Judge: Joseph Lipner, Case: 22STCV30612, Date: 2024-01-30 Tentative Ruling

Case Number: 22STCV30612    Hearing Date: March 12, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Plaintiff and Cross-Defendant Jay Novak (“Jay”) moves to strike portions of the Cross-Complaint filed by Frank Novak (“Frank”) (the Court means no offense by its use of the parties’ first names and does so only to avoid confusion).

The Court DENIES Jay’s motion to strike.

Background

Jay and Frank are brothers and business partners. Each of them owns 50 percent of the outstanding shares in Modernica, Inc. (“Modernica”).

Jay filed this action against Defendants Frank and Modernica, Inc. (collectively, “Defendants”) on September 20, 2022, raising claims for (1) involuntary dissolution of Modernica pursuant to Corporations Code sections 1800 and 1804; (2) appointment of receiver pursuant to Corporations Code section 1803; (3) breach of contract; and (4) breach of fiduciary duty.

On May 31, 2023, Frank filed a Cross-Complaint against Jay and Modernica (collectively, “Cross-Defendants”) for breach of fiduciary duty.

Jay previously filed a demurrer to the cross-complaint, without a motion to strike.  The Court overruled the demurrer on January 30, 2024, because it only attacked the punitive damages award, which is not the proper subject of a demurrer.

On February 1, 2024, Jay filed a motion to strike attacking the punitive damage claim.  Frank filed an opposition.  Jay did not file a reply. 

Legal Standard

Motion to Strike

The court may, upon a 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(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(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.)

Discussion

As noted, the Court previously overruled Jays demurrer to Frank’s demand for punitive damages.

“Since a demurrer does not lie to a part of a cause of action, petitioners' punitive damage allegations were not subject to real parties' demurrers. There is no cause of action for punitive damages. Punitive or exemplary damages are remedies available to a party who can plead and prove the facts and circumstances set forth in Civil Code section 32944[.] Punitive damages are merely incident to a cause of action, and can never constitute the basis thereof.” (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 163–164 [internal citations, quotation marks, and brackets omitted].)

“The adequacy of the punitive damage allegations could, however, have been tested by motion to strike.” (Grieves, supra, 157 Cal.App.3d at p. 164.) The Court therefore addresses the question of punitive damages here.

Punitive damages are appropriate when a defendant acted with malice, oppression, or fraud. (Civ. Code, § 3294, subd. (a).) “In order to survive a motion to strike an allegation of punitive damages, the ultimate facts showing an entitlement to such relief must be pled by a plaintiff.” (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) “In passing on the correctness of a ruling on a motion to strike, judges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth.” (Ibid.) “In ruling on a motion to strike, courts do not read allegations in isolation.” (Ibid.)

Allegations that a defendant’s conduct against a plaintiff was retaliatory are sufficient to allege malice and thereby survive a motion to strike a plea for punitive damages. (Perkins v. Superior Court (1981) 117 Cal.App.3d 1, 6.)

Here, Frank alleges in the Cross-Complaint that Jay “continu[ed] to operate [his portion of the company] at a consistent loss in order to impair the overall profitability of the business and spite his brother Frank[.]” (Cross Complaint at p. 3:8-9.) These allegations adequately allege retaliation and malice. Frank has therefore stated a basis for punitive damages.

The Court therefore denies the motion to strike.