Judge Holly J. Fujie, Case 20STCP04290 2023-05-16 Tentative Ruling

DEPARTMENT 56 JUDGE HOLLY J. FUJIE, LAW AND MOTION RULINGS. The court makes every effort to post tentative rulings by 5.00 pm of the court day before the hearing. The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)], and are also available in the courtroom on the day of the hearing [see CRC 3.1308(b)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) call Dept 56 by 8:30 a.m. on the day of the hearing (213/633-0656) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no telephone call is necessary and all parties should appear at the hearing in person or by Court Call. Court reporters are not provided, and parties who want a record of motions and other proceedings must hire a privately retained certified court reporter.

MOVING PARTIES: Defendants Brian Kennedy (“Brian”), Regency Outdoor Advertising, Inc. (“Regency”), Skyline Outdoor Media, LLC (“Skyline”), and Drake Kennedy (“Drake”) (collectively, “Moving Defendants”) [1]

This action arises out of a business relationship involving the ownership and management of billboards. The currently operative fifth amended complaint (the “5AC”) alleges: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) breach of fiduciary duty; (4) false promise; (5) intentional interference with contractual relations; and (6) aiding and abetting breach of fiduciary duty.

In relevant part, the 5AC alleges: Plaintiff worked for brothers Brian and Drake, and their billboard businesses as a consultant for Regency and a 20 percent owner of Skyline. (See 5AC ¶¶ 4, 21, 24.)^{^[2]} Brian and Drake had a contentious relationship, and in 2013, Drake sued Brian for involuntary dissolution. (See 5AC ¶¶ 30, 34.) On April 1, 2017, a settlement agreement was reached in judicial buyout proceedings that resulted in the execution of a binding term sheet (the “BTS”) that included terms for the forced sales of the Kennedys’ companies’ business assets, such as the terms of Plaintiff’s compensation during the sale. (See 5AC ¶¶ 3, 35, Exhibit A.) The BTS was modified on October 9, 2017, March 2, 2018 and June 14, 2018. (See 5AC ¶¶ 41, 50, 59, Exhibits B-D.) After the first amendment to the BTS, the Kennedys decided that they would not pay Plaintiff his promised two percent bonus, despite separate representations to Plaintiff that he would be paid this amount. (See 5AC ¶¶ 42-44.)

Plaintiff helped the Kennedys make a billboard sale to Netflix, which Netflix conditioned on Plaintiff’s continuing to manage the transition of assets after the sale. (5AC ¶¶ 61-62.) When the Netflix sale closed, Plaintiff was paid one percent of the sale price. (5AC ¶ 68.) The Kennedys thereafter decided to stop paying Plaintiff money he was owed under the BTS. (See 5AC ¶¶ 69-73.) Regency also stopped paying Plaintiff his monthly salary that he was entitled to until all of its assets were sold and the terms of the BTS were fulfilled. (5AC ¶ 74.)

Brian, Regency and Skyline filed a demurrer (the “Demurrer”) to the fourth cause of action on the grounds that it fails to state sufficient facts to constitute a cause of action. Brian, Regency and Skyline also filed a motion to strike (the “Motion”) portions of the 5AC. Drake filed a joinder to both the Demurrer and Motion.

Moving Defendants’ Requests for Judicial Notice are GRANTED. Plaintiff’s Requests for Judicial Notice are GRANTED. While the Court takes judicial notice of the existence of court documents, it does not take notice of the truth of the matters stated therein. (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113.) In addition, though the Court takes judicial notice of factual findings in another proceeding, it does not take notice of the truth of that finding. (Steed v. Department of Consumer Affairs (2012) 204 Cal.App.4th 112, 121.)

A demurrer tests the sufficiency of a complaint as a matter of law. (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.) The court accepts as true all material factual allegations and affords them a liberal construction, but it does not consider conclusions of fact or law, opinions, speculation, or allegations contrary to law or judicially noticed facts. (Shea Homes Limited Partnership v. County of Alameda (2003) 110 Cal.App.4th 1246, 1254.) With respect to a demurrer, the complaint must be construed liberally by drawing reasonable inferences from the facts pleaded. (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) A demurrer will be sustained without leave to amend if there exists no reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

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 promisee 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 promisee. (Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1498.)

The heightened pleading for standard for fraud claims is relaxed if it appears from the nature of the allegations that the defendant must necessarily possess full information, or if the facts lie more in the knowledge of opposing parties. (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384-85.) The plaintiff need not plead specific information that should be within the knowledge of the defendant. (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.)

The Court finds that the 5AC sufficiently alleges a cause of action for false promise based on the misrepresentations made to induce Plaintiff to enter into the BTS and its subsequent amendments. As alleged, the claim is not barred by the statute of limitations because it is based on facts that have been alleged in earlier versions of the operative pleading. The Court therefore OVERRULES the Demurrer.

Under California Code of Civil Procedure (“CCP”) section 436, a motion to strike either: (1) strikes any irrelevant, false or improper matter inserted in any pleading; or (2) strikes any pleading or part thereof not drawn or filed in conformity with the laws of this state, a court rule or order of court. (CCP § 436, subds. (a)-(b).) “Irrelevant” matters include: allegations not essential to the claim, allegations neither pertinent to nor supported by an otherwise sufficient claim or a demand for judgment requesting relief not support by the allegations of the complaint. (CCP § 431.10, subd. (b).)

The allegations of the complaint are presumed true; they are read as a whole and in context. (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) A motion to strike should not be a procedural “line item veto” for the civil defendant. (PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1683.) Pleadings are to be construed liberally with a view to substantial justice. (CCP § 452.)

Moving Defendants seek to strike allegations concerning fiduciary duties under the BTS and punitive damages.

A plaintiff may recover punitive damages in an action for breach of an obligation not arising from contract when the plaintiff proves by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice. (Civ. Code § 3294, subd. (a).)

The request for punitive damages is rooted in the fourth cause of action. As the 5AC sufficiently alleges a claim based in fraud, the Court DENIES the Motion with respect to punitive damages.

Every contract to some extent requires each party to repose trust and confidence in the other; one party's right to contingent compensation, standing alone, does not give rise to a fiduciary duty. (City of Hope National Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 391.)

The 5AC alleges an interpretation of the BTS that imposes obligations beyond the right to compensation. (See, e.g., 5AC ¶ 36.) Moving Defendants do not raise arguments challenging Plaintiff’s interpretation of the BTS and the Court thus accepts Plaintiff’s interpretation as true. (See Aragon-Haas v. Family Security Ins. Services Inc. (1991) 231 Cal.App.3d 232, 240.) The Court therefore DENIES the Motion with respect to these allegations.

Moving Defendants are ordered to file a responsive pleading within 20 days of this order.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

[1] The Court uses first names to distinguish individuals with the same last name and intends no disrespect in so doing.

[2] The Court refers to Brian and Drake collectively as the “Kennedys” or the “Kennedy Defendants.”