Judge: Joseph Lipner, Case: 24STCV18438, Date: 2024-12-03 Tentative Ruling

Case Number: 24STCV18438    Hearing Date: December 3, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Defendants Bobby Bakhtiar Moussazadeh and B Moussazadeh, a Medical Corporation demur to the first, second, fourth, ninth, tenth, eleventh, twelfth, thirteenth, and fourteenth causes of action in Plaintiffs’ complaint.

            The Court OVERRULES Defendants’ demurrer to Plaintiffs’ first, fourth, twelfth, and fourteenth causes of action.

The Court SUSTAINS WITH LEAVE TO AMEND Defendants’ demurrer to Plaintiffs’ second, ninth, tenth, eleventh, and thirteenth causes of action.  Plaintiffs shall amend within thirty (30) days.

Background

Plaintiffs Integrative Surgical Associates Group LLC and Farnad Medical Corporation (“Plaintiffs”) sued defendants Bobby Bakhtiar Moussazadeh (“Moussazadeh”) and B Moussazadeh, a Medical Corporation (together “Defendants”) on July 23, 2024, asserting the following causes of action:

(1) accounting;
(2) breach of fiduciary duty;
(3) breach of contract;
(4) breach of the covenant of good faith and fair dealing;
(5) goods and services rendered;
(6) money had and received;
(7) open book account;
(8) restitution to avoid unjust enrichment;
(9) intentional interference with contractual relations;
(10) intentional interference with prospective economic relations;
(11) negligent interference with prospective economic relations;
(12) conversion;
(13) violations of Penal Code § 496;
(14) violations of Business & Professions Code §§ 17200, et seq.; and

(15) aiding and abetting.

As alleged in Plaintiffs’ complaint and accepted as true upon Defendants’ demurrer (paragraph citations to the complaint unless otherwise indicated):

Plaintiff Integrative Surgical Associates Group LLC (“ISAG”) “is a state-of-the art ambulatory surgical center designed for qualified doctors to perform their outpatient surgery procedures as a more convenient alternative to hospital-based procedures.” (¶ 12.) ISAG was founded in 2019 by medical doctors Shahbaz Farnad (“Farnad”) and Parvaz Mizrahi. (Ibid.) Farnad remains a principal of ISAG. (¶ 2.) Plaintiff Farnad Medical Corporation (“FMC”) is “Dr. Farnad’s corporation through which he provides anesthesia services”, including services provided at ISAG’s facility. (¶ 12.)

Defendants provided medical services in Los Angeles County during all relevant times, including in partnership with Plaintiffs on the terms discussed below. (See ¶¶ 1-3 and 13.)

Plaintiffs’ action involves “a professional business relationship gone awry.” (¶ 1.) Dr. Farnad, ISAG and FMC’s principal, and defendant Moussazadeh “once entered an agreement [“Agreement”] to enable the treatment of Moussazadeh’s patients at ISAG’s facilities.” (¶ 2.) At the outset, the Agreement’s terms were simple. “Moussazadeh’s patients would be treated at ISAG”; FMC would sometimes provide services in connection with that treatment. (Ibid.) “[T]hose patients would then be billed separately” for the services they received, each party paid for the services it provided. (Ibid.)

The Agreement became more complicated because many of the parties’ patients “were personal injury plaintiffs/claimants for whom Plaintiffs and Moussazadeh would provide services on a ‘lien basis’ ”. (¶ 3.) Plaintiffs did not receive immediate payment from these “lien patients” (Court’s term). (See ibid.) Rather, they “would treat patients and retain the right to payment directly from a settlement or award that the patient receive[d] or obtain[ed] in the future.” (Ibid.)

“ISAG incurs expenses each time its facilities and staff are used for [lien patients’] treatments[.]” (Ibid.) Because payment for lien patients’ treatments were deferred, “the parties agreed that Moussazadeh would make monetary advances to help defray some of ISAG’s expenses”, then “reconcile[ ] those … advances against future payments made on ISAG’s liens.” (Ibid.)

“In many instances, Plaintiffs entrusted Moussazadeh with the fiduciary responsibility of billing, securing liens, and collecting” on services provided to lien patients, then reconciling any advances with the amount the parties finally recovered on their liens. (¶ 4.)

In August 2023, Plaintiffs’ principal revoked Moussazadeh’s facility privileges for reasons unrelated to the parties’ Agreement. (¶ 6.)

In December 2023, Plaintiffs received an Explanation of Benefits from an insurer that referred to services Moussazadeh had purportedly provided to a patient at ISAG. (¶ 7.) Moussazadeh had not provided these services; as noted, his facility privileges had been revoked months earlier. (¶ 7.)

Plaintiffs began investigating Moussazadeh’s billing practices for their shared patients, including the lien patients. (¶¶ 7-10.) They discovered that he had fraudulently billed insurance providers multiple times for services he falsely claimed he had performed at ISAG’s facilities. (¶¶ 7-9.) They also discovered Moussazadeh had been providing false records to lien patients’ personal injury attorneys, and he had been withholding payments on patient liens that should have been directed to Plaintiffs. (¶¶ 9-10.)

Plaintiffs attempted to resolve the parties’ dispute through informal mediation and conference with Moussazadeh’s criminal defense counsel. (¶ 1.) When these efforts were unsuccessful, Plaintiffs sued.

On October 16, 2024, Defendants demurred to Plaintiffs’ first, second, fourth, ninth, tenth, eleventh, twelfth, thirteenth, and fourteenth causes of action. Defendants argue Plaintiffs have failed to allege facts sufficient to state any of these claims.

On November 18, 2024, Plaintiffs filed their opposition. On November 22, 2024, Defendants replied.

Legal Standard

             Where pleadings are defective, a party may raise the defect by way of a demurrer. (Coyne v. Krempels (1950) 36 Cal.2d 257, 262.) A demurrer for sufficiency tests whether the complaint alleges facts sufficient to constitute a cause of action. (Cal. Code Civ. Proc. § 430.10; Young v. Gannon (2002) 97 Cal.App.4th 209, 220.)

When considering a demurrer, a court reads the allegations stated in the challenged pleading liberally and in context, and “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Serrano v. Priest (1971) 5 Cal.3d 584, 591.) Put differently: for purposes of demurrer, the court treats all facts alleged – but only the facts alleged – in the complaint as true. (Picton v. Anderson Union High School District (1996) 50 Cal.App.4th 726, 732.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)

Meeting and Conference

“Before filing a demurrer ... , the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc., § 430.41(a).)

Defendants’ counsel filed a declaration that satisfies section 430.41. (See Goodman Decl., ¶ 3.)

Discussion

Defendants argue Plaintiffs have failed to state their claims for (1) an accounting, (2) breach of fiduciary duty, (4) breach of the implied covenant of good faith and fair dealing, (9-11) intentional and negligent interference with contractual relations and prospective economic relations, (12) conversion, (13) civil theft, and (14) unfair business practices.

First Cause of Action for an Accounting

Plaintiffs have stated a claim for an accounting.

An action for an accounting has two elements: (1) ‘that a relationship exists between the plaintiff and defendant that requires an accounting’ and (2) ‘that some balance is due the plaintiff that can only be ascertained by an accounting.’ [Citations.]” (Sass v. Cohen (2020) 10 Cal.5th 861, 869.)

Here, Plaintiffs have pled an ongoing business arrangement with a complicated payment scheme. They have also pled Defendants embezzled funds in unknown amounts and failed to cooperate with Plaintiffs’ efforts to reconcile the payments. The parties had a relationship that requires an accounting, and at least according to the Complaint, the balance owed to Plaintiffs cannot be ascertained without court intervention.

The demurrer to the first cause of action is overruled.

Second Cause of Action for Breach of Fiduciary Duty

Plaintiffs have not stated a claim for breach of fiduciary duty.

To state a claim for breach of fiduciary duty a plaintiff must plead “the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach.” (Thomson v. Canyon (2011) 198 Cal.App.4th 594, 604.)

“A fiduciary relationship is ‘ “any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party.’ ” (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 29.) It is “ ‘ordinarily synonymous with a “confidential relation.” It is ... founded upon the trust or confidence reposed by one person in the integrity and fidelity of another, and likewise precludes the idea of profit or advantage resulting from the dealings of the parties and the person in whom the confidence is reposed.’ ” (Rickel v. Schwinn Bicycle Co. (1983) 144 Cal.App.3d 648, 654.) “‘[B]efore a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which imposes that undertaking as a matter of law.’” (Hasso v. Hapke (2014) 227 Cal.App.4th 107, 140 (quoting Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 221).)

Plaintiffs do not allege any facts to establish a fiduciary duty between the parties. They allege, as a conclusion, that they “entrusted  Moussazadeh with [a] fiduciary responsibility”. (¶ 4.) This is insufficient to sustain their claim. Plaintiffs allege no facts to show Moussazadeh was bound to act in “utmost good faith” or that he knowingly undertook such a duty. Also, other allegations in the complaint suggest the parties’ arrangement might preclude a fiduciary duty between them; Plaintiffs allege they and Defendants occupied a contractual relationship meant to generate profits for both.

The allegations suggest a fiduciary relationship, but they require more specifics to establish the necessary duty and its breach. The demurrer to the second cause of action is sustained with leave to amend.

Fourth Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing

Defendants argue Plaintiffs’ claim for breach of the implied covenant of good faith and fair dealing fails because it duplicates Plaintiffs’ claim for breach of contract. The Court disagrees.

“ ‘The [implied] covenant of good faith and fair dealing [is] implied by law in every contract.’ (Citation.) The covenant is read into contracts and functions ‘as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party's rights to the benefits of the contract.’ (Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031–1032.) The covenant also requires each party to do everything the contract presupposes the party will do to accomplish the agreement's purposes. (Harm v. Frasher (1960) 181 Cal.App.2d 405, 417.) 

Breach of the covenant of good faith does not, per se, duplicate breach of contract. (See Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.) In fact, a claim for breach of the covenant of good faith and fair dealing does not stand without an underlying breach of contract. (Green Valley Landowners Assn. v. City of Vallejo (2015) 241 Cal.App.4th 425, 433.) The breach of covenant depends on breach of contract and goes beyond it. (Ibid.) The claim would be superfluous in all cases if it both required a breach of contract and failed because it was duplicative of a breach of contract.

Here, Plaintiffs’ claim does not rely on a simple breach of a specific contract term. They do not only allege that Defendants failed to deliver money owed. They claim Defendants intentionally neglected to manage the payments in the manner agreed. They also allege Defendants failed to cooperate with Plaintiffs’ efforts to reconcile the payments once Defendants’ alleged breaches were discovered. The case is more complicated than simple failure to pay. Plaintiffs have stated a claim for breach of the implied covenant, as a supplement to the express contract terms.

The demurrer to the fourth cause of action is overruled.

Ninth, Tenth, and Eleventh Causes of Action for Interference with Contractual and Prospective Economic Relations

Plaintiffs have not stated claims for interference with contractual or prospective economic relations, intentional or negligent. These three claims share substantially the same elements; as relevant here, all require a plaintiff to plead (1) a contract or economic relationship with a third party, (2) defendant’s knowledge of that relationship, and (3) actual disruption to the relationship. (Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1148 [intentional interference with contractual relations], 1152 fn.6 [intentional interference with prospective economic advantage]; Golden Eagle Land Investment, L.P. v. Rancho Santa Fe Assn. (2018) 19 Cal.App.5th 399, 430 [negligent interference with prospective advantage].)

Plaintiffs allege “Moussazadeh is continuing to … undermine Plaintiffs and bad-mouth them, and interfere with Plaintiffs’ business and relationships.” (¶ 11.) They provide no further specifics. The complaint does not place Moussazadeh on notice of the basis of Plaintiffs’ claims, e.g., to whom he has bad-mouthed them, or how he has interfered.

The Court sustains the demurrer to the ninth through eleventh causes of action with leave to amend.

Twelfth Cause of Action for Conversion

Plaintiffs have stated a claim for conversion, and that claim is not barred by the economic loss rule as a matter of law at the demurrer stage.

a. Plaintiffs state a claim for conversion because the object of their claim, though intangible, is capable of identification.

“A cause of action for conversion requires allegations of plaintiff's ownership or right to possession of property; defendant's wrongful act toward or disposition of the property, interfering with plaintiff's possession; and damage to plaintiff. [Citation.] Money cannot be the subject of a cause of action for conversion unless there is a specific, identifiable sum involved, such as where an agent accepts a sum of money to be paid to another and fails to make the payment. [Citation.]” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1491.) However, “it is not necessary that each coin or bill be earmarked” to state a claim for conversion. (Haigler v. Donnelly (1941) 18 Cal.2d 674, 681.) The amount need only be “capable of identification.” (Ibid.)

Although Plaintiffs have not identified a sum of money in their pleading – in fact, they ask the Court to do so via their claim for an accounting – the sum is nonetheless capable of identification. Defendants cite PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384. The citation is unpersuasive. There, the Court of Appeal observed that Plaintiffs may have stated a cause of action – their claim failed at summary judgment because they failed to identify a specific sum. (Id., at pp. 396-397.)

The proper result here is apparent from Welco Electronics, Inc. v. Mora (2014) 223 Cal.App.4th 202, 217-218 (“Welco”). There, the plaintiff proved his agents “misappropriated a specific sum” – precisely what Plaintiffs claim here – and, upon proving that sum, the plaintiff prevailed.

If Plaintiffs cannot identify the sum they are owed at summary judgment, their claim for conversion might not prevail. But they have pled the claim sufficiently at this stage.

            b. Plaintiffs’ claim for conversion is not barred by the economic loss rule.

The economic loss rule posits that a purchaser of a product that does not live up to the buyer's expectations can only recover in contract and not a tort, “unless [the purchaser] can demonstrate harm above and beyond a broken contractual promise.” (Food Safety Net Services v. Eco Safe Systems USA, Inc. (2012) 209 Cal.App.4th 1118, 1130 (quoting Robinson Helicopter Company, Inc. v. Dana Corporation (2004) 34 Cal.4th 979, 988).) A tort claim must be sufficiently independent from a breach of contract claim for which the plaintiff suffered economic loss. (Robinson Helicopter, supra, 34 Cal.4th at 991.) The economic rule has also been characterized not to apply where “the means used to breach [a] contract are tortious, involving deceit or undue conversion.” (Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th 85, 105, italics added (conc. opn., J. Mosk).)

Plaintiffs allege a deceitful, intentional scheme to deprive them of money they were owed. Whether or not Defendants breached the terms of an express contractual agreement, Plaintiffs’ complaint describes circumstances wherein Defendants could be held liable in tort.

The economic loss rule does not bar Plaintiffs’ claim for conversion. (The same reasoning applies to Plaintiffs’ claim for civil theft, discussed below, although the demurrer to that claim is sustained on other grounds.)

For pleading purposes, Plaintiffs have stated their claim. The demurrer is overruled.

Thirteenth Cause of Action for Violation of Penal Code Section 496 (“Civil Theft”)

Plaintiffs have not stated a claim under Penal Code section 496.

Penal Code section 496 creates a private right of action for a plaintiff who has been the victim of criminal theft as it is defined in Penal Code section 484. The elements of this “civil theft” action are laid out in section 496, subdivision (a):

(1)       that the defendant bought or received property; concealed, sold, or withheld property from its owner; or aided in concealing, selling, or withholding the property from its owner;

(2)       that the property in question was stolen, or obtained in any manner constituting theft or extortion;

(3)       that the defendant knew the property to be so stolen or obtained; and

(4)       that the plaintiff suffered injury.

Plaintiffs’ complaint fails at the second element: that the property was stolen or obtained by theft.

For purposes of section 496, the terms “stolen” and “theft” derive their meaning from Penal Code section 484, defining criminal theft. Under that section, a “theft” occurs when a defendant “feloniously steal[s], ... the personal property of another, or … fraudulently appropriate[s] property which has been entrusted to him..., or … knowingly and designedly, by any false or fraudulent representation or pretense, defraud[s] any other person of ... property[.]” (Pen. Code, § 484(a).)

“[N]ot all commercial or consumer disputes alleging that a defendant obtained money or property through fraud, misrepresentation, or breach of a contractual promise will amount to a theft. To prove theft, a plaintiff must establish criminal intent on the part of the defendant beyond ‘mere proof of nonperformance or actual falsity.’ [Citation.]” (Siry Investment, L.P. v. Farkhondehpour (2022) 13 Cal.5th 333, 361.) In fact, to state a cause of action under Penal Code section 496(a), a plaintiff must plead and prove not just intent, nor malice or oppression, but “careful planning and deliberation reflecting the requisite criminal intent.” (Ibid., italics added.) The Supreme Court has suggested that a plaintiff must, at a minimum, show a defendant possessed “animus furandi”, or the intent to permanently deprive a plaintiff of its property. (See id., at p. 367 (conc. opn., J. Groban).)

Plaintiffs have not pled specific facts to show Defendants possessed the criminal intent required for a civil theft claim. The demurrer to the thirteenth cause of action is sustained with leave to amend.

Fourteenth Cause of Action for Unfair Business Practices

The Unfair Competition Law (“UCL”) “bars ‘unfair competition’ and defines the term as a ‘business act or practice’ that is (1) ‘fraudulent,’ (2) ‘unlawful,’ or (3) ‘unfair.’ … Each is its own independent ground for liability under the [UCL], but their underlying purpose ‘is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services’ … .” (Shaeffer v. Califia Farms, LLC (2020) 44 Cal.App.5th 1125, 1135, citations omitted.) “[T]he UCL is a chameleon. … Depending on which prong is involved, a UCL claim may most closely resemble, in terms of the right asserted, an action for misrepresentation …, misappropriation …, price fixing …, interference with prospective economic advantage …, or any of countless other common law and statutory claims. ” (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1196.)

Defendants argue they cannot be held liable under the UCL solely because “there is no violation of any other laws”. (Dem., 13:8.) But several of Plaintiffs’ claims have gone unchallenged, and several others survive demurrer. Common-law as well as statutory claims may establish unlawful practices for purposes of the UCL. (See ibid.)

Moreover, Defendants have not directed any argument to the “fraudulent” or “unfair” prongs of the law, both of which Plaintiffs cite in their opposition as alternative bases for liabilty.

The demurrer to the fourteenth cause of action is overruled.