Judge Kerry Bensinger, Case Number: 24STCP03525, Date: 2025-04-10 Tentative Ruling

DEMURRER TO PLAINTIFF’S COMPLAINT BY DEFENDANTS EOTEHN ALAPATT p/k/a EGON AND NOW-AGAIN RECORDS, LLC WITH MOTION TO STRIKE

DEFENDANT JEFFREY CARLSON a/k/a JEFF JANK’S DEMURRER WITHOUT MOTION TO STRIKE

Plaintiff Otis Jackson, Jr., professionally known as Madlib (“Madlib” or “Plaintiff”) is a world-renowned DJ, music producer, multi-instrumentalist, songwriter, and rapper. During his career, Madlib has released dozens of albums, some of which appear under other monikers, including Yesterday’s New Quintet and Quasimoto (collectively, the “Monikers”). Madicine Show, LLC (“Madicine Show”) and Rapp Cats, LLC (“Rapp Cats”) (collectively, the “LLCs”). Madlib is a member of and owns one-half of Madicine Show and one-third of Rapp Cats. Eothen Alapatt p/k/a “Egon” (“Egon”) is a member and manager of the LLCs. Jeffrey Carlson a/k/a Jeff Jank (“Jank”) is a member of Rapp Cats.

Plaintiff brings this action seeking a judicially supervised dissolution and wind up of the LLCs as well as for breach of fiduciary duty claims against Egon and Egon’s company, Now-Again Records, LLC (“Now-Again”), and declaratory relief against all defendants regarding the use of the Monikers.

On October 31, 2024, Plaintiff filed a complaint against defendants the LLCs, Egon, Now-Again, and Jank alleging causes of action for (1) judicially supervised dissolution and wind up, (2) breach of fiduciary duty, and (3) declaratory relief.

On December 26, 2024, Egon and Now-Again filed a demurrer to the Second Cause of Action in the Complaint and concurrently filed a motion to strike portions of the Complaint.

On December 27, 2024, Jank filed a demurrer to the Third Cause of Action in the Complaint.

On January 21, 2025, the court granted the parties’ stipulation to consolidate the hearings for Defendants’ demurrers and motion to strike for April 10, 2025.

A demurrer for sufficiency tests whether the complaint states a cause of action.¿ (Hahn v. Mirda¿(2007) 147 Cal.App.4th 740, 747.)¿ When considering demurrers, courts read the allegations liberally and in context, accepting the alleged facts as true.¿ (Nolte v. Cedars-Sinai Medical Center¿(2015) 236 Cal.App.4th 1401, 1406.)¿ “Because a demurrer challenges defects on the face of the complaint, it can only refer to matters outside the pleading that are subject to judicial notice.”¿ (Arce ex rel. Arce v. Kaiser Found. Health Plan, Inc.¿(2010) 181 Cal.App.4th 471, 556.)¿

Egon and Now-Again demur to the Second Cause of Action. Defendant Jeff Jank demurs to the Third Cause of Action. The court addresses the demurrers in turn.

The Second Cause of Action is asserted against Egon and Now-Again only. As alleged, Egon controlled the financial, legal, and business aspects of the LLCs. (Complaint, ¶¶ 14-16.) As alleged in the Complaint, Madlib discovered Egon was engaging in self-dealing, concealing of information, and mismanaging the LLCs in numerous ways, including improperly inserting Now-Again as a middleman between Madicine Show and its primary music distributors, taking a fee from any income generated by the sale or other distribution of Madicine Show’s recorded music, failing to produce the full and complete books and records of the LLCs, among other things. (Complaint, ¶ 18(A)-(J).) Further, Now-Again aided and abetted Egon in some or all of the breaches and has served as a vehicle in furtherance of the breaches. (Complaint, ¶ 30.)

The elements of a cause of action for breach of fiduciary duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach.¿ (Knox v. Dean (2012) 205 Cal.App.4th 417, 432-433; CACI No. 4100.)¿¿To plead a cause of action for breach of fiduciary duty, a plaintiff must allege facts showing the existence of a fiduciary duty owed to that plaintiff, a breach of that duty and resulting damage.¿ (Pellegrini v. Weiss (2008) 165 Cal.App.4th 515, 524.)¿ A fiduciary duty is founded upon a special relationship imposed by law or under circumstances in which “confidence is reposed by persons in the integrity of others” who voluntarily accept the confidence.¿ (Tri-Growth Centre City, Ltd. v. Silldorf, Burdman, Duignan & Eisenberg (1989) 216 Cal.App.3d 1139, 1150.)

Egon and Now-Again (hereafter, “Defendants”) argue the Second Cause of Action fails for the following reasons: (1) Plaintiff should have but failed to bring (at least part of) the breach of fiduciary claim derivatively (Complaint, ¶ 18.A-C, F-G, J) because, as alleged, Madicine Show and not Plaintiff was injured; (2) the remaining breach of fiduciary duty claims (Complaint, ¶ 18.D-E, H-I) alleging direct injury to Plaintiff are not cognizable claims for breach of fiduciary duties; and (3) as to Now-Again, Now-Again does not owe fiduciary duties to Plaintiff because it is not a member of the LLCs[1].

The court disagrees in considerable part with the first and second arguments. Even if Plaintiff alleges harm to Madicine Show which would have required Plaintiff to file a derivative action,[2] Defendants acknowledge that Plaintiff has alleged conduct by Egon which directly harmed Plaintiff. That direct misconduct includes the following:

“EGON directed a single lawyer and single accountant to represent him, MADLIB, MADICINE SHOW, RAPP CATS and NOW-AGAIN, all without any informed consent from MADLIB, let alone a written and signed conflict waiver and MADLIB did not have separate professional representation in his dealings with EGON, MADICINE SHOW or RAPP CATS;”

“EGON directed that lawyer and that accountant to refuse to cooperate with MADLIB’s newly retained professional team or to provide that team with information or documents;”

“EGON employed MADICINE SHOW as a so-called “furnishing entity” for MADLIB’s outside production services (i.e., for works not distributed by MADICINE SHOW), thereby capturing half of MADLIB’s producer royalties and advances for himself;”

“EGON has locked MADLIB out of several key music business platforms that he should have access to including but not limited to Ingrooves, Apple Music, Bandcamp, and YouTube as well as MADLIB’s own Facebook account and the Instagram account for his QUASIMOTO character”.

In response, Defendants argue the foregoing conduct does not constitute cognizable fiduciary duties owed by a member to other members of a limited liability company. Not so. In making that argument Defendants focus solely on subdivision (b) of Corporations Code section 17704.09 which prescribes a limited list of the conduct constituting a member’s duty of loyalty. However, Defendants overlook subdivision (c) of Corporations Code section 17704.09.[3] Subdivision (c) provides, “A member’s duty of care to … the other members in the conduct and winding up of the activities of the limited liability company is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.” Defendants fail to show that subdivision (c) does not encompass Egon’s alleged conduct, either in his capacity as a manager or a member of Madicine Show. (See Corp. Code, § 17709.04, subd. (f)(1).) The demurrer, as it concerns the sufficiency of the allegations against Egon, fails.

As to Now-Again, it is undisputed Now-Again is not a member of Madicine Show (or Rapp Cats, for that matter), and thus did not owe any fiduciary duties to Plaintiff. Nonetheless, Plaintiff contends, a person or entity may be liable for breach of fiduciary duty if it aids or abets another in breaching a fiduciary duty. For this proposition, Plaintiff relies on American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451 which noted that liability for breach for fiduciary duty may be imposed in two situations: (1) where the aider and abettor owes a fiduciary duty to the victim or (2) when the aider and abettor commits an independent tort. Plaintiff appears to rely on the second theory. Plaintiff sets forth one allegation concerning Now-Again’s conduct: “NOW-AGAIN has aided and abetted in some or all of those breaches and EGON has otherwise used that entity as a vehicle in furtherance of the same.” (Complaint, ¶ 30.) Absent from these allegations are any facts describing the independent tort committed by Now-Again that would serve to validate, at this stage of the proceedings, Plaintiff’s fiduciary duty claim against Now-Again. In other words, the allegations are vague and insufficient to apprise Now-Again of what it is called to answer.

Accordingly, Defendants’ demurrer to the Second Cause of Action is OVERRULED as to Egon and SUSTAINED as to Now-Agan. Leave to amend is GRANTED.

The Third Cause of Action is asserted against all defendants. As alleged, “A dispute and actual controversy has arisen and now exists between MADLIB, on the one hand, and one or more Defendants, on the other hand. MADLIB contends that he has terminated any rights granted to either MADICINE SHOW or RAPP CATS in and to his recorded music and the goodwill associated with his professional career (including use of the QUASIMOTO name and character) as embodied in whole or in part by his registered trademarks, as well as his name and likeness, which he contends he wholly owns or controls. One or more Defendants disagree.” (Complaint, ¶ 35, emphasis in original.) “MADLIB therefore desires a declaration from the Court determining that none of the Defendants owns or has any continuing right or interest in the above and that he has lawfully terminated any rights he may have granted therein to any of the Defendants.” (Complaint, ¶ 36, emphasis in original.)

“To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909, quotation marks and brackets omitted.)¿¿

A cause of action for declaratory relief should not be used as a duplicate cause of action for the determination of identical issues raised in another cause of action.¿ (General of America Insurance Co. v. Lilly (1968) 258 Cal.App.2d 465, 470.)¿¿Further, “there is no basis for declaratory relief where only past wrongs are involved.”¿ (Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 366, quotation marks omitted.)¿¿

Jank demurs to the Third Cause of Action on the grounds it fails to state sufficient facts to constitute a cause of action for declaratory relief and is uncertain. Jank’s principal contention appears to be the ambiguity in the allegation that “[o]ne or more Defendants disagree” that Plaintiff “has terminated any rights granted to either MADICINE SHOW or RAPP CATS in and to [Plaintiff’s] recorded music and the goodwill associated with his professional career (including use of the QUASIMOTO name and character)….” (See Complaint, ¶ 35.) This allegation sufficiently apprises Jank of the nature of the claim. A reasonable inference to be drawn is that Jank is one of the defendants who disagrees with Plaintiff’s termination of the use of Plaintiff’s recorded music and Monikers, among other things. To the extent Jank disputes the factual basis of this allegation, a demurrer is not the context to prove that claim.

Egon and Now-Again’s demurrer is Overruled as to Egon and Sustained as to Now-Again. Leave to amend is Granted.

Any party, within the time allowed to respond to a pleading, may serve and file a motion to strike the whole pleading or any part thereof.¿ (Code Civ. Proc., § 435, subd. (b)(1); Cal. R. Ct., rule 3.1322(b).)¿ On a motion to strike, the court may: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court.¿ (Code Civ. Proc., § 436, subds. (a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782.)¿¿¿

“The grounds for a motion to strike are limited to matters appearing on the face of the challenged pleading or matters which must or may be judicially noticed. (§ 437, subd. (a); Evid. Code, §§ 451, 452.).” (Garcia v. Sterling (1985) 176 Cal.App.3d 17, 20.)¿¿

Egon and Now-Again (hereafter, “Defendants”) move for an order to strike the following allegations: (1) Paragraphs 18.A-C, F-G and J on the grounds these allegations state direct injuries to Madicine Show, not Plaintiff, and Plaintiff has failed to allege a derivative action, (2) Paragraphs 18.D-E and H-I on the grounds these allegations do not describe cognizable breaches of fiduciary duty; and (3) the prayer for attorneys’ fees on the grounds there is no basis alleged for an award of attorneys’ fees.

The court quickly addresses the second and third arguments. As to Paragraphs 18.D-E and H-I, the court has already found that these allegations set forth breaches of a member’s fiduciary duty of care pursuant to Corporations Code section 17704.09, subdivision (c). (See Discussion, supra, at Section II(B)(1).) The motion to strike Paragraphs 18.D-E and H-I is DENIED.

As to the request for attorneys’ fees, the motion to strike is well taken. Plaintiff does not identify a basis for an award of attorneys’ fees. Plaintiff contends that the court “may award Plaintiff his attorney’s fees and costs should he succeed in a forced dissolution of either or both entities or on any derivative claim.” (Opp., p. 8.) In support, Plaintiff cites The Rutter Group California Practice Guide on Corporations, Ch. 6-G at ¶¶ 6:618.3 and 6:668-669. However, Plaintiff’s citation to The Rutter Group confirms only that a successful plaintiff in a derivative action may obtain attorney’s fees. Plaintiff concedes he has not brought a derivative action. Accordingly, the motion to strike the request for attorneys’ fees is GRANTED.

The court now turns to whether Paragraphs 18.A-C, F-G and J should be stricken because they allege harm to Madicine Show and not Plaintiff. “The Corporate principles governing derivative actions apply to limited liability companies.” (Tuli v. Specialty Surgical Center of Thousand Oaks, LLC (2024) 105 Cal.App.5th 997, 1018) (citing Corp. Code § 17709.02; Sirott v. Sup. Ct. (2022) 78 Cal.App.5th 371, 381).) Courts “guard against tactical efforts to recharacterize actions as direct when in reality they are derivative in character.” (Tuli, 105 Cal.App.5th at p. 1018 (citing PacLink Communications Internat., Inc. v. Sup. Ct. (2001) 90 Cal.App.4th 958, 964-966).)

Direct claims and derivative claims are “mutually exclusive.” (Bader v. Anderson (2009)

179 Cal.App.4th 775, 793 (quoting Oakland Raiders v. National Football League (2005) 131

Cal.App.4th 621, 650-51).) The right to bring a particular cause of action and seek recovery “belongs to either the shareholders (direct action) or to the corporation (derivative action).” (Bader, 179 Cal.App.4th at p. 793 (quoting Oakland Raiders, 131 Cal.App.4th at pp. 650-51).)

An “action is derivative” if “the gravamen of the complaint is injury to the corporation.” (Sirott, 78 Cal.App.5th at p. 381 (quoting PacLink, 90 Cal.App.4th at p. 964).)

Citing Denevi v. LGCC, LLC (2004) 121 Cal.App.4th 1211, Plaintiff argues that the same conduct may give rise to derivative claims, individual claims or both. “[A] single course of action by a majority shareholder might give rise to derivative claims, individual claims, or both.” (Denevi v. LGCC, LLC (2004) 121 Cal.App.4th 1211, 1222, emphasis in original.) Stated another way, Plaintiff argues he may rely on Egon’s alleged conduct which harmed Madicine Show to support his individual claims.

The court is not persuaded by Plaintiff’s argument. First and foremost, Plaintiff concedes he intended to bring individual claims. Thus, Plaintiff must allege harm he suffered from Egon’s conduct. Further, that harm cannot merely be incidental to the injury to the corporation. As Denevi states, “[i]f the injury is not incidental to an injury to the corporation, an individual cause of action exists. (Denevi, supra, 121 Cal.App.4th at p. 1222, quotations and citation omitted.) Paragraphs 18.A-C, F-G and J do not make clear whether Plaintiff suffered an injury that was not incidental to an injury to Madicine Show. Indeed, Paragraphs 18.A-C, F-G and J describe injury to Madicine Show only. The motion to strike is meritorious on these grounds.

Accordingly, the motion to strike Paragraphs 18.A-C, F-G and J is GRANTED. Leave to amend is GRANTED.

Egon and Now-Again’s demurrer is Overruled as to Egon and Sustained as to Now-Again. Leave to amend is Granted.

Egon and Now-Again’s motion to strike is Granted in Part. Paragraphs 18.A-C, F-G and J, and the request for attorneys’ fees are stricken from the pleading. Leave to amend is Granted.

Plaintiff is ordered to serve and file the First Amended Complaint within 30 days of this order.

The court will discuss with the parties available dates to hear Plaintiff’s Application for Decree of Dissolution, Etc. as to Rapp Cats, LLC.

¿¿¿

¿ Kerry Bensinger¿¿

¿ Judge of the Superior Court¿

[1] The court notes that Defendants do not address the breach of fiduciary duty claim as it relates to Rapp Cats.

[2] Defendants also seek to strike the allegations which describe injury to Madicine Show as a result of Egon’s conduct (Paragraphs 18.A-C, F-G and J). The court addresses the propriety of these allegations in connection to the motion to strike.

[3] Plaintiff also relies on Corporations Code section 17704.09, subd. (d) which provides, “A member shall discharge the duties to … the other members under this title or under the operating agreement and exercise any rights consistent with the obligation of good faith and fair dealing.” However, as subdivision (a) of Section 17704.09 states, the fiduciary duties are limited to those stated in subdivisions (b) and (c).