Judge Holly J. Fujie, Case Number: 24STCV03009, Date: 2024-08-29 Tentative Ruling

MOVING PARTY: Defendants DR. SHERVIN ERFANI (“Erfani”) and SET PRICE NOW, INC. (collectively, “Defendants”)

This case arises from a failed business relationship. On February 5, 2024, Ranklogic filed a complaint asserting the following causes of action: (1) trade secret misappropriation (injunctive relief); (2) trade secret misappropriation (damages); and (3) breach of fiduciary duty.

On June 7, 2024, Defendants filed a Demurrer to Plaintiff’s Complaint (the “Demurrer”), and subsequently filed a Motion to Strike Plaintiff’s Complaint (the “Motion to Strike”) on June 10, 2024. Ranklogic filed a timely opposition on August 16, 2024, and Defendants filed a late reply on August 23, 2024, which this Court exercises its discretion to consider.

Ranklogic’s objections to the Declaration of Kasra Sadr (Objections 1 through 3) are SUSTAINED. The statement and documents are extrinsic evidence. A demurrer “tests the pleadings alone and not the evidence or other extrinsic matters.” (SKF Farms v. Sup. Ct. (1984) 153 Cal.App.3d 902, 905.) Extrinsic evidence may not properly be considered on demurrer. (Ion Equipment Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.) Moreover, California Rules of Court, rule 3.1113(l) requires: “Any request for judicial notice must be made in a separate document listing the specific items for which notice is requested and must comply with rule 3.1306(c).”

1) Exhibit 1: State of California, Office Of The Secretary Of State, Statement and Designation - Out-of-State Stock Corporation, RankLogic, Inc., filed May 13, 2024;

2) Exhibit 2: California Secretary of State issued Certificate of Status of RankLogic, Inc., certified, and dated July 25, 2024; and

3) California Secretary of State printout from Business Search for RankLogic, Inc. on August 11, 2024, showing RankLogic is in Good Standing with the California Secretary of State.

Ranklogic’s request for judicial notice (“RJN”) is GRANTED as to all documents pursuant to Evidence Code sections 452(c) and 452(h).

The party against whom a complaint has been filed may object to the pleading, by demurrer, on several specified grounds, including that the person who filed the pleading does not have the legal capacity to sue; there is another action pending between the same parties on the same cause of action, or the pleading does not state facts sufficient to constitute a cause of action. (Code Civ. Proc. § 430.10(b), (d), (e).)

“A demurrer tests the sufficiency of the complaint as a matter of law; as such, it raises only a question of law.” (Osornio v. Weingarten (2004) 124 Cal.App.4th 304, 316.) No matter how unlikely or improbable, the complainant’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.) However, the Court does not need to assume the truth of “contentions, deductions or conclusions of law.” (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.)

Each evidentiary fact that might eventually form part of the plaintiff's proof need not be alleged. (C.A. v. William S. Hart Union High School Dist. (2012) 53 C4th 861, 872.) The complaint should be liberally, but reasonably construed. (Fisher v. San Pedro Peninsula Hospital¿(1989) 214 Cal.App.3d 590, 604.) It must be read as a whole, and its parts in their context to give the complaint a reasonable interpretation. (Estate of Holdaway (2019) 40 Cal.App.5th 1049, 1053.)

A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.)

A foreign corporation shall not transact intrastate business without having first obtained a certificate of qualification from the Secretary of State.¿ (Corp. Code, § 2105(a).)¿ A foreign corporation which transacts intrastate business without complying with Corp. Code section 2105 shall not maintain any action or proceeding upon any intrastate business until it has complied with those provisions and has paid to the Secretary of State a penalty of $250 in addition to the fees due for filing the statement and designation required.¿ (Corp. Code §2203(c).)

Here, Defendants assert that Ranklogic lacks standing to sue. Defendants contend that Ranklogic is a foreign (Delaware) corporation conducting business in California without having first obtained from the Secretary of State a certificate of qualification as required under Corporations Code § 2105, and therefore, under Corporations Code § 2203, cannot maintain this action. Defendants argue that Plaintiff filed only a registration of a foreign name. Defendants, however, have not properly provided any evidence with a request for judicial notice. A request for judicial notice must be filed as a separate document listing the specific items for which notice is requested. (California Rules of Court, rule 3.1113(l).)

In opposition, Plaintiff presents evidence through its RJN that on May 13, 2024, Ranklogic filed the required Statement & Designation form with the California Secretary of State to obtain a certificate of qualification to conduct intrastate business. (RJN, Exh. 1.) It also submitted in evidence that the California Secretary of State confirmed Ranklogic’s active and good standing with its Certification Status letter dated July 25, 2024 (RJN, Exh. 2). As evidenced by the documents from the California Secretary of State (RJN, Exhs. 1, 2, 3), Plaintiff has complied with Corporations Code § 2105, and is therefore not barred from maintaining this action.

Parenthetically, Defendants also raise in the Notice of Demurrer the Court’s lack of jurisdiction and uncertainty of the pleading as grounds for demurrer. Defendants, however, do not present any facts or legal authority to support the demurrer on this ground, and fail to discuss these grounds in the demurrer. Thus, the Court OVERRULES the demurrer on these grounds.

“Under the [California Uniform Trade Secrets Act], a prima facie claim for misappropriation of trade secrets requires the plaintiff to demonstrate: (1) the plaintiff owned a trade secret, (2) the defendant acquired, disclosed, or used the plaintiff’s trade secret through improper means, and (3) the defendant’s actions damaged the plaintiff.” (Sargent Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1665; see also Civ. Code, § 3426.1) “‘Trade secret’ means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: [¶] (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and [¶] (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” (Civ. Code, § 3426., subd. (d).) “‘Improper means’ includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” (Civ. Code, § 3426.1, subd. (a).)

Defendants assert that Ranklogic has not pleaded the existence of trade secrets with sufficient specificity. (Demurrer, p. 10.) The Complaint, however, alleges the trade secret at issue: “One of the products that RankLogic developed is called ‘Right Price Now.’ This was formerly called the ‘Best Price Now.’ This is an application that connects consumers and professionals for timely products and services based on the consumer’s needs, effectively, pairing consumers and professionals to instantly find each other for an agreed upon price. The “Right Price Now” was a product developed by Neder and Erfani together, for the benefit of RankLogic.” (Complaint, ¶ 16.) Ranklogic also sufficiently alleges that it took significant steps to protect the secrecy of the “Right Price Now” product and how it works. (Id., ¶ 17.)

Defendants also assert a statute of limitations defense, claiming that the Complaint alleges that the claims began in 2016. (Demurrer, p. 10.) An action for misappropriation of trade secret must be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered. (Glue-Fold, Inc. v. Slautterback Corp. (2000) 82 Cal.App.4th 1018, 1023.) The Complaint, however, specifically alleges that Ranklogic discovered the misappropriation in or around April 2023. (Complaint, ¶ 18.) Therefore, nothing on the face of the Complaint supports an assertion that it is barred by the statute of limitations.

“The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, breach of fiduciary duty, and damages.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820.)

Here, the Complaint sufficiently alleges that Defendant Erfani is a shareholder and was a director and officer of Ranklogic (Complaint, ¶ 35), and that as a Director and Officer of the company, Erfani owed a fiduciary duty of care, loyalty and disclosure to Ranklogic and its stockholders. (Id., ¶ 36.) Plaintiff has therefore alleged sufficient facts that Defendant Erfani was in a fiduciary relationship with Ranklogic, and that based on his conduct as alleged in paragraphs 15 through 21 of the Complaint, he breached his fiduciary duties owed to Ranklogic which caused Plaintiff damages. (Complaint, ¶¶ 36-39.)

Defendants move to strike portions of the Complaint referencing punitive damages on the ground that there are no facts to support a claim therefor.

Punitive damages may be recovered upon a proper showing of malice, fraud, or oppression. (Civ. Code, § 3294, subd. (a).) “Malice” is defined as conduct intended to cause injury to a person or despicable conduct carried on with a willful and conscious disregard for the rights or safety of others. (Turman v. Turning Point of Cent. Cal., Inc. (2010) 191 Cal.App.4th 53, 63.) “Oppression” means despicable conduct subjecting a person to cruel and unjust hardship, in conscious disregard of the person’s rights. (Ibid.) “Fraud” is an intentional misrepresentation, deceit, or concealment of a material fact known by defendant, with intent to deprive a person of property, rights or otherwise cause injury. (Ibid.) Conclusory allegations, devoid of any factual assertions, are insufficient to support a conclusion that parties acted with oppression, fraud or malice. (Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1042.)

It is clear that a demand for punitive damages for the commission of any tort requires more than the mere allegation of the “wrongfully and intentionally,” “oppression, fraud, and malice” sort of language found in Civil Code § 3294. (Perkins v Superior Court (1981) 117 Cal.App.3d 1, 6 – 7.) The allegations of fact must, in their totality, describe a state of mind and a motive that would sustain an award of punitive damages. (Id.) The mere allegation that an intentional tort is committed is not sufficient to warrant an award of punitive damages. (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 166.) Not only must there be circumstances of oppression, fraud or malice, but facts must be alleged in the pleading to support such a claim. (Id.)

Here, the Complaint does not allege facts sufficient to constitute malice, oppression or fraud as those terms are defined in Civil Code § 3294(c)(1)-(3) for purposes of the imposition of punitive damages. Thus, the Motion to Strike is GRANTED as to all references to punitive damages, with thirty days leave to amend.

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.

Hon. Holly J. Fujie

Judge of the Superior Court