Judge: Joseph Lipner, Case: 21STCV30610, Date: 2023-09-21 Tentative Ruling

Case Number: 21STCV30610    Hearing Date: December 19, 2023    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Defendant Halt Gold Group, LLC (d/b/a Patriot Gold Group, LLC) (“Halt”), Patriot Gold Group, LLC (“Patriot”), and Mike Celano (collectively, “Defendants”) moves for summary judgment as to the First Amended Complaint (“FAC”) filed by Plaintiff Orion Precious Metals, Inc. (“Plaintiff”). In the alternative, Defendants move for summary adjudication of each of Plaintiff’s causes of action and Plaintiff’s prayer for punitive damages.

The Court issues the tentative ruling below.  However, it is subject to argument that the Court solicits on the following issues and may change based on the parties’ responses on these issues:

(1)   Defendants argue that Plaintiff is required to show evidence that Plaintiff’s economic injury was caused by the false advertising.  (See, e.g., 9/29/23 Defendants’ Reply at p. 15:15-19.)  Does Plaintiff have the burden of showing that the false advertising was the reason that its potential customers gave their business to Defendants?  And, if so, what is the evidence to support the claim that the false advertising was the basis for the customers’ decision to give their business to Defendants? 

(2)   Defendants object on hearsay grounds to Plaintiff’s evidence that they have heard from customers and potential customers that they were doing business with Defendants because Patriot made the claim to have been in business for 30 years.  (See, e.g., 9/29/2023 Objections filed by Defendants, Objections 1, 4, 5, 6, 8, 9, 10, 12, 15, 17; 12/14/2023 Objections filed by Defendants, Objections 2, 5, 6, 7, 9, 10, 11, 16, 18, )  Are Defendants’ hearsay objections on this evidentiary issue well taken?  If not, why not?

The Court wishes to  hear first from Plaintiff and then from Defendant on the issues raised above.  The parties should each expect to have no more than ten minutes to make their argument at the December 19, 2023 hearing.  The Court may take the matter under submission after the argument.

Subject to the issues above, the Court is tentatively inclined to rule as follows:

The Court DENIES Defendants’ motion for summary judgment.

The Court GRANTS Defendants’ motion for summary adjudication as to the third cause of action for intentional interference with contractual relations and DENIES Defendants’ motion for summary adjudication otherwise.

Background

The Court summarizes the evidence in the light most favorable to Plaintiff, the non-moving party.

Plaintiff and Defendants are competitors in the sale of precious metals for investment and retirement purposes.

            Patriot was founded in April 2016 by Jacob Blalock, Benjamin Novack, Defendant Mike Celano, and three other members. Blalock and Novak separated from Patriot in May 2017 in what they characterize as an ouster. They founded Plaintiff Orion four months later in September 2017.

            In the precious metals business, the amount of time a company has been in business is one of the most important factors in a customer’s decision-making process on whether to use that company. (Separate Statement of Additional Material Facts filed December 5, 2023 (“AMF”) ¶ 27.) The gravamen of Plaintiff’s claims is that Defendants falsely claimed to have been in business for at least 30 years, since 1986 (the “30-Year Claim”).

            Celano has admitted that Defendants were making the 30-Year Claim for at least some period prior to 2018. (Celano Decl. ¶ 3-4.) Defendants contend that they stopped making the 30-Year Claim in 2018. However, there is substantial evidence suggesting that they did not. As recently as 2023, Patriot’s website has included the following language: “Our friends over at The Patriot Gold Group, a national silver dealer since 1986, rated the Top Gold dealer in the U.S. with Consumer Affairs is offering a FREE Silver Investor Guide and up to $1500 in Free Silver on your first silver investment.” (Zaffos Decl. ¶ 43, Exh. B.) There is also a video on the website of Dick Morris, who refers to Patriot as a major silver investor since 1986. (Zaffos Decl. ¶ 43, Exh. B.) Subpoenas by Plaintiff to organizations, news sites, and retirement savings websites that advertised the 30-Year Misrepresentation that Patriot made have revealed no efforts by Patriot to correct the misrepresentation. (Zaffos Decl. ¶ 38.)

            In Orion’s customer relations data, there are over sixty customers who mentioned Patriot in conversations with Orion. (Blalock Decl. ¶¶ 5-6.) Orion identifies ten specific potential Orion customers to whom it provides evidence that Patriot made the 30-Year Claim, and who subsequently became customers of Patriot over Orion. (AMF ¶¶ 29-44.) Much of this information was produced following two orders compelling discovery responses issued during the pendency of the summary judgment motion. As discussed below, some discovery disputes are still pending, which Plaintiff contends will reveal even more sales. (AMF ¶ 50.) The discovery already produced reveals that Patriot obtained at least $124,000 as a result of these transactions. (AMF ¶¶ 34, 35, 37, 38, 42, 43, 44, 48.)

Plaintiff filed this action on August 18, 2021. The operative complaint is the FAC, filed against Defendants on November 23, 2021. The FAC alleges (1) false advertising under Bus & Prof. Code § 17500; (2) unfair competition under Bus & Prof. Code § 17200, et seq.; (3) intentional interference with contractual relations; and (4) intentional interference with prospective economic relations.

Defendants filed this motion on January 10, 2023. Plaintiff filed an initial opposition on June 15, 2023.

Since June 15, 2023, Plaintiff obtained additional discovery from Defendants which Plaintiff contends revealed a number of inconsistencies in Defendants’ position. Based on this, Plaintiff filed a motion to compel further responses, which the Court granted on October 3, 2023. Because the Court found that the responses sought could potentially affect the outcome of the summary judgment motion, the Court ordered the continuance of the hearing to December 19, 2023 and ordered additional briefing by both parties.

To date, Plaintiff has filed two supplemental oppositions as a result of the additional discovery, and Defendants have filed two supplemental replies. Plaintiff contends that Defendants have promised further supplemental discovery responses but have not yet produced them.

Request for Judicial Notice

Defendants request that the Court take judicial notice of a number of records of other Los Angeles County Superior Court cases. The Court takes judicial notice of the requested records.

Evidentiary Objections

The Court has reviewed Plaintiff and Defendants’ objections to each other’s evidence.  The Court will rule on the objections after hearing argument. 

Legal Standard

The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 843.) “Code of Civil Procedure section 437c, subdivision (c), requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) 

“In ruling on the motion, the court must consider all of the evidence and all of the inferences reasonably drawn therefrom [citation] and must view such evidence [citations] and such inferences [citations] in the light most favorable to the opposing party.” (Aguilar, supra, at pp. 844-845 [quotation marks omitted].) 

“On a motion for summary judgment, the initial burden is always on the moving party to make a prima facie showing that there are no triable issues of material fact.” (Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519.)  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 the party has shown that one or more elements of the cause of action . . . cannot be established, or that there is a complete defense to the cause of action.” (Code Civ. Proc., § 437c, subd. (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 the cause of action or a defense thereto.” (Ibid.) To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.) “If the plaintiff cannot do so, summary judgment should be granted.” (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467.) 

Discussion

False Advertising – First Cause of Action

To set forth a claim for a violation of Business and Professions Code section 17200 (“UCL”), Plaintiff must establish Defendant was engaged in an “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising” and certain specific acts. (Bus. & Prof. Code, § 17200.) A cause of action for unfair competition “is not an all-purpose substitute for a tort or contract action.” (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 173.)

Defendants argue that summary judgment or adjudication is appropriate because Plaintiff cannot prove that it suffered damages as a result of the 30-Year Claim. However, as discussed above, Plaintiff has provided substantial evidence that it lost potential customers as a result of Defendants making the 30-Year Claim.

            In Orion’s customer relations data, there are over sixty customers who mentioned Patriot in conversations with Orion. (Blalock Decl. ¶¶ 5-6.) Orion identifies ten specific potential Orion customers to whom it provides evidence that Patriot made the 30-Year Claim, and who subsequently became customers of Patriot over Orion. (AMF ¶¶ 29-44.) Much of this information was produced following two orders compelling discovery responses issued during the pendency of the summary judgment motion. As discussed below, some discovery disputes are still pending, which Plaintiff contends will reveal even more sales. (AMF ¶ 50.) The discovery already produced reveals that Patriot obtained at least $124,000 as a result of these transactions. (AMF ¶¶ 34, 35, 37, 38, 42, 43, 44, 48.)

Thus, Plaintiff has created a triable issue of fact that it was harmed by Defendants’ conduct. The Court therefore denies summary judgment and denies summary adjudication on this issue.

Unfair Competition – Second Cause of Action

To set forth a claim for a violation of Business and Professions Code section 17200 (“UCL”), Plaintiff must establish Defendant was engaged in an “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising” and certain specific acts. (Bus. & Prof. Code, § 17200.) A cause of action for unfair competition “is not an all-purpose substitute for a tort or contract action.” (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 173.)

Defendants argue that summary judgment or adjudication is appropriate because Plaintiff cannot prove that it suffered damages as a result of the 30-Year Claim. As discussed above, Plaintiff has provided substantial evidence that it lost potential customers as a result of Defendants making the 30-Year Claim. Thus, Plaintiff has created a triable issue of fact that it was harmed by Defendants’ conduct. The Court therefore denies summary judgment and denies summary adjudication on this issue.

Intentional Interference with Contractual Relations – Third Cause of Action

The elements of a cause of action for intentional interference with contractual relations are “(1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (I-CA Enterprises, Inc. v. Palram Americas, Inc. (2015) 235 Cal.App.4th 257, 289.)

Defendants argue that summary judgment or adjudication is appropriate because Plaintiff cannot prove that it suffered damages as a result of the 30-Year Claim. As discussed above, Plaintiff has provided substantial evidence that it lost potential customers as a result of Defendants making the 30-Year Claim. Thus, Plaintiff has created a triable issue of fact that it was harmed by Defendants’ conduct.

However, Plaintiff has not pointed to evidence in the record showing the existence of an actual contractual relationship, nor does there appear to be such evidence based on the Court’s own search of the evidence provided. Thus, the first element of the cause of action is missing, and summary adjudication is proper.

Intentional Interference with Prospective Economic Relations – Fourth Cause of Action

The elements of a claim for intentional interference with prospective economic advantage include “(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional or negligent acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.” (Crown Imports, LLC v. Superior Court (2014) 223 Cal.App.4th 1395, 1404 [citations, brackets, and quotation marks omitted].) Further, “the alleged interference must have been wrongful by some measure beyond the fact of the interference itself. For an act to be sufficiently independently wrongful, it must be unlawful, that is, it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” (Ibid., citation, ellipsis, and quotation marks omitted.)

            Defendants argue that Orion has not produced evidence showing a probability of future economic relations with the customers in question.  However, the Court concludes that Orion’s evidence showing that the customers were in fact in Orion’s customer relations system creates a triable issue of fact under the facts of this case.

Defendants argue that summary judgment or adjudication is appropriate because Plaintiff cannot prove that it suffered damages as a result of the 30-Year Claim. As discussed above, Plaintiff has provided substantial evidence that it lost potential customers as a result of Defendants making the 30-Year Claim. Thus, Plaintiff has created a triable issue of fact that it was harmed by Defendants’ conduct. The Court therefore denies summary judgment and denies summary adjudication on this issue.

Punitive Damages

To obtain summary adjudication as to punitive damages, a moving party must conclusively show that it did not act with malice, oppression, or fraud. (Fadeeff v. State Farm General Insurance Co. (2020) 50 Cal.App.5th 94, 109; Civ. Code, § 3294, subd. (a); Code Civ. Proc., § 437c, subd. (f)(1).)

Here, Plaintiff has provided evidence that Defendants continued to make the 30-Year claim well after 2018, and during the pendency of the lawsuit. Celano additionally made the incorrect statement that Defendants ceased making the 30-Year Claim after 2018 in his declaration. (Celano Decl. ¶ 3-4.) While these facts do not necessarily prove a case for punitive damages by clear and convincing evidence, they could support a jury determination that Defendants acted maliciously. Thus, summary adjudication is denied.