Judge: Joseph Lipner, Case: 22STCV29610, Date: 2023-09-12 Tentative Ruling

Case Number: 22STCV29610    Hearing Date: September 12, 2023    Dept: 72

9/12/23

#4

Case Number:  22STCV29610

Case Name:  Heather Altepeter v. Ash Patel, et al.

            On April 19, 2023, and again on April 24, 2023, Defendant Commercial Bank of California (Bank) filed a demurrer to the First Amended Complaint of Plaintiff Heather Altepeter (Plaintiff). On June 28, 2023, Plaintiff opposed the demurrer. On September 5, 2023, Defendant filed a reply.

            On April 19, 2023, Defendants Ash Patel, Shahzad Khan, Houri Simon, Neel Pinge, Alex Meruelo, Thomas McCullough, John Friedeman, and Bank (collectively, Defendants) filed a motion to stay discovery and/or for protective order. On May 24, 2023, Plaintiff filed an opposition and amended opposition. On June 1, 2023, Defendants replied.

            On June 29, 2023, Plaintiff filed a motion for leave to file a Second Amended Complaint. On August 29, 2023, Defendants opposed the motion. On September 5, 2023, Plaintiff replied.

            The Court OVERRULES the demurrer to the First Amended Complaint. Defendant Commercial Bank of California must file an answer within 10 days of the date of this order.

            The Court DENIES the motion to stay discovery and/or for protective order.

            The Court DENIES the motion for leave to file a Second Amended Complaint.     

Background of the Case

            This action arises out of a business dispute. Plaintiff filed this action on September 12, 2022. Plaintiff filed the operative First Amended Complaint on January 24, 2023, alleging causes of action for unfair business practices, intentional interference with prospective economic relations, negligent interference with prospective economic relations, intentional interference with contractual relations, inducing breach of contract, and negligence, against Defendants Ash Patel, Shahzad Khan, Houri Simon, Neel Pinge, Alex Meruelo, Thomas McCullough, John Friedeman, and Commercial Bank of California.

Legal Standard – Demurrer

A demurrer is a pleading used to test the legal sufficiency of other pleadings. It raises issues of law, not fact, regarding the form or content of the opposing party's pleading (complaint, answer or cross-complaint). (Code Civ. Proc., § 422.10; see Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) It is not the function of the demurrer to challenge the truthfulness of the complaint; and for purposes of ruling on the demurrer, all facts pleaded in the complaint are assumed to be true. (Id., 116 Cal.App.4th at p. 994.) 

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. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Donabedian, supra, 116 Cal.App.4th at p. 994.) No other extrinsic evidence can be considered. (Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881 [error for court to consider facts asserted in memorandum supporting demurrer]; see also Afuso v. United States Fid. & Guar. Co. (1985) 169 Cal.App.3d 859, 862 [disapproved on other grounds in Moradi-Shalal v. Fireman’s Fund Ins. Cos. (1988) 46 Cal.3d 287] [error to consider contents of release not part of court record].) 

A demurrer can be utilized where the “face of the complaint” itself is incomplete or discloses some defense that would bar recovery. (Guardian North Bay, Inc. v. Superior Court (2001) 94 Cal.App.4th 963, 971-972.) The “face of the complaint” includes material contained in attached exhibits that are incorporated by reference into the complaint, or in a superseded complaint in the same action. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94; see also Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505 [“[W]e rely on and accept as true the contents of the exhibits and treat as surplusage the pleader’s allegations as to the legal effect of the exhibits.”]). 

            A demurrer can only be sustained when it disposes of an entire cause of action. (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119; Kong v. City of Hawaiian Gardens Redev. Agency (2003) 108 Cal.App.4th 1028, 1046.)

Request for Judicial Notice – Demurrer

            The Court DENIES Defendant Bank’s request for judicial notice of Exhibit 1 attached to the Declaration of Thomas Case. Exhibit 1 contains no court stamp indicating that it was filed with the Court. (See Case Decl., Ex. 1.) For the Court to take judicial notice of a document in its files, it must be a copy from the Court’s files. (See Evid. Code § 452(d).)

Analysis – Demurrer

            Although not mentioned in the parties’ respective briefings, the Court notes that Defendant Bank’s demurrer is procedurally defective in numerous respects. First, Bank has not actually provided a demurrer; instead, Bank has provided a notice of demurrer and a memorandum of points and authorities in support of a demurrer. (See A. Demurrers, Cal. Prac. Guide Civ. Pro. Before Trial Ch. 7(I)-A [“The demurring party must file with the court, and serve on the other party, the following: • Demurrer; • Notice of Hearing (see ¶ 7:110 ff.); • Memorandum of Points and Authorities; [CRC 3.1112(a)] • Proof of service. [CCP § 1005(b); CRC 3.1300(c)].” [emphasis added].) The demurrer is separate from the notice and the memorandum of points and authorities. (See Id.)

Second, Bank’s demurrer fails to comply with Code of Civil Procedure section 430.60, which provides that, “[a] demurrer shall distinctly specify the grounds upon which any of the objections to the complaint, cross-complaint, or answer are taken. Unless it does so, it may be disregarded.” (Code Civ. Proc., § 430.60) [emphasis added]. Bank fails to specify each ground upon which Bank demurs to Plaintiff’s First Amended Complaint. It is not enough that Bank argues that the First Amended Complaint is defective; Bank must specify the grounds provided under Code of Civil Procedure section 430.10 which provide the purported basis for a demurrer to the First Amended Complaint, such as failure to state a cause of action or uncertainty. (See Id., § 430.10.)

Third, Bank was required to specify in a separate paragraph each ground for demurrer to the First Amended Complaint and the causes of action contained therein. (Cal. Rules of Court, rule 3.1320, subd. (a) [“[e]ach ground of demurrer must be in a separate paragraph and must state whether it applies to the entire complaint, cross-complaint, or answer, or to specified causes of action or defenses.”])

Bank’s demurrer fails to comply with the foregoing requirements, which renders it difficult for the Court to properly assess the demurrer and therefore subject to being overruled. It is unclear to the Court if Bank is demurring to the First Amended Complaint in its entirety or to each cause of action individually.

Moreover, the Court finds Bank’s arguments on the demurrer to be substantively unpersuasive, such as those regarding Plaintiff signing a general release of all her claims against Defendants. First, the Court is limited to matters within the four corners of the pleading or that which is subject to judicial notice. “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318) [internal citations omitted]. The First Amended Complaint does not contain a copy of or any allegations regarding a general release. (See FAC, generally.)

The general release does not provide the Court grounds to sustain the demurrer as it is outside the four corners of the complaint and not subject to judicial notice. (See Evid. Code § 452(d).) While Bank requested the Court to take judicial notice of the general release in its memorandum of points and authorities, (Demurrer, 13:17-14:4), such request is improper because it does not comply with Rule 3.1113(l) of the California Rules of Court which requires the request to be made in a separate document. (Cal. Rules of Court, rule 3.1113(l) [“Any request for judicial notice must be made in a separate document listing the specific items for which notice is requested and must comply with rule 3.1306(c).”] [italics added].) Bank’s reliance upon People v. Preslie (1977) 70 Cal.App.3d 486 is misplaced, as that case addressed judicial notice in the context of appellate procedure and held that a separately noticed motion was not required, not that a separate document was not required. (See Id., at pp. 493-494.) That case was also decided before the current California Rules of Court were enacted, which necessarily includes Rule 3.1113(l). The Court also notes that the copy of the general release provided with the demurrer is not a court record, (Case Decl., Ex. 1), and thus cannot be judicially noticed under Evidence Code section 452(d), which is the code section upon which Defendant requests judicial notice of the general release. (Demurrer, 13:17-14:4; Evid. Code § 452(d).)

Additionally, the Court only takes judicial notice as to “the existence, content and authenticity of public records and other specified documents” under Evidence Code section 452(d); it does not take judicial notice of the truth of the factual matters asserted in those documents. (Dominguez v. Bonta (2022) 87 Cal.App.5th 389, 400.) Thus, even if the Court had taken judicial notice of the general release, it would not necessarily vitiate Plaintiff’s claims.

Second, Bank’s arguments based on the statutes of limitations are also unavailing at the demurrer stage. Paragraphs 62 and 72 of the FAC do not fully disclose all facts necessary to enable the Court to conclude as a matter of law that Plaintiff’s claims are time barred. (See Schmier v. City of Berkeley (2022) 76 Cal.App.5th 549, 554.) While they may show that the claims are potentially time barred, that is insufficient for purposes of a demurrer. (See Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403.)

Accordingly, the Court OVERRULES the demurrer.

Legal Standard – Leave to File a Second Amended Complaint

“The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading or proceeding by adding or striking out the name of any party, or by correcting a mistake in the name of a party, or a mistake in any other respect; and may, upon like terms, enlarge the time for answer or demurrer.  The court may likewise, in its discretion, after notice to the adverse party, allow, upon any terms as may be just, an amendment to any pleading or proceeding in other particulars; and may upon like terms allow an answer to be made after the time limited by this code.” (Code Civ. Proc., § 473(a)(1).)

“This discretion should be exercised liberally in favor of amendments, for judicial policy favors resolution of all disputed matters in the same lawsuit.” (Kittredge Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1047.) A motion to amend a pleading shall: (1) include a copy of the proposed amendment or amended pleading, which must be serially numbered to differentiate it from previous pleadings or amendments; (2) state what allegations in the previous pleading are proposed to be deleted, if any, and where, by page, paragraph and line number, the deleted allegations are located; and (3) state what allegations are proposed to be added to the previous pleading, if any, and where, by page, paragraph, and line number, the additional allegations are located. (Cal. Rules of Court, rule 3.1324(a).)

A separate declaration must accompany the motion and must specify (1) the effect of the amendment; (2) why the amendment is necessary and proper; (3) when the facts giving rise to the amended allegations were discovered; and (4) the reasons why the request for amendment was not made earlier. (Cal. Rules of Court, rule 3.1324(a).)

Analysis – Leave to File a Second Amended Complaint

            Although not addressed by the parties in their respective briefings, the Court notes that Plaintiff’s motion for leave to file a Second Amended Complaint fails to comply with the requirements of Rule 3.1324 of the California Rules of Court, i.e., providing a separate declaration specifying the effect of the amendment, why the amendment is necessary and proper, when the facts giving rise to the amended allegations were discovered, and the reasons why the request for amendment was not made earlier. (Cal. Rules of Court, rule 3.1324, subd. (b).) Plaintiff provided no such declaration. This is of particular concern since nowhere in Plaintiff’s motion does she indicate when she discovered the facts giving rise to the amended allegations or the reasons why the requests for amendment were not made earlier. Vague descriptions of learning about these facts “as trial neared” does not solve this problem either. (Motion, 2:22-27.)

Defendants contend that Plaintiff has engaged in gamesmanship by dismissing the other related case (Case No. 21STCV44674) (Related Case) shortly before trial, refiling a similar lawsuit here, and then seeking to add the plaintiff from the Related Case. The Court record supports Defendants’ argument.  The plaintiff in the Related Case could have litigated that case to conclusion or Plaintiff could have sought to consolidate the two cases. Instead, the plaintiff dismissed the case without prejudice after an adverse ruling for what appears to be entirely strategic reasons.  Plaintiff’s lack of declaration providing the above-described details further supports evidence of unfounded procedural maneuvers on Plaintiff’s part, which in turn justifies denying Plaintiff’s motion for leave to amend. (See Green v. Rancho Santa Margarita Mortg. Co. (1994) 28 Cal.App.4th 686, 692-693.)

Finally, this motion to amend comes too late.  The earlier case was on file since December 8, 2021.  That case, in turn, alleged actions going back to the 2017-2018 time frame.  The long delay in seeking to add these claims to the current case, and the prejudice it would cause Defendants to do so in terms of litigating issues that were already in the process of litigation, is another independent reason to deny the amendment.  (Ibid.)

            Therefore, the Court DENIES the motion for leave to file a Second Amended Complaint.

Motion to Stay

            “Management of discovery lies within the sound discretion of the trial court.” (Johnson v. Superior Ct. (2000) 80 Cal.App.4th 1050, 1061, disapproved of on other grounds by Williams v. Superior Ct. (2017) 3 Cal.5th 531.)

            Defendants seek for the Court to stay discovery until a determination is made on Defendant Bank’s demurrer and/or for protective order, citing prior extensive discovery conducted in relation to the Related Case (Case No. 21STCV4467). Defendants’ primary basis for the motion appears to be simply that they have already responded to large amounts of discovery in connection with the Related Case. Since the Court has already addressed Defendant Bank’s demurrer as discussed above, the Court finds this motion to be moot. Additionally, Defendants have not cited the statutory basis for any protective order either, but only the Court’s general discretion to manage discovery, so it is unclear what relief Defendants seek in terms of a protective order.

            Accordingly, the Court DENIES the motion to stay discovery and/or for protective order.