Judge: Kenneth J. Medel, Case: 37-2021-00053083-CU-BC-CTL, Date: 2023-12-15 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - December 14, 2023

12/15/2023  09:30:00 AM  C-66 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Kenneth J Medel

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Civil - Unlimited  Breach of Contract/Warranty Summary Judgment / Summary Adjudication (Civil) 37-2021-00053083-CU-BC-CTL JRWCM LLC VS PACIFIC REAL ESTATE PARTNERSHIP [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion for Summary Judgment and/or Adjudication, 07/20/2023

Defendants PACIFIC REAL ESTATE PARTNERSHIP, BRIAN ARRINGTON, and REAL ESTATE OF THE PACIFIC, INC.'s Motion for Summary Judgment is DENIED.

The Court GRANTS the Alternative Motion for Summary Adjudication of the First, Second, Third, Sixth and Seventh Causes of Action. The Court DENIES the Motion for Summary Adjudication of the Fourth, Fifth and remaining causes of action.

Allegations of the First Amended Complaint Plaintiffs filed this action against Defendants for the 'equity /ownership' and 'wage-and-hour' claims related to services provided by Plaintiffs to Defendant PREP from approximately 2012 through March 2020. This action alleges multiple causes of action alleging a dissolution of partnership as well as Labor Code violations. Plaintiffs filed their original Complaint against Defendants on December 20, 2021, and filed a First Amended Complaint ('FAC') on March 24, 2023.

Based on the allegations of the FAC, JRWCM is a technology consulting company founded by individuals Willey and Millward. Since 1982, Willey has been working as an employee and/or consultant to real estate brokerage and real estate related technology and services companies.

In 1989, Willey founded a technology consulting company, non-party ISDI in Hawaii. Millward has a manufacturing engineering background and joined ISDI as a project manager in the Technical Support department.

ISDI created a real estate operating environment called PRISMS in the early 1990s. The PRISMS platform addressed all aspects of operating a real estate brokerage other than financial accounting. In 1992, PRISMS platform was sold to non-party the Prudential Real Estate Affiliates. After PRISMS was sold to Prudential, ISDI and Prudential began working to sell the product to Prudential's affiliated real estate brokerages.

Prudential California Realty (Pru-Cal) was founded by Nyda Jones-Church ('Jones-Church') and Steve Games and was the fastest growing Prudential affiliate at the time. PruCal was also one of PRISMS first customers. Willey and Jones-Church began working closely together as the PRISMS application was implanted in PruCal. Over about a 2-year period, the business relationship grew to the point where Willey provided technology consulting for the entire company.

In or around 1998, ISDI and PruCal formed a technology and technology service company called ISDI.net to promote applications and services to other real estate brokerages nationwide. In 2000, ISDI.net started looking for funding. As part of that effort, Jones-Church introduced Willey to her contacts at Fidelity National Financial. Fidelity National Financial ended up purchasing ISDI.net and Willey and Millward went to work at Fidelity as part of the deal.

At Fidelity, Willey ran their national real estate software and services division and Millward ran the technical operations for that division.

Immediately after the sale of ISDI.net, Willey and Jones-Church agreed upon an outsource of all of Calendar No.: Event ID:  TENTATIVE RULINGS

3018701  21 CASE NUMBER: CASE TITLE:  JRWCM LLC VS PACIFIC REAL ESTATE PARTNERSHIP [IMAGED]  37-2021-00053083-CU-BC-CTL PruCal's technology and related operations to Fidelity. At this point in time, PruCal had over 100 offices and approximately 5,000 agents.

In or around 2007, Ms. Jones-Church and Mr. Games sold PruCal to Berkshire Hathaway HomeServices. As part of that transaction, Ms. Jones-Church and Mr. Games had to refrain from competing in the real estate business for five (5) years, until 2012.

In 2007, Willey and Millward left Fidelity to form a new consulting company – Rematics, LLC. In 2010, Defendant Arrington formed Defendant Pacific Real Estate, a small brokerage under Keller Williams. In 2012, based on information and belief, Jones-Church and Games became general partners of Pacific Real Estate, and owned 50% of the company.

In 2012, Willey received a call from Jones-Church informing him that she and Games were back in business and had become partners at Pacific Real Estate. Jones-Church, who was then Pacific Real Estate's Chief Operations Officer ('COO'), wanted Willey and Millward's help in putting an operation together (process and technology) that could support the rapid growth that was being planned. Based on Willey's and Millward prior relationships with Jones-Church, and her own ownership and executive management position in Pacific Real Estate, Rematics, LLC immediately agreed to help.

During this time, Willey and Millward became employees of Pacific Real Estate. As an employee, Willey was paid $1,000 per month from (October 2016 through June 2020) so that he could access the corporate systems. Millward allegedly never received any remuneration.

From the beginning, Jones-Church, Games and Arrington advised that Pacific Real Estate had no money – in fact, the company was losing money when Jones-Church and Games became 'partners'. An agreement was reached between Pacific Real Estate and Willey and Millward (then Rematics, LLC) for moving forward. Plaintiff alleges that Ms. Jones-Church offered Willey and Millward to become partners of Pacific Real Estate and have an equity interest and, in exchange, Rematics would heavily discount their hourly rates to a flat billing rate of $125.00 per hour for their services. (Plaintiff contends this is a significant discount from normal billing rates at the time (2012) - $175.00 per hour.) Plaintiffs also allege that because Rematics would be delivering more hours of work than could be paid for, all of the excess hours that would be reflected on the invoices but not become due and owing, or billed for, would become equity in Pacific Real Estate based on a pro-rata percentage of the value of the excess hours and the value of Pacific Real Estate. In the alternative, Willey and Millward would have the option to be compensated for their unbilled hours.

Plaintiffs alleges that all parties agreed on the Agreement and there was unanimous consent that Willey and Millward would become partners and have an equity interest in Pacific Real Estate.

Rematics worked for seven (7) months before they were paid anything for their invoiced work (July 2012 through January 2013) During this time and according to the plan they had created, Rematics allegedly did the following: (i) selected new software platforms for Pacific Real Estate's accounting and financial accounting systems, negotiated platform pricing with vendors, implemented the financial and accounting systems and an associated transaction management system, developed and delivered training to all employees, contractors and Realtors that would be using the new systems; (ii) defined standardized networking and technology infrastructures, selected new telecommunications and equipment vendors, negotiated contracts with those vendors and implemented the new infrastructure companywide; (iii) established a company technology department, interviewed and hired technical resources to staff the department and managed those employees from that point forward (including timesheets and overtime, reviews and raises, terminations and new hires; (iv) designed and deployed a technology and operations support platform and related business operations (help desk), and created trained all technology, branch and other admin personnel on how to operate the help desk services.

The next three (3) years were spent implementing all of the processes and systems, and reworking the technology infrastructure, while supporting the rapid growth of the company which was driven by the new leadership team, including Willey and Millward. Between 2016 and 2017, Rematics also worked through the evolution and development of a new website and other marketing systems, and Willey began to take on more of an operational role for aspects of the business beyond just those related to technology.

Plaintiffs allege that throughout this period, and because 'he was now a partner', Willey was asked to attend Pacific Real Estate's weekly partner's meetings to provide updates on operations and technology projects. The only individuals who attended the weekly meetings were partners of Pacific Real Estate.

41.

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3018701  21 CASE NUMBER: CASE TITLE:  JRWCM LLC VS PACIFIC REAL ESTATE PARTNERSHIP [IMAGED]  37-2021-00053083-CU-BC-CTL Plaintiffs allege that Rematics helped grow the company from approximately 383 million in sales to over $4 billion in sales volume by the end of 2017. 'Willey and Millward and their team were willing to make this contribution of not collecting on the excess hours of services to the benefit of Pacific Real Estate because of the understanding that they would have an equity interest.' In or around 2017, Church-Jones and Games decided to purchase Hom Sothebys, which operated in Orange County and the Coachella Valley. The purchase closed in April, 2018. Willey and Millward were given the job assimilating Hom into the Pacific Real Estate operation. Willey managed the entire Hom transition and Willey, Millward and their employees implemented all systems, defined and implemented all operations and business processes and got Orange County and the Coachella Valley running with minimal help from Pacific Real Estate's management team. Willey was functioning as the General Manager of Operations for Pacific's North Region. Over 2018 and 2019, the entire Hom operation was successfully assimilated into Pacific Real Estate.

Willey and Millward formed RMV2, LLC in 2017 and continued delivering services to Pacific Real Estate through that entity. By 2019, Willey and Millward they created Plaintiff JRWCM. All of the invoices and excess hours of worked work transitioned and were assigned from Rematics, to RMV2, and then to JRWCM.

Plaintiffs allege that a substantial percentage of the billing efforts related to the Hom acquisition had not been paid, including prior services of work. (As of March 31, 2020, the unpaid balance for JRWCM's serviced billed for and agreed to by Pacific Real Estate was $534,740) The parties eventually reached a settlement on the Outstanding Balance but there is still a dispute regarding the equity interest.

Plaintiff JRWCM alleges that it has a 16.74% equity interest in Pacific Real Estate based on the Agreement. This is calculated Further, as employees, Willey and Millward were not compensated at their discounted hourly rate of $125 for said hours, nor were they reimbursed business expenses such as cell phone use, travel, etc. in violation of the Labor Code.

Defendant Arrington purchased Jones-Church and Games ownership interest in Pacific Real Estate.

While Games and Jones-Church acknowledges the Agreement, Defendant Arrington now denies there was ever an Agreement and that JRWCM has an equity interest in Pacific Real Estate, despite the thousands of hours of services that were contributed to the partnership.

Motion for Summary Judgment Defendants Pacific Real Estate Partnership move for summary judgment. Defendants argue Plaintiffs' involuntary dissolution (COA 1), breach of contract (COA 2), breach of fiduciary Duty (COA 3), common Count: goods and services (COA 4), common count: open book accounting (COA 5), accounting (COA 6), and unjust enrichment (COA 7) are all based on Plaintiffs' claim that JRWCM has an equity / ownership interest in PREP.

Each of these causes of action require Plaintiffs establish that JRWCM was either a partner or shareholder in PREP. Plaintiffs cannot meet that required showing. There is no evidence to support Plaintiffs' claims that there was ever an agreement to provide JRWCM equity in PREP.

PREP's Partnership Agreement identified each of PREP's partners-Plaintiffs are not listed. (SSUF 14.) The Partnership Agreement contemplated PREP existing until June 5, 2024, some 12 years after its formation. (SSUF 13.) PREP's partnership agreement required 'agreement or unanimous consent of the Partners,' in writing, for any 'amendment of this agreement' or 'granting or pledging security for any indebtedness of the Partnership or any other person or entity.' (SSUF 15.) The only certain agreement was the September 2012 services agreement between the Parties memorialized in Willey's e-mail to non-party Jones-Church. (SSUF 34.) As for the Wage-and-Hour claims, Plaintiffs signed a settlement agreement which released their wage-and-hour claims and their Eighth through Thirteenth Causes of Action should be adjudicated in Defendants' favor.

First, Second, Third, Fifth, Sixth and Seventh Causes of Action Motion for Summary Adjudication is GRANTED.

Plaintiffs' first cause of action for involuntary dissolution, second cause of action for breach of contract, third cause of action for breach of fiduciary duty, and sixth cause of action for accounting are premised on JRWCM's equity / ownership in PREP.

Defendants claim there is no equity deal because the Partnership Agreement requires an 'agreement or Calendar No.: Event ID:  TENTATIVE RULINGS

3018701  21 CASE NUMBER: CASE TITLE:  JRWCM LLC VS PACIFIC REAL ESTATE PARTNERSHIP [IMAGED]  37-2021-00053083-CU-BC-CTL unanimous consent of the Partners, no Partner shall have the authority to perform any of the following acts without the written consent of all of the Partners.' On June 6, 2012, Defendant PREP was formed through a General Partnership Agreement Between Defendant Real Estate of the Pacific and non-Party Pickford. As part of that Agreement, PREP was to exist until June 5, 2024, unless extended or sooner terminated by an agreement of the parties to the Partnership Agreement (Real Estate of the Pacific and Pickford). As part of that Agreement, PREP was to exist until June 5, 2024, unless extended or sooner terminated by an agreement of the parties to the Partnership Agreement (Real Estate of the Pacific and Pickford).

Plaintiffs do not dispute that at the time PREP was formed, the Partnership Agreement did not list JRWCM as a partner. However, plaintiffs contend JRWCM eventually became a partner per the Agreement.

There is little evidence to support an actual agreement on equity share. In her deposition, Nyda Jones-Church states at p.52: 'After Orange County, we did talk about equity.

- At the beginning, we did not.' Q.

- - And what was your discussion about equity? A.

- - That there would have to be some adjustment made, some agreement or some -- I keep talking like it's in writing....There would have been some adjustment for the number of hours put in.' On page 53, she denies that an agreement on 'adjustments' was reached: Q.

- - Did you ever have a conversation where you reached an agreement regarding those -- with Mr. Willey regarding those adjustments? A.

- - No.

However, John Willey – individual plaintiff and a member of JRWCM states in his declaration: 'In 2012, Nyda-Jones Church called me and asked for help with PREP. As explained in detail in my deposition taken during this litigation, because PREP had no money and there was more work to do than could be paid for, an agreement was reached between PREP and JRWCM for moving forward. Jones-Church offered me and Millward, through JRWCM, to become partners of PREP and have an equity interest....and would discount their hourly rates to a flat billing rate of $125.00 per hour for their services.

Because we would be delivering more hours of work than could be paid for by PREP, the percentage of equity would be determined by a pro-rata percentage of the value of the unbilled/excess hours and the value of PREP (the 'Agreement'). As part of the Agreement, Millward and I would alternatively have the option to be compensated for the unbilled/excess hours.' In his deposition, he testifies at p. 42: 'What was offered additional hours pay for would be that partnership partnership. was that we would work as partners and the that we were delivering that they could not used to establish our equity interest in or whatever came after the sale of that.' The above evidence does not show an agreement was reached regarding equity. Discussions are not agreements.

The deposition testimony of Plaintiff Willey in support of Plaintiffs' position indicates expectation and discussion: 'Our expectation and what we discussed relative to that was that if there was a sale of the company, we did not expect to be-we expected to be compensated relative to the amount of effort we had put in upon the sale.' (Plaintiffs' Appendix of Exhibits ['PAE'], Ex. 1, 45:25-464) Expecting to be compensated for services is separate and distinct from an equity interest in a partnership which required a written amendment to the Partnership Agreement to confer equity.

Non-Party Jones-Church's testimony confirms this: Q. Isn't it true that at some point in time, you and Mr.

Willey initially agreed that you would build the partnership similar to how you had built PruCal and that everyone would benefit upon the sale of the company or from the growth of the company if it wasn't sold? A. I don't think it was anything that specific. I think it was we're putting together a team that we trust, we Calendar No.: Event ID:  TENTATIVE RULINGS

3018701  21 CASE NUMBER: CASE TITLE:  JRWCM LLC VS PACIFIC REAL ESTATE PARTNERSHIP [IMAGED]  37-2021-00053083-CU-BC-CTL think we can do the job of expanding the company and everybody should benefit.

Q. When you say 'everyone should benefit', how? A. I guess it all comes down to monetarily. Q. So how would Mr. Willey benefit then? A. We – we didn't have any specific discussions on a dollar amount or anything like that.' (PAE, Ex. 4, 45:20-46:8.) The evidence does not support that there was ever an agreement reached for share in equity. There may be issues regarding whether plaintiff was fully compensated, but the evidence does not show that plaintiff became a partner.

Fourth and Fifth Causes of Action Summary adjudication is DENIED.

Plaintiffs fourth cause of action for goods and services, fifth cause of action for common count – open book, and seventh cause of action for unjust enrichment, are claims based on the 9,677.33 of unpaid/excess hours that Plaintiffs provided to PREP.

The only essential allegations of a common count are '(1) the statement of indebtedness in a certain sum, (2) the consideration, i.e., goods sold, work done, etc., and (3) nonpayment.' ' (Farmers Ins.

Exchange v. Zerin (1997) 53 Cal.App.4th 445, 460 [61 Cal.Rptr.2d 707], internal citations omitted.) Plaintiffs claim they provided approximately 9,677.33 of hours of services to Defendants that were unpaid and not part of the Outstanding Balance that was eventually settled. [AMF 70] Plaintiffs regularly sent an excel spreadsheet that not only reflected the number of unbilled hours but the hourly rates and the sum that is due on those hours. [AMF 24] Jones-Church acknowledged in her deposition that in addition to receiving an invoice that was part of the Outstanding Balance, she regularly received the excel spread sheets that reflected the additional hours Plaintiffs provided to Defendants, reviewed those excel sheets, never disputed the amounts that were in the excel sheets, and has no reason to believe they are inaccurate. [AMF 25]. Jones-Church acknowledges that Plaintiffs would eventually get paid for those hours. [AMF 62] Lastly, the common counts claims are not waived based on any Settlement (discussed below) because the Settlement has an express carve out for such claims, which states in part that 'the foregoing release does not extend to Claims by JRWCM for equity or for the excess hours worked by JRWCM above hours billed to the Partnership for work performed by JRWCM as a contribution towards equity.' [AMF 56] Wage and Hour Claims Motion for Summary Adjudication is DENIED.

There is no dispute that Willey was a W-2 employee of PREP. [AMF 71] Defendants, however, contend that plaintiff Millward was not PREP's employee.

'The ABC test presumptively considers all workers to be employees, and permits workers to be classified as independent contractors only if the hiring business demonstrates that the worker in question satisfies each of three conditions: (a) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; and (b) that the worker performs work that is outside the usual course of the hiring entity's business; and (c) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.' (Dynamex, supra, 4 Cal.5th at pp. 955–956.) Millward was the Manager of PREP's Help Desk. If any of the technician employees were off (generally over the weekend) or if the technical employees had already worked their full eight (8) hours, Millward was required to cover the Help Desk and in fact covered the Help Desk 'all the time'. [AMF 72] If Millward was required to cover the Help Desk all the time, it's pragmatically impossible for him to be free of control from PREP.

Millward claims he did not perform work outside the usual course of PREP's business. Jones-Church agrees that IT and Operations was an essential tool to operate the brokerages and that the back office real estate system (i.e., which was one of many Millward's responsibilities) was integral for PREP. [AMF 73, 74] On these two points alone, there is a triable issue whether Millward was an employee of PREP.

As of March 31, 2020, the unpaid balance for JRWCM's serviced billed for and agreed to by PREP was $534,740.00 [AMF55] .The parties eventually reached a settlement on the Outstanding Balance (the 'Settlement') but the dispute regarding the equity and unbilled hours interest remained. [AMF 56] Of note, the Settlement was between Defendants and JRWCM. The parties to the Settlement are only JRWCM, PREP, Pacific, and Pickford Realty, Inc. [AMF 56, 57] 'The Agreement shall be binding upon, and shall insure to the benefit of the Parties hereto and their Calendar No.: Event ID:  TENTATIVE RULINGS

3018701  21 CASE NUMBER: CASE TITLE:  JRWCM LLC VS PACIFIC REAL ESTATE PARTNERSHIP [IMAGED]  37-2021-00053083-CU-BC-CTL respective officers, directors, shareholders, partners, employees, predecessors in interest, agents, servants, insurers, heirs, administrator, executors, successors, transferees, future affiliated and related entities and representatives and assigns; past and present.' Defendant argues that the wage and hour claims were released based upon the above language.

Plaintiffs argue that while the Agreement was signed by both Plaintiff Willey and Plaintiff Millward. (SSUF 41), the language of the agreement could not be more clear: the general release applies to Plaintiff Willey and Plaintiff Millward as owners and managing members of JRWCM. It was not intended to release their wage and hour claims. The wage and hour claims are individual claims.

The CCP § 1542 waivers are specific to, and initialed by, each party, and notably, the release specifically states that JRWCM (not Willey or Millward) limitedly waived and released Pickford and Pacific.

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