Judge: Joseph Lipner, Case: 21STCV23353, Date: 2023-11-09 Tentative Ruling

Case Number: 21STCV23353    Hearing Date: November 9, 2023    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Defendant Hayman Holdings, LLC (“Defendant”) moves to dismiss the third amended complaint (the “TAC”) filed by Plaintiff Michael Treiman (“Plaintiff”). Defendant also moves for sanctions and moves to strike the TAC’s request for punitive damages.

Defendant’s demurrer is SUSTAINED WITHOUT LEAVE TO AMEND. Defendant’s motion for sanctions is GRANTED.  Plaintiff shall pay directly to Defendant’s counsel $15,000 in attorney’s fees within 30 days of this order. 

Background

          In 2019, Plaintiff suffered an adverse ruling in an arbitration against Defendant and Defendant’s owner, Robert Hayman (“Hayman”). Defendant was ordered to pay $539,491 to Hayman for his attorney’s fees.

In the proceedings to confirm the arbitration award, Plaintiff took the position that the arbitration award had been satisfied by using Plaintiff’s share of the proceeds from the sale of a property that Plaintiff was invested in (“the Lehi Funds”).  (Defendant’s Request for Judicial Notice, Exh. B at p. 3 [“Specifically, the Final Award was satisfied by using the proceeds of the sale of a property in which  [Plaintiff] had invested.”)

That use of funds, which Plaintiff contends that he did not authorize, forms the gravamen of Plaintiff’s claims here.

The arbitration award was confirmed by the Los Angeles Superior Court on July 6, 2021 in Robert Hayman v. Michael Treiman, Case No. 21STCP01359. (Defendant’s Request for Judicial Notice, Exh. A.)

          On March 31, 2023, Plaintiff served on Hayman a demand for acknowledgment of satisfaction of judgment. (Defendant’s Request for Judicial Notice, Exh. C.) On April 10, 2023, Hayman filed an acknowledgment of satisfaction of judgment with the Los Angeles Superior Court. (Defendant’s Request for Judicial Notice, Exh. D.)

Plaintiff filed the TAC, the operative complaint, on August 31, 2023. The TAC alleges (1) conversion; (2) breach of fiduciary duty; (3) aiding and abetting breach of fiduciary duty; (4) intentional interference with contractual relations; and (5) violation of Business & Professions Code section 17200. Plaintiff seeks the return of the Lehi funds, in addition to treble, punitive, and exemplary damages.

Requests for Judicial Notice

Judicial notice may be taken of “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code § 452, subd. (d); see also Evid. Code § 452, subd. (h).)

“In taking judicial notice of an official document, a court may take notice not only of the fact of the document but also facts that can be deduced, and/or clearly derived from, its legal effect, such as the names and dates contained in the document, and the legal consequences of the document.” (Julian Volunteer Fire Co. Assn. v. Julian-Cuyamaca Fire Prot. Dist. (2021) 62 Cal. App. 5th 583, 600.)

Defendant’s requests for judicial notice are GRANTED. Plaintiff’s request for judicial notice is GRANTED. The Court takes judicial notice of the requested documents only for their existence and the facts that can be clearly derived from their legal effects.

Legal Standard

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967.)

Further, the court may, upon 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 the laws of this state, a court rule, or an order of the court. (Code Civ. Proc., § 436, subd. (b).) The grounds for a motion to strike are that the pleading has irrelevant, false, or improper matter, or has not been drawn or filed in conformity with laws. (Code Civ. Proc., § 436.) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., § 437.)

Where a demurrer is sustained, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the plaintiff to show the court that a pleading can be amended successfully. (Id.; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) However, “[i]f there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245).

Discussion

Demurrer

Judicial Estoppel

Judicial estoppel applies “when: (1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake.” (State Water Resources Control Bd. Cases (2006) 136 Cal.App.4th 674, 826–827.)

“Because of its harsh consequences, the [judicial estoppel] doctrine should be applied with caution and limited to egregious circumstances.” (Blix Street Records, Inc. v. Cassidy (2010) 191 Cal.App.4th 39, 47; see also Minish v. Hanuman Fellowship (2013) 214 Cal. App. 4th 437, 449 [“because judicial estoppel is an extraordinary and equitable remedy that can impinge on the truth-seeking function of the court and produce harsh consequences, it must be ‘applied with caution and limited to egregious circumstances’….”].)

Defendant argues that Plaintiff is judicially estopped from seeking return of the Lehi Funds on the basis that they were wrongfully taken because Plaintiff previously took the position that the Lehi funds were used to satisfy the judgment.  The Court agrees.

The legal effect of Plaintiff’s demand for acknowledgment of satisfaction of judgment was to assert that the judgment was satisfied. This fact is properly judicially noticeable from the document. One legal effect of Plaintiff’s response to the petition to confirm the arbitration award was Plaintiff’s assertion of the position that the arbitration award was satisfied by use of the Lehi Proceeds. (Defendant’s Request for Judicial Notice, Exh. B at p. 3.) These facts indicate that Plaintiff initially took the foregoing position in a court proceeding. Furthermore, because Hayman filed an acknowledgment of satisfaction of judgment and the Court deemed the judgment satisfied, Plaintiff was successful in asserting this position and received a benefit from it. The legal effect of having a party file an acknowledgment of satisfaction of judgment is that the judgment creditor can no longer take any actions to collect from the judgment debtor. (Brochier v. Brochier (1941) 17 Cal.2d 822, 825.)

Plaintiff argues that because the demand for acknowledgment was not submitted to a court, it is not a position taken in a judicial proceeding. The Court does not need to reach this argument, because Plaintiff’s position that the award was satisfied through the Lehi Funds was unambiguously taken in a confirmation proceeding in this Court. Moreover, the demand for acknowledgement was a legally operative document containing the statutory language mandated by CCP § 724.050 in connection with a lawsuit.  Plaintiff does not deny that Defendant filed with the Court the Acknowledgement of Satisfaction of Judgment on April 4, 2023 in response to the demand.

Plaintiff’s position in this action, that the Lehi funds must be returned because their use in satisfaction of the previous judgment was illegal, is clearly inconsistent. Plaintiff’s previous position was that he had paid what he had owed using the Lehi Funds; the TAC alleges here that Plaintiff is actually entitled to their return.

There are no facts showing that Plaintiff took the first position as the result of ignorance, fraud, or mistake.

Although Plaintiff argues that the demand for acknowledgment operated only as to the costs and fees ordered in the confirmation proceeding, the demand’s own language, stating that “this document constitutes a demand for acknowledgment of full satisfaction of the judgment in the above-entitled cause,” belies this assertion.

This case presents exactly the type of circumstances in which judicial estoppel is appropriate – when one party, having already secured proof of satisfaction of judgment, attempts to have the money he paid in satisfaction of that judgment returned to him. The Court therefore finds that Plaintiff is judicially estopped from asserting that the Lehi Funds were wrongfully taken from him.

Because the judicially noticeable facts conclusively foreclose Plaintiff’s causes of action, amendment would be futile. The demurrer is SUSTAINED WITHOUT LEAVE TO AMEND.

Motion for Sanctions

An attorney or party who presents a pleading, motion or similar paper to the court makes an implied "certification" as to its legal and factual merit and is subject to sanctions for violation of this certification. (Code Civ. Proc., § 128.7; Murphy v. Yale Materials Handling Corp. (1997) 54 Cal.App.4th 619, 623.)  Section 128.7 has a “safe harbor” provision allowing the offending party to withdraw the offensive pleading within 21 days and thus be immune to sanctions.  Here, Plaintiff was afforded the ability to withdraw the Third Amended Complaint when the motion was served but not filed on or about September 14, 2023.  Plaintiff chose not to withdraw the complaint.

“If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation. In determining what sanctions, if any, should be ordered, the court shall consider whether a party seeking sanctions has exercised due diligence.” (Code Civ. Proc. § 128.7, subd. (c).)

A trial court may impose sanctions if it concludes a pleading was filed for an improper purpose or was indisputably without merit, either legally or factually. (Bucur v. Ahmad (2016) 244 Cal.App.4th 175, 189.) A claim is factually frivolous if it is “not well grounded in fact” and it is legally frivolous if it is “not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law.” (Peake v. Underwood (2014) 227 Cal.App.4th 428, 440.)

Here, Plaintiff took advantage of his right to demand an acknowledgment of satisfaction of judgment, preventing Hayman from collecting any further funds from him. His TAC, which asserts that those funds must now be returned, is frivolous. The Court therefore awards attorney’s fees to Defendant.

          Defendant has provided of its attorneys’ rates and their reasonableness.  Defendant did not, however, break down the amount of work done by each of the attorneys or paralegals, whose rates vary widely from $890 to $500 to $200 an hour.  (Valle Decl. ¶ 20.)  The Court therefore will conservatively use the middle rate of $500 per hour for 30 (not 40) hours for a total of $15,000.