Judge: John J. Kralik, Case: 22BBCV00336, Date: 2023-08-18 Tentative Ruling
Case Number: 22BBCV00336 Hearing Date: December 15, 2023 Dept: NCB
North
Central District
|
raymond
zargaryan, Plaintiff, v. karen
petrosyan, et al., Defendants. |
Case No.: 22BBCV00336 Hearing Date: December 15, 2023 [TENTATIVE] order RE: demurrer; motion to strike |
BACKGROUND
A.
Allegations of the TAC
Plaintiff Richard Zargaryan (“Plaintiff”) alleges
that on January 6, 2020, Defendant Karen Petrosyan (“Petrosyan”) solicited
Plaintiff to, jointly and equally, purchase Cold Stone Creamery number 20242 in
Seal Beach (“SB Store”) and Cold Stone Creamery number 22066 in Costa Mesa (“CM
Store”). The SB Store was owned and
operated by SGB Enterprise, Inc. and the CM Store was owned and operated by MP
Ice Cream, Inc., both of which Plaintiff believes Sharon Gottlieb was the primary
officer, director, and shareholder of SGB Enterprise, Inc. and MP Ice Cream,
Inc.
Plaintiff alleges that on January
21, 2020, he and Petrosyan formed Cooler West Enterprises (“CWE”) for the
purpose of purchasing and operating both Stores. Plaintiff alleges that CWE reached an agreement
with Gottlieb and simultaneously entered into escrow for both stores, putting an
earnest money deposit of $25,000 each. The
escrows for the SB Store and the CM Store were scheduled to close on April 1, 2020
and April 8, 2020 respectively, based on several conditions including approval
from franchisor Kahala Franchising, LLC (“Kahala”). On April 8,
2020, CWE executed a franchise agreement with Kahala on the SB Store and closed escrow upon the deposit of $620,000 from Plaintiff and $50,000
from Petrosyan. Plaintiff alleges that
he deposited $620,000 into escrow with an agreement and understanding between
Petrosyan and Plaintiff, that Plaintiff would be reimbursed $285,000, which was
loaned and promised to be paid back by Petrosyan, in order to finalize the
closing of the SB Store. Plaintiff
alleges that Petrosyan failed to reimburse him.
Plaintiff
alleges that the CM Store was delayed due to Petrosyan’s inability to marshal
capital to finance his portion of the investment and that Petrosyan canceled escrow
on the CM Store on May 6, 2020, resulting in the loss of the $25,000 earnest
money deposit.
Plaintiff
alleges that CWE took over possession of the SB Store and almost immediately Petrosyan,
with the cooperation of his spouse Defendant Naira Kalashyan (“Kalashyan”), conspired
to defraud Plaintiff by converting and misappropriating CWE’s funds for
personal benefit and excluding Plaintiff from the books, accounts and
suppliers, in order to cover their wrongdoing.
By October 2021 Petrosyan insisted that he bought CWE for upwards of $500,000
but was unwilling to provide access to CWE’s books for Plaintiff to conduct due
diligence and assess the corporate value. Plaintiff alleges that Petrosyan and Kalashyan
conspired to exclude Plaintiff and his family from overseeing the SB Store. He alleges that Petrosyan and Kalashyan embezzled
cash receipts and diverted supplies for personal gain. Plaintiff alleges that Petrosyan closed escrow
on the CM Store in June 2021 and began converting and embezzling CWE’s bank
funds for his personal benefit.
The third amended complaint (“TAC”),
filed May 4, 2023, alleges causes of action for: (1) breach of contract against
Petrosyan; (2) common count against Petrosyan; (3) tortious interference with
prospective economic advantage derivatively on behalf of CWE and against
Petrosyan and Kalashyan; (5) intentional interference with contract derivatively
on behalf of CWE and against Petrosyan; (6) negligent interference with
prospective economic advantage derivatively on behalf of CWE and against
Petrosyan; (7) fraudulent concealment by Plaintiff and derivatively on behalf
of CWE and against Petrosyan and Kalashyan; (8) conversion by Plaintiff and derivatively
on behalf of CWE and against Petrosyan and Kalashyan; and (9) accounting against
Petrosyan and CWE.
B.
Allegations of the Cross-Complaint
On May 31, 2023, Defendants/Cross-Complainants
Karen Petrosyan and Naira Kalashyan filed a cross-complaint against Richard Zargaryan,
Anzhela Sargsyan, and CWE. On August 22,
2023, the Court sustained in part and overruled in part Cross-Defendants Zargaryan
and Sargsyan’s demurrer to the cross-complaint with 20 days leave to
amend.
On September 11, 2023, Defendants/Cross-Complainants
Karen Petrosyan and Naira Kalashyan filed a first amended cross-complaint (“FAXC”),
alleging causes of action for: (1) breach of shareholders’ agreement; (2)
breach of implied covenant of good faith and fair dealing; (3) negligent
misrepresentation; (4) intentional misrepresentation – fraud; (5) IIED; (6)
breach of contract; (7) breach of implied covenant of good faith and fair
dealing; (8) conversion; (9) intentional misrepresentation – fraud; (10) negligent
misrepresentation; (11) negligent interference with contractual relationship;
(12) intentional interference with contractual relationship; (13) breach of fiduciary
duty; (14) accounting; (15) breach of implied in fact contract; (16) quantum
meruit; (17) common counts; and (18) appointment of provisional director. The 1st to 5th causes
of action are alleged by Petrosyan against Zargaryan. The 6th, 7th, and 9th-14th
causes of action are alleged derivatively on behalf of CWE by Petrosyan against
Zargaryan. The 8th cause of
action is alleged derivatively on behalf of CWE by Petrosyan against Zargaryan
and Sargsyan. The 15th to 18th
causes of action are alleged by Petrosyan against CWE.
C. Motions on
Calendar
On October 26,
2023, Cross-Defendants Zargaryan and Sargsyan filed a demurrer and a motion to
strike portions of the FAXC.
On December 4,
2023, Cross-Complainants Petrosyan and Kalashyan filed opposition briefs.
REQUEST FOR JUDICIAL NOTICE
With
the opposition papers regarding the demurrer, Cross-Defendants request judicial
notice of: (a) the Court’s August 22, 2023 order; and (2) a printout of the
Articles of Incorporation of CWE obtained from the Secretary of State website
on December 4, 2023. The request is
granted.
DISCUSSION
RE DEMURRER
Cross-Defendants Zargaryan and
Sargsyan demur to the 1st to 12th causes of action alleged
in the FAXC.
A. 1st and
6th causes of action for Breach of Shareholder’s Agreement and
Breach of Contract
The essential
elements of a cause of action for breach of contract are: “(1) the existence of
the contract, (2) plaintiff's performance or excuse for nonperformance, (3)
defendant's breach, and (4) the resulting damages to plaintiff.” (Oasis
West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) “A written contract may be pleaded either
by its terms—set out verbatim in the complaint or a copy of
the contract attached to the complaint and incorporated therein
by reference—or by its legal effect.” (McKell v. Washington Mutual, Inc. (2006) 142
Cal.App.4th 1457, 1489.) An oral
contract may be pleaded generally as to its effect, because it is rarely
possible to allege the exact words.” (Khoury v. Maly's of California, Inc.
(1993) 14 Cal.App.4th 612, 616.) The
applicable statute of limitations for a breach of oral contract is two years,
whereas the statute of limitations for a breach of written contract is four
years. (Code Civ. Proc., §§ 337(1),
339(1).)
In the 1st cause of action for
breach of shareholder’s agreement by Petrosyan against Zargaryan, Cross-Complainants
allege that in December 2019, Zargaryan conspired with Sargsyan and promised to
provide a $1 million advance from his own money to facilitate the purchase of 2
franchise stores in California to incite Cross-Complainants to sell their 2
South Carolina stores and move to Los Angeles.
(FAXC, ¶86.) They allege that in
January 2020, Petrosyan and Zargaryan entered into an oral shareholders’ agreement
to establish a California corporation as 50/50 shareholders, which would purchase
Cold Stone Creamery stores in California, with the understanding that Petrosyan
was already a franchisee and had the expertise to run the store while Zargaryan
would be an investor. (Id., ¶87.) Cross-Complainants allege that Petrosyan agreed
to pay Zargaryan an income of 20% of whatever amount Zargaryan would invest in
the joint venture in exchange for Petrosyan running the business. (Id., ¶88.) They allege that the oral agreement was memorialized
in email on January 6, 2020 via an email dispatched by Petrosyan to Zargaryan. (Id., ¶¶88, 90; Ex. A.) Cross-Complainants allege that Zargaryan and
Sargsyan conspired and misrepresented that Zargaryan would provide a facility
for the purchase of 2 stores. (Id.,
¶89.) On January 20, 2020, Zargaryan instructed
his personal assistant David Davidian to form CWE. (Id., ¶91.) Cross-Complainants allege that Zargaryan was
involved in the management of CWE pursuant to the Shareholders’ Agreement in
2020 and 2021, but he never fulfilled his duties and obligations as a shareholder/officer
of CWE to actively participate in running the store with Petrosyan after
September 2021. (Id., ¶¶92-95.) The 6th
cause of action for breach of contract is brought derivatively on behalf of CWE
by Petrosyan against Zargaryan. (Id.,
¶¶164-176.)
First, Cross-Defendants argue that the
parties to the oral shareholders agreement is not clearly identifiable because
it is unclear if the agreement is between Petrosyan and Zargaryan, Petrosyan
and CWE, Zargaryan and CWE, etc. For the
1st cause of action, the FAXC alleges that Petrosyan and Zargaryan entered
into the oral shareholders’ agreement to be 50/50 owners, which clearly defines
the parties. (FAXC, ¶39.) The
FAXC includes an email from Petrosyan to Zargaryan dated January 18, 2020 with
the terms of the agreement and their agreement to form CWE. (FAXC, Ex. A.) With respect to the 6th
cause of action, Cross-Complainants assert that it is being brought
derivatively on behalf of CWE by Petrosyan against Zargaryan. As such, the parties to the agreement are sufficiently
defined in the allegations.
Second, Cross-Defendants argue that the
parties were not capable of contracting because CWE became an established entity
on January 21, 2020 such that the parties could not enter into the shareholders’
agreement prior to its formation. A “shareholders’
agreement” is defined as a “written agreement among all of
the shareholders of a close corporation, or if a close corporation has only one
shareholder between such shareholder and the corporation, as authorized by
subdivision (b) of Section 300.” (Corp.
Code, § 186.) They argue that shareholders
agreements are entered among shareholders of close corporations and CWE is not
identified as such. (Corp. Code, §
158(a).) In opposition, Cross-Complainants
argue that CWE is not a close corporation and includes a copy of its
Articles of Incorporation (RJN, Ex. B), such that the statute of frauds does
not apply to the oral agreement. While
the 1st cause of action is titled as a breach of the “shareholders’
agreement,” which may be a term of art, the “title” of the agreement need not
be controlling as the allegations show that the parties agreed orally to forming
a corporation together and then reduced that oral agreement to form CWE into
writing. The term “shareholders’
agreement” is never used in the January email—rather the term “shareholders’
agreement” is only used in the cross-complaint, which is likely a choice by
counsel as opposed to the parties to the agreement itself. So long as the 1st and 6th
causes of action are able to state a claim (despite the designation or how the
contract is named), the Court will allow the causes of action to remain at the
pleading stage. The demurer will not be sustained
on this basis.
Third, Cross-Defendants also argue that
the material terms of the agreement(s) are not sufficiently certain. The Court previously raised the issue that
Cross-Complainants had not provided a copy of the written agreement or email. Cross-Complainants have attached a copy of the
January email as Exhibit A to the FAXC and have alleged facts concerning the oral
agreement. Cross-Defendants also argue
that the FAXC alleges that Zargaryan promised to advance $1,000,000, but then
states differently that Zargaryan orally agreed to loan $500,000. (FAXC, ¶¶35, 51, 86, 173.) The
allegations are somewhat confusing, but it appears that Zargaryan represented
initially that he would contribute $1,000,000 in funds to induce
Cross-Complainants to sell their South Carolina stores and move to Los Angeles (FAXC,
¶¶35, 86) in December 2019, but then the parties came to an agreement and
reduced in writing that Zargaryan would contribute $500,000 in January 2020 (id.,
¶51, Ex. A). Further, “[i]f facts
appearing in the exhibits [attached to the complaint] contradict those alleged,
the facts in the exhibits take precedence.”
(Holland v. Morse Diesel Intern.,
Inc. (2001) 86 Cal.App.4th 1443, 1447.) In addition, any ambiguity as to the terms can
be resolved through discovery. The Court
will not sustain the demurrer on this basis.
Fourth, Cross-Defendants argue that Zargaryan
did not communicate mutual assent that he accepted the oral agreement or that
he accepted the terms of the email. While
the email does not show whether Zargaryan responded affirmatively to Petrosyan’s
email, Zargaryan forwarded Petrosyan’s email to David Davidian to “see message
below” from Petrosyan regarding the formation of CWE and that he would be
contributing $500,000 towards the loan.
(FAXC, Ex. A.) While an express
assent of the terms is not provided by Zargaryan to Petrosyan via the email, the
email exchanges show that Zargaryan’s engaged in conduct where one can affirm his
assent (in addition, Cross-Complainants allege that the parties agreed to the
terms). At the demurrer stage, this is sufficient.
Finally,
Cross-Defendants argue that any action on the oral contract is time-barred because
the alleged breach of the shareholder’s agreement occurred on May 6, 2020 and
the action was filed on May 13, 2022. In
opposition, Cross-Complainants argue that the oral agreement was ongoing
because Cross-Defendants failed to actively participate in running the business
to this day and that their agreement to run the business together was memorialized
in the January 6, 2020 email—particularly since September 2021. (See FAXC, ¶¶94-95, 100-112.) If taking the date of the breach to be
September 2021, then the action would technically be timely filed. The demurrer on this basis is overruled.
For these reasons, the demurrer to the 1st
and 6th causes of action are overruled.
B.
2nd and 7th causes of action for
Breach of Implied Covenant of Good Faith and Fair Dealing
“There is an implied covenant of good faith and fair dealing
in every contract that neither party will do anything which will injure the
right of the other to receive the benefits of the agreement.” (Comunale v. Traders & General Ins. Co. (1958) 50
Cal.2d 654, 658.) “Without a contractual underpinning, there is no independent
claim for breach of the implied covenant.”
(Fireman's Fund Ins. Co. v.
Maryland Casualty Co. (1994) 21 Cal.App.4th 1586, 1599.)
Cross-Defendants argue that the causes of action
for breach of the implied covenant of good faith and fair dealing fail to
allege any facts separate from the breach of contract causes of action. They argue that the claims are uncertain as
they fail to allege a contractual relationship and fails to show how
Cross-Defendnats prevented the alleged contract other than a mere contract
breach. The 2nd cause of
action is alleged by Petrosyan against Zargaryan. The 7th cause of action is alleged
derivatively on behalf of CWE against Zargaryan.
In opposition, Cross-Complainants argue
that the agreements alleged in the 2nd and 7th causes of
action are different because the 2nd cause of action is with respect
to Zargaryan’s failure to actively participate in the running of the business
of the Seal Beach store since September 2021, while the 7th cause of
action relates to Zargaryan’s ongoing failure to actively participate in the
running of the business.
Regardless of whether the claims are separate
types of breaches, the allegations of the 2nd and 7th
causes of action fail to allege facts showing that Cross-Defendants did more
than breach the terms of the agreements. In other words, as currently alleged, the breach
of implied covenant causes of action do not allege supporting facts to show a
breach beyond a mere breach of contract.
The Court previously ordered Cross-Complainants to allege facts showing
how the implied covenant of good faith and fair dealing was separately
breached. However, they have failed to
do so in the FAXC. The opposition also
fails to provide additional facts or arguments showing that the 2nd
and 7th causes of action are distinct from the 1st and 6th
causes of action.
As such, the demurrer to the 2nd
and 7th causes of action is sustained without leave to amend.
C. 3rd, 4th,
9th, and 10th causes of action for negligent
misrepresentation and intentional misrepresentation
To allege a cause
of action for fraud, the requisite elements are: (1) a representation, usually of fact, which is false; (2) knowledge of its
falsity;
(3) intent to defraud; (4) justifiable reliance upon the
misrepresentation; and (5) damage resulting from that justifiable reliance. (Stansfield
v. Starkey (1990) 220 Cal. App. 3d 59, 72-73.) To allege a cause of action for negligent misrepresentation, the requisite elements are: (1) a misrepresentation of a past or existing material fact; (2) without
reasonable grounds for believing it to be true; (3) with intent to induce
another's reliance on the fact misrepresented; (4) ignorance of the truth and
justifiable reliance thereon by the party to whom the misrepresentation was
directed; and (5) damages. (B.L.M. v. Sabo & Deitsch (1997)
55 Cal. App. 4th 823, 834.) Negligent
misrepresentation, unlike fraud, does not require knowledge of falsity. (Apollo
Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226,
243.)
These
causes of action are torts of deceit and the facts constituting each element
must be alleged with particularity; the claims cannot be saved by referring to
the policy favoring liberal construction of pleadings. (Committee on Children's Television, Inc. v.
General Foods Corp. (1983) 35 Cal.3d 197, 216.) Since the claims
must be pleaded with particularity, the causes of action based on
misrepresentations must allege facts showing how, when, where, to whom, and by
what means the misrepresentations were tendered. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.)
In the 3rd and 10th
causes of action for negligent misrepresentation, Cross-Complainants allege
that Cross-Defendants expressed interest in acquiring 2 stores with Petrosyan, knowing
that Cross-Complainants would have to sell their 2 South Carolina stores. (FAXC, ¶¶114, 222.) They allege that in December 2019, Zargaryan
and Sargsyan promised to advance $1,000,000 to Cross-Complainants to facilitate
the purchase of 2 California stores. (Id.,
¶¶115, 223.) They allege that Zargaryan
made material misrepresentations that he would fulfill his obligations
according to the shareholders’ agreement and that he knew or should have known
that his representations were false. (Id.,
¶¶117, 225.) Cross-Complainants allege
that Cross-Defendants’ negligent misrepresentations were intended to and did
induce Cross-Complainants to act in a manner that caused substantial
damages. (Id., ¶¶119, 226.)
In the 4th and 9th
causes of action for fraud, Cross-Complainants allege that Petrosyan and
Zargaryan entered into a shareholder’s agreement in January 2020 and they
agreed that Petrosyan would pay Zargaryan an income of 20% of whatever amount Zargaryan
invested in the joint venture in exchange for Petrosyan taking care of the
running of the business or, alternatively, they would equally share in the
duties of running the business. (FAXC, ¶¶122,
205.) For the 4th cause of
action, they allege that Petrosyan and Sargsyan conspired and misrepresented
they would provide a facility for the purchase of the 2 stores. (Id., ¶124.) They allege that
Zargaryan was involved with the management of CWE per the shareholders’ agreement
in 2020 and 2021, but he failed to fulfill his duties with respect to the Seal
Beach store after September 2021. (Id.,
¶¶125-128.) Cross-Complainants also allege that in April 2020, Cross-Defendants
intentionally did not lend $500,000 to CWE to purchase a second store and insisted
on canceling escrow. (Id., ¶¶129.) For the 9th cause of action, they allege
that Zargaryan promised to provide a $1,000,000 facility to CWE from Zargaryan’s
own money to facilitate the purchase of 2 stores, but in April 2020,
Cross-Defendants failed to lend an additional $500,000 to CWE for the purchase
of a second store. (Id., ¶¶206-207.) In both causes of action, Cross-Complainants
allege that Cross-Defendants failed to disclose that they would not fulfill
their obligations under the shareholder’s agreement. (Id., ¶¶130, 208.) Cross-Complainants allege that Cross-Defendants’
representations were false and made with the intent to defraud and that they were
ignorant of Cross-Defendants’ secret intention not to perform. (Id., ¶¶131-132, 209-210.)
Cross-Defendants argue that the
fraud claims are generalized claims that amount to breach of contract and are
not pled with the requisite particularity.
In the Court’s prior ruling on the demurrer to the initial cross-complaint,
the Court stated that the fraud causes of action appeared to be reiterations of
the breach of contract claims. The same
problem persists in the FAXC. Further,
the Court previously noted that the claims were not pled with the requisite
particularity regarding the misrepresentations.
Additional facts should be alleged for this element. (Cross-Defendants also argue that Cross-Complainants
cannot allege damages because they own and operate the store they usurped from
CWE, but this appears to be an extrinsic fact and does not directly address the
breach and damages that Cross-Complainants are claiming in connection with
their fraud claims—i.e., that they were induced to leave their South Carolina
home and stores, that Zargaryan was not performing work as agreed, etc.).
The demurrer to the 3rd, 4th, 9th,
and 10th causes of action is sustained with leave to amend.
D. 5th cause
of action for IIED
The elements of
intentional infliction of emotional distress are: (1) outrageous conduct by the
defendant; (2) the defendant’s intention of causing or reckless disregard of
the probability of causing emotional distress; (3) the plaintiff suffered
severe or extreme emotional distress; and (4) the plaintiff’s injuries were
actually and proximately caused by the defendant’s outrageous conduct. (Vasquez
v. Franklin Mgmt. Real Estate Fund, Inc. (2013) 222 Cal.App.4th 819,
832.) In order to avoid a demurrer, the
plaintiff must allege with great specificity, the acts which she believes are
so extreme as to exceed all bounds of behavior usually tolerated in a civilized
community. (Id.)
Conduct to be outrageous must be so
extreme as to exceed all bounds of behavior usually tolerated in a civilized
community. (Christensen v. Superior Court (1991) 54 Cal.3d 868, 903.) In addition, the outrageous conduct must be
of a nature which is especially calculated to cause, and does cause, mental
distress of a very serious kind. (Id.)
“Although emotional distress may consist of any highly unpleasant mental
reaction such as fright, grief, shame, humiliation, embarrassment, anger,
chagrin, disappointment or worry [citation], to make out a claim, the plaintiff
must prove that emotional distress was severe and not trivial or
transient.” (Wong
v. Tai Jing (2010) 189 Cal.App.4th 1354, 1376.) Such
distress must be “of such substantial quality or enduring quality that no
reasonable person in civilized society should be expected to endure
it.” (Potter v.
Firestone Tire & Rubber Co. (1993) 6 Cal.4th 965, 1004.)
In the 5th cause of action,
Cross-Complainants allege that Sargsyan were astonished and envious that Kalashyan
worked at 2 stores and that Sargasyan was developing a jealousy, animosity, and
hatred against Kalashyan. (FAXC, ¶¶142-143.) They allege that in order to inflict
financial loss on Cross-Complainants, Cross-Defendants intentionally did not
lend $100,00 for the purchase of a second store and canceled escrow so that
they would own only half a store. (Id.,
¶144.) Cross-Complainants allege that
Zargaryan did not disclose that he would not fulfill the agreement and made misrepresentations
to induce Petrosyan to sell his 2 South Carolina stores and move to Los
Angeles. (Id., ¶¶145-147.) They allege that Cross-Defendants acted with
hatred and disgust towards Cross-Complainants, Zargaryan and Sargsyan used
despicable (cussing) language when communicating with Petrosyan and Kalashyan
(over the phone and in person), and that Cross-Defendants pursued outrageous
conduct, causing Cross-Complainants to suffer severe emotional distress. (Id., ¶¶151-156.) They allege they suffered frustration,
depression, nervousness, and anxiety. (Id.,
¶158.)
The Court previously sustained the
demurrer to the 5th cause of action as alleged in the initial cross-complaint. The Court found that the allegations of the
IIED cause of action were not pled with the requisite specificity to show that Cross-Defendants
engaged in extreme and outrageous conduct or that Cross-Defendants’ actions
were done in a manner to intentionally cause Cross-Complainants emotional distress. Further, the Court noted that the allegations
regarding severe emotional distress were not alleged with sufficient facts to
show that the emotional distress was of a substantial quality or enduring quality
that no reasonable person in a civilized society should be expected to
endure. “[M]ere allegation that the plaintiffs suffered
severe emotional distress, without facts indicating the nature or extent of any
mental suffering incurred as a result of the defendant's alleged outrageous
conduct, fail[s] to state a cause of action for intentional infliction of
emotional distress.” (Pitman v. City of Oakland (1988) 197 Cal.App.3d
1037, 1047.) “The allegation that plaintiff
suffered shame, humiliation and embarrassment without further factual
explanation does not meet the requirement of specificity….” (Id.)
The same defects persist despite Cross-Complainants being
apprised of the issues with the IIED cause of action. Again, the allegations for severe emotional
distress are general and fail to show any extent of their emotional distress
and suffering. In addition, the
allegations fail to show that Cross-Defendants’ conduct was extreme and
outrageous—through their misrepresentations about the store or providing funds,
or their use of colorful language.
As such, the demurrer to the 5th cause of action
is sustained without leave to amend.
E. 8th cause
of action for Conversion, 11th cause of action for negligent interference
with contractual relationship (or prospective economic advantage), and 12th
cause of action for intentional interference with contractual relationship
Cross-Defendants demur to the 8th,
11th, and 12th causes of action.
In opposition, Cross-Complainants state
that they will not address Cross-Defendants’ arguments to the 8th,
11th, and 12th causes of action because the Court previously
overruled the demurrer to these causes of action in the initial cross-complaint.
Indeed, the Court previously ruled on the
demurrer to the initial cross-complaint and overruled Cross-Defendants’
demurrer to the 8th, 11th, and 12th causes of
action. Thus, the Court will not discuss
these causes of action again.
The demurrer to the 8th, 11th,
and 12th causes of action is overruled.
DISCUSSION
RE MOTION TO STRIKE
Cross-Defendants
Zargaryan and Sargsyan move to strike portions of the cross-complaint. They move to strike paragraphs 111, 112, 116,
139, 161, 162, 189, 190, 202, 220, 247, 264, and 265, as well as portions of
48, 50, 64, 129, 131, 136, 144, 146, 198, 209, 215, 217, 219, 230, 242, and
246. They also move to strike the prayer
for relief at paragraphs 3. They seek to
strike allegations for punitive damages and fraud.
A.
Punitive Damages
A complaint including a request for punitive
damages must include allegations showing that the plaintiff is entitled to an
award of punitive damages. (Clauson
v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) A
claim for punitive damages cannot be pleaded generally and allegations that a defendant
acted "with oppression, fraud and malice" toward plaintiff are
insufficient legal conclusions to show that the plaintiff is entitled to an
award of punitive damages. (Brousseau
v. Jarrett (1977) 73 Cal.App.3d 864, 872.) Specific factual
allegations are required to support a claim for punitive damages. (Id.)
Civil Code § 3294
authorizes a plaintiff to obtain an award of punitive damages when there is
clear and convincing evidence that the defendant engaged in malice, oppression,
or fraud. Section 3294(c) defines the terms in the following manner:
(1)
"Malice" means conduct which is
intended by the defendant to cause injury to the plaintiff or despicable
conduct which is carried on by the defendant with a willful and conscious
disregard of the rights or safety of others.
(2)
"Oppression" means despicable
conduct that subjects a person to cruel and unjust hardship in conscious
disregard of that person's rights.
(3)
"Fraud" means an intentional
misrepresentation, deceit, or concealment of a material fact known to the
defendant with the intention on the part of the defendant of thereby depriving
a person of property or legal rights or otherwise causing injury.
The FAXC generally alleges that Cross-Defendants
acted despicably, willfully, wantonly, oppressively, fraudulently, and in conscious
disregard for their rights and that punitive damages should be imposed against
Cross-Defendants or that they acted oppressively with despicable conduct. (See e.g., XC, ¶¶111-112, 202.) The Court has reviewed the FAXC and the
allegations contained therein. At this time,
the Court does not find that the allegations for punitive damages reaches the
level of particularity required to assert such damages against Cross-Defendants. The allegations regarding malicious, oppressive,
and/or fraudulent behavior are also conclusory.
Further, as discussed above in the Court’s order on the demurrer, more
facts must be alleged in support of the 4th (paragraph 139) and 9th (paragraph 220) causes of
action. The Court has also sustained
without leave to amend the demurrer to the 2nd (paragraphs 111-112),
4th (paragraphs 161-162), and 7th (paragraphs 189-190)
causes of action, such that the motion is moot as to these paragraphs.
The motion cites
to paragraph 116, but this paragraph is regarding the terms to pay Zargaryan an
income of 20% of whatever amount he invested in the joint venture and does not
have punitive damages allegations. As
such, the motion is denied as to paragraph 116.
B.
Fraud
With respect to
the allegations for fraud, the Court has sustained with leave to amend the demurrer
directed at the causes of action for fraud.
Thus, the motion to strike the allegations for fraud is granted with
leave to amend.
CONCLUSION
AND ORDER
Cross-Defendants Karen Petrosyan and Naira
Kalashyan’s demurrer to the FAXC is overruled as to the 1st, 6th,
8th, 11th, and 12th causes of action; sustained
without leave to amend as to the 2nd, 5th, and 7th
causes of action; and sustained with 20 days leave to amend as to the 3rd,
4th, 9th, and 10th causes of action.
The motion to strike allegations for
punitive damages is granted with 20 days leave to amend for the causes of
action where the Court has sustained with leave to amend or overruled the
demurrer. The motion to strike
allegations for fraud is granted with 20 days leave to amend.
Cross-Defendants shall provide notice of
this order.
Warning regarding
electronic appearances: All software for remote or electronic
appearances is subject to malfunction based on system weakness and human error,
which can originate from any of the multiple parties participating each
morning. The seamless operation of the Court’s electronic appearance software
is dependent on numerous inconstant and fluctuating factors that may impact
whether you, or other counsel or the Court itself can be heard in a particular
case. Not all these factors are within the control of the courtroom staff. For
example, at times, the system traps participants in electronic purgatories where
they cannot be heard and where the courtroom staff is not aware of their
presence. If you call the courtroom, please be respectful of the fact that a
court hearing is going on, and that the courtroom staff is doing their best to
use an imperfect system. If it is truly important to you to be heard, please
show up to the courtroom in the normal way. Parking is free or reasonable
in Burbank.
DATED: December 15, 2023 ___________________________
John Kralik
Judge
of the Superior Court