Judge Joel L. Lofton, Case Number: 23AHCV00341, Date: 2023-11-30 Tentative Ruling

Judge: Joel L. Lofton, Case: 23AHCV00341, Date: 2023-11-30 Tentative Ruling

Case Number: 23AHCV00341 Hearing Date: November 30, 2023 Dept: X

Tentative Ruling

Judge Joel L. Lofton, Department X

HEARING DATE: November 30, 2023 TRIAL DATE: No date set.

CASE: PALLICKAL, MALLIK, PONNEZHAN MEDICAL CORPORATION, a California professional corporation, v. NALIN MALLIK, M.D., an individual; NM MEDICAL, a California corporation; INNOVATIVE HEALTH ASSOCIATES, INC., a California corporation; DOES 1 through 20.

Cross: NALIN MALLICK, M.D., an individual, v. LEEJOE PALLICKAL, M.D., an individual; VIMAL PONNEZHAN, M.D., an individual; COMPREHENSIVE CARE PROVIDERS CORPORATION, a California corporation; PALLICKAL, MALLIK, PONNEZHAN MEDICAL CORPORATION, a California professional corporation; and ROES 1 through 20.

CASE NO.: 23AHCV00341

DEMURRER WITH MOTION TO STRIKE

MOTION FOR ORDER REQUIRING BOND

MOVING PARTY: Comprehensive Care Providers Corporation, Leejoe Pallickal, M.D. and Vimal Ponnezhan M.D.

Pallickal, Mallick, Ponnezhan Medical Corporation

RESPONDING PARTY: Nalin Mallick M.D.

SERVICE: Demurrers separately filed September 11, 2023

OPPOSITION: Filed November 15, 2023

REPLY: Filed November 20 and 21, 2023

BACKGROUND

This case arises out of Plaintiff Pallickal, Mallik, Ponnezhan Medical Corporation’s claim that Defendant Nalin Mallick, M.D. (“Dr. Mallick”) breached his fiduciary duty to Plaintiff. Plaintiff filed this complaint on February 16, 2023, alleging two causes of action of action for breach of fiduciary duty and intentional interference with prospective economic advantage.

Dr. Mallick filed a first amended cross-complaint (“FACC”) on July 10, 2023, alleging four causes of action for breach of fiduciary duty.

TENTATIVE RULING

CCPC’s demurrer to Dr. Mallick’s first and second causes of action is SUSTAINED with 20 days leave to amend.

Dr. Pallickal and Dr. Ponnezhan’s demurrer to Dr. Mallick’s third cause of action is SUSTAINED with 20 days leave to amend. The remainder of Dr. Pallickal and Dr. Ponnezhan’s demurrer is OVERRULED.

PMP’s demurrer to Dr. Mallick’s second and fourth causes of action is SUSTAINED with 20 days leave to amend.

Cross-Defendants’ motion to strike is DENIED.

PMP’s motion for an order to furnish a bond is DENIED.

LEGAL STANDARD

Demurrer

A general demurrer may be taken to a complaint where “[t]he pleading does not state facts sufficient to constitute a cause of action.” (Code of Civ. Proc. § 430.10(e).) A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (Code Civ. Proc. section 430.30(a).) 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.) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn v. Mirda, supra, 147 Cal.App.4th 740, 747.)

Additionally, a special demurrer to a complaint may be brought on the ground the pleading is uncertain, ambiguous, or unintelligible. Code Civ. Proc section 430.10(f); Beresford Neighborhood Assn. v. City of San Mateo (1989) 207 Cal.App.3d 1180, 1191.) A demurrer based on uncertainty is disfavored and will be strictly construed even when the pleading is uncertain in some respects. (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.) A demurrers based on uncertainty are “granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Lickiss v. Financial Industry Regulatory Authority (2012) 208 Cal.App.4th 1125, 1135.)

Motion to Strike

Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike a pleading or any part thereof. (Code Civ. Proc., § 435, subd. (b)(1).) The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) The court may also strike all or any part of any pleading not drawn or filed in conformity with California law, a court rule, or an order of the court. (Code Civ. Proc., § 436, subd. (b).) An immaterial or irrelevant allegation is one that is not essential to the statement of a claim or defense; 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. (Code Civ. Proc., 431.10, subd. (b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., § 437.)

DISCUSSION

This hearing involves two separately filed demurrers. The first demurrer is filed by Comprehensive Care Providers Corporation (“CCPC”), Leejoe Pallickal, M.D. (“Dr. Pallickal”), and Vinal Ponnezhan, M.D. (“Dr. Ponnezhan”) (collectively “Cross-Defendants”). The second demurrer is filed by Pallickal, Mallick, Ponnezhan Medical Corporation (“PMP” or “Nominal Cross-Defendant”).

Direct versus Derivative Claims

An overarching theme in the two demurrers is whether Dr. Mallik’s claims are derivative or direct. The FACC alleges four separate causes of action for breach of fiduciary duty. “ ‘The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) its breach, and (3) damage proximately caused by that breach.’ ” (O’Neal v. Stanislaus County Employees’ Retirement Assn. (2017) 8 Cal.App.5th 1184, 1215.) The first and third causes of action are facially listed as direct claims while the second and fourth causes of action are facially listed as derivative claims.

“Shareholders may bring two types of actions, ‘a direct action filed by the shareholder individually (or on behalf of a class of shareholders to which he or she belongs) for injury to his or her interest as a shareholder,’ or a ‘derivative action filed on behalf of the corporation for injury to the corporation for which it has failed or refused to sue.’ ” (Schuster v. Gardner (2005) 127 Cal.App.4th 305, 311-12.) “A single cause of action by a shareholder can give rise to derivative claims, individual claims, or both.” (Goles v. Sawhney (2016) 5 Cal.App.5th 1014, 1018, fn. 3.) “But where a cause of action seeks to recover for harms to the corporation, the shareholders have no direct cause of action ‘[b]ecause a corporation exists as a separate legal entity’ [citation] and ‘is the ultimate beneficiary of such a derivative suit’ ”. (Schrage v. Schrage (2021) 69 Cal.App.5th 126, 149.)

CCPC, Dr. Pallickal, and Dr. Ponnezhan’s Demurrer

Dr. Mallick’s first cause of action is nominally a direct shareholder claim against Dr. Pallickal, Dr. Ponnezhan, and CCPC. Cross-Defendants argue that the first cause of action fails because it is entirely a derivative claim.

“ ‘[T]he action is derivative, i.e., in the corporate right, if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets.’ ” (Jara v. Supreme Meats, Inc. (2004) 121 Cal.App.4th 1238, 1254.) “ ‘The stockholder's individual suit, on the other hand, is a suit to enforce a right against the corporation which the stockholder possesses as an individual.’ ” [citations.] For example, “ ‘[i]f the injury is one to the plaintiff as a stockholder and to him individually, and not to the corporation, as where the action is based on a contract to which he is a party, or on a right belonging severally to him, or on a fraud affecting him directly, it is an individual action.’ ” (Schrage v. Schrage, supra, 69 Cal.App.5th at p. 150.) “If the injury is not incidental to an injury to the corporation, an individual cause of action exists.” (Ibid.)

Dr. Mallick’s first cause of action, in large part, does allege a derivative claim because the allegations involve harm to PMP. Dr. Mallick alleges that Cross-Defendants formed a separate corporation to compete against PMP and took PMP’s funds. (FACC ¶¶ 29-30.) Dr. Mallick also alleges that he was harmed because he was denied a share of PMP’s resulting profits. (Id. ¶ 32.) These allegations pertain to harm suffered by PMP are therefore the basis of a derivative claim.

In opposition to Cross-Defendants’ demurrer, Dr. Mallick asserts that he is asserting a direct claim because he alleges that Cross-Defendants denied him work hours at Good Samaritan Hospital during May and June of 2022. (FACC ¶¶ 30, 32.) Dr. Mallick also argues he makes a direct claim when he alleges that Dr. Pallickal and Dr. Ponnezhan withdrew $116,000 from PMP, relying on Jara v. Suprema Meats, Inc. (2004) 121 Cal.App.4th 1238. (Ibid.) However, Dr. Mallick’s reliance on Jara is misplaced. In Jara, the plaintiff had alleged that the individual defendants had received compensation that exceeded the amount agreed upon. (Id. at p. 1243.) The Jara court stated that a “minority shareholder [is allowed] to bring a personal action alleging ‘a majority stockholders' breach of a fiduciary duty to minority stockholders, which resulted in the majority stockholders retaining a disproportionate share of the corporation's ongoing value.’ ” (Id. at pp. 1257-58.)

Here, Dr. Mallick alleges that Cross-Defendants improperly withdrew $116,000 from PMP’s accounts and paid their personal debts. (FACC ¶ 30.) Dr. Mallick does not allege he was a minority shareholder or that Cross-Defendants acted in a way to harm him rather than PMP. Dr. Mallick alleges that Cross-Defendants improperly took money from PMP, which is harm to PMP directly and the basis of a derivative claim.

Dr. Mallick states a direct claim against Cross-Defendants for denying him shifts. Dr. Mallick alleges facts pertaining to a derivative claim within his nominally titled direct cause of action. However, “[o]rdinarily, a general demurrer does not lie as to a portion of a cause of action, and if any part of a cause of action is properly pleaded, the demurrer will be overruled.” (Fire Ins. Exchange v. Superior Court (2004) 116 Cal.App.4th 446, 452.) Thus, Dr. Mallick’s first cause of action states a direct claim.

The last issue is whether CCPC is properly named as a Cross-Defendant. CCPC is alleged as a Cross-Defendant to Dr. Mallick’s first and second causes of action. Dr. Mallick concedes that he does allege he was a member of CCPC or that CCPC owes him a duty. Dr. Mallick argues that CCPC is a party because it the appropriate Defendant for a constructive trust.

“A constructive trust is an equitable remedy that compels a wrongdoer – one who has property or proceeds to which he is not justly entitled – to transfer same to its rightful owner.” (Shoker v. Superior Couty of Alameda County (2022) 81 Cal.App.5th 271, 278.) The elements required to create a constructive trust are (1) the property, (2) the plaintiff’s right to that property, and (3) the defendant’s acquisition of the property by some wrongful act. (Optional Capital, Inc. v. DAS Corp. (2014) 222 Cal.App.4th 1388, 1402.) Dr. Mallick does not allege that CCPC obtained any property owed to him by wrongful act. Thus, CCPC’s demurrer to Dr. Mallick’s first and second causes of action is sustained.

Cross-Defendants also argue that Dr. Mallick’s sixteenth affirmative defense is a conclusive rebuttal against Dr. Mallick’s own claims. The court declines to follow Cross-Defendants’ request to read Dr. Mallick's own allegations as making factual claims against him. To do so would go against the judicial precept of reading the allegations in the light most favorable to Dr. Mallick. (See Venice Town Council, Inc. v. City of Los Angeles (1996) 47 Cal.App.4th 1547, 1557.) Dr. Pallickal and Dr. Ponnezhan’s demurrer to Dr. Mallick’s first cause of action is overruled.

Dr. Mallick’s third cause of action focuses on harm solely to PMP. Dr. Mallick alleges that Dr. Pallickal and Dr. Ponnezhan took business away from PMP and failed to exercise due care while preparing PMP’s taxes. (FACC ¶¶ 49-51.) The alleged harm pertain solely to harm experienced by PMP. Thus, Dr. Mallick’s third cause of action fails as a direct claim. Cross-Defendant’s demurrer to Dr. Mallick’s third cause of action is sustained.

PMP’s Demurrer

PMP demurrers to Dr. Mallick’s second and fourth causes of action containing derivative claims. A preliminary issue argued by both parties is the significance of Dr. Mallick’s prayer for a constructive trust. PMP argues that Dr. Mallick is trying to enrich himself and not seeking redress to harm to PMP, the function of a derivative suit. However, PMP cites no authority for the proposition that a demurrer should be sustained where a party pleads a particular self-serving remedy.

The next issue is whether Dr. Mallick’s FACC complies with Corporations Code section 800, subdivision (b)(2), (“section 800”). Section 800, subdivision (b)(2), requires a plaintiff to allege “in the complaint with particularity plaintiff’s efforts to secure from the board such action as plaintiff desires, or the reasons for not making such effort, and alleges further that plaintiff has either informed the corporation or the board in writing of the ultimate facts of each cause of action against each defendant or delivered to the corporation or the board a true copy of the complaint which plaintiff proposes to file.”

Dr. Mallick argues that he sufficiently alleged futility because Dr. Pallickal and Dr. Ponnezhan were the only members of the board and interested in the various transactions. (FACC ¶¶ 42-59.) However, Dr. Mallick concedes that he did not allege he informed the board in writing of the ultimate facts. Although Dr. Mallick attempts to skirt around this requirement, the simple fact of the matter is that his allegations currently fail to comply with the statutory requirements.

PMP’s demurrer to Dr. Mallick’s second and fourth causes of action is sustained.

Cross-Defendants’ Motion to Strike

Cross-Defendants’ move to strike portions or the entirety of sixteen paragraphs of Dr. Mallick’s FACC based on Dr. Mallick’s sixteenth affirmative defense. As previously stated, Cross-Defendants request this court to read Dr. Mallick’s allegations against him. The court declines to do so. Cross-Defendants’ motion to strike is denied.

Motion to Furnish Bond

PMP moves for an order requiring Dr. Mallick to furnish a bond totaling $50,000. Corporations Code section 800, subdivision (c), provides: “In any action referred to in subdivision (b), at any time within 30 days after service of summons upon the corporation or upon any defendant who is an officer or director of the corporation, or held such office at the time of the acts complained of, the corporation or the defendant may move the court for an order, upon notice and hearing, requiring the plaintiff to furnish a bond as hereinafter provided. The motion shall be based upon one or both of the following grounds: [¶] (1) That there is no reasonable possibility that the prosecution of the cause of action alleged in the complaint against the moving party will benefit the corporation or its shareholders. [¶] (2) That the moving party, if other than the corporation, did not participate in the transaction complained of in any capacity. [¶] The court on application of the corporation or any defendant may, for good cause shown, extend the 30-day period for an additional period or periods not exceeding 60 days.”

The court observes that in PMP’s motion, PMP conveniently omits the portion of statute that provides that the corporation may move for an order within 30 days of service. This is omission is convenient for PMP because according to the proof of service attached to Dr. Mallick’s FACC, service of the most recent cross-complaint was on July 10, 2023. However, this motion for a bond was not filed until September 11, 2023. PMP does not mention this timing issue. PMP’s motion for an order requiring Dr. Mallick to file a bond is denied.

CONCLUSION

CCPC’s demurrer to Dr. Mallick’s first and second causes of action is SUSTAINED with 20 days leave to amend.

PMP’s demurrer to Dr. Mallick’s second and fourth causes of action is SUSTAINED with 20 days leave to amend.

Cross-Defendants’ motion to strike is DENIED.

PMP’s motion for an order to furnish a bond is DENIED.

Dated: November 30, 2023 ___________________________________

Joel L. Lofton

Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court indicating their

intention to submit. alhdeptx@lacourt.org