Judge Holly J. Fujie, Case Number: BC512275, Date: 2024-10-22 Tentative Ruling

RESPONDING PARTY: Defendant SHERYL ROSENBERG (“Defendant” or “Rosenberg”)

The Court has considered the moving and opposition papers. No reply has been filed. Any reply was required to have been filed and served at least five court days prior to the hearing. (Code Civ. Proc., § 1005, subd. (b).)

This action was initiated on June 17, 2013, and stems from a dispute between two sisters, Plaintiff and Defendant, regarding the management and control of SD Sheryl Brigette, LLC (“SDSB”), a limited liability company formed for their benefit by their late father, Stanley Diller. The operative Third Amended Complaint (“TAC”) filed on July 16, 2019 asserts the following causes of action: (1) Declaratory Relief; (2) Breach of Fiduciary Duty (Individual); (3) Breach of Fiduciary Duty (Derivative); (4) Accounting and Constructive Trust; and (5) Judicial Expulsion. The TAC alleges that: (1) Plaintiff and Defendant were transferred equal interests in SDSB by their father, Diller, prior to his death; (2) Plaintiff and Defendant are both managing members of SDSB; but (3) Defendant has fraudulently deprived Plaintiff of her economic and management rights in SDSB.

On May 8, 2024, the Court issued a Statement of Decision on Phase One of the trial (“SOD – 1”), which addressed Plaintiff’s request for declaratory relief. On August 6, 2024, the Court issued a Statement of Decision on Phase Two of the trial, focusing on the validity of Defendant’s 24^th affirmative defense. Both Phase One and Phase Two of the trial were decided in favor of Plaintiff and against Defendant.

On June 26, 2024, Plaintiff filed the instant Motion for an Order to Clarify for SDSB’s Banks That It Is Member-Managed by Nine Members; or, in the Alternative, Enjoining Any Interference with the December 5, 2022 SDSB Members’ Resolution Appointing Muhammad Khilji, CPA as SDSB’s Daily Administrator; or, in the Alternative, for Appointing Khilji as SDSB’s Receiver Pendente Lite (the “Motion”). Defendant filed an opposition on October 9, 2024.

Defendant requests judicial notice of the June 16, 2015 Complaint filed in Orange County

Superior Court Civil Action No. 30-2015-00793563-CU-MC-CXC (Exhibit 1). The Court takes judicial notice of its existence, but not of the truth of assertions within. (Evid. Code, § 452(c), (d); Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375.)

A trial court has the inherent power to amend its statement of decision before the entry of judgment. (Bay World Trading, Ltd. v. Nebraska Beef, Inc. (2002) 101 Cal. App. 4th 135, 141.) Even after a court has issued a written decision, it retains the power to change its findings of fact or conclusions of law until judgment is entered. (Id., citing Phillips v. Phillips (1953) 41 Cal.2d 869, 874-875.) “Until a judgment is entered, it is not effectual for any purpose (Code Civ. Proc., § 664), and at any time before it is entered, the court may change its conclusions of law and enter a judgment different from that first announced. [Citations.] Moreover, a judge who has heard the evidence may at any time before entry of judgment amend or change his findings of fact. [Citations.]” (Id. at p. 874.)

Under the Cal. Rules of Court (“CRC”), rule 3.1590, “[a]ny party may, within 15 days after the proposed statement of decision and judgment have been served, serve and file objections to the proposed statement of decision or judgment.” (CRC rule 3.1590(g). Under the same rule, however, the CRC provides that the court “may, by written order, extend any of the times prescribed by this rule and at any time before the entry of judgment may, for good cause shown and on such terms as may be just, excuse a noncompliance with the time limits prescribed for doing any act required by this rule.” (CRC rule 3.1590(m).)

Plaintiff brought this Motion on the ground that on December 5, 2022, at a duly-noticed SDSB members’ meeting, six of SDSB’s member managers voted to have Muhammad Khilji, CPA (“Khilji”) take over the daily administration of SDSB. Plaintiff states that since Khilji’s appointment on said date, Defendant has refused to recognize that resolution, or to implement it. Defendant refuses to agree to any action regarding SDSB that requires the consent of Stanley Diller’s grandchildren, purportedly based on Defendant’s insistence that she and Plaintiff are the only two managing members of SDSB. Plaintiff alleges that as a result of Defendant’s refusal, she has suffered financial harm, and SDSB was not able to make timely tax payments, among others.

As such, Plaintiff asks the Court for an order to clarify its finding in SOD-1 that SDSB is managed by all nine members, including the seven grandchildren of Diller (Reid and Rosenberg’s cumulative children) — and not by Reid or Rosenberg alone. In the alternative, Plaintiff seeks an injunction enjoining anyone from interfering with Khilji’s administration of SDSB or, alternatively, the appointment of Khilji as SDSB’s receiver.

In opposition, Defendant argues that the Motion is improper for several reasons. Regarding Plaintiff's request to clarify this Court’s statement in SOD-1, Defendant contends that it is too late for such a request, as Plaintiff should have sought a declaration regarding the management of SDSB by nine members before Phase One of the trial, not afterward. Defendant also cites Rule of Court 3.1590(g), establishing a 15-day deadline for filing objections to a proposed Statement of Decision. Although Plaintiff did file objections to the proposed Statement at that time, she did not make the current request for the Court’s consideration then. Furthermore, Defendant argues that Plaintiff’s request for clarification cannot be treated as a motion for reconsideration, as such motions must be filed within ten days, and there are no new facts or attorney declaration attesting to the same. Defendant also asserts that whether SDSB has two or nine members is a disputed fact that should be resolved during the trial rather than through a regular motion.

The Court, however, had clearly stated its finding on this matter in SOD-1 based on the evidence presented during Phase One of trial. Specifially, the Court stated: “The sole initial member of SDSB was Diller. When [Diller] assigned 100% of his interest equally to Reid and Rosenberg, with half of each of their interests to their children, equally, Reid, Rosenberg, Eddie, Ben, Oliver R, Oliver M, Charlie, Brianna and Brandon became members of SDSB and thus were managers under the Articles. The Court finds that as of August 19, 2011 and continuing to the present time, all members of SDSB were the managers of SDSB.” (SOD-1, p. 15 (emphasis added).) This statement is correlated with the Court’s citation of SDSB’s Article of Organization stating that “6. THE LIMITED COMPANY WILL BE MANAGED BY:” with a checkmark in the box before the words “ALL LIMITED LIABILITY COMPANY MEMBER(S).” (Id., p. 14.)

Moreover, on the last page of SOD-1, the Court again stated that “[t]he Court specifically finds that all competent and credible evidence supports a definitive finding that Diller’s intent was to create an LLC that was equally managed by Plaintiff and Defendant, with membership interest also held by their children.” (Id., p. 34. (emphasis added).) Finally, the Conclusion of SOD-1 set forth that “SDSB is a multi-member all member-managed limited liability company.” (Id., (emphasis added).)

To the extent the parties need clarification, the Court confirms and reiterates its finding in the May 8, 2024 Statement of Decision that SDSB is an “all member-managed limited liability company”, and that it is managed by all its members, including Diller’s seven grandchildren. In light of this clarification, the Court finds it unnecessary to consider the alternative reliefs requested in Plaintiff’s Motion.

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