapor consulted with Gloria Brandes prior to responding to Koral’s text, and he tailored his response to confirm Gloria’s misrepresentation that there was no pending sale.  Id. at ¶¶59-60.  Plaintiff alleges that it would not have entered into the 2019 Agreement were it not for Kapor’s text corroborating Gloria’s statements and both Kapor’s and Gloria’s misrepresentations.  Id. at ¶¶62-63. 

V.  Motion to Strike—DENY

            A.  Tort of Another

            Defendants move to strike Plaintiff’s prayer for relief based on “tort of another” on grounds that they did not commit any tort.  As they did in their demurrer to the fraud and negligent misrepresentation claims, Defendants argue Plaintiff cannot plead or prove any tort claim against them due to Plaintiff’s allegations and discovery responses in the Brandes Action.  As discussed in connection with Defendants’ demurrer to the fraud and negligent misrepresentation causes of action, Plaintiff’s allegations and discovery responses in the Brandes Action do not contradict or preclude Plaintiff’s instant allegations of justifiable reliance on Kapor’s allegedly false text message.  Plaintiff sufficiently states a claim for fraud and negligent misrepresentation against Defendants, defeating Defendants’ grounds to strike the allegations of “tort of another.” On this ground, the motion to strike is DENIED.

            B.  Attorney’s Fees

            Defendants move to strike Plaintiff’s request for “attorney’s fees to the extent permitted under California law” on grounds that no contractual or statutory basis for recovery of fees is alleged.  However, on the face of the complaint, Plaintiff’s request for “attorney’s fees to the extent permitted under California law” is not false, irrelevant or improper.  

            C.  Failure to plead special damages with particularity

            Defendants move to strike Plaintiff’s request for “special damages in the amount according to proof at trial.”  Defendants argue special damages must be pled with particularity.  Plaintiff sufficiently alleges special damages in the form of attorney’s fees based on tort of another.  See Complaint, ¶49.