Judge John C. Gastelum, Case 18-01037455 2022-10-05 Tentative Ruling

Judge: John C. Gastelum, Case: 18-01037455, Date: 2022-10-05 Tentative Ruling

Motion for Summary Judgment and/or SAI

Tentative Ruling: Defendant Newport Center Anacapa Associates, LLC’s Motion for Summary Judgment as to the Ninth Cause of Action for Judicial Dissolution alleged in the First Amended Complaint is GRANTED.

Defendant Newport Center Anacapa Associates, LLC (“NCAA”) moves for summary judgment in its favor and against Plaintiff 150 Newport Center Drive, LLC (“150 NCD”) as to the Ninth Cause of Action for Judicial Dissolution alleged in the First Amended Complaint filed by Plaintiffs Kimberly Moffatt Jones and 150 NCD (collectively, “Plaintiffs).

NCAA’s Request for Judicial Notice: The Court GRANTS NCAA’s Request for Judicial Notice as to Exhibit A pursuant to Evidence Code section 452(d), and as to Exhibits B through D pursuant to Evidence Code section 452(h), but declines to take notice of the truth of the statements stated therein.

Plaintiffs’ Request for Judicial Notice:

The Court GRANTS Plaintiff’s Request for Judicial Notice as to Exhibit 1 pursuant to Evidence Code section 452(h), but declines to take notice of the truth of the statements stated therein.

A defendant moving for summary judgment or summary adjudication has met his or her burden of showing that a cause of action has no merit if he or she shows one or more elements of the cause of action cannot be established, or that there is a complete defense to that cause of action. (Code Civ. Proc. § 437c(p)(2).) Once the defendant has met that burden, the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists as to that cause of action or a defense. (Ibid.) A plaintiff must set forth specific facts showing that a triable issue of material fact exists as to a cause of action or a defense thereto. (Ibid.)

The court follows a three-step process in reviewing a summary judgment motion. (Hansra v. Superior Court (1992) 7 Cal.App.4th 630, 638.) The court first “ ‘identif[ies] the issues framed by the pleadings since it is these allegations to which the motion must respond by establishing a complete defense or otherwise showing there is no factual basis for relief on any theory reasonably contemplated by the opponent’s pleading. [Citations.][¶].’ ” (Ibid.) Second, the court “ ‘determine[s] whether the moving party’s showing has established facts which negate the opponent’s claim and justif[ies] a judgment in movant’s favor. [Citations.] . . . [¶] When a summary judgment motion prima facie justifies a judgment, the third and final step is to determine whether the opposition demonstrates the existence of a triable, material factual issue. [Citation.]’ [Citation.]” (Ibid.)

The party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849-850.) The party moving for summary judgment also “bears an initial burden of production to make a prima facie showing of the nonexistence of any trial issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact.” (Id. at p. 850.)

“The motion shall be supported by affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice shall or may be taken.” (Code Civ. Proc., § 437c(b)(1).) “The opposition, where appropriate, shall consist of affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice shall or may be taken.” (Code Civ. Proc., § 437c(b)(2).)

Where facts relevant to standing are undisputed, standing is a question of law. (Scott v. Thompson (2010) 184 Cal.App.4th 1506, 1510.) “A litigant’s standing to sue is a threshold issue to be resolved before the matter can be reached on the merits. [Citation.]” (Blumhorst v. Jewish Family Services of Los Angeles (2005) 126 Cal.App.4th 993, 1000.)

Judicial Dissolution under Corporations Code section 17707.03

NCAA contends 150 NCD ceased being a Member of NCAA prior to filing its original Complaint in December 2018, and thus, lacked standing to bring a cause of action for judicial dissolution under Corporations Code section 17707.03(a) because 150 NCD became involuntarily withdrawn and disassociated as a Member.

The Ninth Cause of Action for Judicial Dissolution in Plaintiffs’ First Amended Complaint (“FAC”) is brought pursuant to Corporations Code sections 17707.01 and 17707.03 against NCAA only. As relevant to 150 NCD’s ability to bring this cause of action, the FAC alleges:

145. Plaintiff 150 Newport Center is, and has been since before the time of the filing of the Complaint in this matter, still a member of NCAA, because NCAA has not complied with the buyout provisions in either the NCAA Agreement or Corporations Code § 17707.03.

146. In fact, the buyout provisions in the NCAA Agreement are contrary to law, pursuant to Corporations Code § 17701.10(c)(8).

147. 150 Newport Center is entitled to the dissolution and winding up of NCAA under the provisions of Cal. Corp. Code § 17707.03, and requests, without limitation, the appointment of a receiver to effectuate such dissolution and winding up.

(Ex. 11 to Declaration of Daniel E. Joslyn (“Joslyn Decl.”), FAC, ¶¶ 145-147.)

Corporations Code section 17706.02 states, in pertinent part: “A person is disassociated as a member from a limited liability company when any of the following occur: . . . (b) An event stated in the operating agreement as causing the person’s dissociation to occur.” (Corp. Code § 17706.02(b).)

Corporations Code section 17707.03 states, in part: “Pursuant to an action filed by any manager or by any member or members of a limited liability company, a court of competent jurisdiction may decree the dissolution of a limited liability company whenever any of the events specified in subdivision (b) occurs. (Corp. Code § 17707.03(a).)

It is undisputed that NCAA was formed on November 18, 2013, that 150 NCD was formed on December 23, 2013, and that 150 NCD was admitted as a member of NCAA on January 8, 2014, by executing the Second Amendment to the Operating Agreement. (Plaintiff’s Separate Statement in Opposition (“PSS”), 1, 24, 25.)

NCAA’s Operating Agreement sets forth an enumerated list of 12 events that constitute an “Involuntary Withdrawal,” including two events at issue set forth in subdivisions (b)(7) and (b)(11) which state, in relevant part:

(b) “Involuntary Withdrawal” means, with respect to any Member, the occurrence of any of the following events:

[¶¶]

(7) if the Member is a partnership or limited liability company, the dissolution and commencement of winding up of the partnership or limited liability company; or if the partnership’s or limited liability company’s powers are suspended and not revived within thirty (30) days; . . . .

[¶¶.]

(11) if the Member files an action seeking a decree of judicial dissolution pursuant to Section 17351 of the Act; . . . .

(Ex. A to Declaration of Tod Ridgeway attached to Notice of Errata (“Ridgeway Decl.”), NCAA Operating Agreement, § 6.2(b) at pp. 12-13; ROA 1607.)

The threshold issue is whether “Involuntary Withdrawal” means that the person has disassociated as a member where the Operating Agreement does not expressly state as such. Though not discussed or analyzed by the parties as such, this becomes an issue of contract interpretation.

“When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible; . . . .” (Civil Code § 1639.) “Under California law, contracts are interpreted by an objective standard; the words of the contract control, not one party’s subjective intentions. (Brant v. California Dairies, Inc. (1935) 4 Cal.2d 128, 133.)” (Global Packaging v. Superior Court (2011) 196 Cal.App.4th 1623, 1234.) “An interpretation which gives effect is preferred to one which makes void.” (Civil Code § 3541.) If it may be done without violating the parties’ intent, we must interpret the contract in such a way as to make it “lawful, operative, definite, reasonable, and capable of being carried into effect.” (Civil Code § 1643.) “The words of a contract are to be understood in their ordinary and popular sense, rather than according to their strict legal meaning; . . . .” (Civil Code § 1644.)

It is undisputed that Exhibit C to the Operating Agreement defines “Voluntary Withdrawal” as “a Member’s disassociation from the Company [NCAA] by means other than a Transfer of Involuntary Withdrawal.” (PSS, 107; Ex. A to Ridgeway Decl., NCAA Operating Agreement, Ex. C, “Certain Terms Defined” at p. 27; ROA 1607.)

Corporations Code section 17706.03 states, in relevant part:

(a) When a person is dissociated as a member of a limited liability company all of the following apply:

(1) The person's right to vote or participate as a member in the management and conduct of the limited liability company's activities terminates.

(2) If the limited liability company is member-managed, the person' s fiduciary duties as a member end with regard to matters arising and events occurring after the person's dissociation.

(3) Subject to Section 17705.04 and Article 10 (commencing with Section 17710.01), any transferable interest owned by the person immediately before dissociation in the person's capacity as a member is owned by the person solely as a transferee.

(Corp. Code, § 17706.03(a).)

Applying the principles of contract interpretation, and interpreting the relevant language of the Operating Agreement, including the definition of “Voluntary Withdrawal” by an objective standard which gives effect to Section 6.2, the 12 enumerated events constituting an “Involuntary Withdrawal” as set forth in Section 6.2 of the Operating Agreement are reasonably interpreted as causing the person’s dissociation to occur.

Plaintiffs appear to concede that 150 NCD’s powers were suspended by the Secretary of State of California and were not revived within 30 days as they do not dispute the specific assertion that 150 NCD’s powers were suspended on August 7, 2018, and that those powers were not revived until November 2019, such that they were not revived within 30 days. (NCAA’s Separate Statement of Undisputed Material Facts (“SSUMF”), 108-109.) Plaintiffs do not dispute either of these facts, but only respond that “150 NCD is currently authorized to conduct business in California, and any past problems with such authorization within California have now been cured by 150 NCD.” (PSS, 108-109.)

Despite this concession, Plaintiffs first argue that they were not provided with documents in discovery, namely, California Secretary of State records and the corporate history of 150 NCD at the California Secretary of State’s official business records portal which are attached to Mr. Chatow’s declaration, and which are also attached as Exhibit D to NCAA’s Request for Judicial Notice (“NCAA’s RJN”). (Declaration of Mark E. Chatow (“Chatow Decl.”), ¶¶ 12-13; Exs. K and L; NCAA’s RJN, Ex. D.) There is no evidence submitted to support the assertion that Plaintiffs were not provided with these documents in discovery, nor have Plaintiffs otherwise separately filed any objections to the admission of these documents. The Court notes that these are publicly available documents and 150 NCD would be in the best position to know of its entity status at all times with the State of California, and as such, exclusion of such evidence does not appear warranted, and are be considered.

Plaintiffs next argue that “any problems 150 NCD had with its California status have obviously since been cured, and the argument is therefore moot.” (Opposition, 17:17-19.) However, Plaintiffs provide no evidence or authority supporting that any Involuntary Withdrawal event, including such event under Section 6.2(b)(7), can be “cured” such that a disassociated Member automatically becomes a Member again. Thus, this argument is not supported. The Court may treat an argument as waived where no legal authority supporting the argument is cited. (Hood v. Gonzales (2019) 43 Cal.App.5th 57, 73-74.)

Plaintiffs additionally argue that “NCAA itself has acknowledged that 150 NCD was a member of NCAA in 2021 through NCAA’s sending 150 NCD tax documentation for 150 NCD’s share of NCAA for the year 2021.” (Opposition, 17:19-21.) Plaintiffs provide no authority indicating or supporting the effect of such actions by NCAA, and tax documentation does not appear to show whether a person is disassociated as a member as Corporations Code section 17706.03(a) only speaks to the termination of the person’s right to vote or participate as a member in the management and conduct of the company, and the termination of the person’s fiduciary duties with regard to matters arising and events occurring after the person's dissociation. As a result, the fact that 150 NCD received tax documentation does not tend to support that it is not a disassociated person.

Finally, Plaintiffs argue that “even if NCAA’s argument were somehow correct, all that would mean is NCAA would have had the ability to invoke the buy out procedures of § 6.3 of the Operating Agreement,” and that there is no dispute that NCAA did not do this. (Opposition, 17:21-24.) Despite these arguments by Plaintiffs, there is no analysis or authority to support Plaintiffs’ interpretation of when disassociation occurs. Plaintiffs cite to no part of the Operating Agreement which states that disassociation occurs when the buy-out provision of Section 6.3 of the Operating Agreement is completed.

Based on the foregoing, the occurrence of one of the 12 events constituting an “Involuntary Withdrawal” is interpreted as causing a person’s disassociation from NCAA and the undisputed material facts show that 150 NCD became disassociated as a member when an “Involuntary Withdrawal” event under Section 6.2(b)(7) occurred as 150 NCD’s powers were suspended on August 7, 2018 by the California Secretary of State and not revived within 30 days, as it was not revived until November 26, 2019. (PSS, 108-109; Chatow Decl., ¶¶ 12-13; Exs. K and L; NCAA’s RJN, Ex. D.) It thus appears that 150 NCD became disassociated as a member after September 6, 2018, which is 30 days after August 7, 2018, when its powers were suspended.

As noted above, Corporations Code section 17707.03 allows for a court to decree the dissolution of a limited liability pursuant to an action filed by any manager or by any member of a limited liability company. (Corp. Code § 17707.03(a).) 150 NCD filed the instant Complaint on December 10, 2018, and summons on December 14, 2018 (see ROA 2, 7) after it had already become disassociated a member of NCAA, such that it could not have brought the Ninth Cause of Action under Corporations Code section 17707.03(a) as it was not a member of NCAA, and in turn, does not have standing. Thus, NCAA shows that it is entitled to judgment as a matter of law.

To the extent that a limited liability company, i.e., 150 NCD, could cure a suspension of its powers and revive its powers after 30 days, Plaintiffs provide no evidence or authority to support that such action automatically reverses its disassociation. Consequently, that 150 NCD may be currently active and in good standing does not establish that it is now a Member of NCAA, and Plaintiffs fail to create a triable issue as to whether there was an “Involuntary Withdrawal” event under Section 6.2(b)(7) of the Operating Agreement and whether they are a disassociated member. Therefore, the Court GRANTS the motion for summary judgment as to the Ninth Cause of Action for Judicial Dissolution.

In light of the Court’s ruling that 150 NCD became an involuntary withdrawn and disassociated member under Section 6.2(b)(7) of the Operating Agreement in September 2018, the Court does not separately address whether another “Involuntary Withdrawal” event occurred under Section 6.2(b)(11) of the Operating Agreement to support a judicial dissolution under Corporations Code section 17707.03(a), or Plaintiffs’ additional arguments that there are triable issues of material fact regarding whether judicial dissolution is appropriate under Corporations Code sections 17707.03(b)(2) and (b)(5).

The Court notes the Ninth Cause of Action appears to also rely on Corporations Code section 17707.01, as follows: “Fifty percent or more of the voting interests of the members of NCAA have voted to dissolve NCAA as required by Cal. Corp. Code § 17707.01 and NCAA’s articles of organization.” (Ex. 11 to Joslyn Decl., FAC, ¶ 142.) However, Corporations Code section 17707.01 does not provide a separate ground for judicial dissolution.

NCAA’s Objections filed in Reply

“In granting or denying a motion for summary judgment or summary adjudication, the court need rule only on those objections to evidence that it deems material to the disposition of the motion.” (Code Civ. Proc. § 437c(q).)

NCAA’s Objections consists of an introductory four-page memorandum setting forth its opposition and objections supporting why and how Plaintiffs failed to dispute any of the facts, and then separately sets forth objections in the proper manner. The Court disregards these four pages to the extent that they exceed the 10-page limit for replies. (CRC, rule 3.1113(d).) CRC, rule 3.1113(g) provides, “A memorandum that exceeds the page limits of these rules must be filed and considered in the same manner as a late-filed paper.” (CRC, rule 3.1113(g).) While a paper may not be rejected for filing on the ground that it was untimely submitted for filing, the court, in its discretion, may refuse to consider a late filed paper. (CRC, rule 3.1300(d).) If the court does so, the minutes or order must so indicate. (Ibid.)

Nevertheless, the Court rules on the objections as follows.

Given the Court’s ruling, the Court declines to rule on the objection to Exhibit 9 as it is not material to the disposition of the motion.

NCAA purports to object to “Separate Statement.” It appears that the objections are to Plaintiff’s Separate Statement in Opposition. Specifically, NCAA appears to object to Plaintiff’s response and evidence cited to an asserted material fact in the SSUMF, as well as appears to object to Plaintiff’s additional material facts. NCAA appears to quote the entirety of Plaintiff’s response, including both the Plaintiff’s response and the evidence cited by Plaintiff, where applicable, and includes both Plaintiff’s additional material fact and evidence cited. As such, the Court is unable to decipher what precise statement or matter NCAA is objecting to, such that the Court DECLINES to rule on these objections.

NCAA to give notice.