Judge: Joel R Wohlfeil, Case: 37-2018-00054834-CU-BT-CTL, Date: 2024-03-22 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - March 07, 2024

03/08/2024  09:00:00 AM  C-73 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Joel R. Wohlfeil

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Civil - Unlimited  Business Tort Summary Judgment / Summary Adjudication (Civil) 37-2018-00054834-CU-BT-CTL AMINPOUR VS CALHOUN [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion for Summary Judgment and/or Adjudication, 12/08/2023

The Motion (ROA # 987, 1137, 1145) of Defendant LARA D. CALHOUN ('Defendant') for an order for summary judgment or, in the alternative, summary adjudication of the First Amended Complaint ('FAC') for (a) each and every cause of action pled by LarKing, Inc., and (b) the fifteenth cause of action for attempted civil extortion, by Plaintiffs Ashkan K. Aminpur and LarKing, Inc. ('Plaintiffs'), is GRANTED IN PART and DENIED IN PART.

The Motion for summary judgment is DENIED.

The alternative Motion for summary adjudication is DENIED to causes of action 1 - 14, and is GRANTED to cause of action 15.

These rulings are based on the analysis set forth below.

Defendant's Request (ROA # 991) for judicial notice is GRANTED IN PART and DENIED IN PART. The Court takes judicial notice of Exh's 'C and F' and the dates only on which Exh's 'A, B and D' were filed with the Court; otherwise, the Request is DENIED.

Plaintiffs' Requests (ROA # 1160, 1167) for judicial notice is GRANTED IN PART and DENIED IN PART.

The Court takes judicial notice of Exh's '5, 9, 10, 11 and 12' and the dates only on which Exh's '4 and 7' were filed with the Court; otherwise, the Request is DENIED.

Timeliness of Motion The proof of service (ROA # 992) indicates that plaintiffs were served via personal service and electronic service on December 8, 2023. This is more than 75 days before the hearing date. Also, the Court granted a request to hear this motion less than 30 days prior to trial.

Status as Suspended Corporation Except for filing an application for tax-exempt status or amending the articles of incorporation to change the corporate name, a suspended corporation is disqualified from exercising any right, power or privilege. Timberline, Inc. v. Jaisinghani (1997) 54 Cal. App. 4th 1361, 1365 (citing Rev. & Tax. Code 23301).

This means a suspended corporation may not prosecute or defend an action in a California Court. Id. Calendar No.: Event ID:  TENTATIVE RULINGS

3087483  19 CASE NUMBER: CASE TITLE:  AMINPOUR VS CALHOUN [IMAGED]  37-2018-00054834-CU-BT-CTL 'However, if the corporation's status only comes to light during litigation, the normal practice is for the trial court to permit a short continuance to enable the suspended corporation to effect reinstatement (by paying back taxes, interest and penalties) to defend itself in court.' Id. at 1366.

In a number of situations, the revival of corporate powers by the payment of delinquent taxes has been held to validate otherwise invalid prior action. Id. The purpose of section 23301 is to put pressure on the delinquent corporation to pay its taxes, and that purpose is satisfied by a rule which views a corporation's tax delinquencies, after correction, as mere irregularities. Id. There is little purpose in imposing additional penalties after the taxes have been paid. Id. The suspension of a corporation's corporate powers due to a failure to comply with statutory requirements governing corporations does not implicate the court's subject matter jurisdiction or prevent the corporation from commencing an action. CLD Construction, Inc. v. City of San Ramon (2004) 120 Cal. App. 4th 1141, 1151.

Noncomplying corporations have been permitted to revive their corporate powers or correct the defects prior to trial. Id. Upon correction of the defect, the corporation is permitted to prosecute or defend an action. Id. Disputed material facts exist indicating that Plaintiff LarKing was suspended as the result of a tax delinquency, which has since been corrected. It is disputed whether LarKing's corporate status has been reinstated and is once again in good standing such that this action may proceed.

Authorization for Lawsuit It is disputed whether the Board of Directors for LarKing, Inc. is deadlocked. Separate Statement no. 24.

There is evidence that this board consists of three directors, not two: Calhoun, Ashkan King Aminpour and Aurash Aminpour. Id. Nonetheless, it is undisputed the Board of Directors for LarKing, Inc. never voted to prosecute this action. Separate Statement no. 12. Instead, there is evidence that the decision for LarKing to commence and maintain this lawsuit was unilaterally made by Ashkan King Aminpour, as the purported President of the corporation. Separate Statement no. 26.

A corporation is a legal entity that is distinct from its shareholders. Grosset v. Wenaas (2008) 42 Cal. 4th 1100, 1108.

The authority to manage the business and affairs of a corporation is vested in its board of directors, not in its shareholders. Id. This includes the authority to commence, defend, and control actions on behalf of the corporation. Id. In Anmaco, Inc. v. Bohlken (1993) 13 Cal. App. 4th 891, the opinion states: 'Appellant argues at length that by virtue of the corporate bylaws, he, as president of Anmaco has 'general supervision, direction and control of the business and officers of the corporation.' Appellant finds in this sentence the express authority to institute legal actions on behalf of the corporation when the other 50 percent owner of the shares does not consent. The bylaws also provide that the president's exercise of his office is 'subject to the control of the Board of Directors ....' The bylaws further state: 'The business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of its Board of Directors.' The president does not have the power to enter into contracts or execute other instruments or render the corporation 'liable for any purposes or Calendar No.: Event ID:  TENTATIVE RULINGS

3087483  19 CASE NUMBER: CASE TITLE:  AMINPOUR VS CALHOUN [IMAGED]  37-2018-00054834-CU-BT-CTL any amount' without board authorization. We think it clear, from the restrictions on the power of the corporate officers, that there is no power to institute litigation in the corporate name against the other 50 percent shareholder.

In general, the issue of the president's power in the face of a corporate deadlock is unsettled, and has not been the subject of a great deal of case law. (See, e.g., Annot. (1949) 10 A. L. R. 2d 701.) Our Supreme Court has not found occasion to reach this issue. (Holt v. College of Osteopathic Physicians & Surgeons (1964) 61 Cal. 2d 750, 755 - 756, fn. 4.) 'There is a conflict in the decisions as to the right of the president of a corporation, in the event of a deadlock or division of the directors, to initiate litigation in the corporation's name.' 2A Fletcher, Cyclopedia of the Law of Private Corporations (1992 rev. § 618.10, p. 192.) Regarding the general power of the president to act when the directors are deadlocked, a commentator has stated that out-of-state cases are inconsistent in their results, but 'it is clear that the scope of such permissible action is extremely limited and clearly does not exist with respect to any major corporate decision.' (3 Marsh, Cal. Corporation Law (3d ed. 1992 supp.) § 22.21, p. 1878.)' Id. at 898, 899.

The opinion continues: 'After reviewing the issue, we agree with the New York courts that have found no presumptive or implied authority in the president to institute litigation in the name of the corporation against a codirector and equal shareholder. Pressing the corporation into litigation as a plaintiff is inappropriate where the other shareholder-director could claim equal authority to bring suit in the corporate name. This is particularly obvious in the instant case where Bohlken is not only an equal director and shareholder, but is also chief executive officer of the company. The proper vehicle for such a suit, when the gravamen of the complaint is injury to the corporation, is a shareholder's derivative action. (Corp. Code, § 800; Jones v. H. F. Ahmanson & Co. (1969) 1 Cal. 3d 93, 106 [81 Cal. Rptr. 592, 460 P. 2d 464].) There was no error in the order granting summary judgment.' Id. at 900 (footnote omitted).

'The president of a corporation has no inherent or presumptive authority to bring a direct action in the corporate name to redress harm done by individual directors. Where the bylaws confer no such authority, the president / 50% shareholder may not purport to file suit on behalf of the corporation against the other shareholder as a vehicle to break a board deadlock.' Soza and Jann, California Practice Guide: Corporations (The Rutter Group 2023) at ¶ 6:604.5.

Given the authority cited above, Ashkan King Aminpour, as purported President of the corporation, had no inherent or presumptive authority to bring a direct action in the name of LarKing, Inc. to redress harm done by Calhoun, a director and shareholder. On the other hand, the authority to prosecute this action could be conferred by express language within the corporate bylaws. The board could have expressly delegated this authority to Ashkan King Aminpour. The record on this Motion does not include the corporate bylaws. It is improper to submit new evidence with the reply papers. As a result, whether these bylaws confer the necessary authority remain a disputed issue of material fact.

15th COA: Civil Extortion Civil extortion is a 'recognized a cause of action for the recovery of money obtained by the wrongful threat of criminal or civil prosecution.' Fuhrman v. California Satellite Systems (1986) 179 Cal. App. 3d 408, 426 (disapproved on other grounds in Silberg v. Anderson (1990) 50 Cal. 3d 205 (citing Leeper v. Beltrami (1959) 53 Cal. 2d 195, 203 - 204 and Woodham v. Allen (1900) 130 Cal. 194, 198 - 200).

It is essentially a cause of action for moneys obtained by duress, a form of fraud. Id. Calendar No.: Event ID:  TENTATIVE RULINGS

3087483  19 CASE NUMBER: CASE TITLE:  AMINPOUR VS CALHOUN [IMAGED]  37-2018-00054834-CU-BT-CTL To be actionable, the threat of prosecution must be made with the knowledge of the falsity of the claim.

Id.

'The fatal flaw in plaintiff's action is that she apparently never paid the money defendants demanded in their letters.' Id. In Reese-Bey v. Ochoa (C. D. Cal., Apr. 20, 2021, No. CV2006693JAKDFM) 2021 WL 4803495, at *5, the federal District Court states: 'In California, extortion allows for the recovery of money obtained by the wrongful threat of criminal or civil prosecution. Fuhrman v. Cal. Satellite Sys., 179 Cal. App. 3d 408, 231 (1986), overruled on other grounds by Silberg v. Anderson, 50 Cal. 3d 205 (1990). 'It is essentially a cause of action for moneys obtained by duress, a form of fraud.' Id. '[T]he threat of prosecution must be made with the knowledge of the falsity of the claim.' Id. Plaintiffs' extortion claims are deficient. Plaintiffs do not allege having paid any money to Defendants. See Fuhrman, 179 Cal. App. 3d at 428 ('As she did not pay the money demanded by defendants, plaintiff did not sustain damages cognizable in a cause of action for duress.').

Plaintiffs thus fail to state a claim for extortion.' Plaintiffs cite Monex Deposit Co. v. Gilliam (C. D. Cal. 2009) 666 F. Supp. 2d 1135. However, this case appears to be an outlier: 'Following Fuhrman, a number of federal district court cases and California appellate cases recognize that a civil cause of action for extortion under California law is more appropriately considered a claim for 'moneys obtained by duress,' and many address whether a plaintiff complied with the additional requirements to plead that the defendant knew the extortive demand was false and that the plaintiff suffered actual damages.' Intermarketing Media, LLC v. Barlow (C. D. Cal., May 4, 2021, No. 820CV00889JLSDFMX) 2021 WL 5990190, at *12.

The Intermarketing Media, LLC case expanded upon this conclusion as follows: 'In contrast, at least one federal district court could be read to have relieved plaintiffs of the requirement of pleading damages, based on a criminal statute relating to the sending of an extortive writing that criminalizes such conduct whether or not any money or property was obtained as a result of the writing. See Monex Deposit Co. v. Gilliam, 666 F. Supp. 2d 1135, 1136 (C. D. Cal. 2009). The court did so in reliance on California's adoption of § 874A of the Restatement (Second) of Torts, which permits courts to create new tort causes of action based on criminal prohibitions. See id. at 1136 - 37.

No published California case has adopted the reasoning in Monex. And despite being decided over ten years ago, only one unpublished California appellate case has adopted its reasoning, and even that one does not analyze the issue. See Schiffman v. Knoll, No. B286311, 2019 WL 1254152, at *3 (Cal. Ct.

App. Mar. 19, 2019) (unpublished/noncitable) (relying on Monex and stating '[a] person can commit extortion even if he or she does not obtain any money or property as a result of the threat (§ 523, subd.

(a) [related to the sending of an extortive writing.]'); cf. Tran v. Eat Club, Inc., No. H046773, 2020 WL 4812634, at *15 (Cal. Ct. App. Aug. 18, 2020) (unpublished / noncitable) ('No California state case has relied upon the Restatement Second of Torts, section 874A to recognize a tort action for civil extortion based on criminal extortion under the Penal Code.'). In the absence of adoption of Monex's reasoning by California appellate courts or the California Supreme Court, the Court declines to adopt it here.' Id. at fn.10.

Although this District Court rulings in Reese-Bey and Intermarketing Media, LLC are not precedent, this Court finds that both are persuasive. Any cause of action for damages based on wrongful threats used to obtain money or property, whether labeled 'economic duress' or 'civil extortion,' is akin to a tort action for deceit based on fraud. Logic dictates that actual damages must be shown since such damages are an essential element of a tort action for deceit.

Plaintiffs also cite Cohen v. Brown (2009) 173 Cal. App. 4th 302. However, the only issue addressed in Calendar No.: Event ID:  TENTATIVE RULINGS

3087483  19 CASE NUMBER: CASE TITLE:  AMINPOUR VS CALHOUN [IMAGED]  37-2018-00054834-CU-BT-CTL Cohen was whether speech giving rise to a civil extortion claim is constitutionally protected, and thus protected by Code of Civil Procedure section 425.16 (anti-SLAPP). Id. at 317. The opinion concluded this was not protected speech such that the court 'need not reach the question as to whether plaintiff has made a prima facie showing that he can prevail on any of his various causes of action.' Id. at 318.

This opinion does not discuss the issue of the necessity of damages for purposes of pursuing a civil extortion claim. See also Flatley v. Mauro (2006) 39 Cal. 4th 299 (extortion not protected speech, anti-SLAPP motion properly denied).

In addition, the opinion in Galeotti v. International Union of Operating Engineers Local No. 3 (2020) 48 Cal. App. 5th 850 also does not support Plaintiffs' position. This opinion involved criminal extortion as the 'public policy' underlying a claim for wrongful termination in violation of public policy. It did not address the elements of a claim for civil extortion.

Plaintiff also cite the District Court order in Zoellner v. City of Arcata (N. D. Cal., Apr. 19, 2021, No.

18-CV-04471-EMC) 2021 WL 1531169. However, this ruling did not adopt the position that attempted civil extortion is a valid claim. Rather, the Court denied a motion to dismiss on the basis that the facts alleged could support a claim for intentional infliction of emotional distress. This action is far beyond the pleading stage and Plaintiffs have not sought leave to amend to allege a cause of action for IIED.

In this case, it is undisputed that Plaintiffs never paid any money, and Aminpour did not resign from Larking, Inc. in response to the allegedly extortionate demands. Separate Statement fact nos. 28 - 30.

As a result, the claim for civil extortion is not actionable and summary adjudication is granted on this basis.

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